Financial Information Homework: Analysis and Reporting of Costs

This assignment solution addresses key concepts in the management of financial information. Section A presents multiple-choice questions covering topics like cost classification (direct vs. indirect), depreciation, budgeting, and variance analysis. Section B delves into more complex problems, including overhead allocation using direct labor hours, calculating production overhead rates, and analyzing cost behavior. The solution includes detailed calculations for reapportioning canteen costs, determining overhead absorption rates for machining and assembly departments, and calculating the cost of production for items like suitcases and handbags. The assignment demonstrates an understanding of cost accounting principles, including the calculation of costs for materials, labor, and overhead, as well as the application of these principles in decision-making scenarios.

MANAGEMENT OF
FINANCIAL INFORMATION

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
SECTION A.....................................................................................................................................1
SECTION B.....................................................................................................................................1
2...................................................................................................................................................1
3...................................................................................................................................................2
4...................................................................................................................................................3

SECTION A
1- d) Managers salary
2 – c) Total depreciation expense of business.
3 – b) 16.3
4 – d) 63000
5 – b) Nails to fit fabric to seat of chair
6 – a) 2750
7 – a) 4167 units
8 – b) 63070
9 – c) Decision making
10 – c) Warehouse rent
11 – c) Direct costs are those costs that are directly associated with product or service.
12 – a) Over recovery of £36,205
13 – c) 18.8
14 – d) Floor Area
15 –a) Budget
16 – a) 8 per direct machine hour
17 – b) Variance analysis
18 – c) Variable
19 – b) Machine hours
20 – d) Planning
SECTION B
2.
a) Direct labour hours should be used to apportion the overheads as they are more high than the
machine hours and it requires mixing by hand. It will provide more reliable apportion of the
overhead costs.
b)
Direct labour hour cost
Production overhead 550000
Direct labour hours 27000
Rate per labour hour 20.37
1

c)
Direct labout cost per hour 20.37
Customer order 85
Production overhead 1731.45
d)
Actual direct labour hour 26000
Actual cost per labour hour 20.37
Recovery of production
overheads 529620
e)
Actual overheads 575000
Production overhead recovered 529620
Under recovery 45380
3.
a)
Gold needed to meet the production
Necklace (1400*80) 112000
Bracelet (650*40) 26000
Earrings (200*10) 2000
In Grams 140000
In kgs 140
b)
Gemstones needed to meet the
production
Necklace (1400*15) 21000
Bracelet (650*5) 3250
Earrings (200*2) 400
Number of gems required 24650
c)
Gold required to be purchased
Budget = Production + Cl. Stock - Op
Stock
Production 140000
2

Closing stock 10000
Opening stock 6000
Purchase to be made 144000
d)
Gemstones required to be purchased
Budget = Production + Cl. Stock - Op
Stock
Production 24650
Closing stock 2000
Opening stock 3000
Purchase to be made 23650
e)
Total purchase budget
Gold required 140
Rate 270
Budget 37800
Gems required 24650
Rate 55
Budget 1355750
Total purchase budget 1393550
4.
a)
Reapportionment of canteen cost
Canteen overheads 30000
Total employees in machining & assembling 24
Per employee overhead rate 1250
Allocation to machining (1250*16)
20000
Allocation to Assembly (1250*8)
10000
b)
3

OAR per machine rate for machining
department
Canteen section apportioned to machine 20000
Machining overheads 84000
Total cost (20000+84000)
104000
Suitcase production (20000*1)
20000
Handbag production (15000*0.2)
3000
Total machine hours 23000
Rate per machine hour (104000/23000)
4.52
c)
OAR per labour hour for assembly department
Canteen section apportioned to assembly 10000
Assembly overheads 36000
Total cost 46000
Suitcase production (20000*0.4)
8000
Handbag production (15000*0.5)
7500
Total Labour hour 15500
Rate per labour hour (46000/15500)
2.97
d)
Cost of Suitcase
Materials 23
Labour 3.6
Machine overhead 4.52
Assembly overhead 1.188
Total 32.308
4

e
Cost of Suitcase
Materials 16
Labour 4.5
Machine overhead 0.904
Assembly overhead 1.485
Total 22.889
5