Practice_Test_SOLUTION_Oct_2010

# Practice_Test_SOLUTION_Oct_2010 - QUESTION 1 MPV Purchase...

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QUESTION 1 MPV Purchase @ actual cost \$2,690 Purchase @ std cost (5,600 x \$0.50) 2,800 MPV \$110 FAV LPV Actual payroll \$ 7,600 Actual DLH @ std rate (1,870 X \$4) 7,480 LPV \$120 UNF QUANTITY VARIANCES MATERIALS LABOUR Finished 900 units 900 + EI WIP 200 120 - BI WIP 120 60 Equivalent prod’n 980 960 Std Quantity ( 4 Kg) 3,920 (2 DLH) 1,920 DLH Actual Quantity 3,800 1,870 120 Kg 50 DLH Standard Price X \$0.50 X \$4 \$ 60 FAV \$200 FAV B. Pro-ration of variances would not be necessary or appropriate if i) the variances are immaterial (assuming the standards themselves are reasonable) and ii) the variances are material and unfavourable and represent a loss. QUESTION 2 A)i) Maintenance P.S. Molding Finishing 8,000 20,000 (8,000) 5,714 2,286 (20,000) 9,412 10,588 15,126 12,874 ii)Close Maintenance first (PS uses 30% of M versus M’s use of 15% of PS) Maintenance P.S. Molding Finishing 8,000 20,000 (8,000) 2,400 4,000 1,600 22,400 (22,400) 10,541 11,859 14,541 13,459 1

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ii)Close PS first (PS has the largest service cost) Maintenance P.S. Molding Finishing 8,000 20,000 3,000 (20,000) 8,000 9,000 11,000 (11,000) 7,857 3,143 15,857 12,143 iii) M = 8,000 + 0.15 P P = 20,000 + 0.30 M M = 8,000 + 0.15 { 20,000 + 0.30 M } M = 8,000 + 3,000 + 0.045 M 0.955 M = 11,000 M = 11,518 P = 23,455 Maintenance P.S. Molding Finishing 8,000 20,000 (11,518) 3,455 5,759 2,304 3,518 (23,455) 9,382 10,555 15,141 12,859 B.Finding and eliminating inefficiencies in both the service departments and in the
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