CONFIDENTIAL 1 AC/JAN 2023/MAF201

UNIVERSITI TEKNOLOGI MARA

TEST 2

COURSE : COST AND MANAGEMENT ACCOUNTING 1

COURSE CODE : MAF201
EXAMINATION : JANUARY 2023
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO (2) questions.

2. Answer ALL questions in English.

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

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

This examination paper consists of 5 printed pages

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CONFIDENTIAL 2 AC/JAN 2023/MAF201

QUESTION 1

A. True and False Questions. Choose the most suitable answers.

1. Break-even point represents the minimum sales volume that should be achieved by
the organizations to avoid losses.

2. The organization still earns profit if the sales volume reduces more than the margin of
safety.

3. Sales mix is required to be applied in a single and multi-product CVP analysis.

(3 marks)

B. Structured Question.

Cook Culture Sdn Bhd is a manufacturing company producing and selling cast iron
cookware called Casserole. This product is sold at a selling price of RM700 per unit. The
company forecasted the annual budgeted production and sales units in the year 2022 to be
6,000 units.

The following information relates to the cost incurred for the year 2022:

RM
Direct material costs 720,000
Direct labour costs 1,080,000
Production overhead 640,000 (3/4 variable cost)
Selling expenses 630,000 (1/3 fixed cost)
Fixed administrative expenses 330,000

Required:

(Each question is to be treated independently)

a. Find the following for the year 2022:

i. The variable cost per unit

ii. The annual fixed cost
(3 marks)

b. Assess for the year 2022:

i. Whether the company can achieve the break-even point at the current sales
level.
ii. The margin of safety in units and value.
iii. The net profit for the period.
(6 marks)

c. Due to the current economic condition, the company anticipates a 10% increase in
direct material costs. The marketing manager plans to spend an additional RM30,000
on fixed marketing and promotional cost. With this marketing plan, sales volume is
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CONFIDENTIAL 3 AC/JAN 2023/MAF201

expected to increase by 5% while maintaining the current selling price. Assess

whether this marketing plan should be implemented or otherwise. (Support your
answer with the comparison of net profit).
(6 marks)

d. For the year 2023, the company plans to introduce a new product in addition to the
current one. The new product is known as Skillet and can be sold at a selling price of
RM550 per unit and has a variable cost of RM240 per unit. Annual fixed cost is
expected to increase to RM728,750. With two products in the market, the company
expects to sell one unit of Skillet for every three units of Casserole sold.

Explain whether Cook Culture Sdn Bhd should proceed with the future business plan.
Your advice should be based on the break-even point.
(7 marks)
(Total: 25 marks)

QUESTION 2

A. Multiple Choice Questions. Choose the most suitable answers.

1. The cash budget is a summary of the following:

A. Estimated expenses and income.
B. Estimated cash receipts and cash payments.
C. Estimated purchases and sales.
D. All of the above.
(1 mark)

2. Total cash available in the cash budget can be calculated by:

A. Opening cash balance plus cash inflows.
B. Opening cash balance plus cash inflows less cash outflows.
C. Cash inflows less cash outflows.
D. Cash inflows plus cash outflows.
(1 mark)

3. Find which of the following is not true about the cash budget?
A. Cash budget indicates the cash balance at the end of every budget
period.
B. Cash budget does not include depreciation expenses.
C. Cash budget includes personal cash receipts and payments.
D. Cash budget helps companies to reduce expenditures and begin to
control costs.
(1 mark)

4. A master budget consists of

A. Individual budgets made for short-term goals.
B. Emphasis is put on cash resources for goals of capital planning.
C. Interrelated budgets for an action plan for a specific period.
D. Focuses on review of progress towards long-term goals.
(1 mark)

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CONFIDENTIAL 4 AC/JAN 2023/MAF201

5. Indicate which of the following budgets should be produced first?

A. Purchase Budget.
B. Production Budget.
C. Master Budget.
D. Sales Budget.
(1 mark)

B. Structured Question.

SweetBelle Cosmetic Sdn Bhd is a manufacturing company located in Ipoh, Perak. The
company produces a revitalizing nourishing creams. It is a safe and effective product of the
highest quality, created to satisfy the beauty requirements of women of any age and skin
colour. At the end of this year, Bella, the founder of SweetBelle Cosmetic Sdn Bhd, plans to
expand the target market to a few Asian countries. She therefore asks the accountant to
prepare the company's cash budget for the fourth quarter of 2023. She believes that with the
information then, she will be able to make the best decision. The following information is
available:

1. Budgeted sales revenues, production units, material costs, and labour costs are as
follows:

Jul Aug Sept Oct Nov Dec

Sales revenues 148,000 150,000 160,000 180,000 200,000 260,000

(RM)
Production units 12,700 11,300 11,700 12,800 13,400 15,200

Direct material costs 68,500 71,250 76,150 85,450 88,800 89,150

(RM)
Direct labour costs 16,500 17,500 18,500 19,500 20,500 21,500
(RM)

2. The payment for the material purchases is as follows:

- 60% paid in the month of purchase.
- The remaining balance will be paid one month after purchase.

3. The collection of the monthly sales is as follows:

- 10% of the sales are cash sales.
- 40% of the credit sales are collected one month after sales, and the remaining
credit sales will take an additional month's credit.

4. Variable overhead is RM1.20 per unit. Two-thirds of the variable overhead is paid in
the month incurred. The balance is payable one month in arrears.

5. The monthly fixed overhead is RM20,000 and is paid as it is incurred. The fixed
overhead costs include monthly depreciation of the cosmetic mixer machine and
bottle filling machine, amounting to RM2,400 and RM1,800, respectively.

6. The advertising and office expenses are 8% and 10% of the monthly sales,
respectively, and are paid as it is incurred.

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7. The company plans to purchase a new motor van costing RM100,800 in December,
with payment over seven (7) years in equal monthly installments. The company
agrees to make the first instalment payment starting December 2023.

8. The company will receive interest on a fixed deposit amounting to RM25,500, which
will be paid in three (3) equal installments starting from October 2023.

9. A consultation fee of Good Manufacturing Practices for cosmetic products, including

their production, control, storage, and shipment, amounting to RM5,500, is expected
to be paid in November 2023.

10. Direct labour costs are paid as it is incurred.

11. The closing cash balance for the third quarter is an overdraft of RM14,500.

Required:

Prepare a cash budget for SweetBelle Cosmetic Sdn Bhd for the fourth quarter of 2023.
(20 marks)
(Total: 25 marks)

END OF QUESTION PAPER

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