2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
Sparkle produces one product, the Esprit. During the year ended 31 December 2013, the company produced 15 000 units of Esprit and incurred the following total costs: $ Direct materials 90 000 Direct labour 67 500 Variable production overhead 45 000 Fixed production overhead 60 000 Other fixed overheads 25 000 Each Esprit is sold for $26.00 There was no opening inventory of finished goods at 1 January 2013, and only 13 000 units were sold in the year ended 31 December 2013. REQUIRED Calculate the marginal cost of producing one unit of Esprit. Additional information Sparkle absorbs fixed production overheads on a unit basis. Other fixed overheads are not absorbed. REQUIRED Calculate the cost of producing one unit using absorption costing. Calculate the profit for the year ended 31 December 2013 if Sparkle values inventory on a marginal cost basis. Calculate the profit for the year ended 31 December 2013 if Sparkle values inventory on an absorption cost basis. Prepare a statement reconciling the profit from 3with your profit from 3. Explain the reason why valuing inventory on a marginal cost basis produces a different profit figure than valuing it on an absorption cost basis. Additional information The directors of Sparkle have discovered that $7 500 fixed production overhead was incorrectly analysed as direct materials. REQUIRED Explain the effect that this error will have on contribution and profit when using marginal costing.
9706_s14_qp_22
THEORY
2014
Paper 2, Variant 2
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DP Limited is a large manufacturing and retailing company. The following information is available. Current selling price per unit $3.60 Current weekly sales 2 000 units Contribution margin 45% REQUIRED Calculate the total contribution that the company would earn over the four-week period. Additional information The directors are planning to hold a four week price promotion on its most popular product. The directors plan to reduce the selling price of the product by 20% over the whole four weeks of the promotion. They forecast that additional sales of the product will be 150% of the current sales. The company will incur additional fixed costs of $6000 to run the promotion. The directors forecast that unit variable costs will remain as they currently are. REQUIRED Calculate the total forecast units to be sold if the directors proceed with the promotion. Calculate the additional profit or loss if the company proceeds with the promotion. Calculate the percentage by which current unit sales must increase for the promotion to break even. Advise the directors whether or not they should proceed with the promotion. Justify your answer using both financial and non-financial factors. Explain the purpose of costvolumeprofit analysis. State four assumptions of costvolumeprofit analysis. Additional information The directors provide the following information for the manufacturing part of the business: Budgeted labour hours 26 400 hours Budgeted machine hours 10 500 hours Actual labour hours 22 300 hours Actual machine hours 11 400 hours Budgeted overheads $445 000 Actual overheads $420 000 REQUIRED Calculate an appropriate overhead absorption rate for the business. Explain one limitation of absorption costing.
9706_s18_qp_23
THEORY
2018
Paper 2, Variant 3
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Questions Discovered
903