OCD006
UNIVERSITY OF BOLTON
OFF CAMPUS DIVISION
THE UNIVERSITY OF BANKING - HCMC VIETNAM
BA (HONS) ACCOUNTANCY
SEMESTER 1 EXAMINATIONS 2015/16
STRATEGIC MANAGEMENT ACCOUNTANCY
MODULE NO: ACC6005
Date: Wednesday 30th December 2015
Time: 3 Hours
INSTRUCTIONS TO CANDIDATES:
You must answer 4 of the 5
questions on this paper.
Answer BOTH questions in Part A
and TWO questions from Part B
Part A questions carry 30 marks
and Part B questions carry 20
marks
This is a closed book examination.
You must hand in this exam paper
with your answer booklet.
Page 2 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
PART A – ANSWER BOTH QUESTIONS
Question A1: Product X
Product X has a standard selling price of £2,000 and contains two components with
the following specification:
Components
A
B
Standard Quantity
10
12
Standard price
£40
£30
The standard direct labour hours to produce the product at the standard wage rate of
£10 per hour has been established at 20 hours per product.
The annual fixed production overhead budget is divided into calendar months with
equal production per month. The budgeted annual fixed overheads are £60,000 for
the budgeted output of 3,000 units of Product X per annum.
Actual results for the month of June were as follows:
£
Sales
Cost of sales
Direct labour
Direct materials
Fixed production overheads
41,220
157,300
198,520
5,400
Gross profit
Selling and distribution expenses
Administrative expenses
Net profit
£
400,000
203,920
196,080
21,980
18,340
40,320
155,760
QUESTION A1 CONTINUES OVERLEAF
Page 3 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
PLEASE TURN THE PAGE
Question 1 cont’d …
Stocks for June were:
Component A
Component B
1 June
400
600
30 June
450
500
The actual hours worked were 4,580. Purchases were as follows:
Component A: 2,000 units for £84,000. Component B: 2,500 units @ £29 each
REQUIRED;
(a)
Calculate the standard product cost of product X.
(4 marks)
(b)
Produce a flexible budget to identify actual and budgeted profit
(5 marks)
(c)
Calculate:
(i) The sales volume variance.
(ii) The direct material variances for both price and usage for each
component used in the month of June assuming that prices were
stable throughout the relevant period.
(iii) The direct labour efficiency and wage rate variances for the
month of June.
(iv) The fixed production overhead expenditure and volume variances.
(12 marks)
(d)
Produce a detailed reconciliation statement of the standard profit with the
actual profit for the month of June.
(4 marks)
(e)
Write a report to the board of directors critically evaluating the performance of
the company.
(5 marks)
Total 30 marks
Page 4 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
PLEASE TURN THE PAGE
Question A2: Launder Limited.
Launder Ltd is a commercial laundry service. The company uses a traditional
method of overhead absorption. It has two cost centres, Laundry operations and
Transport. The management is unhappy with the profitability of some of its
operations. The CEO wants to discontinue the unprofitable business, but the COO
feels that this will let competition increase market share. The COO is convinced that
an activity based costing system (ABC), of dealing with overheads, will provide
management with the information they need to make the correct decisions. The
management accountant has been asked to investigate.
The estimated data for next year using the existing absorption method is as follows:
Total number of cost units to be
processed
Total transport km for collection/delivery
Total overheads
Overhead absorption rate
50,000
200,000 Km
£500,000
70% laundry
30% transport
Additional data resulting from the ABC investigation:
Main Activities
Cost Driver
Collection & Delivery of
laundry
Loading & unloading
Laundry
Drying
Pressing
200,000 kms
Cost pool (% of total
overheads)
20
12,500 transport runs
400,000 kg dry weight
500,000 kg wet weight
50,000 cost units
10
30
20
20
Data from two sample contracts:
Number of cost units
processed
Number of transport runs
Transport km
Average dry weight per
cost unit
Average wet weight
St Mary’s Hospital
10,000
The Royal Hotel
5,000
1,000
6,000
4 kgs
400
8,000
3 kgs
5.3 kgs
3.3 kgs
Page 5 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
QUESTION A2 CONTINUES OVERLEAF
PLEASE TURN THE PAGE
Question 2 cont’d…
Required:
a) Using the traditional absorption costing information, calculate the overhead
absorption rate (OAR) for each of the two cost centres.
(5 marks)
b) Calculate the OAR for each activity using the additional ABC information
(7 marks)
c) Compare the overhead absorbed by both St Mary’s Hospital and the Royal Hotel
using both the traditional system and the ABC approach.
(8 marks)
d) Critically evaluate how the ABC approach to overhead absorption will
assist management in decision-making.
(10 marks)
Total: 30 marks
Page 6 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
PLEASE TURN THE PAGE
PART B – ANSWER TWO QUESTIONS FROM THIS PART
Question B3.
(a)
(b)
Suggest the main reasons for the adoption of a transfer pricing system.
(10 marks)
Critically evaluate the use of the following:
(i)
market price based transfer prices; and
(ii)
cost based transfer prices.
Outline the main types that exist under each heading.
(10 marks)
Total: 20 marks
QUESTION B4.
(a) Critically evaluate the use of the “Balanced Score Card” and give examples
of its use in the business environment.
(10 marks)
(b) Using a business of your choice as an example, identify one corporate goal
for each of the 4 perspectives and give examples of one performance
indicator for each performance goal. Give reasons justifying your selection of
each performance indicator.
(10 marks)
Total: 20 marks
QUESTION B5.
TQM aims to change the management culture in an organisation to that of a 'quality
culture', focusing on improving customer care, the relationship with suppliers and
team-centred management. All business functions in the organisation are involved in
continuous quality improvement.
(a) Analyse the above statement and how the traditional approach to quality differs
from the TQM approach.
(10 marks)
(b) Critically evaluate the effect that TQM will have on management and control
systems and the information needs of management.
(10 marks)
Total: 20 marks
Page 7 of 7
University of Bolton
Off Campus Division
The University of Banking HCMC
BA (Hons) Accountancy
Semester 1 Examination 2015/2016
Strategic Management Accountancy
Module No. ACC6005
END OF QUESTIONS