Unit: Management accounting
11 Questions| 1 | Process One cost data: Raw material inputs (40.000 kgs) Direct wages Overheads Output: Transferred to Process Two By product Zed Closing work in progress (50% complete as to conversion costs) ........................................................................................................ | Sh.9,620,000 Sh.7,650,000 Sh.1,105,000 30,000Kgs 2,000kgs 8,000kgs |
| 2 | By product Zed retails at Sh.75 per kg. Additional selling costs amount to Sh. 15 per kg. 500 kgs. were sold in 2 July 2015 |
| 3 | Process Two cost data: Additional direct materials Direct wages Overheads Output Finished goods (Exe and Wye) Losses in the process ................................................... | Sh. 3,852,500 Sh.6,099,609.5 Sh 3,828,750 28,000kgs 2,000kgs |
| 4 | The output is produced in the ratio of 2:3 for products Ese and Wye respectively |
| 5 | Normal loss in the process is 2.5% Scrap value per unit is Sh.200. |
| 6 | The selling price per unit of each product is as follows: |
| Exe Wye | Sh.2,000 per Kg Sh.1,218.75.per.Kg. |
| 7 | Joint costs are allocated on the basis of sales revenue at separation point. |
| 1 | Actual cost data: Direct materials purchased (36000 Kgs.) Direct wages (6800 hours) Variable production overheads Fixed production overheads .................................................................. | Sh. 1,890,000 2,210,000 620,000 1,880,000 |
| 2 | Output during the period was 3500 units of product Y. |
| 3 | The standard production units were budgeted at 4800 units. |
| 4 | The standard cost data per unit is as follows: |
Direct materials purchased (Sh.500 per Kg.) Direct wages (2 hours) Variable production overheads Fixed production overheads ......................................................................... | Sh. 500 600 200 400 1,700 |
| 5 | Labour records show 6200 hours were worked. 600 hours were recorded as idle time due to machine breakdown. |
| Department Allocated overheads (Sh.) No. of employees Maintenance orders Products Production (units) Direct material cost per unit (Sh.) Direct labour hours per unit: Machining (Sh.60 per hour) Finishing (Sh.50 per hour) Machine hour per unit: Machining ...................................................... | Machining 3,502,000 15 52 Benta 3,000 120 3 4 2 | Finishing 1,748,000 9 13 Centa 4,500 150 2 2 4 | Canteen 800,000 2 - Denta 2,000 170 1.5 2 3 | Maintenance 400,000 6 - |
| ................................................... Total attendance time Normal working hours Productive time Non productive time - Due to poor supervision - Normal machine repairs Basic hourly rate per hour | Direct.employees 19800 hours 18000 hours 18850 hours 400 hours 550 hours Sh.150 | Indirect.employees 7050 hours 6400 hours - - - - Sh.150 |
| Overtime is paid at a premium of 40% of base rate. 40% of the overtime for both categories was worked to meet specific request of a customer. A general bonus of Sh.625,000 was paid to all the employees. |
| Required: Wages control account to show the wages allocation for the period. |
| 1 | The product will retail at a price of Sh.500 per litre. |
| 2 | Variable production costs are as follows: |
| ................................................. Direct materials Direct labour Variable production overheads | Crushing Sh. 50 Sh. 150 Sh. 40 | Filtering - Sh. 40 Sh. 20 |
| 3 | Fixed production overheads amount to Sh.5,000,000 for both departments. |
| 4 | The Crushing department is currently operating at full capacity with available labour hours being 10,000. |
| 5 | Each unit of Omega requires 0.25 hours in the Crushing department. |
| (a) | (i) | Break-even point in units and revenue. |
| (ii) | Margin of safety in units. | |
| (iii) | Current budgeted profit. |
| (b) | A customer has offered to purchase 2000 units of product Alpha, another product that Omega Manufacturers Limited can produce with the new production facility: Cost data is as follows for product Alpha: |
| (i) | Cost per unit .................................................. Direct materials Direct labour Variable production overheads | Crushing Sh. 250 Sh. 300 Sh. 50 | Filtering - Sh. 80 Sh. 20 |
| (ii) | Each unit of Alpha requires 0.5 hours in crushing department. | |
| (iii) | The customer has offered a price of Sh.1500 per unit of Alpha. | |
| (iv) | Incremental fixed costs associated with the offer amount to Sh.1,000,000. | |
Required: Advise the company on whether to accept the offer. | ||
| (c) | The management is considering a proposal to establish a new market in a neighbouring country for product Omega. This will require expansion of the production facility. The proposal will increase costs as follows: |
| Advertising expenses Travelling expenses Fixed.production.overheads | 10% of revenue. 10%.of.prime.cost. Sh.2,500,000 |
| Target annual sales volume will be 10,000 units in the new market at a price of Sh.900 per unit. Required: Advise the company on whether it should market product Omega in the new country. |
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