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CMA611S-COST AND MANAGEMENT ACCOUNTING 201-2ND OPP JULY 2024 |
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nAmI BIA un IVERS ITY
OF SCIEn CE Ano TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICS,ACCOUNTINGAND FINANCE
QUALIFICATION:BACHELOR OF ACCOUNTING
QUALIFICATIONCODE:07BGAC LEVEL:6
COURSECODE: CMA611S
COURSENAME: COST & MANAGEMENT ACCOUNTING 201
SESSION:JULY 2024
DURATION: 3 HOURS
PAPER:THEORY AND CALCULATIONS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINERS Namwandi, H., Mbangula P., and Sheehama, K.G.H.
MODERATOR 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 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]
North-region Corporation makes a single product called OMBIKE/KASHIPEMBEwhich is sold for
N$300. It is based upon the organization's current normal operating capacity of 3 000 units per period.
Currently, the organization can sell all that it produces, and it has no inventory of any kind (raw
materials, work-in-progress or finished goods) on hand.
At this level of production, the costs per unit are:
Direct material
Direct labour (5 hours per unit)
Manufacturing overheads
Production/Manufacturing cost
Administration and selling
Total costs
N$
150 000
75 000
270 000
495 000
135000
550 000
Manufacturing overheads have been shown to have the following cost-volume relationship:
Direct labour hours per period
Manufacturing overheads
5 000
N$375 000
6 250
N$393 750
7 500
N$412 500
The administration and selling cost comprises a sales commission, which is calculated at 5% of the
selling price and is incurred for each unit sold. The balance of the administration and selling costs is
fixed in nature. All fixed production overhead costs are budgeted on the basis of 20 000 direct labour
hours per year.
Actual fixed production overheads of N$300 000 for the period were in line with the budget for that
period.
The industry in which North-region Corporation operates is becoming extremely competitive. North-
region Corporation is considering changing its method of inventory valuation from absorption costing
to direct costing. It is expected that all other variable costs per unit and other fixed costs will remain
unchanged or the foreseeable future. The managing director has asked you to undertake various
financial analyses as shown in the requirements below, to assessthe impact of the proposed changes.
In all cases,you are informed that the Corporation had actual production of 2 800 units and had sold
2 500 units. The business did not have any inventory at the beginning of the period.
You are required to:
a) Calculate the predetermined overhead rate (POR)or overheads absorption rate. (2 marks)
b) Calculate the contribution margin per unit.
(5 marks)
c) Compute total fixed costs
(2 marks)
d) Prepare a statement of profit or loss for the period using Absorption costing system. (9
marks)
e) Determine the net income/net profit using direct costing system without preparing
statement of profit or loss.
(3 maks)
f) Explain the reasons for any difference in the reported profit under the two costing systems.
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QUESTION 2
[25 Marks]
PART A
(18 marks)
Geoffrey Ltd manufactures a product in two departments. The following information is available in
respect of Department 1 for April 2024:
Opening inventory (WIP) 1 April 2024
Stage of completion:
Direct material
Direct labour and factory overheads
Units started into production
Completed and transferred to Department 2
Closing inventory (WIP) 30 April 2024
Stage of completion:
Direct material
Direct labour and factory overheads
Costs incurred during the week:
Direct material
Direct labour and factory overheads
Amount (N$)
23 000
17 600
98 800
38400
Units
10000
40%
60%
50000
40000
20000
80%
70%
You are required to:
a) Briefly outline the circumstances where process costing may be suitable as a method of
valuing production and provide examples.
(4 marks)
b) Assume that Geoffrey Ltd uses the FIFO method of valuing inventory. Prepare a quantity
schedule for physical units, equivalent units and equivalent unit costs for the materials and
the conversion costs.
(14 marks)
PARTB
(7 marks)
Shawana Ltd manufactures three joint products in the same production process. Joint costs are
apportioned on the basis of the number of units manufactured for each product. All three products
can be sold either at the split-off point or after further processing. Total joint costs for the past month
amounted to N$60 000. The following details are presented to you:
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Product
Alpha
Beta
Gamma
Units
produced
and sold
N$
1000
2 500
2 500
After further production processing
Selling price Additional costs Selling price
N$
N$
N$
8.00
5 000
18
12.00
12 500
16
10.00
12 500
17
REQUIRED:
Calculate the total net income of Shawana Ltd after processing further.
(7 Marks)
QUESTION 3
[25 marks]
Rob Ltd manufactures a single product. During the past five years the company has experienced a
steady growth in sales. However, increased competition has led the directors to believe that an
aggressive advertising campaign will be necessary to maintain the company's present growth.
To prepare for next year's advertising campaign the company's accountant has prepared and
presented the following data for the current year (2023):
Cost schedule:
Variable costs:
Direct materials
Direct labour
Variable overheads
N$3,25 per unit
N$ 8,00 per unit
N$2,50 per unit
Fixed costs:
Manufacturing
Selling
Administrative
N$25 000
N$40 000
N$70 000
Selling price per unit
Sales (2023)
N$25,00
20 000 units
The company has set the sales target for 2024 at a level of 22 000 units.
Required:
a) Calculate the company's net profit for 2023.
(5 marks)
b) Calculate the company's break-even point in sales value for 2023.
(6 marks)
c) The directors believe that an additional selling expense of N$11 250 for advertising in 2024,
with all other costs remaining unchanged, will be necessary to attain the sales target.
Calculate the net profit for 2024 if the additional amount is spent on advertising.
(5 marks)
d) How many more units must be sold in 2024 in order to break even if the additional N$11 250
is spent on advertising?
(3 marks)
e) Outline six assumptions for using CVPanalysis.
(6 marks)
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Question 4
[25 Marks]
Poller Ltd manufactures two products, namely A and B. The company operates an absorption costing
system according to which all production overheads are gathered in a single cost centre and allocated
to products using direct labour cost as an allocation basis. An ABC system has been introduced
recently.
Budgeted information for the following financial year is as follows:
Product A
Product B
Direct material cost per unit
Direct labour cost
90
100 000
10
900 000
1000 000
Production overheads:
Machine set-up costs
Design costs
Other overheads
Total overheads
100 000
300 000
1100 000
1500 000
Number of units manufactured
Number of machine set-ups
Number of design hours
1000
50
2 000
9000
50
8 000
10000
100
10 000
Other overheads are allocated to individual products based on direct labour costs.
Required:
a) Calculate the unit cost of each product using the absorption costing system. (6 marks)
b) Calculate the unit cost of each product using the ABCsystem.
(11 marks)
c) Discuss the difference in cost that is calculated in the results of (a) and (b).
(4 marks)
d) Explain the circumstances under which an activity-based costing system would produce
similar product costs to those produced using a traditional absorption costing system.
(4 marks)
End of question paper.
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