Question 4
- Explain the difference between financial accounting andmanagement accounting.
Ensure yourexplanation clearly explains the purpose of managementaccounting.
- Car Services Ltd produces custom tow bars and bull bars forutes and cars. Each customer’s order is treated as a separate jobso costs can be tracked for each customer.
Tasks
Briefly explain the following:
- The meaning of the term cost object. Identify the cost objectthat would be used by Car Services Ltd when recording costs.
- The difference between a direct cost and an indirect cost.Identify examples of both direct costs and indirect costs for thecost object.
- Salmon Ltd provides you with the following information on thecosts of testing the water quality of their wastewater.
| No of tests | Costs |
July | 30 | 7,315 |
August | 25 | 6,500 |
September | 34 | 8,120 |
October | 28 | 6,990 |
November | 32 | 7,950 |
December | 31 | 7,445 |
Task
Using the high low method, calculatethe fixed cost per month and the variable cost per test.
d) King Ltd uses a job costing system. The company’s budget forthe year included a budgeted total manufacturing overhead cost of$1,800,000 and budgeted total direct labour hours of 60,000 hours.Manufacturing overhead cost is applied to jobs based on directlabour-hours worked. During December, King Ltd started andcompleted one manufacturing job (Job 571). The events of Decemberare:
Direct material cost: Job 571 | $215,000 |
Indirect material cost for December | $55,000 |
Other manufacturing overhead cost incurred in December | $45,000 |
Direct labour cost (4,800 hours, including 100 hours idletime) | $120,000 |
Indirect labour cost for December (excluding idle time) | $40,000 |
Tasks
- Calculate the total cost of Job 571.
- Determine the amount by which the manufacturing overhead costis overapplied or underapplied for December.
