PAPER F2

JUNE 2010 REVISION COURSE

FORMULAE SHEET

a=

∑y b∑x n n∑xy-∑x∑y n∑x2 -(∑x)2 x ∑xy-∑x∑y ( a=

Regression analysis
∑y b∑x n n

b=

r=

∑y b∑x a= n∑xy-∑x∑y n n n∑x2 -(∑x)2 b∑x ∑y a= nn∑xy-∑x∑y n b= n∑xy-∑x∑y 2 2 n∑x -(∑x) r= n∑xy-∑x∑y (n∑x2 -(∑x)2 )(n∑y 2 -(∑y)2 ) b= n∑x2 -(∑x)2 x∑xy-∑x∑y r= 2 2C0D (n∑x -(∑x)2 )(n∑y 2 -(∑y)2 ) = Economic order x∑xy-∑x∑y quantity Ch r= 2 (n∑x -(∑x)2 )(n∑y 2 -(∑y)2 ) 2C0D = 2C0D Ch = D 2C0D = Ch (1- ) C h R Economic batchD 2C0 quantity = D Ch D 2C(1- R ) 0 = D Ch (1- ) R b=

PAPER F2

JUNE 2010 REVISION COURSE

OVERHEAD ALLOCATION AND ABSORPTION
Jones Ltd has allocated overheads between departments as follows: Dept $ A 336,000 B 210,000 Repairs 42,000 Maintenance 28,000 In addition there are general overheads of $308,000 which should be apportioned: A: 40%; B: 30%; Repairs: 20%; Maintenance: 10%.

A & B are production departments. The repairs and maintenance service production department as follows: A 60% 40% B 40% 40% Repairs – 20% Maintenance – –

Repairs Maintenance Budgeted labour hours: A: 40,000 hrs; B: 8,000 hrs

Budgeted machine hours: A: 5,000hrs; B: 60,000 hrs (a) (b) Calculate an overhead absorption rate for each production dept. Smith Ltd has budgeted overheads of $200,000 and budgeted labour hours of 50,000. Actual hours worked were 48,000 and actual overheads were $205,000. Calculate the amount of over or under absorption of overheads

000 Stores and Canteen are service departments.000 56.000 196.PAPER F2 JUNE 2010 REVISION COURSE OVERHEAD ABSORPTION . and are used by other departments as follows: X Y Stores Canteen Stores 80% 10% – 10% Canteen 60% 36% 4% – Reallocate the service department costs .SERVICE DEPARTMENTS After allocating and apportioning overheads. the total overheads for each department are: X Y Stores Canteen 280.000 84.

000 Net Profit $56.000 Fixed 336.000 (a) (b) (c) (d) What is breakeven sales volume for 2010? What is the margin of safety in 2010? What is C/S ratio in 2010 Draw (i) profit volume chart (ii) breakeven chart for 2010 .000 84.000 Fixed 168.000 Gross Profit 224.000 84.PAPER F2 JUNE 2010 REVISION COURSE BREAKEVEN ANALYSIS Skully Ltd has produced the following (summarised) P&L A/C for 2010: $ $ Sales (20 000 units) 560.000 Production costs: Variable 252.000 Non-production costs: Variable 84.

120 (There were no losses during the month) Write up the process account. at the start of month: 400u [Materials 100% complete: $1.000 Labour and overheads: $3.u. using FIFO .000u were started during the month.000 Labour: $18.PAPER F2 JUNE 2010 REVISION COURSE PROCESS COSTING A In process X.600 Labour 30% complete: $240] W.I.P at start or end of month) Write up the Process account and Loss account for the month B In process Y.I. 8.I. Actual units completed during the month were 7300u.P. All losses are sold for $1 p.840 (There was no W.000 units were started during the month. There is a normal loss of 10% of input.P. W. Costs incurred during the month: Materials: $20. at the end of month: 600u [ Materials 100% complete Labour 60% complete] Expenditure during the month: Materials: $30. 6.

000 Product A needs a further $3 per kg to be spent before it is ready for sale. calculate the stock value per kg splitting the joint costs (i) (ii) on the basis of weight on the basis of sales value .000 kg S.000 kg 10. (per kg) $10 $14 $1.P.40 The costs incurred in the process are $460.PAPER F2 JUNE 2010 REVISION COURSE JOINT COSTS AND BY-PRODUCTS Jackson Ltd produces 2 products (& a by-product) in a joint process. During 2010. For products A & B. production was as follows: A B By-product 10.000 kg 40.

and material is restricted to a maximum of 13.PAPER F2 JUNE 2010 REVISION COURSE LINEAR PROGRAMMING Mulder Ltd manufactures 2 products .000 u Y 15 5 $10 4 hrs 3 kg 12.000 u Selling price Variable costs Contribution Labour usage Material usage Maximum demand: If labour hours are restricted to a maximum of 8.000kg.000 hours.X & Y with the following unit costings: X 20 14 $6 2 hrs 5 kg 3. what is the optimum production schedule? .

PAPER F2 JUNE 2010 REVISION COURSE LINEAR PROGRAMMING CONSTRAINTS: Labour: 2x + 4y ≤ 8. y ≥ 0 OBJECTIVE: Maximise contribution: C = 6x+10y y 4333 The demand for y constraint is obviously redundant A Demand For x Material 2000 1500 C Labour Objective E 2500 2600 [Contribution line: if C = $15.000 Non-negativity: x ≥0. x=2500 BUT use any value for C .000 Material: 5x + 3y ≤ 13. y ≤ 12.000.slope will be the same] B D 4000 x . then: x=0.000 Demand: x ≤ 3000. y=1500 y=0.

000 (1) 5x + 3y = 13.5 gives: (3) – (2) gives 2x + 4y = 8.PAPER F2 JUNE 2010 REVISION COURSE LINEAR PROGRAMMING Optimum production schedule occurs at point E on the graph At point E: and (1) x 2.000 (3) 7y = 7000 y = 1000 2x + 4000 = 8000 2x = 4000 x = 2000 Substitute for y in (1): Optimum production schedule: Produce 2000 units of product X and 1000 units of product Y .000 (2) 5x + 10y = 20.

PAPER F2 JUNE 2010 REVISION COURSE STOCK CONTROL X plc needs to purchase 1. The lead time varies between 10 and 15 days. (i) (ii) What should the reorder level be? If the reorder quantity is 1. Delivery costs per order: Stock holding costs p. what will be the maximum stock level? – buffer (or safety) stock . (b) Y Plc has minimum demand of 20 units per day. (as %age of purchase cost): (a) $32 18 % p. The purchase price of each unit is $25.800 units a year.200 units. and the total costs p.a.a. average demand of 30 units per day. Calculate the optimum order quantity. and maximum demand of 40 units per day. at that order quantity.a.

PAPER F2 JUNE 2010 REVISION COURSE REGRESSION Units x 100 200 300 400 500 600 700 (a) (b) (c) Costs ($’000’s) y 40 45 50 65 70 70 80 xy x2 y2 Calculate the regression line Calculate the coefficient of correlation Calculate the coefficient of determination .

which was purchased for $5 per kg. which was purchased for $2 per kg. What is the relevant cost? SUNK COSTS OPPORTUNITY COSTS . Labour is paid $6 per hour. and the company has spare capacity. and the current realisable value is $6 per kg. The current purchase price is $7 per kg.PAPER F2 JUNE 2010 REVISION COURSE RELEVANT COSTING Example 1 500 kg of material are needed for a special contract. What is the relevant cost? Example 2 600 kg of material are needed for a special contract. What is the relevant cost? Example 3 A contract needs 200 hours of labour. Labour is paid $8 per hour.. There are 200 kg in stock.20 per kg. There is no spare capacity.. There are 400 kg in stock. The material is in regular use. The company has no other use for this material. The current purchase price is $2. What is the relevant cost? Example 4 A contact needs 300 hours of labour. and the labour would have to be transferred from other work producing units that earn a contribution of $14 per unit and take 2 hours per unit to produce.

Average number of employees 200 +160 Average number of employees = = 180 2 Labour turnover rate = 10 × 100% = 5.PAPER F2 JUNE 2010 REVISION COURSE LABOUR COSTS Ratios: Production Volume Ratio = Expected hours to make output Hours budgeted Actual hours worked Hours budgeted Expected hours to make output Actual hours worked Capacity Ratio = Efficiency Ratio = Piecework: Pay workers per unit produced Labour Turnover Rate = Employees Replaced Average Number of Employees Example Firm had 200 employees at start of the year. and 160 at the end of the year. During the year 50 employees had left.56% 180 . Answer Number of employees fell by 40. so if 50 left 10 must have been replaced.

using absorption costing What would the profit be using marginal costing? . Z Ltd produced 50.000 desks and sold 45.000.000. The profit was calculated at $220.PAPER F2 JUNE 2010 REVISION COURSE MARGINAL AND ABSORPTION COSTING Z Ltd produces desks for which the standard cost card is as follows: $ pu Materials 10 Labour 6 Variable overheads 4 Fixed overheads 3 $23 During January.

000 B 56 18 16 10 44 $12 1. How many units of each should be produced to maximise profit? . Maximum demand A 42 10 12 8 30 $12 1.000 hours available.000 C 51 14 12 10 36 $15 1.000 Labour is paid $4 per hour.u. and there is a maximum 8.PAPER F2 JUNE 2010 REVISION COURSE KEY FACTOR ANALYSIS XX produces 3 products: Selling price Materials Labour Variable overheads Contribution p.

and how many purchased from the supplier. How many units of each should be produced.000 Labour is paid $5 per hour. and there are only 5.u..000 G 4 10 4 18 2. and G: $26p. The units may be purchased from a supplier at costs of F:$22p.PAPER F2 JUNE 2010 REVISION COURSE KEY FACTOR ANALYSIS (2) YY makes 2 products: Materials Labour Variable overheads Units required F 8 5 3 16 2.u.000 hours available. in order to minimise costs? .

000 We used 105.PAPER F2 JUNE 2010 REVISION COURSE VARIANCES – MATERIALS Standard cost of materials: 20 kg at $4 per kg = $80 per unit During the month we produced 5000 units.000 kg in production (the other 15.000 kg are in inventory) Materials expenditure (price) variance: Materials usage variance: . We purchased 120.000 kg of material and paid $500.

Labour rate of pay variance: Labour idle time variance: Labour efficiency variance: . We worked 49.20 per hour.000 hours of labour at the rate of $3.PAPER F2 JUNE 2010 REVISION COURSE VARIANCES – LABOUR Standard cost of labour: 8 hours at $3 per hr = $24 per unit During the month we produced 6000 units. We paid for 52.500 hours.

900 for variable overheads. We worked for 7100 hours.PAPER F2 JUNE 2010 REVISION COURSE VARIANCES – VARIABLE OVERHEADS Standard cost of variable overheads: 6 hours at $2 per hr = $12 per unit During the month we produced 1. and paid $13. Variable overhead expenditure variance: Variable overhead efficiency variance: .200 units.

We worked for 35.000 hours. and paid $100. and budgeted to produce and sell 8.PAPER F2 JUNE 2010 REVISION COURSE VARIANCES – FIXED OVERHEADS Our company uses absorption costing.000 units. Total fixed overhead variance: Fixed overhead expenditure variance: Fixed overhead volume variance: Fixed overhead capacity variance: Fixed overhead efficiency variance: .000 units.000 for fixed overheads. Standard cost of fixed overheads: 4 hours at $3 per hr = $12 per unit During the month we produced 9.

The standard selling price is $20 per unit.000 units at a selling price of $19 per unit Absorption costing: Sales price variance: Sales volume variance: Marginal costing: Sales price variance: Sales volume variance: .000 units. The standard costs are: Variable costs $12 per unit Fixed costs $ 5 per unit The actual sales were 12.PAPER F2 JUNE 2010 REVISION COURSE VARIANCES – SALES We budgeted to sell 10.

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