Cost allocation – Knowsia

SCS – L3 – Q28 – Environment analysis

Comment on the value and purpose of SWOT analysis in GlobalCom's corporate review process.

Question

(a) Comment on the value and purpose of the SWOT analysis in the process of corporate review.

(b) Explain what other charging systems Tech Trend could adopt for supplying Nexus Com. Discuss how your proposals would affect the remit under which Tech Trend currently operates.

(d) Discuss the considerations which a buyer is likely to consider when constructing its bid price.

(e) Suggest, and briefly justify, alternative strategies which Nexus Com could implement in Tech Trend in order to increase its competitiveness, and to identify more clearly its performance.

Answer

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Tags: charging systems, Cost allocation, internal efficiency, market-based pricing, profit centre
Level: Level 3

Topic: Competitive advantage, Functional strategies

MA – L2 – Q15 – Budgetary Control

Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

Question

A private medical practice based near Mount Adaklu has five full-time doctors, five full-time assistants, and two administrators.
Each doctor treats 18 patients each day on average. The medical centre is open for five days each week, 46 weeks each year.
Charges for patients vary according to the age of the patient and the nature of the treatment provided.

Charges

	Adults below 65 years of age	Children and individuals aged 65 years and over
No treatment: consultation only	GH¢50	GH¢30
Minor treatment	GH¢200	GH¢120
Major treatment	GH¢600	GH¢280

The patient mix and the treatment mix are as follows:
Patients:

Adults: 45%
Children: 25%
Over 65 years old: 30%

Treatment:

No treatment: 20%
Minor treatment: 70%
Major treatment: 10%

The salary of each doctor is GH¢240,000, assistants earn GH¢100,000, and administrators earn GH¢80,000. In addition, everyone receives a 5% bonus at the end of the year.
The medical practice expects to pay GH¢414,300 for materials next year and other (fixed) costs will be GH¢733,600.
Required:
Using the information provided, present a statement of profit or loss for the medical practice for next year. (Ignore the effects of inflation.)

Answer

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Tags: Budgeting, Cost allocation, Financial Performance, Medical Services, Operational Costs, Patient Mix, Profit or Loss, Revenue Calculation, Salary Costs
Level: Level 2

Topic: Budgetary Control

MA – L2 – Q14 – Budgetary control

Prepare a budgeted profit or loss statement for Mampong Delivery Co. for Year 2, considering revenue, salaries, fuel, and operational costs.

Question

A company operating out of Mampong provides three types of delivery service to customers: service A, service B, and service C. Customers are a mix of firms with a contract for service with the company, and non-contract customers.
The following information relates to performance in the year to 31st December Year 1:

	Service A	Service B	Service C
Number of deliveries made	350,000	250,000	20,000
% of deliveries to contract customers	60%	60%	80%
Price charged per delivery:
Contract customers	GH¢9	GH¢15	GH¢300
Premium for non-contract customers	+30%	+50%	+20%

The premium for non-contract customers is in addition to the rate charged to contract customers.
All employees in the company were paid GH¢45,000 per year and sundry operating costs, excluding salaries and fuel costs, were GH¢4,000,000 for the year.
The following operational data for the year relates to deliveries:

	Services A and B	Service C
Average kilometres per vehicle/day	400	600
Number of vehicles	50	18
Operating days in the year	300	300

For Year 2, the company has agreed a fixed price contract for fuel. As a result of this contract, fuel prices will be:
(a) GH¢0.40 per kilometre for Services A and B
(b) GH¢0.80 per kilometre for Service C.
Sales prices will be 3% higher in Year 2 than in Year 1, and salaries and operational expenses will be 5% higher. Sales volume will be exactly the same as in Year 1.
The number of employees will also be the same as in Year 1: 60 employees working full-time on Services A and B and 25 employees working full-time on Service C.
Required:
(a) Prepare a budgeted statement of profit or loss for the year to 31st December Year 2.

(b) Comment on vehicle utilisation.

Answer

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Tags: Budgeting, Cost allocation, Financial Performance, Fuel Costs, Operational Costs, Performance Analysis, Profit or Loss, Revenue Calculation, Sales Projections, Services
Level: Level 2

Topic: Budgetary Control

MA – L2 – Q11 – Activity-based costing

Calculate budgeted production cost per unit for products using traditional and activity-based costing methods.

Question

ADDO COMPANY
ADDO Company has a single production process, for which the following costs have been estimated for the period ending 31st December Year 7:

	GH¢
Material receipt and inspection costs	31,200
Power costs	39,000
Material handling costs	27,300

ADDO Company makes three products – X, Y, and Z. These products are made by the same group of employees, using power drills. The employees are paid GH¢8 per hour. The following budgeted information has been obtained for the period ending 31st December Year 7:

	Product X	Product Y	Product Z
Production quantity (units)	2,000	1,500	800
Batches of material	10	5	15
Direct material (metres)	5	3	4
Direct material cost (GH¢)	6	4	6
Direct labour (minutes)	30	20	15
Number of power drill operations (per unit)	3	2	3

Overhead costs are currently absorbed into the cost of production units using an absorption rate per direct labour hour. A factory-wide absorption rate is used for work in all the production departments.
An activity-based costing investigation has revealed that the cost drivers for the overhead costs are as follows:

Material receipt and inspection: number of batches of material
Power: number of power drill operations
Material handling: quantity of material (metres) handled.

Required:
Prepare a summary of the budgeted production cost per unit for each of the products X, Y, and Z for the period ending 31 December Year 7:
(a) using the existing method for the absorption of overhead costs, and
(b) using an approach based on activity-based costing, and the information available about cost drivers.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity Based Costing, Cost allocation, Cost drivers, Overhead absorption, Production costing
Level: Level 2

Topic: Activity-based costing

Tag (SQ): Cost allocation

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SCS – L3 – Q28 – Environment analysis

Comment on the value and purpose of SWOT analysis in GlobalCom's corporate review process.

MA – L2 – Q15 – Budgetary Control

Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

MA – L2 – Q14 – Budgetary control

Prepare a budgeted profit or loss statement for Mampong Delivery Co. for Year 2, considering revenue, salaries, fuel, and operational costs.

MA – L2 – Q11 – Activity-based costing

Calculate budgeted production cost per unit for products using traditional and activity-based costing methods.

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Tag (SQ): Cost allocation

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SCS – L3 – Q28 – Environment analysis

Comment on the value and purpose of SWOT analysis in GlobalCom's corporate review process.

You're reporting an error for "SCS – L3 – Q28 – Environment analysis"

MA – L2 – Q15 – Budgetary Control

Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

You're reporting an error for "MA – L2 – Q15 – Budgetary Control"

MA – L2 – Q14 – Budgetary control

Prepare a budgeted profit or loss statement for Mampong Delivery Co. for Year 2, considering revenue, salaries, fuel, and operational costs.

You're reporting an error for "MA – L2 – Q14 – Budgetary control"

MA – L2 – Q11 – Activity-based costing

Calculate budgeted production cost per unit for products using traditional and activity-based costing methods.

You're reporting an error for "MA – L2 – Q11 – Activity-based costing"

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