Question1
a) List the four areas in which standards of ethical conduct exist for management accountants in Australia. For each standard, give an example that demonstrates compliance with that standard.
b) Classify each cost item of Ripon Printers into one of the following business functions of the value chain: (1) R&D, (2) design, (3) production, (4) marketing, (5) distribution or (6) customer service
Cost Items:
a. cost of customer order forms
b. cost of paper used to manufacture of books
c. cost of paper used in packing cartons to ship books
d. cost of paper used in display at national trade show
e. depreciation of trucks used to transport books to college bookstores
f. cost of the wood used to manufacture paper
c) Isabelle Pty Ltd uses a budgeted factory overhead rate to apply overhead to production. The following data are available for the year 2010.
Budgeted Actual
Factory overhead $675,000 $716,000
Direct labour costs $450,000 $432,000
Direct labour-hours 12,500 DLHs 13,325 DLHs
Required:
a. Determine the budgeted factory overhead allocation rate based on direct labour-hours.
b. Compute the amount of under-or-overallocated overheads.
c. Describe the alternative ways to dispose of under-or-overallocated overheads costs.
Question 2
a) Explain the difference between a Product cost and a Period cost. What potential problems does an inaccurate classification of product and period costs cause?
b) How is it possible that a raw material such as a glue might be considered as an indirect material for one furniture manufacturer and as a direct material for another furniture manufacturer?
c) Evans Inc. had the following activities during 2012:
Direct Materials:
Beginning inventory $40,000
Purchases $123,200
Ending inventory $20,800
Direct manufacturing labor $32,000
Manufacturing overheads $24,000
Beginning work in progress inventory $1,600
Ending work in progress inventory $8,000
Beginning finished goods inventory $48,000
Ending finished goods inventory $32,000
Required:
a. What is the cost of direct materials used during 2012?
b. What is the cost of goods manufactured for 2012?
c. What is cost of goods sold for 2012?
d. What amount of prime costs was added to production during 2012?
e. What amount of conversion costs was added to production during 2012?
Question 3
Super Product Ltd prepares monthly income statements. Data relating to the months of March and April 2012 are given below:
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March 2012
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April 2012
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Beginning Inventory
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Nil
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150 Units
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Production
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500 Units
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400 Units
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Sales
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350 Units
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520 Units
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Variable Cost Data:
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Manufacturing cost per unit produced
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$100
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$100
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Operating Cost (Non-manufacturing Costs) per unit sold
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$30
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$30
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Fixed Cost Data:
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Manufacturing Costs
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$20 000
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Operating Costs (Non-manufacturing Costs)
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$6 000
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Selling Price per unit
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$240
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Stocks are valued on First In First Out (FIFO) basis.
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Required:
a. Compute operating profit for March and April 2012 using absorption costing.
b. Compute operating profit for March and April 2012 using variable costing.
c. Reconcile and explain why the income was different each month using the two methods. Show computations.
d. Assume that the performance of the top manager is evaluated and rewarded largely on the basis of reported profit. Which costing method would the manager prefer? Why?