Accounting Assignment - (Solution)

ACCOUNT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
Computation of predetermined factory overhead for each company..........................................3
Indicating whether factory overhead was over and under applied for each company.................4
QUESTION 2..................................................................................................................................4
Preparing schedule of estimated cash collections from revenue for the first 6 months of 2020
for Bounce Athletics Ltd.............................................................................................................4
QUESTION 3..................................................................................................................................5
CONCLUSION................................................................................................................................5

INTRODUCTION
In the current times, business units lay high level of emphasis on undertaking the system
of management accounting. Tools and techniques of management accounting provide high level
of assistance in drafting budget as well as decision making The present report is based on
different case scenarios which will provide deeper insight about the manner in which overhead
rate can be determined. Further, it also furnishes information about clients who Booth Bootcamp
Pty Ltd needs to serve.
QUESTION 1
Computation of predetermined factory overhead for each company
Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total units in
the allocation base
Assessment of factory overhead rate on the basis of expected cost and data set
Particulars Aloe ltd Basil ltd
Factory overhead cost 499200 888160
Number of units produced /
Direct labour hours
104000 units 164000 hours
Factory overhead rate 499200 / 151600 = 4.8 888160 / 164000 = 5.42
Calculation of predetermined overhead as per actual data set
Particulars Aloe ltd
Factory overhead cost 528000
Number of units produced 109600
Factory overhead rate 528000 / 109600 = 4.81
Particulars Basil ltd
Factory overhead cost 860000

Direct labour hours 174000
Factory overhead rate 860000 / 174000 = 4.94
Indicating whether factory overhead was over and under applied for each company
Computation of under and over-applied overhead
Particulars Aloe ltd
Applied factory overhead 499200
Actual factory overhead 528000
Under applied overhead
Applied overhead < actual overhead
28800
Particulars Basil ltd
Applied factory overhead 888160
Actual factory overhead 860000
Over applied overhead
Applied overhead > actual overhead
28160
QUESTION 2
Preparing schedule of estimated cash collections from revenue for the first 6 months of 2020 for
Bounce Athletics Ltd
Estimated cash collections of Bounce Athletics Ltd from revenue pertaining to the period of 6
months are as follows:
January February March April May June
Cash collection

70% within the
month
7000 35000 56000 17500 56000 42000
Remaining
30% in the
following
month
3000 15000 24000 7500 24000
QUESTION 3
Client 1 Client 2
Sales revenue 860 * 10 = $8600 900 * 8 = $7200
Cost per person for food and
equipment
180 * 10 = 1800 170 * 8 = 1360
Payment made to David’s 1100 1100
Fitted SUV cost 2800 2800
Fixed cost 2500 2500
Total cost or expenses
Profit 400 (560)
Referring above table it can be stated that Booth Bootcamp Pty Ltd should choose client
1 over others. Moreover, in the case of client 1, Booth Bootcamp Pty Ltd will get profit of $400.
On the other side, under client 2, business entity will face the situation of loss amounted to $560
significantly. Hence, focus should be placed on offering services to 10 people rather than 8.
Hence, by selecting client 1, Booth Bootcamp Pty Ltd would become able to maximize its profit
level.
CONCLUSION
From the above report, it has been articulated that overhead of Basil Ltd falls under the
category of over-applied. Besides this, it can be inferred that using cash collection procedure