ACC5213 Assignment

21 May

ACC5213 Assignment

You should make use of the readings and materials from Modules 6-8 and other research as you feel necessary, to help answer this assignment.

Be guided by the number of marks regarding length of response for the written secions. Generally these are short answer question. Question 1 c is the longest written section.


QUESTION 1 (30 marks)

Part A (6 marks)


Garret, K 2015, Target Costing and Lifecycle Costing, ACCA Technical article, updated 2 March 2015, Association of Chartered Certified Accountants, viewed 28 March 2017, journey/qual resource/acca-qualification/f5/technical-articles/target-lifestyle.html



Read the above article, and in conjunction with material from module 6, answer the following questions.

  1. What two flaws in conventional costing are identified by Garret (2015) and how are these addressed by the use of target costing and life cycle costing? In your answer explain how target costing and lifecycle costing are implemented. What is the link between life cycle costing and target costing? (6 marks)

Part B (12 marks)


Meyhoff Fry, J, Hartlin, B, Erika Wallén E, and Aumônier S 2010, Life cycle assessment of example packaging systems for milk, Environmental Resources Management Limited for WRAP, viewed 28 March 2017,



Read the above case study article and answer the following questions Note that you do not need to read all of the detail of the report in order to answer these questions. Read the summary, conclusions and selected suitable sections sufficient to answer the following questions in brief:


  1. What definition of life cycle costing is provided (and state the source)? (2 marks)
  2. Explain the ‘waste hierarchy’ p. 104 figure 6.1. At what stage of a product’s life cycle are potential savings in environmental impact most effective? (5 marks)
  3. What are their main recommendations? (2 marks)
  4. Identify the main limitations/difficulties experienced. How did they affect the study? (3 marks)



Part C (12 marks)


Investigate the life cycle of a hypothetical T shirt. You will need to show the stages of its life and identify issues of environmental or social impact – hidden costs (externalities) not necessarily captured in traditional economic accounting, but captured by Environmental Management Accounting (EMA) using Lifecycle analysis (LCA). Use diagrams if you wish. Suggest ways in which the LCA analysis could lead to improvement in the product to reduce the product costs (e.g. reduce environmental or social costs or reduce waste).


You may use any source provided it is appropriately referenced. A reference section should be included at the end of this question.


You may like to perform a ‘youtube’ search (there are several examples on there) but think about the credibility of the source!


(Word limit for Part C 300-400 words, not including references or diagrams)


QUESTION 2 (28 marks)

The management accountant, with assistance from the production and sales managers, has obtained the following estimated information about Vera’s Fishes (a shop selling exotic pet fish and fish supplies) in order to prepare the budgeted income statement for July 2017:

  1. Estimated sales for July- August:
  Units Units Average
      Selling Price
      per unit
Fish tanks 320 330 $150
Tank filters 380 390 $40
Fish food (tubs) 600 600 $30
Live stock 800 820 $20
(average price)      

Sales are 90% cash sales. Credit sales are collected in the month following sale.

  1. Opening inventories were:
  Units Average cost per unit
Fish tanks 90 $75
Tank filters 115 $20
Fish food (tubs) 180 $15
Live stock 250 $10

Desired ending inventories are 30% of next month’s sales (in units).

In any month an estimated 5% of opening live stock dies before being sold due to the poor condition of some fish arriving from the supplier. Inventory loss is written off as part of cost of goods sold by inclusion in purchases. Purchases are paid for the month following purchase.

iii.      Operating expenses budgeted for July are:

Wages – sales staff $6,000
Advertising $1200
Supplies used $150
Rent for month $2,000
Telephone & electricity $300
Depreciation of fixtures $200

The supplies used were part of supplies purchased for cash in June 2017. All other expenses are paid as incurred.

  1. Accounts receivable as at 30th June 2017 were $9,100
  2. Accounts payable as at 30th June 2017 were $40,945
  3. The cash at bank balance at 30th June 2017 was $6,000 debit (overdrawn)



  1. Prepare a sales budget for July. (3 marks)
  2. Prepare a purchases budget for July. (7 marks)
  3. Prepare a budgeted income statement for July. (9 marks)
  4. Prepare a cash budget for July. (9 marks)

Round all amounts to nearest whole number. Ignore GST.


QUESTION 3 (42 marks)

Morse manufacturing makes organic hand made soap and is analysing the costs for its leading brand. Each bar requires 170g of material and requires 6 minutes of labour time. The original budget (standard costs) for the month’s planned 10,000 units (bars of soap) was as follows:

Standard/static budget for 10,000 bars of soap:

Sales   $ 80,000
Variable costs    
Direct Materials $ 34,000
Direct labour $ 21,000
Variable overheads $ 1,000
  $ 56,000
Contribution margin $ 24,000
Fixed overheads $ 15,000
Budgeted profit $ 9,000



Variable overheads are allocated on labour hours.

Actual results for the month were as follows (8,000 bars of soap produced requiring 180g materials per bar and 5.7 minutes of labour per bar):

Actual results:        
Sales   $ 64,000
Variable costs        
Direct Materials $ 21,600    
Direct labour $ 16,720    
Variable overheads $ 836    
      $ 39,156
Contribution margin     $ 24,844
Fixed overheads   $ 16,000
Actual profit     $ 8,844


The owner of the business, E. Morse, is upset at the fact that the profit is less than expected.


  1. Calculate the budgeted contribution per unit (4 marks)
  2. Prepare a flexed/flexible budgeted for the product for the month. (9 marks)
  3. Explain to the owner that the actual results need to be compared to a flexed budget, clearly explaining what a flexible budget is. Compare the actual results to the flexed budget calculated in (a) in your explanation. (3 marks)
  4. Calculate the following:
    1. Sales volume variance ( 2 marks)
    2. Materials price variance ( 2 marks)
  • Materials efficiency/quantity variance ( 2 marks)
  1. Direct labour price/rate variance ( 3 marks)
  2. Direct labour efficiency/quantity variance ( 3 marks)
  3. Budgeted variable overhead cost rate per unit (1 mark)
  • Variable overhead spending and efficiency variances (4 marks)
  • Overall Fixed overhead variance (note that standard costing for fixed overheads has not been used, so there is only a spending variance). (1 mark)

(You may calculate the variances using a diagram or spreadsheet template if you wish, provided i to viii are clearly labelled & workings shown)

  1. Prepare a reconciliation of static budget operating profit and actual operating profit showing all calculated variances (similar to Table 11-4 p.433) (8 marks)


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