1 CONFIDENTIAL FA1/AUG2020/MAF551 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE : MANAGEMENT ACCOUNTING AND CONTROL COURSE CODE : MAF551_PAPER 2 EXAMINATION : AUG 2020 TIME : 2 HOURS (2:15pm-4:15pm) INSTRUCTIONS TO CANDIDATES 1. This question paper consists of two (2) questions. 2. Answer ALL questions in your own paper. Scan your answer and convert to pdf file before submit to your lecturer. Saved your file as follows: MAF551_Group_Name_UiTM ID (Eg: MAF551_ACC2204B__Maisarah Binti Harun_ 2019263155) 3. Make sure you write your name and uitm ID in each page of your answer scripts. Please write page number and use ballpoint pen. 4. Answer ALL questions in English. This examination paper consists of 4 pages Hak Cipta Universiti Teknologi MARA CONFIDENTIAL 2 CONFIDENTIAL FA1/AUG2020/MAF551 QUESTION 1 Excell Sdn Bhd manufactures and sells three products; ABA, ACA and ADA. The products pass through four departments (namely department 1 through 4). Both labour and machine times are applied to the products in each of the four departments. The machine processing and labour skills required in each department are such that neither machine nor labour can be switched from one department to another. Excell's management is preparing its production schedule for the next several months. Some of the machines will be out of service for extensive maintenance. Available monthly capacity by department for next six months is listed below. Monthly Capacity Availability Normal capacity (in machine hours) Less machine being repaired (in machine hours) Available capacity (in machine hours) 1 4,000 Department 2 3 4,000 3,500 4 3,500 (500) 3,500 (250) 3,750 (200) 3,300 (300) 3,200 Machine hours requirement for each unit of product is provided below: Product ABA ACA ADA 1 3 2 1.5 Department 2 3 1.5 2 2 1 2 1.5 4 2 2 1 The sales department's forecast of product demand over the next six months is as follows. Product Monthly sales volume ABA 500 units ACA 400 units ADA 1,000 units Excell's inventory levels will not change for the next 6 months. The unit price and cost data for the next 6 months are presented below: Item Unit costs: Direct material Direct labour Department 1 Department 2 Department 3 Department 4 Variable support Fixed support Variable selling Unit selling price Hak Cipta Universiti Teknologi MARA ABA (RM) PRODUCT ACA (RM) ADA (RM) 14.00 26.00 17.00 24.00 42.00 48.00 18.00 54.00 30.00 6.00 341.00 12.00 20.00 14.00 30.00 40.00 20.00 4.00 246.00 12.00 14.00 16.00 19.00 25.00 32.00 4.00 167.00 CONFIDENTIAL CONFIDENTIAL 3 FA1/AUG2020/MAF551 Required: a. As an account assistant, you was ask to calculate maximum contribution for Excell Sdn Bhd. Show all relevant workings. (12 marks) b. Mr Zack, a production manager for the factory was suggested of further processing 50% of second ranking product into product AXA. It is estimated that further processing cost is 50% of variable cost for second ranking product and it can be sell at RM350 per unit. Product AXA requires 4.8 machine hours per unit. Mr Zack believes that product AXA is more marketable. In order to implement this suggestion, he suggested to stop production of the last ranking product. Evaluate suggestions made by Mr Zack . (8 marks) c. Recently, the sales team from Excell Sdn Bhd received an email from a new customer requesting for 150 units for each product ABA, ACA and ADA. The customer also proposed to buy the products above the market price set by Excell Sdn Bhd. En Khalid, the Managing Director is keen to accept the offer. As a financial analyst of the company, advise En Khalid on relevant issues that Excell Sdn Bhd should consider before agreeing with the customer. (5 marks) (Total: 25 marks) QUESTION 2 Aafifa Beauty Sdn Bhd is an established manufacturer of a wide range of beauty products including skin care and traditional herbs. The company has several autonomous divisions which include Skincare (SC) Division and Herbal Division. The SC Division produces and sells varieties of skin care meanwhile Herbal Division produces and sells traditional herbal products. As the company's policy provides all investment centers a divisional autonomy, both divisional managers of SC Division and Herbal Division are given freedom to choose their sources of purchases and sales. Currently, Herbal Division sell its product externally at a price of RM300 per packet of 1 kg. In addition to an external market sale, Herbal Division also accepted internal order from SC Division. Based on an old agreement, Herbal Division agreed to transfer its output to SC Division at variable cost plus 50% markup. In order to encourage internal transfer of goods Herbal Division agreed not to charge Selling & Distribution cost to SC Division. Below are the standard cost per packet of 1 kg of traditional herbal products: Direct materials RM100 Direct labour RM20 Production overhead RM15 Variable selling & distribution cost RM5 The Herbal Division is currently operating at its full capacity with 3,000 packets produced and sold every month. 20% of its production overhead cost is fixed. Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 4 FA1/AUG2020/MAF551 Currently, 50% of SC Division's requirement for herbal ingredient was supplied by Herbal Division and the balance supplied by external supplier at RM300 per kg. Each unit skincare products requires 10 grams herbal ingredient. Below are the data for SC Division's for the month: Current production Selling price Direct materials excluding herbal ingredient Direct labour Production overhead (40% variable) 210,000 units RM30 per unit RM3 per unit RM5 per unit RM15 per unit The finished products of SC Division are highly demanded. Thus, Miss Dhiya, the manager of SC Division is planning to increase its production capacity for the following month by 30% to reach its maximum level. It is policy of the company to absorbed fixed costs based on full capacity. Required: a. Based on current policy, evaluate the performance of each divisions and company as a whole for current month. (Show income statement in columnar form) (10 marks) b. Using the general rule of transfer pricing determine the minimum transfer price that Herbal Division would quote to SC Division if suggestion made by Miss Dhiya is being implemented. (5 marks) c. Advise the management of Aafifa Beauty Sdn Bhd on the impact of profitability for each divisions and company as a whole if Miss Dhiya proceed with her planning, assuming 50% of SC Division's requirement for herbal ingredient will be supplied by Herbal Division. (Show Income Statement). (10 marks) (Total: 25 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL Hak Cipta Universiti Teknologi MARA 5 FA1/AUG2020/MAF551 CONFIDENTIAL