Discuss one of the costing systems you found interesting in this unit from the list below, and provide 2 reasons what was interesting about it to you.

Discuss one of the costing systems you found interesting in this unit from the list below, and provide 2 reasons what was interesting about it to you.

Question 1 (7 marks)
a) Discuss one of the costing systems you found interesting in this unit from the list below, and provide 2 reasons what was interesting about it to you. (3 marks)
Students to reflect on any one of the costing systems stated below:
• Job Costing system
• Process Costing system
• Hybrid Costing or Operation Costing system
• Service Costing system
Word limit 250
ANSWER a): (answer box will enlarge as you enter your response)
b) The following financial information is for Khatri Boots Ltd, a safety boots manufacturer.
June 30, 2023 June 30, 2022
Raw materials inventory $ 15 000 $ 10 000
Work-in-process inventory 80,000 95 000
Finished goods inventory 250 000 310,000
Of the total raw materials placed in production for the year, $10 000 was for indirect materials. Khatri Boots had $1 200 000 in sales for the year ended June 30, 2023. The company also had the following costs for the year:
Selling $ 40 000
General and administrative $140 000
Raw materials purchases $180 000
Direct labour used in production $115 000
Depreciation of factory building $100 000
Insurance on factory $ 30 000
Factory Utilities $ 95 000
Depreciation on factory equipment $ 20 000
Repairs and Maintenance on factory $ 35 000
Indirect materials $ 10 000
Indirect labor $ 35 000
Prepare a schedule of cost of goods manufactured for the year ended June 30, 2023. (4 marks)
Question 2 (11 marks)
a) Explain the hierarchy of activities concept and its relevance in an activity-based product costing system. Include an example of each type of cost in the hierarchy in your answer. (5 marks)
b) Hilltop Ltd applies overhead on the basis of machine hours and reports the following information:
i. What is the predetermined overhead rate? (1.5 marks)
ii. How much overhead was applied during the year? (1.5 marks)
iii. Was overhead over- or underapplied, and by what amount? (2 marks)
iv. Explain how the over- or underapplied overhead in (iii) is treated in the accounting records. (1 mark)
Question 3 (7 marks)
Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its 1st quarter budget: July – September. Budgeted sales are as follows:
Month Sales ($) Units sold
May 250,000 2,500
June 280,000 2,800
July 350,000 3,500
August 400,000 4,000
September 300,000 3,000
October 360,000 3,600
Additional information:
i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase.
ii) Ending inventory must equal 40% of the next month’s sales.
v) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale.
v) The balance in the bank account as at 30 June is $10,000.
a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales). (3 marks)
b) Prepare the schedule of expected cash collections from Accounts Receivable for 1st quarter. (2 marks)
c) Comment on the company’s credit collection policy. (2 marks)
Question 4 (7 marks)
a) Name two (2) non-financial performance measures for a Preschool that provides early education and care for children aged between 3 and 6 years old. Make sure that your measures are specific to the type of business. (2 marks)
b) Gaming Ltd has two divisions—Computer Games and Video Games. Segmented income statement information for the most recent year ended June 30 is shown as follows. Assume average operating assets totalled $16 000 000 for the Computer division and $17 500 000 for the Video division.
i) For each division, calculate operating profit margin, asset turnover, and resulting ROI. (3 marks)
ANSWER b (i):
ii) Which division has the highest ROI and provide reasons for this? (1 mark)
ANSWER b (ii):
iii) For the division that has the lowest ROI, suggest ways to improve this ratio? (1 mark)
ANSWER b (iii):
Question 5 (11 marks)
Engine Ltd manufactures engines for speed boats. Its popular engine called ‘ignite’ is currently under review. Cost and revenue data, based on sales of 5,000 units, is given below:
The cost of goods sold consists of $1 000 000 variable expense with the balance being fixed. Selling and administration expense consists of $250 000 variable expense with the balance being fixed.
a) Restate the above income statement using the contribution income statement format. (3 marks)
b) Calculate the break-even point in units. (2 marks)
c) Calculate the margin of safety at the present sales level in dollars. (2 marks)
d) Engine Ltd received an order for 50 units at a price of $420.00. There will be no increase in fixed costs and variable costs on the 50 units will be reduced by $1.50 per unit in packaging costs. The company has excess capacity to produce the order. Determine the projected increase or decrease in profit from the order. (2 marks)
e) Discuss the weaknesses of the CVP analysis technique as a financial planning tool. Can flexible budgets be used to overcome its weaknesses? Explain. (Word limit: 200 words) (2 marks)
Question 6 (7 marks)
a) Differential or incremental analysis is used to decide whether to accept a special one-time order made by a customer. However, organizations must be careful to consider the long-run implications of accepting a special order.
Discuss the long-run implications of accepting a special order. (2 marks)
b) Vinod Patel Ltd has the following data concerning a model electric train it manufactures:
Variable manufacturing cost $ 120
Applied fixed overhead $ 80
Variable selling and administrative cost $ 40
Allocated fixed selling and administrative cost $ 25
i. If the company uses cost-plus pricing based on manufacturing costs, determine the mark-up percentage used by the company to obtain a selling price of $300. (3 marks)
ANSWER b (i):
ii. Determine the selling price if the company uses full cost pricing method plus 60% mark-up. (2 marks)
ANSWER b (ii):
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