2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
V Limited is a manufacturing company which uses marginal costing. REQUIRED Define: marginal cost contribution break‑even point. Additional information The following information is available for a single type of product made at one of the company’s factories. Per unit $ Selling price Direct materials Direct labour Fixed costs per month are $36 900. Maximum output per month is 2500 units. The factory operates at full capacity. REQUIRED Calculate the break‑even point: in units in sales value. Additional information The directors plan to increase factory capacity to meet increased demand. The following details are available. Factory capacity will be increased by 15%. Additional machinery will be required at a cost of $72 000. Machinery is depreciated at 20% per annum on cost. The directors will apply for a bank loan of $60 000 at 8% per annum interest to finance the cost of the additional machinery. Direct materials will cost less per unit as a result of buying in greater bulk. Suppliers currently give a 20% trade discount but will give a 25% trade discount in future. Direct labour costs and selling price will remain unchanged. REQUIRED Calculate the increase in the monthly margin of safety in units, assuming all production is sold. REQUIRED Calculate the profit per month to be made under each option. Option A Option B Advise the directors which option they should choose. Justify your answer by considering both financial and non‑financial factors. Explain two advantages to a business of using absorption costing.
9706_s23_qp_23
THEORY
2023
Paper 2, Variant 3
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Lin, a manufacturer, makes three products: X, Y and Z. He uses cost-volume-profit (CVP) analysis in his business. He has prepared the following profit/volume (P / chart for product X for the year ending 31 December 2016. $ 000s units 000s Sales – – – A B – REQUIRED Identify from the P / V chart for the year ending 31 December 2016: what point A 20 000 represents what point B ($60 000) represents State what is meant by P / V ratio. State two benefits and two drawbacks of CVP analysis. Benefits Drawbacks Additional information Lin has provided you with the following budgeted information for the year ending 31 December 2016. X Y Z Annual sales 15 000 5 000 8 000 $ $ $ Selling price (per unit) Variable cost (per unit) Annual allocated fixed costs 60 000 25 000 30 000 Lin is considering stopping production of X. REQUIRED Calculate for the year ending 31 December 2016: the total contribution for each product the total profit or loss for each product Discuss whether or not Lin should continue to produce all three products. Justify your answer. Additional information Since preparing his budget, Lin has received two separate orders. For order 1 the customer has offered an amount in total of $10 000. For order 2 the customer has offered a price per unit for each separate product. The details are as follows: Order 1 Order 2 units units proposed price per unit $ X X Y Y Z Z Proposed total order price $10 000 Lin has spare production capacity and the fixed costs will not be affected by the orders. REQUIRED Calculate the contribution gained or lost on each order. Advise Lin whether or not each of the orders should be accepted. Justify your decision. Explain, giving two reasons, why a business needs to plan for the future.
9706_m16_qp_22
THEORY
2016
Paper 2, Variant 2
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Questions Discovered
533