Managerial Accounting (ACCM3204)
Faculty of Economics and Management Science (FEMS)
Semester: Resit
Level: 300
Year: 2017
Section A; COST ANALYSIS
SECTION A: COSTS ANALYSIS (35 MARKS)
From the same raw materials, the company “KTOH” manufactures two products; TISO and
FACTO in two different workshops. At the actual state of the manufacturing process, the
production for a unit of product needs the combination of the following quantities of factors;
items Product TISO Product FACTO
Raw materials
Consumable materials
Direct labor
3kg
1.5 liters
2 hours
5 kg
1 liter
4 hours
The product TISO and FACTO are sold at the respective prices: 7,600F for TISO and 9,950F
for FACTO.
For the two terms of the year 2016, the cost accounting service of the enterprise gives the
following inquiries:
- Unit purchase cost of raw materials use: 1,200F per kg.
- unit purchase cost of consumable materials used; 400F per liter;
- hourly cost of direct labor is 500F (social costs are considered as variable cost and
are already included in the purchase cost);
- indirect expenses:
Items Total Fixed cost Measurement unit
Product of TISO
Product of FACTO
Distribution
4,400,000
1,680,000
440,000
3,400,000 (1)
1,200,000 (1)
0
Hour of direct labor
Hour of direct labor
(1) The fixed costs and the other indirect expenses are already counted 3,400,000F in the
total of 4,400,000F and 1,200,000F in the total of 1,680,000F.
The distributions of indirect expenses are shared between the products TISO and FACTO
proportionally to the numbers 5 and 6 for the second term of 2016.
The enterprise has produced and sold 2,000 units of product TISO and 1,200 units of
product FACTOR during the second term of 2016.
Work required:
1. Establish for each product TISO and FACTO, a table showing the different element
constituting the unit variable cost and the unit contribution margin.
2. Deduce the total cost and the global net results for +++each of the two products TISO
and FACTO.
The total cost of each of these products being a function of the number X of units produced can
be written in the form: y=ax+b.
3. Give the mathematical expressions, in function of X of:
- Product TISO total cost Y
1
- Product FACTO total cost Y
2
- Product TISO turnover Y
3
- Product FACTO turnover Y
4
- Product TISO contribution margin Y
5
THE UNIVERSITY OF BAMENDA
FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES
Resit Course: Managerial Accounting: ACCT308
Credit Value:
Course Lecturers:
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- Product FACTO contribution margin Y
6
4. Deduce from the above, at what levels of production are placed the Break Even Points
of the products TISO and FACTO.
CHANGE OF STRUCTURE
In reason of results got on product FACTOR the enterprise views the modernization of the
manufacturing work of the product FACTO which needs an investment of 50,000,000F
depreciable in 5 years.
The consequences in the manufacturing process would be as follows:
- A decreasing of the quality of raw materials consumed per unit of product, it would
pass from 5kg to 3kg only;
- A decreasing of 25% of the time of direct labor necessary per unit produced;
- A consumption of consumable materials per unit of product and the distribution unit
variable cost will remain un-charged.
Besides, a study done by the commercial department shows that, in order to increase the sales,
it is necessary to view a reduction of the selling price which will be fixed at 8,000F per unit.
5. Reckon the new unit variable cost and the new contribution margin of the product
FACTO in this new hypothesis for the 3
rd
term of 2016
6. Write the new equation of the cost of the product FACTOR Y
7
7. Determine the minimum production level to reach (Break-Even Point) considering the
new net unit selling price fixed at 8,000F
NB; the depreciation charge must be calculated for the term, because it is the reference period
of calculation.
SECTION B: BUDGETARY MANAGEMENT (35 MARKS)
COFFEECAM is a company specialized in the production of coffee using raw coffee. The
production of 1kg of coffee requires 5kgs of raw coffee. The raw coffee is supply to the
company by a supplier who move from famers to famers to buy. The table below gives the
projected production of coffee for 2018:
J F M A M J J A S O N D
1,605 1,605 1,605 2,200 2,200 2,200 1,670 470 1,670 1,325 1,325 1,325
Additional information;
➢ The unit holding cost is 6frs per year
➢ The cost per order is 8,000F
➢ The lead time is one month
➢ The security stock is one-month consumption.
➢ Delivery are received at the start of the month
➢ The stock of raw coffee as at 31/12/2017 will be 2,000kgs
➢ The purchasing department used the model of Wilson
As the managerial accountant of the company, you are required to:
1. Explain what you understand by; supply budget, EOQ, lead time
2. Calculate 2018 the:
- Required raw coffee to be consumed (D);
- Economic Order Quantity (Q)
- Optimal number of orders to be made (N);
- Interval of time between two orders (t)
3. Present the supply budget for 2018, given that a varying quantity (Q) is ordered at fixed
intervals (periods).
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