ACC2350 Cost Accounting II: Cost Analysis, Budgeting, and ABC

This assignment solution covers several key areas of cost accounting. It begins with classifying costs into variable, fixed, product, conversion, and selling & administrative categories. It then delves into overhead allocation using activity-based costing (ABC) for two products, calculating unit manufacturing costs and analyzing over or under allocation of overheads. Further, the assignment includes a detailed quantity schedule and equivalent unit computation using the weighted-average method, determining the cost per equivalent unit and assigning costs to completed and ending work-in-process inventories. Lastly, it reflects on personal preferences within costing topics, discussing the advantages and challenges associated with budgeting and activity-based costing, respectively. Desklib offers similar solved assignments and study tools for students.

Solution-1
Classification of Costs:
Cost Item Variabl
e Cost
Fixed
Cost
Produc
t Cost
Conversion
Costs
Selling &
Admin Cost
Direct labor cost X X X
Depreciation on factory space X X X
Direct Material X X
Rental Cost of the small
warehouse X X X
Advertising cost X X
Production supervisor’s salary X X X
Sales commission X X

Solution-2
Part-1
Calculation of unit manufacturing cost for each product
Activity Cost
Pool
Actual Activity Budgeted
Activity
rate
Overhead allocation
Product
C Product D Total Product C Product D
Machine set ups 100 190 290 50 5,000 9,500
Design 500 1,250 1,750 60 30,000 75,000
General Factory 4,160 2,100 6,260 9 37,440 18,900
119 72,440 103,400
No. of units produced 4,000 2,000
Cost per unit 18.11 51.70
Hence, the unit manufacturing cost for Product C is $18.11 and Product D is $ 51.70.
Part-2
Activity a. Cost Hierarchy
Level
b. Allocation base/ cost
driver
1. Machine set ups Batch Level Setup hours
2. Design Product Level No. of design layouts

Part-3 Calculation of over or under allocation of overheads
Activity Cost
Pool
Actual Overheads allocated Budgeted Overhead allocation Under or
over
allocatio
n Nature
Product
C
Product
D Total
Product
C
Product
D Total
Machine set
ups 4,700 8,930 13,630 5,000 9,500 14,500 870
Under
allocation
Design 32,500 81,250 113,750 30,000 75,000 105,000 (8,750)
Over
allocation
General
Factory 45,760 23,100 68,860 37,440 18,900 56,340 (12,520)
Over
allocation
82,960 113,280 196,240 72,440 103,400 175,840 (20,400)
Wn-1: Calculation of actual overheads allocation
Activity Cost
Pool
Actual
overhead
costs
Actual Activity Actual
Activity
rate
Overhead allocation
Product
C
Product
D Total Product C Product D
Machine set ups 13,630 100 190 290 47 4,700 8,930
Design 113,750 500 1,250 1,750 65 32,500 81,250
General Factory 68,860 4,160 2,100 6,260 11 45,760 23,100
196,240 123 82,960 113,280

Solution-3
Part-1
(a) A quantity (physical flow) schedule
QTY SCH Physical Units
B'fwd units 40,000
Current units 100,000
Units to account for 140,000
QUANTITIES Physical Units
Opening WIP 40,000
Started & finished 50,000
Ending WIP 50,000
Units accounted 140,000
(b) Computation of Equivalent Units
physical T/I Mat CC
QUANTITIES units Equivalent Units
Opening WIP 40,000 - 40,000 10,000
Started & finished 50,000 50,000 50,000 50,000
Ending WIP 50,000 50,000 - 20,000
140,000 100,000 90,000 80,000
Part-2
Calculation of cost per equivalent units
T/I Mat CC Totals
COSTS ($) $
B'fwd costs 32,000 0 40,000 72,000
Current costs 150,000 55,800 128,000 333,800
Total costs 182,000 55,800 168,000 405,800

Cost per Equivalent Units = Current costs / Equivalent Units
T/I Mat CC Totals
Current units/costs 150,000 55,800 128,000 333,800
Equivalent Units 100,000 90,000 80,000
Cost per Equivalent unit $1.50 $0.62 $1.60 $3.72
Part-3
COSTS ASSIGNED T/I Mat CC Totals
Completed Units
Opening WIP (25%) 72,000
Completing WIP - 24,800 16,000 40,800
Started & finished 75,000 31,000 80,000 186,000
298,800
Ending WIP 75,000 - 32,000 107,000
Total Cost of goods transferred out - $298,800
Total cost of ending work in process - $107,000
Part-4
WIP - Finishing Dept
Bal (begin) 75
% T/I $32,000 units $
40,000
ma
t 0
cc 40,000
72,000
Transferred
In 100,000 $150,000 Complete 90,000
$298,80
0
Curr Costs ma
t 55,800
cc 128,000
333,800 Bal cd 50,000
$107,00
0
0%
140,000 405,800 $140,000
$405,80
0

Bal (end) 50,000 40
% T/I 75,000
ma
t 0
cc 32,000
$107,000
Solution-4
1. Topic in costing unit I like the most is budgeting
The topic in costing unit I like least is activity based costing
2. I like the budgeting, since it involves forecasting of costs and revenues and provides the
insight of the upcoming profitability, it is a very easy and sorted topic. The budgets are
prepared on the basis of actual numbers. For budget preparation, we just need to take the
current numbers and adjust them with the future probabilities.
I dislike the activity based costing, since it is very typical and confusing. It involves lots
of step beginning with identification of cost drivers, which is in itself a very difficult
process. As I got always confused, as how to identify the relevant cost drivers and then
identifying the associated cost with those activity drivers. So, I believe it to be a
complicated process. It is a very complex process and involves lots of steps and
calculations.
3. The time required for me to master the topic of activity based costing is 1 full week. So,
that I can read and understand the effects and process of the activity based costing. Yes, I
will be requiring help of experts who can sort out my confusions and let me know the
correct process of dealing with it. I would like to ask my tutors for help as they are expert
in the topic involved.

If my employer ask me to undertake the calculations / analysis, I would take the help of
my, tutors, friends and internet.