The budgeted information on the two business opportunities that Green Bush records are currently considering investing in is as follows:

Transcription

1 ICB Cost and Management Accounting Playlist Handbook SECTION A: REVISION VIDEO QUESTIONS Break-even analysis The budgeted information on the two business opportunities that Green Bush records are currently considering investing in is as follows: Opportunity 1 Opportunity 2 (based on units produced) Total (based on units produced) Sales Less: Costs ( ) ( ) Direct material Direct labour Fixed manufacturing overheads Sales commission Fixed administrative costs Total Required: (a) (b) (c) Complete the cost analysis as it appears in your answer book (round all calculations to 2 decimal places). Calculate the break-even point in units for both opportunities. Calculate the break-even point in sales revenue for both opportunities (round your answer to the nearest rand). 1

2 Section A: Revision Video Questions Answer template: (a) Cost analysis Type of cost Variable cost in total rand value Opportunity 1 Opportunity 2 Variable cost per unit Fixed costs in total rand value Variable cost in total rand value Variable cost per unit Fixed costs in total rand value Direct material Direct labour Fixed manufacturing overheads Sales commission Fixed administrative costs (b) The break-even point in units Opportunity 1 Opportunity 2 (c) The break-even point in sales revenue Opportunity 1 Opportunity 2 2

3 ICB Cost and Management Accounting Playlist Handbook Apportionment of overheads Sparrows Ltd has three production departments (H, I and J) and one service department in its factory. A predetermined overhead absorption rate has been established for each of the production departments on the basis of machine hours at normal capacity. The overheads of each production department comprise directly allocated expenses and a share of the overheads of the service department, apportioned in the ratio 2:1:1 to departments H, I and J respectively. All overheads are classified as fixed in nature. The actual overhead incurred in each department was in line with the budget. The following table of incomplete information is available concerning the apportionment and absorption of production overheads for a period. Required: Calculate the missing figures for (i) (viii). Production departments H I J Budgeted allocated expenses R R R Budgeted service department apportionment (i) (ii) R Normal machine hours capacity hours (iii) (v) Predetermined absorption rate (vi) R (iv) Actual machine utilisation (vii) hours hours Over/(under) absorption of overheads R (viii) (R ) Answer template: Production departments H I J Budgeted allocated expenses R R R Budgeted service department apportionment (i) (ii) R Normal machine hours capacity hours (iii) (v) Predetermined absorption rate (vi) R (iv) Actual machine utilisation (vii) hours hours Over/(under) absorption of overheads R (viii) (R ) 3

4 Section A: Revision Video Questions Workings: 4

5 ICB Cost and Management Accounting Playlist Handbook Manufacturing general ledger accounts The following information relates to Barbara-Bui for the year ended 30 November 2012: Balances on 1 December 2011: Raw materials inventory R Work-in-process inventory R Finished goods inventory Indirect material inventory R R Transaction totals for the year ended 30 November 2012: Credit purchases of raw materials R Freight on raw material purchases (on credit) R Indirect material purchased on credit R Sales of finished products R Direct labour: Factory wages R Pension fund contributions paid by employer R Medical aid contributions paid by employer R UIF contributions paid by employer R Indirect labour R Telephone and Fax: Factory R Administrative offices R Security expense: Factory R Administrative offices R Rent expense: Factory R Administrative offices R Internet expense: Factory R Administrative offices R Selling and administrative costs R Office consumables R Salaries of administrative staff R Sales returns of finished products R Consumable stores (Indirect materials) issued to the factory R Depreciation on factory machinery R Balances on 30 November 2012 Unfinished goods on hand R Raw materials on hand R Finished products on hand R

6 Section A: Revision Video Questions Required: Prepare the following general ledger accounts of Barbara-Bui: Direct material (B7) Work-in-process (B8) Finished goods (B9) Indirect material (B10) Direct labour (C1) Factory overhead costs (C2) Cost of sales (N2) Trading account (F1) Profit and loss account (F2) Answer template: General ledger of Direct material B7 6

7 ICB Cost and Management Accounting Playlist Handbook Work-in-process B8 Finished goods B9 7

8 Section A: Revision Video Questions Indirect material B10 Direct labour C1 8

9 ICB Cost and Management Accounting Playlist Handbook Factory overhead costs C2 Cost of sales N2 9

10 Section A: Revision Video Questions Trading account F1 Profit and loss F2 10

11 ICB Cost and Management Accounting Playlist Handbook Cash budgets The budgeted transactions of Kgalagadi CC for the quarter ending the 30 November 2012 are as follows: 1. Budgeted sales amount to R for the quarter. (34% will be sold during September, 40% during October and the rest during November). 55% of the sales are expected to be made on credit. Debtors usually pay their debt as follows: 24% in the month following the month of sales 32% in the second month following month of the sales 12% in the third month following the month of the sales 32% is written off as irrecoverable in the last month of collection 2. Purchases is expected to amount to R for the quarter. Assume that opening and closing inventories will remain constant and that a constant mark-up percentage is maintained throughout. 47% of all the purchases are made on credit, while creditors are paid in the month following the month in which the purchases were made. 3. Sales personnel receive a commission of 7% on all sales. Office personnel each receive salaries of R per month. There are 5 office staff members. The commission and salaries are paid in cash every month. 4. A new delivery vehicle with a hire purchase price of R will be purchased on 1 September. A deposit of 25% of the HP price must be paid on 1 September, and the balance must be paid in 60 equal monthly instalments starting the end of October. R depreciation is to be written off per month on this vehicle as from 1 September. 5. Income tax amounting to R is payable during November to SARS. 6. Dividends of R , declared on 10 August, must be during October. 7. The following balances appeared in the books of Kgalagadi CC on 31 August 2012: Bank (favourable) R Debtors R Creditors R Credit sales were as follows during the previous budget period: June 2012 R July 2012 R August 2012 R Required: Prepare Kgalagadi CC monthly cash budget for September, October and November

12 Section A: Revision Video Questions Answer template: Cash budget of September October November 12

13 ICB Cost and Management Accounting Playlist Handbook 13

14 Section A: Revision Video Questions Activity based costing Gentrum Traders uses activity-based costing to calculate product costs for external reports. The business has three activity centres and applies overheads using pre-determined overhead rates for each activity centre. Estimated costs and activities for the current year are as follows: Activity centre Cost driver Expected activity Estimated overhead cost Machine setups Setups R Product assembly Assemblies R Packaging Packaging R Total R Actual costs and activities for the current year are as follows: Activity centre Cost driver Actual activity Actual overhead cost Machine setups Setups R Product assembly Assemblies R Packaging Packaging R Total R Required: Determine how much of the total overhead was applied to products during the year and how much overhead was over-applied or under-applied by filling in the missing data in the schedules provided in your answer book. 14

15 ICB Cost and Management Accounting Playlist Handbook Answer template: Activity center Estimated overhead cost Expected activity Predetermined overhead rate Activity center Predetermined overhead rate Actual activity Applied Overhead cost Total overhead applied Activity center Overhead applied Overhead overapplied/(under-applied) Actual overhead cost Total overhead applied 15

16 Section A: Revision Video Questions Production cost and trading statements The following information relates to Toscana (Pty) Ltd for the year ended 31 May 20.8: Balances on 1 June 20.7: Raw materials inventory R Work-in-process inventory R Finished products (goods) inventory R Indirect material inventory R Transaction totals for the year ended 31 May 20.8: Credit purchases of raw materials R Freight on raw material purchases (on credit) R Indirect material purchased on credit R Sales of finished products R Direct labour: Factory wages R Pension fund contributions paid by employer R Medical aid contributions paid by employer R UIF contributions paid by employer R Indirect labour R Rent: Factory R Administrative offices R Electricity: Factory R Administrative offices R Insurance: Factory R Administrative offices R Telephone and fax: Factory R Administrative offices R Selling and administrative costs R Stationery R Salaries of administrative staff R Sales returns of finished products R Consumable stores (Indirect materials) issued to the factory R Depreciation on factory machinery R Balances on 31 May 20.8 Work-in-process goods on hand R Raw materials on hand R Finished products (goods) on hand R

17 ICB Cost and Management Accounting Playlist Handbook Required: Prepare the production cost statement, the trading statement and applicable notes of Toscana (Pty) Ltd for the year ended 31 May 20.8 Answer template: Production cost statement of Notes R 17

18 Section A: Revision Video Questions Trading statement of Notes R Notes to the financial statements: 1. Direct material costs 18

19 ICB Cost and Management Accounting Playlist Handbook 2. Direct labour costs 3. Factory overhead costs 4. Cost of finished goods sold 19

20 Section A: Revision Video Questions Standard costing Trekstor Traders uses a standard costing system for recording transactions in respect of the manufacture of their single product, Trickly Hose. The standard and budgeted costs are as follows: Standard direct material per unit (3 R 7.50 per metre) R Standard direct labour per unit (5 R per hour) R Standard variable manufacturing overheads per unit (6 machine R R per machine hours) Budgeted fixed overheads R Budgeted machine hours 8 hours The operating results for April 20.8 were as follows: Material purchased R 7.80 per metres Material issued metres Direct labour R per hour Variable overheads R Fixed overheads R Actual production units Actual machine hours 8 hours Required: Calculate the following variances: (a) (b) (c) Material variances Direct material purchase price variance Direct material issue price variance Direct material usage variance Total direct material variance Labour variances Direct labour rate variance Direct labour efficiency variance Total direct labour variance Overhead variances Fixed overhead expenditure variance Variable overhead expenditure variance Variable overhead efficiency variance 20

21 ICB Cost and Management Accounting Playlist Handbook Answer template: Name of variance: Name of variance: Direct material purchase price variance Direct material issue price variance Name of variance: Direct material usage variance Name of variance: Total direct material variance 21

22 Section A: Revision Video Questions Name of variance: Direct labour rate variance Name of variance: Direct labour efficiency variance Name of variance: Total direct labour variance Name of variance: Fixed overhead expenditure variance 22

23 ICB Cost and Management Accounting Playlist Handbook Name of variance: Variable overhead expenditure variance Name of variance: Variable overhead efficiency variance 23

24 Section A: Revision Video Questions Capital budgeting Husky CC is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects, Ronda Project and Ponzi Project. The relevant cash flows for each project are shown below together with the net present value of the projects using the costs of capital given. Actual cash flows - Project Ronda Project NPV using 21.00% NPV using 19.00% Initial cash outflow (R ) (R ) (R ) Net cash inflow at the end of year 1 R R R Net cash inflow at the end of year 2 R R R Net cash inflow at the end of year 3 R R R Net cash inflow at the end of year 4 R R R Net present value (R ) R Actual cash flows - Project Ponzi Project NPV using 24.00% NPV using 22.00% Initial cash outflow (R ) (R ) (R ) Net cash inflow at the end of year 1 R R R Net cash inflow at the end of year 2 R R R Net cash inflow at the end of year 3 R R R Net cash inflow at the end of year 4 R R R Net present value (R ) R Required: (a) Calculate the payback period for each project. (b) Calculate the net present value (NPV) for each project using a cost of capital of 20 %. (c) Calculate the internal rate of return for each project. 24

25 ICB Cost and Management Accounting Playlist Handbook Answer template: (a) Payback period Project Calculation Payback period (b) Net present value Project Ronda Actual cash flow Calculation Present value Amount Initial cash outflow Net cash inflow at the end of year 1 Net cash inflow at the end of year 2 Net cash inflow at the end of year 3 Net cash inflow at the end of year 4 Net present value Project - Ponzi Actual cash flow Calculation Present value Amount Initial cash outflow Net cash inflow at the end of year 1 Net cash inflow at the end of year 2 Net cash inflow at the end of year 3 Net cash inflow at the end of year 4 Net present value 25

26 Section A: Revision Video Questions (c) Internal rate of return Project Calculation Payback period 26