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MANG6026W1

SEMESTER 1 EXAMINATIONS 2018- 19

MANAGEMENT ACCOUNTING 1

Required

(a) Prepare calculations that indicate whether it is the current level of staffing or the supply of Material X that will constrain the business from meeting the expected demand for baskets. [30 marks]

(b)  Determine,  with  clear  workings  and  justification  (including assumptions made), the optimal quantity of each product that the business should produce each week. [40 marks]

(c)  Explain  what  steps  the  business  might  take  to  improve  its profitability in the near future. [30 marks]

2.

The finance manager of Willow plc is evaluating two mutually exclusive projects with the following cash flows.

Willow’s cost of capital is 12 per cent and both investment projects have zero scrap value.

Required:

(a) calculate the net present value (NPV) of both projects; [40 marks]

(b) calculate the internal rate of return (IRR) of both projects; [40 marks]

(c) calculate the payback period (PP) of both projects, assume the cash flows occur evenly throughout the year [10 marks]

(d) based on the calculations of NPV, IRR and PP, advise the company which project should be undertaken. [10 marks]

3.

Kaplan plc makes a range of suitcases of various sizes and shapes. There are ten different models of suitcase produced by the business. In order to keep inventories of finished suitcases to a minimum, each model is made in a small batch. Each batch is costed as a separate job and the cost for each suitcase is deduced by dividing the batch cost by the number of suitcases in the batch.

At  present, the  business derives the cost of each  batch  using a traditional   job   costing   approach.    Recently,   however,    a   new management accountant was appointed, who is advocating the use of activity-based costing (ABC) to deduce the cost of the batches. The management accountant claims that ABC leads to much more reliable and relevant costs and that it has other benefits.

Required:

(a) Explain how the business deduces the cost of each suitcase at present. [40 marks]

(b)  Explain  how  ABC  could  be  applied  to  costing  the  suitcases, highlighting  the  differences   between  ABC   and   the  traditional approach. [40 marks]

(c)  Explain  what  advantages  the   new  management  accountant probably believes ABC to have over the traditional approach. [20 marks]

4.

Describe the contingency theory of management accounting and discuss  its relevance  to  the  choice  of  management  accounting systems/techniques in practice.

In your discussion, you should refer to at least two management accounting  systems/techniques.  These  can  be  any  management  accounting systems/techniques you are familiar with, such as costing, decision-making, budgeting, and performance measurement. [100 marks]

Discount Factor Table

Year          5%        10%        12%        15%        20%