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TIME ALLOWED: 4.5 hours
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Assessment Weight: 50 total marks
? All questions must be answered by using the answer boxes provided in this paper.
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Submission instructions are at the end of this paper.
This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit

Question 1 (7 marks)
Job order cost sheets show the following costs assigned to each job for the month of June:
The company assigns overhead at twice the direct labor cost. Job 131 was completed, but unsold. Job 132 was 60% completed and Job 133 was completed and sold.
a) What is the total cost for each job as at the end of June? (3 marks)
b) What are the balances in the work in process inventory, finished goods inventory, and cost of goods sold for June? (1.5 marks)
c) At a recent meeting, one of the managers stated: ‘The production cost report adds no value to my department since it reports on past costs’. Write your response to this statement. (2.5 marks)
ANSWER: ** Answer box will enlarge as you type

Question 2 (11 marks)
a) Exquisite Cases Ltd is a manufacturer of custom-made bags for electronic devices such as phones, computers, and tablets. These bags can be customized by adding such things as the customer’s name, initials, school, or business name. The company buys the bags in various colours and then uses laser technology to do the customization of the letters and to add school or business names, logos, and so on.
Identify two (2) potential activity-based costing pools for Exquisite Cases, and their appropriate cost drivers? (4 marks)
b) Sporty Ltd is a major provider of sports uniforms to high schools throughout NSW, Australia. Students submit their order to Sporty Ltd online at the beginning of the year. Sporty Ltd fills the order in three processes:
1. Receipt of order
2. Packing and dispatch of order
3. Payment is received from the student and processed.
The costs of these three processes in the year just ended are listed below:
Cost Receipt of order Packing and dispatch of order Receipt of payment
Staff salaries $80,000 $150,000 $70,000
Equipment depreciation 505000 174000 290000
Equipment insurance 96000 65000 98000
Telephone 5000 3800 3800
Data processing 9000 2500 15000
Postage 0 190000 0
Consumables 4000 45000 3000
During the year, Sporty Ltd processed 30 000 student orders.
1. Calculate the cost per order for each process. (1.5 marks)
2. Calculate the total cost per order. (0.5 marks)
3. Calculate the selling price of the school uniform, if Sporty Ltd uses 65% mark-up. (1 mark)
4. Why wouldn’t the total cost per order provide a reliable estimate of the costs incurred to process each order? Explain your answer by outlining factors that may affect the cost of an individual order. (4 marks)
Question 3 (7 marks)
MICOL and Co. is a retailer of a popular baby stroller and provides you with the following information for the preparation of its 2nd quarter budget: October, November, and December. Actual and budgeted sales are as follows:
Month Sales ($) Units sold
August 250,000 2,500
September 280,000 2,800
October 300,000 3,000
November 400,000 4,000
December 350,000 3,500
January 370,000 3,700
Additional information:
i) Purchases are budgeted at $6.00 per unit and are paid for in full in the month after purchase.
ii) Closing inventory must equal 50% of the next month’s sales.
iii) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the
month after the sale; 5% in the second month after the sale.
iv) The balance in the bank account as at 30 September is $12,000.
1. Prepare a purchases budget (in units and $) for the 2nd quarter. (Purchases are based on expected sales). (3 marks)
2. Prepare the schedule of expected cash collections from Accounts Receivable for the months of October and November. (2 marks)
3. Explain how a flexible budget can be used in MICOL & Co. (2 marks)
Question 4 (7 marks)
a) What type of responsibility centre best describes each of the following, and why? (2 marks)
i) The ticket sales division of Qantas airlines.
ii) The Hongkong Division of a global video advertisement company, whose head office is in
b) Matuku’s Fishing Supplies has two divisions, Basic and Deep Sea. Each division manager is evaluated based on profit produced by each division. The Basic division often sells a certain graphite fishing rod internally to the Deep Sea division for $52 per rod to cover variable costs. The Basic division also sells the same graphite rod to outside customers for $60 per rod. The Deep Sea division manager has the option of purchasing a similar rod from an outside supplier for $55.
i) Using the general transfer pricing rule, calculate the optimal transfer price assuming the Basic division is operating below capacity. (1 mark)
ii) Calculate the optimal transfer price assuming the Basic division is operating at full capacity. (1 mark)
iii) The company’s CEO recently established the following policy: all internal transfers will be made at variable cost-plus 10 percent. Assume the Basic division is operating below capacity. As the Deep Sea division manager, what would you do: purchase internally or purchase from an outside supplier? Why? (2 marks)
iv) How will your decision impact overall company profit? (1 mark)
Question 5 (11 marks)
Smarty Inc. Ltd produces two different products with the following monthly data:
A1 A2 Total
Selling price per unit $100 $12
Variable cost per unit $ 70 $ 3
Expected unit sales 21,000 14,000 35,000
Sales mix 40 percent 60 percent 100 percent
Fixed costs $500,000
Assume the sales mix remains the same at all levels of sales.
Round to the nearest unit of product, hundredth of a percent, and nearest cent where appropriate.
a) Calculate the weighted average contribution margin per unit. (1 mark)
b) How many units in total must be sold to break even? (1 mark)
c) How many units of each product must be sold to break even? (1 mark)
d) How many units of each product must be sold to earn a monthly profit of $100,000? (3 marks)
e) Prepare a contribution margin income statement for the month. (3 marks)
f) Would CVP Analysis technique be appropriate for multi-product businesses operating during this global pandemic period? Explain. (2 marks)
Question 6 (7 marks)
QT Ltd has been asked to quote a price for a special job that must be completed within one week. The job requires a total of 80 skilled labour hours and 80 unskilled labour hours. The current employees are paid a guaranteed minimum wage of $560 for skilled workers and $280 for unskilled workers for a 35-hour week. Currently, skilled labour has spare capacity amounting to 70 labour hours each week and unskilled labour has spare capacity amounting to 100 labour hours each week. Additional skilled workers and unskilled workers can be employed and paid by the hour at rates based on the wages paid to the current workers.
The materials required for the job are currently held in inventory at a book value of $5,000. The materials are regularly used by QT Ltd and the current replacement cost for the materials is $4,500. The total scrap value of the materials is $1,000.
a) What is the total relevant cost to QT Ltd of using skilled and unskilled labour on this job? (2 marks)
b) What is the relevant cost of using the materials in inventory on this job? Justify your answer. (2 marks)
c) Explain how short-term decisions are better suited using the contribution margin analysis and provide examples to support your answer. (3 marks)
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