BKAM2013 CONFIDENTIAL (@UUM Universiti Utara Malaysia FINAL EXAMINATION FIRST SEMESTER SESSION 2012/2013 COURSE CODE/NAME : BKAM2013 MANAGEMENT ACCOUNTING 1 : 3 JANUARY 2013 : 2.30 PM — 5.30 PM(3 HOURS) : BK2 (FPAU) INSTRUCTIONS : 1, This examination paper contains FIVE (5) questions in SIX (6) printed pages excluding the cover! page. 2. Answer ALL questions in the answer sheet provided MATRIC NO : (in words) (in numbers J IDENTIFICATION CARD NO. : LECTURER : GROUP : ] TABLE NO. : DO NOT OPEN THIS EXAMINATION PAPER UNTIL INSTRUCTED CONFIDENTIALBKAM2013 MANAGEMENT ACCOUNTING I QUESTION 1 (15 MARKS: 27 MINUTES) Bignet.com is an internet advertising agency. The firm uses a job cost system in which each client is a different “job”. Bignet.com traces direct labor, software licensing costs, and travel costs directly to each job (client). The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate based on direct labor hours. At the beginning of the current year, managing partner, Mr.Benjamin Ali prepared a budget: Direct labor hours (professional) 2,500 hours Direct labor costs (profes RM250,000 Support staff salaries RM85,000 Rent and utilities RMIS5,500 Supplies RMS,500 Lease payments on computer hardware RM30,000 During January of the current year, Bignet.com served several clients, Records for two clients appear here: Leisure.com Alpha Blogspot Direct labor hours 250 hours 45 hours Software licensing costs RM1,500 RM850 Travel costs RM8,000 RMO REQUIRED: (a) Compute Bignet.com’s predetermined indirect cost allocation rate for the current year based on direct labor hours. (3 Marks) (>) Compute the total cost of each job. (8 Marks) (©) Determine how much should be the total fee to be charged to each of these two clients, if Bignet.com wants to earn profits equal to 20% of sales revenue. (2 Marks) (4) Explain why Bignet.com assigns costs to jobs. (@ Marks)BKAM2013 MANAGEMENT ACCOUNTING 1 QUESTION 2 (25 MARKS:45 MINUTES) Zaitun Company manufactures cooking com oil and uses a process costing system. The company’s product goes through TWO (2) processing departments: Mixing Department and Packaging Department. The Mixing Department uses First In First Out (FIFO) method. In the Mixing Department, direct materials are added at the beginning of the production process. The Packaging Department uses Weighted Average method. In the Packaging Department, an additional direct materials are added when the production processes is 85 percent. In both departments, direct labor and overhead are added continuously throughout the process. Manufacturing overhead costs are applied at the rate of 300 percent of direct labor cost for both processing departments. The following table summarizes the production data and cost for September 2012: Mixing Packaging Departmemt Department Work in process, I Sepiember (Units) 30,000 10,000 Costs (RM): ‘Transferred in - 40,500 Direct materials 45,000 25,000 Direct labor 15,500 8,000 Percentage of compietion: Direct material ei ? Conversion 70 percent 80 percent Current production: Physical u Started 70,000 2 Completed and transferred out 2 2 Work in process, 31 September 25,000 15,000 Costs (RM): ‘Transferred in - 2 Direct materials, 105,000 30,000 Direct labor 35,500 15,550 Percentage of completion (ending work in process): __Conversion costs 60 percent 90 percent REQUIRED: (Note: Give your answer into three decimal places) @® Prepare and calculate the following for Mixing Department (for September): () Physical flow schedule. (15 Marks) (i) Equivalent units of production {4 Marks)b) © BKAM2013 MANAGEMENT ACCOUNTING 1 Gi) Costs per equivalent unit. @ Marks) (iv) Cost of goods transferred out. 2 Marks) (v) Cost of ending work in process. (1.5 Marks) Prepare and calculate the followingfor the Packaging Department: () Equivalent units of production. (6 Marks) Gi) Cost per equivalent unit. (6 Marks) Explain ONE (1) difference between job order costing and process costing. (2 Marks)BKAM2013 MANAGEMENT ACCOUNTING 1 QUESTION 3 (23 MARKS: 41 MINUTES) Brilliant Company produces electronics components on a job order basis. Most business is gained through bidding on jobs. The company operates two service departments ~ Maintenance and Power, and two production departments - Casting and Assembly. Manufacturing overhead costs and quantities of activities for each department are shown below: Ttems ‘Maintenance Power Castin, ‘Assembly ‘Overhead costs (RM) 900,000 350,000 200,000 150,000 Machine hours 0 70,000 50,000 30,000 Kilowatt hours 100,000 0 525,000 175,000 Direct labor hours He 0 200,000 120,000 Costs of the maintenance department are allocated on the basis of machine hours and the costs of power department are allocated on the basis of kilowatt hours. Departmental rates are used to assign overhead costs to products. The casting department uses machine hours, and the assembly department uses direct labor hours for this purpose. Intakes 2.5 machine hours to manufacture one unit product in the casting department and 1 labor hour to assemble one unit product in the assembly department. Direct labor and material costs amount to RM150 per unit. A prospective customer has requested a bid on a two-year contract to purchase 2,000 electronic components every month. Brilliant Company has a policy of adding a 30 percent markup to the full manufacturing cost to determine the bid. REQUIRED: (a) Determine the bid price under the direct method. (10 Marks) (b) Determine the bid price under the sequential method. (Assume that the costs of the service department incurring the greatest cost are allocated first) (11 Marks) (©) Explain ONE (1) difference between the direct and sequential methods of service department cost allocation. {2 Marks)‘BKAM2013 MANAGEMENT ACCOUNTING I QUESTION 4 (20 MARKS: 36 MINUTES) ‘The Avengers Company is noted for a high quality LED computer monitor. The company operates one of its plants at Bukit Kayu Hitam Industrial Park, Kedah, The plant produces ‘two types of computer monitor: Large (32- inch) and Medium (21-inch). The current cost accounting system allocates manufacturing overhead costs to the two products on the basis of direct labor hours. At the beginning of 2011, the following data were prepared: __ Hae Medium Sales price per unit RM600.00 RM360.00 Sales unit 20,000 50,000, Prime cost per unit RM380.00 RM250.00 Manufacturing overhead cost per unit RM100.00 RM80.00. Upon examining the data, Mrs. Tanuja, the Vice President of Marketing Department was particularly impressed with the per-unit profitability of the large monitor and suggested that mare emphasis should be placed on producing and selling this product. However, Mr. Ammar, the Production Manager objected to this strategy, arguing that the cost of the large monitor was understated. Mr. Ammar argued that manufacturing overhead costs could be allocated more accurately by using multiple cost drivers that better reflect each product's consumption of support activity resources. In order to convince top management that this activity-based costing (ABC) could produce a significant difference in product costs, Mr. Ammar obtained the following information from the Controller: Aalivity Cost Driver Cost(RM)____Large Medium Setups Number of setups 800,000 190 130 Material handlings Number of material orders 600,000 300 200 handled Machine-related Machine hours 1,000,000 120,000 80,000 Engineering Engineering hours 1,400,000 50,000 20,000 Packaging. Packaging hours 200,000 15,000 __25,000 REQUIRED: (a) Compute the total cost to manufacture one unit of each computer monitor, based on the ABC data presented above. (12 Marks) (b) Determine whether the large monitor is profitable as Mrs. Tanuja thinks it is under the existing cost accounting system (support your answer with calculation), Do you agree with Mrs.Tanuja suggestion to shift the sales mix in favour of the large model? Explain. (6 Marks) (c)__ Discuss the main advantages of ABC compared to traditional costing system (3 Marks)BKAM2013 MANAGEMENT ACCOUNTING I QUESTION 5 (17 MARKS: 31 MINUTES) NilamBerhad, has just completed its first year of operations. The company uses a normal ig system and the unit costs are as follows: Manufacturing costs (per uni Direct materials (4 kilograms @ RM2.25) Direct labor (0.5 hour @ RM28) Variable overhead (0.5 hour @ RM12) Fixed overhead (0.5 hour @ RMI8) Selling and administrative costs: Variable RM9.00 14.00 6.00 9.00 RM4 per unit RM276,000 During the year, the company has the following information: Units produced 24,000 Units sold 21,300 Unit selling price RM68.00 _Direet labor hours worked 24,000 Actual fixed overhead was RM24,000 less than budgeted fixed overhead. Budgeted variable overhead was RM10,000 less than actual variable overhead. T company used an expected actual level of 48,000 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold Account. REQUIRED: (a) (b) © @ Compute the product cost per unit using: () Variable costing method. ii) Absorption costing method. Prepare an income statement using variable costing method. Prepare an income statement using absorption costing method. Reconcile the difference between the two income statements. END OF QUESTIONS (4.5 Marks) (5 Marks) (5 Marks) (2.5 Marks)