2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
For Examiner's Use Ken owns a manufacturing business which makes a single product. The following figures apply for all relevant periods. Per unit $ Selling price Direct material Direct labour Fixed manufacturing overheads Fixed manufacturing overheads are absorbed into product costs at pre-determined rates per unit of output. Under- or over-absorbed manufacturing overheads are transferred to profit and loss in the period in which they occur. Normal production is 80 000 units per accounting period. REQUIRED Calculate the break-even point in both units and dollars, based on the information above. The following information has been acquired for the last three accounting periods. Three months ended 28 February 31 May 31 August Units Units Units Sales 60 000 80 000 45 000 Stock at start of period 15 000 35 000 Stock at end of period 35 000 20 000 For Examiner's Use Calculate the profit or loss in each period using marginal costing. For Examiner's Use Calculate the profit or loss in each period using absorption costing. Prepare a financial statement that reconciles your profit using marginal costing with your profit using absorption costing. For three months ended 28 February 31 May 31 August $ $ $ Profit using marginal costing Profit using absorption costing
9706_w08_qp_2
THEORY
2008
Paper 2, Variant 0
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Redwood Manufacturing Ltd started in business on 1 January 2008 to manufacture furniture to customers’ special requirements. The following information is available for its first three years in business. $ $ $ Fixed Costs 60 000 66 000 70 000 Direct materials (per unit) Direct labour (per unit) Variable overheads (per unit) Selling price (per unit) The production and sales quantities during the period were: Production 15 000 12 000 16 000 Sales 12 000 13 000 16 000 All inventory has been valued using FIFO. REQUIRED Prepare a statement showing the gross profit for each of the three years if the company used marginal costing principles to valuing inventory ; absorption costing principles to valuing inventory . Prepare a statement to reconcile the amounts of profit for each of the three years calculated under both marginal costing and absorption costing principles.
9706_w11_qp_23
THEORY
2011
Paper 2, Variant 3
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KC Global Limited provides the following budgeted information. January 2015 February 2015 Production 10 000 units 10 000 units Sales 7 000 units 13 000 units Production costs per unit: Direct materials $4.50 $4.50 Direct labour $6.00 $6.00 Variable overheads $2.50 $2.50 Additional information The budgeted selling price per unit is $17. Budgeted production for the year is 120 000 units spread equally over the year. There is no opening inventory at 1 January 2015. Annual fixed overheads are budgeted to be $324 000. Fixed overheads are absorbed on a unit basis. REQUIRED Calculate the monthly breakeven point in units. Prepare forecast profit statements for January and February 2015 using absorption costing. January 2015 $ February 2015 $ Prepare forecast profit statements for January and February 2015 using marginal costing. January 2015 $ February 2015 $ Prepare a reconciliation statement showing the difference between the absorption costing profit and the marginal costing profit for January and February 2015. January 2015 $ February 2015 $ Absorption costing profit Marginal costing profit Explain why the absorption costing statement produces a different profit figure to the marginal costing statement. Additional information The directors of KC Global Limited are considering an advertising campaign starting in January 2015. This will cost $60 000 spread evenly over the year. The volume of sales and production would both increase by 10%. REQUIRED Prepare a revised profit statement for January 2015, using absorption costing. State three situations where marginal costing would help in making a short term decision. Evaluate the limitations of marginal costing.
9706_w14_qp_23
THEORY
2014
Paper 2, Variant 3
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Questions Discovered
533