The Suzuki Company in Japan has a division that manufactures two-wheel motorcycles. Its budgeted sales for Model Z in 2020 is 800,000 units. Suzukis ending inventory is 100,000 units, and its beginning inventory is 120,000 units. The companys budgeted unit selling price to its distributors and dealers is 400,000 yen.

Suzuki buys all its wheels from an outside supplier. No defective wheels are accepted. (Suzukis needs for extra wheels for replacement parts are ordered by a separate division of the company.) The companys target ending inventory is 30,000 wheels, and its beginning inventory is 20,000 wheels. The budgeted purchase price is 16,000 yen per wheel,

Required:

1. Compute the budgeted sales in yen.
2. Compute the number of motorcycles to be produced.
3. Compute the number of budgeted purchases of wheels in units.

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Question 9 (3 + 4 = 7 marks)

Dangerfield Pty Ltd would like to determine the variable rate for electricity per machine hour in order to estimate the electricity costs for the months of May and June. Information for the four months January to April are listed below:

Machine hours worked Electricity costs

January 2,400 $2,060

February 2,600 $2,122

March 2,800 $2,241

April 3,000 $2,420

Estimated units to be produced:

May: 2,150

June: 2,260

Each unit requires an average of 1.5 machine hours.

Required:

1. Compute the variable and fixed cost components of the total electricity cost.
2. Using the data calculated above, estimate the electricity for the months of May and June.

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Question 10 (6 + 6 = 12 marks)

Adelaide Pty Ltd plan to sell 400,000 units of finished production July of 2020. Management anticipates a growth rate in sales of five recent per month. The desired ending inventory in units of finished product is 80 percent of the next months estimated sales. There are 300,000 finished units on 30 June 2020.

Each unit of finished product requires four kilos of direct material at a cost of $1.50 per kilo. There are 1,600,000 kilos of direct material in inventory on 30 June 2020.

Required:

1. Compute Adelaide Pty Ltd.s production requirements in units of finished product for the three-month period ending 30 September 2020.
2. Independent of your answer to A above, assume the company plans to produce 1,200,000 units of finished product in the three-month period ended 30 September 2020. The company will have direct materials inventory at the end of the three-month period equal to 25 percent of the direct material used during that period. Compute the estimated cost of direct materials purchases for the three-month period ending 30 September 2020.

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Question 11 (2 + 4 + 6 + 2 = 14 marks)

The following information applies to the overhead account of Churchill Pty Ltd at the end of the financial year:

Debits for actual manufacturing overhead = $520,000

Credits for applied manufacturing overhead = $450,000

Required:

1. Is the manufacturing overhead underapplied or overapplied?
2. Describe the two possible methods of disposing of the difference between actual and applied overhead.
3. Prepare journal entries to dispose of the overhead. Assume 20% of the production is still work-in-process and 15% is finished but unsold. Show journal entries for both possible methods as you have discussed in item 2 above.
4. How would the above entries be different if the accounts were as follows:

Actual manufacturing overhead = $450,000

Applied manufacturing overhead = $520,000

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Question 12 (3 + 3 + 3 +3 = 12 marks)

Berwick Pty Ltd manufactures a product with the following standard costs:

Direct materials: 40 metres @ $2.7 per metre $108

Direct labour: 8 hours @ $18 per hour $144

Total standard prime cost per unit of output $252

The following information pertains to the month of July 2020:

Direct material purchased: 42,000 metres @ $2.76 per metre = $99,360

Direct materials used: 36,000 metres

Direct labour: 7,200 hours @ $18.30 per hour = $131,760

Actual July 2020 production was 1,000 units.

Required:

Compute the following variances for the month of July, indicating whether each variance is favourable or unfavourable:

1. Direct material price variance.
2. Direct material quantity variance.
3. Direct labour rate variance.
4. Direct labour efficiency variance.

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