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
Required:
Prepare a schedule of cost of goods manufactured for the year ended June 30, 2023. (4 marks)
ANSWER b)
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)
ANSWER a):
b) Hilltop Ltd applies overhead on the basis of machine hours and reports the following information:
Required:
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)
ANSWER b):
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.
Required:
a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales). (3 marks)
ANSWER a):
b) Prepare the schedule of expected cash collections from Accounts Receivable for 1st quarter. (2 marks)
ANSWER b):
c) Comment on the company’s credit collection policy. (2 marks)
ANSWER c):
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)
ANSWER a):
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.
Required:
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.
Required:
a) Restate the above income statement using the contribution income statement format. (3 marks)
ANSWER a):
b) Calculate the break-even point in units. (2 marks)
ANSWER b):
c) Calculate the margin of safety at the present sales level in dollars. (2 marks)
ANSWER c):
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)
ANSWER d):
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)
ANSWER e):
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.
Required:
Discuss the long-run implications of accepting a special order. (2 marks)
ANSWER a):
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
Required:
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):
END OF FINAL ASSESSMENT
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