ACC2350 Cost Accounting: Hummer Inc. Solved Assignment, S2 2018

This assignment solution covers key concepts in managerial accounting, including activity-based costing, process costing, and job costing. It addresses questions related to cost assignment within a manufacturing cell, specifically focusing on Hummer Inc. The solution includes calculations for raw material purchases, work-in-process inventory, direct labor hours, and cost of goods manufactured. It also analyzes overhead allocation and provides journal entries for adjustments. Further, it differentiates between process and job costing, highlighting their applications in various industries. The assignment also covers the allocation of service department costs to production departments and calculates economic order quantity (EOQ) for inventory management.

MANAGERIAL ACCOUNTING 1
MANAGERIAL
ACCOUNTING

MANAGERIAL ACCOUNTING 2
Answer 1:
Part 1:
The best method for the stated purposes would be the Activity Based Costing technique.
For direct tracing, the traditional method costing could be used whereas for driver tracing,
activity based costing technique could be used
Part 2:
a. Salary of cell supervisor-the number of hours spent on each product could be used
b. Power to heat and cool the plant in which the cell is located-the number of unit consumed
in the electricity could be used
c. Materials used to produce the motors-the direct materials consumed could be used
d. Maintenance for the cell’s equipment (provided by the maintenance department)-the direct
costs incurred could be used
e. Labour used to produce the motors-the direct labour hours spent could be used
f. Depreciation on the plant- the number of units manufactured from that plant could be used
g. Deprecation on equipment used to produce the motors- the number of units manufactured
from that equipment could be used
h. Ordering costs incurred by the Purchasing department for ordering raw materials for all of
Hummer’s products- the number of orders made from each department could be used
Answer 2:
1 Cost of Raw materials purchased during November
Closing Inventory as on 30 Nov $20,000.00

MANAGERIAL ACCOUNTING 3
Less: Opening Inventory as on 1 Nov $17,000.00
Increase in Inventory during Nov $3,000.00
Add: Raw materials drawn during production $39,000.00
Raw materials purchased $42,000.00
2 A total of 300 hours of direct labour time had been expended on the jobs in the
beginning Work in Process inventory. Calculate the direct materials cost in the
beginning Work in Process inventory.
Work in Process as on 1 Nov $9,00
0.00
Less: Direct Labour Cost
(300 hours) $10 per hour $3,00
0.00
Less: Overhead
(300 hours) $8 per hour $2,40
0.00
Raw materials in Work in Process $3,60
0.00
3 Calculate the actual direct labour hours worked
during November
Allocated Overheads during Nov $26,4
00.00
a

MANAGERIAL ACCOUNTING 4
Predetermined Overhead
Rate
per Direct
Labour hour
$8.00 b
No. of direct labour hours worked 3300 a/
b
4 The ending Work in Process inventory contained $4,700 of direct materials cost.
Calculate the amount of direct labour cost in the ending Work in Process
inventory
Work in Process as on 30 Nov $11,0
00.00
Less: Direct Materials $4,70
0.00
Cost of Direct Labour and Overheads in
Work in Process
$6,30
0.00
a
Direct Labour Hour Rate per Direct
Labour hour
$10.0
0
Predetermined Overhead
Rate
per Direct
Labour hour
$8.00
Total Labour &
Overhead Rate
per Direct
Labour hour
$18.0
0
b
No. of Direct Labour
Hours
350 c =
a/
b
Hourly Rate $8.00 d

MANAGERIAL ACCOUNTING 5
Direct Labour Cost $2,80
0.00
c*
d
5 Calculate the cost of goods manufactured in
November
Process Account
Description Amount in $ Description Amount
in $
To Opening Work in
Process
By Finished
Goods Account
- Raw Materials 3600 - Raw
Materials
37
90
0
- Direct Labour 3000 - Direct
Labour
32
50
0
- Overheads 2400 9000 - Overheads 26
00
0
96
40
0
To Raw Materials drawn
in production
3900
0
(given in question)
To Direct Labour 3300 By Closing

MANAGERIAL ACCOUNTING 6
0 Work in
Process
(3300 hours as calculated
in Q3 @ $10 per hour)
- Raw
Materials
47
00
To Overheads 2640
0
- Direct
Labour
35
00
(3300 hours as calculated
in Q3 @ $8 per hour)
- Overheads 28
00
11
00
0
1074
00
10
74
00
Cost of Good Manufactured during November
$96,400
6
a Calculate the amount of manufacturing overheads under or over allocated
(applied), stating clearly whether the amount is under or over allocated
Overhead Applied in
November
$26,400.00
Overhead Incurred in
November
$28,000.00

MANAGERIAL ACCOUNTING 7
Under applied / allocated
Overheads
$1,600.00
b Prepare the journal entries to adjust for the overheads under or over
allocated. No explanation is required.
Manufacturing Overhead
Control A/c
$1,600.00
To Costing Profit & Loss
A/c
$1,60
0.00
Answer 3:
Part 1:
Process costing is used in automobiles, food industries
And it is used in petroleum, coal mining industries.
Part 2:
For the service industries, job costing is sued. From the purposes of accounting, the process
costing differs from the job costing. The job costing tracks in all the costs along with the
profits for each and every job and this helps in accounting of all the expenses for each job for
the taxation purposes and also for analysis.
On the other hand, the process of process costing helps in tracking of all the costs that are
associated with the manufacturing of the products. For example, a company manufactures the
plastic combs, now the plastics is put in the mild in the molding department and then the

MANAGERIAL ACCOUNTING 8
same is painted before the same is packed. As these combs move from one department to
another, more costs are added to production (Lumen learning, 2018).
Answer 4:
Part a:
Particulars Production Departments
MA SA
Direct overhead costs 9,00,000.00 8,00,000.00
Computing
department allocation 1,10,000.00 90,000.00
200000 would be
divided into 385:315
Engineering
department allocation 2,12,000.00 1,88,000.00
400000 would be
divided into 530:470
Total costs 12,22,000.00 10,78,000.00
Part b:

MANAGERIAL ACCOUNTING 9
Particulars Service departments Production Departments
Computing Engineering MA SA
Direct overhead
costs 9,00,000.00 8,00,000.00
Computing
department
allocation -2,00,000.00 18181.81818 1,00,000.00 81,818.18
200000 would be
divided into
70:385:315 400000
418181.8182 100000 81818.18182
Engineering
department
allocation 2,21,635.93 1,96,545.07
418181 would be
divided into
530:470
Total costs 3,21,635.93 2,78,363.25
Answer 5:

MANAGERIAL ACCOUNTING 10
Part 1:
Annual
demand 40,000.00
Delivery
time 5.00
Ordering
costs per
order 100.00
Carrying
costs per
bottle per
year 0.50
EOQ
Sq root of (2*Ordering costs per order*Demand/Holding
costs)
160,00,000.00
EOQ 4,000.00
Part 2:

MANAGERIAL ACCOUNTING 11
Inventory costs
when 4000 bottles
are ordered 2,000.00
costs before 3,000.00
Cost savings 1,000.00
Part 3:
Annual
demand 52500
Delivery
time 5
Ordering
costs per
order 100
Carrying
costs per
bottle per
year 0.5
EOQ
Sq root of (2*Ordering costs per order*Demand/Holding
costs)

MANAGERIAL ACCOUNTING 12
210,00,000.00
EOQ 4852.57