Managerial Accounting Assessment|ACC720 |March 2020
PART A
1. For an activity base to be useful in cost behavior analysis,
a. the activity should always be stated in dollars.
b. there should be a correlation between changes in the level of activity and changes in costs.
c. the activity should always be stated in terms of units.
d. the activity level should be constant over a period of time.
2. A variable cost is a cost that
a. varies per unit at every level of activity.
b. occurs at various times during the year.
c. varies in total in proportion to changes in the level of activity.
d. may or may not be incurred, depending on management's discretion.
3. A cost which remains constant per unit at various levels of activity is a
a. variable cost.
b. fixed cost.
c. mixed cost.
d. manufacturing cost.
4. Two costs at Bradshaw Company appear below for specific months of operation.
Month Amount Units Produced
Delivery costs September $ 40,000 40,000
October 55,000 60,000
Utilities September $ 84,000 40,000
October 126,000 60,000
Which type of costs are these?
a. Delivery costs and utilities are both variable.
b. Delivery costs and utilities are both mixed.
c. Utilities are mixed and delivery costs are variable.
d. Delivery costs are mixed and utilities are variable.
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Managerial Accounting Assessment|ACC720 |March 2020
5. An increase in the level of activity will have the following effects on unit costs for variable and fixed
costs:
Unit Variable Cost Unit Fixed Cost
a. Increases Decreases
b. Remains constant Remains constant
c. Decreases Remains constant
d. Remains constant Decreases
6. A fixed cost is a cost which…
a. varies in total with changes in the level of activity.
b. remains constant per unit with changes in the level of activity.
c. varies inversely in total with changes in the level of activity.
d. remains constant in total with changes in the level of activity.
7. Fixed costs normally will not include
a. property taxes.
b. direct labor.
c. supervisory salaries.
d. depreciation on buildings and equipment.
8. The increased use of automation and less use of the work force in companies has caused a trend
towards an increase in
a. both variable and fixed costs.
b. fixed costs and a decrease in variable costs.
c. variable costs and a decrease in fixed costs.
d. variable costs and no change in fixed costs.
9. Cost behavior analysis is a study of how a firm's costs
a. relate to competitors' costs.
b. relate to general price level changes.
c. respond to changes in the level of business activity.
d. respond to changes in the gross national product.
10. Cost behavior analysis applies to
a. retailers.
b. wholesalers.
c. manufacturers.
d. all entities. ( / 2 =20 marks)
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Managerial Accounting Assessment|ACC720 |March 2020
PART B
Question 1
A major difference between financial accounting and management accounting is the focus on users of
information. The external reporting that is financial accounting, is therefore said to be insufficient for
managers to perform their managerial functions.
Required:
a. Contrast financial and management accounting on the basis of user orientation, purpose of
information, level of aggregation, conformance to accounting standards and data orientation
towards past or future.
10 marks
b. Based on your answer in (a), why do you think financial accounting is insufficient for
management to plan, control and decisions? Elaborate by including the different requirement of
management accounting information for senior managers, middle managers and operation
managers.
15 marks
Question 2
Tefale Ltd manufactures variety of products from stainless steel and brass, including Triple A and Double
A. The following information provides details of the activity, cost driver, volume and transaction cost
drivers for a period in respect of Tefale Ltd
Activity Cost Driver Cost driver Cost pool
volume/year
RM
Purchasing Purchase orders 1,500 75,000
Setting Batches produced 2,800 112,000
Materials handling Materials movements 8,000 96,000
Inspection Batches produced 2,800 70,000
Machining costs Machine hours 50,000 150,000
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Managerial Accounting Assessment|ACC720 |March 2020
The following are the Product Triple A and Double A data for next year budget:
Triple A Double A
Purchase orders 25 15
Output 15,000 units 12 000 units
Production batch size 100 units 100 units
Materials movements per batch 6 5
Machine hours per unit 0.1 0.2
Required:
a) Calculate the budgeted overhead costs for product Triple A and Double A using Activity Based
Costing method. (Show all workings)
(20 marks)
b) Calculate the budgeted overhead costs for product Triple A and Double A using traditional costing
method using machine hour as the basis of overhead absorption. ( 10marks)
c) Explain two (2) benefits of using Activity Based Costing method. (5 marks)
(Total: 35 marks)
Question 3
Genting Bhd manufactures and sells many types of toys. The business is considering producing a new
type of toy called LPS. The manager of Genting Bhd estimates the monthly fixed costs to be RM1,800
which consists of RM1,200 for administrative expenses and RM600 for selling and distribution expenses.
It is also estimated that the costs of material and labour to produce LPS is RM5 per unit. Additionally,
the business has to incur RM1 on special packaging for each unit of LPS. As the product is relatively new
to the market, the business forecasts that only 500 units of LPS will be sold during the first month at a
proposed selling price of RM12 per unit.
Required:
a) Compute the contribution margin per unit of LPS. (2 marks)
b) Compute the break-even-point of LPS in units and ringgit. (4 marks)
c) How many units of LPS must be sold if the business wishes to earn a profit of RM2,400?
(8 marks)
d) If the price of the special packaging is increased to RM1.50 per unit, calculate the new break-
even-point of LPS in units and ringgit. (8 marks)
e) Based on the original data, calculate the margin of safety in units and ringgit if the business
plans to sell 600 units of LPS. . (8 marks)
(Total: 30 marks)
