Accounting For Managers 2

Assignment 2 (30 MARKS)

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:

2015. Calculate the predetermined overhead rate to be used in each company during 2015.
2016. 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

c. What is the balance of Work-in-Process account at the end of the month?

QUESTION 1

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.

Feedback refers to reactions or any kind of backlash or counteraction in an organization when any kind of policy, rule or any new line of product is introduced, altered or implemented. It may be an appreciation or criticism. But it should be timely, specific and in the correct manner. (OPM, n.d.) For example- Reaction of the employees on shifting the factory to a new site, feedbacks of the workers on implementation of mechanized systems in various departments, response of laborers on introduction of job work in the production line, etc.

The organizations along with the help of the managers and the entire workforce, work for the attainment of organizational success. Accounting takes care of the monetary effect of the various transactions in a workplace. It calculates the monetary effect of various policies or plans which are thought of or implemented. With a smooth communication system in the organizations, the managers are able to actually know the feedbacks of the employees in diverse situations. These facilitate the managers to analytically judge the possible advantages/disadvantages; profits/losses when something new is being done in business. For example- The loyal employees would give genuine feedbacks to the company and this would help the managers to alter, accept or reject the move and proceed in the correct direction. Also, when the managers give corrective feedbacks to the employees, the work can be done in as per the plans more accurately.

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.

In the Balance Sheets of an enterprise, accumulated depreciation is reported as a liability and reduced from the specific assets. But in certain cases, expenses like salaries and depreciation can be reported as assets also. These happen when they are a part of the manufacturing costs of certain inventories, which are not sold by the company. They lay added in the inventory cost and are disclosed in the inventory costs of finished goods or Work-in-Progress in the Balance Sheets. They remain disclosed in the same manner until the inventory is finally sold by the company in the form of finished goods as per the prevailing norms until that time. In certain cases, when the salaries are prepaid to the respective employees, they are disclosed as Prepaid Salaries under the head Short term assets in the balance Sheet. During the coming year, when the salary actually becomes due, the salary account is debited and prepaid account diminishes. (M.Scilly, n.d.) For example- The prepaid salary account for ABC Company stands debited with $5000 as on 31st December, 2014. On 2nd February, when the salary actually becomes due, the prepaid account closes and the amount is transferred to salary account.