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ACCT6004 Management Accounting Assessment 2 Sample

Assignment Brief

Length - (1,800 words +/- 10%)

Learning Outcomes

a) Identify and analyses ethical and organizational issues confronting contemporary management accountants.

b) Categories and identify the nature of various types of costs, cost objects and cost behaviours and use cost estimation techniques to develop cost functions.

c) Apply cost accounting techniques to calculate the cost of a range of cost objects, as well as analyse costs.

d) Apply cost information to planning, control and decision-making.

e) Critically evaluate the relevance of both quantitative and qualitative costing information to management decision making.

Submission - by 11:55pm AEST/AEDT Sunday of Module 5.1 (week 9)
Weighting - 30%
Total Marks -100 marks 

Context:

The purpose of this assessment is to establish the skills needed in the workplace for costing products and services using the appropriate processes and tools and applying analytical processes to construct accounting systems and models using workplace tools. Each question uses realistic data and the professional practices
similar to that found in workplaces.


Submission Instruction

Due Date/Time: 11:55pm Sydney time (AEST/AEDT) on Sunday 18th April 2021 Please aim to complete this assignment a few days prior to the due date to allow for any unforeseen circumstances such as illness, holidays, family issues, work commitments etc. You may submit the assignment early if you have other commitments around the due date.

All times listed are local (Sydney) times. For assignment help Please ensure you factor in any time difference between Sydney and your location when submitting your assignment, to avoid incurring any late submission penalties.

Please note the following important instructions relating to the assignment format and Submission:

• Note that this is an individual piece of assessment. You will need to work individually to prepare a response to ALL of the questions listed in the assessment.

• You must submit your assessment in one Excel file. Any submissions in any other file formats will not be accepted.

• Each question (including all sub-questions) should be presented in a single worksheet. As there are 5 questions in this assessment, your Excel file should contain 5 worksheets in total.

• You cannot scan handwritten responses and submit. All answers must be typed in Excel.

• Your assessment needs to be submitted though the submission links available on the Blackboard. Assignments submitted via e-mail (or any other method) will NOT be accepted.

• Make sure that you upload the correct file. If you discover (after the due date) that you have uploaded a draft version or the wrong file completely, you will not be allowed to submit a second file.

- The typo in Question 2-part C has been rectified in this version.

Question 1: Support Department cost allocation

Diamond Trust Bank has two support departments: The Human Resources Department and the Computing Department. The bank also has two operation departments that service customers directly: The Deposits Department and the Loan Department. The usage of the two support departments' output is provided below:

 
Providerofservice
Usersofservice
HumanResources
Computing
HumanResources
-
20%
Computing
20%
-
Deposits
50%
60%
Loans
30%
20%

 

The costs in the support departments and operation departments for the is presented below:

Departments
BudgetedCosts
HumanResources
$72,000
Computing
$120,000
Deposits
$300,000
Loans
$500,000

 

Required

a) Report the total costs of operation departments (the Deposits Department and the Loan Department) after the support departments' (the Human Resources Department and the Computing Departments) costs have been allocated using each of the following methods:

i) Direct Method
ii) Step Down Method (The bank allocates the costs of the Human Resources Department first.)
iii) Reciprocal Method

b) Diamond Trust Bank evaluates the performance of the operation department managers on the basis of how well they manage their total costs, including allocated costs. As the manager of the Loan Department, which allocation method would you prefer? Why?

Question 2: Job Costing

ACT Manufacturing Ltd. is highly automated company that uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
 

Computer-hours
85,000
Manufacturingoverheadcost
$1,530,000

 

The company’s cost records revealed the following actual cost and operating data for the year:

Computer-hours
60,000
Manufacturingoverheadcost
$1,350,000
Inventoriesatyear-end:
 
Rawmaterials
$600,000
Workinprocess
$230,000
Finishedgoods
$1,756,000
Costofgoodssold
$2,800,000

 

Required

a) What is ACT Manufacturing Ltd.’s predetermined overhead rate for the year?

b) Calculate the company’s under applied or over applied overhead for the year.

c) Assume that overapplied or underapplied overhead allocated on a pro rata basis to the ending balances in work in process, finished goods and cost of sales. The ending balance of these accounts are reported below. Prepare journal entries to show the allocation.
 

Workinprocess
$43,200
Finishedgoods
$280,000
CostofGoodsSold
$756,000

d) How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated on a pro rata basis rather than closed directly to Cost of Goods Sold? Explain the reason for this difference.

Question 3: Process Costing System

Techsafe Company manufactures car seats. Each car seat passes through the assembly department and testing department. When the assembly department finishes work on each car seat, it is immediately transferred to testing department. The process-costing system at Techsafe Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process.

The table below shows the relevant data for the assembly department for July 2020.
 

 
Physical Units
(Car Seats)
Direct Material Costs
Conversion Costs
 
Work in process, 1July2020(*)
 
5,000
 
$1,250,000
 
$402,750
StartedduringJuly
20,000
 
 
2020
 
 
 
Completedduring
22,500
 
 
July2020
 
 
 
Workinprocess,31
2,500
 
 
July2020(**)
 
 
 
Costsaddedduring
 
$4,500,000
$2,337,500
July2020
 
 
 

Note:
(*) Degree of completion: 100% for direct materials and 60% for conversion cost (**) Degree of completion: 100% for direct materials and 70% for conversion cost

Required

a) Determine the cost per equivalent unit for the Techsafe Company’s direct materials and conversion costs, and the total unit cost for the current period, under the FIFO method. Show all workings.

Determine the cost per equivalent unit for the Techsafe Company’s direct materials and conversion costs, and the total unit cost for the current period, under the Weighted Average method. Show all workings

Question 4: Cost Volume and Profit (CVP) analysis

Veritas Software is a leading Australian based accounting software manufacturer. It develops software packages for accounting firms located in Australia and overseas. Veritas is planning to release an upgraded version of their software soon. The company divides its clients into two groups: Local firms (those firms that operate in Australia) and Global firms (those firms that operate in overseas). Although the same physical product is provided to each client group, significant differences exist in selling prices and variable marketing costs: 

 
Localfirms
Globalfirms
Sellingprice(perunit)
$195
$115
Variablecosts(perunit)
ManufacturingMarketing
 
$15
$50
 
$15
$20

The fixed costs of Veritas Software are $16,500,000. The planned sales mix for the upgraded software in units is 60% Local firms and 40% Global firms.

Required

a) What is the break-even point in units for Veritas Software’s upgraded software if the planned sales mix is attained?
b) If the planned sales mix is attained, what will be the operating income when 180,000 units are sold?
c) If Veritas Software wants to generate operating income of 5,500,000, how many units do they need to sell to Local and Global firms each? Assume that the planned sales mix is attained.

Question 5 Activity Based Costing

MaxPak is a designer of high-quality backpacks and purses. Each design is made in small batches. Each summer, MaxPak comes out with new designs for the backpack and for the purse. The company uses these designs for a year, and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:
  

MaxPak
Budget forcostsandActivities
For theYearEnded30June2020
Directmaterials—purses
$379,290
Directmaterials—backpacks
412,920
Directmanufacturinglabour—purses
98,000
Directmanufacturinglabour—backpacks
120,000
Setup
65,930
Shipping
73,910
Design
166,000
Plantutilitiesandadministration
243,000
Total
$1,559,050

 Other Budget information follows:

 
Backpacks
Purses
Numberofbags
6,050
3,350
Hoursofproduction
1,450
2,600
Numberofbatches
130
60
Numberofdesigns
2
2

Required:

a) Identify the cost hierarchy level for each cost category.
b) Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
c) Calculate the budgeted cost per unit of cost driver for each cost category.
d) Calculate the budgeted total costs and cost per unit for each product line.
e) Explain how you could use the information in requirement 4 to reduce costs.

Solution

Answer 1

Part a

ii) Step down method
In step down method the cost of Human resource department shall be allocated first to
Cost of Human resource department is $ 72000

After allocation of Human resource then the second will be computing department
Cost of Computing department= 120000+14400 = $ 1,34,400.00

Part iii

In Reciprocal method the cost of computing allocated to Human resource shall be distribute again So, in this case $26880 allocated to Human resource from computing will be distributed again till it reduces to zero.

Part B

As a Manager we would always choose that method which provides most accurate measure of cost. Thus by evaluating all the three methods above it can be seen that Reciprocal method gives the most accurate evaluation of cost and thus will provide the most accurate performance evaluation
 

Answer 2

Part a

Part b

Part c

Part d

The company profit has got reduced due to over applied overhead. The cost of goods sold will increase and thus the profit margin will get reduce, thus the company should ignore over application of overhead cost
 

Answer 3

 

Answer 4

Part a


Part b

Part c


Answer 5

 

Part a

he cost hierarchy level of each cost category:
Direct Material
Direct Manufacturing cost
Plant Utilities and administrative
Design
Shipping
Setup

Part b

Part c

Part d

 

Part e

Use of ABC activity based costing gives the true view of cost allocation on the basis of cost driver and thus it eliminated traditional approach of cost allocation
 

 

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