CONFIDENTIAL ACIDEC 2014/MAF451 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE COST AND MANAGEMENT ACCOUNTING COURSE CODE MAF451 EXAMINATION DECEMBER 2014 TIME : 3HOURS 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. 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 il) an Answer Booklet - provided by the Faculty DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 7 printed pages (© Hak Cipta Universiti Teknologi MARA. CONFIDENTIALCONFIDENTIAL 2 ACIDEC 2014/MAF451 QUESTION 1 A. Red Wave Sdn Bhd is a manufacturer of a range of products which passes through three different processes. The output of Process 1 is transferred to Process 2 where additional materials are added. No additional materials are needed in the last process. ‘The details of the process costs are given below: Process 1 Process 2 Process3_| Materials Material A Material D None 10,000 kg at | 6,000 kg at RM2.00 per kg RM2.00 per kg Material B | 3,500 kg at | RM2.20 per kg | Material C | 1,500 kg at | RM5.50 per kg | Wages RM8,000 | RM6,000 RM4,000 Expenses, RM6,200, RM2,700 RM4,497 Normal Losses | 5% of input 7,000 kg 2% of input No scrap value Alillosses can | All losses can be sold at be sold at RMO.90 perkg | RM1.50 per kg ‘Actual Output | 14,000 kg 79,500 kg 19,110 kg ‘Additional information are also given: There is no work in progress at the beginning or ending of each of the processes. ‘The manufacturing overhead is absorbed at 50% of the wages cost in each of the processes. Required: i. Prepare Process 1, 2 and 3 Accounts. (13 marks) ii. Prepare Normal Loss Account and Abnormal Loss Account and/or Abnormal Gain Account. (4 marks) (© Hak Cipta Universiti Teknologi MARA. CONFIDENTIALCONFIDENTIAL 3 ACIDEC 2014/MAF451 B. Threesome Sdn Bhd produces three different products passing through two processes. Output from Process 1 is transferred to Process 2. Itis from Process 2 that the three different products emerged. The following data relates to Process 2: Beginning work in progress 500 kg RM27,370 Stages of completion: Materials transferred from Process 1 100% Materials added in Process 2 80% Conversion costs 50% Materials transferred from Process 1 3,500 kg RM175,000 Materials added in Process 2 200 kg RM16,000 Conversion costs incurred RM30,000 Ending work in progress 400 kg Stages of completion: Materials added in Process 2 70% Conversion costs 60% Required: i. Calculate the equivalent units for Process 2. (7 marks) ji, Calculate the cost per equivalent unit for Process 2. (3 marks) iii. Calculate the value of the ending work in progress for Process 2. (3 marks) (Total: 30 marks) QUESTION 2 Dee Dee Candy Company produces and sells Chocolate Cuties which are packed in a jar containing 100 pieces of Chocolate Cuties. ‘The following cost data relates to the production and sales for the month of October 2014. Cost per Jar RM Direct materials 12.00 Direct labour 6.00 Variable manufacturing overhead 2.00 Variable selling overhead 1.50 Additional information are also given: The annual fixed cost is RM120,000. 100,000 pieces of Chocolate Cuties are produced and sold in the month of October 2014. Chocolate Cuties are sold at RM45.00 per jar. (© Hak Cipta Universiti Toknologl MARA CONFIDENTIAL,CONFIDENTIAL 4 ACIDEC 2014/MAF451 Required: a. Determine the breakeven point in number of jars and value for the month of October 2014. (5 marks) Calculate the margin of safety in number of jars and value for the month of October 2014, (4 marks) For the month of November 2014, it is expected that the direct materials and labour cost will increase by 10% and 15% respectively. The annual fixed costs will increase to RM144,000. Calculate the minimum number of jars the company should produce and sell for the month of November 2014 in order to cover the increase in costs. (7 marks) In order to improve its profitability for the month of November 2014, the company will need to spend an additional RM3,000 in terms of fixed cost. At the same time, it has to increase the selling price to RMSO per jar. The company plans to produce and sell 120,000 pieces of Chocolate Cuties. Other cost data remain the same. Calculate the increase in profit for the month of November 2014. (7 marks) Dee Dee Candy Company and Light Sweets Company are competitors in the same industry. They have similar variable costs per unit and selling prices but Light Sweets Company has more fixed costs. Explain the impact of this situation on Light Sweets Company's breakeven. (2 marks) (Total: 25 marks) © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL, 5 ACIDEC 2014/MAF451 QUESTION 3 Orkid Sdn Bhd manufactures two products, Orkid 1 and Orkid 2. Currently the company applies an overhead rate based on direct labour hours. Production and product costing data are as follows: Orkid 4 Orkid 2 Production quantity 35,000 units 60,000 units Direct materials per unit RM120 RM135 Direct labour hour per unit 2 hours 3 hours Direct labour rate per hour RM30 RM30 ‘The manufacturing overhead budget is as follows: RM Purchasing 167,000 Machine related costs 133,000 Production 205,000 Receiving 150,000 Testing 95,000 750,000 The company prices its products at a markup of 25% on cost. Recently, the management team has suggested that the company calculates its product cost using the activity based costing approach, After doing the cost analysis, the following cost drivers for the five activity cost pools have been identified: Activity Cost Pool Cost Driver Purchasing Number of orders Machine related costs Machine hours Production Number of production runs Receiving Number of requisitions raised Testing Number of tests You have also gathered the following additional data: Cost Driver Orkid 4 Orkid 2 Number of orders 800 1,200 Machine hours 55,000 21,000 Number of production runs 235 250 Number of requisitions raised 35 40 Number of tests 3,200 1,100 (© Hak Cipta Universiti Toknolog! MARA. CONFIDENTIAL,CONFIDENTIAL, 6 Required: a. Compute the unit selling price for Orkid 1 and Orkid 2 using: i. current overhead absorption system. ii. activity based costing system. (Note: round up all calculations to two decimal places) QUESTION 4 ACIDEC 2014/MAF451 (7 marks) (13 marks) (Total: 20 marks) Mawar Sdn Bhd is planning to manufacture a compound that will be used in the automotive industry. The product will be sold at RM125 per unit. The company has just completed its first year operation. Its accountant has prepared the Statement of Profit or Loss for the year 2014. ‘Statement of Profit or Loss for the year 2014 RM Sales (50,000 units @ RM125) Less: Cost of goods sold: Opening inventory - Cost of goods manufactured (60,000 units @ RM70) 4,200,000 Closing inventory (200,000) Gross margin Less: Selling & administration expenses Net profit RM 6,250,000 3,500,000 2,750,000 1,200,000 4,550,000 The company’s fixed selling and administration expenses is RM900,000 per year and the variable expenses is RMS5 per unit. The manufacturing cost per unit is computed based on the following: RM Direct materials 30 Direct Labour 25 Variable factory overhead 5 Fixed factory overhead (based on 60,000 units) 40 Total cost per unit 70 The budgeted production and sales information for 2015 are as follows: Units Production 55,000 Sales 58,000 (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL 7 ACIDEC 2014/MAF451 Required: Using the same cost structure and the selling price given above, prepare the projected statement of profit or loss for the year 2015 using the following approaches: i. Marginal costing. ii. Absorption costing. (15 marks) Reconcile the difference in the marginal and the absorption costing profit figures. (3 marks) State TWO (2) reasons for the difference in the profit figures. (2 marks) Explain to the management of Mawar Sdn Bhd the effects of Marginal Costing approach and Absorption Costing approach on the company's profits in each of the following situations: i. units produced is the same as units sold. ii, units produced is more than units sold. il, units produced is less than units sold ( marks) (Total: 25 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknologi MARA. CONFIDENTIAL