Accounting Business Reporting for Decision Making

CHAPTER 11 Costing and pricing in an entity 491

Manufacturing overhead is allocated on the basis of direct labour hours. At the end of the finan-

cial period, the following information was collected:

• direct labour hours 4700 hours


• manufacturing overhead $204 000.
  Required
  a. Calculate the predetermined indirect cost rate at the beginning of the year.
  b. Calculate the actual indirect cost rate for the year.

11.21   LO5

Refer to 11.20 above. Mallet Manufacturing’s total direct labour cost was $940 000 (4700 hours

× $200 per hour). There was no direct labour cost variance.

Required

a. Calculate the total production cost.

b. Calculate the inventoriable product cost for each unit based on:

i. budgeted costs ii. actual costs.

11.22   LO3

During 2018, Coconut Plantations Pty Ltd continued to grow. Jo Geter, the manager, decided to

add detergents to its existing range of soap and candles. The management accountant, Nick Gee,

expressed concern regarding the accuracy of the product costing system now that the diversity

of output had increased. To further understand the costs, Nick undertook an activity analysis of

indirect costs. His findings are as follows.

Activity Cost Cost driver

Receipt of materials

Machining

Deliveries

Machine set-up

Engineering

Packaging

$15 000

85 000

15 000

30 000

10 000

25 000

Material receipts

Machine hours

Number of deliveries

Machine set-ups

Engineering advice slips

Cartons packed

The products’ use of each cost driver is estimated to be as follows.

Soaps Candles Detergents

Material receipts

Machine hours

Number of deliveries

Machine set-ups

Engineering advice slips

Cartons packed

350

50 000

550

750

25

1 300

50

35 000

150

550

10

450

100

15 000

50

200

15

250

Required

a. Calculate the activity cost rate for each activity.

b. Calculate the indirect product cost based on the activity analysis.

11.23   LO3

A housekeeping support department budgets its costs at $40 000 per month plus $12 per hour.

The estimated and actual hours for November provided by the housekeeping support department

to three operating departments are as follows.

Estimated hours

spent cleaning

Actual hours

spent cleaning

Department A

Department B

Department C

1 600

1 400

2 000

1 500

1 600

1 800

Total 5 000 4 900