Accounting Question

Assessment #1 _Cost Classification _Inventory Valuation
UNIVERSITY OF THE WEST INDIES
GLOBAL CAMPUS
ACCT1003 – Cost & Management Accounting
Semester II_2023/2024
Individual Assignment – Mini Cases/Problems
This assessment is centred on the topics “Cost Classification” & “Inventory Valuation” which are covered in
Units 2 & 3 & speaks to the following objectives:
Course Objectives:
1) Distinguish between manufacturing & non-manufacturing overhead (product versus period costs)
2) Classify costs as prime costs or conversion costs.
3) Use the correct inventory to determine the cost of goods manufactured and cost of goods sold.
4) Calculate unit product cost and selling price, given the mark-up applied by the entity.
5) Given a scattergram with the “line of best fit” develop a cost function clearly showing total fixed costs and
variable cost per unit.
6) Given a set of transactions of a merchandiser for a specified period, prepare an inventory record to
determine the value of ending inventory & cost of goods sold.
7) Demonstrate how sales returns & purchases returns are treated in the inventory record and how they impact
the income statement.
8) Prepare an income statement for a merchandising entity.
9) Use journal entries to demonstrate the difference between a perpetual & a periodic inventory system using
purchases, freight-in & sale of inventory transactions.
10) Explain the differences between a product cost and a period cost.
This assessment will account for 35% of your overall mark. You are required to show ALL supporting workings
where necessary and state any assumption(s) made.
You are required to submit this assignment by Monday, February 26, 2024, by 11:55 p.m. EC Time (10:55 p.m.
Jamaica Time; 9:55 p.m. Belize Time.)
Specifications:
MS Word or Excel Document (97-2003 Version)
Font Size 12
GRADING:
Computations
Understanding
Procedures/Algorithm
Presentation
Total
65 marks
4 marks
4 marks
2 marks
75 marks
Assessment #1 _Cost Classification _Inventory Valuation
Question 1
Part 1
Gopaul Electronics designs and manufactures specialized switches for the telecommunications industry. The
accounting records of the business reflect the following data at December 31, 2023:
Inventory
1/1/2023
31/12/2023
Raw Materials
$260,000
Work In Progress $333,800
Finished Goods
$1,075,200
$230,000
$218,800
$615,000
Other information:
Sales Revenue
Factory supplies
Direct Factory Labor
Special Design Cost
Raw Materials Purchased
Plant janitorial service
Depreciation: Plant & Equipment
Plant Utilities
Plant supervisor’s salary
Property Taxes 1
R & D for Graphic Designs
Office Utilities
Insurance on Plant & Equipment
Delivery truck driver’s wages
Depreciation: Delivery truck
Administrative Wages & Salaries
Sales Commission
1
$5,765,000
45,000
735,000
15,000
540,000
52,000
165,000
385,000
480,000
300,000
70,500
165,000
120,000
125,000
52,000
850,150
97,650
The property taxes should be shared: 60% manufacturing & 40% general & administrative costs.
Required:
a) Calculate the raw material used by Gopaul Electronics.
(2 marks)
b) What is the total factory overhead cost incurred by Gopaul Electronics during the period?
(3 marks)
c) Determine the prime cost & conversion cost of the product manufactured.
(3 marks)
d) Calculate the cost of goods manufactured for the year by Gopaul Electronics
(4 marks)
e) Prepare an income statement for Gopaul Electronics for the year ended December 31, 2023, clearly showing
the calculation of Cost of Goods Sold. List the non-production overheads in order of size starting with the
largest.
(6 marks)
f) What is the selling price per switch if Gopaul Electronics manufactured 1,500 switches for the period under
review and uses a mark-up of 33⅓% on cost?
(2 marks)
Assessment #1 _Cost Classification _Inventory Valuation
PART 2
The Angla Ruston University operates a Laundromat, solely for the purpose of providing laundering services to
students in residence. You have been hired as accounting students to analyze the cost of the laundering services
and develop a cost function which describes the behaviour of the laundering costs.
The university administration has assembled the data for a twelve-month period pertaining to the monthly total
costs of providing the service and the corresponding number of students who used the laundering facilities each
month. You were recently taught how to use the Excel graphing tool and a member of the team successfully
generated the scattergram given below from the data set provided.
The other team members are now tasked to use the graph to provide the administrators with a detailed response
to the following questions:
a) What is another name for the “line of best fit” in Excel? What is the purpose of this line? (2 marks)
b) Using the “line of best fit”, determine Angla Ruston University’s fixed cost per month and the variable cost
per student. (Use 0 & 2,500 students.)
(4 marks)
c) Based on the scatter gram, what is the equation of the total mixed cost function?
(2 marks)
d) In August of the upcoming academic year, the university expects the number of students using the
Laundromat to increase to 3,400. What is the expected total laundering cost for August? (2 marks)
Assessment #1 _Cost Classification _Inventory Valuation
Question 2
RAZR WIRELESS sells a variety of mobile telephone accessories including several brands of Wireless Earbuds
Bluetooth Headphones. The earbuds are sold in cases, with each case containing a pair of earbuds. RAZR began
the last quarter (October to December) of 2021 with 30 cases of the (TOZO T6) earbuds at a total cost of $187,800.
During the quarter the business completed the following transactions relating to the “TOZO T6” earbuds:
October 8
98 cases were purchased at a cost of $6,202 each. In addition, the business paid a freight
charge of $248 cash on each case to have the inventory shipped from the point of purchase
to their place of business.
October 31
The sales for October were 85 cases which yielded total sales revenue of $809,030. (25 of
these cases were sold on account to three longstanding customers)
November 4
A new batch of 67 cases was purchased at a total cost of $465,650
November 10
5 of the cases purchased on November 4 were returned to the supplier, as they were not of
the type nor model ordered.
November 30
During the month 60 cases were sold, yielding total revenue of $621,000
December 4
A customer, to whom 9 cases were sold during the first business day of November, returned
3 of the cases, as they were of another make and model.
December 10
Owing to an increased demand, a further 115 cases were purchased at a cost of $7,900 each;
these were subject to a trade discount of 2% on each case.
December 30
121 cases were sold during December at a unit selling price of $11,085.
December 31
An actual count of inventory was carried out which revealed that there were 34 cases of the
“TOZO T6” brand of merchandise in the storeroom.
Unless otherwise stated, assume that all purchases were on account and received on the dates stated.
Required:
a)
Prepare a perpetual inventory record for this merchandise, using the first in, first out (FIFO) method of
inventory valuation to determine RAZR’s cost of goods sold for the quarter and the value assigned to
ending inventory.
(20 marks)
b)
Given that selling, distribution and administrative costs associated with the TOZO T6 brand of earbuds for
the quarter were $42,844, $38,120, and $157,076 respectively, prepare an income statement for RAZR
WIRELESS (TOZO T6) for the quarter ended December 31, 2021.
(6 marks)
c)
Journalize the transactions for the month of October, assuming the freight was paid by cash and the
business uses a:
Periodic inventory system.
Perpetual inventory system
(7 marks)
d)
Explain the difference between a product cost and a period cost. How does the product cost of a
manufacturer differ from the product cost of a merchandiser?
(2 marks)
Assessment #1 _Cost Classification _Inventory Valuation
Rubrics
Criteria
Understanding
Computation
▪
The solution
completely
addresses all
mathematical
components
presented in the
task.
▪
Excellent
understanding of
the problem. (4)
Thorough analysis of the
problem with accurate
solutions
▪
The solution
addresses all
mathematical
components
presented in the
task.
▪
Understands the
problem. (3)
Value
▪
The solution
addresses some
but not all of the
mathematical
components
presented in the
task.
▪
The solution
addresses none
of the
mathematical
components
presented in the
task.
▪
Minimal
understanding of
the problem (2)
▪
Attempts but
demonstrates no
understanding of
the problem (1)
Analysis of the problem is
evident, considerable
accuracy.
Analyses the problem
with some success, but
accuracy needs to
improve.
Very little evidence of
analysis. Accuracy is
weak. Evidence of
guessing.
Procedures/Algorithm Applies procedures
accurately to correctly
solve the problem. (4)
Some mathematical
procedures are used. (3)
Could not completely
carry out mathematical
procedures (2)
No evidence of
mathematical reasoning
(1)
Presentation
Work demonstrates some
organization(1½)
Disorganized approach
to the problem (1)
Lacks organization and
thought(½)
Work is clearly organized
and includes a step-bystep analysis (2)
4
65
4
2
(Required specifications
are met)
Total
75