Reference no: EM132833382

ACCT6004 Management Accounting - Laureate International Universities

Assessment - Case Study

Learning Outcome 1: Identify and analyse ethical and organisational issues confronting contemporary management accountants.

Learning Outcome 2: Categorise and identify the nature of various types of costs, cost objects and cost behaviours and use cost estimation techniques to develop cost functions.

Learning Outcome 3: Apply cost accounting techniques to calculate the cost of a range of cost objects, as well as analyse costs.

Learning Outcome 4: Apply cost information to planning, control and decision-making.

Learning Outcome 5: Critically evaluate the relevance of both quantitative and qualitative costing information to management decision making.

Question 1: Support Department cost allocation

Diamond Trust Bank has two support departments: the Human Resources Department and the Computing Department. The bank also has two operation departments that service customers directly: the Deposits Department and the Loan Department. The usage of the two support departments' output is provided below:

The costs in the support departments and operation departments for the is presented below:

Required

a) Report the total costs of operation departments (the Deposits Department and the Loan Department) after the support departments' (the Human Resources Department and the Computing Departments) costs have been allocated using each of the following methods:

i) Direct Method
ii) Step Down Method (The bank allocates the costs of the Human Resources Department first.)
iii) Reciprocal Method

b) Diamond Trust Bank evaluates the performance of the operation department managers on the basis of how well they manage their total costs, including allocated costs. As the manager of the Loan Department, which allocation method would you prefer? Why?

Question 2: Job Costing

ACT Manufacturing Ltd. is highly automated company that uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

The company's cost records revealed the following actual cost and operating data for the year:

Required

a) What is ACT Manufacturing Ltd's predetermined overhead rate for the year?
b) Calculate the company's underapplied or overapplied overhead for the year.
c) Assume that overapplied or underapplied overhead allocated on a pro rata basis to the ending balances in work in process, finished goods and cost of sales. The ending balance of these accounts are reported below. Prepare journal entries to show the allocation.

d) How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated on a pro rata basis rather than closed directly to Cost of Goods Sold? Explain the reason for this difference.

Question 3: Process Costing System

Techsafe Company manufactures car seats. Each car seat passes through the assembly department and testing department. When the assembly department finishes work on each car seat, it is immediately transferred to testing department. The process-costing system at Techsafe Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process.

The table below shows the relevant data for the assembly department for July 2020.

Note:
(*) Degree of completion: 100% for direct materials and 60% for conversion cost (**) Degree of completion: 100% for direct materials and 70% for conversion cost

Required

a) Determine the cost per equivalent unit for the Techsafe Company's direct materials and conversion costs, and the total unit cost for the current period, under the FIFO method. Show all workings.

b) Determine the cost per equivalent unit for the Techsafe Company's direct materials and conversion costs, and the total unit cost for the current period, under the Weighted Average method. Show all workings.

Question 4: Cost Volume and Profit (CVP) analysis

Veritas Software is a leading Australian based accounting software manufacturer. It develops software packages for accounting firms located in Australia and overseas. Veritas is planning to release an upgraded version of their software soon. The company divides its clients into two groups: Local firms (those firms that operate in Australia) and Global firms (those firms that operate in overseas). Although the same physical product is provided to each client group, significant differences exist in selling prices and variable marketing costs:

The fixed costs of Veritas Software are $16,500,000. The planned sales mix for the upgraded software in units is 60% Local firms and 40% Global firms.

Required

a) What is the break-even point in units for Veritas Software's upgraded software if the planned sales mix is attained?

b) If the planned sales mix is attained, what will be the operating income when 180,000 units are sold?

c) If Veritas Software wants to generate operating income of 5,500,000, how many units do they need to sell to Local and Global firms each? Assume that the planned sales mix is attained.

Question 5 Activity Based Costing

MaxPak is a designer of high-quality backpacks and purses. Each design is made in small batches. Each summer, MaxPak comes out with new designs for the backpack and for the purse. The company uses these designs for a year, and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:

Other Budget information follows:

Required:

a) Identify the cost hierarchy level for each cost category.
b) Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
c) Calculate the budgeted cost per unit of cost driver for each cost category.
d) Calculate the budgeted total costs and cost per unit for each product line.
e) Explain how you could use the information in requirement 4 to reduce costs.

Attachment:- Management Accounting.rar