University of the South Pacific

School of Accounting and Finance

AF201 MANAGERIAL ACCOUNTING

Semester 1, 2022 (Face-to-Face & Blended Modes)

Mid-Semester Test

Duration
Reading time 10 minutes, Writing time 2 hours

Instructions
Answer the multiple choice questions on the special answer sheet
provided.
All questions are compulsory.
The total mark for this test is 100 and it carries a 25% weighting towards
your overall course grade.
You may use a non-programmable calculator. No other materials are
allowed.
There are 11 pages in this test paper, including this cover page.
An attachment for Question 1, Section B is on the last page.

SECTION A MULTIPLE CHOICE

MARK YOUR ANSWERS TO QUESTONS IN SECTION A ON THE

ANSWER SHEET PROVIDED AND RETURN THE SHEET WITH YOUR
ANSWER BOOKLET

Answer the questions by placing a circle around the letter on the ANSWER
SHEET that you think is the correct answer.

There are 15 questions in this Section. All questions carry 2 marks each.
 ]
Begi

Q1. The following information is available for the current year for Sven’s Brokerage
Services:

Beginning work in process $7,000

Ending work in process 6,000
Direct labor 100,000
Direct materials 30,000
Overhead 150,000

What is the cost of services sold?

A. $281,000
B. $280,000
C. $279,000
D. $260,000

Q2. The following information is provided for Drew Company:

Direct materials $55,000

Direct labor 115,000
Manufacturing overhead 210,000
Beginning work in process 70,000
Ending work in process 30,000

The cost of goods manufactured would be

A. $340,000
B. $380,000
C. $420,000
D. $480,000

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 Q3. MIssar Company’s direct labor cost is 40 percent of is prime cost and 25 percent of its
conversion cost. If manufacturing overhead was $150,000 during the month of May, the
direct materials cost for the month of May was

A. $90,000
B. $75,000
C. $125,000
D. Cannot be determined with the information given

Q4. If the independent variable is production volume and the dependent variable is total
manufacturing cost, a R square of 0.90 indicates

A. 90 percent of the change in manufacturing cost can be explained by the change in the
production volume.
B. 90 percent of the change in volume is caused by changes in manufacturing cost.
C. 10 percent of the change in volume is caused by changes in manufacturing cost
D. costs will change by 90 percent of the change in volume

Q5. In January, 5,000 units were manufactured at a unit cost of $5. At this level of
activity, variable costs are 40 percent of total unit costs. The following month, the
company planned to manufacture 4,500 units. If cost behavior patterns remain
unchanged in February,

A. total fixed costs will decrease

B. total variable cost will remain unchanged
C. total cost per unit will increase
D. variable cost per unit will decrease

Q6. The results of the regression analysis to estimate setup costs using the number of setups
and number of setup hours as activity cost drivers are as follows:

SUMMARY
OUTPUT

Regression Statistics
Multiple R 0.9706
R Square 0.9421
Standard Error 1747.948
Observations 12

ANOVA
df SS MS F Significance

Page 3 of 11
 F
132519140.
Regression 3 397557422 7 43.373 0.00003
24442577.9
Residual 8 7 3055322.25
Total 11 422000000

Standard
Coefficients Error t Stat P-value Lower 95% Upper 95%
Intercept 11188.151 7391.604 1.514 0.169 -10221.329 32597.63
DLH 6.155 1.809 3.402 0.009 0.915 11.395
STS 0.216 0.128 1.684 0.131 -0.155 0.587
PL 32.169 23.526 1.367 0.209 -35.973 100.312
DLH – Direct Labor Hour
STS – Square metre of turf seeded
PL - Planting

Based on the multiple regression analysis output, what is the estimated cost function?
A. Total overhead= $11,188.15 + ($6.16 x DLH)
B. Total overhead = $11,188.15 + ($6.16 x DLH) + ($0.22 x STS)
C. Total overhead = $11,188.15
D. Total overhead = $11,188.15+ ($6.16 x DLH) + ($0.22 x STS) + ($32.17 x PL)

Q7. Minty Manufacturing Company’s average electricity costs were $1 per machine hour
at an activity level of 10,000 machine hours in March and $0.80 at an activity level of
15,000 machine hours in February. Assuming that this activity is within the relevant
range, total expected electricity costs for an estimated activity level of 11,000 machine
hours would be

A. $11,000
B. $8,800
C. $10,400
D. None of the above

Q8. If the method of least squares (regression)indicated that the intercept equals $20
and the slope equals $40 for a cost function, then

A. estimated costs would be $240 at 10 units of activity

B. estimated costs would be $60 at 10 units of activity
C. estimated costs would be $420 at 10 units of activity
D. the variable cost per unit of activity is $20

Refer to the following information and answer questions 9, 10, 11 & 12

Page 4 of 11
Norman Manufacturing prices its products at full cost plus 40 percent mark-up. The company
operates two support departments and two producing departments. Budgeted costs and normal
activity levels are as follows:
User Departments
Support Departments Producing Departments
Providers W X Y Z
Overhead costs $10,000 $25,000 $45,000 $60,000
Square feet (Dept. W) 1,000 1,200 2,000 6,000
Number of employees 10 15 30 20
(Dept. X)
Direct labor hours - - 5,000 3,200
Machine hours - - 3,000 5,400

Support Department W’s costs are allocated based on square feet, and Support Department
X’s costs are allocated based on number of employees.

Department Y uses direct labor hours to assign overhead costs to products, and Department Z
uses machine hours.

One of the products the company produces requires four direct labor hours per unit in
Department Y and no time (zero hours) in Department Z. Direct materials for the product cost
$45 per unit, and direct labor is $20 per unit.

Q9. The total cost accumulated in producing department Y using the direct method is
calculated to be

A. $54,000
B. $45,000
C. $62,500
D. $60,000

Q10. Based on your answer in question 9, the pre-determined overhead rate for producing
department Y is

A. $10.80 per DLH

B. $9 per DLH
C. $12.50 per DLH
D. $12.00 per DLH

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Q11. After calculating the MOH rate in Q10, the total cost per unit for the product is:

A. $50 per unit

B. $65 per unit
C. $70 per unit
D. $115 per unit

Q12. Using the current pricing policy of the firm, the selling price of the product is:

A. $161
B. $98
C. $91
D. $115

Use the following information to answer questions 13, 14 & 15.

Russell Co. produces three products – U, V, & W – from a joint process. Each product may
be sold at the split-off point or processed further. Additional processing requires no special
facilities, and production costs of further processing are entirely variable and traceable to the
products involved. Last year all three products were processed beyond split-off. Joint
production costs for the year were $70,000. Sales value and costs needed to evaluate Russell’s
production policy follow.

If Processed Further
Units Sales Value at Sales Value Additional
Product Produced Split-off Costs
U 7,000 $30,000 $50,000 $11,000
V 5,000 $50,000 $54,000 $ 8,000
W 3,000 $29,000 $38,000 $10,000

13. The amount of joint costs rounded-off to the nearest dollar that is allocated to product V
using the physical unit method is calculated to be:

A. $19,266
B. $32,110
C. $23,333
D. $32,667

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Q14. The amount of joint costs rounded-off to the nearest dollar that is allocated to product
W using the relative sales value method is calculated to be:

A. $19,266
B. $32,110
C. $18,624
D. $28,496

Q15. The amount of joint costs rounded-off to the nearest dollar that is allocated to product
U using the net realizable value method is calculated to be:

A. $24,159
B. $28,496
C. $18,624
D. $17,345

SECTION B ANSWER ALL QUESTIONS

Q1: Management Accounting Information

Read the attached Chairman’s Review of Fiji Television Limited (see last page) and answer
the questions that follow.

Total marks for this question: 10 marks

[Suggested time: 12 minutes]

REQUIRED

1. Briefly discuss the business strategy depicted in the article that Fiji Television
Limited uses to gain competitive advantage, which resulted in an increase financial
performance. (5 marks)

2. One of the changes in the business environment that Fiji Television Limited is facing
is a challenging business environment due to changes in the Media Industry. Discuss
how management accounting information may have contributed to Fiji Television
Limited’s financial performance.
(5 marks)

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Q2: Variable and Absorption Costing

Total marks for this question: 30 marks

[Suggested time: 36 minutes]

Grehan Company produces and sells wooden pallets that are used in moving and stacking
materials. The operating costs for the past year were as follows:

Variable costs per unit:

Direct materials $3.60
Direct labor 2.00
Variable overhead 0.40
Variable selling expenses 0.30

Fixed costs per year:

Fixed overhead $180,000
Fixed selling and administrative 70,000

During the year, Grehan produced 200,000 wooden pallets and sold 207,000 at $10 each.
Grehan had 9,300 pallets in beginning finished goods inventory; costs have not changed from
last year to this year. An actual costing system is used for product costing.
REQUIRED: Show ALL workings

1. (i) Identify the cost object (1 mark)

(ii) Suggest two examples of direct costs and two examples of indirect costs used
the production of the cost object identified in (i). (4 marks)

2. Calculate the cost per unit using the:

(i)absorption costing? (3 marks)

(ii)variable costing? (2 marks)

3. (i) Prepare an income statement to calculate the operating profit using absorption
costing method. (8 marks)

(ii)Prepare an income statement to calculate the operating profit using variable

costing method. (8 marks)

4. Using the appropriate scenario of reconciling the profit between variable and
absorption costing, explain why there is a difference in the profits calculated in 3(i) &
(ii). (4 marks)

Q3: Conventional vs Activity-based Costing

Total marks for this question: 30 marks

[Suggested time: 36 minutes]

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Baker Manufacturing has four categories of overhead. The four categories and the expected
overhead costs for each category for next year are as follows:

Maintenance $140,000
Materials handling 60,000
Setups 50,000
Inspection 100,000
TOTAL OVERHEAD $350,000

Currently, overhead is applied using a predetermined overhead rate based upon budgeted
direct labor hours. For next year, 50,000 direct labor hours are budgeted.

The company has been asked to submit a bid (price) for a proposed job. The plant manager
feels that obtaining this job would result in new business in future years. Usually, bids are
based upon full manufacturing cost plus 30 percent mark-up.

Estimates for the proposed job are as follows:

Direct materials $5,000

Direct labor (750 hours) $7,500
Number of materials moves 8
Number of inspections 5
Number of setups 3
Number of machine hours 300

In the past, full manufacturing cost has been calculated by allocating overhead using a
volume-based cost driver; direct labor hours. The plant manager has heard of a new way of
applying overhead that uses cost pools and cost drivers.

Expected activity for the four activity-based cost drivers related to the four cost categories
(pools) respectively that would be used are as follows:

Machine hours 16,000

Material moves 4,000
Setups 2,000
Quality inspections 8,000

REQUIRED

Show ALL relevant workings where necessary.

(1) Using the Traditional method currently used:

(i) Compute the pre-determined OH rate (Note: Label the rate correctly).
(2 marks)
(ii) Compute the total cost of the proposed job. (4 marks)
(iii) Compute the bid using the firm’s usual method. (2 marks

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(2) Using Activity Based Costing:
(i) Compute the four activity rates related to the four cost pools (Note: Label
the activity rates correctly). (8 marks)
(ii) Compute the total cost of the proposed job. (7 marks)
(iii) Compute the bid using the firm’s usual method. (2 marks)

(3) Prepare a memorandum to the plant manager recommending the bid price for the
potential job. Support your recommendation by explaining which costing method best
reflects the actual cost of the job. (5 marks)

~THE END~

Page 10 of 11
Attachment: For the year ending 30th June 2018, the consolidated group net profit after tax recorded
was $819,248 in comparison to the net profit of $575,134 recorded for the previous year.
FIJI TELEVISION LIMITED ANNUAL REPORT 2018 FIJI TELEVISION
Total Group Revenue for financial year 2018 stood at $11.860m in comparison to
LIMITED ANNUAL REPORT 2018
$10.334 for 2017 financial year. This is a 14 percent growth in the revenue compared to
the same period last year.
CHAIRMAN’S REVIEW
Fiji TV’s net total assets increased by 2 percent from the previous year and stood at
Dear Shareholders,
$14.833m as at balance date.
On behalf of the board of directors of Fiji Television Limited, I am pleased to present to
During the last financial year, the company declared and paid first an interim dividend of
you the financial year 2018 Annual Report. The company has performed well given the
$412,000 in September 2017 with a final dividend of $309,000 in February 2018.
challenging business environment we operate in, especially given the changes in the
Media Industry. The results for Fiji TV are reflective of the work of the Board,
The Future
Management and Staff and we will continue to improve further as we progress into the
next financial year.
Being the longest running free-to-air television station in Fiji, this year marks the
completion of 24 years of compelling content being broadcasted to the viewers in Fiji
The current year has begun well with the investment by Fiji TV in the upgrade of our
and in the Pacific Islands.
equipment in line with the evolution of the technology that the TV industry is
experiencing. This investment in new equipment has definitely seen a boost in the
Fiji TV‘s revenue and profit has both grown over the financial year and we intend to
broadcasting standards of our services.
improve this even further in the coming year. A lot more focus is on major operational
cost savings in order for us to achieve a much higher bottom line which will increase
During the year, Fiji TV launched its new website for viewers, to enable better browsing
shareholder value for the future.
for information from local shows, news, current affairs & sports, information on Fiji TV
and contacts. It even allows the viewers to view their favorite programs on archives
I take this time to thank my fellow board members, management and staff of Fiji
should they miss it at the normal scheduled time.
Television Limited who have worked hand-in-hand to deliver the credible results in a
challenging industry. I also thank our viewers, advertisers and suppliers who have
Another significant achievement for Fiji TV was the launch of Fiji’s first ever Television
worked with us throughout the financial year and we look forward to another great year
APP which gives viewers access to Fiji Television’s services in the palm of their hands,
ahead.
from latest news, local programs, sports, TV program schedules, LIVESTREAM and
much more.
R.G. (Bob) Lyon
Chairman

Financial Performance