Finance & Accounting

# Accounting For Managers Assignment 2

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Word Count

1500 words

Subject

Accounting

4 Days

## Assignment Criteria

QUESTION 1 (5 MARKS) (200 words)

What function does 'feedback' play in the work of the manager and how does accounting help the managers in this regard? Explain using examples to support your discussion.

QUESTION 2 (5 MARKS) (200 words)

Is it possible for costs such as salaries or depreciation to end up as assets on the balance sheet? Explain using examples to support your statements.

QUESTION 3 (5 MARKS) (200 words)

XYZ Company has high fixed expenses and is presently operating somewhat above the break-even point. From this point on, will percentage increases in net income tend to be greater than, about equal to, or less than percentage increase in total sales? Why?  Explain.

QUESTION 4 (5 MARKS)

Estimated or budgeted cost and operating data for three companies for 2015 are given below:

Company X Company Y Company Z

Units to be produced 10,000 8,000 12,000

Machine- hours 50,000 10,000   6,000

Direct labour- hours 12,000 16,000 36,000

Direct labour cost \$48,000 \$64,000 \$150,000

Factory overhead cost 150,000 40,000     60,000

Predetermined overhead rates are calculated on the following bases in the three companies:

Overhead rate based on

Company X Machine-hours

Company Y Direct labour-hours

Company Z Direct labour cost

Required:

1. Calculate the predetermined overhead rate to be used in each company during 2015.
2. Assume that three jobs are worked on during 2015 in company X. Machine-hours recorded by jobs are: job 23, 21,000 hours; job 29, 16,000 hours; and job 31, 11,000 hours. How much overhead will the company apply to work in process? If actual overhead costs total \$149,000 for 2015, will overhead be over- or under-applied? By how much?

QUESTION 5 (5 MARKS)

Tony's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:

Men’s Boys’

Selling Price \$28.80 Selling Price \$24.00

Variable Cost \$20.40 Variable Cost \$16.80

Fixed costs are \$38,400.

Required:

• What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men’s shirts?
• What is the operating income, assuming the sales mix is 2:1 in favor of men’s shirts, and sales total 9,000 shirts?

QUESTION 6 (5 MARKS)

The Wilson River Company uses a job order cost system.

The table below provides selected data on the three jobs worked on during the company's first month of operations:

Job 101 Job 102 Job 103

Units of product in the job 2,000 1,800 1,500

Direct labor hours worked 1,200 1,000 600

Direct material cost 3,200 3,980 1,200

Direct labor cost 6,000 5,000 3,000

Actual overhead costs of \$5,880 were incurred during the month. Manufacturing overhead is

applied to production on the basis of direct labor-hours at a predetermined rate of \$2 per hour.

Jobs 101 and 102 were completed during the month, job 103 was not completed.

Required:

1. Calculate the amount of manufacturing overhead that would have been charged to each job during the month.
2. Calculate the unit cost of jobs 101 and 102
3. What is the balance of Work-in-Process account at the end of the month?

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## Assignment Solution

### QUESTION 1 (5 MARKS) (200 words)

What function does 'feedback' play in the work of the manager and how does accounting help the managers in this regard? Explain using examples to support your discussion.

Feedbacks are basically responses or any kind of reactions, which may be regarding a product, task, operations, moves, introduction, or implementation of policies, or regarding any other matter. It may take the form of criticism as well.

Managers work for the betterment of a corporate and strive hard to achieve organizational goals. Timely and accurate feedback facilitates the managers to act in an efficient manner. It helps in efficient implementation in regard to performance management. It also helps to set up desirable and achievable goals. If the managers give accurate feedback to their employees in an earnest manner, the chances of improvement in the performance of the employee’s increase. (Dignen, 2014). Accounting correct feedbacks helps People to accurately know the correct responses as to as what, where and why things may be deviating from the plans and therefore corrective actions may be successfully implemented. Hence specificity and timeliness play a very important role in this regard. For example, the feedback by the employees in regard to the excess cost of manufacturing revealed that the poor working conditions reduces the efficiency of them and makes them take longer in producing the goods. This increases the cost of production unnecessarily. Further management accounting mechanically acts as a controlled loop in regard to the targets set and the measured performance. (OPM, 2015)

For example, the level of deviation from the actual targets can be resolved by earnestly discussing the matter with all departments and their feedbacks would make the accountants and management practically implement the ideas and suggestions, hence, materially affecting the successful implementation of the same.

### QUESTION 2 (5 MARKS) (200 words)

Is it possible for costs such as salaries or depreciation to end up as assets on the balance sheet? Explain using examples to support your statements.

Accumulated depreciation is clearly reported as a cumulative amount as a reduction from the respective assets in the Balance Sheet.  (Coach, n.d.) As per my opinion, expenses like depreciation and salaries may be disclosed as a part of the balance sheet in case they happen to be a part of manufacturing costs of goods, which are a part of inventories. The manufacturing costs of goods need to be considered as a part of inventory till the time the finished goods corresponding to the same are finally sold. In case, the units happen to be a part of the inventory, they need to be considered as either Inventory of finished goods or inventory in regard to Work in Progress. Specific disclosure requirements need to be followed as per the prevailing regulations. In addition to this, the manufacturing costs and salaries when prepaid to the respective stakeholders needs to be displayed in the balance sheets under short-term assets. They are later on considered as expenses when they become due. For example, a sum of \$1200 was paid on 1st December for the next 6 months. On 31st December, when the books of the company and closed, 200 would be treated as salary expense and \$1000 would be accounted as a short-term asset in the balance sheet of the company.