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

Costs and cost behaviour — practice question

H Limited is a services company that offers administrative support to other businesses. It has two separate departments, Payroll services and Accountancy services. The directors are now drawing up budgets for the year ending 31 December 2025.
(a(i))[1]

Calculate for the Payroll services department only: the total number of chargeable hours available for the year ending 31 December 2025.

(a(ii))[3]

Calculate for the Payroll services department only: the break-even point in hours.

(a(iii))[1]

Calculate for the Payroll services department only: the number of chargeable hours required to produce a profit of $45000 for the year ending 31 December 2025.

(b)[4]

Prepare a budgeted marginal cost statement to show the Payroll services department profit for the year ending 31 December 2025.

(c)[3]

Calculate the number of overtime hours required for the Payroll services department for the year ending 31 December 2025 if the directors choose Option 1.

(d)[7]

Prepare a budgeted marginal cost statement to show the Payroll services department profit for the year ending 31 December 2025 if the directors choose Option 1.

(e)[1]

Calculate the Payroll services department contribution for the year ending 31 December 2025 if the directors choose Option 2.

(f)[7]

Advise the directors which option they should choose. Justify your answer by considering both financial and non-financial factors.

(g)[3]

State three limitations of cost-volume-profit analysis.

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