END-OF-SEMESTER EXAMINATION

SEMESTER 2, 2021/2022 SESSION

KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

Programme : BACC Level of Study : 2

Time : 2.30 pm – 5.30 pm Date : 4/7/2022

Duration : 3 Hr(s) 0 Min(s)

Course Code : ACC 2112 Section(s) : 1&2

Course Title : Cost Management

(This Question Paper Consists of 5 Printed Pages)

INSTRUCTION(S) TO CANDIDATES
DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO
ANSWER ALL QUESTIONS

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OFFENCE WHICH MAY LEAD TO DISMISSAL

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Question 1
a) Deena Industries manufactures and sells small pumps made to customer specifications. It
has two service departments and two production departments. Data on 2022 operations
follow:
Service Departments Production Department
Item Maintenance Power Casting Assembly
Support costs RM750,000 RM450,000 RM150,000 RM110,000
Machine hours 0 80,000 80,000 40,000
Kilowatt hours 40,000 0 200,000 160,000
Direct labour 0 0 100,000 60,000
hours

Management allocates maintenance department costs using machine hours, and power
department costs using kilowatt hours. Separate cost driver rates are determined on the basis
of machine hours for the casting department and on the basis of direct labour hours for the
assembly department. It takes 1 machine hour to manufacture a pump in the casting
department and 0.5 labour hours to assemble a pump in the assembly department. Direct
labour and material costs amount to RM32 per pump.
A prospective customer has requested a bid on a 2 year contract to purchase 1,000 pumps
every month. Deena Industries has a policy of adding a 25% markup to the full
manufacturing cost to determine the bid.
Required:
What is the bid price when:
i. direct method is used?
ii. the sequential method that begins by allocating maintenance department costs is
used?
Comment on the results.
(13 marks)

b) In an oil mill of Purname Refinery Sdn. Bhd., four products emerge from a refining
process. The total cost of input during the quarter ending March 2022 is RM 148,000. The
output, sales and additional processing costs are as follows:

Product Output in Additional processing cost after Sales Value (RM)

Litres split-off point (RM)
P 8,000 43,000 172,500
Q 4,000 9,000 15,000

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 R 2,000 Nil 6,000
S 4,000 1,500 45,000

Required:
Calculate the cost of each product under the following methods:-
i. Physical Unit/Weight Method
ii. Net Realizable Value Method
Why the allocation of joint costs resulted in different values under the two methods? Explain.
(12 marks)
(Total: 25 marks)
Question Two
Electronica Enterprise produces variety of electronic products. One of its plants produces two
laser printers, Supreme and Speedy. At the beginning of 2022, the following data were
prepared for this plant:
Supreme Speedy
Quantity 50,000 400,000
Selling Price RM 475 RM 300
Unit prime cost RM 180 RM 110
Unit overhead cost RM 20 RM 153.60

The unit overhead cost is calculated using the predetermined overhead application rate based
on the direct labour hours.
Upon examining the data, the marketing manager was particularly impressed with the per unit
profitability of the Supreme printer and suggested that more emphasis be placed on producing
and selling this product. The plant supervisor objected to this strategy, arguing that the
Supreme model required a very delicate manufacturing process. The supervisor believed that
the cost of the Supreme printer was likely to be much higher than reported.
The controller suggest an activity based costing system and provides the following budget
data pertaining to the period:
Activity Consumption
Overhead Cost Driver
Activity Cost Driver Rate Supreme Speedy
Setups No. of setups RM 2,800 200 100
Machine costs Machine hours RM 100 100,000 400,000
Engineering Engineering hours RM 40 45,000 120,000

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Packing Packing orders RM 20 50,000 200,000

Required:
1. Using the projected data based on the firm’s current costing system, calculate
gross profit per unit and gross profit percentage for each product.
(5 marks)
2. Using the suggested multiple cost driver overhead rates, calculate the overhead
cost per unit for each product and determine gross profit per unit and gross profit
percentage for each product.
(10 marks)
3. Based on your results, evaluate the suggestion of the marketing manager to
emphasize the Supreme model.
(5 marks)

4. Briefly describe what is meant by customer profitability analysis and explain how
Electronica could use the tool to improve its profitability.
(5 marks)
(Total: 25 marks)
Question Three
The following information shows last year’s quality related costs for the Excel Enterprise.
ITEM AMOUNT (RM)
Quality engineering 500,000
Warranty claims 2,345,000
Product liability lawsuits 4,500,000
Research of customer needs 75,000
Maintenance of test equipment 350,000
Returned products 1,200,000
Rework costs 1,200,000
Quality training 125,000
Process control monitoring 1,000,000
Inspection and testing of incoming materials 400,000
Repair costs in the field 850,000
Statistical process control 250,000
Product recalls 2,000,000
Waste 700,000
Net cost of scrap 635,000
Product quality audits 475,000
Downtime due to defects 125,000
Supplier certification 90,000

Total sales for the year were RM100,000,000.

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Required:
1. Prepare a cost of quality report grouping costs into prevention, appraisal, internal
failure and external failure. Also show costs as a percent of sales (Round up to 2
decimal places)
(16 marks)
2. Interpret the data and make recommendations to Excel Enterprise
(6 marks)
3. Managers of Excel Enterprise concerned with improving quality sometimes have
a difficult balancing act, given the four types of quality costs that they have to
manage. Advise the managers on how to do the balancing act for Excel.
(3 marks)
(Total: 25 marks)
Question Four
A partial standard cost card for the single product produced by Maju Sdn Bhd is given below:
• Direct materials: 3 pounds @ RM8 per pound
• Direct labor: ? hours @ ? per hour
Last period the company produced 4,000 units of product. Cost and other data associated with
this production are given below:
Direct materials purchased and used, at cost RM103,320
Direct labour cost incurred (10,400 hours) RM120,640
Materials price variance (unfavourable) RM2,520
Labour efficiency variance (unfavourable) RM4,800
Total labour variance (unfavourable) RM640

Required:
1. Determine the number of pounds of direct materials purchased and used during
the period.
(3 marks)
2. Determine the materials quantity variance.
(3 marks)
3. Determine the standard direct labour rate per direct labour hour.
(5 marks)
4. Determine the standard hours allowed for the production of the period.
(4 marks)
5. List TWO reasons for a materials unfavourable variance and another TWO
reasons for labour unfavourable variance.
(4 marks)
6. What are the main uses of variances analysis in an organization? How does
variance analysis help in continuous improvement? Comment on the implication

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of using variance as the only tool to evaluate the performance of managers from
an Islamic perspective.
(6 marks)
(Total: 25 marks)
END OF QUESTIONS