2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
Connie manufactures three products: A, B and C. She has provided the following budgeted information for one unit of each product for the year ending 31 December 2021. Product A Product B Product C $ $ $ Selling price 15.00 20.00 25.00 Direct Materials 5.00 5.50 6.00 Direct Labour 4.00 5.00 7.50 Variable Overheads 2.50 3.50 2.50 Total fixed costs for the year are expected to be $100 000. Forecast annual demand for each product is 12 000 units. REQUIRED Explain what is meant by contribution. Calculate the budgeted unit contribution for each product. Calculate the budgeted total profit for the year ending 31 December 2021 if the demand is fully met. Additional Information Connie has now discovered that her landlord may limit the use of the premises resulting in a total of only 78 000 machine hours being available. The number of machine hours to make each product are: Product A Product B Product C Fixed costs will remain unchanged. REQUIRED Prepare the optimum production plan for the year ending 31 December 2021 based on the available machine hours. Calculate the budgeted total profit for the year ending 31 December 2021 based on the optimum production plan. Additional information If Connie pays her landlord $65 000 she will be able to have unlimited machine hours. REQUIRED Advise Connie whether or not she should pay her landlord $65 000. Justify your advice. Define the following terms: Variable cost Semi-variable cost Fixed cost State three assumptions made when using marginal costing.
9706_w20_qp_23
THEORY
2020
Paper 2, Variant 3
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Questions Discovered
533