ACC3208 (Revision) / Page 1 of 3

Question 1
a) Explain in what ways are job-order and process costing similar.(5 marks)

b) Ayres Inc. uses the weighted-average method in its process costing system. The following
data concern the operations of the company's first processing department for a recent month.

Work in process, beginning:

Units in process ........................................................... 300
Stage of completion with respect to materials ............ 60%
Stage of completion with respect to conversion.......... 60%
Costs in the beginning inventory:
Materials cost ........................................................... $1,314
Conversion cost ........................................................ $6,102

Units started into production during the month .............. 22,000

Units completed and transferred out .............................. 21,800

Costs added to production during the month:

Materials cost .............................................................. $164,436
Conversion cost ........................................................... $728,058

Work in process, ending:

Units in process ........................................................... 500
Stage of completion with respect to materials ............ 60%
Stage of completion with respect to conversion.......... 10%

Required:

i. Prepare a schedule of equivalent unit.

(4 marks)

ii. Compute the cost per equivalent unit

(8 marks)

iii. Compute the costs of goods transferred out and the cost of ending work in process.
(3 marks)
Total: 25 marks
 ACC3208 (Revision) / Page 2 of 3

Question 2
a) A number of companies in different industries are listed below:
i) Natural gas production company
ii) Food caterer that supplies food for weddings and other special events
iii) Elevator production and installation company
iv) Gold mining company
v) Contract printer that produces posters, books, and pamphlets to order
vi) Dairy farm that supplies cow’s milk
vii) Manufacturer of paper clips
viii) Engineering consulting firm.
ix) Manufacturer of party balloons.
x) Manufacturer of custom-built emergency rescue vehicles.

Required:

For each company, indicate whether the company is most likely to use job-order costing or
process costing.
(5 marks)
b) Explain the rationale of using predetermined overhead rates instead of actual manufacturing
overhead rates to apply manufacturing overhead costs to jobs.
(3 marks)
c) Granite Company uses a job-order costing system. The company applies manufacturing
overhead to jobs using a predetermined overhead rate based on direct labour-hours. Last year,
manufacturing overhead and direct labour-hours were estimated at $80,000 and 16,000 hours
respectively, for the year. In June, Job #315 was completed. Materials costs on the job totalled
$1,500 and labour costs totalled $2,400 at $6 per hour. At the end of the year, it was determined
that the company worked 15,000 direct labour-hours for the year, and incurred $78,000 in
actual manufacturing overhead costs.

Required:
i. Determine the predetermined overhead rate for the year.
(2 marks)
ii. Determine the amount of overhead charged to jobs during the year.
(2 marks)

iii. Determine the amount of under-applied or over-applied overhead for the year.
(2 marks)

iv. Assuming that 100 units were completed, determine the unit cost that would appear on the
job cost sheet for Job #315.
(6 marks)
Total: 20 marks
 ACC3208 (Revision) / Page 3 of 3

Question 3
Dunstan Ltd manufactures tents and sleeping bags in three separate production departments. The principal
manufacturing processes consist of cutting materials in the pattern cutting room, and sewing the material
in either the tent or the sleeping bag departments. For the year to July 31 cost centre expenses and other
relevant information are budgeted as follows:

Production Service
Raw
Cutting Sleeping
Total Tents material Canteen Maintenance
room bags
stores
RM RM RM RM RM RM RM
Indirect
147,200 6,400 19,500 20,100 41,200 15,000 45,000
wages
Consumable
54,600 5,300 4,100 2,300 - 18,700 24,200
materials
Plant
84,200 31,200 17,500 24,600 2,500 3,400 5,000
depreciation
Power 31,700
Heat and
13,800
light
Rent and
14,400
rates
Building
13,500
insurance
BASES:
Floor area
30,000 8,000 10,000 7,000 1,500 2,500 1,000
(sq. ft.)
Estimated
power usage 100 17 38 32 3 8 2
(%)
Direct
labour 112,000 7,000 48,000 57,000 - - -
(hours)
Machine
usage 87,000 2,000 40,000 45,000 - - -
(hours)
Value of
raw material 100 62.5 12.5 12.5 - - 12.5
issues (%)
Required:
a) Prepare and overhead analysis sheet showing clearly allocations, apportionments and reapportionments
to each cost centre.(12 marks)
b) Calculate appropriate absorption rates for each production department.(3 marks)
c) Explain the reason indirect costs cannot be directly traced to cost objects in the same way as direct
costs. You may include examples wherever applicable.(5 marks)