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