UKMM1043 Basic Economics, Accounting and Management

Tutorial 4
1. Identify and describe FOUR (4) users of accounting information.
2. Describe the differences between management accounting and financial accounting.

3.

Complete the gaps in the following table:

Assets
RM
55,000
36,100
119,500
88,000

Liabilities
RM
16,900
17,200

Capital
RM
34,400
28,500

15,400
62,000
110,000

49,000
4. Classify the following items into liabilities and assets:
a)
b)
c)
d)
e)
f)
g)
h)
i)

Motor Vehicles
Premises
Trade Creditors
Inventory
Other Debtors
Bank Overdraft
Cash in Hand
Loan from Kamal
Plant and Machinery

5. Fatimah is setting up a new business. Before commencing the business, she purchased
furniture for RM1,200, a van for RM6,000 and inventory worth RM2,800. Although she
has paid in full for the fixtures and the van, she still owes RM1,600 for some of the
inventory. To finance her business, Fatimah took a loan from CIMB Bank which amounts
to RM2,500. After taking into account all of the above transaction, Fatimah has RM200 in
the business bank account and RM175 cash in hand.
Calculate the capital of Fatimah.
6. The assets and liabilities of Kok Heng as at 30 Nov 2011 is as follows:Creditors
Furniture
Motor Vehicle
Inventory
Debtors
Cash at Bank
Cash in Hand

RM
2,800
6,200
7,300
8,100
4,050
9,100
195

During the first week of December 2011:

a)
b)
c)
d)
e)

He bought extra equipment on credit for RM110

He bought extra stock by cheque RM380
He paid creditors by cheque RM1,150
Debtors paid Kok Heng RM640 by cheque and RM90 by cash
He put in extra RM1,500 into the business, i.e. RM1300 by cheque and RM200 in
cash.

Work out the amount of assets, liabilities and capital for Kok Heng as at 7 Dec 2011.
7. At the beginning of the year, Micha Jewelers had RM120,000 in liabilities. During
the year, assets increased by RM150,000, and at year-end they totaled RM350,000.
Liabilities decreased RM20,000 during the year. Calculate the amount of both the
beginning and ending value of capital.

UKMM1043 Basic Economics, Accounting and Management

Tutorial 5

1. Your friend turned her hobby into a small business called Glazed Over. She is a potter
and manufactures and sells bowls that can be used for decoration. She has one employee
who works 40 hours a week no matter how many bowls are made.
Following is the list of costs extracted from your sisters accounting records. Categorise
each cost as direct or indirect cost, assuming the cost object is an individual unit of
production (i.e. bowl).
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)

Employee salary;
Clay used to make bowls;
Glaze;
Brushes for the glaze;
Electricity;
Advertising;
Pottery studio maintenance;
Packing materials for the bowls; and
Business license.

2. Categorise each of the following costs into one of these seven categories:
Direct materials
Direct labour
Direct expenses
Manufacturing overhead
Administration expenses
Selling and distribution cost
Finance cost
(a) Interest on bank overdraft
(b) Factory raw materials storekeepers salary
(c) Hire a Rolls-Royce for managing directors use
(d) Repair to factory roof
(e) Hotel bills incurred by sales staff
(f) Motor vans road tax (these motor vans are used for delivering goods to customers)
(g) Chief accountants salary
(h) Lubricants for factory machinery
(i) Costs of disks for firms computer
(j) Helicopter hire charges for special demonstration of companys products
(k) Debt collection costs
(l) Cost of painting advertising signs on Star LRT
(m)Cost of airplane tickets for sales staffs
(n) Wages of painters engaged in production
(o) Wages of timekeepers in factory
(p) Postal charges for letters
(q) Wages of office boy in general office
(r) Postal charges parcels sent to customers
(s) Repairs to vans used for taking goods to customers
(t) Cost of raw materials included in product
(u) Wages for cleaners engaged in administration block
(v) Carriage inwards on raw materials
(w) Advertising agency fees

(x) Wages of crane drivers in factory

(y) Power costs of accounting equipment
(z) Royalty expenses
Q3.
(Modified from Business Accounting 2, Frank Wood, 11th edition, Prentice Hall)
From the following information, work out:
(a) Direct materials;
(b) Direct labour;
(c) Direct expenses;
(d) Prime cost;
(e) Production overhead;
(f) Total cost of production;
(g) Selling and distribution cost;
(h) Administrative expenses;
(i) Finance cost;
(j) Product cost; and
(k) Period cost.
RM
Wages and salaries of employees:
In factory (60% is directly concerned with units being
manufactured)
In sales force
In administration

RM
150,000
15,000
26,000

Carriage costs:
On raw materials bought into the firm
On finished goods delivered to customers

1,800
1,100

Rent and rates:

Of factory block
Of sales department and showrooms
Of administrative block

4,900
1,000
1,100

7,000

Travelling expenses:
Sales staff
Administrative staff
Factory workers not connected directly with production

3,400
300
200

3,900

Raw materials:
Inventory at start of period
Bought in the period
Inventory at end of period

11,400
209,000
15,600

Royalties: payable per unit of production

(during the year, a total of 10,000 units were produced)
Depreciation:
Sales staff cars
Vehicles used for deliveries to customers
Cars of administrative staff
Machinery in factory
Office machinery

500
300
400
1,800
200

3,200

Interest costs on borrowed money

Other indirect manufacturing costs
Other administrative expenses
Other selling expenses

800
6,000
4,000
1,000

Q4.
(Extracted from Management and Cost Accounting, Colin Drury, 7 th edition, Cengage
Learning)
For the relevant cost data in items (1) to (6), indicate which of the following is the best
classification.
Sunk cost
Incremental cost
Variable cost
Fixed cost
Semi-variable cost
Semi-fixed cost
Opportunity cost
1. A company is considering selling an old machine. The machine has a book value of
RM20,000. In evaluating the decision to sell the machine, the RM20,000 is a
_____________________.
2. As an alternative to the old machine, the company can rent a new one. It will cost
RM3,000 a year. In analyzing the cost-volume behavior, the rental is a
_____________________.
3. To run the firms machines, here are two alternative courses of action. One is to pay the
operator a base salary plus a small amount per unit produced. This makes the total cost of
the operators a _____________________.
4. As an alternative, the firm can pay the operators a flat salary. It would then use one
machine when volume is low, two when it expands and three during the peak periods.
This means that the total operator cost would now be a _____________________.
5. The machine mentioned in (1) could be sold for RM8,000. If the firm considers retaining
and using it, the RM8,000 is a _____________________.
6. If the firm wishes to use the machine any longer, it must be repaired. For the decision to
retain the machine, the repair cost is a _____________________.

Q5.
(Extracted from Management and Cost Accounting, Colin Drury, 7 th edition, Cengage
Learning)
Classify each of the following as being usually:
Fixed
Variable
Semi-fixed
Semi-variable
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)

Direct labour
Depreciation of machinery
Factory rental
Supplies and other indirect materials
Advertising
Maintenance of machinery
Factory managers salary
Supervisory personnel
Royalty payments