MAF551

Management Accounting and Control

QUESTION PACKAGE

FARISHA HIJAB SDN BHD

Prepared By:
Muraddin Bin Purag
Faridah Ismail

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 Instructions to students:
1. This is a group work assessment. One group should consist of a
maximum of five (5) students.

2. Students must answer all questions within 2 weeks (18/12/22 - 1/1/23)

and submit the answer to the respective teaching lecturers on or before
1 January 2023. Please save your work as a pdf file and email to your
lecturer.

3. Free rider/s is/are not entitled to get any marks.

4. Allocations of marks for case study are as follows:

i. 30 marks for communication in writing.

ii. 10 marks for relevant theories apply.
iii. 10 marks for originality of work.
iv. 50 marks based on case study requirement.

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QUESTION 1

The CEO of Farisha Hijab Sdn Bhd is worried about the increase in operating costs, especially
the cost of direct materials and direct labour. Due to that, the company has increased the
selling price of each product by RM2. However, increase in selling price is unable to cover the
increase in the cost of direct materials and direct labour, this causes the company's net profit
to show an unfavorable result.

Followings are the additional information related to the sales and costs for the three products:

1. The sales are based on the following product group:

Products Annual sales volume

Estimated Actual
Jelita Premium Cotton Shawl 6,000 @ RM29 5,500 @ RM31
Easy Going Chiffon Shawl 2,350 @ RM49 2,420 @ RM51
Manis Premium Satin Shawl 950 @ RM119 960 @ RM121

2. Each product requires different types of material with the same quantity of usage.
Following are the standard material used for each product:

Products Material Material usage

Jelita Premium Cotton Shawl Cotton silk 1.3 meter @ RM7/meter
Easy Going Chiffon Shawl Chiffon silk 1.3 meter @ RM11/meter
Manis Premium Satin Shawl Satin silk 1.3 meter @ RM22/meter

Early 2022, the supplier from China informed that there will be an increase in the material
price, following are the actual price of the product:

Materials Quantity Total (RM)

Cotton silk 154 rolls (50 meter per roll) 69,300
Chiffon silk 68 rolls (50 meter per roll) 44,200
Satin silk 27 rolls (50 meter per roll) 32,400

3. Each products used same standard labour hours as follows:

Skilled labour 1 hour @ RM9 per hour
Semi-skilled labour 1 hour and 30 minutes @ RM6.50 per hour

Actual direct labour used during the year are:

Skilled 9,768 hours at total cost of RM92,796
Semi-skilled 15,540 hours at total cost of RM93,240

4. Indirect materials are the cost incurred to print business brands on each product, the cost
is RM0.15 per product. In actual, the cost increased to RM0.20 per product.

5. Rental, utilities, maintenance and depreciation cost are fixed costs. Meanwhile, selling and
administration consist of following:

Advertising RM2,000
Fixed salary RM3,000
Commission 5% of sales

As an accountant executive, prepare the following report:

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a. Prepare the performance report for the year ended 31 December 2022.
(11 marks)

b. Based on the performance report of the company, discuss the two most significant
variances that require further investigation.
(2 marks)

c. The CEO of the company wants you to explain further on the learning curve theory and
how Farisha Hijab may apply this theory to reduce the labour costs.
(3 marks)
(Total: 16 marks)

QUESTION 2

The CEO of Farisha Hijab Sdn Bhd insisted on further investigation to be carried out that he
also required Mr Muaz to conduct the analysis of variance for the material and labour of the
product. Standard material to produce each product are as follows:

Products Material Material usage

Jelita Premium Cotton Shawl Cotton silk 1.3 meter @ RM7/meter
Easy Going Chiffon Shawl Chiffon silk 1.3 meter @ RM11/meter
Manis Premium Satin Shawl Satin silk 1.3 meter @ RM22/meter

Meanwile, standard labour hours for each product are as follows:

Skilled labour 1 hour @ RM9 per hour

Semi-skilled labour 1 hour and 30 minutes @ RM6.50 per hour

However, following are the actual cost incurred for the direct materials and direct labour:

Materials Quantity Jumlah (RM)

Cotton silk 154 rolls (50 meter per roll) 69,300
Chiffon silk 68 rolls (50 meter per roll) 44,200
Satin silk 27 rolls (50 meter per roll) 32,400

Skilled 9,768 hours at total cost of RM92,796

Semi-skilled 15,540 hours at total cost of RM93,240

As an accountant executive, prepare the following:

a. Calculate the individual variances for the following:

i. Direct material price and usage for each product.

ii. Direct labour rate and efficiency variances.
iii. Direct labour mix and yield variances.
(13 marks)

b. Discuss the result of the variances above in relation to the business dilemma.
(4 marks)
(Total: 17 marks)

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QUESTION 3

Farisha Hijab Sdn Bhd produces and sells cotton premium square scarf in four special hand
made designs for Muslim women namely Bawal Abstract, Bawal Floral, Bawal Batek and
Bawal Plain. The company uses special cotton fabric which is imported from Japan and
Indonesia.

Currently, the company’s main production resources, direct labour and special cotton
fabric, are in short supply. Management thus has to decide on the optimal production mix in
anticipation of these possible resource constraints for the following year. The following
information relates to the production and sales for the four types of the cotton premium square
scarves:

Cost per piece

Product Demand Selling price Special Direct labour Total

(pieces) per piece Cotton (RM) overheads
(RM) Fabric (RM) (RM)
Bawal 7,900 165.00 45.00 50.00 58.00
Abstract
Bawal Batek 5,500 178.00 55.00 60.00 60.00
Bawal Floral 7,550 150.00 35.00 40.00 55.00
Bawal Plain 4,200 90.00 30.00 20.00 40.00
Exclusive

Additional information:

1. Direct labour rate is RM20.00 per hour, while each of the bawal hjab require 1 meter of the
special cotton fabric.

2. There will be 16,000 meters of special fabric supplied from Japan and 10,000 meters
supplied from Indonesia throughout the year.

3. The fixed production overheads are absorbed into the products based on direct labour
hours. The total budgeted direct labour hours available are 50,000 hours and the fixed
overheads for the period are budgeted at RM500,000.

4. The fixed administration expenses are expected to be RM22,000 per year.

Required:

a. Identify, showing calculations, which is the limiting factor of the company for the next year:

i. Direct labour
ii. Special cotton fabric
(3 marks)
b. Prepare calculations to show:

i. The optimum production mix.

ii. The maximum profit for next year based on the most optimal mix of products.
(9 marks)

c. In order for the company to meet rising demand for all its hijap, the production manager
suggests to buy Bawal Batek from an outside supplier in Indonesia, Putri Chantique , at a
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cost of RM160 per piece including transportation. Putri Chantique is able to supply all the
quantities of the product required. However, the Bawal Batek need to be repacked at a cost
of RM5 per piece before it could be sold. If Bawal Batek is outsourced, the released
capacity will be available to manufacture the other product that is Bawal Plain Exclusive.

Advise whether the company should buy or outsource Bawal Batek from Putri Chantique
next year by considering both quantitative and qualitative factors that Farisha Hijab Sdn
Bhd should consider. (Show the revised profit of the company if Bawal Batek is outsourced).
(5 marks)
(Total: 17 marks)

END OF QUESTION

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