This paper concentrates on the primary theme of Explain the process of setting a master budget. In your answer pay attention to logical sequence and structure. [12] in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.
COST ACCOUNTING
Instructions to candidates:
a) Time allowed: Three hours (plus an extra ten
minutes’ reading time at the start – do not write anything during this time)
b) Answer any FIVE
questions
c) All questions carry
equal marks. Marks for each question are shown in [ ]
d) Non-programmable calculators
are permitted in this examination
1. a) Explain the
process of setting a master budget. In your answer pay attention to logical
sequence
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and structure.
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[12]
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b) Enumerate the principal benefits of maintaining a
budgetary control system.
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[8]
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2. Manufacturers Ltd has three production cost centres X, Y and Z and one
service cost centre M which is the maintenance department. The budgeted
overhead expenditure for the year ended 31 March 2016 is as follows:
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£000
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Depreciation of production and
maintenance equipment
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500
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Employer’s liability insurance
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175
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Heating and lighting
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200
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Indirect labour
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1,000
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*
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Rent and business rates
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800
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Staff welfare and safety expenses
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200
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-------
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Budgeted overhead expenditure:
total
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2,875
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=====
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* To be apportioned on the basis of the number of employees per
cost centre. Other data/information is as follows:
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Value of production equipment:
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Cost centre X
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£1,000,000
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Cost centre Y
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£800,000
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Cost centre Z
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£500,000
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Cost centre M
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£200,000
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Floor area:
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Cost centre X
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80,000
sq. metres
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Cost centre Y
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60,000
sq. metres
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Cost centre Z
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50,000
sq. metres
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Cost centre M
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10,000
sq. metres
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Number of employees:
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Cost centre X
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200
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Cost centre Y
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100
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Cost centre Z
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80
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Cost centre M
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20
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Overheads to be allocated to cost
centre M amount to £55,000.
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Cost centre M is to be apportioned 50% to X, 35% to Y and 15% to
Z.
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Budgeted direct labour hours are:
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Cost centre X
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200,000
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Cost centre Y
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217,500
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Cost centre Z
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171,250
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Question 2 continues
overleaf
TASKS
a)
Prepare an overhead
analysis sheet showing:
i. A column stating the
overhead expense, e.g. depreciation
ii. A column for each
department, e.g. X, Y, Z and M, showing the apportioned expenditure
iii. A total column
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iv
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a column noting the basis used for
calculating the expenditure, e.g. area
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[10]
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B) Calculate the overhead absorption rates for
EACH of the three production cost centres using
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budgeted direct labour hours.
Round to two decimal places.
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[6]
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b)
Prepare a cost statement
for a product which has a prime cost of £640, and takes 4 hours in cost
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centre X, followed by 5 hours in
cost centre Y, and 3 hours in cost centre Z.
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[4]
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3. Al-Ga plc has a
limited capital budget available for investment in suitable projects this year,
and has shortlisted two possible choices. Details are as follows:
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Project
Alpha
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Project
Omega
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Capital cost
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£1,750,000
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£1,800,000
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Expected life
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5
years
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5
years
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Residual value
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nil
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nil
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Budgeted cash inflows:
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£000
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£000
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Year 1
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500
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600
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Year 2
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950
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1,200
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Year 3
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1,300
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1,500
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Year 4
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800
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600
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Year 5
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300
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300
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The cost of capital to Al-Ga plc
is 9%.
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Extracts from NPV tables are as
follows:
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Year
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8%
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9%
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10%
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1
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.926
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.917
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.909
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2
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.857
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.842
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.826
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3
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.794
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.772
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.751
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4
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.735
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.708
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.683
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5
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.630
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