Solve My Cost Accounting Assignment which includes case study of ACC Engineering Pte Ltd

Question - DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 1


Full-Time Diploma in Accounting (DACCF)

Acc002 COST AND MANAGEMENT ACCOUNTING
CONTINUOUS ASSESSMENT 2 Group Assignment – 40 marks (10% weightage)

Read these instructions carefully. There will be a penalty with mark deduction if instructions are
not strictly followed.
There should be 3 members per group. Groups are to submit HARDCOPY assignments to the
instructor on Week 12 in class. Write your FULL na mes AND your IC/Passport numbers as in
the register on the Assignment/Project Submission F orm (Appendix). The document footer must
include all 2-3 student names and pages number (for mat: Pg x of y). ...Read More The SOFTCOPY of the
assignment must be emailed to yyuen001@gmail.com
using the same deadline. The submitted
report must show evidence that this is the students ’ own work. Students should keep a copy of
the assignment submitted.
Please be reminded that plagiarism and collusion is a serious offence, and all cases will be
referred to the Head of Programme. Grades will be withheld if the submission is suspected for
plagiarism or collusion till investigations are com pleted.

After the due date, the students’ submissions will not be entertained.
Deadline: In Week 12 start of the lecture at 12 noo n

Penalty Marks for Late Submission of Assignment
Within 24 hours: 20% to be deducted from total mark s
More than 24 hours: Submission will be graded zero.

DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 2

The scenario:


ACC Engineering Pte Ltd started by Ang Cang Cong us ed to manufacture only component
Acc001. It has always been prudent in its business ventures. New generation product Acc002 is
its current top selling product model.
The budget for the coming year starting 1/07/20X4 i s to be prepared as soon as possible. Two
members of the top management team are currently in discussion for the matter:

Managing Director (MD): “Are we running late in pre paring Acc002’s operating budget for our
accounting year starting 1.7.20X4 and ending 30.6.2 0X5?”

General Manager (GM): “I notice that too. It is al ready November 20X3, and we have not
received your instructions yet. Historically we nee d to redraft 3-4 times before we finalise the
figures.”
MD: “Well, we have strong directives from the board of directors to grow our second wing and
develop Acc003, remember? That took up a lot of ou r energy and time.”

GM: “Yes, we have countless meetings focusing on di verting our resources to launching our
third product since last year. Unfortunately the un certainty in the export markets has forced us to
put that on hold. I guess we should now put all ou r attention on budgeting for our star product
Acc002. However, you must take note that the raw m aterials’ prices quoted by the suppliers are
spotting shorter and shorter validity periods. Pri ces can hardly be kept fixed by us even if we
wish to put in a huge order to commit ourselves to the manufacturers.”

MD: “Who says we want to give such big blanket orde rs to suppliers? Our customers are fishing
for lower and lower prices from us and our formidab le competitors too.

GM: “Yes boss, I understand that very well as our s ales team has been coming back and asking
for bigger and bigger discounts on behalf of our cu stomers. I was unconvinced and visited many
of our key customers. I even tally a list of deman ds from them. In a nutshell, they want higher
safety levels of stock to be kept by us, yet they a lso want cheaper prices from us too. It is tough
in this current business climate. If we give in to them, our profit would suffer. If we do not, we
exposed ourselves to more competition by allowing c ompetitors to enter into our market as the
customers would seek them out.”
MD: “On the double, you go and draft me the first s et of the operating budgets for Acc002 for
the year starting 1.7.20X4. Support all your claim s by attaching suppliers’ quotations and let me
make my own judgement. From now onwards, I want to approve all quotations issued by our
staff for quotes above 500 units of Acc002. We nee d to keep very close tab on things in such
difficult times.”
That meeting ended with uncertainty in the air….

DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 3

Three weeks later, GM has the following information
(a. to f.) on expectations for the coming
year starting 1.7.20X4:
a) Demand for component Acc002 is 7,000 units for the coming year. Expected selling price
is $632 per unit.

b) 13.5 kg of direct material will be required for eac h unit of output. The opening stock of
raw material is 9,000 kg valued at $6.00 per kg. Ta rget closing stock is 18,000 kg. The
estimated purchase price is $6.60 per kg.

c) Opening stocks of finished goods for the period are 350 units valued at $320 per unit.
Estimated closing stocks are 2,100 units.

d) Each unit of output will require 4.5 hours of direc t labour. Direct Labour per hour is
estimated to cost $20.

e) Production overheads are to be absorbed on the basi s of direct labour hours. The
following is the estimated overhead cost:

Estimated for next year $ $
Supplies 225,000

Indirect Labour 500,000
Payroll 800,000
Power 225,000
Maintenance 175,000
Total variable overhead 1,925,000

Depreciation
575,000

Property Tax 125,000
Property insurance 25,000
Power - Fixed Portion 50,000
Maintenance 50,000
Total fixed overhead 825,000
Total Overhead 2,750,000

DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 4

f)
Marketing & Administration costs - estimated to be 20% higher for selling expenses, and 10%
higher for administration expenses (as compared to the previous year’s budgeted figures:

Figures from 20X3 budget $ $
Sales Commission 220,000
Advertising 66,000
Salary 110,000

Total Marketing 396,000

Office salary
110,000

Supplies 13,200

Total Administration 123,200

Total
519,200

Assume a First-In-First-Out cost flow and that no w ork-in-progress exists at any time

Required:
Question 1:


Prepare the following budgets for the year starting 1.7.20X4 and ending 30.6.20X5:

a) Production Budget (in units) (3 marks)

b) Direct Material Usage (in units) and Purchase Budge t (in $) (4 marks)

c) Direct Labour Budget (in $) (2 marks)

d) Production Overhead Budget (in $); and
determine the production predetermined overhead rat e in 2 decimal places (3 marks)

e) Ending Stock Budget (in $) (6 marks)

DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 5

f)
Cost of Goods Manufactured Budget (in $) (5 marks)

g) Cost Of Goods Sold Budget (in $) (3 marks)

h) Budgeted Income Statement (in $) (6 marks)

(32 marks)

Question 2:


Following that, assuming you are the MD seeing the first draft of 20X4 budgets (the group’s
answer to Question 1).
The supporting documents like suppliers’ quotations and sales team feedback summary are not
available yet.
List four critical questions you wish to ask the GM to explain to you in the next management
meeting? Explain your answers.
(8 marks)

(Total: 40 marks)

DAccf 3rd intake Oct 2013Acc002 CMA CA2 Group Assignment Page 6

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