UNIVERSITY OF THE WEST INDIES Mona Campus

ACCT 1003 - Intro. to Cost & Management Accounting

Worksheet # I: Cost Classification Selected Solutions Lecture Questions

Question 4 a) b) c) d) e) f) Direct material used Direct labour cost Factory overhead Prime costs Conversion cost Production cost = $349,000 = $150,600 = $111,200 = $499,600 = $261,800 = $610,800

Question 5 Cost of Goods Manufactured Cost of Goods Sold Question 6 i) Using Statement Method Beginning Work in Process Inventory Add: Direct Material Used: Beginning Direct Material Inventory Purchase of Direct Material Direct Material Available For Use Ending Direct Material Inventory Direct Material Used Direct Labour Manufacturing Overhead: Plant Janitorial Services Utilities for Plant Rent on Plant Total Manufacturing Costs Incurred Total Manufacturing Costs to Account For Less: Ending Work in Process Inventory Cost of Goods manufactured
University of the West Indies Introduction to Cost and Management Accounting

$200,000 $195,000

$0 $13,500 31,000 44,500 (9,000) $35,500 18,000 1,250 4,500 9,000

14,750 68,250 68,250 (1,250) $67,000

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Using Equation Method

(a) DM Used

= Beginning DM + DM Purchased Ending DM = $13,500 + 31,000 9,000) = $35,500 = $(1,250 + 4,500 + 9.000) (b) Manufacturing Overhead = $14,750 = DM Used + DL Incurred + Manuf. Overhead (c) Total Manufacturing Costs = $(35,500 + 18,000 + 14,750) = $68,250 Cost of Goods Manufactured = Beginning WIP + Total Manufacturing Costs Ending WIP (d) = $(0 + 68,250 1,250) = $67,000 ii) CLYDES PETS Income Statement For Period Ended 31/12/2008 $ $ Sales Revenue 105,000 Less COS: Beginning Finished Goods Inventory 0 Cost of Goods Manufactured 67,000 Cost of Goods Available For Sale 67,000 Ending Finished Goods Inventory (5,700) (61,300) GROSS PROFIT 43,700 Less Operating Expenses: Sales Salaries Expense 5,000 Delivery Expense 1,500 Customer Service Hotline Expense 1,000 (7,500) NET Profit $ 36,200 iii) Unit Production Cost = $3.83

Question 7
i) VC per unit = $65,000 - $20,000 4,000-1,000 = $15.00 per sales order

TFC

=$65,000 - (4,000 x $15) Or =$20,000 - (1,000 x $15) =$5,000 Total Ordering Cost = $5,000 + ($15.000 x Number of sales order) y = 5,000 + 15x.

Hence cost function is : Or iii) From graph

TFC is approximately $10,000 and VC per unit $10.00.

Cost function as per Scatter-gram

TMC = $10,000 + ($10.00 x # of sales orders.)

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Tutorial Questions Question 1

PAPERMAKING LTD. COST SUMMARY FOR PERIOD ENDED 31/3/02 Pulp $ 100,000 Clay 40,000 Making Department Wages 38,000 Royalty Payments 10,000 PRIME COST PRODUCTION O/Hs: Wrapping Paper 3,500 Spare Knives 800 Cleaning Rags 500 Cutting Dept. Wages 26,000 Packing Dept. Wages 20,000 Fork Truck Driver Wages 8,000 Factory Foreman's Salary 11,000 Production Manager's Salary 21,500 Maintenance (80%* $60,000) 48,000 Electricity (75%*$18,000) 13,500 Sundry 33,000 PRODUCTION COST ADMINISTRATION COSTS: General Manager's Salary 30,000 Administration Salaries 45,000 Maintenance (3%*$60,000) 1,800 Electricity (3%*$18,000) 900 Machine Rental Cost 1,000 Sundry 42,000 SELLING COSTS: Sales Managers Salary Advertising Costs Sales Office Wages Maintenance (3%*$60,000) Electricity (5%*$18,000) Sundry DISTRIBUTION COSTS: Wooden Pallets Dispatch Dept. Wages Delivery Vehicle Drivers Wages Maintenance (14%*$60,000) Electricity (15%*$18,000) Sundry TOTAL COST 17,500 16,500 18,500 1,800 900 11,000 3,600 17,000 9,600 8,400 2,700 16,000

$188,000

185,800 373,800

120,700

66,200

57,300 618,000

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Papermaking Ltd. Income Statement For Period Ended 31/3/02 $ Sales (2,000 @ $300) Less COGS (2,000 @ $149.52) GROSS MARGIN Less Operating Expenses: Administration Selling Distribution NET MARGIN $ 600,000 (299,040) 300,960

120,700 66,200 57,300

(244,200) $ 56,760

Workings for Income statement items Units Produced 2,500 kilos Production cost (as per summary) $373,800 Hence cost per unit = $373,800/2,500 kilos = $149.52/kilo Ending Inventory = Beginning Inventory + Production - Units Sold =0 + 2,500 - 2,000 = 500 kilos

Hence Ending Inventory Value = 500 @ $149.52 = $74,760 COGS = Beginning Inventory + Production Costs End. Inventory (Alternative calculation) = $(0 + 373,800 74,760) = $299,040

Question 2
i) ii) iii) iv) v) Manufacturing Costs Cost of Goods Manufactured Cost of Goods Sold Beginning DM Inventory Ending FG Inventory =$17,300 = $15,800 = $15,000 = $2,000 = $5,100.

Question 3
The High/Low Method in Total Department Costs = $(47,000 - 17,000) in # of patient days = 4,900 - 1,200 Hence VC per patient-day = $30,000/3,700 = $30,000 =$8.108

@ High level of activity TFC = $47,000 - (4,900 @ $8.108) = $7,270 @ Low level of activity TFC =$17,000 - (1,200 @ $8.108) = $7,270 Cost Function: Total Department Costs = $7,270 + ($8.108 * # of patient-days)

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Scatter Diagram
50000

Department Costs

40000 30000 20000 10000 0 0

Change in # of Patient Days

Change in Costs

1000

2000

3000

4000

5000

6000

# of Patient Days

From Graph TFC is approximately $10,000 Using 0 and 3000 patient days: in total cost = $30,000 - $10,000 =$20,000 in # of patient day = 3,000 -0 = 3,000 Hence VC per patient day = $20,000/3,000 = $6.67

Cost function is:

Total department Costs = $10,000 + ($6.67 * # of patient-days)

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