Project #154959 - Accounting

Business Tutors

Subject Business
Due By (Pacific Time) 11/20/2016 07:00 pm

Question 1           (20 marks)
Orkin Limited is manufacturing zinc anodes for rust prevention. You are required to group the costs, which are listed below (a) to (j) into the following classification (each cost is intended to belong to only one classification). Indicate your answer by stating i, ii, iii, iv, v, or vi in the answer space provided.

(i) Direct materials (ii) Direct labour (iii) Direct expenses (iv) Indirect production overhead (v) Selling and distribution costs (vi) Administration costs 

(a) Freight charges for purchase of raw materials   Answer: __________
(b) Secretarial fees for corporate secretarial services   Answer: __________
(c) Wages for manufacturing workers involved in production  Answer: __________
(d) Insurance relating to manufacturing activities    Answer: __________
(e) Property taxes on factory buildings     Answer: __________
(f) Depreciation on factory facilities     Answer: __________
(g) Accountant’s salary       Answer: __________
(h) Advertising expenses for promotion of finished goods  Answer: __________
(i) Carriage outwards incurred for delivery of goods to customers Answer: __________
(j) Lighting and heating at factory premises    Answer: __________


Question 2         
Explain 5 (FIVE) differences between Financial Accounting and Management Accounting.


Question 3                 
State whether the following statements are True or False in the answer space provided:

(a) Cost accounting is concerned with recording, classifying and summarizing costs for determination of costs of products or service     Answer: ____________
(b)  Indirect material and indirect labour are components of prime cost.
Answer: ____________
(c) Sunk cost is a cost which remains constant over a period of time. Answer: ____________
(d) Opportunity cost is the potential benefit that is given up when one alternative is selected over another.        Answer: ____________
(e) Variable cost per unit increases with increase in output.  Answer: ____________
(f) Selling and administrative costs are part of manufacturing overhead. Answer: ____________
(g) Direct labour is a part of manufacturing overhead.   Answer: ____________
(h) Only direct manufacturing costs are assigned to inventories and cost of goods sold. 
Answer: ____________
(i) Commission paid to sell products are part of the cost of goods sold. Answer: _____________
(j) Manufacturing overhead must be assigned to both work-in-process inventory and finished goods inventory for external financial reporting purposes.   Answer: _____________


Question 4        
The following information has been extracted from the books of accounts of Zaltech Limited for the year ended 31 December 2015: 
Selling expenses                                              140,000

Stock of Raw materials, 1 January 2015              90,000

Stock of Raw materials, 31 December 2015         60,000

Direct labour                                                   150,000

Purchases of raw materials                               750,000

Sales                                                            2,500,000

Administrative expenses                                   270,000

Indirect materials                                             30,000

Indirect manufacturing wages                            75,000

Leasing costs – factory                                     306,000

Manufacturing machinery depreciation                204,000

Manufacturing overhead                                     25,000

Work in progress, 1 January 2015                      180,000

Work in progress, 31 December 2015                 100,000

Stock of Finished goods, 1 January 2015            260,000

Stock of Finished goods, 31 December 2015       210,000  

The Board of Directors of Zaltech Limited wants to organise the above data in an appropriate format for the purpose of cost accounting. Assume that raw materials consist entirely of direct materials. 
Prepare a schedule of cost of goods manufactured.


Question 5           
Using the information given in Question (4) above, 
(a) Compute the cost of goods sold       
(b) Prepare an income statement for the year ended 31 December 2015    


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