FATÝH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT

MAN 306 MANAGERIAL ACCOUNTING

MIDTERM EXAM II

Instructor: ALI COSKUN

Duration: 90 Minutes                                                                                                   June 1, 2006

 

(PLEASE CHOOSE FIVE OF THE FOLLOWING QUESTIONS AND ANSWER)

 

QUESTION 1. (20 points)

Ceyhan Corporation has three departments. Data for the most recent year is presented below:

                                          Eminönü           Kadýköy         Beyoðlu       Bostancý

   Sales                               $240,000       $200,000       $180,000       $100,000

   Variable expenses             145,000           138,000         104,000          62,000

   Fixed expenses:

    Avoidable                           76,000             65,000          33,000          43,000

    Unavoidable                       34,000             25,000          24,000          17,000

Required:

a. Compute the operating income of each department.

b. Should any department(s) be eliminated? Which one(s) and why?

 

QUESTION 2. (20 points)

Flash Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 50,000 units of this part are as follows:

     Direct manufacturing costs           $74,000

     Variable factory overhead                90,000

     Fixed factory overhead                     50,000

Of the fixed factory overhead costs, $40,000 is unavoidable.

Required:

a. Assuming there is no alternative use for the facilities, should Flash take advantage of an offer from a supplier who is willing to sell Flash 50,000 units of the same part for $3.80 per unit?

b. Would your answer to Part A change if the facilities could be rented for $25,000 a year?

 

QUESTION 3. (20 points)

Inatra Company prepared the following absorption-costing income statement for the year ended May 31, 2006.

   Sales, (16,000 units)                                      $320,000

   Cost of goods sold                                            216,000

   Gross margin                                                 $104,000

   Selling and administrative expenses                  46,000

   Operating income                                            $58,000

Additional information follows:

Selling and administrative expenses include $1.50 of variable cost per unit sold. There was no beginning inventory, and 17,500 units were produced. Variable manufacturing costs were $11 per unit. Actual fixed costs were equal to budgeted fixed costs.

Required:

Prepare a variable costing income statement for the same period.

 

QUESTION 4. (20 points)

Different management levels in Bags, Inc. require varying degrees of managerial accounting information. Because of the need to comply with the managers' requests, four different variances for manufacturing overhead are computed each month. The information for the September overhead expenditures are as follows:

   Budgeted output units                                     3,400 units

   Budgeted fixed manufacturing overhead        $21,500

   Budgeted variable manufacturing overhead        $5.00 per direct labor hour

   Budgeted direct manufacturing labor hours             2 hours per unit

   Fixed manufacturing costs incurred              $26,000

   Direct manufacturing labor hours used             6,400

   Variable manufacturing costs incurred          $36,400

   Actual units manufactured                               3,200

Required:

Compute a 4-variance analysis for the plant controller.

a. Variable overhead spending, efficiency, production volume and static-budget variance

b. Fixed overhead spending, efficiency, production volume and static-budget variance

 

QUESTION 5. (20 points)

The Moon Company produces and sells a single product. A standard cost card for the product follows:

Standard Cost Card--per unit of product:

    Direct materials, 4 kg at $4.00                     $16.00

    Direct labor, 1.5 hours at $10.00                  $15.00

    Variable overhead, 1.5 hours at $3.00           $  4.50

    Fixed overhead, 1.5 hours at $7.00               $10.50 

    Standard cost per unit                                 $46.00

The company manufactured and sold 18,000 units of product during the year. A total of 70,200 kg of material was purchased during the year at cost of $4.20 per kg. All of this material was used to manufacture the 18,000 units. The company records showed no beginning or ending inventories for the year. The company worked 29,250 direct labor-hours during the year at a cost of $9.75 per hour. Overhead cost is applied to products on the basis of direct labor-hours.

Required

a. Compute the direct materials price and quantity variances for the year.

b. Compute the direct labor rate and efficiency variances for the year.

 

QUESTION 6. (20 points)

Naismith Company manufactures basketball backboards. The following information pertains to the company's normal operations per month:

     Output units                                                  15,000 boards

     Machine-hours                                                 4,000 hours

     Direct manufacturing labor-hours                    5,000 hours

     Direct manufacturing labor per hour                   $12

     Direct materials per unit                                    $100

     Variable manufacturing overhead costs       $150,000

     Fixed manufacturing overhead costs            $300,000

     Marketing and distribution costs                  $250,000

     Research and development costs                  $200,000

Required:

a. What is the unit cost when establishing a long-run price for basketball backboards?

b. What is the unit cost for establishing a minimum bid on a one-time-only special order of 1,000 units from an overseas city if all cost relationships remain the same except for a one-time setup charge of $40,000?

                                              

QUESTION 7. (20 points)

Richmond Table Company manufactures tables for schools. The 2005 operating budget is based on sales of 20,000 units at $100 per table. Operating income is anticipated to be $120,000. Budgeted variable costs are $64 per unit, while fixed costs total $600,000.

Actual income for 2005 was a surprising $354,000 on actual sales of 21,000 units at $104 each. Actual variable costs were $60 per unit and fixed costs totaled $570,000.

Required:

Prepare a variance analysis report with both flexible budget variances and sales-volume variances.

 

 

Bonus (10 points) True-False Questions

( …….. ) Opportunity cost is the contribution to income that is recognized through the use of limited resources available in the best alternative.

( …….. ) Locked-in costs are those costs that have not yet been incurred, but which, based on decisions that have already been made, will be incurred in the future.

( …….. ) Book value of existing equipment in equipment-replacement decisions is relevant.

( …….. ) Variable costing is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.

( …….. ) All fixed manufacturing costs are excluded from inventoriable costs under variable costing.

( …….. ) The variable costing income statement is based on the gross-margin format.

( …….. ) Managers can increase operating income when absorption costing is used by producing more inventory.

( …….. ) Throughput contribution equals revenues minus all variable direct materials costs.

( …….. ) A flexible budget variance is the difference between an actual and a budgeted amount in the static budget.

( …….. ) An actual input is a carefully predetermined quantity of inputs required for one unit of output