4. Cost and management accounting (A Level)
A section of Accounting, 9706
Listing 10 of 174 questions
J Limited manufactures a single product, a leather suitcase. The following forecast information is available. Costs per unit $ Direct materials Direct labour Variable production overheads Fixed costs per month Salaries $ Rent and rates Advertising Other fixed costs The directors calculate the selling price by adding a mark-up of 80% on to the variable costs. The company has orders to supply 240 suitcases per month. This involves working at 75% capacity. REQUIRED State two benefits and two limitations of break-even analysis. Benefits Limitations Calculate the break-even point in units per month. Calculate the monthly margin of safety in units; in revenue. Calculate the maximum monthly profit if the company is working at 100% capacity. Additional information The directors have been approached by Bart, a retailer, who requires a regular monthly order of 150 suitcases. Bart is offering to pay $42 per suitcase. The directors are aware that this order will take production over the current capacity and the following would result: All suitcases over the current maximum production capacity would incur an additional $2 per unit direct labour cost to allow for overtime payments. Additional storage facilities would have to be found at a monthly rental of $200. The directors are also concerned that the target annual profit set by them of $30 000 is not being achieved. They have decided to increase by 10% the selling price of all production except the new contract. They also plan to increase the advertising expenditure by $500 per month and are confident that monthly sales to existing customers will remain at 240 suitcases per month. REQUIRED Prepare a statement, in marginal cost format, to show J Limited’s maximum forecast total profit per month if the directors accept the new contract. Advise the directors whether or not they should accept the new contract with Bart and increase the selling price. Justify your answer by explaining two benefits and two limitations. Advice Benefits Limitations State three financial benefits of a system of budgetary control.
9706_w17_qp_22
THEORY
2017
Paper 2, Variant 2
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B Limited is a manufacturing business. The business uses marginal costing techniques and manufactures three products, Ess, Tee and Ewe. The following budgeted monthly information is available. Per unit Ess Tee Ewe $ $ $ Selling price Direct material Direct labour at $8 per hour Variable overhead Maximum monthly demand 300 units 400 units 360 units Fixed overheads are budgeted to be $96 000 per annum. REQUIRED Calculate the contribution per unit for each product. Prepare a statement to show the maximum monthly contribution and maximum monthly profit that B Limited can earn. Calculate the monthly direct labour hours that B Limited requires to meet the budgeted maximum monthly demand. Additional information Due to a shortage of skilled labour, the directors are aware that only 900 direct labour hours per month will be available from 1 December 2021. REQUIRED Calculate the maximum contribution and maximum profit for December 2021, taking into account the limited direct labour hours available. Additional information In order to overcome the shortage of skilled labour and also be able to meet maximum demand, the directors are considering paying an overtime premium of 25% and paying a total monthly bonus of $200 to be shared between all workers. REQUIRED Calculate the total contribution and total profit for the month of December 2021 if the directors decide to carry out this proposal. Explain two disadvantages to a business of offering a bonus payment to its employees. Explain two disadvantages to a business of operating a system of budgetary control.
9706_w21_qp_21
THEORY
2021
Paper 2, Variant 1
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Questions Discovered
174