Management Accounting: Costing - osbornebooks.co.uk

1 Osborne Books Tutor Zone Management Accounting: Costing Practice assessment 1. Osborne Books Limited, 2016. 2 Management accounting: Costing tutor zone Task 1. Hanjoy Limited uses raw material TX10 in the manufacture of its products. The company had the following quantities of TX10 in inventory: Date purchased Quantity (kg) Cost per kilo Total cost . 5 May 700 7,140. 10 May 1,200 12,360. 24 May 900 9,315. From the following amounts, insert the correct cost into the cost column of the table below to record the issue of 1,000 kg of TX10 on 25 May and to record the inventory balance after the issue using: FIFO (first in, first out).

2 LIFO (last in, first out). Amounts: 10,200 18,465. 10,230 18,470. 10,345 18,585. 10,350 18,615. Cost FIFO issue LIFO issue FIFO balance LIFO balance practice assessment 1 3. Task 2. Hanjoy Limited uses the following accounts to record payroll transactions in its cost bookkeeping system: Code Description 3200 wages control 6010 production direct costs 7200 operating overheads 8200 non-operating overheads For each of the four transactions in the following table show the account code and description which will be debited, the account code and description which will be credited and the amount of the payment. Select from the following accounts: 3200 wages control; 6010 production direct costs; 7200 operating overheads; 8200 non-operating overheads Transaction Account code Account code Amount debited credited.

3 1 Paid wages of production employees. 350 hours at 15 per hour. 2 Paid wages of packaging employees. Basic pay 3,200 + 400 overtime. 3 Paid wages of Maintenance Department staff. 2,100 + 5% bonus. 4 Paid wages of sales staff. 3,170 + 20% bonus. 4 Management accounting: Costing tutor zone Task 3. Hanjoy Limited has a Production Department where the employees work in teams of four moulding the components. Their basic rate is per hour and there are two rates of overtime as follows: Overtime rate 1: basic pay + 25%. Overtime rate 2: basic pay + 50%. Hanjoy sets a target for production of every component each month. A team bonus equal to 15% of basic hourly rate is payable for every unit of production in the month in excess of the target.

4 The target for September for team 3 was 8,000 units. In September the production was 8,500 units. (a) Complete the gaps in the table below to calculate the total labour cost for team 3. Labour cost Hours . Basic pay 510. Overtime rate 1 40. Overtime rate 2 40. Total cost before team bonus 590. Bonus payment Total cost including team bonus (b) Calculate the total labour cost per unit of the finished production for September. Give your answer in s to two decimal places. The total labour cost per unit for September is . There are four employees in team 3. (c) Complete the following sentence: The basic pay and overtime for each member of team 3 for September was and the bonus payable to each team member was.

5 Practice assessment 1 5. Task 4. Hanjoy Limited's budgeted overheads for the next financial year are: . Depreciation of production machinery 13,200. Power for production machinery 3,960. Rent and rates 11,340. Light and heat 3,150. Indirect labour costs: Maintenance 36,300. Stores 21,200. Administration 37,380. Totals 94,880 31,650. The following information is also available: Department Carrying amount Production Floor space Number of of machinery machinery (square metres) employees power usage (KwH). Production cost centres: Moulding 70,000 14,000 100 8. Finishing 40,000 4,000 100 5. Support cost centres: Maintenance 100 3. Stores 80 2.

6 Administration 40 3. Total 110,000 18,000 420 21. 6 Management accounting: Costing tutor zone Overheads are allocated or apportioned on the most appropriate basis. The total overheads of the support cost centres are then reapportioned to the two production centres, using the direct method. 70% of the maintenance cost centre's time is spent maintaining production machinery in the moulding production centre and the remainder in the finishing production centre. The stores cost centre makes 60% of its issues to the moulding production centre, and 40% to the finishing production centre. Administration supports the two production centres equally.

7 There is no reciprocal servicing between the three support cost centres. Complete the apportionment table below using the data above. Select your entries for the Basis of apportionment' column from the following list: Allocated, Carrying amount of machinery, Floor space, Number of employees, Production machinery power usage. Basis of Moulding Finishing Maintenance Stores Admin Totals apportionment . Depreciation of production machinery Power for production machinery Rent and rates Light and heat Indirect labour Totals Reapportion maintenance Reapportion stores Reapportion administration Total overheads to production centres practice assessment 1 7.

8 Task 5. Hanjoy Limited wants to review performance against budget for the last quarter. The budgeted overheads, activity levels and actual overheads are set out below. Moulding Finishing Budgeted overheads ( ) 21,700 12,900. Actual overheads ( ) 21,350 13,100. Budgeted direct labour hours 2,200 2,150. Actual direct labour hours 2,300 1,980. Budgeted machine hours 5,425 750. Actual machine hours 5,735 800. (a) Calculate the budgeted overhead absorption rate for moulding profit centre based on machine hours and that for the finishing profit centre based on labour hours. Show your answer to two decimal places. Budgeted overhead absorption rate moulding: per hour.

9 Budgeted overhead absorption rate finishing: per hour. (b) Identify the most appropriate budgeted overhead absorption rate for the Moulding Department. Budgeted machine hour Budgeted labour hours (c) Identify the most appropriate budgeted overhead absorption rate for the Finishing Department. Budgeted machine hour Budgeted labour hours (d) The data for the last quarter in the table above shows the actual labour hours and machine hours as well as the budgeted data. If the value of the actual overheads exceeded the overheads absorbed for the quarter, Hanjoy Limited will have: over-absorbed overheads for the last quarter under-absorbed overheads for the last quarter (e) Complete the following sentences: An over absorption of overheads will be debited / credited to the Profit and Loss account.

10 This will increase / decrease / not change expenses and increase / decrease / not change profit. 8 Management accounting: Costing tutor zone Task 6. Hanjoy Limited is planning three new components for next quarter, HJ15, HJ16 and HJ17. It has gathered the following data to put together forecasts for the components: 1 The planned production for HJ15 is 1,200 units and the price is per unit. The planned production for HJ16 is 10% less than HJ15, with a price of 15% more. The planned production for HJ17 is 20% more than HJ15, with a price of 10% less. 2 Variable costs are per component for HJ15. Variable costs for HJ16 are 10% less than for HJ15.