AF102: INTRODUCTION TO

ACCOUNTING AND FINANCIAL

MANAGEMENT: PART II

Introduction and Assignments

Semester 1, 2016

School of Accounting and Finance

Faculty of Business and Economics
The University of the South Pacific

Produced by The University of the South Pacific, Suva, Fiji, 2016

First produced 1978

This revision February 2016

Introduction & Assignments team for Semester 1, 2016

Course coordinator
Dr. Pallab Kumar Biswas
Electronic publisher
Pranita Singh
Cover design
Marketing, Development and Communications Office

This material has been prepared by The University of the South Pacific for use by students
enrolled in the course for which it was developed.
It may contain copyright material copied under the provisions of the Fiji Copyright Act 1999 or
under license from rightsholders or their agents. Copyright in material prepared by USP is owned
by USP.
This material cannot be sold or copied for further distribution without the Universitys
permission. Where provided in electronic format, it can only be printed by or for the use of the
student enrolled in the course.

AF102 (IA) 12016

ii

C o n t en t s
Calendar for semester 1, 2016 ................................................................... iv
Your course coordinator ............................................................................ 1
Your learning materials ............................................................................. 2
Your learning support ............................................................................... 4
How to login to Moodle ............................................................................ 6
Additional tutorial questions ..................................................................... 7
Study schedule .......................................................................................... 9
Assessment overview ................................................................................ 11
Grading System......................................................................................... 12
Submission of assignments........................................................................ 14
Plagiarism ................................................................................................. 16
Major assignment ...................................................................................... 18
Past test paper ........................................................................................... 26
Past examination paper.............................................................................. 33

iii

Calendar for semester 1, 2016

iv

Your course coordinator

Welcome to AF102! I am Dr. Pallab Kumar Biswas, the course coordinator for AF102
FL/Print mode course for this Semester 1, 2016.
For AF102 FL I will be updating students regularly through the use of the newly
introduced MOODLE (http://elearn.usp.ac.fj/). Please check this MOODLE
website as well as your student email regularly, for course updates and other pointers
to help you in your study of AF102 on the distance and flexible mode.
AF102 DFL MOODLE Website Forum Discussions: This is a tool students can
use in the AF102 DFL MOODLE site, to interact with other students as well as raise
questions regarding a particular topic.
I am based on the main Laucala Campus, Suva, Fiji Islands. For any queries
regarding this course, you need to contact your FL Centre and if there are any
urgent matters, then you can contact me, your course coordinator, on the following
address:
Room:

S259 School of Accounting and Finance,

Faculty of Business and Economics,
The University of the South Pacific, Laucala
Campus,
Suva,
Fiji.

Email:

biswas_p@usp.ac.fj

Telephone:

(+679) 32 32284

Address:

School of Accounting and Finance,

Faculty of Business and Economics,
The University of the South Pacific,
Laucala Campus,
Suva,
Fiji.

All the best in your studies!

Your learning materials

You should have already received the following materials for AF102:
1. The Introduction and Assignments book, which you are reading now.
2. A Study Guide containing 12 units AF102 (Available in Moodle)

The Study Guide has been written to guide you through the course and the prescribed
textbook. It is neither a textbook nor a substitute for the prescribed text.
It will be vital that you regard the Study Guide as your personal guide to this course and
follow instructions precisely. It will guide you through the text that will be your main source
of study. The text will be supplemented by some comments and notes in the Study Guide.

Contact your USP Campus or Centre IMMEDIATELY if you are missing any of the
material mentioned in 1 above.
3. The recommended textbook for this course is a 7th edition of Managerial Accounting: Tools
for Business Decision Making by Weygandt, J.J., Kiesso, D.E. and Kimmel, P.D. (2015)
Published by John Wiley.

You will need to purchase this separately in addition to those mentioned above.
4. A course Moodle page.
5. Other suggested materials not included in the package:

a) Dictionary
Like most fields of study, accounting has developed some special words and
abbreviations that are not used in everyday speech. This means that you may need to
consult a dictionary, because you will constantly be meeting new words in the Study
guides, readings and in the textbook. If you have not acquired a good dictionary during
your studies, I strongly advise you to buy the Concise Oxford Dictionary. There is also
a glossary of terms included in your textbook, should you need to clarify special
accounting words or abbreviations. If you get in the habit of consulting a dictionary or
glossary of terms frequently, you will quickly become familiar with the new
terminology.
b) Additional References (Optional)
Your local USP Centre Library may hold copies of the following titles for you to
consult in addition to the prescribed text book and study guide, if you wish. You may
also want to refer to these references when doing assignments or preparing for the
final examination.
1. Atkinson, A., Kaplan, R., Matsumura, E. & Young, S. 2007, Management Accounting, 5th
ed, Upper Saddle River, N.J: Pearson/Prentice Hall.

2. Birt, J., Chalmers, K., Beal, D., Brooks, A., Bryne, S., & Oliver, J., 2008.
Accounting: Business Reporting for Decision Making. John Wiley & Sons
Australia, Ltd.
3. Boer, G., 2001, Cost Accounting: A Decision Emphasis, 4th ed, Dame.

4. Carter, W. & Usry, M., 2002, Cost Accounting, 13 ed., Cincinnati, Dame Thomson
Learning.
5. Chadwick, L. 1997, The Essence of Management Accounting, 2nd ed, New York:
Prentice-Hall
6. Collier, M. 2006, Accounting for Managers: Interpreting Accounting Information for
Decision-making, 2nd ed, Hoboken, NJ: Wiley
7. Drury,C., 1997, Management Accounting for Business Decisions, Melbourne,
International Thomson.

8. Fargher, N., Wise, V., Kieso, D.E., Weygandt, J.J., & Warfield, D.T., 2008.
Fundamentals of Intermediate Accounting. John Wiley & Sons Australia, Ltd.
9. Hansen, D. & Mowen, M., 2003, Cost Management: accounting and control, 4th ed,
Thomson/South-western.

10. Hart, J. & Wilson, C., 1996, Management Accounting: principles and applications,
2nd ed, Prentice Hall.
11. Hoggett, J., Edwards, L., Medlin, J., and Tilling, M. 2009. Accounting. 7th
edition. John Wiley & Sons Australia, Ltd.
12. Jackson, S., Sawyers, R., & Jenkins, G. 2006, Managerial Accounting: A Focus on
Decision Making, 3rd ed, Thomson South-Western.
13. Horngren, C. T., Datar, S. M. & Foster, G., 2003, Cost Accounting: A Managerial
Emphasis, 8th ed ( or other), Prentice Hall.
14. Horngren, C., Sundem, G. & Stratton, W., 1996, An Introduction to Management
Accounting, 10 ed, New Jersey, Prentice Hall.
15. Langfield-Smith, K., Thorne, H., and Hilton, R.W., 2006, Management Accounting:
Information for managing and creating value, 4th ed, McGraw Hill Inc.
16. Weygandt, J. J., Kieso, D. E., and Kimmel, P. D., 2008, Managerial Accounting: Tools for
Business Decision Making, Fourth Edition, John Wiley & Sons, Inc.

Your learning support

L o cal t u t o ri al s
To assist you with your studies, regular face-to-face sessions may be held with a tutor. You
should check with your Campus or Centre at the start of semester to see if face-to-face
tutorials will be held for your course.

S t u d y g ro u p s
Most people find it easier to study in a group or with a friend, at least for part of the time.
Working with others helps to motivate us. It provides a shared goal and reduces feelings of
isolation or boredom. Your local Campus or Centre will be able to put you in touch with
students doing this course and may help you get organised.

L i b ra r y se r vi ce s
Making good use of the library and its resources is vital for you to be a successful student.
Learn about library support and services and the importance of information literacy at your
Campus or Centre library.

S t u d en t L e a rn i n g S u p p o rt ( S L S )
SLS supports you through e-mentoring which is giving you learning tips and advice through
email.
You can email us at the following addresses:
Faculty of Business and Economics: fbe_sls@usp.ac.fj

Y o u r RE A CT se s si o n
Apart from local tutorials, USP uses a system known as REACT which allows you to hear and
see your course coordinator or tutor as well as your fellow students who are located in the
various campuses in the USP region. You may get presentations and notes in addition to your
scheduled session. These are commonly known as satellite tutorials. You are encouraged to
attend the scheduled sessions in the weeks shown in your study schedule.
Here are some suggestions for getting the most out of these REACT sessions:
1. Note that before your REACT tutorial session begins your tutorial group will be
advised as to who all the participants are (regional and on-campus). Try to note down
names of your colleagues and which Campuses or Centres they are listening from.
2. Speak slowly and pronounce your words clearly so that your colleagues can
understand what you are saying.
3. Be courteous and try to maintain a polite tone of voice.
4. When you want to address your tutorial group, press the "speak button", and aim to
maintain a 6-inch distance between your mouth and the microphone whilst speaking.
Please note that you may be using two different types of microphones as shown below.

5.

If you have questions or comments to communicate during your tutorial session you
can do so by speaking to a microphone or through the chat tool in REACT.

6. Try not to "steal the show". Remember that each of you will have important points to
add to discussions.
Contact your local USP Campus or Centre for further information on using the REACT
facilities.

O n l i n e l ea rn i n g
Moodle is USPs learning management system and will be used to support learning in some of
your courses.

How to login to Moodle

If your course has a Moodle component, the instructions below will help you access the
system.
You will need a computer connected to the Internet. The computer must have a Web browser
such as Firefox or Google Chrome. Such a computer should be available at your USP Campus
(if you dont already have one at home or work). You will also be given a username and
password by your local USP Campus.
Step 1: Accessing Moodle
Open your browser: Firefox or Google Chrome.
Type in the following at the address bar: http://elearn.usp.ac.fj/

Press Enter.

Alternatively, you can go to the USP website: http://www.usp.ac.fj/ and use the Quick
Links drop down menu to the left of the page and select
Moodle.

Step 2: Username and password

You will come to a Login screen. Type your student number in the Username box.

Type your student email

(webmail) password in
the Password box.

Click Login.

Step 3: Accessing your course

You should now see a list of your courses. Click the Course Code and Title of the
course that you are enrolled in to enter. For example:

L o st o r f o rg o t t en p as sw o rd
Contact your local ITS student Helpdesk or email: moodlehelp@usp.ac.fj

Additional tutorial questions

After covering a Unit, students can attempt the following additional questions for that Unit.
Selected questions only from the list below will be discussed at your local tutorials.
Week

Textbook Chapter

Questions
#
Questions
1, 2, 7, 8, 10, 11, 20
Exercises
1-1, 1-4, 1-13, 1-17
Problems
1-1A, 1-5A
BYP
1-1
Questions
2, 3, 4, 13, 14, 18
Exercises
2-2, 2-6, 2-8, 2-12
Problems
2-1A, 2-3A
BYP
2-2
Questions
1, 10, 16, 17
Exercises
3-3, 3-11, 3-12, 3-17, 3-19
Problems
3-6A, 3-7A
BYP
3-1, 3-2
Questions
1, 3, 5, 6, 17, 19
Exercises
4-1, 4-6, 4-9, 4-12, 4-16
Problems
4-2A, 4-4A, 4-5A
BYP
4-2
Questions
1, 3, 4, 9 12
5-3, 5-4, 5-10, 5-16
Exercises
Problems
5-1A, 5-3A, 5-6A
BYP
5-1, 5-2
Questions
3, 7, 8
Exercises
7-1, 7-2, 7-3, 7-7, 7-8, 7-11, 7-13, 7-15
Problems
7-1A, 7-4A, 7-5A
BYP
7-1
MID-SEMESTER BREAK
Questions
2, 3, 6, 9,
Exercises
8-1, 8-6, 8-10
Problems
8-2A, 8-3A
Questions
1(b), 4, 7, 8
9-3, 9-6, 9-9, 9-12, 9-16, 9-17
Exercises
9-4A, 9-6A
Problems

10

10

11 & 12

11

13 & 14

12

Questions
Exercises
Problems
BYP
Questions
Exercises
Problems
BYP
Questions
Exercises
Problems
BYP

2, 5, 7, 12, 13, 18
10-1, 10-7, 10-9, 10-14, 10-17
10-3A, 10-5A
10-1
1, 2, 5, 7, 9, 13, 17, 18
11-9, 11-12, 11-3, 11-21, 11-22
11-3A, 11-5A, 11-6A
11-1
1, 2, 3, 8, 11, 16
12-1, 12-3, 12-4, 12-9, 12-11
12-1A, 12-2A, 12-4A
12-1

Study schedule
P l an n i n g yo u r w or k
To help you keep pace with the course, we suggest that you try to allocate at least two hours a
day to your studies. You should divide your time based on the following study schedule.
Within the one or two weeks allocated to each unit, you should read through the unit, and do
the thinking and activities associated with it, as well as work on any assignment that is
required.
The key to success in this course is to maintain a constant study programme throughout
the semester. An early start and regular assignments will help you complete the work and will
let you know what standard of performance you are attaining.
On the following pages is a suggested Study Schedule for you. This should enable you to
check your progress from week to week. If you follow the programme you should be well
prepared for the final examination.
The Study Schedule has four columns:
Column 1: Weeks and dates
Column 2: Study topics and units for each week
Column 3: Textbook references
Column 4: Assignment due dates and satellite tutorials dates
Now look at the Study Schedule.
Note:
Check with your local Centre for your Tutorial Timetable. Tutorial questions to be covered are on
Page 7.
You should study all the topics covered by an assignment before you attempt your assignment
questions.

Week no. and dates

Topics and units

Textbook

Week 1
0812 February

Unit 1: Managerial
accounting and financial
management
environment

Week 2
1519 February

Unit 2: Managerial cost

concepts and practices

Chapter 1

Week 3
2226 February

Unit 3: Job order

costing

Chapter 2

Unit 4: Process costing

Chapter 3

Week 5
711 March

Unit 5:Activity-based
costing

Chapter 4

Week 6
1418 March

Unit 6: Cost volume

profit analysis

Chapter 5

Week 7
2125 March

Unit 7:Incremental
analysis

Chapter 7

Week 4
29 February04 March

29 March1 April
Week 8
48 April
Week 9
1115 April
Week 10
1822 April
Week 11
2529 April

Week 12
0206 May

Week 13
0913 May
Week 14
1620 May

Weygandt,
Kieso and
Kimmel
Chapter 1

MID SEMESTER BREAK

Unit 8:Pricing (External
sales)

Chapter 8

Unit 9: Budgetary planning

Satellite tutorial
Saturday 20th February, 2016
12:00noon1:00pm (Fiji time)

Satellite tutorial
Saturday 5th March, 2016
12:00noon1:00pm (Fiji time)

Satellite tutorial
Saturday 19th March, 2016
1:00pm2:00pm (Fiji time)

Major Assignment due:

Friday 1st April, 2016
Satellite tutorial
Saturday 9th April, 2016
12:00noon1:00pm (Fiji time)

Chapter 9

Unit 10:Budgetary control

and responsibility
accounting
Unit 11:Standard Costing
The need for
standards
Setting standards

Satellite tutorial
rd
Chapter 10 Saturday 23 April, 2016
12:00noon1:00pm (Fiji time)

Chapter 11

Unit 11:Standard Costing

Variances from
standards
o Analysing
o Reporting

Chapter 11

Satellite tutorial
Saturday 7th May, 2016
12:00noon1:00pm (Fiji time)

Unit 12: Planning for

Capital Investments
Unit 12: Discounting
methods

Chapter 12

Chapter 12

Satellite tutorial
Saturday 21st May, 2016
12:00noon1:00pm (Fiji time)

Week 15
2327 May
Week 16 & 17
30 May10 June

Assignment and Satellite tutorials

STUDY BREAK
FINAL EXAMINATION
Check with your USP Campus or Centre for the exact time and date of your
examination

10

Assessment overview
This course is assessed in two ways:
Continuous assessment
Final examination
Total value

45%
55%
100%

C o n t i n u o u s a s ses s m en t
Continuous assessment makes up 45% of the final score and includes 1 assignment and a midsemester test. It is weighted in the following way:

Assignment
Mid-semester test

15%
30%

Total value

45%

Check your study schedule for the date of the test; confirm other details with your USP
Campus or Centre. A sample mid-semester test is included in this book for practise; your
test may differ in content and structure from the sample.

F i n al ex a mi n a t i o n
Your final examination is 3 hours long. It will make up the other 55 % of your final score. We
have included a sample examination paper later in this Introduction and Assignments book, to
give you an opportunity to practise for the final examination. Remember that your final
examination may differ in content and structure from the sample paper.

11

Grading System
a) The following grading system will be used by all faculties in awarding final grades for
academic performance in a course:
Pass Grades
Grades
Percentage (%)

Description

A+

85+

Pass with Distinction

78 84

Pass with Distinction

B+

71 77

Pass with Credit

64 70

Pass with Credit

C+

57 63

Pass

50 56

Pass

Other Pass Grades

R

Restricted Pass

Aeg

Aegrotat Pass

Comp

Compassionate

Pas

Pass or Competent

Satisfactory

Note: Pas and S are used in circumstances where graded passes are inappropriate
such as in postgraduate thesis and Professional Diploma in Legal Practice.
Fail Grades
Grade
D

Percentage (%)
40 - 49

40 (Less than)

NC
NV
U
Fail

Description
Work below the standard required
for a pass. This grade will also be
awarded for failure to meet course
minimum requirement
Very weak performance or failure to
complete to the satisfaction of the
examiner such practical, field or
other work as may be prescribed
Not completed
Null and Void: This is awarded for
plagiarism or dishonest practice
Unsatisfactory
Not Competent

Note: Fail and U correspond with Pass and S above respectively.

12

Provisional Results:
I
IP
SE

Incomplete
In progress
Special Exam Granted

b) Students shall be awarded an Aegrotat or Compassionate Pass if they satisfy the conditions
prescribed in Clauses 6.3 or 6.4 of these Regulations respectively.
c) Students may be awarded a Restricted Pass if they satisfy the conditions prescribed in
Clause 8.
d) Students who have been granted an extension of time past the last day of lectures to
complete work required for the final assessment of their course shall be awarded the
provisional grade of I (Incomplete) for an undergraduate or postgraduate course assessed
by coursework, or IP (In progress) for a Supervised Research Project or thesis for a
Master's degree or a thesis for a PhD degree. At the end of the period of extension the
Faculty Assessment Board shall determine a final grade.
e) Students who have not submitted their master's or PhD thesis or Supervised
Research Project by the end of the maximum period of candidature prescribed in the
regulations shall be awarded the grade of NC (Not completed).
[Extracted from 2015 Handbook & Calendar, pp.454455 (hard copy),
pp. 453454 (e-copy)]

13

Submission of assignments
Moodle
You are advised to submit all your assignments before the dates given in your study schedule
or on your course Moodle page to allow for a similarity report from Turnitin, giving you
ample time to make any necessary changes that may be required before the final due date.
Please upload them in the correct assignment drop box. Your assignment file must be carefully
labelled (see below).
For more information on acceptable file types for assignment submission, please visit this
link: http://elearn.usp.ac.fj/mod/book/view.php?id=95144
Hard copy
You should submit all assignments by the dates given on your study schedule. Please submit
them in the correct order and address the envelope to the Course Coordinator. For each
assignment, you should fill out a yellow assignment cover form which you collect from
Student Administrative Services (SAS). If you do not have assignment covers, contact your
USP Campus.

For Suva based FL students, all assignments are to be posted or dropped off at the allocated
boxes in your Faculty at Laucala Campus. Foundation and Preliminary students are to post or
drop off their assignments at the College of Foundation Studies in the Communications
Building.
The only assignment(s) that are to be posted or dropped off at Student Administrative Services
at Laucala Campus are for the Agriculture courses.
For all other FL students, please confirm with your Course Coordinator about your
assignment submission.

It is very important that you keep to the study schedule and complete the assignments so that
you get regular feedback on your progress through this course.

C o r r ec t l ab el l i n g o f a s si g n m en t s
Please be very careful to correctly label your assignments. On each assignment cover or ecopy file that you send in or upload for marking, you should write or type:

the full name you used to enrol in this course;

your student identification number;
the correct course code and title; and
the assignment number.

Correct labelling will help ensure that the marker receives your assignment on time, and that
you get the credit for the work that you do. If your marker receives one of your assignments
late because you did not label it correctly, you may lose marks.

14

L at e as si g n men t s
If you expect to be over two weeks late in submitting an assignment, it is compulsory that you
write to your course coordinator. You should explain why you are late and suggest a revised
schedule that will allow you to complete the remaining assignments on time.
Your course coordinator may mark a late assignment if there is a good reason for its delay. In
deciding whether to mark late assignments, your course coordinator will give greater
consideration to students in remote areas with little or no access to their USP Campus, Centre
or tutorial help.
USP reserves the right to decide whether or not to mark late assignments. It is in your interest
to send in your assignments on time. The assignment schedule gives your course coordinator
time to provide you with regular feedback on your progress, before it is too late for you to use
this information constructively in your studies.
Your course coordinator will not mark any assignment received after the final examination.

M a rki n g c ri t e ri a
We will grade all assignment according to the following criteria where applicable:

evidence of reading;

evidence of good understanding of the topic;

good coverage of the topic;

relevance and correctness of information;

validity and support of opinion;

conciseness;

precision;

logical presentation of information (flow); and

use of illustrations, examples and/or reasons to support statements or arguments.

15

Plagiarism
Plagiarism is the copying of another persons creative work and using it as ones own
without explicitly giving credit to the original creator. Work copied without acknowledgement
from a book, from another students work, from the internet or from any other source is
plagiarism. Plagiarism includes the following:
a) Copying of the published or unpublished words of another writer without
acknowledging the source using acceptable reference citation methods. Thus, to; 'cut
and paste' from internet sources or 'lift' sentences, ideas and sections from a textual
source qualifies as plagiarism.
b) Lifting or cutting and pasting extracts without quotation marks or appropriate
acknowledgement of sources.
c) Paraphrasing of content and ideas without proper acknowledgement of the source.
d) The use of images, diagrams, photographs and material from blogs and social
networks, without acknowledgement.
e) Copying part or all, of another students assignment. In this instance, student
assignment refers to a piece of academic work submitted for assessment purposes for
any course, in past or current years at any educational institutional including USP or
any other university.
i) Collusion
Collusion means working with someone else to deceive or mislead to gain an unfair academic
advantage. It includes:
a) Submission of a paper that has been written by an author other than the author credited
for that piece of writing. This includes the use of paid services of a student, or any
other person that has been solicited for that purpose.
b) Facilitating or enabling another student to plagiarise in any way.

16

ii) Cheating
Cheating involves acting in any way that directly contradicts the explicit rules and guiding
principles of that form of assessment. It applies in any form of examination including short
tests, quizzes and final examinations.
Cheating includes (inter alia):
a) Doing anything to gain an unfair or illicit academic advantage in an examination;
b) Possessing, referring to or having access to any material, or to access the internet crib
notes or device containing information directly or indirectly related to the subject
matter under examination other than what is explicitly approved for examination
purposes;
c) Using a cell phone to communicate with any other student or person inside or outside
the examination venue;
d) Copying from another student in a test or examination; enabling another student to
cheat in a test or examination;
e) Soliciting a person to sit a test or final examination in place of the student enrolled;
sitting a test or final examination in the place of another student;
f) Manipulation of scores in tests or examination or in any other form of assessment; and
g) Enabling another student in any or a combination of any of the above.
[Extracted from 2015 Handbook & Calendar, pp. 462-463 (hard copy),
pp. 461-462 (e-copy)]

17

Major assignment
Due Date:

Friday 1st April, 2016

Marks:

100 marks

Weighting towards final grade:

15%

Course learning outcome:

This assignment addresses the following course learning outcomes:
1.

Explain the nature of managerial accounting and how it differs from

financial accounting.

2.

Define and apply common managerial accounting terms and concepts including
the various cost concepts.

3.

Calculate costs for cost accounting and decision-making purposes, including

determining cost behavior patterns.

4.

Identify and explain how the basic types of cost accounting systems work.

5.

Discuss how managerial accounting is used for control purposes, including the
use of standard costing and cost-volume-profit analyses.

Question 1:

Activity Based Costing

(25 marks)

The Try Corporation has a machining facility specializing in jobs for the aircraft-components
market. Trys previous simple job-costing system had two direct-cost categories (direct
materials and direct manufacturing labor) and a single indirect-cost pool (manufacturing
overhead, allocated using direct manufacturing labor-hours). The indirect cost-allocation rate
of the simple system for 2016 would have been $115 per direct manufacturing labor-hour.
Recently a team with members from product design, manufacturing, and accounting used an
ABC approach to refine its job-costing system. The two direct-cost categories were retained.
The team decided to replace the single indirect-cost pool with five indirect-cost pools. The
cost pools represent five activity areas at the plant, each with its own supervisor and budget
responsibility. Pertinent data are as follows:

18

Activity Area

Cost-Allocation Base

Cost-Allocation Rate

Materials handling

Parts

Lathe work

Lathe turns

0.20

Milling

Machine-hours

20.00

Grinding

Parts

0.80

Testing

Units tested

15.00

$ 0.40

Information-gathering technology has advanced to the point at which the data necessary for
budgeting in these five activity areas are collected automatically.
Two representative jobs processed under the ABC system at the plant in the most recent
period had the following characteristics:
Job 410

Job 411

Direct material cost per job

$ 9,700

$59,900

Direct manufacturing labor cost per job

$750

$11,250

Number of direct manufacturing labor-hours per job

25

375

Parts per job

500

2,000

Lathe turns per job

20,000

59,250

Machine-hours per job

150

1,050

Units per job (all units are tested)

10

200

Required:
1.
2.
3.

Compute the manufacturing cost per unit for each job under the previous simple jobcosting system.
Compute the manufacturing cost per unit for each job under the activity-based costing
system.
Compare the per-unit cost figures for Jobs 410 and 411 computed in requirements 1 and
2. Why do the simple and the activity-based costing systems differ in the manufacturing
cost per unit for each job? Why might these differences be important to Try Corporation?
(3 marks + 6 marks + 16 marks)

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Rubric
Evaluation
Criteria
ABC analysis
(Part 14)

Fails to meet
Expectations
Lacks statistical
skills or
uses inappropriate
formulae,
excessive errors,
etc

Meet Expectations
Applies correct
statistical
techniques with
minimal, minor
errors.

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Exceeds
Expectations
Utilizes
appropriate
formulae, correct
statistical skills
and with virtually
flawless results

Question 2:

Job costing

(50 marks)

S Kumar Ltd manufactures water tanks for different sizes for use by industrial
customers. The company uses a job costing system, in which manufacturing overhead is
applied on the basis of direct labour dollar. The companys budget for the current year
included the following predictions:
Budgeted total manufacturing overhead

$441,000

Budgeted Total direct labour hours

21, 000

Budgeted hourly direct labour rate

$20

During June, the firm began two production jobs:

Job number T81, consisting of 87 water tanks (Standard size).
Job number C40, consisting of 100 water tanks (mini size).
The events of June are described below:
a) 1,000 square meters of rolled aluminium sheet metal were purchased for $6,000
on account.
b) 400 kilograms of aluminium tubing were purchased on account for $5,500.
c) The following requisitions were filed on 5 June:
Requisition number 112: 260 square meters of aluminium sheet metal (for
job number C40) @ $5.60 per square meter.
Requisition number 113: 1,100 kilograms of aluminium sheet metal (for job
T81) @ $9 per kilogram.
Requisition number 114: 10 liters of superb glue @ $15 per liter.
All aluminuim used in production is treated as direct material. Superb glue
is an indirect material.
d) An analysis of labour time sheets revealed the following labour usage for
June:
Direct labour: job number C40, 850 hours @ $20 per hour
Direct labour: job number T81, 950 hours @$20 per hour
Indirect labour: general factory clean up, $5,500
Indirect labour: factory supervision salaries $8,500
e) Depreciation of the factory building and equipment during June amounted to
$12,000.
f) Rent paid in cash for warehouse space used during June was $1,330.
g) Electricity costs incurred during June amounted to $2,400. The invoices for
these costs were received, but only half of the bill was paid in June.
h) June council rates and property taxes on the factory were paid in cash $2,370.

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i) The insurance cost covering factory operations for the Month of June was
$2,500. The insurance policy has been prepaid.
j) The costs of salaries and on-costs for sales and administrative personnel paid in
cash during June amounted to $8,500.
k) Depreciation on administrative office equipment and space amounted to $4,500.
l) Other selling and administrative expenses paid in cash during June amounted to
$1,150.
m) Job number C40 was completed during June.
n) 75% of the water tanks in job number C40 were sold on account during June for
$750 each.
The 1 June balances in selected accounts are as
follows: Cash
Accounts receivable
Prepaid insurance
Raw material inventory
Manufacturing supplies inventory
Work in process inventory
Finished goods inventory
Accumulated depreciation: Buildings and
Equipmentpayable
Accounts
Wages payable

$11,00
20,0000
7,500
150,00
6000
89,000
223,00
99,0000
14,500
8,500

Requirements:
1. Calculate the companys predetermined overhead rate for the current year.
(3 marks)
2. Complete the job cost sheets for job number C40 (Round-off unit cost to the
nearest cent and where necessary, show ALL relevant workings. The job cost
sheet can be downloaded from the AF102 Moodle page.)
(12 marks)
3. Prepare journal entries to record the events of June. (Where appropriate, show
ALL relevant workings. Ignore narrations.)
(9 marks)
4. Calculate the over-applied or under-applied overhead for June. Prepare a
journal entry to close this balance in the cost of goods sold. (Show calculation
for actual and applied overhead.)
(8 marks)
5. Prepare a schedule of cost of goods manufactured for June.
(10.5 marks)
6. Prepare a schedule of cost of goods sold for June.
(4.5 marks)
7. Prepare an income statement for June.
(3 marks)

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Rubric
Evaluation Criteria
Pre-determined rate,
job cost sheets,
journal
entries and over/
under applied
Schedules and
Income statement

Fails to meet
Expectations
Lacks statistical skills or
uses inappropriate
formulae,
excessive errors,
etc.
Incorrect or
inappropriate data
used, Unable to
identify information
and issues needed

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Meet Expectations

Exceeds Expectations

Applies correct
statistical
techniques with
minimal,
minor errors.
Correct data used
with minimal errors,
Mostly able to identify
information and issues
needed

Utilizes appropriate
formulae, correct statistical
skills and with
virtually flawless results
Correct data used
without any errors, Able to
identify
information and
issues needed

Question 3

Cost Volume Profit Analysis

(25 marks)

Mr. High and Mr. Lowe are the presidents of their respective companies.
The two firms manufacture and sell the same product, and due to the
competitive nature of the market, they charge the same selling price of $10
per unit.
High and Lowe differ regarding their production and management
philosophies. The High Company is almost completely automated, and the
labor force is paid on a fixed salary basis. The Lowe Company uses a high
degree of manual labor paid on an hourly basis. The sales force at the High
Company is paid fixed annual salaries with very small commissions, whereas
the sales force at Lowe Company is paid strictly on a commission basis. Mr.
Lowe constantly makes fun of Mr. High's operations, saying the High
Company is inflexible and unable to adjust costs as sales volume fluctuates.
During 2011, both firms reported net income of $12,000 on sales of
$120,000. However, Mr. Lowe was shocked when examining the results
for 2012, which showed that High Company's profits were ahead of
Lowe Company's, even though Lowe Company had higher sales. The results
for the two years are as follows:

Sales revenue
Total costs
Net income
Fixed costs

High Company
2011
2012
$ 120,000
$ 150,000
108000
117000
12000
33000
$ 72,000
$ 72,000

Lowe Company
2011
2012
$ 120,000
$ 180,000
108000
153000
12000
27000
$ 18,000
$ 18,000

Mr. Lowe is trying to figure out why the profit increase of his company was
less than that of High Company. His company's accountants carefully
examined the costs for each year and found no operating inefficiencies or costs
that were out of line. He has hired you as a consultant to help solve the
dilemma.
Required:
A.

Compute the break-even point in units, break-even point in dollar sales

and the margin of safety (in units and percentage) for each company in
2011 and 2012.
(6 marks)

B.

Present the income statements for 2011 and 2012 for both companies in
contribution margin format.
(8 marks)

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C.

Prepare an explanation for Mr. Lowe showing why Lowe Company's

profits for 2012 were lower than those reported by High Company
despite the fact that Lowe Company's sales were higher. Use the concept
of operating leverage for your analysis.
(6 marks)

D.

Comment on the relative position of the two companies if sales in the

future begin to decline.
(5 marks)

Rubric
Evaluation
Criteria
CVP
analysis
(Part A-D)

Fails to meet Expectations Meet

Expectations
Lacks statistical skills or
Applies correct
statistical
uses inappropriate
formulae, excessive errors, techniques with
minimal, minor
etc
errors.

25

Exceeds Expectations
Utilizes appropriate
formulae, correct
statistical skills and
with virtually flawless
results

Past test paper

You are given the following past test paper to help you to prepare for your test.
However, remember that the test paper that you will take this semester may not
follow exactly the same structure, format or content as this one.

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Past examination paper

You are given the following past examination paper to help you to prepare for
your final examination. However, remember that the examination paper that you
will take this semester may not follow exactly the same structure, format or
content as this one.

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