Accting 7014 Management Accounting : Assessment Answers
Questions:
Your assignment consists of different question styles including discussion questions, reports, exercises, problem questions and spreadsheet questions. It assesses learning outcomes as listed in the assignment rationale below.
Identify the five major cost elements in the cost of a product or service. Define each and give examples.
Give five examples of products where more detailed recording of costs is required and five examples of products where averaging techniques may be appropriate.
Question 3 Cost concepts (4 marks)
The monthly cost of renting a manufacturing plant is
A a prime cost and an inventoriable cost.
B a prime cost and a period cost.
C a prime cost and a product cost.
D a conversion cost and a period cost
E a conversion cost and an inventoriable cost.?Explain your answer.
Spreadsheet. See the Spreadsheet Advice PDF in Interact2 Resources and the examples in your textbook.
See the requirements within the spreadsheet template below.
Question 5 Cost concepts (8 marks)
Should overtime payments be treated as direct labour, or as overhead? Explain.with 2 example .
Required:
Show the Materials Control account in the ledger for April and a general journal entry to record the cost materials purchased during April.
Required:
T-account for Accrued Payroll for March and general journal entries for recording salaries and wages earned by factory employees during March.
Required:
(a) Calculate Smith’s gross pay for the week.
(b) Indicate the sum to be treated as indirect labour.
Your employer is contemplating changing the existing traditional costing systems used in the business to adopt activity based costing (ABC). See your text page 81.
Prepare a business report outlining the traditional costing system and evaluate arguments for and against ABC. Use the Internet as a resource. The following resources will help you prepare and format your report:eportfolio.csu.edu.au/pebblepad/viewasset.aspx
Or see this resource. unilearning.uow.edu.au/report/4b.html
S2 has 20 employees, P1 30 employees and P2 30 employees.
The services of S2 are allocated 30% to S1, 20% to P1 and 50% to P2.
Answers:
Answer to Question 1:
Certain cost elements are associated with the cost of producing a cost or service, five of which are described along with their examples as follows:
Materials:
The costs of materials are tangible goods required to produce a product. The material costs could be in the form of direct or indirect material costs. The direct costs of materials are the traceable and quantifiable costs incurred in production (Chenhall & Moers, 2015). On the other hand, the indirect materials are untraceable or it is not cost effective. For instance, an organisation manufacturing artisan crafts might take into account wood as a direct material, as the amount of wood required could be quantified easily. On the contrary, it would not be cost-effective to track glue and other fasteners in this fashion. Thus, these items could be adjudged as indirect materials.
Labour:
The amount incurred in the manufacturing process in the form of wages and salaries to the staffs is considered as the cost of labour. The cost of labour could be segregated into both direct labour and indirect labour. Wages are considered as a major part of direct labour cost, which are paid to the staffs involved with physical handling of the product (Dekker, 2016). The cost of indirect labour comprises of other wages and salaries involved in production; however, they could not be traced to units. For instance, the direct labour costs constitute of the wages for line staffs and material handlers. The indirect labour costs would include the salaries of plant supervisors, engineers of quality control and workers associated with factory maintenance.
Overhead:
The overhead costs are associated with production; however, it could not be segregated as direct materials or direct labour. In other words, the overhead costs consider all indirect material and labour costs along with untraceable costs. Some of the popular overhead costs include manufacturing rents, insurance costs and depreciation on factory equipment. In case of small-sized businesses, majority of the cost of production comprises of overhead cost (Drury, 2013). However, effective cost management practices need to be adopted for handling the overhead costs.
Direct expenses:
The expenses, which could be identified along with charging to the centre directly, are considered as direct expenses. These expenditures are charged directly to the products as portion of prime cost (Farhan, 2013). Some common forms of direct expenses include excise duty, royalty and cost involved in designing a particular pattern.
Period costs:
Period costs are those costs, which are expensed immediately they are incurred. Some of the common period costs involved with small businesses comprise of sales commissions, advertising costs, owners’ salaries and depreciation for non-factory equipment. In addition, period costs might minimise net income and thus, the management might intend to keep track of the same to check if these costs are not higher in contrast to the expected ones.
Answer to Question 2:
The products that require more detailed recording of costs include the raw materials, fuel, packaging, labour and factory depreciation. On the contrary, the products that require averaging techniques constitute of office supplies, advertising, sales commissions, office depreciation and research and development (Schuster, 2015).
Answer to Question 3:
The monthly cost of renting a manufacturing plant is a conversion cost and an inventoriable cost, as it is a portion of the manufacturing overhead costs. It could not be considered as a part of direct labour or prime cost, since it is not directly associated with the cost of production.
Answer to Question 4:
|
In the Books of Tendulkar Manufacturing Co. | ||
|
Manufacturing Statement | ||
|
for the period ended 30 September 3017 | ||
|
Particulars |
Amount (in $) |
Amount (in $) |
|
Raw Materials Purchased |
5,00,000 | |
|
Add: Opening Stock of Raw Materials |
1,10,000 | |
|
Less: Closing Stock of Raw Materials |
16,000 |
5,94,000 |
|
Productive Labour |
1,30,000 | |
|
Inward Charges on Raw Materials |
22,000 | |
|
Prime Cost |
7,46,000 | |
|
Manufacturing Overhead: | ||
|
Manufacturing Expense |
60,000 | |
|
Depreciation on Machinery |
12,000 | |
|
Factory Salaries |
2,00,000 | |
|
Add: Accrued Salaries |
11,000 |
2,11,000 |
|
Insurance |
3,000 | |
|
Add: Prepaid Insurance |
750 |
3,750 |
|
Rates |
6,750 | |
|
Factory Cost |
10,39,500 | |
|
Add: Opening Work-in-Process | ||
|
Material |
15,000 | |
|
Labour |
9,000 | |
|
Overhead Expenses |
6,000 |
30,000 |
|
10,69,500 | ||
|
Less: Closing Work-in-Process | ||
|
Material |
7,000 | |
|
Labour |
5,000 | |
|
Overhead Expenses |
3,000 |
15,000 |
|
Cost of Goods Manufactured |
10,54,500 | |
|
Add: Opening Stock of Finished Goods |
70,000 | |
|
Less: Closing Stock of Finished Goods |
25,000 | |
|
Cost of Goods Sold |
10,99,500 | |
Manufacturing statement for the year (Formula view):
Income statement for the year (Normal view):
|
In the Books of Tendulkar Manufacturing Co. | ||
|
Manufacturing Statement | ||
|
for the period ended 30 September 3017 | ||
|
Particulars |
Amount (in $) |
Amount (in $) |
|
Sales of Finished Goods |
17,00,000 | |
|
Cost of Goods Sold |
10,99,500 | |
|
Gross Profit |
6,00,500 | |
|
Operating Expenses: | ||
|
Advertising |
12,000 | |
|
Audit Fee |
3,000 | |
|
Discount Expense |
6,000 | |
|
Discount Revenue |
(4,000) | |
|
Carriage Outwards |
5,000 | |
|
Insurance |
1,000 | |
|
Less: Prepaid Insurance |
250 |
750 |
|
Light and Power |
12,000 | |
|
General Expenses |
23,000 | |
|
Rates |
2,250 | |
|
Office Salaries |
1,00,000 | |
|
Add: Accrued Office Salaries |
700 |
1,00,700 |
|
Sales Commission |
40,000 | |
|
Total Operating Expenses |
2,00,700 | |
|
Operating Income |
3,99,800 | |
|
Tax Expense |
50,000 | |
|
Net Profit |
3,49,800 | |
Income statement for the year (Formula view):
Answer to Question 5:
In the words of Fullerton, Kennedy & Widener (2014), overtime payments are the amount incurred for the overtime worked in excess of the normal rate of wages. It is treated as cost of indirect labour and such payment is incorporated in the cost of manufacturing overhead. For instance, a labour works for 48 hours each week at a rate of $8 per hour. In a specific week, if the labour works for 52 hours and the payment of each excess hour is $12, the apportionment of labour cost would be as follows:
|
Particulars |
Amount (in $) |
|
Direct labour (52 x 8) |
416 |
|
Manufacturing overhead (4 x 4) |
16 |
|
Total cost |
432 |
At the time the overtime wages are spent on chance, as the staffs are working overtime in contrast to necessity, it could be considered as a strenuous job or a rush job. This is because it needs additional work and thus, overtime payments could be adjudged as overhead with the necessary treatment (Hemmer & Labro, 2016). For instance, it is assumed that a press operator in a plant makes $12 each hour for normal 40 working hours. During a specific worker, the operator has worked for 45 weeks and the overtime premium is $6 per hour. The labour cost would be apportioned as follows:
|
Particulars |
Amount (in $) |
|
Direct labour (12 x 45) |
540 |
|
Manufacturing overhead (6 x 5) |
30 |
|
Total cost |
570 |
Answer to Question 6:
In this case, the GST rate is assumed as 10% on all purchases.
Material control and other associated ledger accounts (Normal view):
|
Material Control Account | |||||
|
Dr. |
Cr. | ||||
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
1st April |
To Balance b/d |
40,000 |
By Work-in-Process Account |
1,00,000 | |
|
To Accounts Payable Account |
80,000 |
31st April |
By Balance c/d |
20,000 | |
|
1,20,000 |
1,20,000 | ||||
|
Accounts Payable Account | |||||
|
Dr. |
Cr. | ||||
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
By Material Control Account |
80,000 | ||||
|
31st April |
To Balance c/d |
88,000 |
By GST Clearing Account |
8,000 | |
|
88,000 |
88,000 | ||||
|
GST Clearing Account | |||||
|
Dr. |
Cr. | ||||
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
To Accounts Payable Account |
8,000 |
By Balance c/d |
8,000 | ||
|
8,000 |
8,000 | ||||
Material control and other associated ledger accounts (Formula view):
Journal entry for recording the cost of materials purchased (Normal view):
|
Journal Entry: | |
|
Material Control Account………Dr |
$ 80,000 |
|
GST Clearing Account…………….Dr |
$ 8,000 |
|
To Accounts Payable Account |
$ 88,000 |
Journal entry for recording the cost of materials purchased (Formula view):
Answer to Question 7:
Accrued payroll and salaries and wages ledger accounts (Normal view):
|
Accrued Payroll Account | |||||
|
Dr. |
Cr. | ||||
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
To Salary and Wages Account |
50,000 |
1st March |
By Balance b/d |
20,000 | |
|
31st March |
To Balance c/d |
8,000 |
By Salary and Wages Account |
38,000 | |
|
58,000 |
58,000 | ||||
|
Salary and Wages Account | |||||
|
Dr. |
Cr. | ||||
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
To Bank Account |
50,000 |
By Accrued Payroll Account |
50,000 | ||
|
To Accrued Payroll Account |
38,000 |
By Salary and Wages Account |
38,000 | ||
|
88,000 |
88,000 | ||||
Accrued payroll and salaries and wages ledger accounts (Formula view):
Journal entries for recording salaries and wages (Normal view):
|
Journal Entry: | |
|
Salary Account……..Dr |
10,000 |
|
Wages Account……..Dr |
28,000 |
|
To Accrued Payroll Account |
38,000 |
|
Accrued Payroll Account…..Dr |
50,000 |
|
To Salary and Wages Account |
50,000 |
|
Salary and Wages Account.....Dr |
50,000 |
|
To Bank Account |
50,000 |
Journal entries for recording salaries and wages (Formula view):
Answer to Question 8:
Gross pay and amount of indirect labour of J. Smith (Normal view):
|
Particulars |
Units |
|
Working hours of J. Smith |
48 |
|
Normal Working hours |
40 |
|
Production time(in hours) |
35 |
|
Idle time (in hours) |
5 |
|
Overtime work on April 20 |
2 |
|
Overtime work on April 22 |
6 |
|
Premium for 1st three hours |
50% |
|
Premium for more than three hours |
100% |
|
Normal wage rate |
$ 22 |
|
Amount paid for normal working hours |
$ 1,056 |
|
Overtime rate for 1st three hours |
$ 11 |
|
Overtime rate after first three hours |
$ 22 |
|
Total overtime amount for J. Smith |
$ 143 |
|
Gross pay of J. Smith |
$ 1,199 |
|
Amount of indirect labour |
$ 253 |
In this case, the amount of idle time and overtime premium has been considered as a part of indirect labour to arrive at the overall amount of the same.
Answer to Question 9:
With the help of costing systems, an organisation would be able to ascertain the cost associated with a specific product or service for revenue generation. The two most prevalent costing systems include traditional costing and activity-based costing. The traditional costing primarily engages in delegating manufacturing overhead depending on the volumes of cost driver. The drivers of cost take into account the machine hours, direct material and direct labour hours. On the other hand, activity-based costing intends to apportion the manufacturing cost of a specific product in compliance with activities for production. Thus, it is crucial for the business managers to gain an insight of the merits and drawbacks of each costing system to fulfil the needs of their business organisations.
The traditional costing system indicates the apportionment of cost related to manufacturing overheads for production. It is utilised for delegation of costs associated with factory overhead depending on the produced units. This method is feasibility when there is lack of availability of time and the impact on production activities is minimal. The external usage is relatively easier for ascertaining the product valuation (Noordin et al., 2014). Activity-based costing enables in depicting accurate overview of the cost of a product. However, its use is supplementary in most of the business organisations. This costing system helps in ascertainment of activity in manufacturing a product and allocation of cost in production activity (Becker et al., 2015). The initiation of this costing system is to overcome the loopholes of the conventional costing system, since it uses drivers of cost for apportionment of indirect cost of the manufacturers.
The costing accuracy in ABC costing is greater, as the costs are assigned to products based on production. Such technique helps in eradicating the apportionment of irrelevant costs for a particular product. In addition, this costing system is easy to interpret for the internal management and standards for overhead costs. However, this system might be time-consuming as well as confusing in absence of lack of adequate knowledge on the part of the business personnel. This is because it takes into account both managerial costs and administration costs at the same time (Otley & Emmanuel, 2013).
Answer to Question 10:
Direct method (Normal view):
|
Particulars |
Material and Labour |
Percentage |
Total of Production Department |
Indirect Costs |
Percentage |
Total of Production Department |
|
P1 |
2,00,000 |
53.33% |
93.33% |
90,000 |
48.91% |
86.96% |
|
P2 |
1,50,000 |
40.00% |
70,000 |
38.04% | ||
|
S1 |
10,000 |
2.67% |
6,000 |
3.26% | ||
|
S2 |
15,000 |
4.00% |
18,000 |
9.78% | ||
|
Total |
3,75,000 |
1,84,000 |
|
Apportionment of Cost: | |||||
|
Particulars |
Material and Labour |
Allocation from Service Department |
Indirect Costs |
Allocation from Service Department |
Total |
|
P1 |
2,00,000 |
43,750 |
90,000 |
42,667 |
3,76,417 |
|
P2 |
1,50,000 |
58,333 |
70,000 |
54,857 |
3,33,190 |
Direct method (Formula view):
|
Step Method: | ||||
|
Particulars |
P1 |
P2 |
S1 |
S2 |
|
Material and labour |
2,00,000 |
1,50,000 |
10,000 |
15,000 |
|
Indirect costs |
90,000 |
70,000 |
6,000 |
18,000 |
|
Total |
2,90,000 |
2,20,000 |
16,000 |
33,000 |
|
Add: Apportionment of S2 department |
18,194 |
13,802 |
1,004 | |
|
Total |
3,08,194 |
2,33,802 |
17,004 | |
|
Add: Apportionment of S1 department |
9,669 |
7,335 | ||
|
Total |
3,17,863 |
2,41,137 | ||
Step method (Formula view):
Reciprocal services method (using algebraic equation):
The cost of simultaneous equation method would be used to solve the provided problem. The original cost of the service departments are provided as follows:
S1 = $16,000
S2 = $33,000
After obtaining the share from the service departments’ distribution:
S1 = $16,000 + 30% S2 [Equation 1]
S2= $33,000 + [20/(20+30+30)] S1
S2 = $33,000 + 25% S1 [Equation 2]
By placing the value of S2 in Equation 1,
S1 = 16,000 + 30% (33,000 + 25% S1)
S1 = 16,000 + 9,900 + 0.075 S1
S1 = 25,500 + 0.075 S1
S1 – 0.075 S1 = 25,500
0.925 S1 = 25,500
S1 = 25,500/0.925
S1 = $28,000
Similarly, by placing the value of S1 in Equation 2,
S2 = 33,000 + 25% (16,000 + 30% S2)
S2 = 33,000 + 4,000 + 0.075 S2
S2 – 0.075 S2 = 37,000
0.925 S2 = 37,000
S2 = 37,000/0.925
S2 = $40,000
Distribution summary:
|
Particulars |
P1 |
P2 |
S1 |
S2 |
|
Material and labour |
2,00,000 |
1,50,000 |
10,000 |
15,000 |
|
Indirect costs |
90,000 |
70,000 |
6,000 |
18,000 |
|
Total |
2,90,000 |
2,20,000 |
16,000 |
33,000 |
|
Add: Distribution of S2 |
40,000 x 20% = 8,000 |
40,000 x 50% = 20,000 |
(40,000 x 30%) = 12,000 |
(40,000) |
|
Add: Distribution of S1 |
28,000 * [30/(30+30+20)] = 28,000 * 37.50% = 10,500 |
28,000 * [30/(30+30+20)] = 28,000 * 37.50% = 10,500 |
(28,000) |
28,000 * 25% = 7,000 |
|
Total |
3,08,500 |
2,50,500 |
- |
- |
Reciprocal services method (Normal view):
|
Reciprocal Method: | ||||
|
Particulars |
Allocation of S1 |
Percentage |
Allocation of S2 |
Percentage |
|
P1 |
30 |
37.50% |
20 |
20.00% |
|
P2 |
30 |
37.50% |
50 |
50.00% |
|
S1 |
30 |
30.00% | ||
|
S2 |
20 |
25.00% | ||
|
Total |
80 |
100 | ||
|
Apportionment of Cost: | ||||
|
Particulars |
P1 |
P2 |
S1 |
S2 |
|
Material and labour |
2,00,000 |
1,50,000 |
10,000 |
15,000 |
|
Indirect costs |
90,000 |
70,000 |
6,000 |
18,000 |
|
Total |
2,90,000 |
2,20,000 |
16,000 |
33,000 |
|
Add: Allocation of S2 |
8,000 |
20,000 |
12,000 |
(40,000) |
|
Total |
2,98,000 |
2,40,000 |
28,000 |
(7,000) |
|
Add: Allocation of S1 |
10,500 |
10,500 |
(28,000) |
7,000 |
|
Total |
3,08,500 |
2,50,500 |
- |
- |
References:
Becker, S. D., Wald, A., Gessner, C., & Gleich, R. (2015). The Role of Perceived Attributes for the Diffusion of Innovations in Cost Accounting: The Case of Activity-Based Costing. Comptabilité-Contrôle-Audit, 21(1), 105-137.
Chenhall, R. H., & Moers, F. (2015). The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, 1-13.
Dekker, H. C. (2016). On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31, 86-99.
Drury, C. M. (2013). Management and cost accounting. Springer.
Farhan, M. A. (2013). Cost & Management Accounting.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7), 414-428.
Hemmer, T., & Labro, E. (2016). Productions and Operations Management & Management Accounting.
Noordin, R., Zainuddin, Y., Mail, F., & Mail, R. (2014). Strategic Management Accounting: State-of-the-Art. Malaysian Journal of Business and Economics (MJBE), 1(1).
Otley, D., & Emmanuel, K. M. C. (2013). Readings in accounting for management control. Springer.
Schuster, P. (2015). Cost and Management Accounting. In Transfer Prices and Management Accounting (pp. 1-4). Springer International Publishing.
Buy Accting 7014 Management Accounting : Assessment Answers Online
Talk to our expert to get the help with Accting 7014 Management Accounting : Assessment Answers to complete your assessment on time and boost your grades now
The main aim/motive of the management assignment help services is to get connect with a greater number of students, and effectively help, and support them in getting completing their assignments the students also get find this a wonderful opportunity where they could effectively learn more about their topics, as the experts also have the best team members with them in which all the members effectively support each other to get complete their diploma assignments. They complete the assessments of the students in an appropriate manner and deliver them back to the students before the due date of the assignment so that the students could timely submit this, and can score higher marks. The experts of the assignment help services at urgenthomework.com are so much skilled, capable, talented, and experienced in their field of programming homework help writing assignments, so, for this, they can effectively write the best economics assignment help services.
