F5: PROGRESS TEST 1
1
Using activity based costing, what is the overhead cost per unit of product Y?
Product X
500
Production (units)
Machine hours per unit
Production runs
Inspections during production
Production set-up costs
Quality control costs
A
B
C
D
Product Y
2,000
10
5
6
$168,000
$96,000
10
2
6
$48.00
$37.71
$66.00
$105.60
(2 marks)
The following data relate to costs, output volume and cost drivers of Heighway Rubbery Ltd for
June 20X1.
Product P
Product Q
Product R
Total
1 Production and sales
3,000 units 2,000 units 1,500 units
2
3
4
5
6
7
8
9
Direct production costs
Direct materials
Direct labour
Labour hours per unit
Machine hours per unit
Number of production runs
Number of deliveries to customers
Number of production orders
Number of deliveries of materials
into store
Production overhead costs
Machining
Set-up costs
Materials handling (receiving)
Packing costs (despatch)
Engineering
$ per unit
12
3
15
½
2
8
3
30
17
$ per unit
11
6
17
1
1
2
2
5
3
$ per unit
8
2
10
1/ 3
2
10
10
15
20
$70,000
$24,000
$94,000
20
15
50
40
$
71,500
10,500
35,000
22,500
25,500
165,000
F5: PROGRESS TEST 1
Indirect production overheads that are not driven by production volume are:
Item
Set-up costs
Materials handling
Packing
Engineering
2
What would be the full production cost per unit of product R if overheads are absorbed on
the basis of direct labour hours?
A
B
C
D
3
$13.75
$23.75
$30.00
$51.25
(2 marks)
What would be the full production cost per unit of product R using activity based costing?
A
B
C
D
4
Cost driver
Production runs
Deliveries of materials
Deliveries to customers
Production orders
$43.27
$45.28
$62.27
$53.27
(2 marks)
Orchard manufactures three products and operates a system of throughput accounting.
$ per hour
Sales price
Material
Labour
Overhead
Profit
A
40
10
5
15
10
B
50
15
15
10
10
If there is unlimited demand for the product which should be produced?
5
C
60
30
10
5
15
(2 marks)
A company makes product X which passes through three production operations A, B and C.
Product X sells for $8 per unit and has a direct materials cost of $3 per unit.
Total labour cost for the period is $10,000 and overheads for the same period amount to
$14,000.
Processing times per unit and maximum processing times available for the three operations
are given below.
Operations
A
B
C
Time per unit
3 mins
11 mins
6 mins
Total capacity (mins)
30,000
50,000
80,000
Calculate the throughput ratio for product X.
A
B
C
D
0.32
0.45
0.48
0.94
(2 marks)
F5: PROGRESS TEST 1
6
In activity based costing what is a cost driver?
A
B
C
D
7
(2 marks)
Indicate which of the following methods can be used to move a currently-attainable cost
closer to target cost.
A
B
C
D
8
An overhead cost that is incurred as a direct consequence of an activity
Any factor which causes a change in the cost of an activity
An activity or product item for which costs are incurred
A basis for apportioning overheads to cost centres
Using standard components wherever possible
Acquiring new, more efficient technology
Making staff redundant
Reducing the quality of the product in question
(2 marks)
A mobile phone manufacturer, C Ltd, is planning to produce a new model. The potential
market over the next year is 1,000,000 units.
C Ltd has the capacity to produce 400,000 units and could sell 100,000 units at a price of
$50. Demand would double for each $5 fall in the selling price.
The company has an 80% cost experience curve for similar products. The cost of the first
batch of 1,000 phones was $103,000.
A minimum margin of 25% is required.
Calculate C Ltd's target cost per unit, to the nearest $.
A
B
C
D
9
(2 marks)
When are the bulk of a product's life cycle costs normally determined?
A
B
C
D
10
$40
$30
$50
$45
At the design/development stage
When the product is introduced to the market
When the product is in its growth stage
On disposal
(2 marks)
J Co produces and sells two products. The O sells for $12 per unit and has a total variable
cost of $7.90, while H sells for $17 per unit and has a total variable cost of $11.20. For every
four units of O sold, three of H are sold. J Ltd's fixed costs are $131,820 per period.
Budgeted sales revenue for the next period is $398,500.
What is the margin of safety (in $)?
A
B
C
D
$131,820
$12,511
$385,989
$27,292
(2 marks)