Question 4

1. Explain the difference between financial accounting and management accounting.

Ensure your explanation clearly explains the purpose of management accounting.

2. Car Services Ltd produces custom tow bars and bull bars for utes and cars. Each customers order is treated as a separate job so costs can be tracked for each customer.

Tasks

Briefly explain the following:

1. The meaning of the term cost object. Identify the cost object that would be used by Car Services Ltd when recording costs.
2. The difference between a direct cost and an indirect cost. Identify examples of both direct costs and indirect costs for the cost object.

3. Salmon Ltd provides you with the following information on the costs of testing the water quality of their wastewater.

	No of tests	Costs
July	30	7,315
August	25	6,500
September	34	8,120
October	28	6,990
November	32	7,950
December	31	7,445

Task

Using the high low method, calculate the fixed cost per month and the variable cost per test.

d) King Ltd uses a job costing system. The companys budget for the year included a budgeted total manufacturing overhead cost of $1,800,000 and budgeted total direct labour hours of 60,000 hours. Manufacturing overhead cost is applied to jobs based on direct labour-hours worked. During December, King Ltd started and completed one manufacturing job (Job 571). The events of December are:

Direct material cost: Job 571	$215,000
Indirect material cost for December	$55,000
Other manufacturing overhead cost incurred in December	$45,000
Direct labour cost (4,800 hours, including 100 hours idle time)	$120,000
Indirect labour cost for December (excluding idle time)	$40,000

Tasks

1. Calculate the total cost of Job 571.
2. Determine the amount by which the manufacturing overhead cost is overapplied or underapplied for December.