Reference no: EM132271427

Question 1: Value Chains

Prepare a report which describes and explains the value chain of the organisation in which you work or for a business or organisation of which you have a deep understanding. Include in your report an evaluation of the value chain's ability to provide a suitable framework for considering management accounting issues within your organisation. Ensure that you have identified the key management accounting issues that are relevant to your organisation. Information on report writing is in the Resources section of this subject site. (500 words)

Question 2 Cost of Manufacturing Statement

The following data refer to Portland Precision Engineering Co Ltd for the year ended 31 December 2018.

Sales Revenue	$1,400,000
Raw material inventory, 1 January	67,200
Purchases of raw materials	194,600
Freight Inwards	2,800
Raw material inventory, 31 December	71,500
Direct labour costs incurred	490,000
Selling and Administrative expenses	22,880
Indirect labour costs incurred	77,200
Council rates	90,000
Depreciation on factory machinery	10,750
Income tax expense	32,400
Indirect material used	8,726
Depreciation on factory fittings	6,400
Factory rent expense	39,270
Advertising expense	20,800
Other manufacturing expenses	5,600
Insurance on factory and equipment	22,120
Interest expense	3,080
Sales salaries expense	121,520
Electricity for factory	58,800
Work in process inventory, 1 January	49,000
Work in process inventory, 31 December	50,700
Finished goods inventory, 1 January	210,000
Finished goods inventory, 31 December	201,500

Required:

1. Prepare a cost of goods manufactured statement for the year ended 31 December 2018. This must be prepared in Excel and cut and pasted into your Word document.

2. What was the company's cost of sales for the year ended 31 December 2018?

3. What was the company's gross profit for the year ended 31 December 2018?

4. What was the company's net profit for the year ended 31 December 2018?

Question 3 Cost Allocation

Bezos Ltd is developing departmental overhead rates based on machine hours for its moulding department and direct labour hours for its assembly department. The moulding department has 20 machines that each run for 2,000 hours per year. The assembly department employs 80 people, who each work 2,000 hours per year. The production related overhead costs distributed to the moulding and assembly departments are budgeted at $500,000 and $740,000 respectively. Two support departments, repairs and engineering, directly support the two production departments, moulding and assembly. These support departments have budgeted costs of $100,000 an $580,000 respectively. The production departments' overhead rate cannot by determined until the support department costs are allocated. The following schedule reflects use of the output of the repairs and engineering departments by the various departments.

Support Departments	Repairs	Engineering	Moulding	Assembly
Repairs (repair hours)	0	2,000	3,000	15,000
Engineering (kilowatt hours)	250,000	0	850,000	150,000

Required

1. Calculate the overhead rates per machine hour for the moulding department and per direct labour hour for the assembly department. Use the direct method to allocate support department costs.

2. Estimate the overhead cost of a thingamebob, which is produced using 3 machine hours in the moulding department and 5 labour hours in the assembly department.

3. Using the step-down method to allocate support department costs, calculate the overhead rates per machine hour for the moulding department and per direct labour hour for the assembly department. Allocate the repairs department costs first.

4. Now estimate the cost of the thingamebob using the overhead rates estimated in part 3.

5. Using the reciprocal services method to allocate support department costs, calculate the overhead rates per machine hour for the moulding department and per direct labour hour for the assembly department.

6. Now estimate the cost of the thingamebob using the overhead rates estimated in part 5.

7. Prepare a short memo to the Chief Financial Officer of Bezos Ltd, explaining which of the three methods of support department cost allocation results in the most accurate overhead rates and product costs. Explain why this is the most accurate method and why accuracy is important.

Question 4 Job Costing

Collaroy Products Ltd uses a job order costing system to control costs in its two production departments. Factory overhead is applied on the basis of machine hours to the Preparation Department and on the basis of direct labour cost in the Finishing Department.

The company budgeted the following for last year:

	Preparation	Finishing
Manufacturing overhead	$ 285,600	$ 684,000
Machine hours	6,800	9,000
Direct labour hours	13,000	24,000
Direct labour cost	240,000 $	$380,000

The accounting records for Job 842 reveal the following:

	Preparation	Finishing
Direct materials requisitioned	$1,300	$1,420
Direct labour cost	$ 1,640	$1,800
Direct labour hours	90	100
Machine hours	40	50

Required

1. Calculate the predetermined overhead rate for each department

2. Calculate the total cost of Job 842.

3. If the actual direct labour cost in the Finishing Department was $375,800 and the actual factory overhead was $682,500 was the overhead over-applied or under-applied?

Question 5 Process Costing

Pure Cotton Ltd manufactures organic cotton fabrics for the clothing industry. The following data relate to the weaving department for March:

	Weighted Average	FIFO
Total equivalent units of direct material	60,000	40,000
Total equivalent units of conversion	52,000	44,000
Units completed and transferred out during December	50,000	50,000

The cost data for March were as follows:

Work in process 1 March:	$
Direct material	188,000
Conversion	88,000
Costs incurred during March:
Direct material	328,000
Conversion	545,600

There were 20,000 units in process in the weaving department on 1 March (100% complete as to direct material and 40% complete as to conversion).

Required

1. Prepare a spreadsheet to calculate each of the following amounts using weighted average process costing:
o cost of goods completed and transferred out of the weaving department during March
o cost of the 31 March work in process inventory in the weaving department.

2. Repeat requirement 1 using the FIFO method.

3. Cut and paste your spreadsheet solution into your the word document for your assignment.