Unit: Management accounting
11 Questions| Month | Machine Hours (“000”) | Electricity expense (Sh.“000”) |
| June | 78 | 1,800 |
| July | 78 | 1,500 |
| August | 93 | 1,590 |
| September | 105 | 1,650 |
| October | 129 | 1,740 |
| November | 144 | 2,040 |
| Type of overhead | Sh.“000” |
| Rent and taxes | 75,000 |
| General lighting | 30,000 |
| Indirect wages | 150,000 |
| Petrol and engine oil | 88,500 |
| Depreciation on tour buses | 500,000 |
| 843,500 |
| Total | Accommodation | Kitchen | Tours | Entertainment | |
| Direct wages (Sh.“000”) | 500,000 | 150,000 | 100,000 | 150,000 | 100,000 |
| Floor area (\(m^2\)) | 100,000 | 30,000 | 25,000 | 20,000 | 25,000 |
| Value of tour buses (Sh.“000”) | 1,250,000 | 350,000 | 650,000 | 150,000 | 100,000 |
| Lighting points | 60 | 20 | 15 | 10 | 15 |
| Number of petrol fillings | 150 | 40 | 50 | 60 | - |
| 1 | In August 2023, it is estimated that there will be 20 guest-nights in Accommodation and 480 meals will be served in the Kitchen. |
| 2 | Secondary allocation of overheads is as follows: |
| 2 | Cost centre Tours Entertainment | Accommodation 60% 50% | Kitchen 30% 30% | Tours - 20% | Entertainment 10% - |
| Service | Salon Sh. per client | Gym Sh. per client | Barber shop Sh. per client |
| Service fee | 300 | 390 | 200 |
| Variable material costs | 140 | 180 | 100 |
| Variable labour costs | 60 | 100 | 50 |
| Fixed overhead costs | 90 | 120 | 40 |
| Labour hours per client | 2 hours | 3 hours | 1.5 hours |
| 1 | Total fixed cost for the next year is expected to be Sh.400,000 |
| 2 | The budgeted maximum demand of clients for the next year for the services is estimated as follows:
|
| 3 | Urembo Lifestyles has a maximum of 9,900 labour hours available next year |
| Actual costs incurred: | Sh.“000” |
| Direct material (1,188 kilograms) | 11,286 |
| Direct labour (5,760 hours) | 41,760 |
| Variable production overheads | 12,096 |
| Fixed production overheads | 48,600 |
Variances: | Sh.“000” |
| Direct material price variance | 594 Favourable |
| Direct material usage variance | 1,080 Adverse |
| Direct labour rate variance | 1,440 Adverse |
| Direct labour efficiency variance | 2,520 Adverse |
| Variable overhead expenditure variance | 576 Adverse |
| Variable overhead efficiency variance | 720 Adverse |
| Fixed overhead expenditure variance | 900 Favourable |
| Fixed overhead volume variance | 4,500 Favourable |
| Product | A01 | B02 | C03 | D04 | Total |
| Output units | 1,200 units | 1,000 units | 800 units | 1,200 units | 4,200 units |
| Machine hours per unit | 4 hours | 3 hours | 2 hours | 3 hours | 12 hours |
| Production runs | 6 | 5 | 4 | 6 | 21 |
| Requisitions raised | 20 | 20 | 20 | 20 | 80 |
| Orders executed | 12 | 10 | 8 | 12 | 42 |
Cost per unit: | Sh. | Sh. | Sh. | Sh. | |
| Direct material | 3,300 | 4,125 | 2,475 | 4,950 | |
| Direct labour | 2,310 | 1,980 | 1,155 | 1,815 |
| 1 | Currently production overheads are absorbed based on conventional machine hour basis although the management is proposing the adoption of activity-based costing (ABC) technique. |
| 2 | The production overheads for the period have been analysed as follows together with ABC cost drivers: |
| Cost element | Sh. “000” | Cost driver | |
| Machinery cost centre | 10,430 | Total machine hours | |
| Set-up costs | 5,250 | Number of production runs | |
| Stores receiving costs | 3,600 | Requisitions raised | |
| Inspection costs | 2,100 | Number of production runs | |
| Material handling costs | 4,620 | Orders executed | |
| 26,000 |
| 1 | Opening work in progress was 900 units at a total cost of Sh.45,000,000. The degree of completion is as follows:
|
| 2 | Data about refining process is as follows:
|
| 3 | Finished units transferred to finished stores were 7,800 units. |
| 4 | Normal scrap loss was 10% of input units and the scrapped units realised Sh.30,000 per unit. |
| 5 | Units scrapped were 1,200 units with the following degrees of completion:
|
| 6 | Closing work in progress was 1,000 units with the following degrees of completion:
|
| 7 | Hard Board Ltd. uses first in first out (FIFO) method. |
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