ACT502: Management Accounting - Accounting and Finance Assignment Help

Assignment Task

Assignment Details

QUESTION 1

Background

Electro Inc. has the following budgeted standards for the month of March 2022:

Sales of 2,000,000 units are budgeted for March. Actual March results are:

➢ Unit sales and production totalled 90% of plan

➢ Actual average selling price declined to $4.80

➢ Productivity dropped to 250 USBs per hour

➢ Actual direct manufacturing labour cost is $15 per hour

➢ Actual direct materials cost per unit dropped to $0.80

➢ Actual direct marketing costs were $0.30 per unit

➢ Fixed overhead costs were $30,000 below plan.

REQUIRED:

Show all workings and prepare the following:

1. Static-budget and actual operating income.
2. Calculate the static-budget variance for operating income.
3. Flexible-budget operating income.
4. Calculate the flexible-budget variance for operating income.
5. Sales-volume variance for operating income.
6. Calculate the price and efficiency variances for direct manufacturing labour.
7. Calculate the flexible-budget variance for direct manufacturing labour.

QUESTION 2

Background

Futura Electronics, a fast-growing electronic price device producer, uses a standard costing system with standards set at the beginning of each year.

In the second quarter of 2021, Futura faced two challenges: it had to negotiate and sign a new short-term labour agreement with the workers’ union, and it also had to pay a higher rate to its suppliers for direct materials.

The new labour contract raised the cost of direct manufacturing labour relative to the company’s 2021 standards. Similarly, the new rate for direct materials exceeded the company’s 2021 standards. However, the materials were of better quality than expected, so Futura’s management was confident that there would be less waste and less rework in the manufacturing process. They also speculated that the per-unit direct manufacturing labour cost might decline as a result of the materials’ improved quality.

At the end of the second quarter, Futura’s CFO, Terence Shaw, reviewed the following results:

Shaw was relieved to see that the anticipated savings in material waste and rework seemed to have materialised. However, he was concerned that the union would press hard for higher wages given that actual unit costs came in below standard unit costs and operating income continued to climb.

REQUIRED:

1. Prepare a detailed variance analysis of the second-quarter results relative to the static budget. Show how much of the improvement in operating income arose due to changes in sales volume and how much arose for the reasons. Calculate variances that isolate the effects of price and usage changes in direct materials and direct manufacturing labour.
2. Use the results of requirement 1 to prepare a rebuttal to the union’s anticipated demands in light of the second quarter results.
3. Terence Shaw thinks that the company can negotiate better if it changes the standards. Without performing any calculations, discuss the pros and cons of immediately changing the standards.

QUESTION 3

Background

Darwin Water uses three processes to manufacture lifts for personal watercraft: forming a lift’s parts from galvanised steel, assembling the lift, and testing the completed lifts. The lifts are transferred to finished goods before shipment to marinas across the country.

Darwin Water’s Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows:

The cost transferred into finished goods inventory is the cost of the lifts transferred out of the Testing Department. Darwin Water uses weighted-average process costing.

REQUIRED:

1. Compute the number of equivalent units of work performed by the Testing Department during the period, the cost per equivalent unit and total costs to account for.
2. Assign total costs to the units completed and transferred out of the Testing Department, and the units in the Testing Department’s ending work in process inventory.
3. Compute the cost per unit for lifts completed and transferred out to finished goods inventory. Why would management be interested in this cost?

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