1.

Which method for assigning costs to products would be more appropriate in

each of the following cases?

a) Cruise ship builder

b) Cornflakes factory

c) Law firm

d) Dentists office

e) Beverage bottling company (5)

2. ABC Company uses job-order costing. It incurred the following costs for job
M301: 20 pounds of raw materials (all direct) were issued to be used for job
M301 at a cost of $7 per pound. Three people were assigned to work on Job
M301 at a rate of $12 per hour. Records show that a total of 25 direct labor-
hours were worked on Job M301. Manufacturing overhead is applied based on
direct labor-hours. At the beginning of the year, estimated total manufacturing
overhead was $450,000 and the total direct labor hours incurred would be
50,000.

Required: Determine the cost assigned to Job M301 (10)

3. Mr Bean’s chocolate Wiggly bars pass through two processes. The data for the
month just ended are:

Mr Bean allows the staff to eat 5% of the chocolate as they work on Process 1.
There was no work in progress at the month end. Prepare the two process
accounts and calculate the cost per kg. (12)

4. Distinguish between Marginal Costing and Absorption costing. Give an

advantage and disadvantage for the two. (8)

5. What is Activity based costing (2)

6. A manufacturing company finds that while the cost of making a component No.
0.51 in its own workshop is $8.00 each, the same is available in market at
$6.50 with an assurance of continuous supply.

The cost data for manufacturing the component is as follows:

Materials 3.00

Direct labour 2.00

Other variable expenses 1.00

Depreciation & other fixed expenses 2.00

Required

i) Give your suggestion whether to make or buy this component. (5)

ii) Give your views in case the supplier reduces the price from $6.50 to $5.50.

(2)

iii) Other than continuous supply and marginal cost of component, highlight
three other factors that have to be considered by the manufacturer when
undertaking a make or buy decision. (4)