Intermediate management accounting

Business Finance

Troy University

Question Description

The two attachments I added are sample questions from previous years. I will send you the real questions at the agreed time. You only need to complete the section A within one hour and fifty minutes. I will do the rest section by myself. The agreed time is 2.15pm London time, May 12th. Time for u do questions is 1h50mins

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School of Social Sciences University of Dundee School of Business INTERMEDIATE MANAGEMENT ACCOUNTING MODULE 2MA – BU22002 APRIL/MAY 2018 TWO HOURS ANSWER BOTH QUESTIONS IN SECTION A, ONE QUESTION IN SECTION B and ONE QUESTION IN SECTION C The use of approved calculators (CASIO FX83, FX85 or FX115) is permitted in this examination Dictionaries are not permitted in this examination BU22002 Page 1 of 6 SECTION A ANSWER BOTH QUESTIONS 1. Fishy Plates Ltd is a small pottery business that designs crockery to the specific requirements of top class fish restaurants throughout the UK. The company’s manufacturing is divided into three specialised sections: moulding, decorating and glazing. There are also two departments that serve all three manufacturing departments, quality control and maintenance. These service departments also provide certain services to one another. The following overhead information has been taken from accounting records and shows the costs that the company has incurred over the period of one year: £ Heating costs 57,930 Insurance of equipment 13,153 Equipment depreciation 10,648 Car leasing 31,321 Petrol 16,969 Wages 329,775 Administration 23,106 Salaries 114,153 Rental of premises 44,785 641,840 The company is also able to supply you with information regarding the activities of each department: Moulding Decorating Glazing Quality control Maintenance Vehicle mileage 0 0 0 33,289 22,712 Cars leased 0 0 0 4 3 Number of staff - waged - salaried 5 5 4 3 3 1 0 0 2 0 Capital value of equipment (£) 13,875 2,946 38,792 9,842 2,484 Floor area (sq m) 84 26 42 18 4 Estimated share of admin (%) 25 15 20 35 5 BU22002 Page 2 of 6 Each service department divides their time over four other departments as follows: Percentage of Service provided to each department Moulding Decorating Glazing Quality Control Maintenance Quality control 30 45 10 - 15 Maintenance 61 6 29 4 - Required: (a) Using appropriate cost allocation techniques, produce an overhead cost schedule for each production department. Make all your assumptions clear and use the repeated distribution method to allocate the costs of the service departments. (30) (b) Describe another method that can be used to allocate service department costs to production departments. (5) (35) BU22002 Page 3 of 6 2. Compper Ltd manufactures a product called ‘CFC’. The company operates a just-in-time production system, so no stocks are held. In December 2017, the company prepared a budget for the first quarter of 2018. Compper Ltd uses a marginal costing system. The original budget assumed that sales for the quarter would be 5,000 units of ‘CFC’. An extract from the standard cost card is shown below: Selling price per unit of ‘CFC’ £70 Direct labour (2 hours @ £11 per hour) £22 Direct materials (4 kgs @ £5 per kg) £20 Total variable cost per unit of ‘CFC’ £42 Contribution per unit of ‘CFC’ £28 The actual outcome for the first quarter of 2018 differed from the budget in a number of respects: • Actual sales were 6,000 units of ‘CFC’ at a price of £68 each. • The total amount of direct wages paid was £124,550. This was in respect of 10,600 direct labour hours. • A total of 23,100 kilograms of direct materials were purchased at a price of £6.20 per kilogram. Required: (a) Calculate the following variances: (i) sales price variance (ii) sales volume variance (iii) materials price variance (iv) materials usage variance (12) (b) Discuss possible reasons for the variances calculated in part (a). In your answer you should refer also to the difficulties associated with calculating sales variances. (8) (c) Assume now that, during the first quarter of 2018, the company realised that the budget which it had prepared in the previous December was based on erroneous assumptions in relation to direct materials. In particular, because of foreseeable supplier price increases and certain improvements in the efficiency of the production process, the budgeted cost of direct materials per unit of ‘CFC’ should have been 3.8 kilograms of direct materials at a cost of £6 per kilogram. Use this additional information to prepare detailed planning and operational variances for direct materials in the first quarter of 2018. (10) (d) Briefly explain the practical benefits to management of calculating detailed planning and operational variances, using the case of Compper Ltd to illustrate your answer. (5) (35) BU22002 Page 4 of 6 SECTION B ANSWER ONE QUESTION 3. Consider the following definitions of management accounting: “The application of appropriate concepts and techniques in processing the historical and projected economic data of an entity to assist management in establishing plans for reasonable economic objectives and in the making of rational decisions with a view toward achieving these objectives.” (American Accounting Association, 1958) “Managerial accounting encompasses techniques and processes that are intended to provide financial and non-financial information to people within an organisation to make better decisions and thereby achieve organisational effectiveness.” (Wilson and Chua, 1993) 4. (a) Explain the different elements of these definitions and detail the ways in which they differ. (8) (b) Describe the stakeholders of a modern organisation and outline their group interests in the activity of the entity. (7) (15) (a) When might an organisation use process costing as part of its control process? (10) (b) Distinguish between a joint product and a by-product. (5) (15) BU22002 Page 5 of 6 SECTION C ANSWER ONE QUESTION 5. “While control through organisational culture does have some of the advantages claimed for it in the prescriptive literature, it also extends the employment contract to areas previously outside the managerial prerogative.” (Gruglis et al., 2000) Required: With reference to the above statement and to the case study outlined by Gruglis et al. (2000) critically discuss the role of cultural and personnel controls in organisations. (15) 6. “To a considerable extent, Golloway and Waldron’s version of TA [throughput accounting] represents a restatement of the contribution-per-unit limiting factor approach which has been discussed in management accounting for years.” (Dugdale and Jones, 1998) Required: Critically discuss the above statement, after outlining the differences between the conventional cost accounting concept of contribution-per-unit limiting factor and throughput accounting. (15) END OF PAPER BU22002 Page 6 of 6 School of Social Sciences University of Dundee School of Business INTERMEDIATE MANAGEMENT ACCOUNTING MODULE 2MA – BU22002 APRIL/MAY 2019 TWO HOURS ANSWER BOTH QUESTIONS IN SECTION A, ONE QUESTION IN SECTION B and ONE QUESTION IN SECTION C The use of approved calculators (CASIO FX83, FX85 or FX115) is permitted in this examination Dictionaries are not permitted in this examination BU22002 Page 1 of 5 SECTION A ANSWER BOTH QUESTIONS 1. The following data relates to Process C, one of a chain of processes in Chemco plc, for the month ended 28 February 2019: Transfers from Process B Materials issued from stores (this material is mixed with transfers from Process B) Direct wage cost Overhead 3,400 kg @ £25 per kg 600 kg @ £29 per kg £15,600 200% of direct labour Normal losses arise through loss in weight due to chemical change and are estimated to be 20% of mixed input. Abnormal losses are assumed to be 100% complete. Closing WIP of 240 kg is two thirds complete in relation to labour and overhead. There was no opening WIP on 1 February 2019. Transfers to Process D during November totalled 2,800 kg. Required: (a) Prepare the relevant accounts for Process C for February 2019. (20) (b) When might an organisation use process costing as part of its control process? (10) (c) Distinguish between a joint product and a by-product. (5) (35) BU22002 Page 2 of 5 2. Mike Johnston (MJ) manufactures two products, G and C, each of which passes through a common series of automated processes. The following information has been extracted from the production/sales plan for the next month. G Direct material cost per unit (£) Production overhead cost per unit (£) Drying process time per unit (minutes) Selling price per unit (£) Maximum demand (units) 3 42 1.2 90 144,000 C 60 6 0.9 105 54,000 The drying process, which is one process of the series of processes which the products undertake, has a maximum capacity of 3,075 hours during the next month and is considered to be a bottle-neck. Production overhead costs are considered variable. Per unit costs are estimated based on the overhead cost for the month and the planned production mix assuming 100% capacity utilization. MJ operates a just-in-time (JIT) production process and aims to hold minimal amounts of inventory. Required: (a) Explain how the principles of throughput accounting differ from those of the traditional marginal costing approach. (5) (b) Using marginal costing principles, calculate the product mix that will maximise profit for the next month. (10) (c) Calculate the throughput accounting ratio and show the product mix that will maximise profit under the throughput accounting approach. Assume that the total variable overheads incurred as a result of the production plan suggested in part (b) are the only fixed costs under the throughput accounting approach. (15) (d) With reference to the throughput accounting ratios, explain how the profitability can be improved. (5) (35) BU22002 Page 3 of 5 SECTION B ANSWER ONE QUESTION 3. Describe the way in which an Activity Based Costing approach to job costing assigns overheads to a product mix. Why is this approach often considered to be an improvement on more traditional methods of job costing? (15) 4. “Long-term competitive advantage will be undermined in those institutions that cannot respond decisively to agile rivals and rethink their business models for the market of tomorrow.” (CIMA, 2016, p.13) Discuss the four Global Management Accounting Principles characterising the ‘Integrated Thinkers’ who bring value to an organisation in today’s business environment. (15) BU22002 Page 4 of 5 SECTION C ANSWER ONE QUESTION 5. “The implementation of virtually all controls, as well as their adaptation to local or situational circumstances, requires companies to incur some direct out-of-pocket costs. But sometimes, those direct costs are dwarfed by indirect costs caused by any of a number of harmful side effects.” (Merchant and Van der Stede, 2017) Required: Critically discuss the harmful side effects that can occur as a result of ‘controls’ in organisations. (15) 6. “While the value of a standard costing system in the modern manufacturing environment (to control costs) may be limited, companies have actually responded to the challenge by adapting their standard costing systems rather than abandoning the systems altogether.” (Sulaiman et al., 2015) Required: Discuss the above statement, and explain how the standard costing systems may be modified to take into consideration the changing organisational environment. (15) END OF PAPER BU22002 Page 5 of 5 ...
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