‘This question paper must be returned. Candldates ae not ‘Permitted to remove any part Cf itfrom the examination room, MACQUARIE UNIVERSITY, SESSION 1 EXAMINATIONS - JUNE 2013 ‘Time Allowed: 3 hours and 10 mlaute reading time ‘Total Namber of Questions: Part A- Twenty (20) Pert B_Sevea () ‘This examination paper cosas of25 pages including this page Instructions: “Answer ALL questions Wirite all answers on this exam paper [No part ofthis exam paper isto be removed ftom the examination room No writing s permitted during reading time Ensure that you have writen your name and student number CORRECTLY atthe top of | this page Answers to multiple choice questions must be indicated on the separate answer sheet provided. There is no negative marking forthe multiple choice questions. 1. Show all supporting computations Materials ot peemited [ane oe detent permed rae 3 oN eee een 7 mao oper) persed ra ; = i |S ent 0 Conn A oon 7a ‘GaeaT aNLL aR TY ‘This part consists of 20 multiple choice questions. Each question is worth 1 mark. Answer to these questions must be indicat onthe separate answer sheet provided. 1. Therole of management accounting is ‘A. provide information to partes ouside the organisation BB. provide information to managers within the organisation. C. provide information to government agencies. D. Alef the given answers Control involves: 2 ‘A. formulating detalls of operations and finances forthe next financial year 'B comparing actual performance agaist targetsfoudgeted performance CC. deciding whether o expand activities D, making choice betwoen available altematives 3. Ifproduction umber of units produced) increases, varinbe cost will: ‘A. romsin constant ona per unit basis B. Increase bya variable amount C.__varyon per unit basis D. remain unchanged 4, Barrett Industries began the month of June with a finished goods inventory of $15 000. ‘The finished goods inventory atthe end of June was $10 000 and the cost of goods sold uring the month was $20 000. The cost of goods manufactured during the month of Seve wins A. $1500 B. $2500 cc. $20000 DB. $5000 ‘Which of the following terms accurately describes all three manufacturing costs (Le. direct materials, direct labour and manufacturing overhead)? A. Product costs BL Variable costs C. Direct costs D. Both dret cost and product costs(Questions 6 and7 relate to the following information, Direct material used 150000 Selling costs $5000 Indirect labour $7000 ‘Adiinistrative csts 10000 Depreciation on fictory building $70.000, Direc Inboor $40 000 Indirect materials $45 000 6 The prime cots are: A. 190000 B_$40.000 $150 000 D. $142.00 7. The conversion costs a A $1500 B $142 000 © 162.000 D. $1900 8, Xchex Ply Lidis considering whether to make or buy a component used ia the production of Fez Machines. The annual cost of producing the 100000 components used bythe company is as follows. ‘Variable manufacturing costs $300000 Fixed mancfaturng costs $100 000 TtXebex wer discontinue production ofthe component, fixed manufacturing costs would ‘be reduce by 87 percent. Xebex should buy the 100 000 components ifthe cost of purchasing per unit isles than what amount? A $450 B $400 c $380 D. $3909. Generally, joint costs are not relevant in decision making after split-off because: A. they donot help increase the sales B. they increase the sales margin only marginally they donot change regardless of any decision. . _jointcoss reflect opportunity costs, 10.Lido Products produces two products (A and B) from a joint process. The joint cost of ‘production is $80 000, 5000 units of Product 4’ can be sold at split for $20 per unt. 10000 units of Product B ean be soldat spli-oft for $15 per unit or processed further at an additional cost of $20 000 and sold for $16 peru. What is the difference in profit if Lido decides to further process Product B, instead of selling iat spi-off? $10 000ineease $20 000 ineease $10 000 decrease $358 000 decresse 11, Management accounting information system sould be designed to provide relevant Information. To be relevant the information must be: ‘A. qualitative not quantitative B. nique and unavailable through othe sources C. historia! in nature, not purport to predict the fture and sensitive 1D. different foreach alteative, relate tothe fate, and be accurate and timely 12, The book value ofan asset such as equipment san example of: AL autre cost B. a differential cost C. an opportunity cost D,amunkeenst 3. Job costing for service entitis applies whe customer contact i low ‘thee is significant back ofice involvement the number of services produced is low the numberof services produced is high pomp14, Under-applicd and over-applied overhead isnot usually required to be adjusted in service costing systems. Why? kis immaterial ‘The costing system is not integrated with the accounting system Underapplied and overapplied overbead has no impact on decison making. Tedoes not affect the accuracy of the service costs, epee ‘Questions 15 and 16 relate to the following information, ‘The Browning Company manufactures a single product; the standard costs per unit ere $8 for ‘variable manufacturing, costs (direct labour, direct materiel and variable manufacturing ‘overhead, end $6 for fied manufacturing ovechead costs. Variable sling and administrative costs are $2 per unit sold, The selling price is $20 per unit. Actual and budgeted fixed manufacturing overhead is $900,000 for the year. Information about Browning's production activity for the year fllows: Seles 125-000 units Budgeted and actual production 130-000 units 18. What is the operating profit under absorption costing? A 3750000 B. $1250000 $3500 D. — $500000 16. What is the operating profit under variable costing? A. $1250000 B. $3500 C$500000 D. $750000 17. When a flexible budget is used, a decrease in the actual production level within a range of activity woulds decrease variable cost per unit decrease otal variable costs increase variable cost per unit 18, BeActive Sporting Goods sells tandem bicycles, The following dta was taken from the most ‘Tecent quarry sales forest. ‘apn 1400 315 May 1s7s a2 June 1650 25 eActives cost for one bieyele i $125. How many units should the company purchase in May? A 147 B 1672 © 1578 D. 136 19. professional audit frm charged juniors at $50 per hour, seniors at $200 per hour and the ‘overhead rate for both was 100 pee cent of direct labour. The firm added 5 percent on total ‘cost to ave ata fe to be charge. Ia job took 10 junior hous and 2 senior hous, what waste fe? A. $800 B $1080 $1880 D. $1800 20, Monex reported an operating profit of $65 000 forthe year using absorption costing. The company hod no units in begining inventory, budgeted and actual production was 20 000 ‘unis and sales were 18 000 units during the yea. Budgeed fxed manufectring overhead ‘was $100 000. Determine the net profit uncer variable costing. A. $115000 B $7500 c.$65 000 D. $3500‘This part consists of seven questions. ‘Topper Sports Inc. produces high quality sports equipment. The company’s Racket Di ‘manufactures three tennis rackets ~the Standard, the Delux, and the Pro hat are widely used in ‘snatour ply. Selected information on the rackets is given below: cae ‘Standard Deluxe Pre Soles Tn ull (per annum) 15.000 6000, 3000 Unit selling price 40 $60) 390. ‘Variable manufacturing cost per uni 32 ‘27 Se Variable selling cost per unit % 5 34 All sales are made through the company’s own retail outlets. Te racket division has the following fixed costs: Perna Fixed manutacturing eos $247 400, Fined selling and edministative costs | $280.000 Total ‘$527 400 Required: () Calelate the unit contribution margia for each product type. (15 nari) (&)Determine the weighted-averege unit contribution margin. (.5mark)(© Compute the break-even point in units forthe company asa whole. (mark) @ Compute the break-even point in units foreach product. (25 marks) (@) Determine the total numberof units that must be sold to obtin a target profit of $87,900 for ‘the company. (marly (9 Lis thre assumptions of cost volume prof analy. (15 mari)‘Gincstin’2 ets Making (Spec Orden ISD ORISSA TERE CriMAR) ‘Mercury Company produces 2 single product. Its manufictring plant has the capacity to ‘produce 10,000 units per month, The company has received a special one-time order for 3 000 mits at price of $12 per unit. The nocmal sling price is $15 per unit. The costs of producing a ‘single unit a the company’s current activity lvel of & 000 units pee month are: ifest material S00 Direct labour $3.50 ‘Variable manufacturing overiead $2.00, "Fined manufacturing overhead $3.00 Tal S130, the order is accepted, the company will incur $3 000 in atonal setup costs end will have to purchase a special device to manufacture units. This device will cost $2 500 and will be siscarded once the special order is complete. Required: (@) How much of the unit product cost of $11.50 relevant in the decision of whether to accept ‘orreject the special order? (Qmarky(©) Determine whether the company should scoept the special order or not from a financial point of view. Show your calculations. (marks) (©)Determine at what price (pr unit) the company would be indifferent between accepting the ‘special onder and continuing fo sll ot regulr customer et $15. Q maria)Handy Power Company manufactures two bost engines ~ Standard model and Commercial ‘movel, Both engines go through the Assembly Department and Testing Department. The available machine hours foc both Assembly and testing departments ae limited. The Assembly ‘Deparunent has 120 machine hours per day andthe Testing Department bas 20 mechine hous ‘per day, Additonal capacity cannot be obtained in the short run, The company can sll as many ‘engines a it produces. The following data is povided: Siandard | Commercial model | model (ger wit | (per unig Selling price :9600_| $800 Direct abour ‘$230 | $30 ‘Variable mandfactring overhead ‘$120 [$150 ours required per engine in Assembly Department | 4 hours [10 hours Hours required per engine in Testing Deparimeat [2 hows [1 hour Required: () Formulate the objective function to maximize the contribution margin, marks) () Formulate the constraints besed on the limited machine hous avalable. (2 marks) "(© Graph the constreints and determine how many units ofeach type af engine should be produced to maximize the total contibution margin. (aris) (4 Calculate the contribution murgin a the optimal olution, (marly(Question Stab Chie aleve Sanne Ee SRE) ( Cool Furniture Company, a small fumiture manufacturer, uses s job costing system. The ompany ba wo jobs in process athe beginning ofthe ear with he following information provi ob 810 000 be 35000) ‘The company applies manufacturing ovesbead en the basi of machine hours. Budgeted overhead and budgeted machine hours forthe year were anticipated to be $45 000 and 30.000 hours ‘spectively. Actual manufacturing overheed costs incurred forthe year consist of. Depreciation 18500 Inditet labour $8300 Supervisory salaries $7200 Factory rent $9000 ‘The company worked on thee jobs during the year. Source documents revealed the following ‘costs were incured during the Yee. ET aE c ae] fee ae ob '$6000] $4000) 5000] Completed and sold for 835000 Too $12 00) —$10000] 16000 Compleat sod TE 35000] — $6000 | OOO | Wk roses (@) Detennine the company’s predetermined averbead rate mary 8(©) Calculate the cost of Jobs @, 64, and 65 atthe end ofthe year (@ maria) (© Prepare journal entries for the year'o record the following: (6 marks) ‘+ The issue of rec material to production ‘© Direct labour coms incurred + The aplication of manufacturing overhead during the year ‘+ The completion of jobs 63 and 6++ Thesleor hb 63 ‘The underiover applied overbead amount tthe end ofthe year i) Knit dre tire types of serves organisations and explain which service costing sytem is ‘the most apnenpiate foreach of these types of organicatione (Gmarks) 6[Question’S = Process Caigting: Weighted averae methods"? “Ci bes) 1) Flexi Company manufactures umibrells. All direct materials are introduced atthe stat ofthe ‘reduction process, and conversion cos is ncumed evenly throughout the profuction process ‘The company hes the following information available forthe month of fun: Work in proces, 1 June ~ $2 000 units Direst material: 100% complete $80 000, (Conversion coe: 40% complete ‘110.000 ‘190.000 Units stated during June 158 000 ‘Units completed daring June 130 000 (Cost ineured during June: Direct material $9235 000 Conversion cost 8328 000 ‘Work in process, 30 June: Direet terial: 100% compete Conversion cost: 20% complete Required: Using the weighted average method of process costing: (@) Determine the umber of physical unis in the 30 June work in process (1 mark) (©) Calculate the numberof equivalent unit for direct material cost and conversion cost. @ mars) 6(©) Compute the cost per equivalent unit of direct material and conversion cost, (3 marks) (@ Determine the total cost of completed units. maria (€) Determine the total cost ofthe June 30 work in process. @ marks) i) Define toe term equivalent units and explain how the concept is used in process costing marks)‘Questibi’6 = aitive Sse Coitig raid Clésee Lasokeat Over ied Costs ANG tars) | 1) Celestial Artisry Company has two support departments: Maintenance and Comping. The ‘company has two production depertments: Etching and Finishing. The budgeted costs ofthe “Maintenance and Computing departments are $95 970 and $499 800 respectively. The usage ‘ofthe two supgort departments’ ouput in the year ended i as fllows: Provider ofservise User ofservice ‘Maintenance | Computing | Eiching [Filing ‘alaienance a 30% 30% Om Computing 30% : 30% OH Require: (@ Allocate the budgeted costs ofthe two support departments to the two prodition eparnents wing the Direct method. Gmaris)(@ Allocate the budgeted costs ofthe two support departments tothe tro production departments using the Step-down method. G marks)i) Hobart Calelators Lid manufactures two types of ealculators— Standard model and Deluxe ‘model The company i eurently using traditional costing system with mechine hours as the ‘cost diver. The company i considering whether to us the activty-basec costing (ABC) method to allocate overhead cost to preducts, Budgeted overheed coms ofthe upcoming accounting, petiod flew: Retving ] Total budgeted | Activity driver ‘Budgeted Tevel activity cost for activity | driver ‘Marais handling | $4500 | Number of material moves [750 moves ‘Machine '$55.000_ | Number of machine hours | 11000 hours | Sea $3120 000 | Number of setups 120setups | Infemation about the two products follows: ‘Nur of setups Total machine hous Unit completed Dist material cost per unit Dist abour cost pe unit Required: (@) Calculate the cost of each product ifthe conventional costing approach i used. @ marks) 20(©) Deccan ‘ont of producing each producti activity based costing is used. (6 maria) ait) “Activity base esting iy ley a supeor sytem to conventional product costing techniques, Hence, all organisations should adopt activity based costing”. Critically evaluate this statement. (marks)(uc a Con CanIESTRNIORr eR RN) () Meroe Company prdice snl pod eile Sipe. The campany ues tnd fo er edt cad Meng sere os el Se (Gklogeams @ $12 per kilogram) 336 Direct labour (2 hours @ $24 per hous) us ‘Verable manufcturing overhead (SS pe direct abour hour) $10 Fined manufacturing overhead ($12 per direct bour hour) $24 sus Fixed manufacturing overhead rate is determined based on budgeted monthly capacity of 8000 ret labour hours. During June, the company recorded the fllowing actual results: [Number of nits produced 3.000 Direct material purchased (16 000 kilograms @ 11.5) $188 000 Direct material used 8250 kilograms [Number of direct labour hours used 7000 hours Direct iabour cost sim soa ‘Variable manufacturing overhead 827000 Fixed manufictring overhead 384000, Required: ‘Compute the following variances: @ maria) (@) Direct material price variance (© Direct material quantity variance 2(©) Direct labour rte vaance (@ Dire labour efficiency variance (©) Variable overhead spending variance @ Variable overhead efficiency variance (@ Fixed overhead budget variance 2(2) Fixed everhead volume vaiance Gi) Whatdoos en unfavouree direct Iour officoney variance indicate? Discuss three (0) actions that could be taken to comes this variance, (Marks) ‘End of exam paper