Reference no: EM132506722

HI5017 Managerial Accounting Assignment - Holmes Institute, Australia

Assessment Task - Tutorial Questions

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit.

Unit Learning Outcomes Assessed:

1. Critically evaluate the various approaches to performance measurement and control in various types of organisations, and devise and evaluate indicators of performance;

2. Demonstrate the need for a balance between financial and non-financial information in decision making, control and performance evaluation applications of management accounting;

3. Analyse a company's financial statements and/or management reports and identify the strengths and weaknesses of the company and articulate these to the various stakeholders.

Description: Your task is to answer a selection of tutorial questions for weeks 1 to 5 inclusive and submit these answers in a single document. The questions to be answered are:

Question 1 - The following data refer to Nani's Fashions for the current year:

Sales Revenues	$475,000
Work in process inventory, 31 December	15,000
Work in process inventory, 1 January	20,000
Selling and administrative expenses	75,000
Income tax expense	45,000
Purchase of raw materials	90,000
Raw materials inventory, 31 December	12,500
Raw material inventory. 1 January	20,000
Direct labour	100,000
Electricity: plant	20,000
Depreciation plant and equipment	30,000
Finished goods inventory, 31 December	25,000
Finished goods inventory, 1 January	10,000
Indirect material	5,000
Indirect labour	7,500
Other manufacturing overhead	40,000

Required -

a) Prepare the schedule of cost of goods manufactured for Nani's fashion.

b) Prepare the schedule of cost of goods sold for Nani's Fashions and explain the information provided by the schedule of cost of goods sold.

c) Prepare an income statement for the current year.

Question 2 - Brisbane Indoor Sports, a sporting complex, has opening hours that fluctuate from month to month. The electricity costs and hours of operation for past six months is listed below:

Month	Total hours of operation	Total electricity cost
January	650	$4,240
February	700	$4,400
March	800	$4,800
April	600	$4,200
May	550	$3,700
June	500	$3,600

Required -

a) Use the high-low method to estimate the cost behaviour for the complex's electricity costs, assuming that the variable costs vary in proportion to the hours of operation. Express the total cost behaviour in formula form (Y = a + bx). What is the variable electricity cost per hour of operation?

b) During July, the complex will open for 570 hours. Predict the complex's total electricity costs for July using the cost estimation method employed in above requirement a).

c) What is the main drawback of the high-low method of cost estimation?

Question 3 - Toys World started and finished job number A26, a batch of 1,000 cuddly koalas, during March 2020. The job required $4,850 of direct material and 32 hours of direct labour at $20 per hour. The predetermined overhead rate is $10.50 per direct labour hour. On 31st March, 900 of the cuddly koalas were shipped to a local toy shop.

Required -

a) Prepare journal entries to record the incurrence of production costs, completion of job number A26 and the shipment of 900 cuddly koalas to local toy shop.

b) Calculate the cost per cuddly koala for job number A26.

c) How might the managers at Toys World use this information?

Question 4 - Rigby Ltd accumulates costs for its single product using process costing. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process. The following is a partially completed production report for May.

	Production report, May
	Physical units	Percentage of completion with respect to conversion	Equivalent units
			Direct materials	Conversion
Work in process, 1 May	$25,000	40%
Units started during May	30,000
	55,000
Units completed and transferred out during May	35,000		35,000	35,000
Work in process, 31 May	20,000	80%	20,000	16,000
Total units accounted for	55,000
		Direct material	Conversion	Total
Work in process, 1 May		$143,000	$474,700	$617,700
Costs incurred during May		$165,000	$2,009,000	$2,174,000
Total costs to account for		$308,000	$2,483,700	$2,791,700

Required -

a) Complete the following process costing steps using the weighted average method:

i. Calculation of equivalent units.

ii. Calculation of unit costs.

iii. Analysis of total costs.

b) Prepare a journal entry to record the transfer of the cost of goods completed and transferred out during May.

Question 5 - Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow's brother Roger, who is a partner in a large firm of chartered accountants.

The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses.

Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of these services.

At the end of the year, Snow reviewed the firm's total costs and activities, resulting in the following list:

Activity	Activity cost	Activity driver	Quantity of activity driver
Interview salaried client	$60,000	No. of salaried clients	8,000
Interview business client	75,000	No. of business clients	2,000
Obtain missing data	600,000	No. of follow-up calls	8,000
Input data	120,000	No. of data entries	400,000
Print return	90,000	No. of returns	10,000
Verify return with client	180,000	No. of hours	6,000
Rectify errors	90,000	No. of errors	6,000
Submit return	30,000	No. of returns	10,000
Total costs	$1 245,000

In identifying the activities required for each type of return, Snow noted the following:

Clients are interviewed only once per return.

All follow-up calls to obtain missing data relate to business returns; on average, each business tax return requires four follow-up calls.

Processing a wage and salary tax return requires 20 data entries, whereas a business return requires 120 data entries.

On average, it takes 22.5 minutes to verify a wage and salary tax return, whereas it takes one and a half hours to verify a business return.

All errors relate to business returns; on average, there are 3 errors per business return.

Required -

a) Use activity-based costing to estimate the cost of preparing:

i. A wage and salary tax return.

ii. A business tax return.

b) In the light of your answers to requirement 1, evaluate the firm's pricing policy.