Osborne Books Tutor Zone Elements of Costing Answers to chapter activities Osborne Books Limited, 2016
2 e l e m e n t s o f c o s t i n g t u t o r z o n e 1 The costing system 1.1 (a) and (c) Materials; (b) Overheads; (d) Labour 1.2 (a), (c) and (d) Direct; (b) Indirect 1.3 (a) Production; (b) and (d) Selling and distribution; (c) Administration 1.4 (a) and (d) are False; the remaining statements are True
a n s w e r s t o c h a p t e r a c t i v i t i e s 3 2 Cost centres and overhead absorption 2.1 (d) Drawer construction; Frame construction: Administration; Dispatch 2.2 Cost description Code given Correct code Wages of the glazier who cuts the glass 212 212 Wood for window frames 113 111 Maintenance of tools in framing section 111 123 Wages of the cleaner who works in the framing section 122 122 Office telephone costs 333 323 Glass 211 211 Stationery for office 322 321 2.3 Transaction Sales of spectacles at Frame Road Purchase of a new testing machine at Eye Street Rent of the premises at Lens Lane Wages of the optician at Eye Street Purchase of a new spectacle cleaning machine for Frame Road Purchase of coffee for the machine at Lens Lane Code FR100 ES800 LL400 ES300 FR800 LL400
4 e l e m e n t s o f c o s t i n g t u t o r z o n e 2.4 Overhead absorption method Direct labour hours Machine hours Overhead absorption rate 7.6667 11.3344 Product J costs: Direct materials 27.80 27.80 Direct labour 30.00 30.00 Overheads 19.17 22.67 Total costs 76.97 80.47 2.5 Budgeted indirect Budgeted direct Overhead absorption costs labour hours rate Fabrication 143,700 35,800 4.01 Assembly 95,200 24,600 3.87 Product Z Direct labour Overhead Overhead absorbed hours per unit absorption rate Fabrication 5 4.01 20.05 Assembly 1.5 3.87 5.81 Total 25.86
a n s w e r s t o c h a p t e r a c t i v i t i e s 5 3 Cost behaviour 3.1 (a) and (d) Fixed; (b) Semi-variable; (c) Variable 3.2 Units Fixed costs Variable costs Total costs Unit cost 500 30,000 5,000 35,000 70.00 1,000 30,000 10,000 40,000 40.00 1,500 30,000 15,000 45,000 30.00 2,000 30,000 20,000 50,000 25.00 3.3 Element Total cost Unit cost Materials 45,000 3.00 Labour 30,000 2.00 Fixed Costs 22,500 1.50 Total 97,500 6.50
6 e l e m e n t s o f c o s t i n g t u t o r z o n e 3.4 Variable cost calculation Total costs Units High data 124,600 10,000 Low data 106,200 6,000 Difference 18,400 4,000 Variable cost per unit 4.60 Fixed cost calculation Number of units Costs Total costs 10,000 124,600 Variable costs 46,000 Fixed costs 78,600 Total cost calculation Variable costs Fixed costs Total costs 7,000 units 32,200 78,600 110,800 7,500 units 34,500 78,600 113,100 9,000 units 41,400 78,600 120,000
a n s w e r s t o c h a p t e r a c t i v i t i e s 7 3.5 Variable cost calculation Total costs Units High data 206,350 8,200 Low data 147,150 4,500 Difference 59,200 3,700 Variable cost per unit 16.00 Fixed cost calculation Number of units Costs Total costs 8,200 206,350 Variable costs 131,200 Fixed costs 75,150 Total cost calculation Variable costs Fixed costs Total costs 5,000 units 80,000 75,150 155,150 6,000 units 96,000 75,150 171,150 7,000 units 112,000 75,150 187,150 3.6 Statement Fixed Variable Semivariable At 2,000 units the cost is 7,800 and at 4,800 units the cost is 14,520 At 8,000 units the cost is 36,800, and at 11,500 units the cost is 52,900 At 3,500 units the cost is 20 per unit, and at 5,000 units the cost is 14 per unit
8 e l e m e n t s o f c o s t i n g t u t o r z o n e 4 Inventory valuation and the manufacturing account 4.1 LIFO 4.2 Method Value of issue on Feb 26 Value of closing inventory on Feb 28 FIFO 1,185 1,640 LIFO 1,225 1,600 AVCO 1,210 1,615 4.3 Method Value of issue on Sept 18 Value of closing inventory on Sept 30 FIFO 2,650 3,660 LIFO 2,660 3,650 AVCO 2,647 3,663 4.4 Manufacturing cost Opening inventory of raw materials 3,000 Opening inventory of raw materials 3,000 Purchases of raw materials 37,000 Closing inventory of work in progress 13,000 Closing inventory of raw materials 10,000 Cost of goods sold Raw materials used in manufacture 30,000 Opening inventory of work in progress 15,000 Direct labour 25,000 Closing inventory of finished goods 19,000 Direct cost 55,000 Closing inventory of raw materials 10,000 Manufacturing overheads 17,000 Direct labour 25,000 Manufacturing cost 72,000 Raw materials used in manufacture 30,000 Opening inventory of work in progress 15,000 Purchases of raw materials 37,000 Closing inventory of work in progress 13,000 Cost of goods manufactured Cost of goods manufactured 74,000 Opening inventory of finished goods 20,000 Opening inventory of finished goods 20,000 Manufacturing overheads 17,000 Closing inventory of finished goods 19,000 Direct cost Cost of goods sold 75,000
a n s w e r s t o c h a p t e r a c t i v i t i e s 9 5 Labour costs 5.1 (a) False; (b) and (c) True 5.2 Worker Hours worked Basic wage Overtime Gross wage I. Morse 38 hours 350.00 39.00 389.00 S. Lewis 35 hours 350.00 0 350.00 5.3 Worker Units produced in a week Gross wage V Barnaby 420 units 336.00 A Sinclair 390 units 312.00 5.4 Worker Hours worked Units produced Basic wage Bonus Gross wage A Smith 35 850 280.00 0 280.00 J Jones 35 975 280.00 20.00 300.00 M Clive 35 905 280.00 6.00 286.00
1 0 e l e m e n t s o f c o s t i n g t u t o r z o n e 5 Providing information budgets and variances 6.1 Element Unit cost Materials 2.50 Labour 0.75 Overheads 2.50 Total 5.75 6.2 (a) False; (b) True 6.3 Cost type Budget Actual Variance Adverse Favourable Direct materials 41,200 39,200 2,000 Direct labour 40,700 47,000 6,300 Production overheads 25,600 25,200 400 Administration overheads 14,200 14,700 500 Selling and distribution overheads 19,800 20,100 300 6.4 Cost type Budget Variance Adverse/ Significant Not Favourable significant Direct materials 41,500 700 A Direct labour 40,400 900 F Production overheads 25,000 1,200 A Administration overheads 14,100 850 F Selling and distribution overheads 19,500 500 F
a n s w e r s t o c h a p t e r a c t i v i t i e s 1 1 6.5 Variance Direct labour cost Administration overheads Manager Production Manager Office Manager