ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Total Score

13 to 17, February, 2012

Year 2011/2012 Semester 2

Name: _____________________________________________________
Class & Instructor

Please Tick One

G1: Prof Leong Kwong Sin

G2: Prof Leong Kwong Sin
G3: Prof Leong Kwong Sin
G4: Wong Suay Peng
G5: Wong Suay Peng

Instructions:

1.

There are 4 questions in this quiz. Answer ALL the questions.

2.

Please write your answers legibly only in the boxes provided. Show your
workings clearly.

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ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Question 1 (20 marks)

(1a) Scent Ltd. produces and sells a wide range of perfumes in specially designed
bottles. The bottle is an important feature of the product. Complete the table
below by putting a to indicate if the cost is a direct material cost, direct
labour cost, manufacturing overhead cost or period cost.
(16 marks)
(1 mark for each correct answer; minus 1 mark for each wrong answer)
Direct
Direct labour Manufacturing
material cost
cost
overhead cost
i. Aroma compounds
essential to create
the fragrance
ii. Water (about 0.1%
of the content of
each bottle of
perfume)
iii. Water for
consumption during
office meetings
iv. Perfume bottles
v. Wages for the
production workers
vi. Overtime premium
for production
workers. OT is due
to increase in
general workload.
vii. Idle time due to
machine breakdown
viii. Salaries of the
production
supervisors
ix. Salaries of the sales
supervisors
x. Office rent
xi. Factory utilities
xii. Depreciation:
factory
xiii. Depreciation: Shop
xiv. Transportation-in
costs on materials
purchased
xv. Transportation-out
costs to customers
xvi. R&D to explore new
products
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Period cost

ACCT112: MANAGEMENT ACCOUNTING

(1b)

2011/12 S2 Test # 1

What is the impact on the balance sheet and income statement if a

manufacturing cost is wrongly recorded as a period cost?
(4 marks)

Answer (1b)

Question 2 (20 marks)

BR makes and sells 2 ice cream flavours. It projected total fixed costs for 2012 to be
$378,000. Forecasted sales and variable costs for the year are as follows:

Sales
Variable costs

Vanilla
$400,000
$100,000

Chocolate
$200,000
$80,000

Assume sales mix will remain constant.

Required
(a) Calculate the sales (in dollars) of each flavour to breakeven. Round your answers
to the nearest dollar.
(5 marks)
Answer (2a)

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ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

(b) BR is considering paying a sales commission of 10% of sales to motivate its retail
staff. What is the additional total sales that must be made to make paying the
sales commission worthwhile?
(10 marks)
Answer (2b)

(c) Compute the additional sales (in dollars) of Vanilla and Chocolate ice cream
required if BR wants to increase operating income by 100%.
(5 marks)
Answer (2c)

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ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Question 3 (20 marks)

BWC uses normal costing in its job costing system. In 2011, the company earned a
gross profit margin of 60% on sales of $475,000. It worked on 3 jobs during the year
and by the end of the year, Job A was still in progress, Jobs B and C were completed
but only Job B was delivered to the customer.
Production data for 2011 are as follows:
Manufacturing
Overhead
Factory supervisor
Production setup
Indirect materials

Job A
Job B
Job C
Total

Cost allocation base

Direct labour cost
No. of setups
Direct materials cost

No. of setups
Budget Actual
4
5
7
8
9
15
20
28

Budgeted Manu
Overhead $
$180,000
$40,000
$15,000
$235,000

Cost of Direct Materials

used
Budget
Actual
$6,000
$8,000
$17,000
$15,000
$7,000
$9,000
$30,000
$32,000

Actual Manu
Overhead $
$100,000
$159,500
$10,000
$269,500

Cost of Direct Labour used

Budget
Actual
$18,000
$20,000
$45,000
$50,000
$27,000
$30,000
$90,000
$100,000

BWC uses activity-based costing to allocate overhead costs. Its policy is to write off
any under- or overapplied overhead to cost of goods sold.
Required
(a) Compute the manufacturing overhead application rates.
Answer (3a)

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(6 marks)

ACCT112: MANAGEMENT ACCOUNTING

(b) Complete the T-accounts on the next page.

Workings:

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2011/12 S2 Test # 1

(14 marks)

ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Answer (3b)
Raw Materials
8,000 (b)

Bal
(a)

Bal

(d)

Cost of Goods Sold

(c)

10,000

Manufacturing Overhead Control

(e)

Show clearly the adjustment of under- or

overapplied overhead

BWIP
Raw Materials
DL
(f)
(g)

WIP: Job A
0
8,000
20,000

Bal

(h)
WIP: Job B

(j)
Raw Materials
DL
(k)

BWIP
Raw Materials
DL
(o)

FG: Job A
0

Bal
15,000
50,000

(m)

FG: Job B
2,000
(n)

(l)

WIP: Job C
5,000
9,000
30,000
(p)

Bal
(q)

(r)

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FG: Job C
7,000

ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Question 4 (20 marks)

DoReMe Music School provides piano and violin classes. It has two service
departments: Administration and Maintenance. The budgeted costs in the service
departments are as follows:
Administration
Maintenance

: $342,000
: $171,000

The usage of the service departments output for the year is as follows:
Provider of Service
Administration
Maintenance
User of Service
Administration
Maintenance
Piano
Violin

10%
40%
50%

5%
60%
35%

Required
(a) As the manager of the Piano Department, would you prefer budgeted or actual
cost allocation rates be used to allocate the service department costs to your
department? Why?
(10 marks)
Answer (4a)

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ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

(b) Use the step-down method to allocate service department costs.

(10 marks)
Answer (4b)

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ACCT112: MANAGEMENT ACCOUNTING

2011/12 S2 Test # 1

Extra space for workings. Please state Question #.

End of Quiz
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