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Overhead analysis sheet, Managerial Accounting

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.1
You are the Management accountant of an industrial concern and have been assigned the duty of preparing a cost accounting system. Initially it has been decided to prepare three production cost centers and two service cost centers.
The subsequent data relating to the next accounting period have been estimated as follows:
Production Cost Centres Service Cost Centres
Milling Assembly Spraying Stores Maintenance Total
No. of employees 30 75 25 6 14 150
Labour hours 1,510 3,320 950 252 595 6,627
Plant & Machines values ($)
225,000
75,000
45,000
17,000
85,000
447,000
Area (m2) 7,500 10,000 3,500 500 1,000 22,500
Material requisitions
1,400
300
250 -
550
2,500
Maintenance hours (minor works)
75
30
45 - -
150
KWH (''000) 300 70 50 10 170 600
Machine hours 8,400 1,100 300 - - 9,800

During the period the following data were recorded
Milling Assembly Spraying Stores Maintenance Total ($)
Indirect materials 25,000 10,000 15,000 3,000 17,000 70,000
Indirect labour 15,200 25,000 22,000 42,000 110,000 214,200
Maintenance works 18,000 17,000 14,000 - - 49,000

The following details were obtained from the accounts relating to the same period:
Fire insurance $12,500
Power $45,000
Heating $ Lighting $20,000
Rent & Rates $18,000
Machine depreciation $84,000
Machine insurance $85,000
Canteen deficit $42,500
Balance of maintenance costs (excluding major works) $17,500
Required:
Prepare an overhead analysis sheet showing how overhead costs should be apportioned between the departments. (17 marks)
For each allocation base you have used, explain reasons suggesting why you have preferred such an allocation base? (08 marks)
Total, 25 marks

Q.2
Sony Inc. is a producer of music compact discs (CDs) and tapes. The following account balances are for the year ended December 31, 2020
Administrative expenses $ 60,000
Depreciation expense – Manufacturing equipment $50,000
Direct labor $468,000
Manufacturing supplies expense $40,000
Indirect labor $36,000
Beginning inventories, January 1:
Direct materials $14,000
Work in process $20,000
Finished goods $128,000
Ending inventories, December 31:
Direct materials $44,000
Work in process $56,000
Finished goods $92,000

Direct materials purchases $216,000
Rent expense – Factory $28,000
Sales $1,400,000
Selling expense $72,000
Other manufacturing overhead $126,000
Required;
Prepare a statement of cost of goods manufactured for Sony Inc. for the year ended December 31. (15 marks)
Prepare an income statement for the year ended December 31, 2020. (10 marks)
Total, 25 marks

SECTION B
Attempt any Two Questions
Q.3
Chicago Inc. is careful in setting budgets in consultation with all relevant stakeholders rather than impose them on the different parts of the business. In this way, managers at all levels feel involved in the process and are more likely to feel motivated to achieve the targets in their budgets. The following financial data has been provided. It shows both actual and anticipated cash receipts and expenditures.
Month Sales
($) Purchases
($) Wages
($) General Expenses ($)
Jan. (Actual) 80,000 45,000 20,000 5,000
Feb. (Actual) 80,000 40,000 18,000 6,000
March (Actual) 75,000 42,000 22,000 6,000
April Budget 90,000 50,000 24,000 6,000
May Budget 85,000 45,000 20,000 6,000
June Budget 80,000 35,000 18,000 5,000
You are further informed that:
80% of Sale and 60% of purchase are for cash
The average collection period of debtors is 1/2 a month and credit purchases are paid off regularly after one month
Wages are paid half monthly and the rent of $500 excluded in expense is paid monthly
Cash and Bank Balance on April 1, was $70,000.

Required:
Prepare a Cash Budget for April, May and June in a columnar form using the above information. Show all the workings. (14 marks)
As a CFO of Chicago Inc. how would you accommodate unexpected changes in your budgets? (06 marks)
Explain the limitations of the budgeting process. (05 marks)
Total, 25 marks


Q.4
Management accounting is regarded to have a wider scope, mention and explain the coverage of management accounting (09 marks)
You have been appointed a new management accountant of a manufacturing concern, how would you help the organization achieve its intended objectives? (08 marks)
In your opinion, do you think management accounting is similar to financial accounting? Discuss. (08 marks)
Total, 25 marks


Q.5
The following direct costs were incurred on Job No. 108 of Hisense Engineering Works:
Materials $3,600
Wages:
Department A 80 hours @ $2.5 per hour
Department B 60 hours @ $4 per hour
Overhead expenses were estimated as follows:
Variable Overheads:
Department A $5,000 for 4000 direct labour hours
Department B $6,000 for 3000 direct labour hours
Fixed Overhead:
Estimated at $7,500 for 10,000 hours normal working time of the factory.
Required:
Formulate a cost sheet for Job No. 108 and estimate the percentage of profit earned if the price quoted was $4,750. (14 marks)
In your opinion, explain the suitability of job costing method. (05 marks)
What are the key distinguishing features between job costing and process costing methods? (06 marks)
Total, 25 marks

Q.6
A pharmaceutical company manufactures only one product called caviar c. The following information relates to the product:
Selling price per unit $50
Direct material cost per unit $6
Direct labour cost per unit $2
Variable overhead cost per unit $4
Sales level in units 10,000
Fixed costs for the period are $25,000.
Required;
Calculate the contribution per unit. (05 marks)
Calculate the number units that would be required to break-even. (05 marks)
Calculate the break even in dollars. (05 marks)
Calculate the level of activity that is required to generate a profit of, say, $40,000. (05 marks)
Assume that the company budgets to sell 13,000 units of it product, calculate the margin of safety in percentage. (05 ma

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