Accounting 9706 · AS & A Level · Traditional costing methods

Traditional costing methods — practice question

Andreas runs a bicycle manufacturing business. It has two production departments, Machining and Assembly, and two service departments, Stores and Maintenance. The information below is given for one bicycle and for the year ended 31 August 2023.
(a)[6]

Complete the table so that it shows how the budgeted overheads are apportioned for the year ended 31 August 2023.

(b)[4]

Calculate, to two decimal places, the overhead absorption rate for each production department, using an appropriate basis.

(c)[4]

Calculate the over-absorption or under-absorption of overheads for every production department.

(d)[4]

Calculate the direct cost of making one bicycle for the special order.

(e)[5]

Prepare a statement showing the total selling price Andreas should quote to the customer so that a 30% gross profit margin is earned on the order.

(f)[7]

Advise Andreas on whether he should accept the terms proposed by the customer. Justify your answer.

Worked solution & mark scheme

This 30-mark question has a full step-by-step worked solution and mark scheme.

  • Full mark scheme, point by point
  • Step-by-step worked solution
  • Write your answer & get it marked instantly by AI