Section A
1.0 Define what is management accounting and explain the differences between Management accounting and financial accounting.
2.0 Define and explain what is a Break Even Point using a graph.
3.0 Giant Ltd specializes in manufacturing different models of mountain bikes. Assume that a new model, the Jaguar, has been well accepted. As a result, the entity has established a separate manufacturing facility to produce these bicycles. Giant Ltd produces 1,000 bicycles per month. Monthly manufacturing C and other expenses related to these bicycles are as follows:
1.Rent on manufacturing equipment (lease cost) – RM2,000/month;
2.Insurance on manufacturing building – RM750/month;
3.Raw materials (frames, tyres and others) – RM80/bicycle;
4.Power costs for manufacturing facility – RM1,000/month;
5.Supplies for general office – RM8,000/month;
6.Wages for assembly line workers in manufacturing facility – RM30/bicycle;
7.Depreciation on office equipment – RM650/month;
8.Miscellaneous materials (lubricants, solders and others) – RM1.20/bicycle;
9.Rates and taxes on manufacturing building – RM2,400/year;
10.Manufacturing supervisor’s salary – RM3,000/month;
11.Advertising for bicycles – RM10/bicycle;
12.Sales commissions – RM10/bicycle; and
13.Depreciation on manufacturing building – RM1,500/month.
Required:
(a)Assign these costs to the various categories (see the attached table).
(b)Calculate the total manufacturing costs (production overhead/factory overhead) for the month.
(C)Assign these manufacturing cost (production overhead or factory cost) and period cost (other overhead) to the various categories.
| Product Costs | ||||||
| Direct Materials | Direct Labour | Manufacturing Overhead | Period Costs | Prime Costs | Conversion Costs | |
| Rent on equipment | ||||||
| Insurance on manufacturing building | ||||||
| Raw materials | ||||||
| Power cost | ||||||
| Supplies for general office | ||||||
| Wages for assembly line | ||||||
| Depreciation on office equipment | ||||||
| Miscellaneous materials | ||||||
| Rates and taxes on manufacturing building | ||||||
| Supervisor’s salary | ||||||
| Advertising | ||||||
| Sales commissions | ||||||
| Depreciation on factory building | ||||||
4.0 Wong Ltd manufactures and sells per-hung metal doors. Recently, it decided to start selling pre-hung timber doors as well. An old warehouse that the business presently owns will be used to manufacture the new product. To manufacture and sell these pre-hung timber doors, Wong Ltd identifies the following costs:
1.The material cost (timber) for each door is RM10.00.
2.Labour costs involved in constructing a timber door are RM8.00 per door.
3.Depreciation on new equipment used to make a timber door using the straight-line method is RM25,000.00 per year.
4.Rates and taxes on the old warehouse used to make the timber doors are RM6,000.00 per year.
5.Advertising costs for the pre-hung timber doors total RM2,500.00 per month or RM30,000.00 per year.
6.Sales commissions related to pre-hung timber doors sold are RM4.00 per door.
7.Maintenance salaries for the old warehouse are RM28,000.00.
8.Salary of factory manager in charge of pre-hung timber doors is RM70,000.00.
9.Cost of shipping pre-hung timber doors is RM12.00 per door sold.
Required:
(a)Assign these manufacturing and selling costs to the various categories:
