Lecturer: Xiaosong Zheng Sample exam paper Course: Management Accounting Autumn 2013 Course code: TAK2830 Open book exam Please answer all questions! Please clearly write down your name and student number on the following line: NAME: __________________________ STUDENT NUMBER: __________________ Part 1. Multiple choice questions (select one correct answer, 3 marks each, 60 marks total) Please record answers to multiple choice questions in the following table: Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 1. Managerial accounting includes the planning function. Which of the following items would be part of the planning function of a business's managerial accounting? A) Comparing actual performance to previously budgeted amounts B) Creating detailed budgets C) Implementing operational plans D) Evaluating results of operations 2. The journal entry to issue $500 of direct materials and $30 of indirect materials to production includes which of the following? A) Debit to Work in process for $500 and debit to Finished goods for $30 B) Debit to Manufacturing overhead for $530 C) Debit to Work in process for $500 and debit to Manufacturing overhead for $30 D) Debit to Work in process inventory for $530 3. Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. What was the predetermined manufacturing overhead rate? A) 80% of direct labor cost B) $1.25 per direct labor hour C) 125% of direct labor cost D) $35.00 per direct labor hour 4. LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2012, the first department, Mixing, had a zero beginning balance. During January, 40,000 liters of chemicals were started into production. During the month, 32,000 liters were completed, and 8,000 remained in process, partially completed. In the Mixing Department, all raw materials are added at the beginning of the production process, and conversion costs are applied evenly through the process. During January, the Mixing Department incurred $48,000 in direct materials costs and $211,600 in conversion costs. At the end of the month, the ending inventory in the Mixing Department was 60% complete with respect to conversion costs. First, calculate the equivalent units, then calculate the cost per equivalent unit, and then calculate the total cost of the product that was completed and transferred out during January. The total cost of product transferred out was: A) $211,600. B) $48,00 ...

1. Lecturer: Xiaosong Zheng
Sample exam paper
Course: Management Accounting
Autumn 2013
Course code: TAK2830
Open book exam
Please answer all questions! Please clearly write down your
name and student number on
the following line:
NAME: __________________________ STUDENT NUMBER:
__________________
Part 1. Multiple choice questions (select one correct answer, 3
marks each, 60 marks total)
Please record answers to multiple choice questions in the
following table:
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
1. Managerial accounting includes the planning function.
Which of the following items
would be part of the planning function of a business's
managerial accounting?
A) Comparing actual performance to previously budgeted
amounts

2. B) Creating detailed budgets
C) Implementing operational plans
D) Evaluating results of operations
2. The journal entry to issue $500 of direct materials and $30 of
indirect materials to
production includes which of the following?
A) Debit to Work in process for $500 and debit to Finished
goods for $30
B) Debit to Manufacturing overhead for $530
C) Debit to Work in process for $500 and debit to
Manufacturing overhead for $30
D) Debit to Work in process inventory for $530
3. Arabica Manufacturing Company uses a predetermined
manufacturing overhead rate
based on a percentage of direct labor cost. At the beginning of
2012, they estimated total
manufacturing overhead costs at $1,050,000, and they estimated
total direct labor costs at
$840,000. What was the predetermined manufacturing overhead
rate?
A) 80% of direct labor cost
B) $1.25 per direct labor hour
C) 125% of direct labor cost
D) $35.00 per direct labor hour
4. LDR Manufacturing produces a pesticide chemical and uses
process costing. There
are three processing departments-Mixing, Refining, and
Packaging. On January 1, 2012,
the first department, Mixing, had a zero beginning balance.
During January, 40,000 liters
of chemicals were started into production. During the month,
32,000 liters were
completed, and 8,000 remained in process, partially completed.

3. In the Mixing
Department, all raw materials are added at the beginning of the
production process, and
conversion costs are applied evenly through the process.
During January, the Mixing Department incurred $48,000 in
direct materials costs and
$211,600 in conversion costs. At the end of the month, the
ending inventory in the
Mixing Department was 60% complete with respect to
conversion costs. First, calculate
the equivalent units, then calculate the cost per equivalent unit,
and then calculate the
total cost of the product that was completed and transferred out
during January.
The total cost of product transferred out was:
A) $211,600.
B) $48,000.
C) $37,200.
D) $222,400.
5. Quality Stereo Company has provided the following
information regarding its activity-
based costing system:
orders and the cost
allocation rate is $75 per purchase order.
of parts used and

4. the cost allocation rate is $1.00 per part.
number of units produced
and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts, and the direct materials cost
per unit is $70. There are
no direct labor costs. Quality Stereo has an order for 1,000
stereos which will require 50
purchase orders in all. What is the total cost of the 1,000
stereos?
A) $125,750
B) $55,750
C) $123,750
D) $122,000
6. Axelrod Company has fixed costs of $250,000. Highest
production volume this year
was in January when there were 100,000 units produced and
total costs of $550,000. In
June, the company produced only 60,000 units. How much was
the total cost in June?
A) $378,000
B) $430,000
C) $330,000
D) $414,500
7. Porterhouse Company has both fixed and variable production
costs. If volume goes up
by 20%, how would that affect the total variable costs?
(Assume all volumes are within
the relevant range.)
A) Would go up 20%
B) Would remain the same

5. C) Would go up by some amount less than 20%
D) Would go down
8. Reevis Company sells hand-sewn shirts for $25 per unit, and
has fixed costs of $7,500.
Their contribution margin ratio is 20%. How many units do they
have to sell to break
even?
A) 950
B) 1,750
C) 1,125
D) 1,500
9. Argyle sells steel beams to building contractors in two sizes:
regular and heavy.
Argyle sells 4 regular beams for every one heavy beam. Cost
data are as follows:
Regular Heavy
Price per unit $20.00 $28.00
Variable cost per unit $16.00 $20.00
Argyle's fixed costs are $2,880 per month. How much is the
breakeven point for total
sales revenues?
A) $12,960
B) $13,240
C) $9,600
D) $12,880
10. Burr Hill golf course is planning for the coming season.
Investors would like to earn a

6. 10% return on the company's $50,000,000 of assets. The
company primarily incurs fixed
costs to groom the greens and fairways. Fixed costs are
projected to be $25,000,000 for
the golfing season. About 500,000 rounds of golf are expected
to be played each year.
Variable costs are about $10 per round of golf. The Burr Hill
golf course has a favorable
reputation in the area and therefore, has some control over the
price of a round of golf.
Using a cost-plus approach, what price should Burr Hill charge
for a round of golf?
A) $50
B) $60
C) $70
D) $80
11. A company produces 100 microwave ovens per month, each
of which includes one
electrical circuit. The company currently manufactures the
circuit in-house but is
considering outsourcing the circuits at a contract price of $28
each. Currently, the cost of
producing circuits in-house includes variable costs of $26 per
circuit and fixed costs of
$5,000 per month.
Assume the company could eliminate all fixed costs by
outsourcing, and that there is no
alternative use for the facilities presently being used to make
circuits. If the company
outsources, how will it affect monthly operating income?
A) Operating income will go up by $2,300.
B) Operating income will go down by $2,800.

7. C) Operating income will go down by $200.
D) Operating income will go up by $4,800.
12. Sun Company is considering purchasing new equipment
costing $350,000. Sun's
management has estimated that the equipment will generate cash
inflows as follows:
Year 1 $100,000
Year 2 $100,000
Year 3 $125,000
Year 4 $125,000
Year 5 $75,000
Using the factors in the table below, please calculate the net
present value of the net cash
inflows above, using a discount rate of 10%. Please round all
calculations to the nearest
whole dollar.
Present
Value of $1
5% 6% 7% 8% 9% 10%
1 0.952 0.943 0.935 0.926 0.917 0.909
2 0.907 0.890 0.873 0.857 0.842 0.826
3 0.864 0.840 0.816 0.794 0.772 0.751
4 0.823 0.792 0.763 0.735 0.708 0.683
5 0.784 0.747 0.713 0.681 0.650 0.621
A) $399,325
B) $342,800
C) $401,667
D) $399,761

8. 13. Which of the following best describes the internal rate of
return?
A) The discount rate that makes the cost of the investment equal
to the present value of
the cash flows
B) The discount rate that is used to borrow funds from a lender
C) The ratio of average annual income to average amount
invested
D) The rate at which an investment pays back
14. Norton Company prepared the following sales budget:
Month Budgeted Sales
March $200,000
April $180,000
May $220,000
June $260,000
Cost of goods sold is budgeted at 60% of sales, and the
inventory at the end of February
was $36,000. Desired inventory levels at the end of each month
are 30% of the next
month's cost of goods sold. What is the desired beginning
inventory on June 1?
A) $36,000
B) $39,600
C) $43,200
D) $46,800
15. Craig Manufacturing Company's budgeted income statement
includes the following

9. data:
Data extracted from budgeted
income statement Mar Apr May Jun
Sales $120,000 $90,000 $95,000 $100,000
Commission exp. - 15% of sales 18,000 13,500 14,250 15,000
Salary exp 30,000 30,000 30,000 30,000
Miscellaneous expense — 4% of
sales 4,800 3,600 3,800 4,000
Rent expense 3,600 3,600 3,600 3,600
Utility expense 1,900 1,900 1,900 1,900
Insurance expense 2,100 2,100 2,100 2,100
Depreciation expense 4,400 4,400 4,400 4,400
The budget assumes that 60% of commission expenses are paid
in the month they were
incurred and the remaining 40% are paid one month later. In
addition, 50% of salary
expenses are paid in the month incurred and the remaining 50%
are paid one month later.
Miscellaneous expenses, rent expense and utility expenses are
assumed to be paid in the
same month in which they are incurred. Insurance was prepaid
for the year on January
1.
How much is the total of the budgeted cash payments for
operating expenses for the
month of June?
A) $54,200
B) $53,250
C) $54,400
D) $53,900
16. AAA Company is preparing its 3rd quarter budget and
provides the following data:

10. Jul Aug Sep
Cash collections $50,000 $40,000 $48,000
Cash payments:
Purchases of inventory 31,000 22,000 18,000
Operating expenses 12,000 9,000 11,600
Capital expenditures 13,000 25,000 0
Cash balance at June 30 is projected to be $4,000. The
company is required to maintain a
minimum cash balance of $5,000 and is authorized to borrow at
the end of each month to
make up any shortfalls. It may borrow in increments of $5,000
and pays interest monthly
at an annual rate of 5%. All financing transactions are assumed
to take place at the end
of the month. Loan balance should be repaid in increments of
$5,000 when there is
surplus cash.
What is the budgeted cash balance at the end of July, after
required financing
transactions?
A) $0
B) $5,000
C) $3.000
D) $8,000
17. The Carolina Products Company has just completed a
flexible budget analysis of 2nd
quarter operating income, as shown here:

11. Actual
Flexible
Budget Flexible
Sales
Volume Static
Results Variance Budget Variance Budget
Units/volume 12,800 0 12,800 800 F 12,000
Sales revenue $62,720 $1,280 U $64,000 $4,000 F $60,000
Variable expenses 27,520 640 U 26,880 1,680 U 25,200
Contribution
margin 35,200 1,920 U 37,120 2,320 F 34,800
Fixed expenses 34,100 100 U 34,000 0 34,000
Operating
income/(loss) $1,100 $2,020 U $3,120 $2,320 F $800
Based on the above data, which of the following statements
would be a correct
interpretation of the flexible budget variance for variable
expenses?
A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs
18. Allbrand Company uses standard costs for their
manufacturing division. Standards
specify 0.1 direct labor hours per unit of product. At the
beginning of the year, the static
budget for variable overhead costs included the following data:
Production volume: 5,000 units
Estimated variable overhead costs: $12,500
Estimated direct labor hours: 500 hours

12. At the end of the year, actual data were as follows:
Production volume: 4,000 units
Actual variable overhead costs: $11,760
Actual direct labor hours: 480 hours
How much is the standard price per hour for variable overhead?
A) $25.00 per direct labor hour
B) $20.50 per direct labor hour
C) $28.00 per direct labor hour
D) $26.88 per direct labor hour
19. A product line at Coca-Cola is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
20. Marcia Consumer Products has several divisions, including
the Education Division
and the Recreation Division. Data on the two divisions are
shown here:
Education Division Recreation Division
Current ROI 9.2% 10.0%
Current WACC 8.0% 8.0%
Operating income $110,000 $200,000
Effective tax rate 20.0% 20.0%
Average total assets $1,200,000 $2,000,000
Current liabilities $30,000 $30,000
How much is the EVA for the Education Division?

13. A) $12,890
B) $4,600
C) ($5,600)
D) ($12,750)
Part 2. (10 marks)
Clark Manufacturing makes blank CDs; it is a very competitive
market and the company
follows a target pricing strategy. Currently the market price for
a unit of product (one
unit equals a package of 100 CDs) is $18.00. Clark's production
costs are shown below:
Direct materials $5.00 per unit
Direct labor $2.90 per unit
Indirect production costs $6.42 per unit
Non-manufacturing costs $3.20 per unit
Clark uses activity-based costing for its indirect production
costs and provides the
following information about this particular product:
The company's objective is to earn 5% profit on the sales price
of the product. Clark
carried out a value engineering study and decided that they
could make the processing
activity more efficient and save costs. They have determined
that if they can reduce the

14. activity rate for the processing activity down low enough, they
can hit their profit
objective. What activity rate would be needed to achieve the 5%
objective they seek?
(Please round to nearest cent.)
Part 3. (10 marks)
Atlas Manufacturing is closing the year 2012. Atlas uses
standard costing methodology
in its accounting system and for internal performance reporting.
Atlas's ending balances
are shown here:
Using the format below, please prepare a statement of operating
income.
Sales revenue (standard)
Sales revenue variance
Sales revenue (actual)
Cost of goods sold (standard)
Manufacturing variances
(Credit balances in parentheses)
Direct materials price variance
Direct materials efficiency variance
Direct labor price variance
Direct labor efficiency variance
Variable overhead spending variance
Variable overhead efficiency variance

15. Fixed overhead spending variance
Fixed overhead volume variance
Cost of goods sold (actual)
Gross profit
Selling & admin. expenses
Net operating income/(loss)