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Exam 2010, questions and answers

Management Accounting 2 (Hanzehogeschool Groningen)

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International Business School

Exam: Code:

Management Accounting IBVH4MAC2A

Date: Mock Exam Time: Duration: 2 hrs.

nd
Room: Class: IBS 2 year Total pages: 10
Teachers: T. H. Horst
Aids:
Exam paper -
Scrap paper yes
Graph paper -
Multiple choice form. -
Calculator yes
Dictionary NO !!
Book, namely NO !!
Exam Form is to be handed in !!

Name : ………………………………………………………………………….

Student Nr. : ………………………………………………………………………….

Class : ………………………………………………………………………….

Special particulars:

- This examform consists of 10 pages !! Check this !!

- This exam consists of 21 questions; Check this !!

The answers to the questions have to be written on this exam form (only if you do not have enough
space use backside of pages) !!

With the MC-questions encircle one best alternative !!

When applicable always show your calculations !!

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Subject: Date: Page:

IBS Financial Management 2
(year 2)

PART A - MULTIPLE CHOICE QUESTIONS – 24 points

QUESTION 1 – 3 points
Cost of goods sold equals
A Sales – Cost of Goods Manufactured
B Operating income + Selling, General and Administative Expenses
C Contribution Margin minus beginning balance of work in process, plus ending balance of work in process,
corrected for abny increase in manufacturing costs
D Cost of goods manufactured minus increase of finished goods inventory

QUESTION 2 – 3 points
Normal costing is taking
A standard costs for direct labour and direct materials
B estimated costs for manufacturing overhead
C only standard costs into consideration
D only estimated costs into consideration

QUESTION 3 – 3 points
For a shop the office floor clean-up is:
A an extra value adding activity
B a value adding activity
C a nonvalue adding activity
D a value subtracting activity

QUESTION 4 – 3 points
The following could represent a cost driver:
A Number of direct labour hours
B $ 100 per machine hour
C Total manufacturing overhead cost (including variable an fixed costs)
D Any activity rate

QUESTION 5 – 3 points
Which of the following is NOT true for Activity Based Management:
A One of its purposes is to eliminate nonvalue adding activities.
B Costs are assigned by using appropriate cost drivers.
C Activity Based Costing can be integrated with job order costing.
D It tries to minimize the chance of running out of stock.

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Subject: Date: Page:

IBS Financial Management 3
(year 2)

QUESTION 6 – 3 points
Given are the following cost and activity observations for a company:
Cost Units Produced
January $ 136,600 25,000
February $ 181,100 35,000
March $ 151,000 28,000
Using the High-Low-Method the variable costs are

A depending on the production level

B $ 44,500
C $ 4.30
D none of the above

QUESTION 7 – 3 points
Which of the following is NOT a way to calculate Return on Investment (ROI):
A Operating Income / Assets Invested
B Operating Income – (Residual Income x Assets Invested)
C Profit Margin x Asset Turnover
D (Operating Income / Sales) x (Sales / Assets Invested)

QUESTION 8 – 3 points
Given is the following budget information for a company:

Direct costs $ 50,000 (of this 20% is selling, general and administrative expenses); Variable and Fixed Overhead
cost respectively $ 75,000 and $ 25,000 (of this $ 100,000 65% is selling, general and administrative expenses),
Operating income is $ 15,000.

The markup percentage is equal to:

A 7.5%
B 20%
C 60%
D 120%

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Subject: Date: Page:

IBS Financial Management 4
(year 2)

PART B - OPEN END QUESTIONS ON PROCESS COSTING- 28 points)

Data for the Faukner Manufacturing Company for the month of July 2002 are as follows:

Beginning Work in Process Inventory

Units 800
Direct material costs $ 21,000
Conversion costs $ 4,500

Production during the period

Units started 17,000
Direct material costs $ 654,500
Conversion costs $ 350,250

Ending Work in Process Inventory

Units 2,000

As far as Conversion Costs are concerned, the beginning work in process inventory was 65 percent complete, and
the ending work in process inventory 75 percent complete. As far as the Direct Materials Costs are concerned all
units are 100 procent complete.
The company uses the FIFO costing method.

Question 9 – 6 points:
Calculate the equivalent units for the various cost categories. In other words, prepare a schedule of equivalent
production.

Q9 DM CC
B 0 .35*800
S&C 15,000 15,000
E 2,000 0.75*2,000

Equivalent units 17,000 16,780

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Subject: Date: Page:

IBS Financial Management 5
(year 2)

Question 10 – 5 points:
Calculate the cost per equivalent unit for the various cost categories. In other words, prepare a unit cost analysis
schedule.

654,500/17,000 + 350,250/16,780 = 38.5 + 20.87 = 59.3731

Question 11 – 6 points:
Calculate the value of the ending work in process inventory.

2,000*38.5 + 0.75*2,000*20.87 = 108,305

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Subject: Date: Page:

IBS Financial Management 6
(year 2)

Question 12 – 6 points:
Calculate the value of the goods transferred out (of the work in process inventory to the finished goods inventory).

B 25,500 + 0.35*800*20.87; S&C 15,000*59.3731; total 921,940.10

Question 13 – 5 points:
Explain what the word FIFO means in FIFO costing method.

First-in First-out: units started first are completed first.

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Subject: Date: Page:

IBS Financial Management 8
(year 2)

PART D – OPEN END QUESTIONS ON VARIANCE ANALYSIS ( 33 POINTS)

Mannon-Brantoom, Inc, produces a minibar. Standards per bar are as follows:

Direct material is 5 kilo at $ 3.5 per kilo, Direct labour is 2 hours at $ 30 per hour, Variable overhead is $ 1.5 per
direct labour hour, Fixed Manufacturing Overhead is $ 10 per direct labour hour. Normal capacity per month is
2,000,000 bars.
For July 2003 the company expects to produce and sell 1,900,000 bars. The actual data for July are as follows:
Production 1,945.000, Direct materials 9,624,000 kilo used at a total cost of $ 36,056,000, Direct labour 3,850,000
hours at a total cost of $ 123,000,000, Variable Manufacturing overhead $ 5,915,000, and Fixed Manufacturing
overhead $ 37,900,000.

Question 17 – 3 points:
Calculate the budgeted Total Fixed Overhead Costs per month.

$10*4,000,000

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Subject: Date: Page:

IBS Financial Management 9
(year 2)

Question 18 – 9 points:
Calculate the Materials Variances (price, quantity and total) and give possible causes for those variances.

Price = -36,056,000 + 3.5*9,624,000 = - 2,372,000

Quantity = -3.5*9,624,000 + 3.5*5*1,945,000 = 353,500

Total = - 2,018,500

Question 19 – 9 points:
Calculate the Labour Variances (rate, efficiency and total) and give possible causes for those variances.

Rate = -123,000,000 + 30*3,850,000 = -7,500,000

Efficiency = -30*3,850,000 + 30*2*1,945,000 = 1,200,000

Total = -6,300,000

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Subject: Date: Page:

IBS Financial Management 10
(year 2)

For the following two questions, if you were not able to calculate question 17, just assume the budgeted fixed
overhead is estimated at $ 45,000,000

Question 20 – 6 points:
Calculate the variable-overhead spending variance and variable-overhead efficiency variance.

Spending = -5,915,000 + 1.5*3,850,000 = -140,000

Efficiency = -1.5*3,850,000 + 1.5*2*1,945,000 = 60,000

Total = -80,000

Question 21 – 6 points:
Calculate the fixed-overhead spending variance and the production-volume variance.

Spending = -37,900,000 + 40,000,000 = 2,100,000

Production-Volume Variance = -40,000,000 + 10*2*1,945,000 = -1,100,000

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Part A: DBCA DABD (Qs 3, 6, and 8 no longer part of exam material)

Part B:

Q9 DM CC
B 0 .35*800
S&C 15,000 15,000
E 2,000 0.75*2,000

Equivalent units 17,000 16,780

Q10

654,500/17,000 + 350,250/16,780 = 38.5 + 20.87 = 59.3731

Q11

2,000*38.5 + 0.75*2,000*20.87 = 108,305

Q12

B 25,500 + 0.35*800*20.87; S&C 15,000*59.3731; total 921,940.10

Q13 First-in First-out: units started first are completed first.

Part C no longer part of exam material

Part D:

Q17 $10*4,000,000

Q18

Price = -36,056,000 + 3.5*9,624,000 = - 2,372,000

Quantity = -3.5*9,624,000 + 3.5*5*1,945,000 = 353,500

Total = - 2,018,500

Q19

Rate = -123,000,000 + 30*3,850,000 = -7,500,000

Efficiency = -30*3,850,000 + 30*2*1,945,000 = 1,200,000

Total = -6,300,000

Q20 (for variable overhead you need to know the following two)

Spending = -5,915,000 + 1.5*3,850,000 = -140,000

Efficiency = -1.5*3,850,000 + 1.5*2*1,945,000 = 60,000

Total = -80,000

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Q21 (for fixed overhead variance you need to know the following two)

Spending = -37,900,000 + 40,000,000 = 2,100,000

Production-Volume Variance = -40,000,000 + 10*2*1,945,000 = -1,100,000

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