Question 1:

Cost pool POR ABC Cost assigned

=Expected cost/total =POR x cost driver of each product
cost driver Deluxe(RM) Regular(RM)

Machining 300,000/5,000 60 x 3,000 60 x 2,000

setup =60 =180,000 =120,000
Quality 200,000/8,000 25 x 5,000 25 x 3,000
inspections =25 =125,000 =75,000
Production 90,000/600 150 x 200 150 x 400
orders =150 30,000 =60,000
Machine hours 330,000/33,000 10 x 10,000 10 x 23,000
worked =10 =100,000 =230,000
Material 80,000/800 100 x 200 100 x 600
receipts =100 =20,000 =60,000
Total 455,000 545,000
production
cost

Deluxe Regular
Production cost per unit 455,000/4,000 545,000/20,000
=Production cost /production unit =113.75 =27.25

Direct material per unit 40 30

Direct labor per unit 20 15
Prodcution cost per unit 113.75 27.25
Full production cost per unit 173.75 72.75

Outcome of ABC

When comparing the results of traditional costing and ABC, the full production cost per unit
of Deluxe increased from 110 to 173.75 while the Regular is decreased from 85 to 72.75. This
is because when single cost driver is used to determine the overhead cost, the overhead cost
will not appropriate compare to multi cost driver. Besides, the overhead cost This is because
the production overheads have been absorbed in a more accurate way.
Question 2:
(a)
Economy(A) Standard(B) High(C)
RM(’000) % RM(’000) % RM(’000) %
Sales 4,000 100 2,250 100 2,000 100
Less: Variable cost (2,760) 69 (562.5) 25 (1,000) 50
Contribution 1,240 31 1,687.5 75 1,000 50

(b)

Budgeted RM(’000) Actual RM(’000)

Total contribution 542.5+3000+1,250 1,240+1687.5+1,000
=A+B+C =4,792.5 =3,927.5
Contribution 4792.5/8250 3,927.5/8250
percentage =58.09% =47.61%
=Contribution/sales
Break even sales 4,250/58.09% 4,250/47.61%
=Fixed cost/ =7316.23 =8926.70
Contribution
percentage

(c)
Budgeted RM(’000) Actual RM(’000)
Total contribution 4,792.5 3,927.5

Less:Fixed overhead 4,250 4,250

Net income/(loss) 542.5 (322.5)

The company expect to earn money but it loss RM322,500 in actual sales. Because the sales
mix of budgeted sales and actual sales are different. Higher sales are put in the standard
product, which brings the higher contribution in budgeted sales compare to actual sales.
While lower sales are put in economy product ,which brings the lower contribution in
budgeted sales compare to actual sales.

(d)
Question 3:
(a)
Finishing Department
Item Physical Equivalent unit
unit:
Transferred in Direct Material Conversion cost

Beginning WIP 1,400

Unit started during 14,000
March
Total units to account 15,400
for
Units completed and 11,900 11,900 11,900 11,900
transferred
Ending WIP 2,800 2,800 2,800 2,100
Normal spoilage 560 560 560 560
Abnormal spoilage 140 140 140 140
Total units accounted 15,400 15,400 15,400 13,300
for
Transferred DM (RM) CC (RM) Total cost (RM)
in (RM)
Cost per equivalent 5 1 3 9
unit
Total cost
Abnormal spoilage 1,260
140 x 9
Completed cost and 11,900 x 9 +
transferred & Normal 560 x 9=
Spoilage 112,140
Ending WIP:
Transferred in 5 x 3,500=
17,500
DM 1 x 3,500=
3,500
CC 3 x 1,400=
4,200
Total ending WIP 25,200
Total cost accounted 132,300
for

(c)
Transferred in cost
= 5 x 15,400 -6,300
=70,700

(d)
Abnormal spoilage =140
Refer to (a)/ should be treated under the total unit accounted for. Separate report in total cost
accounted for using the total cost per equivalent unit multiple by the abnormal spoilage unit .

(e)
No effect
Under the weighted average method, equivalent units are calculated based on 2 things: units
completed and transferred out and units in ending work in process inventory.

Question 4:
(a)
Absorption Costing Income Statement
2017 2018
Sales 5,040,000 3,705,000

Less: Cost of goods sold

Beginning inventory(975 x X) 780,000 780,000
Cost of good Manufactured (975 x X) 2,047,500 1,462,500
Less Ending of Inventory (975 x X) (487,500) (97,500)
Cost of Goods Sold 2,340,000 2,145,000
Gross margin 2,700,000 1,560,000
Less : Selling and administrative expenses
Variable Selling and administrative expenses 300,000 237,500
Fixed Selling and administrative expenses 150,000 150,000
Total Selling and administrative expenses 450,000 387,500
Net income/(loss) 2,250,000 1,172,500

(b)
Variable Costing Income Statement
2017 2018
Sales 5,040,000 3,705,000

Less: Variable expenses

Beginning inventory(735 x X) 588,000 367,500
Cost of good Manufactured (735 x X) 1,543,500 1,102,500
Less Ending of Inventory (735 x X) (367,500) (73,500)
Cost of Goods Sold 1,764,000 1,396,500
Gross margin 3,276,000 2,308,500
Variable Selling and administrative expenses 300,000 237,500
Contribution margin 2,976,000 2,071,000
Less: Fixed cost
Fixed overhead 450,000 450,000
Fixed Selling and administrative expenses 150,000 150,000
Total Fixed cost 600,000 600,000
Net income/(loss) 2,376,000 1,471,000