nAmiBIA UniVERSITY OF SCIEnCE AnD TECHnOLOGY

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS & FINANCE

QUALIFICATION: BACHELOR OF HOSPITALITY MANAGEMENT

BACHELOR OF TOURISM MANAGEMENT

QUALIFICATION CODE: 07BHMN & 07BOTM LEVEL: 6

COURSE CODE:CAH610S COURSE NAME: COST & MANAGEMENT

ACCOUNTING FOR HOSPITALITY AND TOURISM

SESSION: JUNE 2017 PAPER: THEORY & CALCULATION

DURATION: 3 HOURS MARKS: 80

EXAMINER (S)

MODERATOR:

FIRST OPPORTUNITY EXAMINATION PAPER

H. NAMWANDI

L. ODADA

INSTRUCTIONS 1. This examination paper is made up of five (5) questions.

2. Answer all the questions and in blue or black ink.

3. Start each question on a new page in your answer book & show all your workings.

4. Questions relating to this paper may be raised in the initial 30

minutes after the start of the paper. Thereafter, candidates must

use their initiative to deal with any perceived error or ambiguities

and any assumption made by the candidate should be clearly

stated.

5. Pencil work will not be marked.

PERMISSIBLE MATERIALS 1. Non-programmable calculator

THIS QUESTION PAPER CONSISTS OF 5 PAGES (Including this front page)

Question 1 (21 marks)

On 1 April 2017, Commodores Limited formed a wholly owned subsidiary company, Lionel (Proprietary) Limited for the sole purpose of manufacturing and selling a product called "Easy". The board of directors of Commodores Limited approved the following budget at normal capacity at that date:

Lionel (Proprietary) Limited: Budget forecast for the Year ended 31 March 2017

TOTAL PER UNIT

N$ N$

Sales 1 010 000 10,10

Total costs 985 000 9,85

Direct materials 350 000 3,50

Variable production overheads 50 000 0,50

Direct labour 200 000 2,00

Fixed production overheads 180 000 1,80

Variable selling and administration costs 80 000 0,80

Fixed selling and administration cost 125 000 1,25

Profit 25 000 0,25

The following information relates to the actual results for the year ended 31 March 2017:

Sales Opening inventory Closing inventory

90 000 units@ N$1 0,10 Nil 8 000 units

The management accountant of LIONEL (Proprietary) Limited had prepared a profit statement on 31 March 2017 on a variable costing basis, which showed a loss. However, the profit statement prepared on an absorption-costing basis at the same date, showed that LIONEL (Proprietary) Limited had earned a profit.

The operations director of the company is reviewing both statements and is somewhat confused. "You can never rely on the Accountants to give you the right figures", he mutters angrily under his breath as he reaches for his telephone.

Required:

Prepare income statements for LIONEL (Proprietary) Limited for the year ended 31 March 2017 using both the Direct Costing and the Absorption Costing method. (21 marks)

Question 2 (17 marks)

Mr van Cake is considering the acquisition of a business called Taku-Tau shoes which produce and sell shoes boxes. You were provided with information based on the following budgeted cost structure for the next year of operations which is based on normal sales and production capacity of 50 000 boxes per annum:

Cost & revenue per unit: Variable manufacturing costs Variable selling and Administrative costs Selling Price

Operating cost per year: Fixed factory overheads Factory rent Fixed selling and administrative expenses

Required:

Calculate the following: Break-even point in number of boxes

N$ 10 4

20

N$ 90 000 70 000 80 000

2.1 2.1 .1 2.1.2 2.1 .3

Margin of safety ratio and interpret your answer. Total costs of the business

(2 marks) (4 marks) (2 marks)

2.2 One of the directors is of the opinion that sales volume could increase to 60 000 boxes if the selling price is reduced by N$1 per unit. Calculate how much net profit the company would make in such a case. (4 marks)

2.3 List five limitations of break-even analysis as a method of business decision-making.

(5 marks)

Question 3 (10 Marks)

Nest Restaurant & Casino hired an auditor to check if proper accounting records have been kept during the current financial year. The auditor could not perform a proper audit because he discovered that there were no internal controls established in the restaurant. The auditor asked the board of directors of the company to set up internal controls of the company.

Required:

The board of directors of Nest Restaurant & Casino asked you to describe any 1 0 characteristics that make up a good internal control of the organisation.

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Question 4 (20 marks)

Raymond Ltd is currently in the process of putting together its cash budget for the first quarter of 2016.

• The actual sales figures for the last two months of 2015 were as follows:

November December

N$80 000 N$90 000

• The budgeted figures for 2016 are as follows:

January February March

N$75 000 N$75 000 N$80 000

• An analysis of the company's records has shown that debtors normally settle their accounts according to the following pattern:

60% within the month of sale 25% within the first month after sale 15% within the second month after sale

• Extracts from the actual purchases figures for 2015 revealed the following:

November December

N$50 000 N$60 000

• Purchases for 2016 have been estimated as follows:

January February March

N$55 000 N$45 000 N$55 000

• All purchases are on credit and past experience shows that 90% are settled in the month of purchase and the balance settled during the following month.

• Overheads of N$20 000 per month (including N$5 000 depreciation) are settled monthly.

• Taxation of N$8 000 has to be paid in February and the company will receive settlement of an insurance claim of N$25 000 in March.

• The company estimates that it will have a favourable bank balance of N$81 250 on 31 March 2016.

Required:

Compile a Cash Budget for each of the months January, February and March 2016 in column format.

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Question 5 (12 Marks)

Yomunde Ltd produces milk juice in litres. Yomunde normally experiences a loss of equal to

one-eighth in its production process in the form of spoilt units. The cost accountant has

reported that these spoilt units normally have a total sales value of N$0.50 per litre. During

the month of August, 1600 litres of raw material was put into the process at a total cost of

N$1 000, labour cost was N$900 and overheads were N$1 000. Actual production for the

month was 1 300 litres. All the spoilt units were finally sold at profit amounting to N$1 00.

Required:

Enter the above transactions for the month in the following ledger accounts and balance the

accounts at the end of the month: Work in process and abnormal loss.

THE END

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