CONFIDENTIAL 1 AC/COMMON TEST OCT 2019/MAF251

UNIVERSITI TEKNOLOGI MARA

COMMON TEST
SUGGESTED ANSWER FOR STUDENTS

COURSE : COST AND MANAGEMENT ACCOUNTING

COURSE CODE : MAF251
EXAMINATION : OCTOBER 2019
TIME : 1 1/2 HOURS
 CONFIDENTIAL 2 AC/COMMON TEST OCT 2019/MAF251

Question 1

a. Differentiate management accounting and financial accounting:

Management Accounting Financial Accounting

Main users Internal parties such as External parties such as
managers and employees. shareholders, creditors, banks,
customers, and tax authority.
Scope of report Focuses on small segments of Reports on entire organization.
the company such as products
and departments.

b. Four (4) characteristics of good management accounting information:

1) Relevant
- The information must be relevant for the intended purpose. Information must
make a difference and influence the decision considered.
2) Reliable
- Information is only useful if it can be relied upon when making decisions.
Information comes from known and distinguished sources, supported by
evidence.
3) Accurate
- Information must be sufficiently accurate to be relied upon by the managers.
4) Timeliness
- Information must be available when needed and not out-of-date.
5) Completeness
- The information does not omit important aspects of the underlying events that it
measures.
6) Understandable
- The information must be presented in a way that can be easily understood by
intended users.
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Question 2

a) Standard cost card per unit for one unit of ALBERTA:

RM
Direct material 9 kg @ RM12.00 per kg 108
Direct labour 5 hours @ RM7 per hour 35
Variable OH 5 hours @ RM6 per hour 30
Fixed OH 1 unit @ RM30 per unit 30
Standard cost 203
Standard profit 47
Standard selling price 250

b) Variances
i) Direct material price variance
= (SP – AP) x AQ purchased
= (12 - 11.50) x 3,500
= RM1,750 (F)

Direct material usage variance

= (SQ – AQ) x SP
= [(9 x 400) – 3,500] x 12
= (3,600 – 3,500) x 12
= RM1,200 (F)

ii) Direct labour rate variance

= (SR – AR) x AH
= [7 – 7.50] x 1,800
= RM900 (A)

Direct labour efficiency variance

= (SH – AH) x SR
= [(5 x 400) – 1,800] x 7
= (2,000 – 1,800) x 7
= RM1,400 (F)
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CONFIDENTIAL 4 AC/COMMON TEST OCT 2019/MAF251

iii) Variable overhead expenditure variance

= (Actual hours x VOH rate) – Actual VOH
= (1,800 x 6) – 12,000
= 10,800 – 12,000
= RM1,200 (A)

Variable overhead efficiency variance

= (SH – AH) x VOH rate
= [(5 x 400) – 1,800] x 6
= (2,000 – 1,800) x 6
= RM1,200 (F)

iv) Fixed overhead expenditure variance

= Bud FOH – Actual FOH
= [(30 x 350) – 11,000
= 10,500 – 11,000
= RM500 (A)

Fixed overhead volume variance

= (Budgeted output – Actual output) x FOH abs rate/unit
= (350– 400) x 30
= RM1,500 (F)

v) Sales margin price variance

= (Std margin - Actual margin) x Actual Sales Volume
= [RM47 - (RM260 – RM203)] x 400
= RM4,000 (F)
Sales margin volume variance
= (Bud SV – Act SV) x Std margin
= (350 – 400) x 47
= RM2,350 (F)
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CONFIDENTIAL 5 AC/COMMON TEST OCT 2019/MAF251

c) Reconciliation statement:

RM
Fav Adv
Budgeted profit (350 x 47) 16,450

Sales margin price 4,000

Sales margin volume 2,350 6,350
22,800(F)

DM price 1,750
DM usage 1,200

DL rate variance 900

DL efficiency 1,400

VOH expenditure 1,200

VOH efficiency 1,200

Fixed overhead expenditure 500

FOH volume 1,500

7,050 2,600 4,450(F)

Actual profit 27,250

d) TWO (2) limitations of standard costing:

• Difficult to Establish
Inaccurate and unreliable standards may provide misleading results.

• Morale and Motivation may be Affected

If standards are set too high, it may have an adverse effect on the morale and motivation
of the employees.

• Expensive
Revision of standards is costly.
CONFIDENTIAL 6 AC/COMMON TEST OCT 2019/MAF251
CONFIDENTIAL 6 AC/COMMON TEST OCT 2019/MAF251

Question 3

a. Shortage

Products Units MR/U Total MR

Wallet 2,500 0.5 1,250
Handbag 2,000 1.5 3,000
Briefcase 1,500 2.5 3,750
Total material required 8,000
Total material available 7,000
Shortage 1,000

Wallet Handbag Briefcase

Selling price 200 500 800
(-) Variable cost
Direct material 100 300 500
Direct labor 30 45 75
Indirect material 15 40 30
Other Overhead 10 15 19
CM/unit 45 100 176
LF 0.5 1.5 2.5
CM/LF 90 66.67 70.4
Ranking 1 3 2

Product mix

Product units MR Material Available

7,000 Square feet
Wallet 2,500 1,250 5,750
Briefcase 1,500 3,750 2,000
Handbag 1,333 2,000/1.5 0

b. Net profit

Product units CM/unit Total CM

Wallet 2,500 45 112,500
Briefcase 1,500 176 264,000
Handbag 1,333 100 133,300
Total Cm 509,800
(-) Fixed cost
Production OH 100,000
Administration 50,000
Net Profit 359,800
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c. 2 examples of factor that could be the limiting factor in a production

i. Direct Material
ii. Direct Labour Hour
iii. Machine Hour
iv. Limited space
v. Limited Cash / Fund