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Tutorial Questions Topic 2 for Week 3 _ Moodle

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Tutorial Questions Topic 2 for Week 3 _ Moodle

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p4acca
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© © All Rights Reserved
Available Formats
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ACW 2220 MANAGEMENT ACCOUNTING 1

SEMESTER 1, 2022
Tutorial 2 (Week 3)
Topic 2: An Introduction to Cost Terms and Concepts

Questions from the recommended textbook:


Horngren's Cost Accounting: A Managerial Emphasis, Global Edition 16th Edition

2-1, 2-2, 2-4, 2-6, 2-7, 2-9, 2-10, 2-11, 2-12, 2-13, 2-20, 2-25, 2-27, 2-38, 2-39, 2-40, 2-41 and 2-42

Additional Questions

Question 1
The Casual Furniture Company manufactures outdoor furniture, and incurred the following costs
during the month of January:

Timber $25,000
Paint $5,000
Glue $500
Wages—assembly personnel $20,000
Wages—factory supervisor $3,500
Factory cleaner’s wages $2,000
Sales commissions $10,000
Administrative staff salaries $4,000
Depreciation—factory equipment $3,000
Depreciation—sales office equipment $1,000
Utilities, insurance—factory $6,000
Utilities, insurance—sales office $2,000
Advertising $8,000
Total costs $90,000

1
Required:

Calculate each of the following costs.

1. Total prime costs.


2. Total manufacturing overhead costs.
3. Total conversion-costs.
4. Total product costs.
5. Total period costs.

Question 2
Max T Ltd has just completed their operations for the year ended January 31, 2012. Jessica B, the
company’s newly hired accountant trainee has prepared the following Profit and Loss Account for
the financial year’s activities:

$ $
Sales 3,200,000
Less: Operating Expenses:
Insurance 40,000
Gas, electricity and water 100,000
Direct labour cost 600,000
Indirect labour 120,000
Depreciation on factory equipment 160,000
Raw materials purchased during the year 1,200,000
Rent 400,000
Selling and administration overheads 320,000 2,940,000
Net Profit 260,000

As an experienced senior accountant, you have been asked to assist Jessica B in preparing a correct
Profit & Loss Account for the financial year ended on January 31, 2012. The following additional
information is available:

a) Max T Ltd is a manufacturing firm.


b) Eighty percent of the rent paid applies to factory operations and the remainder to selling and
administration activities.

2
c) No raw materials were on hand on February 1, 2011. However, raw materials of $150,000
purchased during the financial year were still on hand at January 31, 2012. The remainder
was used in production during the financial year.
d) Seventy percent of insurance and ninety percent of gas, electricity and water paid apply to the
factory operations; the remainder applies to selling and administration activities.
e) Work-in-progress and finished goods inventories were as follows:

February 1, 2011 January 31, 2012


Work-in-progress $420,000 $480,000
Finished goods $540,000 $400,000

You are required to assist Jessica B in preparing:

a. A Statement of Cost of Goods Manufactured for the financial year ended January 31, 2012,
and
b. A corrected Profit and Loss Account for the financial year ended January 31, 2012.

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