Examinations for Academic Year Semester I / Academic Year 2015 Semester II. 1. This question paper consists of Section A and Section B.

Size: px

Start display at page:

Download "Examinations for Academic Year Semester I / Academic Year 2015 Semester II. 1. This question paper consists of Section A and Section B."

Francis Griffith
5 years ago
Views:

PROGRAMME COHORT BSc (Hons) Human Resource Management BSc (Hons) Management BHRM/14B/FT BMAN/15A/FT B1, B2 Examinations for Academic Year 2015 2016 Semester I / Academic Year 2015 Semester II MODULE:

1 PROGRAMME COHORT BSc (Hons) Human Resource Management BSc (Hons) Management BHRM/14B/FT BMAN/15A/FT B1, B2 Examinations for Academic Year Semester I / Academic Year 2015 Semester II MODULE: COST & MANAGEMENT ACCOUNTING MODULE CODE: ACCF1104 Duration: 2 Hours and 15 Minutes Instructions to Candidates: 1. This question paper consists of Section A and Section B. 2. Section A is compulsory. 3. Answer any two questions from Section B. 4. Always start a new question on a fresh page. 5. Total Marks: 100 This Question Paper is printed on BOTH SIDES. This Question Paper Contains 4 questions and 16 pages. COST & MANAGEMENT ACCOUNTING ACCF1104 Page 1 of 16

2 SECTION A: COMPULSORY QUESTION 1: (40 MARKS) Answer all questions. PART A: Each question carries 1 mark. Q1. Cost unit is defined as: a. unit of quantity of product, service or time in relation to which costs may be ascertained or expressed. b. a location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control. c. centres having the responsibility of generating and maximizing profits. d. centres concerned with earning an adequate return on investment. Q2. Conversion cost included cost of converting into.. a. raw material, wip b. raw material, finished goods c. wip, finished goods d. finished goods, saleable goods Q3. Fixed cost is a cost: a. which changes in total in proportion to changes in output b. which is partly fixed and partly variable in relation to output c. which do not change in total during a given period despite changes in output d. which remains same for each unit of output Q4. Sunk costs are: a. relevant for decision making b. not relevant for decision making c. cost to be incurred in future d. future costs COST & MANAGEMENT ACCOUNTING ACCF1104 Page 2 of 16

3 Q5. A company makes a single product and incurs fixed costs of per annum. Variable cost per unit is 5 and each unit sells for 15. Annual sales demand is units. The breakeven point is: a units b units c units d units Q6. Blanket overhead rate is: a. one single overhead absorption rate for the whole factory b. rate which is blank or nil rate c. rate in which multiple overhead rates are calculated for each production department, service department, etc d. always a machine hour rate Q7. In make or buy decision, it is profitable to buy from outside only when the supplier s price is below the firm s own. a. fixed cost b. variable cost c. total cost d. prime cost Q8. Which of the following is not a reason for an idle time variance? a. Wage rate increase b. Machine breakdown c. Illness or injury to worker d. Non-availability of material COST & MANAGEMENT ACCOUNTING ACCF1104 Page 3 of 16

4 Q9. Overhead refers to: a. Direct or Prime Cost b. All indirect costs c. Only factory indirect costs d. Only indirect expenses Q10. A local authority is preparing cash budget for its refuse disposal department. Which of the following items would not be included in the cash budget? a. Capital cost of a new collection vehicle b. Depreciation of the machinery c. Operatives wages d. Fuel for the collection vehicles PART B: Each question carries 2 marks. Q11. During a period labour hours were worked at a standard cost of 6.50 per hour. The labour efficiency variance was 7800 favourable. How many standard hours were produced? a b c d COST & MANAGEMENT ACCOUNTING ACCF1104 Page 4 of 16

5 Q12. Selected data concerning the past fiscal year's operations (000's) of the Stanley Manufacturing Company are presented below: INVENTORIES Beginning Ending Raw materials Work in process Finished goods Other data: Raw materials used 365 Total manufacturing costs charged to production during the year (includes raw materials, direct labor, and factory overhead) 680 Cost of goods available for sale 765 Selling and general expenses 250 The cost of raw materials purchased during the year amounted to: a b c d Q13. The Macke Company s payroll summary showed the following in November: Sales department salaries 10,000 Supervisor salaries 20,000 Assembly workers wages 25,000 Machine operators wages 35,000 Maintenance workers wages 15,000 Accounting department salaries 5,000 What is the amount that would be included in direct labor in November? a. 25,000 b. 60,000 c. 95,000 d. 120,000 COST & MANAGEMENT ACCOUNTING ACCF1104 Page 5 of 16

6 Q14. A company manufactures a single product for which cost and selling price data are as follows: Selling price per unit 12 Variable cost per unit 8 Fixed cost for a period Budgeted sales for a period units The margin of safety, expressed as a percentage of budgeted sales is: a. 20% b. 25% c. 73% d. 125% Q15. The P/v ratio of a company is 50% and margin of safety is 40%. If present sales is then breakeven point in Rs will be a b c d. None of the above Q16. J Ltd uses standard absorption costing and absorbs production overheads on the basis of standard machine hours. The following budgeted and actual information applied in its last accounting period: Budget Actual Production overhead Machine hours Units produced At the end of the period, production overhead will be reported as: a. under-absorbed by 4344 b. unver-absorbed by 3660 c. over-absorbed by 4344 d. over-absorbed by 3660 COST & MANAGEMENT ACCOUNTING ACCF1104 Page 6 of 16

7 Q17. A company has established a budgeted sales revenue for the forthcoming period of with an associated contribution of Fixed production costs are and fixed selling costs are What is the breakeven sales revenue? a b c d Q18. A company wishes to make a profit of It has fixed costs of with a C/S ratio of 0.75 and a selling price of $ 10 per unit. How many units would the company need to sell in order to achieve the required level of profit? a units b units c units d units Q19. A company manufactures a single product which it sells for 15 per unit. The product has a contribution to sales ratio of 40 per cent. The company s weekly breakeven point is sales of What would be the profit in a week when 1500 units are sold? a. 900 b c d COST & MANAGEMENT ACCOUNTING ACCF1104 Page 7 of 16

8 The following refers to Q20 and Q21 A company has a budgeted material cost of for the production of units per month. Each unit is budgeted to use 2 kg of material. The standard cost of material is 2.50 per kg. Actual materials in the month cost for units and kg were purchased and used. Q20. What was the adverse material price variance? a b c d Q21. What was the favourable material usage variance? a b c d Q22. The following information relates to labour costs for the past month: Budget Labour rate 10 per hour Production time hours Time per unit 3 hours Production units 5000 units Actual Wages paid Production 5500 units Total hours worked hours There was no idle time. What were the labour rate and efficiency variances? COST & MANAGEMENT ACCOUNTING ACCF1104 Page 8 of 16

9 Rate variance Efficiency variance a adverse favourable b adverse favourable c adverse 2500 favourable d adverse favourable Q23. G Ltd repairs electronic calculators. The wages budget for the last period was based on a standard repair time of 24 minutes per calculator and a standard wage rate of per hour. Following the end of the budget period, it was reported that: Number of repairs Labour rate variance 3100 (A) Labour efficiency variance Nil Based on the above information, the actual wage rate during the period was: a per hour b per hour c per hour d per hour e. Q24. The following budgeted information relates to a manufacturing company for next period: Units Production 14,000 Fixed production costs 63,000 Sales 12,000 Fixed selling costs 12,000 The normal level of activity is 14,000 units per period. Using absorption costing the profit for next period has been calculated as $36,000. What would be the profit for next period using marginal costing? a. 25,000 b. 27,000 c. 45,000 d. 47,000 COST & MANAGEMENT ACCOUNTING ACCF1104 Page 9 of 16

10 Q25. A company has calculated a 10,000 adverse direct material variance by subtracting its flexed budget direct material cost from its actual direct material cost for the period. Which of the following could have caused the variance? (1) An increase in direct material prices (2) An increase in raw material usage per unit (3) Units produced being greater than budgeted (4) Units sold being greater than budgeted a. 2 and 3 only b. 3 and 4 only c. 1 and 2 only d. 1 and 4 only SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (30 MARKS) PART A Bookdon Public Limited manufactures three products in two production departments, a machine shop and a fitting section; it also has two service departments, a canteen and a machine maintenance section. Shown below are next year s budgeted production data and manufacturing costs for the company. Product X Product Y Product Z Production 4200 units 6900 units 1700 units Prime cost: Direct materials 11 per unit 14 per unit 17 per unit Direct labour: Machine shop Fitting section 6 per unit 12 per unit 4 per unit 3 per unit 2 per unit 21 per unit COST & MANAGEMENT ACCOUNTING ACCF1104 Page 10 of 16

11 Machine hours per unit 6 hours per unit 3 hours per unit 4 hours per unit Machine Fitting Canteen Machine Total shop section Maintenance section Budgeted Overheads ( ) Allocated Overheads Rent, rates, heat and light Depreciation and insurance of equipment Additional data: Gross book value of equipment ( ) Number of employees Floor space occupied (square metres) It has been estimated that approximately 70 per cent of the machine maintenance section s costs are incurred servicing the machine shop and the remainder incurred servicing the fitting section. Required: (a) (i) Calculate the following budgeted overhead absorption rates: A machine hour rate for the machine shop. A rate expressed as a percentage of direct wages for the fitting section. (15 marks) (ii) Calculate the budgeted manufacturing overhead cost per unit of product X. (2 marks) COST & MANAGEMENT ACCOUNTING ACCF1104 Page 11 of 16

12 (b) The production director of Bookdon PLC has suggested that as the actual overheads incurred and units produced are usually different from the budgeted and as a consequence profits of each month end are distorted by over / under absorbed overheads, it would be more accurate to calculate the actual overhead cost per unit each month end by dividing the total number of all units actually produced during the month into the actual overheads incurred. Critically examine the production director s suggestion. (3 marks) PART B Describe the differences between Management Accounting and Financial Accounting. (10 marks) QUESTION 3: (30 MARKS) Chun is concerned that, while his business is profitable, it has a bank overdraft. He has approached the bank for a loan to repay the overdraft and the bank manager has asked him to prepare a cash budget for each of the three months September to November. Chun is able to provide the following information. (1) Forecast figures for sales, purchases and overheads. July August September October November Sales Purchases of goods for resale Overheads COST & MANAGEMENT ACCOUNTING ACCF1104 Page 12 of 16

13 (2) All sales are on credit. 80% of customers will pay in the month after sale. The remaining customers are expected to pay two months after sale. However, 2% of these customers are unlikely to pay and so Chun has decided that these amounts due will need to be treated as bad debts. (3) Purchases of goods for resale will be paid in the month after the purchase. (4) Overheads will be paid in the month they are incurred. (5) Chun will take drawings equal to 10% of the sales in that month. However, his drawings will never be less than (6) He has asked the bank for a loan of to repay the business overdraft. The loan will be received on 30 September and will be repaid in 24 equal monthly instalments commencing on 31 October. Interest at 6% per annum will also be paid monthly. The interest will be calculated on the amount of the loan outstanding at the beginning of the month. (7) Chun intends to purchase non-current (fixed) assets costing 6800 in September. He estimates that the depreciation on these will be 100 per month. (8) He estimates that his bank balance at 1 September will be overdrawn. Required i. Prepare a cash budget for each of the three months September, October and November. (24 marks) ii. Explain three benefits of cash budgets. (6 marks) COST & MANAGEMENT ACCOUNTING ACCF1104 Page 13 of 16

14 QUESTION 4: (30 MARKS) PART A Mrs Johnson has taken out a lease on a shop for a down payment of Additionally the rent under the lease amounts to 5000 per annum. If the lease is cancelled, the initial payment of 5000 is forfeit. Mrs Johnson plans to use the shop for the sale of clothing, and has estimated operations for the next 12 months as follows: Sales Less Value added tax (VAT) Sales less VAT Cost of goods sold Wages and wage related costs Rent including the down payment Rates, heating, lighting and insurance Audit, legal and general expenses Net profit before tax In the figures no provision has been made for the cost of Mrs Johnson but it is estimated that one half of her time will be devoted to the business. She is undecided whether to continue with her plans, because she knows that she can sublet the shop to a friend for a monthly rent of 550 is she does not use the shop herself. Required: a. Explain and identify the sunk and opportunity costs in the situation depicted above. (4 marks) b. State what decision Mrs Johnson should make according to the information given. (6 marks) COST & MANAGEMENT ACCOUNTING ACCF1104 Page 14 of 16

15 PART B Explain with an example why in the short term some costs and revenues are not relevant fordecision making. (5 marks) PART C Mill Stream makes two products, the Mill and the Stream. Information relating to each of these products for April 2011 is as follows: Mill Stream Opening inventory nil nil Production (units) 15,000 6,000 Sales (Units) 10,000 5,000 Sales price per unit ( ) Unit costs Direct materials 8 14 Direct labour 4 2 Variable production overhead 2 1 Variable sales overhead 2 3 Fixed costs for the month Production costs 40,000 Administrative costs 15,000 Sales and distribution costs 25,000 COST & MANAGEMENT ACCOUNTING ACCF1104 Page 15 of 16

16 Required: (a) Using marginal costing principles, calculate the profit in April (12 marks) (b) Reported profit figures using marginal costing or absorption costing will differ if there is any change in the level of inventories in the period. If production is equal to sales, there will be no difference in calculated profits using the costing methods. Explain (3 marks) ***END OF QUESTION PAPER*** COST & MANAGEMENT ACCOUNTING ACCF1104 Page 16 of 16

Examinations for Academic Year 2017 Semester I / Academic Year 2016/2017 Semester II

Examinations for Academic Year 2017 Semester I / Academic Year 2016/2017 Semester II Programme BSc (Hons) Human Resource Management BSc (Hons) Management (L+G+F+M) Diploma in Procurement and Supply Management COHORT BHRM/12B/13B/14B/ 15A/16A/15B/FT/PT BMANG/F/L/M/12B/13A/ 13B/14A/14B/15A/15B/1