CONFIDENTIAL AC/JAN2023/MAF201

UNIVERSITI TEKNOLOGI MARA

TEST 2

COURSE : COST AND MANAGEMENT ACCOUNTING 1

COURSE CODE : MAF201
EXAMINATION : JANUARY 2023
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO (2) parts: PART A (8 MC Questions)

PART B (2 Questions)

2. Answer ALL questions in English.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This test paper consists of 5 printed pages

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PART A

MULTIPLE CHOICE QUESTIONS

(One mark for each question)

1. The break-even point is where total sales equal total variable costs.

A. True
B. False

2. For purposes of CVP analysis, mixed costs must be classified into their fixed and variable
elements.

A. True
B. False

3. A CVP income statement shows contribution margin instead of gross profit.

A. True
B. False

4. Budgetary control system acts as a guide to the:

A. Management
B. Employees
C. Shareholders
D. Creditors

5. Which of the following is not objective of budgetary control process?

A. To define the goals of the organisation

B. To coordinate different department or sub-units
C. To establish a system of planning and control
D. To help in fixation of selling price

6. The basic difference between a flexible budget and fixed budget is that a fixed budget:

A. Is concerned with fixed expenses whereas flexible budget is on different activity levels
B. Cannot be changed whereas flexible budget can easily be changed
C. Is a budget for single measure of activity whereas flexible budget is on different activity
levels
D. None of the above

7. Regarding the sales budget, which of the following statements is incorrect:

A. Sales budget is a functional budget

B. Sales budget is based on production budget
C. Usually the sales budget is stated in terms of quantity and value
D. Starting point of the development of master budget is preparation of sales budget

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8. While preparing a cash budget which of the following items would not be included?

A. Cash sales
B. Gain on disposal of fixed assets
C. Receipt of interest and dividends from investments outside the business
D. Depreciation

(8 marks)

PART B

STRUCTURED QUESTIONS

QUESTION 1

Lovely Scents Sdn Bhd is a newly established perfume manufacturing company based in Dungun,
Terengganu. Currently the company is producing only one product called Lavender Bliss Perfume.
Below is the information regarding the costs and revenues incurred in producing 80,000 bottles of
Lavender Bliss Perfume in the current year:

RM
Sales revenue 9,600,000
Variable costs:
- Direct material 2,000,000
- Direct labour 1,600,000
- Production overhead 1,200,000
- Variable selling expenses is 10% of selling price per bottle
Fixed production overhead 1,500,000
Fixed selling expenses 800,000
Fixed administrative expenses 700,000

Required:

(Each question is to be treated independently)

a. Classify the current cost into:

i. Total variable cost per unit

ii. Total fixed cost for the year
(3 marks)

b. Determine for the current year:

i. The break-even point (in bottles and RM)

ii. The margin of safety (in bottles and RM)
iii. Number of bottles to be sold if the company plans to achieve a profit of RM648,000

(6 marks)

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c. The company's manager is proposing to repackage the perfume in a more attractive bottle
that may cause the company to incur additional direct expense of RM8 per bottle. In addition,
the manager expects advertisement cost to increase by RM250,000 and expected sales
increase by 25%. All other costs remain unchanged.

Based on the above proposal:

i. Compute the new break-even point (in bottles and RM)

ii. Advise the manager as to whether the proposal should be implemented or otherwise.
(Support your answer with the comparison of annual profits)

(6 marks)

d. In order to improve the company's performance, the manager proposes producing and selling
new products, Citrus Paradise Perfume and Sweet Jasmine Perfume, in addition to the
current production. The projected information related to the new proposed products is as
follows:

Citrus Paradise Perfume Sweet Jasmine Perfume

Selling Price (RM) 110 140
Variable Cost (RM) 65 87

The company plans to sell the products at the following sales mix:

Products Bottles to be sold

Lavender Bliss Perfume 80,000
Citrus Paradise Perfume 70,000
Sweet Jasmine Perfume 100,000

The introduction of the new products requires the company to revise its total fixed cost by
taking into consideration the following:

i. Fixed production overhead will increase by 10%

ii. Extra promotion cost of RM45,400

Required:

Advise whether the company should proceed with the new products to improve its
performance with reference to break-even point in bottles.
(7 marks)
(Total: 22 marks)

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QUESTION 2

Beauty Blossom Sdn Bhd is a company selling skin care products located in Kuala Terengganu.
One of the best-selling products is Blissful Face Serum. The company sells Blissful Face Serum for
RM100 per bottle.

The following data and estimates are available for you to prepare the cash budget for Beauty
Blossom Sdn Bhd for the fourth quarter of 2022.

Particulars JUL AUG SEP OCT NOV DEC

Sales (RM) 190,000 220,000 70,000 100,000 130,000 98,000

Purchases (RM) 73,000 94,000 25,500 52,000 87,000 50,800

Overheads (RM) 30,000 35,000 32,000 33,600 31,000 32,000

Additional Information:

1. All purchases are made on credit and the payments are made two months after purchases.

2. 10% of sales are cash sales. 30% of credit sales are collected in the month after sales while
the remainder is collected in the following month.

3. Advertising expenses is 10% of the monthly sales and is paid as it is incurred.

4. Office expenses is 15% of the monthly sales and is paid as it is incurred.

5. Overheads include a monthly depreciation of motor van amounting RM10,000. There is a

one-month delay in the payments of overheads.

6. The company is expected to receive an interest on fixed deposit amounting to RM14,000 in

November 2022.

7. The company will receive dividends of RM21,000 which will be paid in three (3) equal
installments starting from October 2022.

8. Shop equipment will be replaced on 1 October 2022. The cost of the new shop equipment
will cost RM10,000. 10% cash deposit will be paid in October 2022 and the balance will be
paid in two (2) equal installments starting November 2022. The old shop equipment will be
sold at RM3,000.

9. Cash balance as at 30th September 2022 is RM20,000.

Required:

Prepare a Cash Budget for Beauty Blossom Sdn Bhd for the months of October, November and
December 2022.
(20 marks)
(Total: 20 marks)

END OF QUESTION PAPER

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