MODULE 2 - REVISION

1. Which of the following documents would be completed in each situation

2.

3. Calculate the re-order,maximum and minimum inventory levels from the following information.

4. The purchase price of an inventory item is $42 per unit. In each three‐month period the usage of
the item is 2,000 units. The annual holding costs associated with one unit is 5% of its purchase
price. The cost of placing an order is $4.49. Calculate the economic order quantity.

5. Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour
hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.
What is the budgeted total labour cost for the next period?
6.

7. At 1 January a company employed 5,250 employees. Due to expansion the number of

employees increased to 5,680 by 31 December. During the year 160 staff left the company and
of these, 100 were replaced. What was the labour turnover rate under the replacement and
separation methods?

8.

9. H&H employed on average 55 employees during the year. There had been 8 leavers all of whom
were replaced.   What was the company’s labour turnover ratio?

10. A business employs two grades of labour in its production department. Grade A workers are
considered direct labour employees, and are paid $10 per hour. Grade B workers are considered
indirect labour employees, and are paid $6 per hour. In the week just ended, Grade A labour
worked 30 hours of overtime, 10 hours on a specific customer order at the customer’s request,
and the other 20 hours as general overtime. Grade B labour worked 45 hours of overtime, as
general overtime. Overtime is paid at time‐and‐ one‐half. What would be the total amount of
pay for overtime worked in the week that is considered to be a direct labour cost?

11. A finishing department absorbs production overheads using a direct labour hour basis. Budgeted
production overheads for the year just ended were $268,800 for the department, and actual
production overhead costs were $245,600. If actual labour hours worked were 45,000 and
production overheads were over‐absorbed by $6,400, what was the overhead absorption rate
per labour hour?
12. An employee is paid on a piecework basis. The scheme is as follows:

1 – 300 units per day $0.10 per unit

301 – 400 units per day $0.13 per unit
> 400 units per day $0.20 per unit
If only the additional units qualify for the higher rates, and rejected units do not qualify for
payment, how much would an employee be paid if he produced 487 units in a day of which 67
were rejected as faulty.

13. A company employs three drivers to deliver goods to its customers. The salaries paid to these
drivers are:
(A) a variable cost
(B) a direct production expense
(C) a production overhead
(D) a selling and distribution overhead

14. The Management Accountant of X Co is preparing the budgeted overhead analysis sheet for the
year 20X7/8. The company has two production cost centres (Machining and Assembly) and two
service departments (Stores and Maintenance). The directly attributable production overheads
have already been allocated to the cost centres but other costs need to be apportioned. A
section of the template being used by the Management Accountant and other information is
shown below.

What would be entered in boxes A, B, C and D?

 15.

After the reapportionment of service cost centre costs has been carried out using a method that fully
recognises the reciprocal service arrangements in the factory, what is the total overhead for production
cost centre B?

16. Using the information below, prepare the overhead analysis sheet using the Direct method of re-
apportionment.