This assignment will assess the following learning outcomes:
- Analyse costs in business organisations contexts
- Apply cost estimation techniques in a range of business situations
- Evaluate cost and revenue information and costing methods for managerial decision-making
- Effectively communicate cost and revenue information in a decision making context.
ANSWER ALL THE QUESTIONS
Question 1:
CAREPRO LTD Company is producing three kind of products X, Y and Z. The information related to the production costs are as follows:
|
A
|
B
|
C
|
|
Total Direct material cost (OMR)
|
648,000
|
720,000
|
204,000
|
|
Direct material cost per unit (OMR)
|
180
|
240
|
340
|
|
Direct labour per unit
|
1/2 hours
|
1/3 hours
|
3/4 hours
|
|
Machine time per unit
|
1/4 hours
|
1/3 hours
|
1/2 hours
|
The products X, Y and Z are produced in a production set-ups of 30 units and sold in batches. Every production set up includes 3 batches. Each order contains five batches.
One hour of labour costs 24 OMR and one hour of machine costs 12 OMR
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Cost pool
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Cost driver
|
|
Inspection and quality check
|
Number of set up
|
|
stores
|
Number of batches
|
|
Set up costs
|
Number of set up
|
|
Distribution and handling
|
Number of orders
|
Total production overhead recorded by the cost accounting system is analysed
Question 2:
a) You are provided with the following data from the books of the company ALYSSA LTD. producing one product DELTA, for the year 2015.
| Direct material cost per unit |
OMR 24 |
| Direct labor cost per unit |
OMR 27.20 |
| Variable manufacturing overhead per year |
OMR 2.80 |
| Total fixed manufacturing overhead per year |
OMR 360,000 |
| Variable selling and administration expenses |
OMR 6 unit sold |
| Fixed selling and administration expenses |
OMR 180,000 |
| Number of units produced per year |
30,000 units |
| Opening stock of finished goods |
0 |
| Selling price |
OMR 120 |
You are required to:
(a) Calculate the profit under marginal costing and absorption costing.
(b) Explain the difference between the marginal costing method and the total absorption costing method, using academic articles to support your analysis.
(c) Explain the reason for any difference in net profit reported in the two statements and reconcile any such difference.
(d) Calculate the quantity of product DELTA that ALYSSA LTD needs to sell to breakeven next year, according to the information given.
(e) Based on the following expectations of ALYSSA LTD for the next year 2015.
- All the variable costs will increase by one third.
- Fixed costs will increase by 10%.
- The income tax rate of 40% will be unchanged
You are required to:
i. Calculate the selling price to be adopted in 2016 and that would maintain the same contribution rate as 2015.
ii. Calculate the sales volume for a target net profit of OMR 180,000 in 2016.
iii. Write a report where you critically evaluate the use of 'Cost-Volume-Profit analysis in decision making, and using academic articles to support your analysis.
Question 3:
LILIUM LTD is a company manufacturing two products ‘Gamma' and 'Sigma'. For this, Purpose, LILIUM has three production departments (Cutting, Assembly and Finishing) and departments (Canteen, Stores and Maintenance).
The annual budgeted overhead cost for the year 2015 is as following:
|
Indirect wages OMR |
Consumable Indiarect supplies OMR |
| Cutting |
93,040 |
25,200 |
| Assembly |
82,680 |
36,400 |
| Finishing |
32440 |
8400 |
| Canteen |
16400 |
5600 |
| Stores |
10600 |
8200 |
| Maintenance |
15040 |
6200 |
|
250,200 |
90,000 |
|
OMR |
| Depreciation: Machinery |
88,000 |
| Insurance for Machinery |
16,000 |
| Insurance for Machinery |
7,200 |
| lighting and heating |
12000 |
| Rents and rates |
30200 |
| Electrictiy for machines |
14,400 |
You also provided with the following data:
| Departmaent |
Book value machinery OMR |
Floor area Square meters |
Electricity use% |
Direct labor hours |
Machine hours |
| Cutting |
120, 000 |
10,000 |
40 |
400,000 |
80,000 |
| Asembly |
90,000 |
12,000 |
30 |
300,000 |
100,000 |
| Finishing |
30,000 |
16,000 |
20 |
600,000 |
|
| canteen |
12000 |
4,000 |
5 |
|
|
| stores |
36000 |
5,000 |
5 |
|
|
| maintenance |
12000 |
3,000 |
|
|
|
| Total |
300,000 |
50,000 |
100 |
|
|
answering the following questions and using academic -
You are required to critically evaluate the way Management accounting can help decision using by answering the following question and using acadmics articles to support your analysis:
1. How can management accounting helps strategic decision making process within organisations?
2. Giving examples of the management accounting tools that are used in a decision making.
3. The extent to which management accounting can help in decision making by highlighting the limitations of certain tools.