Pearson Edexcel International AS Level · Accounting (XAC11)
2 multiple-choice questions marked as you go, and 4 written questions with worked solutions. All on Introduction to costing: inventory valuation.
A company manufactures two products, X and Y. The total factory rent is \$60,000. The following information is available:
Floor space (sq. meters): Product X = 3,000; Product Y = 2,000
Machine hours: Product X = 5,000; Product Y = 10,000
Direct labour hours: Product X = 8,000; Product Y = 4,000
What is the amount of rent to be apportioned to Product X using the most appropriate basis?
Which of the following would result in the under-absorption of factory overheads in a manufacturing business?
A company utilizes a machine hour rate to absorb overheads. The budgeted overheads for the period are \(\$120,000\) and the budgeted machine hours are 8,000. During the period, actual overheads incurred were \(\$125,000\) and actual machine hours worked were 8,200. Calculate the amount of over or under absorption of overheads.
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Using the First In First Out (FIFO) method on a perpetual basis, calculate the value of closing inventory from the following transactions:
Jan 1: Opening inventory 100 units at \(\$5\) each
Jan 10: Purchased 150 units at \(\$6\) each
Jan 15: Sold 120 units
Jan 20: Purchased 50 units at \(\$7\) each
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A manufacturer provides the following information for Job 402:
Direct Materials: \( \$1,200 \)
Direct Labour: 40 hours at \( \$15 \) per hour
The business uses a predetermined overhead absorption rate based on direct labour hours. Total budgeted factory overheads for the year are \( \$240,000 \) and total budgeted direct labour hours are 16,000.
(a) Calculate the total production cost for Job 402.
(b) If the business applies a profit markup of \( 25\% \) on production cost, calculate the selling price of the job.
(c) Explain one reason why a business might use a predetermined overhead absorption rate rather than actual overhead costs.
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A business maintains its inventory records using the FIFO (First-In, First-Out) method. The following transactions occurred in April:
- April 1: Opening inventory 100 units at \( \$10 \) each.
- April 10: Purchased 200 units at \( \$12 \) each.
- April 15: Sold 150 units at \( \$20 \) each.
- April 20: Purchased 100 units at \( \$13 \) each.
- April 25: Sold 180 units at \( \$22 \) each.
(a) Calculate the value of the closing inventory at 30 April using the periodic FIFO method.
(b) Calculate the Gross Profit for the month of April.
(c) Explain the effect on profit if the business had used the LIFO method during a period of rising prices.
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