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    Tran Ngan
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    Numan Ltd began producing a new product called Gazza in March. The budgeted costs per unit included £48 per m2 for variable materials using 5m2, £16 per hour for 3.5 hours of variable labor, and £6 per hour for variable production overheads based on labor hours. In March, materials actually cost £52 per m2 but only 4.5 m2 was used per unit. Numan absorbs fixed overheads at 115% of actual materials cost. In April, the actual absorption cost was £592 per unit and Numan set a 33.33% margin target price. In June, materials cost was 10% cheaper but production was the same as budgeted, with a fixed

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    Numan Ltd began producing a new product called Gazza in March. The budgeted costs per unit included £48 per m2 for variable materials using 5m2, £16 per hour for 3.5 hours of variable labor, and £6 per hour for variable production overheads based on labor hours. In March, materials actually cost £52 per m2 but only 4.5 m2 was used per unit. Numan absorbs fixed overheads at 115% of actual materials cost. In April, the actual absorption cost was £592 per unit and Numan set a 33.33% margin target price. In June, materials cost was 10% cheaper but production was the same as budgeted, with a fixed

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    10 views1 page

    Numan LTD

    Uploaded by

    Tran Ngan
    Numan Ltd began producing a new product called Gazza in March. The budgeted costs per unit included £48 per m2 for variable materials using 5m2, £16 per hour for 3.5 hours of variable labor, and £6 per hour for variable production overheads based on labor hours. In March, materials actually cost £52 per m2 but only 4.5 m2 was used per unit. Numan absorbs fixed overheads at 115% of actual materials cost. In April, the actual absorption cost was £592 per unit and Numan set a 33.33% margin target price. In June, materials cost was 10% cheaper but production was the same as budgeted, with a fixed

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    Numan Ltd (Numan) began manufacturing a new product named Gazza in March.

    The budgeted data per unit of Gazza was as follows:


    Cost Resource required
    Variable materials £48 per m2 5m2
    Variable labour £16 per hour 3.5 hours
    Variable production overheads £6 per hour As labour
    3.1
    Requirement
    Calculate the budgeted prime cost per Gazza for March.
    £
    3.2 The budgeted cost and resource requirements for March were all met except for materials price and usage. Owing to higher quality supplies, only 4.5m2 of material were actually used per Gazza but at a cost of £52 per m2. Numan absorbs fixed overheads into all its products using a rate of 115% of actual materials cost.
    Requirement
    Calculate the actual absorption cost per Gazza for March.
    £
    3.3 During April the actual absorption cost per Gazza was £592 and Numan set a target of a 33.33% margin on the selling price per Gazza.
    Requirement
    Calculate the selling price per Gazza in April.
    £
    3.5 In June, the materials usage and labour and variable overhead costs were as the March budget, but materials were 10% cheaper per m2. The labour time per unit was the same as in May. The fixed overhead absorption rate was £56 per Gazza and 1,400 units were produced.
    Requirement
    Calculate the actual marginal cost per Gazza in June.
    £
    3.6 Before finalising the selling price for July, which was to be based on the June costs, the accountant noticed an error in the costing information and this resulted in the actual marginal cost per unit for June being corrected. The fixed overhead per Gazza remained at its June level. A target mark-up on absorption cost was now set.
    Requirement
    Using a corrected marginal cost of £302 and a target mark-up on absorption cost of 22%, calculate the selling price for July.
    £
    3.7 Numan’s accountant decided to experiment with different ways of calculating the fixed overhead absorption rate in August. In particular she wanted to see the effect of using a blanket absorption rate (based on all of Numan’s products) on selling prices. The target mark up remained at 22%.
    The following actual data from August is available:
    Data related to Gazzas
    Total variable cost per unit £305
    Units produced 1,450
    Fixed overheads £82,650
    Labour hours per unit 3
    Data related to all of Numan’s products
    Total fixed overheads £1,239,500
    Total number of units produced 18,500
    Requirement
    Calculate the difference in the selling price of Gazzas that results from switching from a fixed overhead absorption rate based on Gazza’s labour hours to a blanket fixed overhead absorption rate based on all of Numan’s products.
    £
    3.8 The budgeted blanket fixed overhead absorption rate for August was £66.25 per unit of output.
    Requirement
    Calculate the total under or over absorption of fixed overheads for all of Numan’s products using the blanket rate in August.
    £ absorption
    Total: 20 marks

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