P12Case Study 113Solutions.docx

1、P12Case Study 113SolutionsMODULE DPROFESSIONAL EXAMINATION INTERNALLYASSESSED EXAMINATIONS APPROVED BY AIA, UKPAPER 12 MANAGEMENT ACCOUNTING 2SuggestED Solutions2011NAME_ REGISTRATION NO._STUDENT NO._ EXAMINATION TIME: _Please mark the Questions attempted below.Q1Q2Q3Q4Q5TOTALATTEMPTEDMARKQuestion 1

2、This question assesses students understanding of learning curves model (syllabus reference 12.1) and decisions regards to limiting factor (syllabus reference 12.2). This question relates to Chapter 3, paragraph 4 of the AIA study text and Chapter 8, paragraph 5 of the AIA study text. Expected time f

3、or the ninth batchY = a xbY10 = 50 10-0.23447 =29.14 hours (cumulative time per batch) (1)Y9 = 50 9-0.23447 = 29.87 hours (cumulative time per batch) (1)Cumulative batches Cumulative average time Total Time Per batch (hours) (hours) 10 29.14 291.4 9 29.87 268.83 22.57 hoursTherefore, the expected ti

4、me for the tenth batch is 22.57 hours (2)Possible reasons why actual learning rates differed from expected rulesIn months 2, the learning rate was less than expected. This is possible due to workers taking longer to get used to new procedures. By the end of month 2, only two batches have been produc

5、ed-workers have not had a great deal of time to familiarize themselves with techniques and processes. (1)New labour may have been recruited during the period which could have affected the rate of learning. The learning rate may not have been reviewed to take account of this.By month 4, workers will

6、have become more familiar with the procedure and will be able to produce batches more efficiently. Staff turnover may be lower allowing greater continuity of experience. (1)(b)P1P2C1C2Selling price$145$190N/AN/AOpportunity cost$80$75Direct materialsMaterial X$15$10$5$10Material Y$8$15$10$15Direct la

7、bour $20$25$16$8Variable O/H$10$12$9$6Fixed O/H$20$30$16$10Total cost$73$92$56$49Contribution per unit$92$128$40$36m2 of X /unit0.60.40.20.4(1)(1)(1)(1)Contribution / m2$153$320$200$90Ranking3124Optimal production schedulem2Material available1200m2Produce as followsUnitsP21600640m2B.V.560m2(1)C18001

8、60m2B.V.400m2(1)P1667400m2(1)C2Nilm2(1)Therefore, optimal production plan is as follows:P1 667 unitsP2 1,600 unitsC1 800 unitsC2 No units (2)(c) a. The learning curve phenomenon is not always present. It assumes stable conditions at work which will enable learning to take place. This is not always p

9、racticable, for example because of labour turnover. (1)b. It must also assume a certain degree of motivation amongst employees. (1)c. Breaks between repeating production of an item must not be too long, or workers will forget and the learning process will have to begin all over again. (1)d. It might

10、 be difficult to obtain accurate data to decide what the learning curve is. (1)e. Workers might not agree to a gradual reduction in production times per unit. (1)f. Production techniques might change, or product design alterations might be made, so that it takes a long time for a standard production

11、 method to emerge, to which a learning effect will apply. (1)Question 2This question assesses students understanding of transfer pricing (syllabus reference 12.3). This question relates to Chapter 15, paragraph 4, 5, 6 of the AIA study text.Per UnitFor 600 units$Parts Materials50Labour (4 hrs x $25

12、per hour)100Variable O/Hs (4 hrs x $12 per hour)48Marginal cost198118800Fixed O/Hs (4 hrs x $18 per hour)7243200Total Cost270162000Mark-up (30% of total cost)8148600Selling price351210600(2)(2)Transfers at 30% Mark upS SchlageM SchlageWhole Schlage$Sales206500210600206500Costs210600162000162000Profi

13、ts-41004860044500(1)(1)(1)Transfers at Marginal costS SchlageM SchlageWhole Schlage$Sales206500118800206500Costs118800162000162000Profits87700(43200)44500(1)(1)(1)Transfers at Marginal cost with opportunity costS SchlageM SchlageWhole Schlage$Sales206500147600354100Cost147600162000309600Profits58900

14、(14400)44500(1)(1)(1)Reparis carried out be outside company LM S SchlageM SchlageWhole Schlage$Sales2065000206500Repair costs($240 per repair x 600)144000144000Costs - Fixed O/Hs4320043200Profits62500(43200)19300(1)(1)(1)(b) Three problems with transfer pricinga. Divisional autonomyTransfer prices a

15、re particularly appropriate for profit centres because if one profit centre does work for another the size of the transfer price will affect the costs of one profit centre and the revenues of another.However, a danger with profit centre accounting is that the business organization will divide into a

16、 number of self-interested segments, each acting at times against the wishes and interests of other segments. Decisions might be taken by a profit centre manager in the best interests of his won part of the business, but against the best interests of other profit centres and possibly the organizatio

17、n as a whole. (1)A task of head office is therefore to try to present dysfunctional decision making by individual profit centres. To do this, it must reserve some power and authority for itself and so profit centres cannot be allowed to make entirely autonomous decisions.A balance ought to be kept b

18、etween divisional autonomy to provide incentives and motivation, and retaining centralized authority to ensure that the organizations profit centres are all working towards the same target, the benefit of the organization as a whole ( in other word, retaining goal congruence among the organisations

19、separate divisions). (1)b. Divisional performance measurementProfit centre managers tend to put their own profit performance above everything else. Since profit centre performance is measured according to the profit they earn, no profit centre will want to do work for another and incur costs without

20、 being paid for it. (1)Consequently, profit centre managers are likely to dispute the size of transfer prices with each other, or disagree about whether one profit centre should do work for another or not. Transfer prices affect behaviour and decisions by profit centre managers. (1)c. Corporate prof

21、it maximizationWhen there are disagreements about how much work should be transferred between divisions, and how many sales the division should make to the external market, there is presumable a profit-maximising level of output and sales for the organization as a whole. (1)However, unless each prof

22、it centre also maximises its own profit at this same level of output, there will be inter-divisional disagreements about output levels and the profit-maximising output will not be achieved. (1)Question 3This question assesses students understanding of activity based costing (syllabus reference 12.2)

23、. This question relates to Chapter 7, paragraph 2, 3, 4 of the AIA study text.Department KitchensBed RoomsDining RoomsTotalNumber of items sold1,2001,6004,5007,300Purchase orders1,0008502,8004,650Floor area (m2)15,00010,00012,00037,000Number of consultations8203003201,440(2)Cost analysis using the c

24、ost drivers above:Sales staff wages65,800Items sold7,300Per item sold9.01(2)Consultation staff salary24,200Number of consultations1,440Per consultation16.81(2)Warehouse staff salary35,000Items sold7,300Per item sold4.79(2)Administration staff salary32,000Purchase orders + consultations6,090Per task5

25、.25(2)General Overheads165,000Floor space37,000Per m24.46(2)DepartmentKitchensBed RoomsDining RoomsTotal$Sales220,000115,200450,000785,200Cost of Goods sold68,00039,200192,000299,200Other costsSales staff salary10816144224056265,800Consultation staff salary137805042537824,200Warehouse staff salary57

26、54 7671 21575 35,000Administration staff salary9563 6043 16394 32,000General overheads66892 44595 53513 165,000Profit45,194-1,772120,578164,000(1)(1)(1)(1)(b)The traditional cost accumulation system of absorption costing was developed in a time when most organizations produced only a narrow range of

27、 products (so that products underwent similar operations and consumed similar proportions of overheads). And overhead costs were only a very small fraction of total costs, direct labour and direct material costs accounting for the largest proportion of the costs. The benefits of more accurate system

28、s for overhead allocation would probably have been relatively small. In addition, information processing costs were high. (2)In recent year, however, there has been a dramatic fall in the costs of processing information. And, with the advent of advanced manufacturing technology (AMT), overheads are likely to be far more important and in fact direct labour may account for as little as 5% of a products cost. It therefore now appears diffi