management accounting

ACC2110 Management Accounting

Final Examination – Trimester 2, 2021

Assessment Type: Take-Home Examination

Weighting: 45% (+ 5% Oral Test)

Learning Outcomes Assessed: ULO 1, 2, 3 and 4

Due Date: 11 November 2021 (Thursday) 5:00 pm (ASDT)

Please type your answers after each question and save the file as Word document. All submissions must be submitted via Moodle. Late submission will not be accepted.

Question 1 (1 + 6 + 2 + 2 = 11 marks)

At the beginning of September, Glasgow Ltd had two jobs in progress, Job 101 and Job 102, with the following cost information:

Job 101 Job 102

Direct material $40,800 $12,000

Direct labour $9,600 $24,000

Applied overhead $3,120 $7,800

Total $56,640 $51,600

The balance of finished goods inventory on 1 September was $0.

During September, two new jobs, Job 103 and Job 104, were started. The following direct material and direct labour costs were added to the four jobs during September:

Job 101 Job 102 Job 103 Job 104

Direct material $2,500 $7,100 $1,800 $1,700

Direct labour $800 $6,400 $900 $560

At the end of September, Job 101, Job 102 and Job 103 were completed. Only Job 101 was sold.

Required:

a) Calculate the pre-determined overhead rate based on direct labour cost. (1 mark)

b) Prepare a job-order cost sheet for the four jobs. Show the balance as of 1 September as well as direct material and direct labour added in September. Allocate the overhead to the four jobs for the month of September and show the closing balance. (6 marks)

c) Calculate the ending balances of work in process and finished goods as of 30 September. (2 marks)

d) What is normal costing? How does it differ from actual costing? (2 marks)

Question 2 (6 + 6 + 2 = 14 marks)

Quebec Ltd sells all of its products on account. The company has the following accounts receivable payment experience:

Percent paid in the month of sales 45%

Percent paid in the month after the sales 52%

Quebec’s expected sales for the next four months are as follows:

September $200,000

October $180,000

November $230,000

December $250,000

Quebec purchases direct material on account in the following amounts:

September $45,000

October $58,000

November $61,000

December $55,000

Quebec pays 25% of the accounts payable in the month of purchase and the remaining 75% in the following month.

Required:

a) Prepare a schedule of cash receipts for October, November and December. (6 marks)

b) Prepare a schedule of cash payments for purchases for October, November and December. (6 marks)

c) Explain why a manager has incentive to build slack into the budget. (2 marks)

Question 3 (1 + 1 + 2 + 1 + 2 + 2 = 9 marks)

Wellington Ltd plans to sell 30,000 webcams $120 each in the coming year. The production costs include:

Direct material per unit $50

Direct labour per unit $10

Variable overhead per unit $5

Fixed overhead $450,000

Variable selling expense per unit is $8 and the total fixed selling and administrative expense is $255,000.

Required:

a) Calculate the unit contribution margin. (1 mark)

b) Calculate the contribution margin ratio. (1 mark)

c) Calculate the break-even point in unit. (2 marks)

d) Calculate the margin of safety in unit. (1 mark)

e) If Wellington Ltd wishes to earn a profit of $564,000 in the coming year, calculate the sales revenue that the company must make to earn the target profit. (2 marks)

f) Explain why unit contribution margin becomes profit per unit above the break-even point. (2 marks)

Question 4 (4 + 4 + 3 = 11 marks)

The segmented income statement for Cork Ltd’s three product lines is provided below:

Azure Vert Gules Total

Sales revenue $320,000 $46,250 $75,000 $441,250

Less: Variable expenses $278,750 $11,250 $56,250 $346,250

Contribution margin $41,250 $35,000 $18,750 $95,000

Less: Direct fixed expenses

Depreciation $12,500 $3,750 $3,000 $18,750

Salaries $23,750 $21,250 $19,500 $65,000

Segment margin $5,000 $10,000 ($3,750) $11,250

The management of Cork Ltd is considering whether to keep or drop Gules product line. All variable costs are relevant. All depreciation on the equipment is dedicated to the product lines and none of the equipment can be sold. Each product line has a different supervisor whose position would be eliminated if the associated product line is dropped.

Required:

a) Estimate the impact on profit that would result from dropping Gules and explain why Cork Ltd should keep or drop Gules. (4 marks)

b) Assume that 20% of Azure customers would stop buying the product if Gules is no longer available, estimate the impact on profit that would result from dropping Gules and explain why Cork Ltd should keep or drop Gules. (4 marks)

c) Explain the difference between tactical and strategic decisions. (3 marks)

END OF EXAM PAPER

ACC2110 Final Exam T2 2021 1