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2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
A company has budgeted the following factory overheads for the next financial year. machining assembly stores total overheads $80 000 $50 000 $10 000 $140 000 Machining and assembly are production departments and stores is the service department. The two production departments issued requisitions to stores as follows. machining assembly total What was the budgeted overhead absorption rate for the machining department based on 4300 budgeted machine hours?
9706_s21_qp_13
MCQ
2021
Paper 1, Variant 3
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T Limited manufactures goods at two factories: Factory A and Factory B. Factory A Factory A has two production departments, Assembly and Finishing; and two service departments, Administration and Canteen. Absorption costing is used at this factory. Budgeted overheads for February 2021 have already been apportioned. The basis for reapportioning the service department overheads is as follows: Production departments Service departments Assembly Finishing Administration Canteen Canteen 50% 40% 10% - Administration 75% 25% - - REQUIRED Prepare a statement showing the reapportionment of service department overheads for February 2021. Production departments Service departments Assembly Finishing Administration Canteen $ $ $ $ Overheads 83 500 70 100 28 300 15 400 Reapportionment of canteen Subtotal Reapportionment of administration Total overheads Additional information Assembly Finishing Direct labour hours per month Machine hours per month Direct labour rate per hour $8.40 $8.20 REQUIRED Calculate the overhead absorption rate for each production department to two decimal places. Assembly department Finishing department Additional information The company received an order from a customer. The following details are available: Direct materials $1880 Direct labour: Assembly department 11.5 hours Finishing department 6.1 hours Machine hours: Assembly department 5.7 hours Finishing department 2.4 hours The company’s policy is to achieve a profit of 40% on selling price. REQUIRED Prepare a statement to show the total selling price that T Limited will quote to the customer. State two possible causes of under absorption of overheads. State what is meant by allocation of overheads apportionment of overheads REQUIRED Calculate the maximum profit per month that can be made if materials were obtained from the overseas supplier and production limited to 7600 units. Advise the directors whether or not they should change the supplier. Justify your advice by considering both financial and non-financial factors.
9706_s21_qp_22
THEORY
2021
Paper 2, Variant 2
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F Limited is a manufacturing company which uses absorption costing at one of its factories. This factory has two production departments and two service departments. Budgeted costs have already been allocated and apportioned. REQUIRED Explain the meaning of each of the following terms: Allocation Apportionment State one benefit of using absorption costing. State one limitation of using absorption costing. Additional information The budgeted costs for April 2022 before reapportionment of the service departments’ overheads are as follows. Production departments Service departments Assembly department Finishing department Stores department Maintenance department $ $ $ $ Total overhead costs 275 000 103 200 19 200 26 700 The service department overheads are apportioned to the production departments on the following basis. Assembly department Finishing department Stores department Maintenance department Maintenance 60% 30% 10% – Stores 75% 25% – – REQUIRED Calculate the total overheads for each production department by reapportioning the service department overheads. Production departments Service departments Assembly department Finishing department Stores department Maintenance department $ $ $ $ Total overhead costs 275 000 103 200 19 200 26 700 Subtotal Total Additional information The following additional monthly budgeted information is available about the production departments. Labour hours Machine hours Assembly department 1 430 Finishing department REQUIRED Calculate the overhead absorption rate for each department to two decimal places. Assembly department Finishing department Additional information In April 2022, production was less than the forecast figure. The Assembly department’s actual overheads were $285 400, actual labour hours were 820 and actual machine hours were 1310. REQUIRED Calculate the under-absorption or over-absorption of overheads for April 2022 for the Assembly department. REQUIRED Calculate the profit to be made in May 2022 for each of the options. Option A Option B Advise the directors which option they should choose. Justify your answer by discussing both financial and non-financial factors.
9706_s22_qp_22
THEORY
2022
Paper 2, Variant 2
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A business has two production departments: machining and assembly. The budgeted direct labour hours for each department are: machining assembly 16 000. The business has calculated overhead absorption rates as: machining $12 per direct machining hour assembly $7.70 per direct labour hour. Insurance of $4800 relating to the assembly department was incorrectly omitted when making the calculations. What is the correct overhead absorption rate for the assembly department?
9706_s23_qp_11
MCQ
2023
Paper 1, Variant 1
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D Limited has two production departments and two service departments at one of its factories where absorption costing is used. Some forecast factory overheads have already been allocated and apportioned as follows: Production departments Service departments Cutting $ Assembly $ Maintenance $ Canteen $ Factory overheads 223 480 217 980 45 270 36 260 The following forecast factory overheads are still to be apportioned. $ Depreciation of machinery 48 000 Power 40 200 Canteen department overheads should be reapportioned on the basis of the number of employees. Maintenance department overheads should be reapportioned on the basis of the number of machines in production departments. The following data is available. Production departments Service departments Cutting Assembly Maintenance Canteen Machinery at carrying value $90 000 $66 000 $18 000 $6 000 Number of machines Kilowatt hours 1 800 1 500 Number of employees Budgeted machine hours 40 000 33 500 Budgeted direct labour hours 23 000 62 500 REQUIRED Complete the following table to show the apportionment of factory overheads and the reapportionment of service department overheads. Production departments Service departments Cutting Assembly Maintenance Canteen $ $ $ $ Factory overheads 223 480 217 980 45 270 36 260 Depreciation of machinery Power Total overheads Reapportionment Subtotal Reapportionment Total overheads Calculate, to two decimal places, an overhead absorption rate for each production department, using a suitable basis. Additional information The following information is available. Cutting department Assembly department Direct labour rate per hour $10.90 $8.20 Machine hours per unit Labour hours per unit Direct materials cost $6.95 per unit. Selling prices are set to achieve a profit margin of 25%. A customer has placed an order for 40 units. REQUIRED Calculate the selling price to be quoted for this order of 40 units. State two causes of under absorption of overheads. Additional information At the other factory a single product, Product Exe, is currently being made. Marginal costing is used at this factory. The following information is available. Selling price per unit $48 Contribution per unit $13 Direct labour 2.5 hours per unit at $10 per hour Fixed costs $96 000 per annum Factory capacity 28 000 labour hours per year Current production level 80% of factory capacity All units produced are sold. REQUIRED Calculate the profit made each year from Product Exe. REQUIRED Calculate the total profit from both products which will be made in the first year if this plan is put into operation. Advise the directors whether this plan should be put into operation. Justify your answer by considering both financial and non‑financial factors.
9706_s23_qp_21
THEORY
2023
Paper 2, Variant 1
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K Limited is a manufacturing company which has two production departments and one service department at one of its factories. At this factory absorption costing is used. REQUIRED Define each of the following terms: cost centre allocation of overheads apportionment of overheads. Additional information The following budgeted information is available for the year ended 31 August 2022. Production departments Cutting $ Finishing $ Service department $ Factory overheads 273 820 189 240 31 350 The service department’s overheads are reapportioned on the basis of the number of employees in each production department. Cutting department Finishing department Number of employees REQUIRED Reapportion the service department’s overheads to the production departments. Cutting department $ Finishing department $ Service department $ Factory overheads 273 820 189 240 31 350 Reapportionment Total overheads Additional information The following forecast information is available for the year ended 31 August 2022. Cutting department Finishing department Direct labour hours per annum 9 400 7 420 Machine hours per annum 17 900 3 840 REQUIRED Calculate an appropriate overhead absorption rate, correct to two decimal places, for each production department: Cutting department Finishing department. Additional information The actual results for the year ended 31 August 2022 were as follows: Cutting department Finishing department Factory overheads $312 600 $193 400 Direct labour hours 9 800 7 210 Machine hours 17 200 4 220 Calculate the under-absorption or over-absorption of factory overheads for each production department for the year ended 31 August 2022. Cutting department Finishing department Additional information At a second factory marginal costing is used. A single product, Product X, is manufactured. However, demand for this product has fallen recently due to increased competition. The following information is available for Product X. Per unit $ Direct materials Direct labour Contribution Normal capacity is 14 000 units per month. The factory is currently operating at 75% of normal capacity. All the units produced are sold. Fixed costs per month are $56 000. Calculate the profit for one month. Additional information The directors are considering two options to increase profits. Option A: Reduce the selling price per unit by 5%. Run a six-month advertising campaign at a cost of $1100 per month. Monthly sales are forecast to increase by 25% on current levels. Option B Discontinue manufacture of Product X. Produce a different product, Product Y, with a selling price of $58 per unit. It is forecast that demand will be such that the factory can operate at 110% normal capacity. Direct material cost will increase by 10% per unit. Direct labour costs will remain unchanged. However, workers will be paid an overtime premium of 50% for all work over normal capacity. Machinery will need some alterations which will cost $54 000. Non-current assets are depreciated by 25% per annum. The company will need to borrow $30 000 to finance the cost of the machinery alterations. Interest at 6% per annum will be charged on this loan. REQUIRED Calculate the profit to be made on each option in the first month of production. Option A Option B Advise the directors which option they should choose. Justify your answer by considering both financial and non-financial factors.
9706_s23_qp_22
THEORY
2023
Paper 2, Variant 2
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J Limited is a manufacturing company. Recently the directors decided to change the costing system from marginal costing to absorption costing. Explain each of the following terms used in absorption costing. Allocation Apportionment Additional information The factory has two production departments: preparation and finishing. There are two service departments: stores and canteen. Some overheads have already been allocated to departments. The following budgeted overheads for the year ended 31 March 2024 have yet to be apportioned. $ Electricity 63 000 Rent 44 000 The following information is available about the departments. Production departments Service departments Preparation Finishing Stores Canteen Floor area (square metres) Issues from stores – – Number of employees – Power (kilowatt hours) 32 000 Complete the table to show the apportionment of the budgeted overheads for the year ended 31 March 2024. Production departments Service departments Total Preparation Finishing Stores Canteen $ $ $ $ $ Overheads allocated 272 120 184 100 60 800 10 960 16 260 Electricity 63 000 Rent 44 000 Total overheads 379 120 Apportion canteen Subtotal Apportion stores Subtotal Additional information The following budgeted information is available for the two production departments for the year ended 31 March 2024. Preparation Finishing Machine hours 17 500 14 200 Labour hours 16 800 20 300 Calculate, to two decimal places, the overhead absorption rate for each production department for the year ended 31 March 2024. ,  , Additional information For the year ended 31 March 2024, actual hours for the preparation department were: Machine hours 16 920 Labour hours 16 350 Total actual overheads were the same as budgeted overheads. Calculate the over absorption or under absorption of overheads for the preparation department for the year ended 31 March 2024. Additional information An order has been received from a customer. The following information is available. Direct materials $800 Direct labour Preparation department 52 hours at $12.20 per hour Finishing department 90 hours at $14.50 per hour Machine hours Preparation department 140 hours Finishing department 48 hours Products are sold so as to achieve a gross margin of 50%. ,  , Calculate the selling price for the order. ,  , Additional information It has been suggested that the company would benefit if it switched to a just in time (JIT) method of inventory control. Advise the directors whether or not they should switch to a JIT method of inventory control. Justify your answer by considering both financial and non-financial factors. ,  ,
9706_s24_qp_23
THEORY
2024
Paper 2, Variant 3
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Questions Discovered
903