CONFIDENTIAL, ACIMAR 2014/MAF310 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION ‘COURSE : MANAGEMENT ACCOUNTING COURSE CODE : MAF310 EXAMINATION : MARCH 2014 TIME : 3HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of five (5) questions. 2. Answer ALL questions in the Answer Booklet. Start each answer on a new page. 3. Do not bring any material into the examination room unless permission is given by the invigilator. 4 Please check to make sure that this examination pack consists of i) the Question Paper ii) an Answer Booklet - provided by the Faculty DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 6 printed pages (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 2 ACIMAR 2014/MAF310 QUESTION 1 a. The information provided by management accounting system must have certain characteristics or criteria for it to be useful to its internal users. Useful information must be relevant, reliable, understandable, accurate, cost effective and timely. Briefly explain any THREE (3) characteristics of useful information as stated above. (6 marks) b. Differentiate between ‘relevant cost’ and ‘irrelevant cost’. Give ONE (1) example each. (6 marks) (Total: 12 marks) QUESTION 2 Jemeh Berhad manufactures and supplies premium quality engine oil to main automobile service centres. The summarized profit statement of the company for the year ended 31 December 2013 is shown below: | Sales (18,000 units) 1,530,000 | Direct materials and wages 666,000 Fixed production overhead 288,000 Variable production overhead 252,000 Selling overhead (1/3 fixed) 270,000 Administration overhead 173,300 (119,300) Net Loss. el The top management of the company is very upset with the financial result and the managers are urged to come up with proposals to improve the company's performance. The following independent proposals have been put forward for you to analyse: 1. To reduce selling price by 4%, where sales units are expected to increase by 32%. 2, To pay sales commission of 4% on sales, where sales volume is expected to increase by 32%. The total annual fixed costs will be cut by 12%. 3. To increase direct wages rate from RM10 to RM12 per unit. With this, production and sales levels are expected to increase by 35%. However, the company would has to incur additional advertising expenses of RM8,000 per annum. Required: a. _ Determine the break-even point of the company for the year 2013 (both in RM value and in quantity). (7 marks) b. Analyse the above proposals independently and suggest to the management as to which proposal should be undertaken. (14 marks) (Total: 21 marks) (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 3 ACIMAR 2014/MAF310 QUESTION 3 Creamy Yolks Sdn Bhd manufactures “Com Mayo” as their new product. Currently, the company is operating at full plant capacity. The management estimates the following costs at budgeted production and sales volume of 100,000 bottles [ RM) Direct material 500,000 Direct labour — | 350,000 Variable overhead oe 375,000 | Variable selling expenses — 100,000 | - 60,000 | 200,000 expenses 81,000 Fixed administrative expenses 60,000 In order to remain competitive, the management adopts marginal cost plus pricing approach. ‘The standard profit margin is 25% on selling price. Required: a. Compute the selling price per unit of Corn Mayo using the marginal cost plus pricing method. (Round up your computations to two decimal places) (7 marks) b. For the coming year, the management of Creamy Yolks Sdn Bhd requests that the pricing method should be changed to total cost plus pricing, The standard profit margin is maintained 25% on selling price. Compute the selling price per unit of Corn Mayo using the new method. (Round up your computations to two decimal places) (4 marks) . List ONE (1) advantage and ONE (1) disadvantage for the following pricing methods: i. Marginal cost plus pricing Absorption cost plus pricing (4 marks) d. Creamy Yolks Sdn Bhd has received a special order for 5,000 bottles at a price of RM15 per bottle. In order to fulfil the special order, the company has no intention to cut down regular sales and will pay the labour at a rate of 50% higher than the normal rate per unit. However, with the increase in raw materials purchased for the special order, the company is entitled for 10% discount offer from the supplier. The variable selling cost will not be incurred for the special order but cost of special packaging will be charged at RM250 for every one thousand bottles packed. Compute the incremental profit or loss, if any, from the special order. (6 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 4 ACIMAR 2014/MAF310 . Should Creamy Yolks Sdn Bhd accept the special order? Briefly explain. (2 marks) (Total: 23 marks) QUESTION 4 Local Nature Sdn Bhd manufactures and sells its product throughout Borneo. The company operates at three different branches; North, South and West. Local Nature Sdn Bhd headquarters office is situated in the East. The sales in the West branch reported losses for the past few years. For this reason, the management is considering to close down West branch. The following is the summary of the Income Statement for each branch: North South West RM RM RM Variable Expenses 425,000 180,000 132,000 Fixed Expenses: Salaries and Wages 19,000 18,000 17,000 Utilities 2,700 2,500 2,300 Headquarters advertising 10,000 7,000 5,000 Branch advertising 29,000 25,000 27,000 Rent on building 17,000 15,000 12,000 Depreciation on motor van 8,200 10,400 7,400 Repair and Maintenance 3,400 4,000 2,500 General office expenses 14,000 14,000 14,000 Service branch expenses 23,000 23,000 23,000 Total Fixed Expenses 126,300 118,900 110,200 Total costs 551,300 298,900 242,200 Sales Revenue 600,000 360,000 240,000 Net Income / (Loss) 48,700 61,100 (2,200) The following additional information is available: 1. Closing of West branch has no effect on sales in the other branches. 2. The manager of West branch with a salary of RM5,000 will be transferred out to South branch. All other employees will be terminated. 3. If West branch is closed, its utility bills will be reduced by RM900. The remaining will be shared equally by other branches. 4. Total headquarters advertising is to be reallocated to the remaining branches on a basis of sales revenue if any of its branches is closed down. (© Hak Cipta Universit! Teknologi MARA, CONFIDENTIALCONFIDENTIAL 5 ACIMAR 2014/MAF310 5. _ Branch advertising expense for West branch is avoidable when the branch is closed. 6. Rental for the building of West branch is avoidable except that one third of the rent is used for storage space and to be taken over by North branch. 7. The motor van of West branch will be transferred out to North branch. 8. One fifth of the repair and maintenance costs of West branch can be avoided if the branch is closed. The remaining will be shared equally by other branches. 9. General office expenses are unavoidable. The total general office expenses for the company will be shared equally by the remaining branches. 10. Half of the service branch expenses can be avoided if a branch is closed. The remaining will be absorbed equally by other branches, Required: a. Prepare a revised Income Statement using marginal costing approach, if the management of Local Nature decides to close down West branch. (18 marks) b. Compare the net profit before the discontinuance of West branch with the revised net profit. What would be the appropriate action to be taken by the headquarters office? (2 marks) cc. _ List any FOUR (4) qualitative factors that need to be considered before ‘add or delete’ decision is made. (4 marks) (Total: 24 marks) (© Hak Cipta Universiti Toknolog! MARA CONFIDENTIALCONFIDENTIAL 6 ACIMAR 2014/MAF310 QUESTION 5 EastiQoma Enterprise is currently involved in producing and distributing dried fruits to local ‘supermarket chain. The following information is gathered from the budget report of the business for the period ended 31 January 2014 Budgeted cos RM Direct material and labour costs 337,500 Variable factory overhead 212,500 Fixed factory overhead 172,800 Variable selling and administration overhead 28,800 Fixed selling and administration overhead 115,200 Additional information available: 1. The overhead absorption rates are computed based on budgeted activity level of 240,000 packs per period. 2. During the period ended 31 January 2014, 250,000 packs are produced and 240,000 packs are sold at RM4 each. 3. The stocks of finished products as at 1 February 2013 are 8,000 packs. The stocks are valued at the budgeted costs shown above, 4, The actual costs incurred are as per budgeted. Required: a. Calculate the product cost per unit using the marginal costing and the absorption costing approaches. (3 marks) b. Based on the available information, prepare the profit statements for the business for the period ended 31 January 2014, using both absorption and marginal costing methods. (13 marks) ©. Reconcile the net profit figures calculated in (b) above. Explain your answer. (4 marks) (Total: 20 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL