FNSACC517 Assessment Task 2 - Portfolio 2019. (3)

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Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information FNSACC507 Provide management accounting information Assessment Task : Portfolio Assessment Guidelines - The assessment task is to be provided to students in the first session of training - Research may be collaborative however the submission is per individual - Class time may be allocated to complete work on the task - Task may be submitted in piece form enabling student to gain feedback however the task must be submitted in full by the due date assigned in the Student Training Log - Feedback is to be provided to student on the outcome Level of Performance This assessment should be provided with responses consistent with Diploma level performance and should include demonstration of understanding of a broad knowledge base incorporating theoretical concepts, with substantial depth in some areas and the transfer and application of theoretical concepts associated with working in the financial services sector Decision Making Rules Competency of this assessment requires the student provide appropriate responses to all sections of the task. LA102 FO Assessor Guide Page 1 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information 1. Why is a cost referred to as variable if it remains constant per unit for all volume levels within the relevant range Costs incurred by businesses consist of fixed and variable costs. As mentioned above, variable expenses do not remain constant when production levels change. On the other hand, fixed costs are costs that remain constant regardless of production levels (such as office rent) 2. The high-low method of analysing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not? High-Low Method Formula The formula for developing a cost model using the high-low method is as follows: Once the variable cost per unit is determined: Fixed cost = Highest activity cost – (Variable cost per unit x Highest activity units) Fixed cost = Lowest activity cost – (Variable cost per unit x Lowest activity units) The resulting cost model after using the high-low method would be as follows: Cost model = Fixed cost + Variable cost x Unit activity 3. Why are some material and labour costs that should, in theory, be considered direct costs instead accounted for as indirect costs? Because it is also expressed as a percentage of the direct cost of each concept of work, said percentage is calculated by adding the amounts of general expenses that are applicable and dividing this sum by the total direct cost of the work or material in question. 4. Discuss the reasons a company would use a predetermined overhead rate rather than apply actual overhead to products or services LA102 FO Assessor Guide Page 2 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information By using a predetermined overhead rate, companies can ensure that the same rate is applied to each product or service, creating a more accurate representation of actual overhead costs. Third, the predetermined overhead rate is more flexible than relying on actual overhead data. 5. Why can it be said that the cost of goods manufactured schedule shows the flow of production costs in a manufacturing company? In general, having the schedule for Cost of Goods Manufactured is important because it gives companies and management a general idea of whether production costs are too high or too low relative to the sales they are making. 6. Why are departmental overhead rates more useful for managerial decision making than plant wide rates? Similarly, why are separate variable and fixed rates more useful than total rates? Determining overhead rates for each department level decentralises control of production costs and delegates it to department managers. This allows for quicker decision-making with regards to keeping costs in line. It also makes it easier to identify trends leading to higher costs when compared to a method involving company-wide overhead rates 7. Match the following lettered terms on the left with the appropriate numbered description on the right. a. Budgeted cost (8) 1. An expense or loss (d) b. Direct cost (3) 2. A cost that remains constant on a Per unit basis (e) c. Distribution cost (9) 3. A cost associated with a specific Cost object (b) d. Expired cost (1) 4. Direct material, direct labour and Manufacturing overhead (i) e. Fixed cost (2) 5. Product cost (h) f. Inventoriable cost (7) 6. A cost that varies inversely on a per-unit basis with changes in activity (g) g. Period cost manufacturing overhead (6) 7. A cost primarily associated with the passage of time rather than production activity (f) h. Product cost (5) 8. An expected future cost (a) i. Variable cost (4) 9. A cost of transporting a product (c) 8. What production conditions are necessary for a company to use job order costing? LA102 FO Assessor Guide Page 3 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

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Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information The job order costing system is used when the various items produced are sufficiently different from each other and each has a significant cost 9. Describe the following: - Financial Accounting Financial accounting is a specific branch of accounting involving a process of recording, summarising, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarised in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company's operating performance over a specified period - Cost and Management Accounting Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense. Cost accounting is not GAAP-compliant, and can only be used for internal purposes 10. How can contribution margin be used to calculate break-even points both in units and dollars? Break-Even Points Formula based on Sales Dollars: It is calculated by dividing the fixed cost by the contribution margin. Break-Even Point (Units) = Fixed Costs ÷ (sales per unit - variable costs per unit) or in sales dollars using the formula: Break-even point (sales dollars) = Fixed costs ÷ Contribution margin 11. A company is in the 40 percent tax bracket. Why is desired profit after tax divided by 60 percent to determine the needed before-tax profit amount? They will have to apply 40% to the profit before tax to get the profit after taxes. Profit before taxes x (1 - 40%). The result will be desired profit after taxes. According with this when I get the desired profit after taxes to have that I needed before tax profit amount I have to decided the desired profit after taxes by 60% 12. How are BEP and margin of safety integrally related? The margin of safety is the amount sales can fall before the break-even point (BEP) is reached and the business makes no profit. This calculation also tells a business how many sales it has made over its BEP. The margin of safety is calculated as follows: Margin of safety = actual sales − break-even sales For example, a business has a BEP of 100 products and has made 150 sales. Therefore: Margin of safety = 150 – 100 = 50 products LA102 FO Assessor Guide Page 4 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information This means the business is making profit on 50 of its items sold, and its sales could fall by 50 items before the BEP were reached. A company can use its margin of safety to see whether a product is worth selling or not. For example, if the BEP is 3,800 items and projected sales are 4,000 items, the business may decide not to sell the product as it would only be making profit on 200 items, making it high risk. The below example demonstrates a BEP of 100. With sales at 200, this represents a margin of safety of 100 units (ie 200 − 100) 13. What are the purposes of a break-even chart? Break-even analysis entails calculating and examining the margin of safety for an entity based on the revenues collected and associated costs. The break-even analysis determines what level of sales are necessary to cover the company's total fixed costs. A demand-side analysis would give a seller significant insight into selling capabilities 14. Outline the basic budgeting process Budgeting processes are a company's tactical steps to develop a financial plan. Accounting departments use these processes to control their business operations, especially spending. You may follow budgeting processes to document how much a company earns and spends over a certain period 15. The projected sales, in units, for Einstein Inc. by month for the first four months were: January 8,000 February 12,000 March 16,000 April 19,200 Inventory of finished goods on December 31 was 6,400 units. The company desires to have an ending inventory each month equal to one-half of next month’s estimated sales. Determine the company’s production requirements for each month of the first quarter. 7.600 14.000 17.600 =$39.200 16. SLB Co wishes to sell 14,000 units of its product, which has a variable cost of $15 to make and sell. Fixed costs are $47,000 and the required profit is $23,000. What is the required sales price per unit Variable Cost= 14000 × 15 = 210.000 Fixed cost= 47.000 Required profit= 23.000 Total sales= variable cost + fixed cost + required profit Total sales= 280.000 Total sales per unit= $20 LA102 FO Assessor Guide Page 5 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

Lonsdale Institute PTY LTD Assessor Guide FNSACC517 Provide management accounting information LA102 FO Assessor Guide Page 6 of 6 LA102 PP Assessment Management (SNR4.5, 15.3) (ESOS 14.2) V2 Jan 2019 Lonsdale Institute Pty Ltd Provider ID 21915 CRICOS Code 02836F

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