Solutions To Review Exam Papers 1 To 3

Management
Accounting
2008
Solutions
By
Colin Davy and Danny Bruce

Table of Contents
Chapter 1: Cost Concepts .................................................................. 1
Chapter 2: Manufacturing & Trading Statements ..........................11
Chapter 3: Cost-Volume-Profit Analysis......................................... 28
Chapter 4: The Cost Accounting Cycle........................................... 42
Chapter 5: Material & Labour........................................................ 59
Chapter 6: Overhead Allocation ..................................................... 79
Chapter 7: Job Costing.................................................................... 87
Chapter 8: Responsibility Accounting ...........................................114
Chapter 9: Review Examinations ................................................. 122
Chapter 10: Class Examinations ................................................... 145
Regards
Colin Davy & Danny Bruce
www.learnnowbiz.com
ISBN: 1 876 602 856
Fourth Edition 2008

Published by
P.O. Box 210 Bondi N.S.W. 2026
Phone: ( 02 ) 9314 5374
© This book is copyright and all rights are reserved. No part of this work is to be
reproduced other than in accordance with the Copyright Act, or with the written
permission of the publishers.
Chapter 1: Cost Concepts

Chapter Review Solutions
Questions
1. ( a ) By the nature of the item ( a natural classification ).
( b ) In their relation to the product.
( c ) With respect to the accounting period to which they apply.
( d ) In their tendency to vary with volume or activity.
( e ) In their relation to departments.
(f) For planning and control.
( g ) For analytical processes.
2. Those costs which follow the product through inventories are product costs, and those
which are directly applicable against income of the period without assignment to
inventories are period costs.
The classification is primarily useful in organising the accumulation of data to prepare

financial statements. From the income statement point of view the problem of
distinguishing between product and period costs is essentially one of timing the charges
against revenue. For this purpose inventories are an essential means of carrying costs
forward until the corresponding revenue accrues. For other purposes such as cost control,
preparation of budgets, or pricing, the cost classification may be quite different.
3. (a) (i) Indirect (b) (i) Direct Material

( ii ) Direct ( ii ) Factory Overhead
( iii) Indirect ( iii ) Direct Material
( iv ) Factory Overhead
(c) (i) Fixed (d) (i) Product

( ii ) Variable ( ii ) Period
( iii ) Fixed ( iii ) Product
( iv ) Period
(e) (i) Fixed

( ii ) Variable
( iii ) Fixed
( iv ) Variable
(f) (i) All direct costs of production.
(g) ( iii ) Costs associated with conversion of raw materials into finished goods.
1
Management Accounting in Australia - Solutions
4. (a) (i) Fixed cost remain constant in total. - rent

( ii ) Variable rate per unit is constant- dir. wages
( iii ) Has elements of both - telephone
(b) See text.
5. (a) Indirect, fixed

(b) Indirect, variable
(c) Indirect, fixed
(d) Indirect, variable
(e) Direct, variable
(f) Indirect, fixed
(g) Indirect, fixed
(h) Indirect, fixed
(i) Indirect, variable
6. Management accounting deals with the future, financial accounting the past.
Management accounting is designed to facilitate internal decision-making, financial

accounting - provision of information to external users.
Management accounting does not conform to rules or accounting standards.
Management accounting provides detailed information by cost and profit centres, financial
- in aggregate.
7. (i) Direct
( ii ) Direct
( iii ) Indirect
( iv ) Direct
8. See text.
2
9.
Cost Product Period
Description Costs Costs
(a) Rope & Anchors ²
(b) Sales Salaries ²
(c) Power for machine ²
(d) Freight In ²
(e) Protective Clothing ²
(f) Factory Wages ²
(g) Advertising ²
(h) Supervisor Salaries ²
(i) Fibreglass ²
10.
Product Sales Gross Profit C.O.G.S Markup
x 36.49 270,000 120,000 150,000 80.00%
y 47.30 350,000 150,000 200,000 75.00%
z 16.21 120,000 20,000 100,000 20.00%
100.00 % 740,000 290,000 450,000
Sales Gross Profit Gross Profit Rate

x 270,000 120,000 44.44%
y 350,000 150,000 42.86%
z 120,000 20,000 16.67%
Total 740,000 290,000 36.49%
11. SP = CP ( 1 + MR )
CP = SP = 90 = $ 60
1 + MR 1.50
12. See Text
13. SP = VC + ( VC x MR )
= 280 + (280 x 0.50) = $420
3
14. (a) Sales Mix

Product x 60,000
y 55,000
z 95,000
$210,000
(b) Sales volume relates to the total sales and the physical quantity of units sold.
Sales mix relates to the mix of products that contribute to the total sales.
(c) Selling Price = Cost + ( Cost x Markup )
Markup = Selling Price - Cost

Cost
= Gross Profit
Cost
Product Gross Profit C.O.G.S Markup

x 25,000 35,000 71.43%
y 20,000 35,000 57.14%
z 42,000 53,000 79.25%
(d) Product Gross Profit Sales Gross Profit Rate

x 25,000 60,000 41.67%
y 20,000 55,000 36.36%
z 42,000 95,000 44.21%
Total 87,000 210,000 41.43%
(e) If the company’s target gross profit rate is 40% , it is apparent that:
- Product y is achieving a low margin return possibly due to stock surpluses,
obsolescence or the need to reduce the selling price.
- Product z is achieving a high margin return possibly due to special sales or

greater than anticipated demand allowing a higher selling price.
4
15. (a)
CBD Inner Metro Outer Metro Total
Sales 15,000 12,000 16,000 43,000
Less Variable Costs 7,500 5,400 6,400 19,300
Contribution Margin 7,500 6,600 9,600 23,700
Less Fixed Costs 3,500 3,500 3,500 10,500
Net Profit 4,000 3,100 6,100 13,200
(b) Outer Metro
(c) Assume variable costs are a constant percentage of sales.
CBD x = 3,500 + 0.50 x
x = $7,000
where x = sales breakeven $
Inner Metro x = 3,500 + 0.45 x
x = $6,364
Outer Metro x = 3,500 + 0.40 x
x = $5,833
16.
Sales price 200 100.00
Less Variable costs - 90 45.00
Contribution Margin 110 55.00
Break even quantity = Fixed Cost = $110,000 1,000 units

Contribution Margin $110
Contribution Margin: $110

Contribution Margin Ratio 55%
5
17.
(a) C.P.U. 40,000 Units 50,000 Units
Prime Cost 8.50 340,000 425,000
Variable Overhead 2.50 100,000 125,000
Fixed Cost 60,000 60,000
500,000 610,000
(b) Contribution Margin = Variable Cost x 120%
Variable Cost = Contribution Margin = $2.40 = $2.00

120% 1.20
18.
10,000 Units 15,000 Units
Fixed Costs 150,000 150,000
Variable Costs ( $9 x 10,000 ) 90,000 ( $9 x 15,000 ) 135,000
Total Costs $ 240,000 $ 285,000
19.
Prime Cost Con Cost
Direct Material 30.00
Direct Labour 10.00 10.00
Fixed Factory Overhead ( $6 x 5,000 ) / 8,000 3.75
Variable Factory Overhead . 4.00
Cost per Unit 40.00 17.75
20.
35,000 Units 40,000 Units
Fixed Costs 140,000 168,000
Variable Costs ( $2.5 x 35,000 ) 87,500 ( $2.50 x 40,000 ) 100,000
Total Costs $ 227,500 $ 268,000
Fixed Costs $4.00 140,000/35,000 New Fixed Costs = $140,000 x 1.2

Variable Costs 2.50
Total Costs 6.50
21. Prime Cost $ 900,000

Less Direct Labour - 200,000
Equals Direct Materials Used $ 700,000
Variable Mfg Cost $1,000,000

Plus Fixed Mfg Cost 300,000
Total Manufacturing Cost $1,200,000
Variable Mfg Cost $1,000,000

Less Prime Cost - 900,000
Variable Mfg Overhead $ 100,000
6
22.
i Total Factory Overhead Product Cost - Prime Costs
$500,000 - $300,000 $ 200,000
ii Direct Labour Cost Conv Costs - Factory Overhead

$260,000 - $200,000 $ 60,000
iii Direct Material Cost Prime Costs - Direct Labour

$300,000 - $ 60,000 $ 140,000
iv Total Variable Mfg Costs Proct Costs - Fixed Factory Overhead

$500,000 - $140,000 $ 360,000
23.
(i) $
Direct Materials 120,000
Direct Labour 30,000
Prime Costs 150,000
( ii ) $
Conversion Costs 80,000
Less Direct Labour 30,000
Factory Overhead 50,000
( iii ) $
Direct Materials 120,000
Conversion Costs 80,000
Cost of Production 200,000
( iv ) $
Selling & Admin Expenses 70,000
Financial Expenses 30,000
Period Costs 100,000
7
Problems
24. (a)
Prime Costs $500,000
Less Direct Labour 150,000
Direct Materials used 350,000
(b)
Variable Manufacturing cost $525,000
Add Fixed mfg. Overhead 75,000
Total manufacturing cost 600,000
(c)
Variable Manufacturing cost $525,000
Less Prime Cost 500,000
Variable mfg. overhead cost 25,000
Note: Total mfg cost comprises

Direct Materials $350,000
Direct labour 150,000
Variable mfg. overhead cost 25,000
Variable Manufacturing cost 525,000
Add Fixed mfg. overhead 75,000
Total manufacturing cost 600,000
25.
(a) Prime Cost
Direct Materials Fibreglass, resin etc. 12,000
Sailcloth 3,500
Rigging and fittings 3,000
Direct labour Production wages 10,000
28,500
(b) Period cost

General office rent 3,750
General office salaries 2,050
5,800
(c) Fixed manufacturing cost

Factory rent 2,500
Depreciation – factory equipment 700
3,200
(d) Prime Cost + Variable factory Exp ( 28,500 + 500 ) 29,000
8
26. Fanuli Manufacturing Co.

Income Statement
Sales ( 5,000 x 10.00 ) 50,000
Less Cost of Goods Sold
Direct Materials ( $3.00 x 5,000 ) 15,000
Direct Labour ( $2.50 x 5,000 ) 12,500
Overhead Applied ( $1.50 x 5,000 ) 7,500 35,000
Gross Profit 15,000
Less Expenses
Fixed 6,000 6,000
Net Profit 9,000
(a) Prime cost per unit = DM + DL

= 3.00 + 2.50
= $5.50
Prime cost = $27,500
(b) Conversion cost per unit = DL + O/H

= 2.50 + 1.50
= $4.00
Conversion Cost = $20,000
(c) Product Cost

Direct Material 15,000
Variable Overhead 7,500
Fixed Overhead 6,000
41,000
(d) Contribution Margin per Unit. (e) %

Sales price 10.00 100.00
Less Variable costs
Direct Materials 3.00
Direct Labour 2.50
Variable Overhead 1.50 7.00 70.00
Contribution Margin $3.00 30.00
(f) Break even quantity = Fixed Cost = $6,000 2,000 units

Contribution Margin $3.00
9
27. ( a ) Conversion cost:

Direct labour $80,000
Fixed manufacturing overhead 60,000
Variable manufacturing overhead 30,000
$170,000
( b ) Product cost:
Variable manufacturing $250,000
$310,000
( c ) Prime cost:
Less Variable manufacturing overhead 30,000
$220,000
( d ) Period cost:
Fixed selling and administration $110,000
Variable selling 70,000
$180,000
( e ) Manufacturing overhead cost @ 60,000 units:
Fixed manufacturing overhead $60,000
Variable manufacturing overhead $30,000 x 60,000 36,000
50,000 $96,000
28. ( a ) Direct Labour cost:

Conversion costs $150,000
Fixed manufacturing overhead - 56,000
Variable manufacturing overhead - 20,000
$ 74,000
( b ) Variable conversion cost:
Direct Labour $ 74,000
Variable manufacturing 20,000
$ 94,000
( c ) Product cost:
Prime cost $237,000
$313,000
( d ) Period cost:
$175,000
20,000 $86,000
10
Chapter 2: Manufacturing & Trading Statements

1.
(a) Direct Material Cost
Inventory 1/7/09 5,000
Purchases 25,000
30,000
Less Inventory 30/6/10 4,000 26,000
(b) Direct Material Cost

Purchases 26,000
Freight on Purchases 1,000
31,000
Less Inventory 30/6/10 3,000 28,000
(c) Direct Material Cost

Purchases 32,000
Freight & Other Charges 1,000
38,000
Less Inventory 30/6/10 8,000 30,000
(d) Direct Material Cost

Purchases 30,000
Freight 1,000
Duty & Landing Charges 2,000
38,000
Less Inventory 30/6/10 6,000 32,000
(e) Direct Material Cost

Work in Progress 1/7/10 1,200
Purchase 27,300
Freight Inwards 800
35,800
Less Work in Progress 30/6/11 700
Inventory 30/6/11 1,100 1,800 34,000
11
2.
Direct Labour Costs
Direct Labour Paid 48,000
Less Direct Labour. Accrued 1/7/09 1,400
46,600
Add DIRECT LABOUR. Accrued 30/6/10 2,200 48,800
3.
Direct Labour Cost
Less Direct Labour. Accrued 1/7/09 3,200
52,800
Add Direct Labour. Accrued 30/6/10 2,200 55,000
4.
+ Accrued 30/6/10 1,100
Less Accrued 1/7/09 1,600 51,500
63,300
Less Work in Progress 30/6/10 3,300 60,000
5.
Manufacturing Overhead
Factory Insurance 400
Factory Light & Power 1,800
Indirect Labour ( 400 + 15,000 - 400 ) 15,200
Machinery Repairs 1,300
Depreciation Machinery 5,900
Indirect Material ( 1,700 + 5,100 - 1,400 ) 5,400 30,000
6.
Costs for the Period
Manufacturing Overhead
Factory Insurance ( 500 - 100 ) 400
Indirect Labour ( 17,000 + 600 - 400 ) 17,200
Machinery Repairs 400
Depreciation Machinery 4,500
Indirect Materials ( 1,400 + 7,000 - 1,600 ) 6,800
33,800
7. By using method as in solution 5, number manufactured equals 7,000

W.I.P.
O/bal 12,800 F.G.s 112,000
Cost of Prod 112,800 C/bal 13,600
125,600 125,600
Therefore cost per unit = $16.00 ( 112,000 / 7,000 )
12
8.
Factory Rates paid during year 2,500
Add Back prepayments 1/7/2009 1,200
3,700
Add Accrued 30/6/2010 600
To Manufacturing Account 4,300
9.
Manufacturing Account
O / bal Work in Progress 4,000 Trading Account 30,000
Direct Material 12,000 Cost of Production
Direct Labour 8,000
Overhead 8,000
32,000
C/bal Work in Progress 2,000
30,000 30,000
10.
(a) Raw Material Cost
Inventory 1/7/08 10,000
Purchases 60,000
Freight Inwards 2,000
Duty 5,000
79,000
Less Work in Progress 30/6/09 6,000
Inventory 30/6/09 16,000 22,000 57,000
(b) Direct Labour Cost

Labour ( 25,000 + 2,000 - 1,000 ) 26,000
28,000
(c) Prime Cost

Raw Materials 57,000
Direct Labour 22,000 79,000
13
11.
Hopcraft Manufacturing Co. Pty Ltd
Manufacturing Statement Year Ended 30/06/2009
Raw Materials
Inventory 01/07/08 20,000
Purchases 91,000
111,000
Less Inventory 30/06/09 24,000 87,000
Direct Labour
Wages Paid 58,800 58,800
Factory Overhead
Indirect Labour 17,800
Depreciation - Factory Plant 6,800
Factory Supplies 500
Sundry Expenses 28,500 53,600
199,400
Plus Work in Progress 01/07/08 8,600
208,000
Less Work in Progress 30/06/09 - 18,000
Cost of Goods Manufactured 190,000
14
12.
Manufacturing Statement
for the year ended 30 June 2009
Direct Materials
Inventory 1/07/08 7,500
Purchases 46,500
54,000
Less Inventory 30/06/09 4,000 50,000
Direct Labour
Labour paid 20,000 20,000
Factory Overhead
Supervisor 7,800
Depreciation - Manufacturing Plant 2,300
Factory Rates 5,200
Factory Supplies ( 1,400 – 400 ) 1,000
Insurance 1,100
Power 3,100
Repairs to Plant 4,200 24,700
Cost of Production this period 94,700
108,000
Work in Progress 30/06/09 - 8,000
15
13.
Conway Production Company

Manufacturing Statement 31 December 2009
Direct Material
Inventory 01/01/09 40,000
Purchases 180,000
Import Duty 5,000
225,000
Less Inventory 31/12/ 09 30,000 195,000
Direct Labour
Labour Paid 290,000 290,000
Factory Overhead
Depreciation 25,000
Faculty Power , Light & Fuel 6,000
Factory Supervisors Salaries 64,000
Sundry Factory Expenses 80,000 245,000
Total Factory Costs Incurred 730,000
Add Work in Progress 01/01/09 45,000
775,000
Less Work in Progress 31/12/ 09 - 25,000
Trading Statement
Sales 1,200,000
Inventory 01/01/ 09 110,000
Purchases - Finished Goods 150,000
Freight Inwards on Finished Goods 12,000
Import Duty 18,000
Cost of Goods available for Sale 1,040,000
Less Inventory Finished Goods 31/12/ 09 140,000 900,000
Gross Profit 300,000
16
14.
Rex Manufacturing Company Pty Ltd -Manufacturing Statement 31 December 2009
Direct Materials
Inventory 01/01/09 8,400
Purchases 45,100
Duty on Raw Materials 1,400
54,900
Less Inventory 31/12/ 09 6,900 48,000
Direct Labour
Labour Paid 62,000 62,000
Factory Overhead
Holiday and Sick Pay 12,300
Factory Power, Light & Fuel 1,800
Factory Managers Salary 18,600
Sundry Factory Expenses 7,800
Depreciation Factory Plant 2,300 56,000

Work in Progress 01/01/ 09 4,000
15.
P. Hogan Manufacturing Statement - 30 June, 2009

Direct Materials
Inventory 01/01/09 1,000
Purchases 145,000
Freight Inwards 400
146,400
Less Inventory 30/06/09 - 1,500 144,900
Direct Labour
Labour ( 72,000 + 500 – 600 ) 71,900 71,900
Factory Overhead
Factory Rent 50,000
Factory Supplies 2,000
Depreciation Factory Plant 11,000
Electricity 4,000
Indirect Labour 6,500 73,500

291,500
Less Work in Progress 31/12/09 - 1,500
17
16.
30 June 2009
Direct Materials
Inventory 1/7/ 08 3,200
Purchases 72,000
Duty on Raw Materials 3,200
Freight Inwards on Raw Material 3,600
82,000
Less Inventory 30/6/09 - 4,000 78,000
Direct Labour
Labour ( 66,700 + 3,200 – 2,300 ) 67,600 67,600
Factory Overhead
Factory Supplies 01/07/ 08 2,400
Purchases 10,400
12,800
Factory Supplies 30/06/09 – 1,600 11,200
Insurance 400
Factory Managers Salary 12,000
Foreman’s Wages 8,000
Other Indirect Labour 6,400
Repairs to Machinery 2,000
Other Manufacturing Expenses 14,000 55,600
208,400
18
17.
Amalfi Manufacturing Co Pty Ltd
Manufacturing Statement 30 June 2009
Direct Materials
Inventory 1/7/ 08 18,000
Purchases 100,000
123,000
Less Inventory 30/6/ 09 - 19,000 104,000
Direct Labour
Labour Paid 80,000 80,000
Factory Overhead
Factory Supplies 01/07/ 08 4,500
Purchases 10,000
14,500
Factory Supplies 30/06/09 – 5,500 9,000
Factory Expenses 45,400
Indirect Labour 20,000 74,400
263,900
Less Work in Progress 30/6/ 09 8,500
Income Statement
Sales 480,000
Less Cost of Goods Sold 290,400
Inventory 1/7/08 10,000
Purchases of Finished Goods 35,000
301,400
Less Inventory 30/6/ 09 11,000
Add other Operating Income 2,500
Discount Received 2,500
192,100
Less Expenditure Incurred 56,100
Marketing Expenses 11,000
Advertising 4,800
Freight Outwards 6,200
General & Administrative Expenses 42,000
Office Salaries 30,000
Office Rent & Other Expenses 12,000
Financial Expenses 3,100
Discount Allowed 1,100
Interest on Bank Loan 2,000
Net ( Operating ) Profit 136,000
19
18.
(a) Pink Limited
Manufacturing Statement for the Six Months Ended December 31 2009
($000) ($000) ($000)
Direct Materials
Inventory 01/07/09 5
Purchases 255
Freight In 13
273
Less Inventory 31/12/09 48 225
Direct Labour
Labour ( 215 – 5 + 4 ) 214 214
Factory Overhead
Factory Supplies 01/07/09 11
Purchases - Factory Supplies 27
38
Factory Supplies 31/12/09 14 24
Depreciation – Plant 13
Depreciation – Buildings 6
Indirect Wages 50
Expenses (112 + 5 - 3) 114
Factory Manager's Salary 20 227
Cost of Production 666
Work in Progress 01/07/09 14
680
Less Work in Progress 31/12/09 18
Cost of Goods Manufactured 662
(b) Pink Limited

Trading Statement for the Six Months Ended December 31 2009
($000) ($000)
Sales 1,200

Opening Stock 25
Purchases 80
Freight Inwards 2
Cost of Goods Manufactured 662
769
Less Closing Stock 27 742
Gross Profit 458
20
19.
Direct Materials Bal 01/06/09 60,000
Purchases 240,000
300,000
Direct Materials - 65,000 235,000
Direct Labour
Paid & Accrued ( 74,000 + 1,000 ) 75,000 75,000
Factory Overhead
Factory Supplies 01/06/09 6,000
Purchases 18,000
24,000
Factory Supplies 30/06/09 - 4,000 20,000
Indirect Lab 10,000
Insurance ( 4,000 + 13,000 – 6,000 ) 11,000
Power – Factory 12,000
Depreciation * 16,000
Rent – Factory 15,000
General – Factory 18,000 102,000
Current Cost of Goods Manufactured 412,000
Plus Opening Balance of W.I.P. 35,000
447,000
Less Closing Balance of W.I.P. - 47,000
Trading Statement for the Month June 2009

Sales 900,000
Cost of Goods Sold

Finished Goods 01/06/09 100,000
Purchases 50,000
550,000
Finished Goods 30/06/09 -50,000 500,000
Note: Factory plant and machinery is depreciated at 20% p.a. straight-line.

Balance 01 June 2009 960,000 0ne Month 80,000 20%
12
= 16,000
21
20. Manufacturing Statement for the six months ended 30th June, 2009
Direct Materials
Material Inventory 01/01/09 30,000
Purchases 120,000
Cartage and Duty 10,000
160,000
Material Inventory 30/06/09 -10,000 150,000
Direct Labour
Paid & Accrued ( 108,500 + 1,500 ) 110,000 110,000
Factory Overhead
Factory Supplies 01/01/09 3,000
Purchases 12,000
15,000
Factory Supplies 30/06/09 -2,000 13,000
Indirect Labour ( 40,500 + 500 ) 41,000

Electricity 16,000
Rates ( 6,200 - 200 ) 6,000
General 4,000
Depreciation 15,000 95,000
355,000
Work In Progress 01/01/09 44,000
399,000
Work In Progress 30/06/09 - 39,000
Trading Statement for the six month June 2009

Sales 600,000
Cost of Goods Sold

Opening Bal Finished Goods 70,000
Purchases 30,000
460,000
Closing Bal Finished Goods -20,000 440,000
22
21. ( a ) Kangan
$ $ $
Direct Materials
Opening stock 21,000
Cartage Inwards 4,800
Purchases 96,800
122,600
Less: Closing stock - 21,480 101,120
Direct Labour
Direct labour ( 76,950 + 2,000 ) 78,950 78,950
Factory Overhead
Factory Supplies
Inventory 1 July 1,900
Purchases 11,980
13,880
Less Inventory 30 June 2,360 11,520
Indirect Labour ( 32,340 + 1,060 ) 33,400

Rent ( 22,000 x 50% ) 11,000
Rates & Insurance ( 50% x ( 4,100 + 680 – 940 ) 1,920
Sundry 6,070
Depreciation ( 59,000 x 15% ) 8,850 72,760
252,830
Opening Bal Work In Progress 21,710
274,540
Less Closing Bal Work In Progress - 24,540
Cost of Goods Manufactured $ 250,000
(b)
Trading Statement
$ $
Sales 423,600
Less: Cost of goods sold

Opening stock of finished goods 28,320
278,320
Less: Closing stock of finished goods 4,720 273,600
Gross Profit $ 150,000
23
22. ( a ) Brook Vale

$ $ $
Direct Materials
Opening stock 60,000
Purchases 266,000
330,000
Less: Closing stock - 30,000 300,000
Direct Labour
Direct labour ( 123,500 – 1,000 + 2,500) 125,000
Factory Overhead
Factory Supplies:
Purchases 38,000
50,000
Indirect Labour ( Factory Forman ) 49,000

Insurance ( 25% x 4,000 ) + 6,000 7,000
Power 6,000
537,000
Opening Bal Work In Progress 35,000
572,000
Less Closing Bal Work In Progress - 20,000
(b)
Trading Statement
$ $
Sales 1,140,000
Less: Cost of goods sold

Opening stock of finished goods 25,000
Purchases 45,000
624,000
24
23. ( a ) Radoslow Ltd

$ $ $
Direct Materials
Opening Inventory 66,000
Purchases 276,000
Freight inwards 12,000
354,000
Less: Closing Inventory 14,000 340,000
Direct Labour
Direct labour ( 159,800 + 1,100 – 900 ) 160,000 160,000
Factory Overhead
Factory Supplies
Purchases 32,400
45,000

Insurance ( 3,960 + 3,000 – [ 3,960 x 10/12 ] ) 3,660
Power 5,200
595,000
610,000
Work In Progress 30/06/2009 - 10,000
(b)
Trading Statement
$ $
Sales 900,000
Less: Cost of Goods Sold

Opening Stock of Finished Goods 24,000
Purchases 46,700
Freight 2,300
673,000
25
24. ( a ) Lone Pine Ltd Manufacturing Statement for Year Ended 30 June 2009
DIRECT MATERIALS
Inventory 1 July 2008 $ 25,000
Purchases 170,000
200,000
Less: Inventory 30 June 2009 20,000 180,000
DIRECT LABOUR
Direct Labour incurred ( $119,200 + 800 ) 120,000 120,000
FACTORY OVERHEAD
Factory Supplies
Inventory 1 July 2008 2,500
Purchases 17,500
20,000
Factory Repairs and Maintenance 6,500
Factory Power ( $9,500 + 500 ) 10,000
Factory Waste disposal 3,300
Factory Insurance 4,500
Depreciation – Factory building & machinery 15,300 80,100
380,100
400,000
( b ) Lone Pine Ltd Trading Statement for Year Ended 30 June 2009
Sales 800,000
Finished Goods Inventory 1 July 2008 33,400
Purchases 40,600
468,000
Less Finished Goods Inventory 30 June 2009 18,000 450,000
Gross Profit $350,000
26
25. ( a ) Ad Ler Ltd Manufacturing Statement for Year Ended 30 June 2009
DIRECT MATERIALS
Work in Process 1 July 2008 $ 3,100
Purchases 173,970
207,110
Work in Process 30 June 2009 5,300
Less: Inventory 30 June 2009 28,720 34,020 173,090
DIRECT LABOUR
Work in Process 1 July 2008 1,030
Direct labour incurred ( $69,160 + 800 ) 69,960
70,990
Work in Process 30 June 2009 1, 720 69,270
PRIME COST 242,360
FACTORY OVERHEAD
Work in Process 1 July 2008 1,100
Indirect materials used:
Purchases 14,840
17,080
Indirect labour 20, 350
Factory repairs and maintenance 7, 650
Factory power ($8,540 + 1,400) 9,940
Factory waste disposal 2,280
Factory insurance ($4,680 x 3/12) + 3,330 4,500
Depreciation – factory building & machinery 15,200
74,340
Less: Work in process 30 June 2009 1,800 72,540
COST of PRODUCTION 314,900
( b ) Ad Ler Ltd Trading Statement for Year Ended 30 June 2009

Sales 719,600
Finished Goods Inventory 1 July 2008 44,940
Purchases 39,900
403,800
Less Finished Goods Inventory 30 June 2009 35,300 368,500
27
Chapter 3: Cost-Volume-Profit Analysis

1.
Sales $75.00
Var Costs - 45.00
Cont Margin $30.00
Sales B/e units = Fixed Cost = $720,000 = 24,000 units

Cont. Margin $30
2.
%
Sales $10.00 100.00
Var Costs - 5.40 - 54.00
Cont Margin $4.60 46.00
Sales Break Even ( units ) = Fixed Cost + Required Profit

Contribution Margin
= $100,000 + $ 38,000 = 30,000

$4.60 units
3. (a)
Sales $100.00 100%
Var Costs - 45.00 45%
Cont Margin $55.00 55%
Sales B/e units = Fixed Cost = $1,100,000 = 20,000 units

Cont. Margin $55
(b) (i)
Sales B/e ( units ) = Fixed Cost + Required
Contribution Margin
= $1,100,000 + $110,000 = 22,000 units

$55
( ii ) Fixed Cost = $1,210,000 = $220,000,000

Cont. Margin Ratio 0.55
28
4. (a)
Sales $25.00 Sales $31.00
Var Costs - 15.00 Var Costs - 15.00
Cont Margin $10.00 Cont Margin $16.00

Cont. Margin $10
(b)
Sales B/e units = Fixed Cost = $10,000 = 625 units
Cont. Margin $16
5.
Selling Price $4.00 100.00%
- Var. Cost- man $1.20
- sell 0.40 - 1.60 40.00%
= Contribution Margin $2.40 60.00%
(a)
Cont. Margin $2.40
Sales B/e $ = Fixed Cost = $60,000 = $100,000

(b)
Sales B/e $ = Fixed Cost + Req. Profit = $60,000 + $30,000 = $150,000
6. (a)
Selling Price $65.00 100 %
- Variable Cost - 39.00 60 %
= Contribution Margin $26.00 40 %
Sales Break Even ( units ) = Fixed Cost = $13,000 = 500 units

= Fixed Cost = $13,000 = $32,500

Contribution Margin Ratio 0.40
(b)
Sales Break Even ( units ) = Fixed Cost + Required Profit

Contribution Margin
= $13,000 + $ 26,000 = 1,500 units

$26.00
29
7.
Revenue 4,200,000 6.00 100.00
Variable Cost 2,800,000 4.00 66.67
Contribution Margin 1,400,000 2.00 33.33
Fixed Cost 1,400,000
Profit 0
(a) Selling price per unit = Total Revenue = 4,200,000

Units Sold 700,000
= $6 per unit
(b) Variable cost per unit = Total Variable Cost = 2,800,000

Units Produced 700,000
= $4 per unit
(c) Total Revenues 4,200,000 Contribution Margin per unit $2

Less Total Variable Costs 2,800,000
Contribution Margin $1,400,000
(d) At breakeven, profit = NIL Therefore,
Fixed Cost
Breakeven (s) =
Contribution Margin
$1,400,000
= = 700,000
2
Fixed Cost + Required Profit before Tax

(e) Units Required =
Contribution Margin
1,400,000 + 1,000,000
= = 1,200,000
2
8.
C.P.U.
Raw Material $8,960 $2.80
Direct Labour $11,200 $3.50
Variable O/H $2,560 $0.80
$7.10
Minimum Price to accept $7.10
30
9.
Sales 75 100.00
Variable Cost 25 33.33
Fixed Cost 300,000
Profit ?
Fixed Cost $300,000

(a) Breakeven (s) = = = 6,000 units
Contribution Margin 50
(b) To make an operating profit of $15,000
Fixed Costs + Required Profit = 300,000 + 15,000 = 6,300 Units

(c) At 7,000 units,

Sales 7,000 x 75 525,000
Less Costs: Variable Costs 7,000 x 25 175,000
Equals Contribution Margin 350,000
Less Fixed Costs 300,000
Operating Profit $50,000
(d) Sales 60 100.00

Less Variable Cost - 25 42.00
Equals Contribution Margin 35 58.00
Fixed Cost $297,500

Breakeven (s) = = = 8,500 units
(e) Sales 75 100.00

Less Variable Cost - 15 20.00
Equals Contribution Margin 60 80.00
Fixed Cost $300,000

(f) New fixed costs = 300,000 + 50,000

= $350,000 per annum
Fixed Cost $350,000

31
10.
Sales 12 100.00
Fixed Cost 25,000
Profit ?
(a) At breakeven profit = NIL
Fixed Cost $25,000

(b) Operating profit of $50,000
Fixed Costs + Required Profit = 25,000 + 50,000 = 37,500 Units

(c) Operating profit - 10% of sales revenue ( C.M. = 12 – 10 – 1.2 )
Fixed Cost $25,000

Contribution Margin 0.80
(d)
Sales 12.00 100.00
Variable Cost Mfg 9.20
Variable Cost Mkt 2.00 11.20 93.33
Contribution Margin 0.80 6.67
Fixed Cost 25,000
Profit ?
Fixed Cost $25,000

( e ) At 10,000 units
Sales 10,000 x 12 120,000
Less Costs and expenses
Variable Manufacturing costs 10,000 x 8 80,000
Variable marketing costs 10,000 x 2 20,000 100,000
Fixed manufacturing costs 15,000
Fixed marketing and admin costs 10,000 25,000
Operating Loss - 5,000
32
11.
Revenue 130,000 20.00 100.00
Variable Cost 74,750 11.50 57.50
Contribution Margin 55,250 8.50 42.50
Fixed Cost 48,100
Profit 7,150
(a) Required Sales = 10,200 = $24,000

0.4250
∴ sales must increase by $24,000 (154,000 - 130,000)
(b) New Variable Exp. per Unit = $10.35 11.50 x 0.90
New Contribution Margin = $9.65 $20.00 - 10.35
New Sales Volume = 6,175 6,500 units x 0.95
∴ new net profit = Contribution Margin - Fixed Expenses

= (6,175 x 9.65) - (48,100 + 5,000)
= 59,588.75 - 53,100
= $6,488.75
∴ the company should not reduce sales commissions as the net profit would reduce
from $7,150 to $6,488.75.
(c) New Variable Expenses = $12.65 11.50 x 1.1
New Fixed Expenses = $40,885 48,100 x 0.85
New Sales Volume = 7,800 units 6,500 x 1.2
12.65
Contribution Margin Ratio = 0.3675 1-( /20.00)
40,885
Break-even = $111,252 /0.3675
(d) New Sales = 8,320 units 6,500 x 1.28
New Contribution Margin = $70,720 8,320 x 8.50
Expected Net Profit = Contribution Margin - Fixed Expenses

= 70,720 - 48,100
= 22,620
Actual Net Profit = $25,025 7,150 + (7,150 x 2.5)
∴ the company did better than expected.
33
12.
Sales 600 100.00
Fixed Cost 360,000
Profit ?
Fixed Costs
(a) Breakeven Sales (units) =
Contribution Margin
360,000
= = 2,000 units
180
Fixed Costs
Breakeven Sales ($) =
Contribution Margin Ratio
360,000
= = $1,200,000
0.30
(b) Contribution Margin (1,800 machines x $180) $324,000

less: Fixed Costs 360,000
Net Less - 36,000
(c) Workings:
Selling Price/unit = $600
Variable Cost/unit 425
360,000
Breakeven Sales (units) = = 2,057 units
175
2,057 units x $600 = $1,234,200
Fixed Costs + Desired Profit

(d) Sales (units) =
Contribution Margin
360,000 + 180,000 540,000

= = = 3,000 units
180 180
(e) 1. All costs can be classified into fixed and variable costs.
2. All costs are linear in the relevant range, i.e., variable basis change in total
with a change in volume and fixed costs in total remain constant.
3. Selling price will not charge over the range of sales activity.
4. Cost efficiencies remain the same for each product.
34
13. (a)
$ per unit %
Selling Price 576,000 8.00 100.00
Less Variable costs 216,000 3.00 37.50
Contribution margin per unit 360,000 5.00 62.50
Less Fixed Costs 200,000
Equals Profit 160,000
(b)
Break-even point ( units ) = $200,000 = 40,000 units
$5.00
Break-even point ( $ ) = $200,000 = $320,000

0.625
(c)
Sales req for profit = $200,000 + $320,000 = 104,000 units
of $320,000 $5.00
(d)
Margin of Safety = 576,000 – 320,000 = $256,000
(e)
$ per unit %
Selling Price 8.00 100.00
Less Variable costs 2.00 25.00
Contribution margin per unit 6.00 75.00
(i)
Sales B/even = $250,000 = 62,500 units
$4.00
(f)
Selling Price 100.00
Less Variable costs 37.50
Variable selling costs 12.50
Contribution margin per unit 50.00
Break-even point ( $ ) = $200,000 = $400,000

0.5
35
14.
Sales 40 100.00
Fixed Cost 45,000
Profit ?
(a) Fixed Costs . = $ 45,000 = 1,800 Units

(b) Fixed Costs + Required Profit = $ 125,000 = 5,000 Units

(c) Fixed Costs + Required Profit = $ 137,500 = 5,500 Units

( $64,750 / 0.7 ) = $92,500
(d) Sales ( 4,400 x $40.00 ) $176,000

Less Variable Costs ( 4,400 x $15.00 ) - 66,000
Less Fixed Costs - 45,000
Equals Profit $ 65,000
(e) Sales ( 4,000 x $44.00 ) $176,000

Less Variable Costs ( 4,000 x $15.00 ) - 60,000
Less Fixed Costs - 45,000
Equals Profit $ 71,000
36
15. (a)
Revenue 1,920,000 80.00 100.00
Variable Cost 1,152,000 48.00 60.00
Fixed Cost 600,000
Profit 168,000
Fixed Costs . = $ 600,000 = 18,750 Units

(b)
Revenue 1,920,000 80.00 100.00
Variable Cost 1,152,000 60.00 75.00
Fixed Cost 600,000
Profit 168,000
Fixed Costs . = $ 600,000 = $2,400,000

(c) Hours = 1,920,000 = 24,000 hrs

80
Variable cost = 1,152,000 = $48

Hours 24,000
16. $ %
Selling Price 500 100.00 Fixed Costs $ 900,000
- Variable Cost 300 60.00
= Contribution Margin 200 40.00
(a) Fixed Costs = $ 900,000 = $ 2,250,000

(b) Fixed Costs = $ 900,000 = 4,500 Units

(c) Sales 5,000 x $500 $ 2,500,000

- Variable Costs 5,000 x $300 $ 1,500,000
= Contribution Margin $ 1,000,000
- Fixed Costs $ 900,000
$ 100,000
(d) Sales Actual $ 2,500,000

Sales Breakeven $ 2,250,000
Margin of Safety $ 250,000 10.00%

$ 2,500,000
37
(e) Net Profit after Tax $ 98,000

Tax Rate 30.00%
Net Profit Before Tax $ 140,000
F.C. + Required Profit B. Tax $ 1,040,000 = 5,200 Units

(f) Selling Price 500 100.00

- Variable Cost 325 65.00
= Contribution Margin 175 35.00
Fixed Costs . = $ 900,000 = 5,143 Units

(g) Fixed Costs . = $ 1,000,000 = $ 2,500,000

500 x = 300 x + 1,000,000 = 5,000 Units
200 x = 1,000,000 = $ 2,500,000
17.
Sales 4,800 $0.80 100.00
Variable Cost 1,800 0.30 37.50
Fixed Cost 1,650
Profit 1,350
(a) Selling price $ 0.80

Less Variable Cost ( Laundry 1,380 / 6,000 ) $0.23
( Admin 420 / 6,000 ) $0.07 - 0.30
Contribution Margin $ 0.50
(b) Fixed Costs = $ 1,650 = 3,300 Kgs

(c) Fixed Costs + Required Profit = 1,650 + 1,500 = 6,300 Kgs

(d) Fixed Costs = 1,650 = 6,600 Kgs

Sales $0.80 100.00

Variable Cost 0.55 68.75
(e) Profit before tax ( $1,225 / 0.70 ) = 1,750 / 0.50
Fixed Costs + Required Profit = 1,650 + 1,750 = 6,800 Kgs

38
18.
Total C.P.U. %
Sales 500,000 5.00 100
Less Variable costs 300,000 3.00 60
Contribution margin 200,000 2.00 40
Fixed Costs 60,000
(a)
Break-even point ( Q ) = 60,000 / 2.00 = 30,000 units
Break-even point ( $ ) = 60,000 / 0.40 = $150,000
(b)
Margin of Safety = 100,000 – 30,000 x 100 = 70.00%
100,000
(c)
Sales req for profit = 60,000 + 90,000 = $ 375,000
of $90,000 before tax ( 0.40 )
(d)
Sales req for profit = 60,000 + 60,000 = $ 300,000
of $42,000 after tax ( 0.40 )
(e)
Sales req for add = 100,000 + 60,000 = $ 400,000
fixed costs $40,000 ( 0.40 )
39
19.
(a) 360,000 / 1.80 200,000 units
(b) (220,000 x 1.8) - 360,000 $36,000
(c) (360,000+167,940) / 1.80 293,300 units

$1,759,800
(d) before tax profit 180,000

(360,000+180,000)/1.8 300,000 units
(e) 360,000 / 1.50 240,000 units
$1,440,000
(f) break even = 200,000
budget = 300,000
MOS 100,000/300,000 33.33%
(g) Costs are either fixed or variable

Fixed costs are fixed per period
Sales are uniform throughout the period
Production is held constant
20.
(a)
Selling price $25
Less Variable cost 10
Contribution margin 15
Break-even point (units) = $115,800 = 7,720 units

$15
(b) Sales required (units) = $115,800 + 75,000 = 12,720 units

$15
(c) Sales required (units) = $115,800 = 9, 264 units

($15 - $2.50)
(d) Sales increase (units) = $36,000 = 2,400 units

$15
40
21
%
Selling Price 16.00 100.00
Variable Cost 8.00 50.00
(a) Break-even point (units) = $55,000 = 6,875 units

$8
Break-even point ( $ ) = $55,000 = $110,000

0.50
(b) Profit before tax $28,000

Sales required (units) = $55,000 + $28,000 = 10, 375 units
$8
(c) Profit after tax $31,500

Sales required (units) = $55,000 + $45,000 = 12, 500 units
$8
(d) Margin on Safety = 12,900 - 6,875 = 6,025 units
= 6,025 x $16 = $96,400
41
Chapter 4: The Cost Accounting Cycle

1.
Raw Material Control 66,000

Bank 66,000
Work in Progress 64,000
Factory O/H Control 2,000
Labour Control 38,000
Accrued Payroll 38,000
Bank 38,000
Accum Depreciation Plant 1,400
Various Accounts 2,600
Factory O/H Applied 16,000
Finished Goods 100,000
Accounts Receivable 150,000
Sales 150,000
Cost of Goods Sold 100,000
42
2.
Accounts Payable 40,000
Bank 35,000
Bank 2,100
Factory O/H Control 300
Prepaid Insurance 300
Sales 103,500
43
3.

A/c Payable 20,000
PAYG Tax Withheld 3,000
Bank 16,000
Bank ( Rent Paid ) 8,500
Accumulated Depreciation Plant 7,500
Sales 29,000
44
3. (b)
Raw Material Control
Opening Balance 0 Work in Progress 15,000
Accounts Payable 20,000 Factory Overhead Control 2,000
Closing Balance 3,000
20,000 20,000
Labour Control
Accrued Payroll 19,000 Opening Balance 0
Factory Overhead Cost 2,000
19,000 19,000
Accrued Payroll
PAYG Tax Payable 3,000 Labour Control 19,000
Bank 16,000
19,000 19,000
Factory Overhead Control

Raw Material Control 2,000 Factory Overhead Applied 20,000
Bank 8,500
Accum. Depreciation 7,500
20,000 20,000
Factory Overhead Applied

Factory Overhead Cost 20,000 Work in Progress 20,000
20,000 20,000
Work in Progress
Opening Balance 0 Finished Goods 32,000
Factory Overhead Applied 20,000 Closing Balance 20,000
52,000 52,000
Finished Goods
Opening Balance 0 Cost of Goods Sold 22,000
Work in Progress 32,000 Closing Balance 10,000
32,000 32,000
45
4.
Taxation Withheld 10,000
Bank 20,000
Sales 75,000
46
5.
Bank 35,000
Sales 160,000
47
6. General Journal
Bank 72,000
Sales 195,000
Work in Progress
Opening Balance - Finished Goods 130,000
180,000 180,000

General Ledger Control 4,500
26,000 26,000

Factory Overhead Applied 26,000 Work in Progress 16,000
26,000 26,000
48
7. General Journal
Factory Overhead Control 6,000
Bank 48,000
Raw Material Control 900
Work in Progress 900
Accounts Payable 900
Bank 6,000
Sales 100,000
Bank 9,000
Accumulated Depreciation 3,300
Sales 38,000
49
8. General Journal
Bank 24,000
Sales 100,000

Opening Balance 8,000 Work in Progress 24,000
52,000 52,000

25,000 25,000

Factory Overhead Control 25,000 Work In Progress 25,000
25,000 25,000
Work in Progress
Opening Balance - Finished Goods 70,000
75,000 75,000
Finished Goods
Opening Balance - Cost of Goods Sold 62,500
Finished Goods 70,000 Closing Balance 7,500
70,000 70,000
50
9. General Journal
Bank 25,000
Sales 195,000
60,000 60,000

25,000 25,000

Factory Overhead Control 25,000 Work In Progress 25,000
25,000 25,000
Work in Progress
Opening Balance 10,000 Finished Goods 100,000
110,000 110,000
Finished Goods
Opening Balance 30,000 Cost of Goods Sold 130,000
Finished Goods 100,000 Closing Balance 0
130,000 130,000
51
10.
Debit Credit
Tax Withheld 12,000
Bank 48,000
Accum Depreciation 3,200
Bank 15,000
Factory Overhead Applied 27,000
Sales 140,000
Selling Expenses 28,500
Administration Expenses 16,500
Work in Progress
100,500 100,500
Finished Goods
95,000 95,000
Manufacturing Statement Cost of Goods Sold

Direct Material 14,900 Opening Balance Finished Goods 7,000
Direct Labour 54,000 Cost of Goods Manufactured 88,000
Factory Overhead Applied 27,000 95,000
95,900 Closing balance Finished Goods - 15,000
Plus Opening balance Work in Progress 4,600 Cost of Goods Sold 80,000
100,500
Less Closing balance 12,500 Income Statement
Cost of Goods Manufactured 88,000 Sales 140,000
Less Cost of Goods Sold - 80,000
Equals Gross Profit 60,000
Less Expenses 45,000
Net Profit 15,000
52
11.
Debit Credit
Tax Withheld 16,100
Bank 29,900
Bank 4,000
Factory Overhead Applied 22,500 Actual
Work in Progress 21,000 Applied
Sales 151,200
Selling Expenses 18,000
Administrative Expenses 19,200

Direct Material 20,000 Opening Balance Finished Goods 10,000
76,000 Opening Balance Finished Goods - 6,000
Plus Opening balance Work in Progress 14,000 Cost of Goods Sold 84,000
90,000 plus Underapplied Overhead 1,500
Less Closing balance 10,000 Cost of Goods Sold 85,500
Factory Overhead Control Income Statement

Raw M Control 4,000 F O A 22,500 Sales 151,200
Labour Costs 11,000 Cost of Goods Sold 85,500
Other 7,500 Equals Gross Profit 65,700
22,500 22,500 Less Expenses 37,200
Net Profit 28,500
FOC 22,500 W I P 21,000
COGS 1,500
22,500 22,500
53
12.
Debit Credit
Factory Overhead Control 600
Bank 51,600
Bank 1,600
Factory Overhead Control 22,300 Actual
Factory Overhead Applied 24,360 Applied
Sales 120,000
Selling & Admin Exp. 12,060
Bank / Accounts Payable 12,060

Direct Material 35,000 Opening balance Finished Goods 9,500
99,960 Closing balance Finished Goods - 19,500
Plus opening balance Work in Progress 9,700 Cost of Goods Sold 80,000
109,660 Less Overapplied Overhead 2,060
Less Closing balance 18,460 Cost of Goods Sold 77,940
91,200
Less Returns of Raw Material 1,200
Cost of Goods Manufactured 90,000 Income Statement
Sales 120,000
Less Cost of Goods Sold - 77,940
Equals Gross Profit 42,060
Less Expenses - 12,060
Net Profit 30,000
54
13.
Opening balance 14,000 Work in Progress 18,600
Closing balance 15,000
36,000 36,000
Labour Control
Accrued Payroll 23,400 Work in Progress 24,000
Tax Payable 10,200 Factory Overhead Control 10,000
Union Dues 400
34,000 34,000
Work in Progress
Opening balance 15,200 Finished Goods 60,000
Factory Overhead Applied 18,000 Closing balance 15,800
75,800 75,800
Finished Goods
Opening balance 15,000 Cost of Goods Sold 50,000
Closing balance 25,000
75,000 75,000
Total Manufacturing Costs $ 60,600

Less Raw Material Costs - 18,600
Equals Conversion Costs $ 42,000 Conversion Costs $ 42,000 = $ 24,000 ( L.C. )
1.75
Account Depreciation 2,200
Bank 3,000
18,000 18,000

Factory Overhead Control 18,000 Work in Progress 18,000
18,000 18,000

Direct Material $ 18,600 O/Bal Finished Goods $ 15,000
Factory Overhead Applied 18,000 $ 75,000
$ 60,600 C/Bal Finished Goods -25,000
Plus O/Bal Work in Progress. 15,200 Cost of Goods Sold $ 50,000
75,800
Less C/Bal 15,800 Statement of Financial Performance
Cost of Goods Manufactured $ 60,000 Sales $ 100,000
Less Cost of Goods Sold -50,000
Equals Gross Profit $ 50,000
Less Expenses -25,000
Net Profit $ 25,000
55
14.
210,000 210,000
Work in Progress
500,000 500,000
Finished Goods
450,000 450,000
15.
(a) Debit Credit
Tax Withheld 20,000
Bank 75,500
Bank 310,000
Bank 109,000
Accum. Depn. – Plant 1,600
56

Sales 364,500
(b) Raw Material Control

Balance b/d 44,000 Work in Progress 68,000
Balance c/d 25,400
99,000 99,000
Labour Control
Accrued Payroll 95,500 Work in Progress 85,000
95,500 95,500
Accrued Payroll
Bank 75,500 Balance b/d 6,600
PAYG Tax 20,000 Labour Control 95,500
Balance c/d 6,600
102,100 102,100

Raw Material Control 5,600 Factory overhead applied 31,700
Accum. Depn. Plant 1,600
31,700 31,700

Factory Overhead Control 31,700 Work in Progress 37,000
37,000 37,000
Work In Progress
Balance b/d 85,000 Finished Goods 215,000
Factory Overhead Applied 37,000 Balance c/d 60,000
275,000 275,000
Finished Goods
Balance b/d 78,000 Cost of Goods Sold 243,000
Work in Progress 215,000 Balance c/d 50,000
293,000 293,000
57
Accounts Payable
Bank 109,000 Balance b/d 65,400
Balance c/d 25,400 Raw Material Control 55,000
134,400 134,400
Sales
Cost Of Goods Sold

Finished Goods 243,000 Factory Overhead Applied 5,300
Balance c/d 237,700
243,000 243,000
Accounts Receivable
Balance b/d 32,000 Bank 310,000
Sales 364,500 Balance c/d 86,500
396,500 396,500
Accumulated Depreciation - Plant

Balance b/d 92,000
93,600
Bank
Balance b/d 15,000 Accrued Payroll + PAYE Tax 95,500
Accounts Receivable 310,000 Accounts Payable 109,000
Balance c/d 120,500
325,000 325,000
Plant & Machinery

Balance b/d 192,000
Paid Up Capital
Balance b/d 220,000
Retained Earnings
Balance b/d 62,000
Trial Balance Debit Credit

Bank 120,500
Plant 192,000
Retained Earnings 62,000
Paid Up Capital 220,000
Sales 364,500
772,100 772,100
58
Chapter 5: Material & Labour
Chapter 5 Material & Labour

1. First In First Out (F.I.F.O.)
Date Received Issued Total
Qty Unit $ Total Qty Unit $ Total Qty Unit $ Total
1/6 50 5.00 250.00
2/6 40 4.50 180.00 50 5.00 250.00

40 4.50 180.00
90 430.00
3/6 50 5.00 250.00
20 4.50 90.00 20 4.50 90.00
70 340.00
4/6 35 4.00 140.00 20 4.50 90.00
35 4.00 140.00
55 230.00
5/6 20 4.50 90.00
25 4.00 100.00 10 4.00 40.00
45 190.00
Debit Credit
Work in Process 530
Weighted Average
1/6 50 5.00 250.00
50 5.00 250.00
2/6 40 4.50 180.00 40 4.50 180.00
90 4.78 430.00
3/6 70 334.44 20 4.78 95.56
4/6 35 4.00 140.00 20 4.78 95.56

35 4.00 140.00
55 4.28 235.56
5/6 45 4.28 192.73 10 4.28 42.83
Debit Credit
Work in Process 527.17
Raw Material Control 527.17
59

1/12 150 15.00 2,250
6/12 150 15.50 2,325 150 15.00 2,250

150 15.50 2,325
300 4,575
150 15.00 2,250
10/12 30 15.50 465 120 15.50 1,860
180 2,715
120 15.50 1,860
21/12 150 15.60 2,340 150 15.60 2,340
270 4,200
120 15.50 1,860
23/12 40 15.60 624 110 15.60 1,716
160 2,484
Weighted Average
1/12 150 15.00 2,250
150 15.00 2,325

6/12 150 15.50 2,325 150 15.00 2,250
300 15.25 4,575
10/12 180 15.25 2,745 120 15.25 1,830
150 15.60 2,340

21/12 150 15.60 2,340 120 15.25 1,830
270 15.44 4,170
23/12 160 15.44 2,471 110 15.44 1,699
60

(a) Stock Card
1/7 500 4.00 2,000
4/7 200 5.00 1,000 500 4.00 2,000

200 5.00 1,000
700 3,000
8/7 100 4.00 400 400 4.00 1,600
200 5.00 1,000
600 2,600
12/7 - 100 5.00 - 500 400 4.00 1,600

100 5.00 500
500 2,100
15/7 200 4.00 800 200 4.00 800
100 5.00 500
300 1,300
19/7 300 6.00 1,800 200 4.00 800
100 5.00 500
300 6.00 1,800
600 3,100
24/7 200 4.00 800
100 5.00 500
100 6.00 600 200 6.00 1,200
400 1,900
29/7 - 100 4.00 - 400 100 4.00 400
200 6.00 1,200
300 1,600
31/7 50 4.00 200 50 4.00 200
200 6.00 1,200
250 1,400
Debit Credit
(b) Work in Process 2,700
(c) Factory Overhead Control 200

50 units loss @ $4.00 per unit
(d) Accounts Payable 300
300 units overcharged @ $1.00 per unit
61
4. Weighted Average
(a)
1/6 2,800 12.00 33,600
4/6 1,200 12.00 14,400 1,600 12.00 19,200
1,600 12.00 19,200

6/6 1,000 13.30 13,300 1,000 13.30 13,300
2,600 12.50 32,500
8/6 1,000 12.50 12,500 1,600 12.50 20,000
1,600 12.50 20,000

14/6 400 14.00 5,600 400 14.00 5,600
2,000 12.80 25,600
17/6 800 12.80 10,240 1,200 12.80 15,360
1,200 12.80 15,360

20/6 500 14.16 7,080 500 14.16 7,080
1,700 13.20 22,440
25/6 900 13.20 11,880 800 13.20 10,560
800 13.20 10,560

27/6 1,200 12.00 14,400 1,200 12.00 14,400
2,000 12.48 24,960
30/6 50 12.48 624 2,050 12.48 25,584
Debit Credit
62
First In First Out

(b)
1/6 2,800 12.00 33,600
4/6 1,200 12.00 14,400 1,600 12.00 19,200
1,600 12.00 19,200

1,000 13.30 13,300
6/6 1,000 13.30 13,300 2,600 32,500
600 12.00 7,200

8/6 1,000 12.00 12,000 1,000 13.30 13,300
1,600 20,500
600 12.00 7,200

1,000 13.30 13,300
14/6 400 14.00 5,600 400 14.00 5,600
2,000 26,100
600 12.00 7,200 800 13.30 10,640

17/6 200 13.30 2,660 400 14.00 5,600
800 9,860 1,200 16,240
800 13.30 10,640

400 14.00 5,600
20/6 500 14.16 7,080 500 14.16 7,080
1,700 23,320
800 13.30 10,640 300 14.00 4,200

25/6 100 14.00 1,400 500 14.16 7,080
900 12,040 800 11,280
300 14.00 4,200

500 14.16 7,080
27/6 1,200 12.00 14,400 1,200 12.00 14,400
2,000 25,680
300 14.00 4,200

500 14.16 7,080
30/6 50 12.00 600 1,250 12.00 15,000
2,050 26,280
Debit Credit
63
5. Weighted Average
(a)
1/5 350 20.00 7,000
4/5 120 20.00 2,400 230 20.00 4,600
230 20.00 4,600

6/5 200 25.00 5,000 200 25.00 5,000
430 22.33 9,600
8/5 80 22.33 1,786 350 22.33 7,814
12/5 110 22.33 2,455 240 22.33 5,359
240 22.33 5,359

13/5 200 27.00 5,400 200 27.00 5,400
440 24.45 10,759
14/5 220 24.45 5,379 220 24.45 5,380
21/5 80 24.45 1,956 140 24.45 3,424
140 24.45 3,424

28/5 200 30.00 6,000 200 30.00 6,000
340 27.72 9,424
30/5 120 27.72 3,326 220 27.72 6,098
(b) Closing Stock F.I.F.O. 200 x $30.00 = $6,000

20 x $27.00 = 540
$6,540
64
6. ( a ) Weighted Average
1/6 400 25.00 10,000
400 25.00 10,000

200 26.00 5,200
6/6 200 26.00 5,200 600 25.33 15,200
7/6 170 25.33 4,307 430 25.33 10,893
- 20 26.00 - 520
9/6 - 20 26.00 - 520 430 25.33 10,893
410 25.30 10,373
17/6 130 25.30 3,289 280 25.30 7,084
280 25.30 7,084

23/6 120 27.00 3,240 120 27.00 3,240
400 25.81 10,324
400 25.81 10,324

25/6 140 28.00 3,920 140 28.00 3,920
540 26.38 14,244
28/6 160 26.38 4,221 380 26.38 10,023
380 26.38 10,024

30/6 - 10 25.30 - 253 10 25.30 253
390 26.35 10,277
30/6 5 26.35 132 385 26.35 10,145
Purchases Debit Credit

Creditors 12,360
Returns
Creditors 520
F.I.F.O Debit Credit

Issues
Returns
Weighted Average Debit Credit

Issues
Returns
65
6. ( b ) First In First Out (F.I.F.O.)

1/6 400 25.00 10,000
400 25.00 10,000

200 26.00 5,200
6/6 200 26.00 5,200 600 15,200
230 25.00 5,750

170 25.00 4,250 200 26.00 5,200
430 10,950
230 25.00 5,750

9/6 - 20 26.00 - 520 180 26.00 4,680
410 10,430
100 25.00 2,500

17/6 130 25.00 3,250 180 26.00 4,680
280 7,180
100 25.00 2,500

180 26.00 4,680
23/6 120 27.00 3,240 120 27.00 3,240
400 10,420
100 25.00 2,500

180 26.00 4,680
120 27.00 3,240
25/6 140 28.00 3,920 140 28.00 3,920
540 14,340
120 26.00 3,120

100 25.00 2,500 120 27.00 3,240
28/6 60 26.00 1,560 140 28.00 3,920
160 4,060 380 10,280
10 25.00 250
120 26.00 3,120
120 27.00 3,240
30/6 - 10 25.00 - 250 140 28.00 3,920
390 10,530
5 25.00 175
120 26.00 3,120
120 27.00 3,240
30/6 5 25.00 125 140 28.00 3,920
385 10,405
66
7. Note:
Quantities Dollars
Receive Issued Balance Unit Cost Receive Issued Balance
d d
Jun 11 150 330 1.60 240
Total Available 700 units

Issues < 600 >
closing balance 100 units
F.I.F.O. Averag
e
Total Available $1,113 $1,113
Issues* - 943 - 954
Closing balance $170 $159
* Issues is the missing figure.
8.
F.I.F.O UNITS WEIGHTED Av.
Total Av.: $1,113.00 1,400 $1,113.00
Issues $ 858.00 1,100 $ 874.50
Closing balance $ 255.00 300 $ 238.50 ( {$1,113 / 1,400}*300 )
9.
Total Av.: 2550 units
Issued 2000 units F.I.F.O. 500 x $1.20 = $600.00
Closing bal. 550 units 50 x $1.05 = $52.50
$652.50
WEIGHTED Av.
550 x $1.045 = $574.80
( $2,665 / 2,550 )
10.
Norman Elkington Olgle Parry Total Basis
Cost 12,000 7,500 3,000 2,500 25,000 Allocated
Duty 12,000 7,500 3,000 2,500 25,000 Value
Freight 6,000 6,000 3,750 4,250 20,000 Weight
$30,000 $21,000 $9,750 $9,250 $70,000
Units 40 30 15 5
C.P.U. 750 700 650 1,850
x 1.6 $1,200 $1,120 $1,040 $2,960
67
11.
Butter Swiss Cheese Yoghurt Sour Cream Cottage Cheese Ice Cream Total Basis
Cost 30.00 20.00 150.00 120.00 80.00 900.00 1,300 Allocated
Freigh 13.33 6.67 33.33 20.00 26.67 100.00 200 Weight
t
Duty 11.54 7.69 57.69 46.15 30.77 346.16 500 Value
54.87 34.36 241.02 186.15 137.44 1346.16 2,000
Units 20 10 50 30 40 150
C.P.U. 2.744 3.436 4.820 6.205 3.436 8.974
12.
Blades Boards Bikes Total Basis
Cost 50,000 63,000 87,000 200,000 Allocated
Freight 1,600 2,800 3,600 8,000 Weight
Insurance 250 315 435 1,000 Value
Duty 500 600 870 2,000 Value
Cartage 800 1,400 1,800 4,000 Weight
Agents Ch. 1,250 1,575 2,175 5,000 Value
54,400 69,720 95,880 220,000
Units 1,000 700 300
C.P.U. $54.40 $99.60 $319.60
+ S.P. $81.60 $149.40 $479.40
13.
a Work in Process 49,300
b Labour Control 66,000

Health Fund 1,200

Bank 48,700
14.
Work in Process 5,425 + 1,240 6,665
Factory Overhead Control 825 + 2,450 + 620 3,895
Labour Control 8,700 + 1,860 10,560

Selling & Admin 16,100 + 1,080 17,180
PAYE Tax 1,980 + 3,350 5,330
Health Fund 720 + 1,015 1,735

Bank 20,675
68
15.
Direct Labour Indirect Labour
Mon 3+2.5+(0.5x1.5) 6.25 2.00
Tues 5.00 2.50
Wed 7.50
Thurs 10.00 2.5 x 5 1.25
Fri 8.25
Sat 4.5+(0.5x1.5) 4.00 (3x5)+1 2.50
41.00 8.25
Hourly rate of pay $16 $16
Gross pay for the week $656 $132
General Journal (extract)

Work in Process $ 656
Labour Control $ 788
(Distribution of wages for the week)
16. Labour
Total Work in Indirect

Process
Job 42 24 x $ 8.00 $192.00 $192.00
43 14 x $ 8.00 $112.00
30 x 10.00 300.00
$ 412.00 $412.00
44 14 x $10.00 $140.00 $140.00
Sweeping 2 x $ 8.00 $16.00 $16.00
O/T. Premium 2 x $10.00 $20.00 $20.00
$780.00 $744.00 $36.00
Debit Credit
Factory Overhead Cont. 36
Labour Control 780
Labour Control 780

Tax Payable 156
Accrued Payroll 624
69
17.
Employee Hrs. Rate Gross Tax ( 25 % ) Net
Bourne ( 42 + 1 ) 43 $12 $516.00 $129.00 $387.00
Ward (40 ) 40 9 $360.00

( 6 x 1.5 ) 9 9 81.00
$441.00 $110.25 $330.75
Craven 40 9 $360.00
( 8 x 1.5 ) 12 9 108.00
$468.00 $117.00 $351.00
Thomas 38 9 $342.00
2 9 18.00
$360.00 $90.00 $270.00
$1,785.00 $446.25 $1,338.75
Hours Schedule
Normal Overtime Overtime Premium Idle Time Direct Indirect
Time
Bourne 40 2 1 43
Ward 40 6 3 49
Craven 40 8 4 48 4
Thomas 38 2 38 2
135 49
W.I.P. $1,215.00 ( 135 Hrs @ $ 9.00 )

F.O.C. $570.00 ( Supervisor + O / T Premium + Idle Time )
$516.00 + $ 36.00 ( 4 hrs @ $9.00 ) + $ 18.00 ( 2 hrs @ $ 9.00 )
$1,785.00
Debit Credit
Work In Progress 1,215.00
Factory O/ H Control 570.00
Labour Control 1,785.00
Labour Control 1,785.00

PAYG. Tax Payable 446.25
Accrued Payroll 1,338.75
Accrued Payroll 1,338.75

Bank 1,338.75
70
18.
Days W.I.P. F.O.C. Absent Total
Tue 7 1 8
Wed 8 8
Thur 7 2.5* 9.5
Fri 8 8
Mon 8 8
30 hrs 3.5 hrs 8 hrs 41.5 hrs
Normal Time 6 hrs Only O / T Premium to F.O.C.

O / T Time 1 hrs *.5 Hrs + 2 hrs clean up = 2.5 hrs
7 hrs
Debit Credit
Work In Progress 300 ( 30 x $ 10 )
Factory O/H Control 35 ( 3.5 x $ 10 )
Provision for Sick Pay 80 ( 8 x $ 10 )
Labour Control 415 ( 41.5 x $ 10 )
19.
a Work in Process 170,000
b Labour Control 181,400

Prov for Sick Leave 600
Prov for Annual Leave 8,000
Super 9,000
Medical 6,000
Union Dues 400

Bank 134,600
c Factory Overhead Control 16,740

Prov for Sick Leave 5,580
Prov for Public Holidays 3,720
Prov for Annual Leave 7,440
71
20. ( Note: 13 pay periods p. a. ) *

(a) Debit Credit
Work In Progress 26,832 ( 2,216 + 20 ) ( $ 12 )
Factory O/H. Control 7,920 ( 315 + 10 ) ( $ 12 ) + $ 2,820 + $ 1,200
Prov. An. Leave 2,820 ( 15 x 4 x 40 x $12 x 1.175 )( 1/12 ) *
Prov. Sick Pay 1,200 ( 15 x 10 x 8 x $12 )( 1/12 ) *
Debit Credit
Prepaid Workers Comp. Ins. 1,500
21.
Annual Weeks Av. 52 Base Rate 9.00
- Annual Leave 4 ( 4/45 $ 9 ) ( 1.175 ) $0.94 ( including loading )
- Sick Leave. 2 ( 2/45 $ 9 ) $0.40
- Public Holidays 1 ( 1/45 $ 9 ) $0.20
Weeks Available 45 Charge Rate $ 10.54
22.
Hourly Rate $ 20.0000
Annual Leave 4/45 $ 1.7778
Loading 17.50% $ 0.3111
Sick Leave 1/45 $ 0.4444
Public Holidays 2/45 $ 0.8889
Total $ 23.4222
Payroll Tax 23.4222 x 6% $ 1.4053

W.C.I. 23.4222 x 10% $ 2.3422
Superannuation 23.1111 x 9% $ 2.0800
$ 29.2497
72
23.
Hourly Rate 10.0000
Annual Leave 4/44 0.9091
Loading 17.50% 0.1591
Sick Leave 2/44 0.4545
Public Holidays 2/44 0.4545
Total 11.9773
Payroll Tax 11.9773 x 6% $0.7186

W.C.I. 11.9733 x 10% $1.1977
Superannuation 11.9773 - 0.1591 x 9% $1.0636
$14.9572
24.
Productive Weeks = 52 – 9 = 43 weeks $ per Hour
Wages Paid 12.0000
Annual Leave (4/43) 1.1163
Annual Leave Loading (17 ½ %) 0.1953
Other Leave (5/43) 1.3953
14.7069
Superannuation* 14.5116 x 9% 1.3060

Payroll Tax 14.7069 x 6% 0.8824
W.C.I. 14.7069 x 3% 0.4412
2.6296
* ( 14.7069 - 0.1953 ) $ 17.3365
25 Labour Charge Rates

Total pay p.a. $380 per week x 52 weeks $19,760
+ Leave Loading weeks 4 $380 0.175 $ 266
$20,026
Total weeks 52
Annual leave -4 Overtime Premium 1.5
Sick Leave -2
Public Holidays -2 Leave Loading 0.175
Weeks Available 44
Hours Sick 15
Annual Leave Pay 150
Tax Rate 30%
Superannuation 9%
44 Number of working weeks x 37.5 hours per week = 1,650 Annual hours
Gross Charge Rate = Total wages / annual hours $ 12.1370
73
Reconciliation: Normal Overtime

Time
Base Rate: $380 Hrs p.w. 37.5
An Leave 0.09090 weeks 10.1333 10.1333 15.2000
+ Loading 0.92121 x loading 0.1750 1.0824
Loading 0.1612
Public Holidays 0.04545 weeks 10.1333 0.4606
Sick Leave 0.04545 weeks 10.1333 0.4606
Gross Rate: 12.1370 15.2000
Super ( Gross Rate - An Leave Loading ) 9%

12.1370 - 0.1612 11.9758 x 9% 1.0778
Payroll Tax
Normal Time 12.1370 x 8% 0.9710
Overtime 15.2000 x 8% 1.2160
W.C.I.
Normal Time 12.1370 x 6% 0.7282
Overtime 15.2000 x 6% 0.9120
Charge Rate 14.9140 17.3280

Overtime Premium 2.4140
26.
$33,422
Total weeks 52
Sick Leave -2
Weeks Available 42
Hours Sick ( unpaid ) 14
Annual Leave Pay 35
Tax Rate 30%
Superannuation 9%
42 Number of working weeks x 35 hours per week = 1,470 Annual hours
74
Reconcilation: Normal Overtime

Time
Base Rate: $630 Hrs p.w. 35 18.0000 27.0000
An Leave 0.1429 weeks 18.0000

Loading 0.4500
Public Holidays 0.0476 weeks 18.0000 0.8571
Sick Leave 0.0476 weeks 18.0000 0.8571
Gross Rate: 22.7356 27.0000

22.7356 - 0.4500 22.2856 x 9% 2.0057
Payroll Tax 6%
Normal Time 22.7356 x 6% 1.3641
Overtime 27.0000 x 6% 1.6200
W.C.I. 9%
Normal Time 22.7356 x 9% 2.0462
Overtime 27.0000 x 9% 2.4300
Charge Rate 28.1516 31.0500
Overtime Premium 2.8984
Time Sheet Analysis:

620 Direct
Total Hours Worked 700
80 Indirect
Normal Time 651
Overtime 49
Accrual: Debit Credit

Work in Process Direct Hrs 620 x Ch Rate 27.2602 16,901
Factory Overhead Control Indirect Hrs 80 x Ch Rate 27.2602 2,181
Factory Overhead Control Overtime Hrs 49 x O.T. Pre 3.7898 186
Accrued Payroll Normal Time 651 x Base Rate 18.0000 13,041
Overtime 49 x O.T. Base 27.0000
Accrued Annual Leave Normal Time 651 x Leave Rate 3.0214 1,967
Accrued Public Holiday Normal Time 651 x Hol Rate 0.8571 558
Accrued Sick Leave Normal Time 651 x Hol Rate 0.8571 558
Accrued Super Normal Time 651 x Hol Rate 1.1143 725
Accrued Payroll Tax Normal Time 651 x Hol Rate 1.3641 967
Overtime 49 x O/time Rate 1.6200
Accrued W. C. I. Normal Time 651 x Hol Rate 2.0462 1,452
19,268 19,268
75
Payment: Debit Credit

Accrued Sick Leave Hrs Sick 0 x Base Rate 18.0000 -
Accrued Annual Leave Hrs Paid 35 x Base Rate 18.0000 740
+ Plus Loading 1.175
Super Withheld Normal Time 651 x Base Rate 18.0000 617
@ ..% Hrs Sick 0 x Base Rate 18.0000
Hrs Paid 35 x Base Rate 18.0000
Tax Withheld Debits $ 13,781 x Tax Rate 30% 4,134
@ ..%
Bank Missing Figure 9,030
13,781 13,781
27 (a)
Base Rate $ 20.00
Annual Leave (4/45 x 20) 1.78
Loading (0.175 x 1.78) 0.31
Public Hols (2/45 x 20) 0.89
Sick Leave (1/45 x 20) 0.44
23.42
Super (6% x 23.42) 1.41
$ 24.83
(b) i.
Direct (1600 x 15) $ 24,000
Indirect (400 x 15) 6,000
O/Time Premium ( 40 x 15) 600 6,600
$ 30,600
Super (6% x 23.42) 1.41

$ 24.83
Less: Tax (25%) 7,560
Super 3,000 - 10,560
Net Pay Due $ 19,950
ii. Labour Control 30,600


Bank 19,950
PAYE Tax Payable 7,650
Accrued Super 3,000
iii. Work in Process 24,000

76
28.
$23,979
Total weeks 52
Sick Leave -1 Double Time Premium 2
Weeks Available 45
Hours Sick 35
Annual Leave Pay 140
Tax Rate 33.33%
Superannuation 5%
Public Holidays 70
45 Number of working weeks x 35 hours per week = 1,575 Annual hours
Reconciliation: Normal Time Overtime 1 Overtime 2

Base Rate: $455 Hrs p.w. 35 13.0000 19.5000 26.0000
An Leave 0.0889 weeks 13.0000

Loading 0.2022
Public Hols 0.0444 weeks 13.0000 0.5778
Sick Leave 0.0222 weeks 13.0000 0.2889
Gross Rate: 15.2245 19.5000 26.0000

15.2245 - 0.2022 15.0223 x 9% 1.3530
Payroll Tax 4%
Normal Time 15.2245 x 4% 0.6090
Overtime 19.5000 x 4% 0.7800
26.0000 x 4% 1.0400
W.C.I. 6%
Normal Time 15.2245 x 6% 0.9135
Overtime 19.5000 x 6% 1.1700
26.0000 x 6% 1.5600
Charge Rate 17.4981 21.4500 28.6000
Overtime Premium 1 3.9519 Overtime Premium 2 11.1019
77
Time Sheet Analysis:

240 Direct
Total Hours Worked 300
60 Indirect
Normal Time 245
Overtime 1 35
Overtime 2 20
Accrual: Debit Credit
Work in Process Direct Hrs 240 x Ch Rate 17.4981 4,200
Factory Overhead Control Indirect Hrs 60 x Ch Rate 17.4981 1,050
Accrued Annual Leave Normal Time 245 x Leave Rate 1.3578 333
Accrued Public Holiday Normal Time 245 x Hol Rate 0.5778 142
Accrued Sick Leave Normal Time 245 x Hol Rate 0.2889 71
Accrued Super Normal Time 245 x Hol Rate 0.7511 184
Accrued Payroll Tax Normal Time 245 x Hol Rate 0.6090 197
Accrued W. C. I. Normal Time 245 x Hol Rate 0.9135 295
5,610 5,610
Payment: Debit Credit

Overtime 20 x O. T. Base 26.0000
Accrued Sick Leave Hrs Sick 35 x Base Rate 13.0000 455
Accrued Annual Leave Hrs Paid 140 x Base Rate 13.0000 2,139
+ Plus Loading 1.175
Accrued Public Holidays Hrs Paid 70 x Base Rate 13.0000 910
Super Withheld Normal Time 245 x Base Rate 13.0000 273
@ ..% Hrs Sick 35 x Base Rate 13.0000
Hrs Paid 140 x Base Rate 13.0000
Tax Withheld Debits $ 6,981 x Tax Rate 33.33% 2,327
@ ..%
Union Dues 60
Medical Insurance 340
Bank Missing Figure 4,891
7,891 7,891
78
Chapter 6 Overhead Allocation

1.
Units $
High - Low Analysis: High 50,000 155,000 Variable Rate = $3.00 per unit
Low 10,000 35,000
40,000 120,000 ($120,000/ 40,000 )
Fixed Cost = Total Cost - Variable Cost p.u.(production)

= $155,000 - $3.00(50,000)
= $5,000
2.
Hours $
High-Low Analysis: High 19,600 23,760 Variable Rate = $0.60
Low 13,600 20,160
6,000 3,600 ($3,600/6,000 )
Fixed Cost = Total Cost - Variable Cost p.u.( production )

= $23,760 - $ 0.60(19,600)
= $12,000
Total Budgeted Cost: Fixed $12,000

at 19,000 Variable $11,400 (19,000 x $ 0.60)
$23,400
3. (a)
Units $
High - Low Analysis: High 101,000 171,945 Variable Rate = $ 1.67
Low 45,000 78,425
56,000 93,520 ($93,520/56, 000)

= $171,945 - $1.67(101,000 )
= $3,275
(b)
Variable $150,300 ( 90,000 x $ 1.67 )
$153,575
79
4. (a)
Units $
High - Low Analysis: High 21,500 216,100 Variable Rate = $ 9.40
Low 15,000 155,000
6,500 61,100 ($ 61,100 / 6,500 )

= $216,100 - 9.40( 21,500 )
= $14,000
(b)
Variable 188,000 (20,000 x $9.40)
$ 202,000
5. (a)
Units $
High - Low Analysis: High 180 40,000 Variable Rate = $182.50
Low 20 10,800
160 29,200 ($29,200/160 )

= $40,000 - $182.50( 180 )
= $7,150
(b)
Units Produced: 45 (3,600 D.L.H./ 80 D.L.H.)
Total Budgeted Cost: Fixed $ 7,150
Variable $ 8,212.50 ( 45 x $ 182.50 )
$ 15,362.50
6.
(a) Direct Labour Variable
Direct Materials Variable
Indirect Labour Semi Variable
Indirect Materials Semi Variable
Rent Fixed
Power and lighting Semi Variable
Administration Fixed
Insurance Fixed
80
(b) Costs Alternative 1 Alternative 2 Difference

Production units 100,000 150,000 50,000
Indirect labour 25,000 30,000 5,000
Indirect material 8,000 10,000 2,000
Power and lighting 9,500 12,500 3,000
Indirect Labour
Variable cost per unit = 5,000 / 50,000 = $0.10
Fixed cost = 25,000 - ( 100,000 x 0.10 )
= 15,000
Indirect Material
Fixed cost = 8,000 - ( 100,000 x 0.04 )
= 4,000
Power and lighting

Fixed cost = 9,500 - ( 100,000 x 0.06 )
= 3,500
(c) Cost budget

Production in units 120,000
Budgeted costs:
Direct materials 60,000
Indirect labour 27,000
Indirect materials 8,800
Rent 15,000
Power and lighting 10,700
Administration 10,500
Insurance 5,000
Total costs 161,000
81
7.
90% of normal capacity 18,000 units
Level of Activity Unit Costs 90% 100% 110%

18,000 20,000 22,000
Variable Costs:
Indirect Materials 0.90 16,200 18,000 19,800
Indirect Labour 0.60 10,800 12,000 13,200
Light and Power 0.25 4,500 5,000 5,500
Depreciation - Machinery 0.75 13,500 15,000 16,500
Total Variable Costs 45,000 50,000 55,000
Fixed Costs
Indirect Materials 2,000 2,000 2,000
Indirect Labour 18,000 18,000 18,000
Light and Power 6,000 6,000 6,000
Depreciation - Equipment 3,000 3,000 3,000
Rates and taxes 2,500 2,500 2,500
Insurance 3,500 3,500 3,500
Other factory costs 2,000 2,000 2,000
Total Fixed Costs 37,000 37,000 37,000
Total Overhead Costs 82,000 87,000 92,000
8. Departmental overhead rates are used in place of a single rate because they;
( a ) Improve the control of overhead by holding department heads responsible for
controllable overhead.
( b ) Increase the accuracy of product and job costing.
9. Service department overhead must be included in overhead rates to charge all jobs and
products with all overhead incurred in their production. Actual service department
overhead is best controlled if it is accumulated in service department accounts rather than
distributed to producing departments where it becomes an indirect, noncontrollable item
of the department.
10. A producing department is directly concerned with manufacturing products or doing work
on various jobs. A service department renders service to various departments and is not
directly associated with manufacturing operations. The nature of the work done by a
department determines whether it is a service or producing department. Examples of
producing departments are cutting finishing, machining, mixing and refining. Examples of
service departments are medical, power, purchasing, receiving and accounting.
11. Factors involved in selecting the most equitable rate for applying factory overhead include
consideration of the nature of a department’s operations, the relationship of overhead
elements to operations involved, and any clerical difficulties arising through the use of a
particular rate.
82
12. Direct Method

Service Departments Production Departments
Office Stores Assembly Finishing Total
$ 60,000 $ 15,000 $ 80,000 $ 45,000 $200,000
- 60,000 37,500 22,500 Reallocation Office
- 15,000 9,000 6,000
0 0 $126,500 $ 73,500 $200,000
Recovery Rate: Assembly $14.06 per M.Hr ($126,500 / 9,000 Mach. Hrs.)
Finishing $12.25 per D.L.H. ($73,500 / 6,000 D. L. H.)
Plant Wide $25.00 per D.L.H. ($200,000 / 8,000 D. L. H.)
13. (a)
Production Departments Service Departments
Cutting Machining Finishing Stores Repairs Total
$ 23,400 $ 27,900 $ 26,120 $ 25,700 $ 10,500 $ 113,620
15,420 7,710 2,570 - 25,700
1,313 6,562 2,625 - 10,500
$ 40,133 $ 42,173 $ 31,315 0 0 $ 113,620
( b ) Recovery Rate: Cutting $1.00 per D.L.H. ($ 40,133 / 40,133 D.L.H.)

Machining $2.00 per M..Hr. ($ 42,173 / 21,086 Mach. Hr)
Finishing $4.00 per D.L.H. ($ 31,315 / 7,828 D. L. H.)
( c ) Plant wide Rate: $2.30 per D.L.H. ($ 113,620 / 49,400 D. L. H.)
14. Direct Method

Producing Departments Service Departments Total
Cutting Assembly Stores Utilities
$ 21,000 $ 13,000 $ 5,000 $ 2,200 $ 41,200
4,500 500 - 5,000
1,100 1,100 - 2,200
$ 26,600 $ 14,600 0 0 $ 41,200
Recovery Rate: Cutting $8.00 per M..Hr ($ 26,600 / 3,325 Mach. Hr)
Machining $5.00 per D.L.H. ($ 14,600 / 2,920 D.L.H.)
Plant Wide $7.10 per D.L.H. ($ 41,200 / 5,800 D.L.H.)
83
15. Direct Method

Production Service Total
Departments Department Basis
A B X
Rates $ 600 $ 600 $ 300 $ 1,500 Floor Area
Insurance 800 800 400 2,000 "
Maintenance 2,000 2,000 1,000 5,000 "
Depreciation 7,500 5,000 2,500 15,000 Plant Value
Electricity 2,000 600 400 3,000 Power (kwt.)
Indirect Labour 1,500 1,200 600 3,300 Actual
Indirect Material 600 400 500 1,500 Actual
Total $15,000 $10,600 $5,700 $31,300
Redistribution 3,420 2,280 - 5,700
Total $18,420 $12,880 0 $31,300
Recovery Rate: A $5.00 per Mach Hrs ($18,420 / 3,684 M.Hrs)

B 80% D.L.C. ($12,880 / $ 16,100)
16. (a) Direct Method

Producing Service
Total Machining Assembly Stores Basis Of Allocation
Indirect Material $23,000 $14,000 $8,000 $1,000 actual
Indirect Labour 30,000 15,000 10,000 5,000 actual
Rates & Rent 5,000 2,000 2,500 500 area
Insurance -Plant 11,000 9,000 2,000 0 $ plant
Ins -Building 5,000 2,000 2,500 500 area
Depn. -Plant 22,000 18,000 4,000 0 $ plant
Depn. -Building 4,000 1,600 2,000 400 area
Power 10,000 8,000 2,000 0 Power units
Total $110,000 $69,600 $33,000 $7,400
Redistribution 4,400 3,000 - 7,400 No. of Requisitions
Factory O / H $110,000 $74,000 $36,000 $ 0
Recovery Rate: Machining $4.00 per D.L.H. ($74,000 / 18,500 D.L.H.)

Assembly $1.00 per D.L.H. ($36,000 / 36,000 D.L.H.)
(b) Plantwide $2.0183 per D.L.H ($110,000 / 54,500 D.L.H.)
(c) (i) Job No. 1 $20.18 (10 hrs x $2.0183)

Job No. 2 $20.18 (10 hrs x $2.0183)
( ii ) Job No. 1: Machining $32 (8 hrs @ $4.00)

Assembly $ 2 (2 hrs @ $1.00)
Total $34
Job No. 2: Machining $ 8 (2 hrs @ $4.00)

Assembly $ 8 (8 hrs @ $1.00 )
Total $16
84
17. Direct Method

Machining Assembly Finishing Stores Maintenance
Est direct material issues 120,000 72,000 16,000
Producing Depts Service Dept

Total Machining Assembly Finishing Stores Maint
Ind Wages $304,000 $30,000 $52,000 $22,000 $88,000 $112,000
Ind Mat. 79,160 39,580 9,100 17,000 5,800 7,680
Power 23,000 8,000 6,000 3,000 2,000 4,000
Rates 6,000 2,000 1,600 800 400 1,200
Ins. Plant 6,200 3,100 1,500 1,000 200 400
Depn. Plant 44,640 22,320 10,800 7,200 1,440 2,880
Payroll T. 77,000 21,000 35,000 7,000 6,160 7,840
Total $540,000 $126,000 $116,000 $58,000 $104,000 $136,000
Redistribution 60,000 36,000 8,000 - 104,000
Redistribution 64,000 48,000 24,000 - 136,000
$540,000 $250,000 $200,000 $90,000 0 0
Payroll Tax: Based on total labour cost e.g. Machining $21,000 ( 300 / 1,100 )
Recovery Rate: Machining 92.60 % D.L.C. ( $ 250,000 / $ 270,000 )
Assembly $ 4.00 per D.L.H. ( $ 200,000 / 50,000 D.L.H. )
Finishing $ 2.00 per M.Hr ( $ 90,000 / 45,000 M.Hrs )
18. Direct Method – Wages Stores is now $30,000 for the Finishing Dept.
Productive Departments Service Depts
Total Machining Assembly Finishing Stores Office
Electricity $19,000 $14,000 $2,000 $2,000 $1,000 0
Supervision 16,000 4,000 7,000 2,000 1,000 2,000
Reps & Main 3,000 1,000 750 750 500 0
Depn. Factory 4,000 800 1,200 400 1,200 400
Direct 63,000 10,200 14,050 6,850 3,300 28,600
Total $105,000 $30,000 $25,000 $12,000 $7,000 $31,000
Redistribution 20,000 8,000 3,000 - 31,000
Redistribution 4,000 2,000 1,000 - 7,000
Factory O/head $105,000 $54,000 $35,000 $16,000 0 0
Recovery Rate: Machining $3.00 Per Mach.Hr ( $ 54,000 / 18,000 Mach Hr. )
Assembly $0.50 Per D.L.H. ( $ 35,000 / 70,000 D.L.H. )
Finishing 100 % D.L.C. ( $ 16,000 / $16,000 )
85
19. Activity based costing takes account of the fact that many activities affect costs other than
just volume. It is a method of assigning costs to goods and services that assumes all costs
vary with the activities used to produce goods and services.
20. A cost driver is an activity which causes ( drives ) a cost to vary.

Examples include, direct labour hours, machine hours, floor space.
21. (i) Identify the activities or transactions ( cost drivers ) that incur costs
( ii ) Assign a cost to each cost driver
( iii ) Sum the costs of the cost drivers that make up the product.
86
Chapter 7 Job Costing - Solutions
Chapter 7 Job Costing

1.
1 2 3 4 Total
R.M.C.
Op Bal 3,000 1,000 4,000
April 500 4,000 1,100 5,600
Labour
Op Bal 1,500 500 2,000
April 1,200 600 3,000 1,050 5,850
Overhead
Op Bal 1,500 500 2,000
April 1,200 600 3,000 1,050 5,850
8,400 3,700 10,000 3,200 25,300
Fin Goods 8,400 3,700 12,100

C.O.G.S. 8,400 8,400
(i) Work In Progress

Bal b/d 8,000 Finished Goods 12,100
Materials 5,600
Labour 5,850 Balance 13,200
Overhead 5,850
25,300 25,300
( ii ) Finished Goods
W.I.P. 12,100 C.O.G.S. 8,400
Balance 3,700
12,100 12,100
2 (i) Overhead recovery rate = 300/15 = $20 per hour

( ii ) JOB CARD
NAME OF CLIENT: Nick Easter
$
LABOUR COSTS
Partners 10 hours @ $100 per hour 1,000
Staff 20 hours @ $ 50 per hour 1,000
COMPUTER COSTS
Computer Time 10 hours @ $40 per hour 400
OVERHEADS
Overhead applied 30 hours @ $20 per hour 600
TOTAL COST 3,000
INVOICE PRICE $4,500
87
3
Debit Credit
(a) Raw Material Control 55,000
(b) Work In Process 48,000
(c) Factory Overhead Control 2,000
(d) Work In Process 35,000
(e) Factory Overhead Control 4,000
(f) Accrued Payroll 39,000
Bank 39,000
(g) Factory Overhead Control 1,000
(h) Work In Process 7,000
(I) Finished Goods 80,000
Work In Process 80,000
(j) Cost of Goods Sold 60,000
Sales 90,000
4. (a) Overhead Recovery Rate = $ 5,000 = $2.50 per D.L.H.

2,000 D.L.H.
(b) Job Card Summary

Job No. 200 201 202 203 Total
Opening Balance 1,250 1,250
Raw Material Control 560 670 320 280 1,830
Labour Control 1,680 3,360 2,320 400 7,760
Factory Overhead Applied 1,050 2,100 1,450 250 4,850
$4,540 $6,130 $4,090 $930 $15,690
(c) Factory Overhead Control $5,200

Factory Overhead Applied $4,850
Underapplied Overhead $ 350
(d) Work In Process

$15,690 $15,690
88
5.
General Ledger Debit Credit
Bank 80,000
Factory O/head Control 3,000
Bank 40,000
Prepaid Rent 3,000
Factory O/head Applied 10,000
Factory O/head Applied 10,000
Sales 90,000
6.
Debit Credit
(a) Raw Material Control 45,900
(b) Accrued Payroll 60,000
Bank 60,000
(c) Work in Process 54,000
(d) Work in Process 37,300
(e) Factory Overhead Control 3,300
(f) Factory Overhead Control 1,400
(g) Factory Overhead Control 4,200
Prepaid Rent 4,200
(h) Work In Process 32,400
(i) Finished Goods 126,900
(j) Cost of Goods Sold 125,000
Sales 198,000
89
7. (a)
Job Cost Summary Card
Job No. 38 39 40 41 42 43 Total
Opening Balance 6,500 2,500 9,000
Input
Material 1,500 500 21,000 6,300 29,300
Labour 1,000 300 11,000 2,800 15,100
Factory O/h Applied 500 150 5,500 1,400 7,550
Total 9,500 3,450 37,500 10,500 60,950
(b) Debit Credit

Bank 17,000
Sales 23,000
(c) Work In Process

60,950 60,950
Finished Goods
Work in Process 50,450
58,450 58,450
90
8. (a)
Job Cost Summary Card
Job No. 61 62 63 64 Total
Input
Material 3,900 4,000 2,390 10,290
Labour 1,800 5,000 2,600 1,400 10,800
Factory Overhead Applied 2,700 7,500 3,900 2,100 16,200
Total 11,500 28,400 10,500 5,890 56,290
Work in Process 11,500 28,400 10,500 5,890 56,290
Finished Goods 11,500 28,400 10,500 50,400
Cost of Goods Sold 11,500 10,500 22,000
(b)
Profit Summary
Job No. 61 Job No. 63 Total
Sales $ 14,000 $ 12,000 $ 26,000
- Cost of Goods Sold - 11,500 - 10,500 - 22,000
= Gross Profit $ 2,500 $ 1,500 $ 4,000
+ Overapplied Overhead $ 1,140
Actual Gross Profit $ 5,140
(c) Factory Overhead Control

Other 10,355
15,060 15,060

Factory Overhead Control 15,060 Work in Process 16,200
16,200 16,200
Debit Credit
91
9. (a)
Job Cost Card
Job No. 17 18 19 20 21 22 23 24 Total
Material
Input 1,820 1,310 1,400 1,700 2,100 850 2,100 11,280
Labour
Input 1,480 920 980 1,120 1,700 620 1,520 8,340
Factory O/h App
Input 740 460 490 560 850 310 760 4,170
Total 5,760 4,650 2,870 3,380 4,650 1,780 4,380 27,470
Work in Process 5,760 4,650 2,870 3,380 4,650 1,780 4,380 27,470
Finished Goods 5,760 4,650 2,870 3,380 4,650 1,780 23,090
(b) Factory Overhead Control

Labour Control 850
Bank ( Rates ) 1,200
Accumulated Depreciation 800
Bank ( Maintenance ) 500
4,780 4,780

Cost of Goods Sold 610
4,780 4,780

Opening Balance 5,010 Work in Process 11,280
19,510 19,510
92
(b)
Debit Credit
Bank 9,190
Factory Overhead Applied 610
Selling & Administration 3,230
Bank 3,230
Sales 32,300
Sales $ 32,300
- Cost of Goods Sold 23,200
+ Underapplied Overhead 610 $ 23,810
= Gross Profit $ 8,490
- Selling & Administration - $ 3,230
= Net Profit $ 5,260
93
10.
Job Cost Card
Job No. 35 36 37 38 39 40 41 Total
Opening Balance 900 700 1,600
Input
Material 60 2,100 1,345 1,690 4,295 9,490
Labour 520 1,100 2,650 1,630 140 6,040
Factory O/H Appl 312 660 1,590 978 84 3,624
Total 1,792 4,560 5,585 4,298 4,519 20,754
Work in Process 1,792 4,560 5,585 4,298 4,519 20,754
Finished Goods 1,792 4,560 5,585 4,298 16,235
Cost of Goods Sold 1,600 1,300 1,792 4,560 5,585 14,837
Debit Credit
Bank 7,030
Accounts Receivable ( Debtors ) 17,550
Sales 17,550
94
11. (a)
The work in process at the 1st November comprised:
No. Total
In Progress 27 34,600
28 24,200
29 11,600
Job Cost Card

Job No. 27 28 29 30 31 Total
Opening Balance 34,600 24,200 11,600 70,400
Material
Input 3,800 7,200 17,400 20,600 24,900 73,900
Labour
Input 8,600 11,200 9,400 16,300 18,500 64,000
Factory O/H Appl
Input 12,900 16,800 14,100 24,450 27,750 96,000
Total 59,900 59,400 52,500 61,350 71,150 304,300
Work in Process 59,900 59,400 52,500 61,350 71,150 304,300

Finished Goods 59,900 59,400 52,500 171,800
Cost of Goods Sold 59,900 59,400 52,500 171,800
(b) Debit Credit

Bank 78,600
Provision for Depreciation 6,800
Supervision 11,900
Payroll Tax Payable 5,300
(c)
95
12. (a)
Job Cost Card
Job No. 70 71 72 73 74 75 76 Total
Material
Input 120 4,200 2,690 3,380 8,590 18,980
Labour
Input 1,040 2,200 5,300 3,260 280 12,080
Factory O/H App.
Input 624 1,320 3,180 1,956 168 7,248
Total 3,584 9,120 11,170 8,596 9,038 41,508
Work in Process 3,584 9,120 11,170 8,596 9,038 41,508

Finished Goods 3,584 9,120 11,170 8,596 32,470
C.O.G.S. 3,200 2,600 3,584 9,120 11,170 29,674
(b) General Ledger

Debit Credit
Accrued Payroll / Bank 14,060

Bank / Various Accounts 4,180




Factory Overhead Control Factory Overhead Applied

R.M.C. 1,420 F.O.A. 7,580 F.O.C. 7,580 W.I.P. 7,248
L.C. 1,980 C.O.G.S, 332
Other 4,180
7,580 7,580 7,580 7,580
96
13. (a)
Job Cost Card
Job No. 19 20 21 22 23 24 25 26 Total
Opening Balance 3,580 900 4,480
Material
Input 2,400 3,600 2,800 2,000 10,800
Labour
Opening Balance
Input 480 1,160 2,160 3,040 1,240 8,080
Factory O/H Appl
Opening Balance
Input 336 812 1,512 2,128 868 5,656
Total 4,396 2,872 6,072 8,768 4,908 2,000 29,016
Work in Process 4,396 2,872 6,072 8,768 4,908 2,000 29,016
Finished Goods 4,396 2,872 6,072 8,768 4,908 27,016

Accounts Payable 9,600 Factory Overhead Control 700
22,000 22,000
Labour Control
Accrued Payroll / Bank 9,760 Work in Process 8,080
9,760 9,760

Raw Material Control 700 Factory Overhead Applied 4,880
Various 2,420
4,880 4,880

Cost of Good Sold 776
5,656 5,656
Work in Process
29,016 29,016
Finished Goods Control

Work in Process 27,016 Closing Balance 4,908
32,590 32,590
Sales $ 29,620.00
Cost of Goods Sold $ 27,016
+ Overapplied Overhead 226 26,240.00
$ 3,380.00
- Selling and Administration Expenses 1,482.50
= Net Loss $ 1,897.50
97
14.
Job Cost Card
Job No. 311 312 313 314 Total

Input 3,600 3,200 8,000 10,000 24,800
Labour
Input 2,400 3,600 10,000 15,200 31,200
Factory O/H Applied
Input 2,400 3,600 10,000 15,200 31,200
Total 18,000 16,800 28,000 40,400 103,200
Work in Process 18,000 16,800 28,000 40,400 103,200

Finished Goods 18,000 16,800 28,000 62,800
Cost of Goods Sold 18,000 16,800 34,800
(b) Debit Credit Debit Credit

Raw Material Control 24,000 Work in Process 24,800
Work in Process 31,200 Labour Control 43,000

Factory Overhead Control 13,000 Accured Payroll 43,000
Labour Control 44,200 Accured Payroll 43,000
Bank 43,000

Bank 5,600
Prepaid Insurance 10,200

Factory Overhead Applied 30,900 Work in Process 31,200
Factory Overhead Control 30,900 Factory Overhead Applied 31,200
Finished Goods 62,800 Cost of Goods Sold 34,800

Work in Process 62,800 Finished Goods 34,800

34,800 34,800
98
15. (a) One Ledger System Job Cost Card

Job No. 600 601 602 603 604 Total
Opening Bal. 18 24 42
Material Input 10 7 23 20 60
Labour Input 8 15 4 1 28
FOA Input 8 15 4 1 28
Total 44 61 31 22 158
( b ) Transfers to:
Finished Goods 44 61 31 136
C.O.G.S. 38 44 61 143
( b ) General Ledger
Work In Process Control $ 22
Finished Goods Control 31
(c) Raw Material Control
Opening Balance 50 Work in Process 60
Accounts Payable 85 Factory Overhead Control 4
Factory Overhead Control * 5
Closing Balance 66
135 ( stock adjustment )* 135
Labour Control
Accrued Payroll 34 Opening Balance 15
Work in Process 28
Closing Balance 15 Factory Overhead Control 6
49 49
Bank 7 Factory Overhead Applied 40
Prepaid Insurance 8
Labour Control 6
40 40
Factory Overhead Control 40 Opening Balance 5
Work in Process 28
40 40
Work in Process Control
Opening Balance 42 Finished Goods 136
Labour Control 28
Factory Overhead Applied 28 Closing Balance 22
158 158
Opening Balance 38 Cost of Goods Sold 143
Work in Process 136
Closing Balance 31
174 174
( d ) Revenue Statement 600 601 602 Total
Sales $ 55 $ 50 $ 60 $ 165
Cost of Goods Sold - 38 - 44 - 61 - 143
Gross Profit 17 6 - 1 22
Underapplied Overhead - 7
Actual Gross Profit $ 15
99
16. (a)
Job No. 17 18 19 20 21 22 23 24 Total
Material Input 1,820 1,310 1,400 1,700 2,100 850 2,100 11,280
Labour Input 1,480 920 980 1,120 1,700 620 1,520 8,340
F.O.A. Input 740 460 490 560 850 310 760 4,170
Total 5,760 4,650 2,870 3,380 4,650 1,780 4,380 27,470
Work in Process 5,760 4,650 2,870 3,380 4,650 1,780 4,380 27,470
Finished Goods 5,760 4,650 2,870 3,380 4,650 1,780 23,090
C.O.G.S. 1,890 5,760 4,650 2,870 3,380 4,650 23,200
19,510 19,510
Labour Control
9,890 9,890
Bank 1,200 Factory Overhead Applied 5,780
Bank 500
Labour Control 850
5,780 5,780
5,780 5,780
Work in Process
27,470 27,470
24,980 24,980
100
17. Job Cost Card

Job No. 600 601 602 603 604 605 Total
Opening Bal 2,080 1,220 3,300
Material Input 2,200 1,500 500 4,200
Returns - 250
Labour Input 100 50 1,750 1,850 400 4,150
Factory O/H App
Input 80 40 1,400 1,480 320 3,320
Total 2,260 1,310 5,100 4,830 1,220 14,970
Work in Process 2,260 1,310 5,100 4,830 1,220 14,970
Finished Goods 2,260 1,310 5,100 4,830 13,500
C.O.G.S. 900 2,260 1,310 5,100 9,570
General Ledger Raw Material Control

Accounts Payable 5,000 Accounts Payable 250
Work in Process 250 Closing Balance 4,800
9,250 9,250
Labour Control
Accrued Payroll 4,550 Work in Process 4,150
4,700 4,700

Labour Control 550
3,225 3,225

Closing Balance 95
3,320 3,320
Work in Process
Raw Material Control 4,200 Raw Material Control 250
14,970 14,970

14,400 14,400
101
18. (a) Job Cost Card

Job No. 21 22 23 24 Total
Opening Balance 11,220 11,220
Material Input 420 6,200 1,320 7,940
Labour Input 300 5,200 840 6,340
Factory O/H Applied Input 150 2,600 420 3,170

Total 12,090 14,000 2,580 28,670
Work in Process 12,090 14,000 2,580 28,670
Finished Goods 12,090 14,000 26,090
C.O.G.S. 14,500 14,000 28,500
( b ) General Ledger Raw Material Control

10,560 10,560
Labour Control
Accrued Payroll 7,400 Opening Balance 1,000
Closing Balance 980 Factory Overhead Control 1,040
8,380 8,380

3,060 3.060

Closing Balance 110
3,170 3,170
Work in Process
28,670 28,670

40,590 40,590
102
19. (a)
Job Cost Card
Job No. 111 112 113 114 Total
Material
Opening Balance 1,200 800 2,000
Input 1,800 1,600 4,000 5,000 12,400
Labour
Input 1,200 1,800 5,000 7,600 15,600
Factory O/H Applied
Input 1,200 1,800 5,000 7,600 15,600
Total 9,000 8,400 14,000 20,200 51,600
Work in Process 9,000 8,400 14,000 20,200 51,600
Rework - 400 *
Finished Goods 9,000 8,000 14,000 31,000
General Ledger Control 9,000 8,000 14,000 31,000
* Labour & Factory Overhead Applied ( $ 200 + $ 200 )

(b) General Ledger
17,400 17,400
Labour Control
Closing Balance 1,000 Factory Overhead Control 6,500
22,500 22,500
Bank / Various Accounts 7,900 Factory Overhead Applied 15,500
15,500 15,500
Closing Balance 100
15,600 15,600
Work in Process
Raw Material Control 12,400 Rework 400
51,600 51,600
Work in Process 31,000 Cost of Goods Sold 31,000
31,000 31,000
Rework Account
Work in Process 400 Cost of Goods Sold 400
400 400
** Labour $200 + Overhead Applied $200 **
103
20. (a)
Job Cost Card
Job No. 19 18 20 21 22 23 Total
Material
Opening Balance 700 190 890
Input 590 420 480 120 1,610
Labour
Input 50 460 510 590 90 1,700
Factory O/H Applied
Input 25 230 255 295 45 850
Clean-up 46 32 26 28 132
Total 1,751 1,802 1,211 1,393 255 6,412
Work in Process 1,751 1,802 1,211 1,393 255 6,412
Returns - 40
Finished Goods 1,751 1,802 1,211 1,353 6,117
General Ledger Control 950 1,751 1,802 1,211 1,353 7,067
(b) Factory Ledger
Work in Process 40
Factory Overhead Control 20 Closing Balance 1,900
3,870 3,870
Labour Control
2,430 2,430

Bank / Various Accounts 186 Factory Overhead Applied 896
Labour Control 370 Raw Material Control 20
916 916
Factory Overhead Control 896 Work in Process 850
Closing Balance 46
896 896
Work in Process
Raw Material Control 1,610 Raw Material Control 40
Clean Up 132 Closing Balance 255
6,412 6,412
Finished Goods
7,067 7,067
Clean-Up Account
Bank 132 Work in Process 132
132 132
104
21.
Total 40% Floor 60% K.w.H.r
Fixed Overhead $ 36,000 $ 14,400 $ 21,600
Total Cutting Machining Assembly

Floor $ 14,400 $ 2,880 $ 7,200 $ 4,320
K.w.H.r. $ 21,600 $ 8,640 $ 8,640 $ 4,320
$ 36,000 $11,520 $15,840 $ 8,640
Recovery Rate 7,680 D.L.H. 3,840 M. H.r. 11,520 D.L.H.
(a)
Fixed Rate $ 1.50 $ 4.125 $ 0.75
Variable Rate 2.40 4.10 2.80
Recovery Rate $ 3.90 $ 8.225 $ 3.55
Job Card Summary

Job No 42 Job No 43
Cutting Machining Assembly Cutting Machining Assembly Total
Raw Material Control 13,300 1,400 10,800 750 26,250
Labour Control 1st 360 2,160 120 1,560 4,200

2nd 3,200 2,800 2,700 400 9,100
Labourer 3,520 1,280 4,800
Factory O/h Applied 1,365 823 2,056 1,092 1,234 710 7,780
Total 18,225 2,983 9,776 14,712 2,794 3,140 52,130

$ 30,984 $ 20,646 $ 52,130
(b)
W.I.P $26,250 W.I.P $18,100 W.I.P. $7,786 F.G. $31,489 F.O.C. $8,670
R.M.C. $26,250 L.C. $18,100 F.O.A. $7,786 W.I.P. $31,489 A/c P $ 8,670
(c) Overhead Analysis

Actual Flexible Budget based Actual x Total Overhead
on actual production Rate per hr.
$ 2,550 F. $ 960 630 x $ 3.90
V. $ 1,512 ( 630 x $ 2.40 )
$ 2,550 $ 2,472 $ 2,457
$ 78 ( u.f. ) $ 15 ( u.f. )
Overhead Spending Variance Overhead Capacity Variance
105
22. (a)
Job Cost Card
Job No. 49 50 51 52 53 54 Total
Material
Opening Balance 700 570 1,270
Input 70 130 625 1,645 1,410 3,880
Labour
Input 150 190 520 1,370 940 3,170
Factory O/H Appl

Input 300 380 600 1,400 400 3,080
Total 1,970 1,795 1,745 4,415 2,750 12,675
Work in Process 1,970 1,795 1,745 4,415 2,750 12,675
Finished Goods 1,970 1,795 1,745 4,415 9,925
Cost of Goods Sold 2,450 1,970 1,795 1,745 4,415 12,375
(b) Trading Statement

Job No. 49 50 51 52 53 Total
Sales 2,500 2,000 1,600 1,900 1,525 9,525
- C.O.G.S. -2,450 -1,970 -1,795 -1,745 - 4,415 -12,375
= G.P. $50 $30 - $195 $155 - $2,890 -$2,850
Recovery Rate: Dept 1 200 % D.L.C. ($800 / $400 )
Dept 2 50 c per D.L.H. ($2,500 / 5,000 hrs )
Dept 3 $ 2.00 per M. Hr. ($500 / 250 m.hrs )
( c ) Underapplied Overhead $75 ($475 - $400).
106
23. (a)
Accounts Payable 41,000 Work in Process 30,000
41,000 41,000
Labour Control
20,000 20,000

Fixed 25,000 Factory Overhead Applied 47,500
Variable 22,500
47,500 47,500

Overhead Spending Variance 600
Overhead Capacity Variance 2,500
50,600 50,600
Work in Process
Raw Material Control 30,000 Finished Goods 90,000
100,600 100,600
Finished Goods
90,000 90,000
(b) Overhead Analysis

Actual Flexible Budget based Actual x Std. Rate
on actual production
F. $ 25,000 F. $ 25,000 5,500 x $ 9.20
V. $ 22,500 V. $ 23,100 (5,500 x $4.20)
$ 47,500 $ 48,100 $ 50,600
$ 600 (f) $ 2,500 (f)

Income Statement
Sales $ 160,000
- Cost of Goods Sold 85,000
= Gross Profit $ 75,000
- Expenses 72,500
Sell 42,500
Fixed 30,000
Net Profit $ 2,500
107
24. Hint: Work backwards.

Opening Balance 0 Factory Overhead Control 500
Accounts Payable 12,500 Closing Balance 4,000
12,500 12,500
Labour Control
9,500 9,500

Raw Material Control 500 Factory Overhead Applied 6,500
Labour Control 500
Other 5,500
6,500 6,500

Factory Overhead Control 6,500 Opening Balance 500
6,500 6,500
Work In Process
Raw Material Control 8,000 Finished Goods 20,000
23,000 23,000
Finished Goods
20,000 20,000
108
25.
Debit Credit
P.A.Y.G. Tax Payable 1,240
Union Fees Due 60
Medical Benefits Payable 200
Accured Payroll 5,800
Accured Payroll 5,800
Bank 5,800
Factory O/head Control 200
Bank 4,000
109
26. (a)
Job Cost Card
Job No. 1720 1721 1723 1724 1725 R911 R912 Total
Material
Opening Balance 11,200 6,500 1,700 19,400
Input 800 3,200 6,400 4,600 300 1,100 16,400
Labour
Opening Balance 14,400 8,800 4,600 27,800
Input 1,500 5,600 11,300 7,800 700 2,100 29,000
Factory O/H Applied
Opening Balance 7,200 4,400 2,300 13,900
Input 750 2,800 5,650 3,900 350 1,050 14,500
Travel 240 380 620
Total 35,850 31,300 23,350 16,300 10,190 4,630 121,620
Work in Process 35,850 31,300 23,350 16,300 10,190 4,630 121,620
Finished Goods 35,850 23,350 16,300 10,190 85,690
General Ledger Control 18,500 35,850 23,350 10,190 87,890
(b)
Factory Ledger
66,000 66,000
Labour Control
Accrued Payroll 33,000 Opening Balance 1,800
Closing Balance 2,000 Factory Overhead Control 4,200
35,000 35,000

14,600 14,600

Factory Overhead Control 14,600 Opening Balance 700
Cost of Goods Sold 600 Work in Process 14,500
15,200 15,200
Work in Process
Accounts Payable 620 Closing Balance 35,930
121,620 121,620
Finished Goods
104,190 104,190
110
27.
Job Cost Card
Job No. 101 102 103 Total Budgeted Overhead = $ 90,000
Raw Material Control 9,400 13,300 6,400 29,100
Labour Control 2,000 12,400 14,100 28,500
Factory O/H Applied 500 3,100 3,525 7,125 Budgeted Lab. Cost = $ 360,000
Work in Process 11,900 28,800 24,025 64,725 Recovery Rate = 25% DLC
Finished Goods 11,900 28,800 40,700
Cost of Goods Sold 11,900 11,900
General Ledger
41,450 41,450
Labour Control
Accrued Payroll 31,050 Factory Overhead Control 2,550
31,050 31,050

Bank 4,050
8,050 8,050

Opening Balance 350 Work in Process 7,125
Factory Overhead Control 8,050 Closing Balance 1,275
8,400 8,400
Work in Process
Opening Balance 0 Finished Goods 40,700
64,725 64,725

40,700 40,700
111
28.
Opening Balance 24,600 Factory Overhead Control 3,000
Accounts Payable 55,200 Work in Process 66,200
79,800 79,800
Labour Control
Accrued Payroll / Bank 17,000 Opening Balance 780
Closing Balance 1,280 Work in Process 12,500
18,280 18,280
Work in Process
Raw Materials Control 66,200
146,500 146,500
Finished Goods
154,500 154,500

Raw Materials Control 3,000 Factory Overhead Applied 44,200
44,200 44,200

50,000 50,000
Hint: Work backwards.
C.O.G.S. = $ 148,700 ( $ 223,050 )

1.50
Total Factory Labour = 3,500 hrs
- Indirect Labour - 1,000 * * Ind Hrs $ 5,000/ $ 5.00 per hr.
Direct Labour 2,500 hrs
Direct Labour Cost = $ 12,500 (2,500 hrs x $ 5.00 per hr.)
Factory Overhead Applied = $ 50 000 (2,500 hrs x $ 20.00 per hr.)
Overhead Incurred:
Indirect Material $ 3,000
Other O/H Incurred 36,200
Total $ 44,200
112
29. (a)
Job Card Summary
Job No: 20 Price: $ 50,000 Terms: A/c
Customer: Johnnie Ltd Quantity: 100 units Delivery: 28th June
Date Material Labour Factory Overhead Applied Total
16/6 C: $ 21,000 $ 21,000
C: $ 5,500 $ 6,600 $ 12,100
F: $ 850 $ 638 $ 1,488
$ 21,000 $ 6,350 $ 7,238 $ 34,588
Job No: 21 Price: $ 8,400 Terms: C.O.D.
Customer: Walker Ltd Quantity: 48 Units Delivery: 20th June
Date Material Labour Factory Overhead Applied Total
16/6 C: $ 1,960 $ 1,960
C: $ 2,400 $ 2,880 $ 5,280
F: $ 240 $ 180 $ 420
23/6 F: $ 300 $ 225 $ 525
$ 1,960 $ 2,940 $ 3,285 $ 8,185
$ 22,960 $ 9,290 $10,523 $42,773
(b)
Debit Credit
Work In Progress 22,960
Bank ( Rent ) 3,000
Acc. Depreciation 1,700
Bank ( Electricity ) 450
Accrued Payroll Tax 600
Cost Of Goods Sold 3,093
Cost Of Goods Sold 42,773
Bank 8,400
Sales 58,400
113
Chapter 8 Responsibility Accounting

1
Actual Flexible Budget Applied
F 220,500 Fixed 216,000 21,000 x $18.90
V 170,940 Variable 21,000 x $8.10 170,100
$391,440 $386,100 396,900
$ 5,340 Unfavourable $ 10,800 Favourable

$5,460 Over applied Total Variance
2. (a)
Variable Overhead = 180,000 =
200,000 $0.90
Fixed Overhead = 70,000 = $0.35
200,000 $1.25

F 72,000 Fixed 70,000 180,000 x $1.25
V 160,200 Variable 180,000 x $0.90 162,000
$232,200 $232,000 225,000
$ 200 UnF $ 7,000 UF

Spending Variance Capacity Variance
$ 7,200 Underapplied Total Variance
114
Normal capacity 50,000 maintenance labour hours
3. (a) The predetermined overhead rate:

Total Overhead Recovery Rate = Total Budgeted Overhead
Budgeted Level of Activity
= [ $50,000 + ( $2 x 50,000 ) ] / 50,000

$ 3.00 per maintenance labour hour
Variable Overhead Recovery Rate = Total Budgeted Variable Overhead

= $ 100,000 / 50,000
= $ 2.00 per hour
Fixed Overhead Recovery Rate = Total Budgeted Fixed Overhead

= $ 50,000 / 50,000
= $ 1.00 per hour
(b) Amount of Under/Overapplied Overhead:
Actual Overhead Incurred = $ 161,000

Applied Overhead = $ 3.00 x 54,000 = $ 162,000
Overapplied Overhead = $ 1,000
The overapplied overhead of $1,000 is a favourable variance which may be further broken
down into 2 separate variances titled:
• Spending Variance
• Capacity Variance
using the following schedule.
Actual Factory Overhead Flexible Budget based on Actual hours Actual Hours Worked x Total
Incurred worked Overhead rate per hour
Variable = 54,000 x $2.00 = $108,000 54,000 x $ 3.00

Fixed = $ 50,000
$161,000 $158,000 $162,000
Overhead Spending Variance $3,000 U Overhead Capacity Variance $4,000 F
Under/Over Applied Overhead = $1,000 F
115
4. (a) Budgeted direct labour hours = 140,000

Labour hours per unit = 2
Budgeted production = 70,000 units
(b) Indirect cost recovery rate = Total budgeted indirect costs

Budgeted level of activity
= ( 2 x 70,000 ) + ( 4 x 70,000 )
70,000
= $6 per unit
(c) Amount of Under / Over Applied Overhead :

Actual overhead incurred $370,000
Applied overhead 6 x 60,000 $360,000
Underapplied overhead $ 10,000
(d)
Actual Factory Overhead Flexible Budget based on Actual hours Actual Hours Worked x Total
Incurred worked Overhead rate per hour
Variable = $ 240,000 120,000 x 3

Fixed = $ 140,000
370,000 $380,000 360,000
Overhead Spending Variance 10,000 F Overhead Capacity Variance 20,000 U
Under/Over Applied Overhead = 10,000 U
5.
Units $
High - Low High 56,000 268,000
Analysis:
Low 40,000 220,000
16,000 48,000
Variable Rate = $3.00 per unit ($48,000/16,000)
Fixed Cost = Total Cost - Variable Cost (production)

= $220,000 - $3 (40,000)
= $100,000
Flexible Budget Based

Actual on Actual Hours
Fixed $101,000 Fixed $100,000

Variable 152,000 Variable $150,000 (50,000 x $3.00)
$253,000 $250,000
$3,000 Unfavourable Overhead Spending Variance
116
6. Application Rate:
Total Budgeted Overhead Per Unit = Budgeted Factory Overhead
Budgeted Machine Hours
= $ 480,000 = $ 1.20 Per Mach Hr.

400,000 Mach Hrs.
Variable Rate = Budgeted Variable Overhead = $300,000 =$0.75 P/ M.Hr.

Budgeted Direct Labour Hours 400,000 Mach Hs.
Actual Flexible Budget based Actual Hours x Standard

on Actual Hours Budgeted Rate
Fixed $180,000 380,000 x $ 1.20

Variable $285,000 (380,000 x $ 0.75 )
$442,000 $465,000 $456,000
$23,000 favourable $9,000 unfavourable

$14,000 Overapplied
7. Application Rate:
Budgeted Direct Labour Hours
= $ 81,000 = $ 2.70 Per D.L.H.

30,000 D.L.H.
Variable Rate: = $ 1.80 ( 2/3 x $ 2.70 )
Budgeted Fixed Cost = $ 27,000 ( 1/3 x $ 81,000 )

on Actual Hours Budgeted Rate
Fixed $27,000 27,000 x $ 2.70

Variable $48,600 ( 27,000 x $ 1.80 )
$79,000 $75,600 $72,900
$3,400 unfavourable $2,700 unfavourable

$6,100 Underapplied
117
8. Plant - wide recovery rate 66.67 % of D.L.C. ( $ 80,000 / $ 120,000 )
Departmental recovery rate X 25.00 % of D.L.C. ( $ 10,000 / $ 40,000 )

Y 200 % of D.L.C. ( $ 40,000 / $ 20,000 )
Z 50.00 % of D.L.H. ( $ 30,000 / $ 60,000 )
(a) i Job 36 R.M.C. $ 1,500

L.C. 630
F.O.A. 420 ( $ 630 D.L.C. x $0.6667 )
$ 2,550
ii Job 36 R.M.C. $ 1,500

L.C. 630
F.O.A. 550 ( $200 x $0.25 + $190 x $2.00 + $240 x $0.50 )
$ 2,680
( b ) Application Rate:
Budgeted Direct Labour Hours
= $ 36,000 = $ 0.60 Per D.L.H.

60,000 D.L.H.
Variable Rate: = Budgeted Variable Overhead = $ 30,000 = $ 0.50 Per D.L.H.

Budgeted Direct Labour Hours 60,000 D.L.H.
Actual Flexible Budget based Actual Hours x Total Overhead

on Actual Hours Rate per hour
Fixed $6,000 54,000 x $ 0.60

Variable $27,000 (54,000 x $ 0.50 )
$33,800 $33,000 $32,400
$800 unfavourable $600 unfavourable

$1,400 Underapplied
118
9.
Normal Capacity Expected Capacity
80,000 Mach Hrs 64,000 Mach hrs
Variable Cost $ 56,000 $ 44,800
Fixed Cost 128,000 128,000
Total Cost $ 184,000 $ 172,800
$ 2.30 $ 2.70
Variable Rate = $ 0.70 per unit ( $ 44,800 / 64,000 units )

on Actual Mach. Hours Budgeted Rate
Fixed $ 126,400 Fixed $ 128,000 72,000 x $ 2.30

Variable $ 50,200 Variable $ 50,400 (72,000 x $ 0.70)
$ 176,600 $ 178,400 $ 165,600
$1,800 favourable $12,800 unfavourable

$11,000 Underapplied

on Actual Mach. Hours Budgeted Rate
Fixed $ 126,400 Fixed $ 128,000 72,000 x $ 2.70

Variable $ 50,200 Variable $ 50,400 ( 72,000 x $ 0.70 )
$ 176,600 $ 178,400 $ 194,400
$1,800 favourable $16,000 favourable

$17,800 Overapplied
119
10. (a)
Predetermined overhead rate = $350,000 = $17.50 per DLH
20,000
GENERAL JOURNAL
May 31 Work in Process 29,750
Factory Overhead Control/Applied 29,750
Overhead applied $17.50 x 1,700 DLH
(b)
Flexible
Budget
Actual O/h @19,500 DLH Applied O/h
F $202,490 F: $200,000 $17.50x19,500
V 145-080 *V: 146,250
$347,570 $346,250 $341,250

$1,320 unfavourable $5,000 unfavourable
* Variable flexible budget = $150,000 x 19,500 DLH

20,000
11. (a) Predetermined overhead rate = 69,000 = $11.50 per DLHr

6,000
(b)
Total factory overhead applied $11.50 x 6,100 $ 70,150
(c)
Fixed 39,000 6,100 x $11.50
Variable $5.00 x 6,100 units 30,500
$72,000 $69,500 70,150
$ 2,500 Unfavourable $ 650 Favourable

$ 1,850 Under applied Total Variance
120
12. (a) Predetermined overhead rate = 183,000 = $ 6.10 per unit

30,000
(b)
Total factory overhead applied $ 6.10 x 29,000 $176,900
(c)
Fixed 99,000 29,000 x $ 6.10
Variable $2.80 x 29,000 units 81,200
$175,000 $180,200 176,900
$ 5,200 Favourable $ 3,300 Unfavourable

$ 1,900 Over applied Total Variance
13. (a) Predetermined overhead rate = 72,000 = $4.80 per unit

15,000
(b)
Total factory overhead incurred $ 70,300
Total factory overhead applied $4.80 x 13,500 64,800
Under Applied factory overhead 5,500
(c)
F 45,200 Fixed 45,000 13,500 x $4.80
V 27,800 Variable 27,000/15,000 x 13,500 units 24,300
$70,300 $69,300 64,800
$ 1,000 Unfavourable $ 4,500 unfavourable

$5,500 Under applied Total Variance
121
Paper 1 Solutions
QUESTION 1.
( a ) Direct Labour:
Conversion Costs $ 40,100
Factory Overhead - 19,200
$ 20,900
( b ) Production cost:
Direct Material 48,600
$ 88,700
( c ) Variable Conversion cost:

Direct Labour $ 20,900
Variable Factory Overhead 8,800
$ 29,700
( d ) Period cost:
Selling and Administration $ 66,000
Financial expenses 17,500
$ 83,500

Fixed manufacturing overhead ( 19,200 – 8,800 ) $ 10,400
20,000 $ 21,400
122
QUESTION 2.
PART A
(i)
Sales 240,000 100 %
Var Costs - 60,000 25 %
Cont Margin 180,000 75 %
(a)

(b) Sales required ($) = $150,000 + 60,000 = $280,000

75%
(c) Profit before tax required = $63,000 = $90,000

70%
Sales required ($) = $150,000 + 90,000 = $320,000

75%
PART B
(i) (b)
( ii ) ( c )
123
QUESTION 3.
( a ) Derwent Ltd Manufacturing Statement for Six Months Ended 30 June 2008
$ $ $
DIRECT MATERIALS
Inventory 1 January 2008 49,900
Purchases 196,320
Freight in and duty 8,040
254,260
DIRECT LABOUR
Direct labour incurred 80,430
FACTORY OVERHEAD
Factory supplies used:
Purchases 17,560
Freight in 950
22,900
Depreciation Factory P & E ($285,500 x 10 x ½ yr) 14,275
Factory insurances ($1,000 + 6,420 ÷ 3) 3,140
Factory maintenance 5,950
Factory lighting and power ($8,710 - 2,140) 6,570
Annual leave Factory 8,490 87,205
368,515
Work in process 1 January 2008 15,000
383,515
Less: Work in process 30 June 2008 19,350
(b) Derwent Ltd Trading Statement for Six Months Ended 30 June 2008
$ $
Sales 960,180
Finished Goods Inventory 1 January 2008 90,850
Purchases 37,380
Freight In 4,320
496,715
Less Finished Goods Inventory 30 June 2008 Gross Profit 89,535 407,180
$ 553,000
124
QUESTION 4.




Bank 17,000

Payroll Tax Payable 1,000
Accum. Depreciation 600





Sales 80,000
125
QUESTION 5.
(a)
Purchases Issues Balance
Qty Unit$ Total Qty Unit $ Total Qty Unit $ Total
$ $ $
01 April Balance 160 12.20 1,952
05 Issue Job 565 100 12.20 1,220 60 12.20 732
60 12.20 732
10 Purchase 120 12.80 1,536 120 12.80 1,536
180 2,268
60 12.20 732
18 Issue Job 570 100 12.80 1,280 20 12.80 256
160 2,012
20 12.80 256
20 Purchase 60 13.40 804 60 13.40 804
80 1,060
40 12.80 512
23 Return Job 750 - 20 12.80 - 256 60 13.40 804
100 1,316
40 12.80 512
24 Return to supplier - 20 13.40 - 268 40 13.40 536
80 1,048
(b)
GENERAL JOURNAL
June 30 Work in process 2,976
Raw Materials control 2,976
Issue of direct materials
(c)
GENERAL JOURNAL
June 30 Cost of Goods Sold 64
Raw Materials Control 64
Stocktake adjustment 5 x $12.80
126
QUESTION 6.
(a)
Employee Workings Gross Direct Indirect Sick
Z. Abedin 40 x $25 $1,000 $1,000
Y. Barns 44 x $18 792 $792
O/t prem: 2 x $18 36 36
X. Chang 42 x $18 756 756
O/t prem: 1 x $18 18 18
W. Dali 24 x $18 432 432
8 x $18 144 144
8 x $18 144 144
V. Euler 40 x $18 720 720
4,042 1,980 1,918 144
Overtime paid = 6 hrs x $18 x 1½ = $162
(b) (i)
GENERAL JOURNAL
Labour Control ($1,980 + 1,918) 3,898
Provision for Sick leave 144
PAYG Tax 800
Gross factory payroll 9 June
Bank 3,242
Payment of net wages
( ii )
GENERAL JOURNAL
Allocation of factory labour
( iii )
GENERAL JOURNAL
Superannuation Fund 349
Superannuation guarantee payable ($4,042 - 162) x 9%
127
QUESTION 7.
PART A
( a ) Overhead application rate: ( 156,000 + 315,000 ) ÷ 25,000 = $18.84 per M/cH
(b)
Overhead applied $18.84 x 24,000 M/c H = $452,160
Less Actual overhead Var $146,800 Over-applied overhead
Fix 316,800 463,600 $ 11,440
(c)
Factory Overhead Flexible budget @ 24.000 M/c hr Factory Overhead
Actual * V: $149,760 Applied
F: $315,000
$463,600 $464,760 $452,160

$1,160 Favourable $12,600 Unfavourable
Under-applied overhead $11,440
* Variable overhead rate = $156,000 ÷ 25,000 = $6.24 per M/c hr
Variable flexible budget = $6.24 x 24,000 M/c hr
PART B
( a ) Plant-wide overhead rate = $295,200 ÷ 24,000 = $12.30 per DLH
(b)
Total Milling Finishing Maintenance Factory Factory
Storeroom office
Budgeted Costs $295,200 $79,500 $84,600 $40,500 $52,800 $37,800
Re-allocation:
Maintenance 27,000 13,500 - 40,500
Factory stores 33,600 19,200 - 52,800
Factory office 21,000 16,800 - 37,800
Total $295,200 $161,100 $134,100 0 0 0
Departmental rate: Milling = $161,100 ÷ 7,500 = $21.48
Departmental rate: Finishing = $134,100 ÷ 11,250 = $11.92
PART C
(a) (i) Units Cost
Highest activity 9,200 $24,200
Less Lowest activity 5,200 15,400
Difference 4,000 $ 8,800
Variable cost = $8,800 = $2.20 per litre
4,000
( ii ) Highest (OR Lowest)

Total overhead cost $24,200 15,400
Less variable cost: $2.20 x 9,200 - 20,240
$2.20 x 5,200 11,440
Fixed cost per month $ 3,960 $ 3,960
(b)
Fixed cost component $ 3,960
Variable cost component $2.20 x 8,000 17,600
$21,560
128
QUESTION 8.
(a) JOB CARD SUMMARY
Job 233 Job 234 Job 235 Job 236 TOTAL
Bal b/d $15,550 $5,650 $21,200
Direct Materials 2,300 5,180 15,400 5,850 28,730
Direct Labour 1,500 5,720 12,040 1,300 20,560
Overhead Applied 1,875 7,150 15,050 1,625 25,700
TOTAL $21,225 $23,700 $42,490 $8,775 $96,190
(b) MATERIALS CONTROL

June 1 Bal b/d 45,500 June 30 Work in process 28,730
30 Accounts payable 32,110 Factory overhead con. 3,900
Bal c/d 44,980
77,610 77,610
LABOUR CONTROL
June 30 Accrued Payroll 37,700 June 1 Bal b/d 4,400
30 Work in process 20,560
Factory overhead con. 12,740
37,700 37,700
FACTORY OVERHEAD CONTROL

June 30 Bank 3,250 June 30 Factory Overhead App 25,170
Accounts payable 2,680
Accum depn plant 2,600
Labour control 12,740
25,170 25,170
FACTORY OVERHEAD APPLIED

June 1 Bal b/d 120
June 30 Factory Overhead Con 25,170
Cost of Goods Sold 410 June 30 Work In Process 25,700
25,700 25,700
WORK IN PROCESS
June 1 Bal b/d 21,200 June 30 Finished Goods 87,415
30 Materials Control 28,730 Bal c/d (Job 236) 8,775
Factory Overhead App 25,700
96,190 96,190
FINISHED GOODS
June 1 Bal b/d (Job 232) 22,565 June 30 Cost of Goods Sold 67,490
Work in process 87,415 Bal c/d (Job 325) 42,490
109,980 109,980
129
Paper 2 Solutions
QUESTION 1.
PART A
( a ) Conversion cost:
Direct labour $80,000
$170,000
( b ) Product cost:
$310,000
( c ) Prime cost:
Less Variable manufacturing overhead 30,000
$220,000
( d ) Period cost:
$180,000

50,000 $96,000
130
QUESTION 2.
(i)
Sales $ 20.00 100 %
Var Costs - 13.00 65 %
Cont Margin 7.00 35 %
(a)
Cont. Margin $7

(b) Profit before tax required = $36,750 = $52,500

70%
Sales required ($) = $126,000 + 52,500 = $510,000 (OR 25,500 units x $20)
35%
( ii )
(a) Contribution margin per student = $12 - 8 = $4
Break-even point (students) = 140 = 35 students

4
(b) Contribution margin per student = Fee - $8
Break-even point (students) $ 8.00 Variable cost

$ 2.80 Fixed costs ( $140 / 50 )
$10.80 Fee
131
QUESTION 3.
( a ) Paroo Ltd Manufacturing Statement for Six Months Ended 30 June 2008
$ $ $
DIRECT MATERIALS
Purchases 442,230
553,620
DIRECT LABOUR
FACTORY OVERHEAD
Purchases 18,620
Freight in 1,790
28,850
Factory insurances ($2,920 + [12,360 ÷ 4]) 6,010
Factory lighting and power ($16,750 - 4,110) 12,640
Annual leave Factory 16,320 161,400
767,040
795,690
(b) ParooLtd Trading Statement for Six Months Ended 30 June 2008
$ $
Sales 1,846,500
Purchases 38,730
971,890
Less Finished Goods Inventory 30 June 2008 Gross Profit 171,890 800,000
$1,046,500
132
QUESTION 4.




Bank 30,000






Sales 90,000
133
QUESTION 5.
(a)
Purchases Issues Balance
Qty Unit$ Total Qty Unit $ Total Qty Unit $ Total
$ $ $
June 1 Balance 240 6.00 1,440
240 6.00 1,440

5 Purchase 160 5.50 880 160 5.50 880
400 2,320
9 Issue Job 562 140 6.00 840 100 6.00 600

160 5.50 880
260 1,480
15 Issue Job 566 80 6.00 480 20 6.00 120

160 5.50 880
180 1,000
19 Issue Job 571 20 6.00 120

80 5.50 440 80 5.50 440
100 560
80 5.50 440
21 Purchase 240 6.00 1,440 240 6.00 1,440
320 1,880
29 Issue Job 580 80 5.50 440

20 6.00 120 220 6.00 1,320
100 2,440
(b)
GENERAL JOURNAL
June 30 Work in process 2,440
Raw Materials control 2,440
Issue of direct materials
(c)
GENERAL JOURNAL
June 30 Cost of Goods Sold 120
Stocktake adjustment 20 x $6
134
QUESTION 6.
(a)
Employee Workings Gross Direct Indirect Sick
A. Chee 40 x $20 $800 $800
B. Huynh 36 x $16 $688 $576
6 x $16 $96
O/t prem: 2 x $8 $16
C. Chand 42 x $16 $688 $672
O/t prem: 2 x $8 $16
D. Napier 28 x $16 $640 $448
8 x $16 $128
4 x $16 $64
E. Beshay 40 x $16 $640 $640
$3,456 $1,696 $1,632 $128
Overtime paid = 4hrs x $16 x 1½ = $96
(b) (i)
GENERAL JOURNAL
Labour Control ($1,696 + 1,632) 3,328
Provision for Sick leave 128
PAYG Tax 700
Bank 2,756
( ii )
GENERAL JOURNAL
( iii )
GENERAL JOURNAL
Superannuation Fund 302
Superannuation guarantee payable ($3,456 - 96) x 9%
135
QUESTION 7.
PART A
( a ) Overhead application rate: ( 76,000 + 197,600 ) ÷ 19,000 = $14.40 per M/cH
(b)
Less Actual overhead Var $81,600 Over-applied overhead
Fix 201,000 282,600 $5,400
(c)
Factory Overhead Flexible budget @ 20.000 M/c hr Factory Overhead
Actual * V: 80,000 Applied
F: $197,600
$282,600 $277,600 $288,000

$5,000 Unfavourable $10,400 Favourable
Over-applied overhead $5,400
* Variable overhead rate = $76,000 ÷ 19,000 = $4 per M/c hr
Variable flexible budget = $4 x 20,000 M/c hr
PART B
(b)
Total Cutting Assembly Maintenance Factory Personnel
office
Budgeted Costs $246,000 $66,750 $70,500 $33,750 $43,500 $31,500
Re-allocation:
Maintenance 20,250 13,500 - 33,750
Factory office 17,400 26,100 - 43,500
Personnel 13,500 18,000 - 31,500
Total $246,000 $117,900 $128,100 0 0 0
Departmental rate: Cutting = $117,900 ÷ 10,000 = $11.79
Departmental rate: Assembly = $128,100 ÷ 21,000 = $6.10
PART C
(a) (i) Litres Cost
Less Lowest activity 160,000 11,600
Difference 80,000 $ 2,400
80,000

Total overhead cost $14,000 $11,600
Less variable cost: $0.03 x 240,000 7,200
$0.03 x 160,000 4,800
(b)
$13,550
136
QUESTION 8.
Bal b/d $13,350 $2,800 $16,150
Direct Materials 0 5,600 12,000 4,500 22,100
Direct Labour 1,175 4,400 9,250 1,000 15,825
Overhead Applied 1,410 5,280 11,100 1,200 18,990
TOTAL 15,935 18,080 32,350 6,700 73,065
(b) MATERIALS CONTROL

June 1 Bal b/d 35,000 June 30 Work in process 22,100
30 Accounts payable 24,700 Factory overhead con. 3,000
Bal c/d 34,600
$59,700 $59,700
LABOUR CONTROL
June 30 Accrued Payroll 29,000 June 1 Bal b/d 3,375
30 Work in process 15,825
Factory overhead con. 9,800
$29,000 $29,000

June 30 Bank 2,500 June 30 Factory Overhead App 19,300
Accounts payable 2,000
19,300 19,300

June 30 Factory Overhead Con 19,300 June 1 Bal b/d 420
Cost of Goods Sold 110 June 30 Work In Process 18,990
19,410 19,410
WORK IN PROCESS
June 1 Bal b/d 16,150 June 30 Finished Goods 66,365
30 Materials Control 22,100 Bal c/d (Job 326) 6,700
$73,065 $73,065
FINISHED GOODS
June 1 Bal b/d (Job 322) 17,075 June 30 Cost of Goods Sold 51,090
Work in process 66,365 Bal c/d (Job 325) 32,350
$83,440 $83,440
137
Paper 3 Solutions
QUESTION 1.
( a ) Direct Labour:
Variable manufacturing overhead 20,000 - 76,000
$ 74,000
( b ) Variable Conversion Cost:
Direct labour $ 74,000
$ 94,000
( c ) Product Cost:
Prime Cost $237,000
Variable manufacturing overhead 20,000 76,000
$ 313,000
( d ) Period cost:
$175,000
Fixed manufacturing overhead $ 56,000
Variable manufacturing overhead (20,000 / 20,000) x 25,000 25,000
$ 81,000
QUESTION 2. $ %
( a ) Contribution margin: Sales $80 100
Var Costs $60 75
Contribution Margin $20 25
(i) Break-even point (units) = $142,500 = 7,125 units

$20
( ii ) Sales required ($) = $142,500 + 50,000 = 9,625 units

$ 20
( iii ) Profit before tax required = $42,000 = $60,000

70%
Sales required ($) = $145,500 + 60,000 = 10,125 units

$ 20
(i) (a) $40,000

( ii ) (c) If sales fall by 25%, net profit will be nil.
138
QUESTION 3.
( a ) Namoi Ltd Manufacturing Statement for Six Months Ended 30 June 2008
$ $ $
DIRECT MATERIALS
Purchases 518,530
654,540
DIRECT LABOUR
FACTORY OVERHEAD
Purchases 73,980
Freight in 2,230
96,510
Factory insurances ($3,500 + [21,900 x 1/4 ]) 8,975
Factory lighting and power 20,460
Indirect labour ($95,240 – 900 ) 94,340 219,875
933,015
967,915
Less: Work in process 30 June 2008 - 31,500
(b) Namoi Ltd Trading Statement for Six Months Ended 30 June 2008
$ $
Sales 1,946,910
Purchases 135,170
1,284,705
Less Finished Goods Inventory 30 June 2008 210,490 1,074,215
Gross Profit $ 872,695
139
QUESTION 4.





Bank 25,000





Sales 120,000
140
QUESTION 5.
(a) RAW MATERIALS CONTROL
June 1 Bal b/d 46,990 June 30 Work in Process 19,600
30 Accounts Payable 20,830 Factory Overhead con. 2,820
Bank 540 Accounts Payable 700
Work in Process 700 Cost of Goods Sold 360
Bal c/d 45,580
69,060 69,060
(b)
F.I.F.O 50 8.10 405
10 8.30 83
60 488
GENERAL JOURNAL
July 11 Factory Overhead Control 488
Issue of factory supplies
QUESTION 6.
(a)
GENERAL JOURNAL
Labour Control ($25,992 + 2,916 + 4,835) 33,743
Administration Wages and Salaries 16,350
Provision for Annual Leave 1,607
PAYG Tax 11,260
Medical Fund 1,200
Bank 39,240
(b) (i) Direct Labour 1,290 hours x $18 = $23,220

Indirect Labour $33,743 - $ 23,220 = $10,523
( ii )
GENERAL JOURNAL
( iii )
GENERAL JOURNAL
Superannuation Fund 4,550
Prepaid W.C.I. 1,550
Labour related costs for September
141
QUESTION 7.
PART A
( a ) i Overhead application rate: 88,500 + 159,000 = $16.50 per M/cH
15,000
(b) ii
Less Actual overhead Var $92,800
Fix 160,000 252,800
Over-applied overhead $ 11,200
Factory Overhead Applied $ 11,200

Cost of Goods Sold $ 11,200
Transfer of over applied overhead
(b)
Factory Overhead Flexible budget @ 16.000 M/c H Factory Overhead
Actual * V: 94,400 ( 16,000 x 5.90 ) Applied
F: $159,000
$252,800 $253,400 $264,000

$ 600 Favourable $10,600 Favourable
Over-applied overhead $ 11,200
* Variable overhead rate = $76,000 = $4 per M/c H

19,000
PART B
(b)
Total Brewing Bottling Maintenance Factory office
Budgeted Costs $187,000 $49,500 $71,920 $28,700 $36,880
Re-allocation:
Maintenance 8,200 20,500 - 28,700
Factory office 23,050 13,830 - 36,880
Total $187,000 $ 80,750 $106,250 0 0
Departmental rate: Brewing = $80,750 ÷ 12,500 = $ 6.46
Departmental rate: Bottling = $106,250 ÷ 8,500 = $12.50
142
PART C
(a) (i) Litres Cost
Highest activity 600 $8,220
Less Lowest activity 200 4,100
Difference 400 $ 4,120
400
Total overhead cost $8,220 $4,100
Less variable cost: $10.30 x 600 6,180
$10.30 x 200 2,060
(b)
Variable cost component $10.30 x 550 5,665
$7,705
143
QUESTION 8.
Bal b/d $10,230 $10,230
Direct Materials 0 9,640 7,480 5,310 22,430
Direct Labour 500 3,180 2,560 4,100 10,340
Overhead Applied 500 3,180 2,560 4,100 10,340
TOTAL 11,230 16,000 12,600 13,510 53,340
(b) RAW MATERIALS CONTROL

Oct 01 Bal b/d 32,400 Oct 31 Work in process 22,430
Oct 31 Accounts payable 23,700 Factory overhead con. 2,350
Bal c/d 31,320
56,100 59,700
LABOUR CONTROL
Oct 31 Accrued Payroll 9,700 Oct 31 Work in Process 10,340
PAYG Tax Withheld 2,300 Factory overhead con. 2,860
Bal c/d 1,200
13,200 13,200

Oct 31 Accounts payable 3,100 Oct 31 Factory Overhead App 10,410
Accrued expenses 300
10,410 10,410

Oct 31 Factory Overhead Con 10,410 Oct 01 Bal b/d 810
Bal c/d 740 Oct 31 Work In Process 10,340
11,150 11,150
WORK IN PROCESS
Oct 01 Bal b/d 10,230 Oct 31 Finished Goods 39,830
Oct 31 Materials Control 22,430 Bal c/d (Job 818) 13,510
53,340 53,340
FINISHED GOODS
Oct 01 Bal b/d (Job 814) 8,750 Oct 31 Cost of Goods Sold 48,580
Work in process 39,830
48,580 48,580
144
Class Tests
145
Class Test 1
Name:………………………………….
QUESTION 1. ( Marks 10 )
Tassie Devil Pty Ltd has the following summarised costs:
Administration expenses $ 78,000
Depreciation - plant (straight-line) 12,000
Direct materials used 147,000
Fixed selling expenses 40,000
Indirect labour (variable) 14,000
Indirect material (variable) 10,000
Rates and insurances - factory premises 16,000
Sales commission expenses 35,000
All manufacturing costs are included in inventory cost.
Required:
Calculate the following total costs:
( a ) Fixed factory overhead cost.
( b ) Conversion cost.
( c ) Variable production cost.
( d ) Production cost.
( e ) Period cost.
The manager of the Kanga Restaurant prepared the following budget for next month:
Average revenue per meal (including drinks) $ 32
Average variable expense per meal 17
Fixed expenses (per month):

Chef and dishwasher's salaries 5,000
Cleaning of linen 500
Other expenses 3,500
Required:
( a ) Calculate the number of meals per month required to break-even.
( b ) What number of meals would be required for the restaurant to achieve a monthly
net profit of $4,500 (before tax)?
( c ) Given a tax rate of 30%, what number of meals would be required to earn a net
profit of $4,200 after tax?
( d ) Cleaning of linen is currently done by restaurant staff. If this cleaning was done by
a local laundry there would be a saving of $500 in fixed expenses, but variable
expenses would increase by an average of $1.40 per meal.
(i) Calculate the new break-even point for the restaurant.
( ii ) Having regard to your answer in (d) (i) above, should the manager have the
linen cleaned by the local laundry? Explain you answer.
146
Thai Ltd produces conveyor belts. Rubber, polyester fabric and steel cord are coated with
direct materials. The following financial information is for the year to 30 June 2009:
01/07/08 30/06/09
Inventories:
Raw Material $ 29,900 $ 33,730
Indirect Materials 2,840 3,270
Work in Process 13,590 18,520
Finished Goods 51,510 47,350
Prepaid factory insurance 1,850 ?
Accrued electricity:
Factory 2,480 2,600
Administration 380 420
Sales 906,810
Other operating income 6,250
Customs duty – Raw Material 5,470
Discount allowed 9,540
Electricity paid:
Factory 15,240
Administration 2,400
Factory insurance - annual premium due and paid 1/12/08 4,560
Freight inwards:
Raw Material 8,040
Indirect Materials 690
Freight outwards 18,050
Interest on bank loan 11,090
Purchases:
Raw Material 206,230
Indirect Materials 15,760
Other selling and administrative expenses 105,880
Repairs to plant & machinery 8,790
Wages and salaries:
Productive labour 82,340
Non Productive labour 29,520
Selling and administration 65,100
Other information:
Factory plant & machinery at cost 1/7/08 (depreciated straightline @ 15% p.a.) 143,000
Required:
Prepare the following classified statements for the year ended 30 June 2009:
( a ) Manufacturing statement.
( b ) Trading statement.
147
Milly Manufacturing Coy has the following inventories on hand at June 1st:
Raw Materials $ 20,000
The following relates to June operations:

( a ) Materials Purchased on credit $ 60,000
(b) Materials returned to suppliers 10,000
(c) Materials issued for production:

Direct 40,000
Indirect 18,000
(d) Total Payroll incurred:

Direct Labour ( $30 per hour ) 90,000
(e) The payroll due to employees was paid after deducting 30% for income tax
withheld.
(f) Overhead incurred (in addition to indirect materials and indirect labour)
amounted to $20,000 comprising:
Depreciation of Plant $ 9,000
Expired Insurance $ 6,000
Factory Rent $ 5,000
(g) Factory Overhead is applied at the rate of $20.00 per direct labour hour.
(h) Finished goods completed during June amounted to $180,000
(i) Goods costing $200,000 were sold during the period at a mark-up on cost of 50%
(j) Selling expenses were $16,000 and Administration expenses incurred during the
month were $14,000.
(k) Any under / overapplied overhead is accounted for at the end of each year.
Required:
Prepare journal entries to record May transactions in the General Ledger.
148
Class Test 1 Name:………………………………
QUESTION 1
(a)
(b)
(c)
(d)
(e)
149
QUESTION 2.
Workings
(a)
(b)
(c)
(d) (i)
( ii )
150
QUESTION 3.
(a)
(b)
151
QUESTION 4.
152
Class Test 1 Solutions:
QUESTION 1
( a ) Fixed factory overhead cost:

Depreciation - plant (straightline) $12,000
Rates and Insurances — factory premises 16,000
$28,000
( b ) Conversion cost:
Direct Labour $55,000
Fixed Factory overhead (from above) 28,000
Indirect Material 10,000
$107,000
( c ) Variable production cost:

Direct Materials used $147,000
Indirect Material 10,000
$226,000
( d ) Production cost:
Fixed Factor Overhead from (a) $28,000
Variable production cost from (c) 226,000
$254,000
( e ) Period cost:
Administration expenses $78,000
Fixed selling expenses 40,000
Sales commission expenses 35,000
$153,000
153
QUESTION 2.
Contribution margin per meal: Total fixed expenses:
Revenue per meal $32 Chef and dishwasher's salaries $5,000
Less Variable expense per meal 17 Cleaning of linen 500
CM per meal 15 Other expenses 3,500
$9,000
(a) $9,000
Break-even point (meals) - = 600 meals
$15
(b) $9,000 + 4,500

Number of meals required - = 900 meals
$15
(c) $4,200
Profit before tax required - = $6,000
%70
$9,000 + 6,000
Number of meals required = = 1,000 meals
$15
(d) (i)
New Contribution margin per meal:
Revenue per meal $32.00
Less Variable expense per meal 18.40
CM per meal 13.60
New break-even point (meals) = $8,500 625 meals

$13.60
( ii )
If linen is cleaned by the local laundry the break-even point for the restaurant will
be higher, making it more difficult to earn a profit. Linen should therefore be
cleaned by restaurant staff.
154
QUESTION 3.
(a)
Thai Ltd
Manufacturing Statement for the Year Ended 30 June 2009
DIRECT MATERIALS $ $ $
Purchases 206,230
Customs duty 5,470
Freight in 8,040
249,640
Inventory 30 June 2009 - 33,730 215,910
DIRECT LABOUR
Productive labour 82,340 82,340
FACTORY OVERHEAD
Indirect materials used:
Inventory - 1 July 2008 2,840
Purchases 15,760
Freight in 690
19,290
Less: Inventory 30 June 2009 - 3,270 16,020
Factory electricity ($15,240 - 2,480 + 2,600) 15,360
Factory insurances ($1,850 + 4,560 x 7/12) 4,510
Repairs to plant & machinery 8,790
General factory labour 29,520
Depreciation—Factory P & M ($143,000 x 15%) 21,450 95,650
393,900
13,590
407,490
(b)
Thai Ltd
Trading Statement for the Year Ended 30 June 2007
Sales 906,810
Less Cost of Goods Sold:
Finished Goods 1 July 2006 51,510
Purchases 39,810
484,160
Less Finished Goods 30 June 2007 47,350 436,810
Gross Profit $470,000
155
QUESTION 4.
General Ledger Debit Credit
(a) Raw Materials Control 60,000
(b) Accounts Payable 10,000

(c) Work in Progress 40,000

(d) Work in Progress 90,000

(e) Labour Control 120,000


Bank 84,000
PAYG liability 36,000
(f) Factory Overhead Control 20,000

Acc Depreciation - Plant 9,000
Prepaid Insurance 6,000
Bank 5,000

(g) Work in Progress 60,000

(h) Finished Goods 180,000

(i) Cost of Goods Sold 200,000

Sales 300,000
(j) Selling Expenses 16,000

Administration Expenses 14,000
(k) Cost of Goods Sold 8000

156
Class Test 2
Name:………………………………….
( a ) Hanna uses a perpetual inventory system. The business specialises in the custom
manufacture of molded concrete products for the building industry. Cement, sand,
aggregate and steel are accounted for as direct materials, while all other materials
are indirect. The following transactions (relating to the operation of the factory
store) are provided for October 2009:
$
Materials on hand 1 October 2009 74,100
Purchases on credit of cement 43,500
Purchases on credit of other materials 12,980
Freight paid for materials delivered to the store 2,360
Issues of cement 45,090
Issues to the factory of other materials 11,270
Cement issued to a job was found to be the faulty and returned from the 840
factory to the store. The store then returned it to the supplier
Payments to accounts payable 57,320
Discounts received 510
Gross wages of store employees 4,980
Materials on hand 31 October 2009 (from physical stocktake) 75,830
Required:
Prepare the Materials Control account from the above information. Your answer
should show correct 'particulars' (correct names for the other ledger accounts
involved).
(b) Matro Ltd uses a perpetual inventory system. Inventory on hand at 1 August 2009
of an indirect material item used in the factory was 30 units @ $18 each.
During August the following transactions occurred:

Aug 3 Purchased 30 units @ $18.50 each
8 Issued 40 units
Required:
Using the first-in, first-out inventory costing method, prepare a general journal
entry to record the issue on 8 August.
157
Freeo Industries Ltd employs seven wage employees in its factory. All employees are paid
$ 18 per ordinary hour for a normal 40 hour working-week.
• Payroll records for the factory recorded the following total labour hours for
November:
1,080 Ordinary hours worked (including 900 hours on jobs)

40 Annual leave hours taken
1,120 Total hours paid
Total payroll deductions from gross pays for these employees for November were:
$
PAYG tax instalments 3,528
Superannuation fund 1,000
Medical fund 1,200
Company policy is to charge annual leave paid against the liability account
Provision for Annual Leave. All employees are entitled to a leave loading of 17 1/2%
• The company's superannuation guarantee liability for these employees for

November is $1,815.
• Each of the seven factory employees of E.M.U. Industries has an annual entitlement
of four weeks leave plus 17 1/2% loading. The company accrues/provides for
annual leave equally over each month of the year.
• All accounts are in a single ledger.
Required:
Prepare general journal entries to record the following:
( a ) Gross factory pays for November and the payment of net pays.
(b) Allocation of the labour cost as direct and/or indirect.
(c) Accrual of the company's superannuation guarantee liability.
(d) Accrual/provision of the annual leave entitlement for November.
158
Part A Based on an annual production level of 120,000 machine hours (30,000 units), the
estimated factory overhead costs of Oz Ltd would be variable $252,000 and fixed $96,000
(Total $348,000). Factory overhead is applied at a rate per machine hour.
Actual production for the year was 124,000 machine hours, and overhead incurred was
$358,900.
Required:
( a ) Calculate the predetermined overhead rate per machine hour.
( b ) Determine the amount of over or under-applied overhead. Your answer must
clearly state whether the calculated amount is over or under-applied.
( c ) Analyse over/under-applied overhead into a spending (budget) variance and a
capacity (volume) variance.
Part B Bozz Ltd has prepared an annual budget for factory overhead costs for each of its
four factory departments as shown below:
Departments Cost ($) Cost Driver
Cutting 158,100 Direct labour hours
Assembly 169,200 Direct labour cost
Stores 75,600 Material requisitions
Maintenance 105,600 Maintenance hours
Total 508,500
Estimated operating statistics for this year are:
Direct labour Direct labour Material Maintenance
Departments
hours cost ($) requisitions hours
Cutting 22,500 382,500 1,200 4,000
Assembly 15,000 260,000 600 2,400
Stores 150 210
Maintenance 150 430
Total 37,500 642,500 2,100 7,040
Required:
( a ) Calculate a plant-wide overhead rate based on direct labour hours.
( b ) Calculate departmental overhead rates assuming the service departments' costs are
allocated using the direct method.
Part C
A manufacturer incurred the following indirect material costs over the past five years:
Year 2004 2005 2006 2007 2008
Direct labour hours ( hrs ) 6,000 5,500 6,700 7,500 8,500
Cost ( $ ) 16,800 16,200 18,750 21,000 22,500
Indirect materials are considered to be a semi-variable cost.

Required:
( a ) Use the high-low method to calculate the flexible budget formula based on direct
labour hours.
( b ) If 8,000 direct labour hours are estimated for 2009, how much should be budgeted
for this cost?
159
Mel Bourne Pty Ltd manufactures awnings to customer specifications. Job costing is used.
The following financial particulars are for September 2009.
Details of work in process and finished goods inventories at 1 September:

$
Finished goods Job No. 90 6,650
Finished goods Job No. 91 9,270
Work in process Job No. 92 6,340
Transactions for the month:

( i ) Purchase of materials on credit. $ 14,160
( ii ) Summary of materials requisitions -

Job No. 93 3,190
Job No. 94 1,970
Job No. 95 3,760
Job No. 96 1,880
Indirect 2,900 13,700
( iii ) Summary of labour time records -

Job No. 92 880
Job No. 93 2,140
Job No. 94 1,500
Job No. 95 2,490
Job No. 96 970
Indirect 2,720 10,700
( iv ) Factory wages paid - Gross $ 10,700

- PAYG Tax 2,050 8,650
(v) Invoice for sub-contract work on Job No. 94. 400
( vi ) September invoices received for factory overhead. 1,520
( vii ) Depreciation of factory plant and equipment at 10% p.a. on cost of $117,600.
( viii ) Factory overhead is applied to jobs at 100% of direct labour cost.
At 30 September Job No. 96 was incomplete. All completed jobs were sold in September,
except for Job No. 95.
Required:
( a ) Prepare a Job Card Cost Summary for September.
( b ) Prepare entries in general journal form to record the above transactions.
160
Class Test 2 Name:……………………………..
QUESTION 1
(a)
(b)
QUESTION 2.
161
QUESTION 3
PART A
(a)
(b)
(c)
PARTB
(a)
(b)
Total Cutting Assembly Stores Maintenance
Budgeted Costs $508,500 $158,100 $169,200 $75,600 $105,600
Re-allocation:
Stores
Maintenance
Total
162
PART C
(a)
(b)
QUESTION 4.
163
(b)
164
Class Test 2 Solutions:
QUESTION 1
(a) Raw Materials Control
Oct 1 Balance b/d 74,100 Oct 31 Work in Process 45,090
31 Accounts Payable 43,500 Factory Overhead 11,270
Accounts Payable 12,980 Accounts Payable 840
Bank 2,360 Cost of Goods Sold 750
Work in Process 840 Balance c/d 75,830
133,780 133,780
Nov 1 Balance b/d 75,830
(b) FIFO cost:

40 units issued =
30 x $18.00 = $540
10 x $18.50 = 185
$725
GENERAL JOURNAL
August 8 Factory overhead control 725
Materials control 725
QUESTION 2.
(a) GENERAL JOURNAL
Nov 30 Labour Control (1,080 x $18) 19,440
Provision for Annual leave (40 x $18 x 1.175) 846
PAYG Tax 3,528
Medical Fund 1,200
Gross factory payroll for November 14,558
Accrued Payroll
Bank 14,558
(b) GENERAL JOURNAL
Nov 30 Work in Process (900 x $18) 16,200
Factory Overhead Control (180 x $18) 3,240
Allocation of factory labour for month
(c) GENERAL JOURNAL
Nov 30 Factory Overhead Control 1,815
Superannuation guarantee liability
(d) GENERAL JOURNAL
Nov 30 Factory Overhead Control 1,974
Provision for Annual Leave 1,974
Annual leave provision (7 x 4 x 40 x $18 x 1.175 / 12)
QUESTION 3
165
PART A
(a)
$348,000
Overhead recovery rate: = $2.90 pet M/c H
120,000
(b)
Less Actual overhead $358,900
Over-applied overhead $ 700
(c)
Flexible budget
@ 124,000 M/c H
Annual O/h F: $ 96,000 Applied O/h
*V: 260,400
$358,900 $356,400 $359,600

$2,500 Unfavourable $3,200 Favourable
Over-applied overhead $700
* Variable overhead rate = $252,000 - 120,000 = $2.10 per M/c Hr
Variable flexible budget = $2.10 x 124,000 M/c H
PARTB
(a)
Plant-wide overhead rate = $508,500 + 37,500 = $13.56 per DLH
(b)
Total Cutting Assembly Stores Maintenance
Budgeted Costs $508,500 $158,100 $169,200 $75,600 $105,600
Re-allocation:
Stores 50,400 25,200 - 75,600
Maintenance 66,000 39,600 - 105,600
Total $508,500 $274,500 $234,000 0 0
Departmental rate: Cutting = $274,500 = $12.20 per DLH

22,500
Departmental rate: Assembly = $234,000 = 90 % of Direct Labour Cost

$260,000
166
PART C
(a)
DLH Cost
Less Lowest activity 5.500 16.200
Variation 3,000 6,300
$6,300
Variable cost = $2.10 pet direct labour hour
3,000
Highest OR. Lowest

Total overhead cost $22,500 16,200
Less variable cost: $2.10 x 8,500 17,850
$2.10 x 5,500 11,550
Fixed cost per year $4,650 $4,650
Flexible budget formula: $4,650 + $2.10 per DLH
(b)
Budgeted cost for 2009 $21,450
167
QUESTION 4.
Job 92 Job 93 Job 94 Job 95 Job 96 TOTAL
Bal b/d $6,340 $6,340
Direct Materials 0 $3,190 $1,970 $3,760 $1,880 10,800
Direct Labour 880 2,140 1,500 2,490 970 7,980
F.O.A. 880 2,140 1,500 2,490 970 7,980
Sub-contracting 400 400
TOTAL 8,100 7,470 5,370 8,740 3,820 33,500
(b)
GENERAL JOURNAL
Sep 30 ( i ) Raw Materials Control 14,160
( ii ) Work in Process 10,800

( iii ) Work in Process 7,980

PAYG Tax Withholding 2,050
( iv ) Accrued Payroll 8,650
Bank 8,650
( v ) Work in Process 400

Accounts Payable 400
( vii ) Factory Overhead Control 1,520

( vii ) Factory Overhead Control 980

Accumulated Depreciation - Plant & Equipment 980
( 10% x $117,600 x 1/12 )
( viii ) Work in Process 7,980


( $33,500 - 3,820 )

( $6,650 + 9,270 + 8,100 + 7,470 + 5,370 )
168

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Management

Colin Davy and Danny Bruce

Chapter 2: Manufacturing & Trading Statements ..........................11

Chapter 3: Cost-Volume-Profit Analysis......................................... 28

Chapter 4: The Cost Accounting Cycle........................................... 42

Chapter 5: Material & Labour........................................................ 59

Chapter 6: Overhead Allocation ..................................................... 79

Chapter 7: Job Costing.................................................................... 87

Chapter 8: Responsibility Accounting ...........................................114

Chapter 9: Review Examinations ................................................. 122

Chapter 10: Class Examinations ................................................... 145

Fourth Edition 2008

Chapter 1: Cost Concepts

The classification is primarily useful in organising the accumulation of data to prepare

3. (a) (i) Indirect (b) (i) Direct Material

(c) (i) Fixed (d) (i) Product

(e) (i) Fixed

(f) (i) All direct costs of production.

4. (a) (i) Fixed cost remain constant in total. - rent

(b) See text.

5. (a) Indirect, fixed

Management accounting is designed to facilitate internal decision-making, financial

Management accounting does not conform to rules or accounting standards.

Sales Gross Profit Gross Profit Rate

12. See Text

= 280 + (280 x 0.50) = $420

14. (a) Sales Mix

(c) Selling Price = Cost + ( Cost x Markup )

Markup = Selling Price - Cost

Product Gross Profit C.O.G.S Markup

(d) Product Gross Profit Sales Gross Profit Rate

- Product z is achieving a high margin return possibly due to special sales or

(b) Outer Metro

(c) Assume variable costs are a constant percentage of sales.

CBD x = 3,500 + 0.50 x

where x = sales breakeven $

Inner Metro x = 3,500 + 0.45 x

Outer Metro x = 3,500 + 0.40 x

Break even quantity = Fixed Cost = $110,000 1,000 units

Contribution Margin: $110

(b) Contribution Margin = Variable Cost x 120%

Variable Cost = Contribution Margin = $2.40 = $2.00

Fixed Costs $4.00 140,000/35,000 New Fixed Costs = $140,000 x 1.2

21. Prime Cost $ 900,000

Variable Mfg Cost $1,000,000

Variable Mfg Cost $1,000,000

ii Direct Labour Cost Conv Costs - Factory Overhead

iii Direct Material Cost Prime Costs - Direct Labour

iv Total Variable Mfg Costs Proct Costs - Fixed Factory Overhead

Note: Total mfg cost comprises

(b) Period cost

(c) Fixed manufacturing cost

26. Fanuli Manufacturing Co.

(a) Prime cost per unit = DM + DL

(b) Conversion cost per unit = DL + O/H

(c) Product Cost

(d) Contribution Margin per Unit. (e) %

(f) Break even quantity = Fixed Cost = $6,000 2,000 units

27. ( a ) Conversion cost: