MANAGEMENT ACCOUNTING 1 (ACC103)

ASSIGNMENT (15%)
Sem 1, 2020

DUE DATE : 13 APR 2020

GENERAL INSTRUCTIONS :

1. This is a group based assignment. Each group should consist of 4 (min) to 6

(max) members. Individual submission of this assignment is NOT allowed and
will be severely penalised.

2. Fill in and submit the attached form on the following pages together with your
assignment.

3. The FEEDBACK REPORT section in the form MUST be filled in individually

by each of the members. Feedback should NOT exceed the space provided.

4. All answers for each question MUST be summarised and entered / inserted into
the SUMMARY OF ANSWERS section in the form.

5. Failure to complete any of the sections in the attached form may be subject to
penalties.

6. Please take note that copying the work of others, allowing others to copy your
work, and / or attempting to do any of the above mentioned will result in
automatic failure of your assignment. NO EXCUSES FOR ACTS OF
PLAGIARISM WILL BE ENTERTAINED. You may of course consult
textbooks, journals, or any publications for reference purposes. All sources or
materials used should be clearly quoted / referenced.

7. Before submitting your assignment you should make a copy and submit the
original for assessment. Late submissions will not be entertained unless there is
(are) some legitimate mitigating factor(s).
FILL IN ALL SECTIONS OF THIS FORM AND ATTACH IT TOGETHER
WITH YOUR ASSIGNMENT

SECTION 1 - FEEDBACK REPORT (5 marks) :

What matters did you find were interesting or challenging about this
assignment; and working as a group? (Fill in your particulars and feedback in
the space provided below. Your feedback should NOT exceed space provided).

Member 1 :
Member’s Name & ID Work Done

Member 2 :
Member’s Name & ID Work Done

Member 3 :
Member’s Name & ID Work Done
Member 4 :
Member’s Name & ID Work Done

Member 5 :
Member’s Name & ID Work Done

Member 6 :
Member’s Name & ID Work Done
SECTION 2 - SUMMARY OF ANSWERS :
Summarise and enter all your answers for the respective questions in the space
provided below.

Question 1

(a)(i) WA method Transferred Direct Conversion

- In Material Costs
Equivalent units

Cost per equivalent unit ($)

Assignment of costs to :
Completed and transferred out

EWIP

Total cost accounted for

(a)(ii) FIFO method Transferred Direct Conversion

- In Material Costs
Equivalent units

Cost per equivalent unit ($)

Assignment of costs to :
Completed and transferred out from :
BWIP

Cost to complete

Started and completed

Total costs of completed units

EWIP

Total cost accounted for

Question 2
(a) Traditional Costing
Classic Deluxe
D. material costs

D. labour costs

Overheads

Total Costs ($)

(b) ABC
Classic Deluxe
D. material costs

D. labour costs

Overheads :
Energy

Purchasing

Mixing

Total Costs ($)

(c)
Classic Deluxe
SP / unit

(d)
Deluxe
D. material costs

D. labour costs

Overheads :
Energy

Purchasing

Mixing

Total Costs ($)

Question 3

(a) Check digits / indicative solutions :

Gondor Hondor
Joint costs allocated ($)

Total cost per unit ($)

(b)
Gondor Hondor
NRV ($)

Joint costs allocated ($)

Total cost per unit ($)

(c)
Gross Profit (%)

Gondor Hondor
Joint costs allocated ($)

Total cost per unit ($)

(d)
Iondor
Incremental gain / (loss)

Decision :
QUESTION 1 (9 marks)

Safeware Ltd. manufactures a single product, which passes through the Mixing
Department and Freezing Department.

Manufacturing begins in the Mixing Department. All units are then transferred to
Freezing Department.

In the Freezing Department, further materials are added and processed until
completion, and transferred to the finished goods inventory. Overhead is allocated on
the basis of 120% of direct labour cost.

Work in process in the Freezing Department on 1 Mar was 80,000 units (Materials :
50% complete; Conversion : 60% complete). The costs included in these units were as
follows :

Mixing Department costs $1,360,000

Freezing Department : Direct materials $500,000
: Direct labour $960,000
: Overheads $?

During the month, the Freezing Department completed and transferred 150,000 units
to finished goods inventory. Units transferred in from Mixing in Mar were charged at
$20.00 per unit. Freezing Department’s costs in Mar were :

Materials added during the month $1,829,000

Direct labour for the month $3,510,000
Overheads $?

The ending work in process for Freezing Department was 20,000 units (Materials :
40%; Conversion : 30%).

Required :

(a) Prepare the Freezing Department production cost report for the month of Mar
2020 using (round up to 2 decimal place) :
(i) Weighted Average method
(ii) FIFO method
Note : You may prepare the production cost report using WORD or EXCEL. (9 marks)
QUESTION 2 (28 marks)

Instructions (for Q2 only) :

(i) Based on the following case study information, build a spreadsheet model
using Excel 2003 (or later) to answer the accompanying problems.
(ii) The spreadsheet model should include a “Data Input Section” (whereby all
raw / original data from the case should be entered), “Additional Information
Section” (whereby other relevant information for the individual problems
should be entered) and an “Output Section” (whereby the final answers to each
problem is presented).
(iii) Program your spreadsheet to perform all necessary calculations. Do not “hard
code” any amounts, use the addition, subtraction, multiplication, division
operations or any other specialised formulas.

Case study information :

Blessings Inc. produces 2 types of products, “Classic” and “Deluxe”. It expects to

produce 60,000 units of Classic and 90,000 units of Deluxe. Direct material cost in
2020 is expected to be $35.00 per unit for Classic and $60.00 per unit for Deluxe.

Blessings’ total direct labour cost for Classic is expected to be $2,160,000 and
$1,620,000 for Deluxe. Other manufacturing costs are considered as overhead. The
estimated total annual overhead for the year is $5,355,000.

Presently, Blessings allocates its overheads based on direct labour hours. Classic
requires 2.0 direct labour hours, whilst Deluxe requires 1.0 direct labour hours per
unit to complete.

The company is deciding to use the activity-based costing (ABC) system to allocate
all its overheads. Blessings obtained the following information :

Cost Driver Classic Deluxe

Energy Machine Hours 40,000 160,000
Purchasing No. of orders 1 2
Mixing Mixing Hours 90,000 270,000

The company estimates that Energy costs amounts to $2,300,000; Purchasing costs
amounts to $855,000; and Mixing costs amounts to $2,200,000.

Required :

(a) Calculate the total cost of Classic and total cost of Deluxe (assuming that the
expected no. of units are produced) using the traditional costing system.

(b) Calculate the total cost of Classic and total cost of Deluxe (assuming that the
expected no. of units are produced) using the activity-based costing system.
(c) Suppose the company decides to use ABC to set their selling price. What would
be the minimum selling price per unit for each product if the company requires a
gross profit margin of 20% for all products?

(d) Assume that Energy cost increased by $200,000 and Purchasing cost decreased
by 10%. Calculate the total cost of Deluxe only (assuming that the expected no.
of units are produced and the total driver units remains the same) using the
activity-based costing system.
(Parts (a) to (d) - 21 marks)

(e) Explain the term ‘activity analysis’ (include an appropriate illustration /

example). Explain with an appropriate illustration why a new product costing
system may be needed when line managers suggest that an apparently profitable
product be dropped. Implementing ABC / ABM, can be difficult due to
behavioural issues. What can managers do to overcome these challenges? (Word
limit : 500). (7 marks)

QUESTION 3 (8 marks)

Condor Ltd. manufactures the joint products, Gondor and Hondor. Gondor sells for
$60 per unit, whereas Hondor sells for $120 per unit.

The 2 products require further processing beyond the split-off point. The following
information relates to the 2 products :

Gondor Hondor
Production (units) 150,000 200,000
Separable costs $1,500,000 $6,500,000

Total joint processing costs were $7,000,000.

Required :

(a) Determine the total cost per unit of each of the products using the physical
method. (Show all workings. You may prepare your workings using WORD or
EXCEL) (1 mark)

(b) Determine the total cost per unit of each of the products using the net
realisable value method. (Show all workings. You may prepare your workings
using WORD or EXCEL) (3 marks)

(c) Determine the total cost per unit of each of the products using the constant
gross margin method. (Show all workings. You may prepare your workings
using WORD or EXCEL) (2 marks)

(d) “Hondor” could be further processed into “Iondor” for an additional cost of
$18.00 per unit. “Iondor” would sell for $140.00 per unit. Should the company
produce “Iondor”? Show the necessary computation to justify your decision.
(Show all workings. You may prepare your workings using WORD or EXCEL)
(2 marks)