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CMA611S-COST MANAGEMENT ACCOUNTING 201-1ST OPP- JUNE 2024 |
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n Am I BI A u n IVER s I TY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICS,ACCOUNTING_AND FINANCE
QUALIFICATION:BACHELOR OF ACCOUNTING
QUALIFICATIONCODE:07BGAC LEVEL:6
COURSECODE: CMA611S
COURSENAME: COST& MANAGEMENT ACCOUNTING201
SESSION:JUNE 2024
DURATION: 3 HOURS
PAPER:THEORYAND CALCULATIONS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINERS Namwandi, H., Mbangula P., and Sheehama, K.G.H.
MODERATOR Ms Kangala, H.
INSTRUCTIONS
• Answer ALL the questions in blue or black ink only. NO PENCIL.
• Start each question on a new page, number the answers correctly and clearly.
• Write clearly, and neatly showing all your workings/assumptions.
• Work with at least four (4) decimal places in all your calculations and only round off only
final answers to two (2) decimal places.
• Questions relating to this examination may be raised in the initial 30 minutes after the start
of the examination. Thereafter, candidates must use their initiative to deal with any
perceived errors or ambiguities and any assumptions made by the candidate should be
clearly stated.
PERMISSIBLE MATERIALS
• Silent, non-programmable calculators
THIS QUESTION PAPERCONSISTSOF_ 4_ PAGES(excluding this front page)
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QUESTION 1
[25 Marks]
PARTA
(12 marks)
Tura-Kazi DIV Ltd has recently started making one type of special juice using watermelon. The product
is sold in small bottles and is called "Sweet As It Taste (SAIT)". The following is production and sales
information for the month of September 2023:
Sales
Direct material cost
Direct labour cost
Variable production overhead
Variable selling & marketing overhead
Units sold
Units produced
665 000
200 000
150 000
50 000
19 000
9 500
10000
Additional information is as follows:
1. Actual fixed production overhead for the month was N$130 000.
2. Fixed administration overhead of N$80 000 were incurred during the month, in line with the
budget for the month.
3. The business does not expect to have any inventory as at 1 September 2023.
You are required to:
(a) Calculate the break-even point in units.
(bl Calculate the break-even point in sales dollars.
(c) Compute profit-volume (contribution margin) ratio
(d) Calculate percentage margin of safety(% MOS)
(6 marks)
(2 marks)
(2 marks)
(2 marks)
PARTB
(13 marks)
The industry in which Tura-Kazi DIV Ltd operates is becoming extremely competitive. To keep pace
with the technological and maintain market share, the following are being considered:
Acquisition of new machinery, which will increase the current normal operating capacity of 10 000
units by 2 000 units; and increase the variable manufacturing overheads by 15% per unit. The
acquisition of the new machinery will also result in an increase in total fixed manufacturing overheads
by N$258 000 from its current cost level and it will also increase the current selling price by 20%. The
business expects to sell 100% of production with the new machinery and does not expect to have any
opening inventory or closing inventory during the period. It is expected that all other variable costs
per unit and other fixed costs will remain unchanged for the foreseeable future.
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REQUIREMENT:
Advise the management of Tura Kazi DIV Ltd whether it should continue with its current operation
without the acquisition of a new machine or buy the new machine. You should show your calculations
to support your recommendations.
QUESTION 2
[25 Marks]
Having attended a CIMA course on activity-based costing, you decide to experiment by applying the
principles of ABC to the three products currently made and sold by your company. Selling prices are
determined using cost plus 20% pricing. Total production volumes for products A, B, and C for the
current period are 120 units, 100 units and 200 units, respectively. The following information relates
to this production period:
Product
Direct material cost per unit
Direct labour per unit
Machine time per unit
A
N$40
N$28
4 hours
B
N$50
N$21
3 hours
C
N$30
N$35
5 hours
The three products are similar and are produced in production runs of 20 units and sold in batches of
10 units.
Total production overhead recorded by the cost accounting system is analysed under the following
headings:
Cost Pools
Machine set up Costs
Stores receiving costs
Inspection/Quality control
Material handling costs
Total cost
N$
178 500
225 000
65 625
4620
473 745
Cost Drivers
Number of production runs
Requisitions raised
Number of production runs
Orders executed
These overhead costs are absorbed by products at a machine hour rate, N$15.
For the period, the number of requisitions raised was 20 requsitions for each product, while a total
of 42 orders were executed, at 10 units per order.
The company wants to boost sales revenue to increase profits but has a limited capacity to utilize the
option of increased volume. The finance manager suggested a move towards activity-based costing
(ABC), away from full absorption costing. It is believed that this will alter the cost of the products,
which may in turn result in different prices and hopefully increased profits.
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You are required to:
a) Calculate sales price per unit of each product using the current method of absorption costing.
(6 marks)
b) Calculate the full production cost per unit of each product using activity-based costing. (14
marks)
c) Explain the terms" Activity-based costing", and "cost drivers" and state two examples of cost
drivers.
(5 marks)
QUESTION 3
(25 marks]
Tura'Ts is a Windhoek-based company that produces and sells t-shirts. The firm uses variable costing
for internal purposes and absorption costing for external purposes. At year-end, financial information
must be converted from variable costing to absorption costing to satisfy external requirements.
Company management decided to apply fixed manufacturing overhead to products using units of
production. The selling price pert-shirt is N$200.
The following are some data for 2019 and 2020:
Sales (units)
Opening inventory (units)
Production (units)
Closing inventory (units)
Variable manufacturing cost (total)
Variable selling cost per unit
Fixed production overhead
Fixed selling costs
2019
Budget
40000
5 000
???
25 000
N$500 000
N$2.25
N$120 000
N$130 000
Actual
40000
4000
44000
???
N$440 000
N$2.50
118 000
75 000
2020
Actual
35 000
4 000
40000
4000
N$400 000
N$2.50
130000
75 000
REQUIRED:
Calculate the actual net profit for the year 2019 that would be reported under marginal and
absorption costing.
(25 Marks)
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QUESTION 4
(25 MARKS)
Muti Chemicals Ltd is a company that was established in Otjiwarongo in 2012 to answer the call from
the President of Namibia for young entrepreneurs to start their own businesses. The president
encouraged more Namibians to focus on Science Technology Engineering and Mathematics (STEM)
fields so that the country can produce more products internally instead of relying on expensive
imports from other countries.
In 2011, Hunga and his friends decided to put their knowledge, funds, and expertise together to
establish a company that specializes in producing household cleaning chemicals. One of the best-
selling Chemicals is the All-In-One Chemical which passesthrough three processes.
The cost records of Muti Chemicals Ltd show the following information for the year ended 31st
December 2020 in relation to the All-In-One Chemical:
Particulars
Additional Materials
Labour
Overheads
Normal Loss
Scrap value (per unit)
Actual Output (in Units)
Process AN$
48,620
32,865
2,515
20%
1
18,000
Process B N$
108,259
84,553
10,588
15%
2
16,000
Process C N$
103,345
77,180
16,275
10%
3
15,000
Input to the process at the beginning was 20,000 units @ N$28 per unit.
Mr. Tsibeb a dedicated teacher at Outjo High School decided to take his Grade 12 accounting and
business studies pupils on a school trip to visit a number of businesses in Otjiwarongo. One of the
companies that were visited was Muti Chemicals Ltd where the pupils were introduced to process
costing for the very first time. The pupils visited the factory and saw how different chemicals are
produced. During the visit, the pupils were given a PowerPoint presentation by one of the accountants
explaining how process accounts are prepared.
At the end of the visit, one of the brightest students Dawid Benge made the following comment:
"Process costing is wonderful, and I think all the manufacturing companies in Namibia should adopt
process costing".
REQUIRED:
a) Prepare the process accounts for the 3 processes and show the cost per unit for each
process (T-Account).
(21 marks)
b) State whether you agree or disagree wit~ the statement that was made by the high school
pupil and explain when the use of ProcessCosting is appropriate.
(4 marks)
Endof QuestionPaper
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