Target costing – This is a costing technique which involves setting the target cost by
subtracting a desired profit margin from a competitive market price.
marto answered the question on February 26, 2019 at 08:29
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BS Limited manufactures a single standard product and operates a system of standard costing using a
fixed budget. As the company's assistant cost accountant, you are...
(Solved)
BS Limited manufactures a single standard product and operates a system of standard costing using a
fixed budget. As the company's assistant cost accountant, you are responsible for preparing the
monthly operating statements. Details from the budget, the standard product costs and actual results
for the month ended 31 May 2003 are given below:
Required:
The operating statement for the month of May, 2004 showing:
(a) The budgeted profit.
(b) Variances for direct materials, direct wages, overheads and sales.
(c) The actual profit.
Date posted:
February 26, 2019
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Answers (1)
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Ufundi Furniture Ltd. Manufactures a wide range of home furniture. Recently the company added
to its range a side board. The standard cost specification for each...
(Solved)
Ufundi Furniture Ltd. Manufactures a wide range of home furniture. Recently the company added
to its range a side board. The standard cost specification for each side board is given below:
The abnormal idle hours were 400 and the hours worked were recorded as 4,800 hours.
Required:
i) Material price variances (for both materials).
ii) Material usage variance (for both materials)
iii) Labour rate of pay variance.
iv) Labour efficiency variance.
v) Idle time variance.
(c) Suggest possible causes of the material variances.
Date posted:
February 26, 2019
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Answers (1)
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State the advantages of using standard costs in the manufacturing industry.
(Solved)
State the advantages of using standard costs in the manufacturing industry.
Date posted:
February 26, 2019
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Answers (1)
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The standard mix of a product branded Max is as follows:
(Solved)
The standard mix of a product branded Max is as follows:
Required:
i) Material price variance.
ii) Material mix variance.
iii) Material yield variance.
Date posted:
February 26, 2019
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Answers (1)
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Highlight four disadvantages of standards costing.
(Solved)
Highlight four disadvantages of standards costing.
Date posted:
February 26, 2019
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Answers (1)
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Briefly explain four applications of standard costing.
(Solved)
Briefly explain four applications of standard costing.
Date posted:
February 26, 2019
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Answers (1)
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Kuuda Limited manufactures one standard product. Currently, it is operating at a normal level of
activity of 70% with an output of 6,300 units, although the...
(Solved)
Kuuda Limited manufactures one standard product. Currently, it is operating at a normal level of
activity of 70% with an output of 6,300 units, although the sales director believes that a realistic
forecast for the next budget period would be at a level of activity of 50%.
Required:
(i). Prepare a flexible budget based on a 50% level of activity.
(ii). State three problems which may arise from such a change in the level of activity.
Date posted:
February 26, 2019
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Answers (1)
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State the objectives of budgetary planning and control systems.
(Solved)
State the objectives of budgetary planning and control systems.
Date posted:
February 26, 2019
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Answers (1)
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Mavuno Ltd. is a small scale company that specializes in the production of farm tools.
The company uses budgets for planning and controlling its activities. Currently...
(Solved)
Mavuno Ltd. is a small scale company that specializes in the production of farm tools.
The company uses budgets for planning and controlling its activities. Currently the management are
preparing budgets for the three months ending 31 March 2006.
The projected balance sheet as at 31 December 2005 is shown below:
Additional information:
1. The company sells the farm tools at a mark up of 25 %.
2. Purchase of materials stocks is on credit and it is paid for in the month of receipt by the
company
3. Employees are paid wages at the end of every week with the earnings of the last week of the
month being settled in the following month (Assume one month has 4 weeks).
4. Sales commission is paid on month in arrears at the rate of 1% of sales.
5. Overheads include a monthly depreciation charge of Sh. 25,000.
6. 25% of the sales are on cash basis. The other 75% is receivable two months after the sale.
7. The company will receive a loan of Sh.2, 500,000 in the month of March 2006 from Wakulima
Bank.
8. Old equipment will be sold for sh.250, 000 in February 2006 and new equipment will be
purchased at Sh.1, 200,000 to replace the old equipment sold. The new equipment will be paid
for in month of March 2006.
9. Rent is paid for quarterly in advance in the months of January, April, July and October
Required:
(a) Cash budget for the three months ending 31 March 2006.
(b) Budgeted trading profit and loss account for the three months ending 31 March 2006
(c) Budgeted balance sheet as at 31 March 2006.
Date posted:
February 26, 2019
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Answers (1)
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Distinguish between the following sets of terms:-
i) Budgetary slack an principal budget factor
ii) Pudding the budget and rolling budget
(Solved)
Distinguish between the following sets of terms:-
i) Budgetary slack an principal budget factor
ii) Pudding the budget and rolling budget
Date posted:
February 26, 2019
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Answers (1)
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Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:
(Solved)
Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:
Additional information:
1. 25%, of the sales are on cash basis. The balance is receivable three months after the month of
sale.
2. A generator worth Sh.600,000 was procured in September 2011. The supplier would install and
test the generator for three months whereas the payment will be made in January 2012.
3. Payment for raw materials is made to suppliers two months after delivery.
4. A dividend of Sh.900,000 will be paid in December 2011.
5. Rent for three months is payable in advance on the first day of each quarter.
6. Advertising expenses are paid three months in arrears.
7. 75% of the wages are paid in the month they are incurred with the balance being paid in the
following month.
8. The company's cost accountant estimates the closing cash balance for the quarter ending
December 2011 to be Sh.1 million.
Required:
A cash budget for the quarter ending 31 March 2012
Date posted:
February 25, 2019
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Answers (1)
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Explain five factors to consider when preparing a sales forecast for a cash budget.
(Solved)
Explain five factors to consider when preparing a sales forecast for a cash budget.
Date posted:
February 22, 2019
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Answers (1)
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Outline three differences between budgets and standards.
(Solved)
Outline three differences between budgets and standards.
Date posted:
February 22, 2019
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Answers (1)
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Differentiate between the following types of budgets
i) Functional budget and master budget.
ii) Rolling budget and incremental budget.
(Solved)
Differentiate between the following types of budgets
i) Functional budget and master budget.
ii) Rolling budget and incremental budget.
Date posted:
February 22, 2019
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Answers (1)
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XYZ Ltd. Carries on its business in Nairobi. The company has been reporting its profits using
absorption costing system. During the financial year ended 30 September...
(Solved)
XYZ Ltd. Carries on its business in Nairobi. The company has been reporting its profits using
absorption costing system. During the financial year ended 30 September 2005, the following
summary statement was provided:
Date posted:
February 22, 2019
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Answers (1)
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Jogi Transporters operate in the transport industry. On 1 December 2005, the management
acquired a new lorry to meet customer needs and cater for the increase...
(Solved)
Jogi Transporters operate in the transport industry. On 1 December 2005, the management
acquired a new lorry to meet customer needs and cater for the increase in business volume.
The following information relates to the initial and maintenance cost of the lorry.
Additional information:
1. The lorry has an economic life of 4 years.
2. The lorry has 6 tyres after each costing Sh.8000
3. Service is carried out after every 5,000 kilometres.
4. On average the lorry covers 20 kilometres per litre of fuel consumed.
5. The lorry is projected to cover 100,000 kilometres in January 2006, 25,000 kilometres in
Required:
Prepare a schedule for the three months showing
i. Variable costs per kilometer
ii. Fixed costs per kilometer
iii. Total costs per kilometer
c) Fixed costs are actually variable cost
With reference to (b) above explain whether you agree or disagree with the statement.
February 2006 and 50,000 kilometres in March 2006.
Date posted:
February 22, 2019
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Answers (1)
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State the limitations of break – even analysis.
(Solved)
State the limitations of break – even analysis.
Date posted:
February 22, 2019
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Answers (1)
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ABC limited manufactures and sells a single product branded “Zed”. The following data has been
extracted from the budgets and standard costs to product “Zed”.
(Solved)
ABC limited manufactures and sells a single product branded 'Zed'. The following data has been
extracted from the budgets and standard costs to product 'Zed'.
Date posted:
February 22, 2019
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Answers (1)
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Highlight six limitations of cost-volume-profit analysis.
(Solved)
Highlight six limitations of cost-volume-profit analysis.
Date posted:
February 22, 2019
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Answers (1)
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Describe the difference between the accountant's and the economist's model of cost-volume profit
analysis.
(Solved)
Describe the difference between the accountant's and the economist's model of cost-volume profit
analysis.
Date posted:
February 22, 2019
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Answers (1)