INTERIM ASSESSMENT
Accounting for Non Accountants
INSTRUCTION: ANSWER ALL QUESTIONS
Question 1
TT Sisters Limited assembles and sells motor vehicles. It uses an actual costing system, in which
unit costs are calculated on a monthly basis. The selling price per motor vehicle is ¢22,000. Data
relating to January, February and March of 2020 are:
January
Unit data:
Production (units)
Sales (units)
Variable-cost data:
Manufacturing costs per unit produced
Selling and Admin costs per unit sold
Fixed-cost data
Manufacturing costs
Selling and Admin costs
February
March
500
450
500
520
450
470
¢8,000
4,000
¢8,000
4,000
¢8,000
4,000
¢1,200,000 ¢1,200,000
800,000
800,000
¢1,200,000
800,000
Required:
(a) Compute the product cost per unit under both variable and absorption costing methods
(b) Present income statements for Kantanka Motors in January, February and March of 2020
under
(a) Variable costing
(b) Absorption costing.
(c) Reconcile and explain the differences in operating profits under both costing methods.
Question 2
BB Ltd manufactures a single product, which is sold for ¢136 per unit.
The standard variable costs per unit of the product are:
Direct material
Direct labour
Production overhead
Sales overhead
4 kilos at ¢7 per kilo
5 hours at ¢10 per hour
¢2.4 per direct labour hour
¢5 per unit
The company expects to manufacture and sell 8,400 units in total during the forthcoming year
(Year 1). The fixed overhead costs for the forthcoming year are:
¢
Production
60,000
Administration
35,000
Sales
11,000
Required:
(a) State and discuss five (5) assumption of the breakeven analysis (7 Marks)
(b) Calculate for the forthcoming year (Year 1):
(i) The break-even point in cedi and units
(ii) The margin of safety in cedi and units
(iii) The amount of sales in units that would earn the company a profit of ¢180,000
(9 Marks)
(c) The following cost increases are expected in the following year (Year 2):
Variable costs:
Direct material
+5%
Direct labour
+4%
Production overhead
+10%
Sales overhead
+10%
Fixed overhead:
Production
+3%
Administration
+8%
Sales
+10%
Required:
Calculate for Year 2;
(i)
The selling price that will maintain the company’s contribution to sales ratio at the
same level as Year 1.
(ii)
The break-even point in cedis using the selling price calculated in (i) above.
(iii) the amount of sales in units to earn the company a profit of ¢170,000 if the selling price
was raised to ¢150.