ACCT2002 Cost Analysis for Decision Making Assignment

Reference no: EM132660947

ACCT2002 Cost Analysis for Decision Making - Curtin University

QUESTION ONE

BlueScope Steel Limited, an Australian flat product steel producer, closes its books and prepares financial statements at the end of each month. The statement of cost of goods sold for September follows:

BlueScope Steel Limited
Statement of Cost of Goods Sold
For the Month Ended September 30
Beginning Finished Goods Inventory	$ 50,000
Cost of goods manufactured	790,000
Cost of goods available for sale	840,000
Less: Ending Finished Goods Inventory	247,000
Cost of goods sold	$ 593,000

Additional Information:

• Of the utilities, 80 percent relates to manufacturing the steel; the remaining 20 percent relates to the sales and administrative function.
• All rent is for the office building.
• Property taxes are assessed on the manufacturing plant.
• Of the insurance, 60 percent is related to manufacturing the steel, the remaining 40 percent is related to the sales and administrative functions.
• The company manufactured 7,825 tons of steel during September.

The inventory balances at October 31, follow:

Materials inventory	$ 23,000
Work-in-Process Inventory	$ 220,000
Finished goods Inventory	$ 175,000

Depreciation expense includes the following:

Manufacturing plant	$ 20,000
Manufacturing equipment	$ 30,000
Office equipment	$ 4,000
	$ 54,000

BlueScope is subject to 30% company tax.

BlueScope Steel Limited
Pre-closing Account Balances
October 31.
Cash and Marketable securities	54,000
Accounts and notes receivable	210,000
Property, plant, and equipment (net)	1,140,000
Accounts, notes, and taxes payable	70,000
Bonds Payable	582,000
Paid-in capital	100,000
Retained earnings	930,000
Sales	1,488,000
Cost of goods sold	1,112,000
Purchases of direct materials	510,000
Total Manufacturing Cost	1,100,000
Direct Labor	260,000
Indirect factory labor	90,000
Office salaries	122,000
Sales salaries	42,000
Utilities	135,000
Rent	9,000
Property tax	60,000
Insurance	20,000
Depreciation	54,000
Office supplies expense	6,000

REQUIRED:

A. Prepare a Schedule of Cost of Goods Manufactured for October.

B. Prepare a Schedule of Cost of Goods Sold for October.

C. Prepare an Income Statement for the month of October.

QUESTION TWO

Avant Equipment Australia is a family business manufacturing replacement rotary sweeper brooms for the large sweeper trucks that clear leaves and rubbish from the city streets. The business is, to some degree, seasonal, with the largest demand during and just preceding the autumn and winter months. Since there are so many different kinds of sweeper brooms used by its customers, Avant Equipment makes all of its brooms to order.

The company has been analyszing its overhead accounts to determine fixed and variable components for planning purposes. Below are data for the company's janitorial costs over the last two years.

Year	Month	Janitorial costs	Janitorial work days	Number of units produced
2018	January	$ 3,840	21	1,150
	February	$ 3,648	20	1,090
	March	$ 4,128	21	1,220
	April	$ 3,456	19	950
	May	$ 4,320	21	1,250
	June	$ 4,032	22	1,190
	July	$ 2,784	17	770
	August	$ 2,688	16	710
	September	$ 3,840	21	1,080
	October	$ 3,359	20	990
	November	$ 2,584	16	710
	December	$ 2,965	17	680
2019	January	$ 3,764	20	1,100
	February	$ 3,641	20	1,025
	March	$ 3,899	21	1,220
	April	$ 4,226	23	1,310
	May	$ 4,695	23	1,390
	June	$ 4,116	21	1,060
	July	$ 3,112	17	850
	August	$ 3,287	19	790
	September	$ 3,956	19	990
	October	$ 3,265	18	840
	November	$ 2,897	17	770
	December	$ 2,666	16	750
2020	January		17	1,010
	February		16	950
	March		20	1,210
	April		14	1,350
	May		21	1,280
	June		22	1,120

The number of janitorial work days varies from month to month due to the number of weekdays, holidays, days of vacation and sick leave taken in the month. The number of units produced in a month varies depending on demand and the number of workdays in a month.

Avant Equipment is in the process of budgeting monthly janitorial costs for 2020. The assumption is that in some way janitorial costs is related to either janitorial work days or number of units produced.

REQUIRED:

A. Develop a regression that Avant Equipment should use (ie y = a + bx) and explain why it is the appropriate regression to use, using the appropriate statistical tools.

B. Using the regression you developed in (A), predict the janitorial cost for the 6 months of 2020 (round your answer to whole numbers).

QUESTION THREE

Medina Corp produces bicycle helmets. Each helmet is sold for $100. Planned and actual production was the same for May and June. The cost of the beginning inventory in May is the same as the cost of helmets in May. Data for the helmets for May and June follows:

	May		June
Sales	500	units	700	units
Production	700	units	560	units
Beginning inventory	60	units
Costs:
Variable Manufacturing	$ 17,500		$ 14,000
Fixed Manufacturing	$ 14,000		$ 14,000
Variable Operating	$ 10,000		$ 12,000
Fixed Operating	$ 7,000		$ 7,000

REQUIRED:

A. Prepare income statements for May and June under
(i) variable costing; and,
(ii) absorption costing.

B. Prepare a numerical reconciliation and explanation of the difference between operating income for each month under absorption costing and variable costing.

QUESTION FOUR

Jinko Pty Ltd produces circuit boards used in alarm systems. They are in the process of determining the costs and selling prices of three of their main circuit boards: Advanced, Boosted and Customised, for the month of September. It has been established that Jinko will sell 3,000 units of Advanced, 1,000 units of Boosted and 500 units of Customised.

The per-unit requirements for the three circuit boards are as listed:

	Advanced	Boosted	Customised
Direct materials (grams)	50	75	100
Direct labour (hours)	2	1	0.5
Machine time (hours)	1	2	4

Overheads are currently applied from three cost pools: Labour related, machine related and variable overhead. The costs of these costs pools and their relevant cost drivers are as follows:

Cost pools	Total costs	Cost driver
Labour related	$435,000	Direct labour hours
Machine related	$560,000	Machine hours
Variable overhead	$180,000	Number of units

The average cost of direct materials is $600 per kilogram and the wage rate is $80 per hour.

A 20% mark-up from product cost is used to determine the selling price of all products.

Jinko is considering the use of Activity Based Costing and has gathered the following information:

Budgeted Overhead Costs		Cost Driver	Planned activity for cost driver
Labour related overhead
Production scheduling	$94,500	Number of orders	370
Inspection	$174,000	Number of inspections	8,000
Packaging and shipping	$166,500	Number of units	4,500
	$435,000

Budgeted Overhead Costs		Cost Driver	Planned activity for cost driver
Machine related overhead
Machine setup	$176,400	Number of setups	17,000
Machine insertion	$300,350	Number of insertions	1,320,000
Machine soldering	$83,250	Number of parts	207,500
	$560,000

Variable overhead
General supplies	$40,000	Machine hours	7,000
Procurement	$75,000	Number of parts	207,500
Hazardous waste disposal	$65,000	Grams of waste	60,000
	$180,000

Required per Unit	Advanced	Boosted	Customised
Parts	25	70	125
Inspections	1	2	6
Machine setups	2	5	12
Machine insertions	120	480	960
Hazardous waste	10 grams	15 grams	30 grams
Orders	0.1	0.02	0.1
Machine hours	1	2	4

REQUIRED:

A. Determine the per-unit cost of each product using Jinko's original method of costing and establish the selling price for each product from the product costs (round to the nearest dollar).

B. Determine the per-unit cost of each product using Activity Based Costing and determine the selling price for each product under Activity Based Costing (round to the nearest dollar).

Attachment:- Portfolio Questions.rar

Reference no: EM132660947

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