Unit: Management accounting
12 Questions| Budget | Mixing | Blending | Total |
| Budgeted direct wages (Sh.) | 2,400,000 | 7,000,000 | 9,400,000 |
| Budgeted direct labour hours | 40,000 | 100,000 | 140,000 |
| Budgeted machine hours | 120,000 | 10,000 | 130,000 |
| Budgeted production overheads (Sh.) | 18,000,000 | 10,000,000 | 28,000,000 |
| Direct wages (Sh.) | Labour hours | Machine hours | |
| Mixing | 726,000 | 1,200 | 4,600 |
| Blending | 2,490,000 | 4,150 | 380 |
| 3,216,000 | 5,350 | 4,980 |
| (i) | The cost of the batch of Cyan Paint using a single company-wide overhead absorption rate. |
| (ii) | Departmental overhead absorption rates. |
| (iii) | The cost of the batch of Cyan Paint using management accountant proposal. |
| (iv) | During the month of October 2024, the actual overheads and other relevant data was as follows: |
| (iv) | Actual | Mixing | Blending | Total |
| Actual direct wages (Sh.) | 3,000,000 | 5,950,000 | 8,950,000 | |
| Actual direct labour hours | 50,000 | 85,000 | 135,000 | |
| Actual machine hours | 140,000 | 8,000 | 148,000 | |
| Actual production overheads (Sh.) | 20,000,000 | 9,500,000 | 29,500,000 |
| (iv) | Using the management accounting proposal, calculate the over/under absorption of overhead per department. |
| Sh. | Sh. | |
| Selling price | 200 | |
| Less: | ||
| Variable production costs | 120 | |
| Variable selling cost | 10 | 130 |
| Contribution | 70 |
| 1 | The budgeted fixed production cost is Sh.4,200,000 per annum for a normal production of 140,000 units |
| 2 | Budgeted fixed selling and administrative overheads are Sh.2,800,000 per annum. |
| 3 | The budgeted fixed costs are incurred evenly during the year. |
| 4 | There are two periods in a year, each of 6 months. |
| 5 | During the latest financial year, the following results were achieved: |
| Period 1 | Period 2 | ||
| 5 | Production (units) | 75,000 | 65,000 |
| Sales (units) | 60,000 | 70,000 |
| 6 | There was no opening inventory at the beginning of the year. |
| 7 | Fixed production costs and selling and administrative costs incurred during the year were equal to the budget. |
| o | Annual demand | 12,000 units |
| o | Purchase price | Sh.15 per unit |
| o | Fixed cost per order | Sh.200 |
| o | The cost of holding an item “Zedo” in stock for a year is made up of the following percentages: |
| o | Obsolescence | 3% |
| Perpetual audit | 1.5% | |
| Opportunity cost | 2% | |
| Insurance | 1% | |
| Storage | 0.5% |
| Sh. | |
| Direct materials | 60,000 |
| Direct labour | 20,000 |
| Machine setup cost | 6,000 |
| Design and logo | 30,000 |
| Prime cost | 116,000 |
| Budget Units | Actual Units | |
| Sales | 30,000 | 29,000 |
| Production | 30,000 | 30,000 |
Sh.“000” | Sh.“000” | |
| Sales | 420,000 | 411,800 |
| Direct materials | 120,000 | 123,000 |
| Direct labour | 150,000 | 144,000 |
| Fixed overheads | 67,500 | 70,000 |
| Net income | 82,500 | 74,800 |
| Product M Sh. | Product Y Sh. | |
| Selling price | 6 | 12 |
| Variable costs | 2 | 4 |
| Contribution margin | 4 | 8 |
Fixed costs (Sh.) | 96,400,000 | 200,000,000 |
| Units sold (bags) | 70,000,000 | 30,000,000 |
Want to join the discussion?
Log in to post comments and interact with tutors.
Login to Comment