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Assessment Task 1 — Assignment
Due date: Thursday of Week 9 (4.00 pm AEST)
ASSESSMENT
Weighting: 30% 1
Assessment details for ALL students
Objectives
This assessment item relates to the course learning outcomes 1 7.
Details of the assignment:
Question 1 30 Marks
Glass Designs Ltd manufactures decorative glass bowls. The firm employs a process
costing system for its manufacturing operations. All direct materials are added at the
beginning of the process, and conversion costs are incurred uniformly throughout the
process. The company’s production quantity schedule for March 2013 is as follows:
Units
Work in process on 1 March (60% complete as to conversion) 2,000
Units started during March 10,000
Total units to account for 12,000
Units from beginning work in process, which were completed and
transferred out during March
2,000
Units started and completed during March 6,000
Work in process on 31 March (20% complete as to conversion) 4,000
Total units accounted for 12,000
Cost information:
Costs of Work in process (1 March):
? Materials…………………….. $ 40,000
? Labour ………………………. $ 12,000
? Overhead …………………….$ 6,000
Costs added during the month (March) were as follows:
? Materials…………………….. $ 200,000
? Labour ………………………. $ 76,000
? Overhead …………………….$ 38,000
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Required:
(a) Prepare a schedule of equivalent units for each cost element for the month of March
using the weighted average method. (6 marks)
(b) Prepare a schedule of equivalent units for each cost element for the month of March
using the first in first out (FIFO) method. (6 marks)
(c) Calculate the cost (to the nearest cent) per equivalent unit for each cost element for
the month of March using the weighted average method. (3 marks)
(d) Calculate the cost (to the nearest cent) per equivalent unit for each cost element for
the month of March using the first in first out (FIFO) method. (3 marks)
(e) Determine the cost of ending work in process and the cost of finished goods
transferred out during March using the weighted average method. (6 marks)
(f) Determine the cost of ending work in process and the cost of finished goods
transferred out during March using the first in first out (FIFO) method. (6 marks)
Question 2 30 Marks
Beta Company Ltd manufactures two products (product X & product Y) in two production
departments (Department 1 & Department 2). Product X is a simple, high volume product
and product Y is a complex, low volume product. Both products are processed in
departments 1 and 2. Product X uses only one raw material (W), but product B uses two raw
materials (W and Z). Table 1 provides data on the production, sales, selling prices and costs
incurred for the last year ended 30 June 2012.
Table 1: Production, Sales, selling prices and Costs
Product X Product Y Costs
Production and Sales 500,000 units 12,500 units
Selling Price per Unit $78 $133
Direct Materials:
Raw material W 60,000 Kilograms 2,000 Kilograms $744,000
Raw Material Z 1,250 units $120,000
Direct Labour:
Department 1 150,000 hours 5,000 hours $2,325,000
Department 2 75,000 hours 2,500 hours $1,550,000
Production Overhead Cost:
Department 1 $9,610,000
Department 2 $6,277,500
Non production Overhead Cost $1,982,120
Under the traditional costing system Beta Company Ltd allocated production overhead cost
to products using departmental overhead rates based on direct labour hours (for both
departments). Non production overhead cost was absorbed on a sales volume basis.
The Manager (Mr Ahmed) argues that traditional costing ignores the different complexity of
products X and Y as it allocates production and non production overhead cost based on
volume based overhead application rates such as direct labour and sales volume.
Beta Company Ltd attempts to overcome the problem of cost distortions resulting from the
traditional costing system. They consider introducing the ABC costing system that attributes
costs to products based on the activities they demand. Table 2 presents the activities, cost
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drivers and costs identified by Beta Company Ltd’s management accountants for applying
the ABC costing system.
Table 2: Activities, Cost Drivers and Costs
Activities Activity Cost Driver Activity Cost ($)
Received Materials Number of times materials are received 1,250,000
Materials Handlings Number of times materials are moved 1,500,000
Set up of Machines Set up hours 2,400,000
Running of Machines Number of machine hours 5,137,500
Quality Control Number of units inspected 3,100,000
Machine Maintenance Hours of machine maintenance 2,500,000
Delivery to Customer Number of kilometres 1,189,380
Customer Liaison Number of customer visits 792,740
Activity Cost Driver volumes by product are given in Table 3.
Table 3: Activity Cost Driver Volumes
Activity Cost Driver Product X Product Y Total
Number of times materials are received 13,000 7,000 20,000
Number of times materials are moved 90,000 35,000 125,000
Set up hours 30,000 10,000 40,000
Number of machine hours 487,805 12,195 500,000
Number of units inspected 25,000 15,000 40,000
Hours of machine maintenance 100,000 25,000 125,000
Number of kilometres 110,000 40,000 150,000
Number of customer visits 3,750 1,250 5,000
Required:
(a) Calculate full unit cost for products X and Y under the traditional costing system.
(6 marks)
(b) Calculate full unit cost for products X and Y under the new activity based costing
(ABC) system. (9 marks)
(c) Calculate the difference between the full unit cost for products X and Y calculated
under the traditional costing system and that calculated under the ABC costing
system. (3 marks)
(d) Explain the differences calculated in (c) above for both products. (3 marks)
(e) Calculate the difference between product costs of both products and their respective
current selling prices based on the traditional costing system. (3 marks)
(f) Calculate the difference between product costs of both products and their respective
current selling prices based on the ABC costing system. (3 marks)
(g) Identify and explain to Mr Ahmed the possible advantages and disadvantages of
adopting the ABC costing system. (3 marks)
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Important points
? Use the question numbers to indicate which question you are answering.
? The assignment should be prepared using a Word Processing Package or an excel
sheet.
Submission requirements
You must submit this assignment electronically.
Submit electronic copies of the following two documents:
? your answers to the assignment questions
? a signed assessment cover sheet that is available on the university website
Instructions for generating your cover sheet are at:
http://dtls.cqu.edu.au/FCWViewer/getFile.do?id=23407
Ensure your name and your student ID number appear on your answers and on the
marking criteria sheet.
Assessment criteria
The marking criteria sheet at the end of the assignment indicates the allocation of marks for
the assignment. Please submit an electronic copy of this marking criteria sheet
including your name and your student ID with submitting your assignment.
Note: there is a 5% penalty per day for late submissions.
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Marking criteria sheet
Student name: Student ID number:
Assessment criteria Your
marks
Total
marks Comments
Question 1
Prepare a schedule of equivalent units for each cost element
for the month of March using the weighted average method 6
Prepare a schedule of equivalent units for each cost element
for the month of March using the FIFO method 6
Calculate the cost (to the nearest cent) per equivalent unit
for each cost element for the month of March using the
weighted average method
3
Calculate the cost (to the nearest cent) per equivalent unit
for each cost element for the month of March using the FIFO
method
3
Determine the cost of ending work in process and the cost of
finished goods transferred out during March using the
weighted average method
6
Determine the cost of ending work in process and the cost of
finished goods transferred out during March using the FIFO
method
6
Total marks for Question 1 30
Question 2
Calculate full unit cost for products X and Y under the
traditional costing system 6
Calculate full unit cost for products X and Y under the ABC
costing system 9
Calculate the difference between the full unit cost for
products X and Y calculated under the traditional costing
system and that calculated under the ABC costing system.
3
Explain the differences calculated in (c) above for both
products. 3
Calculate the difference between product costs of both
products and their respective current selling prices based on
the traditional costing system.
3
Calculate the difference between product costs of both
products and their respective current selling prices based on
the ABC costing system.
3
Identify and explain to Mr Ahmed the possible advantages
and disadvantages of adopting the ABC costing system.
3
Total marks for Question 2 30
Total marks for assignment 60
To be reduced to
a mark out of 30%
Attachments:
Assessment it….pdf