FNSACC507 Management Accounting Information - Practice Questions and Solutions

FNSACC507 Provide Management Accounting Information
Answer all questions.
Question 1 a)
Complete the following table and show calculations (below):
Units produced @ 3000 units @ 5000 units
Total $ Per unit $ Total $ Per unit $
Fixed costs 57 000 19.00 57 000 11.40
Variable costs 72,000 24.00 120,000 24.00
Total costs 129,000 43.00 177,000 35.40
Workings:
1. Fixed Cost
a. For 3000 units – Fixed Cost = 57000/3000 = $ 19 per unit
b. For 5000 units – Fixed Cost = 57000/5000 = $ 11.4 per unit
2. Total Variable cost
a. For 3000 units – Variable cost = 3000*24 = $72,000
b. For 5000 units – Variable cost = 5000*24 = $120,000
Question 1 b)
Write out and explain the flexible budget formula:
Answer:
Flexible budget formula:
Let number of units produced be X. So flexible budget formula will be – 57,000+24X
Flexible budget is budget which can be changed based on level of activity. It is in the form of income statement
which changes as there is change in level of activity. In flexible budget, only variable cost changes with regard to
activity level and fixed remains constant.
Question 2:
Indicate whether each of the following costs are fixed, variable or semi-variable:
Units produced 4000 6000 Type of cost ?
Costs:
Rent 3000 3000 Fixed Cost
Repairs of machinery 600 800 Semi variable cost
Power 5000 7500 Variable cost
Depreciation of plant 1500 1500 Fixed Cost
Production wages 9000 13500 Variable cost
Indirect material 150 200 Semi variable cost
Question 3:
The following factory overhead budget has been based on the forecast production level of 25,000 direct labour
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hours:
Fixed Costs 195000
Variable Costs 312500
TOTAL COSTS 507500
Required:
a) Show the flexible budget formula for the above costs
b) Prepare flexible budgets for the forecast production levels using direct labour hours of 26,000 and
30,000
c) Calculate overhead application rates for each forecast activity level
Answer:
a) Let X be total direct labour hours. Therefore, variable budget formula:
= 195000+12.5X
b)
Hours 26000 Hours 30000 Hours
Total $ Per unit $ Total $ Per unit $
Fixed costs 195000 7.5 195000 6.5
Variable costs 325000 12.5 375000 12.5
Total costs 520000 20.00 570000 19.00
c) Overhead application rates at Activity Levels:
i. 26000 Hours - $20 per hour
ii. 30000 Hours - $19 per hour
Question 4:
Using the high-low method, calculate the variable cost per unit and the fixed cost per year from the following
record of semi variable costs. (Show your calculation methods.)
Year Units produced Costs $
2017 15 000 155 000
2018 20 500 204 000
2019 21 000 218 300
2020 19 000 193 500
2021 17 500 183 500
2022 21 500 216 100
Answer:
Year Units produced Costs $ Per unit
variable
cost
Total fixed Cost
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2017 15 000 155 000 9.4 155 000-(9.4*15000) = 14000
2018 20 500 204 000 9.4 204 000-(9.4*20500) = 11300
2019 21 000 218 300 9.4 218 300-(9.4*21000) = 20900
2020 19 000 193 500 9.4 193 500-(9.4*19000) = 14900
2021 17 500 183 500 9.4 183 500-(9.4*17500) = 19000
2022 21 500 216 100 9.4 216 100-(9.4*21500) = 14000
Working Note:
1. Calculation of variable cost per unit:
a. Total cost at highest level of activity i.e.21500 units = 216,100
b. Total cost at lowest level of activity i.e.15000 units = 155,000
Variable cost per unit = Difference in total cost at highest and lowest level of activity / difference in
Activity levels
= 216100-155000 / 21500-15000
= $9.4 per unit
Question 5:
Using the following factory overhead forecasts answer the following questions:
Relevant information (Forecast)
Factory overhead
Fixed costs $ 27 000
Variable Costs $ 45 000
Cost drivers:
Machine Hours 18 000
Production units 6 000
a) Analyse, determine and explain which cost driver would probably be the one most suitable for
allocating overhead cost:
b) Using machine hours as the cost driver, calculate the overhead recovery rate to be used for the year:
c) If product A requires ½ hour of machine time and product B requires 3 hours, calculate their respective
overhead costs per unit
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