HI5017 Managerial Accounting

HI5017 Managerial Accounting.

Assessment Task – Tutorial Questions
Unit Code: HI5017
Unit Name: Managerial Accounting
Assignment: Tutorial Questions
Due: 13 October, 2020 at 11.59pm
Weighting: 50%
Total Assignment Marks: 50 marks
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in
this unit
Unit Learning Outcomes Assessed:

1. Synthesize and critically analyse information from various sources and provide recommendations to
improve the operations of organisations through the application of management accounting
2. Critically evaluate the various approaches to performance measurement and control in various
types of organisations, and devise and evaluate indicators of performance.
3. Demonstrate the need for a balance between financial and non-financial information in decision
making, control and performance evaluation applications of management accounting.
4. Analyse a company’s financial statements and/or management reports and identify the strengths
and weaknesses of the company and articulate these to the various stakeholders.

Description: Each week students were provided with three tutorial questions of varying degrees of
difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard.
The Interactive Tutorials are designed to assist students with the process, skills and knowledge to
answer the provided tutorial questions. Your task is to answer a selection of tutorial questions and
submit these answers in a single document.
The questions to be answered are:
Question 2 – Week 3 (7 marks)
Tik Tok Company manufactures customized coffee tables. The following relates to Job No.
X10, an order for 150 coffee tables:
Direct materials used $22 800
Direct labour hours worked 600
Direct labour rate per hour $16.00
Machine hours used 400
Applied factory overhead rate per machine hour $30.00
a) What is the total manufacturing cost for Job No. X10? (3 marks)
b) Calculate the cost per coffee table for Job No. X10? (2 marks)
c) List two uses of this unit cost information to the managers at Tik Tok Company. (2 marks)
Question 2 – Week 5 (11 marks)
TikTok Electronics manufactures an aluminium fibre tripod model “TRI-X” which sells for
$1,600. The production cost computed per unit under traditional costing for each model in
2019 was as follows:

Traditional Costing TRIX
Direct Materials $700
Direct Labour ($20/hour) $120
Manufacturing overhead ($38 per DLH) $228
Total per unit cost $1, 048

In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the
gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRIX as it has continuously failed to reach the gross profit target of $600. Before finalizing its
decision, management asks TikTok Electronics management accountant to prepare an
analysis using activity-based costing (ABC). The management accountant accumulates the
following information about overhead for the year ended December 31, 2019.

Activity Cost
Cost Drivers Estimated
Expected Use of
Cost Drivers
Purchasing Number of
$1,200,000 40,000
Machine setups Number of
900,000 18,000
Machining Machine hours 4,800,000 120,000
Quality Control Number of
700,000 28,000

The cost drivers used:

Cost Drivers TRI-X Product
Purchase orders 17,000
Machine setups 5,000
Machine hours 75,000
Inspections 11,000

1. Calculate the activity rates for each of the overhead items using the four cost drivers. (3
2. Using the rates in (1) determine the unit cost for TRI-X. (4 marks)
3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend
whether or not TRI-X should be discontinued. (4 marks)
Question 3 – Week 6 (11 marks)
A new company, is being established to manufacture and sell an electronic tracking device:
the Trackit. The owners are excited about the future profits that the business will generate.
They have forecast that sales will grow to 2,600 Trackits per month within five months and
will be at that level for the remainder of the first year.
The owners will invest a total of $250,000 in cash on the first day of operations (that is the
first day of July). They will also transfer non-current assets into the company.
Extracts from the company’s business plan are shown below.
The forecast sales for the first five months are:

Month Trackits (units)
July 1,000
August 1,500
September 2,000
October 2,400
November 2,600

The selling price has been set at $140 per Trackit.
Sales receipts
Sales will be mainly through large retail outlets. The pattern for the receipt of payment is
expected to be as follows:
Time of payment % of sales value
Immediately 15 *
One month later 25
Two months later 40
Three months later 15
The balance represents anticipated bad debts.
* A 4% discount will be given for immediate payment
The budget production volumes in units are:

July August September
1,450 1,650 2,120

Variable production cost
The budgeted variable production cost is $90 per unit, comprising:
Direct materials 60
Direct labour 10
Variable production overheads 20
Total variable cost 90
Direct materials: Payment for purchases will be made in the month following receipt of
materials. There will be no opening inventory of materials in July. It will be company policy to
hold inventory at the end of each month equal to 20% of the following month’s production
Direct labour will be paid in the month in which the production occurs.
Variable production overheads: 65% will be paid in the month in which production occurs and
the remainder will be paid one month later.
Fixed overhead costs
Fixed overheads are estimated at $840,000 per annum and are expected to be incurred in
equal amounts each month. 60% of the fixed overhead costs will be paid in the month in
which they are incurred and 15% in the following month. The balance represents depreciation
of noncurrent assets.
a) Prepare a cash receipts budget schedule for each of the first three months
(July – September), including the total receipts per month. (3 marks)
b) Prepare a material purchases budget schedule for each of the first three
months (July – September), including the total purchases per month. (4 marks)
c) Prepare a cash budget for the month of July. Include the owners’ cash
contributions (4 marks)
Question 2 – Week 8 (7 marks)
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is
decentralised and each division is evaluated as a profit centre. The Bottle Division produces
bottles that can be used by the Perfume Division. The Bottle Division’s variable manufacturing
cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division’s external sales
price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The
Perfume Division can purchase similar bottles in the external market for $3.50.
The Bottle Division has sufficient capacity to meet all external market demands in addition to
meeting the demands of the Perfume Division.
a) Using the general rule, determine the minimum transfer price. (2 marks)
b) Assume the Bottle Division has no excess capacity and can sell everything produced
externally. Would the transfer price change? (2 marks)
c) Assume the Bottle Division has no excess capacity and can sell everything produced
externally. What is the maximum amount Perfume Division would be willing to pay for the
bottles? (2 marks)
d) When is it more appropriate to use market-based transfer price rather than cost-based
transfer price? (1 mark)
Question 3 – Week 10 (7 marks)
International Printer Machines (IPM) builds three computer printer models: Alpha, Beta, and
Gamma. Information for these three products is as follows:

Alpha Beta Gamma Total
Selling price per unit $250 $400 $1 500
Variable cost per unit $80 $200 $800
Expected unit sales (annual) 12,000 6,000 2,000 20,000
Sales mix 50 percent 40 percent 10 percent 100 percent

Total annual fixed costs are $5,000,000. Assume the sales mix remains the same at all levels
of sales.
a) Calculate the weighted average unit contribution margin, assuming a constant sales mix. (2
b) How many units of each printer must be sold to break even? (3 marks)
c) i) Explain what is margin of safety (1 mark)
ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are
25,000 units? (1 mark)
Question 3 – Week 11 (7 marks)
GEM Limited has a single product Flicks. The company normally produces and sells 80,000
units of Flicks each year at a price of $240 per unit. The company’s unit costs at this level of
activity are as follow:

Direct material $57.00
Direct labour 60.00
Variable manufacturing overhead 16.80
Fixed manufacturing overhead 30.00
Variable selling and administrative costs 10.20
Fixed selling and administrative costs 27.00
Total unit cost $201.00

GEM has sufficient capacity to produce 100 000 units of Flicks a year without any increase in
fixed manufacturing overhead.
(a) GEM has an opportunity to sell 10 000 units to an overseas customer. Import duties and
other special costs associated with this order would total $42 000. The only selling costs
that would be associated with the order would be a shipping cost of $9.00 per unit.
What would be the minimum acceptable unit price for GEM to consider this order?
(hint: GEM would not accept the order if it would reduce the company’s profit) (3 marks)

(b) The company has 200 units of Flicks on hand that were produced two months ago. Due
to blemishes on the units, it will be impossible to sell these units at the normal price. If

the company wishes to sell them through regular sales channels, what would be the
relevant cost for setting the minimum price? Explain. (2 marks)
(c) “All future costs are relevant in decision making.” Do you agree? Explain. (2 marks)
Submission Directions:
The assignment has to be submitted via Blackboard. Each student will be permitted one
submission to Blackboard only. Each student needs to ensure that the document submitted
is the correct one.
Academic Integrity
Holmes Institute is committed to ensuring and upholding Academic Integrity, as
Academic Integrity is integral to maintaining academic quality and the reputation of
Holmes’ graduates. Accordingly, all assessment tasks need to comply with academic
integrity guidelines. Table 1 identifies the six categories of Academic Integrity breaches.
If you have any questions about Academic Integrity issues related to your assessment
tasks, please consult your lecturer or tutor for relevant referencing guidelines and
support resources. Many of these resources can also be found through the Study Skills
link on Blackboard.
Academic Integrity breaches are a serious offence punishable by penalties that may
range from deduction of marks, failure of the assessment task or unit involved,
suspension of course enrolment, or cancellation of course enrolment.
Table 1: Six categories of Academic Integrity breaches

Plagiarism Reproducing the work of someone else without attribution. When
a student submits their own work on multiple occasions this is
known as self-plagiarism.
Collusion Working with one or more other individuals to complete an
assignment, in a way that is not authorised.
Copying Reproducing and submitting the work of another student, with or
without their knowledge. If a student fails to take reasonable
precautions to prevent their own original work from being copied,
this may also be considered an offence.
Impersonation Falsely presenting oneself, or engaging someone else to present as
oneself, in an in-person examination.
Contract cheating Contracting a third party to complete an assessment task,
generally in exchange for money or other manner of payment.
Data fabrication and
Manipulating or inventing data with the intent of supporting false
conclusions, including manipulating images.

Source: INQAAHE, 2020
If any words or ideas used the assignment submission do not represent your original words
or ideas, you must cite all relevant sources and make clear the extent to which such sources
were used.
In addition, written assignments that are similar or identical to those of another student is
also a violation of the Holmes Institute’s Academic Conduct and Integrity policy. The
consequence for a violation of this policy can incur a range of penalties varying from a 50%
penalty through suspension of enrolment. The penalty would be dependent on the extent
of academic misconduct and your history of academic misconduct issues.
All assessments will be automatically submitted to Self Assign to assess their originality.
Further Information:
For further information and additional learning resources please refer to your Discussion Board for
the unit.

HI5017 Managerial Accounting


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