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 ABG Ltd manufactures three products, Alpha, Beta and Gamma, all of which are made from one basic raw material. Forecast costs and selling prices are as follows. Product Alpha Beta Gamma Sales per month 9 000 12 000 7 000 $ $ $ Selling price per unit Variable costs per unit: Direct material Direct labour Variable overheads The total fixed costs are $250 000 each month. REQUIRED Calculate the contribution per unit for each product. For Examiner's Use Calculate the total monthly profit which can be achieved. Due to a material shortage, ABG Ltd will only receive 80% of its material requirement for the month of April 2013. No other shortages are expected. REQUIRED Using the quantity of material that is available, prepare a statement to show the maximum profit that could be achieved for the three months ended 30 April 2013. For Examiner's Use ABG Ltd has received an enquiry for an additional order of 3000 units of Gamma at a special price of $50 per unit. Additional fixed costs of $15 000 would be incurred. Assuming no material shortage, calculate the profit or loss on this order. Identify three factors which ABG Ltd should consider when deciding whether to accept this additional order for Gamma.
9706_w12_qp_23
THEORY
2012
Paper 2, Variant 3
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Zumbi Limited manufactures three products, Ess, Tee and Ewe. The following information is available for December 2014. Ess ($) Tee ($) Ewe ($) Selling price Direct materials ($2 per metre) Direct labour ($8 per hour) Variable overheads Maximum demand for the month (in units): Ess 19 500 Tee 16 500 Ewe 15 000 REQUIRED Calculate the contribution per unit for each product. Ess ($) Tee ($) Ewe ($) Additional information Due to the production process, Zumbi Limited must manufacture batches of three units of Ess for every two units of Tee. Ewe is always produced in batches of five. REQUIRED Calculate the contribution per batch. Ess ($) Tee ($) Ewe ($) Additional information Zumbi Limited has a contract to supply 7000 units of Ewe each month. The company must honour this contract. The maximum production capacity is a total of 40 000 units per month. All goods will be sold in the month they are produced. Annual fixed overheads are $2 160 000. REQUIRED Prepare a statement for December 2014 showing the maximum monthly profit. Additional information Zumbi Limited has the opportunity to purchase unlimited quantities of product Ewe from an outside supplier at a cost of $30 per unit. REQUIRED Discuss the advantages and disadvantages to the company if it purchases Ewes from the outside supplier. Advantages Disadvantages Advise the directors if they should purchase Ewes from the outside supplier.
9706_w14_qp_21
THEORY
2014
Paper 2, Variant 1
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A division of Hobbs Limited manufactures one product, the Wye. The directors had prepared the following forecast for the year ending 30 June 2016. $000 Sales revenue Direct materials Direct labour Variable administration costs Fixed administration costs Other fixed overheads Budgeted sales for the year ending 30 June 2016 are expected to be 40 000 units. REQUIRED Calculate for product Wye: the contribution per unit the budgeted break-even point in units the margin of safety in units Additional information The directors have been warned that trading conditions are likely to change in the coming year and they plan to make the following changes to their forecasts. Reduce the selling price of the product by 10%. Budget for a 20% increase in sales. Budget for a 3% increase in direct labour. Budget for a 10% decrease in fixed costs. REQUIRED Calculate for product Wye: the revised contribution per unit the revised break-even point in units the revised margin of safety in units Additional information Another division of Hobbs Limited also manufactures one product, the Exe. The following data is available for the year ending 30 June 2016. Unit selling price $20 Unit variable costs $15 Budgeted fixed costs per annum $30 000 Budgeted sales 8000 units REQUIRED Calculate the monthly break-even point in revenue. Prepare a break-even chart for product Exe for the year ending 30 June 2016. Clearly indicate the areas of profit and loss. State three assumptions the accountant must make when preparing a break-even chart. Additional information The company uses marginal costing in order to calculate its break-even point for its ‘make or buy’ decisions. REQUIRED State three further reasons why a business might use a marginal costing system.
9706_w15_qp_22
THEORY
2015
Paper 2, Variant 2
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Costello Limited is a manufacturing business that produces one product, a wooden bookcase. All production is sold to just one customer, Dando plc. Costello Limited is contracted to produce 220 bookcases for the customer each week at a contract price of $30 per bookcase. Employees are paid a fixed salary each week plus a bonus based on output. The costs incurred by Costello Limited are as follows: $ Direct material cost 22.00 per unit Production labour Salaries 345.00 per week Bonus 0.50 per unit Finishing labour Salaries 280.00 per week Bonus 0.25 per unit Machine hire 150.00 per week Administration costs 500.00 per week Property costs 260.00 per week REQUIRED Calculate the weekly break-even point in units. Calculate the weekly margin of safety in units and in revenue. Prepare an annual profit statement using marginal costing. Additional information The directors of Costello Limited are concerned about the future prospects of the company. Employees have spare capacity and the machinery is not being fully utilised. The company has been approached by a large retailer asking for a quotation to produce 100 bookcases each week. The retailer requires the bookcases to have a different finish that would add $2.25 to the direct material cost. REQUIRED Calculate the selling price that the directors should charge the retailer in order to achieve a 20% contribution to sales ratio. Additional information Having considered the situation, the directors have decided to quote a price of $29 per bookcase to the retailer. The additional work will involve employing one additional member of staff at a weekly salary of $140. The contract with Dando plc to produce 220 bookcases per week would still be maintained at the price of $30 per bookcase. REQUIRED Prepare a profit statement for Costello Limited to show the total annual contribution and total annual profit if the retailer accepts the quotation. Advise the directors whether or not they should proceed with the additional order for the retailer. Give reasons for your answer. Additional information Businesses may value inventory using different methods. REQUIRED Explain two advantages and one disadvantage of using the AVCO method of inventory valuation. Advantage 1 Advantage 2 Disadvantage
9706_w16_qp_21
THEORY
2016
Paper 2, Variant 1
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Questions Discovered
533