Performancegeneric 082630
Performancegeneric 082630
Performancegeneric 082630
YEAR: 4
SEMESTER: 7
Instructions
Question 1
RH makes and sells one product, which has the following standard production cost.
MK
Fixed 20
Variable selling, distribution and administration costs are 20 per cent of sales value. Fixed selling,
distribution and administration costs are MK180,000 per annum. There are no units in finished goods
inventory at 1 October 20X2. The fixed overhead expenditure is spread evenly throughout the year. The
selling price per unit is MK140.
Production and sales units are as follows.
Required:
Prepare profit statements for each of the six-monthly periods, using the following methods of costing.
Total 20 Marks
Question 2
Total 20 Marks
Question 3
The Gadget Co produces three products, A,B,C all made from the same material. Until now it has used
traditional absorption costing to allocate overheads to its products. The company is now considering an
activity based costing system in the hope that it will improve profitability.
A B C
Production and sales volume (units) 15,000 12,000 18,000
Selling price per unit 7.5 12 13
Raw material usage (kg) per unit 2 3 4
Direct labour hours 0.10 0.15 0.20
Machine hours per unit 0.50 0.70 0.90
Number of production runs per annum 16 12 8
Number of purchase orders per annum 24 28 42
Number of deliveries to retailers per annum 48 30 62
The price of raw materials remained constant throughout the year at MK1.20 per kg. Similarly the direct
labour cost for the whole work force was MK14.80 per hour. The annual overhead cost were as follows:
MK
Required:
a. Calculate the full cost per unit of each product using activity based costing. 7 Marks
b. Calculate the full cost per unit for products for A, B, C under traditional absorption costing,
using direct labour as basis for apportionment. 7 Marks
c. Using your calculations from (a) and (b) above explain how activity based costing may help
Gadget Co to improve profitability of each product. 6 Marks
Total 20 Marks
END OF QUESTIONS