Answers

ACCA Certified Accounting Technician Examination – Paper T4

Accounting for Costs June 2008 Answers

Section A

1 A
2 D
3 D
4 D
5 B
6 C
7 D
8 C
9 D
10 B
11 D
12 A
13 B
14 B
15 C
16 B
17 B
18 B
19 C
20 A

Workings to calculation MCQs

10 ($36,260 + $4,112)

12 [($28,720 + $10,260) – (1,760 units x $21·50 per unit)]

14 [($12,600 ÷ 0·6) – ($12,600 x 1·3)]

15 {[$45,705 – (300 units x $2·00 per unit)] ÷ 9,700}

16 [$56,000 x ($40,000 ÷ $90,000)]

17 [(1·043)2 – 1]

18 {10% + [(15 – 10%) x (39·1 ÷ 43·9)]}

19 [($56,000 x 3·79) + ($10,000 x 0·62) – $186,000]

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Section B

1 (a) Material pricing method

Last-in First-out (LIFO) – because the issue on day 6 is at the latest price (i.e. the price of the receipt on Day 4 rather than
the price of the opening inventory).

(b) End Month 2 closing inventory value – Material M27

[(2,400 kg at $3·60) + (1,000 kg at $3·65) + (6,000 kg at $3·70)] = $34,490

(c) Month 3 inventory record – Material M27

Day Issues Balance
Quantity Price Value Quantity Price Value
kg $/kg $ kg $/kg $
1 2,400 3·60 8,640
1,000 3·65 3,650
6,000 3·70 22,200
–––––– –––––––
9,400 34,490
–––––– –––––––
2 3,200 3·70 11,840 2,400 3·60 8,640
1,000 3·65 3,650
2,800 3·70 10,360
–––––– –––––––
6,200 22,650
–––––– –––––––
10 2,800 3·70 10,360
1,000 3·65 3,650
500 3·60 1,800
–––––– –––––––
4,300 15,810 1,900 3·60 6,840
–––––– ––––––– –––––– –––––––

2 (a) (i) Cost per kg of expected production of Product A

Expected output = 18,000 kg x 0·95
= 17,100 kg
Total costs: $
Raw materials 162,180
Conversion costs 94,050
–––––––––
256,230
Sales value of waste (1,440) (normal waste 900 kg x $1·60/kg)
–––––––––
Net cost $254,790
Cost per kg = $254,790 ÷ 17,100 kg
= $14·90 per kg
(ii) Total cost of finished output of Product A
17,000 kg x $14·90 per kg
= $253,300

(b) Equivalent units of production of Product B

Conversion costs
(units)
Completed output 12,600
Closing work-in-progress 900 (1,500 x 0·6)
–––––––
Equivalent units 13,500
–––––––

3 (a) Overhead absorption

A separate overhead absorption rate for each machine group, rather than a single factory-wide rate, would be better because
separate rates will reflect the resources consumed in each group. This will then be charged appropriately to jobs according to
their relative consumption of the resources in each group.

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 (b) Overhead cost apportionment
Machine group Total
MG1 MG2 MG3
$ $ $ $
Machine maintenance labour (apportioned on 12,600 8,400 12,600 33,600
machine maintenance labour hours)
Power (apportioned on kilowatt hours) 13,000 6,500 6,500 26,000
Rent and rates (apportioned on floor space) 15,920 13,930 9,950 39,800

(c) Overhead absorption rates

Machine group
MG1 MG2 MG3
Total allocated and apportioned ($) 129,560 107,520 119,070
Machine hours 8,200 5,600 4,900
Absorption rate ($ per machine hour) 15·80 19·20 24·30
––––––– ––––––– –––––––

(d) Production overhead charged to Job J21

$
MG1 5 machine hours at $15·80 = 79·00
MG2 2 machine hours at $19·20 = 38·40
MG3 3 machine hours at $24·30 = 72·90
––––––––
$190·30
––––––––

4 (a) Limiting factor

The limiting factor is the factor (aspect of business/resource) that limits a business organisation’s activities. For many
businesses this may frequently be the level of sales that can be achieved but at other times a business may be limited by a
shortage of a resource (as in the situation described in the next part of this question, where a scarcity of labour prevents the
business from achieving its sales potential).

(b) (i) Production plan

Product X Product Y Product Z
$ per unit $ per unit $ per unit
Selling price 100·00 69·00 85·00
Variable costs 56·60 38·95 46·65
–––––– –––––– ––––––
Contribution 43·40 30·05 38·35
–––––– –––––– ––––––
43·40 30·05 38·35
Contribution per £ of direct operative cost* –––––– –––––– ––––––
24·20 16·50 17·60
= $1·793 = $1·821 = $2·179
Production priority 3 2 1
–– –– ––
* (or
24·20 16·50 17·60
Direct operative hours per unit –––––– –––––– ––––––
11·00 11·00 11·00
= 2·2 hrs = 1·5 hrs = 1·6 hrs
43·40 30·05 38·35
Contribution per direct operative hour –––––– –––––– ––––––
2·2 1·5 1·6
= $19·73 = $20·03 = $23·97
Production priority 3 2 1)
–– –– ––
Production plan:
units hours
Product Z 5,700 x 17·6/11 9,120
Product Y 8,000 x 16·5/11 12,000
Product X 2,400 x 24·2/11 5,280
–––––––
26,400
–––––––

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(ii) Net profit
$ $
Contribution:
Product X 2,400 units at $43·40 104,160
Product Y 8,000 units at $30·05 240,400
Product Z 5,700 units at $38·35 218,595 563,155
––––––––
Fixed costs:
Product X 3,600 units at $34·30 123,480
Product Y 8,000 units at $25·70 205,600
Product Z 5,700 units at $27·20 155,040 484,120
–––––––– ––––––––
Net profit $79,035
––––––––

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ACCA Certified Accounting Technician Examination – Paper T4
Accounting for Costs June 2008 Marking Scheme

Section A
All questions 2 marks each 40

Section B

1 (a) LIFO 2

(b) 1 each for three elements 3

(c) (i) Issues – Day 2 2

– Day 10 2 4
––––
(ii) Balances – Day 1 1
– Day 2 2
– Day 10 1 4 13
–––– –––

2 (a) (i) Expected output 2

Total costs 11/2
Sales value of waste 3
Net cost per kg 11/2 8
––––
(ii) Finished product 2

(b) Completed output + 1/

2
Equivalent units 21/2 3 13
–––– –––

3 (a) Reason 2

(b) 2, 21/2, 21/2 7

(c) 1 for each rate 3

(d) 1 for each MG 3 15

–––

4 (a) Definition 2
Example 1 3
––––

(b) (i) Contribution per unit – 1 for each 3

Contribution per $ of direct operative – 1 for each 3
Production priority 1
Production plan – Z & Y 2
Production plan – X 2 11
––––
(ii) Contribution 21/2
Fixed costs 21/2 5 19 60
–––– ––– ––– ––––
100
––––

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