ACCT20001 Cost Management

Department of Accounting

Tutorial Week 4 Preparation Requirements

REQUIREMENT 1 – from Semester 2, 2014 exam

The Berkeley Watch Company (the company) designs, manufactures and sells highly
fashionable low-priced ladies watches via various retailers in the Australian market.

The company is trying to calculate the cost of producing its different watches and wants to
ensure that indirect costs are accurately allocated to its watches for this purpose. Briefly
explain what is needed to ensure ‘an accurate allocation of indirect costs’.

REQUIREMENT 2:
th
Job Costing – Complete Bhimani et al. (5 Ed. or 6th Ed.) Ex. 3.16.

 Ignore the requirement to determine budgeted consulting labour compensation

for 2010/20151

Additional questions which relate to the background information in Ex 3.16:

(i) Eldorado has chosen consulting labour hours worked to allocate consulting support
cost. The consulting support cost pool consist of the following:
o Printing costs
o IT Support costs
o Telecommunication costs
o Stationery costs

Consider the following statement: “Given that there are 4 cost items, Eldorado
should not have a single indirect cost pool. It should have 4 different cost pools.” Do
you agree with it? Explain.

(ii) What are the benefits of Normal Costing for Eldorado? What are is disadvantages
(relative to Actual Costing)

(iii) Is Job Costing suitable for Eldorado SA? Explain.

REQUIREMENT 3
th
Complete Bhimani et al. (5 Ed. or 6th Ed.) Ex. 3.20.
1
This is because we are not given enough information – specifically we do not know what the budgeted
direct labour cost per hour is.