BBAP2103 Management Accounting

QUESTION 1
Seehat Sdn. Bhd. involves in the operation of making yogurt and soya
milk in Bandar Kayangan. Throughout the month of January, company
has made a total of 200,000 packs of yogurt and 100,000 packs of soya
milk. Its fixed overhead is absorbed to the products based on direct
labour hour. The following is the information on operation of the
company for the month of January 2014:
Selling price
Sales (packs)
Direct labour hour
Manufacturing cost:
Direct material
Direct labour
Variable manufacturing
overhead
Fixed manufacturing
overhead
Non-manufacturing cost:
Variable marketing
cost
Fixed marketing cost
Fixed administrative
cost
a)
Yogurt
RM4.50
210,000
80,000
RM
100,000
400,000
20,000
Soya Milk
RM5.50
90,000
50,000
RM
70,000
250,000
30,000
80,000
50,000
RM
60,000
RM
30,000
40,000
25,000
35,000
25,000
Discuss why management accounting information is important for

managers in Seehat Sdn. Bhd., a manufacturing company.
Small business owners are faced with countless decisions every business day.
Managerial accounting information provides data-driven input to these decisions,
which can improve decision-making over the long term. Small business managers can
leverage this powerful tool to help make their business more successful by
understanding how management accounting benefits common business decision
contexts.
Managerial accounting information is used by company management to determine
what should be sold and how to sell it. For example, a small business owner may be
unsure where he should focus his marketing efforts. To evaluate this decision, an
accounting manager could examine the costs that differ between advertising
alternatives for each product, ignoring common costs. This process is known as
relevant cost analysis and is a technique that is taught in basic managerial accounting
courses. The same process can be used to determine whether to add product lines or
discontinue operations.
Once the company has determined what products to sell, the business needs to
determine to whom they should sell the products. By using activity-based costing
techniques, small business management can determine the activities required to
produce and service a product line. Embedded in this information is the cost of
customers. Deciding which customers are more or less profitable allows the business
owner to focus advertising toward the consumers who are the most profitable.
A primary use of managerial accounting information is to provide information used in
manufacturing. For example, a small business owner may be considering whether to
make or buy a component needed to manufacture the company's primary product. By
completing a make or buy analysis, she can determine which choice is more profitable.
While this technique is certainly useful, small business owners should only use these
analyses as a factor in the decision. There could be other non-financial metrics that are
important to consider that would not be part of the analysis.
b)
Based on the above information, answer the following questions:

i)
calculate the product cost per pack for yogurt using
absorption and marginal costing methods;
(2 marks)
ii)
calculate the product cost per pack for soya milk using
absorption and marginal costing methods;
(2 marks)
iii)
prepare the Income Statement for Seehat Sdn. Bhd. using
absorption costing method;
(4 marks)
iv)
prepare the Income Statement for Seehat Sdn. Bhd. using
marginal costing method;
(4 marks)
v)
adjust the differences in net income reporting that exist

between both income statements; and
(1 mark)
vi)
discuss situations that will result in different net income

reporting for both methods.
(3 marks)
[Total: 20 marks]
QUESTION 2
Citra Tailors provides services of making baju kurung at Bandar Cahaya.
It uses a job order costing system. The overhead absorbed is based on
direct labour hour. The budgeted manufacturing overhead for the year
2014 is RM69,000. Management expects a total of 13,800 direct labour
hours will be used.
a)
Discuss why companies use budgeted overhead costs rather than

actual costs to compute predetermined overhead rate.
(4 marks)
b) Calculate the predetermined overhead rate for Citra Tailors for the
month of April 2014.
(1 marks)
c) Prepare journal entries to record the following transactions
incurred during the month of April 2014:
i)
Purchase direct material AA from Syarikat Jaya on credit at
RM5,885.
ii)
200 metres of direct material AA was requested from the store.
It was bought for RM0.50 per metres.
iii)
The alteration section has requested for 180 metres of material
BB which are the indirect materials. The cost of the purchase
was RM0.30 per metre.
iv)
Direct labour cost incurred for the month of April amounted to
RM40,000.
v)
Car insurance cost for the month of April is RM720. The car is
used for delivery purposes.
vi)
The indirect labour cost incurred for the current month is
RM18,000.
vii)
Depreciation of sewing machines for the month of April is
RM5,000.
viii)
Throughout the month, a total of 5,500 direct labour hours
have been utilised.
(11 marks)
[Total: 16 marks]
QUESTION 3
Job order costing method is suitable to be applied in a tailoring
business.
Assess the above statement.
[Total: 4 marks]

BBAP2103 Management Accounting

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QUESTION 1

Discuss why management accounting information is important for

Based on the above information, answer the following questions:

adjust the differences in net income reporting that exist

discuss situations that will result in different net income

Discuss why companies use budgeted overhead costs rather than

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