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

Required:

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

Required:

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.

Required:

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 55,000 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

Required:

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.

Required:

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

• A wage and salary tax return.