Faculty
Economic & Management Sciences
School
School of Accounting
Subject
Management Accounting 1A
Subject code
CAAM 3691
Date
June 2018
Duration
180 Minutes
Marks
100
REGULAR EXAMINATION
Examiners
Moderator
S TJIUEZA, T NAKWEENDA, B KERIMA, E ODERO & S
KAPENAMBILI
L STEYN (NWU)
This question paper consists of 7 pages (including this front page).
Instructions
1.
2.
3.
4.
5.
5.
6.
Make sure that you are writing the correct examination paper.
Make sure that you are handed the correct examination answer book
by the invigilator.
Show all calculations, where applicable.
Start each question on a new page.
No pencil work will be marked.
Answer all questions.
Use of a non-programmable pocket calculator permissible.
UNIVERSITY OF NAMIBIA EXAMINATIONS
Question 1 (20 Marks, 36 Minutes)
Sophie and Eloy have just attained their qualifications from the University of Namibia in 2017. They have
majored in BACC and BBA, respectively. Given the current state of the country’s economy, they have been
looking for employment opportunities but without success. The two are now contemplating to start up their own
manufacturing company (Cc). If it materialises, their company is to be granted an exclusive right of being a
sole manufacturer and supplier of school uniforms for all secondary schools around Windhoek.
Sophie’s uncle, is a well-known business tycoon who has got business interests in various sectors such as
mining, agriculture, manufacturing and construction. Being an inborn entrepreneur, Sophie’s uncle was happy
to learn that the two graduates are contemplating to start up their own business instead of being job seekers.
As a result, he assured them through Sophie that he would do everything possible to support them both
financially and materially. That is the reason why he requested them to provide him with a detailed (forecast):
PART A: Statement of Cost of Goods to be manufactured, and
PART B: Statement of profit/(loss) up to Gross Profit only.
Consider the following assumptions for the month of June 2018:
1. Capital contribution
N$ 10 000
2. Expected monthly production (prototype)
1 000
3. Expected monthly sales
90% of monthly production
4. Cost of raw material
15% of capital contribution
5. Expected raw material consumption
80% of total purchase
6. Direct cost of labour
10% of capital contribution
7. Indirect material
1/4 of cost of raw material
8. Indirect labour
3/4 of direct labour cost
9. Rental fee
10% of capital of capital (60%-factory and 40%-office)
10. Selling price per unit
Gross profit margin of 25%
11. Assume that no other information is required in order answer both PARTS A and B.
REQUIRED: Assist Sophie and Eloy in preparing the following as per Sophie MARKS
uncle’s request:
9
1.1. Statement of Cost of Goods to be manufactured – clearly showing COGM.
1.2. Statement of profit/(loss) up to Gross Profit only.
11
TOTAL MARKS FOR QUESTION 1
20
2
Question 2 (15 Marks, 27 Minutes)
2.1
Material costs constitute a substantial investment of capital and a business that has adequate inventory
remains competitive with ability of taking advantage of opportunities arising. It is for these reasons that the
management must remain vigilant and keep a close eye on its inventory.
REQUIRED:
MARKS
a
List four reasons businesses should keep adequate inventory.
4
b
List three drawbacks of holding too much inventory.
3
Total Marks 2.1
7
2.2
Muhembo Limited uses 10 000 Kilograms of its main raw material per month. The material costs N$ 8 per
Kilogram to buy, supplier’s delivery costs are N$ 50 per order and internal ordering costs are N$ 4 per order.
Total annual holding costs are N$1 per kilogram. The supplier has offered a discount of 1% if 6 000 kilograms
of the material are bought at a time.
REQUIRED:
MARKS
a
Calculate the economic order quantity (EOQ) under the current purchasing
system.
3
b
Determine whether the discount offer should be accepted.
5
Total Marks 2.2
8
TOTAL MARKS FOR QUESTION 2
15
3
Question 3 (20 Marks, 36 Minutes)
Home Economics (Pty) Ltd manufactures quality coffee tables. Currently, the company uses an hourly rate as
its remuneration system. Being classified as a labour intensive enterprise, one of the challenges that the
company is battling with is the retention of its skilled employees. Mr Jason Hailonga is the company’s Managing
Director who is very much concerned about the high staff turnover being experienced under the Carpentry
department. Though an employee satisfaction survey suggests for the piece work system, he is somewhat
reluctant to implement it. I cannot just implement the piece work system because of the high staff turnover.
There are other factors that one has to consider such as affordability on the side of the company and system
flexibility. Thus, I would only recommend the implementation of a piece work system based on a detailed
analysis between the current remuneration system and what is being proposed. As such, I will hire a consultant
to do such an analysis for us – the MD narrates.
The company’s working days are Monday to Friday. Each employee is expected to work eight hours a day,
Monday to Friday. Mr Joseph is the company’s carpenter; whose employment package comprises the
following:
Standard production
Normal rate per hour
Pension
contribution
(employee)
Social Security Contribution
Trade union contribution
Medical Aid Scheme
PAYE
2 coffee tables per hour
N$ 80,00
7,5% of basic wage
0,9% of basic wage
N$250,00 per week
5% of basic wage
25% of taxable income
Actual information for the week ended 18 May 2018:
Number of coffee tables 75
produced
Hours worked
35
Days worked
5 (Monday to Friday)
It is the company’s policy of rewarding employees according to Halsey bonus system, irrespective of the
remuneration system being used. This has been the company’s strategy as a way of motivating its employees
especially those under the carpentry department where the rate of staff turnover is currently worrisome.
REQUIRD: All questions should be answered within their context.
MARKS
3.1.
Assume that you are the hired consultant. Advice the company’s MD by
15
preparing a detailed analysis as per his request clearly showing the Net
Wage Payable to Mr Joseph for the week ended 18 May 2018 based on
both remuneration systems).
3.2.
Has Joseph achieved his weekly normal production output? Accordingly,
3.5
comment on his weekly productivity.
3.3.
Apart from the two remuneration systems discussed in the case study
1.5
above, what other aspects should the MD consider as a way of overcoming
the current high staff turnover?
TOTAL MARKS FOR QUESTION
20
4
Question 4 (15 Marks, 27 Minutes)
The Metropolitan Hotel is located near a bus station that serves travellers who are on transit to SADC countries.
The hotel which has five cost centres: Residential, Food and Beverage that deal directly with customers, while
Housekeeping and Maintenance are internal service cost centres; is developing a cost accounting system. The
management accountant is in the process of calculating overhead absorption rates for the next period. An
extract from the overhead analysis sheet is as follows:
N$
Residential
500 000
Food
350 000
Beverage
150 000
Housekeeping
100 000
Maintenance
80 000
Total
1 180 000
Housekeeping provides services to Residential, Food, Beverage and Maintenance in the ratio of 4:3:2:1
respectively. Maintenance on the other hand works 5% for Housekeeping, 20% for Food, 55% for Residential
and 20% for Beverage.
Additional information
Residential
Labour hours
35 000
Food
Beverage
18 000
12 000
Required: Where applicable round off your answers to the nearest N$
Marks
4.1.
Using the simultaneous equation approach, compute the total overhead for the
internal service departments.
4
4.2
Allocated internal service departments overhead to Residential, Food and
Beverage.
8
4.2.
Compute the overhead recovery rate for Residential, Food and Beverage.
3
TOTAL MARKS FOR QUESTION 4
15
5
Question 5 (15 Marks – 27 Minutes)
The Wilco Corporation is a large construction company in central Namibia and they have several projects
running for the current financial period, one of its main projects is the construction of an administration building
for a newly establish local university in the outskirts of Windhoek..
The project is expected to take three years and the revenue expected from it is N$ 120 000 000 with retention
money of 5%. The expected costs to complete the project is N$75 000 000 and the client is expected to make
a progress payment of 15 % of the contract price once the project is 25% complete. Other payments are
scheduled at 50% and 75% completion of the project.
Information related to that project for the first year is as follows:
N$
Material costs incurred
22 500 000
Labour
8 250 000
Firm plant and equipment transferred to site 3 200 000
Equipment hired
650 000
Supervisor salaries
425 000
Head office costs
355 000
There was material worth N$ 325 000 left on site at the end of the period. Plant and equipment is depreciated
at 20% on cost per annum and only the depreciated portion should be included on the contract as that is the
cost associated with the specific contract. The value of work certified is N$ 35 000 000
REQUIRED:
MARKS
Calculate the level of completion for the project; will the contractor
receive a progress payment? If so, how much will it be?
Prepare and balance off the contract account for the period concerned,
5.2
only show the notional profit.
TOTAL MARKS FOR QUESTION 5
5.1
6
12.5
2.5
15
Question 6 (15 Marks, 27 Minutes)
You have been appointed as the assistant-management accountant at The Feed Master Ltd, this company
specialises in animal food manufacturing. The following information relates to three types of chicken food:
Glow, Med and Flam. The output in units is respectively 160 bags, 120 bags and 100 bags. The products are
produced in production runs of 20 units and sold in batches of 5 units. The cost to manufacture is as follows:
Glow
Med
Flam
Direct material (per unit)
N$140
90% of the cost of Glow
N$120
Direct labour (per unit)
N$228
N$221
N$214
8
6
5
Machine hours (per unit)
The production overhead costs for the period and the relevant cost drivers are as follows:
Factory rent
N$5 000
Factory depreciation
N$1 000
Supervision
N$15 000
Machine set-up costs
N$12 502 Number of production runs
Stores receiving
N$17 400 Requisitions raised
Distribution costs
N$34 086 Orders executed
Factory rent, factory depreciation and supervision costs are allocated based on machine hours.
The stores raised a total of 75 requisitions, of which 25 were for Glow. Flam required 20% more requisitions
than Glow.
REQUIRED:
MARKS
6.1
Calculate the allocation Rate Per Machine Hour
2
6.2
Calculate the Total Cost for each product using Activity-Based Costing System
13
TOTAL MARKS FOR QUESTION 6
15
… The end …
7