Group Assignment (10%)

ACMB223 Management Accounting

Instructions:

• Form a group with FOUR (4) members.

• Submission of assignment: Latest by 17th May 2024 before 5:00PM, Friday.
• Format:
✓ The cover page should contain student name, ID, and section
✓ Use Times New Roman (font size 12), 1.15 spacing, Paper Length: no limit
✓ All calculations must be made in Microsoft Excel using as many formulas as
possible especially when the calculations are inter-related to other questions
✓ Softcopy of excel spreadsheets must be submitted through links given later
✓ Choose and answer only TWO (2) questions.

QUESTION 1 [25 marks]

Cuisine House (CH) offers monthly service plans for providing prepared meals that are
delivered to customer’s homes. The target market for these meal plans includes double-
income families with no children, retired couples in upper income brackets. CH offers two
monthly plans: Premier Cuisine and Haute Cuisine. The Premier Cuisine plan provides frozen
meals that are delivered twice each month; this plan generates a contribution margin of
RM60 for each monthly plan sold. The Haute Cuisine plan provides freshly prepared meals
delivered on a daily basis; this plan generates a contribution margin of RM45 for each
monthly plan sold. CH reputation provides the company with a market that will purchase
all the meals that can be prepared. All meals go through food preparation and cooking
steps in the company’s kitchens. After these steps, the Premier Cuisine meals are flash-
frozen. The time requirements per monthly meal plan and the hours available per month
are as follows:

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 Preparation Cooking Freezing
Hours Required
Premier Cuisine 2 2 3
Haute Cuisine 1 3 0
Hours available 60 120 100

For planning purposes, CH uses Linear Programming Solver to determine the most
profitable number of Premier Cuisine and Haute Cuisine monthly meal plans to produce.
The following tableau is the optimum solution provided by the software:

P H S1 S2 S3 C
1 0 0.75 -0.25 0 0 15
0 1 -0.5 0.5 0 0 30
0 0 -2.25 0.75 1 0 55
0 0 22.5 7.5 0 1 2250

Required:

(a) Using P for Premier Cuisine and H for Haute Cuisine, state the objective function and
the constraints that SSF should use to maximize the total contribution margin
generated by the monthly meal plans.
[6 marks]
(b) Interpret the final tableau. Your interpretation should include explanation of column
S1.
[9 marks]
(c) Determine the effect of increasing 50 Cooking hours on the final solution
[5 marks]
(d) Determine the range over which the shadow price of Preparation hours applies.
[3 marks]

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(e) Explain what a shadow price is and its importance in decision making. Use your
answer in part (c) to explain the application of shadow price in decision making.
[2 marks]

QUESTION 2 [20 marks]

Unique Design (M) Sdn. Bhd. is a manufacturer of clothing that sells its output directly to
clothing retailers. One of the departments manufactures cardigans. The department has a
production capacity of 50,000 cardigans per month. Because of the liquidation of one of its
major customers the company has excess capacity. The current monthly production and
sales volume are expected to be 35,000 cardigans at a selling price of RM40 per cardigan.
Expected costs and revenues for the next month at an activity level of 35,000 cardigans are
as follows:
RM Per unit (RM)
Sales 1,400,000 40.00
Direct labour 420,000 12.00
Direct materials 280,000 8.00
Variable manufacturing overheads 70,000 2.00
Fixed manufacturing overhead 280,000 8.00
Marketing and distribution costs 105,000 3.00
Total costs 1,155,000 33.00
Profit 245,000 7.00

Unique Design is expecting a sudden rise in demand and considers that the excess capacity
is temporary. A customer, Media Mewah Sdn. Bhd. has offered to buy for its staff 3,000
cardigans each month for the next three months at a price of RM20.00 per cardigan. The
company would collect the cardigans from Unique Design factory and thus no marketing
and distribution costs will be incurred. No subsequent sales to this customer are
anticipated. The company would require its company logo inserted on the cardigan and
Unique Design has predicted that this will cost RM1.50 per cardigan.

Required:
(a) Determine whether Unique Design should accept the offer from Media Mewah?
Support your answer with relevant computations.

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 [8 marks]
(b) Identify and discuss advantages and disadvantages of cost-plus pricing and briefly
explain the TWO (2) alternatives type of pricing strategies.
[6 marks]

(c) The Management Accountant proposes that the company should stop using the
traditional management accounting techniques that focus on cost containment but
instead start to use cost management techniques that focus on cost reduction. He
mentions Benchmarking, Kaizen Costing and Just-in-Time. Describe the three cost
management techniques mentioned by the Management Accountant.
[6 marks]

QUESTION 3 [25 marks]

Ambi Tus Consultancy (ATC) is a company providing consultancy services to Non-

Governmental Organisation, Non-profit companies and other of types of organisations
involved in social work across Malaysia.

In the beginning of November 2016, the Manager of ATC, En. Adli has instructed the IT
division’s manager, Mr. Raju to produce the budget for the year ending 31 October 2021.
The operating statement for its IT division, which operates as profit centre for the year
ended 31 October 2021, is as follows:

Budgeted Actual Variance

Chargeable consultancy 2,400 2,500 100
hours
RM RM RM
Fee charged 360,000 400,000 40,000 (A)
Central administration costs 30,000 31,500 1,500 (A)
Consultants’ salaries 160,000 168,000 8,000 (A)
Casual wages 1,920 1,200 720 (F)
Motor and travel costs 8,800 8,800 -
Utilities and telephone 5,200 5,900 700 (A)
Office expenses 5,280 5,180 100 (F)

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 Depreciation of equipment 6,400 7,160 760 (A)
Total costs 217,600 226,940 10,140 (A)
Profit 142,400 173,060 30,660 (F)

Mr. Raju is extremely happy that the actual profit has exceeded the budget expectations
by RM30,660. Before he presents it to En Adli, he shows the report to you, the newly
appointed trainee management accountant of ATC. He is keen to know how this has been
achieved, so that he be able to explain to En Adli. When you looked more carefully at the
report, you have realised that, having the IT background, Mr. Raju does not know how
flexible budget differs from the static budget. You found that Mr. Raju did not take into the
consideration of the following information:
(i) 27% of utilities and telephone expenses are fixed.
(ii) The following inflation adjusted analysis of office expenses (including printing,
postage and stationery) was obtained for the last four quarters year 2020:
Hours Office expenses
Quarter 4, 2020 2,000 5,800
Quarter 3, 2020 1,500 5,100
Quarter 2, 2020 2,500 6,500
Quarter 1, 2020 1,000 4,400

(iii) The central administration costs are not directly attributable to the profit centre, but
depreciation of equipment is an attributable cost. However, depreciation is not a
controllable cost since the profit centre manager has no control over investment
decisions.

Required:

(a) Explain the term “flexible budget” and describe THREE (3) differences from fixed
budgets.
[4 marks]

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(b) Prepare an alternative statement for the profit centre which distinguishes clearly
between controllable profit and attributable profit, and which provides a realistic
measure of the variances for the period.
[16 marks]
(c) As a trainee management accountant, when you participate in a company
sponsored seminar, the speaker said “The setting of tight and attainable budget
targets may be associated with the subordinates' performance. Tight but attainable
goals may encourage subordinates to internalise budget goals which may lead to a
higher level of subordinates’ aspiration. This, in turn, may motivate subordinates to
exert greater effort to attain the budget and thereby improve their performance”.
Explain this statement.
[5 marks]

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