BMAC5203/JAN15/A-RR

OUM BUSINESS SCHOOL

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ASSIGNMENT
BMAC5203 ACCOUNTING FOR BUSINESS DECISION MAKING

JANUARY 2015
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INSTRUCTIONS TO STUDENTS
1. This assignment contains question that is set in English.
2. Answer in English only.
3. Your assignment should be typed using 12 point Times New Roman font and
1.5 line spacing.
4. You must submit your hardcopy assignment to your Facilitator and ONLINE via the MyVLE. Refer to the portal for instructions on the procedures to
submit your assignment on-line. You are advised to keep a copy of your
submitted assignment and proof of the submission for personal reference.
Your assignment must be submitted on 21st 29th March 2015.
5. Your assignment should be prepared individually. You should not copy another
persons assignment. You should also not plagiarise another persons work as
your own.
EVALUATION
This assignment accounts for

60% of the total marks for the course.

BMAC5203/JAN15/A-RR

ASSIGNMENT QUESTION
Task 1
Objective

Activity-Based Costing
To enable the learner to differentiate between
traditional costing and activity based costing in
decision making.

Marks allocated 30 marks

QUESTION 1
Persiaran Sdn. Bhd. makes two products, Basic and Super. The business is
able to sell these products at a price that gives a standard profit mark-up of 25
per cent of full cost.
Full cost for one unit is calculated by charging overheads to each type of product
on the basis of direct labour hours. The costs are as follows:
Direct labour (RM 10 per hour)

Basic (RM)
40

Super (RM)
60

15

20

Direct material
The total overhead are RM1,000,000

Based on experience over recent years, in the forthcoming year the business
expects to make and sell 40,000 units Basic and 10,000 units Super.
Recently, the management has undertaken an exercise to identify cost drivers
based on various activities. The finding has revealed the following annual
overhead:
Activity (and cost driver)

Cost (RM)

Annual number of activities

000
Total
Number of machine set-ups
Number of quality-control

280
220

100
2,000

20
500

Super
80
1,500

inspections
Number of sales orders

240

5,000

1,500

3,500

processed
General production (machine

260

500,000

350,000

150,00

hours)
Total

Basic

0
1,000

BMAC5203/JAN15/A-RR

Required:
a)

Determine the full cost and selling price of each of the two products based
on the present costing system.
(10 marks)

b)

Determine the full cost and selling price of each product using activitybased costing, taking into account the managements recent investigation.
(10 marks)

c)

What conclusions can you draw?

What advice would you offer to the

management of the business?

(10 marks)

Task 2

Profit Planning and Budgetary Control System

Objective

To enable the learner to prepare the whole master

budget of an organisation.

Marks allocated 40 marks

QUESTION 2
Berjaya Sdn. Bhd. Is preparing budgets for the quarter ending September 30.
Related information is shown as below:

Budgeted sales for the next few months are:

May

15,000 units

June

20,000 units

July

30,000 units

August

40,000 units

September

50,000 units

October

35,000 units

November

25,000 units

The selling price is RM12 per unit.

All sales are on credit and the collection methods are:

i.

50% collected in the month of sales

BMAC5203/JAN15/A-RR

ii.

30% collected in the month following sales

iii.

20% collected in two month following sales

The management at Berjaya Sdn. Bhd. decided that the ending inventory
in units and it is equal to 20% of the following months budgeted sales.

To produce one unit of output, 2 kgs of direct material are needed.

Berjaya decided to have direct materials on hand at 10,000 kgs every

month.

Cost of direct material is estimated at RM1.50 per kg.

The payment of direct materials is below:

i.

50% purchases is paid in the month of purchase

ii.

50% purchases is paid in the following month of purchase

To produce one unit of output, 0.1 hours of direct labor is required.

Berjaya pays RM8 per hour to its direct labor.

All wages are paid at the end of the month

Manufacturing overhead is divided into variable and fixed overhead.

Variable overhead is applied to each units of output on the basis of direct

labor hours.

The variable overhead rate is RM10 per direct labor hour.

Fixed overhead is estimated at RM40,000 cash per month.

Ending Finished Goods Inventory is made up from direct material, direct

labor and manufacturing overhead.

Cost of Goods sold is computed based on the unit production cost RM5.79
per unit.

Selling and administrative cost is divided into variable and fixed

components.

Variable selling and administrative costs is estimated at RM1.50 per unit

sold.

Fixed selling and administrative cost is estimated at RM50,000 per month,

where RM5,000 is depreciation and not a cash expense.

Berjaya has the following cash policy:

i.

Minimum cash balance of RM50,000 is required for every month

ii.

Any deficiency of cash, will be making up by loans and repays back

at the following month.

iii.

The interest on loan is charged at 15% per year.

BMAC5203/JAN15/A-RR

iv.

Purchase an equipment in August totaling RM150,000

v.

Beginning balance of cash balance on 1 July is RM55,000

Berjayas account balances are as follows:

Property

RM

Equipment

458,047.50
150,200

Ordinary Shares

500,000

Retained earnings

335,777.50

Required:
To prepare the whole master budget (Sales budget up to budgeted Statement of
Financial Position) for Berjaya Sdn. Bhd. for July, August and September.
(40 marks)
Task 3
Objective

Short Term Decision Making

To

enable

the

learner

to

identify

relevant

and

irrelevant costs and benefits associated to assist in

decision making.
Marks allocated 30 marks
QUESTION 3
Builders Sdn Bhd offers three products for the construction industry: blocks,
bricks and tiles. The following income statement shows the projected results, by
products, for 2010 (in RM thousands) :
BLOCKS
Sales revenue
Less: Variable expenses
Contribution margin
Less direct fixed expenses:
Advertising
Salaries
Depreciation
Total direct expenses
PRODUCT margin
Less: common fixed
expenses
Operating income

BRICKS

TILES

TOTAL

(000)
RM500
250
250

(000)
RM800
480
320

(000)
RM150
140
10

RM1450
870
580

10
37
53
100
RM 150

10
40
40
90
RM230

10
35
10
55
RM(45)

30
112
103
245
RM3
35
12
5
RM210

BMAC5203/JAN15/A-RR

This is the third consecutive year that the tiles segment is reporting losses. The
managing director is considering dropping the product line as it would mean
saving RM45,000 by dismissing the lines supervisor and also eliminating
depreciation.

a. Do you agree that the tiles division should be closed based on the above
information?
(14 marks)
b. What qualitative factors should be considered before a decision on
whether to keep or drop a product.
(6 marks)
c. The marketing manager suggested that if the tile product is dropped, sales
and variable costs of blocks would reduce by 10%, and sales and variable
costs of bricks by 8% since customers tend to buy all three products
together. Hence if the tile product is dropped, customers will buy blocks
and bricks elsewhere. Does this mean it is better to keep the tile product
line?
(10 marks)
(TOTAL: 100 MARKS)