CPA MA Management Accounting Online Training

1. Coolbreeze Co manufactures refrigerators. The company isorganizedon a divisionalised basis and has two divisions (compressor and cabinet). The compressor division transfers 65% of its output to the cabinet division for $85 per unit, and sells the rest of its output to external companies for $92 per unit.a

The cabinet division sells the final product at an average selling price of $495 per unit. In the next month, it expected that the compressor division will produce 27,000 units. The variable cost of manufacturing compressors is $62 per unit.

What contribution will the compressor division generate in the next month?

2. SolutionCo has prepared budgets based on the following assumptions:

Sales volumethree months to 30 September 2011:85,720 units three months to 31 December 2011:94,560 units

Inventory volumeat 1 July 2011:10% of sales for the next three months at 1 October 2011:75% of sales for the next three months

What is the budgeted production volume for the three months to 30 September 2011?

3. Quastir Co manufactures a single product which sells for $48.80 per unit. At this selling price, theprofitper unit is $5.35, after apportionment of the $65,000 of fixed costs. The budgeted production and sales volume is 20,000 units.

What is the margin of safety, expressed in units (to the nearest unit)?

4. Budgeted sales of X for December are 18,000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for December are budgeted to be 15,000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check.

The production budget for X for December, in units, is:

5. At 30 April 2010, the net assets of Barangia Co had a book value of $22,500,000 and an economic value of $29,900,000. The company’s weighted average cost of capital is estimated to be 16% per annum, and finance can currently be obtained at a rate of 14% per annum.

Net operatingprofitafter tax (NOPAT) has been calculated at $4,851,200.

What is the economic value added (EVA) for the company for the year to 30 April 2010?

6. In the three months to 31 March 2013, Pegem Co paidlaborcosts of $62,597.60 for 6,760laborhours. This included 182 hours of non-productivelabor. The standardlaborcost of the product produced is $21.96, based on a standard time of 2.4 hours per unit.

What was thelaborrate variance for the three months to 31 March 2013?

7. Toshi Ltd currently sets its selling price at $10, which achieves a 25% mark-up on variable cost.

Annual production and sales volume is 100,000 units and annual fixed costs are $80,000.

How much would the selling price need to be increased in order to double profit if costs, production and sales volume remain unchanged?

8. As a result of completing a transaction, Deyal Co will receive an economic benefit in the future.

Which of the following items of financial statements should now berecognized?

9. The marketing director of Peek Co has suggested that, despite an anticipated increase in variable cost per unit of $2, the selling price of the product manufactured by one of the divisions should be reduced by 3% to increase sales volume. The product is currently sold for $110 per unit which generates a contribution/sales ratio of 32%. Fixed costs for the next year are estimated to be $1,250,000.

What will be the breakeven sales volume in the next year (to the nearest unit)?

10. The Getwellquick Hospital has total costs of $1m for 20X1. During 20X1, 200,000 patients were treated and doctors were paid $500,000.

What is the most appropriate cost per unit for the hospital to use?

11. Coolbreeze Co manufactures refrigerators. The company isorganizedon a divisionalised basis and has two divisions (compressor and cabinet).

The compressor division transfers 65% of its output to the cabinet division for $85 per unit, and sells the rest of its output to external companies for $92 per unit.

The cabinet division sells the final product at an average selling price of $495 per unit. In the next month, it expected that the compressor division will produce 27,000 units. The variable cost of manufacturing compressors is $62 per unit.

Assuming that the divisions operate with total autonomy, which of the following options is the most likely reason for making internal transfers at a value which is less than the external selling price of the compressor division?

12. A division manufacturing a single product which sells for $325 has the following unit cost structure:

$

Direct materials95

Directlabor78

Variable overheads56

Share of fixed costs45

Total cost274

In the coming period, the budgeted production volume is 10,000 units.

What is the budgeted breakeven sales volume (to the nearest unit)?

13. Which of the following statements about accounting concepts and the characteristics of financial information is correct?

14. Each division of Calcul Co manufactures a single product.

In one of the divisions the standard profit of each unit is calculated as:

Selling price$135

Total cost$100

Profit$35

It is estimated that fixed costs comprise 54% of the total cost of the product. The budgeted production and sales volumes for the next month is 3,954 units.

What is the margin of safety?

15. On 1 December 2009 Reon Co acquired a non-current asset at a cost of $318,000. The purchase was financed through a six year finance lease. Under the lease, an initial payment of $71,000 was made on 1 December 2009. Five further payments of $71,000 are required on 1 December each year, commencing 1 December 2010. Reon uses the sum of digits method to allocate interest to accounting periods.

How should the total lease liability be reported in the statement of financial position at 30 November 2010?

16. The budgeted overheads of Nambro for the next year have beenanalyzedas follows:

$000

Purchase order processing costs450

Production run set up costs180

Machine running costs640

In the next year, it is anticipated that machines will run for 32,000 hours, 6,000 purchase orders will be processed and there will be 450 production runs.

One of the company’s products is produced in batches of 500. Each batch requires a separate production run, 30 purchase orders and 750 machine hours.

Using Activity Based Costing, what is the overhead cost per unit of the product?

17. At the beginning of March 2012, INS Plc has an opening balance of $60,000 on its receivables ledger. Sales of $160,000 have been budgeted for March and it is budgeted that 60% of these will be settled in March after a cash discount of 2.5%.

If 23% of the opening receivables are still outstanding at the end of March, what will be the budgeted receivables figure at that date?

18. Consider the following statements relating to activity-based costing (ABC) in a manufacturing environment:

(i) ABC eliminates the use of volume as a means of measuring costs

(ii) More accurate cost estimates will always be produced using ABC than absorption costing

Which of the following combinations is correct?

19. On the first day of the new financial year, the value of the non-current assets held by Vieta Co increased because the directors implemented a policy of revaluation.

How will the company’s return on capital employed (ROCE) and net profit margin ratios for the year be affected?

20. Which of the following statements about divisionalizationis/are correct?

(i) Divisionalizationleads to head office managers having reduced control over operational decisions in an operating unit.

(ii) Achieving corporate goals will be the only factor considered by divisional managers when they are making decisions.

(iii) Divisionalizationallows operating decisions to reflect the local conditions of an operating unit.

21. Bush has been asked by his bank to produce a budgeted income statement for the six months ending on 31 March 2014. He forecasts that monthly sales will be $3,000 for October, $4,500 for each of November and December, 2013 and $5,000 per month from January 2014 onwards.

Selling price is fixed to generate a margin on sales of 33.33%.

Overhead expenses (excluding depreciation) are estimated at $800 per month. He plans to purchase non-current assets on 1st October costing $5,000, which will be paid for at the end of December and are expected to have a five-year life, at the end of which they will possess a nil residual value.

The budgeted net profit for the six months ending 31 March 2014 is:

22. Which of the following statements is NOT correct about the Kaizen philosophy?

23. A company absorbs overheads on a machine hour basis. Actual machine hours were 20,000, actual overheads were $480,000 and there was over absorption of overheads of $95,000.

What is the overhead absorption rate?

24. Silur Co buys and restores items of exclusive vintagejewelry. At 31 May 2009, the company had three items in inventory.

Details of the itemswere:

NecklaceBraceletPendant

Purchase cost12,00031,00045,000

Expected selling price25,00038,00053,000

Restoration costs to date6,0005,0002,000

Further costs before sale2,0003,0001,000

What was the total value of Silur’s inventory at 31 May 2009?

25. Sun Mics' e-procurement system shows the bidding to be placed over the Internet, and rival bids for all suppliers.

Which of the following will be an advantage of e-procurement system for Sun Mics’?