Solution MAF451 DEC 2018

Question 1: Solution

A. (i) Explain behavior costs:

Fixed cost – Cost that will not change over a given range of activity.
For example: Insurance, depreciation 

Variable cost - Cost that vary in direct proportion to changes in the level of
activity. Example: Direct material, direct labour.

Mix cost / Semi-variable cost / semi fixed cost - These are costs that
contain both fixed and variable cost. Example: Telephone cost contain a
fixed sum as rental for a period and variable costs for metered calls.
.
(12 x ½ = 6 marks)

(ii) Salwani Hair Saloon

a. Total variable cost

Shampoo RM 600
Hair dye RM 500
RM1,100

b. Total fixed cost

Hairstylists’ salary (RM1,600 x 2) RM3,200
Assistant’s salary RM 800
Rental of shop RM2,000
Business licence RM 40
RM6,040

(8  x ½ = 4 marks)

B.
(i) Current method or traditional system
a. OAR = Budgeted manufacturing overhead
Total Direct Labour Hours
= __ RM2,580,000_____
100,000  + 200,000

= RM8.60 DLH 

Therefore, manufacturing cost per unit is:

BM - W BM - G
RM RM
Direct material 80.00  10.00 
Direct labour 50.00  30.00 
Manufacturing OH 21.50  17.20 
151.50 57.20

(10  x ½ = 5 marks)

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 Solution MAF451 DEC 2018

b. ABC method
Cost Driver rate:
Activites Overhead cost Total activity Cost Driver Rate
RM
Assembly 300,000 300,000 DLH RM1 per DLH 
Machine related 450,000 90,000 MH RM5 per MH 
Machine setups 730,000 5,000 setups RM146 per setup 
Order processing 600,000 6,000 orders RM100 per order 
General factory 500,000 50,000 sq ft RM10 sq ft 

Calculation of manufacturing OH cost:

BM - W BM - G
RM RM
Direct Material 80.00  10.00 
Direct labour 50.00  30.00 
Manufacturing OH:
Assembly RM1 x 100,000 100,000 
RM1 x 200,000 200,000 
Machine related RM5 x 30,000 150,000 
RM5 x 60,000 300,000 
Machine setups RM146 x 4,000 584,000 
RM146 x 1,000 146,000 
Order processing RM100 x 4,500 450,000 
RM100 x 1,500 150,000 
General factory RM10 x 20,000 200,000
RM10 x 30,000 300,000
Total OH 1,484,000 1,096,000
Volume 40,000  100,000 
OH per unit 37.10 10.96

Total manufacturing cost 167.10  50.96 

(28 x ½ = 14 marks)

c. Compute the differences in cost arrived at in part (a) and (b)

BM - W BM -G
Traditional method 151.10 57.20
ABC method 167.10 50.96
Differences 15.60 6.24
Understated Overstated

(4 x ½ = 2 marks)
d. Benefit of ABC Method
i. Provides better information about cost patterns, makes cost information available to
all levels of employees and creates greater cost consciousness within the
organization. 

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 Solution MAF451 DEC 2018

ii. Enables more realistic, detailed and accurate product costs to be computed,
provides greater accuracy of product costs and results in improved product costing
and product pricing. 
iii. The emphasis is on managing activities rather than costs.
iv. It is more useful where there are non-volume related activities.
v. It relates costs to products, customers, processors and management responsibility
(8 x ½ = 4 marks)

QUESTION 2 - Solution
a.
Process 2 Account
Unit RM Unit RM
OWIP 5,000 84,278 CWIP 7,000 56,518
Fr Process 1 40,000 240,000 Normal loss 6,800 9,520

Material 30,000 240,000 Abnormal loss 200  1,964
Conversion cost 160,000 FG – Mawar 21,500 214,559
Cempaka 25,000 327,451
Sejora 14,000 113,516
Kenanga 500 750
75,000 724,278 75,000 724,278

Normal Loss = 10% x [5,000 + 40,000 + 30,000 – 7,000] = 6,800

Statement Of Equivalent Units

Output % From % Materials % Conversion

Unit Process 1 added Cost
Finish goods 61,000 100 61,000 100 61,000 100 61,000
Normal loss 6,800 100 6,800 100 6,800 100 6,800
Abnormal loss 200 100 200 100 200 100 200
CWIP 7,000 100 7,000 80 5,600 60 4,200

75,000 75,000 73,600 72,200

Statement of Costs

From Process 1 Materials added Conversion cost

RM RM RM
OWIP 28,500 36,000 19,778
Cost incur in the period 240,000 240,000 160,000
Total Cost 268,500 276,000 179,778
Equivalent units ÷ 75,000 units ÷ 73,600 units ÷ 72,200 units
Cost per E.U = RM9.82 3.58 3.75 2.49

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 Solution MAF451 DEC 2018

Statement of evaluation

From Process 1 Materials Conversion cost Total (RM)

Finish goods 61,000 x RM9.82 599,020
Normal loss 6,800 x RM9.82 66,776
Abnormal loss 200 x RM9.82 1,964
CWIP 7,000 x RM3.58 5,600 x RM3.75 4,200 x RM2.49 56,518
= 25,060 = 21,000 = 10,458

Transfer To Finish good = 599,020 + (66,776 – 9,520) 

= 656,276
Joint cost = RM656,276 – RM750
= RM655,526

Statement of Joint Cost apportion

Product Kgs SP Final Sales Ratio JC apportion

(RM) value (RM) (RM)
Mawar 21,500 16.00 344,000 (344 ÷ 1,051)  x 655,526 214,559
Cempaka 25,000 21.00 525,000 (525 ÷ 1,051)  x 655,526 327,451
Seroja 14,000 13.00 182,000 (182 ÷ 1,051)  x 655,526 113,516
1,051,000 655,526

(50√ x ½ = 25 marks)

b. Profit Statement

Mawar Cempaka Seroja

Sales 21,500 x RM16 25,000 x RM21 14,000 x RM13
= RM344,000 = RM525,000 = RM182,000
(-) Joint cost RM214,559 RM327,451 RM113,516
Profit RM129,441 RM197,549 RM68,484

(6√ x ½ = 3 marks)

c. Joint product – the main product that emerge together from the production process
and all the products have material values 

By-product – the product that emerge together with the main product nut has got a
very small value 
(4√ x ½ = 2 marks)

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 Solution MAF451 DEC 2018

QUESTION 3
a.
MC (RM) AC (RM)
Direct material 6.00 6.00
Direct labour 5.00 5.00
Variable manufacturing OH 2.00 2.00
Fixed manufacturing OH - 2.00 (RM80,000/40,000)
Total 13.00 15.00

Working: Units sold = opening stock + production – closing stock

= 4,000 + 36,000 – 1,000 = 39,000

Bukit Melawati Sdn Bhd

Marginal costing profit statement for the year ended December 2018
RM RM
Sales (39,000 x RM40) 1,560,000 
Less: Variable cost of sales
Opening stock (4,000 x RM13) 52,000
Production cost (36,000 x RM13) 468,000
Less: Closing stock (1,000 x RM13) (13,000) (507,000)
Gross margin 1,053,000
Less: Variable non-production overhead
Selling and distribution (39,000 x RM3) 117,000 
Admin cost (36,000 x RM2) 72,000  (189,000)
Contribution Margin  864,000
Less: Fixed costs
Fixed manufacturing overhead 80,000 
Selling and distribution 9,000 
Administration 30,000 (119,000)
Net Profit 745,000

Bukit Melawati Sdn Bhd

Absorption costing profit statement for the year ended December 2018
RM RM
Sales (39,000 x RM20) 1,560,000 
Less: Variable cost of sales
Opening stock (4,000 x RM15) 60,000
Production cost (36,000 x RM15) 540,000
Less: Closing stock (1,000 x RM15) (15,000) (585,000)
Gross profit  975,000
Less: Selling and Distribution:
Variable (39,000 x RM3) 117,000 
Fixed 9,000 
Administration
Variable (36,000 x RM2) 72,000
Fixed 30,000 (228,000)
Unadjusted Net Profit 747,000
Less: Under absorption of overhead
Fixed production overhead absorbed (RM2 x 36,000) 72,000 
Fixed production overhead incurred (RM2 x 40,000) 80,000  (8,000)
Net Profit 739,000

(30  x ½ = 15 marks)

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 Solution MAF451 DEC 2018

QUESTION 4

Workings
Total boxes = 10,200 ÷ 6cups of egg tarts
= 1,700 boxes 

Total variable cost = 4,250 + 2,890 + 2,550 + 2,040

Variable cost per box =11,730 ÷ 1,700

=RM6.90 

Monthly Fixed cost = 24,000 ÷ 12 months

= RM 2,000 

a) BEP in units = Fixed cost ÷ contribution margin per unit

= RM2,000 ÷ (RM10.50 – RM6.90)
= 556 boxes 

BEP in RM = 556 boxes x RM10.50

=RM5,838
(12x ½ = 6 marks)
Total revenue
b) Profit-Volume Chart
Total cost
RM
BEP

2,000 Fixed cost

Quantity
Quantity
556 1,700

MOS = 1,144 

(4 x ½ = 2 marks)

c) Total boxes = 18,000 ÷ 6 cups of egg tarts

= 3,000 boxes

Sales (boxes) = fixed cost + net profit/ unit SP – unit VC

3,000  = (2,000 + 25,000) ÷ (unit SP – RM6.90)
Selling Price = RM15.90
(6√ x ½ = 3 marks)

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 Solution MAF451 DEC 2018

d) Option 1
Additional fixed cost = RM30,000 ÷ 5 years
= RM6,000 ÷ 12 months
= RM500

New Fixed cost = RM2,500 

New Production unit = 10,200 x 1.10

= 11,220 ÷ 6 cups of egg tarts
= 1,870 boxes

New Selling Price = RM10.50 x 1.05

= RM11.025

Profit = [1,870 boxes x (RM11.025 – RM6.90)] – RM2,500

= RM 5,213.75

Option 2
New fixed cost = RM2,000 + RM2,000
= RM4,000

New Selling Price = RM12

Total Variable cost = ((4,250 x 1.08) + 2,890 + 2,550 + 2,040) ÷ 1,700

New Variable cost per box = RM7.10

Production units = 12,000 cups ÷ 6 cups per box

= 2,000 boxes 

Profit =[2,000x (RM12 – RM7.10)] – RM4,000

= RM5,800

Option 2 will be preferred as it gives the highest net profit compare to option 1. 

(18 x ½ = 9 marks)

END OF SOLUTION