2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
G Limited manufactures cakes for celebrations. The company uses absorption costing. REQUIRED Explain three benefits to a business of using absorption costing. REQUIRED Complete the table to show the apportionment of overheads and the reapportionment of the service department overheads using suitable bases. Total Baking department Decoration department Stores department Maintenance department $ $ $ $ $ Budgeted overheads already allocated 57 620 38 530 14 150 2 800 2 140 Machinery depreciation 33 600 Power 45 500 Lighting and heating 18 000 Total overheads 154 720 Reapportionment of first service department overheads Subtotal Reapportionment of second service department overheads Total overheads Calculate the overhead absorption rate, to two decimal places, for each production department using an appropriate basis. Baking department Decoration department State two possible reasons why overheads may be under absorbed. Additional information D Limited, a competitor of G Limited, makes a single product. The factory has the capacity to make 850 units per month. Overtime working is not available at this factory. The following information is available for each unit of production and is based on operating at full capacity. $ Selling price Direct labour Direct materials Fixed costs In April 2020 the factory was planned to operate at 80% capacity. The directors of D Limited have received an offer from Wendy to supply 280 units at $45 per unit. Wendy stated that the offer would depend on the entire order of 280 units being supplied. REQUIRED Calculate the profit for the month of April if the offer from Wendy is accepted. Advise the directors whether or not they should accept the offer from Wendy. Justify your answer.
9706_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Questions Discovered
533