Cost and Management Accounting

Summary of Marking Key

Certificate in Accounting and Finance – Spring 2017

Note regarding marking scheme:

The marking scheme is given as a guide. However, markers also award marks for alternative
approaches to a question and relevant/well-reasoned comments/explanations. Moreover, the
available marks in a question may exceed the total marks.

Mark(s)
A.1
Determination of direct labor hours with learning curve effect 4.0

Computation of:
− cost of material 0.5
− direct labor cost 1.0
− variable overheads 0.5
− batch set-up cost 2.0
− relevant fixed cost 1.5

Determination of contract price 0.5

A.2 (a) Computation of:

purchase cost per kg with revised discount and custom duty 1.0

ordering cost per purchase order 0.5

annual holding cost per kg 1.0

Economic Order Quantity (EOQ) 1.5

(b)
Computation of cost of importing tea using EOQ 2.75

Computation of existing cost of importing tea 2.75

Determination of net savings using EOQ 0.5

A.3 (a)
Preparation of ‘quantity schedule’ and ‘equivalent production units’ 3.0

Computation of cost per unit 1.5

Preparation of WIP account 3.5

(b) Preparing accounting entries to record:

over/under applied overheads 1.5

abnormal gain and normal loss 3.5

A.4 (a)
Preparation of budget for material:

− determination of cost of sales 2.0
− determination of cost of goods manufactured 4.0
− determination of direct material purchases 2.0

Preparation of budget for direct wages 1.0

Preparation of budget for overheads 1.0

(b) Cash payment budget for:

material purchases 1.0

direct wages 1.0

overheads 1.0

A.5 (a) Calculation of interest payable and settlement amount if interest rate cap is 13% 2.0

(b) Calculation of interest payable and settlement amount if interest rate cap is 6% 2.0

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 Cost and Management Accounting
Summary of Marking Key
Certificate in Accounting and Finance – Spring 2017

Mark(s)
A.6 (a)
Determination of standard fixed overhead rate per unit 1.0

Computation of profit using standard marginal costing 2.0

(b)
01 mark for computation of each cost variance 7.0

Computation of difference of standard and actual variable cost in closing
stock 1.0

(c) Reconciliation of actual profit under marginal and absorption costing 2.0

A.7
Determination of cash flows relating to:

− initial investment including cost of cars, their residual values, registration
charges and mobile phones 2.0
− rental revenues 1.0
− salaries/meals of drivers 1.0
− maintenance cost 1.0
− insurance premium 1.0
− tax liability including tax depreciation, gain on disposal and adjustment of
insurance premium in current year and next year 7.5

Determination of present values of cash flows 2.0

Recommendation 0.5

A.8
Computation of product wise relevant cost of in-house manufacturing 4.0

Computation of product wise incremental cost per unit / machine hour in case
of external buying 5.0

Ranking for in-house production / external buying 2.0

Determination of number of units to be manufactured and bought externally
according to ranking 2.0

A.9
Computation of:

− revised selling price per unit 0.5
− revised variable costs per unit 4.5
− total fixed cost 1.0

Determination of:
− break-even number of units to be sold 0.75
− budgeted annual sales by incorporating 25% margin of safety 0.75
− budgeted production 0.5

(THE END)

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