PCR Cost of Production budget based on full absorption costing

System

:roll:
I am struggling with understanding the difference in answers for the material part of the cost of production budget between task 1.1(f) June 2006 paper where material used in production before wastage was used but in task 1.1 (g) in June 2005 paper the quantity of material used for the cost of production budget was simply cost of materials usage budget ie including evaporated materials.

Is it simply because the questions are worded slightly different in that in June 2006 paper 2% of material is lost through wastage during production whereas in June 2005 paper evaporation is before issues to production?

Good luck to everyone taking PCR paper on Thursday and after reading comments on PEV paper thank goodness I am not taking it until June 2007!!!!

System

Re:PCR Cost of Production budget based on full absorption costing

Yes without looking, your reasoning sounds plausible. I believe that scrapped finished goods affects production units budget, and wastage before or during production affects the material purchases budget.

If i am incorrect here please put me right!

Good luck

Paul

System

Re:PCR Cost of Production budget based on full absorption costing

Hi Jackie and Paul

I was struggling with exactly the same thing, so have just spoken with the AAT!

They have confirmed that the answer in the June 2006 paper is wrong! Wastage should have been taken into account. They gave me the correct answers:
Sigma - £438,750 Theta £720,000. Calculations are £85,995 X 100/98 x £5 and £141,120 X 100/98 X £5.

Apparently they noticed the mistake before the June papers were marked, and are in the process of correcting the website - 6 months later!! I think it's disgusting and has caused a great deal of confusion! Why they haven't updated it before now or advised relevant learning centres - I dont know!

Good luck on Thursday

Louise

System

Re:PCR Cost of Production budget based on full absorption costing

I was looking at that Saturday and I couldnt see why they were using those figures!!

Paul.

System

Re:PCR Cost of Production budget based on full absorption costing

Louise
Your figures appear to match my purchase value for 1.1 (c)
I would recommend taking a slightly different sequence

where you find the material needed in kgs for each product

then add them

then adjust for the 2% loss

this works because both have the same rate of 2%
this gives the total kgs needed

then multiply by £5 per kg

The AAT solutions are the examiners' suggestions. Since their publication on the sight they have been elevated to a point of being perfect answers, they aren't and very often there are far more appropriate techniques.

Sadly, some students may be misled. But this thread shows that you are not some students so well done for having the courage of your convictions.

System

Re:PCR Cost of Production budget based on full absorption costing

Thank you Paul, thank you Louise and thank you Sandy. I dont think I am going to do any more exam papers as the more I look at them the more I get confused. It makes more sense to me to include the wastage like the material purchases budget.
Good luck to all for the exam.

System

Re:PCR Cost of Production budget based on full absorption costing

So in Task 1.1 (f) did they simply forget to account for wastage within the materials figure, when they should have?

System

Re:PCR Cost of Production budget based on full absorption costing

Yes, they got it wrong! :oops:

I've just checked the website and they have now updated the answer paper! Probably following my phone call yesterday! Bit late really for most of those taking the exam on Thursday!

Good luck to you all!