CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ Autumn Examinations 2014/2015

Module Title: Cost & Management Accounting 1 Module Code:

ACCT6002

School:

Business

Programme Title:

Bachelor of Business (Honours) in Business in Accounting – Year 1 Bachelor of Business in Business in Accounting – Year 1 Bachelor of Business – Year 2 Bachelor of Business (EOD) – Year 2

Programme Code:

BACCT_8_Y1 BACCT_7_Y1 BBUSS_7 _Y2 BBUSE_7 _Y2

External Examiner(s): Internal Examiner(s):

Ms Fiona Malone Ms Ruth Vance, Ms Marie Dorgan, Ms Susan Flannery, Ms Elaine Casey, Mr Bert Aherne, Mr Scott McGowan

Instructions:

Answer Q1 and two other question

Duration:

2 Hours

Sitting:

Autumn 2015

Requirements for this examination:

Calculator

Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the correct examination paper. If in doubt please contact an Invigilator.

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Question 1: Compulsory. 20 Multiple Choice Questions (2 marks each, total of 40 marks ). Attempt all parts and show workings where appropriate. Choose the one alternative that best completes the statement or answers the question. Answer in your answer book only please. If you wish to do calculations do so in a separate rough work section to your answers. 1.

Snead currently produces 120,000 units at a cost of €400,000. Of the €400,000 cost, €200,000 is a fixed cost. Next year Snead expects to produce 145,000 units. Snead's relevant range for production activities is 100,000 to 150,000 units. If 145,000 units are produced next year, what is the expected fixed cost for next year? A) €200,000

2.

3.

B) €483,333

C) €265,833

D) €241,667

As sales volume decreases in the relevant range, fixed costs per unit ________, but total fixed costs ________. A)

do not change; increase

B)

do not change; decrease

C)

increase; do not change

D)

decrease: do not change

The following data has been assembled for Tire Company. Use the high-low method. Month January February March April May

Cost

Hours €24,400 2,000 39,000 2,200 35,280 2,750 36,400 3,500 44,160 3,900

The total fixed cost is ________. A) €3,600

B) €26,672

C) €21,360

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D) €10,112

4.

Presented below is the production data for six months of the year showing the mixed costs incurred by Brooklyn Company. Month July August September October November December

Cost €7,500 11,250 11,500 11,700 13,500 12,850

Units 4,000 9,500 9,000 10,500 12,000 10,000

Brooklyn Company uses the high-low method to analyse mixed costs. The predicted total cost at an operating level of 10,000 units is ________. A) €11,725 5.

B) €11,800

C) €12,500

D) €12,000

The following data has been assembled for Lion Company. Use the high-low method. Month January February March April May

Cost €24,400 39,000 39,280 43,400 44,160

Hours 2,000 3,500 3,450 3,200 3,900

The variable cost per hour is ________. A) €8.64 6.

C) €1.84

D) €1.52

Applied fixed overhead is computed using the ________ amount of the cost driver. A) expected

7.

B) €10.40

B) full-capacity

C) budgeted

D) actual

Kings Company had the following information: Budgeted factory overhead Actual factory overhead Budgeted direct labour hours Actual direct labour hours

€75,000 €80,000 20,000 21,000

Assume the cost driver for factory overhead costs is direct labour hours and a job uses 2,000 direct labor hours. What amount of factory overhead is applied to the job? A) €8,000

B) €7,500

C) €7,140

D) €7,600

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8.

The most important contributor to the variance between actual and applied overhead costs is ________. A) inefficient use of overhead items B) operating at a different level of volume than the level used as a denominator in calculating the budgeted overhead rate C) price changes in overhead items D) poor forecasting

9.

The following information was gathered for the Badger Company: Budgeted direct labour hours Actual direct labour hours Budgeted factory overhead Actual factory overhead

8,000 8,100 €224,000 €224,970

Assume the cost driver for factory overhead costs is direct labour hours. What is the amount of over-applied or under-applied overhead?

10.

A)

€970 under-applied

B)

€1,830 over-applied

C)

€970 over-applied

D)

€1,830 under-applied

Which industry does NOT use job-order costing? A) printing

11.

B) construction

C) aircraft

D) lumber

Clumsy Company produces plastic cups in a one-department process. The following data is available for the past month: Work-in-process inventory, beginning Units started Units completed and transferred Work-in-process inventory, ending

0 60,000 48,000 12,000

The units in process at the end of the month are 100 percent complete with respect to materials and 50 percent complete with respect to conversion costs. What are the equivalent units for materials for the month? A) 30,000

B) 38,400

C) 12,000

D) 60,000

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12.

During the month of May, Masters Clothing transferred 140,000 shirts to Finished Goods Inventory. There was no beginning work-in-process inventory. The company had 40,000 shirts in process at May 31 and the shirts were 50 percent complete with respect to conversion costs. All direct materials are added at the beginning of the production process. The equivalent units for materials for May are ________. A) 180,000

13.

B) 160,000

C) 90,000

D) 140,000

Happy Company manufactures tape dispensers. The Assembly Department reported the follow data for the past month: Units started and completed Units started and not complete Units in beginning inventory

70,000 10,000 0

Direct materials costs Conversion costs

€560,000 €240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials and 60 percent complete with respect to conversion costs. The unit cost of direct materials is ________. A) €3.32 14.

D) €7.00

B) €240

C) €200

D) €400

Modern business tends to have __________ overheads compared to direct costs. A) low

16.

C) €1.67

The Technical Services Department of Michigan State University leased a photocopy machine for €2,000 per month plus €0.04 per copy. Additional budgeted variable operating costs were €0.02 per copy. The Technical Services Department estimated the machine would produce 30,000 copies per month. The Accounting Department estimated is would make 6,000 copies per month but actually made 4,000 copies. Assume fixed and variable cost pools are allocated separately. What is the amount of fixed cost allocated to the Accounting Department for the month? A) €360

15.

B) €6.86

B) accurate

C) variable

D) high

Which of the following defines total product cost? A) prime cost plus production overhead B) direct costs plus indirect costs of production, selling and administration C) prime cost plus direct cost D) indirect cost plus production overhead

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17.

The total of all direct costs of production is also known as: A) prime cost cost

18.

B) variable cost

C) production costs

D) total

Budgeted information relating to two departments in Blair’s Chairs Limited for the next period is as follows:

Department Production overhead € 1 270 000 2 18 000

Direct material cost € 67 500 36 000

Direct labour cost € 13 500 100 000

Direct labour hours 2 25

Machine hours 45 000 300

Individual direct labour workers within each department earn differing rates of pay according to their skills, grade and experience. What is the most appropriate production overhead absorption method for Department 2? A)

€ per direct labour hour

B)

€ per machine hour

C)

% of direct material cost

D)

% of direct labour cost

19. Perth Ltd has been using an overhead cost rate of €5.60 per machine hour. During the year overheads of €275 000 were incurred and 48 000 machine hours worked. Therefore, overheads were: A) C)

over-applied by €6 200 under-applied by €7 600

B) D)

under-applied by €6 200 over-applied by €7 600

20. Depreciation of machinery would be classed as___________ A) factory indirect expenses

B) direct materials

C) direct expenses

D) administration expenses

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Question 2: Process Costing (Total 30 Marks)

TOTAL: 30 Marks

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Question 3: Overheads Analysis & Inventory Valuation (Total 30 Marks) Attempt Part A and Part B. PART A: Overheads Analysis (Total 20 Marks)

Part B on the next page…

Page 8 of 10

PART B: Inventory Valuation (Total 10 Marks)

Page 9 of 10

Question 4: Group Bonus Scheme (Total 30 Marks) Optimum Optics Ltd. employs three laser optical surgeons who are remunerated on a group bonus scheme basis. Each surgeon carries out laser eye surgery which corrects short and long-sightedness, resulting in 20:20 vision for its patients. The following information summarizes the payment terms and work undertaken by the company’s medical team during week 36; 

The basic working week is 36 hours



Overtime is paid at time and a third



The rate per hour paid is €75



The number of corrective laser surgeries expected to be completed per hour is 3

Surgeon Name Hours Worked Week 36

Dr. Bill

Dr. Lil

Dr. Will

50

31

45

The bonus paid is one-half the productivity index over 100 The number of corrective laser surgeries carried out in week 36 was 440 You are required to calculate the gross wages for all three employees:   

Show the total time wages for each employee (you may show basic pay and overtime pay separately if you wish). Show the total bonus payable to each employee based on the group bonus scheme the company operates. Show the total wage payable to each employee (i.e. time-pay plus bonus).

Total 30 Marks.

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