Cost Estimation – NBC Institute

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

Question

A situation where budgeted revenues are intentionally under-estimated or budgeted costs are intentionally over-estimated is known as:
A. Participatory budget
B. Surplus budget
C. Budget slack
D. Deficit budget
E. Imposed budget

Answer

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Tags: Budget Slack, Budgeting, Cost Estimation
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

Question

Use the high-low method to calculate the fixed and variable elements of the following costs:

Month	Activity	N
January	600	1,700
February	800	1,900
March	650	1,750
April	850	1,950
May	900	2,100
June	1,350	2,300

A. VC = N0.08/unit, FC = N1120
B. VC = N0.88/unit, FC = N1020
C. VC = N0.80/unit, FC = N1220
D. VC = N0.82/unit, FC = N1320
E. VC = N0.85/unit, FC = N1330

Answer

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Tags: Cost Estimation, Fixed Cost, High-Low Method, Variable Cost
Level: Level 1

Topic: Costing Techniques
Series: NOV 2014

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

Question

MICRA Manufacturing Company makes a product named as VATA. The records of some of the manufacturing expenses are easily identified as fixed or directly varied with production. The cost accountant of the company is confronted with the problem of preparing a budget for the coming year and wishes to determine the fixed and variable elements of the mixed factory overhead.

The following monthly information in respect of output and mixed factory overhead are provided as follows:

MONTH	NUMBER OF UNITS (x)	MIXED FACTORY OVERHEAD (y)
JANUARY	150	80
FEBRUARY	200	100
MARCH	300	135
APRIL	250	125
MAY	300	130
JUNE	250	120
JULY	350	140
AUGUST	300	125
SEPTEMBER	250	115
OCTOBER	150	80

Required:

a. Calculate the fixed and variable elements of the above mixed factory overhead using the high and low method. (5 Marks)

b. Use the linear regression analysis and determine the line of best fit. (15 Marks)

Answer

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Tags: Cost behavior, Cost Estimation, High-Low Method, Linear Regression
Level: Level 1

Topic: Forecasting Techniques
Series: MAY 2016

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

Question

Diminutive Limited is a manufacturing company situated at the Jubilee field that produces chemicals for oil production. The company is preparing its budget for the coming year. It expects to be able to sell 10,000 tonnes of its only product, the “Sparkle Oil,” in January 2016. Sales are then expected to rise to 11,000 tonnes in February and 14,000 tonnes in March and then remain stable for the rest of the year.

Diminutive Limited aims to carry a finished goods inventory at the end of each month equal to 10% of the following month’s sales. Each “Sparkle Oil” takes 2 hours of labour to make. Diminutive Limited’s 132 production workers are employed on contracts that require them to work a minimum of 160 hours per month and are each paid GH¢1,280 per month. Production workers are highly skilled and require a minimum of one year’s training. In the short term, it is not possible to recruit any more production workers. Any labour hours required in excess of 160 hours per worker are made up by overtime that is paid at the basic rate plus an overtime premium of 48% of the basic rate.

Required:

i) Prepare the production budget on a monthly basis for the first quarter of 2016. (3 marks)

ii) Prepare the labour budget for the first quarter of 2016 showing both hours and labour cost (assume that all production workers work at least 160 hours per month). (6 marks)

Answer

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Tags: Budget Preparation, Cost Estimation, Labour budget, Overtime calculation, Production Budget
Level: Level 2

Topic: Budgetary control, Cash Budgets and Master Budgets
Series: MAY 2018

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

Question

a) Atimbila Ltd manufactures a product that goes through various workshops. The following budgeted overheads for the year 2023, based on normal activity levels, have been provided:

Workshop	Budgeted Overheads (GH¢)	Overhead Absorption Base
Forming	360,000	30,000 labour hours
Machining	860,000	50,000 machine hours
Welding	400,000	36,000 labour hours
Assembly	300,000	20,000 labour hours

Selling and administrative overheads are 25% of factory cost.

An order for 5,000 units of the product (Batch 3391) incurred the following costs on 31 August 2023:

Materials: GH¢62,140
Labour:
- 1,280 hours forming shop at GH¢10.50 per hour
- 4,520 hours machining shop at GH¢11 per hour
- 900 hours welding shop at GH¢10.50 per hour
- 1,750 hours assembly shop at GH¢9.60 per hour
An amount of GH¢1,050 was paid for the hire of a special X-ray equipment for testing the welds. The time booking in the machine shop was 6,430 machine hours. Selling price was GH¢150 per product.

Required:
i) Compute the total cost of the batch. (10 marks)
ii) Calculate the unit cost per product. (1 mark)
iii) Determine the profit per product. (1 mark)

b) The following cost and production data relates to the operations of Mawuga Ltd over a two-year period:

Year	Production (units)	Total Costs (GH¢)
2022	50,000	1,700,000
2023	54,000	1,835,400

Between 2022 and 2023, there has been a 5% cost inflation.

Required:
i) Calculate the real fixed and variable costs. (6 marks)
ii) Estimate what the total costs will be in 2024 if it is expected that there will be 4% cost inflation and output will be 56,000 units. (2 marks)

Answer

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Tags: Batch Costing, Cost Estimation, Overhead Absorption, Real Fixed Costs, Variable Costs
Level: Level 1

Topic: Cost and Cost Behaviour
Series: MAR 2024

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

Question

a) Total production costs each week in a production department have been measured for the past five weeks, as follows:

Week	Units Produced	Total Cost (GH¢000)
1	5	20
2	9	27
3	4	17
4	5	19
5	6	23

Required:
i) Use linear regression analysis to obtain an estimate of fixed costs per week and the variable cost of production per unit (see formula table). (8 marks)
ii) Use your results to estimate total costs in a week when 8 units are produced. (3 marks)
iii) Explain why the regression analysis method of separating cost is considered more accurate than the high-low method. (4 marks)

b) The cost-volume-profit (CVP) analysis, also commonly known as breakeven analysis, looks to determine the breakeven point for different sales volumes and cost structures, which can be useful for managers making short-term business decisions. For CVP analysis to be effective, several assumptions are usually made.

Required:
State FOUR (4) assumptions underlying cost-volume-profit (CVP) analysis. (5 marks)

Answer

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Tags: Breakeven Analysis, Cost Estimation, Fixed and Variable Costs, Linear Regression
Level: Level 1

Topic: Cost Segregation and Estimation, Cost-Volume-Profit (CVP) Analysis
Series: DEC 2022

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Slack, Budgeting, Cost Estimation
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

Question

Use the high-low method to calculate the fixed and variable elements of the following costs:

Month	Activity	N
January	600	1,700
February	800	1,900
March	650	1,750
April	850	1,950
May	900	2,100
June	1,350	2,300

A. VC = N0.08/unit, FC = N1120
B. VC = N0.88/unit, FC = N1020
C. VC = N0.80/unit, FC = N1220
D. VC = N0.82/unit, FC = N1320
E. VC = N0.85/unit, FC = N1330

Answer

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Tags: Cost Estimation, Fixed Cost, High-Low Method, Variable Cost
Level: Level 1

Topic: Costing Techniques
Series: NOV 2014

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

Question

The following monthly information in respect of output and mixed factory overhead are provided as follows:

MONTH	NUMBER OF UNITS (x)	MIXED FACTORY OVERHEAD (y)
JANUARY	150	80
FEBRUARY	200	100
MARCH	300	135
APRIL	250	125
MAY	300	130
JUNE	250	120
JULY	350	140
AUGUST	300	125
SEPTEMBER	250	115
OCTOBER	150	80

Required:

a. Calculate the fixed and variable elements of the above mixed factory overhead using the high and low method. (5 Marks)

b. Use the linear regression analysis and determine the line of best fit. (15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost behavior, Cost Estimation, High-Low Method, Linear Regression
Level: Level 1

Topic: Forecasting Techniques
Series: MAY 2016

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

Question

Required:

i) Prepare the production budget on a monthly basis for the first quarter of 2016. (3 marks)

ii) Prepare the labour budget for the first quarter of 2016 showing both hours and labour cost (assume that all production workers work at least 160 hours per month). (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Preparation, Cost Estimation, Labour budget, Overtime calculation, Production Budget
Level: Level 2

Topic: Budgetary control, Cash Budgets and Master Budgets
Series: MAY 2018

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

Question

a) Atimbila Ltd manufactures a product that goes through various workshops. The following budgeted overheads for the year 2023, based on normal activity levels, have been provided:

Workshop	Budgeted Overheads (GH¢)	Overhead Absorption Base
Forming	360,000	30,000 labour hours
Machining	860,000	50,000 machine hours
Welding	400,000	36,000 labour hours
Assembly	300,000	20,000 labour hours

Selling and administrative overheads are 25% of factory cost.

An order for 5,000 units of the product (Batch 3391) incurred the following costs on 31 August 2023:

Materials: GH¢62,140
Labour:
- 1,280 hours forming shop at GH¢10.50 per hour
- 4,520 hours machining shop at GH¢11 per hour
- 900 hours welding shop at GH¢10.50 per hour
- 1,750 hours assembly shop at GH¢9.60 per hour
An amount of GH¢1,050 was paid for the hire of a special X-ray equipment for testing the welds. The time booking in the machine shop was 6,430 machine hours. Selling price was GH¢150 per product.

Required:
i) Compute the total cost of the batch. (10 marks)
ii) Calculate the unit cost per product. (1 mark)
iii) Determine the profit per product. (1 mark)

b) The following cost and production data relates to the operations of Mawuga Ltd over a two-year period:

Year	Production (units)	Total Costs (GH¢)
2022	50,000	1,700,000
2023	54,000	1,835,400

Between 2022 and 2023, there has been a 5% cost inflation.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Batch Costing, Cost Estimation, Overhead Absorption, Real Fixed Costs, Variable Costs
Level: Level 1

Topic: Cost and Cost Behaviour
Series: MAR 2024

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

Question

a) Total production costs each week in a production department have been measured for the past five weeks, as follows:

Week	Units Produced	Total Cost (GH¢000)
1	5	20
2	9	27
3	4	17
4	5	19
5	6	23

Required:
State FOUR (4) assumptions underlying cost-volume-profit (CVP) analysis. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Breakeven Analysis, Cost Estimation, Fixed and Variable Costs, Linear Regression
Level: Level 1

Topic: Cost Segregation and Estimation, Cost-Volume-Profit (CVP) Analysis
Series: DEC 2022

Question Tag: Cost Estimation

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MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

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Question Tag: Cost Estimation

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MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

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MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

You're reporting an error for "MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques"

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

You're reporting an error for "MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques"

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

You're reporting an error for "MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets"

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour"

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

You're reporting an error for "IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis"

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

You're reporting an error for "MI – Nov 2015 – L1 – SA – Q1 – Budgeting"

MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques

Calculate variable and fixed costs using the high-low method based on monthly activity data.

You're reporting an error for "MI – Nov 2014 – L1 – SA – Q1 – Costing Techniques"

MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques

Determine fixed and variable costs using high-low method and linear regression analysis.

You're reporting an error for "MI – May 2017 – L1 – SB – Q2 – Forecasting Techniques"

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

You're reporting an error for "MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets"

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour"

IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis

Estimation of fixed and variable costs using linear regression and discussion of assumptions underlying Cost-Volume-Profit (CVP) analysis.

You're reporting an error for "IMAC – DEC 2022 – L1 – Q5 – Cost Segregation and Estimation | Cost-Volume-Profit (CVP) Analysis"

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