Vision Pty Ltd, a manufacturer of fibre-optic communications equipment, uses a job costing system. Since the production process is heavily automated, manufacturing overhead is applied on the basis of machine hours using a predetermined overhead rate. The current annual rate of $45 per machine hour is based on estimated manufacturing overhead costs of $3 600 000 and an estimated cost driver level of 80 000 machine hours.

Operations for the current year have been completed, and all the accounting entries have been made for the year except the application of manufacturing overhead to the jobs worked on during December, the transfer of costs from work in process to finished goods for the jobs completed in December, and the transfer of costs from finished goods to cost of goods sold for the jobs that have been sold during December.

Summarised data as at 30 November, and for December, are presented in the following table. Job numbers T11-007, N11-013 and N11-015 were completed during December. All completed jobs except Job number N11-013 had been turned over to customers by the close of business on 31 December.

Work in Process: December activity

Job numbers

Balance 30 November

Direct material

Direct labour

Machine hours

T11-007

$261 000

$ 4 500

$13 500

300

N11-013

165 000

12 000

36 000

1 000

N11-015

0

76 800

80 100

1 400

D12-002

0

113 700

60 000

2 500

D12-003

0

78 000

50 400

800

Totals

$426 000

$285 000

$240 000

6 000

Operating activity

Activity to 30 November

December activity

Actual manufacturing overhead incurred:

Indirect material

$375 000

$27 000

Indirect labour

1 035 000

90 000

Utilities

735 000

66 000

Depreciation

?1 155 000

?105 000

Total overhead

$3 300 000

$288 000

Other items:

Raw material purchases*

$2 895 000

$294 000

Direct labour cost

$2 535 000

$240 000

Machine hours

73 000

6 000

Account balances at beginning 1 January:

Raw material inventory*

$315 000

Work in process inventory

180 000

Finished goods inventory

375 000

Required:

1

How much manufacturing overhead would Vision have applied to jobs to 30 November?

2

How much manufacturing overhead would be applied to jobs by Vision during December?

3

Determine the amount by which the manufacturing overhead is overapplied or underapplied as at 31 December.

4

Determine the balance in Vision's finished goods inventory account on 31 December.

5

Prepare a schedule of cost of goods manufactured for Vision Pty Ltd for the year. (Hint:In calculating the cost of direct material used, remember that Vision includes both direct and indirect material in its raw material inventory account.)

Unit: ACC203 - Management Accounting Submission Date: 02-June-2017 before 23.59 pm Weighting: The assignment is worth 40% of the total unit weight. Instructions: 1. Students are required to cover all stated requirements. 2. Your answer must be both uploaded to Moodle in word file and handed over a printed copy. 3. You need to support your answers with appropriate Harvard style references where necessary. 4. Only include information in your appendixes that has been directly referred to in the body of your document. 5. Include a title/cover page containing the subject title and code and the name, student id numbers. 6. Please save the document as ACC203_B1_T1_first name_Surename_Student Number Eg: ACC203AT2_John_Smith_20160000 1 You are required to finish each of these questions, total 40 marks. Please give the solutions in detail, show calculations and submit the solutions to Moodle using a single file, it can be Excel format, Word format or PDF format, no requirement on word limits, if use any references, please refer to Harvard style. Question 1: Support department cost allocation; plantwide versus departmental overhead rates; product costing; cost drivers: manufacturer (15 marks) Rising Fast Pty Ltd manufactures a complete line of fibreglass attach cases and suitcases. The firm has three manufacturing departments: Moulding, Component and Assembly. There are also two support departments: Power and Maintenance. The sides of the cases are manufactured in the Moulding Department. The frames, hinges and locks are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials and time are required to manufacture each type of case. Rising Fast has always used a plantwide overhead rate. Direct labour hours are used to assign overhead to products. The predetermined overhead rate is calculated by dividing the company's total estimated overhead by the total estimated direct labour hours to be worked in the three manufacturing departments. Liam Bolt, manager of cost accounting, has recommended that Rising Fast use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Bolt and are presented by department in the following schedules. (All numbers are in thousands.) Manufacturing departments Componen Moulding t Assembly Direct labour hours 500 2 000 1 500 Machine hours 875 125 0 Direct material $12 400 $30 000 $1 250 Direct labour 3 500 20 000 12 000 Manufacturing overhead 21 000 16 200 22 600 Total departmental costs $36 900 $66 200 $35 850 Departmental activity measures: Departmental costs: Use of support departments Moulding Componen Assembly 2 t Maintenance: Estimated usage in labour hours for the coming year 90 25 10 360 320 120 Power (in kilowatt hours): Estimated usage for the coming year Support departments Power Maintenance Departmental activity measures: Estimated usage for the coming year 800 kWh 125 labour hours Departmental costs: Materials and supplies (variable) $ 5 000 $1 500 Variable labour 1 400 2 250 Fixed overhead 12000 250 Total support department costs $18 400 $4 000 Required: 1 (a) Calculate the plantwide overhead rate for Rising Fast for the coming year using the same method as used in the past. (b Estimate the overhead cost of an Elite attach case that requires 4 direct labour hours ) and 5 machine hours in the Moulding Department, 3 direct labour hours in the Component Department and 2 direct labour hours in the Assembly Department. 2 Liam Bolt has been asked to develop departmental overhead rates for comparison with the plantwide rate. The following steps are to be followed in developing the departmental rates: (a) Allocate the total Maintenance Department costs to the three manufacturing departments, using the direct method. (b Allocate the Power Department costs to the three manufacturing departments, using ) the direct method. 3 (c) Calculate departmental overhead rates for the three manufacturing departments, using a machine hour cost driver for the Moulding Department and a direct labour hour cost driver for the Component and Assembly departments. 3 Estimate the overhead cost of the Elite attach case using the departmental overhead rates. 4 Should Rising Fast use a plantwide rate or departmental rates to assign overhead to products? Explain your answer. Question 2: Product cost classification: manufacturer (10 Marks) The following cost data for the current year relate to Heartstrings Pty Ltd, a greetings card manufacturer: Service department costs1 $ 50 000 Direct labour: wages 242 500 Direct labour: on-costs 47 500 Indirect labour: on-costs 15 000 On-costs for production supervisor Administrative costs 4 500 75 000 Rental of office space for sales personnel2 Sales commissions 7 500 2 500 Product promotion costs 5 000 Direct material Advertising expense 1 050 000 49 500 Depreciation on factory building 57 500 Cost of finished goods inventory at year end 57 500 Indirect labour: wages 70 000 Production supervisor's salary 22 500 Total overtime premiums paid 27 500 Cost of idle time: production employees3 20 000 Required: Calculate each of the following costs for the year: 1 Total prime costs. 2 Total manufacturing overhead costs. 3 Total conversion costs. 4 Total product costs (for external reporting purposes). 5 Total period costs. Question 3: Cost flows in a job costing system; schedule of cost of goods manufactured; automation: manufacturer (15 marks) 4 Vision Pty Ltd, a manufacturer of fibre-optic communications equipment, uses a job costing system. Since the production process is heavily automated, manufacturing overhead is applied on the basis of machine hours using a predetermined overhead rate. The current annual rate of $45 per machine hour is based on estimated manufacturing overhead costs of $3 600 000 and an estimated cost driver level of 80 000 machine hours. Operations for the current year have been completed, and all the accounting entries have been made for the year except the application of manufacturing overhead to the jobs worked on during December, the transfer of costs from work in process to finished goods for the jobs completed in December, and the transfer of costs from finished goods to cost of goods sold for the jobs that have been sold during December. Summarised data as at 30 November, and for December, are presented in the following table. Job numbers T11-007, N11-013 and N11-015 were completed during December. All completed jobs except Job number N11-013 had been turned over to customers by the close of business on 31 December. Work in Process: December activity Job Balance Direct number 30 materi s November al T11-007 $261 000 $ 4 500 N11-013 165 000 12 000 N11-015 0 76 800 D120 113 002 700 D120 78 003 000 Totals $426 000 $285 000 Operating Activity to 30 activity November Actual manufacturing overhead incurred: Indirect material $375 000 Indirect labour 1 035 000 Utilities 735 000 Depreciation 1 155 000 Total overhead $3 300 000 Other items: Raw material $2 895 000 purchases* Direct labour cost $2 535 000 Machine hours Account balances at beginning 1 January: 73 000 Direct labou Machin r e hours $13 300 500 36 1 000 000 80 1 400 100 60 2 500 000 50 800 400 $240 6 000 000 December activity $27 000 90 000 66 000 105 000 $288 000 $294 000 $240 000 6 000 Raw material $315 000 inventory* Work in process 180 000 inventory Finished goods 375 000 inventory Required: 1 How much manufacturing overhead would Vision have applied to jobs to 30 November? 5 2 3 4 5 How much manufacturing overhead would be applied to jobs by Vision during December? Determine the amount by which the manufacturing overhead is overapplied or underapplied as at 31 December. Determine the balance in Vision's finished goods inventory account on 31 December. Prepare a schedule of cost of goods manufactured for Vision Pty Ltd for the year. (Hint: In calculating the cost of direct material used, remember that Vision includes both direct and indirect material in its raw material inventory account.) 6