Performancegeneric 082630

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FACULTY OF BUSINESS AND COMMUNICATION STUDIES

PROGRAM: BACHELOR OF ACCOUNTANCY

COURSE TITLE: PERFORMANCE MANAGEMENTW

YEAR: 4

SEMESTER: 7

MID SEMESTER EXAMINATION OCTOBER, 2024

Time Allowed: 2 Hours

Instructions

1. Write your registration number on every page.

2. This paper contains three (3) questions.

3. Answer all questions.

4. Each question carries 20 marks.

5. Start each question on a separate page.

6. Answers should be numbered exactly as in the corresponding questions.

DO NOT TURN THE PAGE UNTIL YOU ARE TOLD TO DO SO

Question 1

RH makes and sells one product, which has the following standard production cost.

MK

Direct labour (3 hours at MK6 per hour) 18

Direct materials (4 kilograms at MK7 per kg) 28

Production overhead Variable 3

Fixed 20

Production cost per unit 69

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.

Six months ending Six months ending

31 March 20X3 30 September 20X3

Production 8,500 7,000

Sales 7,000 8,000

Required:

Prepare profit statements for each of the six-monthly periods, using the following methods of costing.

a. Marginal costing. 6 Marks


b. Absorption costing. 10 Marks
c. Reconcile the difference in profits for the six months ending 30 September 20X3 between (a) and
(b) above. 4 Marks

Total 20 Marks

Question 2

Discuss the importance of each of the following costing methods to business.

a) Target Costing. 8 Marks


b) Lifecycle Costing. 6 Marks
c) Backflush Costing . 6 Marks

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.

Information for the last year is as follows.

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

Machine set up costs 26,550

Machine running hours 66,400

Procurement costs 48,000

Delivery costs 54,320

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

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