Cost Accounting Assignment: Anchor Millers Limited (Coursework Sample)

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Cost Accounting
1 ABC Ltd has an aggregate demand of 1.2 Million units. Each time they place an order there is an ordering cost of shs 1,000, holding cost is shs 100 per unit. Determine:
* EOQ (4 Marks)
EOQ= ‚ (2* quantity* cost per day/ carrying cost)
EOQ= ‚ (2* 1200000*1000/100)
EOQ= ‚ 24,000,000
EOQ= 4899 units
* No. of order to be made based EOQ (3 Marks)
No. of orders = annual demand divided by order size
(1200000/4899)
No. of orders = 245 orders
* Total cost of stocks based on the EOQ (3 Marks)
Total cost of stocks = No. of orders multiplied by the holding cost
(245*1000)
Total cost of stocks = shs. 245,000
2 Suppose there are, 4,000 units of a product in ending inventory out of which 60% are fully complete whereas the remaining are 70% complete.
What are the equivalent units of the product? (5 Marks)
Calculation of the begging inventory
= 4000 + (4000*40%) = 5600
Begging inventory = 5,600
Equivalent units of the product
(5600*40%) + (4000*100%) + (4000*70%) = 9,040
3. The following information relates to Anchor Millers Limited
Total budgeted overheads = Shs.240, 000
Production budget is as follows:
Product A B
Units 20,000 10,000
Labour hours 20,000 20,000
Labour cost Shs.17, 500 Shs.22, 500
Machine hours 45,000 15,000
Material cost Shs.15, 000 Shs.25, 000
Required
The overhead absorption rate per unit of A and B using the following methods:
a) Unit method (3 Marks)
Product A = 240, 000/20, 000 = shs.12/units
Product B = 240, 000/10,000 = shs. 24/units
b) Percentage on material cost. (3 Marks)
Product A = 240, 000/ 15000 *100% = 1600%
Product B = 240, 000/25, 000 * 100% = 960%
c) Percentage on labor cost. (2 Marks)
Product A = 240, 000/ 20, 000*100% = 1200%
Product B = 240, 000/ 20,000*100% = 1200%
d) Percentage On prime cost. (2 Marks)
Product A = 240,000/ (17500+15000)*100% = 738.5%
Product B = 240, 000/ (22500+ 25000)*100% = 505.26%
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