2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
Chester Limited manufactures clothing. The work takes place in three production departments – cutting, sewing and finishing. In addition, the business has two service departments – stores and maintenance. The budgeted overheads for the year ending 31 March 2014 were as follows: $ Indirect wages 185 400 Rent and rates 38 500 Power 32 600 Light and heat 18 800 Machine depreciation 73 700 Buildings insurance 18 200 The following information is available. Cutting Sewing Finishing Stores Maintenance Number of indirect employees Floor space (square metres) 5 000 6 000 3 000 3 000 4 000 Net book value of machinery ($) 86 000 64 000 12 000 - 5 000 Machine hours 40 000 50 000 4 000 - - Direct labour hours 84 000 22 000 56 000 - - Raw material issues 75% 17.5% 2.5% - 5% Chester Limited uses a single overhead rate to absorb all overheads on a direct labour hour basis. REQUIRED State one advantage and one disadvantage to Chester Limited of using a single overhead absorption rate. Advantage Disadvantage Calculate, correct to two decimal places, the overhead absorption rate for the year ending 31 March 2014. Additional information The directors of Chester Limited are considering changing the basis for recovering overheads to calculate a separate overhead absorption rate for each production department. REQUIRED Apportion the costs to the five departments and re-apportion the service departments’ costs to production departments using a suitable basis. Total $ Cutting $ Sewing $ Finishing $ Stores $ Maintenance $ Indirect wages Rent and rates Power Light and heat Machine depreciation Buildings insurance Reapportion stores Reapportion maintenance Calculate, correct to two decimal places, appropriate overhead absorption rates for each production department. Additional information The actual results for the year were as follows: Cutting Sewing Finishing Factory overheads $168 180 $146 320 $51 870 Direct labour hours 85 200 20 950 58 140 Direct machine hours 42 330 52 450 4 280 REQUIRED Calculate the under- or over-absorption of overheads for each production department. Cutting $ Sewing $ Finishing $ Manufacturing businesses classify costs by function. State three functional groups of costs.
9706_s14_qp_23
THEORY
2014
Paper 2, Variant 3
View
Bruna Limited is a manufacturing company. It operates three production departments and two service departments. The costs are allocated to each department as follows: Production departments Service departments Machining Assembly Finishing Stores Canteen $ $ $ $ $ Indirect labour 253 000 290 000 340 100 52 000 78 000 Other indirect overhead costs 205 000 90 000 225 000 88 000 92 000 The service departments costs are allocated to the production departments as follows: Stores in proportion to the number of stores requisitions Canteen in proportion to number of employees. The following information is available: Machining Assembly Finishing Direct labour hours 15 000 60 000 40 000 Machine hours 45 000 30 000 25 000 Number of employees Number of stores requisitions 6 300 4 500 7 200 REQUIRED Calculate, to two decimal places, a suitable overhead absorption rate for each of the three production departments. Additional information Bruna Limited has been approached by a customer to quote for one of their products. This will require the following: Direct materials 20 kilos at $5 per kilo Direct labour 10 hours at $9 per hour Direct labour hours and machine hours required in each department will be: Machining Assembly Finishing Direct labour hours Machine time 2 hours 30 minutes 20 minutes It is the company’s practice to achieve a gross margin of 40% on all its products. REQUIRED Calculate the total price to quote to the customer. Additional information The directors are considering changing from departmental overhead absorption rates to one factory-wide rate. REQUIRED Advise the directors whether or not they should make this change. Justify your answer. Explain how over absorption and under absorption of overheads can affect the profit of a manufacturing business.
9706_s16_qp_22
THEORY
2016
Paper 2, Variant 2
View
Questions Discovered
903