Questions and Answers of Advanced Accounting

Hahndorf Gourmet Meats Ltd produces fine German sausages' in the Adelaide Hills. The company's accountant used the account classification method to compile the following information. (a) Depreciation
Daisy Wong is the accountant for the Heavy Manufacturing Company. She has been asked by one of Heavy's senior managers to provide an estimate of the firm's utilities costs using the high-low method.
Refer to the data in Exercise 3.26.Data in Exercise 3.26Required:1. Construct an Excel spreadsheet to estimate the company's utilities cost behaviour.2. Provide an assessment of the explanatory power
Plasma Pathology has incurred the following costs in its diagnostic blood laboratory during the past 12 months:Required:1. Use regression analysis to estimate the variable cost per blood test and the
Garden State Markets, a chain of convenience grocery stores, has store hours that fluctuate from month to month as the tourist trade varies. The electricity costs and hours of operation for one of
What types of cost drivers are used in traditional management accounting systems when costs are classified as fixed or variable? What types of cost drivers are used in more recent approaches, such as
Weathereye Ltd manufactures weather satellites. The final assembly and testing of the satellites is a largely manual operation involving dozens of highly-trained electronics technicians. The
The Mary Ellen Hospice provides services for terminally.ill patients and their families. The hospice provides an accommodation unit for up to six patients and a support service for outpatients, in
Sunshine Press Pty Ltd produces a number of products, including a weekly newspaper called The Sunshine Times, customised business cards and printed stationery. In preparing next year's budget, the
Waterwise Plumbing Supplies is a wholesaler for a large variety of plumbing supplies. The company's accountant, Bob Washer, has recently completed a cost study of the firm's Shipping Department in
Outback Mining Ltd (OML), which mines ore in Australia's north-west uses a calendar year for financial reporting purposes. The following selected costs were incurred in December, the low point of
Identify the major purposes of product costing, for each purpose discuss whether information about current or future product costs is required. What implication does your answer have for developing a
When manufacturing overhead is underapplied, we close it by debiting (adding) it to cost of goods sold, yet, in Exhibit 4.15, when estimating the cost of goods manufactured, under applied overhead is
Explain the difference between job costing and process costing. Give three examples (other than those in the chapter) of businesses that you think would use:(a) A job costing system(b) A process
Describe the two main steps involved in process costing.
Refer to the 'Real life scenario describing the cost of Australian wine. Do you think Australian winemakers use job costing, process costing or a combination of these two product costing systems?
What are the purposes of the following documents: (a) Job cost sheet. (b) Material requisition form. (c) Labour time sheet.
Explain the meaning of the following terms in the schedule of cost of goods manufactured: (a) Total manufacturing costs. (b) Manufacturing costs to account for. (c) Cost of goods manufactured.
Refer to the Spritz example of process costing in the chapter. Explain why the production costs for each department are added together to obtain an estimate of the cost per bottle of Spritz, yet the
Process costing is a product costing system, yet the focus is on the cost of processes or production departments. Explain why.
Describe how inventories are measured under Australian accounting standard AASB 102 Inventories.
A discussion of product costing systems is irrelevant to our firm as we only produce services, not products. Discuss.
Under what circumstances might firms decide to prorate underapplied or overapplied overhead?
Comfy Seats Furniture Pty Ltd incurred the following costs during the year:Direct material...........................................$348,000Direct
Luvable Bears Ltd incurred the following costs to produce job number TB7B, which consisted of 1000 cuddly teddy bears that could walk, talk and play cards:Manufacturing overhead:Applied on the basis
The following information relates to Beautiful Designs Pty Ltd for the year just ended:Required:1. Calculate the firm's predetermined overhead rate. Which was based on direct labour hours.2.
Custom Backpacks started and finished job number D46, a batch of too backpacks, during July. The job required $2850 of direct material and 25 hours of direct labour at $25 per hour. The predetermined
Crafted Furniture Ltd incurred the following actual costs during the year just ended:Direct material used...................................$412,500Direct
Sugary Drink Ltd produces a soft drink called Fizz Cola, in two-litre bottles. Production takes place in two departments: Mixing and Packing. The manufacturing costs for each department for July
Fresh 'n' Kleen, a chemical company, produces its primary product, Splash All-Purpose Cleaner, in 500 millilitre containers. Production takes place in two departments: Mixing and Packaging. The
How often do managers need product cost information?
Buzzsaw Manufacturing incurred $267 200 of manufacturing overhead costs during the past year. However, only $232 000 of overhead was applied to production. At the conclusion of the year, the
Stingray Ltd manufactures outboard motors and an assortment of other marine equipment. The company uses a job costing system and manufacturing overhead is applied on the basis of machine hours.
Cool Beat Sound (CBS) Ltd, which uses a job costing system, had two jobs in process at the start of the year: job number 64 ($84,000) and job number 65 ($53,500). The following information is
Basic job costing; journal entries; ledger accounts; job cost card Quality Boxes manufactures fine, handcrafted wooden jewellery boxes. The firm uses a job costing system, and manufacturing overhead
Cool Cooking Tools Ltd, manufacturer of gourmet cooking utensils, uses job costing. Manufacturing overhead is applied to production at a predetermined overhead rate of 150 per cent of direct labour
Conundrum Ltd manufactures furniture. Due to a fire in the administrative offices, the accounting records for November of the current year were partially destroyed. You have been able to piece
Galactica Ltd's cost of goods sold For June was $690 000. Work in process inventory on so June was 90 per cent of the 1 June work in process inventory. Manufacturing overhead applied was so per cent
The following data refer to Industrial Manufacturing Pty Ltd for the current years:Required:1. Prepare Industrial's schedule of cost of goods manufactured for the current year.2. Prepare Industrial's
Ethical issues; underapptication of manufacturing overhead: manufacturer Tom Savin has recently been hired as a cost accountant by Offset Press Pty Ltd, a company that produces a line of offset
Juicy Ltd produces a mixed-berry-flavoured fruit drink, in 250 ml bottles. Production takes place in departments: first Mixing, then Bottling and finally Packaging. The manufacturing costs for each
How common are product costing systems in practice? Why might a business choose to do without a product costing system?
Proration of overapplied or underapplied overhead: manufacturer Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current
Brass Design Ltd manufactures brass musical instruments for use by high school students. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct
Optic Vision Pty Ltd, a manufacturer of fibre-optic communications equipment, uses a job costing system. Since the production process is heavily automated, manufacturing overhead is applied on the
Refer to the 'Real life' describing product costing in small businesses. Why product is cost information important to small businesses and what do you think might discourage these businesses from
We don't need a product costing system. We are a small manufacturer with a just-in-time approach so that our inventories ore minimal. We have no influence over product price; whatever the big fellows
Is this a reasonable attitude? Explain why. Contrast the requirements used for determining product costs to support short-term management decisions with those used for longer-term management decision
Identify key differences between departmental production reports prepared under weighted average and FIFO assumptions, by referring to Exhibits 5.6 and 5.11.
How are the costs of the beginning work in process inventory treated differently under the weighted average and FIFO methods?
Why is it useful to identify the costs of spoiled units separately in process costing? Explain the terms normal spoilage and abnormal spoilage. How does the accounting for these two types of spoilage
How does the accounting for spoilage differ under the weighted average and FIFO methods of process costing?
Review the scenario described in 'Peal life: Which costing system for Australian wine?' on page 191 and explain whether process costing or operation costing should be used by wine producers.
On page 188 there is an example of how a hybrid costing system might be designed for a large-scale bicycle manufacturer. Select another industry and explain how a hybrid costing system could be
How would the process costing calculations differ from those illustrated in the chapter if overhead costs were used in the production process in a different pattern to direct labour costs?
Why is determining the percentage of completion vital in estimating product costs? Do we need to determine the percentage of completion in an operation costing system? Explain.
It is ridiculous to suggest that process costing may also be suited to service firms, as services cannot be replicated in the same way that manufacturing processes can be. Discuss.
What are transferred-in costs? Using the timber and wine 'Peal life scenarios, provide examples of sequential production processes and the costs that would be transferred into subsequent processes.
In each case below, fill in the missing amount:
Squeeze Ltd produces low fat salad dressing. The following data relate to the year just ended:During the year the company started 200,000 litres of material in production. Required: Prepare a
Kimbos Glass company manufactures decorative glass bowls. The following data relate to May's operation: Work in process, 1 May: Direct
Woodchuck Timber Pty Ltd grows, harvests and processes timber for use in the building industry. The following data relate to the company's sawmill during June:Work in process, 1 June:Direct
The following data relate to Twilight Manufacturing Ltd:During July, 133,500 units were completed and transferred out.Work in process, 1 June:Direct
Natural Fibres Ltd manufactures natural fabrics for the clothing industry. The following data relate to Weaving Department for the month of December:There were 20 000 units in process in the Weaving
On 1 January, the Stamping Department of Pressed Panels Ltd had no work in process inventory due to the implementation of a just-in-time inventory system. On 31 January, the following journal entry
Proudly Paper Corporation manufactures cardboard boxes. In the year just completed the following results were recorded:During the year, 100 000 boxes were started in production. Of these, 10 000 were
Review the 'Peal fife' scenario on page 174 and explain why process costing is likely to be suitable for timber mills.
AusSports Ltd produces sporting equipment in a number of plants across Australia. The Sydney Division's production for November consisted of Batch P25 (1000 professional basketballs) and Batch S33
Concrete Solutions manufactures concrete paving bricks. The processing takes place in two sequential departments. The following cost data relate to the month of January:Required:Prepare journal
Rigby Limited's Machining Department had 20 000 units in work in process (WIP) on 1 March. These units were 40 per cent complete with respect to conversion. Direct materials are added at the
Triangle Zipper Company accumulates costs for its single product using process costing. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly
Bigears Telco Ltd assembles various components used in the telecommunication industry. The company's major product, a relay switch, is made by assembling three parts: XY634, AA788 and GU321. The
Fauxhemain Ltd mass-produces antique-style furniture using an assembly line process. All direct materials are introduced at the start of the process, and conversion cost is incurred evenly throughout
The following relate to the Coating Department of Fantastic Plastics Ltd for July:Additional information:■ Direct material is added at the beginning of the production process, and conversion occurs
Steelworx Ltd accumulates costs for its single product using weighted average process costing. Direct material is added at the beginning of the production process, and conversion occurs uniformly
Goulburn Industries manufactures a variety of plastic products, including a series of moulded chairs. The three models of moulded chairs, which are all variations of the same design, are Standard
Wilkey Ltd manufactures a variety of glass windows in its Perth plant In Department A, clear glass sheets are produced, and some of these sheets are sold as finished goods. Other sheets made in
Orbital Industries Ltd manufactures a variety of materials and equipment for the aerospace industry. A team of P & D engineers in the firm's Technology Park plant has developed a new material
The Launceston Wool Company designs and manufactures woollen coats, which are in high demand the cold Tasmanian winters. The company uses a process costing system to cost products because 1: produces
Autofab Ltd uses a process costing system. A unit of product passes through three departments-Moulding, Assembly and Finishing-before it is completed. The following production took place in the
Leather Products Ltd manufactures leather goods. The company's profits have declined during the past nine months. In an attempt to isolate the causes of poor profit performance, management is
Home and Garden Products Ltd manufactures a plant nutrient known as Garden Pride. The manufacturing process begins in the Grading Department when raw materials are started in process, upon completion
Refer to the data given in Case 5.44. Complete the same requirements, assuming that Home and Garden Products Ltd uses weighted average process costing. In calculating unit costs, round your answer to
Explain how the direct material conversion and total cost per equivalent unit shown in Exhibit 5.3 were calculated.
Explain how the cost of goods completed and transferred out and the work in process inventory on 30 April, shown in Exhibit 5.4 were calculated.
Explain how the calculation of cost per equivalent unit differs between the weighted average and FIFO methods of process costing, by referring to Exhibits 5.3 and 5.8.
What are the distinguishing features of service organisations? Consider the extent to which these features are present in the following industries: (a) Electricity, gas and water supply. (b)
In the 'Peal life on page 230 the New South Wales government recognises that in public sector organisations different costing systems may be appropriate for different types of services. Provide an
Refer to the 'Peal life' example of the client billing system used by SimsPartners. Explain how the WIP Total of $7235.27 has been calculated. Comment on the usefulness of including the costs of
Refer to the 'Real life'. Describe the adverse consequences for clients that billing systems may encourage, particularly where the system is also used to measure employee performance.
Describe the problems that can arise in using process costing to estimate the cost of the services produced in mass service entities.
Consider the costs across the various segments of the value chain of a software developer. Which of these costs should be included in the cost of the firm's software products? Explain your answer.
Explain how estimates of service costs help managers to manage resources and create value.
Use the search term service costing to find websites of industries or organisations that estimate service costs. Identify possible reasons for these industries or organisations estimating service
Do service costs provide a useful basis for planning and controlling costs? Explain.
'Despite the use of predetermined overhead rates in estimating service costs, there is no need to consider underapplied or overapplied overhead.' Do you agree with this statement? Explain your
Identify three service firms that are likely to produce work in process inventory, and explain how the costs of work in process are recorded in the accounting system.
Do retail and wholesale businesses provide services or goods to customers? Discuss.
Identify the costs that should be included in the cost of inventories purchased for resale according to the Australian Accounting Standards.
Classifying costs; direct costs: hotel restaurant For each of the following costs indicate whether it is a direct cost of the restaurant in a hotel and provide reasons to explain your answer: (a)

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