COST AND MANAFEMENT ACCOUNTING Final Exam

NAME: FUNGAYI JOHANE MAJURIRA
STUDENT ID: 21981559
COURSE: COST AND MANAGEMENT ACCOUNTING FOR

PLANNING AND CONROL
COURSE CODE: BBAC 212
PROGRAM: BACHELOR OF BUSINESS IN ACCOUNTING
LECTURER DR.E.T KAPOTWE
DATE: 31 MAY 2021
End of Semester Final Exam June 2021:
1
Standard costing for a product unit cost K total cost for 400,000
Cost
Direct materials 6 2,400,000
Direct labor cost 1.5 600,000
Variable factory overhead 0.4 160,000
Marginal cost 7.9 3,160,000
Fixed cost 280,000
Total manufacturing cost 3,440,000
Distribution and administration expenses 180,000
Total cost 3,620,000
Direct labor cost was adjusted to take account of unfavorable labor cost variance 1.06 *1.5
Calculation of sales in units

Sales 400,000
Less discounts 400,000*0.02 (8,000)
Net sales in units 392,000
Calculation of net sales in value
Return on capital employed = earnings before interest and tax/ capital employed
Let net sales be X

Capital = 50% of net sales + 450,000
Capital = 0.5X +450,000
Profit; X-3,656,000
Expected return is 16%
Return on capital employed = X -3,656,000/0.5X = 16/100

X-3,656,000 = 0.16*0.5X+0.16*450,000
X-0.08X=3,656,000-72,000
0.92X = 3,584,000
Net sales = K3,895,652
Sales price which will yield return on capital of 16% 3,895,652 / 39200
9.937888199
K9.94
2
QUESTION TWO
Marginal cost for division a before Germany offer

number of units unit cost total K
Marginal cost 16,000 300 4,800.000
Sales to division B 12,000 350 4,200,000
Sales to outside firms 4,000 400 1,600,000
Total sales 5,800,000
Contribution 1,000,000
Fixed cost 16,000 0 200,000
Net profit K 800,000
Marginal cost for division A with the Germany offer

number of units unit cost total K
Marginal cost 4,000 300 4,800.000
Sales to division B 0 350
Sales to outside firms 4,000 400 1,600,000
Total sales 1,600,000
Contribution 400,000
Fixed cost 4,000 0 200,000
Net profit K 200,000
Akroid co-corporation improve profit in respect to Germany offer

Number of units price total
From division A 12,000 350 4,200,000
From Germany offer 12,000 320 3,840,000
Benefit 360,000
Total profit made when Germany offer is taken

Benefit due to different price 360,000
Profit from outside firm sale 200,000
Total 560,000
Germany offer when taken has the following implications

- Division A has 75% of sales from Division B and 25% to the outside firms
- When the offer is taken given the fact that the division is not able to expand its sales to
outside firms this will mean Division A sales will shrink by 75%
- When Division A sales shrink by 75% this means the total profit made by this
department will reduce from K800,000 .00 to K200,000.00 this is so because fixed cost
will remain unchanged given the change in production level.
- When the offer is taken this will result in Akroid Corporation Ltd to improve profit by
$360000 this amount is far less than fixed cost incurred by Division A the net effect
will result in profit reduction from $800000 to $560 000 .
3
QUESTION THREE
Job 876 Absorption costing

Costing
Cost Quantity Rate Amount
Direct material 1,000
Direct labor 386
Plant department 81 4 324
Welding department 14 3 42
Assembly department 10 2 20
Prime cost (1,000 +386) 1,386
Add Indirect cost Rate of absorption

Plant department 81 2.4 194.4
Welding department 14 0.9 12.6
Assembly department 10 1.3 13
Total Indirect cost 220
Job cost 1,606
Working Overhead Absoption

Indirect cost Absorption rates Budgeted cost Budgeted hours rate using number hrs
Plant department 22,000 9,000 2.4
Welding department 9,000 10,000 0.9
Assembly department 5,000 4,000 1.3
It is not possible to price the job because we don’t have market price for such kind of jobs or
historical data which state the value of average mark up usually placed on such kind of jobs
4
QUESTION FOUR
a. Distinguish between job costing and process costing

Job costing
Construction of a custom-designed piece of furniture would be accounted for with a job
costing system. The costs of all labor worked on that specific item of furniture would be
recorded on a time sheet and then compiled on a cost sheet for the job. Similarly, any
wood or other parts used in the construction of the furniture would be charged to the
production job linked to that piece of furniture. This information may then be used to bill
the customer for work performed and materials used or to track the extend of the
company’s profits on the production job associated with the specific item of furniture.
Process costing
Involves the accumulation of costs for lengthy production runs involving products that
are indistinguishable from each other. For example, the production of 100,000 gallons of
gasoline would require that all oil used in the process, as well as all labor in the refinery
be accumulated into a cost account, and then divided by the number of units produced
to arrive at the cost per unit
b. Explain how you would treat the following items in the accounts of a
process costing
i.Waste
For normal waste arising from breakage, evaporation, deterioration, shrinkage in
production, the total incurred is distributed over the good output. The treatment is
based on the principle that normal losses should be borne by good output.
Abnormal wastage of material arising due to abnormal reasons, i.e theft, fire,
careless handling is not added to the cost of production but is transferred to
costing profit and loss account. This is necessary to avoid any fluctuation in cost
of production
5
ii. Scrap
From the sale proceeds of scrap selling and distribution costs are deducted and
the net value is deducted from material cost or factory overhead. The effect is to
reduce material cost or overhead recovery rate. This method fails to secure
effective control of scrap arising in processes or jobs. It is suitable in cases
where several production orders are taken in hand and it is not possible to
segregate the value of scrap for each order. The value realized from sale of
scrap is credited to particular job, process or operation. This method has an
advantage of identifying scrap with each job, process or operation.
Process Costing 3
Cost unit amount cost Unit amount
Opening stock 400 338 Normal loss 200 340
Transfer from process ii 5,400 6,240 Abnormal loss 50 85
Material x 2,862 Transfer to process 4 4,550 10,438
Material y 944 Closing stock 1,000 1,048
Labor 468
Overheads 1,398
Total 5,800 12,250 5,800 11,911
Workings
Cost Normal Equiv Abn Equiva Closin Eq Finished Equiv Total Cost
loss alent orm lent g units goods a units per
units al units stock units unit
loss
Material x 9,102 200 160 50 40 1,000 500 4,550 4,550 5,250 1.734
Material y 944 200 160 50 40 1,000 450 4,550 4,550 5,200 0.182
Labor 468 200 120 50 30 1,000 300 4,550 4,550 5,000 0.094
overheads 1398 200 80 50 20 1,000 200 4,550 4,550 4,900 0.285
6
Valuation of opening stock =
500*1.733714+450*0.181538+300*0.0936+250*0.285306
= 1047.955981
Normal loss = 160*1.733714+160*0.181538+120*0.0936+80*0.285306

= 340.4969294
Abnormal loss = 40*1.733714+40*0.181538+30*0.0936+20*0.285306

= 85.12423234
Finished goods = 4550*1.733714+4550*0.0936+4550*0.285306

= 10438.42286
Valuation of opening stock =

200*0.8*1.7+200*0.8*0.181538+200*0.5*0.0936+0.4*200.0285306
= 338.6249294
7
QUESTION FIVE
(i) Actual output

Margin Profit Cost of sales
Sales 30,000 20% 6,000 24,000
Production cost per unit 15

Direct labor 20
Overhead 25
Total 60
Standard output = 24,000/60 = 400 units

Material usage variance = SP*SQ-SP*AQ = 15*400-15*AQ
= 375
Actual output = 375 units
Opening stock and closing stock was the same
(ii) The actual profit = 29,880*20%

= 5,976
(iii) The actual price per unit of material

Material price variance = Direct material
= standard price of material purchased -Actual
= AQ-SP – AQ*AP
= (SP – AP) * AQ = -585
= (15 – AP) * AQ = -585
= 915-AP) * 375
= 15 – AP
= -1.56
Actual price for 10 units= 16.56
The actual price per unit of material = 1.656
(iv) Actual labor rate per hour

DIRECT LABOR TIME VARIANCE (AH – SH)SR = -180
(AH – 2,000)4 = -180
AH = 2,045
Labor rate variance (AR – SR)AH = 318
(AR – 4) 2,045 = 318
AR = 4,155501222
Actual labor rate per hour = 4.16
8
(v) The amount of production overhead incurred
FOEV=standard Fixed Overhead – Actual Fixed Overhead
= 375*25-AFO = 200
= 9,375- AFO
= 9,375 - 200
Production Overhead incurred = 9,175
(vi) The amount of overhead absorbed = 375*25

= 9375
(vii) The amount of production efficiency variance

Actual labor hours * standard rate =
(viii) The selling price variance

SPV = (Budgeted Price – Actual Price)* Actual Quantity
Budgeted price = 30,000/400

= 75
Actual price = 29,88/375

= 79.68
Actual quantity = 375
Selling price variance = (75-79.68)*375

= 1,755 adverse
(ix) The sales volume profit variance

(Actual units sold – Budgeted units sold) – Budgeted price per unit
Actual unit sold = 375
Budgeted unit = 400
Budgeted price = 75
The sales volume profit variance = (375 – 400)75

= 1,875 adverse

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NAME: FUNGAYI JOHANE MAJURIRA

STUDENT ID: 21981559

COURSE: COST AND MANAGEMENT ACCOUNTING FOR

COURSE CODE: BBAC 212

PROGRAM: BACHELOR OF BUSINESS IN ACCOUNTING

LECTURER DR.E.T KAPOTWE

DATE: 31 MAY 2021

End of Semester Final Exam June 2021:

Calculation of sales in units

Calculation of net sales in value

Let net sales be X

Expected return is 16%

Return on capital employed = X -3,656,000/0.5X = 16/100

Marginal cost for division a before Germany offer

Marginal cost for division A with the Germany offer

Akroid co-corporation improve profit in respect to Germany offer

Total profit made when Germany offer is taken

Germany offer when taken has the following implications

Job 876 Absorption costing

Add Indirect cost Rate of absorption

Job cost 1,606

Working Overhead Absoption

a. Distinguish between job costing and process costing

Normal loss = 160*1.733714+160*0.181538+120*0.0936+80*0.285306

Abnormal loss = 40*1.733714+40*0.181538+30*0.0936+20*0.285306

Finished goods = 4550*1.733714+4550*0.0936+4550*0.285306

Valuation of opening stock =

(i) Actual output

Production cost per unit 15

Standard output = 24,000/60 = 400 units

Opening stock and closing stock was the same

(ii) The actual profit = 29,880*20%

(iii) The actual price per unit of material

(iv) Actual labor rate per hour

(vi) The amount of overhead absorbed = 375*25

(vii) The amount of production efficiency variance

(viii) The selling price variance

Budgeted price = 30,000/400

Actual price = 29,88/375

Selling price variance = (75-79.68)*375

(ix) The sales volume profit variance

The sales volume profit variance = (375 – 400)75

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Normal loss = 1601.733714+1600.181538+1200.0936+800.285306

Abnormal loss = 401.733714+400.181538+300.0936+200.285306

Finished goods = 45501.733714+45500.0936+4550*0.285306