Product Costing: Overhead
Full costing and the behaviour of costs
It is not correct to assume that variable costs and indirect costs are the same or
that fixed costs and overheads are the same.
Total cost the sum of the variable and fi
Cost accounting is a subset of management
It relies on the accumulation and determination
of product, process or service costs for the
purposes of assigning these costs to a cost
Product Costing: Dual allocation rates
and Absorption versus variable
Overhead Allocation Methods
Allocation methods include the following:
Activity based costing
Single versus dual methods (using FC and VC)
Plant wide versus departmen
Question 4: Decision making
New Kids on the Block Ltd manufactures two products:
Product One: has a selling price of $30, and variable costs of $12 per unit. Product
one requires 1.5 hours of direct labour.
Product Two: has a selling price of $5
Question 2: Decision Making
a) Fionas Furniture Ltd produces lounge room furniture, such as lounge suites and
coffee tables. The current production costs for their most popular couch are:
Raw materials, (fabric, wood etc) are $480 per unit;
Question 5: Short-term Decision Making and Relevant Costing
Cardinal Company needs 20,000 units of part K28 to use in its production cycle. It can either
make the part itself or outsource it from Oriole Company.
The following information is ava
The following is information about a manufacturing company. Manufacturing overhead is applied to
production on the basis of direct labour hours. During the first month of the companys financial
year (March), $ 84 300 of manufacturing ove
Question 3: Contribution Margin and Cost-Volume-Profit
a) Why is it important to understand cost-volume-profit relationships?
(3 The following data are provided concerning Product X.
Contribution margin per unit
Question 8: Product Costing
The Pet Shop Boys Company manufactures one item. For every unit produced $5.50 of raw
material is used and the direct labour cost is $15 per hour
The firm uses two different overhead application rates as follows:
Question 4: CVP analysis
Provided is a traditional income statement for Hammer-throw Ltd
Sales (50,625 units)
Cost of Goods Sold
Based on an analysis of cost behavio
Question 5: CVP analysis
a) If Paradise City Ltd has:
Sales of $320,000, a contribution margin of 32% and an operating profit of $38,300,
what are their Variable costs and Fixed costs? Show all workings.
b) If Sweet Child Ltd has:
The Dragons Ltd
Statement of Cash Flows
For the period ended 31 March 2010
Receipts from customers
Payments to suppliers and employe
The following table shows an extract from the accounts of Tremendous Ltd for the year
ended 31 March 2010.
Selling and Administ
The following is a Chart of Accounts (in alphabetical order) for Brilliant Ltd.
Long term Loan
Property, Plant and Equipment
Fabulous Ltds balance sheet is presented on the next page; however, some of the amounts
are missing. Fill in the rest of the balance sheet using the following information
a) Fabulous Ltds records show that cur
Question 1: Financial Statements
The following is a list of accounts for Pink Jersey Ltd on 31 March 2012.
Create the following financial statements for Pink Jersey Ltd using both the information on
page 2, and the following additiona
The following are the accounts from The Bulldogs Ltd for the year ended 31 March 2010.
The repayment terms for the mortgage: payments of $2 000 are due on the
1 December each year
The vehicle is brand new, and has not yet been depr
The following table shows the accounts from The Mockers Ltd for the year ended 31 March
2010. Other information is:
The repayment terms for the mortgage: payments of $1,000 are due on the 1
December each year.
The profit for the ye
The following is a trial balance for Big W Ltd on 31 March 2011.
Accumulated depreciation buildings
Accumulated depreciation machines
Accumulated depreciation vehicles
a) Explain how the distribution of profit is different for a sole trader, partnership and a
b) Kate and Lisa are two talented hair and make-up artists. They are good friends. They
have been asked to work, on a cont
Question 4: Depreciation
a) Is land depreciated? Why or why not?
b) What costs are included in the historic cost when an asset is purchased? Give an
example to demonstrate your understanding.
Use the information in the table a
The following transactions occurred throughout 2010 in a small shoe store. At the beginning
of 2010 they had funds in the bank (i.e. it was NOT in overdraft)
1. Borrowed $100,000 cash from the bank
2. Sold inventory originally purcha