FACULTY OF COMMERCE
DEPARTMENT OF ACCOUNTING & AUDITING
BACC309: COST ACCOUNTING
ASSIGNMENT 1
JANUARY – JUNE 2022
Instructions
All assignments must be typed using New Times Roman font size 12, 1.5 line spaced, referenced using 6th Edition APA Guidelines, justified both sides, include a standardized cover page and uploaded as a SINGLE PDF file.
It is the responsibility of the student to upload their assignments in time to avoid inconveniences due to internet failure, system failure, power outages or any other unforeseen circumstances. NO submission extensions will be granted by the Department after the deadline.
All queries for this assignment must be directed to the Course Leader whose contact details are on the List of Course Leaders available on MyVista.
Plagiarism is a serious academic offence. Credit will be given for well written and referenced assignments. Please refer to the Tutorial Letter and other resources for more information on academic writing.
Question 1
LMN Ltd manufactures three products, L, M and N. The company that supplies the two raw materials that are used in all three products has informed LMN that their employees are refusing to work over-time. This means that supply of the materials is limited to the following quantities for the next period:
Material A 1,030 kg
Material B 1,220 kg
No other source of supply can be found for the next period.
Information relating to the three products manufactured by LMN Ltd is as follows:
L M N
Quantity of material used per unit manufactured
Material A (kg) 2 1 4
Material B (kg) 5 3 7
Maximum sales demand (units) 120 160 110
Contribution per unit sold $15 $12 $17.50
Owing to the perishable nature of the products, no finished goods inventory is held.
Requirements
(a) Recommend a production mix that will maximise the profits of LMN Ltd for the forthcoming period.
(b) LMN Ltd has a valued customer to whom they wish to guarantee the supply of 50 units of each product next period. Would this alter your recommended production plan?
Question 2
1. One of the products manufactured by the company passes through two separate processes. In each process losses, arising from rejected material, occur. In Process 1, normal losses are 20 per cent of input. In Process 2, normal losses are 10 per cent of input. The losses arise at the end of each of the processes. Reject material can be sold. Process 1 reject material can be sold for $1.20 per kilo and Process 2 reject material for $1.42 per kilo.
Information for a period is as follows:
Process 1:
Material input 9000 kilos, cost $14 964
Direct labour $12 250
Production overhead $ 2 450
Material output 7300 kilos
Process 2:
Material input 7300 kilos
Direct labour $5000
Production overhead $1300
Material output 4700 kilos
At the end of the period 2000 kilos of material were incomplete in Process 2. These were 50 per cent complete as regards direct labour and production overhead. There was no opening work in progress in either process, and no closing work in progress in Process 1.
Required:
Prepare the relevant cost accounts for the period. (25 marks)
Question 3
Prepare a report for the managing director of your company explaining how costs may be classified by their behaviour, with particular reference to the effects both on total and on unit costs. Your report should:
(i) say why it is necessary to classify costs by their behaviour; and
(ii) be illustrated by sketch graphs within the body of the report. (25 marks)