INSTRUCTOR: Konstantinos Kanellopoulos, MSc (L.S.E.), M.B.A.
FACILITATOR:Dr. Haitham Ahmed Abdelmoneim, YIC.
COURSE:MBA-501-50-F13 Accounting Analysis
SEMESTER:I, 2013
Final Exam preparation
SECTION A
INSTRUCTIONS
Students are required to complete the following 2 parts. The first part consists of multiple choice questions while the second part consists of two problems. The first part counts towards 50% of the final exam evaluation, while the second part counts towards 50% of the final examination. The first part consists of questions from the syllabus and lectures while the second part consists of problems from the textbook“Financial & Managerial Accounting”, by Charles Horngren, Walter Harrison & M. Suzanne Oliver.
Answer:
(a)ALL QUESTIONS in PART 1
(b)ALL PROBLEMS in PART 2 (in the Final Exam only ONE OF THE TWO GIVEN PROBLEMS should be solved)
GOOD LUCK!
Konstantinos Kanellopoulos & Haitham Ahmed Abdelmoneim
12thDecember 2013
SECTION B
PART 1
1. Which of the following applies to goods that are partially completed?
a. Materials inventory
b. Work in process inventory
c. Merchandise inventory
d. Finished goods inventory
2. Which of the following applies to goods that are purchased from a producer and sold by a merchandising company?
a. Materials inventory
b. Work in process inventory
c. Merchandise inventory
d. Finished goods inventory
3. Which of the following is NOT a part of manufacturing overhead?
a. Indirect materials
b. Indirect labor
c. Factory insurance
d. Depreciation on delivery vehicles
4. Wright Company reports production costs for 2012 as follows:
Direct materials used / $375,000Direct labor incurred / $250,000
Manufacturing overhead incurred / $400,000
Operating expenses / $145,000
How much are Wright Company's period costs?
a. $250,000
b. $575,000
c. $145,000
d. $375,000
5. A 15% increase in production volume will result in a:
a. 15% increase in the variable cost per unit.
b. 15% increase in total mixed costs.
c. 15% increase in total manufacturing costs.
d. 15% increase in total variable costs.
6. Which of the following is NOT a period cost?
a. Sales commissions
b. CEO's salary
c. Delivery van depreciation
d. Factory janitorial costs
7. Axelrod Company has fixed costs of $250,000. Highest production volume this year was in January when there were 100,000 units produced and total costs of $550,000. In June, the company produced only 60,000 units. How much was the total cost in June?
a. $378,000
b. $430,000
c. $330,000
d. $414,500
8. Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total of all costs? (Assume all volumes are within the relevant range.)
a. Would go up 20%
b. Would remain the same
c. Would go up by some amount less than 20%
d. Would go down
9. Which of the following statements is CORRECT if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?
a. The contribution margin increases.
b. The breakeven point increases.
c. The contribution margin decreases.
d. The breakeven point decreases.
10. Gould Enterprises sells computer disks for $1.50 per disk. Unit variable expenses total $0.90. The breakeven point in units is 3,000 and budgeted sales in units are 4,300. What is the margin of safety in dollars?
a. $4,500
b. $1,950
c. $2,580
d. $780
11. Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp. The following per unit data are available:
Bedford Lamp / Lowell LampSale price / $25 / $35
Variable costs / $17 / $23
Machine hours required for 1 lamp / 2 / 4
Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. What is the contribution margin per unit for the Bedford lamp?
a. $4 per machine hour
b. $2 per machine hour
c. $6 per machine hour
d. $8 per machine hour
12. RS Company's western territory's forecasted income statement for the upcoming year is as follows:
Sales / $750,000Variable expenses / 420,000
Contribution margin / $330,000
Fixed expenses / 396,000
Operating income / ($66,000)
RS Company's management is considering dropping the western territory and has determined that $300,000 of the fixed expenses are avoidable. What is the change in RS Company's forecasted operating income for the upcoming year if the western territory is dropped?
a. Up $26,400
b. Up $30,000
c. Down $30,000
d. Down $6,000
13. A company sells two products with information as follows:
A / BPrice per unit / $10.00 / $16.00
Variable cost per unit / $8.00 / $11.00
Products are made by machine. 4 units of Product A can be made with one machine hour and 2 units of Product B can be made with one machine hour. The company has a maximum of 2,000 machine hours available per month. Assume there are no constraints on sales of either product, and the company could choose any product mix they wish. What is the maximum amount of contribution margin that the company could earn in a month?
a. $16,000
b, $18,000
c. $20,000
d. $22,000
14. In making a short-term decision, which of the following is MOST important?
a. Separate variable costs from fixed costs
b. Focus on total costs
c. Use a conventional absorption costing approach
d. Focus on the bottom line net income
15. All of the following are relevant to the decision to replace equipment EXCEPT the:
a. cost of new equipment.
b. selling price of old equipment.
c. future maintenance costs of old equipment.
d. original cost of old equipment.
16. Which of the following statements about budgeting is INCORRECT?
a. Budgeting is an accounting function and does not need involvement of operations personnel.
b. Budgeting is an aid to planning and control.
c. Budgets help to coordinate the activities of the entire organization.
d. Budgets promote communication and coordination between departments.
17. Which of the following is an example of the coordination and communication function of a budget?
a. A budget demands integrated input from different business units and functions.
b. Employees are motivated to achieve the goals set by the budget.
c. Budget figures are used to evaluate the performance of managers.
d. The budget outlines a specific course of action for the coming period.
18. In preparing an operating budget, the sales budget is prepared first. Which of the following is prepared next?
a. Capital expenditures
b. Budgeted income statement
c. Operating expenses
d. Inventory, purchases and cost of goods sold
19. Which of the following statements is TRUE about the capital expenditures budget?
a. It is a part of the financial budget.
b. It must be completed before the budgeted income statement is prepared.
c. It includes the sales budget.
d. It must be completed before the cash budget can be prepared.
20. Which of the following BEST describes a business unit where the manager is responsible for both controlling costs and generating sales revenue?
a. Profit center
b. Investment center
c. Revenue center
d. Center
SECTION B
PART 2
Problem 1:
P19-30B Computing breakeven sales and sales needed to earn atarget operating income; sensitivity analysis
Diversified Investor Group is opening an office in Boise. Fixed monthly costs areoffice rent ($8,100), depreciation on office furniture ($1,600), utilities ($2,500), specialtelephone lines ($1,200), a connection with an online brokerage service($2,700), and the salary of a financial planner ($4,900). Variable costs include paymentsto the financial planner (8% of revenue), advertising (14% of revenue), suppliesand postage (1% of revenue), and usage fees for the telephone lines andcomputerized brokerage service (7% of revenue).
Requirements
1. Use the contribution margin ratio CVP formula to compute Diversified’sbreakeven revenue in dollars. If the average trade leads to $750 in revenue forDiversified, how many trades must be made to break even?
2. Use the income statement equation approach to compute the dollar revenuesneeded to earn a target monthly operating income of $10,500.
3. Suppose that the average revenue Diversified earns increases to $1,000 pertrade. Compute the new breakeven point in trades. How does this affect thebreakeven point?
Problem 2:
P20-24A Making dropping a product and product-mix decisions
Brik, located in Port St.Lucie, Florida, produces two lines of electric toothbrushes:deluxe and standard. Because Brik can sell all the toothbrushes it can produce, theowners are expanding the plant. They are deciding which product line to emphasize.
To make this decision, they assemble the following data:
After expansion, the factory will have a production capacity of 4,900 machine hoursper month. The plant can manufacture either 60 standard electric toothbrushes or28 deluxe electric toothbrushes per machine hour.
Requirements
1. Identify the constraining factor for Brik.
2. Prepare an analysis to show which product line to emphasize.
Problem 3:
P20-30B Making dropping a product and product-mix decisions
Breit, located in San Antonio, Texas, produces two lines of electric toothbrushes:deluxe and standard. Because Breit can sell all the toothbrushes it can produce, theowners are expanding the plant. They are deciding which product line to emphasize.To make this decision, they assemble the following data:
After expansion, the factory will have a production capacity of 4,300 machine hoursper month. The plant can manufacture either 65 standard electric toothbrushes or27 deluxe electric toothbrushes per machine hour.
Requirements
1. Identify the constraining factor for Breit.
2. Prepare an analysis to show which product line the company should emphasize.