SOLUTION: Assess students’ understanding | My Assignment Tutor

Arab Open University BE310: TMA – Second Semester 2020 – 2021 Cut-Off Date: 12th May 2021 About TMA The TMA covers the cost accounting concepts and practices in the businesses. It is marked out of 100. It is intended to assess students’ understanding of some of the learning points within chapters 1 to 4. This TMA requires you to apply the course concepts. The TMA is intended to: Assess students’ understanding of key learning points within chapters 1 to 4.Increase the students’ knowledge about the reality of the cost and management accounting as a profession.Develop students’ communication skills, such as essay writing, analysis and presentation of material.Develop the ability to understand and interact with the nature of the managerial accounting tools in reality. The TMA The TMA requires you to: Review various study chapters of ’Cost Accounting’ Book and apply some of the concepts within it.Conduct a simple information search using the internet.Present your findings in not more than 1,200 words (900 words for Part A and 300 words for Part B). The word count excludes headings, references, title page, and diagrams.You should use a Microsoft Office Word and Times New Roman Font of 12 points.You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment. Criteria for Grade Distribution: CriteriaContentReferencingStructure and Presentation of ideasTotal marksPart APart BCost Accounting Systems for Davidson LtdJob Costing for Arabica IndustriesMarks6040(5)(5)100 TMA Questions Cost Accounting Systems for Davidson Ltd Davidson is a leading manufacturing company in Gulf Region. The company adopts traditional costing method for allocating costs to its products. The costing process adopted by this company is as follows: All product costs are charged to inventory. To facilitate this process, company breaks inventory into three categories: RM inventory, WIP inventory, and FG inventory. There are two categories of direct cost (DL & DM) and then there is overhead. Raw materials are charged to RM inventory when purchased and transferred to WIP inventory when it is used. DL is charged directly to WIP. Indirect product costs are charged to an overhead account. (a) Supply Chain and Value Chain of Davidson Ltd. An initial investigation and analysis revealed that the supply chain activities are not managed well. The company is seriously looking for ways and means of improving its performance through cutting its costs. The CEO (Chief Executive Officer) of Davidson wants to study intensively about its supply chain activities and thereby to cut certain non-valuing activities within it. The supply chain of this Davidson has been presented as below: (Source: taken from http://www.ironsystems.com/services/supply-chain-management) (b) Profitability of a Merchandising Unit of Davidson Ltd Davidson Company sells office supplies. The following information summarizes Davidson’s operating activities for 2020: Utilities for store$ 6,000Rent for store$ 8,000Sales commissions$ 4,500Purchases of merchandise$ 54,000Inventory on January 1, 2020$ 30,000Inventory on December 31, 2020$ 20,500Sales revenue$ 108,000 (c) Multiproduct BreakEven for Davidson Company Davidson Company sells two products-X and Y. Product X sells for $ 25 per unit with variable costs of $ 15. Product Y sells for $ 30 with variable costs of $ 20. Total fixed costs for the company are $ 20,000. Browning Company typically sells three units of Product X for every unit of Product Y. (d) What if Analysis for Davidson Company Davidson Company mass produces several common computer chips. Type A sells for $ 1.20 per unit. Variable cost is $ 0.95 per unit and the fixed costs are $ 32,000 per month. Davidson currently sells 140,000 units per month. Under intense pressure to boost profits, the production manager has a plan which will reduce fixed costs by 10%. Required Horngren (2012) argues that customers want companies to use the value chain and supply chain to deliver every improving levels of performance. (1). Explain the meaning of supply chain management and value chain analysis and Discuss how value chain and supply chain analysis help companies in controlling costs. (20 marks) (2) Prepare an income statement for Davidson Company, a merchandiser, for the year ended December 31, 2020 based on the information given above in (b). Show cost of goods sold calculations clearly. (10 marks) (3) Using information given above in (c), compute the BEP in Total Units for Davidson Company. (10 marks) (4). Using the information given above in (d), perform the following calculations. (i) How will this affect the breakeven point in terms of units per month? (ii) How will this affect net operating income? (ii) How much is the margin of safety expressed in units per month? (iv) Because of volatility in the precious metals market, the variable cost per unit has just gone up by $ 0.05, but the company does not believe it can pass the extra cost on to the customer. To offset higher variable costs, the production manager has developed a plan which will reduce fixed costs by 20%. How will these combined changes affect net operating income? (20 marks) (20 + 10 +10 + 20 = 60 marks) PART B Job Costing for Arabica Industries Various jobs of Arabica Industries are presented below: (Independent Scenarios) (a) Job No. 511 Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2020, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June 2020, Arabica completed job number 511. Job stats are as follows: Direct materials cost $ 27,500 Direct labor cost $ 13,000 Direct labor hours 400 hours Units of product produced: 200 units Required (1) Compute the total cost per unit for Job No. 511 (15 marks) (b) Job 13C Arabica Industries uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2020, they formulated a rate of 20% times the direct labor cost. In June 2020, Arabica completed job number 13C. Job statistics are as follows: Direct materials cost $ 6,220 Direct labor cost $ 900 Direct labor hours 32 hours Units of product produced: 250 kilos Required (2) How much was the cost per unit (cost per kilo) of finished product? (Please round to the nearest cent.) (10 marks) (3) Briefly explain the seven steps involved in estimating the total cost per unit under job costing method. (10.5 marks) (4) Explain the differences between Actual Costing and Normal Costing in terms of cost rates to be used for overheads absorption (4.5 marks) (15 + 10 + 10.5 + 4.5 = 40 marks) END OF TMA QUESTIONS