CONFIDENTIAL 1 AC/JAN 2024/MAF551/420

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : MANAGEMENT ACCOUNTING AND CONTROL

COURSE CODE : MAF551/420
EXAMINATION : JANUARY 2024
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

ii) a one-page Appendix 1
iii) an Answer Booklet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 7 printed pages
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QUESTION 1

a. The sales budget shows a detailed summary of the estimated number of units sold for
a particular period. Identify five (5) factors that need to be considered when forecasting
sales volume.
(5 marks)

b. Maju Ria Sdn Bhd, a manufacturer and distributor of porcelain, has been in business
for four (4) years. Maju Ria Sdn Bhd is located in Ipoh, and based on market trends,
the company is expected to grow steadily. The initial budgeted production for the
period is 54,000 units. However, due to the endemic situation, Mr Rayyan, the
production manager, is worried about the workers' ability to achieve the target, which
seems to be too high. He suggested reducing the volume by 9,000 units. The
management of Maju Ria Sdn Bhd agrees with this suggestion. Below is the
information related to the company for the year ending December 2023:

Maju Ria Sdn Bhd

Performance report for the year ended 31 December 2023
Initial Suggested Actual Variance
Budget Budget
Production and sales units 54,000 45,000 49,500 4,500

Costs: RM RM RM
Material 486,000 405,000 482,220 77,220 A
Labour 656,250 548,250 580,950 32,700 A
Utilities 69,750 60,750 58,230 2,520 F
Depreciation 78,750 78,750 73,125 5,625 F
1,290,750 1,092,750 1,194,525 101,775 A

Required:

Prepare a revised budget for the company based on the principles of flexible budgetary
control system.
(10 marks)

c. “Setting a more challenging budget target will always result in an improved company
performance”.

Do you agree with the above statement? Explain your answer.

(5 marks)
(Total: 20 marks)

QUESTION 2

MyKar Electric Sdn Bhd is an Electric Vehicle (EV) Innovation company that provide services
to convert internal combustion engine vehicles to run purely on electricity. The company has
been five years in the business. One of the best-selling services is to convert a compact car
into an electric vehicle called CompactEV. The business model is that customer bring their
vehicle and then the company will convert it into an electric vehicle.

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One unit of CompactEV consist of one unit of Battery Panel System, one unit of Circuit Board
and one unit of Gear and Wheel System. Following are the standard cost to convert one unit
of compact vehicle:

RM
Direct Materials
- 1 unit of Battery panel system 12,000
- 1 unit of Circuit Board 2,000
- 1 unit of Gear and Wheel System 8,000
Direct Labour
- Skilled 1,440
- Semi-skilled 1,350
Variable production overhead 1,200

The standard hours to convert one unit of CompactEV is 120 hours for skilled labour and 180
hours for semi-skilled labour. The company does not maintain materials inventory because it
is customized based on customer vehicles. Below is the financial data for the year ended 31
December 2023 based on 100 units of CompactEV:

RM
Direct Materials
- Battery Panel systems 1,260,000
- Circuit Boards 240,000
- Gear and wheel systems 850,000
Direct Labour
- Skilled 148,800
- Semi-skilled 135,000
Variable production overhead 120,000

In 2023, the standard price of battery panel system has been revised to increase by 5% per
unit due to of the global market situation. In addition, a sudden breakdown in one of the
production lines caused the company to revert to manual production. This results in an
increase in the standard hours by 4 hours for skilled labour. Skilled labour and semi-skilled
labour worked for 11,600 hours and 18,000 hours respectively during the period.

Required:

a. Standard costing is vital control technique to measure the effectiveness and efficiency
of business operation. Discuss briefly five (5) criticisms of the standard costing system.
(5 marks)

b. Calculate the following variances for the year ended 31 December 2023:

i. Material price variances for Circuit Boards

ii. Material price planning variance for Battery Panel Systems
iii. Labour mix variance for semi-skilled labour
iv. Labour yield variance
v. Labour efficiency planning variance for skilled Labour
(10 marks)
(Total: 15 marks)

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QUESTION 3

MM Boutique Sdn Bhd is a boutique in a busy shopping mall in Kota Kinabalu, one of its
signature products is Kurung Batik. Currently, the company is operating at 80% of its full
capacity. The production manager has gathered the following data concerning the production
and sales of the product:

Statement of Profit or Loss

RM RM
Sales (9,600 units) 960,000
Less: variable costs
Direct materials 240,000
Direct labour 144,000
Manufacturing overhead 124,800
Selling expenses 76,800 585,600
Contribution 374,400
Less: fixed costs
Manufacturing overhead 170,000
Administrative expenses 85,000 255,000
Profit 119,400

The firm can maximize its production capacity without increasing costs, but when operating
beyond its maximum capacity, the firm needs to pay overtime to the workers. Following the
prime minister’s announcement to encourage the government and private staff to wear batik
attire daily, the demand for Kurung Batik increased drastically. The production manager is
independently considering the following two special orders.

Puan Anis, a representative for the staff of Agency A, has offered to buy 3,000 Kurung Batik
for RM90.00 each. Puan Anis agreed to bear for the freight cost of RM3,000 but the company
estimates it will incur an additional administrative expense of RM5,000 if the order is accepted.

Puan Emy a representative from a Government Linked Company (GLC) staff ordered 2,400
Kurung Batik at a special price of RM90.00 each. However, if this order is accepted, the
company estimates that it would require an additional administrative expense of RM2,000 if
the order is accepted.

The company does not need to bear the variable selling costs for the special orders.

Required:

a. Theory of Constraints is a process aimed at identifying and removing constraints in

organization processes that are standing in the way of organizational goals. Describe
five (5) steps of maximizing operating profit when faced with bottleneck and non-
bottleneck operations.
(5 marks)

b. Due to limited production capacity, the company can only accept one order, either
Puan Anis or Puan Emy. Determine the order that the company should accept.
(12 marks)

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c. Marketing manager, Mr Sin Chan insists on accepting the orders from both Puan Anis
and Puan Emy. He suggested to outsource Puan Anis order of Kurung Batik to Mira
Tailor for RM70 per piece. However, the company had to bear the delivery cost of
RM3,000 per order made with Mira Tailor. In addition, the company will incur ordering
costs of RM1,000.

i. Assess the impact of this decision on the company’s total profit

(5 marks)

ii. Explain two (2) qualitative factors that MM Boutique should consider when
outsourcing the production of Kurung Batik to Mira Tailor.
(3 marks)
(Total: 25 marks)

QUESTION 4

Khaind Sdn Bhd is a market leader in water filtration market that produces tabletop water filters
namely Sprintzer. For December 2023, the company forecasted that 15,000 units of Sprintzer
will be produced and sold. The budgeted fixed costs per month is RM1,350,000 which consists
of RM450,000 of production costs and RM900,000 of administrative and selling costs. The
variable costs per unit are as follows:

RM
Direct material 330
Direct labour 250
Overhead 150
Sales commission 100

Sales revenue of the Sprintzer is now decreasing due to stiff competition. Hence, the
management of Khaind Sdn Bhd is now contemplating whether they should change the price
of Sprintzer. The company’s management estimates that variable costs per unit and fixed
costs will remain unchanged. The marketing manager of the company seeks your advice
regarding the proposal of changing the price.

Required:

a. Describe two (2) pricing strategies that the company should apply in order to sustain
its position in the water filtration market.
(5 marks)

b. Currently, Khaind Sdn Bhd set their selling price of Sprintzer at full cost plus 50% on
costs. Meanwhile, the competitor offers their water filter at RM1,260 per unit.

i. Compute the selling price per unit of Sprintzer.

(4 marks)

ii. Calculate the target cost per unit and total cost gap for December 2023 if the
company want to maintain its current profit mark up.

(6 marks)
(Total: 15 marks)
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QUESTION 5

Seteguh Maju Bhd is a manufacturer and supplier of motorcar parts and equipment. The
Spare Parts Department is one of its profit centers that produce spare parts and supply the
product to fulfill both internal and external demand. Meanwhile, the Equipment Department
uses spare parts to produce special equipment for external customers. The Spare Parts
Department currently transfer to Equipment Department 5,250 units spare parts at variable
costs plus 20% markup and 25,200 units to external customer at RM150 each. The spare
Parts Department operates at full capacity.

The Equipment Department charges its customers RM200 for each spare part unit sold and
installed in the customer’s vehicles. The other variable production costs incurred are RM33,
and the fixed cost of the Equipment Department is RM170,000 per annum. Equipment
Department expects their sales to remain at 5,250 units for the coming year.

Recently, a customer of the Spare Parts Department has offered to purchase the spare parts
at RM150 per unit. The Spare Parts Department manager is interested in supplying the units
requested by the customer as it appears to be more profitable. However, he was a bit skeptical
that the top management of Seteguh Maju Bhd would approve his action.

The summarised current annual income statement of the Spare Parts Department is provided
below:

Sales to Sales to
Equipment external
Department customers (RM)
(RM)
Sales:
5,250 units at RM96 504,000
25,200 units at RM150 3,780,000
Less: Variable costs (420,000) (2,016,000)
Contribution margin: 84,000 1,764,000
Less: Fixed costs (70,000) (170,000)
Net Income 14,000 1,594,000

Required:

a. Calculate the profit of each division and the company if the transfer price is based on
the variable cost plus 20% markup. (Show Income Statement and relevant
computations)
(8 marks)

b. i) Evaluate the effect on the profit of each division and the company if the external
market price is used as a basis of transfer pricing.
(Show Income Statement and relevant computations).
(10 marks)

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ii) Recommend the best transfer price that would be acceptable for both
managers in each departments. (Show relevant computations and explain your
computations)

(7 marks)
(Total: 25 marks)

END OF QUESTION PAPER

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 CONFIDENTIAL APPENDIX 1 (1) AC/JAN 2024/MAF551/420

VARIANCE ANALYSIS

Basic Variances Formula

Sales price (actual sales price ~ standard sales price) actual volume
Sales margin price (actual margin ~ standard margin) actual volume
Sales margin volume (actual volume ~ standard volume) standard margin
Sales mix variance (actual mix sales volume- std mix of actual total sales) std
margin
Direct Material Price (actual price ~ standard price) actual quantity
Direct material usage (actual quantity ~ standard quantity of actual production)
standard price
Direct material mix (actual mix of actual total material input ~ standard mix of
actual total material input) standard material price
Direct material yield (actual yield ~ standard yield of actual total material input)
standard yield price
Direct labour rate (actual rate ~ standard rate) actual hours
Direct labour efficiency (actual hours ~ standard hours of actual production)
standard rate
Direct labour mix (actual mix of actual total hours ~ standard mix of actual
total labour hours) standard rate
Direct labour yield (actual yield ~ standard yield of actual total labour hours)
standard yield labour cost
Direct labour idle time (idle hours x standard rate)
Fixed overhead volume ( actual volume ~ budgeted volume) fixed overhead
absorption rate
Fixed overhead (budgeted fixed overhead cost ~ actual fixed overhead cost)
expenditure
Fixed overhead capacity (Actual hours ~ Budgeted hours) Fixed overhead absorption
rate
Fixed overhead efficiency (actual hours ~ standard hours of actual production) Fixed
overhead absorption rate
Variable overhead (actual hours ~ standard hours of actual production) variable
efficiency overhead absorption rate
Variable overhead actual variable overhead cost ~ (actual hours x variable
expenditure overhead absorption rate)
Planning Variances
Material price (original standard price ~ revised standard price) revised
standard quantity
Material usage (original standard quantity ~ revised standard quantity of
actual production) original standard price
Labour rate (original standard rate ~ revised standard rate) revised
standard hour
Labour efficiency (original standard hour ~ revised standard hour of actual
production) original standard rate
Operating Variances
Material price (actual price ~ revised standard price) actual quantity
Material usage (actual quantity ~ revised standard quantity) revised
standard price
Labour rate (actual rate ~ revised standard rate) actual hour
Labour efficiency (actual hour ~ revised standard hour) revised standard rate

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