i. Cost-volume-profit analysis assumes that selling price will remain constant throughout the
period under analysis. In real life business situation selling price is likely to change due to
market forces.
ii. Assumes that variable cost per unit remain constant. In business situation, variable costs are
likely to increase.
iii. Assumes that technology will remain constant. However technology is always changing due
to innovations.
iv. Assumes that supply equals demand and hence there is no closing stock. It is difficult to
match supply and demand hence closing stock is always there.
v. Assume that costs can only be divided into two, fixed cost and variable costs, hence no semivariable
costs. It is not easy to completely classify costs into fixed and variable.
vi. Only ideal for short-term planning
vii. Variable cost and sales are unlikely to be linear
viii. The chart is only a reasonable pointer to performance within normal activity ranges
marto answered the question on February 26, 2019 at 08:52
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DXM Ltd. manufactures a cleaning detergent using chemicals that it buys from a number of
suppliers. In the past, DXM Ltd. has used a periodic review inventory control system with
maximum and re-order levels to control its inventory.
The Cost Accountant of DXM Ltd. has recommended adoption of just-in-time (JIT) system in
managing the company's inventory.
Required:
Describe how a just-in-time (JIT) system differs from periodic review control system
Date posted: February 26, 2019. Answers (1)
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I July 2014, the sales demand and the selling prices for Zec are...(Solved)
Makinika Ltd. manufactures a single product branded Zec. For the financial year commencing
I July 2014, the sales demand and the selling prices for Zec are expected to be as follows:
Additional information:
1. Product Zec is produced at a constant rate of 45,000 units per quarter.
2. During the year, the excess production units are held in inventory at a cost of Sh.6 per unit per
quarter based on average inventory.
3. No inventory of product Zec is expected to be held on 1 July 2014.
4. The production costs per unit of product Zec are expected to be as follows:
5. The management is proposing to change the current system of production to the just-in-time
(JIT) system.
6. If the JIT system is adopted, and production level exceeds 45,000 units per quarter, the excess
units would have to be produced by working overtime. This would mean that the unit direct
labour and variable overhead costs of any units above 45,000 per quarter would increase by
50%.
7. No other costs would be affected by working overtime
Required:
Advise the management whether the just-in-time (JIT) system of production should be adopted.
Date posted: February 26, 2019. Answers (1)
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The purchasing director is proposing a system where all purchases are carried out...(Solved)
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Required:
Explain four
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Date posted: February 26, 2019. Answers (1)
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Donta Ltd., a car manufacturer, wishes to determine a target cost for a new model of a car that
the company is about to launch in the market. The price of the car will be set at Sh.4 million.
The company requires a 15% profit margin.
Required;-
The target cost for the car.
Date posted: February 26, 2019. Answers (1)
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Date posted: February 26, 2019. Answers (1)
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BS Limited manufactures a single standard product and operates a system of standard costing using a
fixed budget. As the company's assistant cost accountant, you are responsible for preparing the
monthly operating statements. Details from the budget, the standard product costs and actual results
for the month ended 31 May 2003 are given below:
Required:
The operating statement for the month of May, 2004 showing:
(a) The budgeted profit.
(b) Variances for direct materials, direct wages, overheads and sales.
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Date posted: February 26, 2019. Answers (1)
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Ujuzi Company Limited manufactures and sells one type of product Alpha . The standard
production costs of this item are as follows:
The fixed overheads are allocated on the basis of a budgeted production volume of 3.500 units per
year.During the financial year ended 31 October 2004, 4,000 units of output were produced. The
actual production costs incurred during the year are given below.
Required:
a) Material price and usage variances.
b) Labour rate and efficiency variances
c) Total variable overheads variances
d) Fixed overheads volume variances
e) Identify two possible causes of;-
i) Material usage variance
ii) Labour efficiency variance
Date posted: February 26, 2019. Answers (1)
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to its range a side board. The standard cost specification for each...(Solved)
Ufundi Furniture Ltd. Manufactures a wide range of home furniture. Recently the company added
to its range a side board. The standard cost specification for each side board is given below:
The abnormal idle hours were 400 and the hours worked were recorded as 4,800 hours.
Required:
i) Material price variances (for both materials).
ii) Material usage variance (for both materials)
iii) Labour rate of pay variance.
iv) Labour efficiency variance.
v) Idle time variance.
(c) Suggest possible causes of the material variances.
Date posted: February 26, 2019. Answers (1)
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State the advantages of using standard costs in the manufacturing industry.
Date posted: February 26, 2019. Answers (1)
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different types of chemicals namely Exe, Wye and Zed. The...(Solved)
BCH Ltd produces a type of liquid fertilizer. The production of this liquid fertilizer requires three
different types of chemicals namely Exe, Wye and Zed. The chemicals are mixed in the
proportion of 0.4, 0.3 and 0.3 respectively and their standard costs are Sh.12 Sh.7 and Sh.5 per
litre respectively.
Additional information:
1. In the recent past, the standard yield has been at 80% on 100 litres of the chemicals mix.
2. The company maintains a policy of not carrying any raw materials, as storage space is
limited.
3. Annual production of the liquid fertilizer has been set at 8,320,000 litres.
4. In the month of April 2006, the company produced 150,000 litres of the fertilizer at a total
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chemicals were as follows:
Date posted: February 26, 2019. Answers (1)
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The standard mix of a product branded Max is as follows:
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i) Material price variance.
ii) Material mix variance.
iii) Material yield variance.
Date posted: February 26, 2019. Answers (1)
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namely X, Y, and Z. The standard mix of product Regular is provided below;-(Solved)
Excel limited manufacturers a product branded Regular that uses three different ingredients
namely X, Y, and Z. The standard mix of product Regular is provided below;-
Required:
i. Material price variance
ii. Material mix variance
iii. Material yield variance
iv. Material usage variance
v. Material cost variance
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cost of sh. 8000 made up as follows:-(Solved)
Hygiene products limited manufacturers a single product, a melamine kitchen sink with a standard
cost of sh. 8000 made up as follows:-
Required:
a) In columnar form prepare
i. Actual income statement
ii. Flexible income statement
iii. A reconciliation statement using the reported variances
b) Computer the following variances
i. Material price variance
ii. Material usage variance
iii. Labour rate variance
iv. Labour efficiency variance
v. Material cost variance
Date posted: February 26, 2019. Answers (1)
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The following data relate to actual output costs and variances for the month of March 2010.(Solved)
Viwandani company limited manufactures a single product branded Exe
The following data relate to actual output costs and variances for the month of March 2010.
Date posted: February 26, 2019. Answers (1)