MACHON LEV INTERNATIONAL SCHOOL MANAGERIAL ACCOUNTING COURSE CODE: 210112 SAMPLE MID SEMESTER EXAM WITH ANSWERS

DATE: Duration: Total Marks: Exam Aids Permitted:

IMPORTANT INFORMATION - The possession or use of: Mobile phones or any other device capable of communicating information, are prohibited during examinations Electronic Organisers/PDAs (with the exception of calculators) or similar devices capable of storing text or restricted information are prohibited during examinations. Calculators only calculators approved specifically by the school/department may be used during examinations. Prior to the commencement of the examination, calculators will be checked for compliance by the examiner. Any breach of examination regulations will be considered cheating and appropriate action will be taken in accordance with University policy.

SUNDAY 23 MARCH 2014 1.5 Hours 50 Calculator, 2 A4 Size Double sided page of Notes

COMPLETE ALL QUESTIONS ALL QUESTIONS ARE OF EQUAL MARKS

THIS TEST BOOKLET AND WORKSHEETS MUST BE HANDED IN FAILURE TO DO SO WILL RESULT IN A ZERO MARK BEING AWARDED FOR THE EXAM PLEASE REMEMBER TO PUT YOUR STUDENT ID OR NAME ON YOUR WORKSHEET(S) IF ANY ARE USED

Student ID:

Last Name: First Name:

Total Mark

0.6
1

Weighted Mark

Choose the most appropriate answer (eg. A, B, C or D). Topic 1(8) 1. Which of the following descriptors refers to mangement accounting information? A. It is verifiable and relaible B. It is driven by rules C. It is prepared for shareholders D. It provides reasonable and timely estimates 2. Which of the following typically does not relate to the role of a controller? A. A controller supervises the accounting departments. B. A controller maintains custody of cash and other assets. C. A controller prepares reports required by taxation and governmental authorities. D. A controller normally assumes a narrow role within the organization, often preventing the individual's rise to the firm's top management ranks. Which of the following statements does not relate to the ethical standard of integrity? A. Management accountants have a responsibility to refrain from activities that would prejudice their ability to perform their duties. B. Management accountants have a responsibility to refrain from any activity that would discredit the accounting profession. C. Management accountants have a responsibility to perform duties with a fundamental knowledge of economics. D. Management accountants have a responsibility to communicate both unfavorable and favorable information. Which of the following statements refers to management accounting information? A. There are no regulations governing the reports. B. The reports are generally delayed and historical. C. The audience tends to be stockholders, creditors, and tax authorities. D. It primarily measures and records business transactions. Which one of the following would not be found in a merchandising company? A. Beginning inventory. B. Cost of goods sold. C. Ending inventory D. Work in process. The day-to-day work of management teams will typically comprise all of the following activities except: A. Decision making. B. Planning. C. Cost minimizing. D. Directing operational activities.
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3.

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Which account does a manufacturing company have, but not a service company have? A. Retained earnings B. Advertising expense C. Cost of goods sold D. Salary payable Which of the following is an element of credibility? A. To develop appropriate knowledge about a particular subject. B. To perform duties in accordance with relevant laws. C. To refrain from engaging in an activity that would discredit the accounting profession. D. To communicate information fairly and objectively

8.

Topic 2 (16) 9. Pumpkin Enterprises began operations on January 1, 19XX, with all of its activities conducted from a single facility. The company's accountant concluded that the year's building depreciation should be allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing activities, 45%. If Pumpkin sold 60% of 190 production during that year, what percentage of the depreciation would appear (either directly or indirectly) on the 19XX income statement? A. 27%. B. 45%. C. 55%. D. 82%. Selling Activities 20% + Administrative Activities 35% + Manufacturing Activities 60% of 45% = 20 + 35 + 27 = 82% 10. Which of the following costs should be ignored when choosing among alternatives? A. Opportunity costs. B. Sunk costs. C. Out-of-pocket costs. D. Differential costs. 11. A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction? A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold. B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory. C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, FinishedGoods Inventory. D. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.
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12. Total costs are $80,000 when 8,000 units are produced; of this amount, variable costs are $48,000. What are the total costs when 10,000 units are produced? A. $80,000 B. $92,000 C. $98,000 D. $108,000 Fixed Costs = 80,000 48,000 = 32,000 Variable Costs = 48,000/8,000 x 10,000 = 60,000 Total Costs = $60,000 + $32,000 = $92,000 13. Which of the following statements is true? A. Product costs affect only the balance sheet. B. Product costs affect only the income statement. C. Period costs affect both the balance sheet and the income statement. D. Product costs eventually affect both the balance sheet and the income statement. 14. In a manufacturing company, the cost of goods completed during the period would include which of the following elements? A. Raw materials used. B. Beginning finished goods inventory. C. Marketing costs. D. Depreciation of office equipment. 15. Whether a cost is classified as direct or indirect will depend on: A. The nature of the cost object. B. Whether the cost can be traced to the cost object. . C. Whether the organisation is in a manufacturing or service industry. D. A and B. 16. Lenco Industries has cost of goods manufactured of $65,000 in May. The finished goods inventory at the end of May was $20,000 and the cost of goods sold during May was $75,000. The inventory in finished goods at the beginning of May was: A $ 5,000. B. $10,000. C. $20,000. D $30,000. OFG Inv = COGS COGM + CFG Inv OFG Inv = 75,000 - 65,000 + 20,000 = $30,000
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17. Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a joborder costing system. During March, the following costs were incurred on Job ICU2: direct materials $13,700 and direct labour $4,800. In addition, selling and shipping costs of $7,000 were incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine-hour and Job ICU2 required 800 machine-hours. If Job ICU2 consisted of 7,000 shirts, the Cost of Goods Sold per shirt was: A. $6.00 B. $5.70 C. $5.50 D. $2.86
(13,700 + 4,800 + 800 x 25) = 38,500 COGS per shirt = 38,500/7,000 = $5.50

Use the following information to solve multiple-choice questions 18 - 19. Assume the following information pertained to Cub Company; Prime costs $195,00 Conversion costs 0 0221,000 000 Direct materials used 85,000 Beginning work in 98,000 Ending 81,000 process work in process

18. Direct labour used is calculated to be A. $110,000 . B. $136,000. C. $111,000. D. $ 84,000. DL = Prime Costs Direct Materials = 195,000 85,000 = $110,000 19. Total manufacturing cost is calculated to be A. $332,000. B. $306,000. C. $280,000. D. $331,000. Total Manufacturing Costs = Direct Materials + Conversion Costs = 85,000 + 221,000 = $306,000 20. Costs of goods manufactured is calculated to be A. $289,000.
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B. $348,000. C. $297,000. D. $323,000. COGM = BWIP + Total Manufacturing Cost CWIP = 98,000 + 306,000 81,000 = $323,000 21. Excelsior Corporation recently used $90,000 of direct materials and $1,500 of indirect materials in production activities. The journal entries reflecting these transactions would include: A. A debit to Raw-Material Inventory for $90,000. B. A debit to Manufacturing Overhead for $1,500. C. A credit to Manufacturing Overhead for $1,500. D. A debit to Work-in-Process Inventory for $91,500. 22. The left side of the Manufacturing Overhead account is used to accumulate: A. actual manufacturing overhead costs as incurred throughout the accounting period. B. overhead applied to Work-in-Process Inventory. C. underapplied overhead. D. predetermined overhead. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 23 THROUGH 24: Beginning finished goods, 1/1/20X5 Ending finished goods, 12/31/20X5 Cost of goods sold Sales revenue Operating expenses 23. What is cost of goods manufactured for 20X5? A. $257,000 B. $350,000 C. $243,000 D. $250,000 COGM = COGS BFG + CFG COGM = $250,000 $40,000 + $33,000 = $243,000 24. What is gross margin for 20X5? A. $243,000 B. $527,000 C. $357,000 D. $350,000
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$ 40,000 33,000 250,000 600,000 120,000

Gross Profit/Gross Margin = Sales Revenue COGS Gross Profit/Gross Margin = $600,000 $250,000 = $350,000 Topic 3 (9) 25. The assignment of direct labour cost to individual jobs is based on: A. An estimate of the total time spent on the job. B. Actual total payroll cost divided equally among all jobs in process. C. The actual time spent on each job multiplied by the wage rate. D. The estimated time spent on each job multiplied by the wage rate. 26. Gratis Company applies overhead based on direct labour hours. At the beginning of the year, the company estimated that manufacturing overhead would be $550,000, direct labour hours would be 100,000, and direct labour cost would be $1,100,000. The company's predetermined overhead rate is: A. $0.18 per direct labour hour. B. $0.50 per direct labour hour. C. $5.50 per direct labour hour. D. $11.00 per direct labour hour. POHR = 550,000/100,000 = $5.50 Use the following information to solve multiple choice questions 27-28 HiTech Products manufactures three types of CD players: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below. Activity Material handling Material insertion Automated machinery Finishing Packaging Total indirect cost Cost $ 225,000 2,475,000 840,000 170,000 170,000 $3,880,000 Cost Driver Number of parts Number of parts Machine hours Direct labour hours Orders shipped

The following information pertains to each product line of CD players for next year: Economy 10,000 1,000 10 1 Standard 5,000 500 15 3
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Units to be produced Orders to be shipped Number of parts per unit Machine hours per unit

Deluxe 2,000 200 25 5

Labour hours per unit

Number of Parts = 10 x 10,000 + 15 x 5,000 + 25 x 2,000 = 10,000+75,000+50,000 =225,000 Machine hours = 1 x 10,000 + 3 x 5,000 + 5 x 2,000 = 10,000 + 15,000 + 10,000 = 35,000 Direct Labour hours = 2 x 10,000 + 2 x 5,000 + 2 x 2,000 = 20,000 + 10,000 + 4,000 =34,000 Orders shipped = 1,000 + 500 + 200 = 1,700 27. Assume that HiTech is using a volume-based costing system and indirect manufacturing costs are applied to all products based on direct labour hours. What is the total indirect manufacturing cost assigned to Deluxe? A. $456,471. B. $646,471. C. $961,176. D. $1,141,176. (3,880,000/34,000) x 2 x 2,000 = $456,471 28. Assume that HiTech is using a volume-based costing system and indirect manufacturing costs are applied to all products based on direct labour hours. What is the total indirect manufacturing cost assigned to Standard? A. $456,471. B. $646,471. C. $961,176. D. $1,141,176. (3,880,000/34,000) x 2 x 5,000 = $1,141,176 29. Regency Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a: A. Debit to Depreciation Expense for $90,000. B. Debit to Manufacturing Overhead for $90,000. C. Debit to Manufacturing Overhead for $72,000. D. Debit to Work-in-Process Inventory for $18,000. Depreciation = $90,000 x 80% = $72,000 30. Simon uses a predetermined overhead application rate of $8 per direct labour hour. A review of the company's accounting records for the year just ended discovered the following:
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Underapplied manufacturing overhead: $7,200 Actual manufacturing overhead: $392,000 Budgeted labour hours: 50,000 Simon's actual labour hours worked totaled: A. 48,100. B. 49,100. C. 49,900. D. 50,900. Applied Overhead = Actual Overhead - Underapplied overhead Applied Overhead = 392,000 -7,200 = $384,800 Actual Labour hours = 384,800/8 = 48,100 31. Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labour hours. Overhead was estimated to be $150,000, direct professional labour hours were estimated to be 15,000, and direct professional labour cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labour hours of 14,500, and actual direct labour cost of $222,000. By year-end, the firm's overhead was: A. $1,000 underapplied. B. $1,000 overapplied. C. $4,000 underapplied. D. $4,000 overapplied. POHR = 150,000/15,000 = $10.00 Applied Overhead = 14,500 x 10.00 = 145,000 Underapplied Overhead = Actual overhead Applied Overhead = 146,000 145,000 = $1,000 32. Sanger Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end. On the basis of this information, one can conclude that: A. Budgeted overhead exceeded actual overhead. B. Budgeted overhead was less than applied overhead. C. Actual overhead exceeded applied overhead. D. Actual overhead was less than applied overhead. 33. Many traditional-costing systems: A. Ttrace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. B. Write off manufacturing overhead as an expense of the current period. C. Combine widely varying elements of overhead into a single cost pool.
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D. Use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing. Topic 4 (10)
34. Fidelity Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 457 revealed a traditionally-derived total cost of $683, a newly computed activity-based total cost of $586, and a selling price of $650. Which of the following statements is true? A. All other things being equal, the company should consider a boost in its sales price. B. If product no. 457 is overcosted by traditional accounting procedures, then all of Fidelity's other products may have been undercosted. C. Product no. 457 could be labeled as being undercosted by the finn's traditional costing procedures. D. If product no. 457 is overcosted by traditional accounting procedures, then all of Fidelity's other products must be overcosted as well. 35. Which of the following is not a non-value-added activity? A. Storage time. B. Waiting time. C. Inspection time. D. Production time. Use the following information to solve multiple choice questions 36-39 HiTech Products manufactures three types of CD players: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below. Activity Material handling Material insertion Automated machinery Finishing Packaging Total indirect cost Cost $ 225,000 2,475,000 840,000 170,000 170,000 $3,880,000 Cost Driver Number of parts Number of parts Machine hours Direct labour hours Orders shipped

The following information pertains to each product line of CD players for next year: Economy 10,000 1,000 10 1 2 Standard 5,000 500 15 3 2 Deluxe 2,000 200 25 5 2

Units to be produced Orders to be shipped Number of parts per unit Machine hours per unit Labour hours per unit

Number of Parts = 10 x 10,000 + 15 x 5,000 + 25 x 2,000 = 10,000+75,000+50,000 =225,000

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Machine hours = 1 x 10,000 + 3 x 5,000 + 5 x 2,000 = 10,000 + 15,000 + 10,000 = 35,000 Direct Labour hours = 2 x 10,000 + 2 x 5,000 + 2 x 2,000 = 20,000 + 10,000 + 4,000 =34,000 Orders shipped = 1,000 + 500 + 200 = 1,700
Material Handling = 225,000/225,000 Material Insertion = 2,475,000/225,000 Automated Machinery = 840,000/35,000 Finishing =170,000/34,000 Packaging = 170,000/1,700 = $1.00 per part = $11.00 per part = $24 per machine hour = $5.00 per Direct labour hour =$100 per order shipped

36. What is HiTech's cost application rate for the material-handling activity? A. $1.00 per part. B. $2.25 per part. C. $6.62 per labor hour. D. $13.23 per part. 225,000/225,000 = $1.00 per part 37. Under an activity-based costing system, what is the per-unit cost of Economy? A. $141. B. $164. C. $225. D. $228. 10 x 10,000 x1 10 x 10,000 x 11 1 x 10,000 x 24 2 x 10,000 x 5 1,000 x 100 Total Economy Economy per unit = 100,000 = 1,100,000 = 240,000 = 100,000 = 100,000 = 1,640,000 = 1,640,000/ 10,000 = $164.00

38. Under an activity-based costing system, what is the per-unit cost of Standard? A. $164. B $228 C. $272. D. $282 15 x 5,000 x1 15 x 5,000 x 11 3 x 5,000 x 24 2 x 5,000 x 5 500 x 100 Total Standard = 75,000 = 825,000 = 360,000 = 50,000 = 50,000 = 1,360,000 11

Standard per unit

= 1,360,000/ 5,000 = $272.00

39. Under an activity-based costing system, what is the per-unit cost of Deluxe? A. $272. B. $282 C. $320. D. $440. 25 x 2,000 x1 25 x 2,000 x 11 5 x 2,000 x 24 2 x 2,000 x 5 200 x 100 Total Delux Delux per unit = = = = = = = 50,000 550,000 240,000 20,000 20,000 880,000 880,000/ 2,000 = $440.00

40. Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. The company will likely find that: A. All of its products are undercosted. B. Its high-volume products are undercosted. C. All of its products are overcosted. D. Its high-volume products are overcosted. 41. If the amount of effort and attention to products varies substantially throughout a firm's various manufacturing operations, the firm might consider the use of; A. A plantwide overhead rate. B. Departmental overhead rates C. Actual overhead rates instead of predetermined overhead rates. D. Direct labour hours to determine the overhead rate.

42. Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Set ups Components Direct Labour Hours Standard 22 8 375 Deluxe 28 12 225 Overhead costs $20,000 $40,000

Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model? A. $24,800 B. $35,200 C. $37,500 D. $22,500

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Set ups = 20,000/5 = $400.00 per setup Components = 40,000/20 = $2,000 per component Standard Model = 22 x 400 + 8 x 2,000 = 8,800 + 16,000 = $24,800 43. During a recent accounting period, Marty's shipping department processed 26 orders. Each order typically takes four hours to complete; however, the average time increased to five hours because of various departmental inefficiencies. If shipping labour is paid $14 per hour, the company's non-value-added cost would be: A. $0. B. $56. C. $364. D. $1,456. Non-value-added cost = 26 x 1 x 14 = $364 Topic 5 (7) 44. What is the missing number? Work in Process, January 1 Units started during the year Units completed during the year Work in Process, December 31 A. 700,000 B. 750,000 C. 950,000 D. 200,000

100,000 gallons 850,000 gallons ? 200,000 gallons

Units Completed = OWIP + Units Started CWIP = 100,000 + 850,000 200,000 = 750,000 gallons 45. Which of the following will use process costing A. A soft drink producer B. An apparel manufacturing plant C. A Tile manufacturer D. All the above

The following information is used for questions 46-50. Cold Springs produces premium bottled water. Cold springs purchases artesian water, stores the water in large tanks and then runs the water through two processes: Filtration and Bottling. During February, the Filtration process incurred the following costs in processing 190,000 litres.

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Wages of workers operating the filtration equipment Manufacturing overhead allocated to filtration Water

$21,950 $25,050 $150,000

Cold Springs had no beginning inventory in the Filtration Department in February. At Cold Springs, water is added at the beginning of the Filtration process. Conversion costs are added evenly throughout the process. Assume that in February, 125,000 litres were completed and transferred out of the Filtration Department into the Bottling department. The 65,000 units remaining in Filtrations Ending work in process inventory were 80% of the way through the Filtrations process. Materials costs for the Bottling department are added at the end of the process. The cost of Direct Materials for the Bottling Department was $50,000. Wages of workers operating the Bottling department in February were 10,000 and Manufacturing overhead allocated to the Bottling department was $35,000. Assume that Cold Springs uses the weighted average method. 46. What is the cost per unit for the Filtration Department for February? A. $0.79 B. $1.04 C. $0.25 D. $0.54 All 190,000 litres of water started in the Filtration department were transferred out to the Bottling department in February. Cost per equivalent units for Direct Materials 150,000/190,000 = $0.79 Cost per equivalent costs for Conversion Costs 47,000/190,000 = $0.25 Cost per unit for the Filtration department = $0.79 + $0.25 = $1.04 47. What is the cost per equivalent unit for Direct materials for the Bottling Department for February? A. $1.00 B. $0.26 C. $0.55 D. $0.40 Equivalent units for Direct Materials units completed in February = 125,000 x 100% Ending work in process, February = 65,000 x 0% Total Equivalent units for Direct Materials for the Bottling Department = 125,000 +0 Cost per equivalent units for Direct Materials for the Bottling Department = 50,000/125,000 = $0.40
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48.

What is the cost per equivalent unit for Conversion Costs for the Bottling Department for February? A. $0.36 B. $0.25 C. $0.55 D. $1.00 Equivalent units for Conversion Costs units completed in February = 125,000 x 100% Ending work in process, February = 65,000 x 80% = 52,000 Total Equivalent units for Conversion Costs for the Bottling Department = 125,000 +52,000 = 177,000 There are no Beginning work in process Conversion Costs. Cost per equivalent units for Conversion Costs for the Bottling Department for February = 45,000/177,000 = $0.25

49.

Assuming that Cold Springs uses the FIFO method, what are the cost per equivalent unit for Conversion costs for the Filtration department for February? A. $1.04 B. $0.79 C. $0.25 D. N/A Equivalent units for Conversion Costs units completed in February = 190,000 x 100% Equivalent units for Ending work in process, February = 0 x 100% = 0 Total Equivalent units for Conversion Costs for the Filtration Department = 190,000 + 0 = 190,000 There are no Beginning work in process Conversion Costs. Cost per equivalent units for Conversion Costs for the Filtration Department for February = 47,000/190,000 = $0.25

50.

Assuming that Cold Spring uses the FIFO method, what cost per equivalent unit for Transferred-in for the Filtration Department for February? A. $0.79 B. $0.25 C. $1.04 D. N/A No units were Transferred-in

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