please help with question 1-2

Assignment 3 Question 1 Reynolds Printing Company specializes in wedding invitations. Reynolds uses an actual costing system. An actual overhead rate is calculated at the end of each month using actual direct labour hours and overhead for the month. Once the actual cost of a job is determined, the customer is billed at actual cost plus 50%. During April, Mrs Lucky, a good friend of the owner, Jane Reynolds, ordered three sets of wedding invitations to be delivered on 10 May, 10 June and 10 July respectively. Reynolds scheduled production for each order on 7 May, 7 June and 7 July respectively. The orders were assigned Job numbers 115, 116 and 117 respectively. Reynolds assured Mrs Lucky that she would attend each of her daughters' weddings. Out of sympathy and friendship, she also offered a lower price. Instead of cost plus 50%, she gave her a special price of cost plus 25%. Additionally, she agreed to wait until the final wedding to bill for the three jobs. 117. SH On 15th August, Reynolds her accountant to bring her the completed job-order cost sheets 115, 116 also gave instructions to lower the price as had been agreed upon. The cost sheets revealed the following information: Cost of direct materials Cost of direct labour (5 hours) Cost of overhead Total cost Total price Number of invitations Job 115 R250.00 R25.00 R200 R475.00 R593.75 500 Job 116 R250.00 R25.00 R400.00 R675.00 R843.75 500 Job 117 R250.00 R25.00 R400.00 R675.00 R843.75 500 Reynolds could not understand why the overhead costs assigned to Jobs 116 and 117 were so much higher that those for Job 115. She asked for an overhead cost summary sheet for the months of May, June and July, which showed that actual overhead costs were R20 000 each month. She also discovered that direct labour hours worked on all jobs were 500 hours in May and 250 hours each in June and July Required: 1.1 How do you think Mrs Lucky will feel when she receives the bill for the three sets of wedding invitations? 1.2 Explain how the overhead costs were assigned to each job. 1.3 Assume that Reynolds' average activity is 500 hours per month and that the company usually experiences overhead costs of R240 000 each year. Can you recommend a better way to assign overhead costs to job? 1.4 Recalculate the overhead allocated to each job, using your answer in 1.3 above. 1.5 Which method do you think is best and why? Question 2 Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is the unified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has two producing departments: Drilling and Assembly. Usually the front-end assemblies are ordered in batches of 100. Two support departments provide support for Blender's producing departments: Maintenance and Power. The company does not separate fixed and variable costs. Budgeted data for the coming quarter follows: Support Departments Maintenance Overhead cost R320 000 Machine hours- Kilowatt-hours 40 000 Direct labour - hours Power R400 000 22 500 Producing Departments Drilling R163 000 30 000 36 000 5 000 Assembly R90 000 7 500 324 000 40 000 The predetermined overhead rate for Drilling is calculated on the basis of machine hours. Direct labour hours are used for Assembly. Recently, a truck manufacturer requested a bid on a 3-year contract that would supply front-end assemblies to a nearby factory. The prime costs for a batch of 100 front-end assemblies are R1 817.00. It takes two machine hours to produce a batch in the drilling department and 50 direct labour hours to assemble the 100 front-end assemblies in the assembly department. Bender's policy is to bid full manufacturing costs plus 15%. (Note: Round allocation basis (ratios) to four decimal places, allocated support department cost to the nearest rand, and the job cost components to the nearest cent). Required: 2.1 Calculate the overhead allocation to be included in the product cost for the bids using the following methods: a. b. Direct method Sequential method Reciprocal method C. Assignment 3 Question 1 Reynolds Printing Company specializes in wedding invitations. Reynolds uses an actual costing system. An actual overhead rate is calculated at the end of each month using actual direct labour hours and overhead for the month. Once the actual cost of a job is determined, the customer is billed at actual cost plus 50%. During April, Mrs Lucky, a good friend of the owner, Jane Reynolds, ordered three sets of wedding invitations to be delivered on 10 May, 10 June and 10 July respectively. Reynolds scheduled production for each order on 7 May, 7 June and 7 July respectively. The orders were assigned Job numbers 115, 116 and 117 respectively. Reynolds assured Mrs Lucky that she would attend each of her daughters' weddings. Out of sympathy and friendship, she also offered a lower price. Instead of cost plus 50%, she gave her a special price of cost plus 25%. Additionally, she agreed to wait until the final wedding to bill for the three jobs. 117. SH On 15th August, Reynolds her accountant to bring her the completed job-order cost sheets 115, 116 also gave instructions to lower the price as had been agreed upon. The cost sheets revealed the following information: Cost of direct materials Cost of direct labour (5 hours) Cost of overhead Total cost Total price Number of invitations Job 115 R250.00 R25.00 R200 R475.00 R593.75 500 Job 116 R250.00 R25.00 R400.00 R675.00 R843.75 500 Job 117 R250.00 R25.00 R400.00 R675.00 R843.75 500 Reynolds could not understand why the overhead costs assigned to Jobs 116 and 117 were so much higher that those for Job 115. She asked for an overhead cost summary sheet for the months of May, June and July, which showed that actual overhead costs were R20 000 each month. She also discovered that direct labour hours worked on all jobs were 500 hours in May and 250 hours each in June and July Required: 1.1 How do you think Mrs Lucky will feel when she receives the bill for the three sets of wedding invitations? 1.2 Explain how the overhead costs were assigned to each job. 1.3 Assume that Reynolds' average activity is 500 hours per month and that the company usually experiences overhead costs of R240 000 each year. Can you recommend a better way to assign overhead costs to job? 1.4 Recalculate the overhead allocated to each job, using your answer in 1.3 above. 1.5 Which method do you think is best and why? Question 2 Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is the unified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has two producing departments: Drilling and Assembly. Usually the front-end assemblies are ordered in batches of 100. Two support departments provide support for Blender's producing departments: Maintenance and Power. The company does not separate fixed and variable costs. Budgeted data for the coming quarter follows: Support Departments Maintenance Overhead cost R320 000 Machine hours- Kilowatt-hours 40 000 Direct labour - hours Power R400 000 22 500 Producing Departments Drilling R163 000 30 000 36 000 5 000 Assembly R90 000 7 500 324 000 40 000 The predetermined overhead rate for Drilling is calculated on the basis of machine hours. Direct labour hours are used for Assembly. Recently, a truck manufacturer requested a bid on a 3-year contract that would supply front-end assemblies to a nearby factory. The prime costs for a batch of 100 front-end assemblies are R1 817.00. It takes two machine hours to produce a batch in the drilling department and 50 direct labour hours to assemble the 100 front-end assemblies in the assembly department. Bender's policy is to bid full manufacturing costs plus 15%. (Note: Round allocation basis (ratios) to four decimal places, allocated support department cost to the nearest rand, and the job cost components to the nearest cent). Required: 2.1 Calculate the overhead allocation to be included in the product cost for the bids using the following methods: a. b. Direct method Sequential method Reciprocal method C