1. Use a range of techniques to account for the costs of direct materials & labour.
2. To prepare product & job costs using absorption and process costing techniques.
3. Use marginal costing & breakeven analysis to evaluate and solve of a range of realistic
4. Prepare & interpret a range of budgets and variances as part of budgetary control.
SECTION: A
Answer all four questions.
Question 1
Shown below is a typical cost-volume-profit chart:
Required:
i. Explain to a colleague who is not an accountant the reasons for the change in result on this cost-volume-profit chart from a loss at a point (a) to a profit at point (b).
ii. Identify and critically examine the underlying assumptions of this type of cost-volume-profit analysis and consider whether such analyses are useful to the management of an organisation.
Question 2
A furniture making business manufactures quality furniture to customers orders. It has three production departments and two service departments. Budgeted overhead costs for the coming year are as follows:
|
Total OMR |
| Rent and rates |
51200 |
| Machine insurance |
24000 |
| Telephone charges |
12800 |
| Depreciation |
72000 |
| Production supervisor's salaries |
96000 |
| Heating and lighting |
25600 |
|
281600 |
The three production departments - P, Q and R and the two service departments - S and T are housed in the new premises, the details of which, together with other statistics and information, are given below.
|
Departments |
|
P |
Q |
R |
S |
T |
| Floor area occupied (sq.metres) |
6000 |
3600 |
1200 |
1200 |
800 |
| Machine value(OMR) |
48000 |
20000 |
16000 |
8000 |
4000 |
| Direct labour hours budgeted |
6400 |
3600 |
2000 |
|
|
| Labour rates per hour(OMR) |
7.6 |
7 |
6.8 |
6 |
6 |
| Allotation overheads: |
|
|
|
|
|
| Specific to each department (0MR'000) |
5.6 |
3.4 |
2.4 |
1.6 |
1.2 |
| Service department S's cost apportioned |
50% |
25% |
25% |
|
|
| Service department T's cost apportioned |
20% |
30% |
50% |
|
|
Required:
i. Prepare a statement showing the overhead cost budgeted for each department, showing the basis of apportionment used. Also calculate suitable overhead absorption rates.
ii. Why are budgeted overhead rates preferred to actual overhead rates?
iii. Give the reasons for the under or over-recovery of overheads at the end of the accounting period.
Question 3
Prepare a report for the Director of your company explaining how costs may be classified by their behaviour, with particular reference to the effects both on total and on unit costs. Your report should.
i. Say why it is necessary to classify costs by their behaviour; and
ii. Be illustrated by graphs within the body of the report
Question 4
Explain how the business environment that businesses face has changed over the past decades and discuss how this has had an impact on management accounting.
Instructions to students:
- Your student identification number must be clearly stated at the top of each page of your work.
- Each page must be numbered.
- Please use a minimum font size of 12.
- All referencing must adhere to Institutional requirements.
- A word count must be stated at the end of your work.
- All tables and figures must be correctly numbered and labelled. Note: Total word-count should not exceed 2,000 words (excluding references). This coursework is worth 30% of your overall module mark.