Week 1

The following data refer to Nani’s Fashions for the current year:


Sales Revenues $475,000
Work in process inventory, 31 December     15,000
Work in process inventory, 1 January     20,000
Selling and administrative expenses     75,000
Income tax expense     45,000
Purchase of raw materials     90,000
Raw materials inventory, 31 December     12,500
Raw material inventory. 1 January     20,000
Direct labour   100,000
Electricity: plant     20,000
Depreciation plant and equipment     30,000
Finished goods inventory, 31 December     25,000
Finished goods inventory, 1 January     10,000
Indirect material       5,000
Indirect labour       7,500
Other manufacturing overhead     40,000



  1. Prepare the schedule of cost of goods manufactured for Nani’s fashion.
  2. Prepare the schedule of cost of goods sold for Nani’s Fashions and explain the information provided by the schedule of cost of goods sold.
  3. Prepare an income statement for the current year.


Week 2

Brisbane Indoor Sports, a sporting complex, has opening hours that fluctuate from month to month. The electricity costs and hours of operation for past six months is listed below:


Month Total hours of operation Total electricity cost
January 650 $ 4,240
February 700 $ 4,400
March 800 $ 4,800
April 600 $ 4,200
May 550 $ 3,700
June 500 $ 3,600



  1. Use the high-low method to estimate the cost behaviour for the complex’s electricity costs, assuming that the variable costs vary in proportion to the hours of operation. Express the total cost behaviour in formula form (Y = a + bx). What is the variable electricity cost per hour of operation?
  2. During July, the complex will open for 570 hours. Predict the complex’s total electricity costs for July using the cost estimation method employed in above requirement a).
  3. What is the main drawback of the high-low method of cost estimation?


Week 3

Toys World started and finished job number A26, a batch of 1,000 cuddly koalas, during March 2020. The job required $4,850 of direct material and 32 hours of direct labour at $20 per hour. The predetermined overhead rate is $10.50 per direct labour hour. On 31st March, 900 of the cuddly koalas were shipped to a local toy shop.



  1. Prepare journal entries to record the incurrence of production costs, completion of job number A26 and the shipment of 900 cuddly koalas to local toy shop.
  2. Calculate the cost per cuddly koala for job number A26.
  3. How might the managers at Toys World use this information?


Week 4

Rigby Ltd accumulates costs for its single product using process costing. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process. The following is a partially completed production report for May.

Production report, May
Physical Percentage of Equivalent units
units completion with Direct Conversion
respect materials
to conversion
Work in process, 1 May 25,000 40%
Units started during May 30,000
Units completed and 35,000 35,000 35,000
transferred out during May
Work in process, 31 May 20,000 80% 20,000 16,000
Total units accounted for 55,000
Direct material Conversion Total
Work in process, 1 May $143,000 $474,700 $617,700
Costs incurred during May $165,000 $2,009,000 $2,174,000
Total costs to account for $308,000 $2,483,700 $2,791,700



1. Complete the following process costing steps using the weighted average method:

  • Calculation of equivalent units.
  • Calculation of unit costs.
  • Analysis of total costs.

2. Prepare a journal entry to record the transfer of the cost of goods completed and transferred out during May.


Week 5

Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow’s brother Roger, who is a partner in a large firm of chartered accountants.

The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses.

Snow has only recently joined Taxation Matters and he is concerned about the firm’s pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of these services.

At the end of the year, Snow reviewed the firm’s total costs and activities, resulting in the following list:

Activity Activity cost Activity driver Quantity of activity driver
Interview salaried client $60,000 No. of salaried clients 8,000
Interview business client 75,000 No. of business clients 2,000
Obtain missing data 600,000 No. of follow-up calls 8,000
Input data 120,000 No. of data entries 400,000
Print return 90,000 No. of returns 10,000
Verify return with client 180,000 No. of hours 6,000
Rectify errors 90,000 No. of errors 6,000
Submit return 30,000 No. of returns 10,000
Total costs $1 245,000

In identifying the activities required for each type of return, Snow noted the following:

Clients are interviewed only once per return.

  • All follow-up calls to obtain missing data relate to business returns; on average, each business tax return requires four follow-up calls.
  • Processing a wage and salary tax return requires 20 data entries, whereas a business return requires 120 data entries.
  • On average, it takes 22.5 minutes to verify a wage and salary tax return, whereas it takes one and a half hours to verify a business return.
  • All errors relate to business returns; on average, there are 3 errors per business return.


1. Use activity-based costing to estimate the cost of preparing:

  • A wage and salary tax return.
  • A business tax return.

2. In the light of your answers to requirement 1, evaluate the firm’s pricing policy.

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