CT 2 Dec 2022
CT 2 Dec 2022
CT 2 Dec 2022
TEST 2
INSTRUCTIONS TO CANDIDATES
2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.
3. Do not bring any material into the examination room unless permission is given by the
invigilator.
Secret Kitchen Sdn Bhd is a producer of kitchen bar chair. The company is currently
producing three series of kitchen bar chair namely, Ikemen, Chrome and Antique.
Secret Kitchen Sdn Bhd hires several foreign labours to work in the production of the kitchen
bar chair. Their permits are expiring at the end of year 2022 and the company is facing
unexpected problem with the permit renewal process. Therefore, these labours need to be
deported to their countries. This has caused a problem to Secret Kitchen Sdn Bhd as it
cannot maintain its production plant capacity for the following period due to limited
resources.
The following information is related to the production of the kitchen bar chairs for the month
of January 2023:
Additional information:
i. Annual fixed production overhead cost is RM118,800. The fixed production overhead
cost is absorbed based on direct labour hours.
ii. The fixed selling and administration overhead cost is RM36,000 per year.
iii. The total direct labour hours available for the month of January 2023 are 1,500 hours.
The direct labour rate is RM24 per hour.
Required:
b. Calculate the optimum production plan for Secret Kitchen Sdn Bhd for the month of
January 2023.
(12 marks)
c. Based on your calculation in part (b) above, predict the company’s net profit in January
2023.
(2 marks)
Bright World Sdn Bhd produces various types of lamps for local market. One of the highly
demanded product is table lamps and every month, the company produces and sells an
average of 1,200 units of table lamps. The table lamps are using component NEON which
is currently supplied by the external supplier, Nano Electric at a price of RM150 per unit.
One unit of table lamps require one unit of component NEON.
Due to the short supply of component NEON in the market, the company is planning to
manufacture component NEON internally in which they have to use the same production
line that currently produce another product, bedside lamps. Monthly sales and production of
bedside lamps is 1,250 units with total sales revenue of RM180,000. The total variable cost
for one unit of bedside lamps is RM72 including salesman commission of 5% from selling
price. If the company decided to produce NEON internally, monthly production of bedside
lamps will reduce to 40%.
The Research and Development department has identified and estimated the following cost
of producing one unit of component NEON as follows:
RM
Direct materials 65.00
Direct labour 45.00
Manufacturing overhead 126.50
Total costs 236.50
Included in the manufacturing overhead costs is variable material handling costs, which are
applied to the component on the basis of 10% of direct material costs. The remainder of the
overhead costs consisting of 60% variable costs and 40% fixed costs.
The external supplier, Nano Electric has offered to continue supplying the component
NEON at a price of 20% higher than the current market price. Bright World Sdn Bhd needs
to bear RM10,000 for the transportation cost and RM15,000 for the quality and inspection
costs.
Required:
a. Determine total contribution margin loss from the sales of bedside lamps if company
plan to manufacture component NEON internally.
(3 marks)
b. Compute the relevant cost of making and relevant cost of buying component NEON.
(12 marks)
c. Based on your answer in (b) above, advise the management in making the best
decision for the company.
(2 marks)
d. Identify THREE (3) qualitative factors that Bright World Sdn Bhd should consider when
considering to produce the component NEON internally.
(3 marks)
(Total: 20 marks)