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Final Exam, s2, 2017-Final
Final Exam, s2, 2017-Final
Instructions:
1. This paper has 2 sections. All questions are compulsory.
2. Answer the multiple choice questions on the special answer sheet
provided and attached to answer booklet.
3. This examination carries a 50% weighting towards your overall course
grade. To secure a pass mark in the course, you must score a mark of at
least 50% overall assessment AND a mark of at least 40% in this
examination.
4. You may use a non-programmable calculator. No other materials are
allowed.
5. There are 16 pages in this examination paper, including this cover page.
6. This is a closed book examination.
7. Relevant formulae are provided for you on page 16.
Section A Multiple Choice 30 marks
Answer these questions on the special answer sheet provided.
Each question is worth 1.5 marks.
A. i, iii and iv
B. i, ii and iv
C. i, ii and iii
D. ii, iii and iv
Q2. Beaufort Ltd is introducing a new range of products. It has established that
the target selling prices of the three products are $120, $150 and $210. Beaufort
requires a profit mark-up on cost of 33.3 per cent for all its products. What
percentage of the target prices is the target cost in each case?
A. 50%
B. 60%
C. 66.7%
D. 75%
A. i, ii and iii
B. ii, iii and iv
C. i, iii and iv
D. i, ii and iv
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Q4. When we consider the life cycle sequence of a product, the majority of costs
for a typical product have been committed by the end of:
A. product planning.
B. design and development.
C. customer support.
D. production.
Q5. Lazy Linda Ltd manufactures small kitchen appliances. One of the non-value
added activities identified by the production manager is 'reworking the electrical
component in a toaster'. Which of the following is a likely root cause cost driver?
Q6. The following dates apply to a specific order processed by Hamilton Ltd:
A. 4 days
B. 7 days
C. 10 days
D. 11 days
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Q8. A customer has placed an order with Cyborg Computers for a custom-made
computer. However, as a result of a system error, the order was lost. It took the
sales representative three days to locate the order again. Once the order was
located, the sales representative sent the order to the production department.
This error is likely to negatively affect which of the following?
Q9. 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:
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Q.10 A firm is likely to develop collaborative relationships with suppliers to help
minimise supplier and inventory-related costs when the strategic focus of the firm
is:
A. growth leadership.
B. differentiation strategy.
C. segmentation strategy.
D. cost leadership.
Q11. The following information was taken from the business united profit and loss
statement of Resell Real Estate Agents for 2014:
In addition, the company incurred common fixed costs of $18 000. What was the
business unit margin of the Tamworth Division during 2014?
A. ($8000)
B. $4000
C. $10 000
D. $30 000
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Q12. Which of the following statements about business unit reporting is/are true?
i. Business unit reports distinguish between costs that are controllable by the
business unit manager and costs that are beyond the influence of the
business unit manager.
ii. These statements must be presented in an absorption-costing format.
iii. Business unit reporting shows profit and loss statements for the company
as a whole and for its major business units.
A. i and ii
B. All of the given answers
C. i and iii
D. ii and iii
Q13. Callahan Company consists of two divisions, Northern and Southern. During
2014, many of the accounting records were destroyed in a fire. The managing
director has asked the accountant for information relating to 2014. The following
information is available to the accountant.
In addition, the contribution margin ratio for both divisions was the same. What
were the common fixed costs (labelled ‘) during 2014?
A. $130 000
B. $45 000
C. $70 000
D. $65 000
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Q14. The biggest challenge in making a decentralised organisation function
effectively is:
Q16. Lido Products produces two products (A and B) from a joint process. The
joint cost of production is $80 000. Five thousand units of Product A can be sold
at split-off for $20 per unit or processed further at an additional cost of $20 000
and sold for $25 per unit. Ten thousand units of Product B can be sold at split-off
for $15 per unit or processed further at an additional cost of $20 000 and sold for
$16 per unit.
What is the difference in profit if Lido decides to process further Product B,
instead of selling it at split-off?
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Q17. Xebex Pty Ltd is considering whether to make or buy a component used in
the production of Faz Machines. The annual cost of producing the 100 000
components used by the company is as follows.
A. $50 000
B. $70 000
C. $80 000
D. $100 000
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Q19. Silco Pty Ltd manufactures various lines of computer equipment. They are
planning to introduce a line of laptop computers in January 2008. Current plans
call for the production and sale of 1000 computers with estimated production
costs as follows.
The average amount of capital invested in the laptop computer line is $900 000
and Silco's target return on investment for the line is 18 per cent. What unit price
must Silco charge if the company uses cost-plus pricing based on full cost?
A. $868
B. $900
C. $1192
D. $1930
Q20. Under competitive bidding when a company has no excess capacity, the
bid price would normally include:
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SECTION B: PROBLEM SOLVING QUESTIONS
Pacific Products Pty Ltd operates through two branches, and each manager
enjoys a high degree of autonomy. The two managers are ambitious and
considerable rivalry exists concerning results achieved. The following
comparative summary of results for the year ended December 31, 2016 has
been prepared in the head office of the company and made available, by the
General Manager, to both branch managers for comment.
Among the comments received by the General Manager are the following:
“It is unfair to me to compare results in this way, because my assets are all
company owned whereas in Lautoka they have the following leased assets:
$’000’s $’000’s
Factory 2,000
Factory Buildings 6,000
TOTAL 8,000 1,200
Factory Plant and Equipment 4,000 1,000
“The profit figures are not comparable, because we were required to purchase
product components in the form of electric motors from the Suva branch at a
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cost of $3 million when we could have bought them from an outside supplier for
$2 million, and, in any event the variable cost of production of the motors in the
Suva branch was only $1.5 million.”
REQUIRED
a. Return on sales;
b. Investment turnover;
c. Return on investment;
2. Assuming that the Suva Manager’s comments are correct, for comparison
purposes,
a. Recalculate the rate of return on investments for Lautoka after
making a notional increase to the net assets figure and adjusting
the income to take account of notional depreciation on factory
building at 2.5 % and plant and equipment at 10% per annum,
based on equivalent net book value. [Hint: Consider leased assets]
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QUESTION 2: TRANSFER PRICING.
The Slate Company manufactures and sells television sets. Its assembly division
(AD) buys television screens from the screen division (SD) and assembles the TV
sets. The SD, which is operating at capacity, incurs an incremental
manufacturing cost of $65 per screen. The SD can sell all its outputs to the outside
market at a price of $100 per screen, after incurring a variable marketing and
distribution cost of $8 per screen. If the AD purchases screens from outside
suppliers at a price of $100 per screen, it will incur a variable purchasing cost of
$7 per screen. Slate’s division managers can act autonomously to maximize their
own division’s operating income.
REQUIRED
3. Now suppose that the SD can sell only 70% of its output capacity of 20,000
screens per month on the open market. Capacity cannot be reduced in
the short run. The AD can assemble and sell more than 20,000 TV sets per
month.
a. What is the minimum transfer price at which the SD manager would
be willing to sell screens to the AD? (1 mark)
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QUESTION 3: MANAGEMENT ACCOUNTING AND SUSTAINABILITY
Read the following article and answer the questions that follow:
Fiji Airways yesterday launched its environmental project called, Every take off, one tree at Blackrock
Army Camp in Votualevu Nadi. Photo:ARISHMA DEVI-NARAYAN
March 22
11:00 2017
To begin with its environment conservation project, Fiji Airways yesterday launched
its ‘Every take off, one tree’ initiative by planting 500 mahogany plants in Nadi.
Led by Fiji Airways managing director and chief executive officer, Andre Viljoen and
Hardwood Corporation Limited, they also marked the International Day of Forests at
Blackrock Army Camp Votualevu, in Nadi. The ‘Every take off, one tree’ initiative
means that for every international flight of Fiji Airways that takes off in a year, there
would be a tree planted.
Mr Viljoen said in a year, 2000 flights from the country’s international airport takes
off. Therefore, 2000 trees will be planted this year.
But these trees will be planted on a quarterly basis – 500 trees quarterly.
Mr Viljoen said: “We will be planting one native tree at a very important place where
we know it is protected.”
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He said the project was one of Fiji Airways’ key initiatives towards environmental
conservation.
“These mahogany plantations will be protected forests and grow to maturity without
being harvested for lumber,” Mr Viljoen said.
“As the country’s flag carrier, we see it as our duty to protect and promote the
conservation of our country’s flora and fauna, as well as make every effort to mitigate
the impact of our operations.
The project was launched at Fiji Airways’ 65th year celebrations last September.
Mr Viljoen has further encouraged stakeholders in the forestry, agriculture and rural
development sectors to engage in the expansion of forestry plantations.
Fiji Hardwood Corporation Limited chief executive, Giuseppe Dal Bosco said they
were happy to support Fiji Airways in this commendable initiative by supplying
seedlings and expertise for their plant a tree programme.
“These trees will not to be harvested and will remain for the benefit of future
generations,” Mr Bosco said.
REQUIRED
From the article, identify five stakeholders who might influence Fiji Airway’s
‘Every take off, one tree’ initiative’ or be influenced by this initiative. For
each stakeholder identified, briefly describe how they influenced Fiji
Airways’ initiative or how they are influenced by it. (6 marks)
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(i) How could you add sustainability into a balanced scorecard?
(1 mark)
Westford Company produces three products, A110, B382, and C657. Unit data
for the three products follows:
Product
A110 B382 C657
Selling price $84 $56 $70
Variable costs:
Direct materials $24 $15 $9
Labor and other costs 28 27 40
All three products use the same direct material, Bistide. The demand for the
products far exceeds the direct materials available to produce the products.
Bistide costs $3 per kilogram and a maximum of 5,000 kilograms is available each
month. Westford must produce a minimum of 200 units of each product.
REQUIRED
1. Calculate the contribution margin per kilogram for A110, B382, and C657.
(3 marks)
3. How many units of product A110, B382, and C657 should Westford
produce to achieve the highest contribution margin? (6 marks)
~ THE END ~
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RELEVANT FORMULAE
6.
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