Question 1

Teratai Sdn Bhd produces and sells T-Shirts. The company uses standard costing. The
following is the contribution margin statement for the month of January 2014:

Statement of Contribution Margin for 31 January 2014

RM RM
Sales 2,000,00
0
Less: Variable Cost
Direct material 300,000
Direct labour 560,000
Variable production overhead 230,000 1,090,00
0
Contribution Margin
910,000

The actual production for January 2014 was 20,000 T-Shirts. The actual quantity of
direct material and actual direct labour were 20,000 meters and 60,000 hours
respectively.

The standards set for a T-Shirt are as follows:

Direct materials 2 meter at a standard price of RM 2.00 per meter

Direct labour 1 hour at a standard rate of RM 7.00 per hour
Variable production overhead RM3.60 per labour hour

Required:

Calculate the following variances for the month just ended:

(a) Material price, usage and cost variances.

(9 marks)

(b) Labour rate, efficiency and cost variances.

(9 marks)

(c) Variable production overhead expenditure, efficiency and cost variances.

(7 marks)
(Total: 25 marks)
Question 2

Bai Co Bhd uses standard costing for cost control purposes. Variance analysis is
carried out each month to enable management actions.

The following standards were set for the single product:

RM
Direct materials RM14 per kg x 2 kgs 28
Direct labour RM10 per hour x 3 hours 30
Variable production overhead RM 7 per hour x 3 hours 21

The following actual results were recorded for the month just ended:

Direct materials 2,200 kgs were purchased and used for RM33,660.
Direct labour RM25,810 was paid for 2,900 hours worked.
Variable production overhead RM16,820 was incurred.

860 units of products were manufactured and sold for the month.

Required:

(a) Calculate the following variances for the month just ended:

(i) Material price, usage and cost variances

(8 marks)

(ii) Labour rate, efficiency and cost variances

(8 marks)

(iii) Variable production overhead expenditure, efficiency and cost

variances
(7 marks)

(b) Suggest TWO (2) possible reasons for the labour efficiency variance calculated
in part (a) (ii).
(2 marks)

(Total: 25 marks)
Question 3

Zhi Hui Bhd is preparing budgets for the next accounting period. The following
budgeted income statement is related to the months of June to November, 2012.

June July August September October November

RM RM RM RM RM RM
Sales 65,000 68,000 71,000 66,000 70,000 69,000

Direct materials 32,000 33,000 34,000 31,000 35,000 32,000

Direct labour 14,000 13,000 14,000 15,000 16,000 13,000
Overheads 11,000 13,000 12,000 10,000 11,000 12,000
Total cost 57,000 59,000 60,000 56,000 62,000 57,000

Profit 8,000 9,000 11,000 10,000 8,000 12,000

The following additional information is also available:

(1) 25% of the total sales are in cash terms. 40% of the customers pay 1 month
after the sale and the balance two months later.

(2) A cash discount of 8% is given to all direct materials purchased. The net
amount payable is given 1 month credit.

(3) 80% of direct labour is paid in the month incurred. The remainder is paid in
the following month.

(4) Overheads are payable 1 month after incurring. The overheads shown in the
income statement above include RM5,600 for depreciation in each month.

(5) Capital expenditure is planned as follows:

RM
August 26,600
October 35,400

(6) The bank balance at the beginning of August is expected to be RM 3,800.

Required:

Prepare a monthly cash budget for each of the months from August to November,
2012.
 (Total: 25 marks)

Question 4

Shao Lin Sdn Bhd produces and sells a single product. The following information is
available for the coming year:

RM per unit
Selling price 36

RM per unit
Direct material 12
Direct labour 8
Variable overhead 6

Fixed costs: RM
- Production 30,000
- Administration 20,000
- Selling 10,000

Production and sales units 15,000

Required:

(a) Prepare a detailed profit statement based on Marginal Costing approach.

(7 marks)

(b) Calculate the break-even point in units and in sales value.

(5 marks)

(c) Calculate the margin of safety in units and in percentage of sales.

(4 marks)

(d) Calculate the sales units required to achieve a targeted profit of RM100,000.
(3 marks)

(e) Assuming that the selling price increases by 10% and variable costs decrease by
6%, calculate the revised sales units to earn profit of RM100,000. (Answer
should be rounded to the nearest unit.)
(6 marks)

(Total: 25 marks)
Question 5

Earth Sdn Bhd started a toy business on 1 January 2020. One of the toys
manufactured is 'EXAT'. The standard cost for 'EXAT' is as follows:

RM
Direct material (8kg per unit xRM5perkg) 40
Direct labour (4hours per unit x RM5 per hour) 20
Variable Production Overheads 16
Selling Price 120

The fixed production overhead for the company is RM96,000 which is

constant throughout the year. The company has a normal capacity of 48,000
units per annum.

Variable selling overheads consisting of 20% of sales value and fixed selling
overhead amount to RM36,000 per annum.

The number of units produced and sold for the first two months were as
follows:

January February
Production 4,000 6,000
Sales 3,000 6,400

Required:

(a) Calculate the standard cost and profit for one unit of 'EXAT'

(b) Prepare a statement showing the profits for January and February, using:

(i) Marginal costing

(ii) Absorption costing

(c) Prepare a statement reconciling the profits for each month as

calculated in (b) above.
Answer for Question 1

(a) VARIANCES

(i) MPV
= AC - (SPQ x AQ)
= RM 300,000 - (RM 2.00 X 20,000)
(A
= RM 260,000 (3m)
)

MUV
= (AQ - SQ) x SPQ SQ = SQO X AO
= (20,000 - 40,000) X RM 2.00 = (2 m X 20,000)
= -RM40,000 (F) = 40,000 (3m)

MCV
= MPV + MUV
= RM 260,000 (A) + - RM40,000(F)
(A
= RM 220,000 (3m)
)
(Sub-total: 9m)
(ii) LRV
= AC - (SRH x AH)
RM 560,00 - (RM 7.00 X
=
60,000)
(A
= RM 140,000 (3m)
)

LEV
= (AH - SH) x SRH SH = SHO X AO
= (60,000 - 20,000) X RM 7 = 1 hour X 20,000
(A
= -RM280,000 = 20,000 (3m)
)

LCV
= LRV + LEV
= RM 140,000 + - RM 280,000
(A
= RM 420,000 (3m)
)
(Sub-total: 9m)
(iii) VOExV
= AC - (SRH x AH)
= RM 230,000 - (3.6 hours X 60,000)
= -RM 14,000 (A) (2m)

VOEfV
= (AH - SH) x SRH
= (60,000 - 20,000) X RM 3.60
= RM 144,000 (A) (3m)

VOCV
= VOExV + VOEfV
= -RM 14,000 (A) + RM 144,000 (A)
= RM158,000 (A) (2m)
(Sub-total: 7m)
(Total: 25
marks)
Answer for Question 2

(a
) VARIANCES

(i) MPV
= AC - (SPQ x AQ)
= 33,660 - (14.00 x 2,200)
= 2,860 (A) (3m)

MUV
= (AQ - SQ) x SPQ SQ = SQO X AO
= (2,200 - 1,720) x 14.00 = 2.00 x 860
= 6,720 (A) = 1,720 (3m)

MCV
= MPV + MUV
6,72
= 2,860 (A) + 0 (A)
= 9,580 (A) (2m)
(Sub-total: 8m)
(ii) LRV
= AC - (SRH x AH)
= 25,810 - (10.00 x 2,900)
= -3,190 (F) (3m)

LEV
= (AH - SH) x SRH SH = SHO X AO
= (2,900 - 2,580) x 10.00 = 3.00 x 860
= 3,200 (A) = 2,580 (3m)

LCV
= LRV + LEV
= -3,190 (F) + 3,200 (A)
= 10 (A) (2m)
(Sub-total: 8m)
(iii) VOExV
= AC - (SRH x AH)
= 16,820 - (7.00 x 2,900)
= -3,480 (F) (3m)
 VOEfV
= (AH - SH) x SRH
= (2,900 - 2,580) x 7.00
= 2,240 (A) (2m)

VOC
V
= VOExV + VOEfV
= -3,480 (F) + 2,240 (A)
= -1,240 (F) (2m)
(Sub-total: 7m)

(b) REASONS: LEV (A)

Lack of training
Lower quality of machines
(Sub-total: 2m)

(Total: 25 marks)
 Answer for Question 3
Cash Budget (RM)
Aug Sep Oct Nov
Receipts
Sales (W1) 67,700 68,700 68,750 68,350 (1m)
Payments
Direct materials (W2) 30,360 31,280 28,520 32,200 (1m)
Direct labour (W3) 13,800 14,800 15,800 13,600 (1m)
Overheads (W4) 7,400 6,400 4,400 5,400 (1m)
Capital
Expenditure 26,600 - 35,400 - (1m)
78,160 52,480 84,120 51,200 (1m)
Net cash flows (10,460) 16,220 (15,370) 17,150 (1m)
Balance b/f 3,800 (6,660) 9,560 (5,810) (1m)
Balance c/f (6,660) 9,560 (5,810) 11,340 (1m)

WORKINGS

W1
. Sales
Jun Jul Aug Sep Oct Nov
Total sales 65,000 68,000 71,000 66,000 70,000 69,000 (1m)
Cash sales (25%) 17,750 16,500 17,500 17,250 (1.5m)
Credit sales (1 mth) (40%) 27,200 28,400 26,400 28,000 (1.5m)
Credit sales (2 mths) (35%) 22,750 23,800 24,850 23,100 (1.5m)
Total
receipts 67,700 68,700 68,750 68,350 (1m)

W2
. Direct materials
Jul Aug Sep Oct Nov
Materials incurred 33,000 34,000 31,000 35,000  
Payment (x 92%) (1 mth) 30,360 31,280 28,520 32,200 (1.5m)

W3
. Direct labour
Jul Aug Sep Oct Nov
Direct labour incurred 13,000 14,000 15,000 16,000 13,000 (1m)
Pay in the month (80%) 11,200 12,000 12,800 10,400 (1.5m)
Pay following mth (20%) 2,600 2,800 3,000 3,200 (1.5m)
13,800 14,800 15,800 13,600 (1m)
W4
. Overheads
Jul Aug Sep Oct
Overheads Incurred 13,000 12,000 10,000 11,000 (1m)
Less: depreciation (5,600) (5,600) (5,600) (5,600) (1m)
Payments 7,400 6,400 4,400 5,400 (1m)
Pay following mth Aug Sep Oct Nov

(Total: 25 marks)
Answer for Question 4

(a
) Profit Statement - Marginal Costing approach
RM RM
(1m
Sales (36 x 15,000) 540,000 )
Less variable
costs:
(1m
Direct material (12 x 15,000) 180,000 )
(1m
Direct labour (8 x 15,000) 120,000 )
Variable (1m
overhead (6 x 15,000) 90,000 )
(390,000
)
(1m
Contribution 150,000 )

Less fixed costs:

- Production 30,000
- Administration 20,000
- Selling 10,000 (1m)
(60,000)
Net profit 90,000 (1m)
(Sub-total: 7m)

(b) RM OR RM
Selling price 36.00 T. cont'n 150,000
- V. cost/unit (26.00) - Sales units 15,000
= Cont'n/unit 10.00 = Cont'n/unit 10 (1m)

BEP (units) Fixed cost

= (1m)
Contribution per unit
60,000
= (1m)
10
= 6,000 units

BEP (sales) = BEP (units) x selling price (2m)

= 6,000 x 36
= RM216,000
(c) MOS (units) = total sales units - BEP units (2m)
= 15,000 - 6000
= 9,000 units

Margin of Safety
MOS (%) x 100%
= (units) (1m)
Total Sales Units

(1m)
= 9,000 x 100%
15,000
= 60.00%

(d) Sales units = Fixed Costs + Profit

Contribution per unit
= 60,000 + 100,000 (3m)
10.00
= 16,000 units

(e) RM
Selling price (36 x 1.10) 39.60 (1m)
- V. cost/unit (26 x 0.94) (24.44) (1m)
= Cont'n/unit 15.16 (1m)

Sales units = Fixed Costs + Profit

(1m)
Contribution per unit
= 60,000 + 100,000
(1m)
15.16
= 10554 units (1m)

(Total: 25 marks)
Question 5
(a)
RM RM
Selling p rice 120
Direct material 8*5 40
Direct labo ur 4*5 20
Variable OH 16
Fixed OH 96000/ 48000 2 - 78
Pro fit/ unit 42

(b)
(i) Marginal costing
Jan Feb
Sales 3000*120 360,000 6400*120 768,000
(-) Production cost
Opening stocks - 1000*76 76,000
(+) Production 4000*76 304,000 6000*76 456,000
(-) Closing stocks 1000*76 76,000 228,000 600*76 45,600 486,400
132,000 281,600
(-) Variable selling 20%x360000 -72,000 20%*768000 -153,600
Contribution 60,000 128,000
(-) Fixed costs
FPOH RM96,000/12 8,000 8,000
F. Selling OH RM36,000/12 3,000 -11,000 3,000 -11,000
Net profit 49,000 117,000

Working:
Cost per unit RM
Direct material 8*5 40
Direct lab our 4*5 20
Variab le OH 16
76

Clo sing sto ck Jan Feb

Op ening sto ck - 1,000
Pro duction 4,000 6,000
- Sales - 3,000 - 6,400
Closing stock 1,000 600
(ii) Absorption costing
Jan Feb
Sales 3000*120 360,000 6400*120 768,000
(-) Production cost
Opening stocks - 1000*78 78,000
(+) Production 4000*78 312,000 6000*78 468,000
(-) Closing stocks 1000*78 78,000 234,000 600*78 46,800 499,200
Unadjusted gross profit 126,000 268,800
+/(-) Over/(under) absorbed Fixed Overhead (W) - 4,000
Adjusted gross profit 126,000 272,800
(-) Other costs
(-) Variable selling 20%x360000 72,000 20%*768000 153,600
F. Selling OH RM36,000/12 3,000 -75,000 3,000 -156,600
Net profit 51,000 116,200

Working:
Cost per unit RM
Direct material 8*5 40
Direct labo ur 4*5 20
Variab le OH 16
Fixed OH 96000/ 48000 2
78

Clo sing stock Jan Feb

Op ening stock - 1,000
Pro ductio n 4,000 6,000
- Sales - 3,000 - 6,400
Closing sto ck 1,000 600

Jan Feb
Fixed overhead ab sorb ed 8,000 12,000
(2*4000) (2*6000)
Actual Fixed overhead 8,000 8,000
(Under)/ o ver abso rbed - 4,000

(c)
Jan Feb
Marginal Costing’s profit 49,000 117,000
+/(-) Fixed OH in stock difference (1000-0)*2 2,000 (1000-600)*2 -800
Absorption Cosing’s profit 51,000 116,200