A company manufactures two joint products, P and R, in a common process. Data for June are as follows. $
Opening inventory 1,000
Direct materials added 10,000
Conversion costs 12,000
Closing inventory 3,000
Production Sales Sales price
Units Units $ per unit
P 4,000 5,000 5
R 6,000 5,000 10
12.1 If costs are apportioned between joint products on a sales value basis, what was the cost per unit of product R in June?
A $1.25 B $2.22 C $2.50
12.2 If costs are apportioned between joint products on a physical unit basis, what was the total cost of product P production in June?
A $8,000 B $8,800 C $10,000
D $12,000 (2 marks)
12.3 Which of the following statements is/are correct?
(i) A by-product is a product produced at the same time as other products which has a relatively low volume compared with the other products
(ii) Since a by-product is a saleable item it should be separately costed in the process account, and should absorb some of the process costs
(iii) Costs incurred prior to the point of separation are known as common or joint costs A (i) and (ii)
B (i) and (iii) C (ii) and (iii)
D (iii) only (2 marks)
12.4 A company manufactures two joint products and one by-product in a single process. Data for November are as follows.
$ Raw material input 216,000
Conversion costs 72,000
There were no inventories at the beginning or end of the period.
Output Sales price
Units $ per unit
Joint product E 21,000 15
Joint product Q 18,000 10
By-product X 2,000 2
By-product sales revenue is credited to the process account. Joint costs are apportioned on a sales value basis. What were the full production costs of product Q in November (to the nearest $)?
A $102,445 B $103,273 C $104,727
D $180,727 (2 marks)
12.5 A company manufactures three joint products and one by-product from a single process. Data for May are as follows.
Opening and closing inventories Nil Raw materials input $180,000
Conversion costs $50,000
Output
Sales price
Units $ per unit
Joint product L 3,000 32
M 2,000 42
N 4,000 38
By-product R 1,000 2
By-product sales revenue is credited to the sales account. Joint costs are apportioned on a sales value basis.
What were the full production costs of product M in May (to the nearest $)? A $57,687
B $57,844 C $58,193
D $66,506 (2 marks)
12.6 Two products G and H are created from a joint process. G can be sold immediately after split-off. H requires further processing before it is in a saleable condition. There are no opening inventories and no work in progress. The following data are available for last period:
$
Total joint production costs 384,000
Further processing costs (product H) 159,600
Product Selling price Sales Production
per unit Units Units
G $0.84 400,000 412,000
H $1.82 200,000 228,000
Using the physical unit method for apportioning joint production costs, what was the cost value of the closing inventory of product H for last period?
A $36,400 B $37,520 C $40,264
D $45,181 (2 marks)
12.7 Two products (W and X) are created from a joint process. Both products can be sold immediately after split-off. There are no opening inventories or work in progress. The following information is available for last period:
Total joint production costs $776,160
Product Production units Sales units Selling price per unit
W 12,000 10,000 $10
X 10,000 8,000 $12
Using the sales value method of apportioning joint production costs, what was the value of the closing inventory of product X for last period?
A $310,464 B $388,080 C $155,232
D $77,616 (2 marks)
(Total = 14 marks)
13 Alternative costing principles
19 mins
13.1 Which of the following statements is not correct?
A Activity based costing is an alternative to traditional volume-based costing methods B Activity based costs provide an approximation of long-run variable unit costs C Activity based costing cannot be used to cost services
D Activity based costing is a form of absorption costing (2 marks)
13.2 A product is in the stage of its life cycle which is typified by falling prices but good profit margins due to high sales volumes. What stage is it in?
A Growth B Maturity C Introduction
13.3 In what stage of the product life cycle are initial costs of the investment in the product typically recovered? A Introduction B Decline C Growth D Maturity (2 marks)
13.4 How is target cost calculated?
A Desired selling price – actual profit margin B Market price – desired profit margin C Desired selling price – desired profit margin
D Market price – standard profit margin (2 marks)
13.5 Which stage of the product life cycle do the following characteristics refer to? New competitors
Customer feedback received New distribution outlets being found Product quality improvements made A Growth
B Decline C Maturity
D Introduction (2 marks)
13.6 A new product is being developed. The development will take one year and the product is expected to have a life cycle of two years before it is replaced.
Which of the following statements are true of life cycle costing?
Statement 1 It is useful for assessing whether new products have been successful. Statement 2 The individual profitability for products is less accurate.
A Both statements are true B Both statements are false
C Statement 1 is true and statement 2 is false
D Statement 2 is true and statement 1 is false (2 marks)
13.7 A chain of coffee shops has implemented a Total Quality Management system to ensure high quality and consistency across all outlets. As part of the scheme, the chain offers a free replacement drink to any customer not completely satisfied with their purchase.
Which of the following BEST describes the cost of providing replacement drinks? A An external failure cost
B An internal failure cost C A prevention cost
D An appraisal cost (2 marks)
13.8 Which costing method is based around a calculation involving a desired profit margin and a competitive market price?
A Activity Based Costing
B Total Quality Management C Target costing
D Life cycle costing (2 marks)
Check that you can fill in the blanks in the statements below before you attempt any questions. If in doubt, you should go back to your BPP Interactive Text and revise first.
A ... is a plan of what the organisation is aiming to achieve and what it has set as a target
whereas a ... is an estimate of what is likely to occur in the future.
The degree of correlation between two variables is measured by the ... ... . r = +1 means that the variables are ... ... correlated.
r = –1 means that the variables are ... ... correlated. r = 0 means that the variables are ...
The square of the correlation coefficient is called the ... of ... It measures the
... of the total variation in the value of one variable that can be explained by variations in the
value of the other variable.
Linear regression analysis is one method used for estimating a line of ... ... As with all forecasting techniques, the results from regression analysis will not be wholly reliable. There are a number of factors which affect the reliability of forecasts made using regression analysis. For example, it assumes that a
... ... exists between the two variables.
A time series is a series of figures or values recorded over time. The time series analysis forecasting technique is usually used to ... ...
There are four components of a time series: ..., ... ..., ... ... and
……... …………..
One way of finding the trend is to use ... ...
Management accountants will use spreadsheet software in activities such as budgeting, forecasting, reporting performance and variance analysis. Spreadsheet packages have the facility to perform ...-... calculations at great speed.
The ... ... ... should be identified at the beginning of the budgetary process and the
budget for this is prepared before all others.
... budgets include production budgets, marketing budgets, sales budgets, personnel budgets,
purchasing budgets and research and development budgets. Possible pitfalls
Write down the mistakes you know you should avoid.