Topics: Costs, Variable cost, Management accounting Pages: 72 (24120 words) Published: December 19, 2014
Extra questions for Chapter 3 Cost assignment
3.1 Intermediate: Job cost calculation
A printing and publishing company has been asked to provide an estimate for the production of 100 000 catalogues, of 64 pages (32 sheets of paper) each, for a potential customer.
Four operations are involved in the production process: photography, set-up, printing and binding.
Each page of the catalogue requires a separate photographic session. Each session costs £150.
Set-up would require a plate to be made for each page of the catalogue. Each plate requires 4 hours of labour at £7 per hour and £35 of materials. Overheads are absorbed on the basis of labour hours at an hourly rate of £9.50.

In printing, paper costs £12 per thousand sheets. Material losses are expected to be 2% of input. Other printing materials will cost £7 per 500 catalogues. 1000 catalogues are printed per hour of machine time. Labour and overhead costs incurred in printing are absorbed at a rate of £62 per machine hour.

Binding costs are recovered at a rate per machine hour. The rate is £43 per hour and 2500 catalogues are bound per hour of machine time.
A profit margin of 10% of selling price is required.
You are required to:
(a) determine the total amount that should be quoted for the catalogue job by the printing and publishing company.
(11 marks)
(b) calculate the additional costs that would be charged to the job if the labour efficiency ratio achieved versus estimate in set-up is 90%.
(4 marks)
(Total 15 marks)
ACCA Foundation Stage Paper 3
3.2 Intermediate: Reapportionment of service department overheads and a calculation of under/over-recovery of overheads
An organization has budgeted for the following production overheads for its production and service cost centres for the coming year:
Cost centre
Paint shop
Engineering shop

180 000
160 000
130 000
84 000
52 000
75 000

The product passes through the machining, assembly and paint shop cost centres and the following data relates to the cost centres:

No. of employees
Eng Shop-service
Stores (orders)



18 000

12 000

10 000



The following budgeted data relates to the production cost centres: M/c
Paint shop
M/c hours
9 200
8 100
6 600
Lab hours
8 300
11 250
9 000
Lab cost
£40 000
£88 000
£45 000
(a) Apportion the production overhead costs of the service cost centres to the production cost centres and determine predetermined overhead absorption rates for the 3 production cost centres on the following basis:

Machining - Machine hours.
Assembly - Labour hours.
Paint shop - Labour costs.
(11 marks)
(b) Actual results for the production cost centres were:
M/c hours
10 000
8 200
Lab hours
4 500
7 800
Lab cost
£25 000
£42 000
Actual O/h
£290 000
£167 000

Paint shop
6 600
6 900
£35 000
£155 000

Prepare a statement showing the under/over absorption per cost centre for the period under review.
(7 marks)
(c) Explain why overheads need to be absorbed upon pre-determined bases such as the above. Consider whether these bases for absorption are appropriate in the light of changing technology, suggesting any alternative basis that you consider appropriate. (7 marks)

(Total 25 marks)
AAT Cost Accounting and Budgeting
3.3 Advanced: Comparison of methods of reapportioning service department costs Puerile Plastics Ltd consists of six departments: personnel and administration, maintenance, stores, moulding, extrusion and finishing. The accountant has collected data for the 12 months to 30 September relating to the six departments, which is given below.

The accountant wishes to use the data to derive the selling prices of the firm’s products, based on their full costs. The selling price of each product will be equal to 250% of the product’s full cost. The market for the products is...
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