AF201 REVISION PACKAGE – s1, 2023

The purpose of this revision package is to test your understanding of the topics that will be examined in
the mid-semester test.

SECTION A – MULTIPLE CHOICE

1. Barrister and Company began July with a finished goods inventory of $10 000. The cost of goods
manufactured during the month was $85 000 and the ending finished goods inventory was $20 000.

The cost of goods sold during July was:

A. $ 55 000
B. $ 75 000
C. $ 95 000
D. $105 000

2. Barrett Industries began the month of June with a finished goods inventory of $15 000. The
finished goods inventory at the end of June was $10 000 and the cost of goods sold during the
month was $20 000.
The cost of goods manufactured during the month of June was:

A. $15 000
B. $25 000
C. $20 000
D. $5 000

3. The Casual Furniture Company manufactures outdoor furniture and incurred the following costs
during the month of January:

Timber $ 25 000
Paint $ 5 000
Glue $ 500 (assuming insignificant)
Wages—assembly personnel $ 20 000
Wages—factory supervisor $ 3 500
Factory cleaner's wages $ 2 000
Sales commissions $ 10 000
Administrative staff salaries $ 4 000
Depreciation—factory equipment $ 3 000
Depreciation—sales office equipment $ 1 000
Utilities, insurance—factory $ 6 000

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 Utilities, insurance—sales office $ 2 000
Advertising $ 8 000
Total costs $ 90 000

The manufacturing overhead is:

A. $14 500
B. $15 000
C. $9 500.
D. $9 000

4. Yang Manufacturing makes a product called Yin. The relevant range of operations is between
2,500 units and 10,000 units of Yin per month. Per unit costs at two activity levels are as follows:
5,000 units at $17.00 per unit; 7,500 units at $13.00 per unit. Determine their total cost if Yang
produces 10,000 units.

A. $130,000
B. $125,000
C. $110,000
D. $100,000

Use the following information to answer questions 5 and 6

The results of the regression analysis to estimate setup costs using the number of setup hours are as
follows:

SUMMARY OUTPUT

Regression Statistics
R Square 0.931469
Standard Error 285.6803
Observations 9

ANOVA
df SS MS F Significance F
Regression 1 7765004 7765004 95.14395 2.52E-05
Degrees of Freedom 7 571292.5 81613.21
Total 8 8336296

Coefficients Std Error t Stat P-Value Lower Upper

95% 95%
Constant 2498.644 680.6304 3.671073 0.007953 889.2099 4108.078
X Coefficient 2.506915 0.257009 9.754176 2.52E-05 1.899185 3.114646

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5.  What is the cost function to estimate setup costs? 

A. Setup costs = $2,498.64

B. Setup costs = $2.51x
C. Setup costs = $2,498.64 + $0.93x
D. Setup costs = $2,498.64 + $2.51x

6. If the estimated number of setups is 10,100, what is the estimated total setup cost (rounded
to 2 decimal places)?

A. $ 2,498.64
B. $25,531.00
C. $27,849.64
D. $11,689.64

7. 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

8. If the engineer worked for 20 hours on a job, Z, the overhead rates were 125 per cent of direct labour
cost and the direct labour rate was $25 per hour, what is the total cost of the job?

A. $500
B. $ 625
C. $1000
D. $1125

Use the following information to answer questions 9 and 10.

A firm incurs manufacturing costs totalling $240 000 in process 1 to produce the following three
beverages emerging from that process at the split-off point.

Apple juice: sold immediately it emerges from Process 1 without further processing for
$0.70 litre.
Apple cider: processed further in Process 2 with an additional cost of $0.66667 litre, then
sold for $1.50 litre.
Apple pulp: processed further in Process 3 with an additional cost of $1.50 litre, then sold
for $3.50 litre.

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 The following data relates to the period in which the joint costs were incurred.

Beverage Litres Litres sold

produced

Apple juice 150,000 130,000

Apple cider 90,000 60,000
Apple pulp 60,000 50,000
300 000 240 000

9. What is the amount of joint cost that would be allocated to apple juice if the physical measures
method had been used?

A. $120 000
B. $80 000
C. $84 000
D. $130 000

10. What is the amount of joint cost that would be allocated to apple juice if the net realisable value
method had been used?

A. $120 000
B. $ 80 000
C. $ 84 000
D. $ 91 000

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11. The Lots More Store has a Janitorial Department and a Personnel Department that provide services to
three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel
Department cost is allocated because of employees. The following information is available.

Using the step-down method, calculate the amount of Personnel Department cost allocated to Sales
Department #2, if the Personnel Department is allocated first.

 
A. $19 286
B. $ 22 500
C. $ 12 857
D. $20 250

Use the following information to answer questions 12-15

Support Departments Producing Departments

Personnel Maintenance Fabrication Assembly
Budgeted $160,000 $288,000 $560,000 $640,000
overhead
Direct labor hours 8,000 10,000 32,000 40,000
Machine hours 12,000 15,000 48,000 32,000
Number of 16 20 60 100
employees

The company does not divide costs into fixed and variable components. Personnel costs are allocated
based on the number of employees, and maintenance costs are allocated based on machine hours.

Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round to the
nearest dollar).

12. The amount of maintenance costs allocated to the Assembly Department using the direct method
would be

A. $115,200
B. $192,000
C. $57,600
D. $152,640

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13. If the direct method is used to allocate support department costs, the predetermined overhead rate for
the Fabrication Department would be (round to two decimal places)

A. $28.80 per DLH

B. $ 5 . 4 0 p er D L H
C. $7.28 per DLH
D. $24.78 per DLH

 14. If the reciprocal method is used, the simultaneous equations to allocate the support department costs
would be

A. P=$160,000 + 0.1304M; M= $288,000 + 0.1111P

B. P=$160,000 + 0.1122M; M = $288,000 + 0.1020P
C.P=$160,000 + 0.111M; M=$288,000 + 0.1304M
D.P=$160,000 + 0.1020M; M=$288,000 + 0.1122P

15. If the reciprocal method is used, the TOTAL amount of maintenance costs to be allocated would be
(Hint: Use your answer in Q14 and in your calculation round-off appropriate figures to 4 decimal places.
The final answer however has to be rounded-off to the nearest whole number)
 
A. $288,000
B. $305,778
C. $310,259
D. $448,000
SECTION B

Q1. Management Accounting: Information for creating value and managing resources

Total marks for this question: 15 marks

[Suggested time: 18 minutes]

Read the following newspaper article and answer the questions that follow.

Fiji will pay REQUIRED

for vaccine 1. With reference to your reading of chapter 1 of the textbook,
doses if briefly discuss the type of planning that the Fiji government
needs to execute in order to achieve the COVID-19 campaign
needed: PM mission. (5 marks)

Fiji is prepared to pay for
the COVID-19 vaccine
doses if the need be.
This has been stressed by
Prime Minister Voreqe
Bainimarama while
receiving the AstraZeneca
COVID-19 vaccine in
Nadi last night.
2. According to Prime Minister Bainimarama, the deployment of
the COVID-19 vaccines involves complex logistical effort.
Provide two examples of financial information and two
examples of non-financial information to enhance this
logistical effort.
(4 marks)
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Bainimarama says Fiji is

 3. Briefly explain how Fiji government can enhance customer value in the procurement of the
COVID-19 vaccines. (4 marks)

4. Prime Minister Bainimarama said that Fiji government is “working on a bilateral basis with our
development partners” to procure the addition vaccines.

(i) State the appropriate change in the business environment that this statement entails.
(1 mark)
(ii) State the appropriate organizational response in terms of structures, systems and practices
to address the change you have selected in (i) above.
(1 mark)

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)

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

(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]

Erte, Inc., manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model.
Data regarding the two products follow:

Product Direct Labor-Hours Annual Production Total Direct Labor-

Hours
XR7 0.2 DLHs per unit 20,000 units 4,000 DLHs
ZD5 0.4 DLHs per unit 40,000 units 16,000 DLHS
20,000 DLHs

Additional information about the company follows:

a. Product XR7 requires $35 in direct materials per unit, and product ZD5 requires $25.

b. The direct labor rate is $20 per hour.

c. The company has always used direct labor-hours as the base for applying manufacturing
overhead cost to products. Manufacturing overhead totals $1,480,000 per year.

d. Product XR7 is more complex to manufacture than product ZD5 and requires the use of special
milling machine.

e. Because of special work required in (d) above, the company is considering the use of activity-
based costing to apply overhead cost to products. Three activity cost pools have been identified
and the first-stage allocations have been completed. Data concerning these activity cost pools
appear below:

Activity Cost Pool Activity Measure Estimated Estimated Total Activity

Total Cost XR7 ZD5 Total
Machine setups Number of setups $180,000 150 100 250
Special milling Machine-hours 300,000 1,000 0 1,000
General factory Direct labor-hours 1,000,000 4,000 16,000 20,000
$1,480,000

REQUIRED

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1. Assume that the company continues to use direct labor-hours as the base for applying overhead
cost to products.
a. Compute the predetermined overhead rate. (2 marks)

b. Determine the unit product cost of each product. (6 marks)

2. Assume that the company decides to use activity-based costing to apply overhead cost to
products.
a. Compute the activity rate for each activity cost pool. (6 marks)

b. Compute the amount of overhead cost applied to each product.

(6 marks)

c. Determine the unit product cost of each product. (6 marks)

3. Explain why overhead cost shifted from the high-volume product to low-volume product under
activity-based costing. (4 marks)