Download Homework 2 Apr

F2.Homework- Chapter 9&10
Part 1
Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for
this month, which has been
prepared using marginal costing principles, is as follows:
£’000 £’000
Sales (24,000 units)
864
Less Variable production cost of sales:
Less Opening stock (3,000 units)
169
Less Production (22,000 units)
506
Less Closing stock (1,000 units) 1
(23)
––––
(552)
––––
312
Less Variable selling cost
1(60)
––––
Contribution
252
Less Fixed overhead costs:
Less Production
125
Less Selling and administration 1
40
––––
(165)
––––
Net profit 1
87
––––
The normal monthly level of production is 25,000 units and stocks are valued at standard
cost.
Required:
(a) Prepare in full a budgeted profit statement for this month using absorption
costing principles. Assume that fixed production overhead costs are absorbed using
the normal level of activity.
(b) Prepare a statement that reconciles the net profit calculated in (a) with the net
profit using marginal costing.
(c) Which of the two costing principles (absorption or marginal) is more relevant for
short-run decision-making, and why?
Part 2
Oliphant Company designs industrial prototypes for outside companies. Budgeted
overhead for the year was $476,000, and budgeted direct labor hours were 13,600. The
average wage rate for direct labor is expected to be $25 per hour. During June, Oliphant
Company worked on four jobs. Data relating to these four jobs follow:
Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40
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were completed; Job 39 was sold at 120 percent of cost. (Oliphmt had originally
developed Job 40 to order for a customer; however, that customer was near bankruptcy
and the chance of Oliphant being paid was growing dimmer. Oliphant decided to hold Job
40 in inventory while the customer worked out its financial difficulties. Job 40 is the only
job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the
month.
Required:
1. Calculate the overhead rate based on direct labor cost.
2. Prepare Job Accounts for all jobs in process during June.
3. Calculate the balance in Work in Process as of June 30.
4. Calculate the balance in Finished Goods as of June 30.
5. Calculate the cost of goods sold for June.
6. Calculate the price charged for Job 39.
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