ACC00146 – Management Accounting
S3, 2013
Assignment 1 (20 marks)
Question 1 (5 marks)
a. How do fixed costs in a business create a problem for job costing.
b. Provide examples of wages that might be deemed to be (1) a direct cost and (2) an indirect costs.
Question 2 (5 marks)
Estimated or budgeted cost and operating data for three companies for 2013 are given below:
Company X Company Y Company Z
Units to be produced 10,000 8,000 12,000
Machine- hours 50,000 10,000 6,000
Direct labour- hours 12,000 16,000 36,000
Direct labour cost $48,000 $64,000 $150,000
Factory overhead cost 150,000 40,000 60,000
Predetermined overhead rates are calculated on the following bases in the three companies:
Overhead rate based on
Company X Machine-hours
Company Y Direct labour-hours
Company Z Direct labour cost
Required:
a. Calculate the predetermined overhead rate to be used in each company during 2013. (1.5 marks)
b. Assume that three jobs are worked on during 2013 in company X. Machine-hours recorded by jobs are: job 23, 21,000 hours; job 29, 16,000 hours; and job 31, 11,000 hours. How much overhead will the company apply to work in process? If actual overhead costs total $149,000 for 2012, will overhead be over- or under-applied? By how much? (1.5 marks)
c. Of what value is the schedule of cost of goods manufactured and how does it tie into the profit and loss statement. Discuss. (2 marks)
Question 3 (5 marks)
Tony’s Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:
Men's Boys'
Selling Price $28.80 Selling Price $24.00
Variable Cost $20.40 Variable Cost $16.80

Fixed costs are $38,400.
Required:
a. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts? (1.5 marks)
b. What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts? (1.5 marks)
c. What is meant by a product’s contribution margin ratio and how is this ratio useful in the planning of business operations? (2 marks)
Question 4 (5 marks)
Byron Sports is a manufacturer of sportswear. It produces all of its products in one department
using a process costing system.
The information for the current month is as follows:

Beginning work in process (30% complete as to conversion cost) 12,000 units
Units started 90,000 units
Units completed and transferred out ?
Ending work in process (70% complete as to conversion) 8,000 units

Costs:
Beginning work-in-process direct materials $28,800
Beginning work-in-process conversion $5,040
Direct materials added during month $216,000
Conversion costs incurred during the month $139,200
Direct materials are added at the beginning of the process. Conversion costs are incurred uniformly
throughout the production process. Costing is handled on a FIFO basis
Required:
a. Prepare a production cost worksheet using 5 steps approach. (3 marks)
b. Under what conditions would a process costing system be more appropriate than a job order costing system? Explain. (2 marks)
THE END