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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
24,000
30,000
Manufacturing Overhead
(Maintenance)
(Indirect materials)
21,000
8,000
(Indirect labor)
60,000
(Utilities)
32,000
(Insurance)
(Depreciation)
7,000
56,000
?
Work in Process
(Direct materials)
710,000
(Direct labor)
90,000
(Overhead)
?
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
(a) What is the theory of constraints.
[Total 26 marks]
(13 marks)
(b) The theory of constraints offers a four step approach to process improvement. (13 marks)
[Total 100 marks]
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