HI5017 Managerial Accounting

Answer 1

Job costing is the costing accounting system of accumulating and assigning production cost of individual output unit. It is the method of evaluating the tailor made component cost which is ascertained for individual job. On the other hand process cost accounting system is used during the mass production of similar products. In this cost accounting system cost associated with output’s individual unit cannot be different from each other and is generally used by food production industries, oil refineries or industries involved in chemical processing.

Part a: Engineering consulting firm

Job costing is more appropriate for engineering consulting firm because the Engineering consulting firm provides services to clients with different backgrounds. Job costing is used for costing customizable and unique products. Hence it is more appropriate for the Engineering consulting firm to use job cost accounting system.

Part b: Manufacturer of ceramic tile

The ceramic tile manufacturer should use process cost accounting system since they produce different type of ceramic tiles in different batches of large quantities across similar process of production.

Part c: Architectural firm

The Architectural firm should use job costing method. In the Architectural firm each design made by them is unique. The direct cost like the drawing printing’s costs and the professional fee can be traced to the individual job/ design.

Part d: Manufacturer of party balloons

The party balloons manufacturer should use process cost accounting system. This is because the party balloons manufacturing industry process few types of products but in large quantities and using similar manufacturing processes. Job cost accounting system would not be appropriate for the party balloons manufacturer because of mass production of similar products.

Answer 2

Part a: journal entries

Particular

Debit

Credit

Direct material

            To cash

(raw material purchased)

4850

 

4850

Factory payroll

            To wages payable

(wages earned )

640

 

640

WIP inventory

            To factory payroll

(labour cost adjusted)

640

 

640

WIP Inventory

            To manufacturing overhead

(overhead applied to production)

336

 

336

Part b: cost per cuddly koala for job number A26

Particular

Calculation

Amount ($)

Direct material

 

4850

Add: direct labour

direct labour hours* rate per hour

=32*20

640

Add: overhead cost

direct labour hours* predetermined overhead rate

=32*10.50

336

Total cost

 

5826

cost per cuddly koala

Total cost/number of cuddly koalas

=5826/1000

5.286

 

Part c

The cost accounting information can be used by the managers of toys world for several purposes like planning future operations and making business decisions with knowledge of product’s cost. Cost accounting examines the business’s core structure. It collects information about the cost during the manufacturing process of the organization. It helps the managers in evaluating the efficiency of cost usage. Further the abovementioned information will also help the managers in establishing Company’s performance standard. The cost accounting information is flexible to meet the management needs. It helps the managers in understanding what has happened in the past and provide them helpful insights to plan and prepare for future activities.

Answer 3

Part a: calculation of predetermined overhead rate

Predetermined overhead rate= Total estimated manufacturing overhead/ Total estimated machine hours

=300000/ 40000

=$7.5 per machine hour

Part b: calculation of applied overhead

Particular

Calculation

Amount

B81

1600*7.5

12000

J76

2400*7.5

1800

M49

1000*7.5

7500

Applied overhead

 

37500

 

Part c: calculation of over applied overhead

Particular

Amount

overhead applied to production during January

37500

Actual manufacturing overhead incurred during January

30000

Over applied overhead

7500

 

Part d: journal entry

Particular

Debit

Credit

 

 

 

 

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