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QUESTION 1
A. (i) Students are required to explain on any two (2) of the following major differences:
1) Primary users
2) Reporting requirements
3) Reporting entity
4) Reporting frequency
5) Degree of Precision
6) Time frame
(ii)
i. Fixed costs/Selling and Distribution cost
ii. Variable cost/Production cost
iii. Variable costs/Administration cost
iv. Variable cost/Selling and distribution cost
v. Fixed cost/Administration costs
vi. Variable cost/Production cost
QUESTION 2
WD 3.0L WD 2.0L
RM RM
Direct material 40.00 35.00
Direct labour 20.00 17.00
Prime cost 60.00 52.00
Overhead (RM27 x 2 hours) (RM27 x 1 hour)
54.00 27.00
Product cost per unit 114.00 79.00
Total overhead
Cost Pool WD 3.0L WD 2.0L
Assembly (20,000 x RM12.50) (8,000 x RM12.50)
250,000 100,000
Machining (15,000 x RM10) (16,000 x RM10)
150,000 160,000
Order Processing (800 x RM60) (300 x RM60)
48,000 18,000
Purchasing (270 x RM75) (130 x RM75)
20,250 9,750
Total overhead RM468,250 RM287,750
Number of units 10,000 8,000
OH per unit RM46.83 RM35.97
Cost statement:
WD 3.0L WD 2.0L
RM RM
Direct material 40.00 35.00
Direct labour 20.00 17.00
Prime cost 60.00 52.00
Overhead 46.83 35.97
Product cost per unit 106.83 87.97
b. Comment
WD 3.0L WD 2.0L
RM RM
Product cost Traditional 114.00OF 79.00OF
Product cost ABC 106.83OF 87.97OF
Difference (i) 7.17 8.97
(ii) (overstated) (understated)
c. State 2 disadvantages
1. Limited accuracy. Many businesses shun traditional costing because its lack of
detailed calculations distorts actual overhead expenses.
2. Business owners and managers often prefer activity-based costing because it
helps them reduce waste by showing them every indirect cost for each specific
product or service. Traditional costing doesn’t provide that ability because it looks
at overhead costs in general.
3. Traditional costing typically doesn’t factor in unexpected expenses. This means it
could cost a company more to produce a product than it projected.
(Any relevant answer can be accepted)
QUESTION 3
a)
Colouring Process a/c
Qty RM Qty RM
OWIP 2,400 28,800 Finished goods:
Transfer fr Mixing 48,000 432,000 Lazat Juice 24,000 474,618
Material added 8,000 8,400 Enak Juice 22,200 296,339
Conversion costs 354,500 Sedap Juice 6,300 12,600
NL (56,000x5%) 2,800 5,600
AL 100 1,422
CWIP 3,000 33,119
58,400 823,700 58,400 823,698
Statement of Cost
Transfer fr Material Conversion
Mixing
Current cost 432,000 8,400 354,500
Cost/ Eq units 432,000/56,000 8,400/56,000 354,500/55,820
Total Cost / Eq units = RM7.714 = RM0.15 = RM6.351
= RM14.215 (OF)
Statement of Evaluation
Transfer fr Mixing Material Conversion Total
OWIP current - - 1,320 x RM6.351
= 8,383.32 8,383
CPDP 50,100 x RM7.714 50,100 x RM0.15 50,100 x RM6.351
= 386,471.40 = 7,515 = 318,185.10 712,172
Normal Loss 2,800 x RM7.714 2800 x RM0.15 2,800 x RM6.351
= 21,599.20 = 420 = 17,782.80 = 39,802 - 5,600
= 34,202
CWIP 3,000 x RM7.714 3,000 x RM0.15 1,500 x RM6.351
= 23,142 = 450 = 9,526.50 33,119
Abnormal Loss 100 x RM7.714 100 x RM0.15 100 x RM6.351
= 771.4 = 15 =635.1 1,422
Finished goods costs = OWIP b/d + OWIP current + CPDP + Net Normal Loss
= 28,800 + 8,383 + 712,172 + 34,202 = 783,557
Joint cost to be apportioned
RM RM
As per evaluation 783,557
Less: By-product value
Sales value (RM5 x 6,300 litres) 31,500
Less: Further cost (RM3 x 6,300litres) 18,900 (12,600)
Net joint cost 770,957
Apportioned the net joint cost based on the net realizable value method
b)
Abnormal loss is losses that are not inherent in the production and can be avoided and
eliminated.
These losses cannot be expected and it won’t occur under efficient operating conditions.
Examples are accidents due to carelessness and negligence, plant breakdown etc.
c)
Scraps are those that cannot be used for its original purposes such as rejected wood and off
cut.
The differences between scraps and by-products:
i) By-products have greater sale value than scrap.
ii) By-products are often processed further to make it saleable while scrap is
usually sold on ‘as is where is’ basis.
QUESTION 4
a. i) Product cost per unit:
MC (RM) AC (RM)
Direct Material 20 20
Direct labour 5 5
VPOH 2 2
FPOH 3
27 30
ii) Marginal Costing Approach Profit Statement for the Month of Dec 2019
RM RM
Sales (45 x 5,200) 234,000
(-) VCOGS:
O/S (100 x 27) 2,700
(+) prod. (5,500 x 27) 148,500
(-) C/S (100 + 5,500 - 5,200) x 27 (10,800) (140,400)
Gross Margin 93,600
(-) Other VC- selling (2 x 5,200) (10,400)
Contribution 83,200
(-) Fixed costs: Production (180,000/12) (15,000)
Admin (60,000/12) (5,000)
Net profit 63,200
Absorption Costing Approach Profit Statement for the Month of Dec 2019
RM RM
Sales (45 x 5,200) 234,000
(-) VCOGS:
O/S (100 x 30) 3,000
(+) prod. (5,500 x 30) 165,000
(-) C/S (400 x 30) (12,000) (156,000)
Gross profit 78,000
(-) variable selling OH (2 x 5,200) (10,400)
Fixed Admin (60,000/12) (5,000)
Unadjusted net profit 62,600
+ over absorbed 1,500
Adjusted net profit 64,100
Working: OAR fixed admin=180,000/60,000 = 3
OH incurred (180,000/12) 15,000
(-) OH absorbed 16,500
Over absorbed 1,500
b. Advantages of MC approach:
a. Separation of fixed and variable costs helps to provide relevant information about
costs for making production decisions. Relevant costs are required for variety of short-
term decisions.
b. MC approach avoids fixed production overhead being capitalized in unsold stocks.
QUESTION 5
A. (a)
SP = RM17
V.C = RM7 (RM2.8 + RM2.20 + RM2)
Other F.C = RM40,000 (2/3 x 60,000) Other VC = 60,000 – 40,000 = 2.00
10,000
BEP(unit) = RM40,000 / (RM17-RM7) = 4,000 units
The break even point indicates that the company needs to produce 4,000 units in order to
cover all the cost.
The margin of safety units indicates that the company is in a safety zone where it will only
get loss if the sales drop by 3,000 units.
Company’s profit =(RM17- RM7) 7,000 – RM40,000
=RM30,000
(b)
New SP = RM20.00
New VC = RM9 (RM7+RM2)
New Sale Volume = 6,500 (7,000-500)
New FC = RM45,000
c)
NONAMA
BEP = RM60,000 MOS
(RM17-RM5) = 7,000 – 5,000 = 2,000
= 5,000 units
Explanation: Aramex has a lower break even units and higher margin of safety units
compare to NONAMA. Thus, ARAMAX is operating at a lower risk compare to
NONAMA.
B.
Product CM/unit Sales mix WACM
Gas Oven 1,850 - 1,100 = 750 ¼ = 0.25 750 x 0.25 =187.5
Electric Oven 1,650 - 650 = 1,000 ¾ = 0.75 1,000 x 0.75 =750
1.0 937.50