ACCT6004: Cost Accounting Analysis, Inventory Management, and Ethics

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Added on 2024/07/12

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This assignment solution provides a detailed analysis of manufacturing costs, cost of goods manufactured, and ending work-in-process inventory for J&B Sports. It includes calculations for predetermined overhead rates, gross profit, and an assessment of inventory changes for shorts, jerseys, and jackets. The solution also addresses the ethical implications of accounting adjustments, referencing the Australian Accounting code of ethics, and discusses potential monetary and non-monetary costs associated with unethical practices. Desklib offers a platform for students to access similar solved assignments and study resources.

ACCT6004
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Table of Contents
Activity 3:...................................................................................................................................3
a. Given that J&B Sports uses direct labour dollars as its application base, what is the
company’s predetermined overhead rate?..............................................................................3
b. Taking into consideration only these three products:........................................................4
c. For each of the three products, state whether there are more, fewer, or the same number
of finished units in Finished Goods Inventory on June 30 than there were on June 1...........6
d..............................................................................................................................................7
References.................................................................................................................................. 8
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Activity 3:
a. Given that J&B Sports uses direct labour dollars as its application base, what is the
company’s predetermined overhead rate?
For calculating the predetermined overhead recovery rate first of all total units produced in
relation to all three different types of products need to be computed.
Working Note:
Working Note: Calculation of total units produced in the month of
June
Products Units produced or completed during the
month of June
Shorts 13500
Jerseys 3200
Jackets 2500
Total 19200
Calculation of overhead recovery rate
Particulars Amount (in $)
Total labour cost incurred in the month of June (a)
(given)
74208
Total units produced during June (b) as
determined in Working note
19200
Overhead recovery rate (c) = (a/b) 3.865
Thus, the overhead recovery rate taking the labour cost as the base is 3.865 per labour dollar.
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b. Taking into consideration only these three products:
i. Calculate the total manufacturing cost for June.
Working Note: Calculation of total units sold in the month of June
Products Units sold during the month of June
Shorts 14000
Jerseys 3100
Jackets 2500
Total 19600
Computation of manufacturing cost for the month of June
Particulars Amount ($)
Direct material incurred in the month of June (a) 191591
Labour cost incurred in June (b) 74208
Overhead cost (19600*3.865) (c) 75754
Total manufacturing cost for June (d) = (a+b+c) 341553
ii. Calculate the Cost of Goods Manufactured for June.
Calculation of cost of goods manufactured for the month of June
Particulars Amount ($)
Direct material 191591
Labour cost 74208
Overhead cost (19200*3.865) 74208
Total manufacturing cost for June 340007
It can be clearly observed that while computing cost of goods manufactured, overhead cost in
relation to units produced in the month of June has been considered. On the other hand,
manufacturing cost, the overhead cost in relation to total units sold has been taken into
consideration.
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iii. Calculate the Ending Work in Process Inventory for June.
Calculation of closing work in inventory for the month of June
Particulars Shorts Jerseys Jackets
Opening work in process (WIP) 100 200 50
Units finished or completed 13500 3200 2500
units sold 14000 3100 2500
Closing work in process stock or inventory -400 300 50
iv. Calculate Gross Profit for June.
Calculation of gross profit for the month of June
Particulars Shorts Jerseys Jackets Total
Sales (a) 168000 45880 312500 526380
Total cost of goods sold (b) 138180 34627 192800 365607
Gross profit (c) = (a-b) 29820 11253 119700 160773
Total gross profit 1052760
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c. For each of the three products, state whether there are more, fewer, or the same
number of finished units in Finished Goods Inventory on June 30 than there were on
June 1.
From the calculation done in the above part, it can be concluded that all the three products
have shown different changes in relation to no. of finished goods in respect of finished goods
stock/ inventory. This has been explained below:
Shorts:
Opening WIP is 100 units. Units sold were more than that of units finished or completed. As
such, the closing inventory is -400 which cannot be practically possible. Thus, it is better to
assume that closing work in progress inventory in relation to shorts is Nil and all the units
produced along with opening stock has been sold.
Jerseys:
The opening stock of work in progress in relation to Jerseys is 200 units. While at the end of
month of June, the closing stock is 300 units. This is because almost all the units produced or
manufactured have been sold. Thus, it can be said that the company has determined the
customer demand correctly.
Jackets:
The opening stock as well as closing stock of work in progress of jackets is same. Thus, there
is no fluctuation in opening and closing stock. This is because all the units completed have
been sold in the month of June itself.
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d.
i. Explain why the adjustments the accountant made are unethical, referring to the
Australian Accounting code of ethics.
As per code of ethics prevalent in Australian accounting framework these adjustments are not
ethical. Thus, the financial statements have not been prepared in accordance with the
financial reporting framework. The investors need adequate and correct data so that better
decisions can be taken. As such it may affect the decision-making process of investors or
other stakeholders interested in the business affairs of the concerned business organization.
ii. What additional costs, both monetary and nonmonetary might J&B Sports incur
because of the accountant’s actions?
Adoption of unethical practices has led to incurring of both monetary and non-monetary
types of cost. This only happens only because of the accountant’s actions. The first and
foremost cost is fabric manufacturing cost. If this not happens, this cost could have been
provided. At the same time, monetary costs that the organization may incur is carrying cost in
relation to inventory.
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References
 Hemmer, T. and Labro, E., (2016). Productions and Operations Management & Management
Accounting.
 Hill, C.W., Jones, G.R. and Schilling, M.A., (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
 Manyaeva, V., Piskunov, V. and Fomin, V., (2016). Strategic Management Accounting of
Company Costs.
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