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:
Criteria
Content
Referencing
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
Marks
60
40
(5)
(5)
100
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 : http://jitpm.com/triple-constraints-project-management)
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)
Information
Cost incurred for the year ended 31st Dec 2017
($)
Beginning Inventory
(as on 1st January 2017 ($)
Closing inventory
(as on 31st Dec 2017) ($)
Inventories
Inventory – Materials
40,000
50,000
Inventory – Work – in Progress
100,000
143,000
Inventory – Finished Goods
100,000
120,000
Direct Materials purchased
1,000,000
Direct Labor
40% of direct material purchased
Indirect Manufacturing overheads
Materials handling costs
70,000
Lubricants
20,000
Indirect manufacturing labour
40,000
Depreciation on plant & equipment
36,000
Property taxes and insurance on equipment
7,000
Other Operating Costs
Marketing promotions
66,000
Distribution costs
65,000
Customer service costs
64,000
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:
Particulars
Jan
Feb
Mar
Units expected to be sold
20,000
30 % more than January sales units
40% more than January sales units
Selling Price per unit ($)
80
80
80
Variable cost per unit ($)
30 per unit
30 per unit
40 per unit
Fixed Cost for this period
1,200,000
(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)
Information
Quantity/Hours
Cost/Rate per unit/hour
Materials
Material X
10 units
$ 6 per unit of material
Material Y
10 units
$ 4 per unit of material
Labour
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
Required
(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:
Information/Product
M
N
O
Budgeted annual production (units)
60,000
96,000
80,000
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:
Information
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
Required
(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)