NTT FINAL Examination Paper (COVER PAGE) Session : January 2008 Programme : Bachelor of Business Administration (Hons) Programme Bachelor of International Business (HHons) Programme Course : ACC 3203: Cost and Management Accountin; Date of Examination: 15 April 2008 Time : 8.00 am ~ 10.00 am Reading Time : _Ni Duration : 2 Hours Special Instructions This paper consists of SEVEN (7) questions. Answer any FIVE (5) questions in the answer booklet provided. All questions carry equal marks. Materials permitted Non Programmable Calculator Materials provided Nil Examiner(s) : Shamala Krishnan Moderator : Prof. Dr. Foong Soon Yau This paper consists of 10 printed pages, including the cover page.ACC 3203 (F)/ Page 1 of 9 INTL INTERNATIONAL UNIVERSITY COLLEGE BACHELOR OF BUSINESS ADMINISTRATION (HONS) PROGRAMME BACHELOR OF INTERNATIONAL BUSINESS (HONS) PROGRAMME, ACC 3203: COST AND MANAGEMENT ACCOUNTING FINAL EXAMINATION: JANUARY 2008 SESSION This paper consists of SEVEN (7) questions, answer any FIVE (5) questions in the answer booklet provided. All questions carry equal marks, Question 1 Clean Soap Company produces two different types of detergents Clean and Bersih. Forecast information of sales, production and material requirements for next year are given below: 1) Sales PRODUCT QUANTITY SELLING PRICE PER BOX (Boxes) (£) Clean 730 10.00 Bersih 1,000 8.00 (2) Material usage Chemical GLB and YLB are required in the production of the detergents. Quantity of chemical required per box of each of the two detergents is as follows: GLB YLB «KG «s) Clean 5 4 Bersih 3 6 The purchase price of chemical GLB and YLB per kilogram is expected at £2.00 and £3,00 respectively. (3) Forecasted stock levels, Year Year Beginning Clean 250 boxes 320 boxes Bersih 300 boxes 240 boxes GLB 1200 kg 2000 kg YLB 2800 kg 2500 kg,ACC 3203 (F)/ Page 2 of 9 Required: Prepare the following budgets for each detergent: oO cD) Gi) () wy) Sales budget in units and value, including total value of the two products. G marks) Production budget in units. (4 marks) Material usage budget in units. (4 marks) Material purchases budget in units and value, including the total value of the two products. (5 marks) “Sales are often considered to be the principal budget factor of an organization.’ Explain and discuss the importance of “principal budget factor”. (4 marks)ACC 3203 (F)/ Page 3 of 9 Question 2 @ (i) ©A variable cost is a cost that varies per unit of a product while fixed cost per unit of product is constant.” Do you agree with the statement above? Explain with numerical examples. (8 marks) Company Bee has been producing product Cee for the past six months. The production units and the cost incurred for the last two months were given to the costing assistant and he was directed by the cost accountant to analyse the total cost to the variable and the fixed cost components. The following information is provided to the costing assistant for the analysis. Month May June Production (units) 15,000 17,000 Total cost (£) 64,000 70,000 a) The costing assistant has approached you on the steps he has to take in order to enable him to divide the total cost to variable cost and fixed cost. Advise him (5 marks) b) _ By using the steps as suggested in (a), compute the variable cost and fixed cost for the month of May and June. (4 marks) ©) Ifthe production in July is 20,000 units. Compute the total production cost for the month of July. (3 marks)ACC 3203 (F) / Page 4 of 9 Question 3 Zulton Ltd. requires material Z for its production. The material can be purchased at £1.00 per kilogram for order sizes of $00 kilograms and above, The costs of placing an order are £15.00 and annual demand is expected to be 7,500 kilograms of material Z. The cost of holding stocks is 10% per annum. The supplier is willing to supply in the following order quantities: 500 750 1500 3750 7500 Required: () Using the above five order size options as headings, prepare a tabular statement which shows the total annual cost of ordering and holding stock under each option. (11 marks) (ii) Indicate on the statement which order size should be selected. (2 marks) Calculate the economic order quantity using the traditional EOQ formula, showing details of your workings. G marks) (jv) Distinguish between a periodic and perpetual inventory system. (4 marks)ACC 3203 (F) / Page 5 of 9 Question 4 HSB Company produces pocket calculator which is sold to the retail trade at a price of £20, the current annual turnover being 60,000 calculators. The marginal cost of a calculator is £15 and annual fixed costs amounts to £180,000. Calculate: a) The annual profit, and b) __Break-even point (£ Sales) for each of the following circumstances (® — Asoutlined above. (5 marks) (ii) The marginal cost increases by £1 (5 marks) (ii) Both fixed cost (£180,000) and sales volume (60,000) increased by 10%, while the marginal cost remains at £15. (5 marks) (iv) _ Discuss any TWO (2) assumptions that could have been made by the company in their breakeven analysis. (5 marks)ACC 3203 (F)/ Page 6 of 9 Question 5 The following forecasts are being prepared by Wholesalers Ltd. March April May June £000 £000 £000 £000 Purchases 440 280 560 160 Sales 640 420 160 150 Salaries 133 140 19 124 Overhead expenses 1 5 34 70 Other information are as follows: 10% of all sales are made on a cash basis, the remainders are being sold to customers who pay in the month following sale. 2. All goods are bought on credit from suppliers who allow 2 % cash discount for payment in the month following purchase. All payments to supplier are expected to be made in the month following purchase. 3. Salaries and wages are paid in the month in which they are incurred. 4. Overhead expenses include depreciation amounting to £12,000 each month. Cash payments for overhead expenses are made in the month following the month in which expenses are incurred. 5. Addividend amounting to £88,000 will be paid in May. 6. A delivery van is to be sold for £3,000 cash in June. 7, The balance at the bank on I April is expected to be £90,000. Required: (@ Construct a monthly cash budget in columnar form for the three months ending i) 30th June, showing the bank balance at each month end (16 marks) Explain TWO (2) benefits of preparing a cash budget. (4 marks)ACC 3203 (F)/ Page 7 of 9 Question 6 Betteroff Ltd. specializes in producing fertilizers. You are given the following standard cost information and the actual production information for the month of January. Standard cost per box £ Direct material 36.00 (8 kg at £4.5 per kg) Direct labour 12.00 (2 hours at £6 per hour) Overhead Variable - 2 hours at £5.00 per hour 10.00 ‘The planned production for January is 5,000 boxes. Actual data Boxes produced 4,500 boxes Direct labour = 9,500 hours at £5.70 per hour Direct material = 35,500 kg at £4.60 per kg Variable overhead — - £57,000 Required: () Calculate the following variances: (@) Direct material price variance (6) Direct material usage variance (©) Direct labour rate variance (4) Direct labour efficiency variance (12 marks) (ii) List ONE (1) possible reason for the direct material price variance and ONE (1) for the direct labour efficiency variance. (4 marks) (ii) Explain the term relevant cost and illustrate with an example. (4 marks)ACC 3203 (F)/ Page 8 of 9 Question 7 @ KKK Company operates two production departments and one service department. The following data relates to December 2007: Production 1 Production 2 Service £ £ £ Expenses incurred Indirect materials 400 240 460 Indirect labour 500 300 420 ‘Standing charges Rent 150 100 260 Rates 500 80 180 Insurance 320 200 400 Other expenses i heating 50 30 220 80 50 60 ‘At the end of each month, the expenses of the service department are apportioned to the production departments on the basis of the total expenses of those production departments for the month. The overhead absorption rates in operation during December 2007 were calculated from the following data: Production 1 Production2 Estimated overhead for the month £3000 £6000 Estimated machine hours 300 Estimated direct labour hours 2000 Required: (@) Calculate the overhead absorption rate for each production department for the month of December 2007. (4 marks) () Prepare a statement showing the actual overhead borne by each production department for December 2007. (6 marks) Explain the reasons on why actual overhead cost is not used usually used in determining the overhead rate for a department. (4marks)ACC 3203 (F)/ Page 9 of 9 (iii) Worker B is employed under the monthly salary scheme, and recently the company faced shortage of raw materials and production was temporarily disrupted. During this period of disruption worker B was idle. Explain any ‘TWO (2) other reasons that could cause idle time. (6 marks) -THE END- ACC 5203 (F)/ Jan 2008 /Shamala Krishnan / 26-02-2008