BBMA3203

TAKE HOME EXAMINATION

JANUARY 2021 SEMESTER

BBMA3203

MANAGEMENT ACCOUNTING II

MATRICULATION NO :
IDENTITY CARD NO. :

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PART A

QUESTION 1

a) Contribution margin = revenue − variable costs

135-75=60

b) Total fixed cost =32,600+41,850+37,750

=112,200

Break even point = Total fixed Cost/Contribution margin

= 112,200/60
= 1,870

c) Feb delivery cost = 37,750-20%

= 30,200

Contribution margin = 110-75

= 35

Total fixed cost = 32,600+41,850+30,200

= 104,650

Break even point = 104,650/35

= 2,990

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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QUESTION 3

a)
I. Project A

Year Cash Flow Net Cash Flow

0 500,000 500,000
1 120,000 500,000-120,000
= 380,000
2 100,000 380,000-100,000
= 280,000
3 130,000 280,000 – 130,000
=150,000
4 150,000 150,000-150,000
=0
5 180,000 180,000

Payback period = 4 years

Project B

Payback period = investment/annual payback

= 500,000/150,000
= 3.33 years

II.

Project A

 Yea Cash Net Cash Discounted Cash Net Discounted

r Flow Flow Flow Cash Flow
0 -500,000 -500,000 -500,000.00 -500,000.00
1 120,000 -380,000 104,347.83 -395,652.17
2 100,000 -280,000 75,614.37 -320,037.81
3 130,000 -150,000 85,477.11 -234,560.70
4 150,000 0.00 85,762.99 -148,797.71
5 180,000 180,000 89,491.81 -59,305.90

Net present value = -59,305.90

Project B

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 Yea Cash Net Cash Discounted Cash Net Discounted Cash

r Flow Flow Flow Flow
0 -500,000 -500,000 -500,000.00 -500,000.00
1 150,000 -350,000 130,434.78 -369,565.22
2 150,000 -200,000 113,421.55 -256,143.67
3 150,000 -50,000 98,627.43 -157,516.23
4 150,000 100,000 85,762.99 -71,753.25
5 150,000 250,000 74,576.51 2,823.26

Net present value = 2,823.26

T
Ct
III. 0 = NPV = ∑
t =0 ( 1+ IIR )t

−500,00 150,000 150,000 150,000 150,000 150,000

0= + + + + +
( 1+ IIR )0 ( 1+ IIR )1 ( 1+ IIR )2 ( 1+ IIR )3 ( 1+ IIR )4 ( 1+ IIR )5

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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PART B

QUESTION 1

A responsibility Centre is a component or division of an organization where the manager is in

charge of that section's activities. As a result, responsible accounting is a method that
calculates revenue for each obligation Center based on the information needed by the
managers to operate the Center's operations. As per Belo, there are four types of obligation
centre’s that we can address.

Cost Centre’s
This is a cost-incurring liability centre, and the manager is responsible for the costs incurred.
A cost centre is, for example, a factory's assembly department. The supervisor will be able to
monitor the cost of products assembly in the warehouse, but he or she will not be an expert in
determining the price of such goods. The supervisor will be judged for the function of the
presentation assessment.

Revenue Centre’s
This is a responsibility centre where the manager is only responsible for the revenue or sales
generated. The Marketing Department Manager, for example, has only price-setting and
sales-planning authority. It's a revenue centre with the aim of evaluating results. Total
revenue generated and direct expenses from the Marketing Department would be used to
assess the manager.

Profit Centre’s

This is a responsibility centre where the manager is responsible for both the expenses
incurred and the revenue generated. The manager of a hotel, for example, is held responsible
for the hotel's revenue and expenses. In most cases, they will be judged by contrasting target
profits to actual profits.

Investment Centre’s
This is the centre of accountability, where the manager is responsible for sales, expenses, and
expenditures. For example, the manager of a multinational subsidiary is typically responsible
for the subsidiary's sales and has the power to make capital expenditure decisions such as
plant closures or production line termination. They will be graded on the basis of the
responsibility given. Among the usual measurement used is the return on investment or
residual income

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QUESTION 2

a)

PER UNIT TOTAL

Increase in income RM 0.9 RM 6,300
Increase in Cost
Variable production cost RM 0.6 RM 4,200
Increase in operating RM 2,100
income

Even if the special order's selling price is lower (RM 0.90) than the usual Selling Price, the estimate
above suggests that the new order should be approved since it offers a total profit of RM 2,100. (RM
1.50). If we look closely at the above analysis, we can see that it does not include the fixed production
expense. This is because the fixed cost does not change over time 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.