Faculty of Business, Economics & Accounting

Department of Accounting and Finance

HELP Bachelor of Business (Hons) Year 3

INTERNAL SUBJECT DETAILS

Semester 1, 2017

Subject: ACC 301

Management Accounting 3

Subject Lecturer/Tutor: Mr. Selvanadan Muniappan

Telephone: 603- 2716 2000
Fax: 603- 2093 5311
Email: mselvanadan@help.edu.my

Consultation: By appointment
PRE-REQUISITE (S)

QBM101 BUSINESS STATISTICS &

ACC201 MANAGEMENT ACCOUNTING 2

SYNOPSIS

The subject is concerned with the current issues in management accounting. We will
build upon topics studied in ACC103 Management Accounting 1 and ACC201
Management Accounting 2 by introducing more advance and detail topics in the
framework of management accounting. The subject provides exposure to techniques and
methods used in management accounting application. We focus on evaluating existing
competitive strategies, developing new strategies, and monitoring and assessing progress
towards chosen strategies. The subject seeks to assist those involved in organizational
decision making by providing models which can be used in understanding, structuring
and resolving problems.

OBJECTIVES
Upon completion of this subject, students should be able to:

explain how management accounting helps organizations meet their strategic goals;

design financial models to match strategic and operation decisions;

explain and estimate the relationship between costs and cost drivers;

understand the issues of transfer pricing and divisional performance evaluation;

analyze strategic problems and access factors involved in decision making generally,
and strategic managerial decision making in particular;

demonstrate understanding of the process of strategic analysis and skill in using

relevant techniques to analyze firm and competitor strategies;

analyze customer-related activities and profitability of customers and products;

use various financial and non-financial performance measures to evaluate

performance,

apply expectancy and agency approaches to motivation and evaluate the

alternative features of compensation plan;

use linear programming to model decisions about the use of multiple scarce
resources;

explain the importance of balanced scorecard for communication, motivation

and evaluation, and discuss the internationalization of management accounting,
including the nature and implications of global competitiveness, management
accounting in multinational organizations, and cultural impact of management
accounting.

2
TOPIC 1: Introduction: The management accounting framework
Development of Management Accounting
The Changing Business Environment
Primary Function Management Accounting System
Contemporary Management Accounting Practices
Total Quality Management, BPR and JIT Systems
Life Cycle Costing, Target Costing and Kaizen Costing
Activity Based Management and the Value Chain
Environmental Cost Management
Ethics in Management Accounting

TOPIC 2: Current Issues in Management Accounting

Different Types of Controls
Harmful Side-effects of Controls
Measurement and Reward Process with imperfect measures
Advantages and Disadvantages of Different Types of Controls
Management Control Systems
Nature of Management Accounting Control Systems
The Controllability Principle
Accounting Information for Performance Evaluation

TOPIC 3: Strategic Management Accounting

What is Strategic Management Accounting?
Accounting in Relation to Strategic Positioning
Gaining Competitive Advantage through Value Chain
The Balance Scorecard
Benefits and Criticisms of Balance Scorecard

TOPIC 4: Capital Investment Decision

Capital Budgeting and its process
Cost of Capital, Risk and Return
Appraisal Techniques
Comparison of NPV and IRR
Capital Investment Decisions
Capital Rationing and ranking conflicts
Taxation and Investment Decisions
Dealing with Inflation
Impact of Inflation on Interest rates and Discount rates
Investment Appraisal and Inflation
Risk Adjusted Discount Rates and Weighted Average Cost of Capital
Decision Trees for multi-stage decision problems
Sensitivity Analysis in decision modeling
Due Diligence Investigation and Ethical Issues

3
TOPIC 5: Product profitability and product mix strategies
Limiting Factor
More than one limiting factor
Linear Programming
Assumptions underlying Linear Programming
Graphical method and the mechanics of Simplex solutions
Shadow prices and its use

TOPIC 6: Managing customer profitability

Customer/Channel Profitability Analysis
Customer Revenues and Costs
Customer Cost Hierarchy
Factors in evaluating Customer Profitability such as customers and distribution
channels
Customer Profitability Analysis Illustrated
Sales Variances Mix, Quantity and Volume
Market Share and Market Size Variances

TOPIC 7: Strategy, Balance Scorecard and Strategic Profitability Analysis

What is Strategy?
Five Aspects of Industry Analysis
Basic Business Strategies
Implementation of Strategy
Balance Scorecard Perspectives
Strategy and Balance Scorecard
Evaluating Strategy

TOPIC 8: Cost Estimation and Predictions

Cost Estimation
Cost Estimation Methods
Criteria for using Past Data
Criteria to Evaluate and Choose Cost Data
Goodness of Fit
Statistical Significance Test
Nonlinearity and Cost Function
Learning and Experience Curves

TOPIC 9: Network Analysis

Project Management
Issues that are addressed by CPM and PERT
Project Planning, Scheduling and Controlling
Steps common to CPM and PERT
Advantages and Limitations of CPM and PERT
Drawing the Network
4
 Steps in Project Crashing
PERT

TOPIC 10: Quality,Time and Theory of Constraints

Quality as a Competitive Tool
Two Aspects of Quality
Quality and Failure
Costs of Quality and Quality Reports
Control Charts Statistical Quality Control Charts
Pareto Diagrams
Cause and Effect Diagrams
Time as a Competitive Tool
Two Operational Measures of Time
Time Drivers
Theory of Constraints
Steps in Managing Bottleneck Operations
Methods to relieve Bottlenecks

TOPIC 11: Transfer Pricing and Divisional Performance

Transfer Pricing and purposes
Alternative Transfer Pricing Methods
Transfer Pricing Conflicts and how to Resolve it
Dual Rate Transfer Pricing System
International Transfer Pricing

TOPIC 12: Incentive Systems and Performance Measurement

Fundamental Principle of Incentive and Compensation
Expectancy Theory View of Behavior
Designing Incentive Systems
Financial and Non-Financial Measures
Performance Measurement of Multinational Companies
Distinction and Tradeoffs
Moral Hazard and Intensity of Incentives
Preferred Performance Measures

5
PRESCRIBED TEXTBOOKS

Drury, C. (2015). Management and Cost Accounting, 8th Ed. United Kingdom:
Cengage Learning.

Fatseas, V. A., & Williams, J. F. (2009). Management Accounting Decisions. McGraw

Hill: Australia.

Horngren, C. T., Datar, S.M., & Rajan, M.V. (2015). Cost Accounting: A Managerial
Emphasis, 15th Ed. England: Pearson Education.

RECOMMENDED REFERENCES

Atkinson, A.A., Banker, R.D., Kaplan, R.S., Matsumara, E.M. & Young, S.M. (2015)
Management Accounting: Information for Decision Making and Strategy Execution 7th
edition) Pearson Education.

Hilton, R.W., Maher, M.W. and Selto, F.H. (2015) Cost Management: Strategies for
Business Decisions, International student edition. Boston: McGraw Hill.

Langfield-Smith, K., Thorne, H. & Hilton, R. (2014) Management Accounting:

Information for Managing and Creating Value, 6th ed.: McGraw-Hill.

Young, S. M. (2014). Readings in Management Accounting. 7th edition. Prentice Hall.

JOURNALS

Management Accounting Research

Management Accounting Quarterly IMA

Journal of Management Accounting Research

Advances in Management Accounting Emerald/Insight

6
Subject Outline / Teaching Plan

Department : Accounting & Finance Subject Code : ACC301

Lecturer : M. Selvanadan Subject Title : Management Accounting 3

Week Topics References Tutorial Questions

1 Introduction: The management Drury Ch 1 & 21 1-4,1-6,1-9,21-8,21-13

accounting framework
2 Management control systems Drury Ch 16 16-2, 16-8, 16-12, 16-
15, 16-25
Strategic management accounting Drury Ch 22 22-1,22-2,22-3,22-
3
17, 22-19
Capital investment decisions Drury Ch 13 &i 14 13-17,13-18,13-
4
19, 14-15, 14-16
Product profitability and FBW Ch10, 10-9,10-11,10-12,
5
product mix strategies Drury Ch 25 10-17, 10-20
Managing customer profitability HDR Ch 14 14-6, 14-8, 14-19, 14-
6
20, 14-25

Strategy, balance scorecard and HDR Ch 13 13-18, 13-19, 13-

8 strategic profitability analysis 20, 13-21, 13-27

Cost estimation and prediction Drury Ch 23 23-14,23-15,23-17,23-

9
19
Transfer Pricing Drury Ch 20 20-15, 20-16, 20-
10
19, 20-21, 20-23
Quality, time and the theory of HDR Ch 19 19-16, 19-22, 19-
constraints, Incentive systems and 23, 19-24, 19-25
11 performance measurement HDR Ch 23 23-11,23-20, 23-24,
23-32, 23-33
Network Analysis FBW Ch 11 11-1, 11-6, 11-7,
12
11-8,11-11
REVISION
13 & 14

15 & 16 FINAL EXAM

Textbooks: Drury: Drury, C. (2015)

FBW: Fatseas, V.A., & Williams, J. F. (2009)
HDR: Horngren, C. T., Datar, S.M., & Rajan, M.V. (2015)

7
 ASSESSMENT

There are 3 assessment items for this subject.

Assessment Items Value Due Date

1. Assignment 15% 3 April, 2017

2. Mid Semester Test 15% Week 7 Date TBC***

3. Final Examination (Closed Book) 70% Examination period: 22 April -

6 May 2017**

*** To be confirmed

REQUIREMENTS

To gain a pass in this subject, students must:

Achieve a passing grade in the final examination i.e. score a minimum of 35

marks out of 70 marks if there is an examination for this subject.

Attempt ALL areas of assessment; and achieve a total result of 50% or better
overall.

** - Please check on the notice board and My Acel for the actual date. HELP
University reserves the right to make any changes to the above where appropriate.

8
ASSIGNMENT QUESTION
Written Assignment
Value: 15%
Due Date: 3 April, 2017

Task

You are to imagine that you are the cost accountant and have been asked to report to
management on the issues identified in the questions below. As such you are required to
complete all parts of the questions showing all workings and providing a clear explanation
of the process and output. Where appropriate use a well constructed spreadsheet to answer
the questions.

Your firm is in the publishing sector and offers services in three departments - Editing,
Literature Searches and Printing. Editing services are provided for authors publishing
with your organisation but also for non-publishing authors. The following issues have
arisen and you are required to report to the CEO on the matters raised and explanations
requested.

Question 1 (10 marks)

In order to assist the managers you are compiling a resource which will define the
various terms used in the process of strategic analysis. Provide explanation of the
following terms, with examples, to include in the resource tool which incorporates a
reason why each are relevant or not relevant to decisions.
Sunk cost,
Incremental cost,
Opportunity cost and
Historic cost.

Question 2 (30 marks)

The editing services are incorporated into the publication process for authors who
publish with your firm. However an external market continues exists for editing for
other authors and publishers. Market price has been used as the transfer price into

9
printing for the editing services and the following costs and prices are available for
printing a Small Book.

Average market price for final print publication Small $120

Book
Average market price for editing 90
Average variable costs of editing 60
Average variable cost to complete printing of publication 40

Required:
a) Work in Editing can be variable and Editing is considering a change in the
proportion of work performed for Printing versus that undertaken for external
authors and publishers but it is not possible to do more work which is currently
at a maximum of 100 units per month. What effect, if any, does maximum
capacity have on the minimum transfer price? (10 marks)

b) Suppose that Editing has the choice of:

i. Cutting the external editing price to $75 which would guarantee editing
sales of 100 units per month, or
ii. Maintain the current position whereby the external price of $90 is
applied for the 40 units sold externally per month and the remaining
time is devoted to work for Printing.
Which option should be chosen? (10 marks)

What are considerations should management factor into the decision making
process? (10 marks)

Question 3 (10 marks)

Included in the tasks in the Printing Division is the job to set-up the printing layout for
each type of publication. An analysis of set-up costs indicates a reduction over time
where similar publications are produced which you have attributed to cost experience.
What is meant by the term cost experience? Explain what 80% refers to when used
in the term 80% cost experience curve.

10
Question 4 (25 marks)
The Literature Searches division employs Journal & Electronic Resource researchers,
Book researchers, and Administrative Assistants to compile the search results. The
manager wishes to determine the optimum number of each employee group to employ
so as to minimise the total salaries and wages bill, but still provide a satisfactory level
of service.

The major duties to be performed may be summarised (for simplicity) into (1) Report
preparation, (2) Journal and E-resources searches, (3) Book searches (4) Reference
editing and (5) General inquiries.

Journal and E-resource researchers limit their searches to materials available in

electronic formals while Book researchers are restricted to hard copy publications.
Electronic searches and culling to isolate relevant material takes on average 180
minutes per job request while print based material for the same type of job takes on
average 8 hours. Searching for print material often requires access to individual library
catalogues and in-house catalogues of printed materials.

Administrative Assistants are employed for Report preparation, Reference editing (all
publications printed plus for reports prepared by Literature Searches division) and
General inquiries and spend an average of 60 minutes for each report, 45 minutes on
referencing editing and 5 minutes for general inquiries.

An analysis of the usage indicates the following annual workload:

Task Annual number of tasks

Journal/E-resource
Searches 1500
Book researchers
Searches 600
Administrative assistants
Report 1200
Reference editing 4000
General inquiries 2600

11
The relevant employee awards provide the following conditions:
Award Hours per week Annual Salary Annual Leave
Researchers 37 $70 000 4 weeks
Senior researcher 37 $90 000 4 weeks
Administrative Assistants 36 $38 000 4 weeks
Senior Administrative 36 $45 000 4 weeks
Assistant

The average time lost each year through sickness, etc is 2 days per employee. Public
holidays result in the loss of a further 8 days per year for each employee. Supervision
and associated management tasks equate to 50 days for each of the senior staff.

At least one senior researcher and senior administrative assistant must be employed. A
budget limitation of $480 000 has been placed on the employment in the division.

Required:
a) Formulate a linear programming model for the problem, showing all supporting
calculations, and solve using a computer package (eg solver in Excel) to derive
an optimum staffing schedule. (15 marks)
b) Comment on the solution and the impacts on the division. (10 marks)

Question 5 (25 marks)

The Printing departments most common request is for three types of print material,
large books, small books and magazine style (many photos and or diagrams but small
number of pages). Each are prepared sequentially thorough four sub-departments,
layout, print, bind and packaging. Management is planning its production schedule for
next month. As some machines will be out of service for overhauling the availability of
machine times is reduced to those shown below.

Sub-department
Layout Print Bind Package
Available machine hours
7,000 6,200 5,400 6,600

12
Machine hours required per unit for each product is each department are as follows:
Sub-department
Product Layout Print Bind Package
Large book 3 4 2 1
Small book 2 2 2 1
Magazine style 4 1 1 1
Machine hours required per unit of product

Sales forecasts of product demand next month are:

Product Sales
Large book 500
Small book 600
Magazine style 2,000

Selling prices and raw materials costs of each product are:

Product
Large book Small book Magazine style
Selling price $180 $120 $14
Direct materials cost $70 $40 $8

Required:
a) Determine whether the Printing division can meet the sale demand next month.
What department is a constraint, if any? (10 Marks)
b) What is the most profitable production schedule for the Printing division? (10
marks)
c) What strategies would you suggest to minimise the impact of the machine
down-time? (5 marks)

13
 Assignment No.: __

Assignment Cover Sheet

Student Information (For group assignment, please state names of
Grade/Marks
all members)
Name ID

Office
Module/Subject Information
Acknowledgement
Module/Subject Code
Module/Subject Name
Lecturer/Tutor/Facilitator

Due Date

Assignment Title/Topic
Intake (where applicable)
Word Count Date/Time

Declaration

. I/We have read and understood the Programme Handbook that explains on plagiarism, and I/we
testify that, unless otherwise acknowledged, the work submitted herein is entirely my/our own.
. I/We declare that no part of this assignment has been written for me/us by any other person(s) except
where such collaboration has been authorized by the lecturer concerned.
. I/We authorize the University to test any work submitted by me/us, using text comparison software,
for instances of plagiarism. I/We understand this will involve the University or its contractors copying
my/our work and storing it on a database to be used in future to test work submitted by others.

Note:1) The attachment of this statement on any electronically submitted assignments will be deemed
to have the same authority as a signed statement.
2) The Group Leader signs the declaration on behalf of all members.

Signature: Date:
mail:

14
 Feedback/Comments*
Main Strengths

Main Weaknesses

Suggestions for improvement

Student acknowledge feedback/comments

Graders signature Students signature:

Date: Date:
Note:
1)A soft and hard copy of the assignment shall be submitted.
2)The signed copy of the assignment cover sheet shall be retained by the marker.
3)If the Turnitin report is required, students have to submit it with the assignment. However, departments may allow
students up to THREE (3) working days after submission of the assignment to submit the Turnitin report. The
assignment shall only be marked upon the submission of the Turnitin report.
*Use additional sheets if required.

15
 Department of Accounting &
Finance

ACADEMIC INTEGRITY

Honesty and Responsibility

Academic integrity is an important tenet for HELP University. In pursuit of the highest
standards of academic integrity, the Department of Accounting & Finance holds it
students to the highest ethical standards defined by the Rules and Regulations section
of the Academic Handbook. All students at the Department of Accounting & Finance
are subjected to and are bound by the Student Academic Misconduct Rule to assure
academic honesty. Students are required to sign a pledge on the assignment cover sheet
before submitting your assignments to the Administration Office of the Faculty of
Business, Economics & Accounting.

What is Plagiarism?
Plagiarism is academic dishonesty or academic theft, and it is a serious academic
offence. Plagiarism includes, but is not limited to, the followings:
1. quote, paraphrase or summarize someone elses ideas, theories or data, in whole
or in part, without appropriate acknowledgement
2. borrow ideas, opinion or words, in whole or in part, from other sources without
properly crediting the author(s)
3. use any facts, statistics, diagrams or graphs, in whole or in part, without
acknowledging the source clearly
4. claim or imply original authorship of someone elses ideas, theories or data, in
whole or in part, as your own
5. employ or allow someone to help to revise, amend or write your work and pass
off as your own original work
6. collaborate with or allow other students to copy your work
7. draw on sources more than what you have acknowledged by citations

While a student is not discouraged to discuss an assignment with his/her friends or

classmates, the work he/she submits must be done by the student alone. If a student
shares his/her assignment with other students and they plagiarize it, the student is as
guilty as those students who plagiarized his/her assignment. All parties to plagiarism
are considered equally guilty. Under no circumstances should a student be involved in
collusion with other students unless he/she is permitted to work on an assignment
jointly by the lecturer/tutor. If a student is unsure what constitutes plagiarism, he/she is
obliged to consult the lecturer/tutor on the matter before submission of his/her
assignment.

When and How to Reference?

Knowing when and how to cite is a students responsibility. If he/she is in doubt or
need more help on this matter, the student may consult the lecturer/tutor. The following
list comprises some of the sources a student will need to reference. The list is by no
means exhaustive, but simply consists of the most common sources used by students to
complete their work.
1. Books
16
 2. Chapters in books
3. Journal articles
4. Conference papers
5. Newspaper articles
6. Magazines
7. Websites
8. Study guide

Students are advised to cite in the following cases [1]:

1. When he/she quotes two or more words verbatim, or even one word if it is used
in a way that is unique to the source
2. When he/she introduce facts that he/she have found in a source
3. When he/she paraphrase or summarize ideas, interpretations, or conclusions that
he/she find in a source
4. When he/she introduce information that is not common knowledge or that may
be considered common knowledge in your field, but the reader may not know it
5. When he/she borrow the plan or structure of a larger section of a sources
argument (for example, using a theory from a source and analyzing the same
three case studies that the source uses)
6. When he/she build on anothers method found either in a source or from
collaborative work in a lab
7. When he/she build on anothers program in writing computer code or on a not-
commonly-known algorithm
8. When he/she collaborate with others in producing knowledge

In general, a referencing system requires two parts:

1. In-text citations
This is information about a source within the text of an assignment.
2. List of references
This is a list of all sources a student has used to research his/her assignment. It
is alphabetically arranged by author surname and appears immediately after the
last page of an assignment.

Different faculties or departments may have different requirement on how referencing

for an assignment should be done. The various formats used for in-text citations and list
of references are available in the following websites:
1. Harvard System (http://www.adelaide.edu.au/library/guide/gen/harvard.html)
2. Chicago Style (http://www.chicagomanualofstyle.org/index.html)
3. American Psychological Association or APA Style (http://www.apastyle.org)
4. Modern Language Association of America or MLA Style (http://www.mla.org)

Once a student has selected a referencing style for his/her assignment, he/she must
follow the same style consistently throughout the assignment. We strongly suggest that
the student consults the lecturer/tutor about which method to use before submission of
his/her assignment.

1
http://www.yale.edu/bass/writing/sources/plagiarism/warning.html, accessed May 18, 2008.

17
What are the Procedures and Penalties for Plagiarism?
When a lecturer/tutor encounters a possible case of plagiarism, the lecturer/tutor shall
report the matter to the Head of the Department, who then initiates an investigation on
the matter. The following procedures would be carried out:
1. The lecturer/tutor shall provide evidence that substantiates an academic offence
has occurred. The following documentations must be ready prior to reporting of
alleged plagiarism:
a. Copy of the alleged plagiarized assignment
b. Copy of the source material (e.g. articles, websites, newspaper, etc.)
c. Report of plagiarism
d. Any other information that would support the claim of plagiarism
2. If the evidence warrants an accusation of academic offence, the Head of
Department shall establish a Board of Inquiry comprising 3 academic staff. The
Department shall provide all necessary documentations, including report on
prior academic offences if applicable, to the Board of Inquiry.
3. The Board of Inquiry shall put the matter to the student in writing and give
him/her an opportunity to respond to the accusation within 3 working days.
4. The student will be required to attend a meeting with the Board of Inquiry.
After meeting the student, the Board of Inquiry shall decide whether or not the
alleged plagiarism has occurred. The following documentations shall be
submitted to the Head of Department at the end of the meeting:
a. Findings of the investigation
b. Recommended action(s) to be taken or imposed
5. The Head of Department shall review the Board of Inquirys report with
supporting evidence and shall decide on an appropriate action(s) based on the
recommendation of the Board of Inquiry.
6. The decision of the Head of Department shall be put in writing to the student.
Copies of all documentations will be retained in the Department.
7. If the student feels that he/she has been unfairly accused or treated, the student
may appeal to the Head of Department within 5 working days.
8. The Head of Department shall review the appeal and the final decision will be
communicated to the student in writing and a copy will be kept with the
Department. Once a determination of plagiarism and penalty has been made by
the Head of Department, the investigative process will be deemed to have ended
and the student will not be allowed to appeal.

Possible penalties for plagiarism range from mark reduction for the assignment to
expulsion from the University. The student will not be allowed to make up the
assignment. If plagiarism has been found to have occurred, the Department will take
action(s) as determined by the forms of plagiarism implicated:

1. Complete plagiarism
Verbatim copying another persons work without acknowledgement
1st offence : A grade of F in the subject and a warning letter will be
issued
nd
2 offence : Expulsion from the University at the discretion of the Head of
Department
2. Substantial plagiarism

18
 Near-verbatim copying another persons work by simply altering the order of
the sentences or the format of presentation or by changing a few words or
phrases without acknowledgement.
1st offence : Zero mark on the assignment and a warning letter will be
issued
2 offence : A grade of F in the subject and a warning letter will be
nd

issued
rd
3 offence : Expulsion from the University at the discretion of the Head of
Department
3. Minimal plagiarism
Acknowledgement is made but paraphrasing by changing and/or eliminating
some words
1st offence : Deduction of 50% of available marks on the assignment and a
warning letter will be issued
2 offence : A grade of F in the subject and a warning letter will be
nd

issued
rd
3 offence : Expulsion from the University at the discretion of the Head of
Department
4. Unintentional plagiarism
Insufficient acknowledgement by not applying citation or quotation marks
correctly
1st offence : Deduction of up to 50% of available marks on the assignment
and a warning letter will be issued
2nd offence : A grade of F in the subject and a warning letter will be
issued
rd
3 offence : Expulsion from the University at the discretion of the Head of
Department
Pleading ignorance or unintentional plagiarism does not constitute valid reasons for
plagiarism and will not avoid the penalties from being imposed. Excuses for acts of
plagiarism such as the following, but not limited to, will not be entertained:
1. I dont have time to do the assignment
2. I have too many assignments due on the same day
3. I dont know, I really didnt do it
4. I am not aware
5. I dont understand what plagiarism means
6. I have no intention to plagiarize
7. I forgot to cite the reference
8. I forgot to include the bibliography
9. My English is not good
10. My lecturer/tutor did not explain to me
11. In my country, it is alright to copy someone elses work
12. My friend copied my assignment when I let him/her to look at my assignment
13. My friend copied my assignment when I allow him/her to use my laptop
14. I did my assignment in the computer lab, someone must have copied my work
15. I asked my friend to submit my assignment and he/she copied my work
16. I discussed my assignment with my friends, so our answers are the same/similar
17. Even though I do not have in-text citation but I have bibliography/reference list
Students should be reminded that it is their responsibilities to take due care throughout
their written work to effectively reference or cite when they use others ideas from any
source.

19
 DEPARTMENT OF ACCOUNTING & FINANCE

SEMESTER X, 20XX

SAMPLE FINAL EXAMINATION

Subject Code : ACC301

Subject Name : MANAGEMENT ACCOUNTING 3

This examination carries 70% of the total assessment for this subject.

Examiner(s) Moderator(s)

MR SELVANADAN MUNIAPPAN

Day :
Time :
Date :

Time allowed : Reading 10 MINUTES

Writing 3 HOURS

INSTRUCTION(S):

1. This examination consists of FIVE (5) problem solving and discussion questions.

2. All questions are COMPULSORY and must be attempted.

3. Students are required to answer ALL questions in the answer booklet provided.

4. This is a CLOSED BOOK examination.

5. Students are NOT permitted to retain this examination paper.

6. Students MUST pass this examination to pass the subject.

(This question paper consists of 5 questions in XX printed pages, including cover page)

20
Problem Solving and Discussion Question (100 marks)
All Five (5) questions are COMPULSORY and must be attempted. Please show details
of all calculations. DO NOT round the figures unless stated otherwise.

Question 1 (30 marks)

A Civil Engineering Contractor is planning a major project. As a first step the
project has been broken down into a number of separate tasks identified by the
letters A to J. It has been determined that the following relationships exist among
these tasks:

A and B can be commenced at the same time.

C and D can both be commenced as soon as A is completed.
E cannot be commenced until C and D are completed.
F can be commenced as soon as D is completed.
G can be commenced as soon as F is completed.
H cannot be commenced until E and G are completed.
I cannot be commenced until B and E are completed.
J cannot be commenced until H and I are completed.

The following time and cost estimates for the tasks have been prepared.

Task Normal Time Normal Cost Crash Time Extra Cost per
(days) ($) (days) Day Saved ($)
A 7 1000 5 100
B 34 3900 33 230
C 3 400 2 160
D 12 1800 12 -
E 20 1600 15 200
F 9 1500 6 220
G 8 1800 6 300
H 11 1100 11 -
I 17 1500 15 140
J 16 3200 16 -

Required:
(a) Draw a network diagram for the project showing the task letters on the
activity paths. (5 marks)
(b) Identify the critical path, and, if the work is to be carried out at normal cost,
calculate the minimum time for completion. (3 marks)
(c) Calculate the absolute minimum time in which the project could be
completed, and the minimum total cost at which that completion time could
be achieved. (10 marks)
(d) Explain how a network diagram and the associated time and cost estimates
may be used for control purposes while a complex project is in progress.
(5 marks)
(e) Assume that the project described in the question is nearing completion and
that the contract contains severe penalty provisions if the work is not
finished by the specified date. The only task not completed is task J, which
has been in progress for 4 days, and only 12 days remain before the
specified completion date. The work on task J is on schedule so far as time
 is concerned, but instead of costing $200 per day for 16 days as expected, it
is costing $350 per day. It is felt that an investigation costing $400 might
show that this is due to a problem in the way the work is being carried out.
If the investigation showed this to be the problem, it could be rectified at a
cost of $1000. This would lead to the cost being reduced to $200 per day
for the remaining days. If it is felt that the probability of being able to trace
and immediately rectify the problem is 0.7, should the contractor undertake
the investigation? (7 marks)

Question 2 (20 marks)

Household Appliances Ltd is a divisionalised company in which each of the two
divisions operates as an independent investment centre. For the coming
financial year the pre-tax target rate of return for the divisions and for the
company as a whole is 15%.

Division A produces electric motors and plans to sell 60% of its output to
Division B for use in the production of tumble clothes dryers, while the
remainder are to be sold to an outside user who has contracted to buy 2000
motors. No further outside sales appear possible. Division A is planning to
produce 5000 motors (normal capacity).

Variable cost per motor is $30 while fixed production costs of $50 000 are
expected in Division A. Division A allocates fixed costs on the basis of normal
capacity, regardless of actual production.

The sales price for external sales is $55 per motor. For the purposes of internal
pricing the manager of Division A sets a profit mark-up of 50% on full
absorption cost in order to earn a satisfactory return on divisional assets
employed, $500 000.

Division B has in the past purchased all its motors from Division A. Division
B's costs consist of the transfer-in cost, additional variable production costs of
$48 per dryer, and $60 000 fixed production costs which are allocated to dryers
on an expected annual production basis. Division B plans to produce 3000
dryers in the coming year. Division B sells the finished dryers to retailers for
$180 each. Assets employed in Division B total $1 140 000.

An external supplier has offered to provide two-thirds of Division B's electric

motor requirements for the coming year at a price of $45.

Required:
(a) Calculate the expected profit and rate of return on investment for each
division and for the company as a whole in the coming year, if Division B
purchases its motors from Division A, and sells its entire output to retailers.
(9 marks)
(b) Should Division B buy its motors from the external supplier? Why?
(2 marks)
(c) Prepare divisional and corporate income statements on an absorption
costing basis on the assumption that Division B accepts the offer from the
external supplier and Division A adjusts its planned output accordingly.
Calculate the company and divisional rates of return. On the basis of these

22
 calculations state whether it would be in the best interests of the company
to accept or reject the offer. (9 marks)

Question 3 (20 marks)

Firms P, Q and R are three companies in an industry producing product A. Each
firm has the same 70% cost experience curve based on thousands of units - ie,
the cost of their second thousandth unit will be 70% of the cost of the first
thousandth unit. The following unit costs for product A were obtained by the
three firms for their first one thousandth unit:

P: $100
Q: $80
R: $90

Required:
(a) The accumulated production of each firm is now: P 4000 units, Q 7000
units and R 5000 units. Calculate the current unit cost of product A for each
firm. (4 marks)
(b) The current market selling price for product A is $55 per unit. What profit
per unit is being earned by each firm? (3 marks)
(c) Current market shares for each firm are: P 15%, Q 60%, R 25%. Q wishes
to analyse future cost positions to evaluate some strategies. In particular, Q
wishes to determine the expected unit costs for each firm after it has
reached an accumulated production of 12 000 units.
(i) If the market shares remain the same, calculate the expected
accumulated production for firms P and R when Q has reached the 12 000
unit level. (4 marks)
(ii) Given the result of (i), calculate the expected unit cost position for each
of the three firms. (5 marks)
(d) Suppose that firm Q decides to lower its selling price now (before the
changes suggested in part c) to $40 per unit. Suggest the likely outcome.
(4 marks)

Question 4 (18 marks)

Pine Products Pty Ltd manufactures and sells two grades, A and B, of a single
pine product. Each grade is processed through two departments, Cutting and
Finishing. The following unit information is given:

Grade A Grade B
Selling price $30.00 $20.00
Direct materials $5.60 $2.00
Direct labour (cutting and $12.00 $10.00
finishing)
Variable overhead $2.40 $2.00
Fixed overhead $1.44 $1.12
Labour requirements (hours):
Cutting 0.50 0.50
Finishing 0.40 0.20

23
 The Cutting Department has 400 hours available each week. The Finishing
Department has 240 hours available each week.

Fixed overhead is allocated using a plant-wide rate based on direct labour hours
when the denominator level of activity is equal to maximum weekly plant
capacity.

Sales are limited to a maximum of 800 units of Grade A and 600 units of Grade
B per week.

Required:
(a) Calculate the unit contribution margin for each Grade. (4 marks)
(b) Calculate the budgeted weekly fixed overhead in the plant. (3 marks)
(c) If budgeted fixed overhead is the only fixed expense and if management
wishes to produce and sell Grades A and B in the ratio 3:1, how many units
of each should management plan to produce and sell in a week to earn a net
profit of $416? (3 marks)
(d) Instead of producing the product mix in part (c), management wishes to use
linear programming to find the profit-maximising mix. Write an LP model
and solve to determine the optimum weekly mix and the resulting weekly
net profit. (8 marks)

Question 5 (12 marks)

The new manufacturing environment is characterized by more flexibility, a
readiness to meet customers requirements, smaller batches, continuous
improvements and an emphasis on quality.
In such circumstances, traditional management accounting performance
measures are, at best, irrelevant and, at worst, misleading.

Required:
Discuss the above statement, citing specific examples to support or refute the
views expressed and explain in what ways management accountants can adapt
the services they provide to the new environment.

*** END OF EXAMINATION PAPER ***

24