Question 1: Cost Concepts
Your accounting supervisor asked you to prepare some figures for the coming up management meeting from the following budgeted figures extracted from various budgets:
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$
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|
Conversion cost
|
50,000
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Direct materials
|
35,500
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|
Variable factory overheads
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5,800
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|
Fixed factory overheads
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10,200
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|
Financial expenses
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4,000
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|
Marketing expenses
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6,000
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Administration expenses
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3,000
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Calculate- (a) Direct labour cost
(b) Prime cost
(c) Total production cost
(d) Period cost
Question 2: Manufacturing Statement
The following account balances were extracted from the accounting records of a manufacturing business at the end of the financial year 30 June 2016:
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$
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Direct labour cost paid
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27,000
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Indirect labour cost paid
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3,240
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Insurance paid - office
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12,750
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- factory
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9,860
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Other factory overheads paid
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10,500
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Other office expenses paid
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8,390
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Purchases - Direct materials
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24,260
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Purchases - Finished goods
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7,200
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Additional Information
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1 July 2015
$
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30 June 2016
$
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Direct materials
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18,210
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20,500
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Work in process
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6,300
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3,700
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Wages accrued - direct labour
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880
|
920
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Wages accrued - indirect labour
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0
|
0
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Insurance prepaid - office
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0
|
0
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- factory
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2,110
|
2,620
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Calculate for the financial year 2016- (a) Direct material cost used in the manufacturing statement.
(b) Direct labour cost used in the manufacturing statement.
(c) Factory insurance cost used in the manufacturing statement.
(d) Total production cost (current period)
(e) Cost of goods completed to be transferred to the Trading Statement.
Question 3: Material Cost
A manufacturing business uses First In First Out Method (FIFO) to cost its material issues. Use the Material Ledger Card provided in the ANSWER BOOK, complete the material ledger card for the following transactions:
12 Sept 300 units purchased, $2.40 each.
18 Sept 100 units issued to production.
21 Sept 40 damaged units returned to supplier, purchased on 12 Sept.
30 Sept 130 units issued to production.
Round workings and answers to two decimal places.
Question 4: Labour Cost
The factory workers of UEM Industries Ltd are paid at a base rate of $30 per hour, working 40 hours per week. If working more than 40 hours in a week, overtime is paid at time and a half.
The following information was summarised from the workers' time sheets for a week in May:
- Factory workers worked a total of 1,222 hours. Of the total hours worked, there were 962 direct labour hours and the balance was indirect labour hours.
- Included in the 962 direct labour hours, there were 82 overtime hours working on jobs. The overtime premium is not directly chargeable to any job but is to be spread over to all factory production.
- Included in the indirect labour hours, there are 20 overtime hours.
Deductions:
- 20% PAYG tax on gross wages
- Union fees, $750.
Required- (a) Calculate gross wages.
(b) Prepare general journal entries for gross wages and deductions.
(c) Prepare general journal entries for payment of net wages.
(d) Prepare general journal entries for the distribution of labour cost.
Question 5: Overheads Allocation
An accountant trainee has returned you with the draft budgeted overheads for Year 2016 as follows:
Budgeted overheads for Year 2016
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Production
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Service
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Total
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Cutting
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Finishing
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Store
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$80,000
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$40,000
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$18,000
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$138,000
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You found that she has forgotten to allocate electricity to all departments.
Budgeted electricity for Year 2016: $30,000
Budgeted activity information for Year 2016
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Cutting
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Finishing
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Store
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Area (sq m)
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1,000
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1,200
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800
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No. of employees
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10
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5
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2
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Machine hours
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6,000
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4,000
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0
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No. of material requisitions
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1,400
|
1,400
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0
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Direct labour hours
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4,000
|
10,000
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0
|
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KWh
|
1,200
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1,000
|
800
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Required- (a) Use the Factory Overhead Distribution Worksheet provided in the ANSWER BOOK:
(i) Allocate electricity to all departments, using KWh as basis of allocation.
(ii) Re-distribute service department costs to production departments, using no of materials requisitions as a basis of re-distribution.
(iii) Calculate total overhead costs for each production department.
(b) Calculate the departmental factory overhead recovery rates : using machine hours for Cutting Department and direct labour hours for Finishing Department.
(c) Calculate the plant-wide rate using direct labour hours as application basis.
Question 6: Flexible Budgeting Concept and Variances
The data produced for the June quarter before further analysis shows:
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Original
Budget
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Actual
Result
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|
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10,000 units
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10,700 units
|
|
|
|
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Sales
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$450,000
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$465,450
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Less Variable Costs
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230,000
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235,400
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Contribution Margin
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230,050
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Less Fixed Costs
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125,000
|
143,000
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Net Profit
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87,050
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It shows even though sales increase, but profit decreases. The accountant wants to use the flexible budgeting techniques to assess what causes the profit to fall.
Required- (a) Complete the Flexible Budget at actual activity level and the Performance Report in the ANSWER BOOK.
(b) Give one possible reason to explain why the business' profit decreases when sales increase. Use any figures calculated in (a) to support your answer.
Question 7: Cost-Volume-Profit Analysis
A business produces a product which sells at $30 per unit. The product requires $12 per unit in variable costs to produce and sell. Fixed costs to run production and sales are $25,200 per annum. The manager of the business has set annual net profit target at $10,800 before tax.
Required: (a) Calculate the break-even point in units and in dollars.
(b) Calculate the required sales (in units) to achieve the annual net profit target.
(c) Using the required sales calculated in (b), calculate the margin of safety sales in units and %.
Question 8: Job Costing
Bah Ltd operates a job costing system for its production costs.
Inventory account balances as at 1 May:
Materials Control $ 2,400
Work in process (Job 22) $ 6,050
Finished goods (Job 21) $ 6,800
Transactions for the month of May:
Materials purchased on credit totaled $13,800 + GST $1,380.
Materials issued: $
Job 23 4,110
Job 24 6,000
General factory use 800
Factory wages:
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$
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Job 22
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1,865
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Job 23
|
600
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Job 24
|
2,250
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Supervisors' wages
|
1,625
|
|
Overtime charged to factory overheads
|
60
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Labour cost deductions: PAYG Tax 20% of gross wages
Factory overhead applied to jobs using budgeted overhead rate at 100% of direct labour cost.
Depreciation on plant machinery for the month, $800. Other factory overheads incurred, $1,300+GST $130.
Jobs 22, 23 were completed and transferred to finished goods at the end of the month.
Physical stocktake at end of May indicates $5,000 value of materials in stock.
Required- (a) Complete the Job Cost Card Summary for May in the ANSWER BOOK.
(b) Calculate total overheads paid/incurred in May.
(c) Prepare general journal entries for the following selected transactions in May:
(i) Material gain or loss.
(ii) Factory overhead balances transferred.
(iii) Factory overheads applied to jobs.
(iv) Adjustment of over or under applied overheads.
(v) Finished jobs transferred from production to store.