UNIVERSITY OF DODOMA AF 201: MANAGEMENT ACCOUNTING II TEST- MARKING SCHEME

Question one (a) (i) Motivates divisional managers (ii) Provides information for evaluating managerial and economic performance of divisions (iii) Ensures divisional autonomy is not undermined (iv) Others refer from books.. (b) Direct materials 27.00 Direct labor (4 hrs) 20.00 Variable production overheads 3.00 Fixed production overheads [300,000/25,000 = sh. 12 per direct labor hr] 48.00 Opportunity cost of machine time (1/2 hr 10) 5.00 Full cost 103.00 Profit mark-up (20%) 20.60 Selling price per unit of Product X 123.60 Question two

(a) Make Buy Raw Materials: Shs176, 500 (55 x 1500)+(94 x 1000) shs 0 Direct Labor: 55,000 (22 x 2500) 0 Variable Manufacturing O/H: 12,500 (5 x 2500) 0 Fixed Manufacturing O/H: 50,000 (24,000 + 26,000) 0 Purchase Cost: __0 (100x1500)+(132x1000) Shs282,000 Total Cost: Shs294,000 Shs282,000 You ignore the depreciation expense because it is a sunk cost. The equipment is going to be scraped it has no other value, its cost (the depreciation) has already been spent. (b) Qualitative Factors include (i) quality control on the purchased crowns, (ii) reliability of supplier, (iii) effect of a reduction in work force on labor relations, (iv) eliminates the ability to later produce their own crowns at a later date.

(c) Make Buy Raw Materials: Shs176,500 (55 x 1500) + (94 x 1000) Shs0 Direct Labor: 55,000 (22 x 2500) 0 Variable Manufacturing Overhead: 12,500 (5 x 2500) 0 Fixed Manufacturing Overhead: 24,000 (24,000) 0 Purchase Cost: ____0 (100X1500)+(132X1000) Shs282,000 Total Cost: Shs268,000 Shs282,000 You ignore the depreciation expense because it is a sunk cost. We have no information of alternative use of the space being vacated by the lab. (d) Make Buy Raw Materials: Shs176,500 (55 x 1500)+(94 x 1000) Shs 0 Direct Labor: 55,000 (22 x 2500) 0 Variable Manufacturing Overhead: 12,500 (5 x 2500 0 Fixed Manufacturing Overhead: 24,000 (24,000) 0 Purchase Cost:: 0 (100X1500)+(132X1000) Shs282,000 Rental Income: __ 0 -15,000 Total Cost:: Shs268,000 Shs267,000 Rather than showing the rental income as an opportunity cost which is added to the cost of the Make alternative, we treated the rental income as a reduction of the cost of the Buy alternative. (e) Make Buy Raw Materials: Shs 353,000 (55 x 3000)+(94 x 2000) Shs 0 Direct Labor: 110,000 (22 x 5000) 0 Variable Manufacturing Overhead: 25,000 (5 x 5000 0 Fixed Manufacturing Overhead: 50,000 (24,000+26,000) 0 Purchase Cost:: ____0 (100X3000)+(132X2000) Shs 564,000 Total Cost:: Shs538,000 Shs564,000 We assumed that the Fixed Manufacturing Overhead Costs didnt change. This alternative shows that the decision can change if the circumstances change. You decision making must take this into account.

Question three

a. Sales Value At Split-Off Method:

Product Units Price Ttl Value Rel Value X Jt Cost Jt Cost Cost / Unit

G H I

10000 shs2.50 15000 shs1.75 25000 shs1.25 50000

shs25000 shs26250 shs31250 shs82500

25/82.5 x shs50000 = shs15152 26.25/82.5 xshs50000 = shs15909 31.25/82.5 xshs50000 = shs18940

shs1.51 shs1.06 shs0.75

b. Set Off Against Joint Costs: Revenue COGS shs50,000 Less By-Product [55 (70 -15) x 500] (27,500) Gross Margin c. Other Revenue Revenue By-Product [55 (70 -15) x 500] Total Revenue COGS Gross Margin
Question four Refer literature from books BBA EVENING ONE QUESTION

shs82,500

-22,500 shs60,000 shs82,500 27,500 shs110, 000 -shs50,000 shs60,000

Process 1 costs are incurred whether or not you sell Tyl or process it further and sell Tylenol. So the Process 1 costs are not relevant to our decision. The revenue and costs from selling Buff is also not relevant to our decision. Process 2 costs are incurred only if you process the Tyl into Tylenol, so they are relevant. Sell Process differ analys Revenue: shs 5,000 shs7,500 (fanya mwen Bag Cost: -15 (.75 x(500/25)) 0 yewe ooh!!!!) Shipping Cost: -50 ((2500/25) x1.23) -123 (.1 x 500) Grinding & Tableting 0 (2.5 x 500) -1250 Bottling Cost: _0 (.20 x 2500) -500 Operating Profit (Per 500lb) shs 4,935 shs 5,627 For each 500 pound lot of Tyl, you make shs692 more by processing the Tyl rather than selling it in its raw state. We sell 265,000/500 = 530 lots of Tyl. Therefore we can make shs692 x 530 = shs 366,760 more by processing the Tyl further.
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