Principles Of Management Accounting A South African Perspective 3rd Edition John Williams, Carol Cairney, Richard Chivaka, Dewald Joubert, Shelley Anne Roos, Jonathan Streng - Solutions

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How has the modern business environment become so competitive that organisations now all strive to attain some form of competitive advantage?
To what extent is knowledge of an organisation’s supply chain necessary in order to perform value chain analysis?
In Porter’s sketch of the generic internal value chain of an organisation, will each organisation necessarily have a ‘margin’?Explain your answer.
When supply chain management is practised, does this necessarily mean that an organisation will work together more closely with its suppliers? Explain why.
How do you think Porter would describe the generic strategies followed by some of South African Airways’ local rival airline services such as Kulula.com and Mango?
A manager recently said: ‘In the time during which we produced this product, we sold 50 000 units of it, bringing in total revenue of R5 million. It cost us only R80 per unit to manufacture (which includes materials, labour and overheads), so we made a lot of money.’ What do you think of his
What are the basic steps in determining a product’s (or a service’s)target cost?
Would kaizen costing ordinarily be applied during the product design stage? Explain your answer.
SOURCE: ADAPTED FROM CIMA P1 Note: This question assumes that you have already studied JIT in Chapter 16, Contemporary management accounting concepts.Why is the adoption of total quality management (TQM) particularly important within a just-in-time (JIT) production environment?
What is the difference between activity-based costing (ABC) and activity-based management (ABM)?
SOURCE: ADAPTED FROM ACCA PAPER 3.3 Academic studies argue that the annual budget model may be seen as acting as a barrier to the effective implementation of alternative models for use in the accomplishment of strategic change.In what way(s) may the traditional budgeting process be seen as a
SOURCE: ADAPTED FROM CIMA P1 T Ltd is a large insurance company. The claims department deals with claims from policy holders who have suffered a loss that is covered by their insurance policy. Policy holders can claim, for example, for damage to property or for household items stolen in a burglary.
SOURCE: ADAPTED FROM ACCA PAPER 3.3 CSIX Ltd manufactures fuel pumps using a JIT manufacturing system. The transactions during the month of November were as follows:
SOURCE: ADAPTED FROM CIMA P1 Which of the following denitions is/are correct?JIT systems are designed to produce or procure products or components as they are required for a customer or for use, rather than for inventory.Cost reduction occurs when budget variances are analysed and corrective action
SOURCE: ADAPTED FROM CIMA P1 Consider the following two denitions:Which of the following pairs of terms correctly matches denitions 1 and 2 above?
SOURCE: ADAPTED FROM CIMA P1 Consider the following two denitions:Denition A: ‘an approach to production management which aims to maximise sales revenue less materials’Denition B: ‘a system whose objective is to produce or procure products or components as they are required by a customer or
The production manager of Manufacturing4Africa recently made the following remark:We have a real problem in the factory. Our two newest production machines, the MHP2008 and the ExpressRT, are not performing as well as we had hoped. Unfortunately, our product has to pass through both of them. At
SOURCE: ADAPTED FROM CIMA P1 JJ Ltd manufactures three products: W, X and Y. The products use a series of different machines, but there is a common machine that creates a bottleneck.The standard selling price and standard cost per unit for each product for the forthcoming period are as follows:
SOURCE: ADAPTED FROM CIMA P1 How does throughput accounting (as used when the TOC is employed), differ from variable costing?
SOURCE: ADAPTED FROM CIMA P1 The following data relate to a manufacturing company.At the beginning of August there was no inventory. During August, 2 000 units of product X were produced, but only 1 750 units were sold. The nancial data for product X for August were as follows:Which of the values
A company’s manufacturing division is located in South Africa, while its sales division is located in Asia. The manufacturing division transfers 100 000 units of product to the sales division each year. The manufacturing division incurs variable costs of R15 per unit. The sales division incurs
Unit A of a company transfers products to unit B of the same company. The optimal transfer price is between R50 and R100 per unit, and the optimal production plan is for unit A to transfer 100 000 units of the product to unit B every month. Unit A manufactures 200 000 units per month, its variable
Liquichem has a division that manufactures a chemical powder and transfers it to another division of Liquichem, where a liquid chemical is manufactured. The powder costs R200 per gram to manufacture (all variable costs), and 25 grams of powder is required per 100 millilitres of liquid chemical. The
Division A and division B are highly decentralised units of company C. Division A incurs an incremental cost of R12 per unit manufactured. Some of division A’s manufactured units are transferred to division B. Division B can purchase products that are almost identical to the ones manufactured by
Division one of a company transfers manufactured components to division two of the same company. Division two pays division one the incremental cost per unit, plus a xed fee of R20 000 per year for the usage of division one’s capacity. Division one incurs an incremental cost of R10 on each unit
The farming division of AgriFarms is located in the Eastern Cape and produces eggs, which are transferred to AgriFarms’ marketing division. The marketing division packages the eggs in attractive boxes and sells them to upmarket retail outlets in Gauteng. The eggs are all ‘jumbo’ size and
Every year unit A of a company transfers 5% of its output to unit B of the same company. Five years ago, the two unit managers negotiated a formula to arrive at a transfer price which they both regarded as fair, and every year since then they have merely substituted the formula inputs with the
What are the merits and demerits of negotiation between unit managers as a means of arriving at a transfer price?
The baking division of the Pie Company bakes ready-to-eat pies for distribution to the Pie Company’s 25 retail outlets. The retail outlets charge R8 per pie sold and incur variable costs of R1 per pie. It costs the baking division R4 (variable costs) to bake each pie. The manager of the baking
The Global Company sells leather covers that protect tablet computers. The covers are manufactured exclusively for the Global Company in the Far East. They are then shipped to London, where the Global Company’s brand name is applied to the covers and where they are individually packed in branded
Peter has calculated the following performance measure of the company he works for:Income less (required rate of return × assets)= R1 368 000 – (12% × R10 500 000)= R108 000
The following applies to a company with no long-term liabilities in respect of the 2XX7 year:For purposes of the residual income formula, management requires a return of 10% per annum. Similar companies yield a return on investment of 11% per annum and a return on sales of 30% per annum. How well
Produ (Pty) Ltd has several factories and a highly decentralised management structure. Each factory’s performance is primarily evaluated based on return on investment. The weighted average cost of capital of the company is 11% per annum. Alice, the Cape Town factory manager, is considering
Company C calculates return on investment based on the average investment. Its return on investment for 2XX2 has been calculated as 12,2%. The directors are very disappointed, as they were expecting a 15% return. What can be learnt about company C’s return on investment if the Du Pont analysis is
Two of the divisions of a large retail organisation have approached the central management team to resolve a dispute between them.The security division is tasked with providing effective, visible security at the organisation’s retail outlets. The primary objectives of the security division are to
Treesaver is a not-for-prot organisation that was established in the Garden Route a year ago and aims to save trees of particular historic interest. After a successful year, it is already considering establishing branches in other parts of the country where important trees grow.However, the
Head ofce costs of R662 000 have been allocated to the Cape Town hotel, which is part of a hotel group. The costs comprise R600 000 in head ofce administration costs allocated and R62 000 in respect of wine supplied by head ofce with the hotel logo on the bottle. The following also apply:Head ofce
The copy department of a university reproduces hard copies of course material for students as required. Below are three scenarios explaining the performance measurement of the department:Scenario A: Detailed records are kept of the cost of paper, ink and other operating expenses attributable to the
A transport company operates a number of divisions. One of the divisions, the Trucking Division, has just submitted its management accounts for the nancial year ended 31 July 2XX6 to head ofce. The Trucking Division reported a return on investment of 12% and operating income of R1 000 000 for the
The section 13.14 entitled ‘Criticisms of standard costing’ includes the following sentence:When manufacturing complexity increases, the investigation of and assignment of responsibility for variances become very difcult and require a great deal of diligence and care.Why is it so important that
Why is there no production volume variance for xed costs in a variable costing system?
SOURCE: ADAPTED FROM CIMA P1 – MANAGEMENT ACCOUNTING – PERFORMANCE EVALUATION PQR Ltd operates a standard absorption costing system. Details of budgeted and actual gures are as follows:
SOURCE: ADAPTED FROM CIMA P1 D Ltd manufactures and sells musical instruments, and uses a standard cost system. The budget for production and sale of one particular drum for April was 600 units at a selling price of R72 each.When the sales director reviewed the results for April in the light of the
SOURCE: ADAPTED FROM CIMA P1 – MANAGEMENT ACCOUNTING – PERFORMANCE EVALUATION X Ltd operates a standard costing system and absorbs xed overheads on the basis of machine hours. Details of budgeted and actual gures are as follows:What is the xed overhead expenditure variance?R190 000 favourable
above. What is the total materials yield variance for October?
SOURCE: ADAPTED FROM CIMA P1 PILOT PAPER Refer to the information given in
SOURCE: ADAPTED FROM CIMA P1 PILOT PAPER SW manufactures a product known as the TRD100 by mixing two materials. The standard materials cost per unit of the TRD100 is as follows:In October, the actual mix used was 984 litres of X and 1 230 litres of Y. The actual output was 72 units of TRD100. What
SOURCE: ADAPTED FROM CIMA P1 PILOT PAPER The following data have been extracted from the budget working papers of WR Ltd:In November, the actual activity level was 13 780 machine hours and the actual overhead cost incurred was R14 521. What is the total overhead expenditure variance for November?
Which of the following describes a exible budget?A budget which, by recognising different cost behaviour patterns, is designed to change as volume of activity changes A budget for a 12-month period which includes planned revenues, expenses, assets and liabilities A budget which is prepared for a
SOURCE: ADAPTED FROM CIMA P1 Operation B in a factory has a standard time of 15 minutes. The standard rate of pay for operatives is R10 per hour. The budget for a period was based on carrying out the operation 350 times. It was subsequently realised that the standard time for Operation B included
What is the difference between an incremental budget and a zerobase budget?
The following gures represent a factory’s production gures and related production costs for the past seven months. The cost accountant has to prepare a production budget for the next ve months. Budgeted production is 25 000 units per month. Using the high-low method, what are the expected xed and
What is a master budget?
What three actions could management consider in order to alleviate a short-term cash decit?
What are three possible principal budget factors (factors that could determine the volumes and amounts that should be budgeted)?
Who in the organisation is likely to be responsible for preparing the following aspects of the budget?Materials purchases budget Production budget Sales budget Budget guidelines Fixed overhead absorption rate
Which type of planning in the left column matches the budget period in the right column?
What is the function of a budget manual?
Name ve of the most important objectives of budgeting.
SOURCE: ADAPTED FROM CIMA MA DECISION-MAKING EXAM An organisation produces two products, product X and product Y.The standard variable costs per unit of the products are as follows:The management accountant determined the optimal production plan by using graphical linear programming. He noticed
The following information pertains to products K and L:The availability of raw material Z is limited to 7 000 kg per month.What is the product combination that will optimise the total monthly contribution?
Match the following concepts with their denitions. Write the concept next to the letter which matches its denition.Concepts: Slack, limiting factor, non-negativity, shadow price A scarce resource of which there is a limited supply that affects the protability of the organisation The increase in
A tax consultancy rm employs a foreign tax specialist at a monthly salary of R60 000. On average, the specialist is able to book 120 hours per month to clients. The specialist’s charge-out rate to clients is R1 800 per hour. The specialist does not have the capacity to handle the total workload
AB Pharmaceutical Ltd manufactures sleeping pills that require 0,2 grams of a scarce ingredient, ZZ, per dose. The contribution per dose is R6. The cost of ZZ is currently R80 per gram. What is the shadow price per gram of ZZ?R6 R30 R80 R110
SOURCE: ADAPTED FROM CIMA P2 The following details relate to ready-made meals prepared by a food processing company:
An organisation has determined that its limiting factors are as follows:Raw materials 14A + 8B ≤ 308 000 Labour 0,3A + 0,7B ≤ 15 850 It has also determined that the optimal product mix can be found at the intersection of these limiting factors. What is the organisation’s optimum product
A game farmer has to decide about the mix of antelope on his new farm. The size of the farm is 1 200 hectares (ha). The farmer has only R3 million available to invest in antelope and is considering a mix of impala and sable. Sables cost R75 000 each and require 12 ha per animal. Impala cost R1 200
An organisation produces two components, G and H, in two processes: process 1 has a maximum capacity of 4 000 hours per week, while process 2 is limited to 10 000 hours. Component G requires 6 minutes per unit in process 1 and 12 minutes per unit in process 2. Component H requires 9 minutes in
An accounting organisation is currently assisting a large number of clients with the completion of their tax returns. Which of the following are probable factors limiting income?Lack of computers Lack of suitably qualied accounting staff Lack of secretaries assisting with administration
Intermediate (45 minutes)SOURCE: ADAPTED FROM CIMA STAGE 1 OPERATIONAL COST ACCOUNTING You have received a request from EXE Ltd to provide a quotation for the manufacture of a specialised piece of equipment. This would be a one-off order, in excess of normal budgeted production. The following cost
Intermediate (40 minutes)SOURCE: UNIVERSITY OF JOHANNESBURG ARCHIVE.The management of Computer Development Ltd is considering marketing a new application software package. The package will also include a hardware portion in the form of a graphic monitor.The costs associated with this project are as
Intermediate (40 minutes)SOURCE: ADAPTED FROM ACCA LEVEL 2 MANAGEMENT ACCOUNTING (JUNE 1986)A small contractor has been asked to quote for a contract which is larger than he would normally consider. The contractor would like to obtain the job as he has surplus capacity The estimating and design
SOURCE: ADAPTED FROM ACCA PAPER 1.2 (DECEMBER 2004), QUESTION 18 An organisation considers a contract that requires two types of materials, T and V.
SOURCE: ADAPTED FROM ACCA PAPER 1.2 (JUNE 2006), QUESTION 18 An organisation’s skilled labour, which earns R8 per hour, is fully utilised in manufacturing a product with the following pricing:Selling price: R60 per unit Variable cost: R35 per unit (R20 skilled labour and R15 other costs)The
SOURCE: UNIVERSITY OF JOHANNESBURG ARCHIVE.A company is considering a contract which will require, among other inputs, 50 kg of material M. 80 kg of material M, which were purchased for R1,60 per kg, are in stock. The replacement price of M is R1,75 per kg. The material is in stock as a result of a
SOURCE: ADAPTED FROM CIMA PAPER 2 (MAY 2008), QUESTION 1.8 A company is considering a short-term pricing decision to utilise some spare capacity. The item to be manufactured and sold would use 1 500 kg of raw material Q.Material Q is in regular use by the company. It currently has 1 000 kg in
SOURCE: ADAPTED FROM ACCA PAPER 1.2 (DECEMBER 2005), QUESTION 20 Materials can never have an opportunity cost, while labour can.The annual depreciation charge is not a relevant cost.Fixed costs will have a relevant cost element if a decision causes a change in the total expense.Which statements are
SOURCE: ADAPTED FROM ACCA PAPER 1.2 (DECEMBER 2002), QUESTION 3 An organisation wants to purchase a new machine for R150 000 to perform a contract. The machine will cost R25 000 to install and will have a scrap value of R10 000 in 5 years. It is depreciated on the straight-line basis over 5 years.
What is an opportunity cost and how does it arise?
How can uncertainty be taken into account in the short term?
What is the difference between qualitative and quantitative relevant information?
How would you go about deciding between two investments with different returns and risks? Explain your understanding of the measures of risk and return.
What are some of the qualitative aspects to consider in a closingdown decision?
What quantitative and qualitative aspects would we consider when making a make-or-buy decision?
What are the quantitative and qualitative considerations of a special order decision?
What is the difference between relevant costs and irrelevant costs?
Joint production costs of R1 000 000 are incurred in producing products M and N, which can be sold as follows at the split-off point:Product M: 50 000 units at R16 per unit Product N: 50 000 units at R 8 per unit If additional processing costs of R60 000 are incurred on product N after the
Using the same information as provided in BQ 6 , BQ 7 and BQ 8 , how would the joint costs be allocated using the constant gross prot
In addition to the information relating to costs and units provided in BQ 6 and BQ 7 , assume the following How would the joint costs be allocated using the net realisable value method? What is the gross prot arising from each joint product?
In addition to the unit and cost information provided in BQ 6 above, assume that:product Alpha sells at R60,00 per unit product Beta sells at R75,00 per unit product Charlie sells at R30,00 per unit.How would the joint costs be allocated using the market value at the split-off point method? What is
In a joint process, expenses incurred before the split-off point are as follows:How would the joint costs be allocated using the physical measures method?
Using the information provided in BQ 3 and BQ 4 , what is Yonela’s gross prot/ (loss) as reected in the income statement for September? Show your workings.R100 000 Loss R100 000 R50 000 R0 None of the above
In addition to the information given in BQ3, management has recently found a market for a by-product of the joint process –‘Scent’. The following information for September relates to this byproduct:What will the joint costs to be apportioned to the joint products now be? Show your workings.R2
YoSi Ltd manufactures two raw materials – S and Y – used in the making of perfumes in a joint process. These raw materials are then subject to further processing into perfumes – S to produce Simphiwe and Y to produce Yonela. The following statement was drawn up for September:The joint costs
How does the method of allocation of joint costs affect decisionmaking where joint and by-products are concerned?
What is the difference between accounting for a process that produces batches of identical products and for a process from which different joint and by-products emerge?
Advanced (35 marks; 63 minutes)SOURCE: RHODES UNIVERSITY SoundLab (Pty) Ltd (‘SL’) manufactures sound equipment in its factory. The process is highly sophisticated and requires work in several different departments. SL recently introduced a new type of speaker, the SAAA. The new speaker has
Advanced (20 marks; 36 minutes)SOURCE: ADAPTED FROM CIMA P1 PILOT PAPER PQR Ltd is a chemical processing company. The company produces a range of solvents by passing materials through a series of processes. The FIFO valuation method is used.In process 2, the output from process 1 (XP1) is blended
Advanced (23 marks; 41 minutes)SOURCE: RHODES UNIVERSITY Converse is an American shoe company that is famous for its All Star high-top sneakers. These shoes are now considered to be the most iconic sneakers in the world. Converse recently set up a manufacturing plant in Cape Town in order to supply
Intermediate (14 marks; 25 minutes)SOURCE: ADAPTED FROM ACCA CERTIFIED ACCOUNTING TECHNICIAN EXAM P4 600 tons of raw materials, costing R430 032, were input to a process during a period. Conversion costs totalled R119 328. Losses, in the form of reject product, are normally 12% of input. Reject

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Principles Of Management Accounting A South African Perspective 3rd Edition John Williams, Carol Cairney, Richard Chivaka, Dewald Joubert, Shelley Anne Roos, Jonathan Streng - Solutions

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