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Question1(12marks)ThefollowingincompleteinformationisprovidedbySturtFurnitureLtdtoitsnewlyappointedmanagementaccountantforthemonthofMarch.AccountOpeningBalancesClosingBalancesRawmaterials$15000$45000Workinprocess(WIP)inventory$8000$38000Finishedgoods$35000$5000Accountspayable$12000$1000Accountsreceivable$8000Thecompanyrevealsfurtherinformationasfollows:CollectionsofaccountsreceivableduringMarchamountsto$205000SalesrevenueinMarchis120percentofcostofgoodssold.AllsalesareoncreditOverheadisappliedusinganannualpredeterminedoverheadratebasedondirectlabourhours(4000DLhoursincurred)Thebudgetedoverheadforthecurrentyearis$720000Budgeteddirectlabourcostforthecurrentyearis$960000.Thedirectlabourrateis$20perhourMarchscostofgoodssoldamountsto$180000TheactualmanufacturingoverheadforMarchis$60000Paymentsof$79500weremadetodirectlabouremployeesduringMarch.The28Februarybalanceinthewagespayableaccountis$1000.Theclosingbalanceofwagespayableis$1500Onlypurchasesofrawmaterialsarecreditedtoaccountspayable.Apaymentof$81000wasmadeon15MarchAnanalysisofthefurniturestillinprocesson31Marchrevealsthatsofar,theseitemshaverequired500hoursofdirectlabourand$20500ofdirectmaterialRequired:(i)CompletetherelevantT-accounts(providedonthenextpage)toshowtheflowofcoststhroughthecompanysmanufacturingaccounts.(8marks)7
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Chapter 6 / Exercise 6-2A
Managerial Accounting
Warren/Tayler
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WorkinProcessInventoryRawMaterialInventoryFinishedGoodsInventoryCostofGoodsSoldManufacturingOverheadAccountsReceivable8
(ii)WhatamountofrawmaterialwereissuedtoproductionduringMarch?(1mark)(iii)Wasmanufacturingoverhead(MOH)under/overappliedduringMarch?(1mark)(iv)WhatisthesalesrevenueforMarch?(1mark)(v)WhatisthecostofgoodscompletedduringMarch?(1marks)9
Question2(15marks)NewZealandCompany(NC)manufacturestwoproducts,RegularandPremium,andappliesoverheadonthebasisofdirectlabourhours.Anticipatedoverheadanddirectlabourtimefortheupcomingaccountingperiodare$800000and25000hours,respectively.InformationabouttheNC'sproductsfollows:Regular:Estimatedproductvolume3000unitsDirectmaterialcost$25perunit3hoursat$12perhourDirectlabourperunitPremium:Estimatedproductvolume3000unitsDirectmaterialcost$25perunit3hoursat$12perhourDirectlabourperunitNC'soverheadof$800000canbeidentifiedwiththreemajoractivities:orderprocessing($150000),machineprocessing($560000)andproductinspection($90000).Theseactivitiesaredrivenbynumberofordersprocessed,machinehoursworked,andinspectionhours,respectively.Datarelevanttotheseactivitiesfollow:OrderprocessedMachinehoursworkedInspectionhours300180002000RegularPremium200220008000Theseniormanagerisveryconcernedaboutdecliningprofitabilitydespiteahealthyincreaseinsalesvolume.Thedecreaseinprofitisespeciallypuzzlingbecausethecompanyrecentlyundertookamassiveplantrenovationduringwhichnew,highlyautomatedmachinerywasinstalled-machinerythatwasexpectedtoproducesignificantoperatingefficiencies.Required:(i)Calculatetheunit

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Managerial Accounting
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Chapter 6 / Exercise 6-2A
Managerial Accounting
Warren/Tayler
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