2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
Examiner's Use The following Contribution/Sales chart was prepared for Larry Ltd for the first year of business. Larry Ltd – Profit (Contribution/Sales) Chart $2000 $4000 $6000 $8000 $10 000 $4000 $3000 $2000 $1000 $1000 $2000 $3000 $4000 Selling price is $30 per unit Fixed costs $2000 Variable costs are $9.00 per unit All of the output of 300 units is sold. REQUIRED State what each of the numbers 1, 2, 3 and 4 on the chart represent. Calculate the break-even point in both units and sales value. The formula for your calculations must be shown. For Examiner's Use Define and explain margin of safety. Calculate the margin of safety in units and in value. In the second year of business, expected production and sales is 400 units, and fixed costs are expected to rise by 15 %. Selling price and variable costs will remain as before. REQUIRED Calculate the anticipated profit in the second year of business. Prepare a break-even chart for the second year of business. $12 000 $10 000 $8000 $6000 $4000 $2000 For Examiner's Use REQUIRED State four assumptions made when using break-even charts.
9706_w06_qp_2
THEORY
2006
Paper 2, Variant 0
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Mary Smith’s sales and costing information for the year ended 31 December 2010 included the following: Sales 25 000 Selling price per unit $35 Total costs for the year $ Direct materials 200 000 Direct labour 250 000 Variable overheads 50 000 Fixed costs 180 000 REQUIRED Calculate the following for the year ended 31 December 2010. Contribution per unit Break even output level in units The margin of safety expressed both in units and as a percentage of sales. State three fixed costs a business typically incurs. Explain what is meant by the term ‘stepped costs’. During 2011 sales (in units) were expected to remain at the 2010 level of 25 000 units. Mary Smith is in the process of compiling her 2012 budget. Research has indicated a potential increase in sales (in units) of 60% compared with the 2010 level. The company is assuming that selling price and all variable costs per unit in 2012 will remain at the 2010 level. The current production level is 32 000 units per annum. To increase production further would require: capital investment of $3 000 000; an increase in fixed costs of $195 000 per annum. REQUIRED Prepare and label a break-even chart for 2012, taking into account all of the potential amendments. Use the space below for your workings. Increasing production will allow the firm to potentially earn more profit. However, it could pose significant risks to the business. Evaluate the above statement using your answers to parts and .
9706_w11_qp_22
THEORY
2011
Paper 2, Variant 2
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Questions Discovered
533