2016 EXAMINATIONS ACCOUNTING TECHNICIAN PROGRAMME PAPER TC9: COSTING AND BUDGETARY CONTROL

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EXAMINATION NO. 2016 EXAMINATIONS ACCOUNTING TECHNICIAN PROGRAMME PAPER TC9: COSTING AND BUDGETARY CONTROL THURSDAY 2 JUNE 2016 TIME ALLOWED : 3 HOURS 9.00 AM - 12.00 NOON INSTRUCTIONS 1.

1 EXAMINATION NO EXAMINATIONS ACCOUNTING TECHNICIAN PROGRAMME PAPER TC9: COSTING AND BUDGETARY CONTROL THURSDAY 2 JUNE 2016 TIME ALLOWED : 3 HOURS 9.00 AM NOON INSTRUCTIONS 1. You are allowed 15 minutes reading time before the examination begins during which you should read the question paper and, if you wish, make annotations on the question paper. However, you are not allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. 2. Number of questions on paper 5 3. Answer ALL questions 4. Each question carries 20 marks. 5. Show all your workings in order to gain full marks. 6. Marks will be awarded for clarity, correctness and logical presentation. 7. Use of non-programmable calculators is allowed. 8. Begin each answer on a fresh page. 9. DO NOT OPEN THIS PAPER UNTIL YOU ARE INSTRUCTED BY THE INVIGILATOR This question paper contains 7 pages.

2 1. The following details relate to a business that currently sells 100,000 pairs of high quality safety gloves per annum to the oil industry: Selling price per pair of gloves 80 Purchase cost per pair of gloves 50 Total annual fixed costs Salaries and wages 200,000 Advertising 80,000 Other fixed costs 200,000 Required (a) State any five assumptions behind CVP analysis. 5 Marks Calculate the following: (i) the break-even point in number of pairs of gloves 2 Marks (ii) margin of safety in number of pairs of gloves 2 Marks (iii) the profit or loss if 15,000 pairs of gloves were sold in a year. 2 Marks (c) (d) Calculate how many pairs of gloves would need to be sold, if the company wished to earn a profit of 20,000, whilst at the same time introducing a sales commission of 3 per pair of gloves. 4 Marks Calculate the break-even point in the number of pairs of gloves to be sold, if an additional advertising campaign costing 40,000 is undertaken and the selling price of a pair of gloves is increased by 5%, whilst the purchase price is increased by 4%. 5 Marks (TOTAL: 20MARS) Page 2 of 7

3 2. A company manufactures a product by passing a raw material through processes 1 and 2. Details for a recent period are: Process 1 Input material 10,000 kg at 3 per kg Labour and overhead 17,800 Expected loss is 10% of input Scrap value of losses 0.3 per kg Actual output transferred to process 2 8,600 kg Closing work in progress 200 kg Closing work in progress is complete as to material, 50% complete as to other costs. Process 2 Transfer from process 1 8,600 kg Labour and overhead 26,740 Expected loss is 10% of input Scrap value of losses 4.40 per kg Transfer to finished stock 7,900 kg Closing work in progress 200 kg Closing work in progress is complete as to material, 50% complete as to other costs. The company uses FIFO to value work in progress (WIP). Required: (a) State any two methods which the joint costs of a process can be apportioned over the joint products of the process. 2 Marks Prepare the following accounts: (i) Process 1 8 Marks (ii) Process 2 8 Marks (iii) Normal Loss 2 Marks (TOTAL: 20 MARS) Page 3 of 7

4 3. Rob Chimtengo, a self-employed builder, has been asked to provide a fixed price quotation for some building work required by a customer. Chimtengo s accountant has compiled the following figures, together with some notes as a basis for a quotation. Direct materials: Bricks 250,000 at 100 per thousand 250,000 at 120 per thousand Other materials Direct labour: Skilled 3,200 hours at 12 per hour Unskilled 2,000 hours at 6 per hour Other costs: Scaffolding hire Depreciation of general purpose machinery Rental cost of yard Plans Total cost Profit Suggested price Notes: Notes ,000 30,000 5,000 38,400 12,000 3,500 4,000 5,200 4, ,100 31, ,875 (1) The contract requires 500,000 bricks; 250,000 are already in inventory and 250,000 will have to be brought in. The 250,000 bricks in stock were purchased at 100 per one thousand. The current replacement cost of this type of bricks is 120 per one thousand. If the bricks in stock are not used on this job, Rob is confident that he will be able to use them later in the year. (2) Other materials will be brought in as required; this figure represents the purchase price. (3) Rob will need to be on site while the building work is carried out. He therefore intends to do 800 hours of the skilled work himself. The remaining work will be hired out on hourly basis at 12 per hour. If Rob does not undertake the building work for this customer, he can spend the time repairing his own house. He has had a quotation of 12,000 to repair his home. (4) Rob employs four unskilled workers on contract guaranteeing them a 40 hour week at 6 per hour. These unskilled labourers are currently idle and would have sufficient time to complete the proposal under consideration. Page 4 of 7

5 (5) This is the estimated cost of hiring scaffolding. (6) This cost will remain the same whether or not the quotation is accepted. (7) If Rob does not undertake the above job, he can rent his yard out to a competitor who will pay him rent of 750 per week for the 20-week period. (8) This is the cost of the plans that Rob has already drawn for the project. (9) Rob attempts to earn a mark-up of 25% on cost of all the work undertaken. Required: (a) Define the following terms: (i) relevant costs 1 Mark (ii) job costing 1 Mark (iii) opportunity cost 1 Mark (i) Calculate the minimum price that Rob should quote for the job. 7 Marks (ii) Explain the inclusion or exclusion of every cost in your quote in view of the accountant s estimate. 10 Marks (TOTAL: 20 MARS) Page 5 of 7

6 4. Nkhandwe Corporation produces a single product, called Tseketseke. The company operates a standard absorption costing system and a just-in-time purchasing system. Standard production cost details per unit of Tseketseke are: Materials (5kg at 20 per kg) 100 Labour (4 hours at 10 per hour) 40 Variable overheads (4 hours at 5 per hour) 20 Fixed overheads (4 hours at per hour ) Fixed and variable overheads are absorbed on the basis of labour hours. Budget data for product Tseketseke for July are detailed below: Production and sales Selling price 1,400 units 250 per unit Fixed overheads 70,000 Actual data for product Tseketseke for July are as follows: Required: Production and sales Selling price 1,600 units 240 per unit Direct materials 7,300 kg costing 153,300 Direct labour Variable overheads 25,400 Fixed overheads 74,000 5,080 hours at 9 per hour (a) State any five uses of standards 5 Marks Calculate the following: (i) Budgeted profit (ii) Actual profit 1 Mark 2 Marks Page 6 of 7

7 (c) Calculate the following variances: (i) Total sales price variance 1 Mark (ii) Total sales volume profit variance 1 Mark (iii) Total material price variance 1 Mark (iv) Total material usage variance 1 Mark (v) Total labour rate variance 1 Mark (vi) Total labour efficiency variance 1 Mark (vii) Total variable overhead expenditure variance 1 Mark (viii) Total variable overhead efficiency variance 1 Mark (ix) Total fixed overhead expenditure variance 1 Mark (x) Total fixed overhead volume variance 1 Mark (d) Produce a statement that reconciles the budgeted and actual gross profit 2 Marks 5. (a) In the context of budgeting: (TOTAL: 20 MARS) (i) Mention four reasons why the profit and cash flows during a period may not be the same. 4 Marks (ii) State any four disadvantages of zero-based budgeting (ZBB). 4 Marks (iii) Mention any two problems of holding too much cash. 2 Marks In line with decision making: (i) Define the term sunk cost. 2 Marks (ii) Give four situations where marginal costing can be used as a decision-making aid. 4 Marks (c) In the context of labour remuneration methods, state any (i) two advantages of incentive schemes 2 Marks (ii) two disadvantages of incentive schemes. 2 Marks E N D Page 7 of 7

2016 EXAMINATIONS ACCOUNTING TECHNICIAN PROGRAMME PAPER TC9: COSTING AND BUDGETARY CONTROL

EXAMINATION NO. 2016 EXAMINATIONS ACCOUNTING TECHNICIAN PROGRAMME PAPER TC9: COSTING AND BUDGETARY CONTROL FRIDAY 2 DECEMBER 2016 TIME ALLOWED: 3 HOURS 9.00 AM - 12.00 NOON INSTRUCTIONS 1. You are allowed