BBAP2103 MANAGEMENT ACCOUNTING

JAN 2011 SEMESTER FINAL EXAMINATION

SUGGESTED SOLUTION
BAHAGIAN A

QUESTION 1
Answer pg 8, chapter 1

relevant the choice of a piece of information must give a different decision for
managers to consider in decision making process. (1m) It must also influence
the decision made. However, a piece of information that is not relevant in one
situation may be relevant in another. (1m)
comparability the piece of information must be able to be compared with
previous period or other company in order to be useful to the managers. (1m) It
should also carry some comparative values for decision making purposes. (1m)
[The above answer with clear explanation 2 marks each.]
[Total: 4 marks]

QUESTION 2
Answer: topic 6, pg 133-155
Budgets provide a means of communicating managements plans throughout the
organization. Its process can uncover potential bottlenecks before they occur.
Budgets force managers to think about and plan for the future. It also provides a
means of allocating resources to those parts of the organization where they can
be used most effectively.
Budgets coordinate the activities of the entire organization. Budgeting helps to
ensure that everyone in the organization is pulling in the same direction.
Budgets define goals and objectives that can serve as benchmarks for evaluating
subsequent performance.
[Any 2 of the above answers with explanation, 2 marks each. Total = 4 marks]
[Total: 4 marks]

QUESTION 3
Answer topic 1, pg 4
Aspects
Users

Management Accounting
Financial Accounting
Internal parties such as the External parties such as the
management and employees. creditors, banks and IRB.
More flexible and relevant.
More objective and varies
Data
Report does not have to be Only data that has been
Information details
detailed. Report according to detailed and accurately
divisions, product, customer reported in the annual
and segment.
report.
Emphasis of the Focuses more on activities Summary of the past
influence
future activities and based on
information provided that
decisions.
historical costs.
[Any 2 of the above answer with clear explanation 2 marks each.]
[Total: 4 marks]

QUESTION 4
Answer: topic 1, 20
Product cost
Period cost
The cost that is provided directly The cost that is charged as an
Definition
to the product and can be expense in the period it occurs
inventoried.
and cannot be inventoried.
Direct material cost, direct labour Marketing
expense,
Example
cost
administrative expense
[The above answer with explanation + 1 example = 1.5m + 0.5m = 2 marks each.
Total = 4 marks]
[Total: 4 marks]
QUESTION 5
Answer: topic 1, pg 19
i)

direct labour cost

prime cost
= DM cost + DL cost
RM37,200 = RM21,650 + DL cost
DL cost
= RM15,550
[4 X 0.5m = 2 marks]

ii)

Conversion cost
Conversion cost = DL cost + MOH cost
= RM15,550 + RM19,300
= RM20,350
[Total: 4 marks]

BAHAGIAN B
QUESTION 1
Answer: topic 2, pg 32-52
a)

product cost per unit using the following costing systems:

i)
marginal costing; and
Direct material
Direct labour
Variable OH

RM
8.00
12.00
3.00
23.00

[4 X 0.5m = 2 marks]
(2 marks)
ii)

absorption costing.
Direct material
Direct labour
Variable OH
Fixed OH (RM12,800/ 6,400)

RM
8.00
12.00
3.00
2.00
25.00

[6 X 0.5m = 3 marks]
(3 marks)
b)

Prepare an income statement for Tiffin Sdn. Bhd. for the month ended 31
December 2010 using marginal costing format.
Tiffin Sdn. Bhd
Income Statement
for the month ended 31 December 2010
RM
RM
Sales (8,500 x RM25)
212,500
Less : Variable Cost
Cost of goods sold:
Beginning inventory (3,100 X RM23)
71,300
(+) COGM (6,400 x RM23)
147,200
Costs of good available for sale
218,500
(-) ending inventory (1,000 x RM23)
(23,000)
195,500
(+) selling and distribution costs
(8,500 x RM2)
17,000
178,500
Contribution margin
34,000
Less : Fixed cost:
fixed OH cost
12,800
selling and administrative cost
7,200
20,000
Profit
14,000
[14 X 0.5m = 7 marks]
(7 marks)
3

c)

Discuss how marginal costing method differs from absorption costing

method in calculating product and period cost.
Marginal costing
Absorption costing
Product cost Involves all manufacturing costs Involves all manufacturing
costs (1m)
(1m)
Involves sales and administrative Involves all sales and
Period cost
costs and all fixed costs administrative
expenses
(manufacturing OH and sales (1m)
and administrative cost) (1m)
[The above answers with explanation, 1 mark each. Total = 4 marks]
(4 marks)

d)

Explain advantages and disadvantages of using marginal costing method.

Advantages:
Suitable for performance measurement and cost analysis.
Pricing of selling price so that contribution margin is easier to determine.
[Any 1 of the above answers with explanation, 2 marks each.]
Disadvantages:
Its usage is not wide and limited to internal management only.
The cost of preparing the report is relatively expensive, compared to the
preparation of the report for absorption costing due to the need to prepare for
internal and external users.
[Any 1of the above answers with explanation, 2 marks each.]
(4 marks)
[Total: 20 marks]

QUESTION 2
Answer: topic 3, pg 58-85
a)

Material acquisition form is one of the main documents in job order costing
system. Explain its purpose.
This form is used when raw materials are required for a production process.
(0.5m)It is a form containing detailed information on the type, price and
quantity of material that is to be taken out of the storeroom. (0.5m) It identifies
which job will be charged for the use of the material. (0.5m) It constitutes a
resource document for account entry and control for the production. (0.5m)
[the above answer with explanation, 2 marks]
(2 marks)

b)

What is meant by predetermined overhead rate? Provide formula and

calculate the predetermined overhead rate for Meewah Sdn. Bhd.
Predetermined OH rate: the basis used in allocating overhead cost.(0.5m) It is
calculated using the estimates and not the actual figure (0.5m). The allocation
base is a measurement based on activities (0.5m).
[The above definition = 1.5 marks]
Formula of predetermined OH rate = Estimated total manufacturing cost
Expected total activity or allocation base
Predetermined OH rate

= RM566,930/63,700 direct labour hour

= RM8.90 per DL hour

[5 X 0.5m = 2.5 marks]

(4 marks)
c). Journal entries:
Jan

Dt material
Ct cash
9
Dt MOH
Dt WIP
Ct material
17
Dt WIP
Dt MOH
Ct salaries payable
21
Dt MOH (250 + 208 + 310)
Kt cash
26
Dt WIP (3,860 X RM8.90)
Kt MOH
29
Dt Finished goods
Kt WIP
[20 X 0.5m = 10 marks]

27,100
27,100
11,750
13,200
24,950
11,200
18,200
29,400
768
768
34,354
34,354
8,920
8,920
(10 marks)

d).
Total OH cost absorbed =

RM34,354

Actual OH cost total OH cost absorbed

= RM37,610 RM34,354
= RM3,256
The overhead is under absorbed
[4 X 1m = 4 marks]
(4 marks)
[Total: 20 marks]

QUESTION 3
Answer: topic 1, pg 3 - 30
a)

Explain how management accounting information can assist Endang in

making decisions as the production manager.
To determine the cost of each product and services offered at the bakery
[with explanation]
To carry out the functions of planning, operation, control and performance
evaluation. [ with explanation]
[The above answers with explanation 2 marks each.]
(4 marks)

b) TWO examples for the following costs which are commonly incurred at
Kilang Enaq:
i)
direct material cost;
- example: flour, eggs, sugar etc.
[1m for each example, 2 X 1m = 2 marks]
(2 marks)
ii)

direct labour cost; and

- example: baker, mixer, kitchen assistant etc.
[1m for each example, 2 X 1m = 2 marks]
(2 marks)
iii)

factory overhead cost.

- example: electricity, water bills, rental etc.
[1m for each example, 2 X 1m = 2 marks]
(2 marks)
c)

Discuss how Kilang Enaq is different from the Starbuck, a coffee shop that
sells bread and pastries.

Nature
Income
statement

Balance
sheet

Starbuck (service organization)

Involves in providing service to
customers.
Detailed differentiation between
direct cost and indirect cost in the
income statement. Service cost will
be deducted from the revenue in
order to determine the gross margin.
Then the administrative and
marketing expenses will be
deducted to determine the net profit.
Information provided on intangible
product to customers since they do
not have a physical inventory.

Kilang Enaq (manufacturing organisation)

Involves in converting raw material into
finished goods in the manufacturing process.
Detailed information of direct material cost,
direct labour cost and OH cost. Statement of
costs of goods manufactured should be
prepared first before the income statement.

Information on inventories which are direct

material, work in process and finished
product.

[The above answers with explanation 2 marks each.]

(6 marks)

d)

Explain how fixed cost differs from variable cost. Support your answers by
providing ONE example for each of the cost incurred at Kilang Enaq.

fixed cost the cost that does not vary with production level. The total
cost is not affected by changes in any activity.
Example: rental expense, salary expense, etc.
(definition 1m +1m for example = 2 marks)
variable cost the cost that varies according to changes in production units
or activity units.
Example: direct material cost, direct labour cost, etc.
(definition 1m +1m for example = 2 marks)
(4 marks)
(Total : 20 marks)

QUESTION 4
Answer: topic 4, pg 86-102

a)

Characteristics of process costing system:

All production unit/products are identical and homogenous.
Individual products have to go through the same production process.
Costs will be accumulated according to process or department.
Production report is the source document that reflects all the costs
accumulation and allocation by each department.
Cost per unit is calculated by dividing the total costs for a particular period
with the production units by that particular process.
[Any 2 of the above answer with explanation, 2 marks each. Total = 4 marks]
(4 marks)
b)

The meaning of the following terms:

equivalent unit - equivalent unit is the completed or partially completed units
that are produced using the available resources.
physical unit - physical unit is the planned unit of production.
[The above answer with explanation, 2 marks each. Total = 4 marks]
(4 marks)

c)

Prepare a production report for Teras Sdn. Bhd.:

Format of Production Report (Weighted Average method)

Units to be accounted for:

Step 1
Physical units

Beginning WIP inv

1,500

+ inv started

1,700

= total units to be accounted for

3,200

Step 2
Equivalent units
DM
CC

Units accounted for:

Unit completed and transferred out

2,000

+ ending WIP inv:

1,200

2,000

2,000

DM (1,200 X 60%)

720

CC (1,200 X 20%)

_____

___

240

= total units accounted for

3,200

2,720

2,240

Step 3

DM

CC

Cost to be accounted for:

Beginning WIP inv cost

2,490

4,294

+ current inv cost

4,310

3,770

= total costs to be accounted for

14,864

Step 4
Total cost per unit

6,800
DM

CC

RM6,800

RM8,064

2,720 units

2,240 units

Cost of equivalent product per unit

RM6.10

Step 5: Charging costs to product

Units Completed &

Transferred out

unit completed & transferred out

8,064

RM2.50/unit

RM3.60/unit

Ending
WIP

12,200

Total

12,200

(2,000 units X RM6.10)

ending WIP: DM (720 units XRM2.50)
CC (240 X RM3.60)
total cost that have been accounted for

1,800

1,800

864

864
14,864

[24 X 0.5m = 12 marks]

(12 marks)
[Total: 20 marks]

10

BAHAGIAN C
QUESTION 1
Answer: topic 5, pg 109-132

(a). Contribution margin is the differences between sales revenue and variable costs.
Contribution margin per unit = RM145 RM55
= RM 90
[4 x 0.5m = 2marks]
(2 marks)

(b)

(i) BEP (unit) = (RM29,550 + RM48,900 +RM54,850 +RM35,000)

RM90 per unit
= RM168,300 / RM90 per unit
= 1,870 units

BEP (RM) = 1,870 units x RM145

= RM271,150
[8 x 0.5m =4m]
(4 marks)
(c). Units to be sold = (RM168,300 + RM56,700) / RM90
= 2,500 units
[4 x 0.5m = 2m]
(2 marks)

(d). Old delivery cost = RM35,000

New delivery cost = RM35,000 X 1.3
= RM45,500
New fixed cost = RM29,550 + RM48,900 +RM54,850 +RM45,500
= RM178,800
Old selling price per unit = RM145
New selling price per unit = RM155
New TPM (unit) = RM178,800 / (RM155 RM55) per unit
11

= RM178,800 / RM100 per unit

= 1,788 units

TPM (RM) = 1,788 units x RM155

= RM277,140
[14 x 0.5m = 7m]
(7 marks)
a) Roles of CVP analysis:

Setting selling price/pricing [with explanation]

Determining sales mix [with explanation]

Choosing marketing strategies [with explanation]

Evaluate the effects of changes in cost [with explanation]

[Any 2 answers with explanation, 2.5 marks each. Total = 5 marks. Any other
relevant answers should be given marks as well]
(5 marks)
[Total: 20 marks]

12

QUESTION 2
Answer: topic 7, pg 161-192
a)

Provide the formulae and calculate the following variances. Determine

whether the variance is Favourable (F) or Unfavourable (U):
i)

direct material price variance;

= (SP-AP) AQ = [(RM20 RM525,000/25,000pcs)] 25,000
= (RM20 RM21) 25,000 = RM25,000 (U)

[6 x 0.5m = 3 marks]
(3 marks)
ii)

direct material quantity variance;

= (SQ-AQ) SP = [(9,000 x 3) -24,000] 20
= (27,000 24,000) 20 = RM60,000 (F)

[6 x 0.5m = 3 marks]
(3 marks)
iii)

direct labour rate variance; and

= (AR-SR) AH = [(RM425,000/17,000) RM30)] x 17,000
= (25 30) 17,000 = RM85,000 (F)

[6 x 0.5m = 3 marks]
(3 marks)
iv)

direct labour eficiency variance.

=(AH SH) SR = [17,000 (9,000 x 2) ] x RM30
= (17,000 18,000)30 = RM30,000 (F)

[6 x 0.5m = 3 marks]
(3 marks)
b)

There are several reasons for Trendy Sdn. Bhd. to have an unfavourable
direct labour efficiency variance. Discuss.
The labour is inefficient that cause them to take more time to complete
certain job [with relevant explanation]
The direct material used is low quality or according to the specification
that forces the labour to take more time. [with relevant explanation]
The operation is delayed due to breakdown of machine, insufficient. [with
relevant explanation]
Materials and scheduling that forces the labour to take more time. [with
relevant explanation]
[Any 2 of the above answers with explanation, 2 marks each. Total = 4
marks]
(4 marks)
13

c)

Standard costing is extremely useful for the purpose of product costing.

Discuss the statement above.
Standard costing for the purpose of product costing:
o It is extremely useful because it helps to set the price of the product. This is
because it is not realistic to wait for manufacturing of the product to
complete before identifying the product cost to determine the sales price.
o The standard cost information is used to estimate cost of product and in turn
set product pricing at an earlier stage without waiting for the completion of
production.
[The above answers with explanation, 2 marks each. Total = 4 marks]
(4 marks)

[Total: 20 marks]

14