MAF451 – JUNE 2014

MAF 451 - SUGGESTED SOLUTIONS

QUESTION 1

(a)
Statement of Equivalent Units
Elements of Costs
Input Output Material Labour Overhead
OWIP 500 OWIP 500 √ 0% - 50% 250√√ 60% 300√√
Materials 6,500 CPDP 5,020 100% 5,020 100% 5,020 100% 5,020
Nor Loss 700 √√ 100% 700 100% 700 100% 700
Abn Loss 180 100% 180 100% 180 100% 180
CWIP 600 √ 60% 360 √ 40% 240 √ 40% 240 √
Total 7,000 √ 7,000 6,260 6,390 6,440

To P2 = OWIP + CPDP
5,520 √ = 500 √ + CPDP
CPDP = 5,020

Expected OP = 90% x 7,000 = 6,300 – 600 (Ending WIP) = 5,700 √

Actual OP = 5,520
Abnormal Loss 180 √
16 x ½ = 8 marks

Statement of Cost
Material Labour Overhead
Cost Incurred 13,772 5,751 2,898
Cost per EU 13,772 √ /6,260 √ OF = RM2.20 5,751 √/6,390 √ OF = RM0.90 2,898 √/6,440 √ OF = RM0.45
6 x ½ = 3 marks

RM2.20 + RM0.90 + RM0.45 = RM3.55

Statement of Evaluation
Total Material Labour Overhead
OWIP 360 - 250 √ x 0.90 = 225 300 √ x 0.45 135
CPDP RM3.55 x 5,020 √ = 17,821
Norl Loss RM3.55 x 700 √ = 2,485
Abn Loss RM3.55 x 180 √= 639
CWIP 1,116 360 √ x 2.20 = 792 240 √ x 0.90 = 216 240 √ x 0.45 = 108
8 x ½ = 4 marks
(15 marks)

Transfer to P2
= OWIP + CPDP + OWIP b/d + Net Normal Loss
= RM360 √ + RM17,821 √ + RM1,900 √ + (RM2,485 – {700 x RM1.00}) √
= RM21,866

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(b)

Process 1
Qty CPU RM Qty CPU RM
OWIP 500 √ 1,900 To P2 √ 5,520 √ OF 21,866
Materials 6,500 √ 13,772 Nor Loss √ 700 1.00 √ 700
Labour √ 5,751 Abn Loss √ 180 3.55 √ 639
OH √ 2,898 CWIP 600 √ 1,116
7,000 24,321 7,000 24,321
(15 √)
Process 2
Qty CPU RM Qty CPU RM
Fr P1 5,520 21,866 Favorite A √ 2,600 √ OF 14,925
Labour √ 4,500 Favorite B √ 2,420 √ OF 13,891
OH √ 3,450 Favorite C √ 500 2.00 √ 1,000
29,816 29,816

Joint Cost RM29,816 √

Less: By Product RM1,000 √
Net Joint Cost RM28,816 √

Joint Products Output Weightage

Favorite A 2,600 (2,600 √/5,020 √) x 28,816 = RM14,925
Favorite B 2,420 (2,420 √/5,020 √) x 28,816 = RM13,891
(15 √)
(30 x 1/3 = 10 marks)

(c)
Joint Products Sales (RM) Cost (RM) Profit
Favorite A (2,600 x 8.00)= 20,800 √√ 14,925 5,875 √ OF
Favorite B (2,420 x 7.25)= 17,545 √√ 13,891 3,654 √ OF
(6 x 1/3 =2 marks)

(d)
Normal Loss
Qty CPU RM Qty CPU RM
P1 700 1.00 700 √ Bank 700 √ 1.00 √ 700

700 700

Abnormal Loss
Qty CPU RM Qty CPU RM
P1 180 3.55 639 Bank 180 √ 1.00 √ 180
P&L Stmt √ 459
180 639 639
6 x 1/2 = 3 marks
(Total: 30 marks)

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QUESTION 2

(ai)
BEP (units) = 65,000 √
17.90 √ – 12.64 √ (3.64 + 2.40 + 3.00 + 3.60)
= 12,357.41 units

BEP (value) = 12,357 √ x 17.90 √ = RM221,198 √ OF

MOS (unit) = 30,000 √ - 12,357 √ = 17,643 units √ OF

MOS (value) = 17,643 √ x RM17.90 √ = RM315,810 √ OF

(12 x 1/3 = 4 marks)

(aii)
Profit = Contribution Margin – Total Fixed Cost
= [(RM17.90 – RM12.64) √ x 30,000 √ ] – RM65,000 √
= 157,800 – 65,000
= RM92,800
(3 x 1 = 3 marks)

(b)
Main material 3.64
Other material 2.40
Direct labour (15/60 x 14.00) √√ 3.50
Variable overhead (120% x 3.50) √√ 4.20
13.74

New BEP = RM65,000 √ = 15,625 units √ OF

(RM17.90 √– 13.74 √)
(8 x ½ = 4 marks)

(c)
Target sales = (RM65,000 √ + RM5,000 √) + RM100,000 √
RM17.90 √ – (RM9.00 + [ (RM2.80 √– RM0.30 √) x 1.3 metre √]
= RM170,000
RM5.65
= 30,088 units √ OF
(8 x ½ = 4 marks)

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(d)
New selling price = RM65,000 √ + (RM12.64 √ x 25,000 √√) + 119,000 √
25,000 units
= RM500,000
25,000
= RM20.00 per unit √ OF
(6 x 1= 6 marks)

(e)
• SP is constant i.e. SP will not change with changes in volume
• Cost can be separated into VC and FC
• The analysis applies only to a short-term time horizon
• Total costs and total revenue are linear functions of output
• Applies to a single product, if more than one product then the sales mix is constant
(any 4)
(4 marks)
(Total: 25 marks)

QUESTION 3

(a)
Current OAR = RM816,000 √
(1,200 units x 2 hr) √ + (5,000 units x 3 hr) √
= RM816,000
17,400 DLH
= RM46.90 per DLH √ OF
(4 x ½ = 2 marks)

(bi)
Current SP using current OH absorption system
2013 2014
RM RM
DM 45.00 / 65.00 /
DL 30.00 / 45.00 /
OH (2 DLH x RM46.90) (3 DLH x 46.90) 93.80 / 140.70 /
Total Cost 168.80 250.70
+ MU (20%) 33.76 / 50.14 /
SP 202.56 300.84
(8 x 1/3 = 2 2/3 marks)

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(bii)
Current SP using ABC system
Cost Pool Amount Cost Driver ABC OAR
RM
Machine processing 450,000 9,000 MH / RM50/MH /
Mac Set up 90,000 1,920 Setups / RM46.88/Setup /
Quality control 180,000 40 Inspections / RM4,500/Inspection /
Plant related OH 96,000 100 Shipments / RM960/Shipment /
816,000
8/

2013 2014
1,200 units 5,000 units
DM 45 / 65 /
DL 30 / 45 /

OH
Machine processing (RM50 x 4,000) 200,000 // (RM50 x 5,000) 250,000 //
Set up (RM46.88 x 1,536) 72,007.68 // (RM46.88 x 384) 18,001.92 //
Inspection (RM4,500 x 20) 90,000 // (RM4,500 x 20) 90,000 //
Shipments (RM960 x 75) 72,000 // (RM960 x 25) 24,000 //
Total OH 434,007.68 382,001.92
434,007.68/1,200 = 361.67 382,001.92/5000 = 76.40
TC 436.67 / 186.40 /
+ MU (20%) 87.33 / 37.28 /
SP 524 / 223.68 /
26 /
(34 x 1/3 = 11 1/3 marks)
(14 marks)
(c)

2013 (Low Vol) 2014 (High Vol)

Current OH Costing RM93.80 RM140.70
ABC RM361.67 RM76.40

Current OH Costing
OH costs are applied to products using DLH √. This results in most of the overhead cost being
applied to high-volume product i.e. 2014 √ (RM93.80 (2013) and RM140.70 (2014)).

ABC
When a company implements ABC, four multiple overhead rates √ rather than a single one are
used. OH cost shifts from high-volume products to low volume products √ (RM361.67 (2013)
and RM76.40 (2014)) with a higher unit product cost for the low-volume product i.e. 2013.
(4 marks)
(Total: 20 marks)

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QUESTION 4

(a)
AC focus on Gross Profit √ MC focus on Contribution Margin √
Need to do adjustments for over or under absorption for OH in AC √
AC include FC and VC √
MC include VC only √.
(5 marks)

(b)
P/L Stmt for March 2014 (MC)
RM RM
Sales:
Tender One (1,600 units x RM75 = RM120,000) √.
327,000
Tender Two (2,300 units x RM90 = RM207,000) √.
Less COGS:
Beginning Inv -
Production
Tender One (1,750 units x [RM12 + RM12 + RM8]) = RM 56,000 √√√
Tender Two ( 2,500 units x [RM15 + RM18 + RM12]) = RM112,500 √√√ 168,500
Less: Ending Inv
Tender One (150 units x [RM12 + RM12 + RM8]) = RM4,800 √√√
13,800
Tender Two (200 units x [RM15 + RM18 + RM12]) = RM9,000 √√√
154,700
Contribution Margin √ 172,300
- FProdOH 110,000 √
NP 62,300

P/L Stmt for March 2014 (AC)

RM RM
Sales:
Tender One (1,600 units x RM75 = RM120,000)
Tender Two (2,300 units x RM90 = RM207,000) 327,000
Less COGS:
Beginning Inv -
Production - VC
Tender One (1,750 units x [RM12 + RM12 + RM8]) = RM 56,000 √√
Tender Two ( 2,500 units x [RM15 + RM18 + RM12]) = RM112,500 √√ 168,500
Production – FC
Tender One (1,750 units x RM20) = RM35,000 √√
110,000
Tender Two (2,500 units x RM30) = RM75,000 √√
278,500
Less: Ending Inv
Tender One (150 units x [RM12 + RM12 + RM8 + RM20]) = RM7,800 √√√ 22,,800
Tender Two (200 units x [RM15 + RM18 + RM12 + RM30]) = RM15,000 √√√ 255,700

Gross Profit 71,300

+/- Under/Over FProdOH Absorbed Nil
NP 71,300

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FOH per DLH = RM110,000

(Tender One: 1,750 units x 2 hr) + (Tender Two: 2,500 units x 3 hr)
= RM10 per DLH
Tender One = RM10 per DLH x 2 hr = RM20
Tender Two = RM10 per DLH x 3 hr = RM30
(30 x ½ = 15 marks)

b)
There is a rise in closing inventory in March 2014 √. AC includes a share of FProdOH √ in the inventory
valuation thus giving a higher NP than MC NP √. In MC, the FOH is charged against the contribution
margin (profit) in the month which it is incurred i.e. March 2014.
The NP under AC is RM9,000 higher √ (compare RM71,300 with RM62,300) as RM9,000 of the
FProdOH is “carried forward” √ to the next month i.e. April 2014.
(5 marks)
(Total: 25 marks)