Reference no: EM133049259
ACCG2000 Management Accounting - Macquarie University
Discussion Questions:
Question 1. Explain the difference between a cost and an expense.
Question 2. What is meant by meant by the phrase different costs for different purposes.
Exercises:
Question 1. Classify the following items as either product costs or period costs:
a) depreciation on a vehicle used by the entity's general manager
b) containers used to package finished goods
c) salaries of workers handling inventory during production
d) general manager's salary
e) lease payments on a motor vehicle used by sales representatives
f) superannuation contributions for production workers by the entity.
Problems:
Problem 1. Swan Ltd is a manufacturer with the following information available at year-end:
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Direct material used
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$ 400,000
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Salary of the managing director
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70,000
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Direct labour
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180,000
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Administrative cost
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140,000
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Manufacturing overhead
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40,000
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Required
a) Calculate the total prime costs for the year.
b) Calculate the total conversion costs for the year.
c) Calculate the total period costs for the year.
d) Calculate the total product costs for the year.
Problem 2. Information from the records of Kerley & Co. for the year ended 30 June 2018 is given below.
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Factory overhead , 100% of direct labour cost
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$120,000
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Direct labour
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109,091
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Raw materials inventory, 1 July 2017
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18,000
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Cost of goods manufactured
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520,800
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Raw materials inventory, 30 June 2018
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15,500
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Work in process inventory, 30 June 2018
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50,500
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Raw materials purchased during the year
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210,000
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Required
Prepare the Cost of Goods manufactured Statement and calculate the cost of work in process inventory on 1 July 2017.
Problem 3. Jetboats Ltd uses the high-low method to estimate the cost function. Jetboat operates jet boat rides on Sydney Harbour. The number of hours the engines are run in each month is provided below along with the labour costs for maintaining the jet boats for 2018.
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Month
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Machine (engine) Hours
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Labour costs
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January
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180
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$4,300
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February
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110
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$2,510
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March
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140
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$3,040
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April
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120
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$2,780
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May
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80
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$1,750
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June
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50
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$1,200
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July
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60
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$1,500
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August
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110
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$2,470
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September
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155
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$3,480
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October
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160
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$3,590
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November
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170
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$3,800
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December
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175
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$3,950
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Required
a) What is the cost function?
b) What is the estimate of Jetboats's labour costs when:
i) 130 machine hours are used?
ii) 220 machine hours are used?
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