Home Solutions Diploma in Accounting Costs and Revenues (CSTR)
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(a)When costs are rising which one of the following statements is correct?
LIFO will give the highest reported profits because cost of sales is charged at the latest higher prices
FIFO will give the highest reported profits because cost of sales is charged with the latest higher prices
LIFO will give the lowest reported profits because cost of sales is charged at the latest higher prices
FIFO will give the lowest reported profits because cost of sales is charged with the latest higher prices
(b) If the FIFO method of inventory valuation was used over the lifetime of a business what would be the effect on the reported profits of the business? Select one of the following options
The reported profits would be higher than if another method was used
The reported profits would be lower than if another method was used
There would be no effect on the overall reported profits
(c) The inventory record card for a company has been partially completed.
Complete the entries in the inventory record using the AVCO method of valuation. Round all costs per litre to 3 decimal places.
Cost per litre (p)
A company had the following transactions relating to inventory part RM301 during November:
1 November Opening inventory 8,000kgs of RM301 valued at £3,200
5 November Purchased 4,000kgs of RM301 for £2,080 on credit
12 November Issued 5,000kgs of RM301 at an issue price of £0.44 per kg
18 November Purchased 4,000kgs of RM301 at £0.56 per kg on credit
28 November Issued 6,000kgs of RM301 at a total issue price of £2,880
The issue on 12 November was used to manufacture product PD84, while that on 28 November was used to manufacture product PD27.
The company uses the following cost codes
Inventory of RM301
Work in progress – PD84
Work in progress – PD27
A company has a profit centre that employs a group of production workers who, as well as earning basic pay are also paid a weekly group bonus based on their productivity during each week.
The group has a standard (target) output of 800 units of production per hour worked.
All output in excess of this level earns a bonus for each of the employees.
excess production (units)
standard production (units)
The bonus % is calculated as:
The bonus rate per hour is then calculated as: bonus % x £10
The following information relates to the group’s performance last week:
(a) Complete the table below to calculate the group bonus rate per hour and the total to be paid to the group.
Less standard production (based on actual hours worked)
Group bonus rate per hour £
Total group bonus £
(b) Calculate the total pay for an employee who worked 44 hours last week and is paid a basic rate of £9.60 per hour.
A company has two profit and three cost centres. The budgeted overheads for the next quarter have been identified as follows:
Depreciation of equipment
Premises insurance and maintenance
Rent and rates
Light, heat and power
Departmental specific costs:
Total departmental costs
The following information is also available:
Carrying value of equipment
Floor space (m2)
Power usage (KwH)
Overheads are allocated or apportioned on the most appropriate basis. The total overheads of the support departments’ cost centres are then reapportioned to the two manufacturing profit centres using the direct method.
Light, heat and power – fixed
Light, heat and power – variable
Departmental specific costs
Reapportion quality assurance
Total overheads to profit centres
The following information relates to the manufacture of product FG123:
Total variable overheads
Total fixed overheads
Number of batches manufactured
Complete the table below to calculate the costs per batch.
Prime cost per batch
Marginal cost per batch
Full absorption cost per batch
A company has produced three forecasts of activity levels for the next period for one of its flight routes. The original budget involved flying 5,000 miles, but mileage levels of between 6,000 and 7,000 mile are now more likely.
Complete the table below to profit per mile (in pounds to 2 decimal places) of this contract at both 6,000 miles flown and 7,000 miles flown.
Profit per mile flown
Using the information from Task 6, complete the table below to calculate the required number of miles to be flown to achieve a profit of £60,000 on a contract of 5,000 miles.
Calculation of required number of miles
Fixed costs (£000)
Target profit (£000)
Sales revenue (£000)
Less variable costs (£000)
Contribution per mile (£)
Required number of miles to achieve target profit
The airline pilots’ trade union has planned a three day strike next week. During these three days only those pilots who are not in the union will be available to fly. As a result there will be only 124 hours of pilots’ flying time available between three routes E, F and G.
The following information is available about these routes:
Total number of miles in the route
Number of pilot hours required
Complete the table below to recommend which route(s) should be operated on the three days of the strike to maximise profit on those days.
Contribution per pilot hour (£000)
Pilot hours available
Pilot hours allocated to each route
Number of miles to fly in the route
Total contribution earned (£000)
Less: fixed costs (£000)
Profit/Loss made (£000)
The following budgeted information is available:
Landing and servicing fees are a semi-variable cost. There is a fixed charge of £600,000 plus £50 per mile flown.
The actual miles flown by the company was 5,800.
Complete the table below to show a flexed budget and the resulting variances against this budget. Show the actual variance, in the column headed ‘Variance’ and indicate whether this is Favourable or Adverse by entering F or A in the final column. If neither F nor A, you should enter 0.
A or F
A company has produced three forecasts of activity levels for the next period for one of its products. The original budget involved producing 50,000 units, but sales and production levels of between 60,000 and 70,000 units are now more likely.
Complete the table below to estimate the production cost per unit of product at the three different activity levels.
Cost per unit (to 3 decimal places)
The following budgeted annual sales and cost information relate to two different products.
Units made and sold
The budget has now been revised and the latest sales forecasts are 250,000 units for PD5 and 400,000 units for PD8.
Complete the table to calculate the budgeted break-even sales and the margin of safety in units and as a percentage for both products.
Fixed costs (£)
Unit contribution (£)
Break-even sales (units)
Forecast sales (units)
Margin of safety (units)
Margin of safety (%)
Last month a company had the following process inputs for one of its products:
Direct materials 500kgs at £17.20 per kg
Direct labour 280 labour hours at £10.50 per hour
Overheads absorbed 86 machine hours at £32 per machine hour
Prepare the process account below for the product for last month.
Unit cost £
A company has the following budgeted information relating to the manufacture of one of its products PD64.
All costs are variable except the fixed overheads.
The company actually manufactured 58,500 units.
Complete the table below to show a flexed budget and the resulting variances against this budget. Show the actual variance, for sales revenue and each cost, in the column headed ‘Variance’ and indicate whether this is Favourable or Adverse by entering F or A in the final column. If neither F nor A, you should enter 0.
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