Accounting 9706 · AS & A Level · Costs and cost behaviour

Costs and cost behaviour — practice question

Y Limited produces three products, Exe, Wye and Zed. The budgeted data for July 2017 is given below.
(a)[3]

Calculate the contribution per unit for each product.

(b)[3]

Prepare a statement showing the maximum contribution and maximum profit that Y Limited can earn in July 2017.

(c)[1]

Calculate the total machine hours needed to satisfy maximum demand in July 2017.

(d)[10]

Calculate the maximum contribution and the maximum profit for July 2017, allowing for the restricted machine hours available.

(e)[4]

Advise the directors whether they should hire the replacement machine. Support your answer by weighing up both the advantages and disadvantages of hiring the replacement machine.

(f)[3]

State three short-term decisions, apart from limiting factor decisions, where marginal costing would be useful.

(g)[2]

Calculate to two decimal places a suitable overhead absorption rate for each department.

(h)[4]

Calculate the over absorption or under absorption of overheads for each department.

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