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Accounting Final Exam




Question;SectionA40 marksAnswer Question No. 1, then attempt any other THREE questions.1. Transaction drivers count how often an activity is performed.Duration drivers represent the amount of time required to perform an activity.Intensity drivers directly charge for the resources used each time an activity is performed.Also, a weighted index approach might be used to simulate an intensity driver.a. Give an example of each of the four types of drivers describedabove. b. Explain when each of the four types of drivers should beused.c. For each of the first three types of drivers, explain the assumptions about the activity andthe object of the activity.d. For each of the following activities identify a transaction driver, a duration driver, andan intensity driver.Machine maintenanceMachine setup Qualitycontrol Materialordering Productionscheduling Warehouseexpense EngineeringdesignAttempt any THREE questions of the following2. Describe the steps in the PDCA cycle.3. Describe some of the drawbacks of using the operating budget as a control device.4. What role has the increasingly competitive business environment played in thedevelopment of management accounting?5. Explain how traditional cost systems, using only unit level cost drivers, distort product costs.SectionB60 marksRead the following FOUR cases, then answer the required questions after each case.Case 1Profit sharing Knight Medical Devices makes devices and equipment that it sells to hospitals.The organization has a profit-sharing plan that is worded as follows:The company will make available a profit-sharing pool that will be the lower of the following twoitems:1. 40% of income before taxes in excess of the target profit level, which is 18% of net assets, or2. $14 million.The individual employee is paid a share of the profit -sharing pool equal to the ratio of thatemployee's salary to the total salary paid to all employees.Required(a)If the company earned $90 million of earnings before taxes and had net assets of $200million, what would be the amount available for distribution from the profit -sharing pool?(b)Suppose that Bob Knight's salary was $136,000 and that total salaries paid in the companywere $50 million. What would Bob's profit share be?Sunshine, Inc. sells a single product. The company's most recent income statement is given below.Sales (4,000 units)$120,000Less variable expenses(68,000)Contribution margin52,000Less fixed expenses(40,000)Net income$ 12,000Required:a. Contribution margin per unit isb. If sales are doubled to $240,000,total variable costs will equalc. If sales are doubled to $240,000,total fixed costs will equald. If Sunshine is past the breakeven point and10 more units are sold, profits will increase bye. Compute how many units must be sold to break even.f. Compute how many units must be soldto achieve a profit of $20,000.The Crandon Mill has two divisions. The Cutting Division prepares timber at its sawmills. TheAssembly Division prepares the cut lumber into finished wood for the furniture industry. During theyear, the Cutting Division prepared 60,000 cords of wood at a cost of $660,000. All the lumber wastransferred to the Assembly Division where additional operating costs of $ 6 per cord were incurred.The 600,000 boardfeet of finished wood were sold for $2,500,000.Required:a. Determine the operating income for each division if the transfer price from Cutting to Assemblyis at cost, $11 a cord.b. Determine the operating income for each division if the transfer price is $9 per cord.c. Since the Cutting Division sells all of its wood internally to the Assembly Division, does themanager care what price is selected? Why? Should the Cutting Division be a cost center or a pro fitcenter under the circumstances?Abbot Corporation produces 200,000,000 units of product X and 80,000,000 of product Y with thefollowing costs and machine hours.Product XProduct YTotalDirect costs(material plus labor)$18,000,000EnvironmentalsupportNonenvironmentalsupportTotal supportTotal machine hours$8,000,00028,000,00044,000,00058,000,000$44,000,000$86,000,000$130,000,00020,000,00012,000,00032,000,000Requireda. Determine total product cost per unit for each product using a traditional costing system withmachine hours as the cost driver.b. Determine total product cost per unit for each product using an activity based costing system.Use the number of units as the cost driver for each activity.


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