2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
Y Limited is a large manufacturing company with factories at several locations. The company uses a marginal costing system. REQUIRED State three benefits to a business of break-even analysis. Additional information At one factory a single product is manufactured which sells for $75 per unit. The budgeted costs of manufacture for one unit are as follows: $ Direct materials 2 kg at $12.50 per kg Direct labour 3.5 hrs at $10 per labour hour Fixed costs are budgeted to be $66 000 per month. It is possible to produce 7500 units in normal working conditions. Currently 5800 units are made and sold each month. REQUIRED Calculate the monthly break-even point: in units in sales revenue Calculate the forecast profit per month based on 5800 units. Define the term ‘margin of safety’. Additional information The directors of Y Limited believe they can increase demand for their product by making some changes to the design. This would result in the following. A $7 increase in the selling price per unit A 10% increase in direct materials usage A 20% increase per kg in direct materials cost A forecast 40% increase in demand. Overtime working is available if required. This will be paid at a 25% premium. Additional machinery will be required at a cost of $24 000. The company’s policy is to depreciate machinery over a 5-year period. REQUIRED Prepare a marginal cost statement showing the monthly profit based on these changes. Additional information At a different factory the company manufactures two products: Product A and Product B. The following budgeted information is available. Product A Product B Monthly demand 300 units 200 units Selling price per unit ($) Direct materials per unit ($) Direct labour hours per unit 0.75 0.5 Each product uses the same direct labour, but requires different direct materials. Direct labour is paid at $12 per hour. The production manager is aware that only 285 hours of direct labour will be available in August 2020. REQUIRED Prepare the optimum production plan. Additional information The marketing director does not think that the optimum production plan should be implemented. REQUIRED Advise the directors whether or not the company should implement the optimum production plan. Justify your answer referring to both financial and non-financial factors.
9706_s20_qp_23
THEORY
2020
Paper 2, Variant 3
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G Limited manufactures products at two factories. The company uses marginal costing. REQUIRED State four assumptions used in break‑even analysis. State the formula for calculating the margin of safety in units and sales value. Units Sales value Additional information At one factory a single product is made. The following budgeted details are available. Direct materials per unit 3 kg at $5 per kg Direct labour per unit 2 hours at $9.50 per hour Fixed costs per month $66 000 Selling price per unit $48 Sales 8 000 units per month REQUIRED Calculate the monthly margin of safety in units. Additional information The directors are concerned that there could be a fall in demand for this product. They plan to make some changes to reduce the product’s break‑even point and encourage sales. Use a different grade of material. The list price of this material is 10% less per kilogram than the existing material. Each unit will require 5% more kilograms of this material. The supplier of materials has agreed to give a 20% trade discount. Make alterations to machinery to improve efficiency at a cost of $24 000. Machinery is depreciated at 25% per annum. Introduce a sales commission of $0.50 per unit. Reduce the selling price by 1.5% per unit. REQUIRED Calculate the decrease in the monthly break‑even point in units if these changes are made. Additional information At the other factory monthly production and sales are normally 14 000 units of a different product. This product has a variable cost of $65 per unit and a contribution of $17 per unit. The budgeted factory fixed costs are $128 000 per month. A major customer normally purchases 5500 units per month. However, the company has been informed that no units will be required by this customer in August 2022. The directors are considering two options. Option A Reduce production in August 2022 by 4000 units. Run an advertising campaign at a cost of $2 200 to increase demand so that all production is sold. Option B Continue with normal production in August. Store 5500 units in a warehouse at a cost of $6000. At the end of August an overseas customer will purchase all the units in the warehouse at a special price of $70 per unit. Transport costs of $1.80 per unit will be incurred on these units. REQUIRED Calculate the profit for August 2022 for: 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_23
THEORY
2022
Paper 2, Variant 3
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A company manufactures three products: X, Y and Z. The table provides per unit information concerning the three products. per unit product X $ product Y $ product Z $ selling price 100.00 120.00 130.00 direct material cost 40.00 45.00 48.00 direct labour cost 20.00 25.50 29.00 variable overhead cost 15.00 18.00 20.00 fixed overhead cost 18.00 18.00 27.00 profit 7.00 13.50 6.00 All three products are made from the same material. If the material is in short supply, which manufacturing pattern will maximise profit?
9706_s23_qp_12
MCQ
2023
Paper 1, Variant 2
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Questions Discovered
903