Questions and Answers of Cost And Management Accounting An Introduction

In order to utilize some spare capacity, E Limited is preparing a quotation for a special order which requires 800 kgs of material R.E Limited has 350 kgs of material R in stock(original cost £1.80
Q ple makes two products—Quone and Qutwo—from the same raw material. The selling price and cost details of these products are as shown below:If materials were limited to 2000 kg per week, the
M ple makes two products — MI and M2 —budgeted details of which are as follows:The fixed overhead shown above comprises both general and specific fixed overhead costs. The general fixed overhead
Determining minimum short-term acceptable selling price Company A expects to have 2000 direct labour hours of manufacturing capacity (in normal time)available over the next two months after
Acceptance of a contract JB Limited is a small specialist manufacturer of electronic components and much of its output is used by the makers of aircraft for both civil and military purposes. One of
Preparation of a cost estimate involving the identification of relevant costs You are the management accountant of a publishing and printing company which has been asked to quote for the production
Calculation of minimum selling price You have received a request from EXE plc to provide a quotation for the manufacture of a specialized piece of equipment. This would be a one-off order, in excess
Decision on whether to launch a new product A company is currently manufacturing at only 60%of full practical capacity, in each of its two production departments, due to a reduction in market share.
Contribution analysis and an outsourcing decision AZ Transport Group ple comprises three divisions— AZ Buses; AZ Taxis; and Maintenance.AZ Buses operates a fleet of eight vehicles on four different
Limiting key factors PDR ple manufactures four products using the same machinery. The following details relate to its products:There is a maximum of 2000 machine hours available per
Key/limiting factor decision-making BVX-Limited manufactures three garden furniture products — chairs, benches and tables. The budgeted unit cost and resource requirements of each of these items is
Allocation of scarce capacity and make or buy decision where scarce capacity exists PQR Limited is an engineering company engaged in the manufacture of components and finished products. The company
Price/output and key factor decisions You work as a trainee for a small management consultancy which has been asked to advise a company, Rane Limited, which manufactures and sells a single product.
‘Attributing direct costs and absorbing overhead costs to the product/service through an activitybased costing approach will result in a better understanding of the true cost of the final
In a marginal costing system only variable costs would be assigned to products or services, in which case management may rely ona- contribution approach to decisions.Required:(a) Explain and discuss
Calculation of ABC product costs and a discussion of the usefulness of ABC Trimake Limited makes three main products, using broadly the same production methods and equipment for each. A conventional
Preparation of conventional costing and ABC profit statements The following budgeted information relates to Brunti ple for the forthcoming period:Overheads allocated and apportioned to production
Computation of traditional and ABC unit costs and comments on the reported costs BML has three product lines P1, P2 and P3. Since its creation the company has been using a single direct labour cost
Comparison of ABC with traditional product costing(a) In the context of activity-based costing(ABC), it was stated in Management Accounting—Evolution not Revolution by Bromwich and Bhimani, that
Payback and NPV calculations A company is trying to decide which of two investment projects it should choose. The following information is provided:1. Each product is expected to be operational for
Calculation of accounting rate of return and NPV A company is proposing to enter a new market and has collected the following data.Capital expenditure on plant and machinery to product product X will
NPV and payback calculation plus a replacement decision The management of a hotel group is deciding whether to scrap an old but still serviceable machine bought five years ago to produce fruit pies
An investment project has the following expected cash flows over its economic life of three years:Required:(i) Calculate the net present value (NPV) of the project at discount rates of 0%, 10% and
Present value of purchasing or renting machinery The Portsmere Hospital operates its own laundry.Last year the laundry processed 120000 kilograms of washing and this year the total is forecast to
Calculation of payback, NPV and ARR, and recommendation of which of two mutually exclusive projects should be accepted.(a) Essential to an understanding of the investment appraisal techniques of
The following details have been extracted from the debtor collection records of C Limited:Invoices are issued on the last day of each month.Customers paying in the month after sale are entitled to
Outline:(a) the objectives of budgetary planning and control systems; (7 marks)(b) the organization required for the preparation of a master budget. (10 marks)(Total 17 marks)ACCA Level I Costing
The preparation of budgets is a lengthy process which requires great care if the ultimate master budget is to be useful for the purposes of management control within an organization.You are
Preparation of functional budgets X plc manufactures Product X using three different raw materials. The product details are as follows:The company is considering its budgets for next year and has
Preparation of functional budgets D Limited is preparing its annual budgets for the year to 31 December 2001. It manufactures and sells one product, which has a selling price of£150. The marketing
Calculation of sales to achieve target profit and preparation of functional budgets There is a continuing demand for three subassemblies— A, B and C — made and sold by MW Limited. Sales are in
Preparation of functional budgets Data Wilmslow Ltd makes two products, the Alpha and the Beta. Both products use the same material and labour but in different amounts. The company divides its year
Budget preparation and comments on sales forecasting methods You have recently been appointed as the management accountant to Alderley Ltd, a small company manufacturing two products, the Elgar and
Preparation of cash budgets The following data and estimates are available for ABC Limited for June, July and August.1. 10% of sales are for cash, the balance is received the following month. The
Preparation of cash budgets A redundant manager who received compensation of £80000 decides to commence business on 4 January, manufacturing a product for which he knows there is a ready market. He
Preparation of cash budgets Y plc is currently preparing its budgets for the year ending 30 September 2001.The sales and production budgets have been completed and an extract from them is shown
Direct labour budget and labour cost accounting A company, which manufactures a range of consumer products, is preparing the direct labour budget for one of its factories. Three products are
Outline the main features of a responsibility accounting system.
Explain the meaning of each of the undernoted terms, comment on their likely impact on cash budgeting and profit planning and suggest ways in which any adverse effects of each may be reduced. (a)
Preparation of flexible budget, separation of fixed and variable costs and comments on variances Secondline Ltd, aware of the uncertain nature of its market for the coming year has prepared budgeted
Preparation of flexible budgets The following monthly budgeted cost values have been taken from the budget working papers of MZ Limited for the year ended 30 September 2000.Required:(a) Prepare a
Preparation of flexible budgets based on an analysis of past cost behaviour and an adjustment for inflation TJ Limited is in an industry sector which is recovering from the recent recession. The
Preparation of flexible budgets A manufacturing company has the following budgeted costs for one month which are based on a normal capacity level of 40000 hours.A departmental overhead absorption
Preparation of flexible budgets and an explanation of variances You have been provided with the following operating statement, which represents an attempt to compare the actual performance for the
Preparation of a flexible budget performance report The Viking Smelting Company established a division, called the reclamation division, two years ago, to extract silver from jewellers’ waste
Preparation of flexible budgets Data Rivermede Ltd makes a single product called the Fasta. Last year, Steven Jones, the managing director of Rivermede Ltd, attended a course on budgetary control. As
Demand forecasts and preparation of flexible budgets Data Happy Holidays Ltd sells holidays to Xanadu through newspaper advertisements. Tourist are flown each week of the holiday season to Xanadu,
Responsibility centre performance reports Data Jim Smith has recently been appointed as the Head Teacher of Mayfield School in Midshire. The age of the pupils ranges from 11 years to 18 years. For
During a period 25 600 labour hours were worked at a standard cost of £7.50 per hour. The direct labour efficiency variance was £8250 adverse. How many standard hours were produced?A 1100. B 24500.
In a period, 11 280kg of material were used at a total standard cost of £46 248. The material usage variance was £492 adverse.What was the standard allowed weight of material for the period? AB C D
S plc has the following fixed overhead cost data for October:The values of over-absorption/under-absorption caused by volume and expenditure effects are: Budgeted cost 100 000 Actual cost 101 400
The following information relates to R ple for October: Bought 7800 kg of material R at a total cost of 16380 Stocks of material R increased by 440 kg Stocks of material R are valued using standard
P Limited has the following data relating to its budgeted sales for October:During October actual sales were 11000 units for a sales revenue of £99 000.P Limited uses an absorption costing
The following details have been extracted from a standard cost card of X ple:During October the budgeted production was 5000 units of product X and the actual production was 4650 units of product X.
In a period, 5792 units were made with a standard labour allowance of 6.5 hours per unit at £5 per hour. Actual wages were £6 per hour and there was an adverse efficiency variance of £36000.
J Limited uses a standard costing system and has the following data relating to one of its products:Budgeted sales for April 2000 were 800 units, but the actual sales were 850 units. The revenue
T ple uses a standard costing system, with its material stock account maintained at standard cost. The following details have been extracted from the standard cost card in respect of direct
Z ple uses a standard costing system and has the following labour cost standard in relation to one of its products: 4 hours of skilled labour @ 12.00 per hour = 48.00 per unit During April 2000, 3350
Flexible budgets and computation of labour and material variances(a) JB ple operates a standard marginal cost accounting system. Information relating to product J, which is made in one of the company
Computation of labour and material variances for a hotel You work as the assistant to the management accountant for a major hotel chain, Stately Hotels plc. The new manager of one of the largest
Computation of labour and material variances and reconciliation statements Malton Ltd operates a standard marginal costing system. As the recently appointed management accountant to Malton’s
Reconciliation of actual and budgeted profit (including overhead variances)A local restaurant has been examining the profitability of its set menu. At the beginning of the year the selling price was
Reconciliation of standard and actual cost for a variable costing system Data You are employed as the assistant management accountant in the group accountant’s office of Hampstead plc. Hampstead
Variance analysis and reconciliation of budgeted and actual profit The Perseus Co. Ltd, a medium-sized company, produces a single produce in its one overseas factory. For control purposes, a standard
Calculation of labour, material and overhead variances and reconciliation of budgeted and actual profit You are the management accountant of T ple. The following computer printout shows details
Discussion and calculation of overhead variances(a) Explain fully how the variances between actual and standard production overhead costs may be analysed, where overhead absorption is based upon
Calculation of labour, material and overhead variances The summary production budget of a factory with a single product for a four week period is as follows:Variable overheads are absorbed at a
Computation of variable overhead variances The following details have been extracted from the standard cost card for product X:During October 5450 units of the product were made compared to a
Material price and usage variances and calculation of material price and usage working backwards from variances AB Ltd manufactures a range of products. One of the products, Product M, requires the
Calculation of actual quantities working backwards from variances The following profit reconciliation statement summarizes the performance of one of SEW’s products for March.The budget for the same
Calculation of labour variances and actual material inputs working backwards from variances A company manufactures two components in one of its factories. Material A is one of several materials used
Comparison of absorption and marginal costing variances You have been provided with the following data for S ple for September:Required:(a) Calculate:(i) the standard contribution per unit;(ii) the
Accounting entries for a standard costing system A company uses Material Z in several of its manufacturing processes. On 1 November, 9000 kilos of the material were in stock. These materials cost
Calculation of labour, material and overhead variances plus appropriate accounting entries JC Limited produces and sells one product only, Product J, the standard cost for which is as follows for one
Calculation of variances and accounting entries for an interlocking standard costing system B Ltd manufactures a single product in one of its factories. Information relating to the month just ended
Accounting entries for a standard costing system Fischer Ltd manufactures a range of chess sets, and operates a standard costing system. Information relating to the ‘Spassky’ design for the month
Fixed costs are conventionally deemed to be:A constant per unit of output;B constant in total when production volume changes;C outside the control of management;D those unaffected by inflation.CIMA
Prepare a report for the Managing Director of your company explaining how costs may be classified by their behaviour, with particular reference to the effects both on total and on unit costs. Your
Describe three different methods of cost classification and explain the utility of each method.(11 marks)ACCA Level I Costing LO1
Cost classification used in costing include:(i) period costs(11) product costs(111) variable costs(iv) opportunity costs Required:Explain each of these classifications, with examples of the types of
(a) Describe the role of the cost accountant in a manufacturing organization. (8 marks)(b) Explain whether you agree with each of the following statements:(i) ‘All direct costs are variable.’(ii)
‘Costs may be classified in a variety of ways according to their nature and the information needs of management.’ Explain and discuss this statement, illustrating with examples of the
It is commonly suggested that a management accounting system should be capable of supplying different measures of cost for different purposes.You are required to set out the main types of purpose for
Opportunity cost and sunk cost are among the concepts of cost commonly discussed.You are required:(i) to define these terms precisely; (4 marks)(ii) to suggest for each of them situations in which
Distinguish between, and provide an illustration of:(i) ‘avoidable’ and ‘unavoidable’ costs;(11) ‘cost centres’ and ‘cost units’.(8 marks)ACCA Foundation Paper 3 LO1
For the relevant cost data in items (1)-(7), indicate which of the following is the best classification.(a) sunk cost (b) incremental cost(c) variable cost (d) fixed cost(e) semi-variable cost (f)
A company manufactures and retails clothing. You are required to group the costs which are listed below and numbered (1)(20) into the following classifications (each cost is intended to belong to
(a) ‘Discretionary costs are troublesome because managers usually find it difficult to separate and quantify the results of their use in the business, as compared with variable and other fixed
Analysis of costs by behaviour for decisionmaking The Northshire Hospital Trust operates two types of specialist X-ray scanning machines, XRI and XR50. Details for the next period are estimated as
Sunk and opportunity costs for decisionmaking Mrs Johnston has taken out a lease on a shop for a down payment of £5000. Additionally, the rent under the lease amounts to £5000 per annum. If the
Relevant costs and cost behaviour(a) Distinguish between ‘opportunity cost’ and‘out of pocket cost’ giving a numerical example of each using your own figures to support your answer. (6
Describe the essential requirements of an effective material stock control system. (17 marks)ACCA Level I Costing LO1
You have been given full responsibility for stocktaking of your company’s inventory and its subsequent valuation. There are approximately 4000 different categories of stock, ranging from small
The management of a company manufacturing electrical components is considering introducing an historic batch costing system into its factory.Required:(a) Outline the information and procedures
Stores pricing Z, Ltd had the following transactions in one of its raw materials during AprilYou are required to:(a) write up the stores ledger card using (i) FIFO and (ii) LIFO methods of stock
Stores pricing and calculation of EOQ(a) Atlas Limited Is having difficulty costing material X to the various jobs that it is used on. The material is bought in bulk and recent receipts and issues
Stores pricing and calculation of EOQ and max./min. stock levels You have been appointed as inventory accountant to a company where material is a major element of cost. The chief accountant wants to
Stores pricing and labour cost accounting S. Poynter Public Limited Company, an engineering company constructing special-purpose equipment to customer specification, employs a system of job costing
Evaluation of an incentive scheme XYZ Ltd is considering introducing an incentive scheme. Current production for the period is 100 units, and total wages paid are £600 for this production. Material
Calculation of earnings The following information is available:calculate earnings based on:(i) piecework, where earnings are guaranteed at 80% of time-based pay;(ii) premium bonus system.LO1 Normal

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