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Costing Part Fma

The document contains several budgeting and costing questions related to small businesses. It includes information about budgeted sales volumes, selling prices, variable costs, fixed costs, and profit targets. It asks to calculate break-even points, margins of safety, units required to meet profit targets, and absorption rates using different cost pools. It also discusses factors to consider when deciding to close a department and limitations of break-even analysis.

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0% found this document useful (0 votes)
28 views5 pages

Costing Part Fma

The document contains several budgeting and costing questions related to small businesses. It includes information about budgeted sales volumes, selling prices, variable costs, fixed costs, and profit targets. It asks to calculate break-even points, margins of safety, units required to meet profit targets, and absorption rates using different cost pools. It also discusses factors to consider when deciding to close a department and limitations of break-even analysis.

Uploaded by

masati
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COSTING PART

QUESTION NINE – MAY 2018

Lukuta has been operating a small scale enterprise involved in the selling of oranges to
various customers in Chilenje South. Lukuta , with the assistance of a friend , has
prepared the following budget for the year 31st December, 2018.

Budgeted number of oranges to be sold in the year 48,000

Unit selling price K3.00

Unit Variable cost K1.50

Rent , transport and other fixed expenses per annum K30,000

Required

(a) Calculate the Break – Even Point in quantity and value.

(b) Calculate the Margin of Safety in units and in percentage terms.

(c) Calculate the number of units required to be sold in order to meet a profit target of
K60,000

(d) Calculate the Break – even Point if the selling price was increased by 15% and variable
costs are reduced by 2%. Fixed costs remain unchanged .Discuss the limitations of Break
– Even Analysis.
QUESTION TEN – NOVEMBER 2017

Martina Phiri Mudede plans to start a small shop selling bread in January, 2018. She has
budgeted for the following for the year ended to 31st December, 2018.

Budgeted Quantity 50,000

selling price K10.00

Cost of bread K7.50

Rent , transport and other fixed expenses per annum K25,000

Required

(a) Calculate the Break – Even Point in Quantity and in value terms.

(b) Calculate the Margin of safety in units and in percentage terms.

(c ) Calculate the number of units required to be sold in order to meet a profit target of
K10,000

(d) Calculate the Break – Even point if the selling price was increased by K2.00

(e) Discuss the factors that a manager should take into account in deciding whether to
close down department or cease production of a product.
QUESTION ELEVEN – MAY 2017

Kalunga has been operating a small scale enterprise involved in the selling of Chikanda
to students at University of Lusaka. Chikanda is sold in pieces of equal weight . For the
year to 31st December, 20017 , the following budgeted information is available.

Budgeted number of pieces to be sold per annum 60,000

Selling price per piece K5.00

Contribution to Sales(C/S) ratio 20%

Rent ,Transport and Other fixed expenses per annum K48,000

Required

(a) Calculate the break Even point in pieces and in value terms.

(b) Calculate the Margin of Safety in units and in percentage terms.

(c) Calculate the number of units required to be sold in order to meet a profit target of
K50,000

(d) Calculate the Break – Even Point if the selling price was increased by 10%.

(e) Discuss the uses , underlying assumptions and limitations of Break – Even Analysis.
TUTORIAL EXAM QUESTION

Cranks Machine Parts Limited is a spare parts manufacturing company. The following budget
information relates to the assembling department for the year to 31st December 2015:

Assembling department Total


Budgeted Direct material cost K800,000

Budgeted Direct labour K600,000

Budgeted total fixed factory overhead K300,000

Budgeted Number of units to be produced and sold 20,000

Budgeted Direct labour hours 40,000

Budgeted Machine hours 200,000

Required:
a) Calculate the overhead absorption rates for the assembling department using each of the
following methods:
i. Direct material cost
ii. Direct labour cost
iii. Prime cost
iv. Direct labour hours
v. Machine hours.

b) If the budgeted selling price per unit is K200.00, prepare the budged statement of
comprehensive income for the year ending 31st December 2015 using:
i. Marginal costing
ii. Absorption costing using direct labour hours absorption rate
TUTORIAL EXAM QUESTION

Looking ahead to the financial year ending 31 March 2012, the directors of Problems Limited are faced
with a budgeted loss of K10,000. This is based on the following data.

Budgeted number of units: 10,000

Sales revenue 100,000

Less: Variable costs (80,000)

Contribution 20,000

Less: Fixed costs (30,000)

Budgeted loss (10,000)

The directors would like to aim for a profit of K20, 000 for the year to 31 March 2012. Various
proposals have been put forward, none of which require a change in the budgeted level of fixed costs.
These proposals are as follows:

1. Reduce the selling price of each unit by 10 per cent.

2. Increase the selling price of each unit by 10 per cent.

Required:

(a) For each proposal calculate:

(i) The break-even position in units and in value terms.

(ii) The number of units required to be sold in order to meet the profit target.

State which proposal you think should be adopted.

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