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8 marksCost Elements, Classification and Cost Curves

CAPE Accounting Unit 2 · 2018 · Paper 2 · Question 1(b)(i)

Zamore Ltd prepares cost estimates for manufacturing 8000 units of a subassembly component: Direct materials 40 000 (5/unit), Direct labour 32 000 (4/unit), Variable factory overhead 32 000 (4/unit), Fixed factory overhead 48 000 (6/unit, 150% of direct labour). Total cost = 152 000 (19/unit). An external supplier offers to supply at $16 each. Two-thirds of fixed overheads continue regardless of decision.

Prepare a cost comparison for the manufacture and purchase of the subassembly component.

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Other parts of this question

  1. 1(a)(i)Calculate the number of employees required in the Assembling Department to meet the production target of 1680 units.[2 marks]
  2. 1(a)(ii)Calculate the weekly pay for Scott and Celia for that week.[8 marks]
  3. 1(b)(ii)State the decision that Zamore Ltd should make regarding the subassembly component, based on the cost comparison in (b)(i).[1 mark]
  4. 1(c)(i)Define the term 'EOQ inventory model'.[1 mark]
  5. 1(c)(ii)State TWO assumptions of the EOQ model.[2 marks]
  6. 1(c)(iii)Determine the number of production runs for Zamore Ltd, using the EOQ inventory model. (Note: Replace ordering cost by set-up costs).[6 marks]
  7. 1(c)(iv)Assuming Zamore Ltd is currently incurring total annual set-up and carrying costs of…[3 marks]
  8. 1(d)(i)Outline ONE importance of chemical waste disposal.[2 marks]
  9. 1(d)(ii)State TWO guidelines which must be followed when disposing of solid chemical waste.[2 marks]

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