Assessment Task – Tutorial Questions Assignment
Unit Name: Management Accounting
Assignment: Tutorial Questions Assignment (Individual)
Due: Wednesday 21st October 2020 at 11.59pm
Word Limit: Maximum 800 words ( work on the answer as final exam and don’t worry about words limit)
Assignment Requirment:
• For each question, formulas and data info must be given before performance and presentation of calculations as presented in the interactive tutorial solutions. Formulas and presentation of calculation can be copied and pasted from given formulas and solutions in Black Board Tutorial Materials.
• No Financial Calculator, Excel Calculations and No Excel files are accepted. You are allowed only one attempt to submit your assignment. Do it very carefully, no wrong assignment claim is accepted and no other attempt to be provided.
• The assignment must be in MS Word format, no spacing, 12-pt Arial font and 2 cm margins on all four sides of your page with appropriate section headings and page numbers. All wrong file for other unit, blank file, files in PDF or other formats will be given zero mark. A template of assignment cover page is attached for your usage.
• Please work on the questions like you answer questions in your final exam.
• Reference sources must be cited in the text of the report and listed appropriately at the end in a reference list using Harvard referencing style.
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit
Unit Learning Outcomes Assessed:
1. Outline the differences between fixed costs, variable costs, and mixed costs by categorising various costs of an entity into these categories
2. Calculate fixed and variable costs, contribution margin, contribution margin ratio, break-even point in sales dollars and units, and target sales volume in dollars and units
3. Appraise how pricing decisions are made
4. Calculate both return on investment and residual income and explain how each method is use
5. Apply the concept of costs to various costing systems including justification of cost and system choices
6. Implement systems to plan and control business operations
The questions to be answered are:
Answering Guidelines: There is no reference needed nor word limit applied for any question in the Assignment. However, brief and concise answers which use the knowledge and infromation from your lecture notes and interactive tutorial sessions are expected.
Question 1 - (7 marks)
Star Limited, a management consultancy firm, has operating hours fluctuate from week to week. Its utilities costs and operating hours for the past six weeks are as follow:
Week Operating Hours Utilities Cost ($)
1 42 630
2 55 705
3 37 427
4 33 485
5 39 552
6 41 637
Required:
1. a) Use the high-low method to estimate the cost behaviours for the company’s Utilitiescost,assuming that variable costs vary in proportion to the hours of operation. Express the cost behaviour in a cost function (Y = a + bX).
2. b) Star Limited is expected to be operated for 45 hours in next week. Predict the company’s total utilities cost for the week
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Question 2 - (11 marks)
Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current year, there were no balances in work in process or finished goods inventories. The following estimates were included in the budget for the current year:
Total estimated manufacturing overhead. $300 000
Total estimated machine hours $40 000
During January, the firm worked on the following production jobs:
B81: 1 600 machine hours
J76: 2 400 machine hours
M49: 1 000 machine hours
During January, job numbers B81 and J76 were completed, and job number B81 was sold. The actual manufacturing overhead incurred during January was $30 000.
Required:
a) Calculate the company’s predetermined overhead rate for the year.
b) How much manufacturing overhead was applied to production during January?
c) Calculate the overapplied or underapplied overhead for January.
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Question 3 - (7 marks)
Kool Inc. uses a weighted-average process costing system and has one production department. All materials are introduced at the start of manufacturing; in contrast, conversion cost is incurred uniformly throughout production. The company had respective work in process inventories on 1 May and 31 May of 62,000 units and 70,000 units, the latter of which was 40 per cent complete. The production supervisor noted that Kool completed 100,000 units during the month.
Costs in the 1 May work in process inventory were subdivided as follows: materials, $40,000; conversion, $90,000. During May, Kool charged production with $300,000 of material and $710,000 of conversion, resulting in a material cost per equivalent unit of $2.
Required:
a) Determine the number of units that Kool started during May.
b) Compute the number of equivalent units with respect to conversion cost.
c) Determine the conversion cost per equivalent unit.
d) Compute the cost of the 31 May work in process inventory.
e) What account would have been credited to record Kool's completed production?
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Question 4 – (7 marks)
The data below relate to the standards for the sole product of Marshal Corporation in August:
Standard direct material price
$1.40 per kg
Standard quantity of direct material
20 kg per unit
Standard direct labour rate
$17.00 per hour
Standard direct labour hour
5 hours per unit
Actual results for November are as follows:
Actual output
1,100 units
Direct material purchased
36,000 kg @ $1.76 per kg
Direct material used
19,000 kg
Direct labour
5,200 hours @ $18 per hour
Required:
Calculate the following variances, indicating whether each variance is favourable or unfavourable:
(i)Direct material price variance
(ii) Direct material quantity variance
(iii) Direct labour rate variance
(iv) Direct labour efficiency variance
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Question 5 – (7 marks)
Tiara Corporation manufactures and sells scarfs. Price and cost data for the company are provided below:
Selling price per unit $50
Variable costs per unit
Manufacturing costs
Direct material 15
Direct labour 8
Variable manufacturing overhead 12
Variable selling and administrative costs 3
Annual fixed costs
Fixed manufacturing overhead $2,640,000
Fixed selling and administrative costs $1,560,000
Forecasted annual sales (units) 500,000
Required:
a) What is Tiara Corporation’s break-even point in dollars?
b) How many units would Tiara Corporation have to sell in order to earn a before tax profit of $480,000?
(c) What is the company’s margin of safety (in dollars)?
(d) If the company’s direct material costs increase by 20 percent and the fixed selling and administrative costs decrease by 20 percent, how many units will the company have to sell next year to reach its break-even point?
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Question 6 – (11 marks)
EBP Ltd is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation.
During the past 15 months, a new product has been under development that allows users handheld access to email and video images. EBP named the product ‘Wireless Wizard’ and has been quietly designing two models: Standard and Enhanced. Development costs have amounted to $181 500 and $262 500, respectively. The total market demand for each model is expected to be 40 000 units, and management anticipates being able to obtain the following market shares: Standard, 25 per cent; Enhanced, 20 per cent. Forecast data follow:
Standard Enhanced
Projected selling price $375.00 $495.00
Production cost per unit
Direct material 42.00 67.50
Direct labour 22.50 30.00
Variable overhead 36.00 48.00
Fixed overhead 54.00 72.00
Marketing and advertising per product line 195 000 300 000
Sales salaries per product line 85 500 85 500
Sales commissions* 10% 10%
*Calculated on the basis of sales dollars
Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with EBP paying $34 500 for an in-depth market study.
Required:
a) Calculate the per unit contribution margin for both models.
b) Which of the data above should be ignored in making the product introduction decision? For what reason?
c) Prepare a financial analysis and determine which of the two models should be introduced.
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