Note:

The purpose of the following practice examination is to provide an opportunity for review and to provide some indication of the form,
rather than the content, of the course examination.

MANAGEMENT ACCOUNTING 1 [MA1]

PRACTICE EXAMINATION
IMPORTANT
Before starting to write the examination, make sure that it is complete. This examination consists
of 9 pages. There are 6 questions for a total of 100 marks.

READ THE QUESTIONS CAREFULLY AND ANSWER WHAT IS ASKED.

To assist you in answering the examination questions, CGA-Canada includes the following glossary
of terms.
Glossary
From David Palmer, Study Guide: Developing Effective Study Methods (Vancouver: CGA-Canada, 1996).
Copyright David Palmer.
Compare

Contrast

Criticize

Define

Describe
Diagram

Discuss

Evaluate

Explain

Examine qualities or characteristics that

resemble each other. Emphasize similarities,
although differences may be mentioned.
Compare by observing differences. Stress
the dissimilarities of qualities or
characteristics. (Also Distinguish between)
Express your own judgment concerning the
topic or viewpoint in question. Discuss both
pros and cons.
Clearly state the meaning of the word or
term. Relate the meaning specifically to the
way it is used in the subject area under
discussion. Perhaps also show how the item
defined differs from items in other classes.
Tell the whole story in narrative form.
Give a drawing, chart, plan or graphic
answer. Usually you should label a diagram.
In some cases, add a brief explanation or
description.
This calls for the most complete and detailed
answer. Examine and analyze carefully and
present both pros and cons. To discuss
briefly requires you to state in a few
sentences the critical factors.
This requires making an informed judgment.
Your judgment must be shown to be based
on knowledge and information about the
subject. (Just stating your own ideas is not
sufficient.) Cite authorities. Cite advantages
and limitations.
In explanatory answers you must clarify the
cause(s), or reasons(s). State the how and
why of the subject. Give reasons for
differences of opinions or of results.

Illustrate
Indicate
Interpret

Justify
List

Outline

Prove
Relate

Review

State

Summarize

Trace

Make clear by giving an example, e.g., a

figure, diagram or concrete example.
Provide a short explanation.
Translate, give examples of, solve, or
comment on, a subject, usually making a
judgment on it.
Prove or give reasons for decisions or
conclusions.
Present an itemized series or tabulation.
Be concise. Point form is often
acceptable. (Also Enumerate or Identify)
This is an organized description. Give a
general overview, stating main and
supporting ideas. Use headings and
sub-headings, usually in point form. Omit
minor details.
Establish that something is true by citing
evidence or giving clear logical reasons.
Show how things are connected with each
other or how one causes another,
correlates with another, or is like another.
Examine a subject critically, analyzing
and commenting on the important
statements to be made about it.
Present the main points in brief, clear
sequence, usually omitting details,
illustrations, or examples.
Give the main points or facts in condensed
form, like the summary of a chapter,
omitting details and illustrations.
In narrative form, describe progress,
development, or historical events from
some point of origin.

CGA-CANADA
MANAGEMENT ACCOUNTING 1
PRACTICE EXAMINATION
Marks
30

Time: 3 Hours
Question 1
Select the best answer for each of the following unrelated items. Answer each of these items in your
examination booklet by giving the number of your choice. For example, if (1) is the best answer for
item (a), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item
will not be marked. Incorrect answers will be marked as zero. No account will be taken of any
explanations you offer.
Note:
2 marks each

Note:
Parts (a), (b), and (c) are based on the following information pertaining to Gladstone Manufacturing for Year 2.

Raw materials used in production

Total manufacturing costs added
Applied factory overhead
Selling and administrative expenses
Inventories:
Raw materials, January 1
Raw materials, December 31
Work in process, January 1
a.

$ 2,800
16,000
6,600
4,300
960
1,040
1,460

Work in process, December 31

Finished goods, January 1
Finished goods, December 31

$ 1,300
960
920

For Year 2, what was the cost of raw materials purchased?

1)
2)
3)
4)

$2,720
$2,800
$2,880
$3,760

b. For Year 2, what predetermined overhead rate was used (overhead is applied on the basis of direct
labour costs)?
1)
2)
3)
4)
c.

80%
100%
120%
200%

For Year 2, what was the cost of goods sold?

1)
2)
3)
4)

$16,000
$16,040
$16,200
$16,960

Continued...
PEMA1

Page 1 of 9

d. IPM Co. is considering closing down one of its divisions. The division presently has a contribution
margin of $500,000. Overhead allocated to the division is $1,250,000, of which $125,000 cannot be
eliminated. If this division were discontinued, by what amount would IPMs pretax income increase?
1)
2)
3)
4)
e.

PCP Co. produces and sells two products A and B. These two products are the result of a joint
process. Joint costs are incurred until split-off. After split-off, separate costs are incurred in refining
each product. The joint costs are allocated to each of the two products based on their respective
market values at split-off. If the market value of Product A at split-off increases and all other costs and
selling prices remain unchanged, what will be the effect on the gross margin of the two products?
1)
2)
3)
4)

f.

$125,000
$500,000
$625,000
$750,000

Product A will decrease and Product B will increase.

Product A will increase and Product B will decrease.
Product A will increase and Product B will increase.
Product A will decrease and Product B will decrease.

Fiddling Enterprises entered into a contract with one of its customers. The contract provided for a
formula price of actual cost plus 20%. Fiddling is also entitled to receive 50% of any savings from the
formula price being less than the target price of $4,500,000. Fiddling incurred actual costs of
$3,600,000. How much should Fiddling receive from the contract?
1)
2)
3)
4)

$4,050,000
$4,320,000
$4,410,000
$4,500,000

g. Consider the following incomplete production budget:

Expected sales units

Units to be produced

First
quarter
7,000
6,800

Second
quarter
5,000

Third
quarter
8,000

Fourth
quarter
6,000

The previous year's fourth quarter ending inventory was 700 units, which meets the minimum
requirement for ending inventories. What is the expected production in the current second quarter?
1.
2.
3.
4.

4,500 units
5,200 units
5,300 units
6,800 units

Continued...

PEMA1

Page 2 of 9

Note:
Use the following information to answer parts (h), (i), and (j).

The following information pertains to production activities at Burn Corp. All units in work in process
(WIP) were costed using the FIFO cost flow assumption.

Refining Department
WIP, February 1
Units started and costs incurred in February
Units completed and transferred out
WIP, February 28

Units
25,000
135,000
100,000
?

Percentage of
Completion

Conversion
Costs

80%

$ 22,000
$ 143,000

50%

h. What were the conversion costs per equivalent unit of production last period and this period,
respectively?
1)
2)
3)
4)
i.

What was the conversion cost of the work in process inventory account at February 28?
1)
2)
3)
4)

j.

$1.10 and $1.30

$1.10 and $1.45
$1.30 and $1.30
$1.30 and $1.45

$39,000
$39,600
$42,500
$45,000

What was the per-unit conversion cost of the units started last period and completed this period?
1)
2)
3)
4)

$0.86
$1.14
$1.25
$1.30

Note:
Use the following information to answer parts (k) and (l):

Pots Unlimited manufactures flower pots. It expects to sell 40,000 flower pots in Year 2. At the start of
Year 2, the company had enough beginning inventory of raw materials to produce 48,000 units. Beginning
inventory of finished units totalled 4,000, with a target ending inventory of 5,000 units. The company
keeps no work in process inventory. The flower pots sell for $6.00 per unit, direct materials costs are
$2.00 per unit, and direct labour is $1.00 per unit. Factory overhead is $0.40 per unit.
k. What will be the amount of cost of goods sold for Year 2?
1)
2)
3)
4)

$122,400
$136,000
$139,000
$149,600

Continued...

PEMA1

Page 3 of 9

l.

What will be the total costs incurred for direct materials, direct manufacturing labour, and
manufacturing overhead, respectively, for Year 2?
1)
2)
3)
4)

$0; $40,000; $16,000

$0; $41,000; $16,000
$80,000; $40,000; $16,000
$82,000; $41,000; $16,400

Note:
Use the following information to answer parts (m), (n), and (o).

Ron C. Kalten operates RoCK Ltd., a mobile discotheque. His customers are local residents hosting
private parties. The activities involved in his services and the time required for each activity are as
follows:
Activity
Discuss the type of music with customer
Prepare song list
Travel time to and from location (average)
Set up and take down equipment
Play music at party

Time (in Hours)

0.5
1.0
1.0
1.5
depends on customer

Ron has determined that his time should be priced at $25.00 per hour to make the business economically
viable. Ron charges a travel fee of $0.50 per kilometre (one way only) from the city centre to the
customer. He also pays an assistant $10.00 per hour for the duration of the party, but does not pay the
assistant for travel or set-up and take-down time.
m. How much should Ron charge a customer who lives 10 kilometres from the city centre and gives a
party that lasts 7 hours?
1)
2)
3)
4)

$280
$325
$345
$350

n. A customer requires special lighting that Ron will have to rent for $50 and that will increase the set-up
and take-down time by 2 hours. How much should Ron charge this customer if she lives 10 kilometres
from the city centre and gives a party that lasts 8 hours?
1)
2)
3)
4)

$425
$450
$485
$490

o. Another customer is on a limited budget and offers to supply an assistant to take the place of Rons
regular assistant. This would decrease the set-up and take-down time by 50%. How much should Ron
charge this customer if the party lasts 8 hours and the customer lives 20 kilometres from the city
centre?
1)
2)
3)
4)

PEMA1

$281.25
$291.25
$310.00
$371.25

Page 4 of 9

15

Question 2
Jane left her job as the production manager of a medium-sized firm two years ago to join a new firm that
manufactures a revolutionary type of fitness equipment. Jane was made the general manager at the start of
operations, and the firm seemed to be doing extremely well. The president was pleased with the
companys first-year performance and at the beginning of the second year promised Jane a $20,000 bonus
if the companys net income were to increase by 25% in Year 2.
During Year 2, Jane sold 25% more units than she had in Year 1 and was so confident that she would
receive her bonus that she bought non-refundable airline tickets to Europe for her husband and her three
sons.
At the end of Year 2, Jane received the income statement for Year 2, which showed that the companys
income had decreased from Year 1 even though the company had sold considerably more units. Jane did
not get along very well with the accountant and felt that he had deliberately distorted the financial
statements for Year 2.
Following are the reports Jane received:
Year 1
Production (in units)
Sales (in units)
Unit selling price
Unit costs:
Variable manufacturing
Variable selling
Fixed manufacturing
Fixed selling
Income Statement (FIFO)
Sales
Cost of goods sold
Gross margin
Selling
Net income

$
$

6,000
4,000
500
300
20
180,000
100,000

Year 2

$
$

3,000
5,000
500
300
20
210,000
140,000

Year 1

Year 2

$ 2,000,000
1,320,000
680,000
180,000
$ 500,000

$ 2,500,000
1,770,000
730,000
240,000
$ 490,000

Required
9

a.

b. For Years 1 and 2, prepare a reconciliation for the differences between the net income as determined
by the variable costing income statements you prepared in part (a) and the income statements prepared
by the accountant.

PEMA1

Prepare variable costing income statements for Years 1 and 2.

Page 5 of 9

16

Question 3
Whiskey-Jack Adventures offers guided tours and wilderness experiences in the mountains and lakes
around Whistler, B.C. Whiskey-Jack provides a guide, all the necessary provisions, and equipment for a
fee of $75 per person per day. Based on available equipment and guides, the maximum capacity is
800 tour-days per month (customers are taken on the equivalent of an all-day tour). The company is
presently operating at a level of an average of 600 tour-days per month.
Variable costs per tour-day for Year 2 were as follows:
Food
Supplies
Guides salary
Insurance
Total

$ 7.50
3.00
37.50
12.00
$ 60.00

Annual fixed costs for Year 2 were as follows:

Equipment rental
Marketing
Customer service
Administration
Total

$ 7,500
3,000
1,500
6,000
$ 18,000

Required
Answer the following questions independently of each other.
7

a.

b. A group of foreign travellers has offered Whiskey-Jack a proposal for 300 tour-days in July if
Whiskey-Jack will reduce the fee to $67.50 per tour-day. The group would provide its own food.
Whiskey-Jack would incur $300 in additional costs for bussing the tourists back and forth to the camp
site. Determine whether Whiskey-Jack should accept the proposal. (Hint: Calculate the effect on
operating income.)

PEMA1

Assuming that the fee is increased by $18.00 per person per day in Year 3 and the number of tourdays declines by 200 per month, calculate the effect on the monthly operating income.

Page 6 of 9

15

Question 4
Alpha Inc. manufactures digital compasses for navigation. The companys total overhead budget for
January, for the manufacture of 2,000 units, was $49,600. Overhead is applied on the basis of direct
labour-hours. On the last day of the month, just as the 2,000th unit was completed after a total of
752 actual direct labour-hours, the hard-drive on the microcomputer that contained the months detailed
cost information crashed. With the computer out of commission, the cost accountant has had difficulty
completing the variance analysis report. He has managed to assemble the incomplete information below
for January:
Variable overhead:
0.4 direct labour-hours @ $8.00 per hour (from the standard cost card)
Actual cost: variable overhead cost
Fixed overhead:
Budget variance

$8,400
$2,000 favourable

Required
13
(3)
(3)
(3)
(2)
(2)
2

PEMA1

a.

Compute the following for January:

i)
ii)
iii)
iv)
v)

Variable overhead flexible budget allowance for the manufacture of the 2,000 units
Variable overhead spending variance
Variable overhead efficiency variance
Budgeted fixed overhead
Actual fixed overhead

b. List an advantage of flexible budgets over static budgets as a tool for planning and as a tool for
control.

Page 7 of 9

10

Question 5
BabyGoGo Ltd. manufactures three models of childrens swing sets: standard, deluxe, and super. The
standard set is made of steel, the deluxe set is made of aluminium, and the super set is made of a titaniumaluminum alloy. Because of the different materials used, production requirements differ significantly
across models in terms of machine types and time requirements. However, once the parts are produced,
assembly time per set for the three models is similar. For this reason, BabyGoGo allocates overhead costs
on the basis of machine-hours. In Year 2, the company produced 5,000 standard sets, 500 deluxe sets, and
2,000 super sets. The company had the following revenues and expenses for the year.
BABYGOGO LTD.
Income Statement
year ended December 31, Year 2

Sales
Direct Costs:
Direct material
Direct labour
Variable overhead costs:
Machine setup
Orders processed
Warehouse
Shipping
Contribution margin

Standard

Deluxe

Super

Total

$ 475,000

$ 380,000

$ 560,000

$ 1,415,000

200,000
54,000

150,000
14,400

240,000
24,000

590,000
92,400

?
?
?
?
?

?
?
?
?
?

?
?
?
?
?

26,000
64,000
93,000
36,000
513,600

Fixed overhead costs:

Plant administration
Other
Gross profit

88,000
182,000
$ 243,600

The chief financial officer of BabyGoGo has hired a consultant to recommend cost allocation bases. The
consultant has recommended the following:
Activity Level
Activity
Machine setup
Sales order processing
Warehouse costs
Shipping

Cost Driver
Number of production runs
Number of sales orders received
Number of units in inventory
Number of units shipped

Standard

Deluxe

Super

Total

22
300
200
5,000

11
200
100
500

17
300
100
2,000

50
800
400
7,500

The consultant found no basis for allocating the plant administration and other fixed overhead costs, and
recommended that they not be applied to products.
Required
8

a.

b. Explain how activity-based costing might result in better decisions by BabyGoGo management.

PEMA1

In your examination booklet, complete the income statement using the cost allocation bases
recommended by the consultant. Do not allocate any fixed overhead costs.

Page 8 of 9

Question 6
You have been given the following production information for Gamma Co., and are asked to provide the
plant manager with information for a meeting with the vice-president of operations.
Standard Cost Card
Direct materials (DM) (6 kg @ $3)
Direct labour (DL) (0.8 hr @ $5)
Variable overhead (VOH) (0.8 hr @ $3)
Fixed overhead (FOH) (0.8 hr @ $7)

$ 18.00
4.00
2.40
5.60
$ 30.00

Following is a production report for the last period of operations:

Costs

Total
Standard Cost

Price/
Rate

DM
DL
VOH
FOH

$ 405,000
90,000
54,000
126,000

$ 6,900F
4,850U

Spending/
Budget

Variances
Quantity/
Efficiency

Volume

$9,000U
7,000U
$ 1,300F
500F

$14,000U

Note:
F = Favourable; U = Unfavourable

Required
2
2
3
2
5

a.
b.
c.
d.

Calculate the number of units produced last period.

Calculate the number of kilograms of raw material purchased and used during the period.
Calculate the actual cost per kilogram of raw material.
Calculate the number of actual direct labour-hours worked during the period.

Question 7 (5 marks)
Larch Electrical provides electrical services and uses time and materials pricing. The company has
budgeted the following costs for next year:
Electricians wages and benefits .........................................
Other costs, except for parts-related costs...........................
Costs of ordering, handling, and storing parts.....................

$420,000
$120,000
5% of invoice cost

Larch expects to log 10,000 hours of billable time next year and aims for a profit of $10 per hour of each
electricians time. The markup on parts is 15% of invoice cost.
Required
1. Compute the time rate and the material loading charge that would be used to bill jobs.
2. One of the companys electricians has just completed a job that required 18 hours of time and $520 in
parts (invoice cost). Compute the amount that would be billed for the job.

END OF EXAMINATION
100

PEMA1

Page 9 of 9

CGA-CANADA
MANAGEMENT ACCOUNTING 1 PRACTICE EXAMINATION
SUGGESTED SOLUTIONS
Marks
30

Time: 3 Hours
Question 1
Note:
2 marks each

a.

Sources/Calculations:
3) Topic 1.6 (Level 2)
Raw materials, beginning inventory
Raw materials purchased
Raw materials, ending inventory
Raw materials used in production

960
x
3,840
(1,040)
2,800

x = $2,880
b. 2) Topic 2.1 (Level 1)
c.

3) Topic 1.6 (Level 2)

Work in process, beginning inventory
Finished goods, beginning inventory
Manufacturing costs added
Work in process, ending inventory
Finished goods, ending inventory
Cost of goods sold

d. 3) Topic 9.2 (Level 1)

Overhead which can be eliminated ($1,250,000 $125,000)
Less: Contribution margin
e.

1) Topic 9.7 (Level 1)

f.

3) Topic 10.1 (Level 1)

Formula price ($3,600,000 1.20)
Share of cost savings {[$4,500,000 ($3,600,000 1.20)] 0.50}

1,460
960
16,000
18,420
(1,300)
(920)
16,200

$ 1,125,000
(500,000)
$ 625,000

$ 4,320,000
90,000
$ 4,410,000

g. 3) Topic 6.7 (Level 1)

Ending inventory for one period is 10% of the next periods sales. Therefore, for the second
quarter, beginning inventory must be 500 units (10% of 5,000) subtracted from 5,000 units to be
sold plus desired ending inventory of 800 units (10% of 8,000) = 5,300 units to be produced in the
second quarter.

Continued...
PSMA1

Page 1 of 5

h. 1) Topics 3.3-3.5 (Level 1)

Conversion cost per unit last period
Conversion cost per unit this period

$22,000/(25,000 0.8)
$143,000/110,000

$1.10
$1.30

Calculation of equivalent units:

Production Report
WIP, February 1
Started
Less: transferred out
WIP, February 28

25,000 units
135,000
100,000
60,000 units

Equivalent units (EU) of production:

EU in WIP, February 28, @50%
Plus: completed and transferred out
Less: EU in WIP, February 1, @ 80%
Equivalent units of production in February

i.

30,000 units
100,000
20,000
110,000 units

1) Topics 3.3-3.5 (Level 1)

($143,000/110,000) 30,000 = $39,000

j.

2) Topics 3.3-3.5 (Level 1)

($1.10 0.8) + ($1.30 0.2) = $1.14
or ($1.10 0.8) + [(25,000 0.2) $1.30]/25,000 = $1.14

k. 2) Topic 2.2-2.3 (Level 1)

40,000 ($2.00 + $1.00 + $0.40) = $136,000
l.

4) Topic 2.2-2.3 (Level 1)

(40,000 + 5,000 4,000) $2.00 = $82,000
(40,000 + 5,000 4,000) $1.00 = $41,000
(40,000 + 5,000 4,000) $0.40 = $16,400

m. 4) Topics 10.1 and 10.4 (Level 1)

($0.50 10) + ($25 7) + ($10 7) + ($25 4) = $350
n. 3) Topics 10.1 and 10.4 (Level 1)
$350 + $50 + ($25 2) + $25 + $10 = $485
o. 2) Topics 10.1 and 10.4 (Level 1)
($0.50 20) + ($25 8) + ($25 2.5) + (1.5/2 $25) = $291.25

PSMA1

Page 2 of 5

15

Question 2
Source: Topics 6.1 and 6.2 (Level 1)
9

a.

(1)
(2)
(2)
(2)
(2)
6

Year 1
Sales
Variable costs
(4,000 $320)
Contribution margin
Fixed costs
($180,000 + $100,000)
Net income

$ 2,000,000
1,280,000
720,000
280,000
$ 440,000

b.
Absorption costing net income
Add:
Fixed manufacturing overhead released
from operating inventory (2,000 $30)
Less:
Fixed manufacturing overhead deferred
to closing inventory (2,000 $30)
Variable costing net income

16
7

Year 2
(5,000 $320)
($210,000 + $140,000)

Year 1

Year 2

$ 500,000

$ 490,000

60,000

60,000
$ 440,000

0
$ 550,000

Question 3
a. Source: Topics 4.4 and 4.7 (Level 1)
Guide fee
Variable costs:
Food
Supplies
Insurance
Guide salary
Contribution margin

$ 75.00
$ 7.50
3.00
12.00
37.50

Increase in profit due to increase in selling price (400 tour-days $18)

Decrease in profits due to reduced sales volume (200 tour-days $15)
Increase in monthly operating income
9

$ 2,500,000
1,600,000
900,000
350,000
$ 550,000

60.00
$ 15.00
$ 7,200
(3,000)
$ 4,200

b. Source: Topics 4.4 and 4.7 (Level 1)

Additional tour-days (300 $67.50)
Additional costs:
Guide salaries (300 $37.50)
Supplies (300 $3)
Insurance (300 $12)
Bussing
Contribution margin

$20,250
$ 11,250
900
3,600
300

Opportunity cost (600 + 300 tour-days 800 capacity) $15

Increase in operating income

16,050
4,200
1,500
$ 2,700

Since operating income would increase, Whiskey-Jack should accept the proposal.

PSMA1

Page 3 of 5

15
13

Question 4
a. Source: Topics 8.1-8.4 (Level 1)

(3)
(3)
(3)
(2)
(2)
2

i)
ii)
iii)
iv)
v)

2,000 0.40 $8.00 = $6,400

$8,400 (752 $8.00) = $2,384 unfavourable
(752 $8.00) $6,400 = $384 favourable
$49,600 $6,400 = $43,200
$43,200 $2,000 favourable = $41,200

b. Source: Topic 8.1 (Level 1)

Two advantages of flexible budgets over static budgets:

As an aid to planning, flexible budgets assist in allocating resources by helping managers to predict
what future costs should be at different activity levels
As an aid to the control of costs, flexible budgets help managers gain more insight into the cause of
variances than is available with static budgets.

Note:
1 mark each for any two valid responses

10

Question 5
Source: Topics 5.2 and 5.3 (Level 1)
8

a.

BABYGOGO LTD.
Income Statement
year ended December 31, Year 2

Sales
Direct costs:
Direct material
Direct labour
Variable overhead:
Machine setup
Order processing
Warehouse costs
Shipping
Contribution margin
Fixed overhead:
Plant administration
Other fixed
Gross profit

Standard

Deluxe

Super

Total

$ 475,000

$ 380,000

$ 560,000

$ 1,415,000

200,000
54,000

150,000
14,400

240,000
24,000

590,000
92,400

5,720
16,000
23,250
2,400
$ 168,230

8,840
24,000
23,250
9,600
$ 230,310

26,000
64,000
93,000
36,000
513,600

11,440 1
24,000 2
46,500
24,000
$ 115,060

88,000
182,000
$ 243,600

Sample calculations:
1
2

PSMA1

$26,000 22/50 = $11,440

$64,000 300/800 = $24,000

b. Activity-based costing (ABC) provides a more detailed breakdown of costs and better matches each
cost with the activity that incurred the cost. This additional information should enable BabyGoGo to
make more accurate decisions. For example, if BabyGoGo wants to reduce costs, with ABC it can
identify the most costly activities and/or which costs are most amenable to reduction. Also, The
company will also be able to determine more accurate product cost information for product pricing.

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Question 6
Source: Topics 7.3, 8.2, and 8.4 (Level 1)
2
2
3
2

a.
b.
c.
d.
1
2

$405,000 (6 $3) = 22,500 units

(22,500 6) + ($9,000 $3) = 138,000 kg 1
($405,000 + $9,000 $6,900) 138,000 = $2.95 per kg
(22,500 0.8) + ($7,000 $5) = 19,400 hours 2

Alternative calculation: ($405,000 + $9,000) $3 = 138,000 kg

Alternative calculation: ($90,000 + $7,000) $5 = 19,400 hours

Question 7
Topic 10.4 (Level 1)
1. Time rate to be used:
Electricians wages and benefits
($420,000 10,000 hours)

$42

Other repair costs ($120,000 10,000 hours)

12

Desired profit per hour of electrician time

10
$64

Total charging rate per hour for service

Material loading charge:
Ordering, handling, and storage cost

2.

5% of invoice cost

Desired profit on parts

15% of invoice cost

Material loading charge

20% of invoice cost

$1,152

Time charge: 18 hours $64 per hour

Material charge:
Invoice cost of parts
Material loading charge (20% $520)
Billed cost of the job

$520
104

624
$1,776

END OF SOLUTIONS
100

PSMA1

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