POLYTECHNIC OF NAMIBIA SCHOOL OF ECONOMICS AND FINANCE DEPARTMENT: ACCOUNTING 06DPAF Diploma in Accounting and Finance COURSE CODE: COURSE: CMA512S Cost & Management Accounting 101-2"d OPPORTUNITY DATE: June 2014 DURATION: 2 Hours MARKS: 80 INSTRUCTIONS 1. Answer ALL the questions. 2. Show all your calculations 3. Start each question on a new page 4. Only blue or black ink is allowed 5. No Tippex or pencil 6. Answer Question 1 ON THE ANSWER SHEETS provided at the end of this question paper (Page 7). Examiner: G K S Sheehama, E Kangootui, W Dreyer, A.Ngaruka Moderator: Mr K Boamah This document consists of 7 pages including the cover page 1
QUEST\ON 1 (20 marks) Answer this question ON the Answer Sheet on Page 7 of this question paper. Each of the following questions (1.1-1.1 0) 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: 1.1 A firm requires a certain type of raw material on a continued basis in its manufacturing process. The following information is available in respect of this raw material: Purchase price per unit Cost of placing an order Annual storage cost per unit Minimum lead-time Maximum lead-time Normal usage N$128. 00 N$58. 85 N$3.57 2 weeks 4 weeks 840 units per week The economic order quantity rounded off to the nearest 1 00 is: A. 500 B. 1 200 C. 1 000 D. 450 E. 1 400 1.2The following statement is NOT true: A. Total ordering cost= Cost per order x Number of orders B. Total inventory cost= Total ordering cost+ Total holding cost C. Total holding cost= Re-order quantity x Holding cost per unit per year D. Average inventory = Minimum inventory level + Y:z (Economic order quantity) E. Re-order level= Maximum usage x Maximum lead-time 1.3 Under absorbed overheads occurs when: A. The amount of actual overheads incurred is less than the overheads that have been charged to production B. Actual overheads have fallen in relation to what they were expected to be C. The amount of budgeted overheads is less than the actual overheads incurred. D. The basis of allocating overheads has changed during the period E. The amount of overheads charged to production is lower than the actual 2
1.4 Shetu Company's predetermined overhead rate is based on direct labour hours. At the beginning of the current year, the company estimated that its manufacturing overhead would total N$220 000 during the year. During the year, the company incurred N$200 000 in actual manufacturing overhead costs. The Manufacturing Overhead account showed that overhead was over-applied by N$8 000 during the year. If the predetermined overhead rate was N$20.00 per direct labour hour, how many hours were worked during the year? A 9 600 hours B. 1 0 000 hours C. 10 400 hours D. 11 000 hours E. 12 000 hours 1.5 Cake-makers Ltd has been using an overhead absorption rate of N$7.40 per machine hour. During the year, 60 000 machine hours worked. Overhead costs applied to production was under-applied of N$6 000. What was the amount of actual manufactured overheads for the period? A N$444 000 B. N$450 000 C. N$438 000 D. N$456 000 E. N$486 000 1.6 The financial accounts of Okavango Ltd showed a net income of N$158 500. The inventory valuations were as follows: Opening inventory Closing inventory Cost accounts N$ 35 260 68 490 The net income in the cost accounts was: A N$163 179 B. N$153 821 C. N$140 871 D. N$154 700 E. N$176 129 financial accounts N$ 41 735 57 336 3
1. 7 A firm uses a perpetual inventory system. The following details regarding a certain item have been supplied to you: セイゥ @ 2013 Units Unit Oct 1 Opening balance 250 N$40.00 10 Purchased 100 43.92 12 Issued 150 17 Purchased 200 43.28 25 Issued 150 The value of the closing inventory according to the Weighted Average method was: A N$ 5 150 D N$14 400 B N$ 6 110 E N$15 050 C N$10 550 1.8 A firm operates an integrated cost and financial accounting system. The accounting entry for an issue of indirect material to production would be as follows: A B C D E Or Work-in-process control account; Cr Material control account. Or Finished goods control account; Cr Work-in-process control account Or Material control account; Cr Work-in-process control account Or Cost of goods sold account; Cr Work-in-process control account. Or Overheads control; Cr Material control account 1.9 A company operates an interlocking accounting system in which the cost ledger is kept separate from the financial ledger. The double entry for the recording of gross wages payable in the cost ledger will be as follows: A B C D E Or Wages control account; Cr Creditors control account Or Wages control account; Cr Wages payable account Or Wages payable account; Cr Financial ledger control account Or Wages control account; Cr Financial ledger control account Or Work in Process account; Cr Financial ledger control account 1.10 An employee is paid N$14.50 per hour and normally works eight hours daily from Monday to Friday. During a certain week he also worked four hours on Saturday for which he was remunerated at time-and-a-half. On Sunday he worked for five hours at double the normal rate. He contributes 8% of his basic wage to a pension fund and pays 16% income tax. His net wage for the week amounted to: A B c N$543.90 N$597.80 N$611.50 D E N$621.20 N$643.10 4
Question 2 (35 Marks) Milimuto Manufacturers CC was incorporated on 1 February 2013. After six months of operations, management was disappointed with the results. According to a statement presented by a business consultant, July's Statement of Comprehensive Income was as follows. Milimuto Manufacturers Statement of Comprehensive Income N$ N$ Sales 450 000 Less operating expenses Indirect labour cost Utilities Direct labour cost Depreciation, factory equipment Raw materials purchased Depreciation, sales equipment Insurance Rent on facilities 12 000 15 000 70 000 21 000 165 000 18 000 4 000 50 000 Sellina and administrative salaries 32 000 Advertising 75 000 Net loss 462 000 (12 000) After seeing the N$12 000 loss for July, Milimuto's managing director stated, "I was sure we'd be profitable within six months, now that the six months are gone and this loss for July is even worse than June's. I think it's time to start looking for someone to buy out the company's assets - if we don't, within a few months there won't be any assets to sell. lt might be the right time to look for a new manager." Additional information about the company is as follows: (a) 60% of the utilities cost and 75% of the insurance apply to factory operations respectively and the remaining amounts apply to selling and administrative activities. (b) Inventory balances at the beginning and end of July were: 1 July 31 July N$ N$ Raw materials 8 000 13 000 WIP 16 000 21 000 Finished goods 40 000 60 000 (c) Only 80% of the rent on facilities applies to factory operations; the remainder applies to selling and administrative activities. 5
Required Can you prove or disprove the net loss as stated in the draft financial statement and make a recommendation based on the MD's concerns and views. Your recommendation should be supported by the presentations of relevant financial statements. QUESTION 3 (15 marks) 3.1 Explain the difference between the amount earned by an employee for overtime worked and remuneration earned under a wage incentive scheme. (3 Marks) 3.2James Buckley is an employee in a cement factory. His contract of employment states that he should work 8 hours per day at a wage rate of N$16 per hour. For overtime work he is remunerated at time-and-a-half. On Monday morning his supervisor assigned him a task which he has to complete within 11 hours. He duly finished the task on the same day within 9 hours. Required: Calculate James's total earnings for the day under each of the following bonus systems: 3.2.1 Rowan bonus scheme (6 Marks) 3.2.2 Halsey bonus scheme (6 Marks) Question 4 (1 0 Marks) The Wilderness is a weekly newspaper sold throughout South Africa and Namibia. The following costs were incurred by its publisher during a week: Circulation 100 000 newspapers Total variable costs N$40 000 Total fixed costs N$66 000 Required: Predict the total costs associated with the circulation of 110 000 and 120 000 newspapers respectively. 6
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