MBA_AC7213 Managerial Accounting 2021
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MBA_AC7213 Managerial Accounting
Instructions:
1. This paper consists of 7 printed pages (including the cover).
2. Answer all questions.
3. Students are given 4 weeks to complete the assignment. Late submission will be penalized.
Report format:
1. Typed report with all workings and calculations (if any) shown in the final report. Clear, neat, and orderly report will also be taken into account in the report evaluation process.
2. Your assignment should be typed using Microsoft Words in Times New Roman font size 12 with 1.5-line spacing.
3. In the front page of the report, students need to provide the following information:
Module Name and Code
Students Name and ID Number
Programme
Semester
QUESTION 1 [30 marks]
Select a video that clearly shows a process of producing a product.
1. Describe the processes that are involved in the production of the products. You should include, in your description, cost that are involved through the processes (eg: the types of raw materials that are added to production within the departments involved, the types of labours employed, etc..) and justify if they are product or period cost.
(15 marks)
2. Discuss whether technology plays an important role in the production process and in the company’s business as a whole.
(10 marks)
3. Discuss whether absorption costing or variable costing are more suitable for the selected product.
(5 marks)
QUESTION 2 [15 marks]
MGPK Co Bhd is considering whether to perform its own purchase ledger function or to outsource it to an external accounting service provided. James, the person in charge to provide key opinion on the issue, has obtained the following cost estimates for each option:
Internal processing:
|
Cost |
Acquisition of hardware and software |
RM320 per annum |
Maintenance fee for hardware and software |
RM750 per annum |
Stationery |
RM500 per annum |
Wages for part-time account staff |
RM6,000 per annum |
External service provider:
Processing of invoices/credit notes |
RM0.50 per document |
5,000 per annum |
Processing ofcheque payments |
RM0.50 per cheque |
4,000 per annum |
Reconciling supplier accounts |
RM2.00 per supplier per month |
150 suppliers |
Required:
a) Determine the cost effectiveness of outsourcing the accounting activities
(7 marks)
b) Discuss the qualitative factors involved.
(8 marks]
QUESTION 3 [25 marks]
a) A transfer price is the price at which goods or services are transferred from one department to another or from one member of a group to another. In a manufacturing context, intermediate goods are often transferred to another division within a group, where further work takes place before the final product is made and sold to the external market. These intermediate products need to be priced so that appropriate decision could be made about selling products either internally or externally. The most common method used for transfer pricing is the full cost- based method. However, some managers do use the marginal cost approach in setting the transfer price for their department.
Required:
Explain THREE (3) main drawbacks of using a full cost-based transfer pricing system and discuss FOUR (4) issues that may arise in using the marginal cost-based transfer pricing system, both to the supplying division and receiving division.
(14 marks)
b) The Wood Division (WD) of SINO group of companies manufactures component Base that is used by the Bed Division (BD). The manufacturing costs per unit ofBase are as follows:
RM
Direct material 12
Direct labor 6
Variable production overhead 4
Fixed production overhead 8
Other costs incurred by WD are the fixed selling, administration and distribution costs amounting to RM300,000 per annum and variable sales overhead is RM2 per unit.
The selling price per unit of Base is between RM40 and RM44 in the external market and currently, WD is selling Base to their external customers at a price of RM42 per unit. The WD division has an annual production capacity of 300,000 units but only 200,000 units are being produced and sold due to economic downturn. The variable sales overheads are avoidable ifthe component Base is sold internally.
The BD division has been purchasing the Base component from their external supplier for RM40 per unit and for the coming year, BD expects to use 100,000 units of Base. The production manger of BD division has offered to buy 100,000 units of Base from WD for RM25 per unit.
Required:
i. Determine the minimum transfer price that WD division could accept and explain why WD would accept it. (3 marks)
ii. Determine the maximum transfer price that the production manager of BD division would be willing to pay and why? (3 marks)
iii. Should an internal transfer take place? Explain why or why not? If you were the manager of WD division, would you sell 100,000 units of Base for RM25 each?
Explain.
(5 marks)
QUESTION 4 [30 marks]
Rendang Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows:
October November December
Beginning inventory ......... 10,000 10,000 10,000
Merchandise purchases .... 60,000 70,000 35,000
Sales ................................. 60,000 70,000 40,000
Ending inventory .............. 10,000 10,000 5,000
Units are sold for RM12 each. One fourth of all sales are paid for in the month of sale and the balance is paid in the following month. Accounts receivable at September 30 totaled RM 450,000.
Merchandise is purchased for RM 7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder is paid in the month following purchase. Selling and administrative expenses are expected to total RM 120,000 each month. One half of these expenses will be paid in the month in which they are incurred, and the balance will be paid in the following month. There is a monthly depreciation of RM18,000. Accounts payable at September 30 totaled RM 290,000.
Cash at September 30 totaled RM 80,000. A payment of RM 300,000 for purchase of equipment is scheduled for November, and a dividend ofRM 200,000 is to be paid in December.
Required:
a) Prepare a schedule of expected cash collections in good form for each ofthe months of October, November, and December.
(3 marks)
b) Prepare a schedule showing expected cash disbursements for merchandise purchases and selling and administrative expenses for each of the months October, November, and December.
(3 marks)
c) Prepare a cash budget in good form for each of the months October, November, and December. There is no minimum required ending cash balance.
(15 marks)
d) Advise Rendang Company what, if any, additional funding should be taken as indicated by the cash budget and what action you would recommend him to take.
2022-01-22