Answers

ACCA Certified Accounting Technician Examination – Paper T4

Accounting for Costs June 2009 Answers

Section A

1 A
2 A
3 A
4 A
5 C
6 B
7 D
8 C
9 D
10 B
11 A
12 D
13 A
14 C
15 A
16 B
17 B
18 C
19 C
20 D

Workings:

6 B (63,000/15,000 – 68,000/20,000) + (4·5 – 88,000/2,000)

8 C [(1,100/200 x 60) + 840] ÷ (150 + 60)

16 B 47,620/9,600

17 B 87,480/(128,640 ÷ 268,000/25)

18 C (39,975 + 12,000) ÷ 0·54

19 C 10 + 10(24,760/40,870)

20 D (23,000 ÷ 0·1) – 200,000

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Section B

1 Component
C1 C2
(a) Variable cost of production ($ per unit) 12·50 17·50

(b) Outside supplier cost ($ per unit) 18·50 25·90

–––––– ––––––
Extra cost of buying-in ($ per unit) 6·00 8·40

(c) Machine hours (number per unit) 2·00 3·00

Extra cost of buying-in ($ per machine hour) 3·00 2·80
Priority should be given to the production of component C1 in order to minimise the extra cost of buying-in.

(d) Production:
Component C1 75 units (75 units x 2·0 machine hours/unit = 150 machine hours)
Component C2 50 units [(300 – 150 machine hours) ÷ 3 machine hours per unit]

2 (a) Joint Process Account

litres $ litres $
Crude oil 800,000 130,000 Grade A 468,000 140,400
Conversion costs 105,200 Grade B 312,000 93,600
Normal loss 16,000 –
Abnormal loss 4,000 1,200
–––––––– –––––––– –––––––– ––––––––
800,000 235,200 800,000 235,200
–––––––– –––––––– –––––––– ––––––––
Workings:
Expected output:
Input 800,000 litres
less normal loss 16,000 litres (800,000 litres x 0·02)
––––––––
784,000 litres (800,000 litres x 0·98)
––––––––
Abnormal loss:
Actual output 780,000 litres
less expected output 784,000 litres
––––––––
4,000 litres
––––––––
Cost per litre of expected output:
Total input costs $235,200 ÷ expected output 784,000 litres = $0·30 per litre
Valuation of output: Grade A $140,400 (468,000 litres x $0·30 per litre)
Grade B $93,600 (312,000 litres x $0·30 per litre)
Valuation of abnormal loss: $1,200 (4,000 litres x $0·30 per litre)

(b) Profit statement:

Grade A Grade B Total
$ $ $
Sales revenue 280,800 87,360 368,160
Joint costs (140,400) (93,600) (234,000)
––––––––– ––––––––
Product profit/(loss) $140,400 $(6,240)
––––––––– ––––––––
Abnormal loss (1,200)
––––––––––
Gross profit/(loss) $132,960
––––––––––

3 (a) A cost unit is ‘a unit of product or service in relation to which costs are ascertained’ (CIMA Official Terminology).

(b) Cost units:

(i) a manufacturer of canned food products – can/thousand cans
(ii) a house builder – building job/contract

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 (c) (i) Profit statement – Job X3:
$ $
Sales revenue 13,400
Production costs:
Prime costs (6,560) ($4,360 + 1,660 – 180 + 720)
Overheads (4,290) (10,850) [$2,890 + (720 x 17·5/9)]
––––––– –––––––
Gross profit 2,550
General administration costs (1,085) ($10,850 x 0·1)
–––––––
Net profit $1,465
–––––––
(ii) Work-in-progress valuation – Job X4
$
Prime costs 11,640 (8,240 – 470 + 180 + 3,690)
Production overheads 7,175 (3,690 x 17·5/9)
––––––––
$18,815
––––––––

4 (a) Production cost centre P1:

(i) Budgeted production overhead absorption rate:
Allocated and apportioned $65,800
Re-apportionment of service cost centre S1 $11,200 ($28,000 x 0·4)
––––––––
$77,000
÷ budgeted machine hours 5,500
Budgeted production overhead absorption rate $14 per machine hour
––––––––
(ii) Under absorption of production overhead:
Actual production overhead incurred $75,840
Production overhead absorbed $74,760 (5,340 m/c hrs x $14/ m/c hr)
––––––––
Under absorption $1,080
––––––––

(b) Production cost centre P2:

(i) Budgeted machine hours:
Allocated and apportioned $85,500
Re-apportionment of service cost centre S1 $16,800 ($28,000 x 0·6)
–––––––––
$102,300
÷ Production overhead absorption rate $16·50 per machine hour
Budgeted machine hours 6,200 machine hours
–––––––––
(ii) Actual overhead incurred:
Production overhead absorbed $106,425 (6,450 m/c hrs x $16·50/ m/c hr)
less over absorption $3,550
–––––––––
Actual overhead incurred $102,875
–––––––––

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ACCA Certified Accounting Technician Examination – Paper T4
Accounting for Costs June 2009 Marking Scheme

Section B

Marks
1 (a) Variable costs 1

(b) Extra cost of buying-in ($/unit) 2

(c) Extra cost of buying-in ($/m/c hr) 3

Priority 2 5
––––

(d) Component C1 units 1

Component C2 units 2 3
–––– –––
11
–––

2 (a) Process A/c:

inputs 1
Grades A & B 1
normal loss 1
abnormal loss 1
Expected output 1
Normal loss 1
Abnormal loss 1
Cost per litre 2
Valuation of output:
Grades A & B 1
Abnormal loss 1 11
––––

(b) Sales revenue 11/2

Joint process costs 11/2
Abnormal loss 1
Gross profit/(loss) 1 5
–––– –––
16
–––

3 (a) Cost unit 2

(b) Canned food products 11/2

Builder 11/2 3
––––

(c) (i) Sales revenue 1

Prime costs 2
Production overhead 3
General administration costs 1
Gross profit 1/
2
Net profit 1/ 8
2
––––
(ii) Prime costs 2
Production overhead 2 4
–––– –––
17
–––

17
 Marks
4 (a) (i) Total overhead 2
Per machine hour 2 4
––––
(ii) Overhead absorbed 2
Under absorption 2 4
––––

(b) (i) Total overhead 2

Machine hours 2 4
(ii) Overhead absorbed 2
Actual overhead 2 4
–––– –––
16
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