Question

Question 4 Ellis Ltd uses an operating costing system and produces two products. The same conversion cost is charged to all products passing through a common process. Details for October are: Machining Assembly Painting Direct Materials - Product A $88,000 Direct Materials - Product B $66,000 $1,600 Direct Labour $51,600 $12,000 - 9,000 4,200 Machine Hours Worked 1,080 Units Commenced and Completed: Product A Product B 10,000 5,000 10,000 5,000 2,000 Both products commence production in Machining before passing to Assembly. Product A is then transferred to finished goods. Only Product B is painted. There were no opening inventories of either product of work in process or finished goods. At 31 October, 5,000 units of Products B were completely assembled, but only 2,000 of these had been transferred to Painting and had completed that operation. Factory overhead is applied in all operations at the rate of $4 per machine hour. Required: (a) Calculate the cost per unit for each product (round to two decimal places) (b) Calculate the total costs of all completed production. (c) Calculate the total value of work in process for Product B at the end of Assembly operation (d) Give three examples of industries that are likely to utilise operations costing procedures. Question 7. Identify & explain the key principles & practises of budget preparation. (100-150 words words) Question 8. Describe how budgeting data can be stored? What are some advantages & disadvantages of using 'cloud' data storage? (100-150 words words)

Answer 1

Workings:

1	Material Cost	Total			No of Units			Completed Per Unit cost			WIP Cost
	Particulars	Product A	Product B		Product A	Product B		Product A	Product B		Product B
	Total Material Cost - Machining	88000	66000		10000	5000		8.8	13.2		13.2
	Total Material Cost - Painiting	0	1600		0	2000		0	0.8		0
	Total							8.8	14		13.2
2.a	Direct Labour Cost	Total Cost		No of Units				Allocated Cost
				Product A	Product B	Total Units		Product A	Product B
	Total Labour Cost - Machining	33000		10000	5000	15000		22000	11000
	Total Labour Cost - Assembly	51600		10000	5000	15000		34400	17200
	Total Labour Cost - Painiting	12000		0	2000	2000		0	12000
2	Direct Labour Cost	Total Allocated Cost			No of Units			Completed Per Unit cost			WIP Cost
	Particulars	Product A	Product B		Product A	Product B		Product A	Product B		Product B
	Total Labour Cost - Machining	22000	11000		10000	5000		2.2	2.2		2.2
	Total Labour Cost - Assembly	34400	17200		10000	5000		3.44	3.44		3.44
	Total Labour Cost - Painiting	0	12000		0	2000		0	6		0
	Total							5.64	11.64		5.64
3.a	Factory Overheads	Total Hours	Rate per Hour	Total Cost		No of Units				Allocated Cost
						Product A	Product B	Total Units		Product A	Product B
	Total Machine Hours worked - Machining	9000	4	36000		10000	5000	15000		24000	12000
	Total Machine Hours worked - Assembly	4200	4	16800		10000	5000	15000		11200	5600
	Total Machine Hours worked - Painiting	1080	4	4320		0	2000	2000		0	4320
3	Factory Overheads Cost	Total Allocated Cost			No of Units			Completed Per Unit cost			WIP Cost
	Particulars	Product A	Product B		Product A	Product B		Product A	Product B		Product B
	Total Factory Overheads Cost - Machining	24000	12000		10000	5000		2.4	2.4		2.4
	Total Factory Overheads Cost - Assembly	11200	5600		10000	5000		1.12	1.12		1.12
	Total Factory Overheads Cost - Painiting	0	4320		0	2000		0	2.16		0
	Total							3.52	5.68		3.52

Therefore, Solution (a)
Total Cost per unit per product
Particulars	Per Unit cost
	Product A	Product B
Total Material Cost (from 1 above)	8.8	14
Total Direct Labour Cost (from 2 above)	5.64	11.64
Total Factory Overheads Cost (from 3 above)	3.52	5.68
Total	17.96	31.32
Solution (b)
Total Cost of Completed Goods
Product	Total Cost per unit	No. of units completed	Total Cost
Product A	17.96	10000	179600
Product B	31.32	2000	62640
Total			242240
Solution (c )
Total Cost of WIP Goods - Product B
As Painting work is not done, those costs are not included
Therefore, WIP cost per unit of Product B
Total Material Cost (from 1 above)	13.2
Total Direct Labour Cost (from 2 above)	5.64
Total Factory Overheads Cost (from 3 above)	3.52
Total	22.36
Number of WIP goods	3000
Therefore, total WIP cost	67080
Solution (d)
Examples of industries likely to use Operations costing procedures
oil refining
food production
chemical processing