MAF151 October 2019 Test

Question 1

a) Difference between cost accounting and financial accounting

Characteristics Cost accounting Financial accouting

1. Time frame Concerns with future
information as well as past
information.
2. Legal Optional and no statutory
requirements requirement to publish cost
accounting statements.
Concerned with historical
data based on what has
happened in the past in an
organization.
There is a statutory
requirement for Public
Limited Companies to
produce annual financial
statements.

b) i. Production cost

- Production cost are costs of manufacturing a product which include acquisition of

material cost, labour cost and direct expense. The example are advertising expenses.

ii. Period cost

- Is a costs which are not identified with the product or job and are deducted as
expenses during the period in which they are incurred. Examples are cost of administrative.

c) Documents

i. Invoice
ii. Purchase order
iii. Goods received note
iv. Purchase requisition note
v. Inspection note
vi. Material requisition note

d) Creative Stationary
Cost Statement for the month September 2018

Question 2
a) Four main features of JIT system
 i. Lower investment required in all forms of inventory
ii. Space savings from the reduction in inventory and improved layouts
iii. Long term partnership established with few suppliers
iv. Reduction in costs such as stock holding costs

b) Stay Healthy Sdn.Bhd

i. Demand
10 x 500 x 12 = 60000 units
Ordering cost
RM80 + RM30 =RM110
Holding cost/carrying cost
(20% x RM10) + 1 = RM3

RM RM
Prime cost
Direct material cost 12800
Less: Return of direct material to supplier (500)
PRIME COST 12300
Manufacturing overhead:
Production workers’ salary 8250
Depreciation on special engrave machine 1050
Salary of production supervisor 3500
Rent expenses (60/100 x 5000) 3000
Utilities expenses (80/100 x 2600) 2080
Indirect materials 2300 20180
PRODUCTION COST 32480
Non-Manufacturing overhead:
Depreciation of showroom shelving 500
Advertising and promotion 700
Salary of sales promoter 3600
Rent expenses (40/100 x 5000) 2000
Utilities expenses (20/100 x 2600) 520
Depreciation of delivery van 800 8120
40600

Demand (D) 60000 60000 60000

Order Quantity (Q) 400 500 600
No. of orders (D/Q) 150 120 100
Average stock (Q/2) 200 250 300
Annual ordering cost 16500 13200 11000
D/Q x ordering cost
Annual Carrying cost 600 750 900
 Q/2 x carrying cost
TOTAL COST 17100 13950 11900

iii) Economic order quantity (EOQ) and total cost

= √(2 x Annual demand x Cost of ordering) / Carrying cost)

= √(2 x 60000 kg x 110) /3)

= 2097.62kg

c) LIFO

Date Receipts Issues Balance

Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
per (RM) per (RM) per (RM)
unit unit unit
(RM) (RM) (RM)
1/8 500 20 10000
3/8 300 20.50 6150 500 20 10000
300 20.50 6150
5/8 300 20.50 6150 200 20 4000
300 20 6000
11/8 500 21 10500 200 20 4000
500 21 10500
13/8 300 21 6300 200 20 4000
200 21 4200
18/8 300 22 6600 200 20 4000
200 21 4200
300 22 6600
20/8 300 22 6600 200 20 4000
150 21 3150 50 21 1050
26/8 400 23 9200 200 20 4000
50 21 1050
400 23 9200
28/8 400 23 9200 200 20 4000
50 21 1050
1500 42450 1450 37400 250 5050