Faculty of Economics and Business Administration

Exam: Code: Coordinator: Date: Time: Duration: Calculator allowed: Graphical calculator allowed: Number of questions: Type of questions: Answer in: Credit score: Remarks 1.

Management Accounting BK 2.4 61241024 Frits Duimstra

2 hours and 45 minutes Yes

No 5 assignments Open and multiple choice English Assignment 1 -5 respectively: 18, 20, 18, 18, 16 credits.

Only turn in the answer-sheet (7 pages); other sheets of paper will not be accepted! (Lever alleen het antwoordmodel in; kladpapier e.d. worden niet gecorrigeerd!)

Number of pages:

8 (including front page))

Good luck!

Assignment 1
1a The following cost information pertaining to Mixing Ltd. is given: Gallons 9,900 15,000 22,400 32,500 29,000 Total Cost $29,850 $36,450 $46,400 $59,650 $54,980 Gallons 18,500 9,250 12,200 27,500 30,000 Total Cost $41,050 $28,960 $32,800 $53,260 $56,050

Using the high-low method, Total Costs (rounded at dollars) when 25,000 gallons are used will be? A $45,885 B $49,500 C $48,418 D $51,786 E $49,750 F $46,708 G $50,000 H None of these. 1b XYZ Company sells three products, Xeenon, Ybro and Zeero. The following information is available: Xeenon Ybro Zeero Sales Revenues $290,000 $210,000 $360,000 Variable costs 120,000 100,000 200,000 Fixed costs: Avoidable 40,000 30,000 60,000 Unavoidable 80,000 60,000 120,000 Operating Income $ 50,000 $ 20,000 $(20,000) XYZ Company is considering dropping Zeero because it is reporting a loss. Assuming XYZ drops Zeero and can not replace it, operating income will? A Decrease by $160,000 B Decrease by $100,000 C Increase by $20,000 D Decrease by $360,000 E Decrease by $40,000 F Decrease by $180,000 G Decrease by $20,000 H None of these. The Cloutier Company has prepared a sales budget of 45,000 units for a quarter. The company has an inventory of 8,000 units of finished goods on hand at 1 January and has a target finished goods inventory of 9,200 units at the end of the quarter. It takes two gallons of direct materials to make one unit of finished product. The company has an inventory of 18,000 gallons of direct materials at 1 January, and has a target ending inventory of 17,000 gallons at the end of the quarter. How many gallons of direct materials should be purchased during the first quarter ending 31 March? A 90,200 gallons B 87,600 gallons C 91,400 gallons D 88,600 gallons E 93,400 gallons F 86,600 gallons G 89,000 gallons H None of these.

1c

1d

The firm budgeted sales of 20,000 units of product A, 30,000 units of product B and 50,000 units of product C. The budgeted contribution margins per unit of these products are respectively, $45, $35 and $25. Actually 18,150 units of product A, 26,950 units of product B and 64,900 units of product C were sold. Actual contribution margins were respectively: $42, $33 and $27. Based on these data the sales-mix variance was? A $137,500 (F) B $94,050 (U) C $182,500 (F) D $0 E $182,500 (U) F $94,050 (F) G $137,500 (U) H None of these. The following information pertains to the August operating budget for N7N Trading Corporation. Budgeted sales for July $200,000, August $250,000 and September $450,000 Collections for sales are 20% in the month of sale and 80% in the next month Gross margin is 30% of sales Administrative and general expenses are $10,000 per month. Beginning Accounts Receivable (August 1), $160,000 Beginning Merchandise Inventory (August 1), $17,500 Purchases are paid in full the following month. Beginning Accounts Payable (August 1), $200,000. (All from Merchandise purchases.) Desired ending Merchandise Inventory is 10% of next months cost of goods sold. For August, budgeted Operating Income is? A $65,000 B $53,000 C $79,000 D $60,000 E $51,000 F $63,000 G $75,000 H None of these.

1e

1f

The following process costing data are given for Uran Company: Equivalent units Physical units Transferred-in C. Conversion C. Units completed 6,000 .. .. Units started 800 .. 320

Materials Cost .. 800

Costs/eq.unit $25 $12 $9 Assuming weighted-average costing, the cost assigned to goods transferred out is? A $310,040 B $150,000 C $11,040 D $276,000 E $126,000 F $312,800 G $31,040 H None of these.

Assignment 2
Selected ledger accounts for BelgorCompany are given below for the just completed year. Raw Materials Inventory 40,000 Credits 560,000 90,000 Manufacturing Overhead 535,000 Credits

Bal. 1/1 Debits Bal. 31/12

Debits

Bal. 1/1 Direct materials Direct labor Overhead Bal. 31/12

Work in Process 60,000 Credits 440,000 100,000 550,000 80,000

Debits

Factory Wages Payable 165,000 Bal. 1/1 Credits Bal. 31/12

15,000 ? 10,000

Bal. 1/1 Debits Bal. 31/12

Finished Goods 30,000 Credits ? 60,000

Cost of Goods Sold ?

Required a. b. c. d. e. f. g. h. i. J Is this company applying job-order costing or process costing? Briefly explain your answer. Calculate the amount of raw materials put into production during the year. Calculate how much of the materials in (b.) above consisted of indirect materials. Calculate how much of the factory labor cost for the year consisted of indirect labor. Calculate the cost of goods manufactured for the year. Calculate the cost of goods sold for the year. (Before considering under -/overapplied overhead.) If overhead is applied to production on the basis of direct materials cost, calculate the rate that was in effect during the year. Calculate the amount of underapplied or overapplied manufacturing overhead. Indicate whether it was underapplied or overapplied. Journalize the write-off of over-/underapplied manufacturing overhead to Cost of Goods Sold. Assume that the ending balance in the Work in Process Inventory account consists entirely of goods started during the year. If $28,000 of this balance is direct materials cost, compute how much of it is direct labor cost and how much of it is manufacturing overhead.

Assignment 3
Bateaux du Bois Ltd., makes reproductions of classic wooden boats. The most critical point in the production process is fitting wooden planks to build up the curved sections of the hull. This process requires the attention of the shops most experienced craftsman. Data concerning the companys three products appear below : Grader $1,800 $1,300 160 2.5 5.0 19.0 Leaper $2,400 $1,800 160 3.0 8.0 16.0 Quebac $1,200 $700 140 4.0 4.0 20.0

Gross revenue per boat Variable costs per boat Annual demand (units) Machine hours required per unit Skilled labor hours required per unit Unskillled labor hours required per unit

Available capacity per year is: 2,000 machine hours, 2,400 hours of skilled labor and 9,000 hours of unskilled labor. Fixed costs are $150,000 and cannot be avoided by modifying how many units are produced of any product or even by dropping any one of the products. Required a. 1. Calculate the necessary capacity in machine hours to satisfy demand for all products. 2. Calculate the necessary capacity in skilled labor hours to satisfy demand for all products. 3. Calculate the necessary capacity in unskilled labor hours to satisfy demand for all products. 4. What is your conclusion based on your answers to requirements a1 a3? Derive the optimal production plan for the year. Calculate the operating income for the optimal production plan you proposed. More skilled labor could become available by working overtime by the skilled employees. Calculate up to how much per hour the company should be willing to pay in overtime wages, energy costs, and other incremental costs to work additional hours in overtime. The company is considering to accept a special order of 60 Olympic boats. They have a gross selling price of $3,700 and variable costs of $2,100 per boat. They require per boat the following inputs: 5 machine hours, 10 hours of skilled labor and 14 hours of unskilled labor. 1. Calculate the opportunity cost of this special order. 2. Calculate the effect of this special order on operating income. Indicate favorable or unfavorable. Salespersons are currently paid a commission of 5% of gross revenues. Will this motivate the salespersons to make the right choices concerning which products to sell most aggressively? Motivate your answer and if not, provide a solution to the problem.

b. c. d.

e.

f.

Assignment 4
Jensen and Company, a manufacturer, of quality handmade walnut bowls, has had a steady growth in sales for the past five years. However, increased competition has led Mr. Jensen, the president, to believe that a aggressive marketing campaign will be necessary next year to maintain the companys present growth. To prepare for next years marketing campaign, the companys controller has prepared and presented Mr. Jensen with the following data for the current year, 2008: Variable cost per bowl Direct materials Direct manufacturing labor Variable overhead (manufacturing, marketing, distribution and customer service) Total variable cost per bowl Fixed costs Manufacturing Marketing, distribution and customer service Total fixed costs Selling price Expected sales (in units) Income tax rate $ 25,000 110,000 $135,000 $25 20,000 40% $ 3.25 8.00 2.50 $13.75

Required a. b. c. d. Calculate the projected net income for 2008. Calculate the 2008 margin of safety percentage. Calculate the 2008 operating leverage. Mr. Jensen has set the gross revenue target for 2009 at a level of $550,000 (or 22,000 bowls). He believes an additional marketing cost of $16,875 for advertising in 2009, with all other costs remaining the same, will be necessary to attain the revenue target. Calculate the 2009 net income if the additional $16,875 is spent and the revenue target is met. Calculate the breakeven point in revenues for 2009 if the additional $16,875 is spent for advertising. If the additional $16,875 is spent at a sales level of 22,000 units, calculate the required 2009 selling price, for 2009 net income to equal 2008 net income. At a sales level of 22,000 units, what maximum amount can be spent on advertising if a 2009 net income of $60,000 is desired?

e. f. g.

Assignment 5
The following data pertaining to product Uderz are given. Standard cost of a unit Uderz is as follows: Direct materials 4.00 sqy x $2.50 Direct labor 0.10 dlh x $50 Variable overhead 0.50 mhr x $40 Fixed overhead 0.50 mhr x $90 Standard unit cost

= = = =

$10 5 20 45 $80

Budgeted production was 45,800 units of Uderz. The fixed overhead rate is based on a practical capacity of 24,000 machine hours (mhrs). Actual results: actual production was 46,600 units Uderz, 205,000 square yards (sqy) of materials were purchased for $492,000, used 187,800 sqy of materials, for 4,600 direct labor hours $239,200 was paid, actual fixed overhead was $2,175,000, the machines worked 23,150 hours. Variable overhead spending variance was $50,900 Unfavorable. Variances must be isolated as early in time as possible. Sales volume was 45,900 units Uderz, there was no beginning inventory of units Uderz. Work in process inventory is negligible and may be ignored. 5a I When the fixed overhead rate is based on practical capacity, a favorable production volume is impossible. IA True IB False Practical capacity is a demand based capacity concept. IIA True IIB False Which answers are the correct answers? A IA en IIA B IA en IIB C IB en IIA D IB en IIB 5b The prime costs and conversion costs per unit Uderz are respectively? A $10 and $70 B $15 and $65 C $35 and $45 D $80 and $65 E $15 and $35 F $15 and $70 G $10 and $25 H $80 and $35 I None of these. The direct materials price variance was? A $18,320 (U) B $20,500 (F) C $18,640 (U) D $18,780 (F) E $18,780 (U) F $18,640 (F) G $20,500 (U) H $18,320 (F) I None of these.

II

5c

5d

The direct materials efficiency variance was? A $3,360 (U) B $10,500 (F) C $3,500 (U) D $11,500 (F) E $3,360 (F) F $10,500 (U) G $3,500 (F) H $11,500 (U) I None of these. The direct labor price variance was? A $9,200 (U) B $9,320 (F) C $9,160 (U) D $9,180 (F) E $9,200 (F) F $9,320 (U) G $9,160 (F) H $9,180 (U) I None of these. Actual variable overhead cost was? A $881,100 B $960,900 C $871,100 D $982,900 E $887,100 F $966,900 G $865,100 H $976,900 I None of these. The production volume variance was? A $76,000 (F) B $63,000 (U) C $99,000 (F) D $94,500 (U) E $94,500 (F) F $99,000 (U) G $63,000 (F) H $76,000 (U) I None of these. Compared to operating income under Variable Costing, operating income under Absorption Costing was? A $36,000 higher B $24,500 lower C $31,500 higher D $9,000 lower E $36,000 lower F $24,500 higher G $31,500 lower H $9,000 higher I None of these.

5e

5f

5g

5h

FACULTEIT DER ECONOMISCHE WETENSCHAPPEN EN BEDRIJFSKUNDE Afdeling ACCOUNTING

SOLUTIONS

Assignment 1
1a The following cost information pertaining to Mixing Ltd. is given: Gallons 9,900 15,000 22,400 32,500 29,000 Total Cost $29,850 $36,450 $46,400 $59,650 $54,980 Gallons 18,500 9,250 12,200 27,500 30,000 Total Cost $41,050 $28,960 $32,800 $53,260 $56,050

Using the high-low method, Total Costs (rounded at dollars) when 25,000 gallons are used will be? VCu = ($59,650 - $28,960) / (32,500 9,250) = $1.32; FC = $28,960 9,250 x $1.32 = $16,750 TC = 25,000 x $1.32 + $16,750 = $49,750

1b

XYZ Company sells three products, Xeenon, Ybro and Zeero. The following information is available: Xeenon Ybro Zeero Sales Revenues $290,000 $210,000 $360,000 Variable costs 120,000 100,000 200,000 Fixed costs: Avoidable 40,000 30,000 60,000 60,000 120,000 Unavoidable 80,000 Operating Income $ 50,000 $ 20,000 $(20,000) XYZ Company is considering dropping Zeero because it is reporting a loss. Assuming XYZ drops Zeero and can not replace it, operating income will? OI of Zeero will become $(120,000), a decrease of $100,000

1c

The Cloutier Company has prepared a sales budget of 45,000 units for a quarter. The company has an inventory of 8,000 units of finished goods on hand at 1 January and has a target finished goods inventory of 9,200 units at the end of the quarter. It takes two gallons of direct materials to make one unit of finished product. The company has an inventory of 18,000 gallons of direct materials at 1 January, and has a target ending inventory of 17,000 gallons at the end of the quarter. How many gallons of direct materials should be purchased during the first quarter ending 31 March? Budgeted production = 45,000 + 9,200 8,000 = 46,200 units Materials purchases = 46,200 x 2 + 17,000 18,000 = 91,400 gallons

1d

The firm budgeted sales of 20,000 units of product A, 30,000 units of product B and 50,000 units of product C. The budgeted contribution margins per unit of these products are respectively, $45, $35 and $25. Actually 18,150 units of product A, 26,950 units of product B and 64,900 units of product C were sold. Actual contribution margins were respectively: $42, $33 and $27. Based on these data the sales-mix variance was? Budgeted sales = 20,000 + 30,000 + 50,000 = 100,000 units Actual sales = 18,150 + 26,950 + 64,900 = 110,000 units (increase of 10%) Sales mix variance = (18,150 20,000 x 110%) x $45 + (26,950 30,000 x 1.1) x $35 + (64,900 50,000 x 1.1) x $25 = $173,250 (U) + $211,750 (U) + $247,500 (F) = 137,500 (U)

1e

The following information pertains to the August operating budget for N7N Trading Corporation. Budgeted sales for July $200,000, August $250,000 and September $450,000 Collections for sales are 20% in the month of sale and 80% in the next month Gross margin is 30% of sales Administrative and general expenses are $10,000 per month. Beginning Accounts Receivable (August 1), $160,000 Beginning Merchandise Inventory (August 1), $17,500 Purchases are paid in full the following month. Beginning Accounts Payable (August 1), $200,000. (All from Merchandise purchases.) Desired ending Merchandise Inventory is 10% of next months cost of goods sold. For August, budgeted Operating Income is? OI = 30% x $250,000 $10,000 = $65,000

1f

The following process costing data are given for Uran Company: Equivalent units Physical units Transferred-in C. Conversion C. Units completed 6,000 .. .. Units started 800 .. 320

Materials Cost .. 800

Costs/eq.unit $25 $12 $9 Assuming weighted-average costing, the cost assigned to goods transferred out is? Transferred-out = 6,000 x ($25 + $12 + $9) = $276,000

Assignment 2 (20p)
2a. Job order: one WIP-account (2p)

2b. Mat. Requisitioned = $40,000 + $560,000 $90,000 = $510,000

(2p)

2c. Indirect materials = $510,000 - $440,000 = $70,000

(2p)

2d. Wages Payable Credits = $165,000 + $10,000 - $15,000 = $160,000 Indirect labor = $160,000 100,000 = $60,000

(2p)

2e.

(2p)

CGM = $60,000 + $440,000 + $100,000 + $550,000 $80,000 = $1,070,000

2f. CGS = $30,000 + $1,070,000 - $60,000 = $1,040,000

(2p)

2g.

(2p)

Rate = $550,000 / $440,000 = 125%

2h.

(2p)

Overapplied = $550,000 - $535,000 = $15,000

2i. Manufacturing Overhead CGS $15,000 $15,000

(2p)

2j. D. mat. Costs = $28,000 (see 2g) MOH Applied = $28,000 x 125% = $35,000

(2p)

D. Labor = $80,000 - $28,000 - $35,000 = $17,000

Assignment 3 (18p)
3.a1 (1p)

Necessary capacity Mhrs = 160 x 2.5 + 160 x 3 + 140 x 4 = 400 + 480 + 560 = 1,440 mhrs (Given: available 2,000 mhrs) 3.a2 (1p)

Necessary capacity Skilled dlhs = 160 x 5 + 160 x 8 + 140 x 4 = 800 + 1,280 + 560 = 2,640 skilled dlhs (Given: available 2,400 skilled dlhs) 3.a3 (1p)

Necessary capacity Unskilled dlhs = 160 x 19 + 160 x 16 + 140 x 20 = 3,040 + 2,560 + 2,800 = 8,400 dlhs (Given: available 9,000 unskilled dlhs)

3.a4 Skilled labor is the bottle-neck (constraint):

(1p) available 2,400 hours <-> necessary 2,640 hours (shortage of 240 skilled labor hours).

3b. Grader $1,800 $1,300 $500 5 $100 160 units Leaper $2,400 $1,800 $600 8 $75 130 units ** Quebac $1,200 $700 $500 4 $125 140 units

(4p)

Gross Revenue Variable cost CM per boat Required skilled labor hours CM per skilled labor hour * Optimal production plan

* Conclusion Leaper lowest CM per skilled dlh ** Shortage of 240 skilled labor hours -> 240 dlh/8 dlh per Leaper = 30 Leapers will not be produced

3c. OI = 160 x $500 + 130 x $600 + 140 x $500 - $150,000 = = $80,000 + $78,000 + $70,000 - $150,000 = $78,000

(2p)

3d. Extra hours for extra production of Leaper: extra incremental costs maximal $75 per hour

(2p)

3.e1 Olympics require 60 x 10 skilled dlhs = 600 dlh -> Decrease Leapers = 600 / 8 = 75 units Opportunity cost = 75 x ($2,400 - $1,800) = $45,000 (or: 600 x $75 per dlh)

(2p)

3.e2

(2p)

Change OI = 60 x ($3,700 - $2,100) - $45,000 (Opp. Cost) = $96,000 - $45,000 = $51,000 (Favorable)

3f. No, will sell Leaper, highest gross revenue per boat, but lowest CM per skilled dlh. Solution: commission based on highest CM per unit skilled labor.

(2p)

Assignment 4 (18p)
4a. NI = 60% x {20,000 x ($25 - $13.75) - $135,000} = 60% x ($225,000 $135,000) = 60% x $90,000 = $54,000 (3p)

4b. Bep = $135,000 / ($25 - $13.75) = 12,000 units MOS = (20,000 12,000) / 20,000 MOS = 40% 4c. OL = CM / OI OL = 2.50 = $225,000 / $90,000

(3p)

(2p)

4d. NI = 60% x {22,000 x ($25 - $13.75) ($135,000 + $16,875)} NI = 60% x ($247,500 - $151,875) = 60% x $95,625 = $57,375

(2p)

[OR: $54,000 (see 4a) + 60% x (22,000 20,000) x $11.25 - $16,875 = $57,375 ] 4e. (2p)

Bep = $151,875 / ($25 - $13.75) = 13,500 units Sales Revenues = 13,500 x $25 = $337,500

4f. NI = $54,000 (see 4a) -> OI = $54,000 / 60% = $90,000 22,000 x p = 22,000 x $13.75 + $135,000 + $16,875 + $90,000 22,000 x p = $302,500 + $241,875 = $544,375 ------- -> P = $24,74(4)

(3p)

[OR: p = $25 {$95,625 (4d) - $90,000 (4a)} / 22,000 = $24.74] 4g. NI = $60,000 -> OI = $60,000 / 60% = $100,000 $100,000 = 22,000 x ($25 - $13.75) ($135,000 + Advert. Costs) $100,000 = $247,500 - $135,000 Adv. Costs -> Adv. C. = $12,500 (3p)

[ OR (see 4d): Adv.C. = $16,875 ($100,000 - $95,625) = $12,500 ]

Assignment 5 (16p)
5a I II When the fixed overhead rate is based on practical capacity, a favorable production volume is impossible. False, not likely, but possible, by working overtime, deferring maintenance, etc. Practical capacity is a demand based capacity concept. False, supply based.

5b

The prime costs and conversion costs per unit Uderz are respectively? Prime = direct mat. + direct labor = $10 + $5 = $15 Conversion = D. labor + overhead = $5 + $65 = $70 The direct materials price variance was? PV = ($2.50 $492,000 / 205,000 ) x 205,000 = ($2.50 $2.40) x 205,000 = $20,500 (F) The direct materials efficiency variance was? EV = (46,600 x 4 187,800) x $2.50 = (186,400 187,800) x $2.50 = $3,500 (U) The direct labor price variance was? PV = ($50 $239,200 / 4,600) x 4,600 = ($50 $52) x 4,600 = $9,200 (U) Actual variable overhead cost was? Flexible budget + spending variance + efficiency variance = = 46,600 x $20 + $50,900 (46,600 x 0.50 23,150) x $40 = $976,900 The production volume variance was? PVV = (46,600 x 0.50 mhr 24,000 mhr) x $90 = $63,000 (U) Compared to operating income under Variable Costing, operating income under Absorption Costing was? (46,600 45,900) x $45 = $31,500 higher (fixed costs in inventory increase under Absorption Costing)

5c

5d

5e

5f

5g

5h