| PART 1 | ||||||||||
| on 1st July | 50000 | |||||||||
| Units transferred in | 120000 | |||||||||
| Units accounted for | 170000 | |||||||||
| Units transferred out | 90000 | |||||||||
| As at 31 st july | 80000 | |||||||||
| 170000 | ||||||||||
| Units transferred in | Direct Material | Conversion Cost | ||||||||
| Units transferred out | 90000 | 90000 | 90000 | |||||||
| As at 31 st july | 80000 | 80000 | 80000 | |||||||
| Percentage of completion | 100% | 100% | 40% | |||||||
| Equivalent Units | 80000 | 80000 | 32000 | |||||||
| Equivalent Units | 170000 | 170000 | 122000 | |||||||
| PART 2 | calculation of unit cost | |||||||||
| Units transferred in | Direct Material | Conversion Cost | Total | |||||||
| on 1st July | 80000 | 80000 | 6000 | 166000 | ||||||
| added during july | 490000 | 300000 | 190000 | 980000 | ||||||
| Total | 570000 | 380000 | 196000 | 1146000 | ||||||
| Equivalent Units | 170000 | 170000 | 122000 | 462000 | ||||||
| Unit cost for july | 3.352941176 | 2.235 | 1.607 | 3.842 | ||||||
| (490000/170000) | (38000/170000) | (196000/122000) | (2.235+1.607) | |||||||
| PART 3 | Cost of goods completed and transferred | 3.842*90000 | ||||||||
| 345766.6345 | ||||||||||
| PART 4 | cost of remaining WIP | |||||||||
| Units transferred in | Direct Material | Conversion Cost | Total | |||||||
| As at 31 st july | 80000 | 80000 | 80000 | |||||||
| percentage of completion | 100% | 100% | 40% | |||||||
| Equivalent units | 80000 | 80000 | 32000 | |||||||
| Unit cost for july | 3.352941176 | 2.235 | 1.607 | |||||||
| WIP | 268235.2941 | 178823.5294 | 51409.84 | ` | 230233.4 | |||||
| (178823.5+51409.84) | ||||||||||
| PART 1 | ||||||||||
| Assembly | Finishing | Total | ||||||||
| Manufacturing Overheads | 300000 | 160000 | 460000 | |||||||
| No. of Direct Labours | 45000 | 35000 | 80000 | |||||||
| Predetermined ovehead Recovery rate per hour | $ 6.67 | $ 4.57 | $ 5.75 | |||||||
| Total Direct Labours | ||||||||||
| Assembly | 1800.00 | |||||||||
| Finishing | 1100.00 | |||||||||
| 2900.00 | ||||||||||
| Total Machine hours | ||||||||||
| Assembly | 1200.00 | |||||||||
| Finishing | 700.00 | |||||||||
| 1900.00 | ||||||||||
| Since plantwide ovehead recovery rate is used by the company Total Manufacturing overheads will be divided by total labour hours to determine the overall recovery rate | ||||||||||
| Total Cost of producing Job 888 | ||||||||||
| Direct Material | $ 20,000.00 | |||||||||
| Direct Labour | $ 16,000.00 | |||||||||
| Manufacturing overhead | (5.75*2900) | $ 16,675.00 | ||||||||
| Total cost of job 888 | $ 52,675.00 | |||||||||
| Per unit cost | Total cost of job 888 | 52675 | $ 26.34 | |||||||
| No. of units | 2000 | |||||||||
| However if 2400 units are prepared per unit cost will be | 52675 | $ 21.95 | ||||||||
| 2400 | ||||||||||
| PART 2 | Separate Departmental Overhead Recovery Rate | Assembly | Finishing | |||||||
| Manufacturing Overheads | $ 3,00,000.00 | $ 1,60,000.00 | ||||||||
| No. of Direct Labours | 45000 | |||||||||
| 16000 | ||||||||||
| Predetermined ovehead Recovery rate per hour | $ 6.67 | $ 10.00 | ||||||||
| (300000/45000) | (160000/16000) | |||||||||
| Total Cost of producing Job 888 | ||||||||||
| Direct Material | $ 20,000.00 | |||||||||
| Direct Labour | $ 16,000.00 | |||||||||
| Manufacturing overhead | ||||||||||
| Assembly | (1800*6.67) | $ 12,000.00 | ||||||||
| Finishing | (700*10) | $ 7,000.00 | ||||||||
| Total Cost of producing Job 888 | $ 55,000.00 | |||||||||
| Per unit cost | (55000/2000) | $ 27.50 | ||||||||
| PART 3 | Maintenance | HR | ||||||||
| Assembly | 150 | 100 | ||||||||
| Finishing | 100 | 50 | ||||||||
| Total No. of Hours | 250 | 150 | ||||||||
| Maintenance | HR | |||||||||
| Assembly | 60% | 66.67% | ||||||||
| (150/250) | (100/150) | |||||||||
| Finishing | 40% | 33.33% | ||||||||
| (100/250) | (50/150) | |||||||||
| allocation of support department cost | Maintenance | HR | ||||||||
| Budgeted overhead cost | $ 1,00,000.00 | $ 80,000.00 | ||||||||
| Assembly | $ 60,000.00 | $ 53,333.33 | ||||||||
| (100000*60%) | (80000*66.67%) | |||||||||
| Finishing | $ 40,000.00 | $ 26,666.67 | ||||||||
| (100000*40%) | (80000*33.33%) | |||||||||
| Total Overheads | ||||||||||
| Assembly | Finishing | |||||||||
| Manufacturing Overheads | $ 3,00,000.00 | $ 1,60,000.00 | $ 4,60,000.00 | |||||||
| Maintenance | $ 60,000.00 | $ 40,000.00 | $ 1,00,000.00 | |||||||
| HR | $ 53,333.33 | $ 26,666.67 | $ 80,000.00 | |||||||
| Total | $ 4,13,333.33 | $ 2,26,666.67 | $ 6,40,000.00 | |||||||
| Predetermined overhead recovery rate on the basis of total labour hours | ||||||||||
| Total Direct Labour Hours | Assembly | Finishing | Total | |||||||
| 45000 | 35000 | 80000 | ||||||||
| Total Machine Hours | Assembly | Finishing | Total | |||||||
| 5000 | 16000 | 21000 | ||||||||
| Total Overhead | 640000.00 | $ 8.00 | ||||||||
| Total Direct Labour Hours | 80000.00 | |||||||||
| Total Cost of producing Job 888 | ||||||||||
| Direct Material | $ 20,000.00 | |||||||||
| Direct Labour | $ 16,000.00 | |||||||||
| Manufacturing overhead | (8*2900) | $ 23,200.00 | ||||||||
| Total Cost of producing Job 888 | $ 59,200.00 | |||||||||
| Per unit cost | (59200/2000) | $ 29.60 | ||||||||
| PART 4 | Total Cost of producing Job 888 | |||||||||
| Direct Material | $ 20,000.00 | |||||||||
| Direct Labour | $ 16,000.00 | |||||||||
| Manufacturing overhead | ||||||||||
| Assembly | (9.19*1800) | $ 16,533.33 | ||||||||
| Finishing | (14.17*700) | $ 9,916.67 | ||||||||
| Total Cost of producing Job 888 | $ 62,450.00 | |||||||||
| Per unit cost | (62450/2000) | $ 31.23 | ||||||||
| Assembly overhead per labour hour | 413333.33 | $ 9.19 | ||||||||
| 45000 | ||||||||||
| Finishing overhead per machine hour | 226666.67 | $ 14.17 | ||||||||
| 16000 | ||||||||||
| PART 1 | ||||||||||
| Soft drinks | Fresh produce | Packaged food | ||||||||
| Revenue | 317400 | 840240 | 483960 | 1641600 | ||||||
| Less | Cost of goods sold | 240000 | 600000 | 360000 | 1200000 | |||||
| Store Support Costs | 72000 | 180000 | 108000 | 360000 | ||||||
| (360000*240000/1200000) | (360000*600000/1200000) | (360000*360000/1200000) | ||||||||
| Operating Profit | 5400 | 60240 | 15960 | 81600 | ||||||
| operating profit as a percentage of revenues | 1.70% | 7.17% | 3.30% | 4.97% | ||||||
| PART 2 | ABC METHOD | |||||||||
| Ordering Cost Per Order= | Total Ordering Cost | $ 62,400.00 | $ 100.00 | |||||||
| No. of purchase orders | 624 | |||||||||
| Delivering Cost Per Order= | Total Delivering Cost | $ 1,00,800.00 | $ 80.00 | |||||||
| No. of Deliveries | 1260 | |||||||||
| Cost per shelf stock hour= | Total Shelf Stocking Cost | $ 69,120.00 | $ 20.00 | |||||||
| No. of Shelf Stocking Hours | 3456 | |||||||||
| Support cost per item sold= | Total Customer Support Cost | $ 1,22,880.00 | $ 0.20 | |||||||
| No.of Items Sold | 614400 | |||||||||
| Soft drinks | Fresh produce | Packaged food | Total | |||||||
| Revenue | 317400 | 840240 | 483960 | 1641600 | ||||||
| Less | Cost of goods sold | 240000 | 600000 | 360000 | 1200000 | |||||
| Less | Store Supports Costs | |||||||||
| Cost of bottles returned | 4800 | 4800 | ||||||||
| Ordering Cost | 14400 | 33600 | 14400 | 62400 | ||||||
| (100*144) | (100*336) | (100*144) | ||||||||
| Delivering Cost | 9600 | 70080 | 21120 | 100800 | ||||||
| (80*120) | (80*876) | (80*264) | ||||||||
| Shelf- stocking cost | 4320 | 43200 | 21600 | 69120 | ||||||
| (20*216) | (20*2160) | (20*100800) | ||||||||
| Customer Support Cost | 10080 | 88320 | 24480 | 122880 | ||||||
| (0.2*50400) | (0.20*441600) | (0.20*122400) | ||||||||
| Operating Profit | 34200 | 5040 | 42360 | 81600 | ||||||
| operating profit as a percentage of revenues | 10.78% | 0.60% | 8.75% | 4.97% | ||||||
| PART 3 | As ABC undertakes the overhead allocation on the basis of overheads consumed by each product, it provides the most apporpriate basis of indirect cost allocation. | |||||||||
| This cost allocation helps the firm in idnetifying the true and accurate cost involved in the production of all the products dealt by it. | ||||||||||
| Correct cost determination helps the manangement to set appropriated prices without under rating or over rating the product’s value. | ||||||||||
| PART 1 | ||||||||||
| 1 | Direct material price variance. | Actual Quantity x ( Standard Price – Actual Price) | ||||||||
| 210000 kgs | x | ($32-$33.20) | ||||||||
| $ -2,52,000.00 | Unfavourable | |||||||||
| Actual price | total purchase cost | 130200 | 1.61 | per kg | ||||||
| total number of kgs | 210000 | |||||||||
| Standard price | 32 | per kg | ||||||||
| Standard Data | ||||||||||
| 1 unit | 4 Kgs | |||||||||
| Standard qty required for production | 50000 units | (4*50000) | 200000 kgs | |||||||
| Actual Data | ||||||||||
| Actual Quantity Consumed | 210000 kgs | |||||||||
| 2 | Direct material quantity variance | Standard Price * (Standard Quantity – Actual Quantity) | ||||||||
| 32 *(200000-210000) | ||||||||||
| $ -3,20,000.00 | Unfavourable | |||||||||
| 3 | Direct labour rate variance. | Actual Hours Worked x ( Standard Rate – Actual Rate) | ||||||||
| Actual labour rate per hour | total labour cost | $ 3,00,000.00 | $ 20.00 | per hour | ||||||
| total number of hours worked | 15000 | |||||||||
| 15000 *(22-20) | ||||||||||
| $ 30,000.00 | favourable | |||||||||
| 4 | Direct labour efficiency variance | Standard Rate* (Standard Hours – Actual Hours) | ||||||||
| 22* (12500-15000) | ||||||||||
| $ -55,000.00 | unfavourable | |||||||||
| Standard Hours | No. of units * standard hours per unit | |||||||||
| 50000* 0.25 | ||||||||||
| 12500 | ||||||||||
| PART 2 | Journal Entries | |||||||||
| Raw materials inventory | 7968000 | |||||||||
| (240000*33.20) | ||||||||||
| Direct material price variance | 252000 | |||||||||
| Accounts payable | 8220000 | |||||||||
| Work in process inventory | 7648000 | |||||||||
| (7968000-320000) | ||||||||||
| Direct material quantity variance | 320000 | |||||||||
| Raw materials inventory | 7968000 | |||||||||
| 3 | Management by excepition is the managerial system under which only those areas where deviations are significant enough are examined. |
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