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 AIS , 7 h Seme e Q e ion Bank

Department of Accounting & Information Systems

BBA 23rd Batch
First Online Midterm Assessment
Saiful Sir Management Accounting
Marks: 15; Time: 1 Hour

r a ar l
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Question No. 1
Laila is a junior majoring in hotel and restaurant management. She wants to work for a large hotel chain with the goal
of eventually managing a hotel. She is considering the possibility of taking a course in either financial accounting or
management accounting. Before choosing, however, she has asked you to provide her with some information about
the advantages that each course offers.
Required:
Prepare a letter advising Laila about the differences and similarities between financial accounting and management
accounting. Describe the advantages each might offer the manager of a hotel. (3 Marks)

Question No. 2
Body Fitness Company produces treadmills. One of its plants produces two versions: a standard model and a deluxe
model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor
heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for
this plant:
Standard Model Deluxe Model
Expected quantity 20,000 10,000
Selling price Tk.280 Tk.575
Prime costs Tk.3 million Tk.3.5 million
Machine hours 25,000 25,000
Direct labor hours 50,000 50,000
Engineering support (hours) 9,000 21,000
Receiving (orders processed) 2,000 3,000
Materials handling (number of moves) 10,000 30,000
Purchasing (number of requisitions) 500 1,000
Maintenance (hours used) 4,000 16,000
Paying suppliers (invoices processed) 2,500 2,500
Setting up batches (number of setups) 40 360

Additionally, the following overhead activity costs are reported:

Maintenance Tk. 400,000
Engineering support 600,000
Materials handling 800,000
Setups 500,000
Purchasing 300,000
Receiving 200,000
Paying suppliers 200,000
Required:
i. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs. (2 Marks)
ii. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using
the functional-based (labour hours based) method. Which cost is the most accurate? Explain. (5 Marks)
Question No. 3
RFL manufactures and sells adjustable canopies that attach to motor homes and trailers. The market covers both new
unit purchases as well as replacement canopies. RFL developed its 2022 business plan based on the assumption that
canopies would sell at a price of Tk.400 each. The variable costs for each canopy were projected at Tk.200, and the
annual fixed costs were budgeted at Tk.100,000. RFL’s after-tax profit objective was Tk.240,000; the company’s
effective tax rate is 40 percent.
While RFL’s sales usually rise during the second quarter, the May financial statements reported that sales were not
meeting expectations. For the first five months of the year, only 350 units had been sold at the established price, with
variable costs as planned, and it was clear that the 2022 after-tax profit projection would not be reached unless some
actions were taken. RFL’s president assigned a management committee to analyze the situation and develop several
alternative courses of action. The following mutually exclusive alternatives, labeled A, B, and C, were presented to
the president.
A. Reduce the sales price by Tk.40. The sales organization forecasts that with the significantly reduced sales
price, 2,700 units can be sold during the remainder of the year. Total fixed and variable unit costs will stay
as budgeted.
B. Lower the variable costs per unit by Tk.25 through the use of less expensive materials and slightly
modified manufacturing techniques. The sales price will also be reduced by Tk.30, and sales of 2,200 units
for the remainder of the year are forecast.
C. Cut fixed costs by Tk.10,000, and lower the sales price by 5 percent. Variable costs per unit will be
unchanged. Sales of 2,000 units are expected for the remainder of the year.
Required:
Determine which one of the alternatives RFL Company should select to achieve its annual after-tax profit objective.
Be sure to support your selection with appropriate calculations. (5 Marks)
 Department of Accounting & Information Systems
BBA 23rd Batch
Second Online Midterm Assessment
Management Accounting
Marks: 15; Time: 1 Hour
Saiful Sir
 Write your name and roll no. on each page of the answer script.
 Use maximum five (5) pages for your answer script.
 Upload the image(s) of your written script in the Google classroom.
 If you use word processor for typing your answer, you simply upload the file in Google
classroom.
 You will have 20 minutes for uploading the images of written script.

Question No. 1
(a) Suppose a small division of HRS has assets of Tk.2,000,000, invested capital of
Tk.1,800,000 and net operating income of Tk.600,000. Ignore taxes.
i. If the weighted-average cost of capital is 14%, what is the EVA? (1.5 Marks)
ii. Suppose management uses ROI as a performance metric. What effects on
management behavior do you expect? (1.5 Marks)
(b) Joe Baiden is the controller for Whitehall Hardware Store. In putting together the cash
budget for the fourth quarter of the year, he has assembled the following data:
i. Sales July (actual) $100,000
August (actual) 120,000
September (estimated) 90,000
October (estimated) 100,000
November (estimated) 135,000
December (estimated) 150,000
ii. Each month, 20 percent of sales are for cash, and 80 percent are on credit. The
collection pattern for credit sales is 20 percent in the month of sale, 50 percent in
the following month, and 30 percent in the second month following the sale.
iii. Each month, the ending inventory exactly equals 40 percent of the cost of next
month’s sales. The markup on goods is 33.33 percent of cost.
iv. Inventory purchases are paid for in the month following purchase.
v. Recurring monthly expenses are as follows:
Salaries and wages $10,000
Depreciation on plant and equipment 4,000
Utilities 1,000
 Other 1,700
vi. Property taxes of $15,000 are due and payable on September 15.
vii. Advertising fees of $6,000 must be paid on October 20.
viii. A lease on a new storage facility is scheduled to begin on November 2. Monthly
payments are $5,000.
ix. The company has a policy to maintain a minimum cash balance of $10,000. If
necessary, it will borrow to meet its short-term needs. All borrowing is done at the
beginning of the month. All payments on principal and interest are made at the end
of the month. The annual interest rate is 9 percent. The company must borrow in
multiples of $1,000.

Required:
Prepare a cash budget for the months of September, October, and November and for
the 3-month period in total (the period begins on September 1). Provide a supporting
schedule of cash collections. (12 Marks)
 Department of Accounting & Information Systems
Mid Semester Test I & II (23RD Batch)
Course No. 4101 (Management Accounting)
Section A (Hamid Sir)
Time 2 Hours MID 1 Marks (10+5=15)
Friedan Company’s Contribution format (partial) income statement for the most recent month is given below:

Sales (40,000 units) $800,000

Less: Variable Expenses 560,000
Contribution Margin 240,000
Less: Fixed Expense 192,000
Net Operating Income 48,000
The industry in which Friedan Company operates is quite sensitive to cyclical movements in the
economy. Thus profits vary considerably from year to year according to general economic
conditions. The company has large amount of unused capacity and is studying ways to improve
profits.
Required:
a. New equipment has come on the market that would allow Friedan Company to automate a
portion of its operations. Variable cost would be reduced by $6 per unit. However, fixed cost
would increase to a total of $432,000 each month. Prepare two contribution type income
statement, one showing present operations and one showing how operation would appear if the
new equipment is purchased. Show an amount column, a per unit column, and a percent column
on each statement.
b. Refer to the income statements in (a) above, for both (present and proposed) operations, compute
the degree of operating leverage, the break-even point in units and dollars, and the margin of
safety in both dollars and percentage terms.
c. Refer again to the data in (a) above, as a manager what factors would be paramount in your mind
in deciding whether to purchase the new equipment? You may assume that ample funds are
available to make the purchase.
d. Refer to the original data, rather than purchase the new equipment, the president is thinking
about changing the company’s marketing strategy. Under the new marketing strategy, the
president estimates that sales would increase by 50% each month and the net income would
increase by two-thirds. Fixed cost would be slashed to only $160,000 per month. Using the
president’s estimates, compute the break-even point in dollars for the company after the change
in marketing method. What risks can you see in the president’s proposal?
 Mid 2 Marks: 15
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of
various paper goods. Revenue and costs associated with a ton of pulp follow:
Selling price $70
Less: Expenses
Variable per ton $42
Fixed per ton (based on a capacity of 50,000 tons per year) 18
60
Net operating income per ton 10
Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be
treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently
purchasing 5,000 tons of pulp per year from a supplier at a cost of $70 per ton, less a 10% purchase discount.
Hrubec’s president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if
an acceptable transfer price can be worked out.
Required:
For (a) and (b) below, assume that the Pulp Division can sell all of its pulp to outside customers for $70 per
ton.
a. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for
5,000 tons of pulp next year? Why or why not?
b. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and
sells 5,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the
Pulp Division, the Carton Division, and the company as a whole?
For (c)–(f) below, assume that the Pulp Division is currently selling only 30,000 tons of pulp each year to
outside customers at the stated $70 price.
c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for
5,000 tons of pulp next year? Why or why not?
d. Suppose that the Carton Division’s outside supplier drops its price (net of the purchase discount) to
only $59 per ton. Should the Pulp Division meet this price? Explain. If the Pulp Division does not
meet the $59 price, what will be the effect on the profits of the company as a whole?
e. Refer to (d) above. If the Pulp Division refuses to meet the $59 price, should the Carton Division be
required to purchase from the Pulp Division at a higher price for the good of the company as a
whole?
f. Refer to (d) above. Assume that due to inflexible management policies, the Carton Division is
required to purchase 5,000 tons of pulp each year from the Pulp Division at $70 per ton. What will
be the effect on the profits of the company as a whole?
 DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS
UNIVERSITY OF DHAKA
BBA Program 23rd Batch
4th Year 1st Semester Final Examination 2020
Course Code and Name: 4101 – Management Accounting
Time: 1 Hour 30 minutes Marks: 30
Answer any four questions. Each Question Carries Equal Marks

Question No # 1 Marks: 2.5+5=7.5

a) Define Management Accounting. Briefly explain the current trends in Management Accounting.
b) Maggi Soup Company incurs the following costs:
i. Purchase of tomatoes by a canning plant for Maggi’s tomato-soup products.
ii. Materials purchased for redesigning Nutty biscuit containers to make biscuits stay fresh longer.
iii. Salaries of food technologists researching feasibility of a Pepp pizza sauce that has minimal calories.
iv. Payment to Safeway for obtaining shelf space to display Campbell’s food products.
v. Cost of a toll-free telephone line used for customer inquiries about possible product defects in Maggi’s
soups.
vi. Cost of gloves used by line operators on the Subway breakfast food production line.
Required: Classify each cost item as one of the business functions in the value chain of Maggi Soup
Company.

Question No # 2 Marks: 7.5

The Fashion Shoe Company operates a chain of women’s shoe shops that carry many styles of shoes that are
all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of shoes
sold (in addition to a small base salary) in order to encourage them to be aggressive in their sales efforts. The
following worksheet contains cost and revenue data for Shop-48 and is typical of the company’s many outlets:
Per pair of shoes Per pair of shoes

Selling price Tk. 30.00 Annual fixed expenses:

Variable expenses: advertising 30,000

Invoice cost 13.50 Rent 20,000

Sales commission 4.50 Salaries 100,000

Total variable expenses 18.00 Total fixed expenses 150,000

Required:
i) Calculate the annual break-even point in unit sales and in dollar sales for Shop-48.
ii) If 12,000 pairs of shoes are sold in a year, what would be Shop-48’s net operating income or loss?
iii) The company is considering paying the store manager of Shop-48 an incentive commission of 75 cents
per pair of shoes (in addition to the salesperson’s commission). If this change is made, what will be the new
break-even point in unit sales and in dollar sales?
iv) Refer to the original data. The company is considering eliminating sales commissions entirely in its shops
and increasing fixed salaries by Tk. 31,500 annually. If this change is made, what will be the new break-even
point in unit sales and in dollar sales for Shop-48? Would you recommend that the change be made? Explain.
v) Determine point of indifference between the commission and salary plans.
Question No # 3 Marks: 7.5
The president of the retailer Prime Products has just approached the company’s bank with a request for a Tk.
30,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the
company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget
to help determine whether the loan should be made. The following data are available for the months April
through June, during which the loan will be used:
a. On April 1, the start of the loan period, the cash balance will be Tk. 24,000. Accounts receivable on April
1, will total Tk. 140,000, of which Tk. 120,000 will be collected during April and Tk. 16,000 will be collected
during May. The remainder will be uncollectible.
b. Past experience shows that 30% of a month’s sales are collected in the month of sale, 60% in the month
following sale, and 8% in the second month following sale. The other 2% represents bad debts that are never
collected. Budgeted sales and expenses for the three-month period follow:
April May June

Sales (all on account) Tk. 300,000 Tk. 400,000 Tk. 250,000

Merchandise purchases 210,000 160,000 130,000

Payroll 20,000 20,000 18,000

Lease payments 22,000 22,000 22,000

Advertising 60,000 60,000 50,000

Equipment purchase - - 65,000

Depreciation 15,000 15,000 15,000

c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for
merchandise purchases during March, which will be paid during April, total Tk. 140,000. d. In preparing the
cash budget, assume that the Tk. 30,000 loan will be made in April and repaid in June. Interest on the loan
will total Tk. 1,200.
Required: Prepare a cash budget, by month and in total, for the three-month period.

Question No # 4 Marks: 2.5+5=7.5

a) What are the six steps that define the design of an activity-based costing system?
b) Top Clean provides housecleaning services to its clients. The company uses an activity-based costing
system for its overhead costs. The company has provided the following data from its activity-based costing
system.
Activity Cost Pools Costs Activity
Cleaning................. Tk.645,576 72,70 Hours
Job support ............ Tk.129,546 5,400 Jobs
Client support ........ Tk. 20,900 760 clients
Other ...................... Tk.110,000 Not applicable
Total....................... Tk.906,022
The "Other" activity cost pool covers the costs of idle capacity and organization-sustaining costs. One
particular client, the Chowdhury family, requested 31 jobs during the year that required a total of 62 hours of
housecleaning. For this service, the client was charged Tk.1,620.

Required: Compute the customer margin for the Chowdhury family.

Question No # 5 Marks: 4+3.5=7.5
a) What is transfer pricing? What are the alternative transfer pricing methods? If the minimum transfer price
of the selling division is less than the maximum transfer price of the buying division, the intermediate product
should be transferred internally. Do you agree or disagree? Why?
b) Differentiate between ROI and RI? The following information is given for a firm: Operating Income
Tk.0.385 million; Total Capital Employed Tk.1.06 million; Debt @9% Tk.0.1 million; Equity (with an average
12% cost) Tk.0.9 million; and Tax rate is 35%. Calculate the EVA.

Question No # 6 Marks: 3+4.5=7.5

a) What is a relevant cost? Explain why depreciation on an existing asset is always irrelevant. Give an example
of a future cost that is not relevant.
b) ESG Company manufactures part 4A that is used in one of its products. The unit product cost of this part
is:
Direct materials Tk.9
Direct labor 5
Variable overhead 1
Depreciation of special equip. 3
Supervisor's salary 2
General factory overhead 10
Unit product cost Tk.30

The special equipment used to manufacture part 4A has no resale value. The total amount of general factory
overhead, which is allocated on the basis of direct labor hours, would be unaffected by this decision. The
Tk.30 unit product cost is based on 20,000 parts produced each year. An outside supplier has offered to provide
the 20,000 parts at a cost of Tk.25 per part.
Required: Should we accept the supplier’s offer?
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