- Question 1 25 Marks Quatro Makes Three Types Of Gold Watch The Diamond D The Crest C And The Prince P A Tradit 1 (212.35 KiB) Viewed 39 times
- Question 1 25 Marks Quatro Makes Three Types Of Gold Watch The Diamond D The Crest C And The Prince P A Tradit 2 (188.21 KiB) Viewed 39 times
- Question 1 25 Marks Quatro Makes Three Types Of Gold Watch The Diamond D The Crest C And The Prince P A Tradit 3 (191.08 KiB) Viewed 39 times
Question 1 (25 marks) Quatro makes three types of gold watch the Diamond (D), the Crest (C) and the Prince (P). A traditional product costing system is used at present, although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Product D Product C Product P Hours per unit Materials Labour hours Machine hours Cost per unit (£) ½ 1½ 1 Costs relating to set up Costs relating to machinery Costs relating to materials handling Costs relating to inspection Total production overhead Product D Product C Product P Total 1½ 1 3 Total production overheads are £654,500 and further analysis shows that the total production overheads can be divided as follows: Number of set-ups 75 115 480 670 % 35 20 15 30 100 20 12 25 The following total activity volumes are associated with each product line for the period as a whole: Number of movements of Production Units materials 12 21 87 120 750 1,250 7,000 Number of inspections 150 180 670 1,000 Direct labour costs £6 per hour and production overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is £28 per machine hour. Required: (a) Calculate the cost per unit for each product using traditional method, absorbing overhead on the basis of machine hours. (2 marks) (b) Calculate the cost per unit for each product using ABC method (round off to two decimal places). (18 marks) (c) Calculate the selling price per unit for each product with a mark-up of 10% using ABC method. (3 marks) (d) Based on the answers above, explain an implication of a switch from traditional method to ABC method on pricing. (2 marks)
Question 2 (25 marks) A company manufactures and sells a single product. Budgeted data per unit of the product is: Selling price Direct material Direct labour Variable production overhead Fixed production overhead Sales Production £ per unit 8.50 1.70 1.00 1.00 The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period. Budgeted non-production overhead (all fixed) is £16,800 per period. Actual sales and production for two periods has been: Period 1 Period 2 11,600 units 12,400 units 12,000 units 12,300 units 2.90 REQUIRED There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costswere as per budget in both periods. (a) Prepare profit statements, using absorption costing (b) Prepare profit statements, using marginal costing. (c) Explain fully why the profits reported in parts (a) and (b) differ. Calculations are required to support your explanation. (8 marks) (7 marks) (6 marks) (d) Explain TWO (2) differences between marginal costing and absorption costing. (4 marks)
Question 3 (25 marks) Low-Point Ltd has manufactured 3 products: X, Y and Z. The following projected data is provided for Year 6. Product X Production and Sales (units) 4000 Materials per unit at £5 per kg 2kgs Labour per unit at £8 per hour 3 hrs Variable production overheads at £2 per labour hour Product Y 5000 5kgs 2 hrs All units produced will be sold at the following prices Fixed production overheads-£45,000 are recovered on the basis of projected total units produced. Product Z 6000 5kgs 1 hr Product X £60 Product Y £50 (a) From the above calculate for each product the: (i) variable cost per unit; (ii) contribution per unit. (iii) total cost per unit; (b) Calculate the estimated profit/loss for each product and in total for Year 6. (c) Calculate for product X only the: (i) Break-even Point in units and sales value at projected output; (ii) Margin of Safety in units and sales value at projected output; (iii) Profit or Loss on sales of 1,500 units; (iv) Sales value required to make a profit of £37,500 after tax of 25%; (v) P/V Ratio. Product Z £70 (7 marks) (6 marks) (12 marks)