2019 S1 Solution Final Exam ACW 2391 e PDF

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Current market conditions have lifted treasury departments to the top of bank’s investment priorities—having the right treasury management system for users is critical and meeting...

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SOLUTION FINAL EXAM: ACW 2391 SEMESTER 1 2019 QUESTION 1 (25 MARKS) (a) 4 marks Cost accounting is concerned with cost accumulation for inventory valuation √ to meet the requirements of external reporting and internal profit measurement √. Management accounting is concerned with the provision of information to people within the organization√ to aid decision-making and improve the efficiency and effectiveness of existing operations √.  = 1 mak (b) 6 marks The direct method allocates support-department costs only to the production departments√. It is the easiest method to use, but also the least accurate√. The sequential or step method partially recognizes support-department interaction and is thus more accurate than the direct method√. The reciprocal method of allocation recognizes all interactions among support departments√. This most accurate method is also the most difficult to understand and apply√.  = 1 mak (c) 5 marks Yes, the company can calculate the breakeven point by using the assumption of a constant sales mix of the products√. Sales mix is the quantities (or proportion) of various products ha cie a cma al i ale√. The company will assume the sales mix of products sold remains constant as the total quantity of unit sold changes√√. The company cannot calculate the BEP in products, but can calculate the BEP in dollars revenue √.  = 1 mak (d) 5 marks When the production starts, diec maeial c ad diec lab c ae aced gehe with indirect costs are allcaed  k-in-ce acc√√. After completing the job, the al c f he jb i afeed fm he k -in-ce acc  he fiihed gd account√. And finally, when the sales occur, the total costs of the job is transferred from the fiihed gd acc  he gd ld acc√.  = 1 mak

(e) 5 marks Where the choice of one course of action requires that an alternative course of action be given up the financial benefits that are forgone or sacrificed are known as opportunity costs√. Opportunity costs thus represent the loss contribution to profits arising from the best alternative foregone√. They arise only when the resources are scarce and have alternative uses√. Opportunity costs must therefore be included in the analysis when presenting relevant information for decision-making√√.  = 1 mak

QUESTION 2 (25 MARKS)

(a) 3 marks Units WIP, beg Units transferred in Total units to account for Completed & transferred out WIP, end Total units accounted for

DM 15,000

CC

Transferred in costs

30%

105,000 120,000√ 100,000

100

100,000

100,000

100,000

20,000

60%

0√

12,000

20,000

100,000√

112,000√

120,000√

120,000√

Equivalent units √ = 0.5 mark; 6√ x 0.5 mark = 3 marks

(b) 7 marks

DM WIP, beg Added in June Total Costs Equivalent units Cost per EU

CC

$60,000 $140,000

Transferred in costs $100,800 $144,000 $235,200 $336,000

$200,000√ $336,000√ 100,000 112,000 $2√

Cost of good completed and transferred out (100,000 units x $9) WIP, ending DM (0 x $2) CC (12,000 units x $3) TIC (20,000 units x $4)

$3√

$480,000√ 120,000

$1,016,000√

$4√

$9√

$900,000√ 0√ $36,000√ $80,000√ $116,000√ $1,016,000√

Total Costs √ = 0.5 mark; 14√ x 0.5 mark = 7 marks

(c) 4 marks 1/6 Bal (beg) DM CC TIC Bal (beg)

WIP (Packaging department) FG $304,800√ $140,000√ 30/6 $235,200√ Bal (end) $336,000√ $1,016,000√ $116,000

$900,000√ $116,000√ $1,016,000√

√ = 0.5 mark; 8√ x 0.5 mark = 4 marks

(d) 4 marks DR. WIP  Packaging department CR. WIP  Mixing deparment

$336,000√

DR. Finished Goods CR. WIP  Packaging deparment

$900,000√

√ = 1 mark; 4√ x 1 mark = 4 marks

$336,000√ $900,000√

(e) 4 marks DR. COGS (12,000 units x $9) CR. Finished Goods

$108,000√

DR. Acct Rec/Cash (12,000 units x $12) CR. Sales Revenues

$144,000√

$108,000√ $144,000√

√ = 1 mark; 4√ x 1 mark = 4 marks

(f) 3 marks Normal spoilage is inherent√ in the production process and occurs under efficient operating conditions. It is unavoidable√ and its cost is treated as product costs √, by adding to the cost of good units completed and transferred out.

QUESTION 3 (25 MARKS) (a) 2 marks $358,000/89,500 direct labor hours = $4 per DLH√ = $4 x 750 DLH = $3,000√ √ = 1 mark; 2√ x 1 mark = 2 marks (b) 2 marks DM DL MOH TOTAL COSTS

$5,000 $7,500 $3,000 $15,500√√

√ = 1 mark; 2√ x 1 mark = 2 marks (c) 2 marks Company Bidding = 130% x $15,500 = $20,150√√ √ = 1 mark; 2√ x 1 mark = 2 marks

(d) 9 marks Maintenance: $144,000/24,000 = $6 per machine hour√ Materials handling: $60,000/4,000 = $15 per move√ Setups: $50,000/2,000 = $25 per setup√ Inspection: $104,000/8,000 = $13 per inspection√ Overhead assigned: Maintenance: $6 × 300 machine hours Material handling: $15 × 8 Setups: $25 × 3 Inspection: $13 × 5 Total Overhead Costs

$1,800√ $120√ $75√ $65√ $2,060√

√ = 1 mark; 9√ x 1 mark = 9 marks

(e) 2 marks DM DL MOH TOTAL COSTS

$5,000 $7,500 $2,060 $14,560√√

√ = 1 mark; 2√ x 1 mark = 2 marks

(f) 2 marks Company Bidding = 130% x $14,560 = $18,928√√ √ = 1 mark; 2√ x 1 mark = 2 marks

(g) 6 marks Activity-based costing produces more accurate cost information and a more competitive bid√√. Inaccurate costing will lead to overcosting√ (will cause underpricing which can lead to bidding that actually result in losses, because the sales may bring in less revenue than the cost of resources, though the company is under the assumption that it is making a profit) √ or undercosting√ (will lead to overpricing, causing a loss in market share to competitors producing similar products) √. √ = 1 mark; 6√ x 1 mark = 6 marks

QUESTION 4 (25 MARKS) (a) 8 marks i.

($14,250  $4,250)/(1,240  240) = $10 √√ √ = 1 mark; 2√ x 1 mark = 2 marks

ii. At the highest point: $14,250  ($10 × 1,240) = $1,850√√ √ = 1 mark; 2√ x 1 mark = 2 marks iii. Overhead costs(Y) = $1,850 + ($10 × Machine hours) √√ √ = 1 mark; 2√ x 1 mark = 2 marks iv. $1,850 + ($10 × 500) = $6,850 √ √ √ = 1 mark; 2√ x 1 mark = 2 marks (b) 9 marks i. $9.34√ √ = 1 mark; 1√ x 1 mark = 1 mark ii. $2,433.59√ √ = 1 mark; 1√ x 1 mark = 1 mark iii. Overhead costs(Y) = $2,433.59 + ($9.34 × Machine hours) √√ √ = 1 mark; 2√ x 1 mark = 2 marks iv. $2,433.59 + ($9.34 × 500) = $7,103.59 √√ √ = 1 mark; 2√ x 1 mark = 2 marks v.

The coefficient of determination is 0.93√. This means 93 percent of the variation in electricity costs is explained by variations in machine hours √. This is close to 100 percent√. √ = 1 mark; 3√ x 1 mark = 3 marks

(c) 4 marks The estimates using the regression methods are better than those using the high-low method √. The regression method estimates the cost function minimizing the squared difference between the cost function and the observations and uses all data observed√. The high-low method only uses two observations, the highest and lowest√. Oftentimes, the highest and/or lowest observations are outliers√. √ = 1 mark; 4√ x 1 mark = 4 marks (d) 4 marks The two assumptions are 1.

Variations in the level of a single activity (the cost driver) explain the variations in the related total costs√√.

2.

Cost behavior is approximated by a linear cost function within the relevant range. A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity forms a straight line√√.

√ = 1 mark; 4√ x 1 mark = 4 marks...