The assessment consists of ONE (1) question.Answer ALL sub-sections to meet ALL the learning outcomes.

This assessment is graded out of 15 and counts for 15 per cent of the marks for this unit.

This assessment is an open book assessment, accessible via MyLO on the due date and time.

An open book assessment means that you may access materials from the course, including your lecture and tutorial notes and textbook. You may also access online resources.

An open book assessment DOES NOT MEAN you are exempt from the academic referencing requirements and academic misconduct penalties noted in your Unit Outline, and so:

You MUST appropriately reference any materials relied upon in your assessment.

You MUST NOT collude with other students to answer questions.

Answer in spaces provided.

Question 1:

John, a junior management accountant reporting to Desire, the production manager, estimated overhead rates for allocating production overhead to job orders. The company, Huon Salt and Pepper is based in Tasmania and manufactures Salt and Pepper grinders from Huon and Billy pine based on customer orders. Per company policy, the overhead rate for job costing is calculated on an estimated machine hour basis for the machining department and on an estimated direct labour cost basis for the finishing department.

Huon Salt and Pepper estimated the following for the current year:

Machining

Finishing

Production overhead cost

$1,500000

$870,000

Machine hours

20000

3 300

Direct labour hours

3 200

16 500

Direct labour cost

$95,000

$400,000

During January, the cost record for job no. 999 shows the following:

Machining

Finishing

Direct materials requisitioned

$1,400

$300

Direct labour cost

$600

$1,250

Direct labour hours per unit

0.30

0.50

Machine hours

135

15

Upon reviewing the results for costing of job no. 999, Desire asked John as a favour to disregard the finishing department's overhead allocation when calculating the unit costs as this will result on a loss on job no. 999 when compared to the original estimation. Desire did not take overhead in the Finishing department into account when supplying a valued and long-standing customer with a firm quote. She explains to John this will probably lead to disciplinary action and she is afraid she might even lose her job.

Required

1-What is the estimated overhead rate that should be applied in (a): machining department, (b) finishing department? (c) Explain why different cost drivers are used in the departments.

[3 marks]

2-Research the case study above and apply an appropriate overhead cost allocation to job 999.

[3 marks]

3-If job 999 produced 200 units of product, interpret the data to calculate the unit cost per product of job 999.

[3 marks]

4-From the organisational context explained in the case study, (a) evaluate and critique Desire's suggested technique to calculate the unit costs against the directives in the CIMA code of professional conduct. (b) How should John respond to Desire and which process should he follow if she insists on him adhering to her instruction?

[6 marks]

[ILO Criteria 1 - part 1:3 marks]

[ILO Criteria 3 - parts 2 and 3:6 marks]

[ILO Criteria 4 - part 4:6 marks]

[Total marks: 15 marks]