CONFIDENTIAL, r ACIDEC 2015/MAF451 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE : COST AND MANAGEMENT ACCOUNTING COURSE CODE : MAF451 EXAMINATION : DECEMBER 2015 TIME : 3 HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of four (4) 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 ji) an Answer Booklet ~ provided by the Faculty 5 Answer ALL questions in English. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 6 printed pages (© Hak Cipta Universiti Teknologl MARA CONFIDENTIALCONFIDENTIAL 2 ACIDEC 2015/MAF451 QUESTION 1 Ellipse Bhd is a manufacturing company that produces several types of electrical products. Recently, one of its products ‘Keir’ faced increasing price pressure from its competitors. This has forced the company to lower its selling price well below its target. However, the management observed that another of its product 'Mour’ can be sold at a slightly higher price than its target selling price. The management is somewhat puzzled by the contrasting performance of ‘Keir’ and ‘Mour’ ‘The management has turned up to you for assistance on this matter. As a start, you have decided to examine the company's overhead costing system. Your initial investigation revealed that the company is using direct labour hour as a basis to absorb its overhead costs. The rate of absorption is RM35 per hour. ‘The following data was compiled for ‘Keir’ and 'Mour’ Keir Mour Direct labour hours per unit 3 hours 1.5 hours Production and sales volume 5,000 units 2,500 units Per unit: RM RM Direct material cost 40 50 Direct wages 15 20 Selling price 205 280 After a detailed analysis, you have come up with four cost drivers related to the company's overhead costs: Cost Pool Cost Driver Overhead Cost Driver (RM) Allocation Keir Mour Machine-related cost Machine hours 290,000 12,000 18,000 Set up cost Number of set ups 118,000 50 50 Quality contro! Number of inspections 246,000 1,000 1,500 Purchase order Number of purchase orders __ 330,000 750 450 Total 984,0 Required: a. Calculate the profit per unit of each product using the current system of overhead absorption. (5 marks) b. Determine the profit per unit for both products using the Activity Based Costing system. (10 marks) (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL, 3 ACIDEC 2015/MAF451 c, Comment on the results of the two costing systems as in (a) and (b) above. Determine which of the products that provide higher profit to Ellipse Bhd. (5 marks) (Total: 20 marks) QUESTION 2 Favory Sdn Bhd manufactures its products through two consecutive processes. The ‘company applies process costing principles for the purpose of calculating costs. It is the company's policy to value any incomplete units using First-in-First-Out (FIFO) method. ‘The data below relates to the two processes for the month of January 2016: PROCESS MH Total material costs incurred (12,500 kg) RM60,000 Direct labour and expense cost RM15,500 Actual output to Process KJ 12,000 kg Normal loss. 5% of input Scrap value of losses RMO.20 per kg ‘There is no beginning and ending work-in-progress since the output are fully completed in Process MH. PROCESS KJ Additional material cost RM36,390 Current conversion cost RM24,500 Finished goods 12,000 kg Normal loss 100 kg Scrap value of losses RM1.00 per kg Analysis of the work-in-progress for Process KJ are as follows: - ‘Quantity 7Cost Degree of Completion Beginning work-in-progress | 1,000 kg at RM4,000 | From Process MH = 100% Material 80% Conversion cost, 40% Ending work-in-progress 700 kg From Process MH = 100% Material 90% 50%. __| Conversion cost Additional information: + The finished goods of 12,000 kg are made up of two joint products known as ‘Mult and ‘Ultra’ with a physical output quantity of 6,000 kg each. «The selling price for each of the joint products is RM12,00 per kg for ‘Multi and RM15.00 per kg for ‘Ultra’, respectively. «The joint process cost will be allocated to the products based on the sales value method (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 4 ACIDEC 2015/MAF451 Required: a. Calculate the total costs to be transferred to Process KJ by preparing the Process MH Account. (5 marks) b. Prepare Process KJ Account by showing the Statement of Equivalent Units, Statement of Cost and Statement of Evaluation, (16 marks) Calculate the net profitoss for each of the joint products. (4 marks) d. Explain two (2) differences between normal loss and abnormal loss. State one (1) example for each type of losses. (6 marks) (Total: 30 marks) QUESTION 3 Homey Design Sdn Bhd produces special chairs for handicapped children called ‘Happy Chair’. It is currently sold at a price of RM110 per unit. The following information relates to the production of Happy Chair’ in the month of March 2016: Direct material: - Material DM RM4.00 per unit - Material DS RM3,00 per unit Direct labour 2 hours @ RM3.00 per hour Production overhead RMB.00 per unit Variable selling overhead RM1.00 per unit Fixed selling overhead RM12,000 per month Fixed administrative overhead RM3.00 per unit The company’s activity levels for the month of March 2016 are as follows: Production 27,000 units Sales 22,000 units The production overhead cost per unit includes the fixed cost portion of RM3.00 per unit which is calculated based on normal monthly production level of 30,000 units. The fixed administrative overhead cost is also calculated based on the same monthly production level. Required: a. Calculate the total production cost per unit of ‘Happy Chair’ under both Marginal Costing and Absorption Costing approach. (5 marks) (© Hak Cipta Universiti Teknologi MARA. CONFIDENTIAL,CONFIDENTIAL, 5 ACIDEC 2015/MAF451 b. Prepare a Profit Statement for the month of March 2016 by using both approaches. (14 marks) c. Prepare a profit reconciliation statement for the two profit figures calculated above. (3 marks) d. Discuss the effects on the profits calculated using both Marginal Costing and Absorption Costing approaches with reference to the following situations: i All chairs manufactured are sold. i. The number of chairs sold is less than those manufactured in the period. iii, ‘The number of chairs sold is more than those manufactured in the period (3 marks) (Total: 25 marks) QUESTION 4 ‘A. Datfesia Bhd manufactures lighting components for local market. The company is investigating ways to improvise the profitability of its products. The following informations are available for the production and sales of 25,000 units for the year 2015. RM Sales 1,850,000 Direct material 600,000 Direct labour 375,000 Variable production overhead 175,000 Administrative overhead 420,000 ‘The management is considering two proposals to increase it profits for the year 2016. Proposal 1: Purchase a new machine which will reduce the direct labour cost by RM3 per unit and variable production overhead to RMS per unit Administrative overhead will increase by RM75,000. Other cost and data remain unchanged Proposal 2: Purchasing of a higher quality materials that will increase both the material cost and labour cost by 25%. Selling price will increase by RM18 per unit. Other cost and data remain unchanged. Required: a Calculat i the contribution margin per unit. (3 marks) ji, the annual net profit. (2 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 6 ACIDEC 2015/MAF451 iii, the break-even point in units and value. (3 marks) Wv. ‘the number of units to be sold in order to achieve a profit of RM350,000. (2 marks) b. Calculate the profits for Proposal 1 and Proposal 2 as mention above. Advise the company on which proposal should be chosen in order to achieve maximum profit. (5 marks) B. _D'Jemari Qaseh is a company selling two types of beauty products, BHdetox and Glutha. The selling price, cost per unit and sales commission for each product are shown below: BHdetox: RM Selling price 725 Cost 315 Sales commission 35 Glutha: RM Selling price 500 Cost (245 Sales commission 20 Seventy percent (70%) of the company's sales contributed by Glutha. The company's annual fixed costs are RM110,800. Required: a. Assuming a constant sales mix, calculate a weighted average unit contribution margin. (4 marks) b. Assuming a constant sales mix, calculate the company’s breakeven sales in value (RM). (3 marks) ©. Calculate the number of units of each type of products that must be sold in order to earn a target profit of RM48,100. (3 marks) (Total: 25 marks) END OF QUESTION PAPER © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL