[Noureen]

Hi John,

Sorry about copying the question. I was not aware of it. Thanks for letting me know.

And many thanks for your reply

[Noureen]

Hi John,

The question from BPP kit which is asking for the present value of tax allowable depreciation is Q105 and also the question 106 which is asking the after tax present value of perpetuity is 106..

please if you can explain those 2 as well?

Many thanks,
Noureen

[Noureen]

Hi John,

Thank you for your reply. I have watched all your lectures and I’m very confident of calculating Tax allowable depreciation and tax saving on it..

This question is from Kaplan and also in BPP there is a question in the exam kit where they are asking at the PV of tax allowable depreciation.

I have copied the full question and I’m glad to hear that the chances of such a question is extremely thin.

But this type of question is also asked in BPP kit under the investment appraisal topic.

Please if you still can answer how to calculate I will appreciate that.

Many thanks,
Noureen

[Noureen]

Thank you John

[Noureen]

Hi John

Can you please explain this bit.

pv at year 5 in perpetuity = FV * 6.830?

Many Thanks,
Noureen

[Noureen]

Hi John,

That mean we will adjust the spot rate first and then subtract the premium from the spot rate …so as it is a receipt it will be the higher rate I-e 2.0030-.0020 = 2.001

therefore 2000/2.001 =999.5 euros

is this right answer?

[Noureen]

sorry where Can I send you my answer.. can you provide me with your email address.

Many thanks,
Noureen

[Noureen]

Hi John,

The management accountant of a company has prepared a preform for a minimum tender price the cost in profit Ma is 2m and in notes it says. In case of labour. If the contract was lose the. All of the current staff would me made redundant . Labour is at full capacity. Redundancy cost are estimated to be $50000 now or 60,000 in one year time which one is a relevant cost to be considered as a relevant cost.

Secondly if the current contract is lost then machinery sold for 6000 now or 4500 in one year which one is relevant to the decision and do we add the machine cost as a positive number or negative?

Thanks
Noureen

[Noureen]

No this not the past exam one of the exam kits..

[Noureen]

Also I forgot to supply information about division Y div Y uses one unit of material D to make one unit of finished product . It incurs additional cost of $ 30 per finished product and anticipates that it will produce and sell 2000 finished product . The selling price is $60.

[Noureen]

Hi John,
Division X produces 2 separate material Material G and Material D each unit of material G and D take the same amount of labour time to produce. MAterial G is only sold to external customer at a price of $14. The VC incurred $9 and fixed overheads amount to $1 per unit . The budgeted production for G is 2700 units
Material D is sold to div Y only. The transfer price that has been set for each unit is full cost + 10 % . This material can be purchased external for $26 but div Y have been told by management that they must buy the material from div x . Div x incur VC of $20 and FC of $8 in producing material D budgeted production and sales are 2000 units div X has spare capacity.

A.What is the likely reaction by Div x and Div y to the TP being set at full cost plus 10% recommend the reason a range of TP of material D

B.And second part of div x is at full capacity in terms of labour recommend a new range of TPnfor material D .

I have looked at your lecture and if looking at requirement A the MC of div X is 28 and division x cannot sell less than that and the min price will be set by X but in that case also div Y is making a loss of 1600 if full cost plus 10 percent is used so it will result in goal incongruncy and also the autonomy is not there as div Y must buy from div X but in that case what will be the TP will it be just 28? Or div y will purchase it from external supplier. At $ 26.

Part b I know the the TP will be MC + opportunity cost which would be lost contribution from material G but I’m confused on the calculation can you do it for me pleAse and then the transfer price too

Thanks
Noureen

[Noureen]

Thank you John.

But I was actually looking this question from Kaplan exam kit and part A and b is only given in exam kit which is actually part C and D also my point is when you look at the solution you have reproduce all the cost per unit be it paper, printing machine cost and overheads for part C and for part D you have gone further for property cost, quality control and production setups using the cost driver . So for me it’s confusing in a sense that the why the given table has different per unit cost when you have to reproduce it on the basis of ( point 1,2,3 and 4) why this line is given if the overheads above were reallocated under ABC principle then the result would be that the overhead allocation to CB would be $0.05 higher and the overhead allocated would be $0.03 lower than previously..?

This question is difficult to comprehend.

[Noureen]

Hi John,

I’m trying this question 2008 June Jola company on ABC I don’t understand why the question has given a proforma of information about paper 0.75 printing 1.45 machining cost 1.15 and overheads of 2.3 for CB and TJ separately per unit and in part a it asked to calculate cost per unit and the margin for the CB and TJ using machine hours for section A I copied the proforma till machine cost and for overheads I calculated the OAR based on machine hours which is not right in solution it’s totally different and also in question you have to convert kegs into grams litres into Ml and minutes into hours this kind of question is extremely confusing.. Could you kindly explain how to actually solve such a question if encountered in exam?

Also is there any formula of how to find out number of set ups and number of production runs some times a information of batch Units is given and set ups also given and production runs also given how do we calculate all..please I’m confused can you help?

Thanks
Noureeb

[Noureen]

Hi john,

I’m doing a question about relevant costing and the question say that you are the management accountant of a publishing and printing company which has been asked to quote for the production of a programme for the village fair the profound created by trainee accountant has variable cost of 1500 .. And in explanation it states that variable overheads represents the cost of operating the printing press and binding machine so is this cost relevant to the decision or not? Also in performa it’s have a heading printing press depreciation according to me it shouldn’t be relevant but in explanation it says when not being used by the company the printing press is hired to outside companies for £ 7 per hour and earns a contribution of 4 an hour and unlimited demand of this facility so is this a relevant cost?

Thanks
Nour

[Noureen]

Hi mike,

Sorry for the late reply. But the question I have typed above is word by word in the text book could you kindly give your solution of the above question.

Thanks
Noureen

[Noureen]

Hi Mike,

I have a confusion most of the people are saying about IAS 18 I have a recent text book from Kaplan which has IFRS 15 which covers Revenue recognition from contracts with customer as I have not finished all the IAS’s Is there any difference between the previous IAS 18 (which you mentioned will not be examinable fromSeptember onwards) and the IFRS 15.

Please reply..

Also I’m stuck at a question about revenue recognition
Which I will copy here.
Q: On 1st jan 20×1 castle enter into a contract with a customer to construct a specialised building for consideration of $10 m. Castle is not able to use the building themselves at any point during the construction. At 31st dec 20x 1, castle has incurred cost of 6 m cost to complete are $2 m. Castle decide to measure the progress towards completion based on cost incurred. To date castle has received $3m from the customer.

Requirement: how should this transaction be accounted for in the year ended Dec 31.

The book has given to follow 4 steps approach.
First to calculate the overall profit:
Price
Less: cost to date
Less: cost to complete
Overall Profit or loss

I’m having a profit of 2m as my answer to step 1 but the book as taken $6 as cost to date as well as cost to complete and reported an overall loss of $2m . Could you kindly rectify my confusion

Also in the second step of measuring progress:? Which is measured by input method of Cost to date compared to total cost has taken $6m/12m why. I think it should be $6m/ 10m.. Could you kindly explain

Thanks
Noureen

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