Question

Question 4

Perfect Furniture Berhad (PFB) specialises in living room leather furniture products. During the month of March, the company purchased RM210,000 of raw materials. Direct labour hours worked during the period were 8,000 hours. The workers were paid RM10 per hour. Direct expenses (high performance glue, etc) of RM22,000 were incurred. Manufacturing overhead for the month were RM72,000.

For the month of March, 72 units of leather furniture was sold for RM9,500 each. PFB also incurred selling costs including sales commission of RM155,000 and administration costs of RM32,000. Inventory information for the period is as follows:

	1 March 2019	31 March 2019
Raw materials inventory	RM25,000	RM45,000
Work in process inventory	RM50,000	RM24,000
Finished goods inventory	RM10,400	RM26,000

Required:

1. Determine the cost of raw materials used in production and prime costs.

                                                                                                                        (4 marks)

2. Calculate the cost of goods manufactured for the month of March 2019.

                                                                                                                        (3 marks)

3. Calculate the cost of goods sold for the month of March 2019.

                                                                                                                        (2 marks)

4. Prepare a statement of profit or loss for the month of March 2019.

                                                                                                                        (3 marks)

                                                                                                           (Total: 12 Marks)

Question 5

Jokowi Bond Sdn Bhd (JBSB) produces a type of box which is sold for RM15 per unit. The normal annual production and sales for the boxes are 20,000 units.

The following data consist of costs incurred during the year ended 2018:

	RM
Direct material	80,000
Direct Labour	50,000
Variable selling expenses	30,000
Administrative expenses (60% variable)	60,000
Fixed manufacturing overhead	20,000

The management accountant of the company is proposing the following alternatives to increase sales for the year 2019 and to reduce the idle capacity:

1. Reducing the selling price to RM12 per unit which would lead to an estimated increase in the sales volume by 15%.
2. An increase in sales would result in an increase of direct labour cost per unit by 10%.
3. Fixed manufacturing overhead   is also expected to increase to RM25,000 due to an aggressive advertising campaign planned to boost sales.

Required:

1. Calculate the total variable cost per unit and total fixed expenses for the year 2018. marks (4 marks)
2. Calculate break even unit and sales for 2018.   marks (3 marks)          
3. Calculate margin of safety in units and value for 2018                                                                                                                 (3 marks)
4. Advise JBSB’s management on whether they should implement the proposal outlined above for the year 2019. (Show profit comparison).                                                                                                                                                  

(6 marks)

                                                                                    

Question 4 Portor Furniture Band (PFBI speciale in ing room caller tumbare products. During the month of March the many purch RM210.000 of raw reals Drbour hours worked curtg the per nd was 5003 est. Thu HTX WHIH RM10 p rar Di Hp high pHTTCH yun, w: RN22,000 H Inorrac. Manufacturing Overhead for the month were RM72,000. For the month of March 72 units oferumture was ad for RM9,50 och PFB also neurred seling costs including sales commission of RN 155.003 and admniston costs of R 2.000. Inventory intomator for the FAW Waris relinery way BU002 Bd. Required: 2) Determine the cost of raw materials used in production and prime costs. by Calculate Colfeoda menulired for the month of March 2010 (4 marke) marks) Caleals the cast of goods wol for the month of March 2019 (2 marks) Prepara alment of prorrores for the month of March 2012 mark) Total: 12 Marks Question 5 Jokowi Bond ScoBBBB Pro type of box who and sales for the bones and 20,unts. for RMS pw unit. The nor d productor The following dala w a noured during the yeande 2012 Circler acos Veribe sing excetaka Administrat ve expenses (604 variable nedan.faturo varios 20 000 The management accountant of the company is proposing the following altensthes to incresse sales for the year 2019 and 10 reduce de CAD cly. 1. Reducing the soling price to RM12 por unt which would lead to an estimated increase in the sales volume try 15% 2. An ninh Wu n ciel our play 10 Fond u ring th is a nap la inca la RM25,000 custa un aerise HEV 15 Hul Required: Calculate the stal variabc cost per unit and total fred woonses for the year 2018. b) Calwale tres n nH and wales for 2010 18 Cele mergina y u nts And Us for 2015 c) Advan JBB management on where they should implement proposal cutined above for the year 2010. (Show profi comparison) 16 mars!

Answer 1

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Perfect Furniture Berhad
Answer to Question 4
Raw materials transferred to production	Amount RM
Beginning Raw material inventory	25,000.00
Add: Raw material Purchases	210,000.00
Total Raw material available for use	235,000.00
Less: Ending Raw material inventory	45,000.00
Cost of raw materials used in production	190,000.00
Calculation of Direct Labor costs	Amount RM
Direct Labor hours worked	8,000.00
Rater per hour	10.00
Direct Labor costs	80,000.00
Prime costs	Amount RM
Cost of raw materials used in production	190,000.00
Add: Direct Labor	80,000.00
Add: Direct Expenses	22,000.00
Prime costs	292,000.00
Cost of goods manufactured	Amount RM
Cost of raw materials used in production	190,000.00
Direct Labor	80,000.00
Direct Expenses	22,000.00
Manufacturing Overhead	72,000.00
Total Manufacturing costs	364,000.00
Add: Beginning Work in process inventory	50,000.00
Total cost of work in process	414,000.00
Less: Ending Work in process inventory	24,000.00
Cost of goods manufactured	390,000.00
Cost of goods sold	Amount RM
Beginning Finished goods inventory	10,400.00
Cost of goods manufactured	390,000.00
Cost of goods available for sale	400,400.00
Less: Finished goods inventory, ending	26,000.00
Cost of goods sold	374,400.00
Calculation of sales revenue	Amount RM
Units sold	72.00
Price per unit	9,500.00
Sales revenue	684,000.00
Statement of profit or loss	Amount RM
Sales Revenues
Sales Revenues	684,000.00
Net Sales	684,000.00
Less: Cost of goods sold	374,400.00
Gross Profit	309,600.00
Less: Operating Expenses
Sales commission	155,000.00
Administration costs	32,000.00
Total Operating Expenses	187,000.00
Net Income	122,600.00

Jokowi Bond Sdn Bhd
Answer to Question 5
Answer a
Calculation of total variable costs	Amount RM	Cost per unit	Note
Number of units sold	20,000.00
Direct materials	80,000.00	4.00	This is $ 80,000 divided by 20,000 units.
Direct Labor	50,000.00	2.50	This is $ 50,000 divided by 20,000 units.
Variable selling expenses	30,000.00	1.50	This is $ 30,000 divided by 20,000 units.
Variable Administrative expenses	36,000.00	1.80	60% of Administrative expenses is variable. 60% of 60,000= $ 36,000. This is $ 36,000 divided by 20,000 units.
Total variable costs	196,000.00	9.80	A

Calculation of total fixed costs	Amount RM	Note
Fixed manufacturing overhead	20,000.00
Fixed Administrative expenses	24,000.00
Total fixed costs	44,000.00	B
Answer b	Amount RM	Note
Sell price per unit	15.00
Less: Variable cost per unit	9.80
Contribution per unit	5.20	C
Total fixed costs	44,000.00	See B
Breakeven point (units)	8,461.54	D=B/C
Sell price per unit	15.00	E
Breakeven point (sales)	126,923.08	F=D*E
Answer c	Amount RM	Note
Number of units sold	20,000.00	G
Less: Breakeven units	8,461.54	See D
Margin of safety in units	11,538.46	H=G-D
	Amount RM
Number of units sold	20,000.00	See G
Sell price per unit	15.00	See E
Total sales	300,000.00	I=G*E
Less: Breakeven sales	126,923.08	See F
Margin of safety in value	173,076.92	J=I-F
Answer d
Revised situation		Note
Units sold in 2018	20,000.00	See G
Increase in 2019 by 15%	3,000.00	K=G*15%
Units sold in 2019	23,000.00	L=G+K
Units sold in 2018	20,000.00	See G
Direct Labor	50,000.00	M
Direct Labor cost per unit	2.50	N=M/G
Increase in 2019 by 10%	0.25	O=N*10%
Direct Labor cost per unit in 2019	2.75	P=N+O

Comparative Income Statement	2018	2019	Note
Number of units sold	20,000.00	23,000.00	See L
Sell price	15.00	12.00	This is given in the question
Less: Variable costs per unit
Direct materials	4.00	4.00	See workings above
Direct Labor	2.50	2.75	See P
Variable selling expenses	1.50	1.50	See workings above
Variable Administrative expenses	1.80	1.80	See workings above
Total Variable costs per unit	9.80	10.05
Contribution per unit	5.20	1.95	Q
Total Contribution	104,000.00	44,850.00	R=P*Q
Less: Fixed costs
Fixed manufacturing overhead	20,000.00	25,000.00
Fixed Administrative expenses	24,000.00	24,000.00
Total fixed costs	44,000.00	49,000.00	S
Net Profit	60,000.00	(4,150.00)	T=R-S
Decrease in Net Profit by		64,150.00	This is net profit of 2018 less net profit of 2019.

If the changes were done in 2019 then its net profit will decrease by $ 64,150. So the proposal should not be accepted.