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CMA611S-COST MANAGEMENT ACCOUNTING 201-2ND OPP-JULY 2022 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE
QUALIFICATION : BACHELOR OF ACCOUNTING
QUALi FiCATION CODE: 07BOAC
COURSE: COST & MANAGEMENT
ACCOUNTING 201
LEVEL: 6
COURSE CODE: CMA611S
DATE: JUNE 2022
SESSION: THEORY & CALCULATIONS
DURATION: 3 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION
FIRST
EXAMINER:
MODERATOR:
Ms H. Kangala, Mr G. Sheehama, Mr H. Namwandi
Mr K. Tjondu
INSTRUCTIONS
1. This question paper is made up of FIVE (5) questions.
2. Answer All the questions and in blue or black ink.
3. You are advised to pay due attention to expression and presentation. Failure to do so will
cost you marks.
4. Start each question on a new page in your answer booklet and show all your workings.
5. 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
ambiquities and any assumption made by the candidate should be clearly stated.
PERMISSIBLE MATERIALS
Non-programmable calculator/financial calculator
THIS QUESTION PAPER CONSISTS OF 7 PAGES (Including this front page)
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Question 1
20 Marks
Sonny Limited manufactures a single product that is sold to retailers at N$40 per unit. Fixed
manufacturing overheads are allocated as a percentage of direct material cost. The budgeted
fixed manufacturing overheads amount to N$75 000 and are based on a budgeted direct
material cost of N$50 000.
The total actual production and other costs for 2020 are as follows:
Direct material
N$ 44 800
Direct labour
N$ 90 400
Variable manufacturing overheads
N$ 31 200
Variable selling and admin cost
N$ 1 500
Fixed marketing cost
N$ 30 000
Fixed manufacturing overheads
N$ 70 000
Fixed manufacturing overheads recovery rate
150% of direct material cost
Sonny Limited produced 8 000 units in 2020. There were 3 000 units in opening inventory and
10 000 units were sold. Production was 20% more in 2021 than in 2020 and there were 1 300
units in closing inventory. Direct material, direct labour and variable manufacturing costs
increased by 10% in 2021. Fixed marketing costs increased by 5% in 2021. The actual fixed
manufacturing overhead cost for 2021 amounted to R85 000.
Requirement:
(20)
a) Determine the flow of units for 2020 and 2021.
(2)
b) Calculate the unit cost using the absorption costing method for 2020 and 2021.
(4)
c) Compile the statement of comprehensive income for 2021 if we use the direct costing
methods.
(9)
d) The net income for the statement of comprehensive income using the absorption
costing method is N$34 458. Reconcile the difference in profit (if any) between the
two methods for 2021.
(5)
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Question 2
20 Marks
Triple Limited makes three types of gold watch, the Diva (D), the classic (C) and the Poser
(P). A traditional product costing system is used at present, although and activity-based
costing (ABC) system is being considered. Details of the three products for a typical period
are:
Hours per unit
Material
Production
unit
Labour hours Machine hours Cost per unit (N$)
Product D
½
1½
20
750
Product C
1½
1
12
1 250
Product P
1
3
25
7 000
Direct labour cost N$6 per hour and production overheads are absorbed on a machine hour
basis. The overhead absorption rate for the period is N$28 per machine hour.
Total production overheads are N$654 500 and further analysis shows that the total production
overheads can be divided as follows:
%
Cost relating to set-ups
35
Cost related to machinery
20
Cost relating to materials handling
15
Costs relating to inspection
30
Total production overhead
100
The following total activity volumes are associated with each product line for the period as a
whole:
Number of set-ups Number
of Number
of
movements
of inspections
materials
Product D
75
12
150
Product C
115
21
180
Product P
480
87
670
670
120
1 000
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Requirement:
(20)
a) Calculate the cost per unit for each product using traditional methods, absorbing
overheads based on machine hours.
(3)
b) Calculate the cost per unit for each product using ABC principles (work to two decimal
places).
(12)
c) Explain why costs per unit calculated under ABC are often very different to costs per
unit calculated under more traditional methods. Use the information from Triple
Limited to illustrate.
(5)
Question 3
15 Marks
AXC Limited produces joint products X, Y, Z and by-product XZ. The products are
manufactured in a common process, after which they are separated and processed further.
Joint costs are allocated using the sales value at split-off method, while the proceeds of the
by-product are treated as a reduction of the joint production cost of N$330 000. It is not
possible to sell product XZ without an additional production process after the split-off point.
Inventory is valued on a first-in-first-out (FIFO) basis. The following information relates to
AXC's joint process:
Product X
Product Y
Product Z
Product
xz
Selling price at split-off point
N$50
N$90
N$34
N$12
Selling price after further processing N$90
N$150
N$70
-
Further processing cost (total)
N$200 000 N$150 000 N$270 000 N$12 000
Unit produced
5 000
2 000
5 000
3 500
Unit in opening inventory
800
700
600
-
Units in closing inventory
1 000
500
2 000
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Unit cost of opening inventory
N$60
N$66
N$45
-
Required:
a) Calculate the gross profit per product and in total.
(15)
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Question 4
35 Marks
PART A
(12 marks)
Hemco Limited uses a process costing system to manufacture a range of automotive paints.
The final product (paint) passes through two processes, the mixing process where the paint is
essentially manufactured from mixing different ingredients and the thinning process where the
manufactured paint is then mixed with a liquid that gives it the correct thickness. Raw materials
are added at the beginning of each process and conversion cost (labour and overheads) are
incurred evenly throughout both processes.
The company has just introduced a new metallic high gloss paint and the following details
relate to the mixing process for the month of April 2022:
Inputs in the period
- Materials
- Conversion cost
10 000 litres
N$25 per litre
N$362 700
Normal loss
Scrap value
Actual loss in process
2%
N$10 per litre
220 litres
Closing WIP
Nil
All losses from Process 1 were sold at N$15 per unit.
Requirement:
(12)
a) Prepare the following completed accounts for the most recent financial period
(show all workings):
i)
Mixing process account
(6)
ii)
Normal loss account
(2)
iii) Abnormal loss/Abnormal qain account (2)
(10)
b) In relation to process costing, explain the difference between the FIFO and Average
(Weighted Average) methods for valuing inventory.
(2)
Note: round off to three numbers after decimal.
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PART B
(23 marks)
Based on the information provided in this question Part A above, assuming 97 800 litres at a
cost of N$609 340 were transferred from Mixing process during the month of April 2022. You
are also provided with the following details relate to the Thinning process for the month of April
2022:
Opening WIP
Materials % completed
Conversion cost% completed:
- Materials
- Conversion cost
Thinning
3 000 litres
100%
50%
N$42 000
N$55 750
Inputs in the period
- Materials
- Conversion cost
Closing WIP
Materials % completed
Conversion costs % completed
N$132 000
N$315 250
4 000 litres
100%
40%
Requirement:
(23)
a) Briefly outline the circumstances where process costing may be suitable as a (4)
method of valuing production and provide two examples.
b) Determine the value of equivalent production units completed as well as the
value of closing work-in-progress (WIP) using:
(i) The first in first out (FIFO) method of valuing inventory. (10)
(19)
(ii) The weighted average method of valuing inventory. (9)
Note: round off to four numbers after decimal.
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Question 5
(10 Marks)
Shona Ltd manufactures and sells a single product. Due to adverse events in the social and
political climate, the company has experienced a decline in their profits over the past three
years. The management accountant has therefore decided to investigate a proposal to
increase profitability, offered by the marketing department.
The following budgeted income statement has been prepared for next year.
Sales
12 000 000
Less: Total costs
10 500 000
Direct materials
3 600 000
Direct labour
3 000 000
Variable overheads
1 200 000
Fixed overheads
2 700 000
Net profit
1 500 000
The budgeted figures provided above exclude the following cost increases foreseen in the
next year: The material price is expected to increase by 5%; the labour rates are expected to
increase by 3%; and the fixed overhead is expected to increase by N$300 000.
The marketing department has proposed a reduction in the selling price of the single product
by 5%. It is expected that this reduction in the selling price will increase the number of units
sold by 20%.
Required:
Prepare Shona Ltd.'s income statement considering the changes predicted by the proposal.
(10)
*END OF QUESTION PAPER*
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