assignment accounting vo van loan

Accounting for business decision making assignment 1

MASTER OF BUSINESS ADMINISTRATION

INTERNATIONAL PROGRAM

ACCOUNTING FOR BUSINESS DECISION

MAKING ASSIGNMENT

LECTURER : Dr. TRAN ANH TUAN

STUDENT : VO VAN LOAN

CLASS : MBAOUM 1113-K12C

COURSE : 2013 - 2015

Ho Chi Minh, 21/6/2014


Contents

Task 1. ABC System .................................................................................................................. 3

Task 2. Marginal and Absorption costing .................................................................................. 4

Task 3. Special order, accepted or abandoned production line and scarce resource ................. 5

Task 4. Standard costing and variance analysis ......................................................................... 6

Task 5. Process costing .............................................................................................................. 8

Task 6. Job Order Costing ....................................................................................................... 10

Task 7. Process costing ............................................................................................................ 11

Task 8. CVP analysis ............................................................................................................... 12

Task 9. CVP analysis and cost behavior .................................................................................. 13

Task 10. Budgeting .................................................................................................................. 15


Task 1. ABC System

1. Total cost and product unit cost.

Quantity of order: 80

No Cost Item Quantity Unit

1 Direct material 36,950 USD

2 Purchased parts 21,100 USD

3 Direct labor hours 220 Hour

4 Average direct labor pay rate per hour 15 USD

5 Overhead cost 8,910 USD

The Total cost: DM cost + Purchased parts + Direct Labor cost + Overhead cost

= 36,950+21,100+220x15+8,910=70,260 USD

Product unit cost: Total cost/ Quantity = 70,260/80 = 878.25 USD

2.&3. Using the cost hierarchy, identify each activity as unit level, batch level,

product level, or facility level and Bill for activity cost:

Acitvity Cost Driver Activity cost rate Activity Usage Cost Activity

Unit level

Parts production Machine hours $26 per machine hours

134 machine hours

3,484.00

Product testing Number of tests $32 per test 52 tests 1,664.00

Packaging Number of packages $4.675 per package

80 packages 374.00

Batchs Level

Setup Number of setups $29 per setup 11 setup 319.00

Product Level

Electrical engineering design

Engineering hours $19 per engineering hour

32 engineering hours

608.00

Facility level

Building occupancy

Machine hours $9.80 per machine hour

134 machine hours

1,313.20

Assembly Direct labor’ hours $15 per direct labour hour

220 direct labour hour

3,300.00


4. Total cost and product cost as ABC:

Total cost = 11062.2 USD

Product cost: total cost/quantity = 11062.2/80 = 138.28 USD

5. The result of two computed cases, the total cost, and unit cost of traditional is higher than

the ABC system. Because the Manufacture overhead cost of the Traditional computed is used

for all order of XYZ, and in the ABC system, the overhead cost is only assigned to each

order.

Task 2. Marginal and Absorption costing

With:

Selling price per unit 8 $

Variable costing perunit 4 $

Fixed costing per unit 2 $

Standard quanlity of Quarter 26,000 $

The Profit follows the Marginal and Absorption costing as the below table.

Particulars Quarter 1 Quarter 2

Quantity Cost Sale Quantity Cost Sale

Opening stock (units) -

Production (units) 26,000 30,000

Closing stock (units) 6,000

Sales (Units) 26,000

208,000 24,000

192,000

Variable cost

104,000

96,000

Fixed cost

52,000

60,000

Cost of good sold

104,000

96,000

Profit under marginal costing

104,000

96,000

Profit Under Absorption

costing

52,000

36,000

Reconciliation of profit

52,000

60,000


Particulars Quarter 3 Quarter 4

Quantity Cost Sale Quantity Cost Sale

Opening stock (units) 6,000 2,000

Production (units) 24,000 30,000

Closing stock (units) 2,000


224,000 32,000

256,000

Variable cost

112,000

128,000

Fixed cost

48,000

60,000

Cost of good sold

112,000

128,000


112,000

128,000


costing

64,000

68,000


48,000

60,000

Particulars Quarter 5

Quantity Cost Sale

Opening stock (units)

Production (units) 110,000

Closing stock (units)


880,000

Variable cost

440,000

Fixed cost

220,000

Cost of good sold

440,000


440,000


costing

220,000


220,000

Task 3. Special order, accepted or abandoned production line and scarce

resource

1.

The manager should accept the order because:


The remain capacities of company: 1000x20% = 200 unit. If manager accepts this order, the

cost for production is 200x40=8000 USD, company has paid 100% fixed cost. The sale of

order is 200x20=12000 USD. The company will get more 4000 USD profit. So the Manage

should accept this order.

2.

There are cost and Income of two courses.

Word processing

($’000) Office Skills

($’000)

Tuition fee income 485 500

Variable costs 200 330

Fixed costs 120 220

If the company takes only the Word processing course:

Total cost = Total fixed cost (120 + 220) + Variable cost ( 200 ) = 540

Total Income: 485.

The company loss: 485 – 540 = 55

If The company take both courses:

Total cost = Total fixed cost (120 + 220) + Variable cost ( 200 + 330 ) = 870

Total Income: 485 + 500 = 985.

The company has profit: 985 – 870 = 115.

So The CEO should take more the Office Skills courses.

3.

Task 4. Standard costing and variance analysis

The cost system of ABC company.

Cost standard cost Unit

Direct materials (3 yards at $12.50 per yard) 37.50 $

Direct labour (2 hours at $9.00 per hour) 18.00 18.00 $

Variable overhead (2 hours @ 5.00 per direct labour

hour) 10.00 10.00 $


Standard variable cost per unit $65.50 65.50 $

Actualy cost cost Unit

Capacity direct labour hour 10,000.00 Hour

budgeted Fixed overhead cost 44,000.00 $

Quantity sold 4,900.00 Unit

Direct material purchased 15,000.00 yard

Cost of yards 12.40 $

Labour rate 9.10 $

Direct labour worked 10,050.00 Hour

Actual variable overhead cost 48,900.00 $

Fixed cost 45,000.00 $

The data of company as below:

Items Value Description

1. Direct materials cost variances:

a. Direct materials price variance 12.40 Cost of yards

b. Direct materials quantity variance 15,000.00 Direct material purchased

c. Total direct materials cost variance 186,000.00

Direct materials cost variance per unit 37.96

2. Direct labour cost variance

a. Direct labour rate variance 9.10 Labour rate

b. Direct labour efficiency variance 10,050.00 Direct labour worked

c. Total direct labour cost variance 91,455.00

Direct labour cost variance per unit 18.66

3. Variable overhead variances

a. Variable overhead spending

variance 48,900.00 Actual variable overhead cost

b. Variable overhead efficiency

variance 49,000.00

= Quantity sold x Variable overhead

cost

c. Total variable overhead variance 48,900.00


4. Fixed overhead variance

a. Fixed overhead budget variance 44,000.00 budgeted Fixed overhead cost

b. Fixed overhead volume variance 45,000.00 Fixed cost

c. Total fixed overhead variance 45,000.00 Fixed cost

Task 5. Process costing

1. Prepare a cost of production report for the Sifting Department for August:

Total units = Beg. INV + Started

= 12,000 + 320,000 = 332,000 units

Started & completed in August = Transferred out – Beg.INV

= 323000 – 12000 = 311,000 units

Material equivalent units:

Material Equivalent Units Total units

Percent

added

Equivalent

units

INV in process, August 1 12,000 0 0

Started & Completed In August 311000 100% 3

Transferred out 323000

INV in process, 30 August 9,000 100% 9000

Total units to be assigned costs 332,000 32000

Conversion equivalent units:

Conversion Equivalent Units Total units

Percent

added

Equivalent

units

INV in process, August 1 (3/5 completed) 12,000 40% 4,800

Started & Completed In August 311,000 100% 311,000

Transferred out 323,000

INV in process, 30 August (4/5

completed) 9,000 80% 7,200

Total units to be assigned costs 332,000 323,000

Allocate costs:

Conversion costs in August = DL + FOH = 179,000 + 30,950 = $209,950

Conversion costs per EU = $209,950/323,000 = $0.65/unit


Direct material cost per actual units = $2.45

Actual units

% Equivalent units

Direct Materials Conversion costs

Total costs

Beg. INV 12,000 40 4,800 $28,200 =0.65*4,800 =

$3,120 $31,320

Started & Completed

311,000 100 311,000 $311,000x2.45 =

$761,950 0.65*311,000 =

$202,150 $964,100

End. INV 9,000 80 7,200 $9000*2.45 =

$22,050 0.65*7200 =

$4,680 $26,730

Total 323,000 $812,200 $209,950 $1,022,150

2. Journalize the entries for costs transferred from Milling to Sifting and the costs

transferred from Sifting to Packaging:

(i) Costs transferred from Milling to Sifting:

= DM + DL + FOH = 784,000 + 179,000 + 30,950 = $993,950

(ii) Costs transferred from Sifting to Packaging:

= 323,000 x (2.45 + 0.65) = $1,001,300

3. Determine the increase or decrease in the cost per equivalent unit from July to

August for direct materials and conversion costs:

4. Discuss the uses of the cost of production report.

The cost of production report provides the following quantity and cost data:

- The unit for which the department is accountable and the position of those units.

- The production costs incurred by the department and allocation of those costs between

completed and partially completed units.

A cost of production report also is used to control costs.


Task 6. Job Order Costing

a. Supporting Calculator (USD)

Job

No. Quantity

July 1

Work in

Process

balance

Direct

Materials

Direct

Labor

Factory

Overhead

Total

Cost

Unit

Cost

Units

Sold

Cost of

Goods

Sold

No. 21 200 6,000 20,000 15,000 24,000 65,000 325 160 52,000

No. 22 400 16,000 34,000 26,000 41,600 117,600 294 320 94,080

No. 23 200

14,000 8,000 12,800 34,800 174 - -

No. 24 250

30,000 25,000 40,000 95,000 380 210 79,800

No. 25 180

22,000 17,500 28,000 67,500 375 150 56,250

No. 26 140

8,000 4,500 7,200 19,700 141 - -

Total 1,370 22,000 128,000 96,000 153,600 399,600

282,130

A: Materials requisitions = Total Direct material + In direct material = 128,000 + 16,000 =

144,000 USD

B: July 1 work in process balance: 22,000

C: Work in process material: 128,000

D: Work in process Direct labor: 96,000

E: Work in process overhead: 153,000

F: Job completed: No21 + No22 + No24 + No25 = 65,000+117,000+95,000+67,500 =

345,100

G: Cost of goods sold: 282,130

H: Indirect labor overhead: 120,000 – 96,000 = 24,000

b. Inventory accounts and factory overhead:

Inventory accounts:

- Material balance: 30,000 + 120,000 – 128,000 – 16,000 = 6,000 USD.

- Working process: No23 + No26 = 34,800 + 19,700 = 545,000 USD


- Finished goods: No21, 22, 24, 25 = (65,000-52,000) + 117,600- 94,080 +95,000 -

79,800 + 67,500 - 56,250 = 62,790 USD

- Factory overhead: 22,000 + 24,000 + 16,000 + 95,000 – 153,600 = 3,400 USD.

Task 7. Process costing

Input data

Date Data Debit credit

Balance

Debit credit

Mar 1 Balance, 8,000units, 2/5 completed

15,360

31 Direct materials, 145,000 units

232,000

247,360

31 Direct labor

66,400

313,760

31 Factory overhead

37,060

350,820

31 Goods finished, 148,000 units

340,720

10,100

31 Balance, units, 3/5 completed

10,100

a.

1. Direct materials cost per equivalent unit:

232,000/145 = 1.6

2. Conversion cost per equivalent unit

Number completed units at beginning work in process: 8000*2/5 = 3,200

Number balance unit at beginning work in process: 8000*3/5 = 4,800

Total Equivalent unit in Mar: 145,000+8,000*3/5 = 149,800

Total cost in process: 232,000+66,400+27,060 = 335,460

Cost EU = 149,800/335,460 = 2.4

3. Cost of the beginning work in process completed during March:

= 4,800*2.4 + 15,360 = 26,109

4. Cost of units started and completed during March:

148,000*2.4 = 331,429

5. Cost of the ending work in process: 10,100


b. Assuming that the direct materials cost is the same for February and March, did the

conversion cost per equivalent unit increase, decrease, or remain the same in March?

If the conversion cost of February the same March, Total cost in Process of February

is the same March. But the Balance of Completed unit at beginning WIP of March (2/5)

smaller than completed of April (3/5). So the Equivalent of March bigger than equivalent

of February -> The Conversion cost per equivalent in March will decrease.

Task 8. CVP analysis

Income statement for 2010 of SACCO is as follows (Unit USD):

Sales: 16,920,000

Cost of goods sold 6,000,000

Gross profit 10,920,000

Expenses:

Selling expenses 3,000,000

Administrative expenses 1,800,000

Total expenses 4,800,000

Income from operations 6,120,000

The division of costs between fixed and variable is as follows:

Fixed Variable

Cost of sales 40% 60%

Selling expenses 50% 50%

Administrative expenses 70% 30%

1. Determine for 2010 the total fixed costs and the total variable costs.

Total fixed cost: 6,000,000*40% + 50%*3,000,000 + 70%*1,800,000 = 5,160,000

Total Variable cost: Total cost – total fixed cost:

6,000,000 + 4,800,000 – 5,160,000 = 5,640,000

2. a. Unit variable cost: 5,640,000/112,800 = 50

b. The unit contribution margin: 150-50 = 100

3. Compute the break-even sales (units) for 2010.

5,160,000/100=51,600 Units


4. Compute the break-even sales (units) under the proposed program.

Total fixed cost under proposed program: 5,160,000+200,000 = 5,360,000

The breck-even: 5,3600,000/100 = 53,600 Units

5. Determine the amount of sales (units) that would be necessary under the proposed

program to realize the $6,120,000 of income.

Under program:

Variable cost/Sale = (sale-Income – Fixed cost)/sale = 5,160,000/16,920,000

1 - (6,120,000+5,360,000)/sale = 5,160,000/16,920,000 -> sale = 17,220,000

Number of unit sale: 17,220,000/150 = 114,800

6. Determine the maximum income from operations possible with the expanded plant:

Maximum sale: 16,920,000 + 1,500,000 = 18,420,000

Contribution margin: 18,420,000*(16,920,000 – 5,640,000)/16,920,000 = 12,280,000

Maximum income = Contribution Margin – Fixed cost:

12,280,000 - 5,3600,000 = 6,920,000 $

7. If the proposal is accepted and sales remain at the 2010 level:

Contribution margin = 16,920,000 -5,640,000 = 11,280,000

Income: 11,280,000- 5,360,000 = 5,920,000 $

8. With the data given, I recommend accepted the proposed program. Because the

company will get more sales and more income.

Task 9. CVP analysis and cost behavior

Summary reports of Steamboat Co:

Estimated Fixed Cost Estimated Variable Cost (per unit)

Production costs:

Direct materials 15.00

Direct labor 10.00

Factory overhead 210,000.00 4.50

Selling expenses:

Sales salaries and commissions 41,500.00

2.20

Advertising 14,500.00

Travel 3,500.00

Miscellaneous selling 2,500.00


expense 1.80

Administrative expenses:

Office and officers’ salaries 70,000.00

Supplies 6,000.00 0.75

Miscellaneous administrative expense 11,000.00

1.75

Total 359,000.00 36.00

Sale: 30,000,000 unit, price 60 $

1. Prepare an estimated income statement for 2010 (USD):

No Description Value (USD)

1 Sale 1,800,000

2 Cost of goods sold 1,095,000

3 Gross profit 705,000

4 Selling expenses 182,000

5 Overhead expenses 162,000

6 Net Income 933,000

2. Expected contribution margin ratio:

Variable cost: 1,080,000

Fixed cost: 359,000

Contribution margin: 720,000

Conitrution margin ratio (CM): 0.40

3. Determine the break-even (BRE) sales in units.

BRE = fixed cost/CM = 359,000/0.4 = 897,500 $

BRE in units: 897,500/60 = 14,985 units

4. Construct a cost-volume-profit chart indicating the break-even sales.


5. What is the expected margin of safety in dollars and as a percentage of sales.

- The expected margin of safety ($) = sale – Break even = 1,800,000 – 897,500 =

902,500 ($)

- The expected margin of safety (%) = (sale – Break even)sale

= 902,500/1,800,000 *100% = 50.14%.

6. Determine the operating leverage:

Operation leverage = Contribution margin/net income = 720,000/933,000 = 0.77

Task 10. Budgeting

1. Sales budget for December.

Items Quantity Price Values ($)

Bird House 32,500 50 1,625,000

Bird Feeder 21,300 85 1,810,500

Total sale

3,435,500

2. Production budget for December

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

0.00 14,958.33 30,000.00 45,000.00

Cost-Volume-Profit chart

Expenses Sale

Break even point


Item

Bird house Bird Feeder

Quantity

(Unit) Price Value ($)

Quantity

(Unit) Price Value ($)

Budget sale 32,500 26 845,000 21,300 40 852,000.0

Inventories at December 1 3,100 26 80,600 1,900 40 76,000.0

Inventories at December 31 3,600 27 97,200 1,800 41 73,800.0

Require production December 33,000

828,400 21,200

854,200.0

Total

1,682,600

3. Direct material Budget for December

Items

Wood Plastic

Bird

house

Bird

feeder total

Bird

house

Bird

feeder Total

Inventories at December 1

2,400.00

3,600.00

Inventories at December 31

2,900.00

3,400.00

Direct materials used in

production:

26,400

25,440

51,840.00

16,500

15,900

32,400.00

Direct materials require in

December (Unit)

52,340.00

32,200.00

Price of material ($)

6.00

0.80

Direct materials purchases

in December ($)

314,040.00

25,760.00

Total DM purchases: 339,800.00

4. Direct labor cost budget for December

Items

Bird house Bird feeder Total

(hour)

Wage

Rates Value ($)

Hours

Total

Hours Hours

Total

Hours

Fabrication Department

0.20

6,600.00

0.40

8,480.00

15,080.00

15.00

226,200.00

Assembly Department

0.30

9,900.00

0.35

7,420.00

17,320.00

11.00

190,520.00

Total Direct labor

Cost

416,720.00

5. Factory overhead cost budget for December.

Items Values ($)

Indirect factory wages 750,000

Depreciation of plant and equipment 185,000

Power and light 47,000


Insurance and property tax 15,400

Total 997,400

6. Cost of goods sold budget for December

Items Values ($)

Direct material Budget 339,800

Direct labor cost budget for December. 416,720

Factory overhead cost budget for December. 997,400

Work in process at the beginning of December (add) 27,000

Work in process at the end of December (less) 32,400

Cost of goods sold budget for December 1,748,520

7. Prepare a selling and administrative expenses budget for December

Items Values ($)

Sales salaries expense 465,000

Advertising expense 149,700

Office salaries expense 211,100

Depreciation expense—office equipment 5,200

Telephone expense—selling 4,800

Telephone expense—administrative 1,500

Travel expense—selling 41,200

Office supplies expense 3,500

Miscellaneous administrative expense 5,000

Selling and Administrative expenses budget for December 887,000

8. Budget income statement for December

Item Values ($)

Sale 3,435,500

Cost of goods sold 1,748,520

Gross profits 1,686,980

Other income 5,300

Interest revenue 16,900

Interest expense 11,600

Selling and administration expenses 887,000

Profit before Taxes 805,280

Taxes 281,848

Net Income 605,152

assignment accounting vo van loan

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