Here are the calculations for Suggestion 2:
Total contribution required = £24,000 + £301,000 = £325,000
Number of sales units = £325,000/£20 = 16,250 units
(9 marks)
(Total 20 marks)
3017/4/11/MA Page 8 of 15
QUESTION 4
A company manufactures a single product. The standard cost card for the product is:
Material: 2kg @ £3 per kg
Direct Labour: 1 hour @ £6 per hour
Variable Overheads: £2 per unit
Fixed Overheads: £12,000 per month
The standard cost per unit is
The document provides model answers for a cost accounting exam, including fully worked examples and summaries of the main points expected for each question. It also includes helpful hints for candidates on certain questions or exam technique. The model answers are intended to help teachers and candidates understand the standard required and as an aid for exam success.
The document provides model answers and guidance for the LCCI International Qualifications Cost Accounting Level 3 exam, including reproducing exam questions, summarizing expected answers, and providing additional helpful hints. It is intended as a teaching tool to help teachers, candidates, and centers prepare for the LCCI exam and achieve a distinction grade. The general standard of the model answers aims to achieve a distinction level of response.
The production budget shows the number of units to be manufactured each month based on 60% of next month's sales and 40% of the current month's sales. The material purchase budget shows the amount spent on material purchases each month based on the prior month's production.
(c) Cash budget showing receipts, payments and closing bank balance.
(12 marks)
(d) Explain two uses of cash budgets.
(4 marks)
(Total 21 marks)
This document provides model answers and guidance for Cost Accounting Level 3 exam questions. It includes:
1) The exam questions reproduced from the paper.
2) Model answers summarizing the main points expected in responses and including worked examples where applicable.
3) Helpful hints on individual questions and exam technique.
The model answers are designed to demonstrate a Distinction grade standard and provide teachers and candidates an example of the level required to achieve a high score. While alternative valid answers are accepted, the models aim to offer additional information to help prepare for the exam.
The document provides guidance on how to use the LCCI International Qualifications Model Answer booklet, which contains questions from past exam papers, model answers summarizing the key points expected in responses, and additional helpful hints. The model answers aim to demonstrate the standard required to achieve a Distinction grade and accept that other valid answers may exist.
1. Thackley Ltd's current assets and net current assets have significantly increased from 2005 to 2006, while fixed assets have decreased slightly.
2. Retained earnings have nearly tripled from 2005 to 2006, indicating strong profitability.
3. Ordinary share capital and share premium have increased to help finance the growth in assets and retained earnings.
4. Creditors due after one year (debentures) have decreased slightly from 2005 to 2006.
To analyze the changes, calculate key ratios such as current ratio, acid test ratio, gearing, return on capital employed and earnings per share for 2005 and 2006. This will
This document provides information about cost accounting for a transport business.
[1] It details the vehicle types, costs, and operating assumptions for Carryit Farr transport business. This includes vehicle purchase prices, operating costs, fuel consumption, and depreciation calculations.
[2] It also provides the office costs for the business including rent, insurance, salaries, and how these costs are allocated to vehicle types.
[3] A sample cost calculation is provided to determine the vehicle and office cost absorption rates per kilometer for each vehicle type. These rates are then used to calculate the minimum time and costs to deliver a job using each vehicle type.
At the break-even point:
Sales revenue = £200,000
Fixed costs = £80,000
Break-even point formula: Fixed costs / (Sales price - Variable cost per unit)
So: £80,000 / (1 - Variable cost per £1 of sales)
Variable cost per £1 of sales = 1 - £80,000/£200,000 = 0.6
Variable cost at break-even point = £200,000 x 0.6 = £120,000
At current sales level of £400,000:
Variable cost = £400,000 x 0.6 = £240,000
(b) Calculate the contribution at the break-even
The document provides model answers for a cost accounting exam, including fully worked examples and summaries of the main points expected for each question. It also includes helpful hints for candidates on certain questions or exam technique. The model answers are intended to help teachers and candidates understand the standard required and as an aid for exam success.
The document provides model answers and guidance for the LCCI International Qualifications Cost Accounting Level 3 exam, including reproducing exam questions, summarizing expected answers, and providing additional helpful hints. It is intended as a teaching tool to help teachers, candidates, and centers prepare for the LCCI exam and achieve a distinction grade. The general standard of the model answers aims to achieve a distinction level of response.
The production budget shows the number of units to be manufactured each month based on 60% of next month's sales and 40% of the current month's sales. The material purchase budget shows the amount spent on material purchases each month based on the prior month's production.
(c) Cash budget showing receipts, payments and closing bank balance.
(12 marks)
(d) Explain two uses of cash budgets.
(4 marks)
(Total 21 marks)
This document provides model answers and guidance for Cost Accounting Level 3 exam questions. It includes:
1) The exam questions reproduced from the paper.
2) Model answers summarizing the main points expected in responses and including worked examples where applicable.
3) Helpful hints on individual questions and exam technique.
The model answers are designed to demonstrate a Distinction grade standard and provide teachers and candidates an example of the level required to achieve a high score. While alternative valid answers are accepted, the models aim to offer additional information to help prepare for the exam.
The document provides guidance on how to use the LCCI International Qualifications Model Answer booklet, which contains questions from past exam papers, model answers summarizing the key points expected in responses, and additional helpful hints. The model answers aim to demonstrate the standard required to achieve a Distinction grade and accept that other valid answers may exist.
1. Thackley Ltd's current assets and net current assets have significantly increased from 2005 to 2006, while fixed assets have decreased slightly.
2. Retained earnings have nearly tripled from 2005 to 2006, indicating strong profitability.
3. Ordinary share capital and share premium have increased to help finance the growth in assets and retained earnings.
4. Creditors due after one year (debentures) have decreased slightly from 2005 to 2006.
To analyze the changes, calculate key ratios such as current ratio, acid test ratio, gearing, return on capital employed and earnings per share for 2005 and 2006. This will
This document provides information about cost accounting for a transport business.
[1] It details the vehicle types, costs, and operating assumptions for Carryit Farr transport business. This includes vehicle purchase prices, operating costs, fuel consumption, and depreciation calculations.
[2] It also provides the office costs for the business including rent, insurance, salaries, and how these costs are allocated to vehicle types.
[3] A sample cost calculation is provided to determine the vehicle and office cost absorption rates per kilometer for each vehicle type. These rates are then used to calculate the minimum time and costs to deliver a job using each vehicle type.
At the break-even point:
Sales revenue = £200,000
Fixed costs = £80,000
Break-even point formula: Fixed costs / (Sales price - Variable cost per unit)
So: £80,000 / (1 - Variable cost per £1 of sales)
Variable cost per £1 of sales = 1 - £80,000/£200,000 = 0.6
Variable cost at break-even point = £200,000 x 0.6 = £120,000
At current sales level of £400,000:
Variable cost = £400,000 x 0.6 = £240,000
(b) Calculate the contribution at the break-even
Here are the key points from the information provided:
- Fixed assets have decreased due to depreciation exceeding additions
- Investments have increased
- Stock, debtors and bank have all increased significantly indicating higher activity levels
- Creditors have increased in line with higher activity
- Net current assets have increased substantially
- Retained earnings have increased substantially, indicating good profitability
- Share capital and share premium have increased due to a rights issue
So in summary, the company appears to be growing its operations and investments, experiencing higher activity levels and improving profitability based on the increase in retained earnings. The rights issue also indicates they are financing this growth internally for now. Overall the financial position of the company appears stronger based
Lcci business statistics series 2 2002 考试priya5594
This document provides model answers for the Business Statistics Third Level Series 2 2002 exam. It includes the exam questions, model answers summarizing the key points expected in responses, and some additional helpful hints. The model answers provide summaries of the main statistical calculations and conclusions expected for each multi-part question. They also include comments on graphs and fully worked examples where applicable. The document is intended to help teachers and candidates understand the standard expected and as an aid for exam preparation and success.
x = 522.08, s2x = 5,333.33
y = 537.08, s2y = 6,615.17
t = (522.08 - 537.08) / √((5,333.33/12) + (6,615.17/12)) = -0.82
Conclusion: There is insufficient evidence to reject the null hypothesis at the 5% significance level.
There is no difference in the car rentals paid in country X and country Y.
(c) The sampling distribution of the mean is the theoretical distribution of sample means that would be
obtained by taking all possible samples of a given size from a population. It is
The document provides information to prepare production, material consumption, and material purchase budgets for a company for the first quarter of 2009. It includes monthly sales forecasts, beginning inventory levels, material and labor requirements per unit, and actual results for quarter 1. The assistant is asked to prepare:
(1) Monthly production quantity budgets for quarter 1.
(2) Monthly material consumption quantity budgets from January to April 2009.
(3) Material purchase quantity budgets for quarter 1.
The document provides accounting information for Textbook Inc. including costs incurred, revenues, and beginning and ending inventory balances. It asks to prepare a schedule of cost of goods manufactured and an income statement including cost of goods sold. The answer provides the requested schedules, showing costs of raw materials, direct labor, manufacturing overhead, cost of goods sold, and net profit.
This document contains sales, production, materials, labor, overhead, selling and administrative expense, and cash budgets for a company across 4 quarters. It also includes income statements and balance sheets. Key details include:
- Quarterly sales revenue is projected to be $372,000 for the year.
- Required production for the year is forecasted at 16,250 units to meet sales and ending inventory targets.
- Materials, labor, overhead and other expenses are budgeted based on projected production levels.
- The cash budget tracks projected cash receipts from sales and cash disbursements for expenses.
- Income statements and balance sheets are also provided to summarize projected profitability and financial position.
05210202 Fluid Mechanics And Hydraulic Machineryguestd436758
The document is a past exam paper for a Chemical Engineering Plant Design and Economics course. It contains 8 multi-part questions testing various concepts related to plant design, economics, and capital investment analysis. Specifically, it examines topics such as batch vs continuous operation, methods for estimating capital investment, cost analysis, depreciation methods, taxation, and optimization of plant design parameters. Students were required to answer any 5 of the 8 questions in the 3 hour exam.
www.onlineassignment.net is a 24*7 online portal dedicated to fulfilling students' need from across the globe. Be it assignment, project or thesis, we can provide you quality solution within the deadline set by you. All levels and from any course of study, you need not worry anymore.
Homework Help | Assignment Help | Project Help | Online Tutoring | Math Help | Programming Help | Engineering | Computer Science | AutoCad
www.onlineassignment.net
The document provides information on a shipping company's operating performance for the second quarter, including actual results compared to the master budget and a flexible budget. The actual sales volume was lower than the master budget but actual revenues and most expenses were also lower, resulting in an unfavorable total master budget variance but a favorable flexible budget variance. While contribution margin was lower than the master budget, fixed costs were mostly equal to budget resulting in an unfavorable variance in operating income compared to both budgets.
The least squares regression line is:
y = 4.16x - 881.5
(b) Using the regression line, for a house value of £250,000:
y = 4.16x - 881.5
= 4.16(250) - 881.5
= 1040 - 881.5
= £2,158.5
3009/3/10MA Page 6 of 20
QUESTION 2 CONTINUED
(c) The coefficient of determination (R2) measures the proportion of variation in the dependent variable
(annual expenditure on repairs) that is explained by the independent variable (value of house).
The R2
The document provides details of a proposed project to start a ball pen ink industry in Aligarh, India. It includes information on the production capacity, implementation schedule, technical production process, financial aspects including total capital investment and projected profits, and addresses of machinery and raw material suppliers. The key points are that the project would produce 12,000 litres of ball pen ink per year, require a total capital investment of Rs. 8,09,900, and is estimated to generate a net profit of Rs. 2,99,610 in the first year.
This document discusses limiting factor analysis for multi-product decision making. It provides steps to determine the optimal production plan using the limiting factor to maximize contribution or profit. The steps include determining the limiting factor, calculating contribution per unit of the limiting factor, ranking products based on contribution per unit of the limiting factor, and using the limiting factor to produce products in the ranked order. An example is provided to illustrate the solution.
Crystal Lattice produces exercise mats and has spare annual capacity of 2,000 mats. Resteasy hotel chain placed a one-time order for 3,000 mats at $90 per mat instead of the normal $100 price. Accepting the order would earn a contribution margin of $50 per mat compared to $60 normally, for a net benefit of $70,000 after factoring in the $20,000 cost of an embossing machine needed for the order. Qualitative factors like reactions from other customers and Resteasy's potential as a long-term customer should also be considered before accepting the order.
The document discusses several operational decision making topics:
1. Opportunity costs consider the value of alternatives forgone by selecting one option over another, like outsourcing component manufacturing and using the freed up capacity.
2. Avoidable costs are expenses eliminated by outsourcing an activity, which reduces costs in decision making.
3. Fixed costs are often irrelevant in tactical decision making if infrastructure does not change, but they must be considered if capacity is limited.
The document summarizes a case study analyzing capacity issues and profitability opportunities at Melford Hospital's pediatric unit, Happy Times Pediatrics. A cost-volume-profit analysis was conducted to determine the breakeven point for 60, 70, and 80 beds. Adding 20 more beds could decrease profits linearly by around $30,000 per bed. To maximize profits, the hospital decided to rent the additional 20 beds to an outpatient pediatric surgery group on an as-needed basis. This is projected to increase annual profits by $786,333 by utilizing the beds more efficiently.
1. From the trial balances and adjustments provided, prepare the trading and profit and loss accounts for the year ended 31 December 2005, and a balance sheet as at that date for a sole trader.
2. Prepare the trading and profit and loss accounts and balance sheet as at 30 June 2005 for an import merchant, K. Lai, taking into account closing stock valuation, depreciation, provision for doubtful debts, and prepaid/accrued items.
3. Prepare the income statement for the year ended 28 February 2006 and balance sheet as at that date for a sole trader, Giggs Wong, incorporating stock valuation, accrued/prepaid items, and depreciation calculations.
Activity based costing & activity based managementPiyush Gaur
The document discusses activity based costing (ABC) and how it addresses limitations of traditional costing methods. It explains that ABC allocates overhead costs to products based on multiple cost drivers like direct labor hours, machine hours, and number of purchase orders rather than a single driver. This provides a more accurate reflection of how overhead resources are consumed. The document provides an example to illustrate how ABC can allocate overhead costs differently than traditional methods based on a single driver.
The profit and loss statement for Meeting to Cycle Pty Ltd for the period ending 30 June 2011 shows total revenue of $550,000 with a gross profit of $221,000. Total expenses were $522,353, resulting in a net loss of $301,353. The largest expenses were salaries and wages at $166,000, rent of $40,000, and set-up costs including fit-out expenses of $83,600 that were incurred prior to business commencement in September 2010.
Flexible budgets allow managers to compare actual costs to budgeted costs at different activity levels, rather than comparing actual costs to a static budget for a single planned activity level. Larry, the owner of a lawn care business, prepared a static planning budget for June based on mowing 500 lawns, but he actually mowed 550 lawns. Comparing his actual costs to the static budget revealed unfavorable variances because costs increase with higher activity levels. A flexible budget would have accounted for the higher activity level and shown whether costs were properly controlled as activity increased.
Fixed costs are unaffected by changes in activity level, while variable costs vary with output. The document discusses different types of costs like direct, indirect, standard, cash, book, sunk, and opportunity costs. It provides an example comparing the total costs of using two different sites for a paving project. Breakeven analysis is explained, finding the output level where total revenue equals total costs. The maximum profit output is derived using calculus, and breakeven points are calculated for scenarios where demand depends on or is independent of price.
Here are the key points from the information provided:
- Fixed assets have decreased due to depreciation exceeding additions
- Investments have increased
- Stock, debtors and bank have all increased significantly indicating higher activity levels
- Creditors have increased in line with higher activity
- Net current assets have increased substantially
- Retained earnings have increased substantially, indicating good profitability
- Share capital and share premium have increased due to a rights issue
So in summary, the company appears to be growing its operations and investments, experiencing higher activity levels and improving profitability based on the increase in retained earnings. The rights issue also indicates they are financing this growth internally for now. Overall the financial position of the company appears stronger based
Lcci business statistics series 2 2002 考试priya5594
This document provides model answers for the Business Statistics Third Level Series 2 2002 exam. It includes the exam questions, model answers summarizing the key points expected in responses, and some additional helpful hints. The model answers provide summaries of the main statistical calculations and conclusions expected for each multi-part question. They also include comments on graphs and fully worked examples where applicable. The document is intended to help teachers and candidates understand the standard expected and as an aid for exam preparation and success.
x = 522.08, s2x = 5,333.33
y = 537.08, s2y = 6,615.17
t = (522.08 - 537.08) / √((5,333.33/12) + (6,615.17/12)) = -0.82
Conclusion: There is insufficient evidence to reject the null hypothesis at the 5% significance level.
There is no difference in the car rentals paid in country X and country Y.
(c) The sampling distribution of the mean is the theoretical distribution of sample means that would be
obtained by taking all possible samples of a given size from a population. It is
The document provides information to prepare production, material consumption, and material purchase budgets for a company for the first quarter of 2009. It includes monthly sales forecasts, beginning inventory levels, material and labor requirements per unit, and actual results for quarter 1. The assistant is asked to prepare:
(1) Monthly production quantity budgets for quarter 1.
(2) Monthly material consumption quantity budgets from January to April 2009.
(3) Material purchase quantity budgets for quarter 1.
The document provides accounting information for Textbook Inc. including costs incurred, revenues, and beginning and ending inventory balances. It asks to prepare a schedule of cost of goods manufactured and an income statement including cost of goods sold. The answer provides the requested schedules, showing costs of raw materials, direct labor, manufacturing overhead, cost of goods sold, and net profit.
This document contains sales, production, materials, labor, overhead, selling and administrative expense, and cash budgets for a company across 4 quarters. It also includes income statements and balance sheets. Key details include:
- Quarterly sales revenue is projected to be $372,000 for the year.
- Required production for the year is forecasted at 16,250 units to meet sales and ending inventory targets.
- Materials, labor, overhead and other expenses are budgeted based on projected production levels.
- The cash budget tracks projected cash receipts from sales and cash disbursements for expenses.
- Income statements and balance sheets are also provided to summarize projected profitability and financial position.
05210202 Fluid Mechanics And Hydraulic Machineryguestd436758
The document is a past exam paper for a Chemical Engineering Plant Design and Economics course. It contains 8 multi-part questions testing various concepts related to plant design, economics, and capital investment analysis. Specifically, it examines topics such as batch vs continuous operation, methods for estimating capital investment, cost analysis, depreciation methods, taxation, and optimization of plant design parameters. Students were required to answer any 5 of the 8 questions in the 3 hour exam.
www.onlineassignment.net is a 24*7 online portal dedicated to fulfilling students' need from across the globe. Be it assignment, project or thesis, we can provide you quality solution within the deadline set by you. All levels and from any course of study, you need not worry anymore.
Homework Help | Assignment Help | Project Help | Online Tutoring | Math Help | Programming Help | Engineering | Computer Science | AutoCad
www.onlineassignment.net
The document provides information on a shipping company's operating performance for the second quarter, including actual results compared to the master budget and a flexible budget. The actual sales volume was lower than the master budget but actual revenues and most expenses were also lower, resulting in an unfavorable total master budget variance but a favorable flexible budget variance. While contribution margin was lower than the master budget, fixed costs were mostly equal to budget resulting in an unfavorable variance in operating income compared to both budgets.
The least squares regression line is:
y = 4.16x - 881.5
(b) Using the regression line, for a house value of £250,000:
y = 4.16x - 881.5
= 4.16(250) - 881.5
= 1040 - 881.5
= £2,158.5
3009/3/10MA Page 6 of 20
QUESTION 2 CONTINUED
(c) The coefficient of determination (R2) measures the proportion of variation in the dependent variable
(annual expenditure on repairs) that is explained by the independent variable (value of house).
The R2
The document provides details of a proposed project to start a ball pen ink industry in Aligarh, India. It includes information on the production capacity, implementation schedule, technical production process, financial aspects including total capital investment and projected profits, and addresses of machinery and raw material suppliers. The key points are that the project would produce 12,000 litres of ball pen ink per year, require a total capital investment of Rs. 8,09,900, and is estimated to generate a net profit of Rs. 2,99,610 in the first year.
This document discusses limiting factor analysis for multi-product decision making. It provides steps to determine the optimal production plan using the limiting factor to maximize contribution or profit. The steps include determining the limiting factor, calculating contribution per unit of the limiting factor, ranking products based on contribution per unit of the limiting factor, and using the limiting factor to produce products in the ranked order. An example is provided to illustrate the solution.
Crystal Lattice produces exercise mats and has spare annual capacity of 2,000 mats. Resteasy hotel chain placed a one-time order for 3,000 mats at $90 per mat instead of the normal $100 price. Accepting the order would earn a contribution margin of $50 per mat compared to $60 normally, for a net benefit of $70,000 after factoring in the $20,000 cost of an embossing machine needed for the order. Qualitative factors like reactions from other customers and Resteasy's potential as a long-term customer should also be considered before accepting the order.
The document discusses several operational decision making topics:
1. Opportunity costs consider the value of alternatives forgone by selecting one option over another, like outsourcing component manufacturing and using the freed up capacity.
2. Avoidable costs are expenses eliminated by outsourcing an activity, which reduces costs in decision making.
3. Fixed costs are often irrelevant in tactical decision making if infrastructure does not change, but they must be considered if capacity is limited.
The document summarizes a case study analyzing capacity issues and profitability opportunities at Melford Hospital's pediatric unit, Happy Times Pediatrics. A cost-volume-profit analysis was conducted to determine the breakeven point for 60, 70, and 80 beds. Adding 20 more beds could decrease profits linearly by around $30,000 per bed. To maximize profits, the hospital decided to rent the additional 20 beds to an outpatient pediatric surgery group on an as-needed basis. This is projected to increase annual profits by $786,333 by utilizing the beds more efficiently.
1. From the trial balances and adjustments provided, prepare the trading and profit and loss accounts for the year ended 31 December 2005, and a balance sheet as at that date for a sole trader.
2. Prepare the trading and profit and loss accounts and balance sheet as at 30 June 2005 for an import merchant, K. Lai, taking into account closing stock valuation, depreciation, provision for doubtful debts, and prepaid/accrued items.
3. Prepare the income statement for the year ended 28 February 2006 and balance sheet as at that date for a sole trader, Giggs Wong, incorporating stock valuation, accrued/prepaid items, and depreciation calculations.
Activity based costing & activity based managementPiyush Gaur
The document discusses activity based costing (ABC) and how it addresses limitations of traditional costing methods. It explains that ABC allocates overhead costs to products based on multiple cost drivers like direct labor hours, machine hours, and number of purchase orders rather than a single driver. This provides a more accurate reflection of how overhead resources are consumed. The document provides an example to illustrate how ABC can allocate overhead costs differently than traditional methods based on a single driver.
The profit and loss statement for Meeting to Cycle Pty Ltd for the period ending 30 June 2011 shows total revenue of $550,000 with a gross profit of $221,000. Total expenses were $522,353, resulting in a net loss of $301,353. The largest expenses were salaries and wages at $166,000, rent of $40,000, and set-up costs including fit-out expenses of $83,600 that were incurred prior to business commencement in September 2010.
Flexible budgets allow managers to compare actual costs to budgeted costs at different activity levels, rather than comparing actual costs to a static budget for a single planned activity level. Larry, the owner of a lawn care business, prepared a static planning budget for June based on mowing 500 lawns, but he actually mowed 550 lawns. Comparing his actual costs to the static budget revealed unfavorable variances because costs increase with higher activity levels. A flexible budget would have accounted for the higher activity level and shown whether costs were properly controlled as activity increased.
Fixed costs are unaffected by changes in activity level, while variable costs vary with output. The document discusses different types of costs like direct, indirect, standard, cash, book, sunk, and opportunity costs. It provides an example comparing the total costs of using two different sites for a paving project. Breakeven analysis is explained, finding the output level where total revenue equals total costs. The maximum profit output is derived using calculus, and breakeven points are calculated for scenarios where demand depends on or is independent of price.
1. LCCI International Qualifications
Cost Accounting
Level 3
Model Answers
Series 4 2011 (3017)
For further Tel. +44 (0) 8707 202909
information Email. enquiries@ediplc.com
contact us: www.lcci.org.uk
3. QUESTION 1
Cut Price Woods manufactures fence posts from second hand timbers. Firewood is generated as a
by-product from the process.
Customers’ requirements for the next two periods are 6,800 and 5.200 fence posts respectively.
The following information is available:
Manufacturing
(1) Each length of timber is cut into four units
(2) All units are inspected
(3) A rejection rate of 20% is expected
(4) Acceptable units are coated in a preservative and sold as fence posts
(5) Rejected units are sold as fire wood.
Stock Holding
(6) A stock of finished fence posts will be maintained, at the end of each period, at 25% of the
estimated sales for the following period
(7) Second-hand timbers are ordered in quantities of 1,200 units at a reorder level of 400 units
Delivery is expected the next day
(8) Stock levels at the start of first period:
Second-hand timbers 400 units
Finished fence posts 1,700 units.
Costs
(9) Second-hand timbers £4 per unit (excluding delivery costs)
(10) Preservative £20 per 100 fence posts
(11) Direct labour £2.50 per fence post
(12) Fixed overheads £7,680 per period
(Overheads are absorbed using a rate, recalculated each period, per fence post manufactured)
(13) Second-hand timbers are delivered at a cost of £600 per 1,200 units
(14) Firewood is sold at £0.50 per unit. The revenue generated is used to reduce the cost of fence
posts.
REQUIRED
Calculate:
(a) The total number of second-hand timbers required for manufacturing the customers’
requirements for the first period.
(4 marks)
(b) The stock value (£’s) at the end of the first period for both:
(i) second-hand timbers
(ii) finished fence posts.
The company uses the FIFO method of pricing stock issues.
(14 marks)
(c) The revenue, from the sale of firewood in the first period, if all rejected
units are sold.
(2 marks)
(Total 20 marks)
3017/4/11/MA Page 2 of 15
4. MODEL ANSWER FOR QUESTION 1
Syllabus topic 1: Materials and stock control (1.1)
(a) Manufacturing requirements for fence posts in first period:
Units
Customers requirement for fence posts 6,800
less opening stock of fence posts 1,700 1
add closing stock of fence posts (5,200 x 25%) 1,300 1
Manufacturing requirement 6,400
Second-hand timber requirement for manufacturing
allowing for a 20% rejection rate (6,400/4) / 0.80 2,000 2 OF
(4 marks)
(b) (i) Closing stock of second-hand timbers:
Units
Opening stock of second-hand timbers 400
Add two deliveries of 1,200 units 2,400 1
2,800
Less timbers required for manufacturing 2,000 1 OF
Closing stock (units) 800 1 OF
£'s
Timber value of closing stock (£4 x 800) 3,200
Delivery cost (£600/1,200 x 800) 400 1 OF
3,600 1 OF
(ii) Closing stock of fence posts: £'s
Timber cost [£4 x (1,300/4) / 0.8] 1625.00 2 OF
Preservative (£20 x 1,300/100) 260.00 1 OF
Labour (£2.50 x 1,300) 3,250.00 1 OF
Delivery cost [(£600/1200 x 1,300/4) / 0.8] 203.13 1 OF
Fixed overheads(£7,680 x 1,300/6,400) 1,560.00 1 OF
Less sale of firewood.[£0.50 x (1,300/0.8) x 0.2] 162.50 2 OF
Value of closing stock 6,735.63 1 OF
(14 marks)
(c) Income from sale of rejected timber (£0.50 x 2,000 x 0.2 x 4) £800 2 OF
(2 marks)
(Total 20 marks)
3017/4/11/MA Page 3 of 15
5. QUESTION 2
Comfort Travel Ltd is a transport company operating six passenger vehicles. The business, located in
rented premises, operates Type L and Type M vehicles and employs drivers contracted from an agency
on the basis of individual jobs.
At present the company uses a traditional absorption costing system based on costs per vehicle/km. to
establish the costs of operation. Budgeted operational data for the next period, for each vehicle type, is
as follows:
Type L Type M
Agency driver costs (£) 20,000 6,000
Number of travelling passengers 8,400 1,600
Km per vehicle 16,000 12,000
The following additional information is provided for each vehicle type:
Vehicle data Type L Type M
Purchase price per vehicle (£) 80,000 16,000
Number of vehicles 4 2
Number of seats per vehicle 45 12
Budgeted operational overheads for the period, not including agency driver costs, are £44,000 absorbed
on a rate per kilometre.
Further investigation has revealed the following activities and related operational overhead costs:
Activities Costs (£)
Fuel 22,000
Vehicle insurance 2,816
Vehicle cleaning 1,632
Servicing 3,520
Road fund licence 1,200
Depreciation 5,632
Administration 5,400
Rent 1,800
44,000
Other information
(i) Vehicle servicing is carried out regularly based on a predetermined number of kilometres
completed
(ii) Fuel costs are influenced by the number of kilometres completed
(iii) Cleaning costs are influenced by the number of seats on the vehicles
(iv) Vehicle insurance and depreciation are influenced by the purchase price of the vehicles.
(v) Road fund licence costs are influenced by the number of vehicles in operation.
(vi) Administration costs are influenced by the number of travelling passengers
(vii) Rent is influenced by the number of parking bays required. Each vehicle L requires two bays for
parking whereas each vehicle M only requires one.
REQUIRED
Calculate the budgeted average operational cost per vehicle for the period, for each type of vehicle,
using:
(a) Traditional absorption costing
(5 marks)
(b) Activity based costing.
(15 marks)
(Total 20 marks)
3017/4/11/MA Page 4 of 15
6. MODEL ANSWER FOR QUESTION 2
Syllabus Topic 2: Costing methods and systems (2.1 and 2.2)
(a)
Traditional absorption costing
Overhead absorption rate
Vehicle Type L M Total
No of vehicles 4 2
Km per vehicle 16,000 12,000
Total Km 64,000 24,000 88,000 1
Overhead absorption rate (£44,000/88,000) = £0.5 per km 1
Traditional absorption costing for each vehicle
£ £
Vehicle Type L M
Agency driver 5,000 3,000 1
Overheads 8,000 6,000 1 OF
13,000 9,000 1 OF
Workings (5 marks)
Overheads
Type L 0.50 x 16,000 = £8,000
Type M 0.50 x 12,000 = £6,000
(b)
Activity Based Costing
Activity Driver Vehicle L Vehicle M
£ £
Fuel £0.25 per Km 4,000 (0.25 x 16,000) 3,000 (0.25 x 12,000) 1½
(22,000/88,000)
Insurance £0.008 per £ purchase price 640 (0.008 x 80,000) 128 (0.008 x 16,000) 1½
(2,816/352,000)
Cleaning £8.00 per seat 360 (8.00 x 45) 96 (8.00 x 12) 1½
(1,632/204)
Servicing £0.04 per Km 640 (0.04 x 16,000) 480 (0.04 x 12,000) 1½
(3,520/88,000)
Licence £200 per vehicle 200 (200 x 1) 200 (200 x 1) 1½
(1,200/6)
Depreciation £0.016 per purchase price 1,280 (0.016 x 80,000) 256 (0.016 x 16,000) 1½
(5,632/352,000)
Administration £0.54 per passenger 1,134 (0.54 x 8400/4) 432 (0.54 x1600/2) 1½
(5,400/10,000)
Rent £180 per parking bay 360 (180 x 2) 180 (180 x 1) 1½
(1,800/10)
Total Overheads 8,614 4,772
3017/4/11/MA Page 5 of 15
7. MODEL ANSWER FOR QUESTION 2 CONTINUED
Activity based costing for each vehicle
Vehicle Type L M
£ £
Agency driver cost 5,000 3,000 1 OF
Overheads 8,614 4,772 1 OF
13,614 7,772 1 OF
(15 marks)
(Total 20 marks)
3017/4/11/MA Page 6 of 15
8. QUESTION 3
Makit Ltd, which produces a single component for the motor industry, has just completed its first year of
trading. The summary profit and loss account for the year is set out below:
£ £
Sales (20,000 units) 1,280,000
Direct Costs
Direct material 360,000
Direct labour 320,000
Direct expenses 80,000
Overheads
Production 200,000
Administration 160,000
Selling 181,000 1,301,000
Net Loss 21,000
The following information is available:
(i) all of the direct costs are variable with production
(ii) the production overhead figure includes £80,000 fixed costs. The remaining production
overheads vary with production
(iii) all of the administration overheads are fixed
(iv) variable selling overheads are incurred at the rate of £6 per unit. The remaining selling
overheads are fixed.
REQUIRED
(a) The break-even point in units and sales value.
(7 marks)
(b) The profit that would have been earned from the sale of 24,000 units.
(2 marks)
(c) The number of units needed to be sold to achieve a profit of £14,000.
(2 marks)
The company has set a profit objective of £24,000 for year 2. Two suggestions have been made as to
how this profit could be achieved.
Suggestion1:
Reduce the selling price by £3 per unit and use a less expensive material that
would reduce the direct material cost by £2 per unit
Suggestion 2:
Increase the selling price by £4 and increase advertising expenditure by £75,000
In addition the use a less expensive material that would reduce the material cost by
£2 per unit.
All other fixed costs and unit variable costs will remain unchanged for year 2.
REQUIRED
(d) For each suggestion, calculate how many units need to be sold to achieve the profit
objective of £24,000.
(9 marks)
(Total 20 marks)
3017/4/11/MA Page 7 of 15
9. MODEL ANSWER FOR QUESTION 3
Syllabus Topic 3: Cost-volume-profit analysis (3.2) and (3.4)
(a) Break-even point
= Fixed costs / unit contribution = £301,000/£14 = 21,500 units 1 OF
Sales value 21,500 x £64 = £1,376,000 1 OF
Workings: Variable Fixed
Direct costs/overheads £000 £000
Direct material 360
Direct labour 320
Direct expenses 80
Production overhead 120 80
Administration overhead 160
Selling overhead 120 61
1,000 2 301 1
Selling price per unit (1,280,000/20,000) £64
Less variable cost per unit (1,000,000/20,000) £50 1
Contribution per unit £14 1
(7 marks)
(b) Profit from sale of 24,000 units
Total contribution (24,000 x £14) £336,000 1 OF
less fixed costs £301,000
Profit £ 35,000 1 OF
(2 marks)
(c) Number of units sales for a profit of £14,000
Total contribution required = £14,000 + £301,000 = £315,000 1 OF
Number of unit sales = £315,000/£14 = 22,500 units 1 OF
(2 marks)
(d)
Suggestion 1: £ per unit
Contribution 14
less decrease in selling price 3
plus reduction in material cost 2
New contribution 13 2 OF
Total contribution required = £24,000 + £301,000 = £325,000 1 OF
Number of sales units = £325,000/13 = 25,000 units 1 OF
Suggestion 2: £ per unit
Contribution 14
plus increase in selling price 4
plus reduction in material cost 2
New contribution 20 2 OF
3017/4/11 Page 8 of 15
10. MODEL ANSWER FOR QUESTION 3 CONTINUED
Fixed costs increase by £75,000 (increase in advertising)
New fixed cost £301,000 + £75,000 = £376,000 1 OF
Total contribution required = £24,000 + £376,000 = £400,000 1 OF
Number of sales units = £400,000/£20 = 20,000 units 1 OF
(9 marks)
(Total 20 marks)
3017/4/11 Page 9 of 15
11. QUESTION 4
Sole Products Ltd manufactures and sells a single product. Due to a fall in sales demand the company
has been operating some way below maximum capacity. The company has prepared the following
report, for the year just ending, which indicates that demand is now increasing. Management of the
company, however, is concerned that the report also indicates a large adverse cost variance.
Budget Actual Variance
Production/Sales (units) 10,500 12,000 1,500 F
Sales revenue (£) 126,000 142,800 16,800 F
Direct material (£) 52,500 57,000 4,500 A
Direct labour (£) 31,500 33,600 2,100 A
Production overheads (£) 26,000 28,000 2,000 A
Selling and distribution costs (£) 10,200 10,300 100 A
Administration costs (£) 4,200 4,600 400 A
Total costs (£) 124,400 133,500 9,100 A
Profit (£) 1,600 9,300 7,700 F
The following points have been revealed concerning the budget:
(i) production overheads are £33,000 at the maximum annual capacity of 14,000 units
(ii) selling and distribution costs include a fixed element of £6,000
(iii) administration costs are fixed.
REQUIRED
(a) Briefly explain the main differences between a flexible and a fixed budget.
(4 marks)
(b) Prepare a revised report for the year just ended, in the above format, using a flexed
budget.
(12 marks)
(c) State two possible reasons for each of the direct materials and direct labour costs
variances.
(4 marks)
(Total 20 marks)
3017/4/11 Page 10 of 15
12. MODEL ANSWER FOR QUESTION 4
Syllabus Topic 4: Budgetary planning and control (4.6), (4.8) and (4.9)
(a) Fixed Budget
A fixed budget is normally set prior to the start of an accounting period and
used for planning purposes.
It is based on one level of activity. 2
Flexible Budget
A flexible budget is used for control purposes.
It changes in response to changes in activity by recognising different cost
behaviour patterns.
2
(4 marks)
(b) Flexed Actual Variance
Budget
Production/sales (units) 12,000 12,000 0
£ £ £
Sales revenue 144,000 142,800 1,200 A 2
Direct material 60,000 57,000 3,000 F 1
Direct labour 36,000 33,600 2,400 F 1
Production overheads 29,000 28,000 1,000 F 2
Selling and distribution costs 10,800 10,300 500 F 2
Administration costs 4,200 4,600 400 A 1
Total costs 140,000 133,500 6.500 F 1
Profit 4,000 9,300 5,300F 2
(12 marks)
Workings:
Flexed sales budget 126,000/10,500 x 12,000 = £144,000
Flexed direct material budget 52,500/10,500 x 12,000 = £60,000
Flexed direct labour budget 31,500/10,500 x 12,000 = £36,000
Production overheads
@ max output (14,000 units) £33,000 = fixed cost + 14,000 x unit variable cost
@ 10,500 units output £26,000 = fixed cost + 10,500 x unit variable cost
£7,000 = 3,500 x unit variable cost
unit variable cost = 7,000/3,500 = £2.00 per unit
Fixed cost = 33,000 - 14,000 x 2 = £5,000
Flexed budget for 12,000 units = 5,000 + 12,000 x 2 = £29,000
Selling and distribution
@ 10,500 units 10,200 = 6,000 + 10,500 x unit variable cost
Unit variable cost = (10,200 - 6,000) / 10,500 = £0.40 per unit
Flexed budget for 12,000 units = 6,000 + 12,000 x 0.4 = £10,800
3017/4/11 Page 11 of 15
13. MODEL ANSWER FOR QUESTION 4 CONTINUED
(c) Material variance may be favourable because of wastage below
standard and/or unit prices below standard 2
Labour variances may be favourable because of a decrease in the time
taken to complete the work and/or a labour rate below standard 2
(4 marks)
(Total 20 marks)
3017/4/11 Page 12 of 15
14. QUESTION 5
Mix and Match Ltd uses a batch production method to produce its single product by combining two
materials Tee and Pee. The company has budgeted for a material mix ratio of 80:20 for Tee and Pee
respectively.
The following information relates to each batch:
Direct material input 200 kg
Material Tee standard price £1.50 per kg
Material Pee standard price £3.00 per kg
The standard production specification states that a 90% yield of product is expected.
The waste generated has no value.
Actual results for month 10 were as follows:
Output 1,890 kg
Material Tee 1,140 kg £1,610
Material Pee 860 kg £2,780
There is no stock of raw material
REQUIRED
(a) Calculate, for month 10, the following variances:
(i) material price for each material and in total
(ii) material mix for each material and in total
(iii) material yield in total.
(12 marks)
(b) Explain the meaning of:
(i) material mix variance
(ii) material yield variance.
(4 marks)
(c) Calculate the total material usage variance and reconcile this with the appropriate
variances calculated in part (a).
(4 marks)
(Total 20 marks)
3017/4/11 Page 13 of 15
15. MODEL ANSWER FOR QUESTION 5
Syllabus Topic 5: Standard costing and variance (5.4) and (5.6)
(a) (i) Material Price Variance
(Actual Usage x Standard Price) - Actual cost
Tee (1,140 x £1.50) - £1,610 100 F 1
Pee (860 x £3) - £2,780 200 A 1
1
(3 marks)
(ii) Material Mix Variance
(Actual Usage in Standard Proportions – Actual Usage) x Standard Price
Tee [80% of (1,140 + 860) – 1,140] x £1.50 690 F 2
Pee [20% of (1,140 + 860) – 860] x £3 1,380 A 2
690 A 1
(5 marks)
Alternative solution for (ii)
(Actual input quantity – budgeted material input. Quantity for output produced)
x (Standard weighted average cost per unit - standard cost per input unit)
Tee [1,140 - (1,890/0.9) x0.80] x (1.80 - 1.50) 162 A
Pee [860 - (1,890/0.9) x0.20] x [1.80 - 3.00)] 528 A
690 A
(iii) Material Yield Variance
(Actual input quantity – budgeted material input. Quantity for output produced)
x Standard weighted average cost per unit of material input.
[(1140 + 860) - (1,890/0.9) x] 1.8 180 F 4
(4 marks)
Alternative solution for (iii)
(Actual output - budgeted output for the actual material input) x standard
weighted average cost per unit of output
{1,890 - [(1,140 +860) x 0.9]} x 2 180 F
Workings:
Standard cost of mix
Tee (200x 0.8) kg x £1.50 £240
Pee (200 x 0.2)kg x £3 £120
£360
Standard weighted average cost (material input)
£360/200 £1.80 per kg
Standard weighted average cost (material output)
£360/(0.9 x 200) £2.0 per kg
3017/4/11 Page 14 of 15