Exam

Management Accounting Intermediate

Level
6012B0237 & 6012B0322
8 July 2013

Date: 8 July 2013

Time: 09.00-12.00
Location: IWO
Note:
You can answer questions in English or in Dutch. In this exam the comma
(,) is used as thousands separator and the period (.) is used as decimal
separator.

Rules, regulations etc:

* You are allowed to use a normal calculator (not a graphic calculator),
and if necessary an unmarked dictionary. Otherwise, use of books,
notes, etc is not allowed. Switch off your mobile phone and take it off
your desk.
* If asked, you should be able to identify yourself.
* You need to have registered for this exam through CTIS. If you did not
do so, you have to apply to the Onderwijsbalie (Bureau Examen- en
Studentenzaken) to receive your grade. Dont contact the instructors
for this, they are not allowed to give you your grade.
* You can take this exam sheet with you after you have finished it.
* Write your name and student number on every sheet that you
hand in.
Grading:
This exam consists of 4 exercises. With each question, the number of
points is indicated. In total you can obtain 50 points for this exam. You
will have passed the course if your total is 28 points or more.
Results and review:
* The results will be posted on Blackboard
* The review of the exam will also be announced via Blackboard

Assignment 1: (max. 15 points)

Lane Company manufactures a single product that requires a great deal of hand labor.
Overhead cost is applied on the basis of direct labor- hours. The companys condensed
flexible budget for manufacturing overhead is given below:
Overhead costs
Variable costs
Fixed costs

Cost per
labor-hour
2

Total overhead cost

Direct Labor- Hours

45,000
60,000
75,000
90,000
120,000
150,000
480,000
480,000
480,000
570,000

600,000

630,000

The companys product requires 3 pounds of material that has a standard cost of 7
per pound and 1.5 hours of direct labor time that has a standard rate of 6 per hour.
The company planned to operate at a budgeted activity level of 60,000 direct laborhours and to produce 40,000 units of product during the most recent year.
Actual activity and costs for the year were as follows:
Number of units produced
Actual direct labor-hours worked
Actual variable overhead cost incurred
Actual fixed overhead cost incurred
a.
b.
c.
d.

42,000
65,000
123,500
483,000

Compute the predetermined overhead rate for the year. Break the rate down
into variable and fixed elements (2p)
Compute the standard cost per unit, showing all the details for all
manufacturing costs (4p)
Determine the reason for any under-or over-applied overhead for the year by
computing the variable and the fixed overhead variances (8p)
Suppose the company had chosen 65,000 direct labor-hours as the budgeted
activity rather than 60,000 hours. State which, if any, of the variances
computed above would have changed, and explain how the variance(s) would
have changed. No computations are necessary (1p)

Exam management accounting intermediate level 8 July 2013

Assignment 2: (max. 12 points)

The Timmerman Toy Company manufactures a line of dolls and a doll dress sewing kit.
Demand for the dolls is increasing, and management requests assistance from you in
determining an economical sales and production mix for the coming year. The
companys Sales Department provides the following information:
Product
Debbie
Trish
Sarah
Mike
Sewing kit

Demand next year (units)

50,000
42,000
35,000
40,000
325,000

Estimated selling price per unit

13.50
5.50
21.00
10.00
8.00

The standard costs for direct materials and direct labor per unit are as follows:
Product
Debbie
Trish
Sarah
Mike
Sewing kit

Direct Materials
4.30
1.10
6.44
2.00
3.20

Labor
3.20
2.00
5.60
4.00
1.60

The companys plant has a capacity of 130,000 direct labor-hours per year on a singleshift basis. The companys present employees and equipment can produce all five
products.
The direct labor rate is 8 per hour; this rate is expected to remain unchanged during
the coming year. Fixed costs total 520,000 per year. Variable overhead costs are 2
per direct labor-hour. All of the companys non-manufacturing costs are fixed. The
companys present inventory of finished products is negligible and can be ignored.
a. Determine the production levels for the five models that will maximize profits
during the coming year. (10 p)
What is the highest price, in terms of a rate per hour, that Timmerman
Company would be willing to pay for additional capacity (direct labor hour
time) ? (2 p)

Exam management accounting intermediate level 8 July 2013

Assignment 3: (max. 14 points)

Feltkamp Manufacturing Company produces electronic components on a job order
basis. Most business is gained through bidding on jobs. Most firms competing with
Feltkamp bid full cost plus a 30% markup. Recently, with the expectation of gaining
more sales, Feltkamp dropped its markup from 40% to 30%. The company operates
two service departments and two production departments.
Manufacturing overhead costs and quantities of activities for each department are
shown below:

Overhead costs
Number of employees
Maintenance hours
Machine hours
Direct labor hours

Service Departments
Personnel Maintenance

Production Departments
Machining Assembly

100,000
5
1,500
0
0

400,000
5
7,500
10,000
1,000

200,000
5
200
0
0

300,000
40
1,000
1,000
10,000

Costs of the personnel department are allocated on the basis of employees and those
of the maintenance department on the basis of maintenance hours.
Departmental rates are used to assign overhead costs to products.
The machining department uses machine hours, and the assembly department uses
direct labor hours for this purpose.
The firm is preparing to bid on job 123, which requires three machine hours per unit
produced in the machining department and five direct labor hours per unit produced
in the assembly department. The expected direct materials and direct labor costs per
unit are 450.
a

Allocate the service department costs to the production departments using the
direct method (2p)

Determine the bid price per unit produced for job 123 using the direct method
(5p)

Assume that the costs of the service department incurring the greatest costs are
allocated first, and allocate the service department costs to the production
departments using the step-down method. When allocating costs, assume the
maintenance department has 0 employees (2p)

Determine the bid price per unit produced for job 123 using the
method in part c (5p)

Exam management accounting intermediate level 8 July 2013

Assignment 4: (max. 9 points)

Relative Principle Ltd. makes blended tropical fruit drinks in two stages.
Fruit Juices are extracted from fresh fruits and then blended in the Blending
Department. The blended juices are then bottled and packed for shipping in the
Bottling Department. The following information pertains to the operations of the
Blending Department for January.

Work in progress, beginning

Started into production
Completed and transferred out
Work in progress, ending

Units
30,000
170,000
150,000
50,000

Percentage completed
Materials
Conversion
100%
80%
100%

20%

Cost in the beginning work in progress stock and cost added during January were as
follows for the Blending Department;

Work in progress, beginning

Cost added during January

Materials
86,600
1,005,400

Conversion
84,400
816,100

Question a
Calculate the total costs assigned to units completed and transferred out to the
Bottling Department in January and the total costs of the end-of-month work in
progress using the weighted average method (4p)
Question b
Calculate the total costs assigned to units completed and transferred out to the
Bottling Department in January and the total costs of the end-of-month work in
progress using the fifo method (5p)

This is the end of the exam. Make sure that your name and student
number is on all answer sheets you hand in. You can take this
exam sheet with you.

Exam management accounting intermediate level 8 July 2013

Exam management accounting intermediate level 8 July 2013