Cost Accounting Assignment 2: Lasani Ltd, Lurve Prints & Livia Ltd Case Study on Marginal Costing, Overheads, and Process Costing

You are required to answer ALL Three (3) questions.

Complete your answer in a table format in Word and upload the file.

Label your answer with your name [full name as per your student ID] and Student ID, and put your full name in the saved file name.

Question 1

Lasani Ltd manufactures a single product, “ProGem”. Each product was sold at $110, and the manufacturing cost details have been extracted as follows:

Annual fixed production overheads are budgeted at $2,350,000, with an expected annual production output of 125,000 units. Non-production costs are fixed and amount to $128,000 per month.

The opening inventory on 1 January 2025 was 40,000 units, with 125,000 units produced and 95,000 units sold during the year.

(a) Your immediate supervisor has urgently requested that you calculate the cost per unit of ProGem using marginal costing. [4 marks]

(b) You are to prepare an income statement for the year ended 2025 using marginal costing. [20 marks]

(c) Your supervisor wants to understand if the reported profits will be higher or lower if absorption was used [do not any statements] [6 marks]

Question 2

Lurve Prints Co. manufactures customized notebooks. It has two production departments: Binding and Printing, and one service department: Maintenance.

The following information is also available.

Service department costs are apportioned to production departments in the ratio of 2:3 for Binding and Printing Departments, respectively.

(a) You are assigned to prepare an overhead distribution table clearly showing the basis of allocation, primary apportionment and re-apportionment. [24 marks]

(b) Both the Binding and Printing departments are labour-intensive. Binding records 63,200 labour hours, while Printing records 97,600 labour hours. Calculate the overhead absorption rates for each department based on the labour hours. [round up the rates to 2 decimal places] [6 marks]

Question 3

In July, Livia Ltd, a bottled water manufacturing company, initiated a production process to produce bottled water.

The details of the process are as follows:

The company’s direct materials are 500,000 units of plastic bottles and water, costing a total of $1,500,000.

The direct labour costs of operating the filling, capping, and labelling machines amounted to $1,400,000.

The company allocated $1,250,000 to cover indirect costs such as equipment maintenance, utilities, and factory overheads.

The production process typically incurs a normal loss of 10% due to factors like damaged bottles or spillage. The normal loss has a scrap value of $2 per unit of damaged bottle.

The final output from the production line in July was 420,000 units of bottled water.

The management accountant has requested for you to do the following tasks:

(a) Calculate the cost per unit of output. [22 marks]

(b) Prepare the process account [18 marks]