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Accounting Qualification Answers

Intermediate level Recording and evaluating costs and revenues (ECR)
December 2010

Level 3 Diploma for Accounting Technicians (QCF) Recording and analysing costs and revenues (ECR)

720 .000 420.000 0.4200 0.000 60.000 600.800 163.400 60.000 0.600 240.4300 103. (b) Receipts Date Quantity litres Balance as at 22 November 24 November 25 November 27 November 28 November (c) (d) (e) (f) Receipts Date Quantity litres Cost per litre £ Total cost £ Quantity litres Issues Cost per litre £ Total cost £ Balance Quantity litres Total cost £ LIFO As the cost of buying the stock is increasing.480 140.000 0.880 102.1 (a) The method used for valuing issues is AVCO (deduced from the 25 November issue).000 Total cost £ 162.600 26. FIFO 200.Section 1 Task 1.000 140.200 28 November 180.000 240. therefore minimising the closing stock balance.000 0.200 Cost per litre £ Total cost £ Issues Quantity litres Cost per litre £ Total cost £ Balance Quantity litres 400.000 0.000 246.4480 75.4200 84.200 200.000 62.000 73.000 380.000 180.4100 172.4480 89. the issues will be at a higher price.

3 (a) The total cost of direct labour.200 172.000 Cr (£) 25 November 25 November 6211 1889 172.36 60.200 Task 1.600 28 November 28 November 6278 1889 103.200 27 November 27 November 1889 8055 89.000 litres 60.000 litres Equivalent units produced: Output to next process Closing work in progress (20.600 £81.600 Cost at normal rate: Cost at time and a half: Cost at double time: Total direct labour cost (b) The direct labour cost per litre of the equivalent finished production.000 84.000 litres 8.Task 1.600 £14.600 = £1. 4.000 litres at 40%) Total equivalent production Direct labour cost per equivalent litre .600 89. 52.800 hours at £12 = 800 hours at £18 = 400 hours at £24 = £57.200 103.000 litres £81.2 Date 24 November 24 November Code 1889 8055 Dr (£) 84.400 £9.

698 29.132 (72.060 38.080 14.100 15.100 .500) 43.010 Raw materials store £000 10.193 112.800 326.830 703.030 58.800 180.300 703.902 280.240 Canning £000 21.869 30.4 Basis of apportionment Paint mixing £000 Depreciation of machinery Electric power Insurance of stock Rent and rates Indirect labour NBV of machinery Kwh of machinery Allocated Floor space Allocated 29.198 14.030 42.825 45.Task 1.624 76.188 15.920 9.120 90.312 72.010 Production planning and control £000 Totals £000 72.200 29.600 28.840 72.624 220.920 9.598 Totals Reapportion Equipment maintenance and repairs Reapportion Raw materials store Reapportion Production planning and control Total overheads to profit centres 246.830) 376.800 Equipment maintenance and repairs £000 10.675 (101.560) 86.600 139.560 (76.709 112.240 14.653 30.100 55.

500 x £500 = £24.000/628.000.840.600 = £33.000 .47 (to £466.000 = £600 Canning Rate per machine hour: £326.800. (c) .Overhead absorbed £24.120.000 Over absorbed The £750.000 = £46.000 Overhead OVER absorbed = Actual overhead incurred £24.000/652.37 (to £553.53) Task 1.Task 1.5 (a) Paint mixing Rate per machine hour: £376.000 = £750.750.000/628.000 will be credited to the profit and loss account so as to reduce expenses and increase profit.6 (a) (b) The overhead absorbed = actual machine hours x BOAR = 49.600 = £500 (b) Overhead absorption rates would decrease by: Paint mixing £29.300.63) Canning £21.000/652.750.

because its sales only need to fall by 8.Section 2 Task 2.000 45.36% 69.600 8. because its forecast sales (45.2 (a) Paint type Fixed costs (£) Unit contribution (£) Break-even sales (cans) Forecast sales (cans) Margin of safety (cans) Margin of safety (%) Sales to achieve target profit (cans) (b) (c) DP18 168.00 24.000 units) £12 £3 £15 £3 £4 £7 £8 Task 2.000 4. Type DP18 will achieve its target profit. because its forecast sales (55.600 cans).000 cans) are less than its target sales (69.000 7.67% 42.000/20.000 5. when it starts to lose money. £15 £7 £5 (£100. . Type DP18’s sales would need to fall by as much as 46.400 55. on the other.67% before it starts to lose money.000 cans).000 DP20 252. hand will not achieve its target profit. Type DP20.00 50.600 Type DP20 is in danger of making a loss.000 21.000 cans) are greater than the target sales (42.1 (a) Selling price/can Prime cost/can Variable production cost/can Marginal cost (MC)/can = Contribution/can (b) Selling price/can Marginal cost/can Fixed production cost/can FAC cost/can = Profit/can (c) FAC would give the higher reported profit in the month.000 46.36% before it reaches its break-even point.

000 2.000 272.000 IP46 800 8 100 2 200 IP52 840 7 120 1 200 2.3 Paint type Contribution per thousand litres (£) Kgs of pigment required per thousand litres Contribution per kg of pigment (£) Ranking Kgs of pigment allocated to IP46 to fulfil contracts (25 x 8) Kgs of pigment remaining after fulfilling contracts Kgs of pigment allocated to each paint type per ranking Thousand litres of paint to make Total contribution earned (£) Less: fixed costs (£) Profit made (£) 0 25 20.100 Total .Task 2.100 300 252.000) 200.000 (72.

965 Description Direct materials Direct labour Overheads Abnormal gain Total 4.904 16.80 Total cost £ 3.784 – 80) / 3.000 litres at £0.900 Unit cost £ 0.060 17.680 11.900 60 £ 3.680 11.35 (b) The process account: Litres 4.50 per litre = £80 Cost per litre of normal production = £(16.000 (160) 3.52) Normal loss waste proceeds = 160 litres at £0.840 litres = £4.904 60 4.80) Direct labour (120 hours at £14) Overheads (200 hours at £59.200 1.060 17.784 Workings: Input .Normal loss Expected output Actual output Abnormal gain (difference) Input costs: Direct materials (4.000 Unit cost £ 0.200 1.35 Total cost £ 80 16.4 (a) The cost per litre of normal production: Litres 4.840 3.045 .50 4.35 261 Description Normal loss Output Litres 160 3.Task 2.045 4.

86207 129 280 (105) 175 0.Task 2.5 Net present value of machinery A Year 0 £million Capital expenditure Revenue Operating costs Net cash flows PV factors Discounted cash flows Net present value (125) 1.74316 115 285 (110) 175 0.64066 112 Year 1 £million Year 2 £million Year 3 £million .74316 130 305 (115) 190 0.64066 122 Year 1 £million Year 2 £million Year 3 £million Net present value of machinery B Year 0 £million Capital expenditure Revenue Operating costs Net cash flows PV factors Discounted cash flows Net present value (120) 1.86207 125 250 (95) 155 0.00000 (125) 256 (125) 245 (95) 150 0.00000 (120) 232 (120) 225 (80) 145 0.