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: Mrs 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: Target Costing Anglia Designs have developed a new type of chair. Their market research indicates that it would sell at 125 and the company has set a target profit margin of 30% on the selling price. The manufacturing costs are expected to be as follows; Direct materials Wood is bought in and costs 20 per item when purchased in batches of Delivery costs are 750 per batch. Fabric costs 200 for a roll and 10 items can be cut from a roll. Other materials cost 15 per unit. Direct Labour It takes 3 hours to assemble one chair and labour costs 12 per hour. Production overheads are 140,000 per year. The company are planning for a sales volume of 50,000. Overheads are allocated on the basis of number of units produced. a) Explain the concept of target costing to Anglia Designs and describe how the use of this approach could help them (6 marks) b) Calculate the expected cost per unit and identify any difference between the Target cost and the expected cost. (12 marks) c) Assuming a difference in costs identified in part (b), describe possible steps that the company could use to reduce to reduce the cost gap. (7 marks) Total:

3 Page 3 Question 2: Variable costing and absorption costing Details of a company's first two years of operations are shown: Year 1 Year ,000,000 1,250,000 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. (15 marks) b) Using the profit under Absorption costing, calculate what the profit would be each year if the company used Marginal costing. c) Why is Marginal costing which is used by Management accounting incompatible with Financial accounting? Total: TURN OVER

4 Page 4 Question 3: Activity Based Costing Wright Ltd produces two products, Right and Left. The company currently absorbs overheads on the basis of units produced, but they have read about a method based on activities undertaken and have asked you to help them investigate the method. The output is Right 16,000 and Left 13,000. The company has provided the following information; Overhead activity Annual costs Cost driver Amount of activity Right Left Production 129,800 Machine hours Quality inspection 58,080 No. of production runs Material purchased 71,820 Purchase orders Deliveries to retailers 18,080 Shipments a) Produce a statement that shows the overhead split using the original method, and showing the amount per unit produced. b) Produce a statement showing the overhead split using Activity Based Costing. Show the amount per unit produced. (10 marks) c) Explain the difference between the two methods and the difference in cost per unit. d) Discuss the advantages and disadvantages of the two methods. Total:

5 Page 5 Question 4: Standard costing Cromer Ltd uses variance analysis as a method of cost control. Information for the year ended 31 December 2016 is as follows; Budget Production for the year 1400 units Direct materials (Quantity 2800 at 4) 11,200 Direct Labour (700 hours at 9.5/hour) 6,650 Total 17,850 Actual Production for the year 1,200 units Labour hours for year 750 hours Labour cost for year 7,200 Materials used in year 2,700 Materials cost for year 10,260 a) Calculate the standard costing variances for the materials and labour. (15 marks) b) Explain the variances and the possible interdependence between them. c) Explain the different types of standards which can be set and how the chosen one could affect the outcomes. Total: TURN OVER

6 Page 6 SECTION B: Answer ONE question from this section Question 5: Performance measurement A manager is disappointed to learn that his performance review based on accounting ratios was poor. He had been measured against Earnings per share, market price of company shares and net profit margin. However, he has introduced new working practices this year improving customer reviews and invested in new equipment which should improve results in the future. He mentions that the company are thinking of a new approach to measuring performance next year called the Balanced Scorecard and wonders if this would improve his review. Describe the balanced scorecard approach to performance measurement and the measures that the company might consider including in all the four categories. Question 6: Pricing Discuss the various methods that an accountant might consider when setting a selling price for a new product. What is meant by the term Transfer pricing? And how may Taxation policies affect this? 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. END OF PAPER

7 NBS5007Y Management Accounting Feedback The questions in section A were attempted equally with no question in particular avoided. In section B, questions 5 and 7 were the most popular, question 6 was not answered by many students. The average mark was 61.58% with a Standard deviation of Over 40% of students achieved a mark of 70% or above. Almost 60% of students achieved a mark of 60% or above. Student still performed better on the numerical parts of the questions in section A, sometimes avoiding the written explanations entirely, and thereby limiting their marks achievable.