CONFIDENTIAL 1 AC/FEB 2022/MAF251

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : COST AND MANAGEMENT ACCOUNTING 2

COURSE CODE : MAF251
EXAMINATION : FEBRUARY 2022
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) an Answer Booklet Front Page – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 7 printed pages
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QUESTION 1

A. Financial accounting and management accounting are equally important and have
their own purposes for their intended users.

Required:

i. State TWO (2) main categories of the users for financial and management
accounting data and give an example for each.
(2 marks)

ii. List any THREE (3) differences between financial and management accounting.
(3 marks)

B. ‘Information produced by management accountants must be judged in the light of its

ultimate effect on the outcome of decisions. It is therefore important to have an
understanding of the decision-making process’. (Colin Drury, Management and Cost
Accounting, Eighth Edition)

Required:

i. Briefly discuss THREE (3) characteristics of good management accounting

information.
(6 marks)

ii. Briefly explain any THREE (3) of the decision-making processes that should be
implemented by company.
(6 marks)
(Total: 17 marks

QUESTION 2

Bath & Body Outlet Bhd produces and sells a special fragrance mist called Lilac Paradise.
The company applies standard costing system as part of the control and performance
evaluation process.

The following information is related to the budgeted production and sales of Lilac Paradise
for the month of January 2022:

Production and sales unit 600 bottles

Selling price per bottle RM150
Direct material cost: methyl ether (RM120 per litre) RM36 per bottle
Direct labour cost (RM10 per hour) RM30 per bottle
Variable overhead cost RM2 per hour
Total fixed overhead cost RM5,400

Both variable overhead cost and fixed overhead cost are absorbed based on direct labour
hour.

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In January 2022, the company managed to produce and sell 500 bottles of Lilac Paradise.
The actual data for January 2022 is as follows:

Total revenue RM80,000

Total direct material: methyl ether purchased and used RM14,000 (100 litres)
Total direct labour RM10,000 (1,250 hours)
Total variable overhead cost RM4,950
Total fixed overhead cost RM6,400

Required:

a. Prepare a standard cost card for one bottle of Lilac Paradise.

(4 marks)

b. Calculate the following variances:

i. Direct material price and usage

ii. Direct labour rate and efficiency
iii. Variable overhead expenditure and efficiency
iv. Fixed overhead expenditure and volume
v. Sales margin price and volume
(15 marks)

c. Construct a statement to reconcile the budgeted profit and actual profit for the month
of January 2022.
(4 marks)

d. Identify any THREE (3) causes and respective possible solutions for adverse direct
labour efficiency.
(3 marks)
(Total: 26 marks)

QUESTION 3

Taste of Earth Sdn Bhd produces various types of fruits smoothies’ drinks. One of the fruits
smoothies’ drinks that has a stable demand is Tropical Mango Smoothies which is currently
sold at RM8.00 per cup. The company produces 50,000 cups of Tropical Mango Smoothies
and normally incurred a total production cost of RM6.00 per cup.

The detail costs to manufacture 50,000 cups of Tropical Mango Smoothies are as follows:

RM
Direct materials 100,000
Direct labour 75,000
Total overhead (40% variable) 125,000
Total cost 300,000

Currently, there is an increase in market demand of a new flavoured smoothies which is

Chocolate Banana Smoothies. The company is considering to sell this new flavoured
smoothies and the management team has done some market research. The total research
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cost that has been incurred was RM9,500. Based on the research, the company is confident
in penetrating the market and has forecasted that they can sell 20,000 cups of Chocolate
Banana Smoothies next year.

The estimated selling price is RM10 per cup. However, due to shortage of machine and
labour capacity, the top management suggests two proposals in making the decision.

Proposal 1

The company will buy a ready-made Chocolate Banana Smoothies from supplier and repack
under their own brand name. The following costs are expected to be incurred:

RM
Costs of buying 3.00 per cup
Costs of repacking 1.00 per cup
Transportation cost 30,000
Other expenses 20,000

Proposal 2

The company will produce Chocolate Banana Smoothies. However, the production of
Chocolate Banana Smoothies will decrease the production of Tropical Mango Smoothies by
40% of its normal production in a year. The information related to production of Chocolate
Banana Smoothies is as follows:

Direct material RM2.50/cup

Direct labour RM1.50/cup
Variable overhead RM1.00/cup

Total fixed production overhead of the company will be reallocated and a sum of RM7,000 is
allocated to the production of Chocolate Banana Smoothies.

Required:

a. Calculate the contribution margin loss from Tropical Mango Smoothies if the company
decided to produce Chocolate Banana Smoothies.
(3 marks)

b. Compute the total cost per year incurred for each of the proposal.
(12 marks)

c. Advise the best proposal to be adopted by the company.

(2 marks)

d. List any FOUR (4) qualitative factors that the company needs to consider in making
decision in part (c) above.
(4 marks)
(Total: 21 marks)

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QUESTION 4

Classy Wash Sdn Bhd manufactures natural soaps which are Herbs Soap, Fruity Soap and
Floral Soap. The following table shows the budgeted production and sales of the products
for a month:

Herbs Fruity Floral

Budgeted Production 8,000 units 11,000 units 14,000 units
RM RM RM
Selling Price/unit 14.00 11.00 17.50
Production costs:
Direct Material 2.50 2.00 3.00
Direct Labour 6.00 4.50 9.00
Total Production Overhead 2.50 2.15 3.25

Due to the current pandemic situation, the company could not obtain the usual amount of
raw materials and only some percentage of total workers could come to work according to
government regulation. Therefore, the supply of the raw material is restricted to 168,500
kilograms and the available working labour hour is only 37,000 hours.

The cost of direct material is RM0.50 per kilogram and direct labour rate is RM6 per hour.
Variable production overhead is absorbed based on labour hour whereas the fixed
production overhead is absorbed based on production units.

Total budgeted fixed production overhead cost is RM33,000. The fixed selling and
administration expenses are expected to be RM60,000 per year.

Required:

a. Calculate any shortage or surplus of direct material and direct labour. (Show all
relevant workings)
(3 marks)

b. Advise the company on the optimal production mix to be produced based on the
limiting factor determined in (a) above.
(10 marks)

c. Determine the amount of net profit that can be derived by the company if the
production mix in part (b) above is applied.
(2 marks)

d. Outline FOUR (4) important steps in determining the profitable products mix if there
are limited resources in production.
(4 marks)
(Total: 19 marks)

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QUESTION 5

Sports Apparel Bhd produces and sells sports attires for domestic market. In expanding the
business, the company plans to introduce newly design jogger pants in the market. A similar
quality jogger pants currently being sold by other competitor at RM55 per pair.

The production manager projects the full capacity for the jogger pants to be 15,000 pairs.
However, he estimates that the normal production for the jogger pants will be at 80%
capacity only. He also states that the policy of the company is to absorb all types of fixed
cost based on normal capacity.

The following is the estimation of costs relating to the jogger pants at different levels of
production prepared by management accountant:

Levels of production 70% 80% 90%

Costs: RM RM RM
Direct material 105,000 120,000 135,000
Direct labour 84,000 96,000 108,000
Production overhead 31,000 34,000 37,000
Selling overhead 15,750 18,000 20,250
Distribution overhead 56,500 64,000 71,500
Administration overhead 7,000 7,000 7,000

Based on the cost estimation, the production manager proposes to set the selling price of
the jogger pants at total production cost plus 140% mark-up.

The management accountant, however, suggests that the company should apply another
policy in setting its selling price of the jogger pants in order to increase the profitability of the
company. He suggests to use full cost plus 55% margin as the pricing policy.

Required:

a. Calculate the following for normal production level:

i. The total variable cost per pair.

(3 marks)

ii. The total fixed cost.

(2 marks)

iii. The selling price of the jogger pants per pair based on the suggestion by the
production manager.
(4 marks)

iv. The selling price of the jogger pants per pair based on the suggestion by the
management accountant.
(4 marks)

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b. Based on your calculation in part (a) (iii) and (iv) above, advise the management of
Sports Apparel Bhd on the best pricing policy:

i. If the company's mission is to increase its profit.

ii. If the company's mission is to increase its market share.
(2 marks)

c. State TWO (2) situations where minimum pricing can be applied.

(2 marks)
(Total: 17 marks)

END OF QUESTION PAPER

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