ACC408 CASES

Costing systems, CVP Analysis

1.Boley ltd provides the following data for its single product, Gem.
Units produced 6 000
Variable costs per unit: Direct materials $2
Direct labour $4
Variable manufacturing overheads $1
Variable selling & administration expenses $3
Annual fixed costs:
Fixed manufacturing overheads $30 000
Fixed selling & administration expenses $10 000

Required
Establish the unit product cost under i)Absorption costing ii)Variable costing. (2 marks)
2.The following related to Boley ltd for the year ended December 31 2021. Unit cost data is
carried over from question 1.
Units in initial stock nil
Units produced 6 000
Units sold 5 000
Unit selling price $20
Selling & administration expenses:
Variable per unit $3
Fixed per year $10 000

Required
Draft the Statement of profit & loss & other income under i)Full costing basis ii)Variable
costing.
(12 marks)
Reconcile the profits determined under the two approaches. (3 marks)
3.The following still relates to Boley Ltd for year ended December 31 2022. Unit cost data is
still the same from question 1.
Units in initial stock 1 000
Units produced 7 000
Units sold 7 400
Unit selling price $20
Selling & administration expenses: Variable per unit $3
 Fixed per year $10 000

Required
Draft the Statement of profit & loss & other income under i)full costing ii)variable costing
(12 marks)
Reconcile the profits under the two costing systems. (4 marks)
Which of the two costing approaches is better than the other. Justify your position. (3 marks)

Costs, volume & profit relationship.

4.You are presented with the following data for Jaypack Ltd manufacturing a product Gig whose
data is provided:
Fixed costs $12 000
Unit selling price $12
Unit direct materials $4
Unit direct labour $3

Required
a)Calculate i)Contribution / Sales ratio ii)Break even volume iii)Break even total costs
iv)Break even revenue v)Units to be produced & be sold to generate a return of $5 000 ( 5
marks)
b)At the volume generating a profit of $5 000, calculate the margin of safety. (2 marks)
c)Interpret the margin of safety. (2 marks)
d)Its anticipated that direct materials which are in short supply are likely to go up in price by
25%. What would be the impact of this on i)contribution / sales ratio ii)break even quantity
iii)margin of safety. (3
marks)
d)State the underlying assumptions of break even analysis. (6 marks)