Most products go through five stages in their life namely, Development, Introduction, Growth, Maturity and Decline. These stages have helped in the design of marketing strategies and it is now believed that it can be equally useful for accountants in the determination of the cost of products.
Required:
Identify FIVE benefits of product life cycle costing.                                                                                                         (5 marks)

Smooth Sailing Ltd is a medium size company that specialises in the construction of iron gates for clients. It has three production departments through which all jobs are processed, Assembling, Welding and Finishing. The following data relates to the year ended 30 September, 2015:

It is company policy to make a mark-up of 50% of profit on each job.

Required:
i) Calculate an appropriate overhead absorption rate for each department for the year ended 30 September, 2015; and                                                                                                                                                                                                          (5 marks)

ii) Determine the total costs, and hence, the price of Job CA2.                                                                                        (10 marks)

Identify and explain briefly THREE similarities and TWO differences between activity-based costing and the traditional system of assigning overheads to products.                                                                                                                         (6 marks)

The Management Accountant plays an important role in the modern business environment and his/her activities may be categorized as providing information under the key headings of planning, control and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her the equation Y= a – bx which management accountant always uses are not relevant in modern day business environment.

You are aware of the strong opinion of the Managing Director and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.
Required:
Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:
i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings.                                                                                                                                                                                                     (6 marks)

ii) For each of the THREE key headings of planning, control and decision making; outline one Management Accounting technique and how it would lead to stronger commercial success for the company.                                                          (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd.                                                                                               (2 marks)

Contract manufacturing has grown in popularity in recent years because of its usefulness to companies.
Required:
i) Explain contract manufacturing.                                                                                                                                    (2 marks)

ii) Outline THREE main reasons for the recent surge in contract manufacturing.                                                           (3 marks)

iii) Explain TWO factors that will ensure effective contract manufacturing.                                                                     (2 marks)

a) Explain the term shadow price.                                                                                                                                     (2 marks)

b) Unity Company Ltd is preparing for next seasons operations. The company has provided the following information relating to its three products.

The company can only make available a total of 18,560 hours in the short run.
Required:
i) Provide the optimal production plan for Unity Ltd for the ensuing period.                                                                 (5 marks)

ii) What is the total incremental benefit of producing DA instead of GE, assuming available resources can only meet demand of DA?                                                                                                                                                                                     (3 marks)

iii) Indicate the shadow price of the production plan and state the basic assumption under which this price will apply.  (2 marks)

HK manufacturing company is considering introducing a high day rate incentive scheme. An experiment with one of its average workers showed that an employee is likely to produce 1,500units in a 40hour week if she was paid GH¢25 per hour but 1800units if she was paid GH¢31.25 per hour.
Assume that production overhead is added to cost at the rate of GH¢25 per direct labour hour.

Required:
i) Determine the cost per unit of output on both the low day rate scheme and high day rate scheme.                               (3 marks)

ii) Is it advisable to introduce the high day rate scheme?                                                                                                    (2 marks)

a) Material X is a key raw material of XOXO Ltd. The store keeper is interested in knowing the units they have placed on order because the supporting documents have been destroyed by fire. She is able to provide that immediately before the fire: materials in inventory were 1,250; materials requested by factory but yet to be supplied issued were 375 whilst inventory balance was 3,255. What is the amount of material X that XOXO has ordered from its suppliers?                                                      (2 marks)

b) MM Company Ltd., a manufacturer of groundnut paste, wishes to know whether it is advisable to stick to its economic orders or accept a special order from a foreign supplier for the supply of groundnuts. The following information has been provided:
Purchase price per bag of groundnut                                    GH¢360
Holding cost per annum is 10% of the cost of a bag of ground nut
Ordering cost per annum                                                      GH¢7.7
Annual Demand of groundnut paste                                    6,000
Normal usage per month                                                      520 bags
Minimum Usage per month                                                 500 bags
Maximum usage                                                                   700bags

Required:
i) The foreign supplier promises a reduction in the price of a bag of groundnut by 8% if MM Company is willing to order 3000units each time it wants to order. Advise MM.                                                                                                          (10 marks)

ii) What is the difference between a bin card and a store ledger card?                                                                              (3 marks)

Anim shoes ltd produces and sells Ghana made shoes with two main departments; production/sales and repairs departments. The production and sales department produces and sells 10,000 pairs of shoes each year. Because of the low quality of raw materials available in the country, the company includes an additional GH¢11 in the cost of a pair of shoes sold to cater for one-year after sales repairs.
On average, it is expected that a quarter of the total pairs of shoes sold would come back for repairs a year after sale. Repair works on a pair of shoe takes 2 labour hours and it is estimated that total repair cost on the quarter of shoes will be GH¢27,500.
In addition to providing repair services to the production and sales department, the repair department sometimes picks up offers from outside the company. Such external offers are billed at full cost and a margin on sales of 20%. The following is the breakdown of the average repair cost of a pair of shoe:
                                                     GH¢
Material                                      2.50
Labour                                        1.5 per Labour hour
Variable Overheads                    0.5 per Labour hour
Fixed Overheads                        1.15 per Labour hour

Required:
i) Calculate the individual profits of the Production/Sales department, Repairs department and Anim Ventures if repairs are done by the repairs department of Anim Ventures at either full cost plus 20% margin on sales or at marginal cost.                 (8 marks)

ii) Pee Shoe Repairs has offered to repair each pair of shoe for Anim Ventures at GH¢10.00, a price which is cheaper than what the repairs department is offering. Should Anim Ventures accept this offer?                                                                     (5 marks)

iii) Identify THREE other factors Anim Ventures should consider in finalizing the decision in (ii) above?                    (3 marks)

Explain TWO principles of a good transfer pricing method                                                                                              (4 marks)