POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING, ECONOMICS & FINANCE BACHELOR OF ACCOUNTING

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1 a セ POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING, ECONOMICS & FINANCE BACHELOR OF ACCOUNTING COST & MANAGEMENT ACCOUNTING 201 (CMA 611S) Date: NOVEMBER 2014 Duration: Total marks: 82 3 HOURS SECOND OPPORTUNITY EXAMINATION QUESTION PAPER INSTRUCTIONS I NOTES 1. This examination is made up of four (4} questions 2. Answer ALL the questions and in ink 3. Start each question on a new page in your answer booklet & show all your workings 4. Questions relating to this paper may be raised in the initial 30 minutes after the start of the paper. Thereafter, candidates must use their initiative to deal with any perceived error. or ambiguities & any assumption made by the candidate should be clearly stated. 5. This paper consists of 6 pages excluding the cover page EXAMINERS: E. Kangootui, G. Sheehama MODERATOR: K. Boamah

2 I I... QUESTION 1 (16 marks) Answer this question ON the Answer Sheet on Page 7 of this question paper. Each of the following questions ( ) has only ONE correct answer. Draw a cross {X) OVER the letter which, in your opinion, represents the correct answer. Note that each question counts 2 marks. Put the completed Answer Sheet IN your examination script and submit them together. The following details refer to questions 1.1 and 1.2: Pork-Co. supplied the following details regarding its three joint products for the past month: Production (kilograms) Market value (per kilogram) Spare ribs N$50 Pork roasts N$45 Bacon N$40 The joint costs amounted to N$ during the same period. 1.1 If the physical output method of apportioning joint costs is used, the joint cost allocated to pork roasts will amount to: A N$ B N$ C N$ D N$ E None of the above 1.2 If the market value method of apportioning joint costs is used, the joint cost allocated to spare ribs will amount to: A N$ B N$ C N$ D N$ E None of the above 1.3 When using direct costing information, the contribution margin discloses the excess of: A B C D E revenue over fixed cost projected revenue over the break-even point revenue over variable cost variable cost over fixed cost None of the above 1

3 1.4 Operating income computed using direct costing would generally exceed operating income computed using absorption costing if: A units in closing inventory equal units in opening inventory 8 units in opening inventory exceed units in closing inventory C units in closing inventory exceed units in opening inventory D none of the above 1.5 Operating income computed using absorption costing would generally exceed operating income computed using direct costing if: A units in closing inventory equal units in opening inventory 8 units in opening inventory exceed units in closing inventory C units in closing inventory exceed units in opening inventory D none of the above 1.6 A firm only manufactures products as requested by customers. Recently the firm received an order for a particular product. The following information refers to this job: Direct labour Direct materials Direct labour hours N$1 600 N$ hours Manufacturing overheads are absorbed at a predetermined rate of 60% of direct labour cost. The total cost of this job is: A N$ N$4 800 C N$3 200 D N$4 560 E N$ In relation to contract costing, work certified represents: A The amount of work that has been paid for by the client 8 The amount it has cost the contractor in terms of material, labour and overheads C The amount of work that has been agreed as being complete, certified by the architect D The amount of work that is needed to bring the contract to completion. E The amount that is still outstanding to be paid by the customer (client). 1.8 In process costing the correct treatment of a normal loss is to: A B C D E Write it off to the profit and loss account in the period in which it occurred Charge the loss over the actual units of output made Charge the loss over the expected units of output made Charge the loss to the units of closing inventory at the end of the period. Make no entry. 2

4 QUESTION 2 (19 Marks) Beta Ltd produces a product that passes through two departments, mixing and heating. In the mixing department, all materials are added at the beginning of the process. All conversion costs are added uniformly during the process. The following information relates to activities in the mixing department for July: Beginning work in process: kilograms, 60% complete as to conversion costs, valued at: Direct material Conversion costs During the month the following costs were incurred: Direct material Conversion costs N$2 000 N$4 000 N$ N$ Units completed and transferred out during the month kilograms Required: Ending work in process: kilograms, 40% complete with respect to conversion costs. The company uses the First-in-first-out method for the valuation of its inventories. 2.1 Prepare a Production Cost Report for the mixing department for July; clearly showing, equivalent production schedule, cost and allocation statements respectively. (12 Marks) 2.2 Describe the characteristics of job costing system and give one example of industry where it is typically used. (3 Marks) 2.3 Distinguish between joint products and by-products and give one industry where it is typically used (4 Marks) 3

5 QUESTION 3 (22 marks) Digolo Limited provides you with the following information: Selling price per unit N$ Variable manufacturing cost per unit: Direct Material Direct Labour Manufacturing overheads Total fixed manufacturing cost: N$25.00 N$47.20 N$30.00 N$ Non-manufacturing cost: Fixed marketing cost N$ Fixed administration cost N$ Sales commission 10% of the selling price per unit Required: 3.1 Calculate the margin of safety ratio if Digolo Ltd sells units during the period? (5 Marks) 3.2 Explain what is meant by margin of safety and how it is useful to management? (2 Marks) 3.3 A marketing research consultant has advised the company that a 10% decrease in selling price will give the company an advantage over its competitors in the form of lower prices. This will also increase the sales volume to units compared to the current sales volume of units. Management will only go along with this advice if it results in increased profits. Assuming that all inventory will be sold and this is the only change, prepare a marginal income statement based on the proposed new sales level, and show any relevant calculations, before advising management accordingly. (15 Marks) 4

6 QUESTION 4 (25 Marks) Canyon Ltd started working on a contract on 1 April2013. The contract price was N$ and the target completion date was 31 May It was agreed with the client that the retention amount would be 4% of the work certified by the architect. At 28 FebrL:ary 2014 (the end of the company's accounting period) the cost accountant collected the following information regarding this contract: N$ Material sent to site Material returned to the storeroom Plant sent to site Material transferred to another contract L 000 Material on site at 28 February Plant hire charges Labour cost incurred Overhead costs Direct expenses incurred Sales value of work certified by architect Cost of work not yet certified Cash received from client? Depreciation is charged on plant at a rate of 12% p.a. Required: 4.1 Prepare a contract account in which you clearly indicate which amount should reasonably be transferred to the profit and Joss account at 28 February (21 Marks) 4.2 Prepare an extract of the statement of financial position in respect of the contract, clearly showing; non-current assets, accounts receivable and work in process. (4Marks) 5

7 QUESTION 1: ANSWER SHEET STUDENT NUMBER: August 2014 LJ D D D EJ u LJ D D D c::j u LJ D D D LJ u LJ D D D c::j u LJ D D D LJ u LJ D D D LJ u LJ D D D c::j u LJ D D D 6