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Subject: ACCY211: Management Accounting II Type of assessment task: Assignment 1 Due date: Week 6 in your enrolled tutorial class. QUESTION 1 40 marks BioChem produces trail mix packaged for sale in convenience stores. At the beginning of April 2015, BioChem has no inventory of trail mix. Demand for the three month period from April to June is expected to remain constant at 50,000 bags per month. However, considering the fact many of the employees take holiday in May, BioChem plans to produce 70,000 bags in April. The costs and revenues for April are expected to be as follows: Sales revenue $6.00 per bag Direct materials cost $0.80 per bag Direct manufacturing labour cost $0.45 per bag Variable manufacturing overhead cost $0.30 per bag Variable selling cost 2.5% of sales Fixed manufacturing overhead costs $105,000 per month Fixed administrative costs $35,000 per month Actual sales in April 50,000 bags Required: (a) Compute the unit product cost under variable costing and absorption costing (10 marks) (b) Calculate the net operating income under variable costing. (10 marks) (c) Prepare an income statement using absorption costing. (10 marks) (d) Reconcile the variable costing and absorption costing net operating incomes in (b) (5 marks) and (c) above. (5 marks) (e) Critics of absorption costing have increasing emphasised its potential for leading to undesirable incentives for managers. State two ways of reducing the negative aspects associated with using absorption costing to evaluate the performance of plant manager. 40 marks QUESTION 2 PART A Wollongong Pathology is a medical testing laboratory situated in Wollongong. Dr. Curin Strong the CEO of the centre is in the process of making estimation on the cost of Xrays of the centre. The number of Xrays taken and Xray costs over the last nine months in Wollongong Pathology are given below: Month January February March April May June July August September XRays Taken 6,250 7,000 5,000 4,250 4,500 3,000 3,750 5,500 3,250 XRay Costs($) $28,000 $29,000 $23,000 $20,000 $22,000 $17,000 $18,000 $24,000 $16,000 Required: (a) Using HighLow method, estimate the cost formula for Xray costs. (b) Estimate the cost of Xrays for October using both regression and highlow methods, assuming a leastsquare regression analysis estimated the total fixed costs to be $5,920 per month and the variable cost to be $3.38. The number of X rays for October is expected to be 4,000. Comment on the accuracy of your high low estimates. (10 marks) (10 marks) PART B SuperCools Company is the exclusive distributer for revolutionary two types of cooling bag Deluxe and Superior. The budgeted income statement for next period is as follows: Deluxe Superior Total Sales Mix Units sold 187 500 62 500 250 000 Revenues $5 250 000 $3 125 000 $8 375 000 Variable $3 375 000 $1 875 000 $5 250 000 Contribution margins $1 875 000 $1 250 000 $3 125 000 Fixed cost $2 250 000 Profit $ 875 000 Required: Calculate the estimated breakeven point in units and dollars that the planned sales (20 marks) mix is attained QUESTION 3 20 marks ABC & Associates is a public accounting firm that specialises in providing accounting and auditing service. Its jobcosting system has one direct cost pool, professional labour and a single indirect cost pool that includes all supporting costs of running the office. The support costs are allocated to clients on the basis of professional labourhours. In addition to the two senior partners, ABC has six partners who work directly with clients. Each of the eight partners is expected to work for approximately 2 650 hours a year. Budgeted and actual costs for 2016 were: Budgeted professional labour costs $4 240 000 Budgeted support costs $2 000 000 Actual professional labour costs $4 893 000 Actual support costs $2 400 000 Actual total professional hours 23 300 hours Required: Calculate the direct costs rate per professional labourhour under: (a) Actual costing (10 marks) (b) Normal costing (10 marks)