P A GE 134
10
Section B: Cost and Management Accounting
Question 5
Source B1
T Limited had the following standard cost and budget information for the month of August.
Direct materials : kilos per unit
cost per kilo
Direct labour : hours per unit
rate per hour
Budgeted output and sales (units)
Budgeted direct labour hours
Budgeted fixed overheads
Expected unit selling price
5
$4
3
$12
4 000
12 000
$42 000
$82
T Limited uses absorption costing. The overhead absorption rate is based on direct labour hours.
Answer the following questions in the Question Paper. Questions are printed here for reference
only.
(a) Calculate the total budgeted profit for August.
[2]
Additional information
Actual output and sales for August were 4300 units, selling for $80 per unit.
Actual costs for August were as follows.
Total direct materials cost (22 790 kilos)
Total direct labour costs (12 040 hours)
Fixed overheads
$
95 718
150 500
43 600
(b) Calculate the actual profit for August.
[1]
(c) Calculate the following variances:
(i) sales price variance
(ii) sales volume variance (use standard profit margin per unit)
(iii) labour rate variance
(iv) labour efficiency variance
(v) fixed overhead expenditure variance
(vi) fixed overhead volume variance.
[12]
© UCLES 2020
9706/33/INSERT/M/J/20
P A GE 135
11
Additional information
Material price variance and material usage variance have been calculated at $4558 (adverse) and
$5160 (adverse).
(d) Prepare a statement reconciling the budgeted profit at 4000 units level with the actual profit.
You should start the statement with the budgeted profit in (a).
[5]
Additional information
After analysing the direct materials variances, the directors of T Limited plan to purchase raw
materials from a new supplier who provides better quality raw materials but at a higher price and
with no trade discount.
(e) Advise the directors whether or not T Limited should change to the new supplier. Justify your
answer.
[5]
[Total: 25]
© UCLES 2020
9706/33/INSERT/M/J/20
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P A GE 158
10
Question 6
Source B2
XP plc uses a system of standard costing. It manufactures and sells one product. The following per unit
information is available.
Direct material
Direct labour
Fixed overheads
2 kilos at $6 per kilo
4 hours at $10 per hour
$3.50 per direct labour hour
The master budget for March was based on sales of 15 000 units at a selling price of $100 per unit.
Actual sales in March amounted to 14 000 units at a selling price of $104 each.
The materials usage variance for the month was $22 800 (Favourable) and the materials price variance
was $36 300 (Adverse).
Actual direct labour for the month was 53 200 hours at $10.40 per hour.
The fixed overhead expenditure variance for the month was $10 000 (Favourable) and the fixed
overhead volume variance was $14 000 (Adverse).
Answer the following questions in the question paper. Questions are printed here for
reference only.
(a) Calculate for the month of March:
(i) the amount of direct materials used (in kilos)
[3]
(ii) the amount paid per kilo for the direct materials
[3]
(iii) the labour rate variance
[2]
(iv) the labour efficiency variance
[2]
(v) the actual profit.
[5]
(b) Prepare a statement reconciling the profit of $476 000 from the flexed budget with the actual
profit.
[6]
(c) Name two other variances which the directors could calculate if they wished to do further
analysis of the change in the fixed overheads.
[2]
(d) Suggest one reason for the company’s:
(i) materials price variance
[1]
(ii) materials usage variance.
[1]
[Total: 25]
© UCLES 2020
9706/32/INSERT/O/N/20
P A GE 258
9
Section B: Cost and Management Accounting
Question 5
Source B1
Y Limited produces one product.
Budgeted units produced and sold for the month of July were 1000.
Further budgeted information for July was also available.
$
250 000
(60 000)
(100 000)
(24 000)
66 000
Sales
Direct material ($12 per kilo)
Direct labour ($25 per labour hour)
Fixed overhead
Budgeted profit
Fixed overhead is to be absorbed on the basis of direct labour hours.
The actual units produced and sold for July were 1120.
Answer the following questions in the question paper. Questions are printed here for reference
only.
(a) Prepare the flexed budget to show the budgeted profit for the month of July.
[5]
Additional information
The actual result for the month of July is also available.
Sales
Direct material ($11.80 per kilo)
Direct labour ($25.50 per labour hour)
Fixed overhead
Actual profit
$
277 760
(72 688)
(128 520)
(25 600)
50 952
The cost accountant is going to conduct a variance analysis for the July performance.
(b) State what is meant by the term ‘variance analysis’.
[2]
(c) Calculate the following:
(i) sales price variance
[1]
(ii) sales volume variance
[1]
(iii) direct material total variance
[1]
(iv) direct labour total variance
[1]
(v) fixed overhead total variance.
[1]
© UCLES 2022
9706/32/INSERT/F/M/22
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P A GE 259
10
Additional information
The directors are interested in further analysis of the variances in direct materials.
(d) (i) Calculate the two variances which combine to give the direct material total variance. [4]
(ii) Explain the likely causes of the variances calculated in (d)(i).
[4]
Additional information
In July, Y Limited had adopted a new strategy to increase sales by reducing the selling price.
(e) Advise the directors of Y Limited whether or not the company should continue the strategy in
the long run. Justify your answer.
[5]
[Total: 25]
© UCLES 2022
9706/32/INSERT/F/M/22