 |
CMA612S - COST MANAGEMENT ACCOUNTING 202 - 2ND OPP - JAN 2020 |
|
|
1 Page 1 |
▲back to top |
NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTING, ECONOMICS & FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BOAC
COURSE CODE: CMA612S
LEVEL: 6
COURSE NAME: COST AND MANAGEMENT
ACCOUNTING 202
SESSION: JANUARY 2020
DURATION: 3 HOURS
PAPER: PRACTICAL AND THEORY
MARKS: 100
EXAMINERS:
SECOND OPPORTUNITY QUESTION PAPER
H Namwandi, K Tjondu and A Makosa
MODERATOR:
K Boamah
INSTRUCTIONS
e This examination paper is made up of four (4) questions.
e Answer All the questions and in blue or black ink.
e Show all your workings.
e Start each question on a new page in your answer booklet and show all your workings.
e 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 (Excluding this front page)
|
|
2 Page 2 |
▲back to top |
Question 1
(30 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
K
L
M
N$/unit | N$/unit | N$/unit | N$/unit
56.00
40.00
78.00
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 | Per unit | Per unit | Per unit
2
1
-
3
2
-
3
4
2.5
2
3
2.5
5
8
3
4
Maximum demand per week
Units
1100
Units
3 700
Units
2 950
Units
4750
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.
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.
WZ does not hold inventory of either finished goods or raw materials.
|
|
3 Page 3 |
▲back to top |
REQUIRED
Marks
a)
Calculate:
i. |The net cost or saving to WZ per unit of P by manufacturing the
19
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
factory’s available resources.
Cc)
i. Assuming no other changes, calculate the purchase price of
component P at which your advice in part a) above would change.
ii. | Explain two non-financial factors that should be considered before
deciding whether or not to manufacture the component internally.
If you were to solve part b) above using linear programming,
following:
i. | The objective function
ii. | The inequality for the material A constraint
iii. | The inequality for the material B constraint
state the
Total Marks
30
|
|
4 Page 4 |
▲back to top |
QUESTION 2
(25 Marks)
Tree (Pty) Ltd, a small company, was established two years ago and manufactures a single
wood product. It has enjoyed spectacular growth since its inception, with demand for the
product continuously supply.
You are a business consultant. The managing director has asked you to undertake a full
assessment of the organization’s performance for the first six months of its financial year. Tree
(Pty) Ltd’s part-time accountant has prepared the following:
Tree (Pty) Ltd
Assessment of performance from 1 April 2018 to 30 September 2018
Original budget# | Actual results | Variance
1/04/2018 to
1/04/2018 to
30/09/18
30/09/2018
NS
NS
NS
Sales
3 250 000
4 026 000
776 000 F
Less: Manufacturing costs
1 960 000
2 692 200
732 200A
Raw materials (wood)
Direct labour
Overheads- factory
Closing inventory
Manufacturing profit
Add: Over-absorbed fixed overheads
Less: Overheads - administration
Profit
500 000
260 000
1.200 000
-
1 290 000
-
1.000 000
290 000
787 500
423 500
1 638 000
(156 800)
1 333 800
288 000
1.000 000
621 800
287 500 A
163 500 A
438 000 A
156 800 F
43 800 F
288 000 F
Nil
331 800 F
#Not flexed
The following information is relevant:
1. You may assume that the original budget and actual results presented above are
correct.
2. The organization uses a standard absorption costing system and values its closing
inventory at standard cost.
3. Budgeted sales and production were planned at 25 000 units. Tree (Pty) Ltd had no
opening inventory of raw material, work-in-progress or finished inventory.
Actual unit sales exceeded budgeted unit sales by 32 per cent and there was a closing
inventory of finished goods of 2 000 units. The actual selling price per unit remained
unchanged during the six-month period. There was no inventory of raw material or
work-in-progress at the end of the period.
On 1 April 2018 Tree (Pty) Ltd acquired a new lathe which was to reduce raw materials
losses in the production process and improve operating efficiencies. Prior to the
acquisition of the new lathe, the organization assumed a standard input loss of raw
materials of 20 per cent. The revised standard loss on raw materials input with the new
lather is 10 per cent. The organization budget took into account the revised standard.
The finished wood product is made to exact standard. Precisely 1.8 metres of wood
output from the lathe is required to manufacture one unit of finished wood product. You
may therefore assume that each unit of finished wood product actually used 1.8 metres
of processed wood output from the lathe. Tree (Pty) Ltd purchased the raw materials
wood (that is, wood which has not yet been processed through the lathe) for N$10.50
per metre during the period 1 April to 30 September 2018.
|
|
5 Page 5 |
▲back to top |
7. The standard labour time to make one unit is one hour. The workers are paid according
to an hourly rate. The actual labour hours worked during the six-month period totaled
38 500.
8. Budgeted factory overheads were estimated as follows:
40% - variable
60% - fixed
9. An analysis of the organisation’s actual factory overheads during previous reporting
periods showed the following:
Production (units)
20 000
Overheads (dollar)
N$1 080 000
40 000
N$1 440 000
The same actual overhead cost and volume relationships occurred in the occurred in
the current period.
REQUIRED
MARKS
(a) Calculate all relevant variances in as much detail as possible.
(20)
(Note: You are not required to calculate a fixed overhead volume capacity or
volume efficiency variance)
(b)
Comment briefly on Tree (Pty) Ltd’s performance and give possible reasons for
only the sales and materials variances.
(5)
TOTAL MARKS
(25)
Question 2
(25 marks)
Makalani is a manufacturing company. It has a small permanent workforce, but it is also
reliant on temporary workers, whom it hires on three-month contracts whenever production
requirements increase. All buying of materials is the responsibility of the company’s
purchasing department and the company’s policy is to hold low levels of raw materials in
order to minimise inventory holding costs. Makalani uses cost plus pricing to set the selling
prices for its products once an initial cost card has been drawn up. Prices are then reviewed
on a quarterly basis. Detailed variance reports are produced each month for sales, material
costs and labour costs. Departmental managers are then paid a monthly bonus depending
on the performance of their department.
One month ago, Makalani began production of a new product. The standard cost card for
one unit was drawn up to include a cost of N$84 for labour, based on seven hours of labour
at N$12 per hour. Actual output of the product during the first month of production was 460
units and the actual time taken to manufacture the product totalled 1 860 hours at a total cost
of N$26 040.
After being presented with some initial variance calculations, the production manager has
realised that the standard time per unit of seven hours was the time taken to produce the
first unit and that a learning rate of 90% should have been anticipated for the first 1 000 units
of production. He has consequently been criticised by other departmental managers who
have said that, ‘He has no idea of all the problems this has caused.’
|
|
6 Page 6 |
▲back to top |
REQUIRED
(a)
Calculate the labour efficiency planning variance and the labour efficiency
operational variance AFTER taking account of the learning effect.
Note: The learning index for a 90% learning curve is —0.1520
(0)
Discuss the likely consequences arising from the production manager's
failure to take into account the learning effect before production
commenced.
(c)
The theory of learning curves is limited because it will only hold if a number
of conditions apply. Briefly discuss those conditions.
TOTAL MARKS
MARKS
(7)
(10)
(8)
(25)
Question 4
(20 Marks)
Wollongong wishes to calculate an operating budget for the forthcoming period. Information
regarding products, costs and sales levels is as follows:
Product
Materials required
X (kg)
Y (litres)
Labour hours required
Skilled (hours)
Semi-skilled (hours)
Sales level (units)
Opening inventory (units)
A
2
1
4
2
2 000
100
B
3
4
2
5
1 500
200
Closing inventory of materials and finished goods will be sufficient to meet 10 per cent of
demand. Opening inventory of material X was 300 kg and for material Y was 1000 litres.
Material prices are N$10 per kg for material X and N$7 per litre for material Y. Labour costs
are N$12 per hour for the skilled workers and N$8 per hour for the semi-skilled workers.
REQUIRED
Prepare the following budgets:
i. | Production (units)
ii. | Materials usage (kg and litres)
iii. | Material purchases (kg, litre and N$)
iv. Labour (hours and N$)
MARKS
(8)
(2)
(10)
(5)
TOTAL MARKS
(20)
THE END