Assignment: MANAGERIAL ACCOUNTING

SECTION A: MULTIPLE CHOICE

There are 30 questions in this Section. Answer ALL questions.

Question 1.Which of the following terms relate to e-commerce?

i. B2B
ii. C2B
iii. B2C
iv. EDI

A. i, ii and iii

B. ii, iii and iv

C. i, ii and iv

D. i, iii and iv

Question 2. Which of the following are performance measures used by firms to assess their own performance in relation to suppliers?

i. Percentage of orders processed by electronic means
ii. Number of expedited orders
iii. Response time to customer queries
iv. Reduction in the number of suppliers

A. i, ii and iii

B. ii, iii and iv

C. i, ii and iv

D. All of the given answers

Question 3. Doron Ltd has just computed the supplier performance index (SPI) of the company's two suppliers, Xema and Zetta. Xema's SPI is 2.11 and Zetta's SPI is 0.99.

Which of the following statements is correct?

A. Xema is a preferred supplier because it has a higher SPI than Zetta.

B. Xema is a preferred supplier because its SPI is greater than 1.0.

C. Both suppliers are considered poor quality suppliers, because their SPI is higher than 0.50.

D. The SPI indices suggest that for every $1 purchase price, Doron has to incur $2.11 supplier activity costs for Xema and $0.99 activity costs for Zetta.

Question 4. Customer response time may be defined as:

A. time between receipt of the customer order and placing that order in production

B. time between customer placing an order and customer receiving the completed order

C. time between receipt of order and delivery to customer

D. time between receipt of order and production commencing

Question 5. Which of the following are customer costs at the customer level?

i. Regular sales calls
ii. Customer inquiries
iii. Acceptance of sales order
iv. Provision of samples to customers

A. i, ii and iii

B. i, iii and iv

C. i, ii and iv

D. All of the given answers

Use the following data to answer Questions 6 and 7.

GoGo Furniture needs to purchase glass panes to make glass top coffee tables. Last year GoGo Furniture has two suppliers, BolBol and TolTol. Based on last year's experience with these two suppliers, GoGo provides you with the following supplier related information:

Question 6. The total costs of ownership of BolBol and TolTol are, respectively:

A. BolBol $10 050; TolTol $4050

B. BolBol $15 050; TolTol $6050

C. BolBol $50 300; TolTol $120 600

D. BolBol $65 050; TolTol $126 050

Question 7. The supplier performance index of BolBol and TolTol are, respectively:

A. BolBol 0.30; TolTol 0.05

B. BolBol 1.20; TolTol 1.03

C. BolBol 1.30; TolTol 1.05

D. BolBol 1.51; TolTol 0.40

Use the following data to answer Questions 8 and 9.

GoGo Furniture has collected the following customer-related information:

Question 8. The total customer level cost is:

A. $8500

B. $18 500

C. $30 500

D. $35 500

Question 9. The total order level cost is:

A. $6000

B. $16 000

C. $24 500

D. $29 000

Question 10. A future cost that is the same under different alternatives is considered to be

A. relevant for all alternatives

B. irrelevant for all alternatives

C. relevant only for the most likely alternative

D. relevant only for the least likely alternative

Question 11. Which of the following is NOT a sunk cost?

A. depreciation on an existing asset

B. acquisition cost of an asset purchased one year ago

C. disposal value of an existing asset

D. all of the above are sunk costs

Question 12. Which of the following costs are relevant to a make-or-buy decision?

A. the original cost of the production equipment

B. the annual depreciation of the equipment

C. the amount that would be received if the production equipment were sold

D. the cost of direct materials purchased last month and used to manufacture the component

Question 13. Galaxy Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined to be as follows:

Assume $40,000 of the fixed manufacturing overhead could be avoided if the components are purchased from an outside supplier. An outside supplier has offered to sell the component for $34. If Galaxy purchases the component from the supplier instead of manufacturing it, the effect on income (profit) would be a

A. $60,000 increase

B. $10,000 increase

C. $100,000 decrease

D. $140,000 increase

Question 14. Zandy Beverage Company plans to eliminate a branch that has a contribution margin of $50,000 and fixed costs of $75,000. Of the fixed costs, $55,000 cannot be eliminated. The effect of eliminating this branch on net income (profit) would be a(an)

A. decrease of $25,000

B. increase of $25,000

C. decrease of $30,000

D. increase of $30,000

Question 15. Bridge Industries manufactures a product with the following costs per unit at the expected production of 78,000 units:

The company has the capacity to produce 80,000 units. The product regularly sells for $90. A wholesaler has offered to pay $75 each for 2,000 units.

If Bridge's special order is accepted, the effect on operating income (profit) would be a

A. $20,000 decrease

B. $52,000 increase

C. $14,000 increase

D. none of the above

Question 16. Jigger Corporation has 3,000 out-of-style winter hats that cost the company $6,000 to manufacture. If the hats are restyled for $2,500, they can be sold for $5,000. The other alternative is to sell them for scrap for $1,000. Which alternative is more desirable?

A. restyle and sell

B. sell for scrap

C. do nothing

D. none of the above

Question 17. Information about three joint products is as follows:

In reference to the above information, which of the joint product(s) should be sold at the split-off?

A. product A only

B. product B only

C. product C only

D. both product A and product B

Question 18. In an absorption cost-based pricing system, the markup should cover

A. selling and administrative expenses, desired profit, and manufacturing cost

B. selling and administrative expenses and desired profit only

C. selling and administrative expenses and manufacturing cost only

D. desired profit and manufacturing cost only

Question 19. Setting prices below cost for the purpose of injuring competitors and eliminating competition is

A. predatory pricing

B. target pricing

C. price discrimination

D. price gouging

Question 20.Charging different prices to different customers for essentially the same product is

A. predatory pricing

B. target pricing

C. price discrimination

D. price gouging

Question 21. The Dot company manufactures two products: X and Y. The contribution margin per unit is determined as follows:

Total demand for Product X is 16,000 units and for Product Y is 8,000 units. Machine hours is a scare resource. During the year, 42,000 machine hours are available. Product X requires 6 machine hours per unit, while Product Y requires 3 machine hours per unit.

How many units of Products X and Y should Dot Company produce?

Question 22. Caddo Corporation produces two products using the same manufacturing equipment. Information about the two products is as follows:

If Caddo can produce only one of the products in the next period, which product should be produced?

A. Alpha should be produced because it required less machine hours

B. Beta should be produced because it generates more revenue

C. Beta should be produced because it generates more contribution margin per unit

D. none of the above

Question 23. WJE Company has only 4,000 machine hours available each month. The following information on the company's three products is available:

If demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits?

A. product AA first, product BB second, and product CC third

B. product BB first, product AA second, and product CC third

C. product CC first, product BB second, and product AA third

D. product CC first, product AA second, and product BB third

Question 24. N-Famous Department Stores marks up its merchandise by 125 percent of original cost. For an item recently purchased for $40, the total markup is

A. $50

B. $10

C. $32

D. $120

Question 25. Jason Department Stores marks up its merchandise by 140 percent of original cost. For an item recently purchased for $50, the selling price is

A. $36

B. $50

C. $70

D. $100

Question 26. How does environmental management accounting (EMA) differ from traditional management accounting?

A. EMA focuses on non-financial rather than financial information.

B. EMA includes environmental cost data in addition to traditional product cost data in the firm's management information system.

C. EMA focuses on external costs to society rather than internal cost data.

D. EMA is a reactive costing technique whereas traditional product costing is proactive.

Question 27. Why is the inclusion of ‘environmental performance' likely to become more common in a firm's balanced scorecard?

A. Balanced scorecard must include all stakeholder interests to be complete.

B. It is likely that environmental sustainability is one of a firm's strategic priorities.

C. Balanced scorecard acknowledges that it is no longer adequate to focus on the major stakeholder (the firm's owner(s)).

D. Balanced scorecard acknowledges that numerous stakeholders are important for business success.

Use the following data to answer Questions 28, 29, & 30.

Question 28. Calculate the total of environmental prevention costs.

A. $225 000

B. $150 000

C. $175 000

D. $255 000

Question 29. Calculate the total of environmental appraisal costs.

A. $75 000

B. $80 000

C. $60 000

D. $70 000

Question 30. Calculate the total of environmental external failure costs.

A. $600 000

B. $650 000

C. $660 000

D. $620 000

SECTION B: PROBLEM SOLVING QUESTIONS

Question 1

The contribution format profit statement for Westex, Inc., for its most recent period is given below:

The company had average operating assets of $500,000 during the period and uses net operating profit before tax in its calculation of return on sales.

REQUIRED

1. Compute the company's return on investment (ROI) for the period using the ROI formula stated in terms of return on sales and investment turnover.

2. For each of the following events described below, indicate whether the return on sales and investment turnover will increase, decrease, or remain unchanged, and then compute the new ROI figure. Consider each events separately, starting in each case from the original ROI computed in (1) above.

Events:

a. The company achieves a cost savings of $10,000 per period by using less costly materials.

b. Using Lean Production, the company is able to reduce the average level of inventory by $100,000. (The released funds are used to pay off bank loans).

c. Sales are increased by $100,000; operating assets remained unchanged.

d. The company issues bonds and uses the proceeds to purchase $125,000 in machinery and equipment at the beginning of the period. Interest on the bonds is $15,000 per period. Sales remain unchanged. The new, efficient equipment reduces production costs by $5,000 per period.

e. The company invests $180,000 of cash (received on accounts receivable) in a plot of land that is to be held for possible future use as a plant site.

f. Obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss.

QUESTION 2

Nelcro Company's Electrical Division produces a high-quality transformer. Sales and cost data on the transformer follow:

Selling price per unit on the outside market.............  $40

Variable costs per unit..........................................  $21

Fixed costs per unit (based on capacity).................. $ 9

Capacity in units..................................................  60,0000

Nelcro Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Division. The Motor Division is currently purchasing 10,000 transformers each year from another company at a cost of $38 per transformer. Nelcro Company evaluates its division managers on the basis of divisional profits.

REQUIRED

1. Assume that the Electrical Division is now selling only 50,000 transformers each year to outside customers.

a. From the standpoint of the Electrical Division, what is the lowest acceptable transfer price for transformers sold to the Motor Division?

b. From the standpoint of the Motor Division, what is the highest acceptable transfer price for transformers acquired from the Electrical Division?

c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 transformers from the Electrical Division to the Motor Division? Why or why not?

d. From the standpoint of the entire company, should a transfer take place? Why or why not?

2. Assume that the Electrical Division is now selling all of the transformers it can produce to outside customers.

a. From the standpoint of the Electrical Division, what is the lowest acceptable transfer price for transformers sold to the Motor Division?

b. From the standpoint of the Motor Division, what is the highest acceptable transfer price for transformers acquired from the Electrical Division?

c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 transformers from the Electrical Division to the Motor Division? Why or why not?

d. From the standpoint of the entire company, should a transfer take place? Why or why not?

QUESTION 3

Recently the Water Authority of Fiji (WAF) was commercialized. In its effort to measure how effectively and efficiently it has operated in the 4 years, the management accountant of WAF came to you to seek advice on implementing a balanced scorecard (BSC). The management accountant supplied you with the following information.

Brief History

The Water Authority of Fiji is a new Commercial Statutory Authority (CSA)

The Government of Fiji started reforming the Water and Sewerage Department in 2009. The objective of this reform was to enhance the sustainable delivery of water and sewerage services to appropriate levels of service. The reform aimed at strengthening the then Water and Sewerage Department (WSD) before establishing the Water Authority of Fiji, which is dedicated to the delivery of water supply and sewerage services, autonomous and be able to mobilise the necessary resources to meet the demand, effectively and efficiently at required quality standards.

From January, 1, 2010, WAF officially took over responsibilities, functions and operations previously carried out by WSD. The Water Authority of Fiji operates as a CSA.

The first two years of operations are key to establishing the most effective culture and mix of people, processes, procedures, governance, equipment, policies and monitoring and reporting. 2013 will be WAF's fourth year of operations.

Vision

The effective and efficient delivery of quality drinking water and wastewater services in accordance with the World Health Organisation guidelines.

Mission

The Water Authority of Fiji is committed to operating as an independent, effective, efficient and financially viable water supply and waste water service provider delivering agreed levels of service to the people of Fiji.

Values

The values that are key to Water Authority of Fiji's culture are:

• Customer Service focus

• Individual attitude to do the right job, do it once, and do it right

• Continuous improvements

• Individual accountability'

• Team Work

• Transparency

• Honesty

REQUIRED

(1) Prepare a BSC for WAF that you will take with you in your next meeting with the management accountant. For each of the four perspectives of BSC, you must:

• State the appropriate objective

• State two Lag indicators

• State two Lead indicators

Ensure that the lag and lead indicators must reflect the operation of WAF. General lag and lead indicators are not acceptable.

(2) How would you address environmental performance into the balanced scorecard of WAF?

(3) Suggest TWO performance measures you would use to measure WAF's environmental performance?