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ACC203 Introduction To Financial Accounting

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Question:

A newly established brewing company in Sydney, Cool Brew Ltd, produces its main product, Cool Bay Draught, in 300 milliliter bottles. There are two production departments: Mixing and Bottling. The manufacturing costs for each
department during March 2013 were tabulated below.

Mixing Bottling
Direct materials $ 113 000 $ 17 000
Direct labour 15 000 6 000
Manufacturing overhead 32 000 9 000
In March 2013, Cool Brew Ltd produced 48 000 litres of Cool Bay Draught that was bottled into 160 000 bottles.
There were no beginning and ending work-in-process inventories.

(a) Calculate the cost per bottle for Cool Bay Draught;
(b) Prepare the journal entries to record the production costs for March 2013, assuming that the costs of Mixing and Bottling Departments are charged to their respective work-inprocess inventory accounts.

During October 2013, Kent Ltd’s material purchases amounted to 6 000 kilograms at a price of $7.40/kg.Actual costs incurred in the production of 2 000 units were as follows.
Direct material $ 31 080 $7.40/kg
Direct labour 118 035 $18.30/hour
The standards for one unit of Kent Ltd’s product are as follows.
Direct material Direct labour
Quantity: 2 kg/unit Quantity: 3.5 hours/unit
Price: $7.20/kg Rate: $18/hour

Calculate the following variances and indicate whether each variance is favourable or unfavourable:
(a) Direct material price variance;
(b) Direct material usage variances;
(c) Direct labour rate variance; 
(d) Direct labour efficiency variance. 

Sam, the manager of a local ice cream shop called Super Scooper, is disappointed at the lossmaking financial performance of his newly created fresh fruit juice counter.Sam has prepared following financial analysis for the year just ended.
Sales $ 67 500
Less: Cost of fruit (30 000)
Gross profit 37 500
Less: Operating expenses
Wages of counter staff $ 18 000
Consumables (e.g. cups and straws) 6 000
Utilities (allocated) 4 350
Depreciation of counter equipment and furnishings 3 750
Depreciation of building (allocated) 6 000
Super Scooper manager’s salary (allocated) 4 500
Total operating expenses (42 600)
Loss on fresh fruit juice counter $ (5 100)

(a) Evaluate Sam’s financial analysis for the year just ended; 
(b) Provide a correct profit and loss analysis to financially assess whether the fresh fruit juice counter should be continued. 

ABC Ltd has provided the following data relating to its two most popular models of an electronic product.
Standard Deluxe
$/unit $/unit
Selling price 70 120
Direct material 15 22
Direct labour 10 30
Manufacturing overhead @ $30/machine hour 30 60
Monthly demand (units) 40 000 24 000

The fixed manufacturing overhead component included in the above unit costs is $20 permachine hour.On the very first day of June, a major piece of manufacturing equipment was damaged. It would take two weeks for replacement parts to arrive from Switzerland. Consequently, there would be only 60 000 machine hours available in June to manufacture the two models of the electronic product.

(a) Given the limited machine hours available in June, conduct an appropriate financial analysis. 
(b) Based on the above financial analysis, determine how many units of each product should be produced in that month to maximise ABC Ltd’s profitability.
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