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UNIT CODE:ACT202

UNIT NAME: MANAGEMENTACCOUNTING

Assignment One Information

Semester One 2016

Assessment 40%

Assignment 1

Task:
This is an individual assignment in
which the student is required to answer all of theproblems included.

Value:100
marks (40% of total assessment)

Due date:Week
11 (Monday the 16th of May 2016 at 23.59pm Darwin time)

Preparation:
Topics 1-7.

Presentation:
Online submission through Learnline.

Assessment
Criteria:

This task will
generally be assessed in terms of the following criteria:

1. Effectiveness
of communication: readability, grammar, spelling, neatness, completeness and
presentation.

2. Demonstrated
competency and understanding: This will be evidenced by the student’s ability
to be dialectical in the discussion of contentious issues. The marker will pay

Due Date: Monday the 16th of May 2016 at 23.59pm	1 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

attention to the accuracy of the
content, coverage of relevant issues, structure of argument, English
expressions, and absence of plagiarism, concise writing style, and referencing
style.

Submission of
Assignments

•
Assignments must be submitted by the due
date.

• Failure
to submit an assignment on or before the due date will result in an academic
penalty of 5 % of the marks allocated for the assignment each day the
assignment is overdue.

• All
assignments must be submitted online. (Submissions via email will not be
accepted)

•
Students should include
their names and students numbers clearly on the first page of the assignment
and on each page. Please do not include a cover page.

•
Assignment should be typed and
submission file should be either word or pdf

•
Each page of the assignment should be
numbered.

Assignment
Extensions

All requests for extensions must be in
writing and received seven days before the due assignment submission date.
(Refer to Learnline for more details)

Due Date: Monday the 16th of May 2016 at 23.59pm	2 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

Question-1) Marks 20

Anwar
Ltd produces a moulded plastic casing, LX201, for desktop computers. Summary
data from its 2014 income statement are as follows:

Revenues	$5 000 000
Variable costs	3 000 000
Fixed costs	2 160 000
Operating profit	$(160 000)

Jane
Woodall, Anwar’s CEO, is very concerned about the company’s poor profitability.
She asks Max Wilson, production manager, and Lyle Hayes, management accountant,
to see if there are ways to reduce costs.

After
two weeks, Max returns with a proposal to reduce variable costs to 52% of
revenues by reducing the costs Anwar Ltd currently incurs for safe disposal of
wasted plastic. Lyle is concerned that this would expose the company to
potential environmental liabilities. He tells Max: ‘We would need to estimate some
of these potential environmental costs and include them in our analysis’. ‘You
can’t do that’, Max replies. ‘We are not violating any laws. There is some
possibility that we may have to incur environmental costs in the future, but if
we bring it up now, this proposal will not go through because our senior
management always assumes these costs to be larger than they turn out to be.
The market is very tough, and we are in danger of shutting down the company. We
don’t want all our colleagues to lose their jobs. The only reason our
competitors are making money is because they are doing exactly what I am
proposing.’

Required

a) Calculate
Anwar Ltd’s break-even revenues for 2014.

b)
Calculate Anwar Ltd’s break-even
revenues if variable costs are 52% of revenues.

c) Calculate
Anwar Ltd’s profit for 2014 if variable costs had been 52% of revenues.

d) Given
Max Wilson’s comments, what should Lyle Hayes do?

Due Date: Monday the 16th of May 2016 at 23.59pm	3 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

Question 2: Marks 20

Kim
Daley is examining customer service costs in the southern region of Capital
Products. Capital Products has more than 200 separate electrical products that
are sold with a six-month guarantee of full repair or replacement with a new
product. When a product is returned by a customer, a service report is
prepared. This service report includes details of the problem and the time and
cost of resolving the problem. Weekly data for the most recent 8-week period
are:

Week	Customer Service Department costs	Number of service reports
1	$13 700	190
2	20 900	275
3	13 000	115
4	18 800	395
5	14 000	265
6	21 500	455
7	16 900	340
8	21 000	305

Required

a)
Plot the relationship between customer service costs and number of service
reports. Is the relationship economically plausible?

b)
Use the high–low method
to calculate the cost function, relating customer service costs to the number
of service reports.

c) What
variables, in addition to number of service reports, might be cost drivers of
weekly customer service costs of Capital Products?

Due Date: Monday the 16th of May 2016 at 23.59pm	4 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

Question-3) Marks 20

Pet
Products Company uses an automated process to manufacture its pet replica
products. For June, the company had the following activities:

Beginning work-in-process inventory	4500 items, 1/4 complete
Units placed in production	15 000 units
Units completed	17 500 units
Ending work-in-process inventory	2000 items, 3/4 complete
Cost of beginning work in process	$5250
Direct material costs, current	$16 500
Conversion costs, current	$23 945

Direct
materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process.

Required:

a) Prepare
a production cost worksheet using the FIFO method.

b) What
is the difference between a weighted-average method of process costing and a
first-in, first-out method of process costing?

Question-4)Marks
10

Universal
Industries operates a division in Zimbabwe, a country with very high inflation
rates. Traditionally, the company has used the same costing techniques in all
countries to facilitate reporting to corporate headquarters. However, the
financial accounting reports from Zimbabwe never seem to match the actual unit
results of the division. Management has studied the problem and it appears that
beginning inventories may be the cause of the unmatched information. The reason
for this is that the inventories have a different financial base because of the
severe inflation.

Required:

How can process
costing assist in addressing the problem facing Universal Industries?

Due Date: Monday the 16th of May 2016 at 23.59pm	5 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

Question
5) Marks 20

Brilliant
Accents Company manufactures and sells three styles of kitchen taps: brass,
chrome, and white. Production takes 25, 25, and 10 machine hours to manufacture
1000-unit batches of brass, chrome and white taps, respectively. The following
additional data apply:

	BRASS	CHROME	WHITE
Projected sales in units	30 000	50 000	40 000
PER UNIT data:
Selling price	$40	$20	$30
Direct materials	$8	$4	$8
Direct labour	$15	$3	$9
Overhead cost based on direct labour hours
(traditional system)	$12	$3	$9
Hours per 1000-unit batch:
Direct labour hours	40	10	30
Machine hours	25	25	10
Setup hours	1.0	0.5	1.0
Inspection hours	30	20	20

Total overhead costs and activity
levels for the year are estimated as follows:

Activity	Overhead costs	Activity levels
Direct labour hours		2900 hours
Machine hours		2400 hours
Setups	$465 500	95 setup hours
Inspections	$405 000	2700 inspection hours
	$870 500

Required:

a.
Using the traditional system, determine
the operating profit per unit for each style of tap.

b.
Determine the activity-cost-driver rate
for setup costs and inspection costs.

c.
Using the ABC system, for each style of
tap

1.
compute the estimated overhead costs per
unit.

2.
compute the estimated operating profit
per unit.

d. Explain
the differences between the profits obtained from the traditional system and
the ABC system. Which system provides a better estimate of profitability? Why?

Due Date: Monday the 16th of May 2016 at 23.59pm	6 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

Question
6) Marks 10

Jack
Halpern is the owner and CEO of Aerospace Comfort, a firm specialising in the manufacture
of seats for aeroplanes. He has just received a copy of a letter written to the
general audit section of the RAAF. He believes it is from an ex-employee of
Aerospace Comfort.

Dear Sir,

Aerospace
Comfort manufactured 100 X7 seats for the RAAF in 2014. The following may be of
interest.

1- Direct
materials costs billed for the 100 X7 seats were $25000.

2-
Direct manufacturing labour costs billed for 100 X7 seats were $6000. These
costs include 16 hours of set-up labour at $25 per hour, an amount included in
the manufacturing overhead cost pool as well. The $6000 also includes 12 hours
of design time at $50 an hour. Design time was explicitly identified as a cost
the RAAF would not reimburse.

3-
Manufacturing overhead costs billed for 100 X7 seats were $9000 (150% of direct
manufacturing labour costs). This amount includes the 16 hours of set-up labour
at $25 per hour that is incorrectly included as part of direct manufacturing
labour costs.

You may also want to
know that over 40% of the direct materials is purchased from Frontier
Technology, a company that is 51% owned by Jack Halpern’s brother. For obvious
reasons, this letter will not be signed.

cc: The
Australian, Jack Halpern, CEO of Aerospace Comfort

Aerospace Comfort’s
contract states that the RAAF reimburses Aerospace Comfort at 130% of total
manufacturing costs. Assume that the facts in the letter are correct as you
answer the following questions.

Required

a-
What is the cost amount per X7 seat that Aerospace Comfort billed the RAAF?
Assume that the actual direct materials costs were $25 000.

b-
What is the amount per X7 seat that Aerospace Comfort should have billed the
RAAF? Assume that the actual direct materials costs were $25000.

Due Date: Monday the 16th of May 2016 at 23.59pm	7 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016

c- What should the RAAF do to tighten
its procurement procedures to reduce the likelihood of such situations
recurring in the future?

Good LuckJ

Due Date: Monday the 16th of May 2016 at 23.59pm	8 | P a g e
ACT202 Management Accounting	Assignment one	Semester one -2016