Case study – XXXXXXXXXX% word report and analysis - Individual Assignment. Topic: Job costing...

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Case study – XXXXXXXXXX% word report and analysis - Individual Assignment.

Topic: Job costing system
Task details: Voltus Communications, a manufacturer of communications equipment, uses a job costing system. Manufacturing overhead is applied based on machine hours and it uses a predetermined overhead rate with budgeted overhead of $3,600,000 for the year and 80,000 machine hours.
Voltus uses a financial year of 1 July 2018 to 30 June 2019 and all the activities for the year have been ca
ied out. Summarised details for period 1 July 2018 to 31 May 2019 and for June 2019 follow. Jobs B12- 008,K12-009 and K12-011 were completed during June 2019 .All completed jobs except K12-009 have been sold by 30 June 2019.
    Jobs in process at 31 May 2019
Job numbers

Balance at 31 May 2019

    B12-008
    $263,000

    K12-009
    163,000

    K12-011
    0

    L15-005
    0

    L15-006
    0

    Total
    426,000

    Work ca
ied out during June 2019


    Job numbers
    Direct material    Direct labou
    Machine hours
    B12-008
    $2,500
    13,500
    300
    K12-009
    14,000
    36,000
    1,000
    K12-011
    71,800
    85,100
    1,400
    L15-005
    118,700
    55,000
    2,500
    L15-006
    78,000
    50,400
    800
    Totals
    $285,000
    $240,000
    6,000
    Actual Manufacturing Overhead incu
ed

    1July XXXXXXXXXXMay 2019
    During June 2019
    Indirect material

    $375,000
    $27,000
    Indirect labou

    1,035,000
    90,000
    Utilities

    735,000
    66,000
    Depreciation

    1,155,000
    105,000
    Total overhead

    $3,300,000
    288,000
    Other information


1July 2018 – 31 May 2019

During June 2019
    Raw Material purchases *

    $2,895,000
    $294,000
    Direct labour cost

    2,535,000
    240,000
    Machine hours

    73,000
    6,000
    Account balances 1July
Raw Material Inventory

$315,000
    Work in Process Inventory
    180,000
    Finished Goods Inventory
    375,000
    Account balance 30 June 2019 Raw Material Inventory

$255,000
*Raw material purchases and raw material inventory consist of both direct and indirect materials
Required:
1. Calculate the amount of manufacturing overhead Voltus would have applied to jobs for the period 1 July 2018 to 31 May 2019.
2. Calculate the amount of manufacturing overhead Voltus would have applied to jobs during June 2019.
3. Determine the amount by which manufacturing overhead is overapplied or underapplied at 30 June 2019.
4. Outline the different methods that could be used to dispose of the overapplied or underapplied overhead and explain which method would be prefe
ed in the cu
ent question.
5. It has been suggested that Activity Based Costing may provide a better method of allocating manufacturing overhead .Discuss whether this would be useful particularly in relation to the cu
ent question.
6. Determine the balance in the finished goods account at 30 June 2019.
Research requirements: Students need to support their analyses with references from the text and a minimum of six (6) suitable, reliable and academically acceptable sources. Check with your tutor if you are unsure of the validity of sources. Students seeking Credit or above grades should support their analysis with increased number of reference sources comparable to the grade they are seeking.
Marking Guide:
Marks awarded will be based on the following criteria:
1. Analyses-relevant to task specification    25%
2. Costing techniques applied and evaluated    25%
3. Presentation    25%
4. Research    25%

management-accountung-assement-3132cyci.docx

Akash · Accepted Answer

JOB COSTING SYSTEM
Table of Contents
1) Overheads for July 2018 – May 2019	3
2) Overhead for Jobs during June 2019	3
3) Over-applied Overheads for 30th June 2019	3
4) Methods to Dispose Over-Applied Overheads	3
5) Activity Based Costing	4
Steps involved in Activity Based Costing	4
Advantages of Activity Based Costing	5
Disadvantages of Activity Based Costing	5
Use of Activity Based Costing in the Current Scenario	6
6) Determining the Balance of Finished Goods Account on 30th June 2019	6
References	8
1) Overheads for July 2018 – May 2019
In the given scenario, the overheads are applied based on machine hours, which is one of the easiest and common form of overheads allocation. As given in the case, the total budgeted overheads were $3600000 and budgeted machine hours was 80,000 machine hours. Therefore, the budgeted machine hours per hour was $45/ machine hours. The total machine hours during the period were 73,000 machine hours. Therefore, the total budgeted overheads would be 730000*45 = $3285000. On the other hand, the actual overheads for the period was $3300000. Therefore, the overheads was over-applied by $15,000
2) Overhead for Jobs during June 2019
In the given scenario, the requirement is the amount of manufacturing overheads that would have been applied during June 2019. The actual machine hours in June 2019 was 6000 machine hours. The budgeted overhead rate per machine hour is $45. Therefore, the amount of overheads that would have been applied is $6000*45 = $270000. 
3) Over-applied Overheads for 30th June 2019
In the given scenario, the total number of machine hours were 6000. The budgeted overheads per machine hours is $45 therefore, the total budgeted overhead was $270000. On the other hand, the actual overhead incurred for 6000 machine hours was $288000. Therefore, the over applied overheads is $18000 for the month of June 2019. 
4) Methods to Dispose Over-Applied Overheads
According to Fera et al. (2017), there are multiple ways of treating over applied manufacturing overheads, which includes carrying forward the same to next year, transferring the same to the profit and loss account for the period and transferring the same to the units sold, work in progress and finished goods. In the given scenario, all the three options are available. However, the option that involves accounting for the excess to the units sold, work in progress and finished goods seems to be less logical. Majority of the jobs during the year have been sold and the profit and loss for the same been computed. 
On the other hand, carrying forward the same to the next year is not an effective solution in this scenario, as the production is not standardized. Different input and overheads are incurred for different jobs therefore carrying forward the same to the next years to will lead to imposition of current year’s expenses to the next years. As per the matching concept, there should be a matching expense or the revenue generated. Since the production process is undertaken in the current year, the excess overhead incurred for the jobs done during the period should not be carried forward to the next year.
Therefore, from the above discussion, it can be ascertained that transferring the amount to the profit and loss account is the most appropriate option in the given scenario. The excess overhead for the current period that is July 2018 to June 2019 should be transferred to profit and loss account. The total over applied overheads for the period is $33000 and the same should be transferred to the profit and loss account for the period. 
5) Activity Based Costing
Activity Based Costing is a system of cost allocation in which the cost are assigned to specific products and services. As commented by Javid et al. (2016), it is best applicable for an organization, which does not have a standardized product or service. The overhead are allocated based on the actual requirement of each job. This leads to computation of real cost involve for completion of a job or production of a goods or service.

Case study – XXXXXXXXXX% word report and analysis - Individual Assignment. Topic: Job costing system Task details: Voltus Communications, a manufacturer of communications equipment, uses a job costing...

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