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BAC 302/05

Advanced Cost and Management

Accounting 2016
"Students are highly encouraged to passage their TMAs to the Turnitin system before

submission, to encourage honest academic writing and it is not mandatory except for Project

Tutor-marked Assignment 2
Answer ALL questions below.
For questions 1 to 5, you may need to find the answers on the internet. Please
cite your references as per the WOU citation requirements.
Question 1
Spoilage is the unacceptable units of production that are discarded or sold for disposal
value. Accountants should be able to distinguish between normal and abnormal
Differentiate the two types of spoilage as aforesaid.
(8 marks)
Question 2
Describe the six stages any cost accountant has to go through when performing the
general process of cost allocation.
(8 marks)
Question 3
Explain why backflush costing is different from traditional consting.
(8 marks)

Question 4
Describe how abnormal spoilage is dealt with, if the enterprise uses FIFO method while
valuing its inventory.
(8 marks)
Question 5
Explain two approaches for handling spoilage in process costing.
(8 marks)

Question 6
Tinggen Berhad is a large conglomerate company structured on a divisional basis. It
seeks to maximise investor wealth. Head office avoids day to day involvement in
divisional affairs and only intervenes if performance is considered unsatisfactory.
Divisional performance is measured by residual income.
One of Tinggens larger divisions operates a chain of five star hotels throughout the
Malaysia. The divisions mission statement is To be the hotel of first choice for business
users and tourists. Although the chain has generally been popular with tourists it is not
proving quite so popular with business users and conference organisers.
Competition in the top segment of the hotel market is fierce, with customers expecting
the highest standards of facilities, service and catering. Over the last two years the
division has invested a large amount of money in modernising its hotels including the
improvement of bedrooms and public rooms, installation of gyms and swimming pools
and the information technology features required by business travellers. A large amount
of money has also been spent on staff training to improve service levels and on a
television advertising campaign to promote the improved service levels to business
Head office is concerned that the performance of the hotel chain appears to have
declined over the last few years despite this expenditure.
The following figures are available:
In RM millions
2013 2014 2015
Capital employed
Operating profit
The cost of capital applicable to the hotel division is 20% per annum.
(a) Calculate the residual income for the hotel chain for each of the three years.
(6 marks)

(b) Discuss the advantages and disadvantages of residual income as a divisional

performance measure.
(8 marks)
(c) Explain the advantages to Tinggen Berhad of a balanced scorecard approach to
divisional performance measurement.
(8 marks)
(d) Suggest two suitable critical success factors suitable for the hotel chain:
financial success;
customer satisfaction;
process efficiency;
organisational learning and growth.
For each critical success factor suggest one key performance indicator suitable for
the hotel chain.
(8 marks)
Question 7
Syarikat Sabah prepares lumber for companies who manufacture furniture.
(a) The main product is finished lumber with a byproduct of wood shavings. The
byproduct is sold to plywood manufacturers. For July, the manufacturing process
incurred RM332,000 in total costs. 80,000 board feet of lumber were produced and
sold along with 6,800 kg of shavings. The finished lumber sold for RM6.00 per board
foot and the shavings sold for RM0.60 a kg. There were no beginning or ending
Prepare two statements of financial position as at 31 December 2012 showing the
byproduct as a cost reduction during production, and as a revenue item when sold
(10 marks)
(b) Distinguish and briefly discuss the merits [or demerits] between the two principal
methods of accounting for byproducts: the production byproduct method and the
sale byproduct method.
(10 marks)
(c) Identify the revenue or expense amounts necessary to make a sell-or-processfurther decision and the reasons behind them.
(5 marks)
(d) Identify the four methods of allocating joint costs to individual products and the most
preferred method among accountants.
(5 marks)