2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
Debussy currently produces one product for which the following information is available: Product D946 $ per unit Selling price 6.00 Direct materials 2.50 Direct labour 1.40 Variable overheads 1.10 Total fixed costs $120 000 per annum Sales per annum $200 000 REQUIRED Using the data for the current product D946 calculate the following: break – even point in units and sales value; profit for the year, showing the contribution per unit; margin of safety in units and as a percentage of sales. Prepare the contribution to sales (profit/volume) graph, using the chart below, for the current product D946. Clearly show the profit at the current sales level. $000 ’000 units Debussy is considering extending its product range with two additional products. The fixed costs would double to $240 000 if any new product was introduced and would apply regardless of the number of new products introduced. Product D947 Product D948 $ per unit $ per unit Selling price 9.00 13.00 Direct materials 6.60 7.00 Direct labour 2.40 2.10 Variable overheads 1.50 0.90 Sales per annum 50 000 30 000 The demand for each product is estimated to be fixed at the levels stated, regardless of whether one or two additional products are introduced. The existing workforce is currently operating at full capacity in the production of product D946. REQUIRED Debussy decides to extend the product range with both additional products. Calculate the maximum profit Debussy could achieve in the next full year, if it were to produce products D946, D947 and D948. Show clearly the total contribution per product. Based on your calculations advise Debussy whether or not to go ahead and produce all three products. Give reasons for your advice.
9706_w10_qp_21
THEORY
2010
Paper 2, Variant 1
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Debussy currently produces one product for which the following information is available: Product D946 $ per unit Selling price 6.00 Direct materials 2.50 Direct labour 1.40 Variable overheads 1.10 Total fixed costs $120 000 per annum Sales per annum $200 000 REQUIRED Using the data for the current product D946 calculate the following: break – even point in units and sales value; profit for the year, showing the contribution per unit; margin of safety in units and as a percentage of sales. Prepare the contribution to sales (profit/volume) graph, using the chart below, for the current product D946. Clearly show the profit at the current sales level. $000 ’000 units Debussy is considering extending its product range with two additional products. The fixed costs would double to $240 000 if any new product was introduced and would apply regardless of the number of new products introduced. Product D947 Product D948 $ per unit $ per unit Selling price 9.00 13.00 Direct materials 6.60 7.00 Direct labour 2.40 2.10 Variable overheads 1.50 0.90 Sales per annum 50 000 30 000 The demand for each product is estimated to be fixed at the levels stated, regardless of whether one or two additional products are introduced. The existing workforce is currently operating at full capacity in the production of product D946. REQUIRED Debussy decides to extend the product range with both additional products. Calculate the maximum profit Debussy could achieve in the next full year, if it were to produce products D946, D947 and D948. Show clearly the total contribution per product. Based on your calculations advise Debussy whether or not to go ahead and produce all three products. Give reasons for your advice.
9706_w10_qp_22
THEORY
2010
Paper 2, Variant 2
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For Examiner's Use Cumfycars Ltd produce 3 grades of car seat covers, Basic, Deluxe and Super. Each seat cover is manufactured using a different grade of material. Sales demand for the year ended 30 April 2013 is forecast to be: Basic Deluxe Super Sales demand 4000 The following figures are available: Per Unit Basic Deluxe Super Sales price $12 $20 $30 Variable costs $6 $14 $16 Direct labour hours Total fixed overhead costs for the year ending 30 April 2013 are estimated to be $39 000. Fixed overhead costs are absorbed on the basis of direct labour hours. REQUIRED Calculate the total direct labour hours required to meet the forecast demand for all 3 products. Calculate the estimated fixed overhead recovery rate. Calculate the estimated contribution per unit for each product. For Examiner's Use Calculate the estimated contribution per direct labour hour for each product. The human resource manager has warned of a future skill shortage and forecasts that only 24 400 direct labour hours will be available for the year ended 30 April 2013. Calculate the quantity of each product that should be made in order to maximise total profit if this forecast is correct. For Examiner's Use Prepare a statement showing the net profit or loss made by each product (Basic, Deluxe and Super) for the year ending 30 April 2013. Using the estimated fixed overhead recovery rate calculated in clearly show any fixed overhead over/under-absorbed. For Examiner's Use Cumfycars Ltd also produce car roof racks in separate premises. The total forecast fixed costs for the year ending 30 April 2013 amount to $10 000. Each roof rack has the following unit costs: Unit costs $ Raw materials Direct labour Variable Overheads There are no other costs. Each roof rack sells for $100. REQUIRED Calculate the estimated break-even point in units and in sales revenue. Calculate the estimated margin of safety in units and revenue if 2200 units are produced.
9706_w12_qp_21
THEORY
2012
Paper 2, Variant 1
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For Examiner's Use Rapunzel Ltd produce three types of shampoo: Aloe, Hazel and Peach. Each shampoo uses the same manufacturing process but contains different ingredients. The following data is available for the 6 months ended 31 October 2012. Aloe Hazel Peach Sales 120 000 39 000 60 000 Selling price per litre $8.00 $14.00 $10.00 Direct materials per litre $2.70 $7.80 $5.36 Variable overheads per litre $1.80 $2.20 $1.00 Direct labour rate per hour $3.20 $3.20 $3.20 Output per labour hour 8 Total fixed costs of $477 750 for the 6 months were recovered at the rate of $13.00 per direct labour hour. No inventory is kept and all output is sold in the month of production. REQUIRED Calculate the total direct labour hours required for the 6 months ended 31 October 2012. For Examiner's Use Prepare a statement showing the net profit or loss for each of the three products, and the total profit made for the six months ended 31 October 2012. Calculate the contribution made per direct labour hour for each product. For Examiner's Use One of the directors suggests that production of the Hazel shampoo should be stopped and resources should be concentrated on the production of the Aloe and Peach shampoos. If this decision is implemented: • The sales of Aloe and Peach shampoos are forecast to increase by 10% each; • There will be no increase in the selling price; • The rates for variable costs will remain unchanged; • Higher marketing costs will increase the total fixed costs to $550 000. REQUIRED Prepare a statement showing the expected net profit or loss for the Aloe and Peach shampoos and the total expected net profit for the 6 months ending 30 April 2013. Using the overhead recovery rate of $13.00 per direct labour hour clearly show any fixed overhead over/under absorbed. For Examiner's Use Based on your calculations in and above, advise the Board of Directors regarding the future production of the range of shampoos.
9706_w12_qp_22
THEORY
2012
Paper 2, Variant 2
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Questions Discovered
533