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BBMA3203
MANAGEMENT ACCOUNTING II
MATRICULATION NO :
IDENTITY CARD NO. :
1
BBMA3203
PART A
QUESTION 1
135-75=60
d) By breaking down costs into fixed versus variable, cost-volume-profit analysis gives
BegBiroo strong insight into the profitability of their products. Based on accounting
data, the cost-volume-profit analysis is used to determine the sales quantity needed to
break even as well as the sales quantity required to earn a desired profit margin.
Managers can use cost-volume-profit analysis to estimate the level of sales that will
allow the BegBiroo Company to make a particular profit, called targeted income.
They can add the targeted income to fixed costs associated with production, then
divide the total by the contribution margin ratio.
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BBMA3203
QUESTION 3
a)
I. Project A
Project B
II.
Project A
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BBMA3203
T
Ct
III. 0 = NPV = ∑
t =0 ( 1+ IIR )t
IRR= 15.238%
b) Base on the a) the project should be selected was project B because it’s have positive NPV
compare to project A. The positive NPV implies that the present value of the cash inflows
from the project are greater than the present value of the cash outflows, which represent the
expenses and costs associated with the project. Project B generate an IRR of 15.238% and it
determines the actual rate of return a project earns.
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BBMA3203
PART B
QUESTION 1
A responsibility Centre is one part or section in an organization where the manager will
be responsible for activities of that section. Responsible accounting is therefore a
system that measures revenue for each responsibility Centre according to the
information required by the managers to run the operations at the Centre. There is four
type of responsibility Centre that we can discuss as per below
Cost Centre’s
This is a responsibility Centre where its manager is accountable for the incurrence of
costs. For example, the Assembly Department at a factory is a cost Centre. The
supervisor will be able to control the incurrence of cost in the assembly of goods at the
factory but has no specialist in setting the price of those goods. For the purpose of
presentation evaluation, the supervisor will be evaluated on how far costs are controlled.
Revenue Centre’s
This is a responsibility Centre where its manager is accountable only for the income or sales
attained. For example, the Marketing Department manager has the power only in setting
price and planning sales. It is a income Centre and for the purpose of performance
evaluation. The manager will be evaluated based on total sales achieved and direct costs
from the Marketing Department.
Profit Centre’s
This is a responsibility Centre where its manager is accountable for both incurrence of costs
and the revenue achieved. For example, the manager of a hotel is made accountable for
income and incurred costs of the hotel. Usually, they will be assessed by comparing target
profits and the actual profit achieved.
Investment Centre’s
This is the responsibility Centre where its manager is accountable for revenue, costs and
investments made. For example, the manager of a multinational subsidiary is usually
accountable for the revenue accomplished by the subsidiary and has the authority to make
capital investment decisions such as the shutting of factory or the termination of a production
line. They will be assessed based on the responsibility given. Among the usual measurement
used is the return on investment or residual income
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BBMA3203
QUESTION 2
a)
The calculation above suggest that the new order must be accepted as it provides a total profit of RM
2,100, even though the selling price of the special order is lower (RM 0.90) than the normal Selling
Price (RM 1.50). if we observe the above analysis carefully, it does not take into account the fixed
production cost in the analysis. This is due to the fact that the fixed cost does not increase with the
increase number of orders. The reason that it remains unchanged whatever alternatives we choose and
thus it is irrelevant and should be ignored in this analysis
b)
The relevant range is the quantitative range of units that can be produced based on the
company’s current productive assets. These assets can include equipment capacity or its
labour capacity. Labour capacity is typically easier to increase on a short-term basis than
equipment capacity. The above scenario assumes that labour capacity is available, so only
equipment capacity is considered in the scenario
Manis can produce 18,000 units annually. Its relevant range of production would be zero to
18,000 units annually. As long as the units of production fall within this range, it does not
need additional equipment. However, if it wanted to increase production from 18,000 units to
20,000 units, it would need to buy or lease additional equipment. If production is fewer than
18,000 units, the company would have unused capacity that could be used to produce
additional units for its current customers or for new clients.