Irrelevant Costs – NBC Institute

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

Question

a) Costs may be classified in various ways according to their nature and the information needs of management.

Required:
Explain the following pairs of costs:
i) Direct and Indirect Costs (3 marks)
ii) Fixed and Variable Costs (3 marks)
iii) Controllable and Non-controllable Costs (3 marks)
iv) Production and Non-production Costs (3 marks)
v) Relevant and Irrelevant costs (3 marks)

b) QQQ Ltd has been reporting using an absorption costing technique. However, at a management retreat attended by the Cost and Management Accountant, they discussed the information usefulness of marginal costing reports for short-term decision making extensively.

Required:
Outline FIVE (5) advantages of a marginal costing system of reporting compared to absorption costing system for consideration by the management of QQQ Ltd. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Controllable Costs, Direct Costs, Fixed Costs, Indirect Costs, Irrelevant Costs, Non-controllable Costs, Non-production Costs, Production Costs, Relevant Costs, Variable Costs
Level: Level 1

Topic: Cost and Cost Behaviour, Marginal Costing and Absorption Costing
Series: NOV 2021

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

Question

a) Kwame Adjei has been invited to bid for a contract to construct a place of convenience for a school at Gorlu in the Upper East Region. He has estimated the following expenses to be incurred to execute the contract.

Cost of concrete mixer bought at GH¢70,000 three years ago, has a written down value of GH¢52,000.
Stones bought six months ago at GH¢1,800 per trip currently sells at GH¢2,200 per trip. The contractor constantly uses the stones.
200 bags of cement bought three months ago at GH¢40 per bag, currently sells at GH¢45 per bag.
Sand to be bought at GH¢900 per trip.
Each mason is to be paid GH¢80 per day.
600 pieces of 5” blocks sells at GH¢3 per piece.

Required: i) Identify and explain TWO (2) costs that cannot be used in bidding for the contract. (4 marks)

ii) Identify and explain THREE (3) costs that can be used to bid for the contract. (6 marks)

b) Outline FIVE (5) qualities of good management accounting information system. (5 marks)

c) State and explain FIVE (5) uses of costs and management accounting information to a profit-making organisation. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Bidding, Irrelevant Costs, Management Information Systems, Relevant Costs
Level: Level 1

Topic: Relevant Cost and Revenue
Series: MAY 2021

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

Question

a) QR uses an activity based budgeting (ABB) system to budget product cost. It manufactures two products, product Q and product R. The budget details for these two products for the forthcoming period are as follows:

	Product Q	Product R
Budgeted production (units)	80,000	120,000
Number of machine setups per batch	4	3
Batch size (Units)	5,000	4,000

The total budget cost of setting up the machine is GH¢74,400.

Required: i) State and explain THREE (3) objectives of budgeting. (6 marks)

ii) Calculate the budgeted machine setup cost per unit of product Q and R. (5 marks)

iii) State THREE (3) benefits and TWO (2) limitations of using an activity-based budgeting system. (5 marks)

b) A company has annual sales revenues of GH¢30 million and the following working capital periods:

Period	Months
Inventory conversion period	2.5
Accounts receivable collection period	2.0
Accounts payable payment period	1.5

Production costs represent 70% of sales revenue.

Required: Calculate the total amount held in working capital excluding cash and cash equivalents. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity Based Budgeting, Irrelevant Costs, Machine Setup Costs, Management Information Systems, Objectives of Budgeting, Relevant Costs, Working Capital
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour, Relevant Cost and Revenue
Series: MAY 2021

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

Question

a) Costs may be classified in various ways according to their nature and the information needs of management.

Required:
Outline FIVE (5) advantages of a marginal costing system of reporting compared to absorption costing system for consideration by the management of QQQ Ltd. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Controllable Costs, Direct Costs, Fixed Costs, Indirect Costs, Irrelevant Costs, Non-controllable Costs, Non-production Costs, Production Costs, Relevant Costs, Variable Costs
Level: Level 1

Topic: Cost and Cost Behaviour, Marginal Costing and Absorption Costing
Series: NOV 2021

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

Question

Cost of concrete mixer bought at GH¢70,000 three years ago, has a written down value of GH¢52,000.
Stones bought six months ago at GH¢1,800 per trip currently sells at GH¢2,200 per trip. The contractor constantly uses the stones.
200 bags of cement bought three months ago at GH¢40 per bag, currently sells at GH¢45 per bag.
Sand to be bought at GH¢900 per trip.
Each mason is to be paid GH¢80 per day.
600 pieces of 5” blocks sells at GH¢3 per piece.

Required: i) Identify and explain TWO (2) costs that cannot be used in bidding for the contract. (4 marks)

ii) Identify and explain THREE (3) costs that can be used to bid for the contract. (6 marks)

b) Outline FIVE (5) qualities of good management accounting information system. (5 marks)

c) State and explain FIVE (5) uses of costs and management accounting information to a profit-making organisation. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Bidding, Irrelevant Costs, Management Information Systems, Relevant Costs
Level: Level 1

Topic: Relevant Cost and Revenue
Series: MAY 2021

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

Question

	Product Q	Product R
Budgeted production (units)	80,000	120,000
Number of machine setups per batch	4	3
Batch size (Units)	5,000	4,000

The total budget cost of setting up the machine is GH¢74,400.

Required: i) State and explain THREE (3) objectives of budgeting. (6 marks)

ii) Calculate the budgeted machine setup cost per unit of product Q and R. (5 marks)

iii) State THREE (3) benefits and TWO (2) limitations of using an activity-based budgeting system. (5 marks)

b) A company has annual sales revenues of GH¢30 million and the following working capital periods:

Period	Months
Inventory conversion period	2.5
Accounts receivable collection period	2.0
Accounts payable payment period	1.5

Production costs represent 70% of sales revenue.

Required: Calculate the total amount held in working capital excluding cash and cash equivalents. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity Based Budgeting, Irrelevant Costs, Machine Setup Costs, Management Information Systems, Objectives of Budgeting, Relevant Costs, Working Capital
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour, Relevant Cost and Revenue
Series: MAY 2021

Question Tag: Irrelevant Costs

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Irrelevant Costs

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

You're reporting an error for "IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing"

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

You're reporting an error for "IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue"

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

You're reporting an error for "IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue"

IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing

Explanation of different cost classifications and advantages of marginal costing over absorption costing.

You're reporting an error for "IMAC – NOV 2021 – L1 – Q3 – Cost and Cost Behaviour | Marginal Costing and Absorption Costing"

IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue

Identifying relevant and irrelevant costs for a construction contract, and qualities and uses of management accounting information.

You're reporting an error for "IMAC – MAY 2021 – L1 – Q3 – Relevant Cost and Revenue"

IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue

QR activity-based budgeting system for products Q and R, and working capital calculation for a company.

You're reporting an error for "IMAC – MAY 2021 – L1 – Q2 – Budgeting | Cost and Cost Behaviour | Relevant Cost and Revenue"

Our offerings

Contact Info

Customer

Get In Touch

admin