Cost accounting: Develop students’ communication skills, such as essay writing, analysis and presentation of material

About TMA

The TMA covers the cost accounting concepts and practices in the businesses. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 1 to 5. This TMA requires you to apply the course concepts. The TMA is intended to:

· Assess students’ understanding of key learning points within chapters 1 to 5.

· Increase the students’ knowledge about the reality of the cost and management accounting as a profession .

· Develop students’ communication skills, such as essay writing, analysis and presentation of material.

· Develop the ability to understand and interact with the nature of the managerial accounting tools in reality .

The TMA:

The TMA requires you to:

1- Review various study chapters of ’ Cost Accounting ’ Book and apply some of the concepts within it.

2- Conduct a simple information search using the internet.

3- Present your findings in not more than 1,200 words (900 words for Part A and 300 words for Part B). The word count excludes headings, references, title page, and diagrams.

4- You should use a Microsoft Office Word and Times New Roman Font of 12 points.

5- You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.

Criteria for Grade Distribution:




Structure and Presentation of ideas

Total marks

Part A

Part B

Value Chain and CVP analysis for Roman Cements Company

Job Costing for Nanda Ceramics Company







Part A

Value Chain and CVP analysis for Roman Cements Company

(a) Key Success Factors of Roman Cements Company

Roman Cements has been in operation internationally since 2005. The company is one of the largest producers of cement products. They are so successful in their business activities due to their efficiency and cost-conscious efforts. The top management prioritizes activities in a way that no customer is penalized due to their inefficiency in operations. Their value chain has been so successful. Their operational efficiency has been characterized by their timely supply of finished products to their customers, efficiency in their operations and the value (quality) the product offers to their customers. The following diagram illustrates their operational efficiency:

(Source :

The top-level management has identified that their value chain and their supply chain management activities are their key success factors which need to be further strengthened in order enjoy monopoly profits in the highly competitive cement industry.

(b) Cost & Inventory Information of Roman Cements for 2017

Roman Cement’s cost details for the year 2017 are given as below: (in ‘000)


Cost incurred for the year ended 31st Dec 2017


Beginning Inventory

(as on 1st January 2017 ($)

Closing inventory

(as on 31st Dec 2017) ($)


Inventory – Materials



Inventory – Work – in Progress



Inventory – Finished Goods



Direct Materials purchased


Direct Labor

40% of direct material purchased

Indirect Manufacturing overheads

Materials handling costs




Indirect manufacturing labour


Depreciation on plant & equipment


Property taxes and insurance on equipment


Other Operating Costs

Marketing promotions


Distribution costs


Customer service costs


Sales Information

Number of Units sold

50,000 units

Selling price per unit

$ 80 per unit

(c) Estimations for the next 3 months for one of its products.

The company has estimated its sales and production cost for one of its products for the three months (Jan, Feb, Mar) in 2018 as below:





Units expected to be sold


30 % more than January sales units

40% more than January sales units

Selling Price per unit ($)




Variable cost per unit ($)

30 per unit

30 per unit

40 per unit

Fixed Cost for this period


(d) Product A of Roman Cements Company

Roman Cements wants to launch a new product (Product A) in the coming year. Following are some of the budgeted cost details about material, labour and manufacturing costs.

(i) Prime Cost details (Product A)



Cost/Rate per unit/hour


Material X

10 units

$ 6 per unit of material

Material Y

10 units

$ 4 per unit of material


Unskilled labour

20 hours

$ 4 per hour

Semi- Skilled labour

16 hours

$ 6 per hour

(ii) Manufacturing Overheads (Product A)

Following is manufacturing overheads per quarter (assigned per quarter)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

$ 200,000

$ 200,000

$ 250,000

$ 300,000

(iii) Expected Level of output (Product A)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

40,000 units

50,000 units

60,000 units

80,000 units


(1) Roman Cements Company is enjoying the benefits of having certain key success factors due to timely supply, cost consciousness and quality products. It has been able to enjoy monopoly profits with the help of these strategies.

In light of the above, discuss the meaning of key success factors and explain the strategies of Roman Cements which facilitate in strengthening its key success factors. (15 marks)

(2) Prepare Income Statement of Roman Cements Company for the year 2017. Show all calculations clearly (based on information given above in (b) (15 marks)

(3) Based on the information given above in (c), compute the following:

(i) Operating income for the first quarter (contribution approach to be followed) (10 marks)

(ii) BEP in Units and in money value, assuming Fixed costs and selling price same as given and variable cost per unit to be $ 30 per unit, (5 marks)

(4). Using the information given above for Product A in (d), compute the following:

Prime cost (material + labour) and total cost of manufacturing (material + labour + overheads) for the desired output level of Product A in different quarters (assume no inventories) and cost per unit in different quarters. (15 marks)

(15 + 15 + 15 + 15 = 60)

Part B

Job Costing for Nanda Ceramics Company

(a) Job Costing at Nanda Ceramics

Nanda Ceramics Company manufactures three products M, N and O. The direct costs of three products are shows as below:





Budgeted annual production (units)




Direct Materials

$ 140 per unit

$ 180 per unit

$ 120 per unit

Direct Labour ($ 20 per hour)

$ 160 per unit

$ 120 per unit

$ 200 per unit

In addition to the above direct costs, the company incurs annual indirect production cost of $ 4,176,000. Overheads were allocated to product based on number of direct labour hours

(b) Job K 440

Nanda Ceramics Company executes a job no. K440. The cost and output details of Job No. K440 are given below:


Costs/hours details for Job No. K 440

Direct Materials

$ 420 per unit of output

Direct Labor

$ 300 per unit of output

Overhead Absorption Rate (based on direct labor hours)

(calculated value)

$ 15 per direct labour hour

Number of direct labor hours to be used for Job K440

9,000 hours

Units to be produced (output)

3,000 units


(1) Compute the total cost per unit for Nanda Ceramics Company (based on information given above in (a) (20 marks)

(2) Based on information given in (b) above, ascertain the total cost of Job No.K 440 (10 marks)

(3) Explain briefly why over/under absorption of overheads occur? (10 marks)