T H E M A N C H E S T E R M E T R O P O L I T A N U N I V E R S I T Y

C R E W E + A L S A G E R F A C U L T Y

SUMMER EXAMINATIONS 2000

UNIT NO. 82623147 FINANCE II

TIME ALLOWED: 3 HOURS

Answer four questions.

1. It has been suggested that management accountants have three main functions. For each of the independent activities listed in a) to f), identify the management accountant’s function. You should justify your answer with at least one sentence in each case.

a) A report comparing actual and budgeted waste percentages from a chemical process in a herbicide plant. (4 marks)

b) The monthly report to management of sales by product. (4 marks)c) Explaining the variances in Department 23’s labour report. (4 marks)d) Preparing a budget report for each department. (4 marks)e) Analysing the effects of a new product on the cost of the production process.

(4 marks)f) A comparison of the financial advantages of leasing a building versus

purchasing one. (5 marks)(Total 25 marks)

2. Use the information below to answer the following questions.

Clark Company had the following activities during 19x1:

Direct materials:Beginning inventory £25,000Purchases 77,000Ending inventory 13,000

Direct manufacturing labour 20,000Manufacturing overhead 15,000Ending work-in-process inventory 5,000Beginning work-in-process inventory 1,000Ending finished goods inventory 20,000Beginning finished goods inventory 30,000

What is Clark’s cost of direct materials used during 19x1?

a) £102,000b) £89,000c) £64,000d) £12,000

(5 marks)What is Clark’s cost of goods manufactured during 19x1?a) £134,000

b) £124,000c) £120,000d) £119,000

(10 marks)

What is Clark’s cost of goods sold during 19x1?a) £130,000b) £116,000c) £110,000d) £100,000

(10 marks)

(Total 25 marks)

3. Quinn’s Cellulars sells cellular phones for £100. The unit variable costs per phone is £50 plus a selling commission of 10 percent. Fixed manufacturing costs total £1,250 per month, while fixed selling and administrative costs total £2,500.

Required:

a) What is the contribution margin per phone? (5 marks)b) What is the break-even point in phone? (10 marks)c) How many phones must be sold to earn pre-tax income of £7,500? (10 marks)

(Total 25 marks)

4. Bush Corp. manufactures two models of pens, a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs (£60,000) pooled together to arrive at the following information:

Product Number of setups Number of Components

Number of direct labour hours

Standard 22 8 375Deluxe 28 12 225Costs per pool £15,000 £36,000 £9,000

Required:

What is the total amount of overhead costs assigned to the standard model assuming activity-based costing is used?a) £26,625b) £33,375c) £37,500e) £22,500

(10 marks)

What is the total amount of overhead costs assigned to the deluxe model assuming activity-based costing is used?

a) £26,625b) £33,375c) £37,500d) £22,500

(10 marks)

What is the total amount of overhead costs assigned to the standard model assuming a traditional costing applying overhead costs based on direct labour hours is used?

a) £26,625b) £33,375c) £37,500d) £22,500

(2.5 marks)

What is the total amount of overhead costs assigned to the deluxe model assuming a traditional costing applying overhead costs based on direct labour hours is used?

a) £26,625b) £33,375c) £37,500d) £22,500

(2.5 marks)

(Total 25 marks)

5. Lucy and Rickie provide tax consulting for estates and trusts. Their job costing system has a single direct-cost category (professional labour) and a single indirect-cost pool (research support). The indirect–cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labour-hours.

Required:

a) Discuss the reasons a consulting firm might use budgeted costing in its job system rather than actual or normal costing. (15 marks)

b) What might be some ways for the firm to change from a one-pool allocation concept? (10 marks)

(Total 25 marks)

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