Tutorial 2 Workings

TFQ 1(b)
Direct cost:
Material A 3.5 x $4.8 16.8
Material B 4.5 x $1.9 8.55
Direct labour: Machining 1.5 x $2.04 3.06
Direct labour: Assembly 5 x $2.1 10.5
Direct labour: Finishing 5 x $1.8 9
Total direct cost 47.91
Indirect cost:
Machining 3 x $1.28 3.84
Assembly 5 x $1.48 7.4
Finishing 5 x $2.53 12.65
Total production cost per unit 71.8

Direct labour: Machining = 32,600 / 16,000 = $2.04 per hour

Direct labour: Assembly = 67,200 / 32,000 = $2.1 per hour
Direct labour: Finishing = 7,200 / 4,000 = $1.8 per hour

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TFQ 2
Direct cost:
Direct material 560
Direct labour 340
Direct expenses 560 x 50% 280
Total direct cost 1,180
Indirect cost:
Production 1 3 x $105.8 317.4
Production 2 2 x $128.4 256.8
Total production cost per unit 1,754.2

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TFQ 1

Total area occupied = 24,000 + 36,000 + 16,000 + 4,000 = 80,000

Rent:
Machining = 24,000/80,000 * 2,000 = 600
Assembly = 36,000/80,000 * 2,000 = 900
Finishing = 16,000/80,000 * 2,000 = 400
Stores = 4,000/80,000 * 2,000 = 100

Plant & equipment at cost = 1,400 + 200 + 60 + 10 = 1,670

Depreciation on plant and equipment:

Machining = 1,400/1,670 * 16,700 = 14,000

Total wages = (32,600 + 9,000) + (67,200 + 15,000) + (7,200 + 4,000) + 6,000

= 41,600 + 82,200 + 11,200 + 6,000 = 141,000

Wage related cost:

Machining = 41,600/141,000 * 28,200 = 8,320
Assembly = 82,200/141,000 * 28,200 = 16,440

Total store requisitions = 310 + 1,112 + 100 = 1,522

Re-apportioned cost of stores:

Machining = 310/1,522 * 7,610 = 1,550
Assembly = 1,122/1,522 * 7,610 = 5,610
Finishing = 100/1,522 * 7,610 = 500

OAR:
Machining = 40,864 / 32,000 = 1.28 per machine hour
Assembly = 47,400 / 32,000 = 1.48 per direct labour hour
Finishing = 10,100/4,000 = 2.53 per direct labour hour

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TFQ 8

OAR = 100,000 / 20,000 = $5 per unit

Overheads absorbed for the period = 24,000 * 5 = $120,000

Over absorption = 120,000 – 117,000 = $3,000

TFQ 5

M = 8,000 + 0.2S
S = 10,000 + 0.1M

M in S

S = 10,000 + 0.1 (8,000 + 0.2S)

S = 10,000 + 800 + 0.02S
0.98S = 10,800
S = 11,020

Substitute S = 11,020 in M equation

M = 8,000 + (0.2 * 11,020) = 10,204

Department A = 10,030 + 0.3S + 0.8M

= 10,030 + (0.3*11,020) + (0.8*10,204) = 21,499

Department B = 8,970 + 0.5S + 0.1M

= 8,970 + (0.5*11,020) + (0.1*10,204) = 15,500

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TFQ 6

S = 90,800 + 0.15C
C = 23,600 + 0.2S

Substitute C is S

S = 90,800 + 0.15 (23,600 + 0.2S)

S = 90,800 + 3,540 + 0.03S
S – 0.03S = 94,340
0.97S = 94,340
S = 97,258

Substitute S = 97,258 in C

C = 23,600 + (0.2*97,258) = 43,052

Mixing = 108,200 + 0.5S + 0.45C = 108,200 + (0.5*97,258) + (0.45*43,052)

= 176,202

Stirring = 39,400 + 0.3S + 0.4C = 39,400 + (0.3*97,258) + (0.4*43,052)

85,798

TFQ 7

(a) Mixing = 176,203/20,000 = $8.81 per direct labour hour

(b) Stirring = 85,797/60,000 = $1.43 per machine hour

TFQ 4

Actual FOHs = Budgeted FOHs

Budgeted production per month = 36,000 / 12 = 3,000

Budgeted production FOHs per month = 3,000*5 = 15,000

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Actual production FOHs per month = 15,000

Non-production fixed cost per month = 120,000/12 = 10,000

*If closing inventory is higher than opening inventory, this means that inventory
has increased
*If closing inventory is lower than opening inventory, this means that inventory
has decreased

Example:
AC profit = $548,000
Inventory has decreased from 7,000 units to 6,400 units
Fixed production overheads per unit is $100
MC profit?

MC profit + (Change in inventory*FPOAR/unit) = AC profit

MC profit – (600*100) = 548,000
MC profit = 548,000 + 60,000 = 608,000

EFQ 1
Current New
Sales revenue 100 110
Variable cost (60) (60)
Contribution 40 50

10/40 = 0.25 or 25%

Answer D

EFQ 2
Answer B

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EFQ 3
Opening inventory = 0
Closing inventory = 11,500 – 9,000 = 2,500

MC profit + (Change in inventory*FPOAR/unit) = AC profit

MC profit + (2,500*8) = 42,000
MC profit = 42,000 – 20,000 = 22,000
Answer B

EFQ 4
Answer B

EFQ 5
Over/under absorption = (Actual activity level*FOAR) – Actual FOHs
= Absorbed OHs – Actual OHs
If absorbed OHs > Actual OHs, this is over absorption
If absorbed OHs < Actual OHs, this is under absorption

Answer D

EFQ 6
MC profit + (Change in inventory*FPOAR/unit) = AC profit
435,000 – (5,000*8) = AC profit
AC profit = 395,000
Answer D

EFQ 7
Answer D

EFQ 8
Number of employees = 10 + 8 + 3 = 21
Reapportioned cost to packing department = 3/21 * 8,400 = 1,200
Total OHs = 8,960 + 1,200 = 10,160
Answer D

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EFQ 9
OAR = 258,750/11,250 = 23 per hour
OHs absorbed = 10,980*23 = 252,540
Under absorption = 254,692 – 252,540 = 2,152
Answer A

EFQ 10
Over absorption = OHs absorbed > OHs incurred
OHs absorbed = 496,500 + 64,375 = 560,875
OHs absorbed = Actual activity level*FOAR
560,875 = 22,435 * FOAR
FOAR = 560,875 / 22,435 = 25

EFQ 11
Answer D

EFQ 12
OAR = 493,200/10,960 = 45
OH absorbed = 10,493*45 = 472,185
Under absorption = 514,157 – 472,185 = 41,972
Answer D

EFQ 13
Answer A

EFQ 14

EFQ 15
S = 160,000 + 0.05C
C = 80,000 + 0.3S

C in S

S = 160,000 + 0.05 (80,000 + 0.3S)

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S = 160,000 + 4,000 + 0.015S
S – 0.015S = 164,000
0.985S = 164,000
S = 166,497

C = 80,000 + (0.3 * 166,497)

C = 129,949

Production department J = 0.35S + 0.45C

= (0.35*166,497) + (0.45*129,949)
= 116,751 ~ 116,800

EFQ 16
OHs absorbed = 110,000*2.5 = 275,000
Under absorbed = 300,000 – 275,000 = 25,000
Answer B

EFQ 17
Answer C

EFQ 18
27,000/45,000 = 0.60 per MH
Answer D

EFQ 19
18,000/25,000 = 0.72 per DLH
Answer C

EFQ 20
OHs absorbed = 4,500*8 = 36,000
Actual OHs < OHs absorbed
Actual OHs = 36,000 – 6,000 = 30,000
Answer A

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