BSc.(Hons) Tourism and Hospitality Management Cohort: BTHM/04/PT – Year 2

Examinations for 2005 - 2006 / Semester 1

MODULE: COST AND MANAGEMENT ACCOUNTING MODULE CODE: ACCF1104 Duration: 2 Hours Reading time : 10 Minutes Instructions to Candidates: 1.

This paper consists of Sections A and B.

2.

Section A is compulsory.

3.

Answer any two questions from Section B.

4.

Always start a new question on a fresh page.

5.

Total marks 100.

This question paper contains 4 questions and 8 pages.

Page 1 of 8

SECTION A: COMPULSORY QUESTION 1: (40 MARKS) Part A Fine Basics Ltd has incurred the following overhead costs in period 1 : Rs. Depreciation factory

2,000

Factory repairs and maintenance

600

Factory office costs (treat as production overhead

4,500

Depreciation of equipment

800

Insurance of equipment

200

Heating

390

Lighting

…100

Canteen

800

_____________________________________________________________ Total

10,390

_____________________________________________________________ Information relating to the production and service departments in the factory is as follows. Department Production

Production

( Machining )

Service

(Assembly)

(Store)

Service (Maintenance)

Floor space (Square metres)

180

240

120

60

Volume (cubic metres)

450

900

360

240

Number of employees

60

60

30

30

Book value of equipment

Rs 30,000

Rs 20,000

Rs 10,000 Rs 20,000

Materials issued

Rs 30,000

Rs 50,000

Rs 20,000

Maintenance hours

800

Level of activity – Machine Hrs

300

Level of activity - Labour Hrs

100

100

2000 (Continued)… Page 2 of 8

Question 1 (continued) Required :

(i)

Determine how the overhead costs should be apportioned between the four departments.

(ii)

(10 marks)

Re - apportion the overheads of the service departments to the two production departments using the step down method and starting with Stores department. (7 marks)

(iii)

Calculate an appropriate overhead absorption rate for each of the two production departments.

(iv)

(6 marks)

A job was processed in that period under review.

14 machine hours in

Machining Dept. and 47 labour hours in Assembly Dept. were required for the job. Total prime cost amounted to Rs 5,425.

Calculate the full production cost of the job.

(7 marks)

Part B In respect of the catering division within a hotel, explain with supporting examples the following types of costs :

1)

Direct cost

2)

Overhead

3)

Fixed cost

4)

Variable cost

5)

Semi Variable cost. (10 marks)

Page 3 of 8

SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (30 MARKS) You have been asked to examine the performance of a subsidiary company for May 2005. The subsidiary supplies garden flower pots to the hotel industry. The standard cost of one unit is as follows: Rs Direct material

5 kilos at Rs4 per kilo

Direct labour

4 hours at Rs6 per hour

Direct expense

20 24 10

Variable overheads (based upon an overhead absorption rate of Rs2 Per labour hour)

8

Fixed overheads (based upon an overhead absorption rate of Rs4 Per labour hour)

16

78

Budgeted output in May 2005 was 1,200 units.

The actual results in May 2005 were as follows: •

1,300 units were made.

•

Direct material used was 6,600 kilos at a total cost of Rs25,080.

•

Direct labour was 5,330 hours at a cost of Rs32,513.

•

Actual direct expenses totalled Rs12,500.

•

Actual variable overheads were Rs13,325.

•

Actual fixed overheads were Rs22,000.

(Continued)…

Page 4 of 8

Question 2 (continued) Required:

Calculate the following: (a)

(i)

Material total variance

(ii)

Material price variance

(iii)

Material usage variance

(iv)

Labour total variance

(v)

Labour rate variance

(vi)

Labour efficiency variance

(vii)

Variable overhead total variance

(viii)

Variable overhead expenditure variance

(ix)

Variable overhead efficiency variance

(x)

Fixed overhead total variance

(xi)

Fixed overhead expenditure variance

(xii)

Fixed overhead volume variance. (24 marks)

(b)

Comment on the material price and usage variances, explaining any possible link between them.

(6 marks)

Page 5 of 8

QUESTION 3: (30 MARKS) XYZ Company produces three products X, Y and Z. For the coming accounting period budgets are to be prepared based on the following information. Budgeted sales ( units ) Product X

2000 at Rs 100 each

Product Y

4000 at Rs 130 each

Product Z

3000 at Rs 150 each

Budgeted usage of raw material :

RM11

RM22

RM33

Units

Units

Units

Product X

5

2

-

Product Y

3

2

2

Product Z

2

1

3

Cost per unit of raw material ( Rs)

5

3

4

Finished stocks budget Product X

Product Y

Product Z

Units

Units

Units

Beginning

500

800

700

End

600

1,000

800

Raw materials stock RM11

RM22

RM33

Units

Units

Units

Beginning

21,000

10,000

16,000

End

18,000

9,000

12,000

Product X

Product Y

Product Z

Expected labour hours per unit

4

6

8

Expected labour hourly rate (Rs)

3

3

3 (Continued)… Page 6 of 8

Question 3 (continued) Required:

Draw up the following operating budgets.

(a) Sales budget in terms of both quantity and value (b) Production budget (c) Material usage budget (d) Material purchases budget (e) Labour budget

Note : each part carries equal marks

Page 7 of 8

QUESTION 4: (30 MARKS) A manufacturer of school bags prepares the following forecast for his factory for next year :

Bags to be produced and sold

18,000 units

Average selling price per unit

Rs 45

Average variable cost per unit

Rs 29

Directly attributable fixed Production costs for the year

Rs 90,000

General office costs for the year

Rs 150,000

Required

(a)

Calculate the breakeven point in terms of number of bags to be sold. (4 marks)

(b)

Calculate the margin of safety expressed as a percentage of the forecast number of bags to be sold.

(4 marks)

(c)

Calculate the C/S ratio for the bags.

(2 marks)

(d)

If the manufacturer wishes to make a profit of Rs 80,000 next year, how many bags must he sell next year in order to achieve this target profit?

(e)

(6 marks)

The manufacturer is considering whether he should rent a new machine at an annual cost of Rs 15,000 . The use of this machine will reduce unit variable cost to Rs 24. Advise the manufacturer.

(f)

(8 marks)

The manufacturer could subcontract the production of school bags to a local supplier who would charge Rs 35 per school bag. Advise the manufacturer. (6 marks)

***END OF QUESTION PAPER*** Page 8 of 8