Cost Accounting

Instructions: Attempt all three (3) questions

Question 1

The following costs were reported by XYZ Company.

Period	Units produced	Costs ($)
1	340	2 260
2	300	2 160
3	400	2 300
4	420	2 400
5	360	2266

1. Use the High-low Method to calculate the fixed costs per month and the variable costs per unit. 10 marks

2. The following costs were observed over several periods in a manufacturing company.

	Production level (units)	Total costs ($)
Period 1	8	112
Period 2	10	124
Period 3	14	160
Period 4	14	144
Period 5	18	176
Period 6	20	188

Required

Using the Least Square Method of Linear Regression, determine the:

1. variable cost per units and total fixed cost 5 marks

2. Total cost at an estimated production level of 22 units and 24 units. 5 marks

Question 2

Huge Black Monster Limited uses machine hour rate of overhead recovery in its machinery department and direct labour hour rate of recovery in its assembly department. The budgeted overheads in the machinery department and the assembly department are $40,000 and $64,000 respectively.

	Machining Department	Assembly Department
Budgeted machine hours	10,000	0
Budgeted direct labour hours	25,000	25,600

Job # 627 costs $400 in direct materials and $600 in direct labour. It requires 20 machine hours (80 direct labour hours) in the machining department and 200 hours in the assembly department.

Required:

1. Calculate the full cost of job 627 using the current bases of overhead absorption

7 marks

2. Calculate the full cost of job 627 if the absorption rate is in the machining department is changed to direct labour hour rate. 8 marks

Question 3

Bookal Ltd has the following data:

	Prod 1	Prod 2	Stores dept	Maintenance dept
Overhead costs $	24,000	16,000	10,000	8,000
Cost of material requisitions	40,000	35,000	-	15,000
Mnance hours needed (hrs)	8,000	4,500	1,500

Required:

a) Use the repeated distribution method to apportion the overhead costs of the two service centres 8 marks

b) Ascertain the total overhead costs of the production departments 7 marks

c) Compare the overall cost of the production departments using the repeated distribution method and the traditional overhead absorption method. 3 marks

d) Comment on the benefits or drawbacks of using the repeated distribution method of overhead absorption 2 marks