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Question 1

A liquid detergent manufacturing companyproducesone of its detergentproductusingtwo processes,the Chemical Mixing Process, and the Colouring Process.The detergent product is manufactured beginning with the Chemical Mixing Process, and ends with the Colouring Process.Information relating tothe ColouringProcessfora certain monthis as follows:

Opening inventory 7,000litres:

Degree of completionCost (RM)

Chemical Mixing Processmaterials100%45,000

Added materials40%5,000

Conversion costs30%15,000

65,000

=====

During the month, 40,000litreswere transferred from the Chemical Mixing Processat a valuation of RM250,000. Added materials cost RM28,000and conversion costs were RM85,000.

Closing inventoryfor the monthamounted to 10,000 litreswhich were 100% complete with respect tothe Chemical MixingProcessmaterials and 60% complete with respect to added materials. Conversion cost work was 40% complete.

The companyuses aweighted average cost systemfor the valuation of output and closing inventory.

Required:

(a)Preparethe following parts of thecost ofproduction report:

(i)Aquantity schedule showing thecomputation of equivalent unitsandcost per equivalent unit for the month.(10marks)

(ii)Costassignments.(4marks)

(b)Prepare theColouringProcessaccount forthe month.(3marks)

(c)Explain why the liquid detergent manufacturer uses a Process costing system instead of a Job costing system.(3 marks)

(d)Is it common for a liquid detergent manufacturer to incur normal and abnormal losses in the manufacturing processes? Explain in relation to the liquid detergent manufacturer how normal and abnormal losses can occur and what accounting treatmentis necessary.

(5marks)

[Total: 25Marks]

Question 2

The information below relates to data concerning acompany's operationsin a year:

Units in beginning inventory

0

Units produced

10,000

Units sold

9,000

Selling price per unit

RM60

Variable costs per unit:

Direct materials

RM15

Direct labor

RM5

Variable manufacturing overhead

RM2

Variable selling and administrative

RM4

Fixed costs in total:

Fixed manufacturing overhead

RM200,000

Fixed selling and administrative

RM70,000

Direct labour here is a variable cost.

Required:

(a)Prepare the statement of profit or lossfor the year using absorption costing.(8 marks)

(b)Preparethe statementof profit or lossfor the year usingvariable costing.(8marks)

(c)Themooncake is a Chinese bakery product traditionally eaten during the Mid-Autumn Festival,celebrated on the eight month of the Chinese Lunar calendar.Ifyou are themanagement accountant of a companyproducingmooncakes and other festive delicacies, explain the impact of sales and production cost of such a product on profits if (i) absorption costing, or (ii) variable costing is adopted, clearly proposing which costing system is most suitable here.(9marks)

[Total: 25 Marks]

Question 3

(a)Company Buses atraditionalabsorption costing system and absorbs production overheads on the basis of standard machine hours. The followingarebudgeted and actual information applied in its last accounting period:

BudgetActual

Production overheadRM750,000RM725,000

Machine hours125,000120,000

Units produces50,00050,000

Required:

Calculate the following:

(i)Budgeted overhead absorption rate(1 mark)

(ii)Actual overhead rate(1 mark)

(iii)Actual overhead absorbed(2 marks)

(iv)Production overhead under / over-absorbed(2 marks)

(b)The followingare details of stock purchased and sold inCompany Cbetween January and June of a particular year:

Bought

Sold

January300 units at RM25 each

March250 units at RM30 each

April200 units at RM45 each

May100 units at RM42 each

June200 units at RM 55 each

Required:

(i)Show calculations of stock valuation using the FIFO; LIFO; and AVCO methods using the perpetual system.(15marks)

(ii)In your opinion, how do companies determine the choice of stock valuation method to be used. ExplainTWO (2)reasons affecting the choicewith suitable examples.

(4marks)

[Total: 25 Marks]

Question 4

(a)Prepare the following journal entries for a job costing system:

(i)Purchase of materials from a supplier on credit(2 marks)

(ii)Issues of directand indirect materials for production(2 marks)

(iii)Payment of gross wages to employees(2 marks)

(iv)Allocation of gross wages, comprising direct and indirect wages for production(2 marks)

(b)Both jointproducts and by-products arise from a joint production process whereby they are not separately identifiable until after they have emerged from this joint process.

(i)Aand B are joint product that can be sold immediately after split-off. The following information is available for last period:

No opening inventories.Total joint production costswere RM750,000.

ProductProduction unitsSales unitsSelling price per unit

A14 00012 000RM10

B12 0008 000RM12

Using the physical unit method, computethe value of the closing inventory of product A and B forthelast period.(6marks)

(ii)In your view, why is the physical measures method not as satisfactory as the sales value method of joint cost allocation?(5 marks)

(iii)Provide and describe in detail an example of an industry that produces both joint and by-products.(6 marks)

[Total: 25 Marks]