Managerial Accounting II – Exam

Time alloited: 90 minutes

Problem 1:
Rose Company, a retailer, is preparing budgets for the year ending December 20x1. Budget sales are
100,000 units in the year, with 40% in 1st quarter, 20% in 2nd quarter, 30% in 3rd quarter and 10% in
4th quarter. All sales are on account with 40% collected in the quarter of sale and 60% collected in the
following quarter for both year 20x0 and 20x1. Sales in the 4th quarter of 20x0 are 12,000 units. The
unit selling price is estimated to be $20 for both year 20x0 and 20x1. Account payable at the end of the
year 20x0 was $300,000.
Required: Let’s prepare the sales budget.
Problem 2:
Mickey Corporation has the budgeted information each year as follows:
- Unit sales 2,000 units
- Selling price/unit $250
- Variable cost/unit $100
- Fixed cost/unit 120
Actual information for the year 20x1 has given as follows:
- Unit sales 2,200 units
- Selling price/unit 240
- Variable cost/unit 95
- Fixed cost/unit 110
Requried:
1) Prepare performance report combining activity variances and revenue and spending variances –
contribution costing as the following sample:
Revenue &
Actual Flexible Activity Planning
spending
results budget variance budget
variances
Revenue
Variable costs
Contribution margin
Fixed costs
Operating income
2) Give a reason for revenue variance and a reason for spending variance.
Problem 3:
Andrew Corporation has the standard product cost card for a single product as follows:
$/unit
Direct material cost 2.8 kgs at $15 per kg 42
Direct labor cost 5 direct labor-hours at $2 per direct labor-hour 10
Variable production overhead 2 machine-hours at $1.5 per machine-hour 3
Fixed production overehead 2 machine-hours at $6 per machine-hour 12
Total standard cost per unit 67
In 20x0, the corporation produced 8,000 units and spent $115,000 on fixed production overhead with
39,000 actual direct labor-hours and 18,000 actual machine-hours worked. Its management accounting
department determined the volume variance with $4,200 (Unfavorable).
Required:
1. Determine the budget variance (of fixed production overhead) for the year.
2. Determine the denominator activity level used in setting the predetermine overhead rate for the
year.
Problem 4:
Mathew Company has 2 divisions. Division X produced chips for laptops that can be sold to Division
Y or to outside customers. The management acounting department collected information last year
below:
Division A
- Capacity of chips produced 10,000 units
- Number of chips sold to outside customer 7,000 units
- Selling price/chip $100
- Variable cost/chip $40
- Total segment fixed cost $100,000
Division B
- Number of labtops sold 4,000 units
- Selling price/latop $500
- Variable cost of chip/laptop (chips bought by outside suppliers) $90
- Additional variable cost/laptop $60
- Total segment fixed cost $500,000
Total common fixed costs $220,000
Required:
1. Prepare a segmented contribution format income statement by Division and Total company.
2. Next year, Division B suggests to buy 4,000 chips from Division A. If managers are free to
negotiate and make decisions on their own, will a transfer take place? If so, within what range
will the transfer price fall? Explain.
Problem 5:
Henry Corporation manufactures and sells cars directly to customers, as well as to retail stores. To
produce its cars, the company purchases chips from 2 suppliers - Jayson Co. and Tony Co., in order to
less risky than relying on a single supplier that might sometimes experience delivery or quality
problems. Most orders are placed with Jayson Co., as it charges only $50 per chip , whereas Tony
charges $60 per chip. In the past year, Henry Corporation purchased a total of 2,000 units from Jayson
Co. and 1,000 units from Tony Co. The accountant and the purchasing manager have just completed an
analysis of the costs of dealing with each supplier during the year.
Activity Total costs Activity driver Number of
activities
Jayson Tony
- Rework product due to $54,000 Number of units reworked 200 40
poor-quality material
- Downtime due to poor- $64,000 Number of downtime hours 80 20
quality material
- Place purchase order $150,000 Number of orders 400 600
- Receiving an order $220,000 Number of deliveries 500 500
- Inspect material $30,000 Number of inspects 180 20
- Supplier audit $260,000 (Jayson)
$40,000 (Tony)
- Salary of Supplier $80,000 % time spent 70% 30%
relationship manager
- R&D $60,000 (Jayson)
Required:
Determine the total cost of ownership per unit and the supplier performance index for each of the two
suppliers.
Problem 6:
Mathew Corporation has the information of quality cost for the year 20x0 as follows:
Cost of quality $ %
Quality engineering 70,000
Lost contribution margin from current and future sales 1,200,000
Laboratory testing 60,000
Downtime 100,000
Quality improvement plans 40,000
Servicing customer complaints 50,000
Finished goods inspection 80,000
Rework 400,000
Required:
Preprare a cost of quality report (including classify the above quality costs as prevention, appraisal,
internal failure and external failure.