1.

Sunshine Ltd
Calculate the total value of closing inventory for each product under marginal costing

Standard 14,000.0

Easy Opener 5,000.0

Dome 11,000.0

If sunshin is considering the impact of changing to absorption costing

Calculate the fixed overhead absorption rate per labour hour for April
Fixed the overhead absorption rate for April
Working
Number of labour hour 8,800.0
OAR 10.0

Calculate the total value of the closing inventory for May for each product under absorption costing
Working:
Standard Easy Opener Dome
Hour/unit 0.6 0.2 0.4
Fixed overhead absorbed/unit 9.0 3.0 6.0
Number of closing inventory 1,500.0 500.0 500.0
Fixed overhead absorbed 13,500.0 1,500.0 3,000.0
Variable cost 19,500.0 3,000.0 5,000.0
Total cost 33,000.0 4,500.0 8,000.0

Assuming the same actual production data and fixed production overheads in June as for April
No inventory at the end of the period
Marginal costing Absorption costing
Sale revenue
Standard 414,000.0 414,000.0
Easy Opener 65,000.0 65,000.0
Dome 112,500.0 112,500.0

Total sale revenues 591,500.0 591,500.0

Total marginal cost of sales 233,500.0

Total absorption cost of sales 339,500.0

Fixed production overheads -88,000.0

Gross profit 270,000.0 252,000.0

Working:
Number of working hour for closing inventory 1,200.0
Fixed overhead cost 18,000.0

Key C: Exactly the same under absorption and marginal costing

2. Kingsman Ltd
Calculate the profit or loss for October using both absorption costing and marginal costing
 Absorption
Sales 25,500.0
Variable production cost 14,880.0 14,880.0
Fixed production cost absorbed 2,790.0 0.0
Opening inventory 2,280.0 1,920.0
Closing inventory -2,850.0 -2,400.0
Production cost of sales -17,100.0
Under/over absorption -810.0
Variable selling, admin, distribution -375.0
Fixed selling, admin, distribution -2,625.0
Fixed production cost 0.0
Profit/loss 4,590.0

Working:
Actual cost incurred 3,600.0
Production overhead absorbed 2,790.0
Under absorption 810.0

If there is no inventory at tge end of the first six months of production

the profit calculated under absorption costing and marginal costing is the same

Calculate the percentage mark up using marginal costing and planned selling price
Total absorption cost 420.0
Profit margin 0.3
Sellling price 560.0
Variable cost 380.0

Mark up percentage 0.5

Q.4 Oaklea plc

Calculate the difference between the absorption costing and marginal costing profit for April
Difference 600.0

Operating statement for the month of May

Favorable

Budgeted profit
Sales volume variance
Sales price variance 7,520.0

Cost variances
Material price
Material usages
Labour rate
Labour efficiency 7,232.0
Variable overhead expenditure
Variable overhead efficiency 1,808.0
Fixed overhead expenditure variance
Total variance 16,560.0
Actual profit

Working:
1. Sales volume variance
Budgeted sale volume 400.0
But actually did 376.0
Sale volume variance in unit 24.0 A
x standard contribution per unit 320.0
Sale variance in total value 7,680.0 A

2. Sale price variance

Sale value from 376 unit should be 225,600.0
But actually did be 233,120.0
Sale price variance 7,520.0 F

3. Labour efficiency variance

376 units should take 4,512.0
But actually did take 4,060.0
Labour efficiency variance in hours 452.0 F
x Standard labour rate 16.0
Labour efficiency variance in value 7,232.0 F

4. Labour rate variance

4,060 hours should cost 64,960.0
But did cost 69,020.0
Labour rate variance 4,060.0 A

5. Material usage variance

376 units should take 1,504.0
But actually did take 1,600.0
Material usage variance in metres 96.0 A
x standard cost per metre 10.0
Material usage variance in value 960.0 A

Q.6 Basket Ltd

Calcalate the budgeted prime cost per Large Hamper for January
54.0

Working:
Prime cost
Variable labour cost 30.0
Variable material cost 24.0
54.0

Calculate the actual absorption cost per Medium Hamper in January

144.0
Working:
Variable material 24.0
Variable labour 24.0
Variable production overheads 6.0
Absobed fixed overheads 90.0
Number of hours for Medium 800.0
OAR 30.0

Calculate the selling price per Large Hamper in January:

231.0

Calculate the fixed overhead absorption rate per labour hour in February for Large Hampers
53.8
Working:
Fixed overhead for Large Hamper in Jan 30,500.0
Fixed overhead for Large Hamper in Feb 33,550.0
Labour hours in Feb 624.0
OAR 53.8

Calculate the absorption cost per Large Hamper in March

105.9
Working:
Variable material 34.5
Variable labour 18.7
Variable production overheads 4.7
Absobed fixed overheads 48.0
105.9

Calculate the selling price per Small Hamper for March

105.0

Calculate the decrease in the selling price per Large Hamper that results from switching to a fixed overhead rate abs
overhead absorption rate based on all three hamper sizes
3.7
Working:
Current method New method
Variable cost 100.0 100.0
OAR 26.4 29.3
Difference in total cost 2.9
Difference in selling price at margin 20% 3.7

Calculate the total under or over absorption of fixed overheads for all three hamper sizes using Basket's wide blanke
26,000.0
Working:
Actually incurred 88,000.0
Absobed overhead 114,000.0
Over absorption 26,000.0

Q. 7 Geartop plc
Calculate the total value of the cost of sales for each product for July using marginal costing:

AVX12 62,100.0
PUH78 56,250.0
YTF65 55,080.0

Calculate the fixed overhead absorption rate as percentage of the labour cost for July
Fixed overhead absorption rate 1.48

Calculate the total value of the closing inventory for each product line for August using marginal costing

AVX12 5,200.0
PUH78 4,200.0
YTF65 3,650.0

Assuming fixed production overheads of 81,300 gpd were incurred during September and that there was a total of 4,
included in the absorption costing value of opening inventory, complete the table below which calculate Geartop's pr
costing and absorption costing
Marginal Costing Absorption costing
Sales revenues
AVX12 144,000.0 144,000.0
PUH78 159,000.0 159,000.0
YTF65 133,000.0 133,000.0
Total sales revenue 436,000.0 436,000.0
Total marginal cost of sales -226,750.0
Total absorption cost of sales -313,000.0
Fixed production overhead -81,300.0
Gross profit 127,950.0 123,000.0

Assuming the same actual production data and costs in October as for September, select whether the gross profit in
Exactly the same under absorption and marginal costing

Q.11 Jitinder plc

Calculate the profit or loss for February using both absorption costing and marginal costing:

Absorption Marginal
Sales 132,000.0
Variable production costs 46,200.0 46,200.0
Fixed production cost absorbed 16,800.0 0.0
Opening inventory 8,250.0 6,050.0
Closing inventory -5,250.0 -3,850.0
Production cost of sales -66,000.0
Under/over absorption 426.0
Variable sales, administration and distribution costs -3,080.0
Fixed sales, administration and distribution costs -10,080.0
Fixed production cost 0.0
Profit/loss 53,266.0

If Jitinder were to switch to using Activity based costing, would the total cost per Salis be higher or lower than the co
lower
Because traditional method tends to underallocate overhead to low volume of products and overallocate to high volume of p

Calculate the difference in the price of Salis from applying either a 25% markup or 25% margin
6.7

Working:
Total absorption cost per unit 80.0
Markup 25%
Margin 25%
Selling price at markup @25% 100.0
Selling price at margin @25% 106.7
Difference 6.7

Q. 12Flag Ltd
Calculate Flag's profit or loss for the quarter September to November under both marginal costing and absorption c
Absorption Marginal
Sales 147,525.0
Variable production costs 46,200.0 46,200.0
Fixed production cost absorbed 16,800.0 0.0
Opening inventory 1,725.0 1,265.0
Closing inventory -1,500.0 -1,100.0
Production cost of sales -63,225.0
Under/over absorption -800.0
Variable sales, administration and distribution costs -12,645.0
Fixed sales, administration and distribution costs -12,480.0
Fixed production cost 0.0
Profit/loss 58,375.0

If there is a high inventory of the Substandard at the end of the first year it is manufactured, but no inventory at the
for the second year be higher or lower than those calculated under marginal costing?
Lower of
Calculate the % margin for the Substandard using marginal costing and planned selling price
51%
Working:
Total absorption cost per unit 9.0
Fixed cost per unit 2.0
Variable cost per unit 7.0
Mark up 60%
Selling price 14.4
Margin under marginal costing 51%

Q13. Hexabeast plc

Operating statement for August
Favorable

Budgeted contribution
Sales volume variance 8,370.0
Sales price variance

Variable cost variances

Material price
Material usage 3,096.0
Labour rate
Labour efficiency 5,940.0
Variable overhead rate
Variable overhead efficiency 1,485.0
Total variable cost variances 18,891.0
Total overhead budgeted
Fixed overhead expenditure variance
Actual profit

Working:
1. Sales volume variance

Budgetd sales volume should be 1,200.0

Actual sale volume 1,290.0
Sales volume variance in units 90.0
x Standard contribution 93.0
Sale volume variance 8,370.0

2. Sales price variance

Sale from 1,290 units should be 257,355.0

But actual 244,455.0
Sale price variance 12,900.0

3. Material price variance

Kg used actually= 2,322.0

2.322 kg material should cost 27,864.0

But actually cost 29,025.0
Material price variance 1,161.0

4. Material usage variance

1,290 units shout use 2,580.0
But actually use 2,322.0
Material usage variance in kg 258.0
x standard unit price 12.0
Usage variance in pound 3,096.0

5. Labour rate variance

3,600 hours should cost 79,200.0
But actually did cost 81,576.0
Labour rate variance 2,376.0

Q14. Yarn&Co

Operating statement for the month of November

Favorable

Budgeted contribution
Sales volume variance 3,000.0
Sales price variance

Variable cost variances

Skilled labour rate
Skilled labour efficiency 800.0
Material price
Material usage 1,080.0
Variable overhead rate
Variable overhead efficiency 320.0
Total variance 5,200.0
Budgeted fixed overheads
Fixed overhead expenditure variance
Actual profit

Working:
1. Sales volume variance
Budgeted sale volume 1,200.0
But actually did 1,320.0
Sale volume variance in unit 120.0 F
x standard contribution per unit 25.0
Sale variance in total value 3,000.0 F

2. Sale price variance

Sale value from 1.320 unit should be 138,600.0
But actually did be 132,000.0
Sale price variance 6,600.0 A
3. Labour efficiency variance
1.320 units should take 5,280.0
But actually did take 5,200.0
Labour efficiency variance in hours 80.0 F
x Standard labour rate 10.0
Labour efficiency variance in value 800.0 F

4. Labour rate variance

Total labour variance 2,200.0 A
Labour rate variance 3,000.0 A

5. Material usage variance

1.320 units should take 5,280.0
But actually did take 5,100.0
Material usage variance in metres 180.0 F
x standard cost per metre 6.0
Material usage variance in value 1,080.0 F

Q. 15 Johnson & Redmond plc

Calculate the budgeted prime cost per Large carton for 20X1
20.0
Working: unit cost Resource required
Variable labour 8.0 2.0
Variable material 2.0 2.0
Prime cost 20.0

Calculate the actual absorption cost per unit of output for Medium cartons in 20X1

Working
Total fixed production overheads 336,000.0
Fixed production OH for large cartons 216,000.0
Fixed production OH for Medium carton 60,000.0
Labour hours 12,000.0
OAR 5.0

Actual absorption cost per unit

Variable labour 16.0
Variable material 3.0
Absorbed production overheads 10.0
Variable production overheads 8.0
37.0
Calculate the selling price of Large cartons in 20X1
55.0
Working:
Absorption cost per Large cartons 44.0
Markup rate 25%
Selling price 55.0

Calculate the fixed overhead absorption rate per hour for Large cartons in 20X2
25.2

Working:
Fixed cost 226,800.0
Labour hours 9,000.0
OAR 25.2

Calculate the budgeted absorption cost per Medium carton for 20X3
52.5
Working
Variable labour 14.4
Variable material 2.9
Variable production overhead 7.2
Fixed overhead absorbed 28.0
52.5

Using this data for Small cartons for 20X3 and the target margin calculate the selling price for 20X
47.1
Working:
Absorption cost per unit 40.0
Target margin 15%
Selling price 47.1

Calculate the decrease in the selling price of a Medium carton achieved by switching from a fixed o
hours to a single blanket fixed overhead absorption rate based on all three carton sizes:
1.4
Working:
Current base New base
Variable cost 50.0 50.0
Production overhead absorbed 24.5 23.3
Absorption cost per unit 74.5 73.3
Target margin 15% 15%
Selling price 87.6 86.3
Difference 1.4

Calculate the total under or over absorption of fixed overheads for all three carton sizes using the c
12,500.0 under absorption
Working:
Fixed overhead absorption rate 22.5
Fixed overhead absorbed 337,500.0
Actual overhead costs 350,000.0
(12,500.0) under absorption

Q.16 Kaytering plc

Calculate number of meals that would need to be sold and earn a profit of 4,000 gpd per week
Number of meals per week 772.2 meals

Working:
Sales 42,000.0
Average selling price 60.0
Number of meals 700.0
Variable cost 29,400.0
Fixed cost 9,900.0
Variable cost per unit 42.0
Contribution per unit 18.0

Target profit 4,000.0

Contribution in total 13,900.0
Number of meals required 772.2

Calculate the additional profit or loss that the restaurant would earn per week from introducing ta
Additional profit/loss per week (1,050.0)
Working:
Only involving relevant costs to the calculation
Selling price 18.0
Variable cost 10.5
Contribution per unit 7.5
Number of meals 1,080.0
Contribution in total 8,100.0
Fixed cost 9,150.0
Profit/loss (1,050.0)

If the three additional items are allowed for in the appraisal of the take-away meals proposal, then
Additional profit of 1,877.5 per week

Working:
Saving from existing other meals 2,887.5
Recycle cost for take-away meals 810.0
Advertising costs 200.0
1,877.5

Calculate the maximum contribution that can be earned per week in December
 30,794.4

Working:
Restaurant meals Take-away meals
Contribution per meal 20.0 8.5
Labour time per meal 0.3 0.1
Contribution per labour time 66.7 72.9
Priority ranking 2.0 1.0

Maximum demand per week 1,200.0 1,100.0

Labour time required for maximum dem 360.0 128.3
Labour time available
Allocation of labour time 321.7 128.3
Number of meal produced 1,072.2 1,100.0
Contribution in total 21,444.4 9,350.0

Calculate payback period for the metal press

3.3 years

Working:
Depreciation charge per year 120,000.0
Year Profit Cash flow Cummulative CF
0 (750,000.0) (750,000.0)
1 50,000.0 170,000.0 (580,000.0)
2 95,000.0 215,000.0 (365,000.0)
3 160,000.0 280,000.0 (85,000.0)
4 165,000.0 285,000.0 200,000.0
5 55,000.0 325,000.0 525,000.0
Payback period 3.3

Calculate the net terminal value at the end of Year 3 for the arc welder using an 8% cost of capital
67,801.3
Working:
Year Cash flow Factor
0 (60,000.0) 1.260
1 35,000.0 1.166
2 32,000.0 1.080
3 68,000.0 1.000
Net total

Calculate the net present value of the gloss painter using a 15% cost of capital
(3,510.2)
Working:
Year Cash flow Discount factor
0 (130,000.0) 1.0
1-6 30,000.0 3.784
6 30,000.0 0.432
NPV

Calculate the accounting rate of return of the mixing machine using average investment
0.2
Working:
Year Cash flow Operating profit
0 (200,000.0)
1 63,000.0 20,500.0
2 63,000.0 20,500.0
3 63,000.0 20,500.0
4 63,000.0 20,500.0

Depreciation charges per year 42,500.0

Average operating profit 20,500.0
Average investment 115,000.0
ARR 18%

Interpolate the internal rate of return of the rapid baker using costs of capital of 10% and 15%
12%
Working
Year Cash flow DF at 10%
0 (230,000.0) 1.0
1 55,000.0 0.909
2 55,000.0 0.826
3 55,000.0 0.751
4 55,000.0 0.683
5 55,000.0 0.621
6 55,000.0 0.564
NPV1

IRR

17. DeeSplay Ltd

Ref October
Receipts
Cash sales W1 5,400.0
Credit sales W2 18,228.0
Sales of obsolete materials 0.0
Revaluation of building W8 0.0
Scrap value of machinery W8 0.0
Scrap value of delivery vehicle W8 0.0
Last year's taxable profit W8 0.0

Payments
General provision for bad debts W8 0.0
Payment to suppliers W3 7,200.0
Loss on sale of obsolete materials W8 0.0
Labour W4 3,500.0

Variable production overheads W5 3,600.0

Variable selling expenses W6 2,400.0
Fixed expenses W7 800.0

Delivery vehicle purchase 25,000.0

Machinery vehicle plus machinery total depreciation 0.0

Tax paid 595.0

Overdraft interest

Net surplus/deficit -19,467.0

Opening balance W8 5,000.0
Closing balance -14,467.0

Working
1. Receipts from cash sales Sept Oct Nov
Sale volume 800.0 900.0 700.0
Sales revenues 24,000.0 27,000.0 21,000.0
Cash sales 4,800.0 5,400.0 4,200.0

2. Receipts from credit sale paid

Credit sales 19,200.0 21,600.0 16,800.0
Cash receipts 18,816.0 21,168.0
Loss from bankcrupt customer -588.0
Total cash receipt from credit sale 18,228.0 21,168.0
Note:
The receivable from bankcrupt customer still fully outstanding, not paid.
3. Payment to suppliers
Aug Sept Oct Nov
Production level 800.0 900.0 700.0 600.0
Purchase of material 7,200.0 5,600.0 4,800.0 8,000.0
Purchase payment 7,200.0 5,600.0
Note:
Production takes place in one month before sales
Material are purchased 2 months before sale and are paid for 2 months later
>> Paid to supplier in the month sales

4. Payment to labour
Production take place a month before sale and labour is paid for in the month incurred.
Sept Oct Nov
Production level 900.0 700.0 600.0
Labour expense 4,500.0 3,500.0 3,000.0
Labour expense paid 4,500.0 3,500.0 3,000.0
Note:
Labour costs are paid in the month in which they are incurred

5. Payment for variable production overheads

Variable production overheads are paid in the month following occurrence, then paid in the same month of sale
Sept Oct Nov
Production level 900.0 700.0 600.0
Variable production overhead 3,600.0 2,800.0 2,400.0
Variable production overhead paid 3,600.0 2,800.0
Note:
Variable production overheads are paid in the month following that in which they are incurred

6. Payment for variable selling expenses

Sept Oct Nov
Sale volume 800.0 900.0 700.0
Variable selling expense 2,400.0 2,700.0 2,100.0
Variable selling expenses paid 2,400.0 2,700.0
Note:
Variable selling expenses are paid in the month following that in which they are incurred

7. Payment for fixed expenses

Sept Oct Nov
Fixed expenses 1,000.0 1,000.0 1,500.0
Depreciation expense 200.0 200.0 200.0
Fixed expenses without depreciation 800.0 800.0 1,300.0
Expenses paid 800.0 800.0
Note:
All fixed expenses are paid in the month following that in which they are incurred
Ignore the effect of asset revaluation

8. General notes
The method of cash flow preparation is direct method, then the statement should present cash items, not non cash items like
Scrap value of delivery vehicle, last year's taxable profit (tax refund). Provision, loss on sale of obsolete materials and depre
The bank balance 5,000 pounds in credit mean that cash balance 5000 pound in debit (not overdraft)

18. Baybee plc

Calculate the budgetd total sale revenues for Feb 620,250.0

Calculate the budgeted production for February of the Basic and Deluxe
Basic Deluxe
Production (units) 230.0 37.0

Calculate the budgeted total direct cost of the 310 units of the standard to be produced in February
Budgeted total direct cost for the Standard 153,698.0
Working:
Material 42,160.0
Labour 71,610.0
Labour overtime 33,418.0
Variable overheads 6,510.0
 153,698.0

If the budgeted fixed overhead absorption rate per labour hour for the Standard is 23, calculate the budgeted total fi

Budgeted total fixed overheads for the Standard for February 99,820.0

Using the high low method, calculate the budgetd total fixed overheads and variable overheads per unit for the Delu

Total fixed overheads 15,000.0

Variable overheads per unit 24.0

Prepare the following cash budget extracts for the period May to July.

May
Receipts from cash sales 172,375.0
Receipts from credit sales 498,750.0
Payments for the Standard materials purchases 42,649.6
Payments for the Standard labour costs 100,100.0

Working: Mar Apr May

1. Cash sales
Total sale 700,000.0 700,000.0 700,000.0
Cash sales 175,000.0 175,000.0 175,000.0
Cash receipts 172,375.0 172,375.0 172,375.0

2. Credit sales
Credit sales 525,000.0 525,000.0 525,000.0
Pay in first month 367,500.0 367,500.0
Pay in second month 131,250.0
Total receipts 498,750.0

3. Standard material purchases: purchases 2 month before sales and paid for 2 month later, then paid the same period that sa
Mar Apr May
Sale units 320.0 320.0 320.0
Production level 320.0 320.0 330.0
Purchases volume 320.0 330.0 350.0
Purchase value 43,520.0 44,880.0 47,600.0
Cash payment 42,649.6

4. Labour: 50% paid in production month and 50% paid for in month of sales
Mar Apr May
Production level 320.0 320.0 330.0
Labour cost 98,560.0 98,560.0 101,640.0
Payment in month 50,820.0
Payment in next month 49,280.0
Total 100,100.0

Q. 19 McCarthy plc

Calculate the breakeven number of units for March

Breakeven (units) 18,260.9
Working:
At 40,000 units At 60,000 units
Total cost per units 95.0 88.0
Production volume 40,000.0 60,000.0
Total cost 3,800,000.0 5,280,000.0
Variable cost per unit
Fixed costs
Selling price per unit
Contribution per unit
Breakeven (units)

Calculate how many fewer units would need to be sold using the new production method to give the same budgeted p
Reduction in the number of units 7,291.7

Working:
Current method New method
Selling price per unit 150.0 168.0
Variable cost per unit 80.0 72.0
Fixed cost 1,400,000.0 1,610,000.0
Contribution per units 70.0 96.0
Sale demand (units) 35,000.0 27,708.3
Contribution in total 2,450,000.0 2,660,000.0
Profit 1,050,000.0 1,050,000.0

Calculate how much the introduction of the special edition version of Product Z will increase McCarthy's budgeted p
Increase in profit 60,000.0

Working: Current Increase with edition

Sales 3,000,000.0
C/S ration 0.4
Contribution 1,200,000.0 120,000.0
For edition
Selling price
Variable production cost
Variable packaging cost
Contribution per unit for edition
Sale demand
Contribution for edition version
Increase in profit

Calculate the maximum total price that McCarthy should pay for the extra 20,000 kg of raw materials
Maximum total price 120,000.0

Working:
Product X Product Y
Maximum demand (units) 15,000.0 10,000.0
Optimum planned production (units) 0.0 6,000.0
Contribution per unit 10.0 15.0
Material cost per unit 8.0 6.0
Contribution per limiting factor 1.3 2.5
Ranking 3.0 2.0
Kg material required for production 60,000.0 30,000.0
Usage of additional material 8,000.0 12,000.0
Unit of products with additional materials 2,000.0 4,000.0

Contribution 20,000.0 60,000.0

Material costs
Maximum price

Calculate the payback period for machine L7

2.9 years

Working:
Year Cash flow Cummulative cash flow
0 -800,000.0 -800,000.0
1 280,000.0 -520,000.0
2 280,000.0 -240,000.0
3 280,000.0 40,000.0
4 280,000.0 320,000.0
Payback period 2.86

Calculate the internal rate of return of machine 7 interplolating at discount rate of 10% and 20%
IRR 18.1%

Working:
Year Cash flow DF at 10%
0 -800,000.0 1.0
1 280,000.0 0.9
2 280,000.0 0.8
3 280,000.0 0.8
4 280,000.0 0.7
NPV

IRR= 18.1%

Calculate the difference between the accounting rate of return based on the initial investment and the ARR based on

Difference in ARR (%) 0.1

Working:
Initial investment 680,000.0
Srcap value 120,000.0
Depreciation per year 140,000.0

Year Operating profit

1 120,000.0
2 130,000.0
3 140,000.0
4 110,000.0

Average operating profit 125,000.0

ARR based on initial investment 18.4%
ARR based on average investment 31.3%
Difference 12.9%

Calculate the net present value for machine M8 at discount rate 15%

NPV 145,899.0

Working:
Year Cash flow Discount rate at 15%
0 -680,000.0 1.0
1 260,000.0 0.870
2 270,000.0 0.756
3 280,000.0 0.658
4 370,000.0 0.572
NPV

Q. 20 Glasstop Ltd
July August September
Receipts
Cash sales 7,200.0 6,900.0 10,500.0
Credit sales 14,400.0 15,400.0 16,800.0
Scrap value of new machinery 0.0 0.0 0.0
Scrap value of new fixtures and fittings 0.0 0.0 0.0
Cash on disposal of old machinery 1,000.0
Last year's taxable profit 0.0 0.0 0.0
Loan 0.0 0.0 0.0

Payment
General provision for bad debts 0.0 0.0 0.0
General expenses 3,200.0 3,500.0 3,200.0
Purchases 5,250.0 0.0 5,500.0
Premises rent and rates 5,000.0 5,000.0 5,000.0
Staff costs 3,300.0 3,300.0 3,300.0
Tax 1,640.0
Machinery purchase 4,000.0 4,000.0 0.0
Loss on disposal of old machinery 0.0 0.0 0.0
Fixture and fittings purchase 10,000.0
Loan interest 60.0 60.0 60.0
Net surplus/deficit -8,210.0 6,440.0 8,600.0
Opening balance 12,000.0 3,790.0 10,230.0
Closing balance 3,790.0 10,230.0 18,830.0

Working:

1. Cash sales
May June July
Total sales revenues 21,000.0 22,000.0 24,000.0
Cash sales 6,300.0 6,600.0 7,200.0
Credit sales 14,700.0 15,400.0 16,800.0

2. Credit sales May June July

Credits sales 14,700.0 15,400.0 16,800.0
Cash receipts 14,400.0

3. General expense May June July

General expense 3,400.0 3,200.0 3,500.0
Cash paid 3,400.0 3,200.0

4. Purchases May June July

Sale revenues 21,000.0 22,000.0 24,000.0
Purchases 5,250.0 5,500.0 6,000.0
Cash paid 5,250.0

Note:
General bad debt provision, loss on disposal of old machinary and depreciation are not cash flow >> excluded

Q.21 Treeze Ltd

Calculate the breakeven point for quarter 1 762.5

Working:
selling price 35.0
variable production cost per unit 10.0
Variable admin cost per unit 0.5
Variable selling cost per unit 4.5
Total variable cost per unit 15.0
Contribution per unit 20.0
Fixed cost 15,250.0
Breakeven point for Quarter 1 762.5

Calculate the sales price per unit required to achieve a profit of 80,000 gpd in quarter 2
32.9

Working:
Fixed cost 18,300.0
Targeted profit 80,000.0
Contribution in total 98,300.0
Sales volume 5,200.0
Contribution per unit 18.9
Variable cost per unit 14.0
Selling price 32.9

Calculate the total sales revenues required to achieve the target profit in quarter 3
246,666.7

Working:
Fixed cost 16,000.0
Target profit 95,000.0
Contribution 111,000.0
Contribution ratio 0.5
Sales revenues 246,666.7

Calculate the payback period for the machine

2.1 years
Working:
Year Cash flow Cumulative cash flow
0 -250,000.0 -250,000.0
1 110,000.0 -140,000.0
2 130,000.0 -10,000.0
3 110,000.0 100,000.0
4 70,000.0 170,000.0

Payback period 2.09

Calculate the difference between the accounting rate of return based on the initial investment and ARR based on the
16%

Working:
Total operating cash flow 420,000.0
Depreciation for the project 230,000.0
Total operating profit 190,000.0
Avarage operating profit 47,500.0

ARR based on initial investment 19%

ARR based on average investment 35%
Difference between 2 methods 16%

Calculate the net present value of the machine

84,725.5

Working:
Year Cash flow Discount factor
0 -250,000.0 1.0
1 110,000.0 0.909
2 130,000.0 0.826
3 110,000.0 0.738
4 70,000.0 0.659
NPV

Calculate the constant annual profit that the alternative machine should generate in order to be indifferent between
51,314.0

Present value of cash flow from alternative machine 342,640.0

Annuity factor for 4 years at 15% 2.9
Operating cash flow per year 120,014.0
Depreciation charges 68,700.0
Profit for the year 51,314.0
ption costing
 Marginal costing
25,500.0

-14,400.0
0.0
-375.0
-2,625.0
-3,600.0
4,500.0

ting profit for April

Adverse Amount in total

116,000.0
7,680.0

800.0
960.0
4,060.0
 1,015.0

1,050.0
15,565.0 995.0
116,995.0

6. Material price variance

1600 kg should cost 16,000.0
But actually did cost 16,800.0
Material price variance 800.0

7. Variable overhead expenditure variance

4.060 hours should cost 16,240.0
But actually did cost 17,255.0
Variance overhead expenditure variance 1,015.0

8. Variable overhead efficiency variance

376 units should take 4,512.0
But actually take 4,060.0
Efficiency variance in hours 452.0
x Standard labour rate 4.0
Variable overhead efficiency variance 1,808.0

9. Fixed overhead expenditure variance

Budgeted fixed overhead costs 12,000.0
But actually did cost 13,050.0
Fixed overhead expenditure variance 1,050.0
g to a fixed overhead rate absorption rate based on the labour hours for Large Hamper's from a blanket fixed

es using Basket's wide blanket absorption rate in April

 marginal costing

nd that there was a total of 4,950 gpd of fixed prodution overheads

which calculate Geartop's profit for September under marginal

ct whether the gross profit in October

Marginal
132,000.0

-48,400.0
0.0
-3,080.0
-10,080.0
-16,374.0
 54,066.0

be higher or lower than the cost calculated using traditional absorption costing

verallocate to high volume of products

ginal costing and absorption costing

Marginal
147,525.0

-46,365.0
0.0
-12,645.0
-12,480.0
-17,600.0
58,435.0

ured, but no inventory at the end of the second year, will the profit calculated under absorption costing
 Adverse Amount in total

111,600.0

12,900.0

1,161.0

2,376.0

1,800.0

18,237.0 654.0
(100,000.0)
1,235.0
13,489.0

6. Labour efficiency variance

1,290 units should take
But actually did take
Labour variance in hours
F x standard labour rate
Efficiency variance
F
7. Variable overhead expenditure variance
3,600 hours should cost
But actually did cost
Variable overhead expenditure variance

A 8. Variance overhead efficiency variance

1,290 units should take
But actually did take
Labour efficiency variance in labour
x Standard rate
Labour efficiency variance in pound

A 9. Fixed overhead expenditure variance

Budgeted fixed overhead
Actual fixed overhead
kg Fixed overhead expenditure variance
kg
F

Adverse Amount in total

30,000.0

6,600.0

3,000.0

3,280.0

2,600.0

15,480.0 (10,280.0)
(6,000.0)
500.0
14,220.0

6. Material price variance

Total material variance 2,200.0
Material price variance 3,280.0

7. Variable overhead expenditure variance

5.200 hours should cost 20,800.0
But actually did cost 23,400.0
Variance overhead expenditure variance 2,600.0

8. Variable overhead efficiency variance

1.320 units should take 5,280.0
But actually take 5,200.0
 Efficiency variance in hours 80.0
x Standard labour rate 4.0
Variable overhead efficiency variance 320.0

9. Fixed overhead expenditure variance

Budgeted fixed overhead costs 6,000.0
But actually did cost 5,500.0
Fixed overhead expenditure variance 500.0

s in 20X1
e the selling price for 20X4

y switching from a fixed overhead absorption rate based on the specific carton's labour
e carton sizes:

ee carton sizes using the company wide blanket absorption rate in 20X4
 4,000 gpd per week

week from introducing take-away meals

way meals proposal, then they would result in an

way meals

450.0

ulative CF

ing an 8% cost of capital

Terminal value
(75,582.7)
40,824.0
34,560.0
68,000.0
67,801.3
 Present value
(130,000.0)
113,520.0
12,969.8
(3,510.2)

age investment

pital of 10% and 15%

PV at 10% DF at 15% PV at 15%

(230,000.0) 1.0 (230,000.0)
50,000.0 0.870 47,826.1
45,454.5 0.756 41,587.9
41,322.3 0.658 36,163.4
37,565.7 0.572 31,446.4
34,150.7 0.497 27,344.7
31,046.1 0.432 23,778.0
9,539.3 NPV2 (21,853.5)

12%

November December

4,200.0 3,600.0
21,168.0 16,464.0
250.0 0.0
0.0 0.0
0.0 0.0
 0.0 0.0
0.0 0.0

0.0 0.0
5,600.0 4,800.0
0.0 0.0
3,000.0 5,000.0

2,800.0 2,400.0
2,700.0 2,100.0
800.0 1,300.0

0.0 0.0
5,000.0 5,000.0

0.0 0.0
125.0 130.0

5,593.0 -666.0
-14,467.0 -8,874.0
-8,874.0 -9,540.0

Dec Jan
600.0 1,000.0
18,000.0
3,600.0

14,400.0
16,464.0

16,464.0

Dec
1,000.0

4,800.0

Dec Jan
1,000.0
5,000.0
 5,000.0

same month of sale

Dec Jan
1,000.0 0.0
4,000.0 0.0
2,400.0

Dec Jan
600.0 1,000.0
1,800.0 3,000.0
2,100.0 1,800.0

Dec Jan
1,500.0 1,500.0
200.0 200.0
1,300.0 1,300.0
1,300.0

h items, not non cash items like revaluation of buildings,

of obsolete materials and depreciation. All of them are nil.

in February
calculate the budgeted total fixed overheads for the Standard for February

erheads per unit for the Deluxe

June July
184,687.5 197,000.0
498,750.0 525,000.0
43,982.4 46,648.0
104,720.0 112,420.0

Jun Jul

750,000.0 800,000.0
187,500.0 200,000.0
184,687.5 197,000.0

562,500.0 600,000.0
367,500.0 393,750.0
131,250.0 131,250.0
498,750.0 525,000.0

hen paid the same period that sale incurs

Jun Jul
330.0 350.0 380.0
350.0 380.0
380.0
51,680.0
43,982.4 46,648.0

Jun Jul
350.0 380.0
107,800.0 117,040.0
53,900.0 58,520.0
50,820.0 53,900.0
104,720.0 112,420.0
 74.0
840,000.0
120.0
46.0
18,260.9

d to give the same budgeted profit for April as the existing production method

-7,291.7 Fewer

crease McCarthy's budgeted profit by in May

with edition Edition only

110.0
100.0
20.0
-10.0
6,000.0
-60,000.0
60,000.0

f raw materials

Product Z
8,000.0
8,000.0
20.0
4.0
5.0
1.0
 16,000.0 Total
20,000.0

80,000.0
40,000.0
120,000.0

ative cash flow

years

PV at 10% DF at 20% PV at 20%

-799,999.0 1.0 -800,000.0
280,000.9 0.8 233,333.3
280,000.8 0.7 194,444.4
280,000.8 0.6 162,037.0
280,000.7 0.5 135,030.9
320,004.2 -75,154.3

stment and the ARR based on the avarage investment for M8

rate at 15% Present value
-680,000.0
226,087.0
204,158.8
184,104.5
211,548.7
145,899.0

August September
23,000.0 35,000.0
6,900.0 10,500.0
16,100.0 24,500.0

August September
 16,100.0 24,500.0
15,400.0 16,800.0

August September
3,200.0 5,300.0
3,500.0 3,200.0

August September
23,000.0 35,000.0
5,750.0 8,750.0
0.0 5,500.0

flow >> excluded

units
ive cash flow

stment and ARR based on the average investment for the machine

Present value
-250,000.0
100,000.0
107,438.0
81,168.8
46,118.7
84,725.5

der to be indifferent between the 2 machines

A

A
blanket fixed
 3,870.0
3,600.0
270.0 F
22.0
5,940.0 F

19,800.0
21,600.0
1,800.0 A

3,870.0
3,600.0
270.0 F
5.5
1,485.0 F

100,000.0
98,765.0
1,235.0 F
A
A

A
F