Cost Accounting Exam #1, Spring 2004
Multiple Choice
1.
The Institute of Management Accountants (IMA)
a.
is a voluntary professional organization of management accountants.
b.
is a voluntary professional organization of financial accountants.
c.
issues standards for management accounting.
d.
issues standards for financial accounting.
2.
The Institute of Management Accountants (IMA) has adopted a set of standards of ethical
conduct which includes codes of conduct regarding all of the following except
a.
competence.
b.
independence.
c.
integrity.
d.
confidentiality.
3.
A supplier to your company offers to let you, a management accountant, use the supplier’s
condo in Cancun for your vacation. Accepting the supplier’s offer
a.
does not violates IMA’s ethical code as long as you disclose the gift to your employer.
b.
violates the IMA’s ethical standard of independence.
c.
violates the IMA’s ethical standard of confidentiality.
d.
violates the IMA’s ethical standard of integrity.
4.
Your close friend and drinking buddy asks you for information that is typically available only to
company management. Sharing this information with your friend violates the ethical standard of
a.
privileged information.
b.
independence.
c.
integrity.
d.
confidentiality.
5.
The IMA’s standards for integrity include all of the following except
a.
avoiding actual or apparent conflicts of interest.
b.
refusing any gift that would influence the accountant’s actions.
c.
recognizing and communicating professional limitations.
d.
communicating information subjectively.
6.
Which of the following is not one of the courses of action recommended by the IMA for
practitioners of management accounting faced with significant ethical issues.
a.
follow the established policies of the organization bearing on the resolution of such
conflict.
b.
discuss the ethical problems with the individual(s) you believe is involved.
c.
discuss the ethical problems with the immediate superior except when it appears that the
superior is involved .
d.
consult your own attorney as to legal obligations and rights.
1
Cost Accounting Exam #1, Spring 2004
Problem 1
Flynn Sporting Goods Co. manufactured 100,000 units in 2003 and reported the following costs:
Sandpaper
Materials handling
Coolants & lubricants
Indirect manufacturing labor
Direct manufacturing labor
Direct materials, 1/1/03
Finished goods, 1/1/03
Finished goods, 12/31/03
Work-in-process, 1/1/03
Work-in-process, 12/31/03
$
32,000
320,000
22,400
275,200
2,176,000
384,000
672,000
1,280,000
96,000
64,000
Leasing costs - plant
Depreciation - equipment
Property taxes - equipment
Fire insurance - equipment
Direct material purchases
Direct materials, 12/31/03
Sales revenue
Sales commissions
Sales salaries
Advertising costs
Administration costs
Required:
a.
What is the amount of direct materials used during 2003?
b.
What is the total manufacturing overhead cost incurred during 2003?
c.
What is cost of goods manufactured for 2003?
d.
What is cost of goods sold for 2003?
e.
What is the gross margin for 2003?
2
$ 384,000
224,000
32,000
16,000
3,136,000
275,200
12,800,000
640,000
576,000
480,000
800,000
Cost Accounting Exam #1, Spring 2004
Problem 2
Patrick Ross, the president of Ross’s Wild Game Company, has asked for information
about the cost behavior of manufacturing overhead costs. Specifically, he wants to
know how much overhead cost is fixed and how much is variable. The following data
are the only records available.
Month
February
March
April
May
June
Machine-hours
1,700
2,800
1,000
2,500
3,500
Overhead Costs
$20,500
22,250
19,950
21,500
23,950
Required:
Using the high-low method, determine the overhead cost equation. Use machinehours as your cost driver.
3
Cost Accounting Exam #1, Spring 2004
Problem 3
Schotte Manufacturing Company is considering two different cost drivers (independent
variables) to evaluate costs of the packaging department. The most recent results of the two
separate regressions (using machine-hours in the first regression and number of packages in
the second regression) are as follows:
Machine-hours:
Variable
Constant
Independent Variable
Coefficient
748.30
52.90
Standard Error
341.20
35.20
t-Value
2.19
1.50
Coefficient
242.90
5.60
Standard Error
75.04
2.00
t-Value
3.24
2.80
r2 = 0.33
Number of packages:
Variable
Constant
Independent Variable
r2 = 0.73
Required:
a. What are the estimating equations (cost functions) for each cost driver?
b. Which cost driver is best and why?
c. Using the equation for the best driver, what is the estimated cost for an order
requiring 10 machine hours and is shipped in 200 packages?
4
Cost Accounting Exam #1, Spring 2004
Problem 4
The Big G’s Picture manufactures various picture frames. Each new employee takes 5 hours to
make the first picture frame and 3 hours to make the second. Thus, the learning-curve
percentage (assuming the cumulative average method) is 80% ((5+3)/2]/5). The manufacturing
overhead charge per hour is $20.
Required:
a. What is the time needed to build 8 picture frames by a new employee using the
cumulative average-time method?
b. What is the time needed to produce the 8 picture frames by an experienced
employee, who has already completed 8 picture frames?
c. How much manufacturing overhead would be charged to the 8 picture frames if the
new employee completes 8 picture frames?
d. How much manufacturing overhead would be charged to the 8 picture frames if the
experienced employee completes 8 picture frames?
5