Introduction to Management Accounting: Assignment #5 In Tutorial Library

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TITLE: Introduction to Management Accounting: Assignment #5

UNIVERSITY / INSTITUTE: Edwards School of Business



QUESTION I – 20 marks
Broadwood Company is small manufacturer of wooden household items. Ellen Broadwood, the firm’s controller, plans to implement a standard cost system for the company.
One of Broadwood’s products is a wooden cutting board. Each cutting board requires the following inputs:
Lumber: 0.4 metres @ $9.50 per metre
Rubber footpads: 4 @ $0.05 per footpad
Preparation and cutting of board: 12 minutes @ $12 per hour
Assembly and finishing: 15 minutes @ $15 per hour
The boards are inspected after they are cut. Because the lumber has imperfections, one in six boards cut is rejected and fully scrapped. Four rubber footpads are attached to each good cutting board. After the footpads are attached, the cutting board is finished.
1. Develop the standard cost for each good cutting board and prepare a standard cost card. The standard cost should identify the standard quantity, standard rate, and standard cost for each cost component.
2. List the advantages of implementing a standard cost system.
QUESTION II – 20 marks
Use the standard cost information that you developed in the previous question and the information given below.
1. Compute the following:
- materials price and quantity (efficiency) variances
- labour rate and quantity variances
2. What might be some reasons for the variances?
BudgetedActualProduction quantity2,800 2,690 Direct materials quantity Lumber (kgs)1,344 1,345 Footpads (number)11,200 11,200 Direct materials cost Lumber (kgs)12,768$ 25,824$ Footpads (number)560$ 504$ Direct labour hours Preparation & cuting672 632 Assembly & finishing700 690 Direct labour cost Preparation & cuting8,064$ 7,742$ Assembly & finishing10,500$ 10,212$
QUESTION III – 14 marks
Curtis Klassen was reviewing his files when we noticed that he was missing some information that he needed to prepare a presentation on the recent month’s performance that he is scheduled to make in two days. He searched, scratched his head and made a few calls to try to collect some data to help him with the variance analysis portion of the performance report. This is what he could find/recollect:
1. The company actually produced and sold the quantity that it had planned to sell
2. The company budgeted to purchase 4,800 litres of direct materials using a standard of 1.60 litres per unit. Actual price for direct materials was higher than the budgeted price of $11.80 per litre by $0.40. However, the company saved 0.04 litres per unit.
3. There was no difference between the budgeted and actual wage rates. However, 500 additional labour hours were consumed compared to the budget, and this resulted in a variance of $8,000.
4. Budgeted variable overhead for the month was $45,000 using a POHR of $6 per direct labour hour
5. Actual total variable overhead was lower than the budgeted amount by $200.
Compute the following:
1. Budgeted and actual quantity of output sold
2. Standard and actual quantities of direct materials and direct labour
3. Standard and actual (1) price of direct materials, (2) rate for direct labour and (3) rate for variable overhead
4. All variances for the three types of resources
Note: Please show all your work!
1. A bank manager may review a company’s cash budget to
A. determine whether the firm will earn net income
B. uncover possible employee theft
C. evaluate the company’s ability to repay a loan
D. All of the above
E. None of the above
2. Standard costs are used to
A. estimate product costs
B. allocate overhead costs
C. prepare budgets
D. All of the above
E. None of the above
3. Ideal standards
A. are what organizations always achieve
B. are what organizations want to achieve
C. means lower (easier to achieve) standards compared to practical standards
D. incorporate allowances for waste, rest and breaks and equipment maintenance
E. None of the above
4. Companies maintain an inventory policy
A. to earn higher profits
B. only to increase their stock of product
C. to meet customer needs
D. to aid in budgeting
E. None of the above
5. Standard costs
A. are the same as ideal costs
B. are computed at the end of each accounting period using actual costs
C. are useful for estimating costs
D. provide no input for the process of budgeting
E. None of the above
6. Practical standards
A. include allowance for strikes and other unexpected interruptions
B. include allowances for process-related problems
C. are usually more lenient compared to ideal standards
D. A & B
E. B & C

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