Professional Documents
Culture Documents
submission, to encourage honest academic writing and it is not mandatory except for Project
courses".
Tutor-marked Assignment 2
Answer ALL questions below.
For questions 1 to 5, you may need to find the answers on the internet. Please
cite your references as per the WOU citation requirements.
Question 1
Spoilage is the unacceptable units of production that are discarded or sold for disposal
value. Accountants should be able to distinguish between normal and abnormal
spoilage.
Differentiate the two types of spoilage as aforesaid.
(8 marks)
Question 2
Describe the six stages any cost accountant has to go through when performing the
general process of cost allocation.
(8 marks)
Question 3
Explain why backflush costing is different from traditional consting.
(8 marks)
Question 4
Describe how abnormal spoilage is dealt with, if the enterprise uses FIFO method while
valuing its inventory.
(8 marks)
Question 5
Explain two approaches for handling spoilage in process costing.
(8 marks)
Question 6
Tinggen Berhad is a large conglomerate company structured on a divisional basis. It
seeks to maximise investor wealth. Head office avoids day to day involvement in
divisional affairs and only intervenes if performance is considered unsatisfactory.
Divisional performance is measured by residual income.
One of Tinggens larger divisions operates a chain of five star hotels throughout the
Malaysia. The divisions mission statement is To be the hotel of first choice for business
users and tourists. Although the chain has generally been popular with tourists it is not
proving quite so popular with business users and conference organisers.
Competition in the top segment of the hotel market is fierce, with customers expecting
the highest standards of facilities, service and catering. Over the last two years the
division has invested a large amount of money in modernising its hotels including the
improvement of bedrooms and public rooms, installation of gyms and swimming pools
and the information technology features required by business travellers. A large amount
of money has also been spent on staff training to improve service levels and on a
television advertising campaign to promote the improved service levels to business
users.
Head office is concerned that the performance of the hotel chain appears to have
declined over the last few years despite this expenditure.
The following figures are available:
In RM millions
Year
2013 2014 2015
Capital employed
50
70
90
Operating profit
15
16
17
The cost of capital applicable to the hotel division is 20% per annum.
Required:
(a) Calculate the residual income for the hotel chain for each of the three years.
(6 marks)
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