2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
D Limited is a manufacturing company. Explain two uses of absorption costing. Additional information D Limited uses marginal costing. At one of its factories a single type of product is made. The following budgeted information is available. Per unit $ Selling price Direct materials Direct labour Fixed costs The factory has a budgeted capacity of 15 000 units per month. Calculate the monthly break-even point in units. Additional information It was forecast that only 4920 units would be sold in January 2024. Calculate the forecast profit or loss for January 2024. Additional information The directors have set a target profit of $150 000 per month. Calculate the number of units to be sold in order to achieve the target profit. Additional information At another factory of D Limited a single different type of product is made. The following budgeted details are available for one month’s production: Per unit $ Direct materials Direct labour Other variable costs Contribution Normal capacity at this factory is 18 000 units per month. Recently, the factory has been operating at 80% capacity and this has resulted in a monthly profit of $150 600. The directors have been informed that a major competitor manufacturing the same product plans to stop production. The directors plan to take advantage of the situation and are considering two options. Option A Increase monthly production by 6000 units on current output levels. Sell all production at a price per unit 2% above the current price. Any production above normal factory capacity will require direct labour to be paid an overtime premium of 50%. Option B Increase factory capacity to 22 000 units per month. Sell all production at a price per unit 3% above the current price. Suppliers of direct materials will be expected to offer a trade discount of 25% instead of the current trade discount of 20%. The direct labour rate per unit will be increased to $18.50. Some additional machinery will be purchased at a cost of $120 000. Machinery is depreciated by 20% per annum, using the straight-line method. An additional $20 000 per month will be spent on advertising. Calculate the monthly profit to be made from Option A. Prepare a monthly marginal costing statement for Option B. Advise the directors whether or not they should go ahead with either of these options. Justify your choice by discussing both financial and non-financial factors.
9706_s24_qp_22
THEORY
2024
Paper 2, Variant 2
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Questions Discovered
903