Assignment

Programme Title BSc Accounting and Finance - Singapore

Module Title Management Accounting
Assignment Title Test
Level LI
Weighting 50%
Lecturer Lohrasp Sadri/Anupam Mehta
Hand Out Date 21/10/2020
Due Date & Time 21/10/2020 T.B.C
Feedback Post Date 05/11/2020
Submission Format Other Individual

Time allowed: 2 hours

Calculators may be used provided they are not capable of storing alphabetical information.

This test has two sections - A & B (Both Sections are compulsory)

Answer all questions

Section A
QUESTION 1

Multiple Choice Questions 2 marks each

1. What is the primary difference between a static budget and a flexible budget?

A. The static budget contains only fixed costs, while the flexible budget contains only variable
costs.

B. The static budget is adjusted for different activity levels, while a flexible budget is prepared for
a single level of activity.

C. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for
different activity levels.

D. Both the static budget and the flexible budget are adjusted for different activity levels.

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2. The material price variance is equal to (SP/AP - standard/actual profit, SQ/AQ - standard/actual
quantity):

A. SP X AQ - AP X AQ

B. SP X SQ - AP X SQ

C. SP X SQ - AP X AQ

D. None of the above

3. Which of the following is (are) advantages of standard costing?

i) Help management to focus on important issues

ii) Promote efficiency
iii) Motivate employees to meet the standards
iv) Simplify accounting and bookkeeping
v) Inclusion of objectives other than cost control

A. i & ii

B. i, ii & iii

C. i, ii & iv

D. ii, iii & v

4. The formula for an overhead absorption rate (O.A.R.) is

A. Budgeted overhead/Actual activity

B. Actual overhead/Budgeted activity

C. Budgeted overhead/Budgeted activity

D. Actual overhead/Actual activity

5. In the context of performance measurement, what is a "construct"?

A. The performance measure that is constructed by the management accountant

B. The concept or characteristic that we want to measure

C. The complete performance measurement system

D. A report that is constructed to display performance measures

[10 marks]

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QUESTION 2

Greenstone Cup Ltd. produces and supplies reusable plastic cups to coffee shops that they then sell to
consumers as “cups for life” to boost their environmental credentials. The production process is highly
automated and uses a high-tech molding machine which has the capacity to produce 300,000 units per
month.
The company is in the process of producing its budgets for the third quarter of the year and the Sales
Manager has proposed the following sales budget and a budgeted selling price of £0.60 per unit (cup)
July August September
Sales (units) 220,000 270,000 230,000

Information relating to the production and sales process is shown below:

1. The Sales Manager has also proposed a budgeted sales volume for October of 230,000 units.

2. It is company policy to have sufficient inventory of finished goods at the end of each month to
meet 25% of the following month’s sales and it plans to reduce the inventory of direct
materials by 750kg per month.

3. Opening inventory at the start of July is expected to be 50,000 units of finished goods
and 12,000kg of direct material.

4. The production of each unit requires 0.15kg of direct material. The budgeted cost of direct
material is £2.80 per kg.

5. The product requires 0.20 hours (12 minutes) of direct labour per unit. The budgeted cost of
direct labour is £12.50 per hour.
Required:

a) Prepare the following monthly budgets for July to September:

i. Production (in units) (5 marks)
ii. Material usage (in kg) (3 marks)
iii. Material purchase (in kg and £) (5 marks)
iv. Labour Budget (3 marks)

b) List FIVE reasons for preparing budgets. (5 marks)

c) Explain what “padding the budget” involves and why it might occur. (4 marks)

d) Explain ‘’top-down budgeting’’ along with its advantages. (5 marks)

[30 marks]

QUESTION 3

Explain the role and impact of ‘data and analytics’ in accounting & decision making along with suitable
examples.

[10 marks]

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 Section B
QUESTION 4

Multiple Choice Questions 2 marks each

1. Activity management attempts to

A. identify and eliminate all unnecessary activities.

B. increase the efficiency of necessary activities.
C. add new activities that increase value.
D. do all of the above.

2. Which statement is false?

A. Information technology makes it feasible for most companies to adopt ABC.

B. An ABC system is more refined than one that uses a company-wide overhead rate.
C. ABC focuses on indirect costs.
D. ABC is used only for manufacturing companies.

3. Which of the following stages comes first in product life cycle ?

A. Introduction
B. Growth
C. Development
D. Decline

4. The following costs arise in relation to production of a new product:

The(i) Research and development costs
(ii) Design costs
(iii) Testing costs
(iv) Advertising costs
(v) Production costs
In calculating the lifetime costs of the product, which of the above items would be EXCLUDED?

A. (i), (ii), and (iii) only

B. (ii) and (iii) only
C. (iv) and (v) only
D. None of the above

5. An objective in the theory of constraints is to

A. balance the capacity of each operation in the plant so that all operations will produce at
the same pace.
B. balance the flow of work by allowing the most binding constraint to set the pace for the
plant.

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 C. balance the capacity of each operation by recognizing the variability within the system.
D. balance the flow of work by allowing each operation to produce at it’s own pace.
E. none of the above.
[10 marks]

QUESTION 5

Cibaca Limited manufactures two types of the same product - Standard and Superior, and in recent
months they have been trying to persuade customers who buy the Standard type to purchase the
Superior version instead. Overheads have, in the past been absorbed using the labour hour basis.
Details of the two products are given below.
Standard Superior
Annual sales - units 12,000 12,000
Selling price per unit £130 £174
Batch size – units 1,000 50
Labour time per unit - hours 2 2½
Labour rate per hour £16 £16
Material costs per unit £44 £64
Special parts per unit 1 4
Set-ups per batch 1 3
Material issues per batch 1 1
Number of sales invoices issued per year 50 240
An analysis of overhead costs for Cibaca Limited has provided the following information.
Overhead Analysis £ Cost Driver
Set-up Costs 146,400 number of set-ups
Handling costs - special parts 120,000 number of special parts
Customer invoicing costs 58,000 number of invoices
Material handling costs 126,000 number of batches
Other overheads 216,000 labour hours

Required:
(a) Calculate the profit per unit for the Standard and Superior models using:
(i) traditional absorption of overheads;
(10 marks)

(ii) activity-based costing methods

(10 marks)

(b) Write a brief report to the management of Cibaca that:

(i) recommends managerial action in light of the information calculated in (a) above, and
(3 marks)

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 (ii) explain how activity-based techniques can be used to improve performance. Give two key
points.
(7 marks)

(TOTAL 30 MARKS)

QUESTION 6

Target costing if applied particularly in case of new product development, has a significant impact on the
profitability of the company.

Required

Discuss the impact of Target costing on Profitability of a company? Bring out any two points (bullet point)
as to how the companies in the Consumer electronics industry will be benefitted.

(TOTAL 10 MARKS)

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