Reference no: EM132534407

Shah Bhd. has the following account balances (in millions):

For specific date                                                              For year 2017

­Direct materials inventory, Jan 1, 2017 $ 15          Purchases of direct materials $ 325

Work-in process inventory, Jan 1, 2017 $ 10        Direct manufacturing labor $ 100

Finished goods inventory, Jan 1, 2017 $ 70        Depreciation-plant and equipment $ 80

Direct materials inventory, Jan 31, 2017 $ 20       Plant supervisory salaries $ 5

Work-in process inventory, Jan 31, 2017 $ 5        Miscellaneous plant overhead $ 35

Finished goods inventory, Jan 31, 2017 $ 55             Revenues $ 950

                                                                    Marketing, distribution, and $ 240

                                                              customer-service costs

                                                             Plant supplies used $ 10

                                                                     Plant utilities $ 30

                                                             Indirect manufacturing labor $ 60

Required:

Question a) Prepare schedule of goods manufactured and an income statement for the year ended 31st December 2017.

Question b) Would the sales manager's salary (included in marketing, distribution, and customer-service costs) be accounted for any differently if Shah Bhd. were a merchandising company instead of a manufacturing company?

Question c) Using the flow of manufacturing costs, describe how the wages of an assembler in the plant would be accounted for in this manufacturing company.

Question d) Plant supervisory salaries are usually regarded as manufacturing overhead costs. When might some of these costs be regarded as direct manufacturing costs? Give an example.

Question e) Suppose that both the direct materials used and the plant and equipment depreciation are related to the manufacture of 1 million units of product. What is the unit cost for the direct materials assigned to those units? What is the unit cost for plant and equipment depreciation? Assume that yearly plant and equipment depreciation is computed on a straight-line basis.

Question f) Assume that the implied cost-behaviour patterns in requirement (e) persist. That is, direct material costs behave as a variable cost and plant and equipment depreciation behaves as a fixed cost. Repeat the computations in requirement (e), assuming that the costs are being predicted for the manufacture of 1.2 million units of product. How would the total costs be affected?

Question g) As a management accountant, explain to the president why the unit costs differed in requirements (e) and (f).