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CMA612S- COST AND MANAGEMENT 202- 2ND OPP- NOV 2023 |
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nAm I BI A un IVE RSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCEAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING & FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BOAC
COURSE CODE: CMA612S
LEVEL: 6
COURSE NAME: COST & MANAGEMENT
ACCOUNTING 202
SESSION: JANUARY 2024
DURATION: 3 HOURS
PAPER: PRACTICAL AND THEORY
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINERS:
H Namwandi, H Kangala, S Lishokomosi & S Tjitjo
MODERATOR: E Kangootui
INSTRUCTIONS
• This question paper is made up of four (4) questions.
• Answer All the questions in blue or black ink only.
• You are advised to pay due attention to expression and presentation. Failure to do so will
cost you marks.
• Start each question on a new page in your answer booklet and show all your workings.
• Questions relating to this paper may be raised in the initial 30 minutes after the start of
the paper. Thereafter, candidates must use their initiative to deal with any perceived error
or ambiguities and any assumption made by the candidate should be clearly stated.
PERMISSIBLE MATERIALS
Non-programmable calculator
THIS QUESTION PAPER CONSISTS OF 6 PAGES {Including this front page)
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Question 1
25 Marks
Limehouse Ltd is a local leather products company that sells one type of leather bag. The
company is preparing for its upcoming year, ending 31 December 2023.
Limehouse plans to incur the following fixed costs:
Production overheads
N$720 000
Administration overheads
N$480 000
Over the past 2 years, Limehouse Ltd incurred the following selling overheads:
For the year ending 31 December 2022: N$350 000 for 10 000 units sold.
For the year ending 31 December 2021: N$320 000 for 8 500 units sold.
The planned selling price and variable cost per leather bag is as follows:
Selling price
N$200.00
Variable Costs
Direct Materials - 8 meters N$40.00
Direct Labour - 6 Hours
N$36.00
Production overheads
N$14.00
Limehouse has a profit objective of N$540 000 for the forthcoming year. A sales forecast
revealed high sales in the months of March, June, September, and November; with expected
sales of 10% of the total sales in each of these months. The remainder of the planned sales
quantity is expected to be achieved equally in the other eight months of the year.
Each month's production is planned as follows:
• 40% of each month's sales are produced in the month before sale.
• 60% of each month's sale are produced in the month of sale.
Direct Materials purchases are planned as follows:
• 50% of each month's direct materials requirements are purchased in the month before
the materials are required.
• 50% of the remaining direct materials requirement requirements are purchased in the
month the materials are required.
The opening inventory levels of finished goods and direct materials for the budgeted year
should be assumed to be consistent with the above policies.
All sales and purchases transactions are done on credit. With regards to credit policies,
Limehouse Ltd collects 70% of sales in the month of sale and 30% in the month of after sale.
50% of the payments due to accounts payables are made in the month following purchases,
while the remaining 50% is paid 2 months after purchases.
The company expects to collect N$50,000 from receivables and pay N$75,000 to accounts
payables in the first month of the year which relate to the activities of the previous year.
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REQUIRED:
Prepare the following functional budgets for the first quarter of the year (January
- March):
(a) Sales budget (quantity and value)
(b) Production Budget
(c) Materials budget (quantity and value)
(d) Material payments to accounts payable
Show all your workings!
Total
Marks
(10)
(4)
(8)
(3)
25
Question 2
25 Marks
A prime food manufacturer is reviewing operations for the last three months of 2023. The
company operates a standard marginal costing system and manufactures one product ZP for
which the following standard revenue and costs have been supplied:
Selling price
Material A
Material B
Direct labour
N$ 12.00
2.5 kg at N$ 1.70 per kg
1.5 kg at N$1.20 per kg
0.45 hrs. at N$ 6.00 per hour
Fixed production overheads were expected to be N$ 62,500 for the last three months.
Actual data for the last three months is as follows:
Sales and production 48,000 units of ZP were produced and sold for N$ 580,800.
Material A
121,951 kg were used at a cost of N$ 200 000.
Material B
67,200 kg were used at a cost of N$ 84,000.
Labour
Employees worked for 18,900 hours but only 19,200 were paid at a cost
of N$ 117,120.
Fixed production overheads for the three months were expected to be N$ 62,500.00.
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REQUIRED:
(a) Calculate the following:
i. Sales volume contribution and sales price variances.
ii. Price, mix and yield variance for each material.
iii. Labour rate, labour efficiency and idle time variances.
(b) Prepare an Operating Statement that reconciles budgeted gross profit to
actual Qross profit.
(c) Suggest possible causes of the following variances:
i. Material price and yield variances for material A
ii. Labour rate and labour efficiency.
(d) Explain the difference between Basic and Ideal Standards and their
impact on motivation.
Show all vour workings!
Total
Marks
(3)
(6)
(3)
(5)
(2)
(2)
(4)
25
Question 3
(25 marks)
Chineke Limited traditionally designs and manufactures lightweight aircraft. Orders for these
aircraft have slackened over the past two years; so to enable the company to survive, it has
been decided by Chineke's board of directors to start manufacturing a bigger aircraft.
The production manager expects the first plane to take 330,000 engineering minutes to build,
and from past experience believes a 90% learning curve effect could be achieved. The
relevant costs are as follows:
Direct material
N$50 000 per aircraft
Direct labour
N$1O per hour
Variable overheads
N$0,50 per direct labour hour
Fixed overheads
N$1,00 per labour hour
Profit mark-up is usually 10% per aircraft.
NB: The learning curve coefficient must be rounded off to four (4) decimals.
REQUIRED:
Marks
(a) A local Airline (Oros CC) has offered to purchase four aircraft. Estimate the (6)
price that Chineke Limited should quote for these four aircrafts.
(b) Oros CC was so impressed by the aircraft they had purchased in (a) above, (9)
that they immediately placed a second order for a further five aircrafts.
What price should Chineke Limited quote for this next order?
(c) Explain any two conditions that should prevail for the learning curve to be (2)
used reliably.
(d) Identify one major area within management accounting where learning (2)
curve theory is likely to have consequences and suggest potential
limitations of this theorv.
(e) Explain why it is important to consider the learning curve effect when (6)
determining the terms of the gain-sharing agreement with employees.
Show all your workinqs!
Total
25
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Question 4
(25 marks)
WZ Limited (WZ) is a manufacturing company with two factories. The company's West
factory currently produces a number of products. Four of the products use differing quantities
of the same resources. Details of these four products and their resource requirements are as
follows:
Product
Selling price
J
N$/unit
56.00
K
N$/unit
40.00
L
N$/unit
78.00
M
N$/unit
96.00
Direct labour (N$8 per hour)
Direct material A (N$3 per litre)
Direct material B (N$5 per kg)
Variable overhead (note 1)
Labour related
Machine related
Total variable cost
20.00
6.00
10.00
1.25
1.25
38.50
16.00
3.00
0
1.00
2.00
22.00
24.00
0
15.00
1.50
0.75
41.25
20.00
9.00
20.00
1.25
1.00
51.25
Other data
Direct material A (litres per unit)
Direct material B (kg per unit)
Labour hours per unit
Machine hours per unit
Per unit
2
2
2.5
5
Per unit
1
-
2
8
Per unit
-
3
3
3
Per unit
3
4
2.5
4
Maximum demand per week
Units
1 100
Units
3 700
Units
2 950
Units
4 750
Notes:
1. An analysis of the variable overhead shows that part of it is driven by the number of labour
hours and the remainder is driven by the number of machine hours.
2. Currently WZ purchases a component, "P", from an external supplier for N$35 per
component. A single unit of this component is used in producing "N",the company's only
other product. Product "N" is produced in the company's other factory (East) and does not
use any of the resources identified above. Product "N" currently yields a positive
contribution. WZ could manufacture component "P" in its West factory, but to do so would
require: 1 hour of direct labour, 0.5 machine hours, and 2kgs of direct material B. WZ
purchases 500 components per week. WZ could not produce the component in its East
factory.
3. The purchasing manager has recently advised you that the availability of direct materials
A and B is likely to be restricted to 21 000 litres and 24 000 kilograms per week
respectively. The restriction is unlikely to change for at least 10 weeks. No restrictions are
expected on any other resources.
4. WZ does not hold inventory of either finished goods or raw materials.
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REQUIRED
Calculate:
a)
i. The net cost or saving to WZ per unit of P by manufacturing the
component internally.
ii. Whether either direct material A or B will be a scarce resource
during the next 10 weeks. Assume that 500 P components will be
produced.
iii. Whether WZ should continue to purchase the component P or
whether it should manufacture it internally during the next 10
weeks.
Prepare a statement to show the optimum weekly usage of the West
b) factory's available resources.
Marks
(5.5)
(3.5)
(5)
(4)
i. Assuming no other changes, calculate the purchase price of (2)
c)
component P at which your advice in part a) above would change.
ii. Explain two non-financial factors that should be considered before (2)
deciding whether or not to manufacture the component internally.
If you were to solve part b) above using linear programming, state the
(3)
d) following:
i. The objective function
ii. The inequality for the material A constraint
iii. The inequality for the material B constraint
Show all your workings!
Total Marks
25
THE END
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