Question Tag: Overheads

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PM – May 2023 – L2 – SA – Q3 – Decision Making Techniques

Evaluate the desirability of a contract for Product X by analyzing the labour, material, and overhead costs involved.

Question

Kenny Limited (KL) has been offered a contract that, if accepted, would significantly increase next year’s activity levels. The contract requires the production of 20,000 kg of product X and specifies a contract price of N10,000 per kg. The resources used in the production of each kg of X include the following:

Resources per kg of X:

Labour:

Grade 1: 2 hours
Grade 2: 6 hours

Materials:

Material A: 2 units
Material B: 1 litre

Costs:

Grade 1 Labour: N400 per hour
Grade 2 Labour: N200 per hour
Material A: Replacement cost N1,000 per unit, Net Realisable Value N900
Material B: Replacement cost N3,200 per litre, Net Realisable Value N2,500
Fixed production overheads: N60,000,000 based on 300,000 productive labour hours
Incremental overheads for the contract: N22,800,000
Variable production overheads: N300 per productive labour hour

The contract could also result in a 5,000-unit decrease in sales of another product, Y, which contributes N7,000 per unit in revenue and incurs variable costs of N1,200 and 4 hours of Grade 2 labour per unit. However, avoiding the production of Y will save attributable fixed overheads of N5,800,000.

Required:

a. Advise KL on the desirability of the contract. (8 Marks)
b. Show how the contract, if accepted, will be reported on the routine job costing system used by KL. (6 Marks)
c. Briefly explain the reasons for any differences between the figures used in (a) and (b) above. (6 Marks)

Answer

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Tags: Idle Time, Labour Costs, Materials Costs, Opportunity Cost, Overheads, Relevant Costs
Level: Level 2

Topic: Decision-making techniques
Series: MAY 2023

FA – May 2012 – L1 – SA – Q18 – Accounting Concepts

Identifying the aggregate of prime cost and indirect overheads.

Question

The aggregate of prime cost and indirect overheads is:

A. Cost of goods sold
B. Cost of materials used in production
C. Market value of goods produced
D. Factory cost
E. Total overhead

Answer

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Tags: Costing, Factory Costs, Overheads
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2012

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

Question

A company calculates the prices of jobs by adding overheads to prime cost and adding 30% to total costs as profit margin. A job was sold for N1,690,000 and incurred overheads of N694,000. The prime cost of the job is:

A. N489,000

B. N606,000

C. N996,000

D. N1,300,000

E. N1,400,000

Answer

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Tags: Job Costing, Overheads, Prime Cost, Profit Margins
Level: Level 1

Topic: Costing Techniques
Series: NOV 2020

PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis

Calculate the relevant cost for a special contract and determine if it should be accepted.

Question

Deban Construction Limited is deciding whether or not to proceed with a one-off special contract for which it would receive a one-off payment of N2,000,000. Details of relevant costs are provided for labor, materials, storage, and overheads. Calculate the relevant cost of the contract and advise whether the contract should be accepted or not on financial grounds.

Answer

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Tags: Incremental Analysis, Labour Costs, Material Costs, Overheads, Relevant Costs, Special Contract
Level: Level 2

Topic: Decision making techniques
Series: MAY 2018

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

Question

Major towns and cities in Ibadan State, which is one of the states in the South West of the country, are maintained by local government councils, which are funded through allocations from the federation account, state accounts, and internally generated revenue. The local government councils submit budgets each year, which forms the basis of the funds received.

Matanmi Local Government Council, one of the local government councils in Ibadan State, provides you with the following information as part of the 2019 budget preparation:

Overheads:
Overhead costs are budgeted on an incremental basis, taking the previous year’s actual expenditure and adding a set percentage to allow for inflation. Adjustments are also made for known changes. The details are:

Note 1: One new staff member will be added to the payroll, costing N300,000 in 2020.
Note 2: A move toward a paperless office is expected to reduce stationery costs by 20% in 2020.
Road Repairs:
In 2020, it is expected that 200 kilometers of road will require maintenance, but a contingency of an extra 10% has been agreed.
In 2019, the average cost of a road repair was N1,500,000 per kilometer, but this did not include any cost effects of extreme weather conditions. The following probability estimates have been made in respect of 2020:

Inflation on road maintenance costs is expected to be 10% between 2019 and 2020.

New roads are budgeted on a zero-based basis and will have to compete for funds along with other capital projects such as hospitals and schools.
Required:
a. Calculate the overheads and road repairs budgets for the year 2020.
(10 Marks)

b. The goods and services produced in every society can be classified into public and private goods.
Identify and explain TWO sub-divisions and THREE characteristics of public goods.
(10 Marks)

Answer

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Tags: Local Government Budget, Overheads, Public Goods, Road Repairs
Level: Level 2

Topic: Local Government Accounting, Public Goods
Series: MAR/JULY 2020

BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Candidates are required to prepare a monthly cash budget for a three-month period based on the data provided for Homom Nigeria Limited.

Question

The following information was extracted from the books of Homom Nigeria Limited.

Months	Sales (₦’000)	Materials (₦’000)	Wages (₦’000)	Overheads (₦’000)
February	40,000	20,400	7,600	3,800
March	42,000	20,000	7,600	4,200
April	46,000	19,600	8,000	4,600
May	50,000	20,000	8,400	4,800
June	60,000	21,600	9,000	5,000

Additional details regarding payments, credit sales, machine installation, and dividends are provided.

Required:
Prepare a monthly cash budget for the three months ending June 2022. Show your workings. (20 Marks)

Answer

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Tags: Cash Budget, Machine Installation, Overheads, Sales Collection
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2022

MI – Nov 2022 – L1 – SB – Q3 – Costing Methods

Preparation of a standard cost card for Beta's product based on given rates

Question

The details below relate to a product (BETA) and are to be used in the revision of its standard cost:

Item	Standard Price/Rate
Material
30kg of B35	₦200/kg
50 units of K010	₦50/unit
20 units of K035	₦100/unit
Direct Labour
Machine Operations: 50 hours	₦120/hour
30 hours	₦105/hour
27 hours	₦80/hour
Packaging: 12 hours	₦96/hour

Production Overhead:

Labour hour rate: ₦9/hour
Machine hour rate: ₦7/hour

Departments X, Y, and Z are for operations while department P is for packaging. The batch quantity is 200, and the revision date is April 30, 2020.

Required:
Prepare a STANDARD COST CARD for the product (Beta).

Answer

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Tags: Cost Card, Direct Labour, Materials, Overheads, Standard Costing
Level: Level 1

Topic: Costing Methods
Series: NOV 2022

MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications

Definition of fixed costs in relation to output

Question

Fixed cost is a cost:
A. Which changes in total in proportion to changes in output
B. Which is partly fixed and partly variable in relation to output
C. Which increases per unit as output increases
D. Which remains the same for each unit of output
E. Which remains constant in total as output changes within the relevant range

Answer

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Tags: Costing, Fixed Cost, Overheads
Level: Level 1

Topic: Cost Classifications
Series: NOV 2022

PM – May 2023 – L2 – SA – Q3 – Decision Making Techniques

Evaluate the desirability of a contract for Product X by analyzing the labour, material, and overhead costs involved.

Question

Resources per kg of X:

Labour:

Grade 1: 2 hours
Grade 2: 6 hours

Materials:

Material A: 2 units
Material B: 1 litre

Costs:

Grade 1 Labour: N400 per hour
Grade 2 Labour: N200 per hour
Material A: Replacement cost N1,000 per unit, Net Realisable Value N900
Material B: Replacement cost N3,200 per litre, Net Realisable Value N2,500
Fixed production overheads: N60,000,000 based on 300,000 productive labour hours
Incremental overheads for the contract: N22,800,000
Variable production overheads: N300 per productive labour hour

Required:

Answer

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Tags: Idle Time, Labour Costs, Materials Costs, Opportunity Cost, Overheads, Relevant Costs
Level: Level 2

Topic: Decision-making techniques
Series: MAY 2023

FA – May 2012 – L1 – SA – Q18 – Accounting Concepts

Identifying the aggregate of prime cost and indirect overheads.

Question

The aggregate of prime cost and indirect overheads is:

A. Cost of goods sold
B. Cost of materials used in production
C. Market value of goods produced
D. Factory cost
E. Total overhead

Answer

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Tags: Costing, Factory Costs, Overheads
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2012

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

Question

A. N489,000

B. N606,000

C. N996,000

D. N1,300,000

E. N1,400,000

Answer

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Tags: Job Costing, Overheads, Prime Cost, Profit Margins
Level: Level 1

Topic: Costing Techniques
Series: NOV 2020

PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis

Calculate the relevant cost for a special contract and determine if it should be accepted.

Question

Answer

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Tags: Incremental Analysis, Labour Costs, Material Costs, Overheads, Relevant Costs, Special Contract
Level: Level 2

Topic: Decision making techniques
Series: MAY 2018

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

Question

Matanmi Local Government Council, one of the local government councils in Ibadan State, provides you with the following information as part of the 2019 budget preparation:

b. The goods and services produced in every society can be classified into public and private goods.
Identify and explain TWO sub-divisions and THREE characteristics of public goods.
(10 Marks)

Answer

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Tags: Local Government Budget, Overheads, Public Goods, Road Repairs
Level: Level 2

Topic: Local Government Accounting, Public Goods
Series: MAR/JULY 2020

BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Candidates are required to prepare a monthly cash budget for a three-month period based on the data provided for Homom Nigeria Limited.

Question

The following information was extracted from the books of Homom Nigeria Limited.

Months	Sales (₦’000)	Materials (₦’000)	Wages (₦’000)	Overheads (₦’000)
February	40,000	20,400	7,600	3,800
March	42,000	20,000	7,600	4,200
April	46,000	19,600	8,000	4,600
May	50,000	20,000	8,400	4,800
June	60,000	21,600	9,000	5,000

Additional details regarding payments, credit sales, machine installation, and dividends are provided.

Required:
Prepare a monthly cash budget for the three months ending June 2022. Show your workings. (20 Marks)

Answer

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Tags: Cash Budget, Machine Installation, Overheads, Sales Collection
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2022

MI – Nov 2022 – L1 – SB – Q3 – Costing Methods

Preparation of a standard cost card for Beta's product based on given rates

Question

The details below relate to a product (BETA) and are to be used in the revision of its standard cost:

Item	Standard Price/Rate
Material
30kg of B35	₦200/kg
50 units of K010	₦50/unit
20 units of K035	₦100/unit
Direct Labour
Machine Operations: 50 hours	₦120/hour
30 hours	₦105/hour
27 hours	₦80/hour
Packaging: 12 hours	₦96/hour

Production Overhead:

Labour hour rate: ₦9/hour
Machine hour rate: ₦7/hour

Departments X, Y, and Z are for operations while department P is for packaging. The batch quantity is 200, and the revision date is April 30, 2020.

Required:
Prepare a STANDARD COST CARD for the product (Beta).

Answer

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Tags: Cost Card, Direct Labour, Materials, Overheads, Standard Costing
Level: Level 1

Topic: Costing Methods
Series: NOV 2022

MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications

Definition of fixed costs in relation to output

Question

Answer

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Tags: Costing, Fixed Cost, Overheads
Level: Level 1

Topic: Cost Classifications
Series: NOV 2022

Question Tag: Overheads

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PM – May 2023 – L2 – SA – Q3 – Decision Making Techniques

Evaluate the desirability of a contract for Product X by analyzing the labour, material, and overhead costs involved.

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FA – May 2012 – L1 – SA – Q18 – Accounting Concepts

Identifying the aggregate of prime cost and indirect overheads.

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MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques"

PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis

Calculate the relevant cost for a special contract and determine if it should be accepted.

You're reporting an error for "PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis"

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

You're reporting an error for "PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation"

BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Candidates are required to prepare a monthly cash budget for a three-month period based on the data provided for Homom Nigeria Limited.

You're reporting an error for "BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets"

MI – Nov 2022 – L1 – SB – Q3 – Costing Methods

Preparation of a standard cost card for Beta's product based on given rates

You're reporting an error for "MI – Nov 2022 – L1 – SB – Q3 – Costing Methods"

MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications

Definition of fixed costs in relation to output

You're reporting an error for "MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications"

PM – May 2023 – L2 – SA – Q3 – Decision Making Techniques

Evaluate the desirability of a contract for Product X by analyzing the labour, material, and overhead costs involved.

You're reporting an error for "PM – May 2023 – L2 – SA – Q3 – Decision Making Techniques"

FA – May 2012 – L1 – SA – Q18 – Accounting Concepts

Identifying the aggregate of prime cost and indirect overheads.

You're reporting an error for "FA – May 2012 – L1 – SA – Q18 – Accounting Concepts"

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques"

PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis

Calculate the relevant cost for a special contract and determine if it should be accepted.

You're reporting an error for "PM – May 2018 – L2 – Q3b – Cost-Volume-Profit (CVP) Analysis"

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

You're reporting an error for "PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation"

BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Candidates are required to prepare a monthly cash budget for a three-month period based on the data provided for Homom Nigeria Limited.

You're reporting an error for "BMF – Nov 2022 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets"

MI – Nov 2022 – L1 – SB – Q3 – Costing Methods

Preparation of a standard cost card for Beta's product based on given rates

You're reporting an error for "MI – Nov 2022 – L1 – SB – Q3 – Costing Methods"

MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications

Definition of fixed costs in relation to output

You're reporting an error for "MI – Nov 2022 – L1 – SA – Q7 – Cost Classifications"

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