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QUESTION 1

A
high
low
difference

at
B

a
X
b
total costs

mach costs
94,581
141,852
47,271

labour
1,050
1,380
330

intercept:

(55,827)

1,600

slope
143.25 1/2 mark

173,366 1/2 mark

155.17
1600
(70,207)
178,065

1 mark - no part marks

strong correlation
0.5 mark
89.63% of the variation in Y is explained by X; or
can rely on the formula, provided it is econ. 0.5 mark

small sample size


economic plausability
effects of inflation
negative intercept (econ. Plaus.)
outside of relevant range

1 mark each
1 mark each
1 mark each
1 mark each
1 mark each

Additional: any other reasonable answer


1 mark each
May not be normally dist'd
Seen very frequently: errors/reliability in data collected
Amount of labor used is extreme/outlier
Use of values from different time periods makes it harder to make an estimate
uniformity of residuals; could be other factors affecitng the data
No linear rel'p b/w labour hours and machine costs
Classification of costs (variable or fixed?)
Does not take into account trends; only 10 years of data
May not be stationary over time

QUESTION 2
Work in process
number of units
% completion - Materials
% completion - Conversion
Cost of Materials in WIP
Cost of Conversion in WIP
New units started during year:
Costs incurred during the year:
Costs incurred during the year:
FIFO

% to complete
Equivalent Units

2,000

% complete
Equivalent Units

4,800

Ending WIP
% complete
(started and not completedEquivalent Units

1,200

units accounted for

8,000

Started & Completed

Ending WIP
1,200
80%
80%
?
?

Materials:
Conversion Costs:
physical
units
2,000
6,000
8,000

Open WIP
Started
units to account for
units accounted for as:
Opening WIP
(now complete)

Opening WIP
2,000
90%
40%
$ 25,000
$ 30,000

$
$
Material
equiv units

10%
200

Conversion
equiv units

1/2 mark

60%
1,200

1/2 mark

100%
4,800

1/2 mark

100%
4,800

1/2 mark

80%
960

1/2 mark

80%
960

1/2 mark

5,960
Material
Cost
$
25,000
28,000
53,000

Opening WIP
Costs added
costs to account for

6,000 units
28,000
27,000

6,960
Conversion
Total
Cost
Cost
$
30,000 $ 55,000
27,000
55,000
57,000
110,000

Allocation of Costs:

Costs added
Equiv Units
cost/EU

28,000
5,960
4.70 1 mark

27,000
55,000
6,960
3.88 1 mark

Opening WIP

prior period cost

25,000

30,000

200
4.70
940

1,200
3.88
4,655

25,940

34,655

60,595

1/2 mark

4,800
4.70
22,550

4,800
3.88
18,621

41,171

1/2 mark

960
4.70
4,510

960
3.88
3,724

Total allocation of costs

53,000

57,000

110,000

Cost of Goods Sold


(OpenWIP + Start&Comp)
Ending WIP
Loss on Abnormal Spoilage
Total allocation of costs

48,490
4,510
53,000

53,276
3,724
57,000

101,766
8,234
110,000

current period:

EU
cost/EU
current period cost

Total Cost - Opening WIP


started and completed uni EU
cost/EU
total cost
Ending WIP:

EU
cost/EU
total cost

1 mark for COGS = Opening WIP + units started and completed


If the solution is done using Weighted Average instead of FIFO then deduct 2 marks

8,234 1 mark

QUESTION 3
Beg. Of Year End of Year
Raw Material Inventory
20
Work-in-Progress Inventory
40
20
Finished Goods Inventory
20
10
Budget
350
100
70
170

Overhead
Machine Hours (in hrs)
Direct Labour Costs
Material Purchases

Actual
340
90
90
180

No materials were including in indirect overheads


Materials
opening
Purchases
180
160 to WIP
20
1 mark
(1/2 mark if forget to net out ending balance from purchases)

ending

O/H Rate =
actual hours
Man O/H

actual

3.50 per Hour


90
315 1 mark
(1/2 mark for correct rate, 1/2 mark for actual hours)

Overhead
340

315 applied (to WIP)


subtotal
25
over (under) applied
1 mark
(1/2 mark for showing actual as a DR, 1/2 mark for showing applied as CR)
WIP
opening
Labour
Raw materials
Man O/H

40
90
160
315

1/2 mark
1/2 mark

585 COGM 1 mark


ending

20

Finished Goods
20
585
595 COGS
ending
10
opening
COGM

1/2 mark
1/2 mark

B: COGM

COGM is

585

1 mark

C: over or under: under-allocated


D. Proration
ending % total
Finished Good
10
2%
WIP
20
3%
COGS
595
95%
Total
625 100%

1 mark
x under
0.40
0.80
23.80
25.00

1 mark

E. NORMAL COSTING:
makes it easier to bid on new jobs
1 Mark
Normal costing will result in an overhead rate that is more uniform and realistic for all of the u
Recognized by GAAP
Provides managers with needed information in a timely manner
any other reasonable answer
F. PRORATION
Pro:
more accurate
any other reasonable answer

1/2 mark

Con

1/2 mark

often immaterial
any other reasonable answer

G. Write off method


Pro:
easier
1/2 mark
materiality (most of it usually goes to COGS)
any other reasonable answer
Con

less accurate
1/2 mark
not appropriate if big balance in WIP or Finished goods at end of period
any other reasonable answer

QUESTION 4
Rolling Stock
Rail Charges
Rail Fuel
Rail Yard
Salaries
PART A

total
4,000,000
1,000,000
3,000,000
3,000,000
4,000,000
15,000,000

km travelled
# containters:

total cost
Single cost ratetotal distanace
cost/km
distance
rate
Total

200,000 km
5,000 containers

15,000,000
200,000
75 1 mark

Customer A
Customer B
20
4,000
75
75
1,500
300,000
1/2 mark each 1/2 mark each

PART B
Likely to be underbidding on jobs that are short distance
Likely to be overbidding on jobs that are long distance

1/2 mark each


1/2 mark each

OR
Likely to be underbidding on jobs with lots of containers
Likely to be overbidding on jobs that have few containers

1/2 mark each


1/2 mark each

PART C
Rolling Stock
Rail Charges
Rail Fuel
Rail Yard
Salaries
total cost

total
4,000,000
1,000,000
3,000,000
3,000,000
4,000,000
15,000,000

cost driver

allocated to:
rail
4,000,000
1,000,000
3,000,000

allocated to:
loading

1/2 mark
1/2 mark
1/2 mark
3,000,000 1/2 mark
2,000,000
2,000,000 1/2 mark each
10,000,000
5,000,000
2 marks
1 mark
distance
containers
200,000
5,000

cost per cost driver

50
per km
1/2 mark
distance
rate
sub total
containers
rate
sub total
TOTAL

1,000
per container
1/2 mark

Customer A
Customer B
20
4,000
50
50
1,000
200,000
1
1,000
1,000

###
1,000
1,000

2,000
201,000
1/2 mark
1/2 mark

QUESTION 5
Container size (L x W x H)
Selling Price
Variable cost per container
allocated fixed costs per container
Profit per container

Mini

Standard

Long

7.5 x 8 x 8

20 x 8 x 8

60 x 8 x 8

$400
180
100
$120
Mini

Demand (containers):

31
8
3.88

$900
300
350
$250
Standard

$2,100
400
400
$1,300
Long

17
3
5.67

5
1
5.00

Mini
7.5
x 8 x Standard
8 20 x 8 x 8
size
400
900
price
180
300
VC
220
600
CM
7.5
20
length (constraint)
CM per constraint
29.33
30
1 mark for removing Fixed costs from calculation
1 mark for calculating CM per unit of contraint

Long
55 x 8 x 8
2100
400
1700
60
28.33

per train car


train cars required

available
less: standard
available
less: mini
available
less: long
Optimal is:

containers /
railcar

17

31

1
Mini
31

railcars
10.0
5.7
4.3
3.9
0.5
Standard
17

Long
0
2 marks

14.54
2 marks

2 marks

Therefore should load them in this order: 1st standard, 2nd mini, 3rd long

containers

Total

max CM
$17,020

BONUS - 1 mark
Using CM per unit of contraint will leave some space unused
and will generate total CM of:
Mini
Standard
Long
total
CM unit
220
600
1700
units
31
17
0
total
6820
10200
0 $ 17,020
size (feet)
total (feet)

7.5
232.5

20
340

60
0

572.5

However, there are two other possibilities that generate higher CM


by using all of the unused space with the units that generate lower CM per unit:
Mini
Standard
Long
total
CM unit
220
600
1700
units
29
16
1
total
6380
9600
1700 $ 17,680
size (feet)
total (feet)

7.5
217.5
Mini

20
320

CM unit
units
total

220
24
5280

Standard
600
15
9000

size (feet)
total (feet)

7.5
180

20
300

60
60

597.5

Long
total
1700
2
3400 $ 17,680
60
120

600