Fundamentals of Accounting: Cost Accounting and Cash Flow Statement

This assignment solution delves into the fundamentals of accounting, addressing key concepts such as predetermined factory overhead rates and cash schedule analysis. It calculates factory overhead rates based on different allocation bases like unit production and direct labor hours, further measuring over or under applied overhead for Aloe Limited and Basil Limited. The assignment also constructs a cash schedule for Bounce Athletics Limited, projecting cash collections based on revenue and collection policies. Additionally, it presents a differential income statement to evaluate Adventure 1 and Adventure 2, advising on which adventure to accept based on profitability. This detailed solution provides a comprehensive understanding of cost accounting, cash flow management, and financial decision-making.

Fundamentals of
Accounting
[Type the document subtitle]
Student’s Name
5/30/2018

Question 1:
a)
Calculation of Predetermined factory overhead rate
Estimated factory cost $ 5,28,000 $ 8,60,000
Basis of allocation
Units of
production
Direct labour
hours
Unit of production 109600
Direct labour hours 174000
Factory overhead rate (Estimated
factory cost / unit of production
or Direct labour hours) $ 4.82 $ 4.94
(Bhimani et al, 2008)
b)
Measurement of over or under applied
Aloe Limited Basil Limited
Factory
overhead
Factory overhead
rate
Actual amount $ 4,99,200 $ 4.80
$
8,88,160
$
5.42
Estimated
amount $ 5,28,000 $ 4.82
$
8,60,000
$
4.94
Difference $ -28,800 $ -0.02
$
28,160
$
0.47
Over applied Under applied
Indication:
The above table explains that the Aloe limited has over applied the factory overhead
amount as the actual amount is quite lower than the actual amount. The total difference
among the actual and estimated amount is $ 28,800. On the other hand, it has been found
that the Basil limited has under applied the predetermined overhead rate. The total difference
among the actual and estimated amount is $ 28160.

Question 2:
Statement of cash schedule of Bounce Athletics Limited
Jan Feb Mar Apr May Jun
Budgeted Revenue
$
10,000
$
50,000
$
80,000
$
25,000
$
80,000
$
60,000
Cash schedule:
70% in current
month
$
7,000
$
35,000
$
56,000
$
17,500
$
56,000
$
42,000
30% in next month
$
3,000
$
15,000
$
24,000
$
7,500
$
24,000
Total collected cash
$
7,000
$
38,000
$
71,000
$
41,500
$
63,500
$
66,000
(Krantz, 2016)
The above table explains that the total cash collection of Bounce Athletics limited
would differ on the basis of the total revenue and the cash collection policies of the company.
Question 3:
Statement of Differential Income
Adventure
1
Adventure
2
Revenue cost (A) 8600 7200
Labour cost $ 1,100 $ 1,100
Equipment cost $ 2,800 $ 2,800
Food and equipment
cost $ 1,800 $ 1,360
Fixed cost $ 2,500 $ 2,500
Total cost (B) $ 8,200 $ 7,760
Total net profit (A-B) $ 400 $ -560
(DRURY, 2013)
The above statement explains that the adventure 1 will offer $ 8600 revenue and $ 8200
which explains that the total net profit from the adventure 1 would be $ 400. Whereas, the
adventure 2 explains that the adventure would offer loss to the company. Thus the adventure
1 must be accepted by the business.

References:
Bhimani, A., Horngren, C. T., Datar, S. M., and Foster, G. 2008. Management and cost
accounting (Vol. 1). Pearson Education.
DRURY, C. M. 2013. Management and cost accounting. Springer.
Krantz, M. 2016. Fundamental Analysis for Dummies. John Wiley and Sons.