ACC 203 Cost Accounting
Semester September 2018
Group Assignment Questions
Question 1 [74 marks]
Morgan Inc. uses a job-order costing system. Overhead costs are aassigned to jobs on the basis of machine-hours. At the beginning of the year, management estimated that 80,000 machine hours would be required for the period’s estimated level of production. The company also estimated RM128,000 of fixed manufacturing overhead expenses for the coming period and
variable manufacturing overhead of RM0.80 per machine-hour.
Required:
(a) Compute the company’s predetermined overhead rate. (9 marks)
(b) Assume that during the year the company works only 75,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts:
Job A-300 Molding Fabrication Total
Direct materials cost . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
RM300,000 RM250,000 RM550,000
Direct labor cost . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
RM175,000 RM225,000 RM400,000
Machine-hours . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
6,000
Manufacturing Overhead
(Maintenance) 21,000 ?
(Indirect materials) 8,000
(Indirect labor)
(Utilities)
(Insurance)
(Depreciation)
60,000
32,000
7,000
56,000
24,000 30,000

(Direct materials)
Work in Process
710,000
(Direct labor)
(Overhead)
90,000
?
Copy the data in the T-accounts above onto your answer sheet. Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts.
(33 marks)
(c) Compute the amount of under-applied or over-applied overhead for the year and show the balance in your Manufacturing Overhead T-account. Prepare a journal entry to close out the balance in this account to Cost of Goods Sold. (12 marks)
(d) Explain why the manufacturing overhead was under-applied or over-applied for the year.
(18 marks)
Question 2 [Total 26 marks]
(a) What is the theory of constraints. (13 marks)
(b) The theory of constraints offers a four step approach to process improvement. (13 marks)
[
Total 100 marks]