F2 Revision[1]
Transcript of F2 Revision[1]
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FORMULAE SHEET
Regression analysis
Economic order quantity
Economic batch quantity
a=y
n-
bx
n
b=nxy-xy
nx -(x)
r=xy-xy
(
2 2
nnx -(x) )(ny -(y) )2 2 2 2
=2C D
C
0
h
=2C D
C (1-D
R
0
h))
n
PAPER F2 JUNE 2010 REVISION COURSE
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OVERHEAD ALLOCATION AND ABSORPTION
Jones Ltd has allocated overheads between departments as follows:
Dept $
A 336,000
B 210,000
Repairs 42,000
Maintenance 28,000
In addition there are general overheads of $308,000 which should be apportioned:
A: 40%; B: 30%; Repairs: 20%; Maintenance: 10%.
A & B are production departments. The repairs and maintenance service production department as follows:
A B Repairs Maintenance
Repairs 60% 40%
Maintenance 40% 40% 20%
Budgeted labour hours:A: 40,000 hrs; B: 8,000 hrs
Budgeted machine hours:A: 5,000hrs; B: 60,000 hrs
(a) Calculate an overhead absorption rate for each production dept.
(b) Smith Ltd has budgeted overheads of $200,000 and budgeted labour hours of 50,000. Actual hours workedwere 48,000 and actual overheads were $205,000.
Calculate the amount of over or under absorption of overheads
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OVERHEAD ABSORPTION - SERVICE DEPARTMENTS
After allocating and apportioning overheads, the total overheads for each department are:
X Y Stores Canteen
280,000 196,000 84,000 56,000
Stores and Canteen are service departments, and are used by other departments as follows:
X Y Stores CanteenStores 80% 10% 10%
Canteen 60% 36% 4%
Reallocate the service department costs
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BREAKEVEN ANALYSIS
Skully Ltd has produced the following (summarised) P&L A/C for 2010:
$ $
Sales (20 000 units) 560,000
Production costs:
Variable 252,000
Fixed 84,000336,000
Gross Profit 224,000
Non-production costs:
Variable 84,000
Fixed 84,000
168,000
Net Profit $56,000
(a) What is breakeven sales volume for 2010?
(b) What is the margin of safety in 2010?
(c) What is C/S ratio in 2010
(d) Draw
(i) profit volume chart
(ii) breakeven chart for 2010
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PROCESS COSTING
A In process X, 8,000 units were started during the month. There is a normal loss of 10% of input. All losses aresold for $1 p.u. Actual units completed during the month were 7300u.Costs incurred during the month:
Materials: $20,000Labour and overheads: $3,840
(There was no W.I.P at start or end of month)
Write up the Process account and Loss account for the month
B In process Y, 6,000u were started during the month.W.I.P. at the start of month:
400u [Materials 100% complete: $1,600Labour 30% complete: $240]
W.I.P. at the end of month:600u [ Materials 100% complete
Labour 60% complete]
Expenditure during the month:Materials: $30,000Labour: $18,120
(There were no losses during the month)
Write up the process account, using FIFO
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JOINT COSTS AND BY-PRODUCTS
Jackson Ltd produces 2 products (& a by-product) in a joint process.
During 2010, production was as follows:
S.P. (per kg)
A 10,000 kg $10
B 40,000 kg $14By-product 10,000 kg $1.40
The costs incurred in the process are $460,000
Product A needs a further $3 per kg to be spent before it is ready for sale.
For products A & B, calculate the stock value per kg splitting the joint costs
(i) on the basis of weight
(ii) on the basis of sales value
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LINEAR PROGRAMMING
Mulder Ltd manufactures 2 products - X & Y with the following unit costings:
X Y
Selling price 20 15
Variable costs 14 5
Contribution $6 $10
Labour usage 2 hrs 4 hrs
Material usage 5 kg 3 kg
Maximum demand: 3,000 u 12,000 u
If labour hours are restricted to a maximum of 8,000 hours, and material is restricted to a maximum of
13,000kg, what is the optimum production schedule?
PAPER F2 JUNE 2010 REVISION COURSE
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LINEAR PROGRAMMING
CONSTRAINTS:
Labour: 2x + 4y 8.000Material: 5x + 3y 13.000Demand: x 3000; y 12.000Non-negativity: x 0; y 0
OBJECTIVE:
Maximise contribution:C = 6x+10y
[Contribution line: if C = $15.000, then: x=0; y=1500y=0; x=2500
BUT use any value for C - slope will be the same]
The demandfor y constraintis obviouslyredundant
DemandFor x
y
4333
2500 2600 4000 x
A
C
Objective
2000
1500
E
DB
Material
Labour
PAPER F2 JUNE 2010 REVISION COURSE
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LINEAR PROGRAMMING
Optimum production schedule occurs at point E on the graph
At point E:
2x + 4y = 8,000 (1)
and 5x + 3y = 13,000 (2)
(1) x 2.5 gives: 5x + 10y = 20,000 (3)(3) (2) gives 7y = 7000
y = 1000
Substitute for y in (1): 2x + 4000 = 8000
2x = 4000
x = 2000
Optimum production schedule:Produce 2000 units of product X
and 1000 units of product Y
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STOCK CONTROL
X plc needs to purchase 1,800 units a year. The purchase price of each unit is $25.
Delivery costs per order: $32
Stock holding costs p.a.
(as %age of purchase cost): 18 % p.a.
(a) Calculate the optimum order quantity, and the total costs p.a. at that order quantity.
(b) Y Plc has minimum demand of 20 units per day, average demand of 30 units per day, and maximumdemand of 40 units per day. The lead time varies between 10 and 15 days.
(i) What should the reorder level be?
(ii) If the reorder quantity is 1,200 units, what will be the maximum stock level?
buffer (or safety) stock
PAPER F2 JUNE 2010 REVISION COURSE
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REGRESSION
Units Costs
($000s)
x y xy x2 y2
100 40
200 45
300 50400 65
500 70
600 70
700 80
(a) Calculate the regression line
(b) Calculate the coefficient of correlation
(c) Calculate the coefficient of determination
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RELEVANT COSTING
Example 1
500 kg of material are needed for a special contract.There are 200 kg in stock, which was purchased for $2 per kg.. The current purchase price is $2.20 per kg..The material is in regular use.
What is the relevant cost?
Example 2
600 kg of material are needed for a special contract.There are 400 kg in stock, which was purchased for $5 per kg.The current purchase price is $7 per kg, and the current realisable value is $6 per kg.The company has no other use for this material.
What is the relevant cost?
Example 3
A contract needs 200 hours of labour. Labour is paid $8 per hour, and the company has spare capacity.
What is the relevant cost?
Example 4
A contact needs 300 hours of labour. Labour is paid $6 per hour.There is no spare capacity, and the labour would have to be transferred from other work producing units that earna contribution of $14 per unit and take 2 hours per unit to produce.
What is the relevant cost?
SUNK COSTS
OPPORTUNITY COSTS
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LABOUR COSTS
Ratios:
Production Volume Ratio =Expected hours to make output
Hours budgeted
Capacity Ratio =Actual hours worked
Hours budgeted
Efficiency Ratio =Expected hours to make output
Actual hours worked
Piecework: Pay workers per unit produced
Labour Turnover Rate =Employees Replaced
Average Number of Employees
Example
Firm had 200 employees at start of the year, and 160 at the end of the year.During the year 50 employees had left.
Answer
Number of employees fell by 40, so if 50 left 10 must have been replaced.Average number of employees
Average number of employees =200 +160
= 1802
Labour turnover rate =10
100% = 5.56%180
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MARGINAL AND ABSORPTION COSTING
Z Ltd produces desks for which the standard cost card is as follows:
$ pu
Materials 10
Labour 6
Variable overheads 4
Fixed overheads 3$23
During January, Z Ltd produced 50,000 desks and sold 45,000.The profit was calculated at $220,000, using absorption costing
What would the profit be using marginal costing?
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KEY FACTOR ANALYSIS
XX produces 3 products:
A B C
Selling price 42 56 51
Materials 10 18 14
Labour 12 16 12
Variable overheads 8 10 1030 44 36
Contribution p.u. $12 $12 $15
Maximum demand 1,000 1,000 1,000
Labour is paid $4 per hour, and there is a maximum 8,000 hours available.
How many units of each should be produced to maximise profit?
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KEY FACTOR ANALYSIS (2)
YY makes 2 products:
F G
Materials 8 4
Labour 5 10
Variable overheads 3 4
16 18Units required 2,000 2,000
Labour is paid $5 per hour, and there are only 5,000 hours available.
The units may be purchased from a supplier at costs of F:$22p.u., and G: $26p.u.
How many units of each should be produced, and how many purchased from the supplier, in order to
minimise costs?
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VARIANCES MATERIALS
Standard cost of materials:
20 kg at $4 per kg = $80 per unit
During the month we produced 5000 units.
We purchased 120,000 kg of material and paid $500,000We used 105,000 kg in production (the other 15,000 kg are in inventory)
Materials expenditure (price) variance:
Materials usage variance:
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VARIANCES LABOUR
Standard cost of labour:
8 hours at $3 per hr = $24 per unit
During the month we produced 6000 units.
We paid for 52,000 hours of labour at the rate of $3.20 per hour.We worked 49,500 hours.
Labour rate of pay variance:
Labour idle time variance:
Labour efficiency variance:
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VARIANCES VARIABLE OVERHEADS
Standard cost of variable overheads:
6 hours at $2 per hr = $12 per unit
During the month we produced 1,200 units.
We worked for 7100 hours, and paid $13,900 for variable overheads.
Variable overhead expenditure variance:
Variable overhead efficiency variance:
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VARIANCES FIXED OVERHEADS
Our company uses absorption costing, and budgeted to produce and sell 8,000 units.
Standard cost of fixed overheads:
4 hours at $3 per hr = $12 per unit
During the month we produced 9,000 units.We worked for 35,000 hours, and paid $100,000 for fixed overheads.
Total fixed overhead variance:
Fixed overhead expenditure variance:
Fixed overhead volume variance:
Fixed overhead capacity variance:
Fixed overhead efficiency variance:
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VARIANCES SALES
We budgeted to sell 10,000 units.
The standard selling price is $20 per unit.The standard costs are:
Variable costs $12 per unit
Fixed costs $ 5 per unit
The actual sales were 12,000 units at a selling price of $19 per unit
Absorption costing:
Sales price variance:
Sales volume variance:
Marginal costing:
Sales price variance:
Sales volume variance:
PAPER F2 JUNE 2010 REVISION COURSE