management accounting tutorial 1 question and answer

1-17 (15 min.) Value chain and classification of costs, pharmaceutical company.

Cost Item
Value Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.
Design of products, services or processes
Marketing
Customer Service
Research and Development
Marketing
Production
Marketing
Distribution

*2-23 (15–20 min.) Classification of costs, retail sector.

Cost object: Videos sold in video section of store
Cost variability: With respect to changes in the number of videos sold There may be some debate over classifications of individual items, especially with regard to cost variability.

Cost Item
D or I
V or F
A
I
F
B
D
V
C
D
F
D
I
F
E
I
V
F
I
F
G
D
V

**2-39 (25–30 min.) Income statement and schedule of cost of goods manufactured.

Chan Ltd
Income Statement for the Year Ended 31 December 2011
(in millions)
Revenues $700
Cost of goods sold: Beginning finished goods, 1 Jan. 2011 $ 80 Cost of goods manufactured (below) 408 Cost of goods available for sale 488 Ending finished goods, 31 Dec. 2011 (24) (464)
Gross margin 236
Marketing, distribution, and customer-service costs (180)
Operating income $ 56

Chan Ltd
Schedule of Cost of Goods Manufactured for the Year Ended 31 December 2011
(in millions)
Direct material costs: Beginning inventory, 1 Jan. 2011 $ 60 Direct materials purchased 160 Cost of direct materials available for use 220 Ending inventory, 31 Dec. 2011 (10) Direct materials used $210
Direct manufacturing labour costs 80
Indirect manufacturing costs:
Plant supplies used 12 Property taxes on plant 2 Plant utilities 10 Indirect manufacturing labour costs 40 Depreciation––plant and equipment 18 Miscellaneous manufacturing overhead costs 20 102
Manufacturing costs incurred during 2011 392
Add beginning work-in-process inventory, 1 Jan. 2011 20
Total manufacturing costs to account for 412
Deduct ending work-in-process inventory, 31 Dec. 2011 (4)
Cost of goods manufactured (to income