Reference no: EM132311175 , Length: word count : 1900
Assignment
Subject Learning Outcomes
a) Analyse the links between management accounting, customers, suppliers and sources of external information and assess what is relevant to business decision-making
b) Apply costing techniques and explain their strengths and limitations in specific circumstances
c) Analyse management accounting information and present management accounting information in various formats using appropriate systems
d) Critically evaluate and apply relevant management accounting concepts and management control systems to organisational settings.
Topic: Management Accounting Problem (Case Study).
Connectta Ltd manufactures furniture for computer work stations. Connectta uses a job costing system. The work in process inventory on 30 November consisted of the following jobs.
Job. No.
|
Description
|
Units
|
Total cost
|
CC723
|
Computer caddy
|
20 000
|
$ 900 000
|
CH291
|
Chair
|
15 000
|
431 000
|
PS812
|
Printer stand
|
25 000
|
250 000
|
Total
|
|
|
$1 581 000
|
On 30 November, the company's finished goods inventory consisted of four items.
Item
|
Quantity and unit cost
|
Total cost
|
Computer caddy
|
7 500 units @ $64 each
|
$ 480 000
|
Chair
|
19 400 units @ $35 each
|
679 000
|
Printer stand
|
21 000 units @ $55 each
|
1 155 000
|
Desk
|
11 200 units @ $102 each
|
1 142 400
|
Total
|
|
$3 456 400
|
At the end of November, the balance in Connectta's materials inventory account, which includes both raw materials and purchased parts, was $668 000. Additions to and requisitions from the materials inventory during December included the following.
Additions and requisitions
|
Raw materials
|
Purchased parts
|
Additions
|
$242 000
|
$396 000
|
Requisitions:
|
|
|
Job CC723
|
51 000
|
104 000
|
Job CH291
|
3 000
|
10 800
|
Job PS812
|
124 000
|
87 000
|
Job DS444(5000 desks)
|
65 000
|
187 000
|
Connectta applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totalled $4 500 000. The company planned to use 900 000 machine hours during this period, which is the firm's estimated practical capacity. Through the first 11 months of the year, a total of 830 000 machine hours were used, and actual manufacturing overhead amounted to $4 140 000.
During December, machine hours and labour hours consisted of the following:
Account
|
Machine hours
|
Labour hours
|
Labour cost
|
CC723
|
12 000
|
11 600
|
$122 400
|
CH291
|
4 400
|
3 600
|
43 200
|
PS812
|
19 500
|
14 300
|
200 500
|
DS444
|
14 000
|
12 500
|
138 000
|
Indirect labour
|
-
|
3 000
|
29 400
|
Supervision
|
-
|
-
|
57 600
|
Total
|
49 900
|
45 000
|
$591 100
|
The jobs completed in December and the unit sales for that month are as follows:
Job No.
|
Production items
|
Quantity completed
|
items
|
Quantity shipped
|
CC723
|
Computer caddy
|
20 000
|
Computer caddy
|
17 500
|
CH291
|
Chair
|
15 000
|
Chair
|
21 000
|
DS444
|
Desk
|
5 000
|
Printer stand
|
18 000
|
|
|
|
Desk
|
6 000
|
Required:
1. Describe when it is appropriate for a company to use a job costing system.
2. Calculate the balance in Connectta's work in process inventory account as at 31 December.
3. Calculate the cost of the chairs in Connectta's finished goods inventory as at 31 December.
4. Actual manufacturing overhead incurred in December amounted to $252 000. Calculate Connectta's overapplied or underapplied overhead for the year.
5. Explain two alternative accounting treatments for overapplied or underapplied overhead balances when using job costing system.
6. Explain how activity-based costing could overcome the deficiencies inherent in the existing costing system.