Answer PSPM AA025 0607 by section PDF

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KMP SUGGESTED ANSWER – PSPM AA025 SESSION 2006/SECTION A(a) The roles of accounting information in management:  Planning; process to set organisation goals Example : To prepare operation budget  Controlling; process to determine whether the goals have been achieved or not Example : To prepare vari...

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KMP

SUGGESTED ANSWER – PSPM AA025 SESSION 2006/2007

SECTION A (a)

The roles of accounting information in management:  Planning; process to set organisation goals Example: To prepare operation budget  Controlling; process to determine whether the goals have been achieved or not Example: To prepare variance analysis

(b) Process Costing Factory that produces bread Factory that produces television Factory that produces soap (c) Year

Job Order Costing Business that produces customized wedding cards Business that produces customized cakes Business that produces customized furniture

Relationship between production and sales

Effect towards inventory

Profit under absorption costing and marginal costing

1

Production>Sales

Inventory increases

2

Production < Sales

Inventory decreases

3

Production = Sales

No inventory

Profit under absorption costing > Profit under marginal costing Profit under absorption costing < Profit under marginal costing Profit under absorption costing = Profit under marginal costing

SECTION B QUESTION 3 i)

Physical flow Beginning Work-in-Process Started in production Completed & transferred out Ending Work-in-Process

ii)

a)

10,000 100,000 110,000 80,000 30,000 110,000

Direct materials = Completed & transferred out units + (Ending Work-in-Process units x % complete) = 80,000 + (30,000 x 100%) = 110,000 units Conversion costs = Completed & transferred out units + (Ending Work-in-Process units x % complete) = 80,000 + (30,000 x 1/3) = 90,000 units

b)

Direct materials = Beginning Work-in-Process cost + Costs incurred during January Equivalents units = RM22,000 + 198,000 110,000 units = RM 2.00

[PHOTOCOPYING IS PROHIBITED]

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SUGGESTED ANSWER PSPM AA025 SESSION 2006/2007 Conversion costs = Beginning Work-in-Process cost + Costs incurred during January Equivalents units = RM4,500+158,400 90,000 units = RM 1.81 ∴ Cost per equivalent unit = RM2 + RM1.81 = RM3.81 c)

Completed & transferred out cost 80,000 units x RM3.81 = RM304,800 Ending Work-in-Process cost: Direct materials 30,000 units x RM2 Conversion costs 10,000 units x RM1.81

iii)

= RM60,000 = RM18,100 RM78,100

Dr Work-in-Process Inventory – Processing Department 356,400 Cr Raw Materials Inventory 198,000 Salaries payable 52,800 Manufacturing Overhead 105,600 (To record current manufacturing cost of Processing Department) Dr Finished Goods Inventory Cr Work-in-Process Inventory– Processing Department (To record costs of finished goods)

304,800 304,800

QUESTION 4 i) a) Direct Materials Direct Labour Variable Overhead Fixed Overhead (RM72,000÷12) 12,000 Product cost per unit

RM 6.00 4.00 2.00 0.50 12.50

b) Seroja Sdn Bhd Statement of Comprehensive Income - Absorption Costing For the month ended 31 December 2006 RM Sales (30.00 x 10,000) - Costs of goods sold: Beginning inventory (+) Costs of goods manufactured (12.50 x 12,000) 150,000 Costs of goods available for sale 150,000 (-) Ending inventory (12.50 x 2,000) (25,000) Costs of goods sold

[PHOTOCOPYING IS PROHIBITED]

RM 300,000

(125,000)

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KMP

SUGGESTED ANSWER – PSPM AA025 SESSION 2006/2007

Gross profit - Operating expenses: Variable selling and administrative expenses (2.50 x 10,000) Fixed selling and administrative expenses (36,000/12) Net income

175,000 25,000 3,000

(28,000) 147,000

ii) a) Direct Materials Direct Labor Variable Overhead Product cost per unit

RM 6.00 4.00 2.00 12.00

b) Seroja Sdn Bhd Statement of Comprehensive Income - Marginal Costing For the month ended 31 December 2006 RM Sales (30.00 x 10,000) - Variable costs: Variable costs of goods sold Beginning inventory (+) Costs of goods manufactured (12.00 x 12,000) 144,000 Costs of goods available for sale 144,000 (-) Ending inventory (12.00 x 2,000) (24,000) Variable costs of goods sold 120,000 (+) Variable selling and administrative expenses (2.50 x 10,000) 25,000 Total variable costs Contribution margin - Fixed costs: Fixed overhead 6,000 Fixed selling and administrative expenses 3,000 Net income iii)

Net income reconciliation Net income under Absorption Costing (+) Fixed overhead in beginning inventory (-) Fixed overhead in ending inventory (0.50 x 2,000) Net income under Marginal Costing

[PHOTOCOPYING IS PROHIBITED]

RM 300,000

(145,000) 155,000

(9,000) 146,000

147,000 (1,000) 146,000

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SUGGESTED ANSWER PSPM AA025 SESSION 2006/2007 QUESTION 5 A)

i)

Direct materials price variance = AQ (AP – SP) = 130,000 (RM3.70 – RM4) = 130,000 (RM0.30) = RM 39,000 (F) Direct materials quantity variance

ii)

Direct labor rate variance

= SP (AQ – SQ) = RM4 [(25,000 + 130,000 – 0) – (3 x 50,000)] = RM4 [155,000 – 150,000] = RM 20,000 (UF)

= ARAH - SRAH = RM533,000 – (RM12.50 x 41,000) = RM533,000 – RM512,500 = RM 20,500 (UF)

Direct labor efficiency variance = SR (AH – SH) = RM12.50 [41,000 – (0.8 x 50,000)] = RM12.50 [41,000 – 40,000] = RM 12,500 (UF) iii)

Variable overhead expenditure variance

= ARAH - SRAH = RM250,000 – (RM6.00 x 41,000) = RM250,000 – RM246,000 = RM 4,000 (UF)

Variable overhead efficiency variance = SR (AH – SH) = RM6 [41,000 – (0.8 x 50,000)] = RM6 [41,000 – 40,000] = RM 6,000 (UF) iv)

Fixed overhead budget variance

= ARAH - SRBH = RM95,000 - (RM3)(0.8 x 45,000) = RM95,000 – RM108,000 = RM 13,000 (F)

Fixed overhead volume variance

= SR (BH – SH) = RM3 [(0.8 x 45,000) – (0.8 x 50,000)] = RM3 [36,000 – 40,000] = RM 12,000 (F)

[PHOTOCOPYING IS PROHIBITED]

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KMP

SUGGESTED ANSWER – PSPM AA025 SESSION 2006/2007

B) Make Direct materials (40,000 x RM23.40) Direct labor (40,000 x RM22.30) Variable manufacturing overhead (40,000 x RM1.40) Fixed manufacturing overhead Purchase price (40,000 x RM59.20) Opportunity cost

936,000 892,000 56,000 *984,000 352,000 RM3,220,000

Buy **876,000 2,368,000 RM3,244,000

Net income Increase (decrease) 936,000 892,000 56,000 108,000 (2,368,000) 352,000 (RM24,000)

* (40,000 x RM24.60) ** (40,000 x RM21.90) The net income will decrease by RM24,000 if YSB buy the KLN component. Therefore, YSB should make its own KLN component.

[PHOTOCOPYING IS PROHIBITED]

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