Question 1

JUL23

B. Define the following terms with the example of the company’s name above:

I. Contractor - The party or person who produces product contract work required by
the customer. Contractor's Name: Canteek Design Sdn Bhd

Ii. Contractee - The customer who orders a contract to be done by the contractor.
Contractee’s name: One Sulaman Sdn Bhd

FEB23

B. Progress payment is the same as progress billing. Do you agree? Explain

your answer.

Yes. This is because both are interim payments made by the contractee as the
contract proceeds.

JUL22

B. State Two formulas of determining the percentage of completion for

contract revenue recognition.

i) Input Method :

% completion = (Cost of Work Done to Date/Total Estimated Contract Cost) x 100%

ii) Output Method :

% completion = (Value of work certified / Contract Price) x 100%

FEB22

B. Briefly explain three characteristics of contract costing.

1) Site Based
2) Long-term duration to complete
3) A large portion of direct cost
JUL21/1

B. State the accounting treatment that the company needs to take if it finds out
that there is loss arising from contract in the period.

- Enter the loss amount into the account

- The loss should not be apportioned differently according to the stage of
completion.
- The loss should be recognized into account in full.

JUL21/2

B. List three parties involved in contract costing.

- Contractor
- Contractee
- Subcontructor

FEB21

B. Define the following terms:

I. Value of Work Certified - Value of work done to date confirmed by architect or

surveyor.
II. Architect Certificate - Certificates that provide confirmation of work to a certain
sales value that has been completed, and that some payment to the
contractor is now done.

Question 2

JUL23

C. State two differences between joint products and by-products.

JOINT PRODUCTS BY-PRODUCTS

Two or more main products are An incidental product produced from the
produced from the same operation common processing operation.
process.

Each of the products has a significant The product has an insignificant sales
sales value as the main products value as compared to the main
products.
FEB23

C. Give two differences between process costing and job costing with
examples.

Process Costing Job Costing

Product Similar products Different products

Cost Each product consumes the same Each job required

consumption amount of costs different consumption of
costs.

JUL22

C. Describe four possible reasons for having abnormal losses.

- Incorrect cutting of cloth

- Improper mixing of ingredients
- The use of low-quality material
- Unforeseen external factors like natural disasters.

FEB22

C. Describe the accounting treatment between normal loss and abnormal loss
in a manufacturing company.

Normal loss - the cost of normal losses is included as part of the cost of good
production, and therefore, the cost of normal loss is absorbed into the cost of
completed production.

Abnormal loss - the cost of abnormal losses is treated as period cost and is valued
on the same basis as good production. The cost is written off in the statement of
profit or loss at the end of the accounting period.
JUL21/1

C. State two differences between joint product and by-product

JOINT PRODUCTS BY-PRODUCTS

Two or more main products are An incidental product produced from the
produced from the same operation common processing operation.
process.

Each of the products has a significant The product has an insignificant sales
sales value as the main products value as compared to the main
products.

D. List two causes of abnormal losses.

- Incorrect Cutting Cloth

- Natural disasters.

JUL21/2

C. State four differences between normal loss and abnormal loss.

Normal loss Abnormal Loss

Occur under efficient operating Losses that are not expected to occur
conditions under efficient operating conditions

Uncontrollable losses Controllable losses

Unavoidable Can be avoided

Part of the cost of good production Not an inherent part of the production
process

D. Briefly explain the Net Realisable Value (NRV) method for allocating joint
costs to join products.

Based on the proportion of join products sales value at the split-off point is deducted
with the further processing cost.
FEB21

C. List four industries that commonly use the process costing method.

- Automobiles
- Food production
- Oil refining
- Textiles

D. Explain briefly the term normal loss

Loses occur under efficient operating conditions and are unavoidable.

QUESTION 3

JUL23

C. Explain two benefits of marginal costing approach compared to

absorption costing approach

Marginal costing is useful for decision-making. Marginal costing is a valuable

tool for management to identify optimal production levels and identify which
product lines are most profitable. This is extremely useful in planning for future
production levels and optimizing resource allocation. Compared to absorption
costing, marginal costing is more useful for short-term decision-making as the
fixed cost is assumed to be constant for the short run.

Marginal costing is useful for pricing strategy. By using marginal costing,

companies can help to identify costs at an optimal production level. This can
help management to compare their products to competitors and develop an
optimal sales price. Compared to absorption costing, the marginal costing
price is more competitive.
FEB23

C. Define the term ‘over-absorbed overhead’ in the absorption costing income

statement. Briefly explain the reason for the treatment of ‘over absorbed
overhead’ in the absorption costing income statement.

The treatment of over-absorbed overhead in the absorption costing income

statement involves adjusting the cost of goods sold and/or inventory to reflect the
actual overhead costs incurred. The reason for this adjustment is to ensure that the
income statement reflects a more accurate picture of the costs associated with
producing the goods. (chatgpt)

JUL22

C. Explain two situations where the net profit of marginal costing and absorption
costing will be different.

- Decrease in stock, closing stock is less than opening stock, sales are more
than production
- Increase in stock, closing stock is more than opening stock, sales are less
than production

FEB22

C. Briefly explain one difference between marginal costing and absorption costing
approaches.

Manufacturing fixed overhead should be regarded as a period cost in marginal

costing and manufacturing fixed overhead should be regarded as a product cost in
absorption costing.

JUL21/1

C. Explain two limitations of using the absorption costing approach

- Misleading impression
- Not suitable for short-term planning
JUL21/2

C. Identify two situations where the net profit of absorption costing and
marginal costing will be different.

- Decrease in stock, closing stock is less than opening stock, sales are more
than production
- Increase in stock, closing stock is more than opening stock, sales are less
than production

FEB21

C. Explain two advantages of the marginal costing approach.

- Managers are aware of how sensitive costs are to changes in activity.

- The cost statements prepared are simple and less complicated.

QUESTION 4

JUL23

E. State the importance of break-even point determination when considering

the production of a new product.

It is important to calculate break-even when considering the production of a new

product because we can compare the levels of break-even before and after
producing the new product as shown in (d) above. If the new BEP is higher than the
original BEP, then we should not proceed with the new product and vice versa.

FEB23

E. Sketch a basic break-even chart that shows sales revenue line, total cost
line, break-even point, and profit area.
JUL22

E. State two advantages of cost volume profit analysis.

- Help companies divide how many units of a product to produce.

- Helps companies determine the most profitable price for selling a product.

FEB22

E. List four limitations of cost volume profit analysis.

- Separation of cost into fixed and variable is difficult.

- Sales may be changed to meet the demand
- Fixed cost is not likely to stay constant as output increases.
- Factors other than volume may affect cots.

JUL21/1

E. Define the following terms.

I. Margin of safety - the difference between actual sales and break-even sales.
Ii. The angle of incidence - an angle that created by total sales are total cost line
and formed BEP. It shows the company is making a profit. The bigger the angle of
incidence, the bigger the profit.

JUL21/2

E. List four assumptions of cost volume profit analysis.

- The only factor affecting cost and revenues is the volume of activity.
- All costs can be resolved into fixed and variable elements.
- Over the activity range being considered, cost and revenue behave in linear
functions.
- The technology, production methods, and efficiency remain unchanged.
FEB21

E. State four uses of the CVP analysis.

- Help companies divide how many units of a product to produce.

- Helps companies determine the most profitable price for selling a product.
- Enables businesses to evaluate the performance of various products,
departments, or segments based on their contribution margins.
- Allows businesses to conduct sensitivity analysis by examining how changes
in key variables.

QUESTION 5

JUL23

a. Four objectives of cash budget.

- To forecast future cash balances to identify potential deficits

and surpluses.
- To ensure that sufficient cash is available at all times to meet the level
of operations that are outlined in the various budgets.
- To avoid cash balances that are surplus to its requirement. This will
enable the management to plan on how to invest the surplus cash in
any short-term investments.
- To identify in advance the steps or actions to be taken to meet any
temporary cash deficiencies.

FEB23

a. List four purposes of preparing a budget.

- Planning annual operations.

- Controlling activities.
- Evaluating the performance of managers.
- Communicating plans to the various responsibility centre managers.
JUL22

a. List four uses of budgeting in an organisation.

- Planning annual operations.

- Controlling activities.
- Evaluating the performance of managers.
- Communicating plans to the various responsibility centre managers.

FEB22

a. List four functions of a budget committee.

- Communicating the final budget.

- Comparing the actual performance against the budget.
- Coordinating the budget preparation and issuing the budget manual.
- Continuous assessment of the budgeting and planning process.

JUL21/1

a. State two advantages and two disadvantages of budgeting.

Advantages:
- Better planning
- Improve sources education

Disadvantages:
- Time-consuming may lead to budget slack
- Only considered quantitative budget.

JUL21/2

a. State four benefits of preparing a cash budget for a business.

- Help a firm to avoid cash balances that are surplus to its requirements by
enabling management to take steps in advance to invest the surplus cash in
short-term investment.
- Cash deficiencies can be identified in advance
- Serve as a tool to manage the cash of the firm
- Attain maximum cash availability and maximum interest income.
FEB21

a. State four reasons for preparing a cash budget.

- To forecast future cash balances to identify potential deficits

and surpluses.
- To ensure that sufficient cash is available at all times to meet the level
of operations that are outlined in the various budgets.
- To avoid cash balances that are surplus to its requirement. This will
enable the management to plan on how to invest the surplus cash in
any short-term investments.
- To identify in advance the steps or actions to be taken to meet any
temporary cash deficiencies.