Question 1

Wan Gaal and Wan Persie are two budding entrepreneurs. They are
currently enrolled into MBA program at Putra Business School (PBS).
They noticed that there is an opportunity to sell a local food called
Murtabak to the students of PBS and UPM. Murtabak is a stuffed
pancake or pan-fried bread which is commonly found in Asian region.
With an attractive packaging and right recipe, they are confident that
this venture would be a success. They agreed that they should sell this
Murtabak at RM3.25 per unit. They are planning to open the store and
name the business Murtabak Unggul (MU). They started to collect
business data and the doubt surfaced whether this business is
sustainable. Below is the data that they collected:

Items RM

Murtabaks ingredient (chicken, onion, butter, flour) 1.20 per

unit

Utilities making Murtabak (water, gas) 0.03 per unit

Packaging 0.02 per unit

Store rental (with a capacity of 30,000 Murtabaks per month)

11,900 per month

Rental of cooking equipment 8,000 per

month

Rental of fixtures 5,000 per

month

Two full time chefs 1,800 per person per

month

Full time sales assistant 1,200 per month

Store utilities 300 per month

Required:
a) Identify and compute Murtabak Ungguls total fixed and variable
costs. Calculate the contribution margin per unit.

(6 marks)

b) What profits in the first month would Murtabak Unggul generate if

Murtabak sales were 6,000 unit?

(4 marks)

c) How many units Murtabak Unggul must sell to achieve break even?

(4 marks)

d) Advise Wan Gall and Wan Persie on how they can ensure that their
Murtabak venture will be a sustainable business.

(6 marks)
Question 2

The following budgeted income statements relate to the second

quarter of 2015 for TRW Sdn. Bhd.

APRIL MAY JUNE

Sales RM224,000 RM272,000 RM304,000

Cost of goods sold* 153,600 182,400 201,600

Gross profit RM70,400 RM89,600 RM102,400

Operating 35,200 40,000 43,200

expenses^
Operating income RM35,200 RM49,600 RM59,200

*includes all product costs i.e. direct materials, direct labour and manufacturing
overhead
^includes all period costs i.e. selling, general and administrative expenses.

Additional information:

1. 40% of sales are cash sales.

2. 65% of credit sales will be collected in the first month after the sales, the
30% in the second month after the sales. The remaining will be bad debt.
3. Depreciation represents RM12,800 of the estimated monthly operating
expenses.
4. Cost of goods sold and operating expenses are paid in the month
incurred.
5. Cash at April 1 2015 is RM22,400 and accounts receivable RM239,680
(RM168,000 from March credit sales and RM71,680 from February credit
sales).
6. RM75,000 tax will be paid in May.
7. Capital expenditure of RM30,000 is expected to be made in April.

Required:

Prepare a Cash Budget for the months of April, May and June 2015 and
comment on the usefulness of preparing such a report for
management based on the information revealed in your cash budget.

(20 marks)

QUESTION 3

Persiaran Sdn. Bhd. makes a product in two quality standards, called Basic
and Super. The business is able to sell these products at a price that gives
a standard profit mark-up of 25 per cent of full cost. Full cost for one unit is
calculated by charging overheads to each type of product on the basis of
direct labour hours. The costs are as follows:

Basic (RM) Super (RM)

Direct labour (RM 10 per 40 60
hour) 15 20
Direct material

The total overhead costs are RM1,000,000. Based on past experience the
business expects to make and sell 40,000 Basics and 10,000 Supers in the
coming years.

Recently, the management has undertaken an exercise to identify cost

drivers of various activities. The finding has revealed the following analysis
of the annual overhead:

Activity (and cost driver) Cost (RM) Annual number of activities

 000 Total Basic Super
Number of machine set-ups 280 100 20 80
Number of quality-control 220 2,000 500 1,500
inspections
Number of sales orders 240 5,000 1,500 3,500
processed
General production 260 500,000 350,000 150,00
(machine hours) 0
Total 1,000

Required:

a) Determine the full cost and selling price of each of the two products based
on the present traditional costing system.
(5 marks)

b) Determine the full cost and selling price of each product based on an
activity-based costing by taking into account of the managements recent
investigation. (10 marks)

c) What are you assessment of the two costing approaches? What would
you advise the management on the appropriate costing approach to
adopt? (5 marks)