Question 1(A)

According to Hilton (2010), qualitative factors are factors that cannot be expressed in
numerical terms effectively. It is usually expressed in words and not countable. For example, when
a business suffers financial difficulty, outsourcing production may be a more effective may to
reduce their cost instead of lessen their production by 20%. Outsourcing in this case is the
qualitative factor which is expressed in words while reduction of production by 20% is known as
quantitative factor which is quantifiable. It is one of the essential element in the process of decision
making as it may bring substantive effect if there is a negligence of it. By considering the
qualitative factors, management can avoid ramification of business decision which is made. For
instance, a wrong decision making will affect the morale of the employees in term of productivity
which will caused a loss to the business. The first example of qualitative factors is quality if the
product. Sometimes when business in trying to cut cost, they will tend to produce goods with a
lower quality. A lower quality of goods represent the qualitative factors in decision making. Next
the affect on morality of the labours also recognised as one of the factors as it is not caused by any
numerical expression but the quality of the labours themselves,such as their behaviour. When
making decision, external reputation of the company should be consider as part of the qualitative
factors. The external reputation of the business is very vital as it serves as the first impression
people have towards the company. The last but not least is future and present customer. Business
can try to attract more customer in the future but they also have to maintain their present customer.
If they taken this into consideration, they will control the quality of goods that they produce so that
the present customer will stay .

Question 1(B)
In management accounting, cost can be categorised into product cost and period cost.
(i) Product Costs is the cost that associated in producing a product by using the cost of its direct
labour, direct materials, consumable production supplies and manufacturing overhead. It can be
expressed mathematically as Total direct labor + Total direct materials + Consumable supplies +
Total allocated overhead) / Total number of units. For instance, a production cost can be a cost to
produce a table (Bragg 2013).
(ii) Period Cost is cost that is excluded from the product cost as it is not part of the cost incurred
in the manufacturing process. This cost can be recognised as an expenses at the period where it
arises. According to generally accepted accounting principles (GAAP), administrative and
selling&distribution form part of the period cost. A typical example for this is advertising expenses.
In product cost, it is further formed by direct cost and indirect cost.


(iii) Cost that can be specifically and directly trace to a certain department or product is known
as direct cost. (Averkamp 2014). For example, wages for labour to produce a round table can be
directly allocate as the cost of producing the round table without further allocation.
(iv) Indirect cost has a contrary characteristic from direct cost. It cannot be directly chargeable to
the cost of a certain object. In certain times, if the indirect cost is given as a whole, further
calculation to apportion the indirect cost should made to charge to each product or department, for
instance, rental for a warehouse.

Question 1(C)
Cost unit is costs that are ascertained through quantitative unit of service or product. It is a
device that make in smaller sub-divisions by purpose of breaking up cost. According to Banerjee
(2006), in order to allocate the cost to the product, units of production which is the unit of
measurement of various product can be used to express the physical measurement of the product.
Cost unit serves as the expression to quantify different object in different measurement as a single
type unit of measurement does not serve the desire purpose to every product. For example, petrol is
measurable in litre while paper is measured by ream.
According to the Chartered Institute of Management Accountants, London, cost centre
means a location, person or item of equipment (or group of these) for which costs may be
ascertained and used for the purpose of cost control. Thus, it represents a method where costs can
be gather together during their occurrence. A manager of a cost centre in not liable to generate
revenue for the business however they are responsible for its cost by doing comparison of the actual
cost and budgeted cost. Examples of cost centre in a business can be the invoicing section as they
gather all the invoice of the business.


Question 1(D)
Opportunity cost is benefit that has been forgone as a result of not choosing the next best
replacement in decision making (Hofstrand, D 2013). As if the opportunity cost to create certain
product is to high, the management should come out with a better decision so that they would not
suffer from the loss generate from the opportunity cost. It is a useful concept in deriving a better
decision as it gives aids in considering the uses of the businesss resources. For example, if a
business owns a farming land, the management has the decision to either rent it to others or retain
the land for farming purpose. If the rental rate for the land is RM10,000 monthly, the opportunity
cost suffer by the business is the monthly income of RM10,000 if they use the land for farming. On
the contrary if the choose to rent it out, the opportunity cost is develop the land into a farming land.


In this case, the management can choose to rent the land which is a financially better off choice than
use the land for farming purpose. If the business has made decision by using the land for farming
purpose, they will lose a monthly income of RM10,000. It is vital to analyse about the opportunity
cost as it may bring adverse effect if wrong decision is made.

Question 1(E)
Relevant cost is cost that is taken into consideration during the process of decision making.
There are 2 principles underlies in the determination of relevant cost.
The first principle is that only future cost is consider as relevant cost. Historical cost such as
sunk cost is not recognisable as relevant cost as it has already been incurred and future decision
cannot make any differences to the cost that has already sunk (Accounting Tools, 2013). For
instance, a company invests RM1,000,000 over several years to develop a product. However there
is no market for the product as there is no buyer acquire for the good. The RM1,000,000 spent in
the development of the good is a sunk cost, and no consideration can be made for continuing or
terminate the product as the cost has already incurred .
Next, the relevant cost must be vary among its competing alternatives (Malik 2014). For
example, differential cost and incremental cost are considered as relevant cost as they brings
differences of cost for the corresponding item when different alternatives is chosen. An example for
differential cost will be when a firm decision whether to sell their product through selling
distributors or by hiring salesperson. Differential cost occurs when there are more decision
alternatives specifically two different projects or situations, as stated above there are 2 situation for
the business to choose from. As for incremental cost is when the business decided to increase the
production for table from 100 units to 150 units, the cost for the table may from RM10 per unit to
RM15 per unit. It occurs the cost is associated in producing every extra unit of the product.

Question 2(A)
Features Financial Accounting Management Accounting
Generally accepted
accounting principles
(GAAP)
Financial statement must conform
with the legal requirement and the
GAAP established when preparing
the financial statements
As Management Accounting is
only to provide information for
internal purpose, they do not need
to follow the GAAP


Focus on individual
part or segments of
business
Focuses the whole of the business Focuses only small part of the
organisation
Time Dimension Only past information of the
organisation is reported
Uses both past and future
information
Report Frequency Financial Statement will be
published annually for private
limited company while semi
annually for public listed company
Depends on the demand of the
users of accounting. It can be
conducted daily, weekly or
monthly

By having managerial accounting, one of the role is that it gives motivation for workers to
work harder. A budget planning and performance report that is prepared by the accountant will
affect the workers as they have a target to accomplish which will push them harder in order to
achieve the objectives (Diana, BI).
Next, in terms of communication, managerial accounting serves as a better instrument to
convey messages to the managers by showing him the well-being of his management and also
highlights the problems that needed a mote thorough examination using the management by
exception model.
The last but not least is that it helps in the control process which show a contrast from
planned and achieved performance. As performance report draw up the comparison of actual and
budgeted revenue for each centre, managers will be alerted to those specific activities. Any
deviation can be identified and corrected instantly.

Question 2(B)
According to Kurkarni & Mahajan (2008), one of the function of management accounting is
planning and forecasting as it helps to stipulate companies goal and also help to set the policies and
strategies to achieve the goals through allocation of resources. In order to determine the resources
needed in a business, doing a forecasting is the starting point of it, for instance, budget forecast and
cash flow forecast.
Management Accounting also helps in decision making for management. In order for a
management to make a better decision, calculation and information provided by management
accounting is useful in this case. By applying management accounting concepts and techniques, the
figures obtain can lead the management to make a better decision which will make the business


more profitable. The examples of model to calculate and to make analysis are the cost-volume-
profit and relevant costing.
Lastly, management accounting plays an important role in analysing and interpreting the
financial data. The raw financial data which is collected may not carry management utility.
Therefore, management accountants should analyse the data and then interpret the data with his
comments and recommendation to the management.

Question 2(C)
Accounting information is essential to managers as it can assist the managers in making
decision and also controlling the activities. In decision making, accounting information is important
in computing estimations especially for management accounting. In order to estimate the
profitability of the business, demand for the market and even selling price of a product, sufficient
accounting information is needed (Diana, BI).
Shareholders are also one of the accounting information users. Through the accounting
information, shareholders can know how well is the business performance of the company through
the financial statements. Moreover, they can also be informed about their net worth of investment
and also the profit derived from the investment.
Another user who also uses the accounting information is the employees. Employees may
request for the accounting information of a company to make sure that the business has the
capability to meet certain requirements, such as paying the workers salaries on time and also to
avoid redundancies (Sofat & Hiro 2008).
The last but not least is loan provider may also acquire the accounting information to check
if that certain company have the ability to pay back (Drury, C 2012). Through accounting
information, we can clearly see that if the business is liquid enough and possess the ability in pay
back when they borrow. This gives the creditors assurance about the company and give confidence
for the creditors to sold on credit to the business.

Question 2(D)
When making a decision, information provided must be relevance so that they can be made
accordingly as different decision needed different set of data. Timelines is also important in
determining the usefulness of a information because those information will only be useful when it is
done in a favourable time (Accounting Simplified 2013). With the presence of this two elements, it
increase the usefulness of the data as it is timely and the level of relevance of the data is also
increase.


Next, information data provided should be accurate in the process of planning. In other
words, information given must be precise and any incomplete records or uncertain information will
cause the usefulness of the information to perish. However, even if the information is very accurate
but s irrelevant to the information needed by the decision maker, the information is considered as no
value to the decision maker. For example, when the management is computing the forecast budget,
any inaccurate information is not valid for the process.
Lastly, in control process it is where the corrective action is taken. After a target or standard
is being set, managers should be alert to any deviation occur and they have to take corrective action
immediately if there is a deviation. If their is any negative deviation, it is the managers obligation
to find out the cause and take corrective action to it to improve the situation.



Question 2(E)
Following the pace of technology advancement, it has bring lots of convenient to our
business today. By having a boost in the information technology, it leads to the redesign of business
process. By adapting technologies into business, it helps the business to be more productivity and
also solved some technical problem in the work environment (Davenport, TH 2014). For instance,
an Automated Teller Machine gives convenient to its users as they can deposit or withdraw their
money anytime with the presence of an ATM.
By using information technology, it also enables a fast and convenient way to transmit the
information. With the technologies today, to transmit any information or to search for any related
business information is just a mouse click away. Users can obtain information they needed
effectively using information technology. Besides, they are able to communicate with each others
despite they are in different country. By communicate with each other, it does not only obtain the
information faster but also obtaining a more accurate and trustable information.
Besides, softwares that has been developed to give aids in business also brings effect
towards todays business. Bulky and place consumable paper work can be lessen as the datas can be
stored in our computers. Information can be easily record in our computer instead of recording them
manually on paper. Softwares that have been developed helps to avoid human error made and also
increase the effectiveness in doing accounts and computing calculation. For examples, Microsoft
Excel and UBS.