Principles Of Cost Accounting 1st Edition Reynier Boersma, Marina Bornman, Christo Hurter Joset Jordaan-Marais, Peter Kamala, Jayan Mathew Melissa McGill - Solutions

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King Dry Cleaners is the sole dry cleaning business in their area while Queen Dry Cleaners operate in an area where there are a large number of competitors. The average price per dry cleaning is currently R20.
Wood Manufacturers Limited makes wooden dog houses. They use a market based pricing policy and have set a target cost per unit based thereon. As the target cost is R20 lower than the current cost per unit the following proposals have been made to achieve the target cost:a. They could change their
KP Consulting services are trying to determine an appropriate hourly rate for their consulting services. They have calculated that the consultant’s hourly cost to company is R150 per hour and their variable costs per hour is R20. Their fixed costs are R120 000 per annum and they believe that they
Furniture Galore is a retailer selling furniture. One of their most successful ranges is their‘Golden’ range of lounge suites. A lounge suite costs R3 500 per suite when purchased from their supplier. They are currently reviewing their selling prices for the range.The lounge suites currently
JXT Chemicals produces shampoo. The expected unit costs based on normal capacity per bottle is as follows:
Briefly describe the impact of customers on pricing strategy.
A company uses a market-based approach for calculating the selling prices of its products.They have determined that an appropriate selling price for a product is R25. Based on their required return the target cost for the product is R18, however the expected cost per unit is R20. Briefly describe
Assume that a product’s total production cost is R100 and the company uses a cost based pricing strategy with a 30% markup on total production costs. Calculate the selling price per unit for the product.
Briefly define value engineering.
Briefly differentiate between market based and cost based pricing strategies.
Sparkling Jewellers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is R190 and its unit cost is made up of:
Doodlebop (Pty) Ltd manufactures four products using the same machinery. The following details relate to the products:
Yum Yum, a popular restaurant chain, needs to determine whether it would be cheaper to bake its own bread rolls or to purchase bread rolls from a nearby bakery. Yum Yum requires 2 000 bread rolls per month. The bakery will charge R0,50 per bread roll.Cost information on internal production of 2 000
Rolypoly (Pty) Ltd manufactures 20 000 rolls of paper each period. The paper is used as an input for producing several other products that the company manufactures. The full manufacturing costs for a batch of 100 rolls of paper are as follows:
Three Cheeses Pizza bought their current pizza oven two years ago for R10 500. It has one operating year remaining and a book value of R3 500. The owner could purchase a new oven for R2 200, but it would only last one year. The new oven will result in a saving of R3 000 annually compared to
ZZZ Ltd will lose revenue from their regular customers if they accept a special order while operating at capacity.Identify the type of cost of which this is an example, and discuss whether this cost will be relevant to the decision on whether to accept the special order.
A company produces two products, K and L, each manufactured from the same raw material and they undergo a machining process using the same type of machines. The resources are in short supply and the company needs to determine the best combination of unit numbers in order to maximise profit.The raw
Bond Ltd produces two types of leather cricket balls, A and B. The raw material costs R25 per kilogram and labour is remunerated at R20 per hour.The costs per unit are as follows:
A toy company produces remote-controlled racing cars and remote-controlled speedboats.Management’s strategic planning has indicated that the company must aim to sell a minimum of 100 racing cars and 60 speedboats per week. The battery-operated engines used in both models are limited in supply,
A company manufacturing steel garden chairs and tables has two departments in the manufacturing process – the cutting department and the welding department. Four chairs or 10 tables can be processed in the cutting department each hour. In the welding department, eight chairs or five tables can be
A company manufactures bicycle chains. One type is made from stainless steel and a more expensive type is made from an aluminium alloy. Both types are manufactured using the same machinery and the total daily capacity of the machines is 72 hours. It takes 45 minutes to produce one stainless-steel
Portia Ndau produces tablecloths and aprons, hand-embroidered with flowers. She sells them at a local market and has a fixed demand from a local guest house for three aprons and one tablecloth each week.
Peter’s Paints employs four painters and they specialise in painting palisade fencing and tile roofs. A standard fence (F) of 50 m requires two hours of labour per painter and a standard roof (R) of 80 m2 requires three hours of labour per painter. On a normal day, the painters have collectively
Explain which factors (other than limiting resources) may influence management’s decision to produce a certain number of products.
What is meant by the term ‘optimum product composition’?
Define the concept ‘limiting factor’.
Madlala Engineering Co (Pty) Ltd operates a machine shop in the greater Durban area. It is considering the replacement of one of its metal cutting machines which is now obsolete. The following quotation was received from Linca Heavy Machinery (Pty) Ltd. The new machine would require an initial
According to the company auditors, management has recently made a number of poor decisions with regard to capital appraisal, resulting in a number of investments being unprofitable. As a specialist in this field, you are asked to explain critically the use of the net present value method and the
Consider the following two mutually exclusive projects:
Consider the following two projects that Dee Cee Investments is considering:
Consider the following two mutually exclusive projects, A and B.
Modex Ltd is considering a new investment project. The following facts relate to this project:
Maxwell Ltd has the opportunity to invest in a project with the following estimated future cash flows:
Trefoil Enterprises Ltd wishes to purchase a new cutting machine for its machine shop.Agents from two different companies, A and B, have supplied the following information. Due to limited funds, only one project can be accepted.
Saturn Ltd has an opportunity to invest in a project with the following estimated future cash flows:
A project costing R46 000 yields the following cash inflows:Year 1 R12 000 Year 2 R16 000 Year 3 R20 000 Year 4 R24 000 Year 5 R16 000 Installation costs amount to R6 000. The opportunity cost of the investment is 20 per cent.Using the following investment-appraisal methods, determine whether this
Which of the following are disadvantages of the IRR?a. Where positive and negative cash flows are present, numerous IRRs can occur, resulting in incorrect decision making.b. The IRR is difficult to calculate without a financial calculator or the use of a computer program.c. The IRR is easy to
Which of the following are advantages of the NPV method?a. The time value of money is integral to the calculation of the NPV.b. All cash flows throughout the life of the asset are considered.c. Projects being considered can be easily ranked from most profitable to least profitable, thus simplifying
The discounted payback period is an attempt to overcome the deficiencies of the payback period. However, which of the following deficiencies remain with this method?a. Cash flows after recovery of the initial investment are still not taken into account.b. Short-term profitability is considered
The payback period method of capital appraisal is used extensively, but it has a number of serious deficiencies. Which of the following are deficiencies of the payback period?a. Cash flows after recovery of the initial investment are not taken into account.b. The method does not take the time value
Ethiopia (Pty) Ltd has made the following information available with regard to its monthly revenues and costs:
Trappers (Pty) Ltd manufactures hiking boots. The following information is available:
Bettacouch (Pty) Ltd manufactures couches for a niche market. The company makes use of a standard-costing system. The standard cost card for a two-seater couch is as follows:
Bedridden (Pty) Ltd has a relevant range of 15 000 to 25 000 labour hours per year. The cost formulas for Bedridden’s manufacturing overheads are listed below:
A partially completed flexible overhead budget for Alpha (Pty) Ltd is shown below:
When comparing budgeted data with actual data in a performance report for variable overheads, which variances will be produced if the budgeted data is based on actual hours worked?
When choosing an activity base on which to construct a flexible budget, discuss three criteria that should be considered.
Peter Computers (Pty) Ltd’s variable selling and administrative expenses are R48 000 at a production level of 6 000 units. What are the variable selling and administrative expenses? a.R56 000b. R80 000c. R64 000d. R48 000
Pratly (Pty) Ltd had the following information available for the expected cost and selling price based on 5 000 units:
Which of the following statements is false?a. A flexible budget is used for control purposes and a fixed budget is used for planning purposes.b. A flexible budget is prepared at the end of the period and a fixed budget is prepared at the beginning of the period.c. A flexible budget is not useful
What is the primary difference between a fixed budget and a flexible budget?a. The fixed budget contains only fixed costs, while the flexible budget contains only variable costs.b. The fixed budget is adjusted for different activity levels, while a flexible budget is prepared for a single level of
A fixed budget …a. should not be prepared in a company.b. shows planned results at the actual activity level.c. is useful in evaluating performance by comparing actual and planned variable costs. d.shows planned results at the original budgeted activity level.
Comrado Manufacturers Ltd provides the following estimates for standard costs and expenses at two different levels of production:The company absorbs manufacturing overheads on the basis of a standard production capacity of 22 500 units. Actual production for the year was 21 750 units and sales were
Mosutho Manufacturing Company has a normal production capacity of 22 500 units per annum. The company provides the following cost information about its new product line:
HH Ltd is a manufacturing business that produces one product using two different raw materials. The following statement of financial performance is taken from the books of HH Ltd for the year ended 28 February 2013.
BSP Company produced 37 500 units in the first year of its operations. The selling price of their product is R55 per unit. BSP uses production units as the basis for absorbing the fixed manufacturing overheads. The following information is taken from the company records:
Use the information provided in Question 1. Assume that all the units produced were sold except for 100 units.a. Prepare the statement of financial performance using:i. The direct-costing method ii. The absorption-costing methodb. Account for the difference in the profit.
The following information was extracted from the books of SM Manufacturers:
Are the following statements true or false?• The difference between sales and cost of sales in the case of direct costing is known as contribution margin.• Direct costing is not used in managerial decision making.• Absorption costing writes off the total fixed overhead as a period cost in the
Define the following:• Direct costing• Absorption costing• Contribution margin
Exotica Ltd manufactures two products, X and Y. At present, the company uses a traditional absorption costing system based on production volumes to allocate overheads to products.The budgeted costing information for 2013 is as follows:a. Calculate the overhead cost per unit of each product using
XYZ Ltd manufactures plastic components for the car industry. The following budgeted information is available for three of the company’s key plastic components:
Black Ltd. manufactures two products (X and Y). The overhead costs have been divided into four cost pools that use the following activity drivers:
Dhansay Ltd manufactures medical equipment. Its two products, A and B, are made specifically for use in doctors’ rooms. The company currently uses traditional volume-based costing. The chief financial officer has recently returned from a conference where he learnt that ABC is a more accurate
Using the information given in Example 13.2:a. Calculate the overhead cost per unit for each product using traditional volume-based costing systems, on the basis of machine hours.b. Compare the overhead cost per unit of each product found in Question 1 a., using the traditional volume-based costing
Ronaldo Confectionary bakes and sells three different types of chocolate cake, namely white chocolate cake, brown chocolate cake and dark chocolate cake. The following information is provided for the month of January 2013:Calculate:a. Sales margin mix varianceb. Sales margin quantity variance
Zastron Chemicals manufactures and sells three different types of industrial cleaning liquid.The following standard information and actual information for the month of February 2013 is provided:Calculate:a. Sales margin mix varianceb. Sales margin quantity variance
Tempo manufactures a product Serafin using a mix of two raw materials Alpha and Beta.The standard mix for Serafin is as follows:
Maxwell Manufacturing has operated a standard costing system successfully for a number of years. The standard card for one of its products C2X is as follows:Expected production for the period is 25 000 units.Each unit is expected to take 30 minutes to manufacture.Labour is paid at R15 per
TC Floor Tiles (Pty) Ltd manufactures floor tiles in a material mix as follows:
Remak Manufacturing Company manufactures chemicals for use in the petroleum industry.The following standard card is provided for May 2012:
Alpha Manufacturing Company operates a standard costing system. The following information relates to the three-month period ending 28 February 2011.Standard cost card for the period (as the operation is mostly labour-intensive, overheads are absorbed using direct labour hours):
P Wood (Pty) Ltd uses a standard costing system in the manufacture of bar stools.Data for the standard cost per unit is as follows:Direct material 30 metres of wood at R50 per metre Direct labour 4 hours at R30 per hour Variable overheads 4 hours at R0,50 per labour hour Fixed overheads 4 hours at
Focus (Pty) Ltd operates a standard costing system. Standard cost card information relating to product Zap is provided below:
Ribok Shoe Manufacturing Company operates a standard costing system. The following information is provided for the month of April 2012:Standard card:Selling price per unit R280 Direct material A12 kg at R12,50 per kg Direct Material B 6kg at R6,50 per kg Direct labour 9 hours at R8,50 per hour
Maxwell Manufacturing has operated a standard costing system successfully for a number of years.The standard cost card for one of its products, C2X, is as follows:Expected production for the period is 25 000 units.Each unit is expected to take 30 minutes to manufacture.Labour is paid at R15 per
The standard cost card for product Rubika in terms of sales figures is:Standard sales volume 10 000 units Standard price per unit R10 The actual cost card shows the following:Actual sales volume 9 500 units Actual price per unit R9,50 Prepare the following variances:• Sales margin price
Aegis Chemical Plant provides the following standards per finished product for direct materials and direct manufacturing labour:Direct materials: 20 kg at R6 per kg R120 Direct manufacturing labour: 0,5 hours at R40 per hour R20 The company budgeted for 20 000 units to be completed.
Twofold Production Company uses a standard costing system. The following information is provided:
Mantis Manufacturing Company used 35 000 actual labour hours during the period and paid a rate of R13,00 per hour for this work. The labour efficiency variance was R15 600 favourable. Calculate the standard hours that should have been worked for the same period.
Wandi’s Ltd manufactures joint products A, B and C. Products A and C need to be further processed before being sold. The joint costs are allocated to the three products using market value at the split-off point.The following information is available for December 2012:
Green Plastics Ltd operates a process that produces two joint products, Alpha and Beta.During the month the company used 10 000 kg of materials with a total cost of R1 million, 10 000 labour hours at an average cost of R50 per labour hour and 50 000 machine hours at a cost of R10 per machine hour
Flintstone Dairy Farm manufactures a variety of dairy products. The company uses a joint process to manufacture its products. The two main products are butter and cheese, plus a byproduct, buttermilk. The following information is available for October 2012:• The opening inventory of cheese was
Rainbow Chickens incurs joint production costs of R405 000 for the production of three joint products (whole chickens, braai packs and fillets). The runaways are sold as byproducts.The income generated will be treated as other income. The whole chickens and braai packs can be sold without further
Joiner Ltd is a company that manufactures products L and M using a joint production process.Product L requires further processing before being sold, while product M is sold at the splitoff point. The sales director of Joiner Ltd is concerned about the profitability of product L, which has been
Lone Hill Breweries makes two products, Lone Cider and Hill Beer. The brewery uses a process-costing system, accounting separately for the two product ranges. Both processes are nearly identical and normal losses amount to 5 per cent of units introduced. These losses are all incurred before
Tidy Tiles CC manufactures tiles in two departments. The output from Department 1 becomes the input into Department 2
Disney Land Ltd manufactures two toys, Mickey Mouse and Donald Duck. Disney Land has made the following information available to you:Materials are added to the product as follows –• Mickey Mouse: Material A is added at the beginning of the process; Material B is added at the end of the process;
ABC Ltd manufactures tables and makes use of a process-costing system. The company uses two materials to make the tables. Wood is added at the beginning of the process and steel is added when the process is 40 per cent complete. Conversion costs are incurred evenly throughout the process and no
B&A Natural Products produces aromatherapy oils. The firm’s production for the first six months of 2013 was as follows:
James Ncube Chartered Accountants have five staff members, each earning R8 000 per month. Each staff member works 165 hours per month, of which 15 hours are set aside for office administration and other non-billable hours. James uses a process-costing system to account for the firm’s costs.In
Zera Glass manufactures glass bottles. It receives a mixture from a supplier, which is melted and cast to make the bottles. Normal losses are 5 per cent of inputs, and losses can be sold as scrap at R2 per kg. Due to the nature of the manufacturing process, there is no WIP.The production schedule
Simonswood Cheese Company makes cream cheese. For every 10 kg of the raw cheese mixture the company expects to sell 8 kg of cream cheese. Complete the following table based on production for the previous month:
Explain the following:• Normal losses• Abnormal losses• Abnormal gains
Compare and contrast process costing and job costing, giving examples of industries where they are typically used.
Mbuza and Associates is a consulting firm specialising in local government work. It employs 10 people who work directly with the clients. The average budgeted total cost to company per employee is R550 000 per annum. Each employee is budgeted to bill 1 800 hours per year. All professional labour
KLM records and manufactures CDs for local artists. Each recording is treated as a unique job. In June 2013 the company completed all records that were in progress and in July worked on only two recordings, JZ Rapper and Just Flutes. The following information has been gathered for the two
SKA Manufacturers uses a job-costing system. The plant has a machining department and an assembly department. Its job-costing system has two direct cost categories (Direct materials and direct labour) and two manufacturing overhead cost centres. The machining department overheads are allocated to
A company manufactures to customer order and operates a job-costing system. Job X3 remained incomplete at the end of month 4 with the following production costs incurred?
a. Shadrock the Wood Man is a carpenter who manufactures bar stools and tables. He uses a job-costing system to record his production cost. On 2 April 2013, Shadrock ordered 200 units of wood material and 150 units of iron material from Handiman Supplies on order number 123. The order was delivered

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Principles Of Cost Accounting 1st Edition Reynier Boersma, Marina Bornman, Christo Hurter Joset Jordaan-Marais, Peter Kamala, Jayan Mathew Melissa McGill - Solutions

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