MANAGERIAL ACCOUNTING

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AKUNTANSI FEB UGM TIME: 90 minutes

““Be yourself; everyone else is already taken.” ~Oscar Wilde

 1. Firms may select projects with short paybacks because, except
a. projects with longer paybacks may be riskier
b. shorter paybacks may help reduce liquidity problems
c. if the risk of obsolescence is high, the firm may want to recover the funds rapidly
d. the opportunity cost needs to be considered.
2. A firm is considering two projects with the following cash flows:
Project A Project B
Year 1 $ 40,000 $140,000
Year 2 60,000 60,000
Year 3 140,000 40,000
Each project requires an investment of $120,000.
Which project will have the higher net present value?
a. Project A
b. Project B
c. Project A and Project B will have the same net present value.
d. The question cannot be answered from the information provided.
3. If NPV and IRR produce different rankings, which method should be used in choosing investment projects?
a. Payback
b. accounting rate of return
c. net present value
d. internal rate of return
4. Lean manufacturing is an approach to manufacturing that focuses on
a. sequential processing rather than cell manufacturing
b. eliminating waste and maximize customer value
c. acceptable quality levels, rather than zero-defect quality philosophy
d. production supply rather than customer demand
5. A value stream reflects
a. all the activities that are performed
b. only the value added activities
c. only the non- value added activities
d. only the activities that are directly associated with a particular product
6. Life-cycle cost management emphasizes
a. cost control during production.
b. cost reduction during the development stage.
c. normal costing.
d. process costing.
7. The actual transfer price that a company sets
a. nets out for the company as a whole
b. can affect divisional behavior
c. can affect income taxes
d. All of the above are correct.
8. Investment center managers would be evaluated based on
a. operating income of the profit center
b. return on investment
c. economic value added
d. all of the above
9. Return on investment can be broken into two components:
a. profit margin and asset turnover
b. contribution margin and asset turnover
c. segment margin and asset turnover
d. profit margin and inventory turnover

““Be yourself; everyone else is already taken.” ~Oscar Wilde

10. Transfer prices are set using which of the following?
a. market prices
b. negotiated price
c. cost plus
d. all of the above are correct
11. The idea underlying the zero-damage view (lowest environmental costs are attainable at the zero-damage point) is
a. failure costs are cheaper than detection costs
b. failure costs are cheaper than prevention costs
c. prevention is cheaper than the cure
d. none of the above
12. Which of the following is a value-added environmental activity?
a. training employees
b. inspection processes
c. cleaning up water pollution
d. All of the above are value-added activities.
13. The principal objective of reporting quality costs is
a. to improve and facilitate managerial planning, control, and decision making.
b. to document corporate activity
c. to maintain an acceptable level of quality
d. to improve the managerial staffing and coordination functions
14. Life-cycle cost management is particularly important for firms that have
a. short life cycles because those firms have less opportunity to take advantage of the time value of
money
b. long life cycles because those firms have more opportunity to take advantage of the time value of
money
c. short life cycles because those firms have less opportunity to enhance profit performance through
product redesign or cost reduction
d. long life cycles because those firms have more opportunity to enhance profit performance
through product redesign or cost reduction
Informasi untuk soal 15-16
On June 1, Opal, Inc., received an order for goods costing 100,000 Deutsche marks from a German customer. Payment for
the goods is due August 1. The exchange rates for $1 U.S. are as follows:

Exchange Rates
of $1 for Deutsche Marks
Spot rate, June 1 5.60
Forward rate, August 1 5.70
Spot rate, August 1 6.00
15. If Opal does NOT hedge foreign currency transactions, the exchange gain or loss would be (round to the nearest
dollar)
a. $1,190 loss
b. $1,190 gain
c. $313 loss
d. $313 gain
16. If Opal's policy is to hedge foreign currency transactions, the exchange gain or loss would be (round to the nearest
dollar)
a. $1,190 gain
b. $1,190 loss
c. $313 gain
d. $313 loss

““Be yourself; everyone else is already taken.” ~Oscar Wilde

SHORT ESSSAY

CAPITAL INVESTMENT DECISIONS

Glady, Inc., is considering the purchase of production equipment that costs $800,000. The equipment is expected to
generate annual cash inflows of $250,000. The equipment is expected to have a useful life of five years with no salvage
value. The firm's cost of capital is 14 percent.
Required:
a. Payback for Glady's
b. If depreciation is $190,000 per year, Glady's accounting rate of return/ARR
c. Excluding the effect of income taxes, Glady's NPV

Answers:
a. Payback for Glady's project is $800,000/$250,000 = 3.2 years
b. If depreciation is $190,000 per year, Glady's accounting rate of return based on the average investment would be
($250,000 - $190,000)/($800,000/2) = 15%
c. Excluding the effect of income taxes, Glady's net present value of the project is
Investment $(800,000)
Present value of cash inflows
($250,000 3.433) 858,250
Net present value $ 58,250

DECENTRALIZATION & PERFORMANCE EVALUATION

The following results for the year are for the Clark Division of First Enterprises:
Sales $150,000
Variable costs 50,000
Contribution margin $100,000
Fixed expenses 40,000
Segment income $ 60,000
Clark's average operating assets are $300,000. Clark's minimum required rate of return is 15 percent.
Required:
a. Profit margin for the Clark Division
b. Asset turnover for the Clark Division
c. Return on investment/ROI for the Clark Division
Answers:
a. Profit margin for the Clark Division is $60,000/$150,000 = 40.0%
b. Asset turnover for the Clark Division is $150,000/$300,000 = 50.0%
c. Return on investment for the Clark Division is $60,000/$300,000 = 20.0%

ENVIRONMENTAL COST MANAGEMENT

Environ Corporation reported $10,000,000 in operating costs during its fiscal year ended December 31, 2007. Environ
desires to maintain low levels of environmental costs. The goal is to reduce environmental costs to less than 15% of total
operating costs. Listed below are a number of environmental costs obtained by the controller.

recycling scrap $100,000

cleaning up contaminated soil 200,000
operating pollution control equipment 300,000
restoring land to natural state 100,000
recycling products 200,000
testing for contamination 200,000
auditing environmental activities 100,000
designing processes 300,000
Required:
““Be yourself; everyone else is already taken.” ~Oscar Wilde
 1. What percentage of operating costs are represented by prevention costs?
2. What percentage of operating costs are represented by detection costs?
3. What percentage of operating costs are represented by internal & external failure costs?

Answers:
Prevention costs: designing processes and recycling products
a. Prevention costs: designing processes and recycling products = $500,000.
$500,000/$10,000,000 = 5%
Detection costs: testing for contamination and auditing environmental activities
b. Detection costs: auditing environmental activities and testing for contamination = $300,000.
$300,000/$10,000,000 = 3%
Internal failure costs: operating pollution control equipment and recycling scrap
c. Internal failure costs: operating pollution control equipment and recycling scrap = $400,000.
$400,000/$10,000,000 = 4%
External failure costs: cleaning up contaminated soil and restoring land to its natural state
d. External failure costs: cleaning up contaminated soil and restoring land to natural state = $300,000.
$300,000/$10,000,000 = 3%

““Be yourself; everyone else is already taken.” ~Oscar Wilde