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cost accounting
Costing 6th Edition Terry Lucey - Solutions
A firm makes a single product with a marginal cost of 15p. Up to 40,000 units can be sold at 30p per unit but additional sales can only be made by reducing the selling price to 20p per unit. Fixed costs are £2,500 per period and there is a planned profit of £4,000 per period. How many units must
The following details are available regarding three products.Variable overheads are recovered at the rate of £4 per hour. Total fixed overheads are £120,000.You are required to calculate the priority ranking of the products when the limiting factor is:a. Salesb. Labourc. Materials Product X Y Z
A firm makes 150,000 electric thermostats selling at £12 each. Their last operating statement was:A contract has been offered to sell an additional 50,000 thermostats at £10 each.Acceptance of this contract would increase fixed costs by £50,000 and would mean paying an overtime premium of 20%
A factory has a bottleneck, Machine Z, available for 10,000 minutes per period. Two products are made and the data are Per unit Product Selling price Material cost Time in Z minutes Mini 15 8 2 Micro 12 4 3
What is an alternative term to break even analysis?
What is the major purpose of C-V-P analysis?
What are the major assumptions behind C-V-P analysis?
What is the formula for: the break-even point (£ sales)? Break even point (units)?
What is the C/S ratio?
How is the traditional break-even chart drawn?
What is a contribution break-even chart?
How is a Profit chart drawn?
What is a multi-product profit chart and how is it drawn?
What are the major limitations of break-even and profit charts?
How does the economist’s and accountant’s view of break-even charts differ?
The launch of a new product is being considered and four possible output levels are being considered depending on consumer reaction. The variable costs associated with these levels are shown below.There are fixed costs of £36,000 and the C/S ratio is expected to be 60%.You are required to
The fixed costs of a company are £15,000 and the contributions from the three products are:Assuming that the products are always sold in the same proportions you are required to:a. Plot the above data on a Contribution Break-even Chart andb. Show the break-even point for the company as a
A manufacturer incurred the following costs in a period for his sole product:A normal period’s sales are 500 units at £70 each, but up to 650 units could be made in a period. Various alternatives are being considered:i. Reduce the price to £63 each and sell all that could be made.ii. Increase
A firm has fixed costs of £25,000 p.a. and has three products, the details of which are:Plot the above products on a single profit chart and show the break-even sales. Product A Sales () 80,000 Marginal Cost () 40,000 B 130,000 C 90,000 60,000 . 36,000
What is the additional factor to be considered in long run decision making?
What is the accountant’s role in investment appraisal?
What are the main factors involved in the decision to invest?
Define the ARR. What variations are possible?
What are the drawbacks of ARR?
What is Payback and what is the normal decision rule when Payback is used?
What are the advantages and disadvantages of Payback?
What are the key features of all DCF methods?
What is NPV and how is it calculated?
Define IRR and describe how it is calculated.
What is the decision rule using IRR?
What is the WACC?
Why is it important to consider risk and uncertainty in investment appraisal?
How can Payback be used as a measure of risk?
What is the purpose of sensitivity analysis and how is it carried out?
What are the objectives of a post-audit and what factors would be covered in such an audit?
What are the characteristics of process costing systems? (2)
Give 6 examples of cost units found in process costing? (3)
What are the reasons for process losses? (5)
What are the normal process losses and how are they dealt with in the costing system?
What are abnormal process losses and how are they dealt with in the costing system?
Howis the value of W-I-P established in a process costing system? (9)
What is the distinction between ‘Input Material’ and ‘Material Introduced’?
How is opening balance of W-I-P dealt with?
Distinguish between the FIFO and average cost valuation methods.
A firm has two processes 1 and 2.Material for 12,000 items was put into Process 1. There were no opening stocks and no process losses and there were transfers of 9,000 items to Process 2. The unfinished items were complete as to material and 50% complete as to labour and overhead. The costs of
Orion Ltd produce a single product which undergoes three processes. The following details relate to one period:A normal loss of 5% of the input to each process is anticipated.Units lost have the following scrap values:There was no opening or closing W-I-P.Prepare ledger accounts for the period.
Aplastic manufacturing process has a normal wastage of 8% which can be sold as scrap at £2 per Kg.In a given period, the following data were recorded:Show all relevant accounts. Input 250 Kgs at Labour and overheads Actual output 7 Kg. 3,500 225 Kgs.
Ina given period the production data and costs for a process were:Production 2100 units fully complete 700 units partly complete The degree of completion of the partly complete units was:The costs for the period wereCalculate the total equivalent production, the cost per complete unit and the value
What is a joint product? A by-product?
What are three common methods of dealing with by-product costs?
What is the ‘split-off point’?
What are the two most common methods of apportioning joint costs?
Why are notional sales values at split-off point sometimes calculated?
How is the decision made whether to sell at the split-off point or perform further processing?
The following data relate to three joint products:Joint costs £35,000. Calculate the profit made by each product apportioning joint costs on:a. the sales value basisb. the physical basis. A B C Sales Value 24,000 18,000 15,000 Selling Costs 3,500 4,500 1,000 Weight (Kgs) 180 240 150
Two products, X and Y, are produced from the same material. The material costs 95p per Kg and the products appear after Process 1.X can be sold directly but Y needs further processing in Process 2.The following data relate to one period.There were no materials on hand at the end of the period.You
Four joint products are produced from a refining process. In the past, no attempt has been made to apportion the joint costs and the Sales Manager obtained the best price he could for each product. The new accountant for the firm apportioned the joint costs over the products on a weight basis and
Define planning.
What are the stages in long term strategic planning?
Define short term tactical planning.
What is the purpose of the control process?
What are the elements in the control cycle?
Distinguish between single and double loop feedback.
What is feedforward?
How does Target Costing work?
What are the stages in the decision process?
Give examples of decisions at the three levels in the organizations.
Distinguish between programmed and non-programmed decisions.
What are the characteristics of information which is more likely to be used in decision making?
The cost accounting system of the firms records the costs incurred in the past for products, departments, operations and processes. Accordingly the information contained within the cost accounting system is of no value for decision making purposes.Discuss this statement.
Why should the problems of control be considered at the planning stage?
Give 3 examples of decision making at each of the main management levels ie, strategic, tactical, and operational.
What are the major reasons for the study of cost behavior?
What is normally assumed to be the major factor influencing the level of costs?
Can statistical techniques be of value in predicting costs?
Define a variable cost
What is a curvilinear variable cost?
What is the formula for the cost function known as a Parabola?
What is a linear approximation?
Distinguish between variable cost and the economic concept of marginal cost.
Define a fixed cost
What is a semi-variable cost?
What is the formula for a linear semi-variable cost?
What is the scatter graph technique?
What are the least square Normal Equations?
Why is it necessary to allow for the effect of inflation in cost analyses?
Why is judgement required in cost prediction?
What are step costs?
The behaviour of a cost can be expressed algebraically as:where b = labour hours c = material in Kgs d = machine hours and x = output in units You are required to:a. Explain what type of cost is depictedb. Calculate the cost at output levels of 80 and 100 units when b = 6, c = 0.7 and d = 0.04.
Using the results obtained in Exercise 1 calculate the cost at 85 units using linear interpolation. What is the extent of the error caused by linear interpolation?Data From Exercise 1:-The behaviour of a cost can be expressed algebraically as:where b = labour hours c = material in Kgs d = machine
The following cost and activity data were taken from factory records.Using the least squares method of linear regression calculate the fixed and variable elements of the cost. Cost incurred 656 Activity (units) 80 692 86 683 87 698 94 707 95 703 97 712 104
Draw a scattergraph of the data in Exercise 3 and show the calculated regression line.Data From Exercise 3:-The following cost and activity data were taken from factory records.Using the least squares method of linear regression calculate the fixed and variable elements of the cost. Cost incurred
A company operates interlocking financial and cost accounting book-keeping systems.The following balances and data relate to the Cost Ledger.The following data concerns the period’s operations.You are required to write up all the necessary accounts, prepare the Costing Profit &Loss Account
The profit shown in the financial accounts was £11,287 and for the same period the cost account showed a profit of £2,704.Examination of the accounts showed the following differences:Reconcile the profit figures. Cost Accounts Financial Accounts Depreciation 9,826 10,520 Stock Valuations
A firm maintains separate Cost and Financial Ledgers. The opening trial balance in the Cost Ledger was as follows:Cost Ledger — Opening Trial BalanceDuring the period sales were £37,529 and purchases, wages and overheads totalled £29,286.At the end of the period, by coincidence, the stores
What is a costing method?
What are the five main types of costing methods?
What is the relationship of a costing technique to a costing method?
Define job costing.
What factors need to be present before a job costing system can operate efficiently?
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