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Costing Questions

Costing Questions

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Published by: Innocent Marime on Nov 04, 2011
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Extra questions for Chapter 3 Cost assignment 
3.1Intermediate: Job cost calculation
Aprinting and publishing company has been asked to provide an estimate for the production of 100000 catalogues, of 64 pages (32 sheets of paper) each, for a potentialcustomer.Four operations are involved in the production process: photography, set-up, printingand binding.Each page of the catalogue requires a separate photographic session. Each session costs£150.Set-up would require a plate to be made for each page of the catalogue. Each platerequires 4 hours of labour at £7 per hour and £35 of materials. Overheads are absorbedon the basis of labour hours at an hourly rate of £9.50.In printing, paper costs £12 per thousand sheets. Material losses are expected to be 2%of input. Other printing materials will cost £7 per 500 catalogues. 1000 catalogues are printed per hour of machine time. Labour and overhead costs incurred in printing areabsorbed at a rate of £62 per machine hour.Binding costs are recovered at a rate per machine hour. The rate is £43 per hour and2500 catalogues are bound per hour of machine time.Aprofit margin of 10% of selling price is required.You are required to:(a)determine the total amount that should be quoted for the catalogue job by the printing and publishing company.(11 marks)(b)calculate the additional costs that would be charged to the job if the labour efficiencyratio achieved versus estimate in set-up is 90%. (4 marks)(Total 15 marks)
 ACCAFoundation Stage Paper 3
3.2Intermediate: Reapportionment of service department overheads and acalculation of under/over-recovery of overheads
An organization has budgeted for the following production overheads for its productionand service cost centres for the coming year:
Cost centre£
Machining180000Assembly160000Paint shop130000Engineering shop84000Stores52000Canteen75000The product passes through the machining, assembly and paint shop cost centres and thefollowing data relates to the cost centres:
M/cAssPaintEngStoresshopshop
 No. of employees8151393024Eng Shop-service180001200010000Stores (orders)1801359045
 
The following budgeted data relates to the production cost centres:
M/cAssemblyPaint shop
M/c hours920081006600Lab hours8300112509000Lab cost£40000£88000£45000Required:(a)Apportion the production overhead costs of the service cost centres to the productioncost centres and determine predetermined overhead absorption rates for the 3 production cost centres on the following basis:Machining – Machine hours.Assembly – Labour hours.Paint shop Labour costs. (11 marks)(b)Actual results for the production cost centres were:
M/cAssemblyPaint shop
M/c hours1000082006600Lab hours450078006900Lab cost£25000£42000£35000Actual O/h£290000£167000£155000Prepare a statement showing the under/over absorption per cost centre for the periodunder review. (7 marks)(c)Explain why overheads need to be absorbed upon pre-determined bases such as theabove. Consider whether these bases for absorption are appropriate in the light of changing technology, suggesting any alternative basis that you consider appropriate.(7 marks)(Total 25 marks)
 AATCost Accounting and Budgeting 
3.3Advanced: Comparison of methods of reapportioning service department costs
Puerile Plastics Ltd consists of six departments: personnel and administration,maintenance, stores, moulding, extrusion and finishing. The accountant has collecteddata for the 12 months to 30 September relating to the six departments, which is given below.The accountant wishes to use the data to derive the selling prices of the firm’s products, based on their full costs. The selling price of each product will be equal to 250% of the product’s full cost. The market for the products is supplied by five large companies, of which Puerile Plastics Ltd is one, and ten small companies. Puerile Plastics Ltd hasapproximately a 20% market share. The standard production quantities can be convertedinto standard equivalent units of output for each of the three production departments.The accountant is considering different ways of allocating the costs of the three servicedepartments in order to obtain the full cost per standard equivalent unit, and hence thesales price of each product.
 
Required:(a)Calculate the total cost for each of the three production departments using the directmethod of allocation of the service departments’costs. (4 marks)(b)Calculate the total cost of each of the three production departments using the step-down (sometimes called step or sequential) method of allocation of the servicedepartments’costs. State any assumptions which you make. (5 marks)(c)
 Formulate
the equations which will provide the total cost of each of the three production departments using the reciprocal or cross-allocation method of allocationof costs. (4 marks)(d)Compare and contrast the three methods of service cost allocation, using the resultsobtained in (a) and (b) above as examples. (7 marks)(e)Comment on the approach the accountant is considering for the derivation of theselling price of the products. (5 marks)(Total 25 marks)
 ICAEW P2 Management Accounting 
Data relating to Question 3.3
PersonnelandAdministrationMaintenanceStoresMouldingExtrusionFinishingTotal
Employees (number)204325161078Proportion of totalmaintenance hoursworked in eachdepartment (%)51015204010100Production of store’sfloorspace taken up by each department’smaterials (%)10203040100Output levels (per thousand standardequivalent units)187149336Direct costs (£000):Material362333017020Labour1552518.72168.75115.281Variable overheads71.25151.830Fixed overheads151517.28449.3371.767
Extra questions for Chapter 4 Accounting entries for a job costing system
4.1Intermediate: Integrated cost accounting
 NBLimited operates an integrated accounting system. At the beginning of October, thefollowing balances appeared in the trial balance:
(£000)(£000)(£000)
Freehold buildings800Plant and equipment, at cost480Provision for depreciation on plantand equipment100Stocks:Raw materials400Work in Process 1:direct materials71direct wages50 production overhead125246Work in Process 2:

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