Use the following information to answer Question 20 and Question 21.
Mop Ltd. manufactures product P. Data for product P is as follows:
Direct material cost per unit: Sh.100
Direct labour cost per unit: Sh.130
Direct labour hours per unit: 2 hours
Production overhead absorption rate (OAR): Sh.60 per direct labour hour
Selling and administrative overheads: 10% of total production cost per unit
Mop Ltd. requires a mark-up of 20% of total cost per unit.
20. Calculate the total cost of making product P.
A. Sh.385
B. Sh.230
C. Sh.350
D. Sh.319
21. Calculate the selling price of product P.
A. Sh.382.80
B. Sh.420.00
C. Sh.276.00
D. Sh.462.00
22. A budget which is prepared in a manner so as to give the budget cost for any given level of activity is known as
A. master budget
B. cash budget
C. functional budget
D. flexible budget
Use the following information to answer Question 23 to Question 25.
Budgeted sales for product Q for the next month are 20,000 units. Each unit of product Q requires 5 kgs of raw materials.
Additional budget information for next month is as follows:
Raw materials:
Opening inventory: 7,500 kgs
Closing inventory: 9,000 kgs
Finished product Q:
Opening inventory: 12,000 units
Closing inventory: 9,000 units
23. Calculate the production budget for next month in units only.
A. 29,000 units
B. 17,000 units
C. 23,000 units
D. 20,000 units
Answer (2)
Let's break down the steps to solve each of the questions:
20. Calculate the total cost of making product P.
To calculate the total cost, we need to consider all the costs involved per unit:
Direct Material Cost per Unit: Sh.100
Direct Labour Cost per Unit: Sh.130
Production Overhead Cost:
Given the production overhead absorption rate is Sh.60 per direct labour hour and each unit requires 2 direct labour hours.
So, Production Overhead Cost per Unit = 2 hours * Sh.60 = Sh.120
Total Production Cost per Unit = Direct Material Cost + Direct Labour Cost + Production Overhead Cost = Sh.100 + Sh.130 + Sh.120 = Sh.350
Selling and Administrative Overheads:
This is 10% of the Total Production Cost = 0.10 * Sh.350 = Sh.35
Therefore, the Total Cost of making product P is:
Total Cost = Total Production Cost + Selling and Administrative Overheads = Sh.350 + Sh.35 = Sh.385
Chosen Option for Question 20: A. Sh.385
21. Calculate the selling price of product P.
To calculate the selling price, we require a mark-up of 20% on the total cost:
Total Cost (from Q20): Sh.385
Mark-up = 20% of Total Cost = 0.20 * Sh.385 = Sh.77
Selling Price = Total Cost + Mark-up = Sh.385 + Sh.77 = Sh.462
Chosen Option for Question 21: D. Sh.462.00
22. A budget which is prepared in a manner so as to give the budget cost for any given level of activity is known as:
A flexible budget is specifically designed to provide budgeted costs for any level of activity, making it adaptable to various production/sales volumes.
Chosen Option for Question 22: D. flexible budget
23. Calculate the production budget for next month in units only.
To determine the production budget, we use the formula:
Production Budget = Budgeted Sales + Desired Ending Inventory − Beginning Inventory
Budgeted Sales : 20,000 units
Desired Ending Inventory : 9,000 units
Beginning Inventory : 12,000 units
Substitute the values into the formula:
Production Budget = 20 , 000 + 9 , 000 − 12 , 000 = 17 , 000 units
Chosen Option for Question 23: B. 17,000 units
The total cost of making product P is Sh.385, and the selling price is Sh.462. Additionally, the production budget for the next month is calculated to be 17,000 units. Therefore, the chosen options are A for Question 20, D for Question 21, and B for Question 23.
;
