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I. Multiple choice: Please choose the best answer (each question 2 points, total 20 points)
1. The two dimensions of managerial accounting are: . a decision!influencing dimension and a profit!ma"imi#ing dimension. $. a cost!minimi#ing dimension and a profit!ma"imi#ing dimension. %. a decision!influencing dimension and a cost!minimi#ing dimension. &. a decision!facilitating dimension and a financial!influencing dimension. '. a decision!facilitating dimension and a decision!influencing dimension. The estimates used to calculate the predetermined o(erhead rate will (irtuall) alwa)s: . $. %. &. '. pro(e to be correct. result in a #ero balance left in the *anufacturing +(erhead account at the end of the )ear. result in o(erapplied o(erhead that is closed to %ost of ,oods -old if it is immaterial in amount. result in underapplied o(erhead that is closed to %ost of ,oods -old if it is immaterial in amount. result in either underapplied or o(erapplied o(erhead that is closed to %ost of ,oods -old if it is immaterial in amount.

2.

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/hich of the following represents a correct sequence in preparing a departmental production report0 . nal)sis of total costs, anal)sis of ph)sical flow of units, computation of unit costs, and calculation of equi(alent units. $. nal)sis of total costs, calculation of equi(alent units, computation of unit costs, and anal)sis of ph)sical flow of units. %. %alculation of equi(alent units, anal)sis of ph)sical flow of units, anal)sis of total costs, and computation of unit costs. &. nal)sis of ph)sical flow of units, calculation of equi(alent units, computation of unit costs, and anal)sis of total costs. '. nal)sis of ph)sical flow of units, computation of unit costs, calculation of equi(alent units, and anal)sis of total costs. 2omogeneit) is a 3e) issue in the selection of cost pools. 4n order for a cost pool to be homogeneous, . all costs must relate to the same t)pe of resource. $. the acti(it) associated with each cost must be consumed in appro"imatel) the same proportion b) each product line. %. all costs must be appro"imatel) the same dollar amount.

1.


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all costs must be incurred to ma3e onl) a subset of the products. all costs must be from the same department.

5.

%onsider the following comments about absorption! and (ariable!costing income statements: 46 (ariable!costing income statement discloses a firm7s contribution margin. 44 6 %ost of goods sold on an absorption!costing income statement includes fi"ed costs. 444 6 The amount of (ariable selling and administration cost is the same on the absorption! and (ariable!costing income statements. /hich of the abo(e statements is (are) true0 . 4. $. 44. %. 4 and 44. &. 44 and 444. '. 4, 44, and 444.

8.

%onsider the following statements about the direct method of ser(ice department cost allocation: 4 6 9nder the direct method, all ser(ice department costs are e(entuall) allocated to production departments. 44 6 The order in which ser(ice department costs are allocated to production departments is important. 444 6 +nce a ser(ice department7s costs ha(e been allocated, no costs are recirculated bac3 to that department. /hich of the abo(e statements is (are) correct0 . 4. $. 44. %. 4 and 44. &. 4 and 444. '. 4, 44, and 444.

:.

/hich of the following correctl) notes the decision!ma3ing approch and performance!e(aluation measurement method used b) man) companies that ma) lead a manager to re;ect an attracti(e in(estment for fear of loo3ing bad0 Performance!e(aluation &ecision!*a3ing pproach *easuurement *ethod &iscounted cash flow &iscounted cash flow &iscounted cash flow ccrual accounting ccrual accounting &iscounted cash flow ccrual accounting ccrual accounting <one of the abo(e, because a manager will not act in this manner.

. $. %. &. '.


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=.

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&uring 2001, a department7s .!(ariance o(erhead standard costing s)stem reported unfa(orable spending and (olume (ariances. The acti(it) le(el selected for allocating o(erhead to the product was based on =0> of practical capacit). 4f 100> of practical capacit) had been selected instead, how would the reported unfa(orable spending and (olume (ariances be affected0 -pending (ariance ?olume (ariance . 4ncreased 9nchanged $. 4ncreased 4ncreased %. 9nchanged 4ncreased &. 9nchanged 9nchanged '. %hanged 9nchanged /hen designing a managerial performance e(aluation and reward s)stem, there is often a trade!off between which of the following factors0 . 4ncenti(es to act and salar). $. 4ncenti(es to act and e"perience. %. -3ills and e"perience. &. Ais3 and incenti(es to act. '. '"perience and salar).

@.

10. /hen deciding whether to sell a product at the split!off point or process it further, ;oint costs are not usuall) rele(ant because: . such amounts do not help to increase sales re(enue. $. such amounts reflect opportunit) costs. %. such amounts are sun3 and do not change with the decision. &. such amounts onl) slightl) increase a compan)7s sales margin. '. the sales re(enue does not decrease to the e"tent that it should, if compared with separable processing.

II. Problem and Computing: (80%

1. +n *a) 1, the Taichung %ompan) had a wor3!in!process in(entor) of 10,000 units. The units were 100> complete for material and .0> complete for con(ersion, with respecti(e costs of B.0,000 and B1,=50. &uring the month, 150,000 units were completed and transferred to finished goods. The ending wor3!in!process in(entor) on *a) .1 consisted of 10,000 units. These units were 100> complete with respect to materials and =0> complete with respect to con(ersion.


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%osts added during the month were B..0,000 for materials and B50.,:50 for con(ersion.

"e#uired:
9sing the weighted!a(erage method, calculate: 1) Total equi(alent units for material and con(ersion. (8>) 2) The cost per equi(alent unit for material and con(ersion. (8>) .) The cost transferred to finished goods. (8>) 1) The cost of ending wor3 in process. (8>) 2. Paisa uto ,lass is a regional distributor of automobile window glass. The windshields are manufactured in Capan and shipped to Paisa. *anagement is e"pecting an annual demand of 10,=00 windshields. The purchase price per windshield is B.@5. +ther costs associated with ordering and maintaining an in(entor) of these windshields are as follows: The historical ordering costs incurred in the Purchase +rder &epartment for placing and processing orders are shown below. $ear %rder& Placed and Proce&&ed 'otal Proce&&ing Co&t& 1@@@ 15 B11,@00 2000 50 12,0:5 2001 @5 12,.00 *anagement e"pects the ordering costs to increase 18 percent o(er the amounts and rates e"perienced the last three )ears. 'ach order is inspected b) both Capan and Taiwan officials at the border. B:5 fee is charged. cler3 in the Aecei(ing &epartment recei(es, inspects, and secures the windshields as the) arri(e from the manufacturer. This acti(it) requires eight hours per order recei(ed. This cler3 has no other responsibilities and is paid at the rate of B@ per hour. Aelated (ariable o(erhead costs in this department are applied at the rate of B2.50 per hour. dditional warehouse space will ha(e to be rented to store the new windshields. -pace can be rented as needed in a warehouse at an estimated cost of B2,500 per )ear plus B5..5 per windshield. $rea3age cost is estimated to a(erage B..00 per windshield. Ta"es and fire insurance on the in(entor) are B1.15 per windshield. +ther storage costs amount to B10.50 per windshield. Paisa uto ,lass operates on a si"!da) wor3 wee3 for 50 wee3s each )ear. The firm is closed two wee3s each )ear. -i" wor3ing da)s are required from the time the order is placed with the manufacturer until it is recei(ed.


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"e#uired:
%alculate the following (alues to Paisa uto ,lass %ompan). 1) The (alue of the ordering cost that should be used in the '+D formula. (2int: 9se the high!low method to estimate the (ariable portion of the processing cost per order.) (1>) 2) The (alue of the storage cost that should be used in the '+D formula. (1>) .) The economic order quantit). (1>) 1) The minimum annual rele(ant cost of ordering and storage at the economic order quantit). (1>) 5) The reorder point in units. (1>) 8) *anagement has been able to negotiate a C4T purchasing agreement with the Capan manufacturer, and the inspection fee has been renegotiated with the border officials. The purchasing manager has determined that C4T purchasing would enable the compan) to reduce the cost per order to B.2.10. *oreo(er, she has anal)#ed the cost of storing windshields, ta3ing care to include the cost of wasted space and inefficienc). -he estimates that the real annual cost of holding in(entor) is B80 per windshield. a. %alculate the new '+D, gi(en the purchasing manager7s new cost estimates. (1>) b. 2ow man) orders would now be placed each )ear0 (1>) c. %ompute the new minimum annual rele(ant cost of ordering and storage. (1>) .. &uracell %orporation manufactures rechargeable flashlights in 9- . The firm uses a standard absorption costing s)stem for internal reporting purposesE howe(er, the compan) is considering using (ariable costing. &ata regarding &uracell7s planned and actual operations for 2001 follow: Planned cti(it) ctual cti(it) $eginning finished!goods in(entor) in units .5,000 .5,000 -ales in units 110,000 125,000 Production in units 110,000 1.0,000 $udgeted %osts Per 9nit Total ctual %osts B12.00 B1,8=0,000 B1,580,000 @.00 1,280,000 1,1:0,000 1.00 580,000 520,000 5.00 :00,000 :15,000 =.00 1,120,000 1,000,000 :.00 @=0,000 @=0,000 2.00 2=0,000 250,000 ..00 120,000 125,000

&irect material &irect labor ?ariable manufacturing o(erhead Fi"ed manufacturing o(erhead ?ariable selling e"penses Fi"ed selling e"penses ?ariable administrati(e e"penses Fi"ed administrati(e e"penses


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B50.00 B:,000,000 B8,820,000

The budgeted per!unit cost figures were based on &uracell producing and selling 110,000 units in 2001. &uracell uses a predetermined o(erhead rate for appl)ing manufacturing o(erhead to its product. total manufacturing o(erhead rate of B@.00 per unit was emplo)ed for absorption costing purposes in 2001. n) o(erapplied or underapplied manufacturing o(erhead is closed to the %ost of ,oods -old account at the end of the )ear. The 2001 beginning finished!goods in(entor) for absorption costing purpose was (alued at the 2000 budgeted unit manufacturing cost, which was the same as the 2001 budgeted unit manufacturing cost. There are no wor3!in!process in(entories at either the beginning or the end of the )ear. The planned and actual unit selling price for 2001 was B:0.00 per unit.

"e#uired:
/as &uracell7s 2001 income higher under absorption costing or (ariable costing0 %ompute the following amounts. 1) The (alue of &uracell %orporation7s 2001 ending finished!goods in(entor) under absorption costing. (5>) 2) The (alue of &uracell %orporation7s 2001 ending finished!goods in(entor) under (ariable costing. (5>) .) The difference between &uracell %orporation7s 2001 reported income calculated under absorption costing and calculated under (ariable costing. (5>) 1) -uppose &uracell %orporation had introduced a C4T production and in(entor) management s)stem at the beginning of 2001. a. /hat would li3el) be different about the scenario as described in the problem0 (5>) b. /ould reported income under (ariable and absorption costing differ b) the magnitude )ou found in requirement (.)0 '"plain. (1>)