CONFIDENTIAL 1 FA1/AUG2020/MAF551

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : MANAGEMENT ACCOUNTING AND CONTROL

COURSE CODE : MAF551_PAPER 2
EXAMINATION : AUG 2020
TIME : 1 HOUR 45 MINS (2:15 pm-4:00 pm)

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) questions.

2. Answer ALL questions in your own paper. Scan your answer and convert to pdf file before
submit to your lecturer. Saved your file as follows: MAF551_Student
Name_Group_Name_UiTM ID (Eg: MAF551_Maisarah Binti Harun_ACC2204B_
2019263155)

3. All answers must be handwritten (big & clear) using Foolscap (A4) paper and black
ink ballpoint pen.

4. Write your name and UiTM ID number on top right-hand corner on every page of your
answer scripts. Write page number on every page of your answer sheets.(eg. 1/5, if 5 is the
total number of pages.)

5. Answer ALL questions in English.

This examination paper consists of 4 pages

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CONFIDENTIAL 2 FA1/AUG2020/MAF551

QUESTION 1

Excell Sdn Bhd manufactures and sells three products; ABA, ACA and ADA. The products
pass through four departments (namely department 1 through 4). Both labour and machine
times are applied to the products in each of the four departments. The machine processing
and labour skills required in each department are such that neither machine nor labour can
be switched from one department to another.

Excell’s management is preparing its production schedule for the next several months. Some
of the machines will be out of service for extensive maintenance. Available monthly capacity
by department for next six months is listed below.

Department
Monthly Capacity Availability
1 2 3 4
Normal capacity (in machine hours) 4,000 4,000 3,500 3,500
Less machine being repaired (in
machine hours) (500) (250) (300) (200)
Available capacity (in machine hours) 3,500 3,750 3,200 3,300

Machine hours requirement for each unit of product is provided below:

Department
Product 1 2 3 4
ABA 3 1.5 2 2
ACA 2 2 1 2
ADA 1.5 2 1.5 1

The sales department’s forecast of product demand over the next six months is as follows.
Product Monthly sales volume
ABA 500 units
ACA 400 units
ADA 1,000 units

Excell’s inventory levels will not change for the next 6 months. The unit price and cost data
for the next 6 months are presented below:

PRODUCT
Item ABA (RM) ACA (RM) ADA (RM)
Unit costs:
Direct material 14.00 26.00 17.00
Direct labour
Department 1 24.00 12.00 12.00
Department 2 42.00 20.00 14.00
Department 3 48.00 14.00 16.00
Department 4 18.00 30.00 19.00
Variable support 54.00 40.00 25.00
Fixed support 30.00 20.00 32.00
Variable selling 6.00 4.00 4.00
Unit selling price 341.00 246.00 167.00

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CONFIDENTIAL 3 FA1/AUG2020/MAF551

Required:

a. As an account assistant, you were asked to calculate the maximum contribution for
Excell Sdn Bhd. Show all relevant workings.
(12 marks)

b. Mr Zack, the production manager of the factory has suggested to further process
50% of the second ranking product into product AXA. It is estimated that further
processing cost of 50% of the variable cost for the second ranking product and it can
be sold at RM350 per unit. Product AXA requires 4.8 machine hours per unit. Mr
Zack believes that product AXA is more marketable. In order to implement this
suggestion, he suggested to stop production of the last ranking product. Evaluate
suggestions made by Mr Zack .
(Show all calculations)
(8 marks)

c. Recently, the sales team from Excell Sdn Bhd received an email from a new
customer requesting for 150 units for each of the product ABA, ACA and ADA. The
customer also proposed to buy the products above the market price set by Excell
Sdn Bhd. En Khalid, the Managing Director is keen to accept the offer. As a financial
analyst of the company, advise En Khalid on relevant issues that Excell Sdn Bhd
should consider before agreeing with the customer.
(5 marks)
(Total: 25 marks)

QUESTION 2

Aafifa Beauty Sdn Bhd is an established manufacturer of a wide range of beauty products
including skin care and traditional herbs. The company has several autonomous divisions
which include Skincare (SC) Division and Herbal Division. The SC Division produces and
sells varieties of skin care meanwhile Herbal Division produces and sells traditional herbal
products.

As the company’s policy provides all investment centers divisional autonomy, both divisional
managers of SC Division and Herbal Division are given freedom to choose their sources of
purchases and sales. Currently, Herbal Division sells its product externally at a price of
RM300 per packet of 1 kg. In addition to external market sale, Herbal Division also accept
internal order from SC Division. Based on an old agreement, Herbal Division agreed to
transfer its output to SC Division at variable cost plus 50% markup. In order to encourage
internal transfer of goods Herbal Division agreed not to charge Selling & Distribution cost to
SC Division.

Below are the standard cost per packet of 1 kg of traditional herbal products:

Direct materials RM100

Direct labour RM20
Production overhead RM15
Variable selling & distribution cost RM5

The Herbal Division is currently operating at its full capacity with 3,000 packets produced
and sold every month. 20% of its production overhead cost is fixed.
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Currently, 50% of SC Division’s requirement for herbal ingredient was supplied by Herbal
Division and the balance supplied by external supplier at RM300 per kg. Each unit of
skincare products requires 10 grams of herbal ingredient. Below are the data for SC
Division’s for the month:

Current production 210,000 units

Selling price RM30 per unit
Direct materials excluding herbal ingredient RM3 per unit
Direct labour RM5 per unit
Production overhead (40% variable) RM15 per unit

The finished products of SC Division are highly demanded. Thus, Miss Dhiya, the manager
of SC Division is planning to increase its production capacity for the following month by 30%
to reach its maximum level. It is policy of the company to absorbed fixed costs based on full
capacity.

Required:

a. Based on current policy, evaluate the performance of each divisions and company as
a whole for the current month. (Show income statement in columnar form)
(10 marks)

b. Using the general rule of transfer pricing, determine the minimum transfer price that
Herbal Division would quote to SC Division if suggestion made by Miss Dhiya is being
implemented.
(5 marks)

c. Advise the management of Aafifa Beauty Sdn Bhd on the impact of profitability for
each divisions and company as a whole if Miss Dhiya proceed with her planning,
assuming 50% of SC Division’s requirement for herbal ingredient will be supplied by
Herbal Division. (Show Income Statement).
(10 marks)
(Total: 25 marks)

END OF QUESTIONS

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