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AF102: INTRODUCTION TO ACCOUNTING AND FINANCIAL

MANAGEMENT: PART II

Introduct ion and Assignments

Semester 1, 2016

School of Accounting and FinanceFaculty of Business and EconomicsThe University of the South Pacific

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Produced by The University of the South Pacific, Suva, Fiji, 2016

First produced 1978This revision February 2016

I ntr oduction & Assignments team for Semester 1, 2016

Course coordinator Dr. Pallab Kumar BiswasElectronic publisher Pranita SinghCover design Marketing, Development and Communications Office

This material has been prepared by The University of the South Pacific for use by studentsenrolled in the course for which it was developed.

It may contain copyright material copied under the provisions of the Fiji Copyright Act 1999 or

under license from rightsholders or their agents. Copyright in material prepared by USP is owned by USP.

This material cannot be sold or copied for further distribution without the University’s permission. Where provided in electronic format, it can only be printed by or for the use of thestudent enrolled in the course.

AF102 (IA) 12016

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Contents

Calendar for semester 1, 2016 ................................................................... iv

Your course coordinator ............................................................................ 1

Your learning materials ............................................................................. 2

Your learning support ............................................................................... 4

How to login to Moodle ............................................................................ 6

Additional tutorial questions ..................................................................... 7

Study schedule .......................................................................................... 9

Assessment overview ................................................................................ 11

Grading System ......................................................................................... 12

Submission of assignments ........................................................................ 14

Plagiarism ................................................................................................. 16

Major assignment ...................................................................................... 18

Past test paper ........................................................................................... 26

Past examination paper ..............................................................................33

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Ca lenda r fo r semes te r 1 , 2016

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Your cou rse coo rd ina to r

Welcome to AF102! I am Dr. Pallab Kumar Biswas, the course coordinator for AF102FL/Print mode course for this Semester 1, 2016.

For AF102 FL I will be updating students regularly through the use of the newly

introduced MOODLE (http://elearn.usp.ac.fj/) . Please check this MOODLEwebsite as well as your student email regularly, for course updates and other pointersto help you in your study of AF102 on the distance and flexible mode.

AF102 DFL MOODLE Website “Forum Discussions”: This is a tool students canuse in the AF102 DFL MOODLE site, to interact with other students as well as raisequestions regarding a particular topic.

I am based on the main Laucala Campus, Suva, Fiji Islands. For any queriesregarding this course, you need to contact your FL Centre and if there are anyurgent matters, then you can contact me, your course coordinator, on the followingaddress:

Room: S259 School of Accounting and Finance,Faculty of Business and Economics,The University of the South Pacific, LaucalaCampus,Suva,Fiji.

Email: [email protected]

Telephone: (+679) 32 32284

Address: School of Accounting and Finance,

Faculty of Business and Economics,The University of the South Pacific,Laucala Campus,Suva,Fiji.

All the best in your studies!

http://elearn.usp.ac.fj/)http://elearn.usp.ac.fj/)mailto:[email protected]:[email protected]://elearn.usp.ac.fj/)

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Y o u r l e a rn in g m a te r i a l s

You should have already received the following materials for AF102:

1. The Introduction and Assignments book, which you are reading now.

2. A Study Guide containing 12 units – AF102 (Available in Moodle)

The Study Guide has been written to guide you through the course and the prescribedtextbook. It is neither a textbook nor a substitute for the prescribed text.

It will be vital that you regard the Study Guide as your personal guide to this course andfollow instructions precisely. It will guide you through the text that will be your main sourceof study. The text will be supplemented by some comments and notes in the Study Guide.

Contact your USP Campus or Centre IMMEDIATELY if you are missing any of the

material mentioned in 1 above.

3. The recommended textbook for this course is a 7th edition of “ Managerial Accounting: Tools

for Business Decision Making ” by Weygandt, J.J., Kiesso, D.E. and Kimmel, P.D. (2015)Published by John Wiley.

You will need to purchase this separately in addition to those mentioned above.

4. A course Moodle page.

5. Other suggested materials not included in the package:a) Dictionary

Like most fields of study, accounting has developed some special words andabbreviations that are not used in everyday speech. This means that you may need toconsult a dictionary, because you will constantly be meeting new words in the Study

guides, readings and in the textbook. If you have not acquired a good dictionary duringyour studies, I strongly advise you to buy the Concise Oxford Dictionary. There is alsoa glossary of terms included in your textbook, should you need to clarify specialaccounting words or abbreviations. If you get in the habit of consulting a dictionary orglossary of terms frequently, you will quickly become familiar with the newterminology.

b) Additional References (Optional)

Your local USP Centre Library may hold copies of the following titles for you toconsult in addition to the prescribed text book and study guide, if you wish. You mayalso want to refer to these references when doing assignments or preparing for thefinal examination.

1. Atkinson, A., Kaplan, R., Matsumura, E. & Young, S. 2007, Management Accounting, 5thed, Upper Saddle River, N.J: Pearson/Prentice Hall.

2. Birt, J., Chalmers, K., Beal, D., Brooks, A., Bryne, S., & Oliver, J., 2008.

Accounting: Business Reporting for Decision Making. John Wiley & Sons

Australia, Ltd.

3. Boer, G., 2001, Cost Accounting: A Decision Emphasis, 4th ed, Dame.

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4. Carter, W. & Usry, M., 2002, Cost Accounting, 13 ed., Cincinnati, Dame ThomsonLearning.

5. Chadwick, L. 1997, The Essence of Management Accounting, 2nd ed, New York:Prentice-Hall

6. Collier, M. 2006, Accounting for Managers: Interpreting Accounting Information forDecision-making, 2nd ed, Hoboken, NJ: Wiley

7. Drury,C., 1997, Management Accounting for Business Decisions, Melbourne,International Thomson.

8. Fargher, N., Wise, V., Kieso, D.E., Weygandt, J.J., & Warfield, D.T., 2008.

Fundamentals of Intermediate Accounting. John Wiley & Sons Australia, Ltd.

9. Hansen, D. & Mowen, M., 2003, Cost Management: accounting and control, 4th ed,Thomson/South-western.

10. Hart, J. & Wilson, C., 1996, Management Accounting: principles and applications,

2nd ed, Prentice Hall.

11. Hoggett, J., Edwards, L., Medlin, J., and Tilling, M. 2009. Accounting. 7th

edition. John Wiley & Sons Australia, Ltd.12. Jackson, S., Sawyers, R., & Jenkins, G. 2006, Managerial Accounting: A Focus on

Decision Making, 3rd ed, Thomson South-Western.

13. Horngren, C. T., Datar, S. M. & Foster, G., 2003, Cost Accounting: A ManagerialEmphasis, 8th ed ( or other), Prentice Hall.

14. Horngren, C., Sundem, G. & Stratton, W., 1996, An Introduction to ManagementAccounting, 10 ed, New Jersey, Prentice Hall.

15. Langfield-Smith, K., Thorne, H., and Hilton, R.W., 2006, Management Accounting:Information for managing and creating value, 4th ed, McGraw Hill Inc.

16. Weygandt, J. J., Kieso, D. E., and Kimmel, P. D., 2008, Managerial Accounting: Tools forBusiness Decision Making, Fourth Edition, John Wiley & Sons, Inc.

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Y o u r l e a rn in g s u p p o r t

Loca l tu tor ia ls

To assist you with your studies, regular face-to-face sessions may be held with a tutor. Youshould check with your Campus or Centre at the start of semester to see if face-to-face

tutorials will be held for your course.

Study groups

Most people find it easier to study in a group or with a friend, at least for part of the time.Working with others helps to motivate us. It provides a shared goal and reduces feelings ofisolation or boredom. Your local Campus or Centre will be able to put you in touch withstudents doing this course and may help you get organised.

Library serv ices

Making good use of the library and its resources is vital for you to be a successful student.

Learn about library support and services and the importance of information literacy at yourCampus or Centre library.

Student Learn ing Suppor t (SLS)

SLS supports you through e-mentoring which is giving you learning tips and advice throughemail.

You can email us at the following addresses:

Faculty of Business and Economics: [email protected]

mailto:[email protected]:[email protected]:[email protected]

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Your REACT session

Apart from local tutorials, USP uses a system known as REACT which allows you to hear andsee your course coordinator or tutor as well as your fellow students who are located in thevarious campuses in the USP region. You may get presentations and notes in addition to yourscheduled session. These are commonly known as satellite tutorials. You are encouraged toattend the scheduled sessions in the weeks shown in your study schedule.

Here are some suggestions for getting the most out of these REACT sessions:

1. Note that before your REACT tutorial session begins your tutorial group will beadvised as to who all the participants are (regional and on-campus). Try to note down

names of your colleagues and which Campuses or Centres they are listening from.

2. Speak slowly and pronounce your words clearly so that your colleagues canunderstand what you are saying.

3. Be courteous and try to maintain a polite tone of voice.

4. When you want to address your tutorial group, press the "speak button", and aim tomaintain a 6-inch distance between your mouth and the microphone whilst speaking.

Please note that you may be using two different types of microphones as shown below.

5. If you have questions or comments to communicate during your tutorial session you

can do so by speaking to a microphone or through the chat tool in REACT.

6. Try not to "steal the show". Remember that each of you will have important points toadd to discussions.

Contact your local USP Campus or Centre for further information on using the REACT

facilities.

Onl ine lea rn ing

Moodle is USP’s learning management system and will be used to support learning in some ofyour courses.

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How to log in to Mood le

If your course has a Moodle component, the instructions below will help you access thesystem.

You will need a computer connected to the Internet. The computer must have a Web browsersuch as Firefox or Google Chrome. Such a computer should be available at your USP Campus

(if you don’t already have one at home or work). You will also be given a user name and password by your local USP Campus.

Step 1: Accessing Moodle

Open your browser: Firefox or Google Chrome.Type in the following at the address bar: http://elearn.usp.ac.fj/

Press Enter.

Alternatively, you can go to the USP website: http://www.usp.ac.fj/ and use the QuickLinks drop down menu to the left of the page and selectMoodle.

Step 2: Username and password

You will come to a Login screen. Type your student number in the Username box.

Type your student email(webmail) password inthe Password box.

Click Login.

Step 3: Accessing your course

You should now see a list of your courses. Click the Course Code and Title of thecourse that you are enrolled in to enter. For example:

Lost or forgot ten password

Contact your local ITS student Helpdesk or email: [email protected]

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A dd i t i ona l t u to r i a l ques t i ons

After covering a Unit, students can attempt the following additional questions for that Unit.Selected questions only from the list below will be discussed at your local tutorials.

Week Textbook Chapter Questions #

2 1

QuestionsExercises

Problems

BYP

1, 2, 7, 8, 10, 11, 201-1, 1-4, 1-13, 1-17

1-1A, 1-5A

1-1

3 2

QuestionsExercises

Problems

BYP

2, 3, 4, 13, 14, 182-2, 2-6, 2-8, 2-12

2-1A, 2-3A

2-2

4 3

QuestionsExercises

ProblemsBYP

1, 10, 16, 173-3, 3-11, 3-12, 3-17, 3-19

3-6A, 3-7A3-1 3-2

5 4

QuestionsExercises

Problems

BYP

1, 3, 5, 6, 17, 194-1, 4-6, 4-9, 4-12, 4-16

4-2A, 4-4A, 4-5A

4-2

6 5

QuestionsExercises

Problems

BYP

1, 3, 4, 9 125-3, 5-4, 5-10, 5-16

5-1A, 5-3A, 5-6A

5-1 5-2

7 7

Questions

ExercisesProblemsBYP

3, 7, 8

7-1, 7-2, 7-3, 7-7, 7-8, 7-11, 7-13, 7-157-1A, 7-4A, 7-5A7-1

MID-SEMESTER BREAK

8 8 QuestionsExercises

Problems

2, 3, 6, 9,8-1, 8-6, 8-10

8-2A 8-3A9 9 Questions

Exercises

Problems

1(b), 4, 7, 89-3, 9-6, 9-9, 9-12, 9-16, 9-17

9-4A 9-6A

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10 10 QuestionsExercises

Problems

BYP

2, 5, 7, 12, 13, 1810-1, 10-7, 10-9, 10-14, 10-17

10-3A, 10-5A

10-111 & 12 11 Questions

Exercises

ProblemsBYP

1, 2, 5, 7, 9, 13, 17, 1811-9, 11-12, 11-3, 11-21, 11-22

11-3A, 11-5A, 11-6A11-1

13 & 14 12 QuestionsExercises

ProblemsBYP

1, 2, 3, 8, 11, 1612-1, 12-3, 12-4, 12-9, 12-1112-1A, 12-2A, 12-4A

12-1

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Study schedu le

Planning your work

To help you keep pace with the course, we suggest that you try to allocate at least two hours a

day to your studies. You should divide your time based on the following study schedule.Within the one or two weeks allocated to each unit, you should read through the unit, and dothe thinking and activities associated with it, as well as work on any assignment that isrequired.

The key to success in this course is to maintain a constant study programme throughoutthe semester. An early start and regular assignments will help you complete the work and willlet you know what standard of performance you are attaining.

On the following pages is a suggested Study Schedule for you. This should enable you tocheck your progress from week to week. If you follow the programme you should be well prepared for the final examination.

The Study Schedule has four columns:

Column 1: Weeks and dates

Column 2: Study topics and units for each week

Column 3: Textbook references

Column 4: Assignment due dates and satellite tutorials dates

Now look at the Study Schedule.

Note:Check with your local Centre for your Tutorial Timetable. Tutorial questions to be covered are on

Page 7.

You should study all the topics covered by an assignment before you attempt your assignment

questions.

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Week no. and dates Topics and units Textbook Assignment and Sat ellite tutorials

Week 1 08 – 12 February

Unit 1: Managerialaccounting and financialmanagementenvironment

Weygandt,Kieso andKimmelChapter 1


Unit 2: Managerial costconcepts and practices Chapter 1

Satellite tutorial

Saturday 20th February, 201612:00noon – 1:00pm (Fiji time)


Unit 3: Job ordercosting

Chapter 2

Week 4 29 February – 04 March

Unit 4: Process costing Chapter 3

Satellite tutorial Saturday 5th March, 201612:00noon – 1:00pm (Fiji time)

Week 5 7 – 11 March

Unit 5:Activity-basedcosting Chapter 4


Unit 6: Cost volume profit analysis

Chapter 5

Satellite tutorial Saturday 19th March, 20161:00pm – 2:00pm (Fiji time)


Unit 7:Incrementalanalysis

Chapter 7

29 March – 1 April MID SEMESTER BREAK Major Assignment due: Friday 1st April, 2016

Week 8 4 – 8 April

Unit 8:Pricing (Externalsales)

Chapter 8

Satellite tutorial

Saturday 9th April, 201612:00noon – 1:00pm (Fiji time)


Unit 9: Budgetary planningChapter 9


Unit 10:Budgetary controland responsibilityaccounting

Chapter 10

Satellite tutorial Saturday 23rd April, 201612:00noon – 1:00pm (Fiji time)


Unit 11:StandardCosting • The need for

standards• Setting standards

Chapter 11

Week 12 02 – 06 May

Unit 11:StandardCosting Variances fromstandards

o Analysing

o Reporting

Chapter 11

Satellite tutorial

Saturday 7th May, 201612:00noon – 1:00pm (Fiji time)

Week 13 09 – 13 May

Unit 12: Planning forCapital Investments

Chapter 12

Week 14 16 – 20 May

Unit 12: Discountingmethods

Chapter 12

Satellite tutorial

Saturday 21st May, 201612:00noon – 1:00pm (Fiji time)

Week 15 23 – 27 May STUDY BREAK

Week 16 & 1730 May – 10 June

FINAL EXAMINATION Check with your USP Campus or Centre for the exact time and date of your

examination

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Ass es s men t ov e rv i ew

This course is assessed in two ways:

Continuous assessment 45%Final examination 55%

Total value 100%

Cont inuous assessment

Continuous assessment makes up 45% of the final score and includes 1 assignment and a mid-

semester test. It is weighted in the following way:

Assignment 15%Mid-semester test 30%

Total value 45%

Check your study schedule for the date of the test ; confirm other details with your USPCampus or Centre. A sample mid-semester test is included in this book for practise; yourtest may differ in content and structure from the sample.

Final examinat ion

Your final examination is 3 hours long. It will make up the other 55 % of your final score. We

have included a sample examination paper later in this Introduction and Assignments book, togive you an opportunity to practise for the final examination. Remember that your finalexamination may differ in content and structure from the sample paper.

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Grad ing Sys tem

a) The following grading system will be used by all faculties in awarding final grades foracademic performance in a course:

Pass Grades

Grades Percentage (%) Description

A+ 85+ Pass with Distinction

A 78 – 84 Pass with Distinction

B+ 71 – 77 Pass with Credit

B 64 – 70 Pass with Credit

C+ 57 – 63 Pass

C 50 – 56 Pass

Other Pass GradesR Restricted Pass

Aeg Aegrotat Pass

Comp Compassionate

Pas Pass or Competent

S Satisfactory

Note: Pas and S are used in circumstances where graded passes are inappropriate

such as in postgraduate thesis and Professional Diploma in Legal Practice.

Fail Grades

Grade Percentage (%) DescriptionD 40 - 49 Work below the standard required

for a pass. This grade will also beawarded for failure to meet courseminimum requirement

E 40 (Less than) Very weak performance or failure tocomplete to the satisfaction of theexaminer such practical, field or

other work as may be prescribed NC Not completed NV Null and Void: This is awarded for

plagiarism or dishonest practiceU UnsatisfactoryFail Not Competent

Note: Fail and U correspond with Pass and S above respectively.

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Provisional Results:

I IncompleteIP In progressSE Special Exam Granted

b) Students shall be awarded an Aegrotat or Compassionate Pass if they satisfy the conditions prescribed in Clauses 6.3 or 6.4 of these Regulations respectively.

c) Students may be awarded a Restricted Pass if they satisfy the conditions prescribed inClause 8.

d) Students who have been granted an extension of time past the last day of lectures tocomplete work required for the final assessment of their course shall be awarded the provisional grade of I (Incomplete) for an undergraduate or postgraduate course assessed by coursework, or IP (In progress) for a Supervised Research Project or thesis for aMaster's degree or a thesis for a PhD degree. At the end of the period of extension theFaculty Assessment Board shall determine a final grade.

e) Students who have not submitted their master's or PhD thesis or SupervisedResearch Project by the end of the maximum period of candidature prescribed in theregulations shall be awarded the grade of NC (Not completed).

[Extracted from 2015 Handbook & Calendar, pp.454 – 455 (hard copy), pp. 453 – 454 (e-copy)]

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Submiss ion o f ass ignmen ts

Moodle

You are advised to submit all your assignments before the dates given in your study scheduleor on your course Moodle page to allow for a similarity report from Turnitin, giving you

ample time to make any necessary changes that may be required before the final due date.Please upload them in the correct assignment drop box. Your assignment file must be carefullylabelled (see below).

For more information on acceptable file types for assignment submission, please visit thislink: http://elearn.usp.ac.fj/mod/book/view.php?id=95144

Hard copy

You should submit all assignments by the dates given on your study schedule. Please submitthem in the correct order and address the envelope to the Course Coordinator. For eachassignment, you should fill out a yellow assignment cover form which you collect fromStudent Administrative Services (SAS). If you do not have assignment covers, contact your

USP Campus.

For Suva based FL students, all assignments are to be posted or dropped off at the allocated boxes in your Faculty at Laucala Campus. Foundation and Preliminary students are to post ordrop off their assignments at the College of Foundation Studies in the CommunicationsBuilding.

The only assignment(s) that are to be posted or dropped off at Student Administrative Servicesat Laucala Campus are for the Agriculture courses.

For all other FL students, please confirm with your Course Coordinator about yourassignment submission.

It is very important that you keep to the study schedule and complete the assignments so thatyou get regular feedback on your progress through this course.

Correc t l abe l l ing of ass ignments

Please be very careful to correctly label your assignments. On each assignment cover or e-copy file that you send in or upload for marking, you should write or type:

the full name you used to enrol in this course; your student identification number;

the correct course code and title; and

the assignment number.

Correct labelling will help ensure that the marker receives your assignment on time, and thatyou get the credit for the work that you do. If your marker receives one of your assignmentslate because you did not label it correctly, you may lose marks.

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Late ass ignments

If you expect to be over two weeks late in submitting an assignment, it is compulsory that you write to your course coordinator . You should explain why you are late and suggest a revisedschedule that will allow you to complete the remaining assignments on time.

Your course coordinator may mark a late assignment if there is a good reason for its delay. In

deciding whether to mark late assignments, your course coordinator will give greaterconsideration to students in remote areas with little or no access to their USP Campus, Centreor tutorial help.

USP reserves the right to decide whether or not to mark late assignments. It is in your interestto send in your assignments on time. The assignment schedule gives your course coordinatortime to provide you with regular feedback on your progress, before it is too late for you to usethis information constructively in your studies.

Your course coordinator will not mark any assignment received after the final examination.

Mark ing c r i te r ia

We will grade all assignment according to the following criteria where applicable:

evidence of reading;

evidence of good understanding of the topic;

good coverage of the topic;

relevance and correctness of information;

validity and support of opinion;

conciseness;

precision;

logical presentation of information (flow); and

use of illustrations, examples and/or reasons to support statements or arguments.

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P la g ia r i s m

Plagiarism is the copying of another person’s creative work and using it as one’s own – without explicitly giving credit to the original creator. Work copied without acknowledgementfrom a book, from another student’s work, from the internet or from any other source is plagiarism. Plagiarism includes the following:

a) Copying of the published or unpublished words of another writer withoutacknowledging the source using acceptable reference citation methods. Thus, to; 'cutand paste' from internet sources or 'lift' sentences, ideas and sections from a textualsource qualifies as plagiarism.

b) Lifting or cutting and pasting extracts without quotation marks or appropriateacknowledgement of sources.

c) Paraphrasing of content and ideas without proper acknowledgement of the source.

d) The use of images, diagrams, photographs and material from blogs and social

networks, without acknowledgement.

e) Copying part or all, of another student’s assignment. In this instance, ‘studentassignment’ refers to a piece of academic work submitted for assessment purposes forany course, in past or current years at any educational institutional including USP orany other university.

i) Collusion

Collusion means working with someone else to deceive or mislead to gain an unfair academicadvantage. It includes:

a) Submission of a paper that has been written by an author other than the author credited

for that piece of writing. This includes the use of paid services of a student, or anyother person that has been solicited for that purpose.

b) Facilitating or enabling another student to plagiarise in any way.

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ii) Cheating

Cheating involves acting in any way that directly contradicts the explicit rules and guiding principles of that form of assessment. It applies in any form of examination including shorttests, quizzes and final examinations.Cheating includes (inter alia):

a)

Doing anything to gain an unfair or illicit academic advantage in an examination;

b) Possessing, referring to or having access to any material, or to access the internet ‘crib’notes or device containing information directly or indirectly related to the subjectmatter under examination other than what is explicitly approved for examination purposes;

c) Using a cell phone to communicate with any other student or person inside or outsidethe examination venue;

d) Copying from another student in a test or examination; enabling another student tocheat in a test or examination;

e) Soliciting a person to sit a test or final examination in place of the student enrolled;sitting a test or final examination in the place of another student;

f) Manipulation of scores in tests or examination or in any other form of assessment; and

g) Enabling another student in any or a combination of any of the above.

[Extracted from 2015 Handbook & Calendar, pp. 462-463 (hard copy), pp. 461-462 (e-copy)]

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Majo r ass ignmen t

Due Date: Friday 1st April, 2016

Marks: 100 marks

Weighting towards final grade: 15%

Course learning outcome:

This assignment addresses the following course learning outcomes:

1. Explain the nature of “managerial accounting” and how it differs from

“financial accounting”.

2. Define and apply common managerial accounting terms and concepts including

the various cost concepts.

3. Calculate costs for cost accounting and decision-making purposes, including

determining cost behavior patterns.

4. Identify and explain how the basic types of cost accounting systems work.

5. Discuss how managerial accounting is used for control purposes, including the

use of standard costing and cost-volume-profit analyses.

Question 1: Activity Based Costing (25 marks)

The Try Corporation has a machining facility specializing in jobs for the aircraft-componentsmarket. Try’s previous simple job-costing system had two direct-cost categories (directmaterials and direct manufacturing labor) and a single indirect-cost pool (manufacturingoverhead, allocated using direct manufacturing labor-hours). The indirect cost-allocation rateof the simple system for 2016 would have been $115 per direct manufacturing labor-hour.

Recently a team with members from product design, manufacturing, and accounting used anABC approach to refine its job-costing system. The two direct-cost categories were retained.The team decided to replace the single indirect-cost pool with five indirect-cost pools. The

cost pools represent five activity areas at the plant, each with its own supervisor and budgetresponsibility. Pertinent data are as follows:

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Activity Area Cost-Allocation Base Cost-Allocation Rate

Materials handling Parts $ 0.40

Lathe work Lathe turns 0.20

Milling Machine-hours 20.00

Grinding Parts 0.80

Testing Units tested 15.00

Information-gathering technology has advanced to the point at which the data necessary for budgeting in these five activity areas are collected automatically.

Two representative jobs processed under the ABC system at the plant in the most recent period had the following characteristics:

Job 410 Job 411

Direct material cost per job $ 9,700 $59,900

Direct manufacturing labor cost per job $750 $11,250

Number of direct manufacturing labor-hours per job 25 375

Parts per job 500 2,000

Lathe turns per job 20,000 59,250

Machine-hours per job 150 1,050

Units per job (all units are tested) 10 200

Required:

1. Compute the manufacturing cost per unit for each job under the previous simple job-costing system.

2. Compute the manufacturing cost per unit for each job under the activity-based costing

system.3. Compare the per-unit cost figures for Jobs 410 and 411 computed in requirements 1 and

2. Why do the simple and the activity-based costing systems differ in the manufacturingcost per unit for each job? Why might these differences be important to Try Corporation?

(3 marks + 6 marks + 16 marks)

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Rubric

Evaluation Criteria

Fails to meet Ex ectations

Meet Expectations Exceeds Expectations

ABC analysis(Part 1 – 4)

Lac s stat st caskills oruses inappropriate

formulae,excessive errors,

etc

App es correctstatisticaltechniques with

minimal, minorerrors.

Utilizesappropriateformulae, correct

statistical skillsand with virtuallyflawless results

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Question 2: Job costing (50 marks)

S Kumar Ltd manufactures water tanks for different sizes for use by industrialcustomers. The company uses a job costing system, in which manufacturing overhead is

applied on the basis of direct labour dollar. The company’s budget for the current year

included the following predictions:

Budgeted total manufacturing overhead $441,000

Budgeted Total direct labour hours 21, 000

Budgeted hourly direct labour rate $20

During June, the firm began two production jobs:

• Job number T81, consisting of 87 water tanks (Standard size).

• Job number C40, consisting of 100 water tanks (mini size).

The events of June are described below:

a) 1,000 square meters of rolled aluminium sheet metal were purchased for $6,000on account.

b) 400 kilograms of aluminium tubing were purchased on account for $5,500.

c) The following requisitions were filed on 5 June:

• Requisition number 112: 260 square meters of aluminium sheet metal (for job number C40) @ $5.60 per square meter.

• Requisition number 113: 1,100 kilograms of aluminium sheet metal (for jobT81) @ $9 per kilogram.

• Requisition number 114: 10 liters of superb glue @ $15 per liter.

All aluminuim used in production is treated as direct material. Superb glue

is an indirect material.

d) An analysis of labour time sheets revealed the following labour usage for

June:

• Direct labour: job number C40, 850 hours @ $20 per hour

• Direct labour: job number T81, 950 hours @$20 per hour

• Indirect labour: general factory clean up, $5,500

• Indirect labour: factory supervision salaries $8,500

e) Depreciation of the factory building and equipment during June amounted to$12,000.

f) Rent paid in cash for warehouse space used during June was $1,330.

g) Electricity costs incurred during June amounted to $2,400. The invoices for

these costs were received, but only half of the bill was paid in June.

h) June council rates and property taxes on the factory were paid in cash $2,370.

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i) The insurance cost covering factory operations for the Month of June was$2,500. The insurance policy has been prepaid.

j) The costs of salaries and on-costs for sales and administrative personnel paid in

cash during June amounted to $8,500.

k) Depreciation on administrative office equipment and space amounted to $4,500.

l) Other selling and administrative expenses paid in cash during June amounted to

$1,150.m) Job number C40 was completed during June.

n) 75% of the water tanks in job number C40 were sold on account during June for

$750 each.

The 1 June balances in selected accounts are as

follows: Cash $11,00 Accounts receivable 20,000

Prepaid insurance 7,500Raw material inventory 150,00

Manufacturing supplies inventory 600

Work in process inventory 89,000Finished goods inventory 223,00

Accumulated depreciation: Buildings and 99,000Accounts payable 14,500Wages payable 8,500

Requirements:

1. Calculate the company’s predetermined overhead rate for the current year.

(3 marks)

2. Complete the job cost sheets for job number C40 (Round-off unit cost to the

nearest cent and where necessary, show ALL relevant workings. The job cost

sheet can be downloaded from the AF102 Moodle page.)

(12 marks)

3. Prepare journal entries to record the events of June. (Where appropriate, show

ALL relevant workings. Ignore narrations.)

(9 marks)

4. Calculate the over-applied or under-applied overhead for June. Prepare a

journal entry to close this balance in the cost of goods sold. (Show calculation

for actual and applied overhead.)(8 marks)

5. Prepare a schedule of cost of goods manufactured for June.

(10.5 marks)

6. Prepare a schedule of cost of goods sold for June.

(4.5 marks) 7. Prepare an income statement for June.

(3 marks)

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Rubric

Evaluation Criteria Fails to meet Expectations

Meet Expectations Exceeds Expectations

Pre-determined rate, job cost sheets, journal

entries and over/under applied

Lacks statistical skills oruses inappropriateformulae,

excessive errors,etc.

Applies correctstatisticaltechniques with

minimal,minor errors.

Utilizes appropriateformulae, correct statisticalskills and with

virtually flawless results

Schedules andIncome statement

Incorrect orinappropriate dataused, Unable toidentify informationand issues needed

Correct data usedwith minimal errors,Mostly able to identifyinformation and issuesneeded

Correct data usedwithout any errors, Able toidentifyinformation andissues needed

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Question 3 Cost Volume Profit Analysis (25 marks)

Mr. High and Mr. Lowe are the presidents of their respective companies.

The two firms manufacture and sell the same product, and due to thecompetitive nature of the market, they charge the same selling price of $10

per unit.High and Lowe differ regarding their production and management

philosophies. The High Company is almost completely automated, and the

labor force is paid on a fixed salary basis. The Lowe Company uses a high

degree of manual labor paid on an hourly basis. The sales force at the HighCompany is paid fixed annual salaries with very small commissions, whereas

the sales force at Lowe Company is paid strictly on a commission basis. Mr.

Lowe constantly makes fun of Mr. High's operations, saying the High

Company is inflexible and unable to adjust costs as sales volume fluctuates.

During 2011, both firms reported net income of $12,000 on sales of

$120,000. However, Mr. Lowe was shocked when examining the resultsfor 2012, which showed that High Company's profits were ahead ofLowe Company's, even though Lowe Company had higher sales. The resultsfor the two years are as follows:

High Company Lowe Company

2011 2012 2011 2012

Sales revenue $ 120,000 $ 150,000 $ 120,000 $ 180,000

Total costs 108000 117000 108000 153000

Net income 12000 33000 12000 27000

Fixed costs $ 72,000 $ 72,000 $ 18,000 $ 18,000

Mr. Lowe is trying to figure out why the profit increase of his company was

less than that of High Company. His company's accountants carefully

examined the costs for each year and found no operating inefficiencies or costs

that were out of line. He has hired you as a consultant to help solve the

dilemma.

Required:

A. Compute the break-even point in units, break-even point in dollar salesand the margin of safety (in units and percentage) for each company in

2011 and 2012.(6 marks)

B. Present the income statements for 2011 and 2012 for both companies in

contribution margin format.

(8 marks)

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C. Prepare an explanation for Mr. Lowe showing why Lowe Company's profits for 2012 were lower than those reported by High Companydespite the fact that Lowe Company's sales were higher. Use the conceptof operating leverage for your analysis.

(6 marks)

D. Comment on the relative position of the two companies if sales in thefuture begin to decline.

(5 marks)

Rubric

Evaluation Criteria

Fails to meet Expectations MeetExpectations

Exceeds Expectations

CVPanalysis(Part A-D)

Lac s stat st ca s s oruses inappropriateformulae, excessive errors,

etc

App es correctstatisticaltechniques withminimal, minor

errors.

Utilizes appropriateformulae, correctstatistical skills and

with virtually flawless

results

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Pas t t es t pape r

You are given the following past test paper to help you to prepare for your test.However, remember that the test paper that you will take this semester may notfollow exactly the same structure, format or content as this one.

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Pas t exam ina t i on pape r

You are given the following past examination paper to help you to prepare foryour final examination. However, remember that the examination paper that youwill take this semester may not follow exactly the same structure, format orcontent as this one.

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