Exercise - Variance Analysis

Exercise

Irfan Gadget Sdn Bhd manufactures products for children and babies. Below is the budgeted cost information of one of its products which is baby car seat for the month of July 2018 based on the budgeted production and sales of 4,000 units.

                            

    RM

Direct material:                                    

                          Welding rods (12,000 kg)                 240,000

                          Fabrics (8,000 meters)                       80,000

                          Direct labour (8,000 hours)               160,000

                          Variable overhead                               80,000

                          Fixed overhead                                   40,000

 

The variable overhead cost is absorbed based on direct labour hours while the fixed overhead cost is absorbed based on number of units produced. The standard selling price of the baby car seat is RM200 per unit.

The actual data for the month is as follows:

Units produced and sold                          5,000

Selling price per unit                               RM180

Direct material:

Welding rods purchased and used   12,500 kg@ RM18 per kg

Fabrics purchased and used           8,750 meters @ RM8 per meter

Direct labour                                         10,000 hours @ RM15 per hour

Variable overhead cost                           RM100,000

Fixed overhead cost                               RM40,000

Required:

a.    Prepare a standard cost for one unit of baby car seat.                               

b.    Analyse the following:

i)          Direct material price variance for welding rods

ii)         Direct material usage variance for fabrics

iii)        Direct labour rate variance

iv)       Direct labour efficiency variance

v)        Variable overhead expenditure variance

vi)       Variable overhead efficiency variance

vii)      Fixed overhead expenditure variance

viii)     Fixed overhead volume variance

ix)       Sales margin price variance

x)        Sales margin volume variance

         

c.  Construct a statement reconciling budgeted profit and actual profit for the month of July 2018 assuming Irfan Gadget Sdn Bhd has the following additional variances:

            i.        Direct material usage variance of RM50,000 (F) for welding rods.

           ii.        Direct material price variance of RM17,500 (F) for fabrics.

Exercise - MFRS 137 Provisions, Contingent Liabilities and Contingent Assets.

Mardhiah Resources Bhd is finalizing its financial statement for the year ended 30 June 2018. The company, however, has the following events which need careful consideration so as to adhere to the requirements of MFRS137 Provisions, Contingent Liabilities and Contingent Assets.

i) The company is in the business of selling cars. During the year, the company sold 10,000 units of cars which come with a three-year warranty. It is estimated that the company will incur RM5,000 for 100 units of the cars sold due to effect.

ii)  The company is facing litigation for damages amounting to RM100,000 for an unfair dismissal of a former employee. However, the legal advisor ruled out that there is a very remote chance that the former employee will win the case.

iii) The company has a legal suit with one of its major suppliers which may result in a receipt of compensation amounting to RM200,000. Its legal advisor ruled out that there is a high possibility that the company will be awarded with the compensation. However, it is dependent upon the verdict of the court.

iv) In September 2018, before the financial statement was authorised for issue, the company received a court order to pay for the damages the company has caused as a result of pollution to the river in Idham Valley. Even though the company has no legal obligation to do so, the company declares to the public that it will be responsible to take care of the environment. The damage is estimated to cost the company by RM200,000.

Required:

a.    For each of the economic events described above, advise the management on the proper accounting treatment in accordance with MFRS137 Provisions, Contingent Liabilities and Contingent Assets.                                                 

   b.  Advise the management on the relevant journal entries for transaction (i)  and (iv).

Exercises - MFRS 116 Property, Plant and Equipment

QUESTION 1

    On 2 April 2018, Nazuwa Fashion Bhd purchased 2 units of machines at a total cost of RM150,000. In addition, the company incurred installation cost of RM15,000, insurance cost of RM12,000 and transportation cost of RM8,000 for both machines. Both machines have a eight-year economic life and a total salvage value of RM25,000. The company uses straight line of depreciation on monthly basis. Nazuwa Fashion Bhd closes its book on 31 December each year.

                                        

Required:

1. Explain according to MFRS 116 Property, Plant and Equipment, the initial cost of the machines to be recognized in the Statement of Financial Position.  
2. Compute the initial cost of the machines.                                          
3. Calculate the depreciation expense for both machines as at 31 December 2018.

QUESTION 2

A. Balqis Sdn Bhd acquired two machines costing RM60,000 each on 4 March 2019. The transportation cost of RM2,000 was charged for the delivery of both machine whereas installation cost was RM4,000 for each machine. The machines are expected to be used for 10 years.

Balqis’s depreciation policy for the machine are 25% per annum based on a straight line method, monthly basis. The company’s financial year end is on 31 December each year.

Required:

a.  Identify whether the machine acquired by Balqis Sdn Bhd can be considered as assets of the company in accordance with MFRS 116 Property, Plant and Equipment.                                                          

b.    Calculate the initial cost of the machines.                                     

c. Explain the differences between straight line method and reducing balance method.                                                                                 

d.    Calculate the depreciation expense for the machines as at 31 December 2019.

Exercises - MFRS 110 Events after the Reporting Period

QUESTION 1

The objective of MFRS 110 Events after the Reporting Period is to prescribe when as entity should adjust its financial statement.

Required:

   Explain briefly “events after the end of the reporting period” in accordance with MFRS 110 Events after the Reporting Period.                                                  

 QUESTION 2 

 The financial statements of Rintis Biru Bhd for the year ended 30 June 2018 is authorised for issue on 1 September 2018. The following are events after the reporting period of the company.

       i.       A purchase of goods dated 30 June 2018 amounting to RM120,000 was recorded as sales in July 2018.

      ii.       A major customer with a balance of RM200,000 as at 30 June 2018 was declared bankrupt on 15 August 2018. However, the company managed to get a payment from thee customer amounting to RM20,000 in July 2018.

          Required:

a)     Determine the nature of the above events whether adjusting or non-adjusting by referring to MFRS 110 Events after the Reporting Period.                       

b)     Explain the appropriate accounting treatment for each of the above events in the financial statements of Rintis Biru Bhd as prescribed in MFRS 110 Events after the Reporting Period.                                                                         

Management Accounting Assignment

Assalamualaikum and dear students

Below is the asssignment for this semester. Due date for this assignment is 28 February 2019. Write those neatly. The assignment should be in a group of four.

Good luck guys!

Assignment BUS 1233

Dear students,

As promised and the one that you've been waiting for a long time....Now I give you an ASSIGNMENT for this semester....

Remember, please submit on time or I'll trash it!

Exercises - MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors

    QUESTION 1

      MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors prescribes the criteria for selecting and changing accounting policies, together with the accounting treatment ad disclosure of changes in accounting policies, changes in accounting estimates and correction of errors.

Required:

State any four (4) errors that may arise when preparing the financial statements.

QUESTION 2

       The retained earning account in the books of Zuligg Bhd showed an opening balance of RM 243,000 as at 1 July 2015. During accounting year ended 30 June 2016, situations below were identified:

1.   On 5 June 2016, it was identified that the acquisition of office equipment worth RM40,000 on 1 July 2014 was mistakenly treated as repair and maintenance. It is the company’s policy to depreciate office equipment at 10% on cost.

2.   Zuligg Bhd adopted the weighted average method to value its inventory. Starting from 1 July 2015 the company decided to change to First-in-First-out method. On 30 June 2016, it was found that the year-end closing stock valuation was still using the old method. This has caused the closing inventory to be understated by RM 150,000.

3.   Zuligg Bhd bought a machine on 1 July 2011 which has an estimated useful life of 10 years. On 1 July 2015, the company decided to revise the useful life to 8 years. The carrying value      of this machinery as at 1 July 2015 is RM 20,000. The company adopts straight line method to compute its annual depreciation.

Required:

a.   For each of the above situations, determine whether it is a change in accounting policy, a change of accounting estimates or an error.

b.   Ascertain whether the application of change as all the above situations should be adjusted retrospectively or prospectively.

c.   Prepare the appropriate journal entries to be taken into account for all the above situations   for the accounting year ended 30 June 2016.