Question 1 Furniture-Up Ltd produces high-quality furniture that pass through two production processes.

Data for June for the first process follow: 

Work in process inventory, June 1                                                                      53,000 units 

(Direct material 75% completed and conversion 40% completed) 

Work in process inventory, June 30           

(Direct material 60% completed and conversion 30% completed) 

Direct material costs in work in process inventory, June 1                                       $56,000 

Conversion costs in work in process inventory, June 1                                           $14,900 

Units started into production                                                                               280,000 units 

Units completed and transferred out                                                                   320,000 units 

Direct materials costs added during June                                                                $385,000 

Conversion costs added during June                                                                       $214,500 

Required:  Using the weighted-average method 

A)Calculate the physical units in ending work in process inventory.

b)Calculate the total equivalent units for direct material and conversion. 

C)Calculate the cost per equivalent unit for direct material and conversion.

D) Calculate the cost of units completed and transferred out, and the cost of ending work in process inventory.

Question 2  

Hotel Sydney Ltd is a hotel located near Sydney NSW. For one night accommodation per person, the hotel charges $95. The hotel estimates that the variable cost per person is $45, which includes food and room services. The fixed cost is estimated to be $65,000 per year.

Required: Calculate

A)The annual breakeven point in dollars.

B)Assuming the motel targets a net profit of $65,000 a year before tax, calculate the number of units of service required to reach this target.  

Question 3 

 

Toys Ltd. manufactures two products called Lasertag and Transporter. The transporter is a more complex product, requiring 0.80 hours of direct labour time per unit to manufacture and extensive machining support. The Lasertag requires only 0.40 hours of direct labour time per unit and only a small amount of machining support. Manufacturing overhead costs are currently assigned to products on the basis of direct labour hours. Direct material and direct labour costs per unit are as follows:

 

	Lasertag	Transporter
Direct Material	$35	$60
Direct Labour	$6 (0.4 hours at $15 per hour)	$12 (0.8 hours at $15 per hour)

 

Management estimates that the company will incur $912,000 in manufacturing overhead costs during the current year and 50,000 units of the Lasertag and 25,000 units of the transporter will be produced and sold. 

 

Required: 

a)Compute the predetermined manufacturing overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labour hours and the unit product cost of each product

B) This part is connected to question 5 on the page before. 

Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools:

 

	Expected Annual Activity
Activity drivers	Lasertag	Transporter
Number of part types	500	1000
Number of purchase orders	2000	500
Number of test runs	500	1500
Machine hours	2000	8000

 

Activity cost pool	Activity drivers	Estimated overhead costs
Maintaining parts inventory	Number of part types	$225,000
Processing purchase orders	Number of purchase orders	$182,000
Quality control	Number of test runs	$45,000
Machine related	Machine hours	$460,000

 

Required:

A)  Using activity- based costing compute the unit product cost of each product.

You are required to prepare a presentation based on question 3 in Part A. You are required to:

1. Explain the key differences between conventional and contemporary costing system
2. Explain how conventional costing system might cause cost distortions
3. Discuss the issues business organizations might encounter when designing and implementing contemporary costing systems such as ABC.