UNIVERSITI TEKNOLOGI MARA MELAKA

TEST 2

COURSE : COST AND MANAGEMENT ACCOUNTING 2

COURSE CODE : MAF251
EXAMINATION : MAY 2023
TIME : 1 HOUR 15 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO (2) 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

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

This examination paper consists of 4 printed pages
QUESTION 1

Serunding Petra Sdn Bhd produces three popular traditional serunding which are Fish
Serunding, Original Serunding and Spicy Serunding. The company is currently facing a
problem in meeting the customers’ demands. This is due to short supply in the market
following the upsurge online orders from all over Malaysia.

The following are the information related to the production and sales of the serunding for the
coming month.

i. Selling price and cost structure of the products per packet are as follow:

Fish Original Spicy

Serunding Serunding Serunding
Estimated sales (packets) 500 2,500 2,700
RM RM RM
Selling price 80 120 90
Direct material 10 60 40
Direct labour 20 25 20
Variable production overhead 8 12 10

ii. The direct material used to produce Fish Serunding is mackerel, valued at RM10 per
kilogram. Original Serunding and Spicy Serunding use the same material which is
fresh local meat, priced at RM40 per kilogram. In the coming month, there will be
4,515 kilograms of the fresh local meat and 550 kilograms of the mackarel supplied
from the local suppliers.

iii. The direct labour rate is RM5 per hour. The total direct labour hours available in the
coming month are 25,500 hours.

iv. The fixed production overhead cost and the fixed administrative overhead cost for the
year are estimated to be RM120,000 and RM60,000, respectively.

v. The company pays sales commission at a rate of 2.5% of the selling price.

Required:

a. Compute any excess and/or shortage of the direct material and the direct labour hour
for the coming month.
(3 marks)

b. Calculate the following:

i. The contribution margin per unit for each of the product.

ii. The optimum production plan for all products to be produced by Serunding Petra
Sdn Bhd for the coming month.
(12 marks)

c. Based on your calculation in part (b) above, predict the net profit for the coming month
of Serunding Petra Sdn Bhd.
(2 marks)

d. Determine THREE (3) disadvantages of limiting factor.

(3 marks)
(20 marks)
QUESTION 2

Once Twice Sdn Bhd is a local company that produces children play room’s accessories.
Among the products produced by the company are children’s tent and play tunnel. Polyester
fabric is the main component to produce the children’s tent and this material is currently
purchased from outside supplier, Fabrik Mewah Enterprise.

The top management of Once Twice Sdn Bhd intends to produce the polyester fabric
internally. Hence, the production team has estimated the following costs to produce one
meter of the polyester fabric:

Direct material: polyester filament 0.3 kilogram at RM80 per kilogram

Direct labour 1 hour at RM20 per hour

Besides the costs listed above, the company will incur annual specific costs related to the
production of polyester fabric which are the quality control cost and fixed production
overhead cost of RM16,000 and RM80,000 respectively. The variable production overhead
cost is estimated at 35% of the direct material cost. Once Twice Sdn Bhd estimates to use
10,000 meters of polyester fabric annually in the production of the children’s tent.

Due to limited resources, to produce the polyester fabric internally, Once Twice Sdn Bhd
must use the same production line that produces play tunnel. The annual production of the
play tunnel is 4,000 units.

The data relates to the production of one unit of the play tunnel is listed below:

RM
Selling price 40
Direct material cost 6
Direct labour cost 5
Production overhead cost 10

50% of the above production overhead cost are fixed in nature. If Once Twice Sdn Bhd
decides to produce the polyester fabric internally, three quarter of the annual production and
sales of the play tunnel has to be discontinued.

Once Twice Sdn Bhd purchases the polyester fabric from Fabrik Mewah Enterprise at RM50
per meter. There is an agreement between these two businesses related to the supply of the
polyester fabric. The agreement stated that Once Twice Sdn Bhd will incur the following
additional costs for the purchase of the polyester fabric:

Quality control RM5 per meter

Delivery charges RM1,000 for every 5,000 meters purchased

There is a clause in the agreement stated that cancellation fee of RM15,000 should be paid
by the party that requested the cancellation.

Required:

a. Compute the opportunity cost from the loss of the sales of the play tunnel if Once
Twice Sdn Bhd decides to produce the polyester fabric internally. (Show all workings)
(3 marks)
b. Calculate the following:

i. The total relevant cost to make the polyester fabric.

ii. The total relevant cost to buy the polyester fabric.
(12 marks)

c. Based on your answer in part (b) above, advise the top management of Once Twice
Sdn Bhd in making the best decision for the company.
(2 marks)

d. For each of the following statement, determine whether it is quantitative factor or

qualitative factor in a make or buy decision making:

i. The relevant cost of buying a component is RM15,000 whilst the relevant cost of
making the same component is RM13,200.

ii. A company needs to consider whether it has the expertise to produce a

component if there is a change from outsourcing to producing the component
internally.

iii. A company needs to incur additional rental cost of machineries of RM20,000 per
month, if the company decides to make one of the components required in the
production of its product.
(3 marks)
(Total: 20 marks)

END OF QUESTION PAPER