Quelpr
1 markCost Elements, Classification and Cost Curves

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

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.

State the decision that Zamore Ltd should make regarding the subassembly component, based on the cost comparison in (b)(i).

The mark scheme is shown once you've answered.

Practise this question

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)(i)Prepare a cost comparison for the manufacture and purchase of the subassembly component.[8 marks]
  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]

More practice: the rest of this paper · more Cost Elements, Classification and Cost Curves questions · all CAPE Accounting Unit 2 past papers