#### Question Details

##### [solution] » i want the answer or solution to this Mid-test copy

Brief item decscription

Step-by-step solution file

Item details:

i want the answer or solution to this Mid-test copy
More:

i want the answer or solution to this Mid-test copy

The University of the South Pacific

Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and Vanuatu.

SCHOOL OF ACCOUNTING AND

FINANCE

AF201: MANAGERIAL ACCOUNTING

MID-SEMESTER TEST ? SEMESTER 1, 2015

PRINT MODE

Time Allowed 2 hours plus 10 minutes reading

100 marks (30% of final grade)

There are 2 sections:

Sections

A

B

Questions 1 ? 15: Multiple Choice

Question 1: Problem Solving &amp; Discussion

Question 2: Problem Solving

Question 3: Problem Solving

Question 4: Problem Solving &amp; Discussion

TOTAL

Allocated

marks

30 marks

15 marks

20 marks

10 marks

25 marks

100 marks

Estimated

Time

36 minutes

18 minutes

24 minutes

12 minutes

30 minutes

120 minutes

INSTRUCTIONS

1. ALL questions in each section are compulsory.

3. Non-programmable Calculators may be used, but are not provided.

SECTION A

Answer the questions by placing a circle around the letter on the

There are 15 questions in this Section. All questions carry 2 marks each.

Refer to the following information to answer Questions 1 and 2.

The Norfolk Company reported the following information at the end of the

current year:

Indirect labor

Selling expenses

Rent on factory

Depreciation factory

expenses

\$40,000

\$15,000

\$25,000

\$10,000

Direct materials

Sales Revenue

Factory utilities

Direct labor

\$30,000 Property taxes on

factory

\$50,000

\$200,000

\$10,000

\$45,000

\$5,000

Question 1. Calculate Norfolk Company?s manufacturing overhead cost.

A. \$50,000

B. \$80,000

C. \$90,000

D. \$140,000

Question 2. Calculate Norfolk Company?s total manufacturing cost.

A. \$95,000

B. \$145,000

C. \$175,000

D. \$185,000

Page | 1

Question 3. In January, 5,000 units were manufactured at a unit cost of \$5. At

this level of activity, variable costs are 40 percent of total unit costs. The

following month, the company planned to manufacture 4,500 units. If cost

behavior patterns remain unchanged in February,

A. Total fixed costs will decrease

B. Total variable cost will remain unchanged

C. Total cost per unit will increase

D. Variable cost per unit will decrease

Question 4. The Rutherford Company?s costs and activity level for April and

May are as follows:

Activity level in units

Variable costs

Fixed costs

Mixed (Semi-variable) costs

Total costs

April

10,000

\$10,000

\$30,000

\$20,000

\$60,000

May

20,000

?

?

?______

\$75,000

Assuming that these levels are within the relevant range, the mixed costs for

May are

A. \$10,000

B. \$25,000

C. \$40,000

D. \$20,000

Page | 2

Refer to the following information and answer question 5.

The following cost functions were developed for manufacturing overhead

costs:

Manufacturing

Cost Function

Electricity

=

\$400+ \$30 per direct labor hour

Maintenance

=

\$350 + \$10 per direct labor hour

Supervisors? salaries

=

\$28,000 per month

Indirect materials

=

\$12 per direct labor hour

Question 5. What is the cost function for total manufacturing overhead cost if

September production is expected to be 1,500 units requiring 1,000 direct

labor hours?

A. \$28,000 + (\$12 x Direct labor hours)

B. \$28,750 + (\$52 x Direct labor hours)

C. \$750 + (\$40 x Direct labor hours)

D. \$ 28,750 + (\$40 x Direct labor hours)

Use the following information to answer question 6.

Context Company reported the following shipping charges for the last six

months.

Month

Shipping costs

Units shipped

Jan

\$4,500

12,500

Feb

\$4,680

13,000

Mar

\$5,000

14,000

Apr

\$4,550

13,300

May

\$4,800

13,500

Jun

\$5,500

15,000

Page | 3

Question 6. Using the high-low method, determine the amount of estimated

variable cost per unit shipped.

A. \$0.30

B. \$0.40

C. \$0.20

D. \$0.21

Question 7. The results of the regression analysis to estimate setup costs using

the number of setups and number of setup hours as activity cost drivers are as

follows

SUMMARY

OUTPUT

Regression Statistics

R Square

0.998212

Standard

Error

49.83698

Observations

9

ANOVA

df

F

1675.185

Significance

F

5.71E-09

2

6

8

Coefficients

1493.265

2.605579

Standard

Error

136.42

0.045317

t Stat

10.94608

57.49626

P-value

3.45E-05

1.86E-09

Lower 95%

1159.457

2.494691

Upper 95%

1827.073

2.716466

13.7142

0.916289

14.96711

5.6E-06

11.47212

15.95628

Regression

Residual

Total

Intercept

Setup hours

Number of

setups

MS

4160697

2483.724

SS

8321394

14902.34

8336296

Based on the multiple regression analysis output, what is the estimated cost

function?

A. Total cost = \$1,493.27 + (\$2.71 x Setup hours)

B. Total cost = \$1,493.27 + (\$2.61 x Setup hours) + (\$13.71 x Number of setups)

C. Total cost = \$1,493.27 + (\$13.71 x Number of setups)

D. Total cost = \$1,493.27

Page | 4

Use the following information and answer question 8 and 9.

AB

Units produced

Prime costs

Machine hours (actual)

XY

50,000

65,000

\$750,000

\$650,000

30,000

60,000

Harrison uses a plantwide rate of \$4 per machine hour to apply overhead to

\$376,000.

Question 8. How much of Harrison Company?s overhead was applied to

product AB?

A. \$130,000

B. \$195,000

C. \$120,000

D. \$187,500

Question 9. What was Harrison Company?s total cost to produce product XY?

A. \$650,000

B. \$910,000

C. \$900,000

D. \$890,000

Page | 5

Use the following information to answer questions 10 and 11.

User of service

Support

Producing

Departments

Departments

S1

S2

P1

\$450,000

\$300,000

P2

\$750,000 \$920,000

Provider of service

S1 - Number of employees

10

25

50

75

S2- Machine hours

60

-

140

200

Department S1?s cost is allocated based on the number of employees, and

Department S2?s cost is allocated based on machine hours.

Question 10. If the direct method is used, Department S1?s cost assigned to

Department P1 would be

A. \$157,500

B. \$185,294

C. \$150,000

D. \$180,000

Question 11. If the sequential or step-down method is used and Department

S1?s cost is allocated first, the Department S1 cost assigned to Department S2

would be

A. \$67,500

B. \$60,000

C. \$75,000

D. \$0

Page | 6

Question 12. Lipex Pty Ltd produces two products (A&amp;B) from a particular joint

process. Each product may be sold at the split-off point or processed further.

Additional processing requires no special facilities, and production costs of

further processing are entirely variable and traceable to the products

involved. Joint production costs for the year were \$60 000. Sales values and

costs are as follows.

Allocate the joint production costs based on the physical units method. What

are the joint costs assigned to product A?

A. \$25,714

B. \$20,339

C. \$34,286

D. \$30,000

Question 13. A firm incurs manufacturing costs totaling \$240 000 in process 1 to

produce the following three beverages emerging from that process at the split-off

point.

Apple juice: sold immediately it emerges from Process 1 without further processing

for \$0.70 litre

Apple cider: processed further in Process 2 at an additional cost of \$0.66667 litre,

then sold for \$1.50 litre

Apple pulp: processed further in Process 3 at an additional cost of \$1.50 litre, then

sold for \$3.50 litre

The following data relates to the period in which the joint costs were incurred.

Page | 7

What is the amount of joint cost that would be allocated to apple juice if the

net realisable value method had been used?

A. \$120,000

B. \$80,000

C. \$84,000

D. \$91,000

Use the following information to answer questions 14 and 15

Lazy Linda Kitchen Appliances manufactures small kitchen appliances like

toasters and blenders. Last month Lazy Linda recorded the following quality

costs:

Discarded electrical components due to defects

Managing customer complaints

Quality training programs for employees

Supplier audit

Process inspection

Work-in-process inspection

Maintaining equipment used to perform quality tests

Cost of hiring a technician to fix a machine breakdown

Legal fees paid to a customer whose pet mouse was

electrocuted due to a faulty toaster

\$2,000

\$3,000

\$5,000

\$6,000

\$4,500

\$5,000

\$2,500

\$3,000

\$6,000

Page | 8

Question 14. Lazy Linda's total appraisal cost was:

A. \$5,000

B. \$9,500

C. \$12,000

D. \$18,000

Question 15. Lazy Linda's total internal failure cost was:

A. \$9,500

B. \$7,500

C. \$5,000

D. \$2,000

Total marks for this section: 30 marks

QUESTION 1: Throughput Accounting

The Mayfield Corporation manufactures filing cabinets in two operations:

machining and finishing. It provides the following information.

Annual capacity

Annual production

Fixed operating costs (excluding direct materials)

Fixed operating costs per unit produced (\$640,000

÷ 80,000; \$400,000 ÷ 80,000)

Machining

100,000 units

80,000 units

\$640,000

\$8 per unit

Finishing

80,000 units

80,000 units

\$400,000

\$5 per unit

Each cabinet sells for \$72 and has direct materials costs of \$32 incurred at the

start of the machining operation. Mayfield has no other variable costs.

Mayfield can sell whatever it produces. The following requirements refer only

to the preceding data. There is no connection between requirements (2) and

(3).

REQUIRED

1. Identify the bottleneck department of Mayfield Corporation, and

briefly explain why it is a bottleneck.

(3 marks)

2. An outside contractor offers to do the finishing operation for 12,000

units at \$10 per unit, double the \$5 per unit that it costs Mayfield to do

Page | 9

the finishing in-house. Should Mayfield accept the subcontractor?s

(4 marks)

3. The Hunt Corporation offers to machine 4,000 units at \$4 per unit, half

the \$8 per unit that it costs Mayfield to do the machining in-house.

Should Mayfield accept the subcontractor?s offer? Show your

calculations.

(4 marks)

4. Mayfield is considering how to motivate workers to improve their

productivity (output per hour). One proposal is to evaluate and

compensate workers in the Machining and Finishing Departments on

the basis of their productivities. Do you think the new proposal is a

good idea? Explain briefly.

(4 marks)

Total marks for this question: 15 marks

QUESTION 2: Variable and Absorption Costing

Ivy, Inc., produces a single product that sells for \$60 per unit. There were no

inventories of work in process or finished goods. Costs for the year were as

follows:

Variable costs:

Direct materials

Direct labor

Selling expenses

\$4 per kg.

\$12 per unit

\$5 per unit

\$3 per unit

Fixed costs:

\$36,000

\$15,000

Each unit produced consumes 2 kg of direct materials.

During the year, 4,000 units were produced and 3,500 units were sold. There

were no work-in-process inventories at the end of the year; only finished

goods inventories.

REQUIRED

1. Determine the unit cost of production under variable costing.

(2 marks)

2. Determine the unit cost of production under absorption costing. (3 marks)

Page | 10

3.

(i) Calculate the finished goods in units.

(2 marks)

(ii) Determine the finished goods inventory cost at the year-end using

absorption costing.

(2 marks)

(iii) Determine the finished goods inventory cost at the year-end using

variable costing.

(2 marks)

4. Determine the operating profit under variable costing

(5 marks)

5. Determine the operating profit under absorption costing

(4 marks)

Total marks for this question: 20 marks

QUESTION 3: Support Department Cost Allocation

Suva Private Hospital has two support departments, Customer services

department and housekeeping department and two revenue-producing

departments, outpatient department (O) and maternity department (M). The

controller for the hospital has decided to use the reciprocal method to

allocate the costs of the support departments to the revenue-producing

departments. She has prepared the following cost equations for the two

support departments. C equals the total cost for the customer services

department, and H equals the total cost for the housekeeping department.

C = \$35,000 + 0.3H

H = \$40,000 + 0.2C

Before the controller was able to complete the allocation, she had to leave

to take care of an emergency. In addition to these equations, she left a

hastily scribbled note indicating that Outpatient department uses 40 percent

of customer service?s output and 20 percent of housekeeping?s output.

REQUIRED

1. Using the reciprocal method calculate the values for departments C and H

(4 marks)

2. Allocate the costs of the two support departments to each of the two

producing departments.

(6 marks)

Total marks for this question: 10 marks

Page | 11

QUESTION 4: Conventional vs. Activity-based Costing

The Pasifika Cement plant has two categories of overhead: maintenance

and inspection. Costs expected for these categories for 2008 are as follows:

Maintenance

Inspection

\$ 60,000

180,000

The plant currently applies overhead using direct labor hours and expected

capacity of 20,000 direct labor hours is available. The data provided below

has been assembled for use in developing a bid for a proposed job. Bid prices

are calculated as full manufacturing cost plus 40 percent markup.

Direct materials

Direct labor

Machine hours

Number of inspections

Direct labor hours

\$1,200

\$6,000

300

3

400

Total expected machine hours for all jobs during the year were 10,000, and

the total expected number of inspections is 1,500.

REQUIRED

1. (i) Compute the pre-determined manufacturing overhead rate using the

current conventional method (label the rate correctly).

(2 mark)

(ii) Compute the total cost of the potential job using the MOH rate in 1 (i).

(3 marks)

(iii) Determine the bid price for the potential job.

(2 marks)

2. (i) Compute the pre-determined manufacturing overhead rates using

activity-based costing (ABC) and assuming maintenance is applied to

jobs using machine hours, while inspection is applied to jobs using

number of inspections (label the rates correctly).

(4 marks)

(ii) Compute the total cost of the job using the rates in (2) (i)

(6 marks)

(iii) Determine the bid price for the potential job assuming ABC is used.

(3 marks)

3. Prepare a memorandum to the plant manager recommending a bid price

for the potential job. Support your recommendation by explaining which

method best reflects the actual cost of the job.

(5 marks)

Total marks for this question: 25 marks

~THE END~

Page | 12

STATUS
QUALITY
Approved

This question was answered on: Feb 21, 2020

Solution~000105432.zip (18.37 KB)