MA 4

Question 1

Revenue Producing Activities of Organisations

Answer 1

• Service: Perform work for others
• Merchandising: Buy and sell goods
• Manufacturing: Process raw materials into finished products for sale.

Question 2

Product vs Period Costs

Answer 2

• Product Costs: All production costs necessary to get products ready to sell
• Period Costs: All costs other than product costs, not related to production.

Question 3

Challenges in Product Cost Measurement

Answer 3

• Actual overhead costs are unknown until the period ends.
• Seasonal costs can vary monthly.
• Overhead amounts vary with activity levels.

Question 4

Selecting a Cost Driver

Answer 4

• Assign overhead costs using a driver (e.g., labour hours, machine hours).
• Avoid using unit counts due to differing manufacturing requirements per unit.

Question 5

Predetermined Overhead Rate Formula

Answer 5

Formula: Predicted Total Overhead / Predicted Total Driver Units
E.g., $128,000 / 40,000 hours = $3.20 per hour.

Question 6

Job Costing: Components

Answer 6

• Direct Materials: Tracked using materials requisition forms
• Direct Labour: Tracked using work tickets
• Manufacturing Overhead: Applied using predetermined rates.

Question 7

Impact of Technology on Manufacturing Costs

Answer 7

• Shift from direct labour to overhead costs.
• Indirect costs rise; direct costs decline.
• Use multiple or alternate cost drivers.

Question 8

Process Costing Overview

Answer 8

• Used for continuous, identical production.
• Cost/unit = Total Costs ÷ Units Produced.
• Examples: soft drinks, cheese production.

Question 9

Equivalent Units Calculation

Answer 9

Formula: Partially Completed Units × % Completion
E.g., 90 units × 40% = 36 equivalent units.

Question 10

Process Costing Methods

Answer 10

• Weighted Average: Combines beginning inventory with current costs.
• First-In, First-Out: Separately accounts for beginning units, using first incurred costs.