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management accounting solutions

management accounting solutions

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Published by: dgsabfasb on Feb 10, 2010
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Please Note: This is a brand new textbook and these solutions have not been checked for accuracy. There may well be mistakes. You should regularly check the announcements page on Blackboard for any updates or corrections throughout semester. Email the Tutor-in-charge if you believe any of the following solutions are incorrect.
 ACCT2012 Week 7 Homework Solutions Semester 1, 2009
Australian accounting standard AASB 102 has several requirements relating to inventoriesarising from production:The cost of inventories produced are to include the costs of:
direct materials
direct labour and on-costs
sub-contracted work, and
a systematic allocation of production overheads.The balance sheet must disclose separately the accounting policies adopted for measuringinventories, including work in process and finished goods. Both of these requirements involvecosts determined using job costing systems and process costing systems. The valuing of work inprocess using process costing is not dealt with until Chapter 5.
PROBLEM 7.51 (50 minutes) (appendix) Normal costing; profit underabsorption and variable costing: manufacturer
1 (a)
Furry Pillows Pty. Ltd.Income Statement Under Absorption CostingYear Ended 30 June
Sales revenue (9,000 at $40/unit) $360 000Less: Cost of goods sold (9,000
$19.40)* 174 600Gross margin 185 400Less: Selling and administrative expenses
Variable 9 000
Fixed 60 00069 000Net profit $116 400
Furry Pillows Pty LtdIncome Statement Under Variable CostingYear Ended 31 30 June
Sales revenue (9,000 units at $40/unit) $360 000
Less: Variable expenses
Variable manufacturing costs(9,000 at $14.40) 129 600
Variable selling & administrative costs 9 000138 600
Contribution margin 221 400Less: Fixed expensesFixed manufacturing overhead 50 000
Fixed selling and administrative expenses 60 000Net profit $111 400 
*As there are no work in process inventories, or beginning finished goods inventory, allmanufacturing costs are related to finished goods.Direct material $80 000Direct labour 40 000Variable manufacturing overhead24 000Variable cost of manufacture $144 000 or $14.40/unitFixed manufacturing overhead 50 000Absorption cost of manufacture$194 000 or $19.40/unit

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