Exam 10: Full Costing

The approach to deriving full costs in an operation where only identical products are produced is:

Although ________ costs are important in management decision-making, they cannot be directly related to individual cost units.

A printing firm that produces newsletters, advertising brochures and other small documents for individual clients is operating what type of costing system?

An example of a product cost centre for a furniture manufacturer is:

The classification of a cost as either direct or indirect depends primarily on:

In full costing overhead, costs are:

Use the information below to answer the following questions. Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April: FRAMING STRINGING FINISHING Direct Costs \ 20,000 \ 30,000 \ 66,000 Ind irect Costs \ 10,000 \ 20,000 \ 30,000 Labour Hours 2,000 5,000 3,000 Machine hours 500s $\text { Production for April is } 10,000 \text { racquets }$ -Refer to the table above. The overhead recovery rate for stringing and finishing based on direct labour hours is:

Use information below to answer the following questions. Oswald Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during June: Ind irect labour cost \ 26,000 Direct labour time 10,000 hours Depreciation on equipment \ 20,000 Rent and Rates \ 13,000 Direct labour costs \ 98,000 Heating, lighting and power \ 4,000 Machine time 8,000 hours Indirect materials \ 5,000 Consumables \ 2,000 Direct materials used \ 50,000 Production estimate 1,000 suitcases -Refer to the table above. The management accountant at Oswald Ltd, wants to revise his estimates and use machine hours as the allocation base to determine the overhead recovery rate. The revised overhead recovery rate (rounded)per machine hour will be:

When determining full costs the treatment of direct costs under activity-based costing:

Which type of pricing approach with a supplier use in a competitive market?

What does the break-even price represent?

Use the information below to answer the following questions. Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a webpage design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below: Sales \ 550,000 Direct materials 50,000 Direct labour 300,000 Variable overhead 5,000 Advertising for business 5,000 Depreciation on equipment 30,000 Administration 27,000 Interest 10,000 Profit before tax 133,000 Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below: Direct materials \ 400 Direct labour (100 hours) \ 1,500 -Refer to the table above. Total budgeted direct costs for the year are:

A cost unit can be:

Use information below to answer the following questions. Oswald Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during June: Ind irect labour cost \ 26,000 Direct labour time 10,000 hours Depreciation on equipment \ 20,000 Rent and Rates \ 13,000 Direct labour costs \ 98,000 Heating, lighting and power \ 4,000 Machine time 8,000 hours Indirect materials \ 5,000 Consumables \ 2,000 Direct materials used \ 50,000 Production estimate 1,000 suitcases -Refer to the table above. The full cost of producing the suitcases for May is:

Use the information below to answer the following questions. Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April: FRAMING STRINGING FINISHING Direct Costs \ 20,000 \ 30,000 \ 66,000 Ind irect Costs \ 10,000 \ 20,000 \ 30,000 Labour Hours 2,000 5,000 3,000 Machine hours 500s $\text { Production for April is } 10,000 \text { racquets }$ -Refer to the table above. What is the total overhead for the organisation?

If the overhead applied to a job is $800 and the overhead recovery rate is $20 per direct labour hour, how many direct labour hours were used for the job?

Use the information below to answer the following questions. Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a webpage design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below: Sales \ 550,000 Direct materials 50,000 Direct labour 300,000 Variable overhead 5,000 Advertising for business 5,000 Depreciation on equipment 30,000 Administration 27,000 Interest 10,000 Profit before tax 133,000 Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below: Direct materials \ 400 Direct labour (100 hours) \ 1,500 -Refer to the table above. The recommended quote for the job is:

A service business expects to incur overheads totalling $20,000 next month. The total direct labour time worked is 1,600 hours and total machine hours are 1,000. During next month, the business expects to do just two large jobs. Information concerning each job is as follows: Job1 Job2 Direct Labour hours 700 900 Machine hours 700 300 REQUIRED: a)Calculate the overhead recovery rate for the month using direct labour hours. b)Compute how much of the month's overhead will be charged to each job.

What costing system is used to assign costs to a distinct, identifiable job or service?

Ace Ltd makes trailers for boats. Management have decided they would like to implement a full cost recovery system as detailed below. Direct materials and direct labour are the only costs that can be traced directly to jobs. All other costs will be recovered using an overhead recovery rate based on direct labour cost. Profit (mark-up)will be 12% of full costs. Annual Budget Forecast \ Sales (as per invoices) 230,000 Direct Materials 50,000 Direct Labour 60,000 Variable Overheads 2,400 Advertising for Business 4,000 Rent of Premises 10,000 Depreciation 20,000 Administration expenses 12,000 REQUIRED: a)Calculate the overhead recovery rate to apply overhead to jobs. b)Provide a quotation (full cost estimate plus mark-up)for the following job.