managrial accounting final exam

SectionA                                                                                                                     40marks

Answer QuestionNo. 1,then attempt any other THREE questions.

1.  Transaction drivers count how often an activity is performed.

Duration drivers represent the amount of time required to performan activity.

Intensitydriversdirectlychargefortheresourcesused eachtimean activityis performed. Also, aweighted indexapproachmightbeused to simulateanintensitydriver.

a. Giveanexampleof eachof thefourtypesof driversdescribedabove. b. Explainwheneachofthefourtypesof driversshouldbeused.

c.For eachof the first threetypesof drivers,explaintheassumptionsabouttheactivityandthe objectof theactivity.

d. For eachof the followingactivitiesidentifyatransactiondriver,adurationdriver, andan intensitydriver.

Machinemaintenance

MachinesetupQuality controlMaterialorderingProductionschedulingWarehouseexpenseEngineeringdesign

AttemptanyTHREEquestionsof thefollowing

2.  Describethestepsin thePDCAcycle.

3.  Describesomeof thedrawbacksofusing theoperatingbudgetasa controldevice.

4.  Whatrolehastheincreasinglycompetitivebusinessenvironmentplayed inthe developmentofmanagementaccounting?

5.  Explain howtraditionalcost systems,using only unitlevelcost drivers,distortproductcosts.

SectionB                                                                                                                    60marks

ReadthefollowingFOURcases,thenanswertherequiredquestionsafter eachcase.

Case1

ProfitsharingKnightMedicalDevicesmakesdevicesandequipmentthat itsellstohospitals.The organizationhasaprofit-sharingplan thatiswordedasfollows:

The companywillmakeavailableaprofit-sharingpoolthatwill be thelowerofthefollowingtwo items:

1.40%ofincomebeforetaxesin excessof thetargetprofitlevel,whichis18%of net assets,or

2.$14million.

The individualemployeeis paid ashareof theprofit-sharingpoolequal totheratio of that employee'ssalarytothetotalsalarypaid toallemployees.

Required

(a)        Ifthe companyearned$90millionof earningsbeforetaxesandhadnetassetsof$200 million, whatwouldbetheamountavailablefordistributionfromtheprofit-sharingpool?

(b)        Supposethat BobKnight'ssalarywas$136,000 andthattotalsalariespaidinthe company were$50million. Whatwould Bob'sprofit sharebe?

Sunshine,Inc.sellsasingle product.The company'smostrecentincomestatementisgivenbelow.

Required:

a. Contribution marginper unit is

b. Ifsalesaredoubledto$240,000,

totalvariablecostswillequal

c.Ifsalesaredoubled to$240,000,

totalfixedcostswillequal

d. IfSunshineispast thebreakevenpointand

10 moreunitsaresold,profitswillincreaseby

e.Computehowmanyunits must besold to breakeven.

f. Computehow manyunits mustbesold to achieveaprofit of$20,000.

The CrandonMillhastwodivisions. The CuttingDivision preparestimberat itssawmills.The AssemblyDivision preparesthe cut lumber intofinishedwoodforthefurnitureindustry.Duringthe year,theCuttingDivision prepared60,000cords ofwoodatacost of$660,000.All thelumber was transferredtotheAssemblyDivisionwhereadditionaloperatingcostsof $6per cord wereincurred. The600,000boardfeetoffinishedwood weresoldfor $2,500,000.

Required:

a. Determinetheoperatingincomeforeachdivisionif thetransferpricefromCuttingtoAssembly isat cost,$11acord.

b. Determinetheoperatingincomeforeachdivisionif thetransferpriceis$9 per cord.

c.Since theCuttingDivisionsellsallofits wood internallytotheAssemblyDivision,doesthe managercarewhat priceisselected?Why?ShouldtheCuttingDivision beacost centeroraprofit centerunderthe circumstances?