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Chapter 5
Traditional Approaches to Full Costing
Answers to End of Chapter Exercises

Q 5.1

Direct materials 400,000
Direct labour 325,000
Prime cost 725,000
Manufacturing overheads
Depreciation - plant and equipment 46,000
Rent and rates:factory 48,000
Power - factory 15,000
Works manager 40,000
Total manufacturing overheads 149,000
Total manufacturing costs 874,000
Administration costs:
Depreciation - administration 2,000
Power costs - office 5,000
Managing directors salary 50,000
Administration staff salaries 65,000
Rent and rates - administration 6000
Total administration costs 128,000
Selling costs:
Sales staff 82,000
Rent and rates - sales office 6,000
Total sales 88,000
Total costs 1,090,000

Q5.2
Senior Engineer Junior Engineer

Wages 48,000 28,000

chargeable hours 1200 1,400
Wage rate per hour 40 20
Overhead at 200% 80 40
120 60

Cost of contract:
100 hours senior engineer 12,000
200 hours of junior engineer 12,000
Total cost 24,000

2008 John Wiley & Sons Ltd.

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Q 5.3

Material cost 50.0
Labour department A 15.0
Labour department B 12.0
Overhead department A 22.5
Overhead department B 22.5
Total cost 122.0
Mark-up on cost 20% 24.0
Selling price 146.00

Q 5.4
Total Machining Assembly Finishing Stores
Source information:
Area occupied -square feet 40,000 12,000 18,000 8,000 2,000
Plant and Equipment - at cost 835,000 700,000 100,000 30,000 5,000
Number of employees 47 15 20 10 2
Direct labour hours 6,300 2,100 2,800 1,400
Machine hours 4,800
No. of stores requisitions 1,812 400 1,212 200
Allocation
Traced costs Total basis
Indirect wages 17,000 Traced 4,500 7,500 2,000 3,000
Power 3,300 Traced 2,400 600 300 0
20,300 6,900 8,100 2,300 3,000

other costs:
Rent and rates 7,800 area 2340 3510 1560 390
Lighting and heating 2,400 area 720 1080 480 120
Depreciation - plant and
equipment 50,100 P&E at cost 42,000 6,000 1,800 300
No
Factory administration 21,300 employees 6,798 9,064 4,532 906
Insurance - plant and equipment 5,010 P&E at cost 4,200 600 180 30
No
Canteen subsidy 10,650 employees 3,399 4,532 2,266 453
117,560 66,357 32,886 13,118 5,200
No
Reallocate canteen subsidy employees 1,733 2,311 1,156 -5,200
Overhead by production
department 68,090 35,197 14,273 0
machine hours 4800
labour hours 2800 1400
hourly rate 14.19 12.57 10.20

2008 John Wiley & Sons Ltd.

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Q 5.5
Source information:
Area occupied -square feet 32,000 12,000 18,000 2,000
Plant and Equipment - at cost 805,000 700,000 100,000 5,000
Number of employees 75 25 48 2
Direct labour hours 12,075 4,692 7,383
Maintenance hours worked 160 130 30
machine hours
Allocation
Total basis Machining Assembly Maintenance
Costs
Indirect wages 43,000 traced 15,600 23,400 4,000
other costs:
Rent and rates 12,000 floor area 4500 6750 750
Depreciation - plant and
equipment 14,400 P&E at cost 12,522 1,789 89
No.
Factory administration 15,300 employees 5100 9792 408
No
Canteen subsidy 3,600 employees 1200 2304 96
Total overhead 88,300 38,922 44,035 5,343
Reallocate mainteance 4341 1002 -5343
Overhead by production
department 43,263 45,037 0
machine hours 8755
labour hours 8900
hourly rate 4.94 5.06

iv) Product X Product Y Product Z

Material 11.00 14.00 17.00
Machine labour 6.00 4.00 2.00
Assembly
labour 12.00 3.00 21.90
m/c overhead 9.88 4.94 6.52
Assembly ohd 10.12 2.53 17.71
49.00 28.47 64.23
25% mark-up 12.25 7.12 16.06
Selling price 61.25 35.59 80.29

Q 5.6
Litres
Competed units 14,000
Add equivalent completed units at end of month 280
14,280
Less equivalent completed units at beginning of month 1,800
Equivalent completed units in month 12,480

Cost of production 9,360

Cost per litre 0.75 per litre.

2008 John Wiley & Sons Ltd.

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Q 5.7

Production cost
per unit for 1000 units
Material 20 20,000
labour 30 30,000
Production overhead 2,000
52,000
Administration costs 1,000
Total cost 53,000

Budgeted Profit and Loss

Account

Sales 70,000
Less production costs 52,000
Gross profit 18,000
Administration costs 1,000
Net profit 17,000

Q 5.8
Actual Profit and Loss Account

Sales 49,000
Less production costs 36,400
Gross profit 12,600
Administration costs 1,000
Net profit 11,600

2008 John Wiley & Sons Ltd.

www.wileyeurope.com/college/bowhill