Student Number: (enter on the line below)
Student Name: (enter on the line below)
TRIMESTER 2, 2021
Assessment Weight: 50 total marks
• All questions must be answered by using the answer boxes provided in this paper.
• Completed answers must be submitted to Blackboard by the published due date and time.
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
Assessment Design – Adapted Harvard Referencing
Holmes has been implementing as a pilot program using a revised/adapted Harvard approach to referencing. The following guidelines apply:
• Reference sources in assignments are limited to sources which provide full text access to the source’s content for lecturers and markers.
• The Reference list should be located on a separate page at the end of the essay and titled: References.
• It should include the details of all the in-text citations, arranged alphabetically A-Z by author surname. In addition, it MUST include a hyperlink to the full text of the cited reference source.
P Hawking, B McCarthy, A Stein (2004), Second Wave ERP Education, Journal of Information Systems Education, Fall, http://jise.org/Volume15/n3/JISEv15n3p327.pdf
• All assignments will require additional in-text reference details, which will consist of the surname of the author/authors or name of the authoring body, year of publication, page number of content, paragraph where the content can be found.
“The company decided to implement a enterprise wide data warehouse business intelligence strategies (Hawking et al, 2004, p3(4)).”
Non-Adherence to Referencing Guidelines
Where students do not follow the above guidelines:
1. Students who submit assignments which do not comply with the referencing guidelines will receive a 10% penalty.
2. Students who submit assignments in which the citations are “fake” will be reported for academic misconduct.
Question 1 (7 marks)
Job cost sheets show the following information:
a) Which job(s) are still in process at the end of January, and what is the cost of this job(s)? (1 mark)
b) Which job(s) were completed at the end of February, and what is the cost of this completed job(s)? (2 marks)
c) What are the balances in the work in process inventory, finished goods inventory, and cost of goods sold for March? (1.5 marks)
d) How does job costing in a service organisation differ from job costing in a manufacturing organisation? (2.5 marks)
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ANSWER: ** Answer box will enlarge as you type
Question 2 (11 marks)
a) Discuss the circumstances that would require a business to change from traditional costing to ABC costing? (2 marks)
b) Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing:
i) How much overhead would be allocated to each unit under the traditional allocation method? (2 marks)
ii) How much overhead would be allocated to each unit under activity-based costing? (5 marks)
iii) Would you recommend a change to ABC costing for this company? Justify your answer (2 marks)
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Question 3 (7 marks)
a) Why do successful companies tend to use the bottom-up approach to establish a master budget? (2 marks)
b) Green Tea’s data show the following information for the financial year, beginning July 2020:
July Aug. Sept. Oct. Nov.
Estimated sales (units) 25,000 25,000 27,000 27,500 28,000
Sales price per unit $31 $31 $31 $31 $31
Direct labour per unit $1.75 $1.75 $1.50 $1.50 $1.50
Labour rate per hour $21 $21 $24 $24 $24
New machinery will be added in September. This machine will reduce the labour required per unit and increase the labour rate for those employees qualified to operate the machinery.
Finished goods inventory is required to be 20% of the next month’s requirements. Direct material requires 2.5 kg per unit at a cost of $5 per kg. The ending inventory required for direct materials is 20% of the next month’s needs. In July, the beginning inventory is 3,750 units of finished goods and 13,125 kg of materials.
i) Prepare a production budget for the first quarter of the year (i.e. July – September). (2 marks)
ii) Prepare a direct materials budget for the first quarter of the year (i.e. July – September), to include total direct material purchases ($). (3 marks)
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Question 4 (7 marks)
a) Ally Jones, manager of the Vodafone sales team, has the following budget for her department:
Billings – long distance $350 000
Billings – tele card $70 000
Billings – toll free $260 000
Required: What type of responsibility centre best describes her department, and why? (2 marks)
b) A manufacturing company, Mani Co, has two divisions: Division EX and Division YX. Both divisions make a single standardised product. Division EX makes component TEX, which is supplied to both Division YX and external customers.
Division YX makes product YAS using one unit of component TEX and other materials. It then sells the completed product YAS to external customers. To date, Division YX has always bought component TEX from Division EX.
The following information is available:
Division EX Division YX
Selling price 40 96
Direct materials: Component TEX (40)
Direct materials (12) (17)
Direct labour (6) (9)
Variable overheads (2) (3)
Selling and distribution costs (4) (1)
Contribution per unit before fixed costs ________________________________________16
Annual fixed costs $500,000 $200,000
Annual external demand (units) 160,000 120,000
Capacity of plant 300,000 130,000
Division EX charges the same price for component TEX to both Division YX and external customers. However, it does not incur the selling and distribution costs when transferring internally.
Division YX has just been approached by a new supplier who has offered to supply it with component TEX for $36 per unit. Prior to this offer, the cheapest price which Division YX could have bought component TEX for from outside the group was $41 per unit.
It is head office policy to let the divisions operate autonomously without interference at all.
i) What is the minimum transfer price for component TEX, as per the general transfer pricing rule? (1 mark)
ii) What is the minimum and maximum transfer price which the two divisions can use to negotiate the price for component TEX? (1 mark)
iii) Discuss the problems which will arise if the transfer price remains unchanged. (2 marks)
iv) Advise the divisions on a suitable alternative transfer price for component TEX. (1 mark)
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Question 5 (11 marks)
Smarty Inc. Ltd produces two different products with the following monthly data:
P1 P2 Total
Selling price per unit $100 $12
Variable cost per unit $ 60 $ 3
Expected unit sales 21,000 14,000 35,000
Sales mix 60 percent 40 percent 100 percent
Fixed costs $750,000
Assume the sales mix remains the same at all levels of sales.
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) If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary but may be helpful in confirming your answer.) (2 marks)
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Question 6 (7 marks)
Ezy Fixit 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 90 skilled labour hours and 80 unskilled labour hours. The current employees are paid a guaranteed minimum wage of $525 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 Ezy Fixit 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 Ezy Fixit 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 differ from long-term decisions of a business and provide examples to support your answer. (3 marks)
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END OF FINAL ASSESSMENT
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