ACCG 200 Due week2 - WEEKLY PDF

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ACCG 200 Week 1 Homework Questions (Due in Week 2) Discussion Questions: 1. Explain the difference between a cost and an expense. Cost is the total amount of the resources (e.g. cash paid, liability incurred) sacrificed to produce the goods or services, that are used for business aspect which obtain sale revenue in the future, the cost of the business can be understood as the amount of money invested on goods or services. Expense is the total amount of resources used to consume the goods and services that have no future potential revenue, in the operation of a business. 2. What is meant by meant by the phrase different costs for different purposes. In management accounting, managers make different decisions, they are required an understanding of the organisation cost. The type of cost use depends on the purposes, cost can be classified as Direct cost or Indirect cost, Product cost or period cost (Manufacturing cost or Non-manufacturing cost), Variable cost or Fixed cost. Managers required to know the cost relates to a specific cost object, whether a specific product or service is profitable, cost object is a product, service, customer, department, process. Exercises: 1. Classify the following items as either product costs or period costs: a) depreciation on a vehicle used by the entity’s general manager -- period cost b) containers used to package finished goods. – product cost c) salaries of workers handling inventory during production. – product cost d) general manager’s salary --period cost e) lease payments on a motor vehicle used by sales representatives –period cost f) superannuation contributions for production workers by the entity. –product cost Problems: 1 . Swa nLt di sama n uf a c t u r e rwi t ht hef o l l owi n gi n f o r ma t i o na v a i l a b l ea ty e a r e n d : Di r e c tma t e r i a lu s e d

$ 4 0 0 , 0 0 0

Sa l a r yo ft h ema n a g i n gd i r e c t o r

$ 7 0 , 0 0 0

Di r e c tl a b o ur

$ 1 8 0 , 0 0 0

Ad mi n i s t r a t i v ec o s t

$ 1 4 0 , 0 0 0

Ma n u f a c t u r i n go v e r h e a d

$ 4 0 , 0 0 0

a )Ca l c u l a t et h et o t a lpr i mec os t sf o rt hey e a r . Prime cost = DM+DL=$400.000+$180.000=$580.000

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b )Ca l c u l a t et h et o t a lc o n v e r s i o nc os t sf o rt h ey e a r . Conversion cost = DL+MOH=$180.000+$40.000=$220.000 c )Ca l c u l a t et h et o t a lp e r i odc o s t sf o rt h ey e a r . The total period cost is $140.000+$70,000=$210,000 d )Ca l c u l a t et h et o t a lp r o d u c t c o s t sf o rt h ey e a r . Total product cost= DM+DL+MOH=$400.000+$180.000+$40.000=$620.000 2. Information from the records of Kerley & Co. for the year ended 30 June 2018 is given below. Factory overhead, 100% of direct labour cost Direct labour Raw materials inventory, 1 July 2017 Cost of goods manufactured Raw materials inventory, 30 June 2018 Work in process inventory, 30 June 2018 Raw materials purchased during the year

$120,000 $109,091 $18,000 $520,800 $15,500 $50,500 $210,000

Prepare the Cost of Goods manufactured Statement and calculate the cost of work in process inventory on 1 July 2017:

Kerley & Co. Schedule of cost of goods manufactured Year ended 30 June, 2018 Direct materials used: Raw materials inventory, 1 July 2017 Raw materials purchased during the year Less Raw materials inventory, 30 June 2018 Raw materials used Direct labour Manufacturing overhead Total manufacturing overhead Add: work in process inventory, 1 July 2017 Less: work in process inventory, 30 July 2018 Costs of goods manufactured

$18,000 $210,000 ($15,000) $212,500 $109,091 $120,000 $441,591 $129,709 ($50,500) $520,800

Note:

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3. Jetboats Ltd uses the high‐low method to estimate the cost function. Jetboat operates jet boat rides on Sydney Harbour. The number of hours the engines are run in each month is provided below along with the labour costs for maintaining the jet boats for 2018.

a) What is the cost function? Total cost=Fixed cost + variable cost per unit of activity x No. of unit Step1: Highest activity level 180. Lowest activity level 50. Step2: Variable cost per unit Difference in cost level \ Difference in activity level = ($4300-$1200) / (180-50) = 23.8 per machine hour. Step3: Calculate the fixed cost by selecting one of the 2ponts used to calculate the variable cost per unit. Total cost = FC + VC*No. of unit 4300 = FC+23.8 x 180 FC = 4300-4284 =$16 Step4: Cost Function Total cost = FC+VC x No. of unit

Total cost= 16+23.8 x No. of unit

b) What is the estimate of Jetboats’s labour cost when: 130 machine hours are used? Total cost = 16+23.8 x 130 = $3110

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220 machine hours are used? Total cost = 16+23.8 x 220 = $5252

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