MAC3761 – TEST 1 COMPLETE
MEMORANDUM (DISTINCTION
STANDARD)
Total: 75 Marks
Question 1(a): Direct Costing (8 marks)
Separates fixed and variable costs – improves decision-making (2)
Avoids arbitrary allocation of fixed overheads (2)
Facilitates CVP analysis (2)
Prevents overproduction (2)
Question 1(b): Errors in Income Statement (18 marks)
No Error Explanation Marks
1 EPG demand Expected value not 2
incorrect used
2 SPG units incorrect Market share 2
misapplied
3 Sales incorrect Wrong format used 2
4 Opening inventory Not absorption 2
wrong costing
5 Closing inventory Should be included 2
missing
6 Costing systems Direct vs absorption 2
mixed
7 Costs incomplete Some costs omitted 2
8 Commission High-low not 2
incorrect applied
9 FMO misclassified Should be in COGS 2
MEMORANDUM (DISTINCTION
STANDARD)
Total: 75 Marks
Question 1(a): Direct Costing (8 marks)
Separates fixed and variable costs – improves decision-making (2)
Avoids arbitrary allocation of fixed overheads (2)
Facilitates CVP analysis (2)
Prevents overproduction (2)
Question 1(b): Errors in Income Statement (18 marks)
No Error Explanation Marks
1 EPG demand Expected value not 2
incorrect used
2 SPG units incorrect Market share 2
misapplied
3 Sales incorrect Wrong format used 2
4 Opening inventory Not absorption 2
wrong costing
5 Closing inventory Should be included 2
missing
6 Costing systems Direct vs absorption 2
mixed
7 Costs incomplete Some costs omitted 2
8 Commission High-low not 2
incorrect applied
9 FMO misclassified Should be in COGS 2
