Cost & Management Accounting

Cost & Management Accounting.


PART (i) (20 marks)

Autovalet Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department A, direct labour hours in Department B and machine hours in Department C. The following estimates were used in establishing the predetermined overhead rates for 2014: Department
Manufacturing Overhead $840,000 $902,000 $850,000
Direct Labour Cost $600,000 $100,000 $600,000
Direct Labour Hours 50,000 41,000 50,000
Machine Hours 100,000 120,000 170,000



(a) Calculate the predetermined overhead rate for each department. (4 marks)

(b) During January 2014, the job cost sheets showed the following costs and production data:

Direct materials used $88,000 $85,000 $69,000
Direct Labour Cost $50,000 $37,400 $48,600
Direct Labour Hours 4,000 3,500 4,200
Machine Hours 8,000 10,500 12,800
Manufacturing overhead incurred $78,000 $69,500 $67,200


Calculate the total manufacturing cost assigned to jobs in January in each department.

(c) Calculate the overhead variance for each department at January 31. (4½ marks)


(d) Using the total figures, record the journal entries for:

  1. i) Total direct materials used
  2. ii) Total direct labour costs incurred

iii) Total manufacturing overhead incurred

  1. iv) Total manufacturing overhead applied
  2. v) The manufacturing overhead variance





PART (ii) (20 marks)

The New Beginning Electronics Co. produces an electronic gadget in a three-stage process –Assembly, Programming and Packing. Costs incurred in the Programming Department during October are summarized as follows:

WIP – Programming Department A/C October 1 Bal.

Transfer From Assembly 2,000

Direct Materials Added

Direct Labour

Manufacturing O/H

$ 0






Normal losses are estimated to be 1% of input during the period. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold as scrap at $550 each.

At inspection, 30 gadgets were rejected as scrap. These units had reached the following degree of completion:

Transfer from Assembly 100%

Direct material added 60%

Conversion costs 40%

Work-in-progress at the end of October was 40 gadgets and had reached the following degree of completion:

Transfer from Assembly 100%

Direct material added 70%

Conversion costs 60%

Direct materials added and conversion costs are incurred uniformly throughout the process.


  1. i) A statement clearly showing the equivalent units for each cost element, namely Transfer from Assembly, direct material added and conversion costs. (5½ marks)
  2. ii) Calculate:
  • Cost per unit of finished product, by element of cost and total.
  • Cost of units completed and transferred to Packing
  • Cost of unexpected losses
  • Cost of the units in the Programming Department ending work in process inventory


(6½ marks)

iii) Present the journal entries to record the assignment of direct materials and direct labour and the allocation of manufacturing overhead to the Programming Process. Also give the journal entry to record the cost of the units completed and transferred out to Packing. (3 marks)


  1. iv) Complete the Work in Process Inventory – Programming Department T-account, clearly showing the ending balance. (3 marks)
  2. v) Prepare the abnormal spoilage statement, clearly showing the amount transferred to the costing profit and loss account. (2 marks


Cost & Management Accounting

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