MANAGEMENT ACCOUNTING
ASSIGNMENT 1
QUESTION 1
A. Mariental (Pty) Ltd is a small manufacturing company that is struggling to value one particular material it uses in the production department. The company buys it in bulk and the movements in the materials storeroom for March 2017 are listed below:
|
|
|
Quantity (kg)
|
Unit price/kg
|
|
1 March 2017
|
Balance
|
1 000
|
N$ 5.00
|
|
4 March 2017
|
Receipts
|
2 000
|
N$ 6.00
|
|
5 March 2017
|
Receipts
|
1 500
|
N$ 6.50
|
|
16 March 2017
|
Issued
|
2 500
|
|
|
19 March 2017
|
Receipts
|
3 000
|
N$ 5.50
|
|
28 March 2017
|
Issued
|
3 500
|
|
As the suppliers are very reliable, there is no delivery lead time. The company maintains a perpetual inventory system. The Production Manager is considering a review of the inventory control policy, and he requests your advice.
REQUIRED;
Compile a stores ledger card and calculate the value of material inventory issued in March 2017 using:
a) The First-in-first-out (FIFO) method
b) The Weighted Average method
B. After presenting him with this information, the manager tells you about another type of material that they also carry in the warehouse. He tells you that for this material, he calculated an economic order quantity of 700 units; that the maximum weekly usage is 60 units; the average weekly usage is 50 units; and the suppliers for this material need four weeks lead time. He is worried about the minimum inventory level to maintain and the re-order level with regard to this specific material.
REQUIRED;
Calculate:
a) The re-order level if the minimum inventory level is not maintained
b) The minimum inventory level to maintain
c) The re-order level if the minimum inventory level is maintained
QUESTION 2
Distinguish between product costs and period costs, give one example of each.
What is an opportunity cost? Give 2 examples of each.
State and discuss five distinct activities in any cost accounting system.
Namib Dairy produces cheese, yoghurt and ice cream. They use milk from Billy`s farm and Billy has 400 milk cows and 600 meat cows. He receives 700 litres of milk from 12 cows a day and all the milk cows have to be milked every day. Namib Dairy only needs 16 000 litres per day. Raymond sells the milk at N$ 4 per litre. It costs Namib Dairy N$1.50 to store one litre of milk and N$1.40 to place an order for 2 litres. The applicable interest rate is 14% p.a.
REQUIRED;
CALCULATE THE FOLLOWING:
Economic order quantity
Number of orders per year
Ordering cost per year
QUESTION 3
Academia Carwash Services is a company located in Academia vicinity, specialising in washing the cars of students from UNAM, NUST and IUM, the carwash offers two options to the students. The first option is where the car is washed and dried and is called the "WD Zone" option, costing a student N$ 60 per car. The second option is where the car is washed, dried, vacuumed and polished and costs N$ 125 per car. This option is called "WDVP Zone". The total cost incurred during May 2011 is N$ 30 000. Costs are currently allocated to the two options based on the number of cars washed. A total of 500 cars were washed during November 2017, of which 125 chose the "WDVP zone" option. The rest found the "WD zone" option a bit more affordable
The following is a complete analysis of the costs of Academia Carwash Services for November 2017.
|
Cost
|
Driver
|
N$
|
|
Rent
|
Floor space
|
N$3 000
|
|
Labourers - Washers
|
Hours washed
|
N$4 500
|
|
Driers
|
Hours dried
|
N$3 000
|
|
Polishers
|
Hours polished
|
N$6 000
|
|
Vacuum - labourers
|
Hours vacuumed
|
N$3 000
|
|
Supervisors
|
Hours washed
|
N$2 700
|
|
Maintenance of equipment
|
% of use
|
N$500
|
|
Soap and cloths
|
Number of cars
|
N$2 700
|
|
Polish
|
Number of cars
|
N$1 000
|
|
Water en electricity
|
Number of cars
|
N$3 500
|
|
Invoice books
|
Number of cars
|
N$100
|
|
Total
|
|
N$30 000
|
|
|
WD Zone
|
WDVP Zone
|
|
Floor space
|
30m2
|
20m2
|
|
Wash hours
|
110 hours
|
40 hours
|
|
Driers
|
33.2 hours
|
13.4 hours
|
|
Polisher
|
0 hours
|
67 hours
|
|
Maintenance
|
40%
|
60%
|
REQUIRED;
Kindly explain what Activity Based Costing System is, also include four major attributes that must be followed when dealing with this costing system.
Calculate the cost per car for each option if activity-based costing is applied.
Question 4
Aranos Butchery have four employees and the following information applies to all four employees:
Working hours per day 8 hours
Working days per week 5 days
Annual leave per employee 3 weeks
Public holidays per year 7 days
Annual bonus One month's salary for each employee (for Christmas)
Car allowance N$ 1 000 per month per employee
Clothing allowance N$ 1500 per quarter per employee
Basic monthly salary N$ 3 850 per employee
Deductions are as follows:
Medical aid each employee pays N$ 1 848 per month towards medical
Pension fund 15% based on the basic salary towards Pension
Workers Union N$148 per month
PAYE 25% per annum is payable to m ministry of finance
REQUIRED:
Discuss the following wage schemes;
Halsey-Weir premium bonus system
Rowan premium bonus system
Taylor's differential piecework system
Calculate the yearly total net wage payable to the employees
ASSIGNMENT 2
QUESTION 1
City Box sole trader manufactures one product that it sells to the local market. The following information is in respect of the year ended November 2017:
Manufacturing:
At the beginning of the financial year, inventories were as follows: Direct material - 50 000 kg with a value of N$ 200 000
Work-in-progress - value N$ 200 000
Finished goods - 5 000 units
During the course of the year, the transactions included the following:
- Purchases of 185 000 kg of material at N$3.50 / kg
- Labour of 92 500 hours at N$12.50 / hour
- 30 000 units were completed, of which 28 300 units were sold at N$ 310 per unit As at 30 November, inventories were as follows:
Direct material - 25 200 kg Work-in-progress - value N$82 440 Finished goods - 7 250 units
Manufacturing overhead: Applied on direct labour hours at a rate of N$ 5.50 per hour
The following information is also available:
1. Actual manufacturing overheads: N$ 520 100
2. Prospect Ltd uses FIFO in costing all its inventories.
3. Actual cost of opening inventory of finished goods: N$ 85 per unit
4. Administrative and marketing costs: N$ 1 225 250
REQUIRED;
Prepare a statement of costs of goods manufactured and sold for the year ended year ended 30 November 2017.
Prepare a statement of costs of goods sold for the year ended 30 November 2017.
Wages paid to a timekeeper in a factory is classified as? (a) Conversion cost or (b) Prime cost, kindly explain your answer.
Question 2
Ovitoto Concrete Investment Cc presented you with the following information for the contracts awarded in Sept 2017;
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|
Contract
|
|
|
Okahandja Road
|
Midgard Road
|
|
Contract Price
|
1 499 500
|
1 950 550
|
|
Work certified
|
1 249 500
|
1 550 550
|
|
Cost of work certified
|
1 199 500
|
1 400 550
|
|
Cost of uncertified work
|
999 500
|
1 210 550
|
|
Cash received
|
1 149 500
|
1 400 550
|
|
Total expected cost (including costs incurred)
|
1 299 500
|
1 850 550
|
The percentage of completion method (based on costs) is used to calculate profit on contracts, but only once contracts are 30% or completed or more.
REQUIRED:
Discuss the difference between the Work Certified Method and the Percentage of C0mpletion method.
Calculate the profit/loss that can be brought into account for the financial period under review for each of the contracts in the records of Ovitoto Concrete Investment Cc.
Question 3
The chief executive officer of Indira Investment Cc has appointed you because he requires certain information considering that you are currently a studying Accounting at UNAM. The CEO has high expectations of you. He has asked you to prepare next year's budget. You are currently busy analysing the company's telephone costs of the 9 months of 2017, in order to arrive at a cost function that you can use.
The company provided you with the following information:
|
Month
|
Total cost (N$)
|
Total number of minutes
|
|
January
|
260.00
|
762.00
|
|
February
|
430.00
|
1338.00
|
|
March
|
338.00
|
956.00
|
|
April
|
310.00
|
900.00
|
|
May
|
260.00
|
485.00
|
|
June
|
387.00
|
1255.00
|
|
July
|
354.00
|
1110.00
|
|
August
|
208.00
|
555.00
|
|
September
|
400.00
|
1269.00
|
REQUIRED;
Prepare a cost formula (cost function) by using the high-low-method.
Using the cost function in (3.1), calculate what the cost would be if 900 minutes were used.
Prepare a cost formula (cost function) by using the Least Square method (Simple regression analysis). Show all calculations.
By using your cost function from (3.3), calculate what the expected cost would be if 900 minutes were used.
Discuss the differences between the High Low Method and the Least Square Method, also explain why there are differences between your actual data for April and your answer in (3.2) and (3.4).
Question 4
Metrix Gold Ltd uses a job order costing system, with a predetermined overhead absorption rate based on machine hours. The corporation keeps only one set of books for cost and financial transactions. At the beginning of 2017, the firm estimated its manufacturing overheads for the year at N$65 200 and the machine hours at 9 150. The following are data uses on jobs worked on during December 2017:
|
Details
|
Job A
|
Job B
|
Job C
|
Total
|
|
|
N$
|
N$
|
N$
|
N$
|
|
W.I.P at 01 December 2017
|
7 000
|
3 500
|
2 500
|
13 000
|
|
Costs incurred in December 2017
|
|
|
|
|
|
- Material Requisitioned
from store
|
2 200
|
1 000
|
720
|
3 920
|
|
- Wages according to time
sheet
|
1 500
|
600
|
450
|
2 550
|
|
Production activity: machine hours
|
320
|
260
|
140
|
720
|
On 31 December 2017, only Job A was completed. Actual manufacturing overheads incurred during December 2017 were N$6 200.
REQUIRED;
Define and compute a pre-determined overhead rate for 2017
Calculate the total cost of each job
Calculate the amount of over/under applied overhead for December 2017
What will be the effect of your answer in 4.3?