Question 1 SuperDry manufactures and sells T-shirts for all kinds of events. The company has two manufacturing operations - shirt-making and printing. When the company receives an order, the shirt-making department obtains the materials requested and has the fabric cut and sewn to sizes. The ready T-shirts are then sent to the printing department where the customer labels or designs are prepared and printed onto the surface with hot press machines.

SuperDry has three support departments - Building Maintenance, Human Resources and Designs & Patterns. For the 1^st quarter of 201X, the direct/direct overhead costs incurred by each department are as follows (direct costs for S1 - S3; direct overhead costs for P1, P2 and R):

Shirt-making (P1) $260,000 Building Maintenance (S1) $65,000

Printing (P2) $170,000 Human Resources (S2) $40,000

Sales (R) $84,000 Designs & Patterns (S3) $38,000

The cost drivers identified for costs incurred by S1, S2 and S3 are number of square footage, number of employees and number of designs respectively.

The following table summarises the usage of cost drivers by each department:

	S1	S2	S3	P1	P2	R
Number of Designs	-	-	-	16	30	8
Number of Employees	4	2	6	20	12	12
Square Feet	5,000	10000	10,000	15,000	25,000	5,000

Required:

1. SuperDry allocate support department costs using the step-down method. Recommend the order by which SuperDry should do so. Justify your recommendation.

1. Compute the total amount of overhead costs for P1, P2 and R using the step-down method and based on the order recommended in part (i).

1. Assume P1 requires 10,000 direct labour hours (DLH) and 2,000 machine hours (MH) for shirt-making operations, and P2 requires 1,000 DLH and 6,000 MH for printing operations. Compute the departmental factory overhead rates for P1 and P2 using the appropriate cost drivers.

1. Assume the same information as in (ii) above, compute the plantwide overhead rates based on DLH and MH respectively. Question 2:Adapted from Q1 July Semester 2017 Exam

Sussim Inc. manufactures premium quality, high-performance golf balls and sells them to retailers at a price of $0.70 per ball. The company adopts the Normal Costing method and has completed a customer order for a regular customer called Warrena Golf Club. The product manager is tasked to find out the profitability of this job. The Accountant has broken down the total overhead costs for the period into the following cost pools and identified cost drivers for each cost pool.

Overhead Item	Expected Cost ($)	Cost Driver	Expected Activity
Setup Costs	60,000	Number of Setups	200
Purchasing Costs	40,000	Number of Purchases	2,000
Maintenance Costs	70,000	Maintenance Hours	10,000
Production Scheduling Costs	10,000	Customer Orders	5,000
Electricity Charges	20,000	Kilowatt-Hours	40,000

The following data is retrieved for the job completed for Warrena Golf Club.

Direct materials $300

Direct labor $200

Number of golf balls completed 2600

Direct labor hours 10

Number of setups 4

Number of purchases 2

Maintenance hours 40

Kilowatt-hours 30

The company's budgeted direct labour hours for the year is 2,500 direct labour hours.

Sussim also manufactures a diverse range of other balls such as tennis balls, basketballs, soccer balls, just to name a few. The management has been considering the implementation of the Activity-Based Costing system as a replacement of the existing Normal Costing method.

Required:

1. Using the normal costing method, compute the cost of each golf ball (rounded to 2 decimal place of a dollar) for this customer Warrena Golf Club, using direct labour hours to apply overhead.

1. Using activity-based costing method, compute the unit cost of the same ball (rounded to 2 decimal place of a dollar) sold to Warrena Golf Club.

1. Evaluate which costing method gives the product manager a more accurate picture of the cost and comment on the suitability of the current selling price.

Question 3: Adapted from Q1 from July Semester 2018 Exam

Goodie Inc. manufactures premium quality industrial components. The company adopts job order costing and uses normal costing with activity-based costing to allocate its manufacturing overhead. The annual total overhead costs for the year is broken down into activity cost pools and their respective cost drivers for each cost pool are tabled below.

Overhead Cost Pool	Budgeted Cost ($)	Cost Driver	Budgeted Activity
Setup Costs	60,000	Number of Setups	240
Purchasing Costs	40,000	Number of Purchases	2,000
Maintenance Costs	120,000	Maintenance Hours	4,000
Customer Order Processing	24,000	Customer Orders	600
Electricity Charges	100,000	Kilowatt-Hours	2,500

The following data relates to the current job completed for ABC Ltd, a first time customer.

Direct materials $30,000

Direct labour rate $20 per DL hour

Number of units completed 50,000

Direct labor hours per unit 0.5

Number of setups 8

Number of purchases 40

Maintenance hours 400

Kilowatt-hours 300

The company's budgeted direct labour hours for the period is 500,000 direct labour hours. Goodie also manufactures other components in its factory. It prices its products based on production cost plus a 25% mark up.

Required:

1. Using normal costing method, compute the price that Goodie should bill ABC Ltd for the current job (rounded to nearest dollar).

1. Discuss the suitability of using activity-based costing to allocate overheads for Goodie (you should compare the suitability of other allocation methods in your answer).

1. Maintenance costs is negotiated yearly. The annual maintenance cost is expected to increase by 30% next year. All other overhead costs are expected to remain the same as this year. ABC Ltd is happy with the current job and wishes to engage Goodie to produce the same components next year. Based on the current pricing policy, how much should Goodie quote ABC for the job next year? State the impact on profits if the price was not adjusted from this year (assume all other aspect of the job are similar to the one done this year).

1. Assuming that the under applied overhead variance for this job is $21,500. Prepare a journal entry (narrations are not required) to record the closing of the under application of overhead.