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The format of the tasks in this Practice Assessment is similar to those that will be provided in the AAT’s Computer Based Test for this unit. Whilst completing this assessment, students are advised to provide themselves with a supply of scrap paper to be used for the purpose of making notes and calculations / workings. This information can then be transferred (preferably typed rather than handwritten) into this document. Once you have completed the Practice Assessment, you should save your work and upload this document for marking via the relevant link in your Submission Area (which is found in the ‘My Courses’ menu on the VLC)
Task 1
(a)When costs are rising which one of the following statements is correct?
A
LIFO will give the highest reported profits because cost of sales is charged at the latest higher prices
B
FIFO will give the highest reported profits because cost of sales is charged with the latest higher prices
C
LIFO will give the lowest reported profits because cost of sales is charged at the latest higher prices
D
FIFO will give the lowest reported profits because cost of sales is charged with the latest higher prices
(b) If the FIFO method of inventory valuation was used over the lifetime of a business what would be the effect on the reported profits of the business? Select one of the following options
The reported profits would be higher than if another method was used
The reported profits would be lower than if another method was used
There would be no effect on the overall reported profits
(c) The inventory record card for a company has been partially completed.
Complete the entries in the inventory record using the AVCO method of valuation. Round all costs per litre to 3 decimal places.
Receipts
Issues
Balance
Date
Quantity
litres
Cost per litre (p)
Total cost
£
1 Nov
44,000
17,168
8 Nov
60,000
40.200
10 Nov
70,000
39.700
21 Nov
40,000
16,120
30 Nov
50,000
Task 2
A company had the following transactions relating to inventory part RM301 during November:
1 November Opening inventory 8,000kgs of RM301 valued at £3,200
5 November Purchased 4,000kgs of RM301 for £2,080 on credit
12 November Issued 5,000kgs of RM301 at an issue price of £0.44 per kg
18 November Purchased 4,000kgs of RM301 at £0.56 per kg on credit
28 November Issued 6,000kgs of RM301 at a total issue price of £2,880
The issue on 12 November was used to manufacture product PD84, while that on 28 November was used to manufacture product PD27.
The company uses the following cost codes
Code
Description
1953
Inventory of RM301
3265
Work in progress – PD84
3341
Work in progress – PD27
0080
Trade payables
Dr
Cr
5 November
12 November
18 November
28 November
Task 3
A company has a profit centre that employs a group of production workers who, as well as earning basic pay are also paid a weekly group bonus based on their productivity during each week.
The group has a standard (target) output of 800 units of production per hour worked.
All output in excess of this level earns a bonus for each of the employees.
25% x
excess production (units)
standard production (units)
The bonus % is calculated as:
The bonus rate per hour is then calculated as: bonus % x £10
The following information relates to the group’s performance last week:
Hours worked
Actual production
(units)
Monday
920
940,000
Tuesday
870
890,000
Wednesday
910
930,000
Thursday
960,000
Friday
940
990,000
Saturday
440
690,000
Total
5,000
5,400,000
(a) Complete the table below to calculate the group bonus rate per hour and the total to be paid to the group.
Units
Less standard production (based on actual hours worked)
Excess production
Bonus %
Group bonus rate per hour £
Total group bonus £
(b) Calculate the total pay for an employee who worked 44 hours last week and is paid a basic rate of £9.60 per hour.
Basic pay
Bonus pay
Total pay
Task 4
A company has two profit and three cost centres. The budgeted overheads for the next quarter have been identified as follows:
Depreciation of equipment
4,200,200
Premises insurance and maintenance
2,860,000
Rent and rates
612,000
Light, heat and power
300,800
Departmental specific costs:
Warehouse
608,600
Quality assurance
136,200
Production planning
124,400
Total departmental costs
869,200
The following information is also available:
Department
Carrying value of equipment
Floor space (m^{2)}
Power usage (KwH)
Production
30,400,000
351,000
34,210
Finishing
7,600,000
280,800
27,990
35,100
21,060
14,040
38,000,000
702,000
62,200
Overheads are allocated or apportioned on the most appropriate basis. The total overheads of the support departments’ cost centres are then reapportioned to the two manufacturing profit centres using the direct method.
Planning
Totals
Light, heat and power – fixed
Light, heat and power – variable
Departmental specific costs
Reapportion warehouse
Reapportion quality assurance
Reapportion planning
Total overheads to profit centres
Task 5
The following information relates to the manufacture of product FG123:
Direct materials
14,870
Direct labour
42,206
Total variable overheads
48,064
Total fixed overheads
75,100
Number of batches manufactured
15,020
Complete the table below to calculate the costs per batch.
Prime cost per batch
Marginal cost per batch
Full absorption cost per batch
Task 6
A company has produced three forecasts of activity levels for the next period for one of its flight routes. The original budget involved flying 5,000 miles, but mileage levels of between 6,000 and 7,000 mile are now more likely.
Notes:
Complete the table below to profit per mile (in pounds to 2 decimal places) of this contract at both 6,000 miles flown and 7,000 miles flown.
Miles
6,000
7,000
Costs:
£000
Sales revenue
2,500
Variable/semi-variable costs:
400
850
135
Fixed costs:
420
625
2,430
Total profit
70
Profit per mile flown
14.00
Task 7
Using the information from Task 6, complete the table below to calculate the required number of miles to be flown to achieve a profit of £60,000 on a contract of 5,000 miles.
Calculation of required number of miles
Fixed costs (£000)
Target profit (£000)
Sales revenue (£000)
Less variable costs (£000)
Contribution (£000)
Contribution per mile (£)
Required number of miles to achieve target profit
Task 8
The airline pilots’ trade union has planned a three day strike next week. During these three days only those pilots who are not in the union will be available to fly. As a result there will be only 124 hours of pilots’ flying time available between three routes E, F and G.
The following information is available about these routes:
Route
E
F
G
Contribution
6,200
5,200
7,320
Fixed costs
1,100
Profit
5,100
4,100
6,220
Total number of miles in the route
20,000
16,000
24,000
Number of pilot hours required
50
52
48
Complete the table below to recommend which route(s) should be operated on the three days of the strike to maximise profit on those days.
Contribution per pilot hour (£000)
Route ranking
Pilot hours available
Pilot hours allocated to each route
Number of miles to fly in the route
Total contribution earned (£000)
Less: fixed costs (£000)
Profit/Loss made (£000)
Task 9
The following budgeted information is available:
150
2,445
55
Landing and servicing fees are a semi-variable cost. There is a fixed charge of £600,000 plus £50 per mile flown.
The actual miles flown by the company was 5,800.
Complete the table below to show a flexed budget and the resulting variances against this budget. Show the actual variance, in the column headed ‘Variance’ and indicate whether this is Favourable or Adverse by entering F or A in the final column. If neither F nor A, you should enter 0.
Flexed Budget
Actual
Variance
A or F
Miles flown
5,800
2,875
472
792
190
428
645
2,527
348
Task 10
A company has produced three forecasts of activity levels for the next period for one of its products. The original budget involved producing 50,000 units, but sales and production levels of between 60,000 and 70,000 units are now more likely.
Complete the table below to estimate the production cost per unit of product at the three different activity levels.
Variable costs:
5,250
2,250
11,100
9,200
15,600
43,400
Cost per unit (to 3 decimal places)
0.868
Task 11
The following budgeted annual sales and cost information relate to two different products.
Product
PD5
PD8
Units made and sold
300,000
500,000
£450,000
£600,000
£60,000
£125,000
£36,000
£70,000
Variable overheads
£45,000
£95,000
£158,620
£105,400
The budget has now been revised and the latest sales forecasts are 250,000 units for PD5 and 400,000 units for PD8.
Complete the table to calculate the budgeted break-even sales and the margin of safety in units and as a percentage for both products.
Fixed costs (£)
Unit contribution (£)
Break-even sales (units)
Forecast sales (units)
Margin of safety (units)
Margin of safety (%)
Task 12
Last month a company had the following process inputs for one of its products:
Direct materials 500kgs at £17.20 per kg
Direct labour 280 labour hours at £10.50 per hour
Overheads absorbed 86 machine hours at £32 per machine hour
Prepare the process account below for the product for last month.
Kgs
Unit cost £
Task 13
A company has the following budgeted information relating to the manufacture of one of its products PD64.
Budget
Units produced
90,000
Fixed overheads
74,000
Operating profit
66,000
All costs are variable except the fixed overheads.
The company actually manufactured 58,500 units.
Complete the table below to show a flexed budget and the resulting variances against this budget. Show the actual variance, for sales revenue and each cost, in the column headed ‘Variance’ and indicate whether this is Favourable or Adverse by entering F or A in the final column. If neither F nor A, you should enter 0.
58,500
&