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BKAM2013 MANAGEMENT ACCOUNTING I QUESTION 1 (30 MARKS: 80 MINUTES) Adil Arif & Co. (AAC) is a full service law firm in Kedah, which is specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2019 is RM97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2019. All professionals work for clients to their maximum 1,500 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of AAC other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2019 is RM2,475,000. REQUIRED: a) Determine the 2019 budgeted direct-cost rate per hour of professional labor. Show all workings. (1 Mark) Determine the 2019 budgeted indirect-cost rate per hour of professional labor. Show all workings. (2 Marks) (c) AAC is considering bidding on two (2) jobs: . Job Raya: Litigation work for Raya Construction San Bhd (RCSB), which requires 120 budgeted hours of professional labor. . Job Perkasa: Labor contract work for Perkasa Development Sdn Bhd (PDSB), which requires 160 budgeted hours of professional labor. Determine the estimated cost for each Job Raya and Job Perkasa. Show all workings. (4 Marks)(d) BKAMZOI3 MANAGEMNTACCOUNTING I AAC has just completed a review of its job order costing system. This review included a detailed analysis of how past jobs used the company's resources and interviews with personnel about the factors that drive the level of indirect costs. The management concluded that a system with two direct-cost categories (professional partner labor and professional associate labor) and two indirect-cost categories (general support and secretarial support) would yield more accurate job costs. Budgeted information for 2019 related to the two direct-cost categories or pools is as follows: Professional Professional Partner Labor Associate Labor Number of professionals 5 25 Hours of billable time per professional 1,500 per year 1,500 per year Total compensation (average per professional) RM2 1 0, 000 RM75,000 Budgeted information for 2019 relating to the two indirect-cost categories is as follows: General Support Secretarial Support Total costs RM2,025,000 RM450,000 Coat-allocation base Professional labor-hours Partner labor-hours (1) Determine the 2019 budgeted directcost rates for professional partners and professional associates. Show all workings. (2 Marks) (i1) Determine the 2019 budgeted indirectcost rates for general support and secretarial support. Show all workings. (2 Marks) (iii) Given the following information, determine the budgeted costs for the Raya and Perkasa jobs. Show all workings: Raya Perkasa Professional partners 48 hours 32 hours Professional associates 72 hours 128 hours (10 Marks) BKAMZOI3 MANAGEMNTACCOUNTING I (iv) Discuss on the results in requirement (d)(iii) and (c) above by showing the differences in the costs used by both Raya and Perkasa jobs. Give TWO (2) reasons for the differences. Show all workings. (6 Marks) (v) Would you recommend AAC to use the existing job order costing system prior to the review process or the one after the review process? Give TWO (2) reasons to support your recommendation. (3 Marks) BKAMZOI3 MANAGEMNTACCOUNTING I QUESTION 2 (20 MARKS: 53 MINUTES) Beauty Alun Sdn Bhd (BASB) is a manufacturer of quality hair care products, which operates in Kedah. In the production, each product will pass through two (2) operating departments: Mixing and Packaging. BASB uses the weighted average method in allocating the manufacturing costs. The ingredients are combined in the Mixing Department and nally are packed into lliter containers in the Packaging Department. The following information pertains to the Mixing Department for the month of November 2020: Units 1 in Liters} Work in process, November 1 (100% complete materials, 75% labor and overhead) 10,000 Started during November 50,000 Work in process, November 30 (100% complete materials, 50% labor and overhead) 8,000 The costs in work in process on November 1, in the Mixing Department were as follows: Mixing Department [in BM} Work in process, November 1: Materials 15,000 Direct labor 20,000 Manufacturing overhead 17,600 Total costs 52,600 The costs added by the Mixing Department during the month of November were as follows: Mixing Department 1 in BM; Materials 90,000 Direct labor 120,000 Manufacturing overhead 100,000 Total costs added 310,000 (Round unit costs to two decimal places) BKAMZOI3 MANAGEMNTACCOUNTING I REQUIRED: (a) (b) (0) (d) (e) (0 Prepare a physical ow schedule for the Mixing Department for November 2020. Show all workings. (3 Marks) Determine the equivalent units of production for materials and conversion for the Mixing Department for November 202 0. Show all workings. (3 Marks) Determine the total cost per equivalent unit of production for materials and conversion for the Mixing Department for November 2020. Show all workings. (5 Marks) Determine the cost of goods transferred out and the cost of ending work in process for the Mixing Department. Show all workings. (3 Marks) In line with the current lean manufacturing practices, BASB plans to adopt Just-inTime (JIT) approach to its inventory system Discuss how the adoption of this approach will affect the BASB's process costing method. (3 Marks) Due to COVID-19 pandemic which hit Malaysia since late January 2020, the inflation rate of this country has increased. Accordingly, the nancial accounting reports for the year ended 31 December 2020 of BASB have never seemed to match the actual results of the company. Management has studied the problem and it appeared that the beginning inventories may be the cause of the unmatched information. The reason for this is that the inventory costs have been uctuated due to the inflation. Suggest the best way on how process costing can assist in addressing the problem faced by BASB. Provide justifications for your suggestion. (3 Marks) BKAMZOI3 MANAGEMNTACCOUNTING I QUESTION 3 (40 MARKS: 107 MINUTES) Gamma Sdn Bhd (GSB) is a manufacturer of machine parts for washing machines. GSB has ve support departments and two operating departments. Those support departments include Building and Grounds, Personnel, General Plant Administration, Cafeteria, and Storeroom While the operating departments consist of Machining and Assembly. Moreover, the company has prepared the department overhead budgets for the budgetedvolume levels before allocations as follows: Support Departments: Building and grounds RM45,000 Personnel 300 General plant administration 37,320 Cafeteria: operating loss 970 Storeroom 21% RM 93,580 Operating Departments: Machining RM36,600 Assembly 46,000 82,600 Total for support and operating departments RM176 180 The top management of GSB has decided that the most appropriate inventory costs are achieved by using individual department overhead rates. These rates are developed after the support departrnent costs are allocated to operating departments. Bases for allocation are to be selected fromthe following: Direct Square Feet of Department Manufacturing Number of Floor Space Manufacturing Number of Labor-H ours Employees Occupied Lab or-H ours Requisitions Building and grounds 0 0 0 0 0 Pers onnela 0 0 2,5 00 0 0 General plant administration 0 40 12,000 0 0 Cafeteria: operating loss 0 10 5,000 3,000 0 Storeroom 0 5 6,000 2,000 0 Machining 8,000 55 22,000 13,000 6,000 Assembly 32,000 140 202,500 26,000 4,000 Total 40,000 250 25 0,000 44,000 10,000 a Basis usedis the number of employees BKAMZOI3 MANAGEMNTACCOUNTING I REQUIRED: (a) (b) (0) (d) (6) As the operating department manager, you have been asked by the top management of GSB to allocate the support-department costs using the step-down method. You are required to determine the overhead rates per direct manufacturing labor-hours for Machining and Assembly, and then allocate the costs of the support departments inthe order given (follow the list). In doing this, you are given the authority to select the most appropriate allocation base for each support department. Show all workings. (15 Marks) Using the direct method, rework requirement (a). Show all workings. (11 Marks) Based on the following information about two jobs (Job 11 and 12), determine the total overhead costs for each I ob 11 and Job 12 by using those rates developed in requirement (a) and requirement (b) above. Show all workings. Direct Manufacturing LaborHours Machining Assembly Job 1 1 17 7 Job 12 9 20 (6 Marks) GSB evaluates the performance of the operating department managers based on how well they manage their total costs, including allocated costs. As the manager of the Machining Department, which allocation method would you prefer from the results obtained in requirements (a) and (b)? Explain TWO (2) reasons for your answer. (3 Marks) During the executive meeting held this morning, the top management of GSB is currently considering using the reciprocal method in the near future in allocating the support department costs to the operating departments. As one of the operating department managers, you have been requested to explain on this method and discuss the advantage and disadvantage of using the reciprocal method (in comparison to the direct and step down methods). (5 Marks) END OF QUESTIONS