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9 marksCost Elements, Classification and Cost Curves

CAPE Accounting Unit 2 · 2016 · Paper 2 · Question 1(c)(ii)

Soca Engineering Company manufactures Component ABC and Product XYZ with provided unit costs and fixed overhead conditions.

Advise management whether to accept a special offer of $1750 per unit from an outside company for Product XYZ, providing justification.

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Other parts of this question

  1. 1(a)State the classification for EACH of the 10 listed cost items.[10 marks]
  2. 1(b)(i)Explain what happens to the cost of material issued.[2 marks]
  3. 1(b)(ii)Explain what happens to the value of closing inventory.[2 marks]
  4. 1(b)(iii)Explain what happens to profit.[2 marks]
  5. 1(c)(i)Advise management whether it would be profitable to make or buy Component ABC.[6 marks]
  6. 1(d)(i)Compute the predetermined production overhead rate for 2015.[2 marks]
  7. 1(d)(ii)Calculate the over/under applied overhead for December 2015.[2 marks]

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