Question 1
The Business Times reported on 17 March 2022 that “recovery in visitor arrivals to Singapore is expected to pick up further over the course of 2022 to benefit hotels in Singapore as usage of the Vaccinated Travel Lane (VTL) scheme continues to grow”.
New initiatives that will further boost visitor arrivals were also announced by the Singapore Tourism Board (STB) such as the planned expansion of Resorts World Sentosa, recent extension of Singapore’s contract to host the Formula One Singapore Grand Prix, and several major MICE (meetings, incentives, conferences and exhibitions) events for 2022.
However, challenges such as pandemic-driven cost increases, the risk of new Covid-19 variants and the delayed reopening of travel to and from China would mean that for hotel operators to remain viable, stringent cost saving measures are of paramount importance.
Required:
Explain the term “costs” as used in managerial accounting and show how costs are different from expenses as used in financial accounting. In the context of the hotel industry, give four (4) examples of costs.
Discuss why in management accounting, so much attention is focused on costs and
Examine how the understanding of cost behaviour can help the hotel
Explain the meaning of cost objects. Give four (4) examples of cost objects from the hotel industry. Show why managers might be interested in knowing the costs.
When analysing cost behaviour, explain the meaning of “level of activity”. Give four (4) examples of activity in the hotel industry.
Question 2
The following cost data for the year ending 30 June 2022 relate to Aggro-tech Ltd.
Drone Division
Fertiliser Division
Sales
$
$
$600,000
?
Inventories at 1 July 2021
Raw materials
18,750
?
Work in process
?
175,000
Finished goods
?
250,000
Inventories at 30 June 2022
Raw materials
37,500
400,000
Work in process
6,250
?
Finished goods
31,250
?
Direct material used
?
475,000
Purchases of raw materials
?
575,000
Direct labour
156,250
?
Actual manufacturing overhead
315,000
2,238,750
Selling and administrative expenses
?
?
Total manufacturing costs
537,500
3,850,000
Cost of goods manufactured
550,000
3,875,000
Cost of goods available for sale
575,000
?
Cost of goods sold
?
3,963,750
Gross profit
?
661,250
Net profit
(2,500)
?
The company uses normal costing and manufacturing overhead is applied at the rate of 200% of direct labor cost.
Over or under-applied manufacturing overhead is closed on an annual basis to the cost of goods sold and this has been included in the above data.
Required:
Determine the missing amounts in each of the divisions shown
Calculate the amounts to be charged to work in process, finished goods inventory and cost of goods sold for the Fertiliser Division at the end of 30 June 2022 if proration method is used.
Prepare the necessary journal entries for (b).
Present all workings in a clear and succinct manner.
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