Management Accounting

Topics: Variable cost, Costs, Marginal cost Pages: 7 (1028 words) Published: December 26, 2012
Question 1

a) Total Cost :-
= 240,000 + $10 * (20,000)
= 240,000 + 200,000
= 440,000

Single rate :-
= 440,000 / 20,000
= $22 per hour

In turn, single-rate budgeted amounts should be :-

For Night Light Division :-
= (9,600 * $22) / 12
= $17,600 per month

For Flashlight Division :-
= (5,400 * $22) / 12
= $9,900 per month

b) Since single rate = $22 per hour
In turn, single-rate allocated amounts should be :-

For Night Light Division :-
= 700 * $22
= $15,400 for the month of Juner

For Flashlight Division :-
= 400 * $22
= $8,800 for the month of June

c) Fixed rate :-
= 240,000 / 20,000
= $12 per hour
Variable rate = $10

In turn, dual-rate budgeted amount should be :-

For Night Light Division :-
= 12 * 9,600 + 10 * 5,400
= 115,200 + 54,000
= 169,200
In addition, 169,200 / 12 = $14,100 per month

For Flashlight Division :-
= 12 * (700*12) + 10 * (400*12)
= 100,800 + 48,000
= 148,800
In addition, 148,800 / 12 = $12,400 per month

d) Since Fixed rate = $22 per hour
And Variable rate = $10

In turn, dual-rate allocated costs should be :-

For Night Light Division :-
= $12 * 800 + $10 * 700
= 9,600 + 7,000
= $16,600 for the month of June

For Flashlight Division :-
= $12 * 450 + $10 * 400
= 5,400 + 4,000
= $9,400 per year

e) Since the single-rate cost allocation method just allocates each cost to the cost object by using same rate of single unit. As a result, it does not making any difference between fixed cost & variable cost. However, the dual-rate allocation method is using different cost allocation base(actual & budgeted) to calculate the costing. So that it is considered a practical way for financial controller of the company.

Question 2

a)
|Product |Board feet |Splitoff Point(per |Sales Value |Percent |Allocated | | | |board feet) | | | | |2 X 4’s |6,000,000 |$0.3 |6,000,000 * 0.3 = 1,800,000|1,800,000 / 4,000,000 |280,000 * 45% | | | | | |= 45% |=126,000 | |2 X 6’s |3,000,000 |$0.4 |3,000,000 * 0.4 = 1,200,000|1,200,000 / 4,000,000 |280,000 * 30% | | | | | |= 30% |= 84,000 | |4 X 4’s |2,000,000 |$0.45 |2,000,000 * 0.45 = 900,000 |900,000 / 4,000,000 |280,000 * 22.5% | | | | | |= 22.5% |= 63,000 | |Slabs |1,000,000 |$0.1 |1,000,000 * 0.1 = 100,000 |100,000 / 4,000,000 |280,000 * 2.5% | | | | | |= 2.5% |= 7,000 | |Total | | |$4,000,000 |100% |$280,000 |

In turn the value of ending inventory should be :-

For product 2 X 4’s :-
= (500,000 / 6,000,000) * 126,000
= $10,500

For product 2 X 6’s :-
= (250,000 / 3,000,000) * 84,000
= $7,000

For product 4 X 4’s :-
= (100,000 / 2,000,000) * 63,000
= $3,150

For Slabs :-
= (50,000 / 1,000,000) * 7,000
= $350

b) It is considered the extraction process of ore spending more money than silver. In turn, the finished product will be needed a high costing. Regarding to this problem, Silver Company shall use a joint-costing based accounting method. It is because each finished products can share the cost of extraction. As a...
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