Management Accounting
Fundamentals
Exam Review
Lectures and handouts by:
Shirley Mauger, HB Comm, CGA
Exam Review - Table of Contents
Part
Content
1
2
3
4
5
6
7
8
9
10
11
12
Preparing and studying for the exam
Course review: modules 1-5
Course review: modules 6-10
Review question: Cost of goods manufactured and cost
flows
Review question: Process costing and normal spoilage
Review question: Break-even, special order and pricing
Review question: Process costing and variance analysis
Review question: Activity based costing
Review question: Absorption and variable costing
income statements
Review question: Cash budget
Review question: Decision making – process further or
drop product line
‘Final notes on the final’
2
Regarding this review
•
The audio and visual portions of all lectures
including this review are designed to be used
together.
•
I do not know what is on the final examination
•
This review is only a summary.
–
It does not cover all topics in the course.
–
You are responsible for all of the topics
presented in the lesson notes and textbook
3
MA1 – Exam review
Part 1
Preparing and studying
for the exam
4
Part 1 – Preparing and studying for the exam
Final exam resources available online:
1. MA1 exam blueprint
2. MA1 review questions and solutions
(ma1_modR_handout1)
3. MA1 practice examination
4. MA1 past examinations
5
Part 1 – Preparing and studying for the exam
Question Item
Percentage Weighting
Multiple-choice questions
Short-answer questions
Quantitative problems
Qualitative/worksheet-related questions
20–30%
10–20%
50-60%
10-20%
6
Part 1 – Preparing and studying for the exam
Module weighting
1.
2.
3.
4.
5.
6.
7.
Basic concepts of management accounting
Job-order costing
Process costing
Cost behavior and cost-volume-profit analysis
Activity-based costing and service department costing
Absorption and variable costing and budgeting
Standard costs for materials, labour, and variable
overhead
8. Flexible budgets and decentralization
9. Relevant costs for decision making and inventory
management
10. Pricing and trends in management accounting
2-5%
3-8%
3-8%
15-20%
8-12%
14-18%
9-12%
12-16%
12-16%
2-5%
7
Part 1 – Preparing and studying for the exam
General studying tips:
1 Practice, practice, practice
•
Past exam questions
•
Questions covered in lectures
2. Remember the exam blueprint when focusing your studies
3. Do more questions that relate to topics which are problem
areas for you
•
Try entering topic numbers as search terms into Adobe
when downloading past examinations.
8
Part 1 – Preparing and studying for the exam
General studying tips (continued):
4. Make a list of formulas (you can use the list on handout 1 as
a starting point)
5. Review theory
6. Study ALL of the material
7. Focus on being successful….
9
Part 1 – Preparing and studying for the exam
General exam writing tips:
1 RELAX
2 Scan through the entire exam
3 Start with a question that you feel most confident about
the answer
4 You may get a question that is different than those you’ve
seen before. Remember to focus on the tools you have
learned in the course
5 If you’re stuck on a question, move on to another question
6 Show all calculations
7 Answer what is asked!
10
MA1 – Exam review
Part 2
Course review
(module summaries and key points)
Modules 1 - 5
11
Part 2 – Course review: modules 1-5
Module 1 – Basic concepts of management accounting
Topic
Source
Difference between managerial and financial
accounting
Just-in-time systems, total quality management,
process re-engineering, theory of constraints
Part 1,slide 10
p. 6-9
Part 2, p. 12-20
•
Know the purpose of each
•
Advantages and disadvantages
Prime costs and conversion costs
Part 2, p. 33-34
Product costs vs. period costs
Part 2, p.35-36
How do deal with overtime
Part 4, slide 60
p. 34
Part 3, p.39-40
Format of a schedule of cost of goods
manufactured
12
Part 2 – Course review: modules 1-5
Module 2 – Job-order costing
Topic
Source
Difference between job and process costing
Predetermined manufacturing overhead rate
Estimated total overhead
manufacturing costs
Estimated allocation base
Part 1, p. 87-90
MOH applied = overhead rate x actual activity
(usually hours but read the question carefully)
Part 3, p. 88
Flow of costs through direct materials,
work-in-process, finished goods and cost
of goods sold
Parts 2 and 3
p. 93-102
See exam
review question
(December 1995
exam)
13
Part 2 – Course review: modules 1-5
Module 2 – Job-order costing (continued)
Topic
Source
Journal entries to allocate over or underapplied overhead
• Close to cost of goods sold
• Allocate among work in process,
finished goods and cost of goods sold
(MOH clearing account must go to zero)
Direct materials
• All materials used that are traced to the
product
Raw materials
• Can include both direct materials and
indirect materials.
Part 3, p.103-106
14
Part 2 – Course review: modules 1-5
Module 3 – Process costing
Topic
Source
Know the format and calculations to complete
Parts 2 & 3
an entire production report using both the
p. 152-160, 165-170
FIFO and weighted average methods.
•STEP 1:Prepare a quantity schedule
•STEP 2:Compute cost per equivalent units (also part 1)
•STEP 3:Prepare a cost reconciliation
Normal and abnormal spoilage
•When there is inspection, there is potential
spoilage.
•Unless told otherwise, inspection takes place
when goods are complete
•If inspection takes place on partially complete
products, WIP may need to be included when
calculating spoilage.
Part 4, Reading 3-2
See exam review
question,
(December 1994)
15
Part 2 – Course review: modules 1-5
Module 3 – Process costing (continued)
Topic
Source
Transferred-in costs
• Treat as 100% complete
Know the basic differences between FIFO and
weighted average
Parts 1 & 8(Q1)
p. 149-150
Part 3, slide 62
p. 167-168
16
Part 2 – Course review: modules 1-5
Module 4 – Cost behavior and cost-volume-profit analysis
Topic
Source
Variable costs (and step variable) and the
relevant range
Part 1, p.188-191
Fixed costs (discretionary vs. committed)
Part 1, p. 192-196
Relevant range and affect on variable and fixed
costs
Part 1, p.191-192
& 195
Cost function and the analysis of mixed costs
• Y=a+bX
• Scattergram plot (scattergraph)
• High-low method
NOTE: select the occurrence with the
highest and lowest activity, NOT cost.
• Regression analysis (least squares)
(advantages & disadvantages of each)
Part 2, p.196-208
17
Part 2 – Course review: modules 1-5
Module 4 – Cost behavior and cost-volume-profit analysis
(continued)
Topic
Source
Cost volume profit equation
• SP x(units) – VC x (units) – FC = Profit
(also referred to as NIBT)
• to change income to after tax $ divide by
1-taxrate
Part 3, p.241-242
Breakeven point calculation (CM method)
• Units: FC/CM
•Sales $: FC/CM ratio
Part 3, p.242-244
Degree of operating leverage
Part 4, p.247-249
Margin of safety
Part 4, p. 244
Cost volume profit analysis assumptions
Part 5, slide 66
p. 253
p. 243-244
18
Part 2 – Course review: modules 1-5
Module 5 – Activity-based costing and service
department costing
Topic
Source
Plantwide and departmental overhead
application rates
Part 1, p. 326-327
Activity based costing
Part 1, p.327-328
• Steps in designing
Part 2, p. 328-339
• Advantages and disadvantages and
comparison to a traditional costing system
Part 2, slide 7
Part 2, slides 3435
p. 339-347
Allocating service department costs
• direct, step, and reciprocal methods
Parts 3 & 4
p. 741-745
19
MA1 – Exam review
Part 3
Course review
(module summaries and key points)
Modules 6 - 10
20
Part 3 – Course review: modules 6-10
Module 6 – Absorption and variable costing and budgeting
Topic
Source
Absorption costing vs. variable costing
• Gross margin = absorption costing
• Contribution margin = variable costing
Part 1, p.284-286
• Preparation of income statements
Part 2, p.286-292
• Reconciliation of the difference between
Part 2, p.293-296
both
Difference between income = FMOH costs in
ending inventory less FMOH costs in
beginning inventory.
Fixed overhead rates may be different for
beginning and ending inventories
• Advantages of each
Part 2, p.299-300
21
Part 3 – Course review: modules 6-10
Module 6 – Absorption and variable costing and budgeting
(continued)
Topic
Source
Components of the master budget
Part 3, p.389-390
•Know formats of each budget
Parts 3 & 4, p.391404
•Focus on the cash budget format (it’s the
toughest)
Part 4, p.399-401
22
Part 3 – Course review: modules 6-10
Module 7 – Standard costs for materials, labour, and
variable overhead
Topic
Source
Standard cost card : DM, DL, VOH, and FOH
Part 1, p.436-440
Perform analysis of:
• Direct materials price and quantity
variances
• Direct labour rate and efficiency variances
• Variable overhead spending and efficiency
variances
•Direct materials mix and yield variances
Part 2, p.441-455
Journal entries to record standard costs and
variances
Dealing with variances
Part 3, p.470-471
Part 4, p.447-450
Part 5, p.455-457
23
Part 3 – Course review: modules 6-10
Module 7 – Standard costs for materials, labour, and
variable overhead (continued)
Topic
Source
Advantages and disadvantages of standard costs Part 5, p.457-459
Balanced scorecard advantages
• Financial perspective
• Customer perspective
• Internal business process perspective
• Learning and growth perspective
Part 5, p. 460-462
Delivery cycle time
Throughput time
•Process + inspection + move + queue time
Manufacturing cycle efficiency
•Value added time/throughput time
Part 5 , slide 69
p.465-467
24
Part 3 – Course review: modules 6-10
Module 8 – Flexible budgets and decentralization
Topic
Source
Difference between a static and flexible budget
Part 1, p.500-504
Interpret variable overhead variances
Part 1, p.506-509
Calculate and interpret FOH variances (budget
and volume)
Part 2, p.510-517
25
Part 3 – Course review: modules 6-10
Module 8 – Flexible budgets and decentralization (continued)
Topic
Source
Prepare and interpret contribution margin and
Part 3, p.547-555
segment margin statements
• Traceable vs. common fixed costs
• Segment figures AND totals
• Include % based on sales (sales=100%)
Sales variances
Part 4, p.560-563
• Sales mix and quantity variances
• Market share and market size variances
Calculate and interpret rate of return and residual Part 5, p.566-574
income
26
Part 3 – Course review: modules 6-10
Module 9 – Relevant costs for decision making and
inventory management
Topic
Source
Avoidable, differential, sunk, and opportunity costs Part 1, p.616-617
Adding and dropping product lines, divisions,
segments, etc.
Part 2, p.621-624
Make or buy decision
Part 3, p.624-628
Special orders
Part 3, p.628-629
Use of constrained resources
Calculate the CM per unit of scarce resource
Part 4, p.629-632
Joint product costs
Part 5, p.632-634
Economic order quantity (EOQ)
• Total cost of ordering and carrying inventory
• Safety stock
• Reorder point
Part 6,
Reading 9-1
Reading 9-2
27
Part 3 – Course review: modules 6-10
Module 10 – Pricing and trends in management accounting
Topic
Source
Cost plus formula to calculate the markup %
•Absorption vs. contribution approach
Target costing
• Sales minus profit = target cost
For both, ROI must be in before tax $
Part 1, p.637-639
Time and materials pricing
Part 2, p.641-643
Quality costs and reporting
• Prevention, appraisal, internal failure,
external failure costs.
Part 3, p.54-60
Part 2, p.640-641
Part 7 review
question
28
MA1 – Exam review
Part 4
Review question:
Cost of goods manufactured
and cost flows
(download ma1_modR_handout1.pdf)
29
Part 4 – Review question: Cost of goods manufactured
and cost flows
Question 1 December 1995
Handout pages 3 to 5
a.
Prepare, in proper format, a statement of cost of
goods manufactured
b.
Calculate the following
i.
Cost of goods sold
ii.
Indirect labour
iii.
Various overhead items
iv.
Accounts payable, July 1, 1995
Stop the audio, read and attempt the question
in the handout then come back to listen to
30
the solution.
Part 4 – Review question: Cost of goods manufactured
and cost flows
Question 1 December 1995
Handout pages 3 to 5
a.
Prepare, in proper format, a statement of cost of
goods manufactured
b.
Calculate the following
i.
Cost of goods sold
ii.
Indirect labour
iii.
Various overhead items
iv.
Accounts payable, July 1, 1995
31
Part 4 – Review question: Cost of goods manufactured
and cost flows
Question 1 December 1995
Handout pages 3 to 5
a.
Prepare, in proper format, a statement of cost of
goods manufactured
b.
Calculate the following
i.
Cost of goods sold
ii.
Indirect labour
iii.
Various overhead items
iv.
Accounts payable, July 1, 1995
32
MA1 – Exam review
Part 5
Review question:
Process costing and normal
spoilage
(download ma1_modR_handout1.pdf)
33
Part 5 – Review question: Process costing and normal
spoilage
Question 4 December 1994
Handout page 6
Compute:
•
the cost of goods completed
•
The cost of ending inventory of work in process
Stop the audio, read and attempt the question
in the handout then come back to listen to
34
the solution.
MA1 – Exam review
Part 6
Review question:
Breakeven, special order and
pricing
(download ma1_modR_handout1.pdf)
35
Part 6 – Review question: Breakeven, special order &
pricing
Question 2 March 1994
Handout pages 7 - 8
a.
Calculate the breakeven point in units and dollar sales
b.
Should this special order be accepted?
c.
What price should be charged in order that Hoagie can
earn a profit of $5,000?
Stop the audio, read and attempt the question
in the handout then come back to listen to
36
the solution.
Part 6 – Review question: Breakeven, special order &
pricing
Question 2 March 1994
Handout pages 7 - 8
a.
Calculate the breakeven point in units and dollar sales
b.
Should this special order be accepted?
c.
What price should be charged in order that Hoagie can
earn a profit of $5,000?
37
Part 6 – Review question: Breakeven, special order &
pricing
Question 2 March 1994
Handout pages 7 - 8
a.
Calculate the breakeven point in units and dollar sales
b.
Should this special order be accepted?
c.
What price should be charged in order that Hoagie can
earn a profit of $5,000?
38
Part 6 – Review question: Breakeven, special order &
pricing
Question 2 March 1994
Handout pages 7 - 8
a.
Calculate the breakeven point in units and dollar sales
b.
Should this special order be accepted?
c.
What price should be charged in order that Hoagie can
earn a profit of $5,000?
39
MA1 – Exam review
Part 7
Review question:
Process costing and variance
analysis
(download ma1_modR_handout1.pdf)
40
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 9-10 (question 2)
a.
Calculate the equivalent units of performance for
materials.
b.
Calculate the equivalent units of performance for
conversion costs.
Stop the audio, read and attempt the question
in the handout then come back to listen to
the solution.
41
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 9-10 (question 2)
a.
Calculate the equivalent units of performance for
materials.
b.
Calculate the equivalent units of performance for
conversion costs.
42
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 9-10 (question 2)
c.
Calculate material costs used in the computation of
cost per equivalent materials
d.
Calculate direct labour costs used in the computation of
cost per equivalent unit for labour
e.
Calculate overhead costs used in the computation of
cost per equivalent unit for overhead
f.
Calculate actual cost of the ending work in process
43
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 9-10 (question 2)
c.
Calculate material costs used in the computation of
cost per equivalent materials
d.
Calculate direct labour costs used in the computation of
cost per equivalent unit for labour
e.
Calculate overhead costs used in the computation of
cost per equivalent unit for overhead
f.
Calculate actual cost of the ending work in process
44
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 11-12 (question 3)
Compute:
a.
Materials price variance
b.
Materials usage variance
c.
Direct labour rate variance
d.
Direct labour efficiency variance
e.
Overhead budget variance
f.
Overhead volume variance
g.
Total overhead variance
45
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 11-12 (question 3)
Compute:
a.
Materials price variance
b.
Materials usage variance
c.
Direct labour rate variance
d.
Direct labour efficiency variance
e.
Overhead budget variance
f.
Overhead volume variance
g.
Total overhead variance
46
Part 7 – Review question: Process costing and variance
analysis
Questions 2 & 3 June 1998
Handout pages 11-12 (question 3)
h.
Give brief explanations for the following:
i.
An unfavorable materials quantity variance
ii.
An unfavorable labour rate variance
iii.
A favourable labour efficiency variance
iv.
A favourable variable overhead spending variance
47
MA1 – Exam review
Part 8
Review question:
Activity based costing
(download ma1_modR_handout1.pdf)
48
Part 8 – Review question: Activity based costing
Question 5 December 2006
Handout pages 13-15
a.
Using traditional overhead allocations, calculate the
total manufacturing overhead allocated to chairs and
side tables.
b.
Using activity based costing calculate the total
manufacturing overhead that would be allocated to
chairs and side tables. What is the cost per unit?
c.
Compare the total costs between both methods. What
effect do you think the adoption of activity-based
costing might have on product pricing for this
company?
Stop the audio, read and attempt the question
in the handout then come back to listen to
49
the solution.
Part 8 – Review question: Activity based costing
Question 5 December 2006
Handout pages 13-15
a.
Using traditional overhead allocations, calculate the
total manufacturing overhead allocated to chairs and
side tables.
b.
Using activity based costing calculate the total
manufacturing overhead that would be allocated to
chairs and side tables. What is the cost per unit?
c.
Compare the total costs between both methods. What
effect do you think the adoption of activity-based
costing might have on product pricing for this
company?
50
Part 8 – Review question: Activity based costing
Question 5 December 2006
Handout pages 13-15
a.
Using traditional overhead allocations, calculate the
total manufacturing overhead allocated to chairs and
side tables.
b.
Using activity based costing calculate the total
manufacturing overhead that would be allocated to
chairs and side tables. What is the cost per unit?
c.
Compare the total costs between both methods. What
effect do you think the adoption of activity-based
costing might have on product pricing for this
company?
51
Part 8 – Review question: Activity based costing
Question 5 December 2006
Handout pages 13-15
a.
Using traditional overhead allocations, calculate the
total manufacturing overhead allocated to chairs and
side tables.
b.
Using activity based costing calculate the total
manufacturing overhead that would be allocated to
chairs and side tables. What is the cost per unit?
c.
Compare the total costs between both methods. What
effect do you think the adoption of activity-based
costing might have on product pricing for this
company?
52
MA1 – Exam review
Part 9
Review question:
Absorption & variable costing
income statements
(download ma1_modR_handout1.pdf)
53
Part 9 – Review question: Absorption & variable costing
income statements
Question 5 June 2007
Handout pages 16-17
a.
Prepare an absorption costing income statement
b.
Prepare a variable costing income statement
c.
Explain any differences between the results in parts (a)
and (b)
Stop the audio, read and attempt the question
in the handout then come back to listen to
54
the solution.
Part 9 – Review question: Absorption & variable costing
income statements
Question 5 June 2007
Handout pages 16-17
a.
Prepare an absorption costing income statement
b.
Prepare a variable costing income statement
c.
Explain any differences between the results in parts (a)
and (b)
55
Part 9 – Review question: Absorption & variable costing
income statements
Question 5 June 2007
Handout pages 16-17
a.
Prepare an absorption costing income statement
b.
Prepare a variable costing income statement
c.
Explain any differences between the results in parts (a)
and (b)
56
Part 9 – Review question: Absorption & variable costing
income statements
Question 5 June 2007
Handout pages 16-17
a.
Prepare an absorption costing income statement
b.
Prepare a variable costing income statement
c.
Explain any differences between the results in parts (a)
and (b)
57
MA1 – Exam review
Part 10
Review question:
Cash budget
(download ma1_modR_handout1.pdf)
58
Part 10 – Review question: Cash budget
Question 5 December 2005
Handout pages 18-19
a.
How much will be collected in September from sales
made in August?
b.
What is the amount of expected accounts receivable
collections during July?
c.
How much merchandise should Beta purchase in
August?
d.
State two benefits of cash budgeting.
Stop the audio, read and attempt the question
in the handout then come back to listen to
59
the solution.
Part 10 – Review question: Cash budget
Question 5 December 2005
Handout pages 18-19
a.
How much will be collected in September from sales
made in August?
b.
What is the amount of expected accounts receivable
collections during July?
c.
How much merchandise should Beta purchase in
August?
d.
State two benefits of cash budgeting.
60
Part 10 – Review question: Cash budget
Question 5 December 2005
Handout pages 18-19
a.
How much will be collected in September from sales
made in August?
b.
What is the amount of expected accounts receivable
collections during July?
c.
How much merchandise should Beta purchase in
August?
d.
State two benefits of cash budgeting.
61
MA1 – Exam review
Part 11
Review question:
Decision making - process
further or drop product line
(download ma1_modR_handout1.pdf)
62
Part 11 – Review question: Decision making – process
further or drop product line
Question 4 June 1995
Handout pages 20-21
a.
b.
Advise the management of Wedersen:
–
Should they sell the products at split off or sell them
in their fully processed form?
–
Should they discontinue production or employ some
other course of action
Should Wedersen product Deteron rather than Ceteron?
Stop the audio, read and attempt the question
in the handout then come back to listen to
63
the solution.
Part 11 – Review question: Decision making – process
further or drop product line
Question 4 June 1995
Handout pages 20-21
a.
Advise the management of Wedersen:
–
Should they sell the products at split off or sell them
in their fully processed form?
–
Should they discontinue production or employ some
other course of action
b.
Should Wedersen product Deteron rather than Ceteron?
64
Part 11 – Review question: Decision making – process
further or drop product line
Question 4 June 1995
Handout pages 20-21
a.
b.
Advise the management of Wedersen:
–
Should they sell the products at split off or sell them
in their fully processed form?
–
Should they discontinue production or employ some
other course of action
Should Wedersen product Deteron rather than Ceteron?
65
MA1 – Exam review
Part 12
‘Final notes on the final’
66
Part 12 – ‘Final notes on the final’
If I were you, I would….
•
Work through the modules in order
–
–
–
–
–
Make notes of the important terms
Include main concepts, advantages and disadvantages
Write down and memorize the formulas
Work through the chapter review problems
Work through the review problems from the lecture handouts
Do the multiple choice quiz at the textbook online learning
centre
(you will find a link near the audio lectures)
67
Part 12 – ‘Final notes on the final’
If I were you, I would….
•
Then concentrate on those topics that need more work
–
•
Work through the past examinations available on the website
Remember to allocate your time based on the
percentage weighting in the exam blueprint.
……and
68
Part 12 – ‘Final notes on the final’
If I were you, I would….
Go watch a movie the night
before the final…..
All the best!
69