Southern College Kolej Selatan 南方学院 Final Examination Semester 2 / Year 2011 COURSE : BASIC COSTING COURSE CODE : ACCT2013 TIME : 2 1/2 HOURS DEPARTMENT : FINANCE AND ACCOUNTING LECTURER : GAN HWI SIN Student s ID : Batch No. : Notes to candidates: 1) The question paper consists of 9 pages and 2 Sections. 2) Section A consists of 3 questions and Section B consists of 15 objective questions. 3) Answer ALL the questions. 4) Return the question paper with your answer booklet.
Section A (30%): Answer all the questions: Question 1: a) Company X is preparing a job cost estimate that will be used to provide a quote for a potential customer. Estimated costs for the job to be based on the following: Direct materials RM 2,950 Direct labour 220 hours at a basic rate of RM 6.00 per hour. Production overheads Absorbed at 20% of prime cost + RM 10.00 per direct labour hour Required: Calculate the total estimated PRODUCTION cost of the job. (6 marks) b) Many manufacturing organizations hold raw material stocks. Required: List four examples of holding costs. (4 marks) Page 2 of 9
Question 2: Company XYZ has two production cost centres (P1 and P2) and two service cost centres (Materials Store and Employee Facilities) in a factory. Estimated overheads costs for the factory for a period, requiring apportionment to cost centres, are: RM Buildings maintenance fees 42,000 Management salaries 27,000 Power to operate machinery 12,000 Other utilities 9,400 In addition, the following overheads have been allocated to cost centres: Cost Centre P1 P2 Materials Store Employee Facilities RM 107,000 RM 89,000 RM 68,000 RM 84,000 Further information: Cost Centre P1 P2 Material Employee Total Store Facilities Floor area (m 2 ) 4,560 5,640 720 1,080 12,000 Number of employees 18 24 6 6 54 Share of other utilities overhead 35% 45% 10% 10% 100% Machine hours 6,200 5,800 12,000 Share of Materials Store overheads 40% 60% 100% Required: i) Prepare a schedule showing the allocated and apportioned factory overhead costs for each cost centre. (7 marks) ii) Re-apportion the service cost centre overheads. (4 marks) Page 3 of 9
Question 3: Company ABC has three production cost centres (P1, P2 and P3) and had set its predetermined production overhead rates for the period, used to absorb overheads, are: P1 P2 P3 RM 24.60 per machine hour RM 13.40 per direct labour hour RM 10.80 per direct labour hour Machine hours and direct labour hours in each production cost centre are: Cost centre Machine hours Direct labour hours Budget Actual Budget Actual P1 8,100 8,250 3,650 3,680 P2 1,960 1,880 8,650 8,440 P3 3,610 3,720 15,600 15,990 The actual overhead incurred for the period were: Cost centre RM P1 199,891 P2 116,592 P3 170,947 Required: Calculate for the period for each production cost centre: i) The amount of overheads absorbed; (3 marks) ii) The amount of any over or under absorption of overheads. (6 marks) Page 4 of 9
Section B (30%): Answer all the questions: 1 A company carried out production in accordance with the special requirements of each customer. Which costing method is MOST appropriate? A B C D Batch costing Job costing Process costing Service costing 2 The following data refers to a particular inventory item: Receipts (units) Issue (units) Total cost (RM) Day 1 200 1,100 Day 3 140 Day 6 150 840 Day 7 140 The weighted average method is used to value inventory issues. A weighted average is calculated each purchase. At what cost price per unit (to two decimal places of RM) will the issue on Day 7 be made A RM 5.54 B RM 5.56 C RM 5.57 D RM 5.60 3 A company, which uses marginal costing, normally manufactures 1,000 units of a product in a period. The product is sold for RM 50 per unit. Cost for the 1,000 units are: Direct materials RM 16,300 Direct labour RM 9,800 Fixed overheads RM 21,600 How much profit will be expected if 1,100 units of the product are manufactured and sold in a period? A RM 2,300 B RM 2,530 C RM 4,690 D RM 7,300 Page 5 of 9
4 Which of the following is the most appropriate basis for apportioning the canteen costs in a factory? A B C D Direct labour hours Direct wages Indirect labour hours Number of factory employees 5 A lawyer firm had an overhead budget of RM 21,060 for a period. Actual overhead in the period was RM 21,720. Overheads are absorbed on the basis of client worked which totalled 2,375 in the period and resulted in under-absorption of RM 345. What was the budgeted overhead absorption rate per client hour? A RM 8.72 B RM 9.15 C RM 9.00 D RM 9.29 6 Costs for Job LMN are: Direct materials RM 460 Direct labour RM 600 Overheads 120% of direct labour cost A profit margin of 20% of selling price is required. What is the selling price of Job LMN? A RM 2,136 B RM 2,225 C RM 2,856 D RM 2,975 7 An estimate has been made of the effect that a change in selling price would have on the profit of a product. In which area will this information be especially useful? A Cost reduction B Decision-making C Feedback control D Responsibility accounting Page 6 of 9
8 A single-product business has the following results for a period: Sales revenue RM 268,000 (at RM 25 per unit) Less: Variable costs RM 139,360 Contribution RM 128,640 Less: Fixed costs RM 87,480 Net profit RM 41,160 What is the break-even point in units? A 3,499 B 7,290 C 8,645 D 9,074 9 Production costs incurred in the manufacture of 2,400 units of a product in a period are: RM Direct costs 19,680 Variable overheads 3,120 Fixed overheads 14,640 What would be the expected total cost of manufacturing 2,300 units of the product in a period? A RM 35,880 B RM 36,490 C RM 36,620 D RM 37,310 10 Which of the following are relevant in the calculation of the maximum inventory control level? 1. Maximum lead time 2. Minimum usage 3. Re-order level 4. Re-order quantity A 1 and 2 B 3 and 4 only C 1,3, and 4 D 2,3, and 4 Page 7 of 9
11 Company A has recorded its cost at the output level of: Production output 100,000 units 105,000 units 110,000 units Total costs RM207,000 RM213,000 RM218,200 What is the variable cost per unit (to 2 decimal places of RM), if the high-low method is used: A RM 0.89 B RM 1.04 C RM 1.12 D RM 1.20 12 Which of the following best describes a PROFIT CENTRE A Part of a business where management makes investment decisions B Part of a business that provides a service to other parts of the business C Part of a business where finished products are manufactured D Part of a business where management is responsible for revenues and costs 13 Predetermined production overhead absorption rates i. will not be based upon historical cost data ii. based on budget for output and production overhead iii. to be set at the start of the financial overhead iv. based on future cost data Which of the above statements are correct? A i, ii, iii B ii, iii, iv C i, ii, iv D All are correct 14 Are the following statements about MARGINAL costing TRUE or FALSE? 1. Inventory value will always be lower than when using absorption costing 2. Profits will always be higher than when using absorption costing Statement 1 Statement 2 A True True B True False C False True D False False Page 8 of 9
15 Stock-outs can be avoided by using re-order level formula, the formula is: A Maximum usage x Maximum lead time B Maximum usage x Minimum lead time C Minimum usage x Maximum lead time D Minimum usage x Minimum lead time 000 Page 9 of 9