Last Tutorial Management accounting

May 2022
Agenda

Important dates:
• Exam date: June 9
• Grades & Exam inspection date: announced on canvas
• Resit: July 7
(Problems with registrations: contact Student Desk)

Exam information & Exam tips

Mock exam questions

Exam info
Fill in the correct ANR! (especially 0 & 9)
Structure:

• 100% to be earned on the exam

(0.5 bonus point is additional, subject to
passing the final exam)

 40 multiple choice questions

Always four alternatives

 Knowledge, reasoning, and calculation

i.e. shortcuts to calculations

 Recommended: Use the provided sheet to make a take-home copy

of your answers
Exam tips
Tips:
1. Lecture sheets are leading
- Book is around 900 pages (not everything is covered)
- Use book as background (additional examples etc.)
- Understand theory, concepts, exercise, solution strategy

2. Exercises tutorials + extra exercises in the canvas course are important

3. Extra exercises with a * have solutions

in back of the book  can be considered
Mock Exam + 5 additional questions
(available on Canvas under Tutorial 9)
Solution to sample questions (Q1)
Deep Frost Company has the following information for the current year.
Budgeted indirect costs are $5 000. The budget allocation base is 2 000
hours. Actual indirect costs incurred were $5 090 and the actual allocation
base used was 2 080 hours. If Deep Frost Company uses a normal job-
costing system, what is the under/over-allocated overhead for the year.

A. $ 110 over-allocated
Step 1: method = normal costing
B. $ 110 under-allocated
Allocation rate = 5000 / 2000 = 2.5
C. $ 90 over-allocated
D. $ 90 under-allocated
Step 2: Allocated at 31/12
= 2080 x 2.5 = 5200

Step 3: 5200 – 5090 = 110 overallocated

Solution to sample questions (Q2)
Zook Company uses the weighted-average method for process costing
system. The following data for the Mixing Department were taken from
the company’s records. The equivalent units for conversion costs were:
A. 200 000 units. Beginning work in process inventory (100%
B. 204 000 units. complete as to materials; 80% complete as to 60 000 units
C. 224 000 units. conversion)
D. 176 000 units. Started in process during period 180 000 units
Finished and transferred out 200 000 units
Ending work in process inventory (100% complete
as to materials; 60% complete as to conversion) 40 000 units

Step 1: method = weighted average

equivalence = units on balance at end of period !!

Step 2: 200000 FG + 40000 x 60% = 224 000

Solution to sample questions (Q3)

Bonzo Company has two service departments, S1 and S2, and two operating
segments, P1 and P2. Department S1 is the more general service centre and
provides 20% of its services to S2, the remainder equally to P1 and P2. S2
provides 10% of its services to S1, 60% to P1, and 30% to P2. The direct
costs of S1 are $30 000 and the direct costs of S2 are $9 000. The cost
allocated from S2 to P1 after the second stage of the step-down method is:

A. $15 000
B. $9 000 Step 1:
C. $10 000 From S1 to S2 = 30 000 * 20%
D. $5 000 = 6 000

Step 2:
From S2 to P1 = ( 9000 + 6000 ) * 60%/90%
= 10 000
Solution to sample questions (Q4)
Bruce Inc. has the following information about Rut, the only product it
sells. The selling price for each unit is $20, the variable cost per unit is
$8, and the total fixed cost for the firm is $60 000. The firm's current
tax rate is 25%. If Bruce wants to earn $60 000 in profits after taxes,
how many units must it sell?

Step 1:
A. 7 000 units Before tax profit = 60 000 / (1-0.25)
B. 10 000 units = 80 000
C. 11 667 units
D. 11 250 units
Step 2: units to sell 80 000 + 60 000 (FC)
20 –8
= 11 667
10
11
Solution to sample questions (Q9)

Consider the following table: Use the high-low method of cost

estimation and determine the estimated total cost for July, which is
budgeted for 9 000 units of activity
A. $21 500 period Units Total cost period Units Total cost
B. $23 150 Jan. 10 000 $23 000 April 9 500 $22 400
C. $22 550 Feb. 8 000 $20 000 May 13 000 $27 500
D. $20 357 March 11 000 $24 400 June 12 100 $26 200

Step 1: slope (H-L value Step 2: intercept (fixed costs)

of cost driver) 20 000 – 1.5 * 8 000 = 8 000 $
27500-20000 = 1.5 $
13000 - 8000 Step 3: Estimate for 9 000 (demand)
8 000 + 1.5 * 9 000 = 21 500 $
Solution to sample questions (Q11)
TJ, Inc., which just began business last year, has the following information about JJl, the only
product that it produces and sells. JJI sells for $25 per unit. During its first year, 20 000 units
of JJl were sold and 22 000 units were produced. The following costs were available:
variable costs per unit: direct materials-$8; direct labor-$4; variable manufacturing
overhead-$2; variable selling-$3. The indirect fixed costs for JJI were manufacturing costs
$55 000 and marketing $33 000 During the current year, the costs were exactly the same,
but JJI produced 20 000 units and sold 22 000 units. What would be the difference in
income for the current period between variable costing and absorption costing?

A. $0
Step 1: Shortcut; FC manuf. are treated different
B. $5 500
C. $ 4 000
D. $5 000 Year 1 = 55 000 / 22 000 Year 2: 55 000
= 2.5 per unit + 5 000 = 60000
(end inv. 2 000 x 2.5 = 5 000)
14
Solution to sample questions (Q14)

Perfecto Foods manufactures pumpkin scones. For January 2012, it

budgeted to purchase and use 15 000 kgs of pumpkin at €0.90 per kg.
Actual purchases and usage for January 2012 were 15 750 kg at € 0.84 per
kg. It budgets for 60 000 pumpkin scones. Actual output was 58 275
pumpkin scones.

The price variance is €…. and the efficiency variance is €…

A. 945 F 675 U
B. 945 F 1063.13 U
C. 945U 675 F
D. 874.125 U 675 F
Solution to sample questions (Q14)
Perfecto Foods manufactures pumpkin scones. For January 2012, it budgeted to
purchase and use 15 000 kgs of pumpkin at €0.90 per kg. Actual purchases and
usage for January 2012 were 15 750 kg at € 0.84 per kg. It budgets for 60 000
pumpkin scones. Actual output was 58 275 pumpkin scones.

The price variance is €…. and the efficiency variance is €…

=> Compare flexible budget with actual results

Actual results Flexible budget Static budget
Output 58 275 units 58 275 units 60 000 units
Direct material 15 750 kg 14 568.75 kg 15 000 kg
Price DM € 0.84/kg €0.90/kg € 0.90/kg
DM per unit 0.27 kg/unit 0.25 kg/unit 0.25 kg/unit

DM Price variance = (Pa – Pb) x Qa

= ( 0.84 – 0.90 ) x 15 750 = 945 F
Solution to sample questions (Q14)
Perfecto Foods manufactures pumpkin scones. For January 2012, it budgeted to
purchase and use 15 000 kgs of pumpkin at €0.90 per kg. Actual purchases and
usage for January 2012 were 15 750 kg at € 0.84 per kg. It budgets for 60 000
pumpkin scones. Actual output was 58 275 pumpkin scones.

The price variance is €…. and the efficiency variance is €…

=> Compare flexible budget with actual results

Actual results Flexible budget Static budget
Output 58 275 units 58 275 units 60 000 units
Direct material 15 750 kg 14 568.75 kg 15 000 kg
Price DM € 0.84/kg €0.90/kg € 0.90/kg
DM per unit 0.27 kg/unit 0.25 kg/unit 0.25 kg/unit

DM Efficiency variance = (Qa – Qb) x Pb

= ( 15 750 – 14 568.75 ) x 0.90 = 1063.125 U
Solution to sample questions (Q14)

Perfecto Foods manufactures pumpkin scones. For January 2012, it

budgeted to purchase and use 15 000 kgs of pumpkin at €0.90 per kg.
Actual purchases and usage for January 2012 were 15 750 kg at € 0.84 per
kg. It budgets for 60 000 pumpkin scones. Actual output was 58 275
pumpkin scones.

The price variance is €…. and the efficiency variance is €…

A. 945 F 675 U
B. 945 F 1063.13 U
C. 945U 675 F874.125 U 675 F
19
In throughput accounting the only relevant costs are direct material
costs (see season 6).
Throughput contribution per constrained factor= (price – direct
material costs/unit ) / time needed =
For W: (200-41)/9 = 17,6
For X: (150-20)/9 = 13
For Y: (150-30)/9 = 17,1
20

So: first W, then Y, then X

Solution to sample questions (Q18)
The Fresh Air Sports Company produces a wide variety of outdoor sports equipment. Its
newest division, Golf Technology, manufactures and sells a single product: AccuDriver, a golf
club that uses global positioning satellite technology to improve the accuracy of the golfers’
shots. The demand for AccuDriver is relatively insensitive to price changes. The following data
are available for Golf Technology, which is an investment center for Fresh Air Sports:
Total annual fixed costs € 27 000 000
Variable cost per AccuDriver € 400
Number of AccuDrivers sold each year 165 000
Average operating assets invested in the division € 50 000 000
QI. Compute the Golf Technology’s ROI if the selling price of AccuDrivers is €640 per club.

QII. Assume that Fresh Air Sports judges the performance of its investment centers on the
basis of RI. What is the minimum selling price that Golf Technology should charge per
AccuDriver if the company’s required rate of return is 26%?
QI. QII.
A. 25.2% €78.78
B. 25.2% €642.42
C. 79.2% €478.78
D. 11.9% €478.78
Solution to sample questions (Q18)
Total annual fixed costs € 27 000 000
Variable cost per AccuDriver € 400
Number of AccuDrivers sold each year 165 000
Average operating assets invested in the division € 50 000 000
QI. Compute the Golf Technology’s ROI if the selling price of AccuDrivers is €640 per club.

QII. Assume that Fresh Air Sports judges the performance of its investment centers on the
basis of RI. What is the minimum selling price that Golf Technology should charge per
AccuDriver if the company’s required rate of return is 26%?
= €50 000 000
ROI = Income / Investment = 0.252 25.2%

= Revenues - Costs
= (165 000 x €640) - (165 000 x €400) – 27 000 000
= 12 600 000
Solution to sample questions (Q18)
Total annual fixed costs € 27 000 000
Variable cost per AccuDriver € 400
Number of AccuDrivers sold each year 165 000
Average operating assets invested in the division € 50 000 000

QI. Compute the Golf Technology’s ROI if the selling price of AccuDrivers is €640 per club.

QII. Assume that Fresh Air Sports judges the performance of its investment centers on the
basis of RI. What is the minimum selling price that Golf Technology should charge per
AccuDriver if the company’s required rate of return is 26%?
ROI = Income / Investment = 0.252 25.2%

= 26% = 50 000 000

RI = Income – RRT% x Investment

= Revenues - Costs
= (165 000 x P) - (165 000 x €400) – 27 000 000

(165 000 x P) - (165 000 x €400) – 27 000 000 – 0,26 x 50 000 000 = 0
 P = € 642.42
Solution to sample questions (Q18)
The Fresh Air Sports Company produces a wide variety of outdoor sports equipment. Its
newest division, Golf Technology, manufactures and sells a single product: AccuDriver, a golf
club that uses global positioning satellite technology to improve the accuracy of the golfers’
shots. The demand for AccuDriver is relatively insensitive to price changes. The following data
are available for Golf Technology, which is an investment center for Fresh Air Sports:
Total annual fixed costs € 27 000 000
Variable cost per AccuDriver € 400
Number of AccuDrivers sold each year 165 000
Average operating assets invested in the division € 50 000 000
QI. Compute the Golf Technology’s ROI if the selling price of AccuDrivers is €640 per club.

QII. Assume that Fresh Air Sports judges the performance of its investment centers on the
basis of RI. What is the minimum selling price that Golf Technology should charge per
AccuDriver if the company’s required rate of return is 26%?
QI. QII.
A. 25.2% €78.78
B. 25.2% €642.42
C. 79.2% €478.78
D. 11.9% €478.78
 Solution to sample questions (Q19)

The total raw material purchases budget in kg for material B for the next four quarters for X Plc is:
Solution to sample questions (Q19)

Q1 Q2 Q3 Q4 Q5 Q6 total
Production 0,3*205 0,7*205 0,7*165 0,7*125 0,7*125
0+0,7*2 0+0,3*1 0+0,3*2 0+0,3*2 0+0,3*2
250 = 650= 050= 050= 050=
2190 1930 1770 1810 1490
Material purchases =0,55*2 0,55*19 0,55*17 0,55*18 7685
190+0,4 30+0,45 70+0,45 10+0,45 units
5*1930= *1770= *1810= *1490=
2073 1858 1788 1666

Total kg of material purchased: 7685 x 3 kg = 22 150

Solution to sample questions (Q20)
Solution to sample questions (Q21)
The A Virtual Vacuum Company sells portable vacuum cleaners and in-house vacuum systems.
They operate in a defined geographical location that has been enjoying tremendous growth in
new home building and sales. At the beginning of the year, Virtual had budgeted sales of 75 000
vacuums. Portable machines were budgeted for 80% and built-in systems for 20% of this total
sales amount. Virtual budgeted to sell the portable vacuums for $600 each and the built-in
systems for $2 000 each.
Recent market information had led Virtual to believe that they could expect 75% of the market
for vacuums in that area. At year end, actual sales of vacuums by A Virtual Vacuum Company
were 84 000 machines/systems. Actual selling prices were $500 for the portable and $1 500 for
the built-in system. The market information published immediately after the end of the year
showed sales of 120 000 vacuum machines/systems sold in the geographical area in which A
Virtual Vacuum Company operates.
What is the amount of the market-size variance for A Virtual Vacuum Company?
A. $14 850 000 F
B. $19 500 000 F
C. $6 600 000 F
D. $13 200 000 F
Solution to sample questions (Q21)
The A Virtual Vacuum Company sells portable vacuum cleaners and in-house vacuum systems.
They operate in a defined geographical location that has been enjoying tremendous growth in
new home building and sales. At the beginning of the year, Virtual had budgeted sales of 75 000
vacuums. Portable machines were budgeted for 80% and built-in systems for 20% of this total
sales amount. Virtual budgeted to sell the portable vacuums for $600 each and the built-in
systems for $2 000 each.
Recent market information had led Virtual to believe that they could expect 75% of the market
for vacuums in that area. At year end, actual sales of vacuums by A Virtual Vacuum Company
were 84 000 machines/systems. Actual selling prices were $500 for the portable and $1 500 for
the built-in system. The market information published immediately after the end of the year
showed sales of 120 000 vacuum machines/systems sold in the geographical area in which A
Virtual Vacuum Company operates.
What is the amount of the market-size variance for A Virtual Vacuum Company?
A. $14 850 000 F
B. $19 500 000 F
C. $6 600 000 F
D. $13 200 000 F
Solution to sample questions (Q21)
The A Virtual Vacuum Company sells portable vacuum cleaners and in-house vacuum systems.
They operate in a defined geographical location that has been enjoying tremendous growth in
new home building and sales. At the beginning of the year, Virtual had budgeted sales of 75 000
vacuums. Portable machines were budgeted for 80% and built-in systems for 20% of this total
sales amount. Virtual budgeted to sell the portable vacuums for $600 each and the built-in
systems for $2 000 each.
Recent market information had led Virtual to believe that they could expect 75% of the market
for vacuums in that area. At year end, actual sales of vacuums by A Virtual Vacuum Company
were 84 000 machines/systems. Actual selling prices were $500 for the portable and $1 500 for
the built-in system. The market information published immediately after the end of the year
showed sales of 120 000 vacuum machines/systems sold in the geographical area in which A
Virtual Vacuum Company operates.
What is the amount of the market-size variance for A Virtual Vacuum Company?
A. $14 850 000 F
B. $19 500 000 F
C. $6 600 000 F
D. $13 200 000 F
(120 000 – 100 000) * 75% * 880 = 13 200 000

Sidenote: average price 880 = 600*0.8+2000*0.2

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General remarks:
A copy of the full mock exam (with 5 additional questions) is available on blackboard.

Solution key is provided.

How to get to the solution is self-study!