Module Title: Management Accounting 2

Transcription

1 CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ Semester 2 Examinations 2008/09 Module Title: Management Accounting 2 Module Code: ACCT 6004 School: Business Programme Title: Bachelor of Business Stage 2 Bachelor of Business (Hons) inaccounting Stage 1 Programme Code: BBUSS_7_Y2, BACCT_8_Y1 External Examiner(s): Internal Examiner(s): Ms. Marian Duggan Ms. Marie Dorgan, Ms. Ruth Vance, Mr. Philip Brennan Instructions: Answer all questions Duration: 2 Hours Sitting: Summer 2009 Requirements for this examination: Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the correct examination paper. If in doubt please contact an Invigilator.

2 Q1. Multiple Choice Questions Please attempt all parts. 1. If the selling price is 10 per unit, fixed costs are 750,000 and the break-even point is 100,000 units, what is the total contribution to sales ratio? (a) 75% (b) 50% (c) 25% (d) 10% 2. A company incurs the following costs at various activity levels: Activity Level (Units) Total Cost (Euro) 5, ,000 7, ,500 10, ,000 Estimate the variable cost per unit? (a) 25 (b) 30 (c) 35 (d) In the context of management accounting, the Margin of Safety is best described as: (a) The distance that a machine operative should keep between units of output in the production process (b) The amount of budgetary slack included by managers during budget preparation (c) A situation where there have been overheads over absorbed during a period as a result of better production efficiencies (d) A measure of the surplus over the break even point in CVP analysis

3 4. As a general rule, a division of a company should not be closed down if: (a) All other divisions are profitable (b) The contribution by the division is in excess of the avoidable fixed costs (c) Avoidable fixed costs exceed the contribution (d) The fixed costs equal the variable costs 5. A limiting factor may result in products being produced in order of priority. The product with the highest order of priority is most likely to be: (a) The product which uses the least number if units of the limiting factor per unit produced. (b) The products which has the highest level of contribution per unit of limiting factor per unit produced. (c) The product which uses the highest number of units of limiting factor per unit produced. (d) The product with the overall highest level of contribution per unit produced. 6. The contribution to sales (C/S) ratio was 30% in 2007 and 35% in Fixed expenses remained unchanged in both years. In 2008 the volume of sales fell by 10%. Profit in 2008 increased by 15,000 compared with Sales in 2007 and 2008 were: (a) 1,000, ,000 (b) 1,200,000 1,080,000 (c) 960, ,000 (d) 1,110, , The relevant range can be best described as: (a) The range within which the budgeted costs are closest to the actual costs. (b) The range within which the relationship between direct labour and variable overheads remains constant. (c) The range within which the budgeted and actual profit are the same. (d) The range within which fixed costs remain constant.

4 8. At break even point: (a) Fixed costs are not recovered (b) Profits are positive (c) Profits are negative (d) Profits are zero 9. Which of the following describes a fixed cost? (a) Any overhead cost that is incurred in the factory of a manufacturing company. (b) Any selling, general or administrative cost incurred in a manufacturing company. (c) A total cost that remains constant within the relevant range of output. (d) A total cost which fluctuates with changes in output. 10. Which of the following is correct? (a) Contribution = Sales - variable costs. (b) Contribution = Gross margin - fixed costs. (c) Gross margin = Sales - variable costs. (d) Gross margin = Contribution - variable costs. The following information is relevant for questions 11 and 12: Adverse Ltd produced an operating statement showing a favourable material usage variance of 45,000 and an adverse price variance of 27,000. The standard for this material is 10 Euro each based on budgeted production of 10,000 units in the period. The actual production in the period was 9,000 units. 11. The actual quantity of material used in production during the period was: (a) 22,500 kg (b) 20,000 kg (c) 18,000 kg (d) 13,500 kg

5 12. The actual value of material purchased in the period was: (a) 135,000 (b) 162,000 (c) 189,000 (d) 200, In standard costing a variance is the difference between: (a) A standard cost and an actual cost (b) An actual cost and a controllable cost (c) A predetermined overhead cost and a controllable cost (d) A controllable cost and a standard cost 14. A flexible budget can be described as: (a) A budget which can deal with marginal and absorption costing methods simultaneously. (b) A budget which is suitable for both for a manufacturing or a service based business. (c) A budget which can be adapted to deal with a situation where budgeted levels of activity are different to the actual levels of activity. (d) A budget which is automatically adjusted to cater for changes in the prices of inputs. 15. A company produces 20,000 computer keyboards with the following unit cost: Euro Direct material 10 Direct labour 12 Variable overhead 7 Fixed overhead 7 An outside company has offered to supply similar keyboards at 24 each. Accepting the order would: (a) Save the company 60,000 (b) Save the company 100,000 (c) Lose the company 40,000 (d) Lose the company 100,000

6 16. A company has sales as follows: Jan Feb Mar Apr 150, , , , % of customers pay in the month of sale 25% pay one month after sale 5% pay 2 months after sale The amount collected in customer receipts for March was: (a) 156,624 (b) 156,000 (c) 153,600 (d) 151, The planned sales volume is 400 units per month. The planned stock level at the start of the month is 60 units and the planned stock level at the end of the month is 70 units. The cost per unit is 4. The purchases budget for the month is: (a) 1,560 (b) 1,600 (c) 1,640 (d) 2, Which of the following could explain a favourable labour efficiency variance? (a) A plan to spend more in the future on direct labour training. (b) A high level of absenteeism amongst direct labour. (c) Repeated breakdowns in plant and machinery. (d) An error in setting standard labour efficiency at an artificially low level. 19. Which of the following is the best description of a budget? (a) A budget is a report from the employees explaining why economic factors make it important to give them a pay rise. (b) A budget does not require to be monitored because it is an estimate. (c) A budget is a review of events that have taken place over the past accounting period. (d) A budget is a formal process of planning that guides subsequent action.

7 20. Which of the following is likely to lead to a favourable material usage variance? (a) A reduction in the cost of material during the year. (b) Using more material in total than that which was specified in the budget for the year. (c) An improved labour efficiency variance. (d) The percentage of material scrapped is less than the budgeted percentage. (Total 30 Marks) Q2. Environmental Management Accounting Define environmental costs. Discuss the Key application fields for the use of Environmental Management Accounting. (Total 30 Marks)

8 Q3. Variances Bosco Ltd. produces a product, called Box at its premises in Rathduff. The standard cost of one unit of Box is as follows; Materials (5kgs x 20 per kg) 100 Labour (4hrs x 10 per hr) 40 Variable overheads (4 hrs x 4 per hr) 16 Budgeted production was 1,200 units Actual results were; Production: 1,000 units Materials: (4,850 kgs) 92,150 Labour: (4,200 hrs) 42,420 Variable overheads: 18,900 Required: Calculate the following variances: 1. Materials Price Variance 2. Materials Usage Variance 3. Labour Rate Variance 4. Labour Efficiency Variance 5. Variable Overhead Expenditure Variance 6. Variable Overhead Efficiency Variance (Total 20 Marks)

9 Q4. Budgeting Your company Lispatrick PLC produces two products, the Upper and the Lower, each comprised of the same components Fronts, Middles and Backs. Each Upper contains three units of Fronts, two units of Middles and four units of Backs while each Lower contains four units of Fronts, two units of Middles and three units of Backs. You are also given the following information: Upper Lower Budgeted sales for June 2009 (units) 20,000 30,000 Selling price Stock, 1 June 2009 (units) 2,500 3,200 Expected stock 30 June 2009 (units) 2,000 3,000 Losses in production (units) Expected hours per unit Expected hourly rate (labour) Components Fronts Middles Backs Stock 1 June 2009 (Units) 20,000 24,000 26,000 Expected stock 30 June 2009 (units) 18,000 27,000 22,000 Component costs Losses in transit and storage (percentage of 2% 2% 3% purchases) You are required: (in respect of June 2009 to prepare): (a) The production budget (5 Marks) (b) The material usage budget (3 Marks) (c) The material purchases budget (7 Marks) (d) The labour budget (5 Marks) (Total 20 Marks)