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ACC00714 – 2016 S2 ASSIGNMENT 1 (25 marks) QUESTION 1 (10 MARKS) You have been employed as an entry-level management accountant for a little under a year. You suspect that your immediate supervisor is involved in a significant fraud involving diverting of company assets to personal use. Briefly discuss the steps you might take to resolve this dilemma and use a real world example (not hypothetical) to support your discussion. Question 2 (5 MARKS) Lismore Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted: Work-in-process inventory (January 1) $ 140,400 Work-in-process inventory (March 31) 171,000 Finished goods inventory (January 1) 540,000 Finished goods inventory (March 31) 510,000 Direct materials used 378,000 Indirect materials used 84,000 Direct manufacturing labor 480,000 Indirect manufacturing labor 186,000 Property taxes on manufacturing plant building 28,800 Salespersons’ company vehicle costs 12,000 Depreciation of manufacturing equipment 264,000 Depreciation of office equipment 123,600 Miscellaneous plant overhead 135,000 Plant utilities 92,400 General office expenses 305,400 Marketing distribution costs 30,000 Required: a. Prepare a cost of goods manufactured schedule for the quarter. (1 mark) b. Prepare a cost of goods sold schedule for the quarter. (1 mark) c. Indentify inventoriable and period costs. (1 mark) d. Of what value is the schedule of cost of goods manufactured? How does it tie into the income statement? Discuss and use examples to support your discussion. (2 marks) Question 3 (5 MARKS) The Dougherty Furniture Company manufactures tables. In March, the two production departments had budgeted allocation bases of 4,000 machine-hours in Department 100 and 8,000 direct manufacturing labor-hours in Department 200. The budgeted manufacturing overheads for the month were $57,500 and $62,500, respectively. For Job A, the actual costs incurred in the two departments were as follows: Department 100 Department 200 Direct materials purchased on account $110,000 $177,500 Direct materials used 32,500 13,500 Direct manufacturing labor 52,500 53,500 Indirect manufacturing labor 11,000 9,000 Indirect materials used 7,500 4,750 Lease on equipment 16,250 3,750 Utilities 1,000 1,250 Job A incurred 800 machine-hours in Department 100 and 300 manufacturing labor-hours in Department 200. The company uses a budgeted overhead rate for applying overhead to production. Required: a. Determine the budgeted manufacturing overhead rate for each department. (1 mark) b. Prepare the necessary journal entries to summarize the March transactions for Department 100. (2 marks) c. What is the total cost of Job A? (1 mark) d. What factors should be considered in selecting an allocation base to be used in computing the budgeted overhead rate? Discuss and use examples to support your discussion. (1 mark) Question 4 (5 MARKS) a. Silver Spoon Incorporated is a manufacturer of kitchen utensils. It produces all of its products in one department. The information for the current month is as follows: Beginning work in process 37,500 units Units started 55,000 units Units completed 75,000 units Ending work in process 14,500 units Spoilage 3,000 units Beginning work-in-process direct materials $25,000 Beginning work-in-process conversion $ 10,000 Direct materials added during month $113,750 Direct manufacturing labor during month $40,020 Beginning work in process was 25% complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 37.5% of direct manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is detected at the end of the process. Required: a. Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used. (3 marks) b. Why is cost accumulation easier under a process costing system than under a job order costing system? Discuss and use examples to support your discussion. (2 marks) THE END


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