Answers

ACCA Certified Accounting Technician Examination – Paper T4

Accounting for Costs December 2010 Answers

Section A

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

Workings:

10 (25,500 ÷ 0·85)

13 (650/630 x 100)

16 [176,000 ÷ (36 x 0·4)]

17 [(1·022 – 1) x 100]

18 (300,000 – 100,000)

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Section B

1 (a) (i) 5,000 leaflets 8,000 leaflets

$ total $ total
Preparation costs:
Artwork 560
Machine set-up 320 880 880
Manufacturing costs:
Materials 690
Labour 180
Other variable 60
Fixed overhead (12 hrs x $25) 300
––––––
1,230 x 5,000 = 615 1,230 x 8,000 = 984
––––––– ––– –––––– –––
10,000 10,000
$1,495 $1,864
––––––– –––––––
(ii) $/leaflet $/leaflet
$1,495 ÷ 5,000 = $0·299 $1,864 ÷ 8,000 = $0·233
–––––– ––––––

(b) Direct materials Conversion costs

Equivalent units:
Output completed 24,600 units 24,600 units
Closing work-in-progress 3,200 units 2,400 units (3,200 x 0·75)
––––––– –––––––
27,800 units 27,000 units
Costs $77,840 $28,350
Cost per unit $2·80 $1·05 Total $3·85
––––––– –––––––

2 Assembly Finishing
(a) Absorption rate $61,320 ÷ 8,400 lab hrs $27,280 ÷ 1,760 m/c hrs
= $7·30 per direct labour hour = $15·50 per machine hour
––––––––––––––––––––––––– ––––––––––––––––––––––

(b) Overhead absorbed 8,760 lab hrs x $7·30/hr 1,690 m/c hrs x $15·50/hr
= $63,948 = $26,195
–––––––– ––––––––

(c) Over/under absorption $62,130 – $63,948 $26,860 – $26,195

= $1,818 over absorbed $665 under absorbed
––––––––––––––––––– ––––––––––––––––

3 (a) Relevant costs:

$
Raw materials 8,762 [$5,720 + (180 kg x $16·90/kg)]
Direct labour 6,690 [(430 hrs x $11/hr) + $1,960]
Overheads 1,075 (430 direct labour hours x $2·50/hr)
–––––––
16,527
–––––––

(b) (i) Sunk costs:

Costs that have been incurred or committed prior to a decision point.
(ii) Avoidable costs:
Costs that would not be incurred if the activity to which they relate did not exist.

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4 (a) Marginal costing profit statement:
$000
Sales 295·2 (12,300 units x $24/unit)
Variable cost of sales 135·3 [12,300 units x ($5·60 + 4·20 + 0·70 + 0·50/unit)]
––––––
Contribution 159·9 (12,300 units x $13/unit)
Fixed overheads 120·0 ($78,000 + $42,000)
––––––
Net profit 39·9
––––––

(b) Difference in profit between absorption costing and marginal costing:

Change in inventory (units) x fixed production overhead absorption rate (per unit)
= 500 units (12,300 – 11,800) x $6·50/unit
= $3,250 (absorption costing profit lower by this amount because inventory has reduced).

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ACCA Certified Accounting Technician Examination – Paper T4
Accounting for Costs December 2010 Marking Scheme

Marks
1 (a) (i) Preparation costs 2
Variable manufacturing costs for 10,000 leaflets 1
Fixed overheads for 10,000 leaflets 1½
Total manufacturing costs for 10,000 leaflets 1½
Total manufacturing costs for 5,000 leaflets 1½
Total manufacturing costs for 8,000 leaflets 1½ 9
–––
(ii) Cost per leaflet (1 for each) 2

(b) Equivalent units:

Direct materials 1½
Conversion costs 2½
Cost per unit:
Direct materials 1½
Conversion costs 1½ 7
––– –––
18
–––

2 (a) Absorption rates:

Assembly 1½
Finishing 1½ 3
–––

(b) Overheads absorbed:

Assembly 2
Finishing 2 4
–––

(c) Over/under absorption:

Assembly 3
Finishing 3 6
––– –––
13
–––

3 (a) Raw materials 3½

Direct labour 3½
Overhead 3 10
–––

(b) (i) Sunk costs 2

(ii) Avoidable costs 2
–––
14
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4 (a) Sales 1
Variable cost of sales 2
Contribution 2
Fixed overheads 2
Net profit 2 9
–––

(b) Formula 2
Amount 2
Absorption profit lower 2 6
––– –––
15
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