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JUNE 2011 REVISION

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=

For latest course notes, free audio & video lectures, support and forums please visit

PAPER F2

JUNE 2011 REVISION

**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

For latest course notes, free audio & video lectures, support and forums please visit

support and forums please visit . free audio & video lectures.000 56.000 Stores and Canteen are service departments. 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 For latest course notes.SERVICE DEPARTMENTS After allocating and apportioning overheads.000 196. the total overheads for each department are: X Y Stores Canteen 280.000 84.PAPER F2 JUNE 2011 REVISION OVERHEAD ABSORPTION .

000 Gross Profit 224.000 Fixed 336.PAPER F2 JUNE 2011 REVISION BREAKEVEN ANALYSIS Skully Ltd has produced the following (summarised) P&L A/C for 2010: $ $ Sales (20 000 units) 560.000 Fixed 168.000 (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 For latest course notes.000 Production costs: Variable 252.000 Net Profit $56. support and forums please visit .000 Non-production costs: Variable 84.000 84.000 84. free audio & video lectures.

I.PAPER F2 JUNE 2011 REVISION PROCESS COSTING A In process X.840 (There was no W. 8.P.600 Labour 30% complete: $240] W. All losses are sold for $1 p. at the end of month: 600u [ Materials 100% complete Labour 60% complete] Expenditure during the month: Materials: $30. support and forums please visit .I.000 Labour: $18.000 units were started during the month. at the start of month: 400u [Materials 100% complete: $1. 6. There is a normal loss of 10% of input.u.P at start or end of month) Write up the Process account and Loss account for the month B In process Y. Actual units completed during the month were 7300u. free audio & video lectures.I. Costs incurred during the month: Materials: $20.P. W.000u were started during the month. using FIFO For latest course notes.120 (There were no losses during the month) Write up the process account.000 Labour and overheads: $3.

000 kg S. (per kg) $10 $14 $1.000 kg 10.40 The costs incurred in the process are $460. support and forums please visit .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 For latest course notes. During 2010.P. production was as follows: A B By-product 10. free audio & video lectures.000 kg 40. For products A & B.PAPER F2 JUNE 2011 REVISION JOINT COSTS AND BY-PRODUCTS Jackson Ltd produces 2 products (& a by-product) in a joint process.

000 u Selling price Variable costs Contribution Labour usage Material usage Maximum demand: If labour hours are restricted to a maximum of 8.PAPER F2 JUNE 2011 REVISION LINEAR PROGRAMMING Mulder Ltd manufactures 2 products . free audio & video lectures.000 hours. what is the optimum production schedule? For latest course notes.000 u Y 15 5 $10 4 hrs 3 kg 12.000kg.X & Y with the following unit costings: X 20 14 $6 2 hrs 5 kg 3. and material is restricted to a maximum of 13. support and forums please visit .

y=1500 y=0.PAPER F2 JUNE 2011 REVISION LINEAR PROGRAMMING CONSTRAINTS: Labour: 2x + 4y ≤ 8. free audio & video lectures.000 Non-negativity: x ≥0. 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 Material: 5x + 3y ≤ 13.000. then: x=0.slope will be the same] B D 4000 x For latest course notes. support and forums please visit . x=2500 BUT use any value for C . y ≤ 12.000 Demand: x ≤ 3000.

5 gives: (3) – (2) gives 2x + 4y = 8.PAPER F2 JUNE 2011 REVISION LINEAR PROGRAMMING Optimum production schedule occurs at point E on the graph At point E: and (1) x 2. free audio & video lectures.000 (2) 5x + 10y = 20.000 (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 For latest course notes.000 (1) 5x + 3y = 13. support and forums please visit .

(as %age of purchase cost): (a) $32 18 % p.PAPER F2 JUNE 2011 REVISION STOCK CONTROL X plc needs to purchase 1. Calculate the optimum order quantity. and maximum demand of 40 units per day.a. (b) Y Plc has minimum demand of 20 units per day. The lead time varies between 10 and 15 days.a. support and forums please visit .200 units.800 units a year. what will be the maximum stock level? – buffer (or safety) stock For latest course notes. at that order quantity. and the total costs p.a. The purchase price of each unit is $25. average demand of 30 units per day. free audio & video lectures. Delivery costs per order: Stock holding costs p. (i) (ii) What should the reorder level be? If the reorder quantity is 1.

PAPER F2 JUNE 2011 REVISION 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 For latest course notes. support and forums please visit . free audio & video lectures.

What is the relevant cost? Example 2 600 kg of material are needed for a special contract. free audio & video lectures.. There are 400 kg in stock. which was purchased for $2 per kg. support and forums please visit . What is the relevant cost? SUNK COSTS OPPORTUNITY COSTS For latest course notes. The current purchase price is $2. What is the relevant cost? Example 4 A contact needs 300 hours of labour.PAPER F2 JUNE 2011 REVISION RELEVANT COSTING Example 1 500 kg of material are needed for a special contract. which was purchased for $5 per kg. and the company has spare capacity. Labour is paid $8 per hour. Labour is paid $6 per hour. What is the relevant cost? Example 3 A contract needs 200 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. and the current realisable value is $6 per kg.20 per kg. There is no spare capacity.. The current purchase price is $7 per kg. The material is in regular use. There are 200 kg in stock. The company has no other use for this material.

Average number of employees 200 +160 Average number of employees = = 180 2 Labour turnover rate = 10 × 100% = 5. and 160 at the end of the year. support and forums please visit .56% 180 For latest course notes. free audio & video lectures.PAPER F2 JUNE 2011 REVISION 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. Answer Number of employees fell by 40. so if 50 left 10 must have been replaced. During the year 50 employees had left.

using absorption costing What would the profit be using marginal costing? For latest course notes. The profit was calculated at $220.000.PAPER F2 JUNE 2011 REVISION 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. free audio & video lectures. support and forums please visit . Z Ltd produced 50.000.000 desks and sold 45.

000 B 56 18 16 10 44 $12 1.PAPER F2 JUNE 2011 REVISION KEY FACTOR ANALYSIS XX produces 3 products: Selling price Materials Labour Variable overheads Contribution p. free audio & video lectures.u.000 C 51 14 12 10 36 $15 1. and there is a maximum 8.000 Labour is paid $4 per hour.000 hours available. support and forums please visit . Maximum demand A 42 10 12 8 30 $12 1. How many units of each should be produced to maximise profit? For latest course notes.

u. and how many purchased from the supplier.000 G 4 10 4 18 2.PAPER F2 JUNE 2011 REVISION KEY FACTOR ANALYSIS (2) YY makes 2 products: Materials Labour Variable overheads Units required F 8 5 3 16 2..000 hours available. in order to minimise costs? For latest course notes. support and forums please visit .000 Labour is paid $5 per hour.u. and there are only 5. and G: $26p. free audio & video lectures. How many units of each should be produced. The units may be purchased from a supplier at costs of F:$22p.

000 kg are in inventory) Materials expenditure (price) variance: Materials usage variance: For latest course notes.000 kg of material and paid $500.PAPER F2 JUNE 2011 REVISION VARIANCES – MATERIALS Standard cost of materials: 20 kg at $4 per kg = $80 per unit During the month we produced 5000 units.000 We used 105.000 kg in production (the other 15. We purchased 120. support and forums please visit . free audio & video lectures.

We paid for 52. support and forums please visit .PAPER F2 JUNE 2011 REVISION VARIANCES – LABOUR Standard cost of labour: 8 hours at $3 per hr = $24 per unit During the month we produced 6000 units. We worked 49.500 hours.20 per hour.000 hours of labour at the rate of $3. free audio & video lectures. Labour rate of pay variance: Labour idle time variance: Labour efficiency variance: For latest course notes.

Variable overhead expenditure variance: Variable overhead efficiency variance: For latest course notes.PAPER F2 JUNE 2011 REVISION 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. support and forums please visit .200 units. We worked for 7100 hours.900 for variable overheads. free audio & video lectures.

free audio & video lectures.000 units. Standard cost of fixed overheads: 4 hours at $3 per hr = $12 per unit During the month we produced 9. and paid $100.000 for fixed overheads.PAPER F2 JUNE 2011 REVISION VARIANCES – FIXED OVERHEADS Our company uses absorption costing. Total fixed overhead variance: Fixed overhead expenditure variance: Fixed overhead volume variance: Fixed overhead capacity variance: Fixed overhead efficiency variance: For latest course notes. support and forums please visit . and budgeted to produce and sell 8.000 units.000 hours. We worked for 35.

The standard selling price is $20 per unit. The standard costs are: Variable costs $12 per unit Fixed costs $ 5 per unit The actual sales were 12. support and forums please visit .000 units. free audio & video lectures.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: For latest course notes.PAPER F2 JUNE 2011 REVISION VARIANCES – SALES We budgeted to sell 10.

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