Managerial Accounting_Questions

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SectionA 40marks

AnswerQuestionNo. 1,thenattemptanyotherTHREEquestions.

1. Transactiondriverscount howoftenan
activityisperformed.

Durationdriversrepresenttheamountof timerequiredtoperforman activity.

Intensitydrivers
directlychargefortheresourcesused
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
the
activity.

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

ProfitsharingKnightMedicalDevices
makesdevicesandequipmentthat
it
sellstohospitals.The
organizationhasaprofit-sharingplan
thatiswordedasfollows:

The companywillmakeavailableaprofit-sharingpoolthatwill be
thelower
ofthefollowingtwo items:

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

2.$14million.

The individualemployeeis paid
ashareof
theprofit-sharingpoolequal totheratio of
that
employee’ssalarytothetotalsalarypaid
to
allemployees.

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.

Sales (4,000units)

$120,000

Lessvariableexpenses

(68,000)

Contributionmargin

52,000

Less fixedexpenses

(40,000)

Netincome

$ 12,000

Required:

.png”>a. Contribution
marginper
unit
is

b. Ifsalesaredoubledto$240,000,

.png”>totalvariablecostswillequal

c.Ifsalesaredoubled to$240,000,

.png”>totalfixedcostswillequal

d. IfSunshineispast
thebreakevenpointand

.png”>10 moreunitsaresold,profitswillincreaseby

.png”>e.Computehowmanyunits must besold to
breakeven.

.png”>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.
The
600,000boardfeetoffinishedwood weresoldfor
$2,500,000.

Required:

a. Determinetheoperatingincomeforeachdivisionif thetransferpricefromCuttingtoAssembly
isat cost,$11acord.

b. Determinetheoperatingincomeforeachdivisionif
the
transferpriceis$9
per cord.

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

AbbotCorporationproduces200,000,000units ofproductXand80,000,000of productYwiththe
followingcosts andmachinehours.

ProductX ProductY Total

Directcosts

(materialplus
labor) $18,000,000 $8,000,000

Environmental

support 28,000,000

Nonenvironmental

support 44,000,000
58,000,000

Totalsupport $44,000,000 $86,000,000 $130,000,000

Totalmachinehours 20,000,000 12,000,000 32,000,000

Required

a. Determinetotalproductcostper unit for
each productusing
atraditionalcostingsystemwith
machinehoursasthe cost driver.

b. Determinetotalproductcost
per unit
for each productusing
an activitybasedcostingsystem. Usethe number
of unitsas the costdriverfor each
activity.

TheEnd

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