Question $1$

Burrington Ltd received an order for $2000$ bottles of vinegar. The units were manufactured as Batch#$99$ and passed through three cost centres. Mixing, Bottling and Packing whose overhead absorption rate as follows:

Department Budgeted Overheads Overheads Activity

Mixing $$10000020000$ per machine hour

Bottling $7000014000$ per labour hour

Packaging $500005000$ per labour hour

The following production costs and data were recorded:

Direct Materials $$75000$

Labour: Mixing $100$ hours @ $$25\mathrm{.}00$ per hour.

Bottling $800$ hours @ $$28\mathrm{.}00$ per hour

Packaging $400$ hours @ $$29\mathrm{.}00$ per hour

$500$ mixing hours were recorded in Mixing, and Selling and Administration overheads are absorbed at $10\%$ of production cost. Profit is calculated at $15\%$ mark$-$up$.$

a$.$ Calculate the total cost of the Batch showing clearly:

I Calculate the OAR for each department

II Prime Cost

III Factory Cost

IV Total Batch Cost

b$.$ Unit cost and profit per bottle of vinegar if selling price was $$700$ per bottle.

c$.$ State $2$ differences between activity based and job costing citing $2$ examples.

Question $2$

Part A$.$

Marlon Corporation submitted submit a bid on two prospective jobs, one for Pam Ltd$.$ and the other for Kery Ltd$.$ The Corporation uses a job costing system and applies overheads using machine hours. Total overhead for the year is expected to be$$500000,$ and it is expected that $40000$ machine hours will be worked.

Addition information relating to the prospective jobs is as follows:

Pam Ltd Kerry Ltd

Direct materials $$250000$ $$10500$

Direct labour $$66000$ $$90000$

Number of inspections $129$

Number of set$-$ups $1821$

Number of machine hours $30002900$

Number of engineering hours $120110$

Number of units produced $60005000$

a$.$ Calculate the overhead absorption rate based on the traditional method using

machine hours as the activity base: $(1$ mark$).$

b$.$ Using the traditional job costing system, calculate the total cost of each job.$(8$ marks$)$

c$.$ What is the total cost per unit produced for each job? $(2$ mark$)$

Part B$.$

Wade Corporation is concerned that the company may be over$-$or$-$under$-$pricing the jobs on which they bid. The company has decided to use activity$-$based costing to estimate the cost of future jobs. has as wade Corporation assembled the following information:

Costs $($$$)$ Cost driver Total Capacity

Machining $1000000$ Machine hours $100000$ Machine hrs$.$

Set$-$up $600000$ No$.$ of set$-$ups $600$ set$-$ups

Engineering $50000$ No$.$ of engineering hours $2000$ engineering hrs$.$

Inspection $40000$ No$.$ of inspections $4000$ inspections

Totals $1690000$

d$.$ Compute the activity rate for each activity. $(4$ marks$)$

e$.$ Compute the total cost of each job using activity$-$based costing. $(8$ marks$)$

f$.$ What is the total cost per unit produced for each job? $(2$ marks$)$

g$.$ State TWO advantages of batch costing $(5$marks$)$

$($Total $30$ marks$)$

Question $3$

The following costs relates to Crooks Manufacturing:

Year Units produced Costs $($$$)$

$19006900$

$24006320$

$37006600$

$48506800$

$57206563$

A$.$ Use the High$-$low Method to calculate the variable cost per unit and total fixed cost. $4$ marks

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

Level of activity$($units$)($x$)$ Total costs $($Y$)$

Year $1466$

Year $2659$

Year $3772$

Year $4873$

Year $5980$

Year $61292$

Required:

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

i$.$ variable cost per unit and total fixed cost $19$ marks

ii$.$ the total cost at an estimated production level of $20$ units. $2$ marks

Question $4$

A shoe manufacturer has been asked to supply a shoes to a store. The estimates of costs are given below:

Materials for manufacturing the units $$15,500$

Direct labour for fitting the units $28$ hours @ $$6\mathrm{.}60$ per hour

Direct labour for redecorating $15$ hours @ $$7\mathrm{.}50$ per hour

Overheads are absorbed on the basis of $$22\mathrm{.}40$ per direct labour hour

Profit on each job is taken at $35\%$ of total costs

GCT is charged at $15\%$

Required

a$)$ Prepare a job$-$costing schedule showing how much the kitchen will cost the customer. $(10$ Marks$)$