L5 Tutorial Questions

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Accounting

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Feb 20, 2024

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AYB202 TUTORIAL 5: QUESTIONS QUESTION 1 An excel worksheet is provided on blackboard to assist you in completing this question Go Fast Cycle’s produces three models of bicycles. Model A is a basic bicycle and Go Fast’s most well-established product with production of 100,000 units in the most recent period. Model’s B and C have been introduced more recently as more specialised models to targeting wider customer groups. In the most recent period Go Fast’s production of model’s B and C was 16,000 units and 12,000 units respectively. The way in which the three different products used the varying resources of the firm in the most recent period follow: Model A Model B Model C Total Direct Labour hours per unit 6.5 3 2.5 Machine hours per unit 1 2 6 Number of set-ups in the period 124 200 342 666 Number of orders of parts 200 480 428 1,108 Overhead costs relating to Go Fast’s production have been analysed into three cost pools and three related cost drivers. Total overhead costs of $1,004,230 can be broadly classified as follows, with the chosen cost drivers being those activities with the closest cause-effect relationship to the cost pools. Overhead Cost Pool Cost Driver Budgeted Overhead Costs Machine operating Machine hours $ 583,500 Production scheduling No. of set-ups $ 256,630 Purchasing costs No. of orders $ 164,100 $1,004,230 Required 1. Calculate the amount of overhead cost per unit of each of the three product lines based on: a) a single plant-wide rate based on direct labour hours, and b) ABC rates using the three cost drivers identified above. 2. Compare the overhead allocated per unit for each of the three models sold by Go Fast under the two methods calculated above. Based on your calculations, should Go Fast introduce ABC? – Discuss Why?
AYB202 TUTORIAL 5: QUESTIONS QUESTION 2 Indi is the management accountant at L&D Architects. She recently began a pilot project exploring the use of time-driven-activity-based-costing (TDABC) using the administration support function for the pilot. Relevant information that Indi has managed to collect so far is provided in Table 1. Required (a) Calculate the level of theoretical capacity and practical capacity within the administration support function. (b) Calculate the cost per time unit of practical capacity (c) Why do you think Indi believes TDABC would be beneficial to L&D Architects? a) Theoretical capacity = (8*5*46*4) + (5*5*46) = 8,510 hours Practical capacity = 8510* 0.8 = 6,808 hours b) Cost per time unit = $632,000 / 6808 = $92.83 per time unit c) As it will help to see unused time and determine inefficiencies in activities in the company.
AYB202 TUTORIAL 5: QUESTIONS QUESTION 3 Case Study: We will be doing this activity together in class: After limited discussion, the executive committee of GLITTERS, a jewellery retail and repair company, that is considering new projects for approval has just rejected a proposal by the management accountant, Sheila Wilkins, to implement an ABC system at a cost of $50 000. One of the members of the committee, the deputy CEO, noted, “Given a choice, I will always prefer a $50 000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50 000 on a supposedly better accounting system?” Required As Sheila Wilkins, write an email to the executive committee responding to this comment. Consider: - How would you respond to this? - Think: what are the costs and benefits of ABC? - Does ABC suit all businesses? - Are there any alternative costing systems that may be more applicable? - How do you write an email?
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AYB202 TUTORIAL 5: QUESTIONS Additional questions: In your own time, complete the following questions from the text: Eldenburg et al., 4 th edition 12.1, 12.4, 12.12 12.24 The answers will be on Black Board each week.