TUTORZONE

THE 

TUTORZONE

Cost & Management
Accounting 2

NORAIHAN BINTI MAMAT ZAMBI

COST AND MANAGEMENT
ACCOUNTING & VARIANCE

ANALYSIS

QUESTION 1
List FIVE (5) roles of a Manager in Management Accounting.

Below is the information regarding the operation of
Company VVV Berhad which sells electronic devices T-01.

Items Standard Actual
100 units 125 units
Output RM 2/box RM 2.10/box
Material
200 boxes 252 boxes
price
Material RM 5/hour RM 4.80/hour

usage 25 hours 31 hours
Labour

rate
Working

hours

Determine the variance of materials.
Calculate the variance of labour.
If the standard machine hour was 2.5 hours per unit
with the cost of RM 1.50 per unit, calculate the
variable overhead variances when the actual cost was
RM 197.50 by total of 375 machine hours.
Propose TWO (2) appropriate actions in order
to overcome each of the unfavourable issues which arise in
Company VVV Berhad.

QUESTION 2

Syarikat Perabot Maju is a manufacturer of home furnishing. The
following information is related to the company production of a
table:

Standard cost: 1 meter of wood at RM 0.50 per
Direct meter
material 1.5 kg of iron at RM 0.60 per kg
15 minutes at RM 5.00 per hour
Direct labour RM 1.00 per unit table

Variable RM 1.50 per unit table
Overhead
Fixed
Overhead

Overhead is absorbed on the basic of direct labour hour. The
total production standard of the table is 10,000 unit per
month.
Actual cots:

Direct 10,000 meters of wood at RM
material 6,000
12,000 kg of iron at RM 8,400
Direct labour 2,500 hours at RM 12,750
Variable RM 11,000
Overhead
Fixed RM 12,000
Overhead
12,000 unit per month
Production

You are required to calculate:

a) The material price variance
b) The material usage variance
c) The material cost variance
d) The labour rate variance
e) The labour efficiency variance
f) The labour cost variance
g) The variable overhead expenditure variance
h) The budgeted fixed overhead expenditure variance

QUESTION 3

Identify FIVE (5) features of management accounting
information.

Describe TWO (2) causes of labour efficiency variance.

Data producing one unit product “Tree Leave” are as
follow:
 Standard price of material for 1 kg is RM 5.00
 One unit of product “Tree Leave” needs to use 3 kg of

materials
 In July 2017, 1,000 units of “Tree Leave” were

produced.
 The actual quantity of materials bought and consumed

was 3,100 kg. The actual price of material was RM 5.20
per kg.

You are required to calculate:

i. Material price variance
ii. Material usage variance

Amirina manufacturing produces a product under the
brand “XaXo”. The following are the records for direct
labour and variable overhead relating to the production. In
January 2017 the workers took 4,200 hours to produce
1,000 units of “XaXo”. Total wages involved in January 2017
was RM 15,960. Variable overhead cost incurred was RM
19,000.
Cost standard for 1 unit product:

 Direct labour RM 4 per hour (4 hours per unit)
 Variable overhead RM 5 (based on direct labour

hours)

Analyze the variance for:

i. Labour rate
ii. Labour efficiency rate
iii. Variable production overhead expenditure (price)
iv. Variable overhead efficiency

QUESTION 4

List FIVE (5) characteristics of Management Accounting
information.

Mina Bakery Enterprise produces cake for distribution in Rawang
area. The following is the standard cost for RM 150 units of the
cakes.

Flour (600 kg) RM 3,000
Direct labour (240 hours) RM 2,400
Variable overhead RM 3,000
Fixed overhead RM 3,750

Overhead is absorbed based on labour hours. During November
2017, 220 units of cakes were produced with the following
costs:

Flour 650kg @ RM 5.50/kg
Direct labour 400 hours @ RM 2.30/hours
Variable overhead
Fixed Overhead RM 3,350
RM 4,000

You are required to calculate:

i. Material price variance
ii. Material usage variance
iii. Material cost variance
iv. Labour rate variance
v. Labour efficiency variance
vi. Labour cost variance
vii. Variable overhead expenditure variance
viii. Fixed production overhead expenditure variance

QUESTION 5

Calculate Material Price and Usage Variance based on

the data below:

Price Quantity

Actual data RM 10.00 25 kg

Standard data RM 10.50 20 kg

Sunshine BHD has developed the following standard

for one unit of ZZ:

RM

Materials 10 kg of S @ RM

4.50 per kg 45

Labour 4 hours @ RM 6

per hour 24

Variable 4 hours @ RM

overheads 4.50 per hour 18
87

Budgeted fixed overhead is RM 12,500 The following
information is available:

Actual output was 8,250 units of ZZ. Actual costs
were as follows:

Materials purchases 96,500 kg of S costing

Material usage RM 437,980
Labour wages 86,450 kg of S
RM 196,800 for 32,000
Variable overheads hours of direct labour
Fixed overheads RM 136,000
RM 11,750

You are required to calculate each of the following variances:

i. Material Price and Usage Variances
ii. Labour rate and Efficiency variances

From your answers in (c) above, calculate:
i. Material cost variances
ii. Labour cost variances

Analyze whether the material cost variances and labour cost
variances are favourable or unfavourable and give your reasons
why it occurs.

CLICK HERE FOR ANSWER SCHEME

RELEVANT COST AND SHORT
TERM DECISION MAKING

QUESTION 1

a) State FIVE (5) characteristics of relevant information for
decision making.

Question (b), (c) and (d) relate to the following information.

Natasha`s Chip Bakery is a manufacturer of Hari Raya for local
market. For the past two years, the operation of Natasha’s Chip
Bakery was not fully utilized or under capacity. For the next Hari
Raya there was an interested customer that wanted to order new
cookies called “Chips Mama” cookies. The customer wants to order
80,000 units with the selling price of RM 20.00 per unit. The
sales manager was interested to accept the special order and
he though the fixed cost could cover the production cost of the
cookies. Natasha`s Chip Bakery operation activities were at 90%
capacity and all the cookies produced were assumed to be sold. The
maximum production capacity is 400,000 units.
Below are the details of selling price and the production costs per
unit of “Chips Mama” cookies:

Selling price RM
18.00
Direct material 2.00
1.60
Direct labour 1.80

Production overhead (50% 0.40
fixed cost) 560,000

Variable selling and distribution 200,000

Fixed selling and distribution
cost per year

Fixed administrative cost per
year

If Natasha`s Chip Bakery accepts the special order the labour
have to do an overtime. The direct labour costs will increase by
10%. Since Natasha`s Chip Bakery purchased direct materials in
bulk, they get a discount of 5% on the special order purchased.
(This special order does not change variable selling and distribution
and all fixed costs).

You are required:

b) Calculate the difference of total sales (RM) of sales units, if
Natasha`s Chip Bakery accepted that special order.

By using the Differential Analysis Technique, calculate how
much the annual profit for Natasha`s Chip Bakery if the
special order is accepted.

Based on the answer in (ii) advice the company whether
to accept or reject the special order by giving THREE (3)
qualitative aspects that should be considered in making such
decision.

QUESTION 2

Excellent One Sdn Bhd is a manufacturer of cars. This company
has three departments which are Assembling, Cutting and
Varnishing Department. In fews years back, the Varnishing
Department showed poor progress, where it experienced continual
losses. Excellent One is trying to avoid risks, thus is planning to
close the department. Stated below is the data for
all departments:

Departments Assembling Cutting Varnishing

Sales RM RM RM
350,000 280,000
Less: 120,00
Direct 0
materials
Direct 110,000 90,000 50,000
wages
Variable 75,000 60,000 35,000
overhead
45,000 48,000 25,000

Fixed 50,000 46,000 30,000
overhead 70,000
36,000 (20,000)
Net
profit/loss

Additional information:

If Varnishing Department is closed:
i. 40% from the direct wages from Varnishing Department

can be avoided.
ii. All variable overheads and 60% of direct materials from

Varnishing Department can be exempted.

You are required to:

a) Using the comparative analysis, state the decision whether
Excellent One Sdn Bhd should continue or shut down
Varnishing Department.

b) List FIVE (5) qualitative factors that should be considered
when deciding whether to continue or shut down the Varnishing
department.

QUESTION 3

The management of BOMBAS Bhd is facing some problem in
deciding whether to make or buy XT1 component. The company
currently manufactures 50,000 units of this component per year
at the following costs:

Materials XT1 cost/unit
Labour RM 5.00
Variable overhead RM 2.50
Fixed overhead RM 3.50
Total RM 7.00
RM 18.00

The fixed overhead is absorbed based on production hour. The
company has received a quotation of RM 15.50 per component
from an outside supplier.

You are required to:

a) State whether the company should buy or continue to
manufacture the components. Support your answer with
figures based on financial consideration only.

b) List FOUR (4) other quantitative factors that are
important in making the decision in answer (a).

c) If it is found that to continue manufacturing XT1 component
would restrict the output of a new product XT2 by 40,000 units
per annum, state how this would affect the „make or buy‟ decision.
The new selling price of the product is RM 20 per unit
and its marginal cost is RM 11 per unit.

QUESTION 4

a) Define avoidable cost and give a relevant example.
b) Explain the qualitative factors that should be considered in

the following decision making situation:

i. THREE (3) qualitative factors on whether to make or
buy electrical components from suppliers.

ii. TWO (2) qualitative factors on whether to close or
continue a department which experiencing loss in
hypermarket.

Question (c) and (d) relate to the following information.

D‟Alia Bhd produces perfumes for various types of brands in
Malaysia. As the demand for each brand increase, the
management requests assistance in determining the combination
of product for the coming year. The operational manager
informed that the company direct labour hour capacity is unable
to cope with the increasing demand. The company also provided
the following information:

Perfume Demand Selling Direct Direct
brands (units) price materials labour
per unit
Le 26,000
Sandra RM 90 RM 30 RM 15
Deor
Dolsi 32,000 RM 130 RM 45 RM 25
Gavvana 24,000 RM 110 RM 37 RM 20

The following additional information is available:
i. The company’s production capacity for direct labour is

100,000 direct labour hour per year.
ii. The direct labour rate is RM 10.00 per hour and expected

to remain unchanged for the coming year.
iii. Fixed cost for total production is RM 360,000 per year.

The variable overhead cost is RM 3.00 per direct labour
hour.

c) Calculate the contribution margin per direct labour
hour for each perfume brand.

d) Analyse the allocation of 100,000 direct labour hour
for each perfume brand.

QUESTION 5

Two decision making problems are faced by a company which produces
a range of products and the company had to absorb production
overhead using a rate of 200% on direct wages. This rate was
calculated based on the following budget figures:

RM

Variable Production Costs 64,000

Fixed Production Costs 96,000

Direct Labour Costs 80,000

Scenario 1

The normal selling price of product XX is RM 22 and production
cost for one unit is as follow:

RM

Raw material 8

Direct labour 4

Production overhead 8

Total 20

There is a possibility of supplying a special order for 2,000 units of
product XX at RM 16 each. If the order is accepted the normal
budgeted sales would not be affected and the company has the
necessary capacity to produce capacity to produce additional units.

Scenario 2 RM
The cost of making component Q, which 8
forms part of product Y, is stated below: 4
16
Raw material 28
Direct labour
Production overhead
Total

Component Q could be bought from an outside supplier for RM 20.
Assume that fixed production costs will not change.

You are required:

a) Calculate the percentage of variable production cost and
fixed production costs.

b) Analyze whether the company should
i. Accept the special order in scenario 1
ii. Continue making component Q or buy it from outside supplier
in Scenario 2
(Both i. & ii. Statement s must be supported by details of
costs)

c) Comment on the principle you have followed in your cost analysis
to arrive at your answer to the
two scenario.

QUESTION 6

Syarikat Maju Jaya Berhad is able to produce 4 types of product
and planning to mix its production next month. Below are the
information regarding the estimated costs, sales and its production.

Jasmine Orchid Tulip Rose

Maximum 4,500 5,000 7,000 3,000
production (unit) RM RM RM RM

Sales price (unit) 30 35 50 45
15 10 15 10
Labour cost/unit 5 10 12.50 5
(rm5/hour) 1 1.50 2 2.50
3 455
Material cost/unit
(RM 2.50/kg)

Variable overhead
cost/unit

Fixed overhead cost/unit

The company allocates 51,000 labour hours per month and 64,000
kilogram raw material per month.

You are required to:
a) Decide whether labour hour or raw material is limited.

b) Determine the priority of the products to be produced.
c) Calculate the company’s maximum profit.

QUESTION 7

Al Ikhsan Company produce a product. The cost of producing and
selling a unit of this product at the company‟ s normal activity
level of 60,000 units per year is:

Cost/unit (RM) Total cost
(RM)

Direct materials 5.50 330,000

Direct labour 4.80 288,000

Variable manufacturing 1.80 108,000
overhead

Fixed manufacturing 252,000
overhead

Variable selling and 1.80 108,000
administration

Fixed selling and 168,000
administration
expenses

Additional information:

i. The normal selling price is RM 30 per unit. The company’s
capacity is 75,000 units per year. An order has been received

through email for 15,000 units at a special price of RM 23 per
unit. This order would not affect regular sales.
ii. Acceptance of the offer will cause the company to bear
the overtime cost of 20%.

Required:

a) List TWO (2) criteria of relevant information for decision
making.

b) If the order is accepted, the fixed selling and administration
will increase by 15%. The order will not change the
company‟ s fixed manufacturing overhead. Using the
Differential Analysis Technique, how much annual profits can
be increased or decreased?

c) If Al Ikhsan decided to accept a special order, list THREE
(3) qualitative factors that should be considered in making
this decision.

CLICK HERE FOR ANSWER SCHEME

BUDGETING

QUESTION 1

a) State TWO (2) advantages of preparing budget.

Question (b) and (c) relate to the following information.

Rafeek Enterprise has prepared the budget for the year ended 31st
December 2016

Budget

Number of production (units) 50,000
RM

Sales 600,000
Variable cost:

Direct material 175,000
Direct labor 60,000
Manufacturing overhead 162,500
Total variable costs 397,500
Contribution margin 202,000

Fixed costs: 45,000
32,500
Depreciation 52,000
Repairs and maintenance 17,000
Salary 8,000
Advertising 154,500
Quit rent assessment 552,000
Total Fixed costs 48,000
Total production costs
Net profit

Additional information:
 ∙ Salary and advertising will increase by 5% for every

2,000 units of production increment
For the year ended 2016, the actual costs of production are as
follow:

Budget

Number of production (units) 54,000
RM

Sales 650,000

Variable cost: 195,000
61,500
Direct material 165,250
Direct labor 421,750
Manufacturing overhead 228,250
Total variable costs
Contribution margin 45,000
Fixed costs: 37,000
52,150
Depreciation 17,000
Repairs and maintenance 8,000
Salary 159,150
Advertising 580,900
Quit rent assessment 69,100
Total fixed costs
Total production costs
Net profit

You are required:

b) Prepare a flexible budget for 52,000 units and 54,000
units of production. (show the calculations)

c) Prepare a performance report for the year ended 31st
December 2016 by showing whether variance exist is
favorable (F) or unfavorable (UF).

QUESTION 2

a) List TWO (2) difference between static budget and flexible
budget

b) Bizbus Sdn Bhd manufactures components cars Toyota. Currently
the company is operating at 75% of its capacity. In the past two
years, the level of operations were 55% and 65% respectively.
Presently, the production is 75,000 units. The cost details are as
follows:

55% 65% 75%
(RM) (RM) (RM)

Direct materials 1,100,000 1,300,000 1,500,000

Direct labor 550,000 650,000 750,000

Sales expenses 220,000 260,000 300,000

Administrative 160,000 160,000 160,000
expenses

Additional information:
i. Budgeted sales price is at RM 80 per unit
ii. All the administrative overheads are fixed expenses
iii. Administrative expenses will be increase to RM 200,000 if

the level of production is more than 90%
iv. If the production components are more than 90%,

the direct materials and direct labour will increase
5% per unit.
v) Total of semi variable expenses is RM 114,000. Semi
variables are RM 100,000 for the first 40,000
units. For the next 5,000 unit onwards, the cost will
increase by RM 2,000.

You are required;

Prepare the Flexible budget for 85% and 95% level of production
for Bizbus Sdn Bhd.
(Show clearly the contribution margin, total variable cost, total
fixed cost and net profit).

c) The following is the actual Statement of Comprehensive
Income summary:

Sales unit 95,000 units

RM RM

Sales 8,075,000

(-) Variable cost:

Direct material 1,710,000

Direct labour 855,000

Sales expenses 475,000

Semi variable 47,500

Total variable cost 3,087,500

Contribution margin 4,987,500

(-) Fixed cost:

Administrative expenses 170,000

Semi variable 84,000

Total fixed cost 254,000

Net profit 4,733,500

You are required to:

Prepare a Performance Report by showing whether the variances
are favourable (F) or unfavourable (UF).

QUESTION 3

Gemilang Jaya Company has recently introduced budgeting as an
integral part of its corporate planning process. The company’s first
effort is constructing a Flexible Budget for manufacturing overhead is
shown in the table below:

Percentage of 80% 100%
capacity

Machine hours 4,800 6,000

RM RM

Indirect material 4,080 5,100
Machine 1,480 1,600
maintenance
Supplies 1,920 2,400
Utilities 1,940 2,300
Lubricants 3,120 3,900
Machine set up 960 1,200
Supervision 3,000 3,000
Depreciation 800
800

Total 22,100 26,400
manufacturing

The budget above is relevant over range of 80% to 100% of
capacity. The managers who will be working under these
budgets have control over both fixed and variable costs. The company
applies manufacturing overhead for products on the standard machine
hours basis.

You are required to:

a) Determine the type of cost for each item. Use the high low
method to separate between and variable costs.

b) Present the Flexible Budget in a better format. Show the budget
for 75%, 80%, 95% and 100%.

c) Express the Flexible Budget prepared in (b) above using a
single cost formula for all overhead costs.

QUESTION 4

The following are information about Production Department of
Syarikat Bestari Bhd:

i. 100% activity are equal of 80,000 direct labour hour.
ii. Wages rate per direct labour hour is RM 6.00.
iii. Cost of direct materials is RM 4.50 per unit (a direct labour

hour will produce 5 units product).
iv. Variable cost are included:

 Indirect labour is 50% for each direct labour hour
 Utility RM 1.25 for each direct labour hour
v. Fixed cost is RM 0.50 for each direct labour hour at full
capacity activity level.
vi. Sales price: Budgeted price is RM 22 per unit and actual price
is RM 23 per unit.

Required :

a) Prepare a flexible budget at activity level 80% and 100%.

b) The actual production at level 80% are as follows:

Direct labour RM 350,000
Direct materials RM 1,445,000
Indirect labour RM 180,000
utility RM 83,500
Fixed cost RM 42,000

You are required to prepare Performance Report of Syarikat
Bestari Bhd.

QUESTION 5

Cumicumi Bhd use flexible budget to evaluate their performance.
They use labour hour basis to calculate production overhead. Below
are the information on company’s production overhead.

Indirect labour Fixed cost (RM) Variable cost per
Supply direct labour hour
Utility 9,000 (RM)
Depreciation 12,000
Maintenance 7,500 1.05
18,000 0.80
5,500 0.65

-
0.30

In year 2018, actual labour hour was 15,000 hours. Actual costs
involved were as follows:

Indirect labour Fixed cost (RM) Variable cost (RM)
Supply 8,000 10,000
Utility 13,000 11,500
Depreciation 10,000 9,000
Maintenance 15,000 -
7,000 7,500

You are required to:
a) Demonstrate a flexible budget for 14,000, 15,000 and 16,000

direct labour hours.
b) Illustrate a performance report for year ended 2018.

CLICK HERE FOR ANSWER SCHEME

COST VOLUME PROFIT (CVP)

QUESTION 1
a) Define the following terms:
i. Breakeven point
ii. Margin of safety

Question (b) and (c) relate to the following information.

WooddotMy manufacturer and sell handcrafted wooden for local
market in Malaysia. The company was in process of preparing next
year`s budget. The budgeted statement of Comprehensive Income for
the current year is shown below:

RM RM

Revenue 1,500,000

Cost of sales:

Direct materials 250,000

Direct labour 150,000

Variable overhead 135,000

Fixed Overhead 100,000 (635,000)

Gross Margin 865,000

Selling and administrative Variable (450,000)
415,000
Variable 200,000

Fixed 250,000

Operating income

You are required:

b) Calculate the break-even point in unit and RM for
WooddotMy. The handcrafted wooden button is sold at RM 25
per unit.

c) The company`s accountant plans to have profit of RM
874,000 in 2017. Besides for the coming year the
management WooddotMy anticipates a 15% increase in variable
costs and a RM 50,000 increase (use two decimal points in
your calculation).

i. How many wooden buttons must be sold to achieve
expected profit in 2017?

ii. What would be the new break-even point in unit and new
net profit for the next year if the incremental cost happen?

QUESTION 2

OrangeT Bhd produces and sells orange juice in bottles. The
company`s average sale is 70,000 units per month. At the end of
31 December 2019, the following information was obtained:

Sales price per bottle RM
Variable cost per bottle 5
2

Monthly fixed cost: RM
5,000
Rent 3,000
Advertising 4,000
Depreciation 3,500
Others

You are required:
a) Break-even point and margin safety in unit.

b) Unit of production if company wants to earn RM 60,000
profit.

c) If rent expenses are increased to RM 6,000 per month,
calculate the new break- even point in RM.

d) The Marketing Manager predict that in order to increase sales
by 13% the company needs to increase advertising spending to
RM 1,000 per month. Do you agree with the proposal?

QUESTION 3

Molly Moist Cake Sdn Bhd produces moist chocolate cake at a
factory situated in Lunas, Kedah. Each cake is sold at RM 3.60.
Variable costs are follow:

RM

Flour 0.75

Chocolate 0.38

Other ingredients 0.35

Packing material 1.15

Selling commission 0.25

Fixed overhead costs are RM 12,000 per year. Fixed selling and
administrative costs are RM 6,720 per year. Molly Moist Cake Sdn
Bhd sold 35,000 cakes last year.

You are required:

a) Calculate the contribution margin per cake.

b) Calculate how many cakes must be sold to break-even? What is
the break-even sales revenue?

c) Calculate the operating income of Molly Moist Cake Sdn Bhd `s
last year.

d) Suppose that Molly Moist Cake Sdn Bhd raises the price to RM
4.00 per cake, but the current sales will drop to 30,400 cakes.
What will the new break-even point in units be? Should Molly
Moist Cake Sdn Bhd raise the price? Explain.

QUESTION 4
Required:

Note: Question a, b, c and d are not related each other

QUESTION 5

Wow Bhd is one of the leading companies in Malaysia which
manufactures lighting components. The company is investigating ways
to improve the profitability of its products. The following
information is available for the production and sales of 25,000 units
for the year 2019.

RM

Sales 1,850,000

Direct material 600,000

Direct labour 375,000

Variable Production Overhead 175,000

Fixed cost 420,000

The management is considering two options in view to increase profit
for the year 2020.

Option 1 : Purchase new machinery, which will reduce direct labour
costs by RM 3 per unit and variable production overhead by RM 2
per unit. Fixed costs will increase by RM 75,000. Other costs
remain unchanged.

Option 2 : Purchase higher quality materials and this will increase
material cost and labour cost by 25% respectively. Selling price
will increase by RM 18 per unit. Other costs remain unchanged.

Based on information provided, answer the following questions:
a) For the year 2019, calculate:

i. The contribution margin per unit.
ii. The net profit.
iii. The break even points in units and value.
iv. Number of units to be sold in order to achieve a net

profit RM 336,000.
v. Margin of safety.

b) For the year 2020, taking each option independently, calculate
the net profit for each option. Which option will give the higher
profit?
c) List TWO (2) limitations of Cost Volume Profit (CVP)
analysis.

QUESTION 6

Sesame Street produce a product name Loolipop based in Kulim
Kedah. Below are the information on company’s current income
statement.

Total (RM) Per unit (RM) Percent of sales
60 (%)
Sales (20,000 1,200,000
units) 100
Variable 900,000
expenses 45 A
Contribution 300,000
margin 15 B
Fixed expenses 240,000
Net operating 60,000 -
income -

The management asked the company’s accountant to analyze the
profit as they plan to increase the company’s profit in future.
You are required to:

a) State TWO (2) importance of cost volume profit analysis.

b) Calculate the company’s contribution margin ratio and variable
expenses ratio.

c) Construct a graph that shows the following situation:
i. Break even point
ii. Margin of safety

iii. Profit and loss area

CLICK HERE FOR ANSWER SCHEME