Questions and Answers of Cost And Management Accounting An Introduction

explain how a standard costing system operates;Appendix
calculate labour, material, overhead and sales margin variances and reconcile actual profit with budgeted profit;Appendix
identify the causes of labour, material, overhead and sales margin variances;Appendix
construct a departmental performance report;Appendix
distinguish between standard variable costing and standard absorption costing;Appendix
prepare a set of accounts for a standard costing system.Appendix
During a period, 17500 labour hours were worked at a standard cost of £6.50 per hour.The labour efficiency variance was £7800 favourable.How many standard hours were produced?Appendix 1200 16300
T ple uses a standard costing system, which is material stock account being maintained at standard costs. The following details have been extracted from the standard cost card in respect of direct
PQ Limited operates a standard costing system for its only product. The standard cost card is as follows:Fixed overheads are absorbed on the basis of labour hours. Fixed overhead costs are budgeted
QR Limited uses a standard absorption costing system. The following details have been extracted from its budget for April:In April the fixed production overhead cost was under-absorbed by £8000 and
F Limited has the following budget and actual data:The fixed overhead volume variance:Appendix Budget fixed overhead cost Budget production (units) Actual fixed overhead cost Actual production
J Limited operates a standard cost accounting system. The following information has been extracted from its standard cost card and budgets:If it used a standard marginal cost accounting system and
BS Limited manufactures one standard product and operates a system of variance accounting.As assistant management accountant, you are responsible for preparing the monthly operating statements. Data
Bronte Ltd manufactures a single product, a laminated kitchen unit with a standard cost of 80 made up as follows:The standard selling price of the kitchen unit is £100. The monthly budget projects
The following data relate to actual output, costs and variances for the four-weekly accounting period number 4 of a company that makes only one product. Opening and closing work in progress figures
The following data have been collected for the month of April by a company which operates a standard absorption costing system: Appendix Actual production of product EM Actual costs incurred: Direct
Classify each of the following as being usually fixed (F), variable (V), semi-fixed (SF) or semivariable(SV):(a) direct labour;(b) depreciation on machinery;(c) factory rental;(d) supplies and other
Which of the following costs are likely to be controllable by the head of the production department?(a) price paid for materials,(b) charge for floor space;(c) raw materials used;(d) electricity used
If actual output is lower than budgeted output, which of the following costs would you expect to be lower than the original budget?A Total variable costs B__ Total fixed costs C_ Variable costs per
The following data relate to two output levels of a department:Appendix Machine hours Overheads 17.000 246 500 18 500 251 750 The variable overhead rate per hour is 3.50. The amount of fixed
Prime cost is: A all costs incurred in manufacturing a product; B the total of direct costs; C the material cost of a product; D the cost of operating a department. CIMA Stage 1Appendix
A direct cost is a cost which: A is incurred as a direct consequence of a decision; B C D E can be economically identified with the item being costed; cannot be economically identified with the
Which of the following would be classed as indirect labour?A assembly workers in a company manufacturing televisions;Ba stores assistant in a factory store;C plasterers in a construction company;D an
distinguish between payroll and labour cost accounting;Appendix
describe the materials recording procedure;Appendix
explain the accounting treatment of holiday pay, overtime premiums, employment costs, idle time, stores losses and delivery and materials handling costs;Appendix
calculate the cost of stores issues and closing stock values using FIFO, LIFO and average cost methods of stores pricing;Appendix
explain the arguments for and against using FIFO, LIFO and average cost methods of stores pricing;Appendix
justify which costs are relevant and should be included in the calculation of the economic order quantity(EOQ);Appendix
calculate the EOQ using the formula and tabulation methods;Appendix
describe the ABC classification method;Appendix
describe materials requirement planning (MRP)systems;Appendix
explain just-in-time (JIT) production and purchasing and list the benefits arising from adopting JIT concepts.
Using the first in, first out (FIFO) ean for pricing stock issues means that when prices are rising:A product costs are overstated and_ profits understated;B_ product costs are kept in line with
(a) A company is proposing to introduce an incentive scheme into its factory.Required:Three advantages and three disadvantages of individual incentive schemes. 6 marks(b) The company is undecided on
You have been approached for your advice on the proposed introduction of an incentive scheme for the direct operatives in the final production department of a factory producing one standard product.
On 1 January Mr G started a small business buying and selling a special yarn. He invested his savings of £40000 in the business, and during the next six months the following transactions
(a) Write short notes to explain each of the following in the context of materials control: :(i) Continuous stocktaking.(ii) Perpetual inventory system.(iii) ABC inventory analysis. 9 marks(b)
A large local government authority places orders for various stationery items at quarterly intervals.In respect of an item of stock coded A32, data are:annual usage quantity 5000 boxes minimum order
distinguish between causeand-effect and arbitrary cost allocations;Appendix
explain why different cost information is required for different purposes;Appendix
describe how cost systems differ in terms of their level of sophistication;Appendix
understand the factors influencing the choice of optimal cost system;Appendix
explain why departmental overhead rates should be used in preference to a single blanket overhead rate;Appendix
construct an overhead analysis sheet and calculate cost centre allocation rates;Appendix
justify why budgeted overhead rates should be used in preference to actual overhead rates;Appendix
calculate and explain the accounting treatment of the under/over recovery of overheads;Appendix
record inter-service department transfers using one of the methods described in Appendix 4.1.Appendix
distinguish between an integrated and interlocking accounting system;Appendix
explain the distinguishing features of contract costing;Appendix
prepare contract accounts and calculate attributable profit.Appendix
distinguish between process and job costing;Appendix
explain the accounting treatment for normal and abnormal losses;Appendix
prepare process, normal loss, abnormal loss and abnormal gain accounts when there is no ending work in progress;Appendix
compute the value of work in progress and completed production using the weighted average and first in, first out methods of valuing work in progress;Appendix
differentiate between the different cost per unit calculations which are necessary for inventory valuation, decision-making and performance reporting for cost control;Appendix
compute the value of normal and abnormal losses when there is ending work in progress.Appendix
explain the differences between an absorption costing and a variable costing system;Appendix
prepare profit statements based on a variable costing and absorption costing system;Appendix
explain the difference in profits between variable and absorption costing profit calculations;Appendix
explain the arguments for and against variable and absorption costing.Appendix
describe the differences between the accountant’s and the economist’s model of cost-volume-profit analysis;Appendix
justify the use of linear cost and revenue functions in the accountant’s model;Appendix
apply the mathematical approach to answer questions similar to those listed in Example 9.1;Appendix
construct break-even, contribution and profit—volume graphs;Appendix
identify and explain the assumptions on which cost—volume-profit analysis is based;Appendix
calculate break-even points for multi-product situations.Appendix
A company manufactures and sells two products, X and Y. Forecast data for a year are:Annual fixed costs are estimated at £273 000.What is the break-even point in sales revenue with the current sales
H Limited manufactures and sells two products, J and K. Annual sales are expected to be in the ratio of J: 1, K:3. Total annual sales are planned to be £420000. Product J has a contribution to sales
The following details relate to product R:LO1 Level of activity (units) 1000 2000 (/unit) (/unit) Direct materials 4.00 4.00 Direct labour 3.00 3.00 Production overhead 3.50 2.50 Selling overhead
Z ple makes a single product which it sells for£16 per unit. Fixed costs are £76 800 per month and the product has a contribution to sales ratio of 40%.In a period when actual sales were £224 000,
A break-even chart is shown below for Windhurst Ltd.You are required:(i) to identify the components of the breakeven chart labelled p, q, r, 5, t, u, v, w, x and y3 (5 marks)(ii) to suggest what
ZED ple manufactures one standard product, which sells at £10. You are required to:(a) prepare from the data given below, a graph showing the results for the six months ending 30 April and to
Z plc operates a single retail outlet selling direct to the public. Profit statements for August and September are as follows:Required:(a) Use the high- and low-points technique to identify the
XYZ Ltd produces two products and the following budget applies for 20 × 2:You are required to calculate the break-even points for each product and the company as a whole and comment on your
define relevant and irrelevant costs and revenues;Appendix
explain the importance of qualitative factors;Appendix
distinguish between the relevant and irrelevant costs and revenues for the five decision-making problems described;Appendix
explain why the book value of equipment is irrelevant when making equipment replacement decisions;Appendix
describe the opportunity cost concept.Appendix
Z Limited manufactures three products, the selling price and cost details of which are given below:In a period when direct materials are restricted in supply, the most and the least profitable uses
Your company regularly uses material X and currently has in stock 600kg, for which it paid£1500 two weeks ago. If this were to be sold as raw material it could be sold today for £2.00 per kg. You
BB Limited makes three components: S, T and U. The following costs have been recorded:Which component(s), if any, should BB Limited consider buying in?(a) Buy in all three components.(b) Do not buy
Two decision-making problems are faced by a company which produces a range of products and absorbs production overhead using a rate of 200% on direct wages. This rate was calculated from the
Due to a national wage agreement, you find that wage rates for skilled workers are to increase by 50% over the budget figures. There is a shortage of such skilled workers and it takes over a year to
The production manager of your organization has approached you for some costing advice on project X, a one-off order from overseas that he intends to tender for. The costs associated with the project
Blackarm Ltd makes three products and is reviewing the profitability of its product line. You are given the following budgeted data about the firm for the coming year.The company is concerned about
explain the role of a cost accumulation system for generating relevant cost information for decisionmaking;Appendix
describe the differences between activity-based and traditional costing systems, Appendix
illustrate how traditional costing systems can provide misleading information for decision-making;Appendix
compute product costs for an activity-based costing system;Appendix
explain each of the four stages involved in designing ABC systems;Appendix
describe the ABC cost hierarchy.Appendix
explain the opportunity cost of an investment;Appendix
distinguish between compounding and discounting;Appendix
explain the concept of net present value (NPV) and internal rate of return (IRR);Appendix
calculate NPV, IRR, payback period and accounting rate of return;Appendix
explain the limitations of payback and the accounting rate of return methods;Appendix
calculate the incremental taxation payments arising from a proposed investment.Appendix
distinguish between long-term planning and budgeting Appendix

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