COURSE WORK 1: Individual
Question One:
Standard Cost for Product
RST
£
20
Materials (10kg x £20per kg)
0
Labour (5hrs x £16 per hr) 80
Variable Overheads (5hrs x £8 per
40
hr)
Fixed Overheads (5hrs x £9 per hr) 45
36
5
Budgeted
Results
Production 1000 units
Sales 7500 units
£800 per
Selling Price
unit
Actual
Results
Production 8000 units
Sales 6000 units
85000 kg Cost
Materials
£700000
36000 hrs Cost
Labour
£330900
Variable
£400000
Overheads
Fixed Overheads £500000
Selling Price £260 per unit
i) Required: Calculate
a) Material total variance
b) Material price variance
c) Labour rate variance
d) Selling price variance
ii) Give reasons why an organization would experience Favorable
Material
price Variance and Adverse Material Usage Variance.
Question Two:
a) ABC Ltd budgets to make 25,000 standard units of the product in four (4)
hours each during the budget period of 100,000 hours. The actual out put
during the period was 27,000 units which took 120,000 hours to make
and finish. You are required to:
i) Calculate the efficiency ratio,
ii) ii) Capacity ratio,
iii) iii) Production volume ratio.
b) Outline the features of effective store keeping in regards to materials
management.
c) Kent Limited had a staff level of 800 employees at the beginning of the
year and 1,200 employees at the end of the year. During the year, 500
employees left the organization and 300 were immediately replaced.
Calculate the Labour Turnover rate.
d) XYZ Ltd has a normal working week running from Monday to Friday for 40
hours. The basic rate of pay per hour is 2,000/=. Overtime worked during
the normal week is paid at time and half and overtime on weekend is
paid at two times. Okello is an employee of this company, during the
week ended 18th October 2013 he worked 45hours during the normal
working week and 12 hours at the weekend. Calculate Okello’s Gross pay
in away which can aid decision making
e) Describe the role of management accounting in the planning and control
of production activities.
Course Work 2 : Group
Question One:
Property Masters Ltd is in a process of preparing its master budget for the 6 months to
December 2015. The statement of financial position for the year to 30 June 2015 is
estimated to be as follows:
Shs ‘000’ Shs ‘000’
Non-current assets 140,000
Less depreciation (14,000) 126,000
Current assets:
Inventory 25,000
Trade receivables 24,600
Bank 3,000
52,600
Current liabilities:
Trade payables 25,000
Other payables 9,000
(34,000)
Net-current assets 18,600
Total assets less liabilities 144,600
Capital & reserves:
Share capital
Retained earnings 44,600
144,600
The budget committee have derived the following forecasts for the 6 months to
31 December 2015:
Sales Purchases Wages & Overheads Purchase Issue of Dividends
(units) salaries excluding of fixed shares
depreciation assets
May 4,000 Shs ‘000’
12,000 Shs ‘000’
8,000 Shs ‘000’
7,000 Shs ‘000’ Shs ‘000’ Shs ‘000’
June 4,200 13,000 8,000 7,000
July 4,500 14,000 8,000 7,000
Aug 4,600 18,000 10,000 7,000
Sept 4,800 16,000 10,000 7,000 20,000
Oct 5,000 14,000 10,000 8,000 10,000
Nov 3,800 12,000 12,000 8,000 30,000
Dec 3,800 12,000 12,000 8,000
Additional information:
(a) Selling price in May 2015 was Shs 6,000 per unit and this is estimated to increase
to Shs 8,000 in October. 50% of sales are for cash and 50% on credit paid for 2
months later.
(b) Purchases are to be paid for 2 months after purchase.
(c) 75% of the wages and salaries are to be paid for in the month they will be incurred and
25% in the following month.
(d) Overheads are to be paid one month after they have been incurred.
(e) Fixed assets are to be paid for in three equal installments following the purchase.
(f) Dividends are to be paid 3 months after they have been declared and
receipts from the issue of shares are to be received in the same month as budgeted.
(g) Fixed assets are depreciated at 10 % per annum on a straight-line basis on those assets
owned at 31 December 2015.
(h) Closing inventory at the beginning of the period under review was equal to the previous
2 months’ purchases. At 31 December 2015, it is estimated to equal to 3 months’
purchases.
Required:
Prepare a cash budget for the 6 months to 31 December 2015.
Question Two:
Product P passes through three distinct processes to completion. In December 2009, the cost of
production were as follows:-
Cost Item Processes Totals (shs)
I II III
Additional Materials 2,000 3,020 3,462 8,432
Direct Labour 3,000 4,000 5,000 12,000
Direct expenses 500 226 - 726
Production over heads are 6,000/=
1,000 units at 5/= were issued as input to process I, Out puts of each process were as follows:
Process I 920 Units
Process II 870 Units
Process III 800 Units
Normal Loss per Process were as follows;
Process I 10%
Process II 5%
Process III 10%
The loss in each process represented scrap which could be sold to a trader at a value as follows:
Process I shs. 30 per unit
Process II shs. 50 per unit
Process III shs. 60 per unit
There was no stock of materials of Work in progress in any department of production at the
beginning and end of the period. Production overheads are absorbed in each process on the
basis of 50% of the cost of direct labour.
Required: Prepare process I, II and III accounts and abnormal Gain account.
Question Three:
The following Over heads costs were estimated for the month of November 2009;
Department Indirect Material [shs] Indirect wages [shs]
A 95,000 90,000
B 120,000 110,000
C 20,000 30,000
X 150,000 100,000
Y 40,000 65,000
The departments are divided as follows; A, B and C are production departments while X and Y
are service department.
The following indirect expenses where also estimated.
Items Shs.
Power and lighting 600,000
Rent and rates 280,000
Insurance on Fixed Assets 100,000
Meals expenses 300,000
Depreciation on Fixed Assets 200,000
The following Bases have been provided for the cost accountant to apply in his computation;
Bases /Departments A B C X Y
Floor area in sq m 4000 4000 3000 2000 1000
Value of machinery in 10,000,000 12,000,000 8,000,000 6,000,000 4,000,000
Shs
Kilowatt hours 4000 4400 1600 1500 500
No of employees 90 120 30 40 20
The following are also estimated
Particulars / Departments A B C
Direct labour hours 3600 3200 2200
Number of Requisitions 900 600 500
Number of maintenance hours 1800 1600 1100
Management also uses the following percentages in re-apportioning services cost to production
department.
Departments A % B % C % X % Y %
X 40 30 20 - 10
Y 30 30 20 20 -
At the end of the month, the following actual information or data was obtained ;
Particulars A B C
Direct labour hours used 3000 4000 2000
Total overheads incurred 700,000 1,300,000 350,000
Required:
i) Prepare a primary over head distribution sheet,
ii) Prepare secondary overhead distribution sheet showing re-apportionment of services
department cost to production department using repeated distribution and Algebric
methods.
iii) For each production department, calculate pre determined overhead absorption rate, use
direct labour hours as the base.
iv) Calculate overhead absorbed in each production department, and determine under
absorption and/or over absorption of over heads.
Question Four:
Prime Manufacturing Company Ltd incurs two types of overhead costs, materials
handling and quality inspection. The estimated costs for the coming year are as
follows:
Materials handling Shs 1,000,000
Quality inspection Shs 3,000,000
The company currently charges overheads using direct labour hours and the expected
actual capacity is 50,000 direct labour hours. The company has been asked to submit
a bid and has assembled the following data concerning the proposed job:
Direct material cost Shs 37,000
Direct labour costs (1000 hrs) Shs 70,000
No of material moves 10
No. of inspections 5
The manager has, however, noted that many competitors use an activity- based
costing (ABC) approach to assign overheads to jobs. He estimates that the expected
number of material moves for all jobs during the year is 1,000 and expects 5,000
quality inspections. The manager would like to assess the effects of the ABC
approach before submitting the bid. Assume the bid price is cost plus 25%.
Required:
(i) Compute the bid price using absorption costing approach.
(ii) Compute the bid price using ABC approach.
(iii) What are the advantages of ABC over the traditional absorption
costing approach?