Question
Shah Bhd. has the following account balances (in millions): For specific dateFor year 2017 _______________________________________________________________________________________________________________ Direct materials inventory, Jan 1, 2017 $ 15Purchases of direct
Shah Bhd. has the following account balances (in millions):
For specific dateFor year 2017
_______________________________________________________________________________________________________________
Direct materials inventory, Jan 1, 2017 $ 15Purchases of direct materials $ 325
Work-in process inventory, Jan 1, 2017$ 10Direct manufacturing labor $ 100
Finished goods inventory, Jan 1, 2017$ 70Depreciation-plant and equipment $ 80
Direct materials inventory, Jan 31, 2017 $ 20Plant supervisory salaries$5
Work-in process inventory, Jan 31, 2017$ 5Miscellaneous plant overhead $ 35
Finished goods inventory, Jan 31, 2017$ 55Revenues$ 950
Marketing, distribution, and$ 240
customer-service costs
Plant supplies used$10
Plant utilities $30
Indirect manufacturing labor $ 60
Required:
a) Prepare schedule of goods manufactured and an income statement for the year ended 31st December 2017.
b) Would the sales manager's salary (included in marketing, distribution, and customer-service costs) be accounted for any differently if Shah Bhd. were a merchandising company instead of a manufacturing company?
c) Using the flow of manufacturing costs, describe how the wages of an assembler in the plant would be accounted for in this manufacturing company.
d) Plant supervisory salaries are usually regarded as manufacturing overhead costs. When might some of these costs be regarded as direct manufacturing costs? Give an example.
e) Suppose that both the direct materials used and the plant and equipment depreciation are related to the manufacture of 1 million units of product. What is the unit cost for the direct materials assigned to those units? What is the unit cost for plant and equipment depreciation? Assume that yearly plant and equipment depreciation is computed on a straight-line basis.
f) Assume that the implied cost-behaviour patterns in requirement (e) persist. That is, direct material costs behave as a variable cost and plant and equipment depreciation behaves as a fixed cost. Repeat the computations in requirement (e), assuming that the costs are
being predicted for the manufacture of 1.2 million units of product. How would the total costs be affected?
g) As a management accountant, explain to the president why the unit costs differed in requirements (e) and (f).
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