Faculty of Business, Economics & Accounting

Department of Accounting and Finance

HELP Bachelor of Business (Hons) Year 2

INTERNAL SUBJECT DETAILS

Semester 1, 2016
Subject:

ACC 201
Management Accounting 2

Subject Lecturer/Tutor: Dr. Angeline Yap

Telephone: 03-2716 2000 extension 2036
Fax:
03-2095 7100
Email:
angeline.yap@help.edu.my

Consultation:

Please e-mail to make appointment

PRE-REQUISITE(S)
QBM101
ACC103

BUSINESS STATISTICS &

MANAGEMENT ACCOUNTING 1

SYNOPSIS
The subject is concerned with the provision of financial and other information for use
in decision making in organisations. We will build upon the accounting techniques
studied in ACC103 Management Accounting 1 by introducing further concepts and
techniques. The subject addresses impact of contemporary management philosophies
and reflects the applicability and validity of techniques considered in the current
business environment. We emphasise the role of management accounting in decision
making, particularly in providing information and analysis to support strategic
management activities, and question the relevance of various aspects of traditional
management accounting.

OBJECTIVES
Upon completion of this subject, students should be able to:

appraise contemporary management philosophies and practices, and their impact on

management accounting;

discuss the controllability of variances and the approaches used to determine the
significance of variances;

analyse and manage normal and abnormal spoilage;

explain the importance of managing support or service costs and the consequences
of alternative cost allocation approaches;

identify quantitative and qualitative relevant costs and benefits of decision

alternatives;

structure business decision making problems into objectives, alternative actions and
expected outcomes;

apply sensitivity analysis to model the risks of decisions;

identify and measure the costs of activities that add value to organisations;

prepare and interpret the flexible budget and explain how it can provide more useful
cost management information;

use EOQ model and discuss the implication of the JIT approach to inventory
management;

understand the role of responsibility accounting in fostering goal and behavioral

congruence, and

develop computer spreadsheet models for financial planning and to aid in decision
analysis.

TOPICS
Topic 1: Introduction: Contemporary management accounting developments
Topic 2: Cost Allocation & Service Costing
Topic 3: Relevant costs and decision making
Topic 4: Responsibility accounting and performance measurement
Topic 5: Cost variance investigation
Topic 6: Flexible budgets, variances analysis and management control
Topic 7: Pricing Decision and Cost Management
Topic 8: Activity-based management
Topic 9: Spoilage, rework and scrap
Topic 10: Inventory management, JIT and backflush costing
Topic 11: Decision analysis and choice process
Topic 12: Risk and uncertainty in decision making

PRESCRIBED TEXTS
Horngren, C.T., Datar S.M. and Rajan M.V. (2015) Cost Accounting: A Managerial
Emphasis, 15th Ed., Pearson Education Ltd.: England.
Drury C. (2012). Management and Cost Accounting, 8th Edition, Cengage Learning
EMEA: UK.

RECOMMENDED REFERENCES
Garrison R., Noreen E. & Brewer P. (2014). Managerial Accounting, 15th Ed., McGraw
Hill Higher Education.
Atril P. & McLaney E. (2012). Management Accounting for Decision Makers, 7th Ed.,
Pearson Education Ltd.

Hilton, R.W., Maher, M.W. and Selto, F. (2007) Cost Management: Strategies for
Business Decisions, 4th Ed., McGraw Hill/Irwin: Boston.
Kaplan, R.S., Young A.M. and Atkinson, A.A. (2011). Management Accounting:
Information for Decision-Making and Strategy Execution, 6th Edition, Prentice Hall:
London.

Subject Outline / Teaching Plan

Department
Lecturer

: Accounting & Finance

: Dr. Angeline Yap

Week

Subject Code : ACC 201

Subject Title : Management Accounting 2

Topics

Textbooks

Tutorial Questions

1
(18/1-22/1)

Topic 1: Introduction: Contemporary MA

Developments

Horngren et al. C1

1-26, 1-29, 1-32 & 134

2
(25/1-29/1)

Topic 2: Cost Allocation & Service

Costing

Horngren et al. C2

2-18, 2-24 & 2-41

3
(1/2-5/2)

Topic 2: Cost Allocation & Service

Costing

Horngren et al. C15

15-6, 15-19 & 15-20

8/2-12/2

CNY Break

4
(15/2-19/2)

Topic 8: Activity-Based Costing and

Activity Based Management

Horngren et al. C5

5-16, 5-25 & 5-38

5
(22/2-26/2)

Topic 3: Relevant costs and decision

making

Horngren et al. C11

11-20, 11-34, 11-37,

11-42, & 11-28

6
(29/2-4/3)

Topic 11: Decision analysis and choice

process
Assignment Due Date 4th March 2016

Horngren et al. C11

7
(5/3-12/3)

Mid-Term Break

8
(14/3-18/3)

Topic 12: Risk and uncertainty in decision

making

Drury C12

12.9, 12.11, 12.12,

12.13, 12.14, 12.15,
12.16, 12.17 & 12.18

9
(21/3-25/3)

Topic 4: Responsibility accounting and

performance measurement

Horngren et al. C6

6-39, 6-40 & 6-42

10
(28/3-1/4)

Topic 5: Cost variance investigation

Direct Cost & Overhead Cost Variances

Horngren et al. C7

7-13, 7-15 & 7-36

Topic 6: Flexible budgets

Horngren et al. C8

8-14, 8-15 & 8-33

Topic 6: Sales variances analysis

Horngren et al. C14

14-7, 14-9, 14-24 &

14-30

Topic 4: Responsibility accounting and

performance measurement

Horngren et al. C12

& C23 & Drury C22

12-34, 12-35 & 23-34

Topic 7: Pricing Decision and Cost Mgt.

Horngren et al. C13

13-16, 13-22 & 13-33

12
(11/4-15/4)

Topic 9: Spoilage, Rework and Scrap

Horngren et al. C18

18-35 & 18-40

13
(18/4-22/4)

Topic 10: Inventory management, JIT and

Backflush costing

Horngren et al. C20

20-22, 20-35 & 20-36

14 & 15
(23/4-7/5)

Final Examination

11
(4/4-8/4)

ASSESSMENT:
There are 3 assessment items for this subject.

Assessment Items

Value

Due Date

1. Assignment

15%

4th March 2016

2. Mid Semester Test

15%

Week 7

3. Final Examination (Closed Book)

70%

Examination period: 23th April

7th May 2016**

REQUIREMENTS:
To gain a pass in this subject, students must:

Achieve a passing grade in the final examination i.e. score a minimum of 35

marks out of 70 marks if there is an examination for this subject.

Attempt ALL areas of assessment; and achieve a total result of 50% or better
overall.

** - Please check on the notice board and My Acel for the actual date. HELP
University reserves the right to make any changes to the above where appropriate.

Assignment Information.
1. This is a joint assignment by two (2) students. Both students must contribute
equally toward the completion of this assignment.
2. Assignments should be computer-typed, 1.5-spaced, having a font size of 12, using
Times New Roman. Hand-written assignments will not be accepted. All pages
must be numbered accordingly.
3. Copying the work of others, allowing others to copy your work, and/or attempting
to do any of the above mentioned will result in automatic failure of your
submission.
4. Extension for assignments will only be given to students facing unforeseen and
unavoidable problems. Work and family commitments do not constitute
sufficient reason for the granting of extensions. Request for an extension in
writing must be submitted prior to the due date. Extensions will not be granted on
or after the due date, including MC. Late assignments without an extension granted
by the lecturer are subjected to a penalty of 10% per working day up to a maximum
of ten working days, beyond which assignments will not normally be accepted.
5. Assignments must be submitted to the Administration Office of the Faculty of
Business, Economics & Accounting with the proper acknowledgment of receipt by
the staff. Before submitting your assignment, you should make a copy and submit
the original for assessment.
Assignment question: due date 4th March 2016
Malaysias economy and currency are suffering from an almost perfect storm due to
an outflow of funds from emerging markets, low oil prices and Chinas slowdown.
Malaysia is suffering particularly because it is an emerging market at a time of capital
outflows, it is a net exporter of oil and gas at a time of a significant drop in prices, and
it is perceived to be badly affected by the Chinese slowdown as China is its largest
trading partner. The ringgit has lost a quarter of its value against the US dollar this year
and fallen to its lowest levels since the Asian financial crisis 17 years ago. Bonds have
also fallen.
As far as the overall economic management, fiscal management, Malaysia is on the
right track and obviously Malaysians are better prepared and more resilient to face the
challenges that may come our way (Business News The Star, 1st October 2015).
The objectives of this assignment are to:
1. Obtain a perspective of how businesses of various types saw the storm in
terms of length and depth;
2. Understand the impact of storm on the businesses and the actions they took in
the short/medium term to deal with the challenges of storm;
3. Obtain a view as to how businesses might plan to change their business
strategies to deal with the impacts of the storm; and
4. Consider any management and financial management implications which
ensued.
7

Required:
You are required to carry out a survey study to at least ONE businessman (of sole
proprietor, partner or company director) in Malaysia to gather appropriate data by
questionnaire (to be given during first lecture/to be uploaded to e-learning). You will
submit:
(a) Assignment Cover Sheet,
(b) Assignment Form (to be given together with questionnaire),
(c) Report which is approximately 2,000 words consists of: introduction,
background of the respondent, findings and conclusion in both hard and
soft (Word format) copies, and
(d) Turnitin report which the similarity index must not exceed 20% (ID: 11203808,
password: ACC201MA2).

Assignment No.: __

Assignment Cover Sheet

Student Information (For group assignment, please state names of
all members)
Name

Grade/Marks

ID

Office
Acknowledgement

Module/Subject Information
Module/Subject Code
Module/Subject Name
Lecturer/Tutor/Facilitator
Due Date
Assignment Title/Topic
Intake (where applicable)
Word Count

Date/Time

Declaration
. I/We have read and understood the Programme Handbook that explains on plagiarism, and I/we
testify that, unless otherwise acknowledged, the work submitted herein is entirely my/our own.
. I/We declare that no part of this assignment has been written for me/us by any other person(s) except
where such collaboration has been authorized by the lecturer concerned.
. I/We authorize the University to test any work submitted by me/us, using text comparison software,
for instances of plagiarism. I/We understand this will involve the University or its contractors copying
my/our work and storing it on a database to be used in future to test work submitted by others.
Note:1) The attachment of this statement on any electronically submitted assignments will be deemed
to have the same authority as a signed statement.
2) The Group Leader signs the declaration on behalf of all members.

Signature:

Date:

mail:

Feedback/Comments*
Main Strengths

Main Weaknesses

Suggestions for improvement

Student acknowledge feedback/comments

Graders signature

Students signature:

Date:

Date:

Note:

1)A soft and hard copy of the assignment shall be submitted.

2)The signed copy of the assignment cover sheet shall be retained by the marker.
3)If the Turnitin report is required, students have to submit it with the assignment. However, departments may allow
students up to THREE (3) working days after submission of the assignment to submit the Turnitin report. The
assignment shall only be marked upon the submission of the Turnitin report.
*Use additional sheets if required.

10

Department of Accounting &

Finance
ACADEMIC INTEGRITY
Honesty and Responsibility
Academic integrity is an important tenet for HELP University. In pursuit of the highest
standards of academic integrity, the Department of Accounting & Finance holds it
students to the highest ethical standards defined by the Rules and Regulations section
of the Academic Handbook. All students at the Department of Accounting & Finance
are subjected to and are bound by the Student Academic Misconduct Rule to assure
academic honesty. Students are required to sign a pledge on the assignment cover sheet
before submitting your assignments to the Administration Office of the Faculty of
Business, Economics & Accounting.
What is Plagiarism?
Plagiarism is academic dishonesty or academic theft, and it is a serious academic
offence. Plagiarism includes, but is not limited to, the followings:
1. quote, paraphrase or summarize someone elses ideas, theories or data, in whole
or in part, without appropriate acknowledgement
2. borrow ideas, opinion or words, in whole or in part, from other sources without
properly crediting the author(s)
3. use any facts, statistics, diagrams or graphs, in whole or in part, without
acknowledging the source clearly
4. claim or imply original authorship of someone elses ideas, theories or data, in
whole or in part, as your own
5. employ or allow someone to help to revise, amend or write your work and pass
off as your own original work
6. collaborate with or allow other students to copy your work
7. draw on sources more than what you have acknowledged by citations
While a student is not discouraged to discuss an assignment with his/her friends or
classmates, the work he/she submits must be done by the student alone. If a student
shares his/her assignment with other students and they plagiarize it, the student is as
guilty as those students who plagiarized his/her assignment. All parties to plagiarism
are considered equally guilty. Under no circumstances should a student be involved in
collusion with other students unless he/she is permitted to work on an assignment
jointly by the lecturer/tutor. If a student is unsure what constitutes plagiarism, he/she is
obliged to consult the lecturer/tutor on the matter before submission of his/her
assignment.
When and How to Reference?
Knowing when and how to cite is a students responsibility. If he/she is in doubt or
need more help on this matter, the student may consult the lecturer/tutor. The following
list comprises some of the sources a student will need to reference. The list is by no
means exhaustive, but simply consists of the most common sources used by students to
complete their work.
1. Books
11

2.
3.
4.
5.
6.
7.
8.

Chapters in books
Journal articles
Conference papers
Newspaper articles
Magazines
Websites
Study guide

Students are advised to cite in the following cases [1]:

1. When he/she quotes two or more words verbatim, or even one word if it is used
in a way that is unique to the source
2. When he/she introduce facts that he/she have found in a source
3. When he/she paraphrase or summarize ideas, interpretations, or conclusions that
he/she find in a source
4. When he/she introduce information that is not common knowledge or that may
be considered common knowledge in your field, but the reader may not know it
5. When he/she borrow the plan or structure of a larger section of a sources
argument (for example, using a theory from a source and analyzing the same
three case studies that the source uses)
6. When he/she build on anothers method found either in a source or from
collaborative work in a lab
7. When he/she build on anothers program in writing computer code or on a notcommonly-known algorithm
8. When he/she collaborate with others in producing knowledge
In general, a referencing system requires two parts:
1. In-text citations
This is information about a source within the text of an assignment.
2. List of references
This is a list of all sources a student has used to research his/her assignment. It
is alphabetically arranged by author surname and appears immediately after the
last page of an assignment.
Different faculties or departments may have different requirement on how referencing
for an assignment should be done. The various formats used for in-text citations and list
of references are available in the following websites:
1. Harvard System (http://www.adelaide.edu.au/library/guide/gen/harvard.html)
2. Chicago Style (http://www.chicagomanualofstyle.org/index.html)
3. American Psychological Association or APA Style (http://www.apastyle.org)
4. Modern Language Association of America or MLA Style (http://www.mla.org)
Once a student has selected a referencing style for his/her assignment, he/she must
follow the same style consistently throughout the assignment. We strongly suggest that
the student consults the lecturer/tutor about which method to use before submission of
his/her assignment.

http://www.yale.edu/bass/writing/sources/plagiarism/warning.html, accessed May 18, 2008.

12

What are the Procedures and Penalties for Plagiarism?

When a lecturer/tutor encounters a possible case of plagiarism, the lecturer/tutor shall
report the matter to the Head of the Department, who then initiates an investigation on
the matter. The following procedures would be carried out:
1. The lecturer/tutor shall provide evidence that substantiates an academic offence
has occurred. The following documentations must be ready prior to reporting of
alleged plagiarism:
a. Copy of the alleged plagiarized assignment
b. Copy of the source material (e.g. articles, websites, newspaper, etc.)
c. Report of plagiarism
d. Any other information that would support the claim of plagiarism
2. If the evidence warrants an accusation of academic offence, the Head of
Department shall establish a Board of Inquiry comprising 3 academic staff. The
Department shall provide all necessary documentations, including report on
prior academic offences if applicable, to the Board of Inquiry.
3. The Board of Inquiry shall put the matter to the student in writing and give
him/her an opportunity to respond to the accusation within 3 working days.
4. The student will be required to attend a meeting with the Board of Inquiry.
After meeting the student, the Board of Inquiry shall decide whether or not the
alleged plagiarism has occurred. The following documentations shall be
submitted to the Head of Department at the end of the meeting:
a. Findings of the investigation
b. Recommended action(s) to be taken or imposed
5. The Head of Department shall review the Board of Inquirys report with
supporting evidence and shall decide on an appropriate action(s) based on the
recommendation of the Board of Inquiry.
6. The decision of the Head of Department shall be put in writing to the student.
Copies of all documentations will be retained in the Department.
7. If the student feels that he/she has been unfairly accused or treated, the student
may appeal to the Head of Department within 5 working days.
8. The Head of Department shall review the appeal and the final decision will be
communicated to the student in writing and a copy will be kept with the
Department. Once a determination of plagiarism and penalty has been made by
the Head of Department, the investigative process will be deemed to have ended
and the student will not be allowed to appeal.
Possible penalties for plagiarism range from mark reduction for the assignment to
expulsion from the University. The student will not be allowed to make up the
assignment. If plagiarism has been found to have occurred, the Department will take
action(s) as determined by the forms of plagiarism implicated:
1. Complete plagiarism
Verbatim copying another persons work without acknowledgement
1st offence : A grade of F in the subject and a warning letter will be
issued
2nd offence : Expulsion from the University at the discretion of the Head of
Department
2. Substantial plagiarism
Near-verbatim copying another persons work by simply altering the order of
the sentences or the format of presentation or by changing a few words or
phrases without acknowledgement.
13

1st offence

Zero mark on the assignment and a warning letter will be

issued
nd
2 offence : A grade of F in the subject and a warning letter will be
issued
3rd offence : Expulsion from the University at the discretion of the Head of
Department
3. Minimal plagiarism
Acknowledgement is made but paraphrasing by changing and/or eliminating
some words
1st offence : Deduction of 50% of available marks on the assignment and a
warning letter will be issued
nd
2 offence : A grade of F in the subject and a warning letter will be
issued
3rd offence : Expulsion from the University at the discretion of the Head of
Department
4. Unintentional plagiarism
Insufficient acknowledgement by not applying citation or quotation marks
correctly
1st offence : Deduction of up to 50% of available marks on the assignment
and a warning letter will be issued
nd
2 offence : A grade of F in the subject and a warning letter will be
issued
rd
3 offence : Expulsion from the University at the discretion of the Head of
Department
Pleading ignorance or unintentional plagiarism does not constitute valid reasons for
plagiarism and will not avoid the penalties from being imposed. Excuses for acts of
plagiarism such as the following, but not limited to, will not be entertained:
1. I dont have time to do the assignment
2. I have too many assignments due on the same day
3. I dont know, I really didnt do it
4. I am not aware
5. I dont understand what plagiarism means
6. I have no intention to plagiarize
7. I forgot to cite the reference
8. I forgot to include the bibliography
9. My English is not good
10. My lecturer/tutor did not explain to me
11. In my country, it is alright to copy someone elses work
12. My friend copied my assignment when I let him/her to look at my assignment
13. My friend copied my assignment when I allow him/her to use my laptop
14. I did my assignment in the computer lab, someone must have copied my work
15. I asked my friend to submit my assignment and he/she copied my work
16. I discussed my assignment with my friends, so our answers are the same/similar
17. Even though I do not have in-text citation but I have bibliography/reference list
Students should be reminded that it is their responsibilities to take due care throughout
their written work to effectively reference or cite when they use others ideas from any
source.

14

DEPARTMENT OF ACCOUNTING & FINANCE

SEMESTER X, 20XX
SAMPLE FINAL EXAMINATION
Subject Code

ACC201

Subject Name

MANAGEMENT ACCOUNTING 2

This examination carries 70% of the total assessment for this subject.
Examiner:

Moderator:

DR. ABC
Time allowed :

Reading 10 MINUTES
Writing 3 HOURS

INSTRUCTION(S):
1. This examination consists of FIVE (5) questions.
Students are required to answer ALL questions in the answer book provided.
2. Writing on the examination answer book is NOT permitted during reading time.
3. This is a CLOSED BOOK examination.
4. Students are NOT permitted to retain this examination paper.
5. Students MUST pass this examination in order to pass the subject.

(This question paper consists of 5 questions in XX printed pages, including cover page)

15

Answer ALL questions. Each question carries 20 marks.

Question 1
The New Gadget Sdn. Bhd. (NG) produces three products, X, Y and Z, all made from
the same material. Until now, it has used traditional absorption costing to allocate
overheads to its products. The company is now considering an activity-based costing
system in the hope that it will improve profitability. Information for the three products
for the last year is as follows:

Production and sales volumes (units)

Selling price per unit
Raw materials usage (kg) per unit
Direct labour hours per unit
Machine hours per unit
Number of production runs per annum
Number of purchase orders per annum
Number of deliveries to retailer per annum

15,000
RM$7.5
2
0.1
0.5
16
24
48

12,000
RM$12
3
0.15
0.7
12
28
30

18,000
RM$13
4
0.2
0.9
8
42
62

The price for raw materials remained constant throughout the year at RM$1.2 per kg.
Similarly, the direct labour cost for the whole workforce was RM$14.8 per hour. The
annual overhead costs were as follows:
RM$
26,550
66,400
48,000
54,320

Machine set up costs

Machine running costs
Procurement costs
Delivery costs

Required:
(a) Calculate the full cost per unit for products X, Y and Z under traditional
absorption costing, using direct labour hours as the basis for apportionment.
(5 marks)
(b) Calculate the full cost per unit of each product using activity-based costing.
(9 marks)
(c) Using your calculation from (a) and (b) above, explain how activity-based
costing may help New Gadget Sdn. Bhd. improve the profitability of each
product.
(6 marks)
[Total: 20 marks]

16

Question 2
Excellence Telekom Sdn. Bhd. (ET) is a company specialising in the provision of
telephone systems for commercial clients. There are two parts to the business:
-

Installing telephone systems in businesses, either first time installations or

replacement installations;

Supporting telephone systems with annually renewable maintenance contracts.

ET has been approached by a potential customer, Pushing Sdn. Bhd. who wants to
install a telephone system in new offices it is opening. Whilst the job is not a
particularly large one, ET is hopeful of future business in the form of replacement
systems and support contracts for Pushing Sdn. Bhd. is therefore keen to quote a
competitive price for the job. The following information should be considered:
1. One of the companys salesmen has already been to visit Pushing Sdn. Bhd., to
give them a demonstration of the new system, together with a complimentary
lunch, the costs of which totalled RM$400.
2. The installation is expected to take one week to complete and would require
three engineers, each of whom is paid a monthly salary of RM$4,000. The
engineers have just had their annually renewable contract renewed with ET.
One of the three engineers has spare capacity to complete the work, but the
other two would have to be moved from Contract X in order to complete this
one. Contract X generates a contribution of RM$5 per engineer hour. There are
no other engineers available to continue with Contract X if these two engineers
are taken off the job. It would mean that ET would miss its contractual
completion deadline on Contract X by one week. As a result, ET would have to
pay a one-off penalty of RM$500. Since there is no other work scheduled for
their engineers in one weeks time, it will not be a problem for them to
complete Contract X at this point.
3. ETs technical advisor would also need to dedicate eight hours of his time to the
job. He is working at full capacity, so he would have to work overtime in order
to do this. He is paid an hourly rate of RM$40 and is paid for all overtime at a
premium of 50% above his usual hourly rate.
4. Two visits would need to be made by the site inspector to approve the
completed work. He is an independent contractor who is not employed by ET,
and charges Pushing Sdn. Bhd. directly for the work. His cost is RM$200 for
each visit made.
5. ETs system trainer would need to spend one day at Pushing Sdn. Bhd.
delivering training. He is paid on a monthly salary of RM$1,500 but also
receives commission of RM$125 for each day spent delivery training at a
clients site.
6. 120 telephone handsets would need to be supplied to Pushing Sdn. Bhd. The
current cost of these is RM$18.20 each, although ET already has 80 handsets in
inventory. These were bought at price of RM$16.80 each. The handsets are the
most popular model on the market and frequently requested by ETs customers.
7. Pushing Sdn. Bhd. would also need a computerised control system called
Effective 2. The current market price of Effective 2 is RM$10,800, although
ET Sdn. Bhd. has an older version of the system, Effective 1 in inventory,
which could be modified at a cost of RM$4,600. ET paid RM$5,400 for
17

Effective 1 when it ordered it in error two months ago and has no other use for
it. The current market price of Effective 1 is RM$5,450, although if ET tried to
sell the one they have, it would be deemed to be used and therefore only worth
RM$3,000.
8. 1,000 metres of cable would be required to wire up the system. The cable is
used frequently by ET and it has 200 metres in inventory, which cost RM$1.20
per metres. The current market price for the cable is RM$1.30 per metre.
9. You should assume that there are four weeks in each month and that the
standard working week is 40 hours long.
Required:
(a) Prepare a cost statement, using relevant costing principles, showing the
minimum cost that Excellence Telecom Sdn. Bhd. (ET) should charge for the
contract. Make DETAILED notes showing how each cost has been arrived at
and EXPLAINING why each of the costs above has been included or excluded
from your cost statement.
(16 marks)
(b) Explain the relevant cost principles used in part (a).
(4 marks)
[Total: 20 marks]

18

Question 3
(a) Hi-End Audio Sdn. Bhd. is an electronics company specialising in the
manufacture of home audio equipment. Historically, the company has used
solely financial performance measures to assess the performance of the
company as a whole. The companys managing director has recently heard of
the balanced scorecard approach and is keen to learn more.
Required:
Describe the balance scorecard approach to performance measurement.
(10 marks)
(b) Hi-End Audio Sdn. Bhd. is split into two divisions, X and Y, each with their
own cost and revenue streams. Each of the divisions is managed by a divisional
manager who has the power to make all investment decisions within the
division. The cost of capital for both divisions is 12%. Historically, investment
decisions have been made by calculating the return on investment (ROI) of any
opportunities and at present, the return on investment of each division is 16%.
A new manager who has recently been appointed in Division X has argued that
using Residual Income (RI) to make investment decisions would result in
better goal congruence throughout the company.

Each division is currently considering the following separate investments:

Capital required for investment
Sales generated by investment
Net profit margin

Project for Division X

RM$82.8 million
RM$44.6 million
28%

Project for Division Y

RM$40.6 million
RM$21.8 million
33%

The company is seeking to maximise shareholder wealth.

Required:
Calculate both the Return on Investment (ROI) and Residual Income (RI) of the
new investment for each of the two divisions. Comment on these results, taking
into consideration the managers views about residual income.
(10 marks)
[Total: 20 marks]

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Question 4
Madam Ong is a restaurant that is only open in the evenings, on six days of the week.
It has eight restaurant and kitchen staff, each paid a wage of RM$8 per hour on the
basis of hours actually worked. It also has a restaurant manager and a head chef, each
of whom is paid a monthly salary of RM$4,300. Madam Ongs budget and actual
figures for the month of May 2012 was as follows:
Number of meal
Revenue: Food
Drinks
Variable costs:
Staff wages
Food costs
Drink costs
Energy costs
Contribution
Fixed costs:
Manager's and chef's pay
Rent, rates & depreciation
Operating profit

Budget
1,200
RM$
RM$
48,000
12,000
60,000
(9,216)
(6,000)
(2,400)
(3,387)

Actual
1,560
RM$
60,840
11,700

RM$

72,540
(13,248)
(7,180)
(5,280)
(3,500)

(21,003)
38,997
(8,600)
(4,500)

(29,208)
43,332
(8,600)
(4,500)

(13,100)
25,897

(13,100)
30,232

The budget above is based on the following assumptions:

1. The restaurant is only open six day a week and there are four weeks in a month.
The average number of orders each day is 50 and demand is evenly spread
across all the days in the month.
2. The restaurant offers two meals: Meal X which cost RM$35 per meal and Meal
Y which costs RM$45 per meal. In addition to this, irrespective of which meal
the customer orders, the average customer consumes four drinks each at
RM$2.50 per drink. Therefore, the average spend per customer is either
RM$45 or RM$55 including drinks, depending on the type of meal selected.
The May 2012 budget is based on 50% of customers ordering Meal X and 50%
of customers ordering Meal Y.
3. Food costs represent 12.5% of revenue from food sales.
4. Drink costs represent 20% of revenue from drinks sales.
5. When the number of order per day does not exceed 50, each member of hourly
paid staff is required to work exactly six hours per day. For every incremental
increase of five in the average number of orders per day, each member of staff
has to work 0.5 hours of overtime for which they are paid at the increased rate
of RM$12 per hour. You should assume that all costs for hourly paid staff are
treated wholly as variable costs.
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6. Energy costs are deemed to be related to the total number of hours worked by
each of the hourly paid staff, and are absorbed at the rate ofRM2.94 per hour
worked by each of the eight staff.
Required:
(a) Prepare a flexible budget for the May 2012, assuming that the standard mix of
customers remains the same as budgeted.
(14 marks)
(b) Madam Ongs owner told the restaurant manager to run a half-price drinks
promotion at Madam Ong for the month of May 2012 on all drinks. Actual
results showed that customers ordered an average of six drinks instead of the
usual four but, because of the promotion, they only paid half of the usual cost
for each drink. You have calculated the sales margin price variance for drink
sales alone and found it to be a worrying RM$11,700 adverse. The restaurant
manager is worried and concerned that this makes his performance for drink
sales look very bad.
Required:
Briefly discuss TWO other variances that could be calculated for drinks sales or
food sales in order to ensure that the assessment of the restaurant managers
performance is fair. These should be variances that could be calculated from the
information provided above although no further calculations are required here.
(6 marks)
[Total: 20 marks]

21

Question 5
You are an accountant in the administration department of a small
manufacturing company. Your manager, who is not an accountant, is about to
attend a meeting and is unsure of the meeting of several items that appear on the
agenda
Required:
Produce notes on the following items to help your manager understand their
meeting:
(a) Total quality management (TQM) and the costs of quality;
(10 marks)
(b) Benchmarking (including internal, competitive, functional and strategic
benchmarking).
(10 marks)
[Total: 20 marks]

**END OF EXAMINATION PAPER**

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