Workshop_4_Questions(1)[1]

MANG6026 - MANAGEMENT ACCOUNTING 1

Workshop 4 Questions

Note: Due to time limitations, only a few of these questions will be attempted. You therefore need to prepare and practice these questions on your own. Outline answers will also be available in Blackboard immediately after the workshop.

In addition to the questions below, every student should attempt the end of chapter (chapters 1 and 2 of Drury) summaries, review questions and problems. Solutions to the end of chapter questions and problems are at end of the book. The solutions to the questions without solutions are also AVAILABLE in Blackboard.

Question 1:

Identify and critically discuss each of the stages involved in designing activity-based costing systems. Support your answers with appropriate examples.

Question 2:

The optimal costing system is different for different organisations. Critically compare and contrast the main conditions under which a simple traditional costing system may be suitable to a sophisticated activity-based costing system.

Question 3:

The activity-based costing (ABC) system classifies activities along a cost hierarchy. Using appropriate examples, identify and critically discuss the main types of activities under ABC.

Question 4:

Identify and critically discuss the main factors that hinder the implementation of activity-based costing systems.

Question 5:

Ernest, SA., has identified the following overhead costs and cost drivers for next year:

Overhead Item Expected Cost Cost Driver Expected Quantity

Setup costs ￡320,000 Number of setups 4,000

Ordering costs 120,000 Number of orders 20,000

Maintenance 480,000 Machine hours 24,000

Power 40,000 Kilowatt hours 160,000

The following are two of the jobs completed during the year:

Job 320 Job 321

Direct materials ￡8,000 ￡19,000

Direct labour ￡6,400 ￡12,000

Units completed(最后一步除) 800 1,600

Direct labour hours 240 500

Number of setups 12 20

Number of orders 20 40

Machine hours 400 600

Kilowatt hours 280 400

The company's normal activity is 32,000 direct labour hours. (Round amounts to two decimal places.) Required:

a. Determine the unit cost for each job using direct labour hours to apply overhead.

b. Determine the unit cost for each job using the four cost drivers.

c. Which method produces the more accurate cost assignment? Why?

Question 6:

Lyons, SA., has identified the following overhead costs and activity drivers for next year: Overhead Item Expected Cost Activity Driver Expected Qty.

Setup costs ￡150,000 Number of setups 1,200

Ordering costs 40,000 Number of orders 10,000

Maintenance 200,000 Machine hours 16,000

Power 20,000 Kilowatt hours 100,000

The following are two of the jobs completed during the year:

Job XX Job YY

Direct materials ￡2,250 ￡2,500

Direct labour 3,000 1,875

Units completed 375 300

Direct labour hours 90 110

Number of setups 6 8

Number of orders 8 15

Machine hours 180 150

Kilowatt hours 90 120

The company's normal activity is 20,000 direct labour hours.

Required:

a. Determine the unit cost for each job using direct labour hours to apply overhead.

b. Determine the unit cost for each job using the four activity drivers. (Round amounts to 2

decimal places.)

c. Which method produces the more accurate cost assignment? Why?