Answer FOUR questions: THREE from Section A and ONE from Section B

Transcription

1 UNIVERSITY OF EAST ANGLIA Norwich Business School Main Series UG Examination MANAGEMENT ACCOUNTING NBS-5007Y Time allowed: 3 hours Answer FOUR questions: THREE from Section A and ONE from Section B All questions carry EQUAL marks Notes are not permitted in this examination. Do not turn over until you are told to do so by the Invigilator. NBS-5007Y Module Contact: Susan Wheeler NBS Copyright of the University of East Anglia Version 1

2 Page 2 SECTION A: Answer THREE questions from this section Question 1: CVP Payne Ltd manufactures three products, all of which use the same machine. Only 50,000 machine hours are available per period. The variable costs for each product are shown below and the fixed costs are 300,000 per period. Product A Product B Product C Direct materials Direct Labour: Machinists ( 8 per hour) Assemblers ( 6 per hour) Total variable cost Selling price per unit Maximum demand in units Payne Ltd could buy in similar products at the following unit prices. A 175 B 140 C 200 a) Calculate the deficiency in machine hours for the next period. (4 marks) b) Determine the priority ranking for internal manufacture. (8 marks) c) Determine which products and quantities should be bought externally. (8 marks) d) Explain the other factors that Payne Ltd should consider when deciding how to proceed.

3 Page 3 Total: 25 marks Question 2: Variable costing and absorption costing Details of a company's first two years of operations are shown: Year 1 Year ,200,000 1,500,000 Opening stock in units Units produced Units sold Fixed selling and administrative expenses 110, ,000 The company's unit product cost is computed as follows: Direct materials 4 Direct labour 7 Variable manufacturing overhead 1 Fixed manufacturing overhead 4 ( 180,000/45,000 units) Unit product cost 16 a) Prepare a profit and loss account for each year using Absorption costing. b) Prepare a profit and loss account for each year using marginal costing. c) Explain the difference in profit between the two costing methods. Total: 25 marks TURN OVER

4 Page 4 Question 3: Target costing Fry Ltd are developing a new type of umbrella for cyclists. Market research has indicated that customers would be willing to pay 80 for the product. The company usually expect a profit margin of 12% on products. Fixed costs for enhancements to production machinery are expected to be 250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost 25 per unit. Each product requires 45 minutes of specialist labour to manufacture. The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is per hour. a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost. b) A reduction in the fixed costs of 45,000 could be achieved but this would result in increased labour time to 1 hour per unit. Explain whether Fry Ltd should consider doing this? c) Alternatively, cheaper materials costing only 22 could be used but this would also result in each unit taking 1 hour to make. Should Fry consider this? Give reasons for your answer. d) Alternatively, each member of specialist staff could be provided with an apprentice to assist them. The apprentice will cost 8 per hour and this would enable the specialist staff to spend only half an hour on each unit of the product. Should Fry consider this? e) Suggest other possible actions that Fry could take to enable them to pay the expected rate of pay per hour. 25 marks

5 Page 5 Question 4: Standard costing Yarmouth Ltd uses variance analysis as a method of cost control. Information for the year ended 30 September 2015 is as follows; Budget Production for the year 12,000 units Standard cost per unit: Direct materials (3 Kg at 10/Kg) 30 Direct Labour (4 hours at 8/hour) 32 Overheads (4 hours at 2/hour) 8 70 Actual Production units for year 11,500 units Labour hours for year 45,000 hours Labour cost for year 370,000 Materials used in year 37,250Kg Materials cost for year 345,000 a) Calculate variances and prepare a reconciliation statement between the original budgeted and actual Prime costs. (15 marks) b) Explain the variances and the possible interdependence between them. c) Advise Yarmouth Ltd whether they should continue with the current pay rates for Labour. TURN OVER

6 Page 6 SECTION B: Answer ONE question from this section Question 5: Performance measurement Brace Co is an electronics company specialising in the manufacture of home audio equipment. Historically, the company has used solely financial performance measures to assess the performance of the company as a whole. The company s Managing Director has recently heard of the balanced scorecard approach and is keen to learn more. Describe the balanced scorecard approach to performance measurement and suggest measurements that the company might consider including in all the four categories. Question 6: Budgeting (25 marks) Some commentators argue that: With continuing pressure to control costs and maintain efficiency, the time has come for all public sector organisations to embrace zero-based budgeting. There is no longer a place for incremental budgeting in any organisation, particularly public sector ones, where zero-based budgeting is far more suitable anyway. a) Discuss the particular difficulties encountered when budgeting in public sector organisations compared with budgeting in private sector organisations, drawing comparisons between the two types of organisations. (b) Explain the terms incremental budgeting and zero-based budgeting. (c) Discuss the view that there is no longer a place for incremental budgeting in any organisation, particularly public sector ones, highlighting any drawbacks of zerobased budgeting that need to be considered. 25 marks

7 Page 7 Question 7: Beyond Budgeting In the Beyond Budgeting report produced by CIMA (2007), it is argued that traditional budgeting is in need of serious revision. Why does the author say this? What improvements can be made to facilitate better planning and control. Total: 25 marks END OF PAPER