EBA6113 Solution Assgn 2 (Kiong Kah)

PROGRAMME: CORPORATE MASTER IN BUSINESS ADMINISTRATION
COURSE: ACCOUNTING FOR MANAGER
(EBA 6113)
2016 2017 SEM 1
Solutions
PROBLEM BASED CASE (Q2, Q4 and Q5)
Question 1
CJD ltd makes plastic components for the car industry. The following budgeted information is available
for three of their key plastic components:
Product W Product X Product Y
RM per unit RM per unit RM per unit
Selling price 200 183 175
Direct Material 50 40 35
Direct Labor 30 35 30
Units produced and 10,000 15,000 18,000

sold
The total number of activities for each of the three products for the period is as follows:
No. of inspection in hours 1200 1800 2000
No. of set up 240 260 300
Overhead costs have been analysed as follows:

Receiving/ inspecting quality assurance RM1,400,000
Production scheduling/ machine set up RM1,200,000
Required:
1.Calculate the budgeted profit per unit for each of the three products using ABC budgeting.
2. If the budgeting has been traditionally calculated on the basis of direct labor cost, calculate the
budgeted profit per unit for each of the three products.
SOLUTION (Use ABC Costing)

Overhead Cost:
Quality Assurance 1400K/5000 X 1200 1400K/5000 X 1800 1400K/5000 X 2000
10,000 15,000 18,000
33.6 33.6 31.11
Mach Set up 1200K/800x240 1200K/800x260 1200K/800x300
10000 15,000 18,000
36 26 25
Cost per unit 149.60 134.60 121.11
Budget Profit p.u 50.4 48.40 53.89
1. Use Traditional/conventional direct labor cost
Overhead Cost:
Using direct labor cost 2600K/1365K x 30 2600K/1365K x 35 2600K/1365K x 30
57.14 66.67 57.14
Cost per unit 137.14 141.67 122.14
Budget Profit p.u 62.86 41.33 52.86
Question 2
Details of information regarding the four products belonging to ABC Berhad are given below for one
period:
PRODUCT A B C D
Output in units 120 100 80 120

Cost per unit:
Direct Materials (RM) 40 50 30 60
Direct Labor 28 21 14 21
Machine hour per unit 4 3 2 3
The four products are similar and are usually produced in productions run of 20 units and sold in batches
of 10 units
The production overhead is currently absorbed by using a machine hour rate, and the total of the
production overhead for the period has been analysed as follows:
DETAILS OF COSTS RM
Machine department cost (which include rent, business

rates, depreciation and supervision) 10,430
Set up costs 5,250
3,600
Stores receiving
2,100
Inspection/Quality Control
Materials handling and dispatch 4,620
Total RM26,000
You have ascertained that the cost drivers to be used are as listed below for the overhead costs shown:
COST COST DRIVER
Set up costs Number of production runs
Inspection/Quality control No of Requisition raised
Stores Receiving No of Requisition raised
Materials handling and despatch Orders executed
The number of requisitions raised on the stores was 20 for each product and the number of orders
executed was 42, each order being for a batch of 10 of a product.
You are required:
(a) To calculate the costs per unit for each product if all overheads costs are absorbed on a machine
hour basis;
(b) To calculate the costs per unit for each product, using activity based costing
(c) To compare the unit product cost from your figures in (a) and (b) above, to show the differences and
to comments briefly on any conclusions which may be drawn which could have pricing and profit
implication.
SOLUTION
a. Overheads on a machine Hr basis
PRODUCT A B C D Total

Cost per unit:
Total Machine Hr 480 hr 300 hr 160 hr 360 hr 1300 hours
Overheads on mach hr
26,000/1300 =20 80 60 40 60
Total c.p.u RM148 RM131 RM84 RM141
b. Overheads based on ABC costing
PRODUCT A B C D

Cost per unit:
Overhead
Machine(Mach Hr) 10,430/1300 8.02 x 4 8.02 x 3 8.02 x 2 8.02 x 3
=8.02 x120 x100 x80 x120
3850 2406 1283 2887
Set up costs (Production 5,250/21 6 x250 5 x250 4 x250 6 x250
run) 250 1500 1250 1000 1500
Inspection/Quality 3,600/80 20 x45 20 x 45 20 x 45 20 x 45
control (Requisition =45 900 900 900 900
raise)
Stores Receiving 2,100/80 20 x 20 x 20 x 20 x
(Requisition raise) 26.25 26.25 26.25 26.25 26.25
525 525 525 525
Materials handling and 4,620/42 12 x110 10 x110 8 x110 12 x110
despatch (Order 110 1320 1100 880 1320
execute)
Total overhead 8095 6181 4588 7132

Overhead per unit 67.46 61.81 57.35 59.43
TTL cost per unit 135.46 132.81 101.35 140.43
Workings on Cost drivers in ABC
PRODUCT A B C D Total
No of prodn runs 6 5 4 6 21
No of Requistn Raise 20 20 20 20 80
Orders Executed 12 10 8 12 42
(C )
Traditional RM148 RM131 RM84 RM141
ABC Costing 135.46 132.81 101.35 140.43
Difference 12.54 1.81 17.35 0.57

overcosting undercosting under overcosting
costing
Q3.
Kota Uni manufactures 3 main products, using broadly the same production methods and
equipment for each. A conventional product costing system is used at present, although an
activity based costing (ABC) system is being considered.
Details of the three products for typical period are:
Hours per unit Material cost Volume in units

per unit
Labor hours Machine Hour RM Units
Product X 0.5 1.5 20 750
Product Y 1.5 1.0 12 1,250
Product Z 1.0 3.0 25 7,000
Direct labor costs RM6 per hour and production overheads are absorbed on a machine hour
basis. The rate for the period is RM28 per machine hour.
Further analysis is required to apply ABC costing which would show the total production
overheads which are divided as follows:
Percentage
Costs relating to set-ups 35
Costs relating to machinery 20
Costs relating to material handling 15
Costs relating to inspection 30
Total production overheads 100%
The following activity volumes are associated with the product line for the period as a
whole. Total activities for the period:
Number of set up No of materials No of Inspection

movement
Product X 75 12 150
Product Y 115 21 180
Product Z 480 87 670
670 120 1000
You are required to calculate to:

a) Calculate the cost per unit for period using the conventional approach
b) Calculate the ABC costing to determine cost per unit
c) Comments on the difference between solution in a and b.
Solution
a. Conventional approach
Pro X Pro Y Pro Z

DM 20.00 12.00 25.00
DL
X = .5 X 6 6.00
Y = 1.5 x 6 9.00
Z=1x6 6.00
Production OHD
X = 1.5 x 28 42
Y = 1 x 28 28
Z = 3 x 28 84
COST per unit 68.00 49.00 115.00
b. ABC approach
TOTAL Production cost

X = 28 x 1.5 x 750 units = 31,500
Y = 28 x 1 x 1250 units =35,000
Z = 27 x 3 x 7000 units = 588,000
Total production cost =654,500
BREAK UP COST
Set up cost = 654,500 x .35 =229,075
Machinery cost= 654,500 x .20 = 130,900
Material handling 654000 x .15 = 98,175
Inspection = 654500 x .30 = 196350
TOTAL 654,500
Total machine Hr
X = 1.5 x 750 = 1125 hr
Y = 1 x 1250 = 1250
Z = 3 x 7000 = 21,000
Total = 23,375 Hours
Production rate per activity and COST per Unit in ABC
Cost Driver Cost per unit of X Y Z

activity
Set up 229,075/670 = 341.90 341.90 x 341.90x480/7000
341.90 x75/750= 34.19 115/1250 =
31.45 23.44
Machinery 130,900/23,375 5.60x1.5 = 8.4 5.6 x 1 = 5.6 5.6x 3 = 16.8
=5.60
Material 98,175/120=818.125 818.125x12/750 818.125x21/1250 818.125x87/7000=
handl = 13.09 = 13.74 10.17
Inspection 196,350/1000 = 196.35 196.35 x 196.35x670/7000
196.35 x150/750 = 180/1250 = = 18.79
39.27 28.27
DL 6.00 9.00 6.00
DM 20.00 12.00 25.00
Cost p u 120.95 100.06 100.20
Question 4 (CASH FLOW)
Classify each of the following items under operating, investing or financing.
i) RM150,000 received from cash sales.
Answer: Operating
ii) Cash of Rm230,000 received from customers for sales made in the previous year.
Answer: Operating
iii) Payment of Rm25,000 as dividend to shareholders.
Answer: Financing
iv) payment of Rm98,000 as wages and salaries to employees.

Answer; Operating
v) Payment of 45,000 to buy equipment.
Answer: investing
vi) payment of RM200,000 to purchase land.
Answer: Investing
vii) Cash of RM500,000 received on issue of new shares.
Answer: Financing
viii) Payment of RM12,000 for rent for the period.
Answer: Operating
ix) Payment of RM87,000 to supplier for goods bought in the last period.
Answer: Operating
xi) Receipt of RM3,000 as dividend on shares held in XYX Bhd.
Answer: Investing
xii) Payment of RM45,000 to buy shares in Tenaga Bhd.
Answer: Investing
xiii) Payments of RM25,000 as repayment of bank loan.
Answer: Financing
xiv) Acquisition of building costing RM400,000, payment made through bank.
xv) Receipt of RM23,000 on sale of motor vehicle ( the cost of the vehicle was RM75,000 and it had
RM60,000 accumulated depreciation).
Question 5
Given below are the income statement and the balance sheet of Prism Bhd.
(i) The income statement of Prism Bhd for the year ended 31.12. 2012
RM RM
Sales 500,000
Cost of sales:
Opening stocks 40,000
Purchases 200,000
240,000
Closing stocks (50,000) (190,000)
Gross Profit 310,000
Expenses 115,000
Depreciation 50,000 (165,000)
145,000
Gain on sales of motor vehicle 15,000
160,000
Taxation (30,000)
130,000
Dividends Interim 10,000
- Final 15,000 (25,000)
105,000
======
ii) Prism Balance Sheet as at 31 December
2012 2011
000 RM000 000 RM000
Non Current Assets
Land and Building 300 200
Motor vehicles 80 50
Investment 30 20
------ ------
410 270
Current Assets
Stocks 50 40
Receivables 75 55
Short term investment 18 22
Bank 15 7
---- ----
158 124
Current liabilities
Payables 35 26
Tax payables 35 30
Dividend payables 15 10
----- -----
Net Current assets 73 58
--------------- ------------
483 328
========= ========
Ordinary shares 300 250
Profit and loss balance 183 78
--------------- -------------
483 328
========= ========
iii) Additional information.
a) Depreciation charged on land and buildings is RM20,000 and on motor vehicles RM30,000.
b) Motor vehicles of book value RM10,000 were sold for RM25,000.
c) There were no sales of land and buildings during the year.
From all the above information, prepare the cash flow statement for the year ended 31.12.2012
under the direct method.
Question 6
Buretta Co Financial Statements

Income statement for the year ended 31 Dec 2013 (Millions)
RM(M) RM(M)
Sales 100
Less Cost of Goods Sold
Opening Inventory 15
Purchases 104
-----
119
Closing Inventory 46 (73)
----- ------
Gross Profit 27
Less Other Expenses
General expenses 8
Depreciation 8
Property Taxes 4
Interest expenses 3 23
-------------- -------------
Net Income 4
Retained earnings, Dec 31 , 20x0 7
--------------
Total 11
Dividends (1)
---------------
Retained earnings , Dec 31, 20x1 10
=========
Ba;ance Sheet as at Dec 31 (millions)

RM RM RM
Assets 20x1 20x0 Increase
(Decrease)
Cash 1 20 (19)
Accounts Receivable 20 5 15
Inventory 46 15 31
Prepaid general expenses 4 2 2
Fixed assets 91 50 41
---- ---- ------
162 92 70
=== === ===
Equities
Accounts payable 39 14 25
Accrued property tax payable 3 1 2
Long Term debt 40 - 40
Capital Stock 70 70 -
Retained earnings 10 7 3
----- ----- -----
162 92 70
===== ===== ====
The Buretta Co has prepared the data as per above. In December 2013, Buretta paid RM54 million cash
for a new building acquired to accommodate an expansion of operations. This was financed partly by a
new issue of long term debt for RM40 million cash. During 2013, the company also sold fixed asset for
RM5.0 million cash, which was equal to their book value. All sales and purchases of merchandise were
on credit.
As the net income of RM4 million was the highest in the companys history, Mr Buretta, the chairman of
the board, was perplexed by the companys extremely low cash balance.
1. Prepare a Statement of cash flows. Ignore tax. Use direct method for reporting cash flows from
operating activities.
2. Prepare a supporting schedule that reconciles net income to net cash provided by operating
activities.
3. What is revealed by the statement of cash flows? Does it help you to reduce Mr Burettas
puzzlement? Why?
Question 7.
As required by the FRS 107 you have been preparing the cash flow statement under the Direct Method
and the management is still trying to understand this new method objective of magnifying the
significance of operating cash flow , focusing on the prime components of cash inflow and outflow as
portrayed by the amount received from sales and at the same time disclosing major sums paid out to
trade suppliers and employees.
In the light of the above perspective the management has requested for a cash flow statement to be
prepared on a voluntary basis as the management is more familiar with the indirect method of
disclosure, pointing out that the management is very much in agreement with the disclosure under the
Direct Method as required by the FRS 107.
The Financial statement of the said company Maxim Sdn Bhd as at 31 Dec 2013 was as appended.
Maxim Sdn Bhd.
Income statement for the year ended 31.12. 2013.
RM RM
Sales 1,050,000
Cost of sales:
Opening stocks `` 75,000
Purchases 465,000
540,000
Closing stocks (85,000) (455,000)

Gross Profit 595,000
Expenses 268,000
Depreciation 75,000 (343,000)
252,000
Loss on sales of motor vehicle (25,000)
227,000
Interest Expenses 12,000
Profit before tax 215,000
Taxation (64,500)
Profit after tax 150,500
Dividends Interim 30,000
- Final 35,000 (65,000)
85,500
======
Maxim Sdn Bhd Balance sheet as at 31.12.2013
As at 31.12.2013 As at 31.12.2012
RM RM RM RM
Non Current Assets
Land and Building 350,000 250,000
Motor vehicles 105,000 55,000
Investment 35,000 15,000
---------- ----------
490,000 320,000
Current Assets
Stocks 85,000 75,000
Receivables 105,000 85,000
Less Provision for Doubtful Debts (3,150) Nil
Short term investment 15,000 24,000
Bank 7,700 11,000
----------- ----------
209,550 195,000
Current liabilities
Payables 25,000 32,000
Tax payables 55,000 45,000
Dividend payables 35,000 23,000

--------- ----------
Net Current assets 94,550 95,000
----------- ----------
584,550 415,000
======= ======
Long Term Loan 100,000 60,000
Ordinary shares 287,050 243,000
Profit and loss balance 197,500 112,000
----------- ----------
584,550 415,000
======= ======
Additional information.
a) Depreciation charged on land and buildings is Rm30,000 and on motor vehicles Rm45,000.
b) Motor vehicles of book value Rm35,000 were sold for Rm10,000 by check. There were no sales
of land and buildings during the year.
d) Based on companys debtors review, a provision for doubtful debts of 3 % for the year 2013
has been made. No other provision has been made in the previous years.
Prepare:
(i)In line with the request from the management you are required on a voluntary basis to prepare
another set of cash flow statement using the indirect approach. (20 marks)
Solution to Q4 CASH FLOW.
Classify each of the following items under operating, investing or financing.
i) RM150,000 received from cash sales.
Answer: Operating
ii) Cash of Rm230,000 received from customers for sales made in the previous year.
Answer: Operating
iii) Payment of Rm25,000 as dividend to shareholders.
Answer: Financing
iv) payment of Rm98,000 as wages and salaries to employees.
Answer; Operating
v) Payment of 45,000 to buy equipment.
Answer: investing
vi) payment of RM200,000 to purchase land.
Answer: Investing
vii) Cash of RM500,000 received on issue of new shares.
Answer: Financing
viii) Payment of RM12,000 for rent for the period.
Answer: Operating
ix) Payment of RM87,000 to supplier for goods bought in the last period.
Answer: Operating
xi) Receipt of RM3,000 as dividend on shares held in XYX Bhd.
Answer: Investing
xii) Payment of RM45,000 to buy shares in Tenaga Bhd.
Answer: Investing
xiii) Payments of RM25,000 as repayment of bank loan.
Answer: Financing
xiv) Acquisition of building costing RM400,000, payment made through bank.
Answer: Investing
xv) Receipt of RM23,000 on sale of motor vehicle ( the cost of the vehicle was RM75,000 and it had
RM60,000 accumulated depreciation).
Answer: Investing
Question 5
Solution to Question 5 is just like what we did in the tutorials.
Prism Bhd CASH FLOW statement at

31/12/12
Adjustment for item not involve funds
Add: Depreciation 50,000
Less: Gain on sales of MV -15,000 35,000
195,000
Tax Paid -25,000
170,000
Operating activities
Increase in C/stk -10,000
Increase in Receivables -20,000
Increase in Payables 9,000 -21,000
Cash Flow from Operating activities 149,000
Investing activities
-
Buy new L&B 120,000
Buy new MV -70,000
Dispose MV 25,000
Increase in LT Investm -10,000
Decrease in ST Investm 4,000
Cash Flow from investing activities -171,000
-22,000
Financing activities
Dividend paid -20,000
Issue new share 50,000
30,000
Increase in Cash/cash equivalent 8,000
Cash as at 1.1.2012 7,000
Cash as at 31.12.2012 15,000
Workings
Land & BLDG
Details RM Details RM
P/L
Bal b/f 200,000 Deprn 20,000
CASHFLOW 120,000
Bal c/f 300,000

Total 320,000 Total 320,000
M Vehicles
P/L
Bal b/f 50,000 Deprn 30,000
To
CASHFLOW 70,000 Disposal 10,000
Bal c/f 80,000

Total 120,000 Total 120,000
Disposal of MV
Cash
MV 10,000 Flow 25,000
Gain on sales FA 15,000
Total 25000 Total 25000
Tax Payables
Cash Flow Tax 25,000 Bal b/f 30,000
P/L Tax 30,000
Bal c/f 35,000
Total 60,000 Total 60,000
Dividend payables
Cash Flow Tax 20,000 Bal b/f 10,000
P/L 25,000
Bal c/f 15,000
Total 35,000 Total 35,000
Question 6.
Solution to Boretta CASH FLOW.
Workings
Cash A/C
Details DR (RM) Details CR (RM)
Bal b/f 20 General Expenses paid 10
A/c Receivable 85 A/c payable 79
Sales of Fixed assets 5 Purchase of F/A 54
Issue new LT debt 40 Interest Expenses 3
Dividends 1
Property Tax payable 2
Bal c/f 1
Total 150 Total 150
A/C Receivables
Balance b/f 5 To: Cash a/c 85
Sales 100
Balance c/f 20
Total 105 Total 105
Prepaid General Expenses
Balance b/f 2 P/L General Expenses 8
To: Cash a/c 10
Balance c/f 4
Total 12 Total 12
Fixed Assets
Balance b/f 50 To: Depreciation 8
To: Cash a/c 54 To Disposal of F/Assets 5
Balance c/f 91
Total 104 Total 104
A/C Payables
To: Cash a/c 79 Balance b/f 14
Balance c/f 39 Purchases 104
Total 118 Total 118
Accrued Property Tax Payable
To: Cash a/c 2 Balance b/f 1
Balance c/f 3 To:P/Loss 4
Total 5 Total 5
Long Term Debts
Balance c/f 40 Balance b/f Nil
To: Cash A/c 40
Total 40 Total 40
Disposal of F/Assets
Fixed assets 5 To: Cash A/C 5
Total 5 Total 5
1) Cash Flow Statement under Direct Method
CASH FLOW FROM OPERATING ACTIVITIES RM RM
Cash Collected from Customers 85
Cash Paid to Suppliers & Employees (79 +10) (89)
Net Cash Flow from operating Activities (4)

CASH FLOW FROM INVESTING ACTIVITIES
Property Tax (2)
Purchase of F/Assets (54)
Sales of F/Assets 5 (51)
Net Cash Flow from Investing Activities (55)
CASH FLOW FROM FINANCING ACTIVITIES
Interest Paid (3)
Dividends Paid (1)
Issue of long Term debt 40 36
Increase /Decrease of Cash/ Cash Equivalents (19)
Cash at Beginning of the year 20
Cash at Ending of the Year 1
=====
2) Reconcile of Net Income to Net Cash Operating Activities.
To do this method, you need to use the indirect method of preparing for Cash Flow Statement.
RM RM
Net Income from Operation 4
Add: Items not involving funds
Add: Depreciation 8
Add/less: Items under Investing/Financing activities

Add: Interest Expenses 3
Add: Property Taxes 4 15
Increase or Decrease in Working capital
Increase in Inventory (46-15) (31)
Increase in A/C Receivable (20-5) (15)
Increase in Prepaid General Expenses (4-2) ( 2)
Increase in Account Payable (30-14) 25 (23)
Net Cash Flow From operating activities (4)
====
3) Mr Benettta was puzzled because the current financial year shows that the firm has made a net
profit of RM10.00 profit after paying for capital holders interest such as dividend and interest
payment, but however he notices that the cash balance has dropped from RM20.0 million beginning
of the year to just a mere RM1.0 million cash available at the end of the current financial year.
With the preparation and aid of the cash Flow Statement, the following information are disclosed;
a) Revenue generation from sales of RM100 million just fall short of purchase value of RM104
million.
b) With the expansion of the firms operation, the existing premised need to be reviewed and
expanded, thus there is a requirement to buy new premise costing RM54 million. The sales of
the old assets and the issuance of Long Term Loan are not sufficient to finance the capital
expenditure (investing activities) and thus the firm has no choice but to use its cash reserve,
thus diluting the latter position as reflected in its year end cash balance.
Solution to Question 7
Section A.
i) Maxim Cash Flow as at 31.12.2013

(Indirect Method)
Reconcile of Net Income to Net Cash Operating Activities.
RM RM
Add: Items not involving funds
Depreciation 75,000
Loss on sales M/vehicles 25,000
Provision for Doubtful debts 3,150 103,150
--------- ----------
318,150
Less: Taxation (54,500)
Add: Interest 12,000
----------
Cash Flow before operating activities 275,650
OPERATING ACTIVITIES
Increase in Stocks (10,000)
Increase in Receivables (20,000)
Decrease in Payables (7,000) (37,000)
--------- ----------
Net Cash from operating activities 238,650
INVESTING ACTIVITIES
Purchase of new l/buildings (130,000)

Purchases of m/vehicles (130,000)
Additional L.T. Investment ( 20,000)
Disposal of old m/vehicles 10,000 (270,000)
---------- ----------
Net cash from Investing activities (31,350)
FINANCING ACTIVITIES
Issue of new loans 40,000
Issue of new O/share 44,050
Interest paid (12,000)
Dividend paid (53,000) 19,050
-------- ----------
Net cash flow from financing activities (12,300)
Cash at bank at 1.1.2013 11,000
Add: Sales of short term investment 9,000
----------
Cash at bank at 31.12.2013 7,700
======
ii) Summary of Bank A/c (Cash Inflow/Outflow)

CASH Inflow
Balance b/f 11,000
Disposal of Motor vehicles 10,000
Receipt from debtors 1,030,000

S. T. Investment 9,000
L.T. Loans 40,000
New Ordinary Shares 44,050
-------------
Total cash inflow 1,144,050
========
CASH OUTFLOW
L/ Buildings 130,000
m/ Vehicles 130,000
Investment 20,000
Payment to suppliers 472,000
Taxation 54,500
Dividend 53,000
Expenses(268000-3150) 264,850
Interest Expenses 12,000
Bal c/f 7,700
----------
1,144,050
=======
DIRECT METHOD.
Maxim sdn Bhd

Cash flow from operating activities RM
Cash collected from customers 1030,000
Cash paid to suppliers and employees
(472,000 + 264,850) (736,850)
293,150
Tax paid (54,500)
Net Cash from Investing Activities 238,650
INVESTING ACTIVITIES
Purchase of new l/buildings (130,000)
Purchases of m/vehicles (130,000)
Additional L.T. Investment ( 20,000)
Disposal of old m/vehicles 10,000 (270,000)
---------- ----------
Net cash from Investing activities (31,350)
FINANCING ACTIVITIES
Issue of new loans 40,000
Issue of new O/share 44,050
Interest paid (12,000)
Dividend paid (53,000) 19,050
-------- ----------
Net cash flow from financing activities (12,300)
Cash at bank at 1.1.2013 11,000

Add: Sales of short term investment 9,000
----------
Cash at bank at 31.12.2013 7,700
======

EBA6113 Solution Assgn 2 (Kiong Kah)

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PROGRAMME: CORPORATE MASTER IN BUSINESS ADMINISTRATION

COURSE: ACCOUNTING FOR MANAGER

2016 2017 SEM 1

PROBLEM BASED CASE (Q2, Q4 and Q5)

Product W Product X Product Y

RM per unit RM per unit RM per unit

Selling price 200 183 175

Units produced and 10,000 15,000 18,000

No. of inspection in hours 1200 1800 2000

No. of set up 240 260 300

Overhead costs have been analysed as follows:

Production scheduling/ machine set up RM1,200,000

SOLUTION (Use ABC Costing)

Product W Product X Product Y

Budget Profit p.u 50.4 48.40 53.89

1. Use Traditional/conventional direct labor cost

Product W Product X Product Y

RM per unit RM per unit RM per unit

Selling price 200 183 175

Using direct labor cost 2600K/1365K x 30 2600K/1365K x 35 2600K/1365K x 30

57.14 66.67 57.14

Cost per unit 137.14 141.67 122.14

Budget Profit p.u 62.86 41.33 52.86

Output in units 120 100 80 120

Machine hour per unit 4 3 2 3

Machine department cost (which include rent, business

Set up costs Number of production runs

Inspection/Quality control No of Requisition raised

Stores Receiving No of Requisition raised

Materials handling and despatch Orders executed

You are required:

a. Overheads on a machine Hr basis

Output in units 120 100 80 120

Total Machine Hr 480 hr 300 hr 160 hr 360 hr 1300 hours

b. Overheads based on ABC costing

Output in units 120 100 80 120

Total overhead 8095 6181 4588 7132

Workings on Cost drivers in ABC

Traditional RM148 RM131 RM84 RM141

ABC Costing 135.46 132.81 101.35 140.43

Difference 12.54 1.81 17.35 0.57

Details of the three products for typical period are:

Hours per unit Material cost Volume in units

Number of set up No of materials No of Inspection

You are required to calculate to:

Pro X Pro Y Pro Z

COST per unit 68.00 49.00 115.00

TOTAL Production cost

Production rate per activity and COST per Unit in ABC

Cost Driver Cost per unit of X Y Z

Question 4 (CASH FLOW)

Classify each of the following items under operating, investing or financing.

i) RM150,000 received from cash sales.

iii) Payment of Rm25,000 as dividend to shareholders.

iv) payment of Rm98,000 as wages and salaries to employees.

v) Payment of 45,000 to buy equipment.

vi) payment of RM200,000 to purchase land.

vii) Cash of RM500,000 received on issue of new shares.

viii) Payment of RM12,000 for rent for the period.

xi) Receipt of RM3,000 as dividend on shares held in XYX Bhd.

xii) Payment of RM45,000 to buy shares in Tenaga Bhd.

xiii) Payments of RM25,000 as repayment of bank loan.

Opening stocks 40,000

Closing stocks (50,000) (190,000)