UNIVERSITY OF BOLTON OFF CAMPUS DIVISION THE UNIVERSITY OF BANKING - HCMC VIETNAM BA (HONS) ACCOUNTANCY SEMESTER 1 EXAMINATIONS 2015/16

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1 OCD006 UNIVERSITY OF BOLTON OFF CAMPUS DIVISION THE UNIVERSITY OF BANKING - HCMC VIETNAM BA (HONS) ACCOUNTANCY SEMESTER 1 EXAMINATIONS 2015/16 STRATEGIC MANAGEMENT ACCOUNTANCY MODULE NO: ACC6005 Date: Wednesday 30 th December 2015 Time: 3 Hours INSTRUCTIONS TO CANDIDATES: You must answer 4 of the 5 questions on this paper. Answer BOTH questions in Part A and TWO questions from Part B Part A questions carry 30 marks and Part B questions carry 20 marks This is a closed book examination. You must hand in this exam paper with your answer booklet.

2 Page 2 of 7 PART A ANSWER BOTH QUESTIONS Question A1: Product X Product X has a standard selling price of 2,000 and contains two components with the following specification: Components Standard Quantity Standard price A B The standard direct labour hours to produce the product at the standard wage rate of 10 per hour has been established at 20 hours per product. The annual fixed production overhead budget is divided into calendar months with equal production per month. The budgeted annual fixed overheads are 60,000 for the budgeted output of 3,000 units of Product X per annum. Actual results for the month of June were as follows: Sales 400,000 Cost of sales Direct labour 41,220 Direct materials 157, ,520 Fixed production overheads 5, ,920 Gross profit 196,080 Selling and distribution expenses 21,980 Administrative expenses 18,340 40,320 Net profit 155,760 QUESTION A1 CONTINUES OVERLEAF

3 Page 3 of 7 Question 1 cont d Stocks for June were: 1 June 30 June Component A Component B The actual hours worked were 4,580. Purchases were as follows: Component A: 2,000 units for 84,000. Component B: 2, each REQUIRED; (a) Calculate the standard product cost of product X. (4 marks) (b) Produce a flexible budget to identify actual and budgeted profit (5 marks) (c) Calculate: (i) The sales volume variance. (ii) The direct material variances for both price and usage for each component used in the month of June assuming that prices were stable throughout the relevant period. (iii) The direct labour efficiency and wage rate variances for the month of June. (iv) The fixed production overhead expenditure and volume variances. (12 marks) (d) (e) Produce a detailed reconciliation statement of the standard profit with the actual profit for the month of June. (4 marks) Write a report to the board of directors critically evaluating the performance of the company. (5 marks) Total 30 marks

4 Page 4 of 7 Question A2: Launder Limited. Launder Ltd is a commercial laundry service. The company uses a traditional method of overhead absorption. It has two cost centres, Laundry operations and Transport. The management is unhappy with the profitability of some of its operations. The CEO wants to discontinue the unprofitable business, but the COO feels that this will let competition increase market share. The COO is convinced that an activity based costing system (ABC), of dealing with overheads, will provide management with the information they need to make the correct decisions. The management accountant has been asked to investigate. The estimated data for next year using the existing absorption method is as follows: Total number of cost units to be 50,000 processed Total transport km for collection/delivery 200,000 Km Total overheads 500,000 Overhead absorption rate 70% laundry 30% transport Additional data resulting from the ABC investigation: Main Activities Cost Driver Cost pool (% of total overheads) Collection & Delivery of 200,000 kms 20 laundry Loading & unloading 12,500 transport runs 10 Laundry 400,000 kg dry weight 30 Drying 500,000 kg wet weight 20 Pressing 50,000 cost units 20 Data from two sample contracts: St Mary s Hospital The Royal Hotel Number of cost units 10,000 5,000 processed Number of transport runs 1, Transport km 6,000 8,000 Average dry weight per 4 kgs 3 kgs cost unit Average wet weight 5.3 kgs 3.3 kgs

5 Page 5 of 7 Question 2 cont d QUESTION A2 CONTINUES OVERLEAF Required: a) Using the traditional absorption costing information, calculate the overhead absorption rate (OAR) for each of the two cost centres. (5 marks) b) Calculate the OAR for each activity using the additional ABC information (7 marks) c) Compare the overhead absorbed by both St Mary s Hospital and the Royal Hotel using both the traditional system and the ABC approach. (8 marks) d) Critically evaluate how the ABC approach to overhead absorption will assist management in decision-making. Total: 30 marks

6 Page 6 of 7 PART B ANSWER TWO QUESTIONS FROM THIS PART Question B3. (a) (b) Suggest the main reasons for the adoption of a transfer pricing system. Critically evaluate the use of the following: (i) market price based transfer prices; and (ii) cost based transfer prices. Outline the main types that exist under each heading. Total: 20 marks QUESTION B4. (a) Critically evaluate the use of the Balanced Score Card and give examples of its use in the business environment. (b) Using a business of your choice as an example, identify one corporate goal for each of the 4 perspectives and give examples of one performance indicator for each performance goal. Give reasons justifying your selection of each performance indicator. QUESTION B5. Total: 20 marks TQM aims to change the management culture in an organisation to that of a 'quality culture', focusing on improving customer care, the relationship with suppliers and team-centred management. All business functions in the organisation are involved in continuous quality improvement. (a) Analyse the above statement and how the traditional approach to quality differs from the TQM approach. (b) Critically evaluate the effect that TQM will have on management and control systems and the information needs of management. Total: 20 marks

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