University of the South Pacific

School of Accounting and Finance

AF201 MANAGERIAL ACCOUNTING

Semester 2, 2019 (Face-to-Face Mode)

Mid-Semester Test

Duration
Reading time 10 minutes, Writing time 2 hours

Instructions
Answer the multiple choice questions on the special answer sheet
provided.
All questions are compulsory.
The total mark for this test is 100 and it carries a 25% weighting towards
your overall course grade.
You may use a non-programmable calculator. No other materials are
allowed.
There are 11 pages in this test paper, including this cover page.
An attachment for Question 1, Section B is on the last page.

SECTION A MULTIPLE CHOICE

MARK YOUR ANSWERS TO QUESTONS IN SECTION A ON THE

ANSWER SHEET PROVIDED AND RETURN THE SHEET WITH YOUR
ANSWER BOOKLET

Answer the questions by placing a circle around the letter on the ANSWER
SHEET that you think is the correct answer.

There are 15 questions in this Section. All questions carry 2 marks each.
 ]
Begi

Q1. Blitz CPA firm has provided the following information for its client for the current year:

Beginning work in process $5,000

Ending work in process 10,000
Direct labor 80,000
Direct materials 40,000
Overhead 100,000

What is the Prime cost?

A. $180,000
B. $120,000
C. $140,000
D. $220,000

Refer to the following data and answer questions 2 & 3.

Direct materials inventory (beginning balance) $20,000

Direct materials inventory (ending balance) 5,500
Direct materials purchases 95,000
Direct labor 52,500
Manufacturing overhead 49,500
Work in process (beginning balance) 26,000
Work in process (ending balance) 32,500
Finished goods (beginning balance) 40,000
Finished goods (ending balance) 60,000
Q2. The cost of goods manufactured would be

A. $245,000
B. $211,500
C. $205,000
D. $185,000

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 Q3. The cost of goods sold would be

A. $245,000
B. $211,500
C. $205,000
D. $185,000

Q4. If the independent variable is production volume and the dependent variable is total
manufacturing cost, a R square of 0.90 indicates

A. 90 percent of the change in manufacturing cost can be explained by the change in the
production volume.
B. 90 percent of the change in volume is caused by changes in manufacturing cost.
C. 10 percent of the change in volume is caused by changes in manufacturing cost
D. costs will change by 90 percent of the change in volume

Q5. Technical Engineering presently leases a copying machine on a monthly basis.

The lease agreement requires a fixed fee each month in addition to a charge per
copy. Technical Engineering made 2,400 copies and paid a total of $162 in rent in
September and in October they paid $195 for 3,500 copies. Determine Technical's
monthly fixed fee.

A. $138
B. $90
C. $66
D. $55
Q6. The results of the regression analysis to estimate setup costs using the number of setups
and number of setup hours as activity cost drivers are as follows:

SUMMARY
OUTPUT

Regression Statistics
Multiple R 0.9706
R Square 0.9421
Standard Error 1747.948
Observations 12

ANOVA
Significance
  df SS MS F F
132519140.
Regression 3 397557422 7 43.373 0.00003
Residual 8 24442577.9 3055322.25
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 7
Total 11 422000000      

Standard
  Coefficients Error t Stat P-value Lower 95% Upper 95%
Intercept 11188.151 7391.604 1.514 0.169 -10221.329 32597.63
DLH 6.155 1.809 3.402 0.009 0.915 11.395
STS 0.216 0.128 1.684 0.131 -0.155 0.587
PL 32.169 23.526 1.367 0.209 -35.973 100.312
DLH – Direct Labor Hour
STS – Square metre of turf seeded
PL - Planting

Based on the multiple regression analysis output, what is the estimated cost function?
A. Total overhead= $11,188.15 + ($6.16 x DLH)
B. Total overhead = $11,188.15 + ($6.16 x DLH) + ($0.22 x STS)
C. Total overhead = $11,188.15
D. Total overhead = $11,188.15+ ($6.16 x DLH) + ($0.22 x STS) + ($32.17 x PL)

Q7. McCord Printing Co. uses a job-order costing system. Job 525 consisted of 10,000
newsletters. Overhead is applied based on $25 per machine hour. The following costs
were incurred:

Paper $150
Direct labor 3 hours at $20 per hour
Machine hours incurred 4 hours

What is the unit cost of each newsletter?

A. $0.051
B. $0.031
C. $0.31
D. $0.0285

Q8. Jane Maxwell is a financial planner at Trifle Consulting. Her estimated salary
cost per billable hour is $100. The estimated overhead cost per professional
labour dollar for Trifle Consulting is 20 per cent and the required profit margin is
40 per cent of cost. What is Jane's chargeout rate per billable hour?

A. $100
B. $120
C. $140
D. $168

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Refer to the following information and answer questions 9, 10, 11 & 12

Norman Manufacturing prices its products at full cost plus 40 percent mark-up. The company
operates two support departments and two producing departments. Budgeted costs and normal
activity levels are as follows:
User Departments
Support Departments Producing Departments
W X Y Z
Providers
Overhead costs $10,000 $25,000 $45,000 $60,000
Square feet (Dept. W) 1,000 1,200 2,000 6,000
Number of employees 10 15 30 20
(Dept. X)
Direct labor hours - - 5,000 3,200
Machine hours - - 3,000 5,400

Support Department W’s costs are allocated based on square feet, and Support Department
X’s costs are allocated based on number of employees.

Department Y uses direct labor hours to assign overhead costs to products, and Department Z
uses machine hours.

One of the products the company produces requires four direct labor hours per unit in
Department Y and no time (zero hours) in Department Z. Direct materials for the product cost
$45 per unit, and direct labor is $20 per unit.

Q9. The total cost accumulated in producing department Y using the direct method is
calculated to be

A. $54,000
B. $45,000
C. $62,500
D. $60,000

Q10. Based on your answer in question 9, the pre-determined overhead rate for producing
department Y is
 
A. $10.80 per DLH
B. $9 per DLH
C. $12.50 per DLH
D. $12.00 per DLH

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Q11. After calculating the MOH rate in Q10, the total cost per unit for the product is:

A. $50 per unit

B. $65 per unit
C. $70 per unit
D. $115 per unit

Q12. Using the current pricing policy of the firm, the selling price of the product is:

A. $161
B. $98
C. $91
D. $115

Use the following information to answer questions 13, 14 & 15.

Russell Co. produces three products – U, V, & W – from a joint process. Each product may
be sold at the split-off point or processed further. Additional processing requires no special
facilities, and production costs of further processing are entirely variable and traceable to the
products involved. Last year all three products were processed beyond split-off. Joint
production costs for the year were $70,000. Sales value and costs needed to evaluate Russell’s
production policy follow.

If Processed Further
Units Produced Sales Value at Sales Value Additional
Product Split-off Costs
U 7,000 $30,000 $50,000 $11,000
V 5,000 $50,000 $54,000 $ 8,000
W 3,000 $29,000 $38,000 $10,000

13. The amount of joint costs rounded-off to the nearest dollar that is allocated to product V
using the physical unit method is calculated to be:

A. $19,266
B. $32,110
C. $23,333
D. $32,667

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Q14. The amount of joint costs rounded-off to the nearest dollar that is allocated to product
W using the relative sales value method is calculated to be:

A. $19,266
B. $32,110
C. $18,624
D. $28,496

Q15. The amount of joint costs rounded-off to the nearest dollar that is allocated to product
U using the net realizable value method is calculated to be:

A. $24,159
B. $28,496
C. $18,624
D. $17,345

SECTION B ANSWER ALL QUESTIONS

Q1: Management Accounting Information

Read the attached Chairman’s Review of Fiji Television Limited (see last page) and answer
the questions that follow.

Total marks for this question: 10 marks

[Suggested time: 12 minutes]

REQUIRED

1. Briefly discuss the business strategy depicted in the article that Fiji Television
Limited uses to gain competitive advantage, which resulted in an increase financial
performance. (5 marks)

2. One of the changes in the business environment that Fiji Television Limited is facing
is a challenging business environment due to changes in the Media Industry. Discuss
how management accounting information may have contributed to Fiji Television
Limited’s financial performance.
(5 marks)

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Q2: Variable and Absorption Costing

Total marks for this question: 30 marks

[Suggested time: 36 minutes]

Grehan Company produces and sells wooden pallets that are used in moving and stacking
materials. The operating costs for the past year were as follows:

Variable costs per unit:

Direct materials $3.60
Direct labor 2.00
Variable overhead 0.40
Variable selling expenses 0.30
Fixed costs per year:
Fixed overhead $180,000
Fixed selling and administrative 70,000

During the year, Grehan produced 200,000 wooden pallets and sold 207,000 at $10 each.
Grehan had 9,300 pallets in beginning finished goods inventory; costs have not changed from
last year to this year. An actual costing system is used for product costing.

REQUIRED: Show ALL workings

1. (i) Identify the cost object (1 mark)

(ii) Suggest two examples of direct costs used in the production of the cost object
identified in (i) above. (2 marks)
(iii) Suggest two examples of indirect costs (overheads) in the production of the cost
object identified in (i) above. (2 marks)

2. (i)Calculate the cost per unit using absorption costing? (3 marks)

(ii) Calculate the cost per unit using the variable costing?(2 marks)

3. (i) Calculate the finished goods inventory cost at year end using the absorption
costing. (2 marks)

(ii) Calculate the finished goods inventory cost at year end using the variable costing.
(2 marks)

4. (i) Calculate the operating profit using absorption costing method (Prepare an income
statement. (6 marks)

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 (ii) Calculate the operating profit using variable costing method. (Prepare and income
statement)
(6 marks)
5. Using the appropriate scenario of reconciling the profit between variable and absorption
costing, explain why there is a difference in profit. (4 marks)
Q3: Conventional vs Activity-based Costing

Total marks for this question: 30 marks

[Suggested time: 36 minutes]

ABC Company uses the traditional costing system to allocate the manufacturing overhead to
its two products X and Y using direct labor hours. The total budgeted overhead cost for
October is $220,000 with the budgeted direct labor hours of 40,000 hours. The company is
considering adopting an activity-based costing system, and collects the following information
for the month of October.

Product X Product Y
Production units 20,000 2,000
Direct materials cost per kg $10.00 $8.00
Direct labor cost per hour $10.00 $10.00
Direct labor hours (in total) 34,000 6,000

Each unit of products X and Y consumes 5kg of raw materials.

Overhead cost pool Overhead cost Total activity Activity Consumption

Product X Product Y
Machine setup $ 60,000 1,000 setups 300 700
Engineering change order $ 80,000 100 orders 20 80
Facility rent $ 80,000 1,000 sq. feet 300 700

REQUIRED

Show ALL relevant workings where necessary.

(1) Using the Traditional method:

(i) Compute the pre-determined MOH rate (Label the rate correctly)
(2 marks)
(ii) Compute the unit manufacturing costs for each product
(8 marks)

(2) Using Activity Based Costing:

(i) Compute the Activity rates for the three cost pools. (Label the rates correctly).
(3 marks)

(ii) Compute the unit manufacturing costs of each product

(12 marks)
(3) Which costing system best reflects the cost of the products. Explain and support your
recommendation with relevant data. (5 marks)

~THE END~
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Attachment:
During the last financial year, the company declared
and paid first an interim dividend of $412,000 in
FIJI TELEVISION LIMITED ANNUAL
September 2017 with a final dividend of $309,000
REPORT 2018 FIJI TELEVISION LIMITED
in February 2018.
ANNUAL REPORT 2018
The Future
CHAIRMAN’S REVIEW
Being the longest running free-to-air television
Dear Shareholders,
station in Fiji, this year marks the completion of 24
years of compelling content being broadcasted to
On behalf of the board of directors of Fiji
the viewers in Fiji and in the Pacific Islands.
Television Limited, I am pleased to present to you
the financial year 2018 Annual Report. The
Fiji TV‘s revenue and profit has both grown over
company has performed well given the challenging
the financial year and we intend to improve this
business environment we operate in, especially
even further in the coming year. A lot more focus is
given the changes in the Media Industry. The results
on major operational cost savings in order for us to
for Fiji TV are reflective of the work of the Board,
achieve a much higher bottom line which will
Management and Staff and we will continue to
increase shareholder value for the future.
improve further as we progress into the next
financial year.
I take this time to thank my fellow board members,
management and staff of Fiji Television Limited
The current year has begun well with the investment
who have worked hand-in-hand to deliver the
by Fiji TV in the upgrade of our equipment in line
credible results in a challenging industry. I also
with the evolution of the technology that the TV
thank our viewers, advertisers and suppliers who
industry is experiencing. This investment in new
have worked with us throughout the financial year
equipment has definitely seen a boost in the
and we look forward to another great year ahead.
broadcasting standards of our services.
R.G. (Bob) Lyon
During the year, Fiji TV launched its new website
Chairman
for viewers, to enable better browsing for
information from local shows, news, current affairs
& sports, information on Fiji TV and contacts. It
even allows the viewers to view their favorite
programs on archives should they miss it at the
normal scheduled time.

Another significant achievement for Fiji TV was the

launch of Fiji’s first ever Television APP which
gives viewers access to Fiji Television’s services in
the palm of their hands, from latest news, local
programs, sports, TV program schedules,
LIVESTREAM and much more.

Financial Performance

For the year ending 30th June 2018, the

consolidated group net profit after tax recorded was
$819,248 in comparison to the net profit of
$575,134 recorded for the previous year.

Total Group Revenue for financial year 2018 stood

at $11.860m in comparison to $10.334 for 2017
financial year. This is a 14 percent growth in the
revenue compared to the same period last year.

Fiji TV’s net total assets increased by 2 percent

from the previous year and stood at $14.833m as at
balance date.
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