- November 22, 2015 at 10:24 am #284494
Sir, I’m facing some difficulty for this question :-
QUESTION 7 : GHK manufacturing four products from different combinations of the same direct materials and direct labour…
(the question and answers can be found at this link :https://www.cimaglobal.com/documents/importeddocuments/may06p2book.pdf)
From the model answer, How do I get the respected cost per unit of direct material for each of the products mentioned? Yes, I know $7per kg is the replacement cost as $5 is the sunk cost. But how can I can get G ($4.20), H ($5.60), J ($2.10), K ($8.40)??
It’s difficult to type the whole question out as there are too many information in a table.November 22, 2015 at 12:32 pm #284528
I will answer this question, but please do not post CIMA questions again in this forum – it is for ACCA questions.
I will show you the workings for G (the others are done in the same way).
Currently material A is charged at $3 per unit ($9,000/3,000).
Since the budget is based on original cost of $5 per kg, it means that they must be budgeted on using 3/5 = 0.6 kg.
It should be charged at $7 per kg, which means 0.6 x $7 = $4.20 per unit.November 22, 2015 at 1:11 pm #284544
Sorry, my bad. I didn’t intend of posting it but it was difficult to type the entire question down.
Here, you used ‘budget price per unit over original cost’ formulae to get the budgeted unit?November 22, 2015 at 1:22 pm #284547
And Sir, the overhead on note 4. I divided $6k with 3k units resulting to $2 per unit but the answer showed $1 per unit. I don’t get it 🙁November 22, 2015 at 1:58 pm #284562
Yes (although i don’t like to think of it as a formula).November 22, 2015 at 2:00 pm #284563
You have not read note 4 🙂
So for G, removing the $1,000 would mean they were left with 5,000 for 3,000 units and 7,000 for 5,000 units.
Thank you need to use the high low method which gives a variable cost per unit of (7,000 – 5,000) / (5,000 – 3,000) = $1 per unit.November 22, 2015 at 2:06 pm #284565
and the $7,000 would be from….??November 22, 2015 at 2:08 pm #284569
Subtracting 1,000 from the cost of $8,000 (for 5,000 units) !!November 22, 2015 at 2:10 pm #284572
The rest of it is high-low, and if you are not clear about the high-low method you should watch the relevant F2 lectures (it is at the end of the chapter on cost classification and behaviour).November 22, 2015 at 2:14 pm #284573
Ooohh! How come only overheads we are to use the high low method and the rest are different?November 22, 2015 at 2:17 pm #284575
I’ve watched the F2 lectures but I didn’t know we are to use the high-low method for this kind of question >.<November 22, 2015 at 4:05 pm #284612
But I did the workings for you two replies ago 🙂
You take the difference between the two total costs (after having removed the $1000) and divide by the difference between the two quantities. This gives the variable cost per unit.November 22, 2015 at 4:55 pm #284630
That explains it. Sir, for the relevant selling price per unit.. which column should i see for each product? Is it the one with 3k units or 5k units? Coz no matter which one I choose to calculate out the sp/unit, it gives the same figure.November 22, 2015 at 5:51 pm #284634
In part b) as per the answer : 1,983 units are unsatisfied from the non contract demand of 4,000 units and it requires more of Material B than is released. I’m stuck at why product K should be manufactured at 1,050 units.November 23, 2015 at 6:56 am #284661
It doesn’t matter which column you take – you would expect the selling price per unit to be the same!!November 23, 2015 at 7:00 am #284662
There is 1260 kg of material B released.
Each unit of K takes 1.20 kg
Therefore they can produce 1260 / 1.20 = 1,050 units
(This really is not so good a question to practice for Paper F5).November 23, 2015 at 7:23 am #284671
Yea, I thought so but I had no choice coz I was given this kind of question by my own lecturer although I’m taking ACCA, not CIMA 🙁November 23, 2015 at 7:51 am #284679
I can’t imagine why he has given you this question.
It is better to practice using real past ACCA questions 🙂November 23, 2015 at 7:56 am #284683
Alright, Sir. Thank you so much for your patience in explaining 🙂November 23, 2015 at 10:03 am #284693
You are welcome 🙂November 25, 2015 at 9:02 am #285122monicaokuribidoMember
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On Relevant costing lecture example 2 bank loan interest were relevant but we had a similar scenario on Specimen exam F2 June 2014 section B question 1 (viii) that the interest was irrelevant, can you please help us understand this.
Thank you for great lectures.
Kind Regards.November 25, 2015 at 10:31 am #285140
The F2 question was asking relevant cash flows for a net present value calculations.
Interest is never relevant there because it is accounted for in the discounting.
Relevant cash flows in Paper F5 have nothing to do with net present values.
Net present value calculations are not in the syllabus for paper F5 and are not relevant until Paper F9.
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