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Question 1: (Total 9 Marks) Indooroopilly Corpora...

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Question 1: (Total 9 Marks) Indooroopilly Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266 400 and budgeted machine-hours were 18 500. Actual factory overhead was $287 920 and actual machine-hours were 19 050. Before disposition of under/over-applied overhead, the cost of goods sold was $560 000 and ending inventories were as follows: Direct materials $60 000 WIP 190 000 Finished goods 250 000 Total $500 000 Required: a. Determine the budgeted factory overhead rate per machine-hour. b. Compute the over/under-applied overhead. c. Prepare the journal entry to dispose of the variance using the write-off to cost of goods sold approach. d. Prepare the journal entry to dispose of the variance using the proration approach. Question 2: (Total 10 Marks) Lewis Auto Company manufactures a part for use in its production of motor cars. When 10 000 items are produced, the costs per unit are: Direct materials $12 Direct manufacturing labour 60 Variable manufacturing overhead 24 Fixed manufacturing overhead 32 Total $128 Monty Company has offered to sell Lewis Auto Company 10 000 units of the part for $120 per unit. The plant facilities could be used to manufacture another part at a savings of $180 000 if Lewis Auto accepts the supplier's offer. In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated. Required: a. What is the relevant per unit cost for the original part? b. Which alternative is best for Lewis Auto Company? By how much? Question 3: (Total 7 Marks) Clinton Company sells two items, product A and product B. The company is considering dropping product B. It is expected that sales of product A will increase by 40% as a result. Dropping product B will allow the company to cancel its monthly equipment rental costing $100 per month. The other existing equipment will be used for additional production of product A. One employee earning $200 per month can be terminated if product B production is dropped. Clinton's other fixed costs are allocated and will continue regardless of the decision made. A condensed, budgeted monthly income statement with both products follows: Product A Product B Total Sales $10 000 $8000 $18 000 Direct materials 2500 2000 4500 Direct labour 2000 1200 3200 Equipment rental 300 2600 2900 Other allocated overhead 1000 2100 3100 Operating profit $4200 $100 $4300 Required: Prepare an incremental analysis to determine the financial effect of dropping product B. Should the company drop Product B? Question 4: (Total 10 Marks) Kirkland Company manufactures a part for use in its production of hats. When 10 000 items are produced, the costs per unit are: Direct materials $0.60 Direct manufacturing labour 3.00 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 1.60 Total $6.40 Mike Company has offered to sell to Kirkland Company 10 000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9000 if Kirkland accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated. Required: a. What is the relevant per unit cost for the original part? b. Which alternative is best for Kirkland Company? By how much? Question 5: (Total 4 Marks) Read one recent (year 2000 onwards) online available/accessible journal article on ?social, economic, and/or environmental sustainability? and summarise it your own words (300-350 words). You must provide a valid link to the article for the marker to access and review (students responses will be randomly reviewed by the marker using the link provided for accuracy and relevance). If the article could not be accessed by the marker using the link you have provided, no marks will be awarded for this question.

 

Paper#2012 | Written in 18-Jul-2015

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