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MidSessionPracticeQuestionGuidance
09/04/2008
Solutions to Practice Midsession Questions
QUESTION 1
(a)
The most common mistake was that students forgot to calculate the cost per activity.
Some
students also failed to follow instructions about calculations (keep numbers to 2 decimal points).
Allocate Resources to Activities
Job Size
Estimating
and Job Setup
Dealing
with
Nonroutine Jobs
Other
Total
Wages and salaries
220,000
55,000
165,000
110,000
550,000
Disposal fees
510,000

340,000

850,000
Onsite supplies
46,750
25,500
8,500
4,250
85,000
776,750
80,500
513,500
114,250
1,485,000
Calculate cost per activity
Total
Cost
Quantity of
Activity
Cost Per activity
Job size
776,750
125,000
6.21
Estimating and job setup
80,500
650
123.85
Dealing with nonroutine jobs
513,500
200
2,567.50
1,370,750
(b)
Common mistakes: people did not treat costs appropriately, or forgot to include certain costs
altogether e.g.
., they only calculated costs associated with square metres.
i. Cost for a routine job: 100 sq metres
Job size
621.00
Estimating and job setup
123.85
Dealing with nonroutine jobs

744.85
ii. Cost for a nonroutine job: 100 sq metres
Job size
621.00
Estimating and job setup
123.85
Dealing with nonroutine jobs
2,567.50
3,312.35
(c)
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MidSessionPracticeQuestionGuidance
09/04/2008
This is the section where marks tended to be lost.
An average answer was one that said the
student disagreed because nonroutine jobs would cost more than the quoted price using the
current policy (marks were also given if students had made mistakes with calculations earlier
that led them to argue the opposite).
A really good answer was one that noted that the largest component of the cost of a nonroutine
job was not related to square metres, and that ABC reflects this because it takes into account the
different resource usage of different activities (whereas the current policy does not).
ABC
calculations in part (b) clearly showed this to be the case, and yet students often used
calculations on a per metre basis to justify their answers.
Some students said that if we look at average cost the situation is okay.
However averaging out
costs between the two types of job in order to make a recommendation is against what we have
tried to emphasise at various stages throughout this course – that in order to make correct
decisions (pricing and others) that do not cause us to lose customers (or make them very
unhappy) we should be looking at the specific case for each product/service (unless ABC
calculations demonstrate that the difference is immaterial).
In addition, part (b) was asking for
two particular situations where area size was 100 square metres  if the area is different (as you
would expect where you take on a range of different jobs), the average will change – in
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 Three '11
 a
 Direct material price variance, health department, common mistakes, nonroutine jobs

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