Assignment of accounting Essay Example

Question 1

Plant-wide overhead rate = $59,800/4,000 direct labour hours

= $14.95 per direct labour hour

Estimated the overhead cost = $14.95 * (4 + 3 + 2) = $134.55

Service Dept. Cost Allocation: Direct Method

		Component	Assembly
Allocation of Maintenance Department Costs
Allocation of Power Department Costs

Maintenance Department Costs

1. = 4000 * (90/125) = 2880

2. = 4000 * (25/125) = 800

3. = 4000 * (10/125) = 320

Power Department Costs

1. = 18400 * (360/800) = 8280

2. = 18400 * (320/800) = 7360

3. = 18400 * (120/800) = 2760

Cost driver rate; Molding = $11140/875 machine hours = $12.73 per machine hour

Cost driver rate; Component = $8160/2000 direct labor hours = $4.08 per direct labor hour

Cost driver rate; Assembly = $3080/1500 direct labor hours = $2.05 per direct labor hour

Molding = 875 machine hours * $12.73 = $11140

Component = 2000 direct labor hours * $4.08 = $8160

Assembly = 1500 direct labor hours * $2.05 = $3080

The company may favor the second if overhead costs in the molding department have a cause-and-effect relationship with machine hours, while those in the component and assembly departments have a cause-and-effect relationship with direct labor hours. In this case, the computed total manufacturing cost in part (2) is of similar magnitude to the cost in part (3), and therefore one might be inclined to use the simpler method in part (2) rather than the more accurate but more complex method in part (3).

Question 2

1. Total prime costs = Cost of materials + Cost of direct labor = 1 050 000 + 47 500 = 1 340 000

2. Total manufacturing overhead costs = Service department costs + On-costs for production supervisor + Depreciation on factory building + Production supervisor’s salary + Total overtime premiums paid + Cost of idle time: production employees = 50 000 + 242 500 + 4 500 + 57 500 + 22 500 + 27 500 + 20 000 = 2 062 500

3. Total conversion costs = Cost of direct labor + Indirect labor: on-costs + Indirect labor: wages + Manufacturing overhead costs = 47 500 + 15 000 + 70 000 + 2 062 500 = 2 195 000

4. Total product costs (for external reporting purposes) = Cost of materials + Cost of direct labor + Manufacturing overhead costs = 1 050 000 + 47 500 + 2 195 000 = 3 292 500

5. Total period costs = Administrative costs + Rental of office space for sales personnel + Sales commissions + Product promotion costs + Advertising expense = 75 000 + 7 500 + 2 500 + 5 000 + 49 500 = 139 500

Question 3

73 000 * $45 = $3,285,000

T11-007 = 300 * $45 = $13,500

N11-013 = 1,000 * $45 = $45,000

N11-015 = 1,400 * $45 = $63,000

D12-002 = 2,500 * $45 = $112,500

D12-003 = 800 * $45 = $36,000

Total = $270,000

To November

Projected manufacturing overhead = $3,285,000

Actual manufacturing overhead = $3,300,000

Manufacturing overhead is over-applied by $3,300,000 — $3,285,000 = $15,000.

During December

Projected manufacturing overhead = $270,000

Actual manufacturing overhead = $288,000

Manufacturing overhead is over-applied by $288,000 — $270,000 = $18,000.

Finished goods inventory = Beginning finished goods inventory + Cost of goods manufactured — Cost of goods

Finished goods inventory = 375 000 + 9 390 000 = $9 765 000

Schedule of cost of goods manufactured for Vision Pty Ltd
Direct materials
Beginning raw materials inventory
Plus; Net purchases
Minus; Ending raw materials inventory
Raw materials used in production
Direct labour
Manufacturing overhead
Indirect material
Indirect labour
Utilities
Depreciation
Total manufacturing cost
Beginning work in progress
Cost of goods manufactured

References

Drury, C. Management Accounting for Business, 2005. Thomson publishers, pp. 144-148.

Langfield-Smith, K. Thorne, H. and Hilton, R. Management Accounting: Information for creating and managing value, 2012. 6th ed. McGraw-Hill Australia Pty Ltd.