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1 POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING, ECONOMICS & FINANCE BACHELOR OF ACCOUNTING COST & MANAGEMENT ACCOUNTING 201 (CMA 611 S) FIRST OPPORTUNITY EXAMINATION QUESTION PAPER Date: Duration: Total marks: JUNE HOURS 80 INSTRUCTIONS I NOTES 1. This examination is made up of Five (5) 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 8 pages including the cover page EXAMINERS: E. Kangootui and G. Sheehama MODERATOR: K. Boamah 1

2 Question 1 (20 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 An organization manufactures a single product which has a variable cost of N$36 per unit. The organization's total weekly fixed costs are N$ and it has a contribution to sales ratio of 40%. This week it plans to manufacture and sell 5000 units. What is the organization's margin of safety this week (in units)? A B C D A company has established a budgeted sales revenue for the forthcoming period of N$ with an associated contribution of N$ Fixed production costs are N$ and Fixed selling costs are N$ What is the break-even point in sales value? A. N$ B. N$ C. N$ D. N$ A company uses process costing to value its output. The following was recorded for the period: Input materials 2000 units at N$4.50 per unit Conversion costs N$ Normal Loss Actual Loss 5% of input valued at N$3 per unit 150 units There was no opening or closing inventory. What was the valuation of one unit of output rounded off to the nearest one decimal place? 2

3 A. N$11.8 B. N$11.6 C. N$11.2 D. N$ Two products 0JV and X) are created from a joint process. Both products can be sold immediately after split-off. There are no opening inventories or work in progress. The following information is available for the last period. Total joint costs N$ Products Production units Sales units Selling price per unit w X N$10 N$12 Using the sales value method of apportioning joint production costs, what was the value of the closing inventory of product X for last period? A. N$ B. N$ C. N$ D. N$ In a period, opening inventory were units and closing inventory units. The profit based on marginal costing was N$ and profit using absorption costing was N$ What is the fixed overhead absorption rate per unit (to the nearest two decimal places)? A. N$4.00 B. N$4.27 C. N$4.77 D. N$ XWZ Ltd produces a single product. The management currently uses marginal costing but is considering using absorption costing in the future. The budgeted fixed production overheads for the period are N$ The budgeted output for the period is 2000 units. There were 800 units of opening inventory at the beginning of the period and 500 units of closing inventory at the end of the period. If absorption costing principles were applied, the profit for the period compared to the marginal costing profit would be: 3

4 A N$ higher B. N$ lower C. N$ higher D. N$ lower 1.7. In relation to contract costing, work certified represents: A B C D E The amount of work that has been paid for by the client The amount it has cost the contractor in terms of material, labour and overheads The amount of work that has been agreed as being complete, certified by the architect The amount of work that is needed to bring the contract to completion. The amount that is still outstanding to be paid by the customer (client) The following statement is NOT true: A B C D E A job order costing system is used by repair shops. A process costing system is used in the manufacturing of a large quantity of similar products. A contract costing system is used in the building industry. A manufacturer of paper clips will use a job order costing system. A process costing system is used in the motor assembly industry A firm uses a job order costing system. Direct material, which was previously issued to the factory for use on a particular job, has been returned to the storeroom. The entry to be made for these returns would be as follows: A B C D E Debit Material control account and credit Factory overheads account Debit Material control account and credit Work-in-process account Debit Creditors control account and credit Factory overheads account Debit Creditors control account and credit Work-in-process account. Debit Creditors control account and credit Material control account When ascertaining the profit made on an incomplete long-term contract: A B C D E We should wait until the contract has been completed before we recognise any profit. We should recognise all profits once the contract has been agreed upon. We should recognise profits in proportion to the amount of work that has been done. The architect will prescribe the amount of profit to be recognised on the contract. None of the above. 4

5 Question 2 (15 Marks) Mr Wiseman pays golf and country clubs in the Eastern Cape a flat fee of N$5 000 a month for the right to retrieve all the stray golf balls from club's lakes and ponds. He then cleans the balls and grades them as to quality- birdie, bogey, or duffer. The golf balls are then sold to sports shops for the following amounts (per golf ball): Birdie: N$50 Bogey: N$40 Duffer: N$30 During March 2014, Mr Wiseman paid N$ to various golf and country clubs for the right to retrieve stray golf balls. He managed to retrieve the following quantities of golf balls: Birdie: Bogey: Duffer: In early April 2014, Mr Wiseman was approached by a local golf club who offered to pay him N$50 per ball for all the bogey balls he could retrieve. However, the balls needed to be painted with a distinctive stripe. Mr Wiseman estimates that painting the stripe would cost an additional N$7.50 per dozen balls. Required: 2.1 Determine the gross profit or loss for each type of golf balls for March 2014, using the Sales value at split off method to allocate joint costs. (9 marks) 2.2 Determine the cost of each type of the golf balls (3 Marks) 2.3 Should Mr Wiseman accept the offer for the special bogey balls from the local golf club? Motivate your answer by means of calculations to justify your suggestion. (3 Marks) 5

6 Question 3 (18 Marks) A chemical compound is made by raw material being processed through two processes X and Y. The following information has been provided to you as their cost accountant; Process X Process Y Normal loss of input 2.5% 5% Scrap value (per unit) N$3.00 N$4.00 Output (units) N$ N$ Direct Material ( units) Direct material added in process Direct wages Direct expenses Production overhead is estimated to be 250% of direct wages. Required: Calculate the value of the following: 3.1 Cost per one good unit in process X (6marks) 3.2 Cost per one good unit in process Y (6 Marks) 3.2 The value of any Abnormal Losses or Gain from the production in both processes. (6 Marks) Question 4 (15 Marks) Lazy Cat Ltd makes a product with a variable production cost of N$16 per unit and variable selling costs of N$4 per unit. Fixed cost are N$ per annum, the selling price per unit is N$36, and the current volume of units produced and sold is units per annum. The Company is considering whether to hire a new machine that is expected to reduce the variable production cost per unit by 25%. This would cost the company N$ annually in hiring fees. Required Advice management whether they should hire the new machine or not by clearly showing an increase or decrease in Net income I Loss. 6

7 Question 5 (12 marks) A firm uses a job costing system and keeps only one set of books for their cost accounts and financial accounts. On 1 March the job cost sheets showed the following particulars: Balance b/d Job A N$1 060 Job B N$1 880 Transactions during March: Direct material purchased on credit Factory overheads paid by cheque Requisitions for direct material were as follows: Job A Job B Labour cost on job cards were as follows: Job A Job B N$1 500 N$ 100 N$ 140 N$ 100 N$ 20 N$ 85 Factory overheads are applied at a predetermined rate of 80% of direct labour cost. Job A was completed during March and sold on credit for an amount of N$ Selling and distribution costs paid: N$34 Required: 5.1 Show the work in process account for Job A in the ledger of the firm. 5.2 Determine the value of work in process at 31 March. 5.3 Compute the amount of factory overheads under/over absorbed for March. (5 Marks) (3 Marks) (4 Marks) 7

8 , COST & MANAGEMENT ACCOUNTING 201 (CMA512S) June 2014 QUESTION 1: ANSWER SHEET STUDENT NUMBER: u u D u D u u D u D EJ u D u D D u D u u D u D D u D L:J u D u D D u D u D D u D D D 8