Copyright Reserved Serial No. Institute of Certified Management Accountants of Sri Lanka. Technician Stage September 2010 Examination

Transcription

1 Copyright Reserved Serial No Technician Stage September 2010 Examination Examination Date : 25 th September 2010 Number of Pages : 05 Examination Time: 9.30 a:m p:m. Number of Questions: 05 Instructions to Candidates 1. Time allowed is three (3) hours 2. Answer all questions 3. The answers should be given in the English Language Subject Subject Code Management Accounting Fundamentals (MAF / 502) Question No. 1 (20 Marks) Select the most correct answer to each question. Write the number of the selected answer in your answer booklet with the English letter. E.g. (1) a, (2) b etc (1) The five-step decision process (a) includes planning and control activities. is performed exclusively by management accountants. (c) is not often used, as the costs exceed the benefits. (d) must be performed following GAAP guidelines. (2) What is the total fixed cost of the shipping department of EZ-Mail Clothing Co. if it has the following information for 2010? Salaries Rs.800,000/- 75% of employees on guaranteed contracts Packaging Rs.400,000/- depending on size of item(s) shipped Postage Rs.500,000/- depending on weight of item(s) shipped Rent of warehouse space Rs.250,000/- annual lease (a) Rs. 850,000/- Rs. 900,000/- (c) Rs.1,050,000/- (d) Rs.1,950,000/- (3) Which type of company converts materials into finished products? (a) Not-for-profit. Service. (c) Merchandising. (d) Manufacturing. 1

2 (4) The three categories of inventories commonly found in many manufacturing companies are: (a) Direct materials, direct Labour and indirect manufacturing costs. Purchased goods, period costs and cost of goods sold. (c) Direct materials, work in progress and finished goods. (d) LIFO, FIFO and weighted average. (5) The primary focus of cost management is to (a) help managers make different decisions. calculate product costs. (c) aid managers in budgeting. (d) distinguish between value added cost and non-value added cost. (6) The first step in the seven-step approach to job costing is to (a) select the cost-allocation base to use in assigning indirect costs to the job. identify the direct costs of the job. (c) identify the job that is the chosen cost object. (d) identify the indirect-cost pools associated with the job. (7) Manufacturing Overhead Control Account (a) represents actual overhead costs incurred. has a normal debit balance. (c) is a control account with a subsidiary ledger detailing the components of manufacturing overhead. (d) All of the above. (8) Which of the following is not an advantage in using standard costs for variance analysis? (a) Standards simplify product costing. Standards are developed using past costs and are available at a relatively low cost. (c) Standards are usually expressed on a per-unit basis. (d) Standards can take into account expected changes planned to occur in the budgeted period. (9) When the high-low method is used to estimate a cost function, the variable cost per unit is found by (a) Performing regression analysis on the associated cost and cost driver database. Subtracting the fixed cost per unit from the total cost per unit based on either the highest or lowest observation of the cost driver. (c) Dividing the difference between the highest and lowest observations of the cost driver by the difference between costs associated with the highest and lowest observations of the cost driver. (d) Dividing the difference between costs associated with the highest and lowest observations of the cost driver by the difference in the change in activity. (10) Which of the following should not be considered for every option in the decision process? (a) Relevant revenues. Relevant costs. (c) Historical costs. (d) Opportunity costs. (10 2 Marks = Total 20 Marks) 2

3 Question No. 2 (20 Marks) Answer the following questions. (a) In their use how does management accounting differ from financial accounting? (05 Marks) What is the relevant range? What role does the relevant range concept play in explaining how costs behave? (03 Marks) (c) Describe the overtime premium and idle time categories of indirect labour. (03 Marks) (d) Define cost pool, cost driver, cost allocation and cost allocation base. (04 Marks) (e) Why should managers worry about product over costing and under costing? (05 Marks) Question No. 3 (20 Marks) The Gold Plus Company manufactures medals. Its manufacturing plant has the capacity to produce 10,000 medals each month. Current production and sales are 7,500 medals per month. The company normally charge Rs.1,500/- per medal. Cost information for the current activity level is given below: Rs. Variable Cost Direct Materials 2,625,000 Direct Manufacturing Labour 3,000,000 Variable Batch Manufacturing Costs (150 batches Rs.5,000/- per batch) 750,000 Fixed Manufacturing Costs 2,750,000 Fixed Marketing Costs 1,750,000 Total Costs 10,087,500 The company has just received a special one time order for 2,500 medals at Rs.1,000/- per medal. Accepting the special order would not affect the company s regular business. Gold Plus makes medals for its existing customers in batch sizes of 50 medals (150 batches 50 medals per batch = 7,500 medals). The special order requires Gold Plus to make the medals in 25 batches of 100 each. Required: (a) Should the company accept this order? Show your calculations. (10 Marks) Suppose the plant capacity were only 9,000 medals instead of 10,000 medals each month and the special order must either be taken in full or be rejected completely, should company accept the order? Show your calculations. (10 Marks) 3

4 Question No. 4 (20 Marks) (a) When Standard Costing System is introduced by the management, there are four different types of Performance Standards that an organization could aim for. List the four different types of Performance Standards. (04 Marks) A manufacturer of an article for which there is a high demand for the product advised his team of managers to prepare standard cost per unit for the product. The Management Accountant coordinated with other managers and prepared the standard cost per unit, which is given below. Standard Cost Per Unit Direct Material: 1½ Kgs per Rs.40/- per Kg. 60 Direct Labour: 2 Rs.15/- per hour 30 Variable Production Rs.10/- per hour 20 Fixed Production Overheads per unit 10 Total Standard Cost per unit 120 Monthly Production Budget 2,000 units Total Fixed Production Overheads Rs.20,000/- for the month Standard Fixed Production Overhead per unit is based on unit of output method. Actual Results No. of units produced 2,100 Material used 3100 a price of Rs.42/- per Kg. Labour Hours Rs.16/- per hour Variable Overheads Rs.12/- per hour Actual Fixed Overhead Rs.22,000/- You are required to prepare: (i) (ii) (iii) (iv) (v) (vi) (vii) Material Price Variance. Material Usage Variance. Labour Rate Variance. Labour Efficiency Variance. Variable Overhead Expenditure Variance. Variable Overhead Efficiency Variance. Fixed Overhead Expenditure Variance. (viii) Fixed Overhead Volume Variance. (16 Marks) 4

5 Question No. 5 (20 Marks) Brown & Company retail a product Super XL. The estimated income statement for the next period is as follows. Super XL Units sold 150,000 Rs.20/- per unit 3,000,000 Less: Total Variable Rs.14/- per unit 2,100, ,000 Less: Fixed Cost (300,000) Operating Income 600,000 Assuming that the planned profit is achieved. You are required to: (a) Calculate the breakeven point in units and in sales value. (03 Marks) (c) If the variable cost increases to Rs.16/- per unit and the sale price and fixed cost remain unchanged. How many units should be sold in order to earn a profit of Rs.720,000/-. (04 Marks) Assume that unit sale price decreases to Rs.19/- and the variable cost per unit increased to Rs.15/-. Calculate the number of units to be sold in order to maintain the same profit of Rs.600,000/-. (04 Marks) (d) State the main difference between the Marginal Costing & Absorption Costing. (02 Marks) (e) State the assumptions made in breakeven analysis. (04 Marks) (f) From the following information, calculate; (i) Breakeven Sales Value. (ii) Fixed Cost. Sale Value Profit 400,000 80, , ,000 (03 Marks) End of Question Paper 5