Course Plan Certified Management Accountant - CMA Financial Planning Performance & Control (Weekend) Section | Class Subject we Cost Element, Functions, Cost Behavior, Absorption Viable Cos. Overhead Cost lection, ABC, Actual Normal / Standord Costing, 7 Service Cost Alocation, Joint Product Life Cyl, Operational Eiciency, Normal & | 2995 2 | Abnormal Los Process Costing, ob Costing) Business recess Rxeeiance i 3. _| Budget concep, Methodology, Types, Re 4 | Forecasting, Lstring Curve, Probably, Rsk Top evel plan _ Variance Analysis — Mater Labor. |_| vray oved Ss, ret, 20% 6. | responsiiy Corer, Performance Measures 7. | sovernance, rk nd compliance 8_| titer auting / Systems controls and securty measures 9 | Finacial statements A 15% 10 | Recogation, measurement, valuation and dsclosure Exam Format: Multiple Choice Questions 100 Questions Essay 2 Questions Total Time = 4 Hours: Capyrgereseved by EMERGE Management Ting Center GA/WO-1/weaue 17 ast2 A mem CMA PART 1 a]. Financial Planning, Performance and Control ute Cost Management sees Sec. D- Handouts 1 ‘Cost Accounting Methods to find out costo a cost object. ~ Cost ebjct may be produc, servic, department, process el Income Statement Pcs of sats ee = coef nes att : TER, | [wena (wen ator reason | | RSBy So Gross Prof ac (Ure reatirsitl ee | reiwscat | oui Wen eed «karte ont egese 44 : jenone une = ai cont be at we Product Cost 3 3 cotes “> Zo $$ > can on trated renee eee Prime Cast Relakions bap blo oe $NA pire tabor ‘ Monufoctring vehend Manufacturi ‘Component Behavior ae cot be | — incre teri Variable Gm oon Labo net | Le Lodicek + nec bor ine Cer ‘) Fred a oe | Menuacturng Expenses Sei fed shoo sayy to ise Cenrght resend by EMERGE Monegan Tring Cantor U7 1/Sec0/ HOY Cast 1Somponents Methost Reason Dire Materia / Direct Labor — Tracing “Theresa relation between output to nput Overhead — lao — No relation: so we need to alocate to 2bects ‘Tere ae two methods 2) POOMR - Pre Determined Overhetd Rate 1) ABC Activity Based Costing Ibustration Cost Frew meted oo Bae Calculation Cost of Goods Manufacturing & Sold vento Dect Matra Purchased 42.000 ‘aventory Opening Ending Gadiaeni 30,000 orectwateral 19000 15000 | | Manutacunng Ovenead 40.000 WorcinProgess ‘3000 ‘ono | | Sales 200.000 Tnsnedeode 27000 96.000 | | SetingExpenses 2000 fammnetraton fxpenses 1.000 Celevlationt ttaterlat Consumed _Gaculation of Cast of Goads Manufactured gegen oan Inventoy Opening Ending ‘Direct Material Purchased 200,000 Direct Labor 100,000 Direct Material 10,000 2,000 ‘Manufacturing Overhead (Actual) 30,000 Manufacturing Overhead (pple) 48,000 Workin Progress 2,000 1,000 |_| caes 40000 Saling Expenses 19,00 Finshes Geade 100,000 75,000 | | Stina menses oad ons DM consumed cot ‘br josad Dmel = ger stay: see a se het 00,500 te a ret om 2OvosD ROY pme Soe ee ee oy emcee’) 00 ee couse Is ooh oe Coes Fin Gali Loe, Ein Gwe Of = FS 58D _ Sa inpesls Cut) chit) 3 Samet 3) ghton SS ©) Rapeston Method {ota coat Cost Per Unit y Teste ’ ne Li i me po " i . Units . ms mated) ccaltte lech G ook ‘Fixed Cost a [fame — 0-0] ‘ rongett 40-6) fangs 80- 20 ara von Copygh reserve by EMERGE Management Taig Corer 4 /P1/ SC 0/ HO Cas 1Ulustration of High Low Method High Low Method yh Maintenance (ns) Jiraya 3300 Fema 0 2.00 March 70 360 Yon —P_ 00a hot 00 2.009, gh 200 3,800 + tow 0 2.500 jp Diferencedtt L500 1,000 Variable cost/Per unit 1000 = $2 / u a 1000 = $2 une te Pee a ‘Segregation of Mixed Cost Varclecosyer unit 1000 = gy 02 = s2yunt Te Total cost fr 900 hes. ve Variable cost $2 900, SSE ted east Lent eestor mie Cys uns x apo Fb) 200 (bones). ‘Check the answer for 400 rs. aon 3800 — “TE Fed cost Vowecn saxo Zam <0 — ve C4e0x2) toate za Tam Ee ‘Copyright reser by BERGE Management Trang Cntr (CHA 01 Sec D/HO-1/ Cass 6Exercise ‘High Low Method Maintenance Activity —Cost__ January 4,000 3,000 February 3,000 7,000 March 2,000 5,000 April 4,000 9,000 May 2,500 6,000 argh reserve by EMERGE Manages Trang Cntr API) Se / HOY CaceRegression Method = Regressions metesnatial expression of retaonsip between vanes oe Teta cose” 1 Dependent variable (te depends on Ve) Pee cae cateted a spear roo) 1 baecochdittot2Laies) 2 6 Activity (LHRIMAR/LInY wer fens . 1 Independent vaible Illustration wed Ox Totatcostorso0hs. waszmno a= tesa ( & 2 adc = 200 bs 2 Verte cot = nt Sa 2 2ave tee ‘Tis can be used as forecasting model. Fer e., We want to know the tla coe for estimated unt of 1,100 Y= 2000 42x oO / = 2000 + 2%:,300 = 200+ 2.200 qe z saimated Cost = 4,200 Wo 5 ee” Cangas by CHERGE Mayen ity Cnker (CW /P1/ S007 HOLY CostExercise Find out total cost if 1,500 2 4,000 =5 a b c d ‘Standard error (2) = 0.90 Standard error (b) = 0.75 =700 Absorntion vs, Variable Costing ‘pets [ase wie verel) Cost Component win | Variable Cost Die Motard Product Predict (W) Bret Labour Predict Pret (J [3 arabe mig. Ovehesd Prodi Prot Cw) 4, Fred Nig, Ovemead Prodice Preah 5 Variable Seling/Amin, Overhead Peri Period ( onic in fle 6 Fd Seling/nin, Ovrheoe Peres peed (oubads Me (oes 7. Peapae by US GAAP ve No Used or eral Purpose ‘Sales < Predvction Sales > Production anya reserved by EMERGE Management anny Center A PL/S0c0/WO1/ Cass 1 9‘Absorption vs, Variable Costing Production e 20,000 Sales $40 : 15000 Iwentory 5,000 | Det Materia $10 |e abou $5 | rite tg, Overhead $5] Faxed Mfg. Overhead 100,000 Yvible Satin Overnead G2] gOverread 8,000 | {Cost of Production TFS Matera Variable tg, Overhead Fixed Mfg, Overhead “ota Cost of Proucion Coste Production Sale (40. 15,000) Cost of Goods Sl (25 x 15,00). Gress Prone Fixed fg, Overhend = ~100}000 Vara Sain tg, Overnens ($2 15,000) -30000 30,000 xed Selig Nig. Overhene =ssoo = 50,09 Profit 4ss.o00 420,900 ie puaaeet yg resorved by EMERGE Management Ting Center (naP1/ S00 0/ HOH asst Fmgert= lone 2 1e0n0 0Exercise Absorption vs. Variable Costing Trosction 76.000 Sales $50 ‘3000 invertor 2000 Direc Note $100;00 Direct Labour $50,000 ‘oriole Hg, reread $50,000 Fred Mig, Overhead 20,000 Vaile Sling Overead 16,000 | Fed Seling Overnead 10,090 Copyright reserved by EMERGE Managment Tag Center OA 01) S000 / WO; Cat anCMA PART 1 Financial Planning, Performance and Control ‘Overhead Allocation — Costing Systems Section D - Handouts 2 ‘Overhead Application ‘inate Rate Multiple Rate Predetermined Overhead Rate Activity based costing recap costEements oj exc Cod Dred Mekrid = _DheL Debt oP ag Dirac Laboe Prete tor — Manufactung Oveead 3 rec Matesl | [Seneca] poorn ow ccount [-———* Allocate. dec ater el Aout Factor Expense clr P DAKE MBC pig reserved by EMERGE Maraparent Ting Center : em/riy sec0/H0~2/ cessFactory Cost ‘aciaaaian ‘mn bane cue Pee ye | |= ' wert) bude [Baas Teenie pan sae] Serer, Tar aes | "seo oes rae pares Tce a ‘rece | Direct nsec Expense Tare terse Thre Wages Factory ase iret atari Direct Wages loess Oversee (copies) vicina shes ecu ‘Goang Iiventory Goods sod ‘OUTSIDE FACTORY conto SALES | ends Sait | Fro Soi expense | + seing Bipense ‘ain pee | rir cence Cop nservl by BERGE Nonagaen Tang arr M401) 8500/0 2/ dost‘Actual Manufacturing overhead gos to overhead contol accour. From overhead conto account it allocated to Product ost. location Metre 13) POOHR (Single Rate) o- 1b) ABC (Muti Rates) Predetermined Overhead Rate Method ‘Based on Labor Hour or Machine Hour (Activity Base) Before the Start of the Year Total Esterated Overhead = 1,200,000 eal Overs faudset Prmuct Quantity unum | | actual practi Qt. Teal LHR A = soo 2 aso B= 200 2 ‘A, Calculation of Predetermined Overhead Rate Before Start ofthe Year roown = Toles.Ovetead - 1200000, 1.gong00 Total Es nciy, ~ GOD) + (2000060) “ “S00.c00, = $24 flaborHour (0H requires 2 Labor Hours = ee wh on) Oh machine Hew + Tra vente J Coleulehon 90 4 i ra dreceabie » 8 ‘Applicaton During the Year ‘Based on Actual Ovethead ator Hour consumed. Oveead willbe debts to Werk n Progress Account art CCedted to Overiead Cental Acco. Eres a: Wen Actual Oversea i eure: Debit: Overhead contol 1,250,000, Cred: PeyableCash Mlcation When Labor Hors ae consumed Debt: Workin Poses 1,236,000 1,250,000 | | Ces: Overhead Contra Alocaton 1,236,000 Sis x2 2 128eo- Cart ta) ‘Cepyrion reseed by MERGE Monogr Tain Crt. 3 (G1 /P1/ Se D/HO~2/ C51Disposal of over applied / under apie overhead contol count ol Owiteot 1250000 [amlas———LEROID Unseepted 14.000 Heheaticensiaimioutians Geveleoly Debit: Cost of Goods Sold 14,000 ree nae Gredit : Overhead Control Account 14,000 3 ae Fastome Shale méage tute dencete setter: (ell? 0% Sh a Dei: Cat of Goods Sold CGsing Fished goods inventory Cesing Workin Progress Cre: Overhead Conte Aecbunt “wi be gen nthe question Overappret = ony esr by EMERGE Nanagenent Ting Catar uy 11/90 0/HO~2/ Cx 1 2ato Sreenferwed to 3+ Conere siinpe~ 2 700 14000 revere toe gobyClass Exercise 1 Budaet ‘Total Overhead ($) 4,000,000 ‘Total Exit Production () 10,000 St Machine Hour pr Unt (Hr) 10 ‘etal Machina Hows () 100,000 ‘Adual 1/030;000 11,000 00 (celeste redeteminad Overnesa Rate > 18 * Daaw Overhead Cenrl Account ater -C OK Gumbel Ale A ttulen [03060 | pppiteal on = SP | Cater Nour’ Joya as Peturl Sg Popewe . Lege xe) Over upped — Pos nsjofient OK conp] Ale 2200 Pa, © 4s LEO Capit reserve! by EMERGE Manogaren Trg Carts. | /P1/ Sec D/HO~2/ Cass Qe, eoClass Exercise 2 Teal Overeod (6) “Total Estimates Production (#) 10,000, 11900 Ft, Macre Hut per Unt (+2) 5 7 “Total Mache Hours (4) (ales redetermined Overhead Rate ena head Cone Aezount argh raed by EMERGE Manager Tig Certer OU /PI/%0/H0-2/cass1io wee oot Impact on Overhead ? ey Al Treortcaveonodsf 7 Pract Capacity Creel) oi mol Consey = cet avcty = 2 reaution Scat 7 Prodation «Bue z tual > at = Atl F< Bug Ay OH > Best - Acti OH < Bode Mpclgoe, = Mays undannped > app ese by EMERGE NoapotTsy Cater ou /Pr/sec0/ 10 -2/Cass 1Dd Plager [DVD Mayers ohh” ‘Overhead Application System hs af f vty bY te Manag oremetcomtccurt GAY tol [eet ioes Tee ages Tw | Facer Oweeadperse | tigation “net _| toviet | overs | room ( apitant ac Laatae) a ‘cos [ Fine. | GaP te ‘re Darina Ova Rate POOH ct ][ com | [cor | [con foot || foo || fect |] pon ote = e L% < || Tas barrie Lai 7 [cipleGagen range FE oy footed ovens = Formac in | "2g SESE ~ Dove! erst | rune |) Pace |] ie Luss |L_Oe t 4 4 ween] [2] fe] fe fete fooled RX ORK RK RX scl sexaton, sent MBE ey eee on te | | UR Laer Hour : Hv Machine Hou Bd vacdases I) ARC 9 Gad Planmy G04 tntyslen chepertrmauks » copra are by MERGE Menage Tg Cert ® (01/80 0/140~2/ a1Activity - Based Costing (ABC) gee ee = ar pe Identify an define acitles and acy posts and develop an adv dciray. Trae or asin costs to activites and cost cet. Calesate activity ates. Pai us ak i, Propare essary repr. Hierarchy of Activities seve Activities ‘Activity Measures Datta cestng unis mahines Wachine hous Process wil by hee eet kre Consuming factory suples Units produced Batch eet Procestng partons oars Purchase orders proceed Processing roducten orders Producten orders processes Setting up equipment Number of setups Handling motos Pounds of material handled Producten | Teatng naw proaas cars often te Aamintrng pars iventies | Number of pat pes Designing pros ours of design time Foalgpavel [Gana fairy adnnsvaton Dred laborers Plant bllng and grounds Direct aber hare any eso by EMERGE Managanet Tan Cor 10 /1/Se 0/HO~2/ Cass 1Mustration Using Activity-Based Costing ‘Comte Scund ne. makes tao product that are Salto automebie manufacturers, aio wih a bultin (Co payer anda acto witha bitin DVO player 2. For the cust yar, Comtsk tas budgeted sales of 50,000 OVD units and 200,000 CD units. 3. Both products require tw cect lsborhours to complete, for a otal of $0,000 direct labor hours. Direct Labor-Hours as a Base “otal manufacurng vera Gas for the cert yar oe estimated to be $10,000,000. The conpary daveloos the fllowing avrhad at bese oon boro: Presetemined $10000.000 — 420 perdu overhead rate ~ 500/000 0uH Dire Mater 2 Dire Labor ot ean Manuf overhead ce) (anus ao ae ev oduct | fa om nit sed by EMERGE eager Taig Cater 0 1 /P1) Sec0/WO-2/ Cassq Computing Activity Rates “The ABC project team at Comtek has developed the folowing basi Information Estimated Overneas Actvly and Aetiviy Measures Cost Expected Act Toul ovD eo Labor lata (OLH) $200,000 —800,000--5 700,000 ~ 400.000 Machine related (MH) 24100,000 1,000,000 300,000 + 700,000 Machine setups (setups) 18000004000 3.000 1,000, Procuction orders orders) ‘4500004200400 ‘800, Product testing (tests) 41700,000 20,000 16.000 4000 Material receipts (receipts) ‘000000 5000 t.800 «3,200, Parts administration (parttypes) 360,000, oo 400300, ‘General factory (MH) 2,000,000. 1,000,000 300,000 700,000 £39300,000" ‘Computing Activity Rates ‘We can calculate the following activity rates: Estimated ‘Total, Overhead Expected ‘Actity and Activity Measures "Gost __Aatiiy Actily Rate Labor related (LH) 3 s00.s00" + —so0000 = $460. por DLT ‘Machine related (eH) 200000 + 400000 = "240. perklH ‘Machine sotups (setups) ‘us00.000 + "4000 = 400.00. persetup Production orders (orders) ‘450.000 + 4.200 = 37500. pecan Produetteating (est) 41700900 + 20000 = “88.00. pertest Material receipts (ocsipts) ‘\p00.000 + “S00 = 200.00. perreceint Pars administration (perttypes) 360000 + "700 = 0000. perpart type (Genera factory (i) 2300000 + 1000000 = 200 perm 510,000,500 Using the new activity rates let's assign overhead to the two products bated upon activity. ‘Caprio reserved by EMERGE Manager Taig Cntr (Om /P1/secb/WO-2/ Cass 1‘Computing Overhead Cost per Unit ‘pvp units: Expected Activity Activity end Actiy Measures Acti Rate’ _ Amount Labor relatee(OLH) 1009000 ¥ $180 = § 160.000 300000 * * 240 =» €30,000, 3000 * 40000 = 1,200,000, Production orders (orders) 400 37500 = 150,000 Producttostng (tes) 16000 x 9600 = 1,260,000, Material ecepis (receipts) 41800 x 20000 = 360,000, Pants administration ( % 60000 = 200,000 Genera factory (MH) x "200 = 600,000, ‘Total Overhend cost assigned $560,000 Number of unite produces "s,000 Overhead cost por unit 3.20 ‘Computing Overhead Cost per Unit cD Unite Expected Activiy Activity and Actviy Measures Activity Rate’ _Amount {Labor related (OLH) 1400000 * $1.40» § 640,000 Machine related (MH) 700000 * "240 = 4470,000, Machine setups (setups) 11900 x 40000 = 400,000, Production orders (orders) ‘800 x 37600 = 300,000 Productteating (est) 4900 x 600 = 340,000, Mater pt) 33200 * 20000 = 640,000, Pars administration (partypes) "300 x 500.00 = $80,000 General factory (MH) e000 * — 200 400,000. Total Overhead cost sestoned $5,340,000 Numberof unt produced 700,000 Overhead cost per unit 25.70 opt esr by EMERGE Management Tang Cart u/s v/y0~2/ C21Computing Product Costs Actvity-Based Costing _ Direct-Labor Costing DVO Unis CD Units ‘DVD Units CD Units Direct material 3 9000 “§ 6000 $ 9000 —s 5000 Direct labor 2000 2000 2000 20.00 Maruiacturing overhead 93.20 2670 40.00 __40.00. Unit product cost $ 20320, “$86.70. “§ 76000. “§ 11000 Notice thatthe unt product cost af a CD unit decreased from $110 to $96.70 . ‘while the unit cost of & DVD unt increased from $150 to $203.20, Shifting of Overhead Cost Direct may z 30.00 Dieetab zo00 2000 20.00, Manutactufog ovens 2670 __ 40.00 40.00, Unt pron 95.70" “§-160.00" “3 710.00 Low-volume product] When 2 company implements activty-based costing, overhead ‘cost often shifts from high-volume to low-volume products with higher unit product cost resulting for the low-volume products. opi reserved by EMERGE Manager Ting Center OU/01/Sec0 /Y0-2/ Cass 1 B‘Targeting Process Improvements ‘Activity-Based Management “Involves focusing on activites to eliminate waste, decease procesing tie, and reduce deft, Benehmarking 'sa systematic approach to Wdentiying the activites wth the retest rom forimorovement. I's based on comparing the performance in anerganizton wth the performance ete, smlareganzatins Know for {hel oustanding performance Evaluation of Activity-Based Costing Benefits of ABC “+ Improves the acureyof products cass. ‘+ _Actvay cost pools are more homogeneous than departmental cst poo ‘+ ‘locates ovsnead onthe bass of aces thet case overhead cats. Limitations of ABC ‘Gost of imlementation may exens bene. 1 Products costs are nt aiays relevant hen aking deions ang cried hy EMERCE Mangere Ting Coker 1 /P1}s2¢0/40~2/Cuss 1CMA PART 1 Financial Planning, Performance and Control Section D.t Hands-on Exercise In practice, ens such as wood screws and glue used Inthe prodction of school desks and chats woud mast kal be cassie 68 Airc bor Factory overhead. rea materials. pei ests pekr 2. Kane Company has the folowing unit cost for the crane yer. aw mater $20.00 Det aber 25.00 Variable manufacturing ovehead 10.00, Fred manufacturing overhead 15.00 “Tota unt cost xed manufacturing costs based onan ann activity eve! of 8,000 unis. Ease on these data, the ‘otal manufcton cost expected to be nce fo manutatre 9,000 uns nthe ae yeas 2. $360,000. $575,000. $615,000, 4. $630;0, 3. review of Purkett Corpor’ account card for lst year dosed the folowing selected Infomation. Variable costs Dect mates usd 56000 Diet labor 178,00 Mandacurng oveead 154,000 Seng 5s 108 400 Feed cots Manufacturing overhead 257,000 Seng ots 121,000 Damiisratne costs 235,900 1h aden the company suffered 2 $27,700 uninsured factory Fie loss Ging the year. What ware Puke’ reduc casts and perio costs forthe last yea? Pratik, _ Petia. a, $235,100 $915,000. b, $497,500 $651,600, <2 $656,100 $403,000 4, $683,800 $465,300 Copp resend by EMERGE Monagonent Taig Carter 1 uk /P1/Sac0/WE-1/ Cass4. Taylor Corporation fs determining the cost behaver of several ems in order to budget forthe ‘pearing year. Past ends have ndeated the folowing dlrs were sper at tree cfrent evel of out a ame tcc. 00 cota Heso0 $2900 $35,000. cont ‘000 "15,000 15000 cone 15000 1800022500 In estabishing a budget fr 14000 unt, Taylor should teat Costs A,B, and G respectively as semivarale, fd an variable, ‘arabe ed and varabe Scnivorabl,semivaroble and semvorate, ‘arabe, semvarable, and semiarbl |5. Which one ofthe flowing refers oa cost that reins the some as the ohne of acy dresses vin the retvan range? Average cost per ut Bh Vanabl cost pr unt © Unit fied eos 4. Totlvaree cost, 16 Fowler Co. provides the following summary ts nal budgeted preducten cass at three production reves. oligo Uns 000. S00" 2.00 cone gia0 a0 paw cone, siisso $2200 © 2.900, cease $1,000) $1000 $1,000 Gab ss as $3260 ‘Te cost beatir of ch ofthe Costs A roush D, respectively, s 2, Semi-varabia varie, ed, and varie by, Vanable,sen-varatle, fined and sari-varabe, ‘¢ arabl; ied hed ond varie 4 Varbble,samyratie, nad, and variable, 7. -Kmanagerant accounts abou to prepare reps of total varie cost and peri varie cost for use ia shert-term planning made. Dolls wl be dented on the vetcal as; acy wil be ‘Sow onthe hoora as How wl ese graphs appear upen camper? ‘etait Cost Pack vail Cost, ‘8. Salghtine, sloping upward tothe ight. Straight Ine paral to the horizontal as. 1. Guasineny, sloping pmo te igh. Aline that Dosey poral he horizontal 2s, st decreasing and then ices {& Stloht ine, sloing upward tothe ight, Straight ne, oping upward to ther {Swag ine, pall te hora! xis. Sight Ine, oping ower tothe rhe Corot one by EMEREE Mosport Ting Carter 2 (ou /1/Se0/ME~1/ Coss 1Cy ‘8. Lar Company has found that ts total eectcty cost tas both 2 hed component and 2 variable ‘amponert win the relevant range. The vate comport scams to vary rect ith te ber of unis produced. Which one of the folowing statements concering Lars wecmcty casts Incorrect? “The toa elect cost wl increase as poduction volume erases. “The toa elect cost per un of production il ieease as procution volume nreaes. “The verabe decry eas par unt producto wil remain constant a produto volaie “The ved secret cost pe unit of production wil decline as reduction vlume erases. Lal Co, produces tree types of mers undershirt: This, Voeck shits, and athlete sits. Inthe Folding and Packaging Department, operations cosing are used to apply costs to indie uns based onthe stander time allowed to fold and package each typeof undershirt. The tandard time Fld and package each type of undershit as fotous, hie 40 seconds per sit .neck shit 40 seconds pe ir. ‘hee sit 20 seconde pe rt During the mort ofA, Loyal produced ad sll 50000 shits, 3,000 V-neck sits, and 20000 alte sits, I costs inthe Fong and Packaging Department were $78,200 during Api, Pow much {oldng end packaging cst shoud be applied 0 each T-shirt? a $s b. Snes © $760, $3688, 10, Vitich ofthe fallowing correct shows te treatment of (1) Factory ura, (2) ec labor en (3) ‘inished goods shipping costs Under absorption costing ad vaabe costing? Asxmton Costing atale Costing Producto Period Cost” rosie Cast Bain Cost 2 2 3 2 42 t 3 3 43 z 2:3 Fi 11, Dremmon Copration Lies @ standard cost axcunting system, Data forthe lst Fal year are as ‘oon Begining inventory of ished goods Production during the year Sse Eng ivertory Pec Product sling price ‘Standard variable manufacturing cost ‘Standard ed mansfacurng cos fuged sling and administrative casts (le) *Penominator evel of activity s 750 wits forte year. Cont eset by EMERGE enapenent Tang Carter 0 /P1/secD/ME-1/ cuss 1‘There were no price, efficiency, ar spending variances forthe year, and aca sling and ainktrve expeniesequsied the buspet amount. Bry velume vanancef writen off to cst {onde Satin the year nerves. here ae no wor procss nents, Assuming tht Orerenen used absorption casing, the amount of eperating Income eared inthe last fiscal yar was a. $21,500, B $27,000 © $23,000 $30,000 112, Chassen Company, 2 cracker and cookle manufacturer, has flowing un costs er the mnth of Dune Viable Varobie Fed Feed rmavgting cost. manuactuina cst) mateo cst $500. $350 #200, ‘00 ‘total of 109,000 units were manufactured during une of which 10,000 remain Herding invertor. Chassen uses tne fst, frstout (FIFO) inventory method an the 10,000 uns ae the ony ished goods inventory at month-end. Using the ful absorption costng method, Cass’ ished goods Inventory valve woul be a. $50,000, 5 $7000, $85,000, $345,000, Cig ried by EMERGE onazement Ting Cntr 4 (0 /01/Sec0/NE-1/ Coss 1CMA PART 1. _. Financial Planning, Performance and Control suspen art Manogment Sannee ‘Section D2 Hands-on Exercise from the folowing budgetel cata, calculate the budgeted indrect cost rate that would be used in a oral costing system, “otal drect bor Fours 250,000 Dec cots $10,900,000, ‘Total inde abo: bors 50,000 ‘Total nds ox relaed costs $5,000,000 ‘Total indict ntbor rested costs § 7,000,000, a $20. b 42s. © $40 a $8 2 Metene Company uses a standard cost accounting Stem. Data er the last fal yr ae as flows ts Begining inventory of fished goods 100 Production dng the yeor 700 ‘Soles 750 Erin invent ‘3 Peco Produc selgsice ‘200 ‘Standard varie manufac cot 0 ‘Standard thes manutacising cost 2 ‘udgate sting Bc administrate costs (al ae) 45,000 *Dateminatr lvl fective is 750 uns fr the yar Thate were pores, enc), or spending variances for the year, and actual sling and ‘minerative exoaeee eqsle the botnet amount. Any volume variance fe ween of to coe of ‘ods sed the year cure. Tere are no work preces evertres, “The amount of eéfting name earns by Mylene forthe lst scl year using variable costing Was 21,50. $22,500. $28,000. 31/00, ree aprigit reser by BHERGE Menezeent ig Center 1 (0/21) 9/2/0008?3. Consider the fotowng skuaton of Weisman Corporation fr the rir yer, “The company produces 1000 uns and sold 900 uns, bot as budget, ‘+ There were no begining or ending workin-pocess vetoes and no begining fished 00d verry. ‘+ Budgeted and acual ied costs were equal all varisle manufacturing cost ae afta bp value of poducten only, and a varable sling costs arate by sles volume oy 1+ Buagotes per unt reverus and cost were as follows Pectit Soles pice $100, (ect mates » Det aber 20 Variable maruacturng costs 0 Fred manufacturing cos 5 Variable seting crs 2 Fes seling costs ($3,600 ttl) 4 Freed acinstative costs ($1,800 ttl) 2 ‘The operating nce for Wesan forthe prior year using absorption casting vias a $13600, b $1420, © $15,300, 6 $150. 44 Polder Products Company mandfecures two types of eigneerng agnostics equipment used in onstruction, The wo preduts are based upon diferent tecnologis, xray and vasound, but 2 ‘manufactured inthe sae fetry. Pele Fas computes the manufot cst othe xray and la Sound products by adding together dect materials, cect later, a overhead cost apple’ based cn the numberof det labor hours. The factory has thee overheas deparmants that suport the sie roducton line that makes both products. Bucpetad overhead spending for te department 36 fotows Matevialanding Seu _Tataln» $6000 $5000 $300 “414000 Polder budgeted manufactting actives and costs forthe period a a allows, eames cai ag UeSand Ut reduced and sold 0 100 Diet moteals uses $5,000 $8,000 Diet aber hors sad ‘0 300 Direct aber cost 4000 $2000 Naber of parts used ‘0 0 Number of fingering changes 2 1 Number of produ é 7 ‘The budgeted cost to manufacture one utre-sound machine using acy based costing method a. 922s. ee, e323. $305 ony reserved by EMERGE Monagarert Tang Caner 2 0 /t/ Sac /ME-2/ Cass 1cr 5. Aime! In. manufactures nd ses two products. Dat with regard to these peeduts ae given belo. ProductA Pratt 8 Unis produced and elt 30,000 12,00 chine hours reqited pe uit 2 3 Recaving orders per product Ine st 150 Prosucbon ares pe’ pad ine 2 8 Prosucion rns 5 2 Inspecvons 2 x ‘Total budgeted machin tours are 12808-The budgeted overhead cst are shown blow 400 Recsving eats 450,000 Engineer ents 300,000 ature setup costs 25,000, Trepacton ets 000 Total budgeted overhead costs $275,000 Using acy based cost, the per uit overhead cost allocation of ring cot or produc ks © ps for we Hale 4 fn {6 ohn eng, cost accountant at Stet Compan, s developing deparomertal factory overhead ‘applcaten rates for te company’s tooling a fatcatng Sepetments The budgeted oven for ‘501 department andthe det or one fob re shown Elon, Denacments “Taling bration Supplies 5.850 $200 Superiso' salaries 1,500 2,000 Ire ator 1300 4380 Depracaton 1000 5500 Pepais ams a ‘Total budget vernens 8,625 fuex20 “Total ractaber hours 460 0 Diet ioborhours on Job #2812 3 Using the departmental ovehead application rte, ttl overhead apple to Jeb #231 inthe Tooing and Fabricating Departments wil be Ak 05, $303, $537 a on enya reseed by EMERGE Managemen Tang Cater 3 (0k /21/ Sue D/HE-2/ Cee 1Jones Tax Company his thee dsors ~Camiance, Téx Panning, and Fnenil Contig. Based an the diisionl data presented below, whch one of See alocaton bases fr coneren eonpay ‘rperes woud kay have the east negnve betavral pact on the Fhanca Dison manager? comaliznce Revenues 4,500,000 Varoble expenses "7,500,000, Nove employees 8 2 Revenues. Conrbsten margin Equal sharing, 4 Nomber of enployees. TaxPlaming nancial Conutiag $6,000,000 500,000, 3,750,000 "2,250,000, 76 56 18 Atmel inc. manufactures and sls wo procs. Dat with regard to tess predicts ae given below Luts produced and sol oxhne urs ruled per unit eceving ord’ per product ne rahi odes per product ne eduction ns Inspections Products Boda 8 30,00 p00 2 3 50 19 2 8 3 2 20 2 “Total wget machine hours are 100000.The bot Gethiead oss are shown below. acting oss Brneeing ets achne setup costs Mspecon cats "Total budgeted overhead costs $450,000, 300,00 25,000 0.000 $o75000 “he cst cive for eninering costs I the number of producto orders per product ine. Using acy ‘ised costg, the engnsrng cost per unt for Product 8 woud be a 4400. be g100. fe) g1500 faba. opin served by EMERGE Menapoon Ting Crt 4 04/P1/Sec0/HE-2/ C051e A= CMA PART1. Financial Planning, Performance and Control fener Cost Management — Section D (Class Exercise 1) 41, The chice between absorption costing and variable costing may havea significant effect. on the: _apparert profitably of a company. Required 2 Using 2 numeral example, titrate how 3 company using absption costing wil report ‘redter net income for a given level of sales than a company using Vane costing by ‘managing production volume. State one argument in fevour of absorption costing and one argument in favour of variable costa, Sales Price a Sales Volume = 900 units Production Volume 1000" units Variable Cost of Production Direct Material $200 / Part Direct Labour $150 / Purit Variable Manufactiting Cost $150 / Pusrit ‘Fixed Manifacturing Cost '$300,000 P. year Fixed selling & Admin, P. year Draw Incline stdtement under Variable & Absorption Costing. Cong ecard by EMEREE Nanogen Ting Cente 1 mu /71/See D/ CHE 1) CossCy o ‘cha Part Financial Planning, Performance and Control eee Allocation of Joint Cost BO ‘Sec. D (Homework 4) MD onscess : _ Bea Ra Won xantonvatacng Comgay bs fon $80 per ene en of cei epee ates ee pools ach Ce ae NGS a sae a [eee ae ae Bryne? tn pessed meres Poe a estan oo els ene a i Department 1 2 a ost of faron $96 00 Diet labor $1000 $45,000» $65,000, Manufacturing overeat $10,000 $21,090 $48,000 Produ spin Gy, una Gals sot 2.000 3.045.000 Golons on and at une 30,2005, 30.00 ” 15,000, Ses in doar $30,000" )$56,000 ps $141,780 ‘There were no inventories on hand at ty 4, 2008 andere nano fron on and a une 30,200, Al gallons ‘2 hand at June 30,2005 wore complete 3 o processing, Johan ues he net veslzabevlverethod _alecatng ft cost 1. Foralloatng joint oss, the ne alae value lpn for he yea ended une 2, 2005 . $20000 85,000 $21,000 3.46000 2. Te ot oss forte year eine 30, 2005, to be lca re ‘$30,000, 8 95,000, (© $120,000 $36 000 3. Te cost of elon sol fr the yar ended une 30,2005, ‘$80,000 8, $66,000, se5857 1. $36,000, 4. The salueofenang inventory for alone $24,000 8 $12,000 $000 2.$13333 nyt reser by EMERGE Managenent Trang Cantor GU /Pt/S D/H = 4/0082CMA PART 1 a Financial Planning, Performance and Control jagea 8" Section D3 Hands-on Exercise 4. When considering normal and abrerma spotage, which one of the folowing is theoretically the best ‘eccountin method for spolage ina process-cosing syste? 2, Both normal ae abnarmalspolge os shoud be charged toa seperate expense acount 3° Normal spige cost shoul be charged to good uns and anaralspaloge cst sould be ‘charged toa separate expense acount. Bath normal ae abnormal spologe ott hou be charged to od unis 4. Norm plage casts should be charged to a separate expense accoutand ronal spoage cost soul be charged to goad unis 2. Soxtwiod industries uses a process costing system and rss ts gods ot he nd of Imanufacuring, The inspection as of Dune 30 revealed the folowing nermatin for Ue rent of une, ceed units completed 16,00 Normal spine unt) ‘0 ‘oreena sponge (unt) 100, nies costs were: materials $3.5; and earesion cots, $6.00. The numberof uit that southwcod ‘woul transfer tos ished goods investor and te rlte cst of these untae: ots Tanseed st 15000 “$152,000 E6000 5154.50, © 15000 $158,500, 4 16300 §i54.so, 13. Cotton Company has two seve deprtents and thee operating departnents, In allocating sence ‘epartment ext to the operating departments, which ofthe flowing thee methods (det, sep ‘nn, reproca) wil result inthe same amount of service department ext beng lates to each parting department, regaclest of he erern which the sence department costs are alosted? <6 Dinect and reciprocal methods oly. Step down and reciprocal methods coy. © Dire and step don maths ony ‘4. Direct method on. “4. Logo me as two data services department (the Systems Department and the Facies Department) that provide support tothe compan three producten departments (Machining Department, ‘Assembly Departmen, and Fishing Department). The overead costs ofthe System Department ore ‘located to other departments on the basis of comper usage hous. The ovehead costs ofthe Facies Department ae allocated based on square feet occupies (thousand), Other nfamation ataning to Log is as follows: eng recov by EMERGE Managment Taig Corer 1 (Oi /P1/SacD/WE-3/ Ove 2Computer Square Feet ecatment Overhead sages © Qc Systems $200,000, 300 1000 Fates 106,000 500 ‘00 ecining 00,000 3600 2,000 Assembly 350,000 4a00 3,000 Frisiog 620,000 2200 000 200 0 1 Logo erpoys the direct mestod of allocating service department cos the overhead of the Syste Department would be alocte by ding the overheod amount by: 1200 hous 0 bio ars senor 4 So00hows '5. Adam Cerporaten manufocures computer ables and has the folloning budgeted neck manufecuring costnformation for nes year. SuoeeLDenartments Operating Departments Taal Mintecanee—Suatams Machining —-Farkation Budgeted ‘Overhead $360,000 —$85000 $200,000 $3000 $95,000 ‘Support work urishes From Mainterance 10% 50% 0% 100% From systems 59% 3% 508 100% 11 Adam uss the stebdonn meted, basing wth the Mantanance Department, to alae spport epartment costs to production department, the tal overhead (rounded tothe nearest dor) er the Machining Department nalocte to Rs prods would be: a $4155. $422,750, wl $080,083. ‘$445,000, 6. IrAdam ses the direct mathod to locate support department costs to production departments, the teal overhead (rounded tothe nearest col) fer the Machining Departmen to alocate ots products would be: a $416,000 b. $422,750 Go $2053, 4485000 cont reser by EMERGE Meagan Tang Cntr 2 OM /P1/ Sec / E37 Oss:2cL CMA PART 1 oe Financial Planning, Performance and Control — Section 0.4 ‘se Hands-on Exercise |. Oster Manufacturing uses a vghted-everage process costing system and asthe folowing css nt cy tring October. Mater $49,000 Conersion cost $2500 “Total besreing wore prcess inventory $2500 Moers $700 00 (Conversion cost 51500 "Teal production costs October suauzso0 Production completed 0}00 uns Workn-poces, October 31 20,0 uns ‘A malas ar introduced atthe star ofthe maruactrng process and Gnversin cot is cures Uunformy throughout reducton. arwesens wth plank personnel reveal tha, on average, monty fend Inorocess inventory is 2556 complete. Assuming no spalape, how shad Osters October Imanufaduring cost be asines? raducton Completed Workst-rocess = ons ‘94700. b $utss000 $222.50 2 Hiss 23500. @jiassar7 fing Dusny Oesnber, Kane Grad Company hid the folmvng selected aete concemng the manufacture of Xyze, en industri deser. . Prin Fo Pastas compte an rarer ee ert Fry Eade were eay 12 (arsconplte Total units to account for 110 eae: Les Sagi wren procs net 2 opal Unt stared ing aeber Fa Cong rere by BHERGE Managment Taig Cots 19/1/14 1 A /PI/ Sec D/HE-4/Coss2‘matali eed atthe begining of procesing in this department, and conversion costs ae ‘ded unflorm ding the process. The beginning workinprocess ventory had $120 of rem ‘mater and $190 of conversion cots incared. Mater added cing December was $540 and canversion casts of $1484 were Incured. Krause uses the welghted-average process-costing ‘method. The ttl conversion cost assigned fo uns transfered to the next department 8 December $1661 su60e ss) i484 Coke 13. All mate Is added atthe begining of processing In this department, and conversion cats ae ‘ded unfermiy during the process. The Begining wrk-l-pooess Inventory had $120 of aw materal and $180 of converson costs of $1,484 was inured. Krause uses the fistin first-out (FIFO) process-costing method. The exalt uns of producion Used to calcite conversion ‘oats er December was 10 unis, 104 ants UE Dune inp esr by EMERGE NoayorenTsny Car 1/1/84 2 Hj) Se DHE =A Case?(CMA PART 1 = Financial Planning, Performance and Control SMB suse Costing Systems fae teocrem Section D - Handouts 3 Allocation of Service Departments Cost to Production Centers: ‘+ tsign 3 Dect Maker, Direct Labor and Overheads to prosucion ad ne service function, 1+ ose ne Senice Cepartmen and allocate to reduction Une. to obtain cst of Prats) Mahods: rect Step Resipocal Disadvantage Direct | Eosy 8 Sime to Caeute Not consis Series to interservice cepartnents stop | £2578 Simpe to Clete Not considers series to ntersenice separtnent uly Reciprocal | Considers services to all inte sence | Complex to aut departments (200,000) | 32 75,000 Mustration ' co Direct Method F | pb 100000 ana00 | 705,000 [a aoe | aoe s2 | 3 | (200,000) Bam aa + estan See Dept alee odtinDeprtetni "ict soe Dope sates edt brine on (hatoeoier ofan Sree ore tare epee) Copyright reserved by EMERGE Maageent Tag Cntr 19/10/14 1 Ousri/ se0/Ho~3/ C8882[eat anasto | 40,000, | | s.=sm¢00 +025, Sis mono + 0406 = amo00 + o.1100000+02 5] 204000 + 10900 + 002 5 S002 5 = 219000 (ssn) 098 14,285, asi | ear (216285), 64205 | 6s205 | axasr [0 | 2059 | 907.80 | con908 | 2300000, 5: 109000 +02 216285 Tiasr Calesate algebra the total Serve Department cost ater conidering the allocation om thee Serve Depertment + Alot toalepartmentsinfl, pit ered by EMERGE Management Tang Cntr 1/1074 a na /11/See0/190~3/ C882[ us P,P, You mE " 10% som -% ss tsk ye Cepia ered by EMERGE Management Tig Conor 19/0/14 (G14 /P1/S0¢0/H/0-3/ Gass 2Normal and Abnormal toss "A rnan purchase 1 Bor of mangoes (100 pc) fer $100. Expeced rotten mangos 20%, mangoes ae sald at $2 5c, and 40 mangoes en ventory. How much is the profit ae the inventory value? Mango. Mo 4 Sot tox 100 $100 $1.00" 20% Rormsitee a0 2 mw sus Ses x2 = 00 (ist of Goods Sold foxtas 2 So Pot 2 ree = a0 Inventory aoxias = so Limon = "Therefore Normal Loss ie 8 Product cost and it chould be conelderad in Brodick cost (31 has increased $1.25) ‘Capit reserved by BHERGE Manoprent Taig Canter 1970/4 G1 /P1/ Sec0/MO~3/ Cass?"Aman purchase 1 box of mangoes (100 pcs.) Fer $100. Expected rotten mangoes i 20%, Dus to acon, ‘nother 20 mangoes were damaged. 30 mangoes ar sald $2 each, nd 30 mangoes a In inventory How mich isthe prof and th ivertery va? 090 moe 1 mo $300 4300 eens me 2 @ ne Aesisllos 2380-15 tegeisse is Sia tog imenay 3 ak LS ie sie wa Scots — Bhias GosPrtt Accidental 204125 = 22500 ee nt "2 Cpe = awe | — 9. > Inventory BOx125 = 3750 ee ‘normal Loss Abnormal Loss wil not charg the cost per unit "factory plans to produce 10000 us as span $100,000 Dvext Matera, 450,000 Ovex Labor ‘and $50,000 Manufacturing Overhead. Norma sss 10% ofthe net. Due to fre acer, 1000 ts ‘2tdamaged atthe eal stage of production. 6/60 units are sald fer $40. Selig ard Adminstration Expenses $10,000. ‘+ _Caluate Net income ad Inventory Value. uauay, py ered by EMERGE Management Ting Ctr 19/018 s 044/717 50/40 -3/ Gass 2Allocation of Cost to Joint / Byproducte + Jn: Products - Hore than one prods coming out of commen pecs wth sneak ae. lua, 7 Brraduels—- Reds coin out of common process wah instant ae c+ S00 a mate tin te production procs. or ees in easton ste) + Raverk —_-Oee rac neste ce tment eG preiashen (fete ‘Example of Joint and Byproducts int oducts Super 8 Molasses —r Super Indy Mest & Bone <> Bucey Timber A Timber —e Timbo Induety Nechol RC, gis Products Bagasse (ber waste) — Super Industry Allocation of Cost to Joint Products 1. Physical Unt Method ~ oie Products are homogencus, having inl unis of messuemert 2, Sales Value Method Al peucs a Split Pint are saleable nd hve Fai Markt Vale (Sling Pic 3: Realzabl Sls Value Method ~ Products cant be sold &t Slt Pot, os Ris and requ futher Processing for sling. 4. Goss rf Meth Joint Product Costing 500. 7 $80, 1,000.00 = so6c00 "Tinber Gating $1,000,000, Tinber® } 200. 1,000,000 0, 300 Tone | “tooo Cea 222. 3,000,000 = 209. « 3,000,000 = 200,000 apg rome by EMERGE Menagerie Taig Cet 1/0/14 (064/917 Sec 0/HO ~3/Cess2Sales Units Price Amount Gute 7) son sures «$2,000 = 1000800 300 nx $4,000 = 200.900, 00000 ‘Seling Price Geo} 1.900.000 =m 2920000 1,000,000 = 77000 tual Gas 300.099 y 1,090,000 = 230,000 730,000 Realizable Sales Joint Process Output Reales products “Cost” Seling rice sales Valve web | 1002, 1.0.000 as = dete | a ‘00 000 anhg00 x 200,00 5.007 800,000, oO; 1.050 210.00 60,000 = 185,009 Sip | 000/000. 355.000 ‘Cyr reseed by HERGE Managrent Tang Cate 1810/14 7 (G4 /P1/Sec0/HO~3/ C2882