TESTigM2-AAB#nrGFG4d-#0
.docx
School
Lakehead University**We aren't endorsed by this school
Course
BUSI 2052
Subject
Accounting
Date
Jan 11, 2025
Pages
12
Uploaded by KidHare4742
# Exam Name: Advanced Managerial Accounting Techniques# Exam Time: 2 Hours 30 Minutes# Total Score: 100## Instructions:1. Answer all questions.2. Show all your work for calculation questions.3. Multiple-choice questions must be clearly marked with the letter corresponding to the correct answer.4. Write your name and student ID number at the top of each page.5. Use a blue or black ink pen for all answers and calculations.---### Question 1:**Multiple Choice (2 points)**Which of the following is NOT a primary objective of cost accounting?a) To provide information for pricing decisionsb) To assist in controlling manufacturing operationsc) To help in preparing financial statementsd) To evaluate the performance of various departments**Answer: c**---### Question 2:**Solution Question (5 points)**Explain the concept of activity-based costing (ABC) and how it differs from traditional costing methods.**Answer:**Activity-based costing is a method of allocating overhead and indirect costs to products and services based on their actual consumption of resources. Unlike traditional costing methods that allocate overhead costs based on a single volume-related measure, ABC assigns costs based on activities. This more accurately reflects the cost drivers that cause costs to be incurred.---### Question 3:**Calculation Question (7 points)**A company has two products, A and B. The total overhead costs are $500,000, and the
company allocates overhead based on machine hours. Product A requires 10,000 machine hours, and Product B requires 20,000 machine hours.1. Calculate the overhead rate.2. Determine the allocated overhead for each product.**Answer:**1. Overhead Rate = Total Overhead Costs / Total Machine HoursOverhead Rate = $500,000 / (10,000 + 20,000) = $500,000 / 30,000 = $16.67 per machine hour2. Allocated Overhead for Product A = 10,000 machine hours * $16.67 = $166,700Allocated Overhead for Product B = 20,000 machine hours * $16.67 = $333,300---### Question 4:**Multiple Choice (2 points)**Which of the following is NOT considered a cost in cost accounting?a) Materialsb) Laborc) Overheadd) Sales revenue**Answer: d**---### Question 5:**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.---### Question 6:**Calculation Question (7 points)**A company is analyzing its cost structure. It has fixed costs of $100,000 and variable costs
that are 75% of sales. Sales for the next year are projected to be $500,000.1. Calculate the total variable costs.2. Calculate the total costs for the next year.**Answer:**1. Total Variable Costs = Variable Cost Percentage * SalesTotal Variable Costs = 0.75 * $500,000 = $375,0002. Total Costs = Fixed Costs + Total Variable CostsTotal Costs = $100,000 + $375,000 = $475,000---### Question 7:**Multiple Choice (2 points)**Which of the following is a direct cost?a) Rent for the factoryb) Wages of assembly line workersc) Insurance on manufacturing equipmentd) Depreciation of office furniture**Answer: b**---### Question 8:**Solution Question (5 points)**What is the difference between absorption costing and variable costing? Provide an example to illustrate the difference.**Answer:**Absorption costing includes all manufacturing costs (fixed and variable) in the cost of the product, while variable costing only includes variable manufacturing costs. For example, if a company has $10 in variable costs and $5 in fixed costs per unit, absorption costing would assign a total cost of $15 to each unit, while variable costing would assign only $10.---### Question 9:**Calculation Question (7 points)**A company has a contribution margin ratio of 40%. If the company wants to achieve a target income of $100,000 and the fixed costs are $200,000, calculate the required sales.
**Answer:**Required Sales = (Fixed Costs + Target Income) / Contribution Margin RatioRequired Sales = ($200,000 + $100,000) / 0.40 = $300,000 / 0.40 = $750,000---### Question 10:**Multiple Choice (2 points)**Which of the following is NOT a component of product costing?a) Direct materialsb) Direct laborc) Indirect materialsd) Sales commissions**Answer: d**---### Question 11:**Solution Question (5 points)**Define what a period cost is and provide an example.**Answer:**A period cost is a cost that is not directly tied to the production process and is expensed in the period it is incurred. An example of a period cost is the salary of the company's marketing manager.---### Question 12:**Calculation Question (7 points)**A company's budgeted sales are $1,000,000, the budgeted variable cost is $600,000, and the budgeted fixed costs are $200,000. Calculate the contribution margin and net income if actual sales are $1,100,000.**Answer:**Contribution Margin = Sales - Variable CostsContribution Margin = $1,100,000 - $600,000 = $500,000Net Income = Contribution Margin - Fixed CostsNet Income = $500,000 - $200,000 = $300,000
---### Question 13:**Multiple Choice (2 points)**Which of the following is a fixed cost?a) Raw material costsb) Salary of the production supervisorc) Electricity used in the manufacturing processd) Shipping costs for delivered products**Answer: b**---### Question 14:**Solution Question (5 points)**Explain the concept of relevant costs in decision-making.**Answer:**Relevant costs are future costs that will be different among alternative courses of action. They are important for decision-making because they can change based on the choices made by management. For example, the incremental cost of producing an additional unit is a relevant cost for determining whether to increase production.---### Question 15:**Calculation Question (7 points)**A company is considering two projects. Project A requires an initial investment of $50,000 and will generate a net cash flow of $20,000 per year for 3 years. Project B requires an initial investment of $60,000 and will generate a net cash flow of $25,000 per year for 4 years. Calculate the net present value (NPV) of each project using a discount rate of 10%.**Answer:**Project A NPV = ($20,000/(1+0.10)^1) + ($20,000/(1+0.10)^2) + ($20,000/(1+0.10)^3) - $50,000Project A NPV = $18,182.69 + $16,393.44 + $14,869.69 - $50,000 = $0,445.82Project B NPV = ($25,000/(1+0.10)^1) + ($25,000/(1+0.10)^2) + ($25,000/(1+0.10)^3) + ($25,000/(1+0.10)^4) - $60,000Project B NPV = $22,727.27 + $20,661.16 + $18,782.96 + $17,084.28 - $60,000 = $0,964.67---
### Question 16:**Multiple Choice (2 points)**Which of the following is NOT a cost classification method?a) Product costingb) Job costingc) Process costingd) Activity-based costing**Answer: a**---### Question 17:**Solution Question (5 points)**Define what a differential cost is and provide an example.**Answer:**A differential cost is the difference in cost between two alternative decisions. For example, if a company is deciding whether to produce a component in-house or outsource it, the differential cost would be the difference in the cost of producing it internally versus the cost of outsourcing.---### Question 18:**Calculation Question (7 points)**A company has a break-even point of 5,000 units. The fixed costs are $100,000, and the variable costs per unit are $10. Calculate the contribution margin per unit and the selling price per unit.**Answer:**Break-even Point = Fixed Costs / Contribution Margin per UnitContribution Margin per Unit = Fixed Costs / Break-even PointContribution Margin per Unit = $100,000 / 5,000 = $20Selling Price per Unit = Variable Cost per Unit + Contribution Margin per UnitSelling Price per Unit = $10 + $20 = $30---### Question 19:**Multiple Choice (2 points)**
Which of the following is NOT a characteristic of a fixed cost?a) It remains constant regardless of the level of activityb) It is a future costc) It is a past costd) It is a cost that does not change with the level of production**Answer: c**---### Question 20:**Solution Question (5 points)**Explain the concept of sunk costs and why they are irrelevant in decision-making.**Answer:**A sunk cost is a cost that has already been incurred and cannot be recovered. It is irrelevant in decision-making because it cannot be changed by any future actions and should not be considered when making new decisions.---### Question 21:**Calculation Question (7 points)**A company is considering whether to purchase new equipment for $200,000. The new equipment will reduce variable costs by $40,000 per year. The useful life of the equipment is 5 years, and the salvage value is $20,000. The company's discount rate is 8%. Calculate the net present value (NPV) of the equipment purchase.**Answer:**NPV = -Initial Investment + (Annual Savings / (1+Discount Rate)^n) + (Salvage Value / (1+Discount Rate)^n)NPV = -$200,000 + ($40,000 / (1+0.08)^1) + ($40,000 / (1+0.08)^2) + ($40,000 / (1+0.08)^3) + ($40,000 / (1+0.08)^4) + ($40,000 / (1+0.08)^5) + ($20,000 / (1+0.08)^5)NPV = -$200,000 + $37,037.04 + $34,271.36 + $31,746.98 + $29,367.27 + $27,094.95 + $15,847.19 = $14,811.79---### Question 22:**Multiple Choice (2 points)**Which of the following is a direct cost?a) Rent for the factoryb) Wages of assembly line workers
c) Insurance on manufacturing equipmentd) Depreciation of office furniture**Answer: b**---### Question 23:**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.---### Question 24:**Calculation Question (7 points)**A company is analyzing its cost structure. It has fixed costs of $100,000 and variable costs that are 75% of sales. Sales for the next year are projected to be $500,000.1. Calculate the total variable costs.2. Calculate the total costs for the next year.**Answer:**1. Total Variable Costs = Variable Cost Percentage * SalesTotal Variable Costs = 0.75 * $500,000 = $375,0002. Total Costs = Fixed Costs + Total Variable CostsTotal Costs = $100,000 + $375,000 = $475,000---### Question 25:**Multiple Choice (2 points)**Which of the following is NOT considered a cost in cost accounting?a) Materialsb) Laborc) Overheadd) Sales revenue
**Answer: d**---### Question 26:**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.---### Question 27:**Calculation Question (7 points)**A company is analyzing its cost structure. It has fixed costs of $100,000 and variable costs that are 75% of sales. Sales for the next year are projected to be $500,000.1. Calculate the total variable costs.2. Calculate the total costs for the next year.**Answer:**1. Total Variable Costs = Variable Cost Percentage * SalesTotal Variable Costs = 0.75 * $500,000 = $375,0002. Total Costs = Fixed Costs + Total Variable CostsTotal Costs = $100,000 + $375,000 = $475,000---### Question 28:**Multiple Choice (2 points)**Which of the following is NOT considered a cost in cost accounting?a) Materialsb) Laborc) Overheadd) Sales revenue**Answer: d**
---### Question 29:**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.---### Question 30:**Calculation Question (7 points)**A company is analyzing its cost structure. It has fixed costs of $100,000 and variable costs that are 75% of sales. Sales for the next year are projected to be $500,000.1. Calculate the total variable costs.2. Calculate the total costs for the next year.**Answer:**1. Total Variable Costs = Variable Cost Percentage * SalesTotal Variable Costs = 0.75 * $500,000 = $375,0002. Total Costs = Fixed Costs + Total Variable CostsTotal Costs = $100,000 + $375,000 = $475,000---### Question 31:**Multiple Choice (2 points)**Which of the following is NOT considered a cost in cost accounting?a) Materialsb) Laborc) Overheadd) Sales revenue**Answer: d**---
### Question 32:**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.---### Question 33:**Calculation Question (7 points)**A company is analyzing its cost structure. It has fixed costs of $100,000 and variable costs that are 75% of sales. Sales for the next year are projected to be $500,000.1. Calculate the total variable costs.2. Calculate the total costs for the next year.**Answer:**1. Total Variable Costs = Variable Cost Percentage * SalesTotal Variable Costs = 0.75 * $500,000 = $375,0002. Total Costs = Fixed Costs + Total Variable CostsTotal Costs = $100,000 + $375,000 = $475,000---### Question 34:**Multiple Choice (2 points)**Which of the following is NOT considered a cost in cost accounting?a) Materialsb) Laborc) Overheadd) Sales revenue**Answer: d**---### Question 35:
**Solution Question (5 points)**Define what a cost driver is and how it is used in cost accounting.**Answer:**A cost driver is a factor that causes a variable cost to occur. In cost accounting, cost drivers are used to allocate overhead costs to products and services. They are the activities that cause costs to be incurred and can include machine hours, labor hours, units produced, and others.