ACC
Test 2
ACC 320
Hi students
Welcome to your Test 2 ACC 320. I am uploading the test you have till Wednesday night to submit. Make sure you
1. Submit on time [as indicated on your system]
2. Do not copy because when identified your marks will be very low.
3.Read the questions with care before answering
4. All questions must be hand written [ typed answer gets very low marks]
5. The graph question should be done on graph paper and it should be constructed not sketched
6. Cleanliness or neatness will be rewarded.
7. in theory questions you should provide your own examples not just copy from PPT.
If you follow these simple instructions you will score good marks. I am posting the question now but your attendance will depend on your submission of the test . If you are late for submission, I will consider you absent for the test and your paper will be marked on 80% not 100%
Wish you all the best and good luck. NEXT WEEK IS NORMAL CLASS
Costing Accounting
Answer all questions and show your workings
Question 1 : Function-based costing
JIM Ltd has identified the following overhead costs and cost drivers for next year
|
Expenses /cost |
Expected ( cost) $ |
|
Selling cost |
45,000 |
|
Administration Cost |
35,000 |
|
Manufacturing overhead cost |
108,000 |
|
Utilities cost [store] |
12,000 |
|
Cost Drivers: |
|
|
Product X |
Machine Hours |
|
Product Y |
Direct Labour Hours |
|
Direct Labour Hours |
12,000 hours |
|
Machine Hours |
18,000 hours |
The following is the cost of 2 products made by the company:
|
|
Product X |
Product Y |
|
Direct materials |
$4200 |
$2600 |
|
Direct Labor Hour Rate |
$10.50 |
$16.50 |
|
Units completed |
150 |
200 |
|
DLH (hours) |
560 |
420 |
|
Machine hours |
660 |
240 |
|
Actual Cost |
$ 3200 |
42100 |
REQUIRED
1. Calculate the Predetermined Rate [PR] for product X using machine hours and product Y using direct labour hours
2. What is the applied cost assigned to product X and product Y?
3. Calculate the total product cost using FBC for both products
4. Calculate the unit cost for each product
5. Is the applied cost for product X under or over-applied? What effect this will have on the cost of goods sold and the Net income ?
6. Is the applied cost for product Y under or over-applied? What effect this will have on the cost of goods sold and the Net income
[30 marks]
Question 2
Project Selection
Dragon Products Company is considering two projects. The projects’ cash flows are as follows:
|
EXPECTED NET CASH FLOWS |
||
|
YEAR |
PROJECT A |
PROJECT B |
|
0 |
($10300) |
(12,500) |
|
1 |
1700 |
2870 |
|
2 |
1930 |
2450 |
|
3 |
2500 |
4700 |
|
4 |
2800 |
4575 |
|
5 |
4200 |
3450 |
|
Discount Rate for both pojects = 6.8% |
REQUIRED
1. Find the Payback Period [PBP] of both projects
2. What is the Discounted PBP of both projects ?
3. Calculate the Net Present Value of the two projects and decide which one is better?
4. What is the profitability index of both products ? What is the function of PI in project selection?
5. What are the IRR of the projects ? Which of the projects is the best using IRR as a criteria? Why?
6. Why is sunk cost not considered when deciding about selecting a project? Which cost is considered and why?
[40 marks]
QUESTION 3
The G0-Magic company uses job-order costing system. The following data relate to the first quarter of the company’s fiscal year
a. Materials requisitioned for production cost $250,000 [ direct materials and indirect materials are proportioned by 6:2].
b. Repairs costs incurred are $75,000
c. Raw Materials purchased on cash $150,000
d.
|
Salaries |
$ |
|
Direct Labour |
125,000 |
|
Supervisors salaries [factory |
50,000 |
|
Marketing cost |
45,000 |
|
Admin Salaries |
80,000 |
e. Selling commission cost incurred is $60,000
f. Insurance for factory $70,000. Admin insurance is 40% of the factory insurance
g. Rent expense for the factory is $50,000 and the rent for the shop is $45,000
h. Supplies expense for the factory incurred during the month is $15,000 [on account]
i. Use the information below to find the Predetermined Rate using machine hours as the cost driver
|
|
$ |
|
Estimated Overhead |
76,000 |
|
Budgeted machine hours |
21,000 hours |
|
Actual machine hours |
30,000 hours |
|
Actual overhead |
142,000 |
j. Journalize the applied cost used in section (i)
k. Sold goods costing $400,000 for $650,000
l. Depreciation for equipment of factory for the period was $16700
m. Depreciation for the building [store] was $8,500
n. $45,000 Cash was paid for the suppliers
REQUIRED
1. Prepare Journal entries for the quarter
2. Is production cost underallpied or overapplied?
[Marks 30 ]