T4 June 08 Ans

Answers

ACCA Certified Accounting Technician Examination – Paper T4 Accounting for Costs

June 2008 Answers

Section A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

A D D D B C D C D B D A B B C B B B C A

Workings to calculation MCQs 10 ($36,260 + $4,112)

12 [($28,720 + $10,260) – (1,760 units x $21·50 per unit)]

14 [($12,600 ÷ 0·6) – ($12,600 x 1·3)]

15 {[$45,705 – (300 units x $2·00 per unit)] ÷ 9,700}

16 [$56,000 x ($40,000 ÷ $90,000)]

17 [(1·043)2 – 1]

18 {10% + [(15 – 10%) x (39·1 ÷ 43·9)]}

19 [($56,000 x 3·79) + ($10,000 x 0·62) – $186,000]

13

Section B 1

(a)

Material pricing method Last-in First-out (LIFO) – because the issue on day 6 is at the latest price (i.e. the price of the receipt on Day 4 rather than the price of the opening inventory).

(b)

End Month 2 closing inventory value – Material M27 [(2,400 kg at $3·60) + (1,000 kg at $3·65) + (6,000 kg at $3·70)] = $34,490

(c)

Month 3 inventory record – Material M27 Day Quantity kg

Issues Price $/kg

2

3,200

3·70

11,840

10

2,800 1,000 500 –––––– 4,300 ––––––

3·70 3·65 3·60

10,360 3,650 1,800 ––––––– 15,810 –––––––

Value $

1

2

(a)

(i)

Quantity kg 2,400 1,000 6,000 –––––– 9,400 –––––– 2,400 1,000 2,800 –––––– 6,200 ––––––

1,900 ––––––

Balance Price $/kg 3·60 3·65 3·70

3·60 3·65 3·70

3·60

Value $ 8,640 3,650 22,200 ––––––– 34,490 ––––––– 8,640 3,650 10,360 ––––––– 22,650 –––––––

6,840 –––––––

Cost per kg of expected production of Product A Expected output = 18,000 kg x 0·95 = 17,100 kg Total costs: Raw materials Conversion costs Sales value of waste Net cost Cost per kg

(ii)

$ 162,180 94,050 ––––––––– 256,230 (1,440) (normal waste 900 kg x $1·60/kg) ––––––––– $254,790

= $254,790 ÷ 17,100 kg = $14·90 per kg

Total cost of finished output of Product A 17,000 kg x $14·90 per kg = $253,300

(b)

Equivalent units of production of Product B

Completed output Closing work-in-progress Equivalent units

3

(a)

Conversion costs (units) 12,600 900 (1,500 x 0·6) ––––––– 13,500 –––––––

Overhead absorption A separate overhead absorption rate for each machine group, rather than a single factory-wide rate, would be better because separate rates will reflect the resources consumed in each group. This will then be charged appropriately to jobs according to their relative consumption of the resources in each group.

14

(b)

Overhead cost apportionment

Machine maintenance labour (apportioned on machine maintenance labour hours) Power (apportioned on kilowatt hours) Rent and rates (apportioned on floor space) (c)

(a)

MG3 $ 12,600

Total $ 33,600

13,000 15,920

6,500 13,930

6,500 9,950

26,000 39,800

MG1 129,560 8,200 15·80 –––––––

Machine group MG2 107,520 5,600 19·20 –––––––

MG3 119,070 4,900 24·30 –––––––

Production overhead charged to Job J21 MG1 5 machine hours at $15·80 = MG2 2 machine hours at $19·20 = MG3 3 machine hours at $24·30 =

4

Machine group MG2 $ 8,400

Overhead absorption rates

Total allocated and apportioned ($) Machine hours Absorption rate ($ per machine hour) (d)

MG1 $ 12,600

$ 79·00 38·40 72·90 –––––––– $190·30 ––––––––

Limiting factor The limiting factor is the factor (aspect of business/resource) that limits a business organisation’s activities. For many businesses this may frequently be the level of sales that can be achieved but at other times a business may be limited by a shortage of a resource (as in the situation described in the next part of this question, where a scarcity of labour prevents the business from achieving its sales potential).

(b)

(i)

Production plan

Selling price Variable costs Contribution

Product X $ per unit 100·00 56·60 –––––– 43·40 ––––––

Product Y $ per unit 69·00 38·95 –––––– 30·05 ––––––

Product Z $ per unit 85·00 46·65 –––––– 38·35 ––––––

43·40 –––––– 24·20

30·05 –––––– 16·50

38·35 –––––– 17·60

= $1·793

= $1·821

= $2·179

Contribution per £ of direct operative cost*

Production priority

3 ––

2 ––

1 ––

* (or 24·20 –––––– 11·00

16·50 –––––– 11·00

17·60 –––––– 11·00

= 2·2 hrs

= 1·5 hrs

= 1·6 hrs

43·40 –––––– 2·2

30·05 –––––– 1·5

38·35 –––––– 1·6

= $19·73

= $20·03

= $23·97

3 ––

2 ––

Direct operative hours per unit

Contribution per direct operative hour

Production priority Production plan: Product Z Product Y Product X

units 5,700 8,000 2,400

x 17·6/11 x 16·5/11 x 24·2/11

hours 9,120 12,000 5,280 ––––––– 26,400 –––––––

15

1) ––

(ii)

Net profit $ Contribution: Product X Product Y Product Z

2,400 units at $43·40 8,000 units at $30·05 5,700 units at $38·35

104,160 240,400 218,595 ––––––––

Fixed costs: Product X Product Y Product Z

3,600 units at $34·30 8,000 units at $25·70 5,700 units at $27·20

123,480 205,600 155,040 ––––––––

Net profit

16

$

563,155

484,120 –––––––– $79,035 ––––––––

ACCA Certified Accounting Technician Examination – Paper T4 Accounting for Costs

June 2008 Marking Scheme

Section A All questions 2 marks each

40

Section B 1

(a)

LIFO

2

(b)

1 each for three elements

3

(c)

(i)

(ii)

2

(a)

(i)

(ii) (b)

3

4

Issues

– Day 2 – Day 10

2 2 ––––

Balances – Day 1 – Day 2 – Day 10

1 2 1 ––––

Expected output Total costs Sales value of waste Net cost per kg

2 11/2 3 11/2 ––––

Finished product

4

4 –––

8 2

1/ 2 21/2

Completed output + Equivalent units

––––

3 –––

(a)

Reason

2

(b)

2, 21/2, 21/2

7

(c)

1 for each rate

3

(d)

1 for each MG

3 –––

(a)

Definition Example

2 1 ––––

(i)

Contribution per unit – 1 for each Contribution per $ of direct operative – 1 for each Production priority Production plan – Z & Y Production plan – X

3 3 1 2 2 ––––

Contribution Fixed costs

21/2 21/2 ––––

(b)

(ii)

13

17

13

15

3

11

5 –––

19 –––

60 –––– 100 ––––