cost accounting

St Mary’s University

School of Graduate Studies, MBA

Group Assignment (30%)

Submission date: February 25, 202

Course: Accounting and Finance for Managers

Group Assignment 2

1. The following data belong to a company for a period.

· Materials used $80,000 (60% for DM)

· Labor used 400,000(50% for DL)

· FOH cost (others) 40,000 (Heat, Light, Power)

Instruction: Compute:

A. Prime cost

B. Total FOH cost

C. Conversion cost

D. Production cost (mfg)

E. Direct cost

F. Indirect cost

2. AXY Company produces two products, the ABB and the ACC. The ABB is a high-volume item totaling 50,000 units annually. The ACC is a low-volume item totaling only 10,000 units per year. Each product requires 4 hour of direct labor for completion. Therefore, total annual direct labor hours are 240,000. Expected annual manufacturing overhead costs are $1,600,000. The cost allocation base is direct labor hour. The direct materials cost per unit is $80 for the ABB and $60 for the ACC. The direct labor cost is $24 per unit for each product.

AXY Company’s expected annual overhead costs of $1,600,000 relate to two activities—machine setups, machining.

Activity	Cost Driver	Total expected overhead cost	Total expected use of driver
Machine setup	Number of setup	$600,000	3000
Machining	Machine hours	1,000,000	100,000
Cost Driver	ABB	ACC
Number of setup	1000	2000
Machine hours	60,000	40,000

Required:

a. Allocate overhead cost in traditional costing system and ABC costing system.

b. Determine unit cost under traditional costing and ABC costing system and comment on it.

3. A Bike manufacturer manufactures gear shifters used in one of its products.The unit product cost of this part is:

Variable cost	$19
Depreciation of special equipment	2
Allocated general overhead	4
Unit product cos	$25

The special equipment has resale value of $20,000.The total amount of general overhead, which is allocated on the basis of direct labor hours, would be unaffected by this decision.The $25 unit product cost is based on 10,000 parts produced each year.An outside supplier has offered to provide the 10,000 parts at a cost of $20 per part. Required:Should we accept the supplier’s offer? Why/why not?

4. Data related to the expected sales of a Products for ABC Inc. for the current year is follows:

Products Unit Selling Price Unit Variable Cos

Automobile ETB 200,000 ETB 160,000

The estimated fixed costs for the current year are ETB 20,000,000.

Instructions:

a) Determine the estimated units of sales of the product necessary to reach the break-even point for the current year.

b) Assume the company targets income before tax ETB 4,000,000. Calculate total units to be sold to achieve target profit.

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