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ACC - Cost Management Assignment #2




Question;Very Important InstructionsHow to save and submit your completed assignment:1. Put your answers in a separate word document.2. Submit the answers only. I.E. Do not resubmit the question.3. Submit answers in Micro Soft Word document.4. For the true false and multiple choice questions, list in column format, thenumber of the question followed by the one best answer. No marksawarded for explanation or calculations for true and false or themultiple choice questions.5. Completed assignment to be uploaded to the Assignment #1 Submissionarea posted under Week 5. Ensure that you upload the correct file asyou only have one attempt to upload your assignment. The fileuploaded will be the one that is graded.6. Unreadable or unattached files are considered a non submission. Lateassignments will not be accepted.File Naming:1.Assign the file name in the following manner: Student last name, first Name Ass #2.Also you must place you full name on the top of the word document3. Note: There is a 10% deduction on each submission when theseinstructions are not followed.File Uploading Instructions1. Open the Submit Assignment 1 icon and upload yourcompleted assignment.2. Use the Browse button at the bottom of the page to selectyour Word document for uploading13. Click UploadQuestion #1 ACTIVITY-BASED COSTING (20 marks)Markham Inc. designs and builds custom windows for luxury homes. Most of thewindows are custom made but occasionally the company does mass production onorder. Its budgeted manufacturing overhead costs for the year 2006 are as follows:Overhead Cost PoolsPurchasingProduction (cutting, milling, finishing)Setting up machinesInspectingUtilitiesTotal budget overhead costsAmount$ 180,000400,000135,000160,000300,000$1,175,000For the last three years, the company has been charging overhead to products on thebasis of machine hours. For the year 2006, 100,000 machine hours are budgeted.Tommy Barry, owner-manager of Markham Inc. recently directed her accountant toimplement the activity-based costing system she has repeatedly proposed. At Tommysrequest, the accountant and production foreman identify the following cost drivers andtheir usage for the previously budgeted overhead cost pools.Overhead Cost PoolsPurchasingProduction (cutting, milling, finishing)Setting up machinesInspectingUtilitiesActivity Cost DriversNumber of ordersDirect labour hoursNumber of setupsNumber of inspectionsSquare metres occupiedTotalDrivers50080,0001,0005,00075,000During this month, the company received an order for 50 window sets from a housingdevelopment contractor. The accountant prepares cost estimates for producingcomponents for 50 window sets so Tommy can submit a contract price per window set tothe contractor. The following data for the production of 50 window sets is accumulated:Direct materials$120,0002Direct labourMachine hoursDirect labour hoursNumber of purchase ordersNumber of machine setupsNumber of inspectionsNumber of square metres occupied$135,00012,00010,00050803807,000Instructions(a) Calculate the predetermined overhead rate using traditional costing with machinehours as the basis.(b) Calculate the manufacturing cost per window set under traditional costing.(c) Calculate the manufacturing cost per window set under the proposed activity-basedcosting.Question #2 ABC COST DRIVERS (10 marks)Ajax Corporation manufactures all-terrain vehicles (ATV) in its Ajax, Ontario plant.InstructionsIdentify an appropriate cost driver that may be used to assign each of the following coststo each line of ATVs. Cost drivers may be used more than once. Cost drivers are listedbelow.Cost DriversMachine hoursNumber of partsNumber of finished vehiclesEngineering hoursSquare metreageNumber of setupsNumber of employees/direct labour hoursNumber of testsNumber of ordersCostCost Driver1.Assembling__________________________2.Engineering__________________________3.Machining__________________________4.Ordering and receiving__________________________5.Painting__________________________6.Machine setup__________________________7.Storing__________________________38.Supervising__________________________9.Packing and shipping__________________________10.Inspecting and testing__________________________4Question #3 MULTIPLE CHOICE (20 marks)Instructions: Designate the best answer for each of the following questions.___1.Looker Hats is planning to sell 600 felt hats, and 700 will beproduced during June.Each hat requires metre of felt and hour of direct labour. Felt costs$3.00 per metre and employees of the company are paid $20 perhour. How much is the total amount of budgeted direct labour for June?a. $3,000b. $48,000c. $3,500d. $2,400____ 2.Orr Corporations manufacturing costs for August when productionwas 800 units appears below:Direct material$10 per unitDirect labour$4,800Variable overhead4,000Factory amortization3,000Factory supervisory salaries2,000Other fixed factory costs1,000How much is the budgeted manufacturing cost for a month when 900units are produced?a. $23,800b. $18,900c. $24,900d. $25,650____ 3.Lewis Production is planning to sell 220 boxes of bricksand produce 200 boxes of bricks during May. Each box of bricks requires20 kilograms of brick mix and a half hour of direct labour. Brick mix costs$5 per 100 kilograms and employees of the company are paid $12.00 perhour. Manufacturing overhead is applied at a rate of 120% of direct labourcosts. Lewis Production has 600 kilograms of brick mix in beginninginventory and wants to have 800 kilograms of brick mix in endinginventory. What is the total amount to be budgeted for manufacturingoverhead for the month?a. $1,440b. $2,880c. $2,400d. $1,200____ 4.Hargrow, Inc. makes and sells a single product, buckets. Ittakes 30 ounces of plastic to make one bucket. Budgeted production ofbuckets for the next three months is as follows: August 90,000 units,September 75,000 units, October 65,000 buckets. The company wants tomaintain monthly ending inventories of plastic equal to 10% of thefollowing month's production needs. On August 31st, 195,000 ounces ofplastic were on hand. The cost of plastic is $0.03 per ounce. How much isthe ending inventory of plastic to be reported on the companys balancesheet at September 30?a. $195,0005b. $5,850c. $6,750d. $7,500____ 5. Razmataz Company makes and sells umbrellas. The company is in theprocess of preparing its Selling and Administrative Expense Budget for thelast half of the year. The following budget data are available:ItemSales commissionsShippingAdvertisingAmortization on officeequipmentOther operating expensesVariable Cost Per Unit Sold$0.60$1.20$0.30Monthly Fixed Cost$3,000$4,000$0.35$34,000Expenses are paid in the month incurred. If the company has budgeted tosell 2,000 umbrellas in October, how much is the total budgeted variableselling and administrative expenses for October?a. $41,000b. $4,600c. $45,900d. $4,900____6. Grant Company estimates its sales at 80,000 units in the first quarterand that sales will increase by 8,000 units each quarter over the year.They have, and desire, a 25% ending inventory of finished goods. Eachunit sells for $25. 40% of the sales are for cash. 70% of the creditcustomers pay within the quarter. Theremainder is received in the quarterfollowing sale. Cash collections for the third quarter are budgeted ata.$1,356,000.b.$1,968,000.c.$2,364,000.d.$2,736,000.____7.At January 1, 2006, Jake, Inc. has beginning inventory of 3,000surfboards. Jake estimates it will sell 14,000 units during the first quarterof 2006 with a 10% increase in sales each quarter. Jakes policy is tomaintain an ending inventory equal to 20% of the next quarters sales.Each surfboard costs $140 and is soldfor $200. How many units shouldJake produce during the first quarter of 2006?a.14,080b.14,000c.16,800d.14,2006____ 8.Nunnally Manufacturing Company has furnished the followinginformation which occurred during May:Accounts Payable balance at April 30Purchases on account during MayCash payments for materials purchased in AprilCash payments for materials purchased in May$ 29,000150,00029,000135,000The accounts payable account is used only for direct materials. Howmuch will Nunnally report as accounts payable on the balance sheet atthe end of May?a.$21,000b.$103,000c.$8,000d.$15,000____9.Harrah Company provided the following information for the monthof October:Beginning cash balanceCash receiptsCash disbursements$ 35,000460,000485,000Harrahs policy is to keep a minimum end of the month cash balance of$30,000. How much will Harrahs need to borrow during October?a.b.c.d.____10.$20,000$25,000$10,000$0Each production worker can produce 4 wooden chairs per hour.During the month of June, Chairs, Inc. has forecasted sales of 100,000chairs. The beginning inventory was 10,000 chairs, and desired endinginventory is 2,500 chairs. How many hours of direct labour must bebudgeted to meet production needs?a.25,375b.25,000c.23,125d.24,6257Question #4 True or False (15 marks)1. The usual starting point in budgeting is to make a forecast of cash receipts andcash disbursements.2. Budgets are used for planning rather than for control of operations.3. A continuous or perpetual budget is one that covers a 12-month period, but isconstantly adding a new month onto the end of the 12-month period as thecurrent month is completed.4. Control involves developing objectives and preparing the various budgets toachieve those objectives.5. One of the distinct advantages of a budget is that it can help to uncover potentialbottlenecks before they occur.6. The participative budget can be a very effective control device in an organization.7. Sales forecasts are drawn up after the cash budget has been completed becauseit is only at that time that the funds available for marketing are known.8. A production budget is to a manufacturing firm as a merchandise purchasesbudget is to a merchandising firm.9. The direct materials to be purchased for a period can be obtained by subtractingthe desired ending inventory of direct materials from the total direct materialsneeded for the period.10. In companies that have "no lay-off" policies, the total direct labour cost for abudget period is computed by taking the total direct labour hours needed to makethe budgeted output of completed units and multiplying them by the direct labourwage rate.11. In the merchandise purchases budget, the required purchases (in units) for aperiod can be determined by subtracting the beginning merchandise inventory (inunits) from the budgeted sales (in units).12. The beginning cash balance is not included on the cash budget since the cashbudget deals exclusively with cash flows rather than with balance sheet amounts.13. When using the participative budget approach, it is generally best for topmanagement to accept all budget estimates without question in order to minimizeadverse behavioural responses from employees.14. The effect of responsibility accounting is to personalize the accounting system.15. Zero-based budgeting requires managers to justify all costs of programs as ifthese programs were being proposed for the first time.8Question #5 SALES AND PRODUCTION BUDGET (15 marks)Jennings Corporation manufactures two models of tires: XL and DL. Based on thefollowing production and sales data for August 2006, prepare (a) a sales budget and (b)a production budget.Estimated inventory, August 1Desired inventory, August 31Expected sales in unitsUnit sales priceQuestion #6XL3503757,500$150DL1501255,200$130STANDARD COSTS (20 Marks)Lido Company's standard and actual costs per unit for the most recent period,during which 400 units were actually produced, are given below:StandardMaterials:Standard: 2 metres at $1.50 per metreActual: 2.1 metres at $1.60 per metreDirect Labour:Standard: 1.5 hrs at $6.00 per hrActual: 1.4 hrs at $6.50 per hrVariable Overhead:Standard: 1.5 hrs at $3,40 per hrActual 1.4 hrs at $3.10 per hrTotal unit costActual$3.00$3.369.009.105.10$17.104.34$16.80Required:From the above information, compute the following variances. Show whether thevariance is favourable (F) or unfavourable (U):a) Materials price varianceb) Materials quantity variancec) Direct labour rate varianced) Direct labour efficiency variancee) Variable overhead spending variancef) Variable overhead efficiency variance


Paper#39407 | Written in 18-Jul-2015

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