【CGA】Management Accounting Fundamentals Assignment 1.docx

LESSON 1 AssignmentNote:For multiple-choice questions, identify the best response. Answer each item by giving the letter of your choice. For example, if (4) is the best answer for (a), write a(4) as your answer. Select only one answer for each item. If more than one answer is given, it will not be marked. Incorrect answers will be marked as zero. No marks will be given to any explanation you offer.Question 1 (42 marks)Multiple choice (2 mark each)a.Which of the following statements about managerial accounting is true?1)Managerial accounting information is prepared for external users.2)Managerial accounting information is a legal requirement.3)The structure of managerial accounting practice is relatively flexible.4)There are structured standards of acceptability for managerial accounting.b.Which of the following statements is incorrect with regard to a manufacturing firm?1) Inventoriable costs include only prime costs.2) Inventoriable costs include prime costs and manufacturing overhead costs.3) Inventoriable costs include both variable manufacturing and fixed manufacturing costs.4) Inventoriable costs will never include any period costs.c.Crandall Company manufactures a variety of products. The controller is considering how to account for labour fringe benefits. Which of the following methods provides the best measure of the relative cost of manufacturing Crandalls different products?1)Treat all labour fringe benefits as indirect labour by adding the total to manufacturing overhead.2)Treat all labour fringe benefits as direct labour.3)Treat labour fringe benefits that relate to direct labour as additional direct labour cost and treat fringe benefits that relate to indirect labour as part of manufacturing overhead.4)Treat labour fringe benefits as period expenses and expense these costs as incurred.d.In the context of making a decision, which of the following statements regarding relevant costs is incorrect?1)An opportunity cost is a relevant cost.2)A traceable fixed cost is a relevant cost.3)A variable cost is a relevant cost.4)A sunk cost is a relevant cost.e.Which of the following functions of management compares planned results with actual results?1)Planning2)Directing and motivating3)Controlling4)Decision makingf.When distinguishing between fixed costs and variable costs, which of the following statements is true?1)As production rises, variable costs per unit will fall.2)As production rises, total fixed costs will rise.3)As production falls, fixed costs per unit will rise.4)As production falls, variable costs per unit will fall.g.Which of the following are included in manufacturing overhead?1)All direct material, direct labour, and administrative costs2)All manufacturing costs except direct labour3)All manufacturing costs except direct labour and direct materials4)All selling and administrative costsh.Which of the following statements describes the treatment of period costs? 1)They will never constitute part of the cost of goods manufactured statement but will always be part of the income statement.2)They will always be part of the cost of goods manufactured statement.3)They will never constitute part of the cost of goods manufactured statement or be part of the income statement.4)They will only be incurred if the product is made in the current period.i.What criterion is used in making the distinction between indirect and direct costs?1)Whether a cost differs between alternatives2)Whether a cost is variable or fixed3)Whether a cost is a product or a period cost4)Whether a cost can be easily traced to the cost object under considerationj.Buford Company rents out a small unused portion of its factory to another company for 1,000 per month. The rental agreement will expire next month, and rather than renew the agreement, Buford Company is thinking about using the space itself to store materials. What term is used to describe the 1,000 per month?1)Sunk cost2)Period cost3)Variable cost4)Opportunity costk.A machine was purchased in 20X6 to make experimental boards. The machine is still being used in the manufacture of the new board. What term is used to describe the cost of this machine in 20X9?1)Opportunity cost2)Sunk cost3)Differential cost4)Period costNote:Questions (l) through (n) are based on the following information pertaining to Haileys manufacturing operations:InventoriesJanuary 1, 2011December 31, 2012Direct materials30,00020,000Work in progress30,00025,000Finished goods28,00035,000Additional information for 2011:Direct materials purchased110,000Direct manufacturing labour payroll90,000Direct manufacturing labour rate per hour10Factory overhead rate per direct manufacturing labour-hour7l.For 2011, what was the prime cost?1)90,0002)120,0003)170,0004)210,000m.For 2011, what was the conversion cost?1)90,0002)153,0003)183,0004)200,000n.For 2011, what was the cost of goods manufactured?1) 35,0002)268,0003)273,0004)278,000o.In the preparation of the schedule of cost of goods manufactured, the accountant incorrectly excluded as part of manufacturing overhead the janitorial expense of the firms factory. What impact will this error have on the financial statements?1)It will overstate period expenses on the income statement. 2)It will overstate the cost of goods sold on the income statement.3)It will understate the cost of goods manufactured.4)It will have no effect on the cost of goods manufactured.Note:Answer Questions (p) and (q) using the following selected data for March, taken from Ryker Companys financial statements:Cost of goods available for sale61,000Manufacturing overhead25,000Cost of goods manufactured51,000Finished goods inventory ending10,000Direct materials used20,000Sales115,000Selling and administrative expenses30,000Direct labour15,000Work-in-progress inventory beginning8,000p.What was the gross margin for March?1)20,0002)34,0003)50,0004)64,000q.What was the work-in-progress inventory at the end of March?1) 02)9,0003)17,0004)60,000r.Done and Bradsweet, LLC, is a professional accounting services company. In 2012, the firm incurred $76,000 in promotion expenses. Of this, $61,000 was for activities related to entertaining potential clients and included charges for hotel stays and transportation for clients and management to corporate head office to promote the firm and its services. Some, but not all, of these clients subsequently engaged the services of the company during the year. The remaining $15,000 was spent on advertising the firm in print and television media in Europe. Which of the following statements is correct? 1)$76,000 represents a period cost.2)$76,000 represents a product cost.3)$61,000 is a product cost and $15,000 is a period cost.4)$61,000 is a direct cost and $15,000 is an indirect cost.Note:Answer Questions (s) and (t) using the following data from the Bonnie Company for the month of November 2012:Inventories11/1/201211/30/2012Raw materials19,000?Work in progress12,00014,000Finished goods?9,000Additional data:Sales revenue106,000Direct labour costs10,000Manufacturing overhead costs11,000Selling expenses12,000Administrative expenses18,000s.If the cost of raw materials purchased in November was 14,000 and the cost of goods manufactured was 40,000, what was the inventory of raw materials on November30?1)12,0002)14,0003)16,0004)19,000t.If the cost of goods manufactured for November was 40,000 and net income was 41,000, what was the finished goods inventory on November 1?1) 1,0002) 4,0003)32,0004)35,000u.At a sales volume of 40,000 units, Carne Companys total fixed costs are 40,000 and total variable costs are 40,000. The relevant range for the product is 30,000 to 50,000 units.If the company were to sell 42,000 units, what would be the total expected cost?1)73,6002)80,0003)82,0004)90,000Question 2 (12 marks)What is the major intention of the IFAC Code of Ethics for Professional Accountants? Describe the Codes five fundamental principles. Question 3 (20 marks)Several years ago, 4R Company purchased a small building adjacent to its manufacturing plant in order to have room for expansion when needed. Since the company had no immediate need for the extra space, the building was rented out to another company for a rental revenue of $40,000 per year. The renters lease will expire next month and, rather than renewing the lease, 4R Company has decided to use the building itself to manufacture a new product.Direct materials cost for the new product will total $40 per unit. It will be necessary to hire a supervisor to oversee production. Her salary will be $2,500 per month. Workers will be hired to manufacture the new product, with direct labour cost amounting to $18 per unit. Manufacturing operations will occupy all of the building space, so it will be necessary to rent space in a warehouse nearby in order to store finished units of product. The rental cost will be $1,000 per month. In addition, the company will need to rent equipment for use in producing the new product; the rental cost will be $3,000 per month. The company will continue to depreciate the building on a straight-line basis, as in past years. Depreciation on the building is $10,000 per year.Advertising costs for the new product will total $50,000 per year. Costs of shipping the new product will be $10 per unit. Electrical costs of operating machines will be $2 per unit.To have funds to purchase materials, meet payrolls, and so forth, the company will have to liquidate some temporary investments. These investments are presently yielding a return of $6,000 per year.RequiredPrepare an answer sheet with the following column headings:Cost itemVariable costFixed costProduct costPeriod costOpportunity costSunk costDirect materialsDirect labourManufacturing overhead List the different costs associated with the new product decision down the extreme left column (under “Cost item”). Then place an X under each heading that helps to describe the type of cost involved. There may be Xs under several column headings for a single cost. (For example, a cost may be a fixed cost, a period cost, and a sunk cost; you would place an X under each of these column headings opposite the cost.)Question 4 (11 marks)Calistas Pasta is a pasta company in Cecilia, Italy. The owner, Andrew Calista, wants to identify the various costs incurred each year in order to plan and control the business costs. The companys costs for the last year are as follows ( 000s):Utilities for the plant1,000Salaries direct labour11,000Pasta equipment maintenance800Depreciation property, plant and equipment1,000Uniforms400Direct materials 9,500Insurance for the plant300Presidents salary15,000Rent administrative offices4,000Administrative costs9,000Advertising and selling expenses6,500Boxes and bags used in pasta packaging6,000Idle time600Overtime premiums direct labour3,500Fringe benefits direct 2,000Fringe benefits indirect labour1,400Total costs72,000Requireda.(4marks)Divide the total expenses of 72,000,000 into two categories: product and period cost.b.(7 marks in total)The president, Andrew Calista, is planning to expand his business into Greece and Spain. This expansion will not require additional pasta facilities, but direct materials and labour will increase significantly. Both Greek and Spanish authorities will require specific documentation and inspections for the goods to get entry approval. This will be an additional cost to take into consideration.(i)(3 marks)Are these additional costs product or period costs?(ii)(4 marks)Explain to Andrew Calista whether all these additional costs are relevant to the decision to expand his business to Greece and Spain.Question 5 (15 marks)International Beans Inc. has just completed a year of operations and the controller has called a meeting for tomorrow morning. As the assistant controller you are asked to prepare the following: schedule of cost of goods manufactured income statement These will be presented to the executive committee at the meeting. Unfortunately, you cannot get a