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BUACC5933 – Cost and Management Accounting Semester 1 2018
ASSIGNMENT (Due Date: 4.00pm Friday, Week 10)
This assignment is to be completed in groups of three and carries 30 percent of the marks in this course.
The following considerations will be applied when evaluating the submission:
Part 1 and Part 2 are worth twenty marks (20 marks). Criteria for assessment will be based on: 1. Presentation. 2. Accuracy of calculations and Analysis.
Part 3 (10 marks) Students should concentrate on the following for Part three (3): 1. Introduction, 2. Content, 3. Expression, 4. Presentation, 5. Conclusion, and 6. Reference List.
1. All written work must conform with the Federation University General Guide for the Presentation of Academic Work. 2. For all written work students must ensure that they submit their own original work. A high level of scrutiny will be conducted. Any act of plagiarism will be severely penalised. Students are strongly advised to use turnitin.
Plagiarism is presenting someone else work as your own and is a serious offence with serious consequences. As set out in the University Regulation 6.1.1, students who are caught plagiarising will, for a first offence, be given a zero mark for that task. A second offence will result in a failing grade for the course(s) involved and any subsequent offence will be referred to the Student Discipline Committee. Student must be aware of the University Regulation 6.1.1 Student Plagiarism.
Students must: • fully reference the source(s) of all material, even if you have re-expressed the ideas, facts or descriptions; • acknowledge all direct quotations; and • not submit work that has been researched and written by another person.
Part 1
HomeGardens Ltd is a manufacturer of garden fertiliser, and has two main products: VegieGrow and FlowerFood. At present, the company’s management accountant allocates overhead using a factory-wide application rate based on direct labour costs. However, consideration is now being given to implementing an activity-based costing (ABC) system. Two activity cost pools have been developed as follows:
Cost pool Activity undertaken Cost driver
1. Processing Acquisition and processing Number of kilograms of raw materials processed 2. Packaging Products packaged ready Number of units for delivery to customers packaged
The following annual cost and activity data is available for the company’s operations:
VegieGrow FlowerFood
Direct labour costs $180,000 $420,000 Kilograms processed 192,000 kg 320,000 kg Units packaged 90,000 units 110,000 units
Total annual overhead cost is estimated at $960,000. Overhead cost allocated to the processing activity cost pool is $640,000, and $320,000 is allocated to the packaging activity cost pool.
a) Calculate the overhead rate using the traditional (factory-wide) approach and allocate the total overhead costs to the two products using this method. (1.5 Marks)
b) Calculate the overhead rates using the ABC approach and allocate the total overhead costs to the two products using this method. (2.5 Marks)
c) Explain how an organisation should select an appropriate “cost driver” for an activity cost pool. (1 Mark)
Tudor Designs sells window treatments (shades, blinds and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.
Commercial Residential Revenues $300,000 $480,000 Direct materials costs $ 30,000 $ 50,000 Direct labour costs 100,000 300,000 Overhead costs 85,000 215,000 150,000 500,000 Operating income (loss) $85,000 ($ 20,000)
The financial controller is concerned about the residential products line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two products lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed:
Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $ 85,000 Hours of travel Setup time 90,000 Number of setups Supervision 60,000 Direct labour costs
Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 350 250
Requirements: a) Compute the activity-based overhead rates for each of the three cost pools and determine the overhead cost assigned to each product line. ( 3 Marks) b) Compute the operating income for each product line, using the activity-based overhead rates. (1 Mark) c) What do you believe the controller should do? (1 Mark)
Part 2
Oceania Ltd makes three models of tasers. Information on the three products is given below: Spotter Snooker Stunner Sales $ 300,000 $ 500,000 $ 200, 000 Variable expenses 150,000 200,000 145,000 Contribution margin 150,000 300,000 55,000 Fixed expenses 120,000 230,000 95,000 Net income $ 30,000 $ 70,000 $ ( 40,000)
Fixed expenses consist of $ 300,000 of common costs allocated to the three products based on relative sales and additional fixed expenses of $30,000 (spotter), $ 80,000 (Snooker) and $ 35,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The other expenses would be eliminated if a model is phased out. The managing director of the company feels the Stunner line should be discontinued to increase the company’s net income.
a) Compute current net income for Oceania Ltd. (0.5 Marks) b) Compute net income by product line and in total for Oceania Ltd if the company discontinues the Stunner product line. (Hint: Allocate the $ 300,000 common costs to the two remaining product lines based on their relative sales). (2 Marks) c) Should Oceania eliminate the Stunner product line? Why or why not? (1 Mark) QUESTION 2
Tasman Company Ltd manufactures tennis rackets. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and costs data for the month of July 2017 are as follows:
Production data – Tennis rackets Units Percentage complete Work in process units, July 1 500 60% Units started into production 1,000 Work in process units, July 31 600 40% Cost data – Tennis rackets Work in process, July 1 Materials $750 Conversion costs 600 $ 1,350 Direct materials 2,400 Direct labour 1,580 Manufacturing overhead 1,240
Requirements: a) Calculate the following.
1) The equivalent units of production for materials and conversion costs. (1 Mark) 2) The unit costs of production for materials and conversion costs. (1.5 Marks) 3) The assignment of costs to units transferred out and in process at the end of the accounting period. (1 Mark) b) Prepare a production cost report for the month of July for the tennis rackets. (3 Marks)
Part 3 (Word Limit: 1500+/-100) (10 Marks)
Note: students are strongly urged to read reviewed academic journal articles and provide at least three academic journal articles in the reference. Please provide relevant examples and where appropriate use graphs to illustrate your answers.
Carefully consider the following two quotations:
Quotation 1: “Corporate scandals (i.e. Enron, Tyco, and WorldCom) in the early 2000s have demonstrated how accounting and auditing failures have resulted in corporate failures, destroying investor confidence, and harming capital markets. In response to these corporate accounting scandals, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) in 2002, to protect investors from possible future scandals as well as to prevent fraudulent financial reporting by companies. In fact, these corporate failures are not peculiar to just one country or a geographical region, and they are not limited to a time frame; they occur in various countries at varying time intervals, as past harsh experiences have shown. A quick Google search produces a comprehensive list of such scandals across countries and intervals. In the context of Australia, Garry et al. (2014) reported that these corporate scandals were cyclical over four rounds of corporate failures (i.e. early 1960s, late 1980s, early 1990s and the early 2000s), and that these corporate scandals were followed by a series of changes in governance (i.e. legislative reforms relating to financial reporting or auditing) to prevent their recurrence. For example, in response to the crisis in the early 2000s, the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 Cwlth (CLERP 9 Act 2004) was enacted, which included increased disclosure requirements, tightened requirements for continuous disclosure, enhanced accountability, increased penalties for non-compliance, and increased auditors’ independence (Australian Securities and Investments Commission, 2012). The adoption of corporate governance principles and the enactment of regulations to improve investor confidence in the marketplace were hastily put into place all around the world” (Uyar, Gungormus and Kuzey, 2017, p. 10).
The above quotation is taken from: Uyar, Ali; Gungormus, Ali Haydar; and Kuzey, Cemil (2017). “Impact of the Accounting Information System on Corporate Governance: Evidence from Turkish Non-Listed Companies”, Australasian Accounting, Business and Finance Journal, 11(1), 9-27.
Quotation 2: One of the key factors affecting the efficient use of resources, the increase of shareholders confidence in the managers of the company, the success in achieving objectives and economic efficiency is the system of corporate governance by which a company is managed and controlled. We cannot talk about a culture of corporate governance without thinking of the criteria of transparency, of responsibility in ensuring the accuracy of data from financial reports. Transparency is a prerequisite of good communication between the company and the interested parties (Man and Ciurea, 2016, p.41).
The above section is taken from: Man, Mariana and Ciurea, Maria (2016) “Transparency of Accounting Information in Achieving Good Corporate Governance. True View and Fair”. Social Sciences and Education Research Review, 3(1), pp 41-62).
Required: Critically examine the significance of accounting information and financial reporting in enhancing corporate governance in business organisations.
NB: 1) Understanding the notions of financial reporting and corporate governance in business is more important than an enlargement with the advanced maths in many articles.
2) Do not plagiarise articles content-instead cite, or better yet, paraphrase it and always give full references. This shows that your opinions are informed opinions.
Plagiarism, Cheating & Collusion
Plagiarism, cheating or collusion is regarded as a serious breach of the University's academic standards.

Editable Microsoft Word Document
Word Count: 1990 words including Calculation work and References

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