ACC00724 (Accounting for Managers), S2, 2015

QUESTION 4 (5 MARKS)

Estimated or budgeted cost and operating data for three companies for 2015 are given below:

                                                                  Company X                 Company Y            Company Z

Units to be produced                                 10,000                                     8,000            12,000

Machine- hours                                         50,000                                   10,000              6,000

Direct labour- hours                                  12,000                                   16,000            36,000

Direct labour cost                                      $48,000                                $64,000            $150,000

Factory overhead cost                               150,000                                  40,000                60,000

Predetermined overhead rates are calculated on the following bases in the three companies:

                                                                  Overhead rate based on

Company X                                                Machine-hours

Company Y                                                Direct labour-hours

Company Z                                                Direct labour cost

Required:

a.   Calculate the predetermined overhead rate to be used in each company during 2015.

b.   Assume that three jobs are worked on during 2015 in company X. Machine-hours recorded by jobs are:           job 23, 21,000 hours; job 29, 16,000 hours; and job 31, 11,000 hours. How much overhead will the          company apply to work in process? If actual overhead costs total $149,000 for 2015, will overhead be    over- or under-applied? By how much?

QUESTION 5 (5 MARKS)

Tony’s Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:

                                       Men's                                       Boys'

            Selling Price       $28.80            Selling Price       $24.00

            Variable Cost     $20.40            Variable Cost     $16.80

Fixed costs are $38,400.

Required:

a.     What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts?

b.     What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts? 

QUESTION 6 (5 MARKS)

The Wilson River Company uses a job order cost system.

The table below provides selected data on the three jobs worked on during the company’s first month of operations:

                                                                                   Job 101           Job 102           Job 103           

Units of product in the job                                            2,000               1,800               1,500

Direct labor hours worked                                             1,200               1,000                  600

Direct material cost                                                        3,200               3,980               1,200

Direct labor cost                                                                                    6,000               5,000            3,000

Actual overhead costs of $5,880 were incurred during the month. Manufacturing overhead is

applied to production on the basis of direct labor-hours at a predetermined rate of $2 per hour.

Jobs 101 and 102 were completed during the month, job 103 was not completed.

Required:

a.      Calculate the amount of manufacturing overhead that would have been charged to each job

         during the month.

b.      Calculate the unit cost of jobs 101 and 102

c.      What is the balance of Work-in-Process account at the end of the month?