2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
Aluko Limited manufactures three products for the automobile industry, BS100, BS200 and BS300. The business is divided into four departments – machining, assembly, stores and canteen. The following information is available for one unit of the three products. BS100 BS200 BS300 Direct materials $12.60 $14.10 $18.80 Direct labour hours – machining ($7.80 per hour) 30 minutes 50 minutes 55 minutes Direct labour hours – assembly ($6.30 per hour) 10 minutes 12 minutes 15 minutes Machine hours – machining 20 minutes 30 minutes 30 minutes Machine hours – assembly 5 minutes 5 minutes 10 minutes The total estimated overhead costs for the year ended 30 June 2015 are as follows: $ Indirect wages 232 000 Machinery maintenance 94 000 Machinery insurance 9 020 Rent and rates 49 600 Buildings insurance 12 800 Machinery depreciation 26 600 The following information is also available. Machining Assembly Stores Canteen Number of indirect employees Floor area (sq metres) 8 000 9 000 2 000 1 000 Value of machinery ($000) Number of orders from stores 6 300 1 300 Budgeted labour hours 7 720 28 600 Budgeted machine hours 46 400 3 200 Use of canteen 30% 55% 15% REQUIRED Apportion the costs to the four departments and re-apportion the service departments’ costs to production departments using a suitable basis. Total $ Machining $ Assembly $ Stores $ Canteen $ Indirect wages Machinery maintenance Machinery insurance Rent and rates Buildings insurance Machinery depreciation Reapportionment of canteen Reapportionment of stores Calculate appropriate absorption rates for each production department correct to two decimal places. Additional information The actual results for the year were as follows: Machining Assembly Factory overheads $239 110 $192 860 Direct labour hours 8 420 28 150 Direct machine hours 49 120 3 050 REQUIRED Calculate the under or over absorption of overheads for each production department. Machining $ Assembly $ Explain the reason for the over or under absorption of overheads calculated for each production department in part . Additional information Aluko Limited has been asked to prepare a quotation for a customer requiring 250 units of BS200. The company requires a 35% gross profit on each order. REQUIRED Calculate the quoted selling price. $ Explain the following terms in relation to overheads. 1 Allocation 2 Apportionment 3 Absorption
9706_w14_qp_22
THEORY
2014
Paper 2, Variant 2
View
Highlander Limited has two production departments, Machining and Assembling, and one service department, Maintenance. The following estimates had been made for year 1. Annual budgeted information Machining Assembling Maintenance Total Number of employees Floor area (square metres) 7 000 5 000 4 000 16 000 Power (kilowatt hours) 70 000 52 500 17 500 140 000 Direct machine hours 14 000 - 14 400 Direct labour hours 1 000 6 000 - 7 000 $ $ $ $ Indirect material Indirect wages 2 720 1 480 5 060 Value of machinery 52 000 48 000 - 100 000 Annual budgeted overheads $ Rent 12 800 Machinery depreciation 10 000 Power 7 200 Supervision of employees 6 400 Indirect materials Indirect labour 5 060 Total overheads 42 348 REQUIRED Apportion the budgeted overheads to the three departments and re-apportion the maintenance department costs to the two production departments on the basis of the value of machinery. Overhead Analysis Sheet Overheads Basis of Apportionment Machining Assembling Maintenance Totals $ $ $ $ Rent floor area Machinery depreciation value of machinery Power kw hours Supervision of employees number of employees Indirect materials allocated Indirect labour allocated re-apportionment of maintenance department overheads Additional information The Machining department overhead absorption rate is applied on a machine hour basis. The Assembling department overhead absorption rate is applied on a direct labour hour basis. REQUIRED Calculate overhead absorption rates for each of the two production departments. Calculations should be to two decimal places. Machining department Assembling department Additional information The following information relates to Job 68 which was completed during year 1. Machining Assembling $ $ Direct materials 3 500 Direct labour 1 400 Machine hours Direct labour hours REQUIRED Prepare a statement to show the total cost of Job 68. Clearly identify the prime cost and the total overhead cost. Calculate the selling price of Job 68 if the profit margin is 20% of selling price. Round-up your answer to the nearest whole number. Additional information At the end of year 1 the estimated cost figures were compared with the actual cost figures. Machining department Indirect wages amounted to $2020 and not the $2720 estimated. Assembling department Actual direct labour hours used in the department totalled 5570 hours and not the 6000 hours estimated. REQUIRED Explain the meaning of the following terms. Illustrate your answer by reference to the additional information and, where appropriate, your answer to part . Overhead over absorption Overhead under absorption
9706_w15_qp_21
THEORY
2015
Paper 2, Variant 1
View
Rajesh is a manufacturer with a trading year end of 31 December. He currently uses absorption costing. The business operates two production cost centres and two service cost centres. Details of these cost centres and the budgeted overhead costs for the whole business for the year ended 31 December 2015 are as follows: Overhead $ Basis of apportionment Depreciation 8 750 Non-current assets at cost Machinery maintenance 27 000 Machine hours Power 15 370 Kilowatt hours Rent of premises 63 510 Floor area The following information is also available: Production cost centres Service cost centres Machining Assembly Stores Canteen Floor area (square metres) Kilowatt hours 3 750 2 500 Non-current asset at cost ($) 90 000 30 000 12 000 8 000 Stores requisitions - - Staff - Direct labour hours 2 300 13 900 - - Machine hours 14 100 2 650 - - REQUIRED Apportion the overhead costs to the four cost centres and re-apportion the service cost centres costs to production cost centres using a suitable basis. Total Production cost centres Service cost centres Machining Assembly Stores Canteen $ $ $ $ $ Depreciation Machinery maintenance Power Rent of premises Re-apportionment of canteen Re-apportionment of stores Total overhead cost Calculate suitable overhead absorption rates for each production cost centre correct to two decimal places. Additional information The following budgeted information is also available: Product A Product B Number of units Direct costs per unit $5.75 $8.25 Machine hours per unit 1.5 0.3 Assembly hours per unit 0.5 2.0 REQUIRED Calculate the total cost per unit of Product A and Product B. Additional information The actual results for the year were as follows: Machining Assembly Factory overheads $76 750 $45 675 Direct labour hours 2 560 12 650 Machine hours 16 210 2 490 REQUIRED Calculate the over absorption or under absorption of overheads for each production cost centre. State what is meant by allocation. State what is meant by overhead costs. Explain why overhead costs are re-apportioned from service cost centres. Additional information Rajesh has been advised to change to a marginal costing system. REQUIRED Advise Rajesh whether or not he should change. Justify your answer.
9706_w16_qp_23
THEORY
2016
Paper 2, Variant 3
View
Anna has a manufacturing business with two production departments and two service departments. She makes circuit boards for electronic games using batch costing. REQUIRED Explain what is meant by ‘batch costing’. Additional information The following budgeted annual data for Anna is available: Production departments Service departments Assembly Machining Stores Canteen Overheads $36 000 $50 000 $6 250 $2 500 Direct labour hours 6 000 3 500 – – Machine hours 2 500 5 500 – – The following information is also available: Assembly Machining Stores Number of orders – Use of canteen 65% 25% 10% REQUIRED Re-apportion the service departments’ costs to the production departments using a suitable basis for each. Assembly $ Machining $ Stores $ Canteen $ Allocated overheads 36 000 50 000 Re-apportionment of canteen Subtotal Re-apportionment of stores Total Calculate a suitable overhead absorption rate for each production department to two decimal places. Additional information A typical order for a batch of 1000 circuit boards requires the following: Direct materials $48 000 Direct labour Assembly department 500 hours at $12 per hour Machining department 300 hours at $8 per hour Machine hours Assembly department 210 hours Machining department 500 hours Selling and administration costs $7000 REQUIRED Calculate, to two decimal places, the total cost per circuit board based on a batch of 1000 units. Additional information Sally, a customer, asked for a quote for an order for 75 circuit boards. Anna calculates the selling price to give a profit margin of 60%. REQUIRED Prepare a quote showing the total selling price. Additional information Sally considered the quoted price and has asked for a discount of 5%. REQUIRED Advise Anna whether or not she should allow Sally the discount. Justify your answer. Additional information Anna has recently opened another factory making cases for the electronic games. She is considering closing this factory as she believes it is unprofitable. The following estimated data is available based on orders for the next six months: Per unit $ Selling price Variable costs Total fixed costs 21 000 Estimated demand 2800 units REQUIRED Calculate the break-even point in units. Advise Anna whether or not she should close this factory giving both financial and non-financial reasons for your answer.
9706_w17_qp_21
THEORY
2017
Paper 2, Variant 1
View
Questions Discovered
533