i want the answer or solution to this Mid-test copy

The University of the South Pacific Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and Vanuatu. SCHOOL OF ACCOUNTING AND FINANCE AF201: MANAGERIAL ACCOUNTING MID-SEMESTER TEST - SEMESTER 1, 2015 PRINT MODE Time Allowed 2 hours plus 10 minutes reading 100 marks (30% of final grade) There are 2 sections: Sections A B Questions 1 - 15: Multiple Choice Question 1: Problem Solving & Discussion Question 2: Problem Solving Question 3: Problem Solving Question 4: Problem Solving & Discussion TOTAL Allocated marks 30 marks 15 marks 20 marks 10 marks 25 marks 100 marks Estimated Time 36 minutes 18 minutes 24 minutes 12 minutes 30 minutes 120 minutes INSTRUCTIONS 1. ALL questions in each section are compulsory. 2. Write your answers in the answer booklet provided. 3. Non-programmable Calculators may be used, but are not provided. SECTION A 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. Answer ALL questions. Refer to the following information to answer Questions 1 and 2. The Norfolk Company reported the following information at the end of the current year: Indirect labor Selling expenses Rent on factory Depreciation factory Administrative expenses $40,000 $15,000 $25,000 $10,000 Direct materials Sales Revenue Factory utilities Direct labor $30,000 Property taxes on factory $50,000 $200,000 $10,000 $45,000 $5,000 Question 1. Calculate Norfolk Company's manufacturing overhead cost. A. $50,000 B. $80,000 C. $90,000 D. $140,000 Question 2. Calculate Norfolk Company's total manufacturing cost. A. $95,000 B. $145,000 C. $175,000 D. $185,000 Page | 1 Question 3. 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 Question 4. The Rutherford Company's costs and activity level for April and May are as follows: Activity level in units Variable costs Fixed costs Mixed (Semi-variable) costs Total costs April 10,000 $10,000 $30,000 $20,000 $60,000 May 20,000 ? ? ?______ $75,000 Assuming that these levels are within the relevant range, the mixed costs for May are A. $10,000 B. $25,000 C. $40,000 D. $20,000 Page | 2 Refer to the following information and answer question 5. The following cost functions were developed for manufacturing overhead costs: Manufacturing Overhead Cost Cost Function Electricity = $400+ $30 per direct labor hour Maintenance = $350 + $10 per direct labor hour Supervisors' salaries = $28,000 per month Indirect materials = $12 per direct labor hour Question 5. What is the cost function for total manufacturing overhead cost if September production is expected to be 1,500 units requiring 1,000 direct labor hours? A. $28,000 + ($12 x Direct labor hours) B. $28,750 + ($52 x Direct labor hours) C. $750 + ($40 x Direct labor hours) D. $ 28,750 + ($40 x Direct labor hours) Use the following information to answer question 6. Context Company reported the following shipping charges for the last six months. Month Shipping costs Units shipped Jan $4,500 12,500 Feb $4,680 13,000 Mar $5,000 14,000 Apr $4,550 13,300 May $4,800 13,500 Jun $5,500 15,000 Page | 3 Question 6. Using the high-low method, determine the amount of estimated variable cost per unit shipped. A. $0.30 B. $0.40 C. $0.20 D. $0.21 Question 7. 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 R Square 0.998212 Standard Error 49.83698 Observations 9 ANOVA df F 1675.185 Significance F 5.71E-09 2 6 8 Coefficients 1493.265 2.605579 Standard Error 136.42 0.045317 t Stat 10.94608 57.49626 P-value 3.45E-05 1.86E-09 Lower 95% 1159.457 2.494691 Upper 95% 1827.073 2.716466 13.7142 0.916289 14.96711 5.6E-06 11.47212 15.95628 Regression Residual Total Intercept Setup hours Number of setups MS 4160697 2483.724 SS 8321394 14902.34 8336296 Based on the multiple regression analysis output, what is the estimated cost function? A. Total cost = $1,493.27 + ($2.71 x Setup hours) B. Total cost = $1,493.27 + ($2.61 x Setup hours) + ($13.71 x Number of setups) C. Total cost = $1,493.27 + ($13.71 x Number of setups) D. Total cost = $1,493.27 Page | 4 Use the following information and answer question 8 and 9. AB Units produced Prime costs Machine hours (actual) XY 50,000 65,000 $750,000 $650,000 30,000 60,000 Harrison uses a plantwide rate of $4 per machine hour to apply overhead to production. Budgeted overhead was $392,000, but actual overhead was $376,000. Question 8. How much of Harrison Company's overhead was applied to product AB? A. $130,000 B. $195,000 C. $120,000 D. $187,500 Question 9. What was Harrison Company's total cost to produce product XY? A. $650,000 B. $910,000 C. $900,000 D. $890,000 Page | 5 Use the following information to answer questions 10 and 11. User of service Budgeted overhead Support Producing Departments Departments S1 S2 P1 $450,000 $300,000 P2 $750,000 $920,000 Provider of service S1 - Number of employees 10 25 50 75 S2- Machine hours 60 - 140 200 Department S1's cost is allocated based on the number of employees, and Department S2's cost is allocated based on machine hours. Question 10. If the direct method is used, Department S1's cost assigned to Department P1 would be A. $157,500 B. $185,294 C. $150,000 D. $180,000 Question 11. If the sequential or step-down method is used and Department S1's cost is allocated first, the Department S1 cost assigned to Department S2 would be A. $67,500 B. $60,000 C. $75,000 D. $0 Page | 6 Question 12. Lipex Pty Ltd produces two products (A&B) from a particular 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. Joint production costs for the year were $60 000. Sales values and costs are as follows. Allocate the joint production costs based on the physical units method. What are the joint costs assigned to product A? A. $25,714 B. $20,339 C. $34,286 D. $30,000 Question 13. A firm incurs manufacturing costs totaling $240 000 in process 1 to produce the following three beverages emerging from that process at the split-off point. Apple juice: sold immediately it emerges from Process 1 without further processing for $0.70 litre Apple cider: processed further in Process 2 at an additional cost of $0.66667 litre, then sold for $1.50 litre Apple pulp: processed further in Process 3 at an additional cost of $1.50 litre, then sold for $3.50 litre The following data relates to the period in which the joint costs were incurred. Page | 7 What is the amount of joint cost that would be allocated to apple juice if the net realisable value method had been used? A. $120,000 B. $80,000 C. $84,000 D. $91,000 Use the following information to answer questions 14 and 15 Lazy Linda Kitchen Appliances manufactures small kitchen appliances like toasters and blenders. Last month Lazy Linda recorded the following quality costs: Discarded electrical components due to defects Managing customer complaints Quality training programs for employees Supplier audit Process inspection Work-in-process inspection Maintaining equipment used to perform quality tests Cost of hiring a technician to fix a machine breakdown Legal fees paid to a customer whose pet mouse was electrocuted due to a faulty toaster $2,000 $3,000 $5,000 $6,000 $4,500 $5,000 $2,500 $3,000 $6,000 Page | 8 Question 14. Lazy Linda's total appraisal cost was: A. $5,000 B. $9,500 C. $12,000 D. $18,000 Question 15. Lazy Linda's total internal failure cost was: A. $9,500 B. $7,500 C. $5,000 D. $2,000 Total marks for this section: 30 marks SECTION B ANSWER ALL QUESTIONS QUESTION 1: Throughput Accounting The Mayfield Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information. Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced ($640,000 80,000; $400,000 80,000) Machining 100,000 units 80,000 units $640,000 $8 per unit Finishing 80,000 units 80,000 units $400,000 $5 per unit Each cabinet sells for $72 and has direct materials costs of $32 incurred at the start of the machining operation. Mayfield has no other variable costs. Mayfield can sell whatever it produces. The following requirements refer only to the preceding data. There is no connection between requirements (2) and (3). REQUIRED 1. Identify the bottleneck department of Mayfield Corporation, and briefly explain why it is a bottleneck. (3 marks) 2. An outside contractor offers to do the finishing operation for 12,000 units at $10 per unit, double the $5 per unit that it costs Mayfield to do Page | 9 the finishing in-house. Should Mayfield accept the subcontractor's offer? Show your calculations. (4 marks) 3. The Hunt Corporation offers to machine 4,000 units at $4 per unit, half the $8 per unit that it costs Mayfield to do the machining in-house. Should Mayfield accept the subcontractor's offer? Show your calculations. (4 marks) 4. Mayfield is considering how to motivate workers to improve their productivity (output per hour). One proposal is to evaluate and compensate workers in the Machining and Finishing Departments on the basis of their productivities. Do you think the new proposal is a good idea? Explain briefly. (4 marks) Total marks for this question: 15 marks QUESTION 2: Variable and Absorption Costing Ivy, Inc., produces a single product that sells for $60 per unit. There were no inventories of work in process or finished goods. Costs for the year were as follows: Variable costs: Direct materials Direct labor Manufacturing overhead Selling expenses $4 per kg. $12 per unit $5 per unit $3 per unit Fixed costs: Manufacturing overhead Selling and administrative $36,000 $15,000 Each unit produced consumes 2 kg of direct materials. During the year, 4,000 units were produced and 3,500 units were sold. There were no work-in-process inventories at the end of the year; only finished goods inventories. REQUIRED 1. Determine the unit cost of production under variable costing. (2 marks) 2. Determine the unit cost of production under absorption costing. (3 marks) Page | 10 3. (i) Calculate the finished goods in units. (2 marks) (ii) Determine the finished goods inventory cost at the year-end using absorption costing. (2 marks) (iii) Determine the finished goods inventory cost at the year-end using variable costing. (2 marks) 4. Determine the operating profit under variable costing (5 marks) 5. Determine the operating profit under absorption costing (4 marks) Total marks for this question: 20 marks QUESTION 3: Support Department Cost Allocation Suva Private Hospital has two support departments, Customer services department and housekeeping department and two revenue-producing departments, outpatient department (O) and maternity department (M). The controller for the hospital has decided to use the reciprocal method to allocate the costs of the support departments to the revenue-producing departments. She has prepared the following cost equations for the two support departments. C equals the total cost for the customer services department, and H equals the total cost for the housekeeping department. C = $35,000 + 0.3H H = $40,000 + 0.2C Before the controller was able to complete the allocation, she had to leave to take care of an emergency. In addition to these equations, she left a hastily scribbled note indicating that Outpatient department uses 40 percent of customer service's output and 20 percent of housekeeping's output. REQUIRED 1. Using the reciprocal method calculate the values for departments C and H (4 marks) 2. Allocate the costs of the two support departments to each of the two producing departments. (6 marks) Total marks for this question: 10 marks Page | 11 QUESTION 4: Conventional vs. Activity-based Costing The Pasifika Cement plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for 2008 are as follows: Maintenance Inspection $ 60,000 180,000 The plant currently applies overhead using direct labor hours and expected capacity of 20,000 direct labor hours is available. The data provided below has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus 40 percent markup. Direct materials Direct labor Machine hours Number of inspections Direct labor hours $1,200 $6,000 300 3 400 Total expected machine hours for all jobs during the year were 10,000, and the total expected number of inspections is 1,500. REQUIRED 1. (i) Compute the pre-determined manufacturing overhead rate using the current conventional method (label the rate correctly). (2 mark) (ii) Compute the total cost of the potential job using the MOH rate in 1 (i). (3 marks) (iii) Determine the bid price for the potential job. (2 marks) 2. (i) Compute the pre-determined manufacturing overhead rates using activity-based costing (ABC) and assuming maintenance is applied to jobs using machine hours, while inspection is applied to jobs using number of inspections (label the rates correctly). (4 marks) (ii) Compute the total cost of the job using the rates in (2) (i) (6 marks) (iii) Determine the bid price for the potential job assuming ABC is used. (3 marks) 3. Prepare a memorandum to the plant manager recommending a bid price for the potential job. Support your recommendation by explaining which method best reflects the actual cost of the job. (5 marks) Total marks for this question: 25 marks ~THE END~ Page | 12