CONFIDENTIAL 1 AC/FEB 2021/MAF201

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : COST AND MANAGEMENT ACCOUNTING 1

COURSE CODE : MAF201
EXAMINATION : FEBRUARY 2021
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in English. Start each answer on a new page.

3. Please submit your HANDWRITTEN answers in ONE (1) pdf file.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 7 printed pages

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QUESTION 1

CCR Construction Sdn Bhd has been engaged to construct a resort at Pulau Sipadan. The
contract has commenced its operation on 1 February 2020 and it is expected to be completed
on 31 August 2021. The following details of the contract have been extracted from the
company’s book of account for the period ended 31 October 2020:

Items Value (RM)

Contract value 2,783,000
Materials issued to site 847,000
Materials returned to store 96,800
Plant and machinery sent to site at cost 1,391,000
Materials at site 31 October 2020 104,060
Wages paid 417,450
Subcontractor charges paid 60,500
Direct expenses paid 33,880

The company’s accounting period ends on 31 October every year. Depreciation on plant and
machinery is charged on monthly basis at a rate of 20% per annum on cost. Overheads are
absorbed at 25% of total material used during the period. As at 31 October 2020, total
subcontractor charges and total wages incurred for the period is RM54,450 and RM435,600
respectively.

Value of the work certified by the architect on 31 October 2020 is RM1,996,500. Cash received
from client is subjected to 4% retention money. Due to some unforeseen circumstances, the
company needs to incur additional costs to complete this contract and it is estimated to be
RM800,000. The company also estimates for warranty and rectification costs of RM29,368 to
be incurred in the future. Profit for the contract is to be recognised based on the input (cost)
method.

Required:

a. Prepare the following for the period ended 31 October 2020:

i. Construction in Process Account

ii. Contractee Account
(12 marks)
b. Define the following terms:

i. Value of work certified

ii. Architect Certificate
(3 marks)
(Total: 15 marks)

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QUESTION 2

Rahman Aaira Sdn Bhd is a company which produces air-freshener. One of its products,
‘Apple Fragrance Bag’ needs to undergo two processes, Roasting Process and Packaging
process. The following is the information regarding the two processes for the month of January
2021:

Roasting Process

Direct materials 15,000 kilogram @ RM3 per kg

Direct labour 2,000 hours @ RM6 per hour
Direct expenses RM10,000
Production overheads Absorbed at a rate of RM4 per direct labour hour
Output 12,000 kilogram

No losses are expected to be incurred in this process. There is no opening and closing work
in progress for the process.

Packaging Process

Material added 5,000 kilogram costing RM20,000

Conversion cost RM30,000
Opening work in progress on 1 January 2021 was 1,400 kilograms at the following
costs:
From previous process RM4,400
Material added RM7,000
Conversion cost RM5,600

Stage of completion for opening work in progress: Material added: 90%

Conversion cost: 70%
At the end of January 2021, there were 1,000 Material added: 60%
kilograms partly completed units at the following stage Conversion cost: 40%
of completion:
Actual losses were 400 kilograms which were 890 kilograms lesser than the normal
loss. All losses can be sold as scrap for RM1.40 per kilogram.
At the end of the month, 17,000 kilograms were completed and transferred to finished
goods.
It is the policy of Rahman Aaira Sdn Bhd to adopt weighted average cost method in
valuing the opening work in progress.

Required:

a. Prepare Roasting Process Account.

(6 marks)

b. Prepare Packaging Process Account with the relevant statements.

(15 marks)

c. List FOUR (4) industries that commonly use the process costing method.
(4 marks)
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d. Explain briefly the term normal loss.

(2 marks)
(Total: 27 marks)

QUESTION 3

Awesome Pharmaceutical Sdn Bhd is a manufacturing company producing medical devices,

including Personal Protective Equipment (PPE). Due to the pandemic Covid-19 global
outbreak, the company is considering to increase their production for PPE.

The following data relates to the production of the company for the month of December 2020.

Variable cost per unit of PPE:

RM
Direct material 10.00
Direct labour 5.00
Production overhead 3.00

Fixed cost per month:

RM
Production overhead 70,000
Administrative overhead 45,000

The fixed production overhead absoption rate is determined based on normal production
capacity of 20,000 units per month. Actual units produced during the month were 25,000.
There were 1,000 units of finished goods in store on 30 November 2020. Due to uncertainties
in the demand of the PPE in future, the company has tripled the stock level at the end of
December 2020. The selling price was at RM25 per unit. Variable selling and distribution
overhead is 2% from total sales value for the month. Total fixed selling and distribution
overhead for a year is RM210,000.

Required:

a. Prepare the Statement of Profit or Loss for the month of December 2020 for Awesome
Pharmaceutical Sdn Bhd using:

i. Marginal costing approach

ii. Absorption costing approach
(10 marks)

b. Justify the differences in profit between marginal costing and absorption costing in (a)
above.
(2 marks)

c. Explain TWO (2) advantages of marginal costing approach.

(2 marks)
(Total: 14 marks)

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QUESTION 4

Superspice Sdn Bhd manufactures black pepper barbeque sauce called Smack. Each packet
of Smack sells for RM4.80. The company’s budgeted monthly production is 2,250 packets of
Smack.

Information related to the month of December 2020 is as follows:

RM
Production costs (40% fixed) 5,000
Selling and distributions expenses (70% fixed) 3,500
Fixed administration costs 1,850

For the month of December 2020, the company has sold 3,000 packets of Smack.

Required:

a. Identify the following for December 2020:

i. The variable cost per packet

ii. The monthly fixed cost.
(4 marks)

b. Determine the following for December 2020:

i. The number of packets needed to be sold to breakeven

ii. The margin of safety in packets
iii. The net profit for the period
iv. The number of packets the company must sell to achieve a targeted profit of
RM8,700.
(6 marks)

c. Due to the current economic condition, a 10% increase in variable cost per unit is
anticipated due to the higher material prices. Determine the new selling price per
packet if the company wishes to maintain the current contribution sales ratio.
(4 marks)

d. The company has been planning to launch another sauce called Sweets in the year
2021 in addition to the current production line. Each packet of Sweets will be sold for
RM6.50 with a contribution sales ratio of 70%. Both Smack and Sweets will be
produced using the same production plant, requiring an additional fixed cost of
RM4,000 per month.

The sales volume for Sweets is expected to be 3,375 packets while for Smack, it has
to be limited to the budgeted monthly production level as being practiced by the
company.

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Required:

Advise Superspice Sdn Bhd whether to proceed or not with the future business plan
by referring to the break-even point in packets.
(6 marks)

e. State FOUR (4) uses of the CVP analysis.

(4 marks)
(Total: 24 marks)

QUESTION 5

Anggun Sdn Bhd manufactures and sells beauty products. The management accountant of
the company has been instructed to prepare a cash budget for the second quarter of 2021.
The operational budgets of the company for 2021 are as follows:

Selling and
Sales Purchases Wages Factory
distribution
Month overhead
overhead
RM RM RM RM
RM
February 500,000 230,000 210,000 110,000 48,000
March 470,000 270,000 205,000 155,000 55,000
April 400,000 255,000 210,000 135,000 40,000
May 350,000 230,000 210,000 110,000 39,000
June 315,000 225,000 192,000 115,000 40,000

Additional information:

1. 20% of the total sales are in cash with 5% discount given and the balance are credit
sales.

Debtors collection will be made in two stages:

Stage one - 50% of debtors pay one month following the sales.
Stage two - 50% of the debtors pay in the second month following the sales.

Normally, 3% of the total credit sales are uncollectable in the second stage of debtors’
collection.

2. All purchases are on credit. The amount is to be settled in the month of purchase and
are entitled for a 5% purchase discount.

3. 90% of wages expenses are paid in the month incurred while the accrued amount will
be paid within the first week of the following month.

4. Factory overheads are to be settled in the month incurred, while selling and distribution
overhead are paid in the following month.

The company adopts the straight-line method for calculation of depreciation expenses.
The depreciation expenses included in the overheads are as follows:

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 Factory overhead is inclusive of depreciation on factory machinery of RM384,000

per annum.
 Selling and distribution overhead is inclusive of depreciation on delivery vans of
RM198,000 per annum.

5. Loan repayments of RM150,000 will be paid in six monthly equal instalments starting
December 2020.

6. In June 2021, the company is expected to gain a profit of RM5,000 from selling its
motor vehicle with a carrying value of RM40,000.

7. The cash balance as at 1 April 2021 is RM450,000.

Required:

a. State FOUR (4) reasons for preparing cash budget.

(4 marks)

b. Prepare a cash budget for the second quarter of year 2021.

(16 marks)
(Total: 20 Marks)

END OF QUESTION PAPER

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