2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
Andreas owns a business manufacturing bicycles. The business operates two production departments, Machining and Assembly, and two service departments, Stores and Maintenance. The following information is available for one bicycle. Direct materials $45.60 Direct labour: Machining ($10 per hour) 30 minutes Direct labour: Assembly ($12 per hour) 105 minutes Machine hours: Machining 20 minutes Machine hours: Assembly 15 minutes Total budgeted overheads for the year ended 31 August 2023 are as follows: $ Indirect wages 420 000 Factory rent and rates 30 000 Machine overheads 22 000 The following information is also available. Production departments Service departments Machining Assembly Stores Maintenance Floor space (square metres) 4 000 5 600 1 800 Number of orders from stores 2 100 1 600 Maintenance call outs Budgeted direct labour hours 22 200 77 700 Budgeted machine hours 34 300 25 700 Number of indirect employees Machine overheads are apportioned on the basis of machine hours. Complete the table to show the apportionment of the budgeted overheads for the year ended 31 August 2023. Production departments Service departments Total $ Machining $ Assembly $ Stores $ Maintenance $ Indirect wages 420 000 Factory rent and rates 30 000 Machine overheads 22 000 Total overheads 472 000 Apportion Stores Subtotal Apportion Maintenance Total overhead costs Calculate, to two decimal places, an overhead absorption rate for each production department, using a suitable basis. Additional information The actual results for the year ended 31 August 2023 were as follows: Machining Assembly Total overheads $226 952 $267 465 Direct labour hours 28 450 72 580 Machine hours 44 120 15 270 Calculate the over‑absorption or under‑absorption of overheads for each production department. Additional information Andreas has been approached by a new customer wishing to make a special order for 120 bicycles with modifications to the customer’s own specification. In order to complete the order, the following would apply for the manufacture of one bicycle. The total material cost would increase by 30%. The direct labour hours in the machinery department would increase by 50% and an additional 15 minutes of direct labour hours would be required in the assembly department. Due to workers in the assembly department already working at full capacity, these workers would have to work overtime to complete the order at a premium of 25% on the usual direct labour rate. Calculate the direct cost of producing one bicycle for the special order. Additional information In order to remain competitive, Andreas wishes to achieve a 30% gross profit margin on all work. Prepare a statement to show the total selling price that Andreas should quote to the customer in order to achieve a 30% gross profit margin on the order. Additional information Having received the quotation from Andreas, the customer has stated that he will commit to a regular monthly order of 100 of the special bicycles if Andreas will offer a 10% discount on the quoted price and allow 2 months’ credit. Andreas’s business is successful, though managing cash flow is often difficult. Advise Andreas whether he should accept the terms offered by the customer. Justify your answer.
9706_w23_qp_22
THEORY
2023
Paper 2, Variant 2
View
Alberto owns a manufacturing business. Define each term: cost centre cost unit direct cost indirect cost. Additional information Alberto’s business operates a system of absorption costing. There are two production departments, Machining and Finishing, and two service departments, Stores and Canteen. The budgeted information for the year ended 30 September 2024 is available. Production departments Service departments Machining $ Finishing $ Stores $ Canteen $ Number of employees - Floor area (square metres) 3 000 5 000 1 500 Stores requisitions 3 600 5 400 – – Direct labour hours 14 300 18 500 – – Machine hours 28 900 3 600 – – The following indirect overheads have not yet been apportioned. $ Light and heat 12 800 Production supervisors’ wages 42 000 Complete the table to apportion costs to the production departments. Total $ Production departments Service departments Machining $ Finishing $ Stores $ Canteen $ Allocated overheads 512 100 195 200 234 700 66 400 15 800 Light and heat 12 800 Production supervisors’ wages 42 000 Total overheads 566 900 Reapportion Canteen Reapportion Stores Calculate, to two decimal places, a suitable overhead absorption rate for each production department. Additional information The actual results for the year ended 30 September 2024 were as follows: Machining Finishing Total overheads $249 200 $320 400 Direct labour hours 14 220 18 650 Machine hours 26 880 3 910 Calculate the over-absorption or under-absorption of overheads for each production department. Additional information Alberto has been asked to prepare a quotation for a new customer to supply 12 units of a product. Each unit would require the following: Direct material 4 metres at $3.85 per metre Direct labour Machining department – 0.75 hours Finishing department – 1.5 hours Overheads Machining department 0.5 direct labour hours 0.5 machine hours Overheads Finishing department 1 direct labour hour 0.75 machine hours The budgeted hours for the year ending 30 September 2025 will remain unchanged from the previous year. The total direct labour budget for the year is as follows: $ Machining department 127 270 Finishing department 183 150 Alberto wishes to achieve a gross margin of 40% on the work. Calculate the budgeted hourly direct labour rate for each department. Prepare a statement to show the total selling price that Alberto should quote the customer. Additional information Alberto is aware that the factory is not currently working at full capacity. In order to secure the work, he has quoted a very competitive price. The new customer has agreed to accept the quotation only if Alberto agrees to allow a 20% discount for immediate settlement on delivery. Advise Alberto whether or not he should accept the proposed terms offered by the customer. Justify your advice by discussing both financial and non-financial matters.
9706_w24_qp_21
THEORY
2024
Paper 2, Variant 1
View
Questions Discovered
533