J Limited is a company that produces two types of filing cabinet; a basic model and a superior...

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J Limited is a company that produces two types of filing cabinet; a basic model and a superior model. The company wishes to calculate the total cost per unit for each product, but so far has only calculated the direct cost per unit as follows: BasicSuperior ££ DIRECT COSTS PER UNIT Materials30.0050.00 Labour cost17.0022.50 TOTAL DIRECT COSTS PER UNIT47.0072.50 The filing cabinets are manufactured using a two part process. The first part of the process is to assemble the filing cabinet and the second part of the process is to paint the filing cabinet. The indirect overheads for the year comprise: £ Factory manager’s salary40,000 Rent for factory60,000 Insurance for factory 30,000 Salary of supervisor in assembly department28,500 Salary of supervisor in paint department26,500 TOTAL£185,000 To apportion the factory manager’s salary the company intends to use number of employees (there are 6 employees in the assembly department and 4 employees in the paint department); to apportion the rent cost the company intends to use floor area (the assembly department has an area of 500 square metresand the paint department 700 square metres); to apportion the insurance cost the company intends to use value of machinery (the value of machinery in the assembly department is £100,000 and the value of machinery in the paint department is £50,000) . The company has decided that the absorption of the above overheads should be performed on the basis of labour hours. The labour hours for assembling and painting one filing cabinet are as follows: BasicSuperior Assembly2 hours2.5 hours Painting1 hours1.5 hour

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MAN00017I BA and BSc Degree Examinations 2014-2015 THE YORK MANAGEMENT SCHOOL Intermediate Management Accounting Time allowed: Two hours You must answer all questions Each question to be answered on a separate page. University approved calculators may be used in this examination. Show all workings TURN OVER Question 1(25 marks) J Limited is a company that produces two types of filing cabinet; a basic model and a superior model. The company wishes to calculate the total cost per unit for each product, but so far has only calculated the direct cost per unit as follows: BasicSuperior££DIRECT COSTS PER UNITMaterials30.0050.00Labour cost17.0022.50TOTAL DIRECT COSTS PER UNIT47.0072.50 The filing cabinets are manufactured using a two part process. The first part of the process is to assemble the filing cabinet and the second part of the process is to paint the filing cabinet. The indirect overheads for the year comprise: £Factory manager’s salary40,000Rent for factory60,000Insurance for factory 30,000Salary of supervisor in assembly department28,500Salary of supervisor in paint department26,500TOTAL£185,000 To apportion the factory manager’s salary the company intends to use number of employees (there are 6 employees in the assembly department and 4 employees in the paint department); to apportion the rent cost the company intends to use floor area (the assembly department has an area of 500 square metresand the paint department 700 square metres); to apportion the insurance cost the company intends to use value of machinery (the value of machinery in the assembly department is £100,000 and the value of machinery in the paint department is £50,000) . The company has decided that the absorption of the above overheads should be performed on the basis of labour hours. The labour hours for assembling and painting one filing cabinet are as follows: BasicSuperiorAssembly2 hours2.5...

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David · Accepted Answer

MAN00017I Intermediate Management Accounting  
2014-15 Examination Solutions 
 
Question 1(25 marks) 
 
 
Requirement 1 
 
 
 Assembly dept Painting dept 
ALLOCATION   
Supervisor salaries 28,500 26,500(1 mark)
APPORTIONMENT   
Factory manager salary 
(6:4) 
24,000 16,000(1 mark) 
Rent 
(500:700) 
25,000 35,000(1 mark) 
Insurance 
(100,000:50,000) 
20,000 10,000(1 mark) 
 £97,500 £87,500  (1 mark)
ABSORPTION   
Assembly labour hours 
(10,000 x 2hrs) + (5,000 
x 2.5hrs) 
 
Painting labour hours 
(10,000 x 1hrs) + (5,000 
x 1.5hrs) 
 
 
32,500 hours(2 marks) 
 
 
 
 
 
17,500(2 marks) 
Absorption rates 
 
£97,500/32,500 
 
= £3.00 per hour 
£87,500/17,500 
 
= £5.00 per hour 
 
               (1 mark) 
 
 
  [10 marks] 
 
 Basic Superior 
 £ £ 
DIRECT COSTS   
Materials 30.00 50.00 
Labour cost 17.00 22.50 
TOTAL DIRECT COSTS 47.00 72.50
INDIRECT COSTS   
Assembly   
2hrs x £3.00  
2.5hrs x £3.00 
 
Painting 
1hr x £5 
1.5hrs x £5 
 
6.00 
 
 
 
5.00 
 
7.50 
 
 
 
7.50 

TOTAL COST PER FILING 
CABINET 
£58.00 £87.50 
 
 [9 marks- 1.5 marks for each point ] 
 
Requirement 2 
Students need to explain: 
Allocation – assigning whole of indirect cost to cost centre 
Apportionment – spreading indirect costs over cost centres 
Absorption – attaching indirect overheads to products 
[6 marks- 2 for each point] 

Question 2 (25 marks) 
 
(i) Calculate the cash flows. 
 
Capital allowances 
Year Opening 
bal 
Capital 
allowances 
at 25% 
Balancing 
allowance/(charge) 
Closing 
bal
 £‟000 £ „000 £‟000 £‟000
0 50   50  
1 50 12.5  37.5 ½  
2 37.5 9.375  28.125 ½  
3 28.125     
Proceeds (10)  18.125  1 
4      
Total  21.875 18.125   
 
Taxation payable 
Year 0 1 2 3 4  
 £‟000 £ „000 £‟00
0 
£‟000 £‟000
Sales  225 236.
25 
248.063  ½ 
Material  (112.5) (118
.125
) 
(124.03
1) 
 ½ 
Leasing   (30) (30) (30)  ½  
Fixed overhead  (35) (35) (35)  ½ 
Capital allowances  (12.5) (9.3
75) 
(18.125)  1 
Profit before tax  35 43.7
5 
40.

J Limited is a company that produces two types of filing cabinet; a basic model and a superior model. The company wishes to calculate the total cost per unit for each product, but so far has only...

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