s
Brighton Business School
Undergraduate Programmes
Maths with Finance
Level One Examination
May/June 2013
MA161: Management Accounting
Instructions to candidates:
Time allowed: 2 Hours
Rubric: You are required to answer FOUR questions in total
Section A: You are required to answer BOTH questions in this section. Section A, Question 1
(carrying 30 marks) consists of twenty multiple choice questions. Candidates should answer ALL
questions in this section on the sheet at the back of the examination paper by circling the
appropriate letter. Do not circle more than one letter. Please detach the answer sheet and hand
it in with your answer book at the end of the examination.
You are also required to answer Question 2 in Section A and this carries 20 marks
Section B: You are required to answer any TWO questions in this section (each question carries 25
marks)
Note: Unless indicated to the contrary, work to four decimal places. Marks will be awarded for
good presentation of workings, so show all workings.
Nature of examination: Unseen
Allowable material: None
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MA161: Management Accounting (May/June 2013)
Section A: You are required to attempt BOTH questions in this section.
Question 1 consists of multiple choice questions (1½ marks each), totaling 30 marks. There are no
penalty marks for incorrect answers.
Question 2 is an Activity Based Costing Question and carries 20 marks.
Question 1.1
Managerial accounting:
A)
Is more future oriented than financial accounting
B)
Tends to summarize information more than financial accounting
C)
Is primarily concerned with providing information to external users
D)
Is more concerned with precision than timeliness
Question 1.2
Compared to financial accounting, managerial accounting places more emphasis on:
A)
The flexibility of information
B)
The precision of information
C)
The timeliness of information
D)
Both A and C above
Question 1.3
Indirect labour is a part of:
A)
Prime cost
B)
Conversion cost
C)
Period cost
D)
Nonmanufacturing cost
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MA161: Management Accounting (May/June 2013)
Question 1.4
Prime cost and conversion cost share what common element of total cost?
A)
Direct materials
B)
Direct labour
C)
Variable overhead
D)
Fixed overhead
Question 1.5
When the activity level is expected to decline within the relevant range, what effects would be
anticipated with respect to each of the following?
Fixed costs
per unit
Variable costs
per unit
A)
Increase
Increase
B)
Increase
No change
C
No change
No change
D)
No change
Increase
Question 1.6
Within the relevant range, variable costs can be expected to:
A)
Vary in total in direct proportion to changes in the activity level
B)
Remain constant in total as the activity level changes
C)
Increase on a per unit basis as the activity level increases
D)
Increase on a per unit basis as the activity level decreases
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MA161: Management Accounting (May/June 2013)
Question 1.7
Which of the following is correct? The break-even point occurs on the CVP graph where:
A)
Total profit equals total expenses
B)
Total profit equals total fixed expenses
C)
Total contribution margin equals total fixed expenses
D)
Total variable expenses equal total contribution margin
Question 1.8
If a company decreases its total fixed expenses while increasing the variable expense per unit, the
total expense line relative to its previous position on a cost-volume-profit graph will:
A)
Shift upward and have a steeper slope
B)
Shift upward and have a flatter slope
C)
Shift downward and have a steeper slope
D)
Shift downward and have a flatter slope
Question 1.9
Which of the following costs should not be included in product costs for internal management
reports that are used for decision-making?
A)
Costs of unit-level activities
B)
Costs of batch-level activities
C)
Costs of product-level activities
D)
Costs of organization-sustaining activities
Question 1.10
Assembling a product is an example of a:
A)
Unit-level activity
B)
Batch-level activity
C)
Product-level activity
D)
Organization-sustaining
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MA161: Management Accounting (May/June 2013)
Question 1.11
Which of the following budgets are prepared before the production budget?
Direct Materials
Budget
Sales Budget
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
Question 1.12
Which of the following is NOT an objective of the budgeting process?
A)
To communicate management's plans throughout the entire organization
B)
To provide a means of allocating resources to those parts of the organization where they
can be used most effectively
C)
To ensure that the company continues to grow
D)
To uncover potential bottlenecks before they occur
Question 1.13
A labour efficiency variance resulting from the use of poor quality materials should be charged to:
A)
The production manager
B)
The purchasing agent
C)
Manufacturing overhead
D)
The engineering department
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MA161: Management Accounting (May/June 2013)
Question 1.14
A favorable labor rate variance indicates that:
A)
Actual hours exceed standard hours
B)
Standard hours exceed actual hours
C)
The actual rate exceeds the standard rate
D)
The standard rate exceeds the actual rate
Question 1.15
For which of the following decisions are opportunity costs relevant?
A)
Choice A
B)
Choice B
C)
Choice C
D)
Choice D
Question 1.16
Which of the following costs are always irrelevant in decision making?
A)
Avoidable costs
B)
Sunk costs
C)
Opportunity costs
D)
Fixed costs
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MA161: Management Accounting (May/June 2013)
Question 1.17
Within the relevant range, variable costs can be expected to:
A)
Vary in total in direct proportion to changes in the activity level
B)
Remain constant in total as the activity level changes
C)
Increase on a per unit basis as the activity level increases
D)
Increase on a per unit basis as the activity level decreases
Question 1.18
An example of a committed fixed cost is:
A)
Management training seminars
B)
A long-term equipment lease
C)
Research and development
D)
Advertising
Question 1.19
Which of the following represents the normal sequence in which the below budgets are
prepared?
A)
Sales, Balance Sheet, Income Statement
B)
Balance Sheet, Sales, Income Statement
C)
Sales, Income Statement, Balance Sheet
D)
Income Statement, Sales, Balance Sheet
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MA161: Management Accounting (May/June 2013)
Question 1.20
All the following are considered to be benefits of participative budgeting, except for:
A)
Individuals at all organizational levels are recognized as being part of a team; this
results in greater support for the organization
B)
The budget estimates are prepared by those in directly involved in activities
C)
When managers set their own targets for the budget, top management need not be
concerned with the overall profitability of operations
D)
Managers are held responsible for reaching their goals and cannot easily shift
responsibility by blaming unrealistic goals set by others
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MA161: Management Accounting (May/June 2013)
Question 2
Pavalo Ltd. manufactures two products, Product Caramel and Product Delight. The company
estimated it would incur £130,890 in manufacturing overhead costs during the current period.
Overhead currently is applied to the products on the basis of direct labour hours. Data
concerning the current period's operations appear below:
Estimated unit production
Direct labour hours per unit
Direct materials cost per unit
Direct labour cost per unit
Caramel
Delight
400 units
0.70 hour
£10.70
£11.20
1,200 units
1.20 hours
£16.70
£19.20
Required:(a)
Compute the predetermined overhead rate under the current method, and determine
the unit product cost of each product for the current year.
(7 marks)
(b)
The company is considering using an activity-based costing system to compute unit
product costs for external financial reports instead of its traditional system based on
direct labor hours. The activity-based costing system would use three activity cost
pools.
Data relating to these activities for the current period are given below:
Estimated
Overhead
Activity Cost Pool
Machine setups
Purchase orders
General factory
Costs
£ 13,570
91,520
25,800
£130,890
Expected Activity
Product
Product
Caramel
Delight
100
130
810
1,270
280
1,440
Total
230
2,080
1,720
Determine the unit product cost of each product for the current period using the activity-based
costing approach.
(13 marks)
(Total: 20 marks)
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MA161: Management Accounting (May/June 2013)
Section B: You are required to answer any TWO questions only from this section
Question 3
Petwee Ltd. produces and sells a single product. The company's income statement for the most
recent month is given below:
Sales (6,000 units at £40 per unit)
£240,000
Less manufacturing costs:
Direct materials
£48,000
Direct labor (variable)
60,000
Variable factory overhead
12,000
Fixed factory overhead
30,000
Gross margin
150,000
90,000
Less selling and other expenses:
Variable selling and other expenses
24,000
Fixed selling and other expenses
42,000
Net operating income
66,000
£ 24,000
There are no beginning or ending inventories.
Required:(a)
Compute the company's monthly break-even point in units of product. Draw up a
contribution format income statement to assist you in your calculations.
(10 marks)
(b)
What would the company's monthly net operating income be if sales increased by 25%
and there is no change in total fixed expenses?
(5 marks)
(c)
What value of sales must the company achieve in order to earn a net operating income
of £50,000 per month?
(5 marks)
(d)
The company has decided to automate a portion of its operations. The change will
reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed
factory overhead. Compute the new break-even point in units.
(5 marks)
(Total: 25 marks)
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MA161: Management Accounting (May/June 2013)
Question 4
Alidough Ltd's standard and actual costs per unit for the most recent period, during which 400 units
were actually produced, are given below:
Materials:
Standard
Standard 2 kg at£1.50 per kg
Actual
£3.00
Actual 2.1 kg at £1.60 per kg
£3.36
Direct labour:
Standard 1.5 hours at £6 per hour
9.00
Actual 1.4 hours at £6.50 per hour
9.10
Variable overhead:
Standard 1.5 hours at £3.40 per hour
Actual
5.10
1.4 hours at £3.10 per hour
Total unit cost
4.34
£17.10
£16.80
Required:From the foregoing information, compute the following variances. Show whether the variance is
favourable (F) or unfavourable (U):
(a)
i.
ii.
iii.
iv.
v.
vi.
vii.
Total materials variance
Materials price variance
Materials quantity variance
Direct labor rate variance
Direct labor efficiency variance
Variable overhead rate variance
Variable overhead efficiency variance
(b)
Explain why the total materials variance is split into the materials price variance and the
materials usage variance
(12 marks)
(Total: 25 marks)
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MA161: Management Accounting (May/June 2013)
(1 mark)
(2 marks)
(2 marks)
(2 marks)
(2 marks)
(2 marks)
(2 marks)
Question 5
All sales at Mybuys Ltd., a wholesaler, are made on credit. Experience has shown that 70% of the
accounts receivable are collected in the month of the sale, 26% are collected in the month
following the sale, and the remaining 4% are uncollectible. Actual sales for March and budgeted
sales for the following four months are given below:
March (actual sales)
£200,000
April
£300,000
May
£500,000
June
£700,000
July
£400,000
The company's cost of goods sold is equal to 60% of sales. All purchases of inventory are made on
credit. Mybuys Ltd. pays for one half of a month's purchases in the month of purchase, and the
other half in the month following purchase. The company requires that end-of-month inventories
be equal to 25% of the cost of goods sold for the next month.
Required:(a)
Compute the amount of cash, in total, which the company can expect to collect in May.
(6 marks)
(b)
Compute the budgeted pound value of inventory which the company should have on hand
at the end of April.
(3 marks)
(c)
Compute the amount of inventory that the company should purchase during the
Months’ of May and June.
(8 marks)
(d)
Compute the amount of cash payments that will be made to suppliers during June for
purchases of inventory.
(8 marks)
(Total: 25 marks)
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MA161: Management Accounting (May/June 2013)
UNDERGRADUATE PROGRAMMES
LEVEL ONE EXAMINATION
MA161: MANAGEMENT ACCOUNTING
MAY/JUNE 2013
SECTION A – QUESTION 1: MULTIPLE CHOICE ANSWER SHEET
Candidates should answer all questions by placing a ring around the letter of their choice on this
answer sheet.
Please detach the answer sheet and hand it in with your other answer books at the end of the exam.
Candidate Number: (please write clearly)
1.1
A
B
C
D
1.11
A
B
C
D
1.2
A
B
C
D
1.12
A
B
C
D
1.3
A
B
C
D
1.13
A
B
C
D
1.4
A
B
C
D
1.14
A
B
C
D
1.5
A
B
C
D
1.15
A
B
C
D
1.6
A
B
C
D
1.16
A
B
C
D
1.7
A
B
C
D
1.17
A
B
C
D
1.8
A
B
C
D
1.18
A
B
C
D
1.9
A
B
C
D
1.19
A
B
C
D
1.10
A
B
C
D
1.20
A
B
C
D
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MA161: Management Accounting (May/June 2013)