Assignment

TASK 1

NusajayaSdn. Bhd. is preparing budgets for the quarter ending September 30. Related information is shown as below:

1. Budgeted sales for the next few months are:

2. The selling price is RM12 per unit.

3. All sales are on credit and the collection methods are:

i. 50% collected in the month of sales
ii. 30% collected in the month following sales
iii. 20% collected in two month following sales

4. The management at NusajayaSdn. Bhd. determines the ending inventory in units to be equal to 20% of the following month's budgeted sales.

5. To produce one unit of output, 2 kilograms of direct material are needed.

6. Nusajaya decides to have direct materials on hand at 10,000 kilograms every month

7. Cost of direct material is estimated at RM1.50 per kg.

8. The payment of direct materials is below:

i. 50% purchases is paid in the month of purchase
ii. 50% purchases is paid in the following month of purchase

9. To produce one unit of output, 0.1 hours of direct labor are required.

10. Nusajaya pays RM8 per hour to its direct labor.

11. All wages are paid at the end of the month.

12. Manufacturing is divided into variable and fixed overhead.

13. Variable overhead is applied to each unit of output on the basis of direct labor hours.

14. The variable overhead rate is RM10 per direct labor hour.

15. Fixed overhead is estimated at RM40,000 per month.

16. Ending Finished Goods Inventory is made up from direct material, direct labor and manufacturing Overhead.

17. Cost of Goods Sold is computed based on the unit production cost of RM5.79 per unit.

18. Selling and administrative cost is divided into variable and fixed components.

19. Variable selling and administrative cost is estimated at RM1.50 per unit sold.

20. Fixed selling and administrative cost is estimated at RM50,000 per month, where RM5,000 is the depreciation and it is not a cash expense.

21. Nusajaya has the following cash policy :

i. Minimum cash balance of RM50,000 is required for every month.
ii. Any deficiency of cash will be covered by loans with repayment in the following month.
iii. The interest on loan is charged at 15% per year.
iv. Purchased an equipment in August totalling RM150,000.
v. Cash balance on 1 July is RM55,000.

22. Nusajaya's account balances are as follows:

                                RM
Property                458,047.50
Equipment             150,200 (net)
Ordinary Shares     500,000
Retained earnings   335,777.50

Required:

To prepare the master budget (sales budget up to budgeted Statement of Financial Position) for NusajayaSdn. Bhd. for July, August and September.

The following data has been taken from the records of SenkyoSdn. Bhd.

Required:

a) Using the above information, compute the following ratios for the two years:

i. Gross profit margin.
ii. Net profit margin before tax.
iii. Return on capital employed.
iv. Return on shareholder's funds.
v. Long term debt to equity ratio.
vi. Current ratio.
vii. Quick ratio.
viii. Inventory turnover.
ix. Receivable turnover.
x. Average collection period.
xi. Average inventory holding period.
xii. Non-current assets turnover.

b) Discuss the qualitative information that may enhance your analysis of theperformance of the company.

TASK 2- Topic: Cost-Volume Profit Analysis

Objectives To be able to identify the relevant and irrelevant costs and benefits associated with each feasible alternative with the greatest overall net benefit to aid decision making.

Linen FasternersSdn. Bhd. makes three different clothing fasteners in its manufacturing facility in Klang. Data concerning these products is as follows:

All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers.

The company has an extremely effective lean production system, so there is no beginning or ending work in process or finished goods inventories.

You are required to answer in a contribution income statement format, the following:

a) What is the company's overall break-even point in dollar sales?

b) Of the total fixed expenses of RM400,000, RM20,000 could be avoided if the Velco product is dropped, RM80,000 if the Metal product is dropped, and RM60,000 if the Nylon product is dropped. The remaining fixed expenses of RM240,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.

i. What is the break-even point in unit sales for each product?

ii. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company?

iii. If the managers drop the Velcro and Metal products, what will be the overall profit or loss of the company? Explain your result.

iv. Prepare a segmented income statement of all three products to prove your answer in (iii) above.

TASK 3- Topic: Short Term Decision Making

Objectives To enable the learner to identify relevant and irrelevant costs and benefits associated to assist in decision making.

KonstruckSdn. Bhd. offers three products for the construction industry: blocks, bricks and tiles. The following income statement shows the projected results, by products, for 2015 (in RM thousands) :

This is the third consecutive year that the tiles segment is reporting losses. The managing director is considering dropping the product line as it would mean saving RM45,000 by dismissing the line's supervisor and also eliminating depreciation.

a) Do you agree that the tiles division should be closed based on the above information?

b) What qualitative factors would need to be considered before a decision on whether to keep or drop a product is adopted?

c) The marketing manager suggested that if the tile product is dropped, sales and variable costs of blocks would reduce by 10%, and sales and variable costs of bricks by 8% since customers tend to buy all three products together. Hence if the tile product is dropped, customers will buy blocks and bricks elsewhere. Does this mean it is better to keep the tile product line?

TASK 4- Topic: Standard Costing and Variance Analysis

Objectives To enable the learner to identify variance analysis and be able to benchmark for the purpose of performance evaluation for organisational efficiency and sustainability.

Cahaya Enterprise, a sole proprietor, is a registered contractor with MajlisPerbandaranKajang (MPK) and operates a residential landscaping business. Besides business from MPK he has a diverse range of clients in the affluent residential areas of Ampang. In an effort to provide quality service, he has concentrated solely on the design and installation of landscaping covering trees, shrubs, fountains and lighting. With his clients continually requesting additional services, Cahaya Enterprise recently expanded into lawn maintenance, including fertilisation.

The following data relate to his first year's experience with 53 fertilisation upmarket residential clients. Each residential client required six applications throughout the year and was billed RM40 per application.

• Two applications involved Type A fertiliser, which contains a special ingredient for weed control. The remaining four applications involved Type B fertiliser.

• Cahaya Enterprise purchased 5,000 kg of Type A fertiliser at RM0.53 per kg and 10,000 kg of Type B fertiliser at RM0.40 per kg. Actual usage amounted to 3,700 kg of Type A and 7,800 kg of Type B.

• A new part-time employee was hired to spread the fertiliser at the rate of RM11.50 per hour. The employee logged a total of 165 hours at client residences.

• Based on previous knowledge of his operations and conversations with other landscapers, Cahaya Enterprise established the following standards:

- Typical hourly rate of landscape personnel: RM9
- Labour time per application: 40 minutes
- Fertiliser purchase price per kg: Type A, RM0.50; Type B, RM0.42
- Fertiliser usage: 40 kg per application

Unfortunately, Cahaya Enterprise's new lawn fertilisation business did not go as smoothly as planned, with customer complaints being much higher than expected.

You are required to:

a) Compute Cahaya Enterprise's direct material variances (price, quantity and purchase price) for each type of fertiliser.

b) Compute the direct labour variances (rate and efficiency).

c) Compute the actual cost of the client applications. (Note: exclude any fertiliser ininventory, as remainingfertiliser can be used next year.) Was the new service a success? Explain.

d) Analyse the variances you have computed in requirements (a) and (b).

i. Was the new service a success from an overall cost control perspective? Briefly discuss.
ii. What seems to have happened that would give rise to customer complaints?

e) In view of the complaints, should the fertiliser service be continued next year? Why?