FNSACC507 Management Accounting Information - Practice Questions and Solutions

This article provides practice questions and solutions for FNSACC507 Management Accounting Information. It covers topics such as flexible budget formula, cost drivers, job costing, activity-based costing and more. The questions are designed to help students prepare for their exams and improve their understanding of the subject.

FNSACC507 Provide Management Accounting Information
Answer all questions.
Question 1 a)
Complete the following table and show calculations (below):
Units produced @ 3000 units @ 5000 units
Total $ Per unit $ Total $ Per unit $
Fixed costs 57 000 19.00 57 000 11.40
Variable costs 72,000 24.00 120,000 24.00
Total costs 129,000 43.00 177,000 35.40
Workings:
1. Fixed Cost
a. For 3000 units – Fixed Cost = 57000/3000 = $ 19 per unit
b. For 5000 units – Fixed Cost = 57000/5000 = $ 11.4 per unit
2. Total Variable cost
a. For 3000 units – Variable cost = 3000*24 = $72,000
b. For 5000 units – Variable cost = 5000*24 = $120,000
Question 1 b)
Write out and explain the flexible budget formula:
Answer:
Flexible budget formula:
Let number of units produced be X. So flexible budget formula will be – 57,000+24X
Flexible budget is budget which can be changed based on level of activity. It is in the form of income statement
which changes as there is change in level of activity. In flexible budget, only variable cost changes with regard to
activity level and fixed remains constant.
Question 2:
Indicate whether each of the following costs are fixed, variable or semi-variable:
Units produced 4000 6000 Type of cost ?
Costs:
Rent 3000 3000 Fixed Cost
Repairs of machinery 600 800 Semi variable cost
Power 5000 7500 Variable cost
Depreciation of plant 1500 1500 Fixed Cost
Production wages 9000 13500 Variable cost
Indirect material 150 200 Semi variable cost
Question 3:
The following factory overhead budget has been based on the forecast production level of 25,000 direct labour
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hours:
Fixed Costs 195000
Variable Costs 312500
TOTAL COSTS 507500
Required:
a) Show the flexible budget formula for the above costs
b) Prepare flexible budgets for the forecast production levels using direct labour hours of 26,000 and
30,000
c) Calculate overhead application rates for each forecast activity level
Answer:
a) Let X be total direct labour hours. Therefore, variable budget formula:
= 195000+12.5X
b)
Hours 26000 Hours 30000 Hours
Total $ Per unit $ Total $ Per unit $
Fixed costs 195000 7.5 195000 6.5
Variable costs 325000 12.5 375000 12.5
Total costs 520000 20.00 570000 19.00
c) Overhead application rates at Activity Levels:
i. 26000 Hours - $20 per hour
ii. 30000 Hours - $19 per hour
Question 4:
Using the high-low method, calculate the variable cost per unit and the fixed cost per year from the following
record of semi variable costs. (Show your calculation methods.)
Year Units produced Costs $
2017 15 000 155 000
2018 20 500 204 000
2019 21 000 218 300
2020 19 000 193 500
2021 17 500 183 500
2022 21 500 216 100
Answer:
Year Units produced Costs $ Per unit
variable
cost
Total fixed Cost
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2017 15 000 155 000 9.4 155 000-(9.4*15000) = 14000
2018 20 500 204 000 9.4 204 000-(9.4*20500) = 11300
2019 21 000 218 300 9.4 218 300-(9.4*21000) = 20900
2020 19 000 193 500 9.4 193 500-(9.4*19000) = 14900
2021 17 500 183 500 9.4 183 500-(9.4*17500) = 19000
2022 21 500 216 100 9.4 216 100-(9.4*21500) = 14000
Working Note:
1. Calculation of variable cost per unit:
a. Total cost at highest level of activity i.e.21500 units = 216,100
b. Total cost at lowest level of activity i.e.15000 units = 155,000
Variable cost per unit = Difference in total cost at highest and lowest level of activity / difference in
Activity levels
= 216100-155000 / 21500-15000
= $9.4 per unit
Question 5:
Using the following factory overhead forecasts answer the following questions:
Relevant information (Forecast)
Factory overhead
Fixed costs $ 27 000
Variable Costs $ 45 000
Cost drivers:
Machine Hours 18 000
Production units 6 000
a) Analyse, determine and explain which cost driver would probably be the one most suitable for
allocating overhead cost:
b) Using machine hours as the cost driver, calculate the overhead recovery rate to be used for the year:
c) If product A requires ½ hour of machine time and product B requires 3 hours, calculate their respective
overhead costs per unit
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Answer:
a) As both the product may require different amount of machine hours, machine hours will be most suitable
cost driver for allocating overhead cost.
b)
Factory overhead
Fixed costs $ 27 000
Variable Costs $ 45 000
Total overhead (a) $ 72 000
Machine Hours (b) 18 000
Overhead recovery rate (a) / (b) $ 4 per machine hour
c) Calculation of overhead cost per unit
Product Machine Hours
Required
Overhead recovery rate Overhead cost per unit
A 0.5 $ 4 per hour $ 2
B 3 $ 4 per hour $ 12
Question 6:
The Raymond Manufacturing Company applies factory overhead at a rate per direct labour hour.
Manufacturing records for the relevant period show:
Budgeted factory overhead:
Fixed = 244 900
Variable = 86 900
Budgeted direct labour hours = 158 000
Actual factory overhead incurred:
Fixed = 246 800
Variable = 89 600
Actual direct labour hours = 146 000
Calculate:
a) The factory overhead application rate
b) Overhead applied during the period
c) Under or over-applied overhead for the period
d) Flexible budget formula
e) Spending variance
f) Capacity variance
Answer:
a) Overhead application rate
Budgeted overhead
Fixed $ 244 900
Variable $ 86 900
Total overhead (a) $ 331 800
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Budgeted direct labour hours (b) 158 000
Overhead recovery rate (a) / (b) $ 2.1 per labour hour
b) Overhead applied during the year = 2.1*146000 hours = $ 306,600
c) Under or over-applied overhead for the period = $ 336 400 - $ 306 600 = $29,800 (Under absorbed)
d) Flexible budget formula = 244 900 + 0.61X
e) Spending variance = Actual factory overhead - Budgeted allowance based on actual hours worked
= $ 336 400 - $ 306 600 = $29 800 (adverse)
f) Capacity variance = (Budgeted hours – Actual hours)* Std rate
= (158 000 – 146 000)*2.1
= 25,200 (Favourable)
Question 7:
Job Costing – John Thoms Trucking Company has given you the following information:
Opening Balance WIP Job 161 $7000
Job 162 $12000 $19000
Material requisitions Job 162 $3900
Job 163 $4000
Job 164 $2390 10290
Indirect 2920 $13210
Time sheets Job 161 90 hours $1800
Job 162 250 hours $5000
Job 163 130 hours $2600
Job 164 70 hous $1400
Indirect 105 hours $1785 $12585
TOTAL
hours
645
Other overhead Incurred $10355
Overhead Recovery Rate – Per direct labour hour $30.00
Product report: Jobs 161, 162 and 163 are complete
Sales (excluding 10% GST): Job 161 = $14,000
Job 163 = $12,000
Required:
Prepare: a) a Job Summary Card for each job
b) profit summary by job and in total.
c) ledgers for Factory Overhead control & applied overhead
d) calculation for over applied or under applied overhead
e) journal entry for allocation of the over/under applied overhead to COGS
f) an extract of income statement showing Sales and COGS
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a) Job Summary Card
(Amount in $)
Particulars Job 161 Job 162 Job 163 Job 164 Total
Opening WIP 7,000 12,000 19,000
Direct Materials 3,900 4,000 2,390 10,290
Direct Labour 1,800 5,000 2,600 1,400 10,800
Prime Cost 8,800 20,900 6,600 3,790 40,090
Overhead @ 30 per direct
labour hour 2,700 7,500 3,900 2,100 16,200
Total cost incurred 11,500 28,400 10,500 5,890 56,290
Finished Goods 11,500 28,400 10,500 50,400
WIP 5,890 5,890
b) Profit Summary by Job and in Total
(Amount in $)
Particulars Job 161 Job 163 Total
Sales (Excluding GST) 14,000 12,000 26,000
Cost of production (Refer (a)
above) 11,500 10,500 22,000
Profit 2,500 1,500 4,000
c) Ledgers for Factory Overhead control and applied overhead
Factory overhead control account
(Amount in $)
Particulars Dr Amount Particulars Cr Amount
To, Indirect Materials 2,920 By, Overhead applied 16,200
To, Indirect Labour 1,785
To, Overhead overabsorption 11,495
Total 16,200 16,200
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Overhead applied account
(Amount in $)
Particulars Dr Amount Particulars Cr Amount
To, Factory Overhead control
account 16,200 By, Job 161 2,700
By, Job 162 7,500
By, Job 163 3,900
By, Job 164 2,100
Total 16,200 16,200
d) Over applied overhead = $ 11,495 (Factory overhead control account)
e) journal entry for allocation of the over/under applied overhead to COGS
(Amount in $)
Particulars Dr Amount Cr Amount
Overhead applied account ….Dr 4,683
To, Job 161 1,916
To, Job 163 2,767
(Being over applied overhead
allocated to COGS in the ratio of
direct labour hours)
f) an extract of income statement showing Sales and COGS
(Amount in $)
Particulars Job 161 Job 163 Total
Sales (Excluding GST) 14,000 12,000 26,000
Less:
Cost of production (Refer (a)
above) 11,500 10,500 22,000
Allocation of over applied
overhead -1,916 -2,767 -4,683
Profit 4,416 4,267 4,000
Question 8:
Activity Based Costing
Major Manufacturing Company Limited produces two products. The production of Product A is 1000
units and the production of Product B is 1000 units. It is using a traditional costing systems however the
managers are considering transferring to an activity based costing system. With the following
information, the managers are wanting to know what the cost of inspection would be for both products if
they transferred to the Activity Based costing system.
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Item Product A Product B Total
Number of inspections 2 10 12
Cost per inspection $1,000 $1,000 $12,000
Direct Labour hours per unit 3 2 5,000
Required:
Using Direct Labour Hours as the cost driver, calculate the allocation of inspection costs to each product – ie.
Product A and Product B.
a. In Activity Based Costing methods
b. Through traditional costing methods
Answer:
a) Allocation of inspection cost under activity based costing:
b) Allocation of inspection cost under traditional costing method:
Working note: Calculation of overhead rate in traditional costing method
Total overhead $ 12000
Direct labour hours 5
Overhead rate $ 2400 per hour
References:
Averkamp, H. (2017) Activity based costing. Averkamp [Online]. Available from:
https://www.accountingcoach.com/activity-based-costing/explanation [Accessed 29 May 2018]
Wilkinson, J. (2013) Job Costing. Wilkinson [Online]. Available from: https://strategiccfo.com/job-costing/
[Accessed 29 May 2018]
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Particulars Product A Product B Basis of allocation
Inspection cost per unit $ 2000 $ 10 000 Number of inspections
Particulars Product A Product B Basis of allocation
Inspection cost per unit $ 4800 $ 7200 Direct labour hours