UNIVERSITY OF THE COMMONWEALTH CARIBBEAN

SCHOOL OF BUSINESS, ENTREPRENEURSHIP &

MANAGEMENT

FALL 2023 (Online)

INDIVIDUAL ASSIGNMENT

COURSE NAME: MANAGEMENT ACCOUNTING

COURSE CODE: ACT207

TOTAL MARKS ON THIS PAPER = 80

MAXIMUM SCORE (WEIGHTING) = 15%

DATE: October 24, 2023

OPENING TIME:

CLOSING TIME:

DURATION:

INSTRUCTIONS:

1. Please read all instructions carefully before attempting any question.

2. ANSWER ALL THE QUESTIONS.
3. PLEASE DOWNLOAD THIS FILE AND COMPLETE ANSWERS
WITHIN THE DOCUMENT USING EITHER MICROSFT WORD OR EXCEL.
PICTURES OF HANDWRITTEN WORK WILL NOT BE ACCEPTED.
4. Write clearly the number of the question on each of the relevant pages.
5. Where questions have multiple parts, all parts must be answered.
6. Start the response to each question on a new page.
7. This exam is worth 15% of your final grade.

Page 1 of 11
 SECTION A

Instructions: This section contains eight (8) multiple choice questions. Select the
correct letter for each question.

1. Product costs include:

a. Prime cost plus any fixed factory overheads

b. Direct materials plus conversion costs
c. Prime cost plus factory overheads plus selling expenses
d. Conversion costs plus selling expenses

2. Which of the following statements are true regarding financial and Management
Accounting?

a. Both are mandatory

b. Both rely on the same underlying financial data
c. Both emphasize the segments of an organization rather than look at the
organization as a whole
d. Both are geared to the future rather than the past

3. A business applies overhead costs on the basis of direct labour at the rate of 80% of direct
labour. The following data is revealed:

Direct labour $111 600

Direct material $ 84 200
Actual overhead $ 98 700

The amount of over or under applied overhead for the year is:

a. Over absorb by $12 900 c. Over absorbed by $9,420

b. Under absorbed by $12 900 d. Under absorbed by $9,420

4. What is another term used to describe the type of costing often called ‘full costing’?

a. Standard costing c. Variable Costing

b. Activity based costing d. Absorption costing

Page 2 of 11
The following information relates to item 5

The Hilary Firm uses a traditional costing system. The firm uses machine hours as a basis for
overhead allocation in its cost centre. Cost data for a production period are as follows:

Estimated Actual
Overheads $85 000 $82 605
Machine hours 7 500 7 210
Prime cost $125 000 $126 000

5. What is the predetermined overhead rate?

a. $11.33 per machine hour c. $11.45 per machine hour

b. $28.00 per machine hour d. $29.00 per machine hour

6. The following data relates to questions 6 and 7. Determine the unit product cost under
absorption costing.

Details $
Units produced 1,000
Direct materials per unit $8
Direct labour per unit $12
Fixed production overhead $7,000
Variable production overhead per unit $3

a. $23
b. $26
c. $30
d. $35

7. Referring to the data in question 6, determine the unit product cost using the variable
costing approach.

a. $23
b. $26
c. $30
d. $35

8. Which of the following is NOT an element of factory overheads?

a. Salary of a marketing manager

b. Depreciation on the maintenance equipment
c. Salary of the plant supervisor
d. Property taxes on the plant building

Page 3 of 11
 SECTION B

Question #1 (32 marks)

One of the products that are manufactured by Chung Sisters Ltd is ZP11. The company has a
budgeted capacity of 6,000 units per month and monthly fixed production expenses relating to
this product are estimated at $360,000. At the start of January 2020 the company had in store 400
units of the product. During January 2020 the company produced 5,400 units of the product and
sold 5,500 units. Administrative and selling expenses for the month of January 2020 were
estimated at $500,000 and $250,000 respectively. The following information was also taken
from the company’s records for the month of January 2020:
Cost per unit
Details $
Direct materials 200
Direct labour 250
Variable overheads 100
550

Selling price per unit $1,200

Required:
(a) Closing stock in units for January 2020. (2 marks)

Closing stock = Units produced - Units sold + Beginning

inventory

= 5400 - 5500 + 400

= 300 units
(b) The marginal cost per
unit. (1 mark)

Marginal cost = $200 +$250 + $100 = $550

(c) The full cost per unit. (2 marks)
Full cost = $550 + ($360,000/6000) = $550 + $60 = $610
(d) Contribution margin per unit. (1 marks)

Contribution margin = Selling price - variable cost

= $1200 - $550 = $650
(e) Prepare the income statement using the marginal costing approach for January 2020.
(11
marks)

Page 4 of 11
 Marginal Costing $

Sales 6600000

Opening stock (x Total Variable Cost per unit) 220000

Add Production (x Total Variable Cost per unit) 297000

0

Goods Available for sale 319000

0

Less: closing stock (x Total Variable Cost per unit) 165000

Less Cost of sales 3025000

(f) Prepare the
Contribution margin 3575000 income
statement
Less: fixed costs 1,110,000 using the
absorption
Net profit 2,465,000 costing
approach for
January 2015.
(13
marks)

Absorption Costing

Sales 6,600,000

Opening stock (x Total Production Cost per unit) 480,000

Add Production (x Total Production Cost per unit) 3,294,000

Available for sale 3,774,000

Less: closing stock (x Total Production Cost per unit) 183,000

Less Unadjusted Cost of sales 3,591,000

(Over)/Under absorbed overhead (600*60) 36,000

Cost of sales 3,627,000

Page 5 of 11
Gross Profit 2,973,000

Less Non Production Fixed Costs (such as Selling and Marketing Overheads) 750,000

Net profit 2,223,000

(g) Reconcile the difference in profit obtained under both costing methods. (2 marks)

RECONCILIATION

Profit as per MC 2465000

Add FC in closing stock 18000

subtract FC in opening stock 24000

Profit as per absorption 2459000

Page 6 of 11
Question #2 (40 marks)

The following sales forecast was developed by the sales team at a M& M Manufacturing
Company Limited for the months indicated. The company produces two products Bassinets and
Swings
Sales Forecast 2021
Details Bassinets Swings
July 1.500 units 2,000 units
August 1,750 units 2,250 units
September 1,900 units 2,000 units
October 1,400 units 1,600 units
November 1,700 units 1,500 units
December 2,200 units 2,300 units
Notes:
(i) To make one unit of bassinet four (4) units of raw material F250 is used. One unit of
F250 costs $40. Swings uses two (2) units of raw material K200 which costs $30
each.
(ii) The company has decided that raw material stocks at the end of each month should be
held equivalent to fifteen percent (15%) of the budgeted sales for the month in
question.
(iii) During the year, the company sold one unit of Bassinet for $110, while one unit of
Swing was sold for $150.
(iv) The decision was made that at the end of each month there should be in store
sufficient finished goods stock to meet twenty percent (20%) of the sales for the next
month.

Required:

Prepare the following budgets for the months of August to November 2021:
(a) Sales budget for both products (6 marks)

M& M Manufacturing Company Limited

for the months of August to November 2021

Septemb
Bassinet July August er October November December Total

Expected sales in
units 1500 1750 1900 1400 1700 2200 10450

x Selling price per

unit 110 110 110 110 110 110 110

Total sales 16500 192500 209000 154000 187000 242000 1149500

Page 7 of 11
 0

Septemb
Swings July August er October November December Total

Expected sales in
units 2000 2250 2000 1600 1500 2200 11550

x Selling price per

unit 150 150 150 150 150 150 150

30000
Total sales 0 337500 300000 240000 225000 330000 1732500

(b) Production budget for both products (10 marks)

Augus Octobe
t September r November Total

Bassinet

Sales 1750 1900 1400 1700 6750

Add: Desired closing stock(units) 380 280 340 440 440

Total Production Required 2130 2180 1740 2140 8190

Less: opening stock (units) 262.5 285 210 255 262.5

Production required (units) 1867.5 1895 1530 1885 7927.5

Swings

Sales 2250 2000 1600 1500

Add: Desired closing stock(units) 450 400 320 300

Total Production Required 2700 2400 1920 1800

Less: opening stock (units)

Page 8 of 11
Production required (units)

(c) Direct raw materials usage budget. (5 marks)

Details August September October November Total $

Material AB( 4 units for Bassinet) 2130 2180 1740 2140 8190 32760

Material CD (2 units for Swings ) 2700 2400 1920 1800 8820 17640 (d)
(d)
(d)
Direct raw material purchase budget. (15 marks)

Direct Raw Material Purchase Budget for 2021

Month Sales Forecast (Bassinets) Sales Forecast (Swings) Total Sales Stock Policy (15%)
Required Units Unit Cost (F250) Unit Cost (K200) Total Cost (F250)Total Cost (K200)

August 1,750 2,250 4,000 600 4,600 $40 $30 $184,000 $138,000

September 1,900 2,000 3,900 585 4,485 $40 $30 $179,400 $134,550

October 1,400 1,600 3,000 450 3,450 $40 $30 $138,000 $103,500

November 1,700 1,500 3,200 480 3,680 $40 $30 $147,200 $110,400

Details Octobe Tota

August September r November l $

Raw Material (Bassinet)

material usage(4)

Add: Desired closing stock

(units)

Total required

Less: Opening stocks

Purchases required

Page 9 of 11
Price per unit ($)

Purchase value ($)

Raw Material CD (Standex)

material usage(2)

Add: Desired closing stock

(units)

Total required

Less: Opening stocks

Purchases required

Price per unit ($)

Purchase value ($)

Total purchase value ($)

(e) Briefly explain, using two examples what is meant by a “limiting budget factor”
(4 marks)

The term "limiting budget factor" refers to the specific factor or resource that imposes a

restriction or limitation on the budgeting process or the overall budget. It is the factor that

has the greatest impact on determining the budgetary limits or constraints. This factor can

vary depending on the context and can include factors such as production capacity,

available funds, resource availability, or any other element that restricts the budgeting

decisions. The limiting budget factor helps determine the maximum allocation or

utilization of resources within the given budgetary constraints.

Page 10 of 11
END OF ASSIGNMENT

Page 11 of 11