Question 265

(a) Using Traditional Absorption Costing

Total Overheads = 26550 + 66400 + 48000 + 54320

= 195270

Budgeted Overheads
OAR=
Budgeted Labour hours

195270
OAR=
6900

OAR= $28.3 / labour hour

Products A B
Sales units 15000 12000
hours/unit 0.1 0.15
Total hours 1500 1800
Overhead 42450 50940
Overhead/unit 2.83 4.245
Material cost 2.4 3.6
Direct Labour cost 1.48 2.22
Cost per unit 6.71 10.07

(b) Using ABC

Cost pool $ cost driver

Machine setup 26550 no of production runs (16 + 12 + 8) =
Machine running cost 66400 no of machine hours =
procurement costs 48000 no of purchase orders = (24 + 28 + 42)=
Delivery Costs 54320 no of deliveries = (48 + 30 + 62) =

W1: Machine hours

A B
production units 15000 12000
machine hrs/ unit 0.5 0.7
Total machine hours 7500 8400

Overhead Allocation

Products A B
Machine setup 11800 8850
 Machine running cost 15514 17376
procurement costs 12255 14298
Delivery Costs 18624 11640
Total Overheads 58193 52164
production units 15000 12000
Overheads / unit 3.88 4.35

Overheads / unit 3.88 4.35

Material cost 2.4 3.6
Direct Labour cost 1.48 2.22
Cost per unit 7.76 10.17

Cost per unit using

Traditional costing 6.71 10.07
ABC 7.76 10.17
increase/ decrease 1.05 0.10
% increase/decrease 16 1

Question 266 (a)

Budgeted Overheads
OAR=
Budgeted Labour hours

400000
OAR=
40000

OAR= $ 10 /labour hr

$ $
GC EX
Material cost 3500 8000
Direct Labour cost 4500 7500
Overhead/unit 3000 5000
Cost per unit 11000 20500
Profit (50% markup) 5500 10250
Selling price 16500 30750

(b)

Using ABC

Cost pool $ cost driver

Supervisors 90000 site visits
Planners 70000 planning documents
Property related 240000 labour hours
 Overhead Allocation

Products GC EX
Supervisors 180 1080
Planners 280 1400
Property related 1800 3000
Overheads / unit 2260 5480

$ $
GC EX
Material cost 3500 8000
Direct Labour cost 4500 7500
Overhead/unit 2260 5480
Cost per unit 10260 20980
Profit (50% markup) 5130 10490
Selling price 15390 31470

Question 267
(b) $ $
CB TJ
Direct Production costs
paper 0.8 0.1
ink ($30/litre) 1.5 4.5
Machine hrs ($12/hr) 1.2 2
3.5 6.6
Overheads (W1) 2.4 4
Total Cost 5.9 10.6
Selling price 9.3 14
Margin 3.4 3.4

[C] Cost Pool $ Cost Drivers

Property Costs 2,160,000 Machine hrs
Quality Control 668,000 No of Inspections
Production setup costs 52,000 No of Setups

Overhead Allocation
CB TJ
Property Costs 1,800,000 360,000
Quality Control 601,200 66,800
 Production setup costs 13,000 39,000
Overheads 2,414,200 465,800
Production units 1000000 120000
Overhead/unit 2.41 3.88

$ $
CB TJ
Direct Production costs
paper 0.8 0.1
ink ($30/litre) 1.5 4.5
Machine hrs ($12/hr) 1.2 2
3.5 6.6
Overheads (W1) 2.41 3.88
Total Cost 5.91 10.48
Selling price 9.30 14.00
Margin 3.39 3.52

Question 268
(i)
$ $
Sunshine Roadster
Material cost 400 600
Direct Labour cost (W1) 500 687.5
Overhead/unit (W2) 2400 3300
Cost per unit 3300 4588
Selling Price 4000 6000
Profit 700 1412.5
Total Profit 1400000 2260000

W2:
Budgeted overheads
OAR =
Budgeted Labour hours

12000000
OAR =
500000

OAR = 24 /labour hr

(ii)
Cost Pool $ Cost Drivers
Delivery costs 2,400,000 no of deliveries
Set-up costs 6,000,000 No of Setups
Purchase orders 3,600,000 No of orders
 Overhead Allocation
Sunshine Roadster
Delivery costs 960,000 768,000
Set-up costs 2,100,000 2,400,000
Purchase orders 1,800,000 1,350,000
Overheads 4,860,000 4,518,000
Annual Output 2,000 1,600
Overheads/ unit 2,430 2,824

$ $
Sunshine Roadster
Material cost 400 600
Direct Labour cost (W1) 500 687.5
Overhead/unit (W2) 2430 2824
Cost per unit 3330 4111
Selling Price 4000 6000
Profit 670 1888.8
Total Profit/(loss) 1,340,000 3,022,000

Question 271
(b) Budgeted results of the game
Yrs 1 2
Sales 240000 480000
Variable cost (W1) 40000 80000
Fixed Costs (W1) 80000 120000
Marketing Costs 60000 40000
Profit 60000 240000

W1:
Activity Level Cost
10000 130000
14000 150000

Using high-low method to separate fixed and variable costs

Variable cost = Cost at high activity - cost at low activity

high activity - low activity

VC = 150000 - 130000
14000 - 10000

VC = $5/unit

using Y = a + bx
where Y = Total Cost , a = Fixed Cost, b = Variable cost per unit & x = Activity Level
 130000 = a + 5 (10000)
Rearranging above equation, we get:

a= 130000 - 5 (10000)
a= 80000

At any activity above 15000 units, fixed cost increases by 50%.

Activity Level 8000 16000

Variable Costs 40000 80000
Fixed Costs 80000 120000

Question 272

{c} (i) Estimate the market Price

market price = $ 44.00

(ii) Calculate the desired profit margin/markup

Margin = 20% of sales = 20% of $44 =

(iii) Calculate the target Cost

Market price - Desired Profit = 44 - 8.8 = $ 35.20

(iv) Calcuate the product's cost

Component 1 (W1) $ 4.70

Component 2 (W2) $ 0.128
Other Material $ 8.10
Assembly Labour (W3) $ 7.00
Production Overhead
Variable $ 10.00
Fixed $ 6.00

Total Cost $ 35.93

Target Cost $ 35.20

Cost Gap $ (0.728)

Question 274
(A) $ $
Product A Product B
D. Material Cost 2 40
Variable POH 28 4
Fixed POH (W1) 10 6
Total Cost 40 50
Selling Price 60 70
Profit 20 20

Comment: Since the profit per unit of both products is same, it is indifferent as to
what sales mix is used by the managenment

(B)
Product A Product B
Selling Price 60 70
D. Material Cost 2 40
Throughput per unit 58 30
Bottleneck hours/unit 0.02 0.015
Throughput/hr 2900 2000

Rank 1st 2nd

hours Units Made

Hours available 3075
Hours used for A 2880 144000
Hours remaining 195
Hours used in B 195 13000
0

Product A Product B
Salex Mix 144000 13000
Throughput/unit 58 30
Total throughput 8352000 390000
 Factory OHs
Variable 4032000 52000
Fixed
Net Profit

(ii) Throughput ratio

TPAR = Throughput per hour

cost per factory hour

Throughput per hour of B= 2000

Cost Per Factory Hour = Factory Overheads

Total Bottleneck hours

Factory Overheads = Fixed OH + variable OH =1470000 + 4084000 =

Cost Per Factory Hour = 5554000

3075

Cost Per Factory Hour = 1806.18

TPAR = 2000
1806.18

TPAR = 1.11

Question 273
(A)
Total Factory Hours 225000

The production capacity of product A in pressing can be calculated as :

= 225000 / 0.5 = 450000

Production capacity of each product from following processes is as follows

Product A Product B
Pressing 450000 450000
Stretching 900000 562500
Rolling 562500 900000

Pressing process is a bottleneck as the production capacity of each product is lower in this pro
 {b} TPAR

TPAR = Throughput per hour

cost per factory hour

Product A Product B
$ $
Selling Price 70 60
Direct Mat. Cost 3 2.5
Throughput per unit 67 57.5
Bottleneck hrs per unit 0.5 0.5
Throughput per hour 134 115
Cost per factory hour (W1) 90 90
TPAR 1.49 1.28

W1: Factory Overheads = Labour cost + Other Factory Costs

Labour cost = $10 for each 225000 hours =

Factory Overheads = 2250000 + 18000000 =

Cost Per Factory Hour = Factory Overheads

Total Hours

Cost Per Factory Hour = 20250000

225000

Cost Per Factory Hour = 90

{C} (i) by increase the selling price of C.

(ii) by reducing the material cost of C.
(iii) reducing the factory overheads.
(iv) by speeding up the bottleneck process

Question 276
(A) Product S
$
Selling Price 12
Variable cost 7
Contribution 5
Cont./Sales % 41.67

Breakeven Point (units) = fixed costs

Contribution per unit
 Breakeven Point (units) = 20000
5

Breakeven Point (units) = 4000 units

breakeven point in $ = 4000 units x $12/ unit =

Budgeted revenue = budgeted units * selling price per unit

= 6000 * 12

Margin of safety in $ = budgeted revenue - BEP revenue =

Margin of safety in $ = 72000 - 48000

Margin of safety in % = Margin of safety

budgeted Sales

Margin of safety in % = 24000

72000

Margin of safety in % = 33.33

(C} limitations
cost behaviour is assumed to be linear but costs may only be linear over a certain activity rang
economies of scale in material costs and learning curve in labour costs
difficult to separate variable and fixed costs
revenue is assumed to be linear but CAF like many companies need to cut its unit selling price
assumes that all units produced are sold i.e, no inventory is taken into account while doing ca
breakeven analysis ignores the effects of tax and inflation

Question 277
(A)
Bags Belts
Selling price 400 125
V.cost excluding material 150 50
Material cost 60 15
Contribution 190 60

Weighted Cont./sales = Contribution of each product

Revenue of each product

Weighted Cont./sales = (190*1000) + (60*2000) +(55*1500) +(85*3500)

(400*1000) + (125*2000) + (150*1500) + (300*3500)

Weighted Cont./sales = 35.844%

 Breakeven Revenue = Fixed Costs
Weighted C/S ratio

Breakeven Revenue = 580000

36%

Breakeven Revenue = $ 1,618,116

(B) Bags Belts

Selling price 400 125
V.cost excluding material 150 50
Material cost 60 15
Contribution 190 60
C/S ratio 0.4750 0.4800
Rank 2nd 1st

Sales Commulative Revenue Contribution Cummulative profit/loss

none 0 0 (580000)
2000 250000 120000 (460000)
1000 650000 190000 (270000)
1500 875000 82500 (187500)
3500 1925000 297500 110000

Question 279
(A) Assume total sales = $100
Product X Product Y
Sales 70 30
V.cost 31.5 18
Contribution 38.5 12

Weighted contribution of X & Y

Contribution/sales Revenue of X & Y

Weighted 50.5
Contribution/sales 100

Weighted 50.5%
Contribution/sales

Breakeven Revenue = Fixed Costs

Weighted C/S ratio

Breakeven Revenue = 1212000

 51%

Breakeven Revenue = $ 2,400,000

{C} Breakeven Revenue = Attributable Fixed Costs + $700000

Weighted C/S ratio

Breakeven Revenue = 455000 + 700000

55%

Breakeven Revenue = $ 2,100,000

Question 280

1. Formulate the problem

Let:
x = the gallons of super petrol
y = the gallons of regular petrol
C = Total Contribution

2. Define the objective function

C = 0.25x + 0.10y

3. Define the variables

super (x) regular (y)

Heavy Crude 0.7 0.5
Light Crude 0.5 0.7

Supply of heavy crude 0.7 x +0.5 Y ≤ 5000

Supply of light crude 0.5 x +0.7 Y ≤ 6000
market condition x ≥ 2/3(x+y)
rearranging 3x ≥ 2x + 2y
or x ≥ 2y
also x,y ≥ 0
Question 281

(A) By looking at the feasible region with the help of iso-contribution line, we find out that the op
3x +2y = 5000 & 4x +5y = 9600 intersect.

solving the simulltaneous equations for these costrainsts.

3x +2y = 5000 --- (i)

4x +5y = 9600 --- (ii)
 Multiply (i) by 5 and (ii) by 2, and subtract (ii) from (i):

15x + 10y = 25000

- 8x + 10y = 19200
7x = 5800
x = 5800/7 = 828.57

Put X = 828.57 in (i)

3(828.57) + 2y =5000
2y = 5000 - 2485.71
y = (5000 - 2485.71)/2
y= 1257.15

Question 283
cakes (g) shakes (g)
Betta required/unit 0.5 1
Demand 11200 7500
Betta required 5600 7500
Betta Available
shortfall

Cakes Shakes
contribution 2.60 1.20
Betta required/unit 0.5 1
Contribution/ betta 5.20 1.20
Rank 2nd 3rd

first we need to complete the order of 5000 shakes

Grams Units Made

Betta Available 12000
Betta for 5000 shakes (5000) 5000
Betta Available 7000
betta for 9800 cookies (1960) 9800
Betta Available 5040
betta used in cakes (5040) 10080
0
optimum production mix
Cakes Shakes
Units 10080 5000
contribution/unit 2.60 1.00
Total Contribution 26208 5000
Fixed Costs
Profit
Question 284
Ref $
Incremental Revenue W1
incremental Costs:
Cost of Sales W2 335000
Staff W3 45000
Managers Bonus W4 8000
Heating W5 9000
Lighting W6 9000

Incremental Profit

Current $ Sunday $
W1: Average Daily sales 10000 16000
Annual Sales 3000000 800000
Gross Profit 2100000 400000
Cost of Sales 900000 400000

W2:
Extra purchasing from Sunday = $ 400,000
Current Purchasing $ 900,000
Total Purchases $ 1,300,000
Discount of 5% $ 65,000
Net Cost of Sales $ 1,235,000
Incremental cost of sales $ 335,000

W3: assistants required = 5

annual Sunday hours = 6 hours * 50 300
Rate (time and half) $20 * 1.5 30
incremental staff cost = 5*300*30 45000

W4: 1% of Sunday Sales = 1% of $800000 8000

W5: hours required for heating 8 hours/day

winter weeks 25
Total hours 200
Heating Cost $45/hr
Total Heating Cost 9000

W6: lighting hours per day 6

Annual sundays 50
total lighting hours 300
Lighting Cost $30/day
 Total lighting Cost 9000

Question 285

Cost or Revenue Reference $

saved TD cont. W1 12000
lost cont. from DW & WM W2 (71000)
redundancy and recruitment W3 (3700)
lost discount W4 (19000)
Sublet income 12000
supervisor 0
net cashflow (69700)

W1: saved cont. of TD = 1200 * 10 = 12000

W2: DW WM
sales units 5000 6000
loss of 5% (units) 250 300
Contribution 80 170
Sales revenue Lost 20000 51000

W3: if TD is ceased now:

$
Redundancy payment (6000)
Saved retraining 3500
Recruitment Cost (1200)
(3700)

W4: DW WM
Purchased material 350000 600000
material if TD Ceased 332500 570000

Discount lost

Question 287
Demand Price
8000 $1,350
7000 $1,400
9000 $1,300

Using price equation:

 P = a - bQ -----(i)

b= change in price
change in demand

b= 50
1000

b= 0.05

when P = 1350, D = 8000, eq (i) becomes

1350 = a - 0.05(8000)
rearranging
a= 1350 + 0.05(8000)

a= 1750

Price maximising demand equation is:

P = 1750 - 0.05Q ----(ii)

MR = 1750 -0.1Q ----(iii)
MC = 1020 W1

At profit maximising point MR = MC

1750 - 0.1Q = 1020

0.1Q = 1750 - 1020
0.1Q = 730
Q = 730/0.1 = 7300 units

put Q = 7300 in (i)

P = 1750 - 0.05 (7300)

P= $ 1,385

Question 288 (a) $ $

selling price 100 85
Variable cost 38 38
contribution / unit 62 47
Demand 600 800
Total Contribution 37200 37600

choose a price of $75 as it maximises the weekly contribution

 (B) Using price equation:

P = a - bQ -----(i)

b= change in price
change in demand

b= 10
200

b= 0.05

when P = 100, D = 1000, eq (i) becomes

100 = a - 0.05(1000)
rearranging
a= 100 + 0.05(1000)

a= 150

Price maximising demand equation is:

P = 150 - 0.05Q ----(ii)

MR = 150 -0.1Q ----(iii)
MC = 45

At profit maximising point MR = MC

150 - 0.1Q = 45
0.1Q = 150 - 45
0.1Q = 105
Q = 105/0.1 = 1050 units

put Q = 1050 in (i)

P = 150 - 0.05 (1050)

P= $ 97.50

Question 289
(a) pricing under existing policy
$
steel 0.4/0.95 *4 1.68
other mat. 3*0.9*0.1 0.27
labour 0.25hr@ $10/hr 2.50
 VOH 150% of 2.5 3.75
delivery 0.50
Total cost 8.70
profit markup 30% 2.61
Selling price 11.32

(b) under new policy

$
steel 0.4/0.95 *4 1.68
other mat. 3*0.9*0.1 0.27
labour 0.25hr@ $10/hr 2.50
VOH 150% of 2.5 3.75
FOH 80% of VOH 3.00
delivery 0.50
Total cost 11.70
profit markup 10% 1.17
Selling price 12.87

price difference = 12.87 - 11.32 = 1.56

Question 290
production of 1000 standard perfume
$
Diluted Alcohol (990 litres *$20 / litre) 19800
Aromatic Oils (10 litres *$18000/litre) 180000
Labour cost (2000 hours * $15/hour) 30000
Total Cost 229800
Cost per litre 229.8
Selling price / litre 399.8
Contribution per unit 170

Lost contribution on 1000 litres 170000

Contribution per labour hour 85
labour Cost per hour 15
Relevant cost of labour / hour 100

Incremental Costs

Male Version Female Version

Hormones 15500 96000
Labour 50000 70000
supervisor 0 0
fixed cost 0 0
research cost 0 0
Total Cost 65500 166000
 Incremental revenues
Male Version Female Version
Selling price per litre 750 595
Litres produced 202 808
Sales Revenue 151500 480760
Standard Revenue of 200L 79960 319840
Incremental Revenue 71540 160920

Benefit/loss 6040 -5080

Question 291

(i) process R further if incremental revenues are greater than incremental costs

Incremental revenue
$
selling price at split off 1.5
selling price after mixing 10
increase in selling price 8.5
Total Incremental revenue 4250

Incremental Costs

variable costs + opportunity costs

$
90% of process costs are variable 2700
other separable costs 500
Incremental Costs 3200

Opportunity Costs

Mixing hours are limited and scarce

R uses 10 mixing hours and if R is not processed further than it can earn $200/hour
$
Opportunity cost 2000
10% of fixed costs 300
Total Contribution 2300

Net Incremental benefit / loss -1250

Question 293
 (a) Payoff table

Level of Waste
High
High 962.5
Advance order of chemical
Medium 912.5
Low 837.5

W1:
Advance order of chemical level of waste probabilty
high 0.3
high } medium
low
0.5
0.2
high 0.3
medium } medium
low
0.5
0.2
high 0.3
low } medium
low
0.5
0.2

W2: Waste Available:

High Medium
Aluminium Extracted 7500 5700
Contribution per unit of AL 0.195 0.195
Contribution excluding X 1462.5 1111.5

W3: For a high order and low waste a penalty of 0.6 on $1 price is paid so cost = $1 + 0.6 = $1.6 * 3
For a high order and medium waste,penalty = 0.25 on $1, cost = $1 + 0.25 = $1.25* 380000
For a high order and high waste no penalty so cost = $1 * 5000000
For a low order & high waste, discount= 0.15 on 1.4 = 1.25* 500000
For a low order & medium waste, discount= 0.10 on 1.4 = 1.3* 380000
For a low order & low waste, discount= 0 on 1.4 = 1.4* 300000

(ii)
Level of Waste
High
High 962.5
Advance order of chemical
Medium 912.5
Low 837.5

Maximum choose high order

maximin choose low order

Question 295
 Payoff Table
capacity of vans
100
120 300 (W1)
Demand of crates
190 300 (W3)

Workings W1 W2
Sales 1000 1200
Variable Cost (400) (480)
good will (100) -
VC adjustment - 48
Depreciation (200) (300)
profit 300 468

Question 298

Using P = a - bQ ---(i)

b= change in price
change in demand

b= 2
5000

b= 0.0004

maximum demand is 1 million batches ( at which price is 0)

eq (i) becomes:

0 = a - 0.0004(1000000)
a = 0.0004(1000000)
a= 400

eq (i) becomes:

P = 400 - 0.0004Q ----(ii)

MR = a -2bQ
MR = 400 - 0.0008Q ---(iii)

Marignal Cost:
$
Material Z (500 * 0.10) 50
 Material y (300 * 0.5) 150
Machine cost (6 *20/60) 2
Labour cost (W1) 6.60396
Marginal Cost 208.603957225

At optimum price MC = MR, so:

400 - 0.0008Q = 208.6039

Q= 239250

P = 400 - 0.0004(239250)
P= 304.3

$
Selling price 304.3
Marginal cost 208.60
Contribution 95.70
total contribution 22896225
Fixed Costs 500000
Profit 22396225

Question 299

(b) $
Contribution from rooms 15
Contribution from tickets 5
Sales revenue from room 135
sales revenue from tickets 100

Weighted C/S ratio = 20

235

Weighted C/S ratio = 0.08510638298

BEP = Fixed Costs

Weighted C/S

BEP = 20000
0.08510638298

BEP = $ 235,000
Question 300
Rolling budget

Q1 (actual) Q2
Sales 14096 14378
Cost of Sales 8740 8914
Gross Profit 5356 5464
Distribution costs 705 719
Administration costs 2020 2020
Operating Profit 2631 2725

Question 304
(a) $
Target price 120
Required Profit 20% 24
Target Cost 96
Manufacturing Cost (W1) 96.95
Cost Gap (0.95)

{c} Material: $
Massage mechanism 51
Leather (2/0.8)*$10 25
Labour Cost (W2) 19.35
Product Cost 95.35

Question 305
(b)
Using learning rate equation

Find the average time to fit 200 kitchens

Y = a * xb
Y = 24 * 200-0.074
Y = 16.2156746466

Total time for 200 kitchens= 3243.13

Find the average time to fit 199 kitchens

Y = a * xb
Y = 24 * 199-0.074
Y = 16.2216906116
 Total time for 200 kitchens= 3228.12

Time required for 200th = 15.02

this will be the time that is used for all the subsequent kitchens later on

Total labour time = time for 200 kitchens + 15.02* 400 kitchens
Total labour time = 9250.53397548

Labour Cost = $ 138,758

Using high-Low method to analyze overheads

V.C/unit = Cost at highest Activity - Cost at lowest activity

Highest Activity - Lowest Activity

V.C/unit = 116800 - 113600

9600 - 9200

V.C/unit = $ 8.00

Put V.C = $8 in total cost equation for any level of Activity

Y = a + bx
113600 = a + 8(9200)
a= 40000

FOH = Overheads
Budgeted activity level

FOH = 480000
120000

FOH = 4.00

$
Labour Cost (As above) $ 138,758
VOH $ 74,004
FOH $ 37,002
$ 249,764
{c}
Unit No time required Cum. Time Average time/unit
1 24 24 24
2 21.6 45.6 22.8
 Learning Rate = 22.8/24 *100= 95%

Question 306
Standard
Sales Revenue 2156000
Cost of Sales:
Material 007 1131900
Material XL90 147840
Labour 582120
Overheads 86400
1948260
Total Costs 1948260
Profit 207740

(b)
Material 007
Material price variance = (Standard price - Actual price ) * Material purchased
Material price variance = (12.25 - 12.75 ) * 98560 =

Material Usage variance = (standard usage for actual production - actual usage ) * standard pr
Material Usage variance = (6*15400 - 98560 ) *12.25 =

Material XL90

Material price variance = (Standard price - Actual price ) * Material purchased

Material price variance = (3.2 - 3.14 ) * 42350 =

Material Usage variance = (standard usage for actual production - actual usage ) * standard pr
Material Usage variance = (3*15400 - 42350 ) *3.2 =

Labour Variances

Labour rate Variance = (standard rate - actual rate ) *actual hours worked
Labour rate Variance = (8.4 - 8.65 ) *70840 =

Labour efficiency Variance = (standard hours for actual production - actual hours) * Standard
Labour efficiency Variance = (4.5*15400 - 70840) * 8.4 =

Fixed Overhead Variances

Fixed overhead expenditure = bugeted overheads - actual overheads

Fixed overhead expenditure = 86400 - 96840 =

FOAR = Budgeted OHs

 Budgted hours

FOAR = 86400
72000

FOAR = 1.2

Fixed Overhead Capacity Variance = (Actual hours - budgeted hours) *FOAR =

Fixed Overhead Capacity Variance = (70840 - 72000) *1.2 =

Fixed Overhead Volume variance = (Standard hours for actual production - Actual hours) * FO
Fixed Overhead Volume variance = (69300 - 70840) * 1.2 =

Sales Variances

Sales price variance = (Actual Price - Standard price) *actual sales

Sales price variance = (138.25 - 140) *15400 =

Statement of Variances:
$ $
Standard Profit 207740
Sales price variance (26950)
Mat 007 price Variance (49280)
Mat 007 usage Variance (75460)
Mat XL90 Price Variance 2541
Mat XL90 Usage Variance 12320
Labour Rate variance (17710)
Labour Efficiency variance (12936)
FOH expenditure variance (10440)
Total Variances (177915) -177915

Actual Profit 29825

Question 307

(a) (i) Sales Mix contribution variance

Products AQAM AQSM

Valet 4000 5130
Mini-Valet 3980 2850
7980 7980
 Valet Mini Valet
Standard proportion 3600 2000
Proportion 3.6 2
contribution/sales 44.60% 55%
Selling price 50 30
Contribution 22.3 16.5

(i) Sales Quantity contribution variance

Products AQSM SQSM

Valet 5130 3600
Mini-Valet 2850 2000
7980 7980
Question 308

Actual price/ metre $ 2.85

Standard price/metre $ 3.00
Revised Price / metre $ 2.85

Actual material usage 2.2 metre

Standard material usage 2 metre
Standard production 30000 units
Actual production 24000 units
Actual usage 54560 metre
Revised usage 52800
standard usage 48000
Material price variances:
Planning Variance = (standard price - revised price) * actual material bought
Planning Variance = (3 - 2.85) * 54560 =
operational Variance = (revised price - actual price) * actual material bought
operational Variance = (2.85 - 2.85) * 54560 =
Total Material price Variance

Material usage variance:

planning variance = (standard usage - revised usage) * standard price
planning variance = (48000 - 52800) * 3 =
operational variance = (revised usage - actual usage) *standard price
operational variance = (52800 - 54560) *3 =
Total material usage variance =

Total Material variance

(b) Labour variances

standard rate $ 12.00 /hour
 standard hours for actual production 3200
revised hours for actual production 4000
actual hours 3840
no rate variance

Labour efficiency variance

planning variance =(standard hours - revised hours) * standard rate
planning variance =(3200 -4000) * 12 =
operational variance = ( revised hours - actual hours) * standard rate
operational variance = ( 4000 - 3840) * 12 =
Total labour efficiency variance
Total labour variance

Question 309
standard rate 14
standard time 3 hours
standard production 12000 pairs
Actual production 12600 pairs
standard hours for actual production 37800 hours
actual rate $ 14.38
Revised rate $ 14.28
Revised time 3.25 hours
revised time for actual production 40950 hours
actual hours 37000 hours
Actual time 2.94 hours

(a) Labour Total Variances

Labour rate variance = (standard rate - actual rate) *actual hours

Labour rate variance = (14 - 14.38) *37000

Labour efficiency rate = (standard hours for actual production - actual hours) * standard rate
Labour efficiency rate = (37800 - 37000) * 14

(b) Labour Planning & Operational Variances

Labour rate variance:

planning variance = (standard rate - revised rate) * actual hours worked
planning variance = (14 - 14.28) * 37000
operational variance = (revised rate - actual rate) *actual hours worked
operational variance = (14.28 - 14.38) *37000

Total Rate Variance

 Labour Efficiency variance:
planning variance = (standard hours - revised hours) * standard rate
planning variance = (37800 - 40950) * 14
operational variance = (revised hours - actual hours ) * standard rate
operational variance = (40950- 37000 ) * 14

Total Efficiency Variance

Question 310
(a)
(i) Usage variances:

material usage V of Alpha

Usage Variance = (Standard usage for actual production - actual usage) *standard rate
Usage Variance = (0.4*4600 - 2200) *2 =
material usage V of Beta
Usage Variance = (Standard usage for actual production - actual usage) *standard rate
Usage Variance = (0.6*4600 - 2500) *2 =
material usage V of Gamma
Usage Variance = (Standard usage for actual production - actual usage) *standard rate
Usage Variance = (0.2*4600 - 920) *2 =

Total Usage Variance

(i) Mix variance:

Materials AQAM AQSM

Alpha 2200 1873.33
Beta 2500 2810.00
Gamma 920 936.67
5620 5620

Alpha Beta
Standard Proportion 40 60
Standard Proportion % 33% 50%

(ii) Yield Variance

Materials AQSM SQSM

Alpha 1873.33 1840.00
Beta 2810.00 2760.00
Gamma 936.67 920.00
5620.00 5520.00
Question 311
 (i) Mix variance:

Materials AQAM AQSM

Lye 34080 33613.33
Coconut Oil 83232 80672.00
Shea Butter 64200 67226.67
181512 181512

Alpha Beta
Standard Proportion 0.25 0.6
Standard Proportion % 18.52% 44.44%

(ii) Yield variance:

Materials AQAM SQSM

Lye 33613.33 34000.00
Coconut Oil 80672.00 81600.00
Shea Butter 67226.67 68000.00
181512.00 183600

Lye Coconut Oil

Standard Proportion 0.25 0.6
Standard Proportion % 18.52% 44.44%

Question 312
Bonus Appraisal
Q1 Q2
Staff on time?
on-time% 95.6% 94.2%
Bonus earned yes no
Member Visits?
Target visits 21600 23040
Actual Visits 20000 24000
Target Achieved? No Yes
Bonus Earned
Training Session?
Target Sessions 300 320
Actual Sessions 310 325
Target Achieved? Yes Yes

Bonus Earned:
6 targets were achieved by the manager so:
Bonus = 2400
Question 313
 ROI = Controllable profit
Capital Employed

Controllable Profit: $000 $000

Division P Division Q
Revenue 14000 18800
Direct Labour 2400 3500
Direct Material 4800 6500
Divisional OHs 3480 4740
Trading Profit 3320 4060
Exhange Gain/loss (200) 460
Net controllable profits 3120 4520

Capital Employed:
$000 $000
Division P Division Q
Non current Assets 15400 20700
Current Assets:
Inventory 1800 3900
Trade receivables 6200 8900
Current Liabilities:
Overdraft 500 0
Trade Payables 5100 7200
Capital Employed 17800 26300

Division P Division Q
ROI = 17.53% 17.19%
Question 315

(a) (i)

ROI = Controllable profit

Controllable capital enployed

Division F Division N
Controllable profit 2645 1970
Non current Assests 9760 14980
Current Assets 2480 3260
Trade Payables 2960 1400
Controllable C.E 9280 16840
ROI = 28.50% 11.70%
 Inc/dec in ROI = 18.50% 1.70%

(ii) bonus Division F Division N

Whole % increase points 18 1
Bonus for every point 2400 2400
Bonus earned 43200 2400
Maximum bonus 36000 36000
Bonus Paid 36000 2400

Question 316
(i) ROI = Controllable profit
Controllable capital enployed

$000 $000
Division C Division E
Opening controllable N.A 13000 24000
Closing Controllable N.A 9000 30000
Average Controllable C.E 11000 27000
Contribution 2400 5370
Fixed Costs (W1) 275.5 582
Controllable Net Profit 2124.5 4788
ROI 19.3% 17.7%

(ii) RI = Controllable Profit - (Cost of Capital * Average Controllable Capital Employed)

$000 $000
Division C Division E
Controllable Profit 2124.5 4788
Cost of Capital 12% 12%
Average Controllable C.E 11000 27000
Residual Income 804.5 1548

Question 317
(a) Transfer Pricing
Division A Division B
Inter-company External
Sales Revenue 27000000
Inter-company 1950000
External 3000000
Costs:
Cost of adapter purchase 0 1950000
Materials 1050000 6750000
Labour 1400000 5250000
Annual Fixed OHs 2200000 5460000
 Selling Cost 200000 0
Profit 100000 7590000

Question 318
FD
$ $
Sales revenue
external sales 400000
internal sales 990000
Cost of sales
Variable production OH 800000
Fixed Production OH 400000
Moulding Price 0
1200000
Gross Profit 190000
Variable Selling & Dist. 20000
Fixed Admin Overhead 80000
100000
Net Profit before Interest 90000
Finance Charges 90000
Net Profit after tax 0

Capital Employed 750000

Cost of Capital 12%
RI 0
Target RI 85000
bonus 0

Question 319
W Co
(a) Design Division Gearbox Divison
$000 $000
Sales Revenue 14300 25535
Net Profit 6000 3875
Capital Employed 23540 32320
ROCE 25.49% 11.99%
Asset Turnover 0.61 0.79
Operating Profit Margin 41.96% 15.18%

Question 320
Division A
Sales Revenue 3150000
Variable Cost 1980000
 Contribution 1170000
Fixed Costs 1080000
Net Profit 90000
Capital Employed 3200000
Cost of Capital 12%
Residual income -294000
Target residual income 180000
Difference in RI 474000

minimum contribution = 7.90

Transfer price = 29.90

Question 327
OPERATING STATEMENT:

$ $
Budgeted surplus (W1)
Funding shortall (W2)

Variances: Favourable Adverse

Free Meals (W3)
Price Variance (4000)
Usage Variance (8750)
Overnight Shelter (W4)
Price Variance (4380)
Usage Variance 31000
Advice Center (W5)
Price Variance (9100)
Usage Variance (7500)
Camp & Adv (W6)
Expenditure variance (15000)
Fixed Cost
Expenditure variance (18000)
Total Variances 31000 (66730)

$
W1: Budgeted Funraising 700000
Budgeted spending:
Free meals provision 91250
overnight shelter 300000
advice center 60000
campaigning and advertising 150000
Budgeted Surplus 98750
66400 + 48000 + 54320

Budgeted Overheads
udgeted Labour hours

195270
6900

$28.3 / labour hour

C Total
18000
0.2
3600 6900
101880 195270
5.66
4.8
2.96
13.42

cost/driver
oduction runs (16 + 12 + 8) = 36 737.50
achine hours = 32100 2.07
rchase orders = (24 + 28 + 42)= 94 510.64
liveries = (48 + 30 + 62) = 140 388.00

C Total
18000
0.9
16200 32100

C Total
5900 26550
 33510 66400
21447 48000
24056 54320
84913 195270
18000
4.72

4.72
4.8
2.96
12.48

13.42
12.48
(0.94)
(7)

Total cost/driver
500 180.00
g documents 250 280.00
40000 6.00
 W1:
CB TJ Total
Machine hr/unit 0.1 0.17
Budgeted units 1000000 120000
Budgeted M.hrs 100000 20000 120,000

Budgeted Overheads = $ 2,880,000

OAR Budgeted Ohs

Budgeted M.hours

OAR $ 2,880,000
120000

OAR $ 24 /machine hour

Total (W2) Cost/Driver

120000 18
200 3,340
16 3,250

W2:
Total CB TJ
2,160,000 M. hr/unit 0.1 0.17
668,000 Bud. units 1000000 120000
 52,000 Bud. M.hrs 100000 20000
2,880,000

$
Fireball W1:
900 Sunshine Roadster Fireball
1000 Labour hrs 200000 220000 80000
4800 Annual Output 2000 1600 400
6700 Hours/unit 100 137.5 200
8000
1300 Labour Cost = $10 /labour hr
520000 4180000
labour Cost 500 687.5 1000

Overheads $
Delivery costs 2,400,000
Set-up costs 6,000,000
Purchase orders 3,600,000
12,000,000

Total (W2) Cost/Driver

250 9,600
100 60,000
800 4,500
 Fireball Total
672,000 2,400,000
1,500,000 6,000,000
450,000 3,600,000
2,622,000 12,000,000
400
6,555

$
Fireball
900
1000
6555
8455
8000
-455
(182,000) 4180000

3 Total
120000 840000
20000 140000
80000 280000
- 100000
20000 320000

y - cost at low activity

y - low activity

per unit & x = Activity Level

 4000
20000
80000

W4:
Activity Level Cost
19000 620000
23000 700000

Using high-low method to separate fixed and variable costs

$ 8.80
Variable cost = Cost at high activity - cost at low activity
high activity - low activity

VC = 700000 - 620000
23000 - 19000

VC = $ 20.00 / unit
W1:
$4.1 + 2400/4000

W2:
Ideal usage + wastage = Actually bought
98 2 100
25 X Y

X= 25 * 2
98

X= 0.51

Y = 25 + X = 25.51

W3:
Productive time + idle time = Time paid
 90 10 100
0.5 X Y

X= 0.5 * 10
99

X= 0.06

Y = 0.5 + X = 0.56

W1:
Product A Product B Total
hours/unit 0.25 0.15
Prodution Units 120000 45000
Total hours 30000 6750 36750

Total Overheads $ 1,470,000

s same, it is indifferent as to OAR = BOH

B.Hours

OAR = $ 1,470,000
36750

OAR = $ 40 /hr

units
Demand of A = 120% of 120000 = 144000
Demand of B = 120% of 45000 = 54000
hours req for A 140000*0.02/unit 2880
hours req for B 54000*0.015/unit 810

Total

8742000
 4084000
1470000
3188000

=1470000 + 4084000 = $ 5,554,000

e calculated as :

units of product A

ocesses is as follows

Product C
562500
900000
900000

acity of each product is lower in this process

 Product C
$
27
1.8
25.2
0.4
63
90
0.70

$ 2,250,000

$ 20,250,000
 $ 48,000

price per unit

$ 72,000

$ 24,000

x 100

x 100

nly be linear over a certain activity range

e in labour costs

mpanies need to cut its unit selling price to increase its market share
ory is taken into account while doing calculation

Shoes Jackets
150 300
65 125
30 90
55 85

+(55*1500) +(85*3500)
) + (150*1500) + (300*3500)
 Shoes Jackets
150 300
65 125
30 90
55 85
0.3667 0.2833
3rd 4th

lative profit/loss

Total
100
49.5
50.5
ed Costs + $700000
ed C/S ratio

ontribution line, we find out that the optimal point lies at C i.e, where
cookies (g) Total
0.2
9800
1960 15060
12000
(3060)

Cookies
1.75
0.2
8.75
1st

Cookies
9800
1.75
17150 48358
(3000)
45358
 $
800000

(406000)
394000
Total

71000

TD Total Discount % Gross

60000 1010000 5% 1063158
902500 5% 950000
921500 3% 950000
19000
 W1:
Marginal cost:
marginal cost of mat $270
marginal cost of Ohs $750
Marginal Cost / unit $1,020

Using High-Low method;

V.cost = cost at highest activity - cost at lowest activity

highest activity - lowest activity

V.cost = $7000000 - $5446000

9400 - 7300

V.cost = $ 740/unit

$ $
80 75
38 38
42 37
1200 1400
50400 51800
Sunk
Sunk
Sunk
emental costs

er than it can earn $200/hour

 Level of Waste
Medium Low
636.5 397.5
655.5 442.5
617.5 457.5

$000 $000 (W3)

Cont. Excl. X Chemical X Cost Net Contribution
1462.5 500 962.5
1111.5 475 636.5
877.5 480 397.5
1462.5 550 912.5
1111.5 456 655.5
877.5 435 442.5
1462.5 625 837.5
1111.5 494 617.5
877.5 420 457.5

Low
4500
0.195
877.5
$
price is paid so cost = $1 + 0.6 = $1.6 * 300000 480000
$1, cost = $1 + 0.25 = $1.25* 380000 475000
1 * 5000000 500000
1.25* 500000 625000
4 = 1.3* 380000 494000
300000

Level of Waste
Medium Low
636.5 397.5
655.5 442.5
617.5 457.5
 capacity of vans
150 200
468 (W2) 368 (W3)
500 (W5) 816 (W6)

W3 W4 W5 W6
1200 1000 1500 1900
(480) (400) (600) (760)
- (100) (100) -
48 - - 76
(400) (200) (300) (400)
368 300 500 816

W1: using learning curve formula

Y = a*xb
 Y = 5 * 1000-0.321928
Y = 0.540985972656476
Total time for 1000 batches = Y *1000

Total time = 540.985972656476

Y = a*xb
Y = 5 * 999-0.321928
Y= 0.54116024639037
Total time for 1000 batches = Y *1000

Total time = 540.61908614398

Total time for 1000th batch

time req = 0.366886512496421

Labour cost = 6.60396
 Q3 Q4 Q5
14665 14959 15258
9093 9274 9460
5573 5684 5798
733 748 763
2020 2020 2020
2820 2916 3015

W1: W2:
Material: $ using learning rate formula
Massage mechanism 51 Y = a* xb
Leather (2/0.8)*$10 25 calculated the average time required for 128 un
Labour Cost (W2) 20.95
Product Cost 96.95 Y = 2 * 128-0.074000581
Y = 1.396675
Avg labour cost = 20.95

Time for 128 units = y * 128

Time for 128 = 178.7743

calculated the average time required for 127un

Y = 2 * 127-0.074000581
Y = 1.397485
Avg labour cost = 20.96

Time for 127units = y * 127

Time for 127 = 177.4807

Time req for 128th unit =

Labour cost of 128th unit =
t kitchens later on
 Actual
2129050

1256640
132979
612766
96840
2099225
2099225
29825

) * Material purchased
(49280) Adverse

roduction - actual usage ) * standard price/kg

(75460) Adverse

) * Material purchased
2541 Favourable

roduction - actual usage ) * standard price/kg

12320 Favourable

ctual hours worked

(17710) Adverse

production - actual hours) * Standard rate

(12936) Adverse

ual overheads
(10440) Adverse
dgeted hours) *FOAR =
(1392) Adverse

r actual production - Actual hours) * FOAR

(1848) Adverse

(26950) Adverse

Variance Contribution / unit Variance ($)

(1130) 22 (25199) Adverse
1130 17 18645 Favourable
0 (6554) Adverse
 5.6

Variance Contribution / unit Variance ($)

1530 22 34119
850 17 14025
0 48144

ctual material bought

8184 Favourable
ctual material bought
0
8184 Favourable

standard price
(14400) adverse
standard price
(5280) adverse
(19680) adverse

(11496) adverse
 hours
hours
hours

tandard rate
(9600) adverse
standard rate
1920 favourable
(7680) adverse
(7680) adverse

(13930) adverse

duction - actual hours) * standard rate

11200 Favourable

ual hours worked

(10360) Adverse
ual hours worked
(3570) Adverse

(13930) Adverse
standard rate
(44100) Adverse
standard rate
55300 favourable

11200 favourable

n - actual usage) *standard rate

(720) adv

n - actual usage) *standard rate

1300 fav

n - actual usage) *standard rate

0

580 fav

Difference Standard cost/kg Variance

-326.67 2 -653.33 Adv
310.00 5 1550.00 Fav
16.67 1 16.67 Fav
0.00 913.33

Gamma Total
20 120
17% 100%

Difference Standard cost/kg Variance

-33.33 2 -66.67
-50.00 5 -250.00
-16.67 1 -16.67
-100.00 -333.33 Adv
 Difference Standard cost/kg Variance
-466.67 10 -4666.67
-2560.00 4 -10240.00
3026.67 3 9080.00
0.00 -5826.67 adv

Gamma Total
0.5 1.35
37.04% 100.00%

Difference Standard cost/kg Variance

386.67 10 3866.67
928.00 4 3712.00
773.33 3 2320.00
2088.00 9898.67

Shea Butter Total

0.5 1.35
37.04% 100.00%

Q3 Q4

94.0% 95.8%
no yes

23760 24480
26000 24000
Yes No

330 340
310 339
No No

which is 50% of the total bonus achieveable

 W1:
Division C Division E
Total fixed Costs 945 1420
Uncontrollable Dep 49.5 138
Apportioned F. Costs 620 700
Controllable F.Costs 275.5 582

ntrollable Capital Employed)

PGC Co

30000000

7800000
6650000
7660000
 200000
7690000

TM
$ $

7500000

4500000
900000
990000
6390000
1110000
375000
375000
750000
360000
180000
180000

1500000
12%
180000
105000
9000

C Co

$000
15560
7010
82975
8.45%
0.19
45.05%
 $ W3: price variance = (standard price - actual price) * actual meals
98750 price variance = (5 - (104000/20000)) * 20000 =
(80000)
18750 Usage variance = (standard meals - actual meals) *standard price
Usage variance = (18250 - 20000) *5 =

W4: price variance = (standard price - actual price) * actual nights

price variance = (25 - 25.5) * 8760 =

Usage variance = (standard nights - actual nights) *standard price

Usage variance = (10000 - 8760) *25 =

W5: price variance = (standard price - actual price) *actual sessions

price variance = (15 - 17.6) *3500 =

Usage variance = (standard sessions - actual sessions) *standard price

Usage variance = (3000 - 3500) *15 =

(35730) W6: Expenditure variance = budgeted expenditure - actual expenditure

(16980) Expenditure variance = 150000 - 165000 =

W7: Expenditure variance = budgeted expenditure - actual expenditure

Expenditure variance = 65000 - 83000 =

$
W2: budgeted funding 700000
actual funding 620000
Shortfall 80000
Total
120000

Total
500000
 using Y = a + bx
where Y = Total Cost , a = Fixed Cost, b = Variable cost per unit & x = Activity Level
700000 = a + 20 (23000)
Rearranging above equation, we get:

a = 700000 - 20 (23000)
a = 240000
annual overheads = 2880000
OAR = budgeted Overheads
Budgeted Labour hrs

OAR = 2880000
240000

OAR = $ 12.00 /hr

erage time required for 128 units

erage time required for 127units

1.293695
19.35
 (4000) Adv

(8750) Adv

(4380) Adv

31000 Fav

(9100) Adv

standard price
(7500) Adv

(15000) Adv

(18000) Adv