This document provides instructions and questions for an assignment on cost and managerial accounting concepts. It asks the student to: 1. Analyze supply chain management and value chain analysis concepts for a furniture company to control costs, including constructing a schedule of cost of goods manufactured and income statement. 2. Calculate output levels, unit costs, and operating income for one of the company's products under different promotional scenarios. 3. Compute overhead rates and total/unit costs for a job order costing case study involving two production departments. 4. Briefly discuss advantages and disadvantages of activity-based costing. The assignment is divided into two parts worth a total of 100 marks and includes quantitative problems, short

1. Arab Open University
BE310: TMA – First Semester 2018 - 2019
Cut-Off Date: 29th
November 2018
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:
Criteri
a
Content Referencin
g
Structure and
Presentation
of ideas
Total
marksPart A Part B
Supply chain, Decision
making, CVP Analysis
Job Costing for
Modern

2. -2-
for KVK Industries Furniture
Marks 60 40 )5( )5( 100
Part A
Supply Chain, Decision Making, CVP Analysis for KVK Industries
)a) Supply Chain and Value Chain link for KVK Industries
KVK industries is a leading manufacturing company located in GCC Countries. It has a
manufacturing plant at Bahrain and UAE. The company is one of the leading exporters of its
products to other GCC Countries and to other parts of the world. The company could
connect its value chain with its suppliers’ company, but it was not able to connect with the
value chain of its distributing organizations (logistics companies). Due to this, KVK
Industries has been spending a lot and its costs are becoming uncontrollable.
An initial investigation and analysis revealed that the supply chain activities are not managed
well. The company is seriously looking for ways and means of improving its performance
through cutting its costs. The CEO (Chief Executive Officer) of KVK Industries wants to
study intensively about its supply chain activities and thereby to cut certain non-valuing
activities within it. The supply chain of this KVK industries has been presented as under:
)Source: taken from http://www.ironsystems.com/services/supply-chain-management(
)b) Inventory & Cost & Sales Details of KVK Industries for the year 2018
The inventory, cost & sales details of PSA Ltd for the year 2018 are given below:
Information Beginning
value($)
End year value
($)
Cost for the
current period
(2018(
Direct Materials purchased 140,000
Stock of Materials 26,000 12,000
Work in Process 16,000 18,000
Finished Goods 40,000 28,000
Direct Labour cost 154,000
Overheads
Indirect Labour 6,600
Factory Insurance 5,000

3. -3-
Depreciation on Machinery 4,600
Machinery Repairs 3,000
Factory Utilities 3,300
Miscellaneous manufacturing overheads 2,500
Sales 398,000
Selling Expenses 15,450
Administrative Expenses 9,560
)c) Units and Costs Details about one of its products “Product “M” (Estimations) for
2019
The company has estimated the variable cost per unit, fixed costs and the number of units to
that will be produced in four quarters of 2019.
Period Expected units to be
produced (units(
Variable cost per unit
($)
Fixed Costs for the
year 2019($)
First quarter 100,000 30 $800,000to be
distributed equally
to respective quarters
Second Quarter 200,000 30
Third Quarter 500,000 30
Fourth Quarter 400,000 30
)d) Promote or not to promote Product “N”
The company has been seriously thinking how to improve the sale of product “N” in the
market. It considers seriously about providing extra promotional activities like advertising to
promote the sale of product N. It needs to decide whether promotion should be done or not.
The cost and other details of N as follows:
Information Existing situation After promotional
activities undertaken
Number of products produced and sold 1,200units 1,500units
Variable cost per unit $48 $48
Fixed Costs $40,000 $50,000
Selling Price per unit $200 $200
The company has been seriously thinking whether it needs to go additional promotional
aspects like advertising or not. The company has estimated that it will get certain benefits
out of sales but at the additional fixed costs (as given above(

4. -4-
Required
Horngren (2012) argues that customers want companies to use the value chain and supply
chain to deliver every improving levels of performance.
)1(.Explain the meaning of supply chain management and value chain analysis and
Discuss how value chain and supply chain analysis help companies (with reference to KVK
Industries) in controlling costs.(20 marks(
)2(.Using the Inventory, Cost and Sales details of KVK Industries for the year 2018 given
above in (b,(
)i) Construct the schedule of cost of goods manufactured(10 marks(
)ii) Prepare an Income Statement for KVK Industries for the year 2018. (10 marks(
)3(.Using the information given above (given in c) for Product M, ascertain the following:
)i) Total Cost for the respective output levels of Product M in different years (5 marks(
)ii) Total Cost per unit for those levels of output (5 marks(
)4(Calculate operating income for the two options for product “N” (given in d) (giving
additional promotion or keeping the existing situation) and advice the company
accordingly.(10 marks(
)20+10+10+10+10=60marks(

5. -5-

6. -6-

7. -7-

8. -8-

9. -9-
PART B
Job Order Costing for Modern Furniture
Modern Furniture Company makes chairs and uses job order costing and applies
manufacturing overheads to individual jobs by using predetermined overhead rates. Modern
has two departments, assembly and finishing. In assembly department, overhead is applied
based on machine hours, and in finishing department, based on direct labor hours. At the
beginning of year 2018, Modern Company’s management made the following budget
estimates as a step toward determining the overhead application rates:
Assembly
department
Finishing
department
Direct labor $105,000 $75,000
Manufacturing overhead 135,000 103,000
Machine-hours 4,500 475
Direct labor hours 7,000 6,250
Production of 500 chairs (job no. 555), was started in the first of January and completed
three weeks later. The cost records for this job no. (555) show the following information:
Job No. 555 (500 Chairs(
Assembly
department
Finishing
department
Cost of materials used on job $1,700 $1,125
Direct labor cost $2,025 $1,800
Direct labor hours 135 150
Machine-hours 62.5 25
Required
)1(.Compute the overhead rate that should be used for each department in applying overhead
costs to job no. 555.(15 marks(
)2.(What is the total cost of job No. 555, and what is the unit cost of the product
manufactured on this production order?(15 marks(
)3(Discuss in brief some of the advantages and disadvantages of Activity Based Costing
Method(10 marks(
)15+15+10=40marks(

10. -10-
END OF TMA QUESTIONS