Managerial Accounting

MANAGERIAL ACCOUNTING

TABLE OF CONTENTS
QUESTION 1.............................................................................................................................3
Part A.....................................................................................................................................3
Part B......................................................................................................................................3
QUESTION 2.............................................................................................................................4
QUESTION 3.............................................................................................................................5
QUESTION 4.............................................................................................................................6
QUESTION 5.............................................................................................................................8
QUESTION 6.............................................................................................................................9
REFERENCES.........................................................................................................................11

QUESTION 1
Part A
a)
If 25000 units are produced, the variable cost per unit will be
Direct material = $13
Direct Labour = $8
Variable manufacturing overhead = $3
Total variable cost per unit = $24
b)
If 16000 units are produced, the variable cost per unit will remain the same as above.
Direct material = $13
Direct Labour = $8
Variable manufacturing overhead = $3
Total variable cost per unit = $24
c)
The variable changes with eth change in eth level of activity but eth per unit cost remains the
same. As the above two cases, when the 25000 units were produced the variable cost was
$600000 ($24 * 25000) and under 16000 units, eth variable cost was $384000 ($24 * 16000).
Thus, variable changes but per unit cost remains the same.
d)
If 18,000 units are produced, the total variable cost will be $24 * 18000 = $432000.
Part B
a)
Copies made Amount charged
5000 $600 January
3000 $400 April
The variable cost per copy if GEM uses the high-low method to analyse costs
Variable cost per copies = (High cost - low cost) ÷ (High number of copies - low number of
copies)
= ($600 -$400) / (5000-3000)

= $200 / 2000 = $0.10
b)
Amount to be paid if 7500 copies are made
When 5000 copies were made, variable cost was 5000 * $0.10 = $500
So, fixed cost is $100
In the similar way, when 3000 copies were made, variable cost = 3000 * $0.10 = $300, so,
fixed cost is $100
Now the total paying cost equal to
= Fixed cost + (High number of copies × Variable cost per copies)
= $100 + (7500 * 0.10)
= $850
QUESTION 2
a)
Traditional:
If Basic uses 140,000 hours to make 70,000 units; the number of machine hours per unit for
Basic = 140,000 hours/70,000 units = 2 hours per unit.
The overhead per unit of Basic = $21 per machine hours × 2 hours per unit = $42.
If Deluxe uses 60,000 hours to make 30,000; the number of machine hours per unit for
Deluxe is 60,000 hours/30,000 units = 2.
The overhead per unit of Deluxe = $21/machine hours × 2 hours/unit = $42.
Basic Deluxe
Direct material $10 $15
Direct labour 60 40
Manufacturing overhead 42 42
Total per-unit cost $112 $97
b)
The overhead rate per activity is the estimated total overhead per activity divided by the
estimated activity.
Total
Overhead
per Activity
Estimated Activity Rate per
Activity
Machine setups $90000 300 setups $300
Machine
processing
$4000000 200000 machine
hours
$20
Material $100000 200 parts $500