AFMC215 Managerial Accounting Open-end Questions – Set 2 - Nov 2020 - QP

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Chartered Institute of Technology

Item Open-ended questions 2（4%）

Submit Date: 11 November Before “E” 学

(To be confirmed by CITECH Tutor - Tan Lele
or Ding Jin Liang)

Method of Wechat/Email
Submission
Instructions: 1. Write down your answers in WORD or
PPT form. If document cannot be edited,
hand-write
write the answers in A4 paper and send
photos instead.

2. To include all groupmates’ names in form

below.

3. Send document/photo to CITECH Tutor

(Tan Lele or Ding Jin Liang ) 3 hours before
“E”学 and notify for acknowledgement

4. Document name should be in this format:

(Module Name-YYMMDD-Group
Name-Open-Ended Questions-1)
Example: 1 AFMC215-200414-Group 1
-Open-ended questions-1

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 AFMC215 Managerial Accounting Open-end Questions – Set 2 - Nov 2020 - QP

Question 1
The following information pertains to Max Kitchen Ware for the year ended.

Budgeted direct-labor cost: 75,000 hours (practical capacity) at $16 per hour
Actual direct-labor cost; 80,000 hours at $17.50 per hour
Budgeted manufacturing overhead: $997,500
Actual selling and administrative expenses: $435,000

Actual manufacturing overhead:

Depreciation $231,000
Property taxes 21,000
Indirect labor 82,000
Supervisory salaries 200,000
Utilities 59,000
Insurance 30,000
Rental of space 300,000
Indirect material (see data below) 79,000

Indirect material:
Beginning inventory, January 1 48,000
Purchases during the year 94,000
Ending inventory, December 31 63,000

Required:
A. Compute the firm’s predetermined overhead rate, which is based on direct-labor
hours.

B. Calculate the overapplied or underapplied overhead for the year.

C. Prepare journal entry to close out the Manufacturing Overhead account into Cost of
Goods Sold.

D. The company plans to produce handmade glassware, what would be the appropriate
volume-based cost driver upon which to base the application of overhead? Write a
memo to the company’s CFO explaining your choice (Assuming you are the Man-
agement Accountant).

E. The company has invested a new product line that uses a highly automated produc-
tion process to produce plasticware for the mass market. The CFO has approached
your to choose a volume-based cost driver upon which to base the application of
overhead for this new product line. Write a memo to him explaining your choice.

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 AFMC215 Managerial Accounting Open-end Questions – Set 2 - Nov 2020 - QP

Question 2
Rex Leather Company manufactures high-quality leather goods. The company’s profits
have declined during the past nine months. In an attempt to isolate the causes of poor
profit performance, management is investigating the manufacturing operations of each of
its products.

One of the company’s main products is leather belts. The belts are produced in a single,
continuous process in the Texas Plant. During the process, leather strips are sewn,
punched, and dyed. The belts then enter a final finishing stage to conclude the process.
Labor and overhead are applied continuously during the manufacturing process. All ma-
terials, leather strips, and buckles are introduced at the beginning of the process. The
firm uses the weighted-average method to calculate its unit costs.

The leather belts produced at the Texas Plant are sold wholesale for $9.95 each. Man-
agement wants to compare the current manufacturing costs per unit with the market
prices for leather belts. Top management has asked the Texas plant management ac-
countant to submit data on the cost of manufacturing the leather belts for the month of
October. These cost data will be used to determine whether modifications in the produc-
tion process should be initiated or whether an increase in the selling price of the belt is
justified. The cost per belt used for planning and control is $5.35.

The work-in-process inventory consisted of 400 partially completed units on October 1.

The belts were 25% complete as to conversion. The costs included in the inventory on
October 1 were as follows:

Leather strips $ 960

Buckles 260
Conversion costs 300
Total $1,550

During October 7,600 leather strips were placed into production. A total of 7,000 leather
belts were completed. The work-in-process inventory on October 31 consisted of 1,000
belts, which were 50% complete as to conversion.

The costs charged to production during October were as follows:

Leather strips $19,900

Buckles 5,250
Conversion costs 20,700
Total $45,850

Required:

In order to provide cost data regarding the manufacture of leather belts in the Dallas Plant
to the top management of Rex Leather Company, compute the following amounts for the
month of October.

A. The equivalent units of material and conversion.

B. The cost per equivalent unit of material and conversion.

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 AFMC215 Managerial Accounting Open-end Questions – Set 2 - Nov 2020 - QP

C. The assignment of production costs to the October 31 work-in-process inventory and

to goods transferred out.

D. The weighted-average unit cost of leather belts completed and transferred to finished
goods. Comment on the company’s cost per belt used for planning and control.

E. Rex Leather Company’s production manager, Steve, has been under pressure from
the company CEO to reduce the cost of conversion. In spite of several attempts to
reduce conversion costs, they have remained more or less constant. Steve is faced
with an upcoming meeting with the CEO, at which he will have to explain why he has
failed to reduce conversion costs. Steve has approached you, who are the manage-
ment accountant, with the following request:
”I have been under pressure to reduce costs in the production process. There is no
way to reduce material cost, so I’ve got to get the conversion costs down. If I can show
just a little progress in next week’s meeting with the CEO, then I can buy a little time to
try some other cost-cutting measures I’ve been considering. I need your help. If we
raise the estimate of the percentage of completion of October’s inventory to 60%, that
will increase the number of equivalents units. Then the unit conversion cost will be a
little lower.”
By how much would Steve’s suggested manipulation lower the unit conversion cost?
What should you do? Discuss this situation, citing specific ethical standards for
managerial accountants.

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 AFMC215 Managerial Accounting Open-end Questions – Set 2 - Nov 2020 - QP

Template of Answers sheet

MODULE / COURSE NAME: AFMC215

Open-ended questions 2

Class ________________ Group ______________________

Name Name 拼音

Question 1

Question 2

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