Question no 1

University is planning a concert university.

The university is considering a selling price for tickets at either RS 2,000 or RS 4,000 each

The following are the estimated costs of the proposed concert

RS

Advertising

250,000

Wages of University Personnel employed at the concert

600,000

Printing of tickets

350,000

Fee of singer

2,500,000

Ticket sellers, security

200,000

Printing of tickets

500,000

Required:

i.Calculate the number of tickets which must be sold at each price to achieve break-even point, if the singer agrees to change from fixed fee of RS 2.5 million to a fee equal to 25% of the contribution margin.

ii.Calculate the level of ticket sales for each price, at which the company would be indifferent as between the fixed and percentage fee alternative.

iii.Comment on the factors, which you think, the company might consider in choosing between the fixed fee and percentage fee alternative.

Question no 2

Oxford publishes two type of book.

The company publishes a finance book (FB), which is sold in large quantities to government controlled schools.

The book is produced in only four large production runs but goes through frequent government inspections and quality assurance checks.

The FB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Oxford publishing will produce its annual output of 1,000,000 FBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

There are three main overheads the data for these are:

Overhead Annual Cost Activity driver

Property cost 2,160,000 Machine hours

Quality control 668,000 Number of inspections

Production setup costs 52,000 Number of setup

2,880,000

The directors are keen to introduce AC for the coming year and have provided the following cost and selling price data:

1.The paper used costs RS 2 per kg for a FB but the TJ paper costs only RS 1 per kg. The FB uses 400g of paper for each book, four times as much as TJ uses.

2.Printing ink costs RS 30 per litre. The FB uses one third of the printing ink of the large TJ. The TJ uses 150 ml of printing ink per book.

3.The FB needs six minutes of machine time to produce each book, whereas the TJ needs 10 minutes per book. The machine cost RS 12 per hour to run.

4.The sales prices are to be RS 9.30 for the FB and RS 14.00 for the TJ.

Required:

(a)Calculate the cost per unit and the margin for FB and the TJ using machine hours to absorb the overheads.

(b)Calculate the cost per unit and the margin for the FB and the TJ using activity base costing principles to absorb the overheads.

(c)Discuss whether traditional costing method is beneficial or activity base costing methods explain.

Question no 3

The Black Pepper Corporation desires to classify the cost and provides you the figure of trial balance for the period ended on December 31, 2016 as under:

Rupees

Material Consumed

30% of direct labour cost

Factory overhead

60% of direct labour cost

Finished goods - Beginning

49,000

Finished goods - Ending

68,000

Work in process - Beginning

42,000

Work in process - Ending

51,300

Materials - Beginning

29,500

Materials - Ending

25,810

Cost of goods manufactured

460,000

Required: Prepare Cost of Good Manufacture Statement

Question no 4

Estimated Time: 30 Mins06 Marks

During March, Gul Ahmed Fabrics Corporation manufactured 1,000 units of a special multilayer fabric with the trade name Ideas. The following information from the Ideas production department also pertains to March.

The standard prime costs for one unit of Ideas are as follows:

Direct-labor rate variance: RS 630 Unfavorable

Direct material purchased: 36,000 yards at RS 1.38 per yardRS 49,680

Direct material used: 19,000 yards at RS 1.38 per yard RS 26,220

Direct labor: 4,200 hours at RS 9.15 per hour RS 38,430

Direct material: 20 yards at RS 1.35 per yard RS 27

Direct labor: 4 hours at RS 9.00 per hourRS 36

Total standard prime cost per unit of output RS 63

Calculate:

a)Direct Materials Usage and Price Variances

b)Direct Labor Efficiency.

Question no 5

Silgan Containers Company manufactures metal cans used in the food-processing industry. A case of cans sells for $25. The variable costs of production for one case of cans are as follows:

Direct Material $7.50

Direct labor $2.50

Variable manufacturing overhead$6.00

Total variable manufacturing cost per case $16.00

Variable selling and administrative costs amount to $0.50 per case. Budgeted fixed manufacturing overhead is $400,000 per year, and fixed selling and administrative cost is $37,500 per year. The following data pertain to the company's first three years of operation. (A unit refers to one case of cans.)

Year 1 Year 2 Year 3

Planned production (in units) 80,000 80,000 80,000

Finished-goods inventory (in units), January 1 0 0 20,000

Actual production (in units)80,000 80,000 80,000

Sales (in units) 80,000 60,000 90,000

Finished-goods inventory (in units), December 310 20,000 10,000

Actual costs were the same as the budgeted costs.

Required:

1.Prepare operating income statements for Silgan ContainersCompany for its first three yearsof operations using:

a.Absorption costing.

b.Variable costing.

2.Reconcile Silgan Containers Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method.

3.Suppose that during Silgan's fourth year of operation actual production equals planned production, actual costs are equal to budgeted costs, and the company ends the year with no inventory on hand.

a.What will be the difference between absorption-costing operating income and variable-costing operating income in year 4?

b.What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Explain