Section

NAME:
A/10
Section
STUDENT ID:
B/15
Total
SIGNATURE:
(/25)

TUTORIAL NUMBER:

SCHOOL OF ACCOUNTING

ACCT 2522 Management Accounting 1

In-class test
Week 6, 2018

Time allowed: 45 minutes

Total of 25 marks

Tip: You have 45 minutes to complete the in-class test worth 25 marks. This means that, on
average, you should spend approximately 1.8 minutes per mark.

 The candidate may NOT retain this paper.

 This in-class test represents 26% of your total mark for this course.
 This paper consists of two (2) sections:
o Section A: One (1) written question; and
o Section B: Ten (10) multiple choice questions (MCQs) and five (5) short
calculation questions (round final answers to 2 decimal places).
 All answers to your MCQs must be answered on the separate answer sheet
provided. Answers provided anywhere else will not be marked.
 With the exception of MCQs, answers must be written in the space provided – any
writing beyond the allocated spaces/lines will NOT be marked.
 Answers are to be written in ink.
 Answer ALL questions.

V1!!DO NOT OPEN THIS PAPER UNTIL INSTRUCTED BY YOUR TUTOR!!

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Section A (10 marks)
Smart Tech (ST) Ltd manufactures three types of coffee machines: CM1, CM2 and CM3. ST
currently adopts a volume-based costing (VBC) system, and allocates its manufacturing
overhead costs (MOH) based on the number of coffee machines produced. ST is considering
adopting an activity-based costing (ABC) system. Hence, ST implemented a pilot ABC system,
and collected the following data for the month of March 2018:

CM1 CM2 CM3 Total

Number of coffee machines

1,000 600 400 2,000
produced

$ $ $ $
Prime Costs   260,000   350,000   300,000   910,000

Activity Costs
Research and development 75,000 300,000 375,000 750,000
Moulding components 180,000 240,000 180,000 600,000
Assembling coffee machines 400,000 240,000 160,000 800,000
655,000 780,000 715,000 2,150,000
Total cost 915,000 1,130,000 1,015,000 3,060,000

Cost per coffee machine 915.00 1,883.33 2,537.50

Activity drivers relating to the above activity costs are as follows:

Activity costs Activity Drivers Activity drivers consumed

CM1 CM2 CM3 Total
Research and development No. coffee machine
10 40 50 100
upgrades
Moulding components No. of production runs 60 80 60 200
Assembling coffee No. of coffee machines
1,000 600 400 2,000
machines produced

Using current VBC system: CM1 CM2 CM3

$ $ $
Cost per coffee machine 960.00 1,283.33 1,450.00

Required: Should Smart Tech implement an ABC system? Provide three case facts to support
your answer.

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Decision to implement ABC:

Fact1:

Fact 2:

Fact 3:

DO NOT WRITE BEYOND THIS LINE

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 Section B (15 marks) - Multiple Choice and Short Calculation
Questions
Note: Answers that are not inside the table below WILL NOT be marked.

Multiple choice answers (10 marks): Choose the ONE BEST answer to each question and
shade your answer in the separate answer sheet provided.

Short calculation answers (5 marks): Write your FINAL answer to each question in the
table provided below.

You do not need to show any workings as they will not be marked.

Question Answer Marks

11 1 mark

12 1 mark

13 1 mark

14 1 mark

15 1 mark

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Multiple Choice Questions (10 marks)

The information below is used for Questions 1 and 2.

The results of a regression analysis to estimate clinical costs are as follows:

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.64139363
R Square 0.35794325
Adjusted R Square 0.31126712

ANOVA        
df SS MS F Significance F
Regression 3 1316266356 438755452 14.54395235 0.07134589
Residual 18 543015952.2 30167552.9  
Total 21 1859282308

Coefficients Standard Error t Stat P-value

Intercept 2548.12674 4469.030731 0.57017436 0.575608041
No. of patients 282.013981 342.8825463 0.822479836 0.021566356
No. of new drugs developed 10.8136972 3.016044815 3.585390084 0.152114818
No. of wards 3.18517183 0.955124383 3.345293962 0.073602215

1. Based on the results of the regression analysis, which of the following statement(s) about
the Significance F is/are incorrect?

I. About 7.1% change in the cost drivers is caused by clinical costs.

II. About 7.1% of the change in clinical costs is explained by the change in all the cost
drivers.
III. The likelihood that the relationships between clinical costs and all of the cost drivers
have happened by chance is about 7.1%.
IV. Given that the p-value associated with the F-statistic is 7.1%, one does not need to
proceed to look at the p-value associated with the t-statistics.

A. I and II
B. II and III
C. III and IV
D. I, II, and III
E. I, II, III and IV

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THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

Writing on this page will not be marked

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2. Based on the results of the regression analysis, which of the following statement(s) is/are
correct?

A. The adjusted R-square suggests that there is no need to identify new cost drivers.
B. Ignoring all other statistics, the p-value associated with the t-statistic suggests that no.
of wards should be dropped as a cost driver.
C. Ignoring all other statistics, the p-value associated with the t-statistic suggests that no.
of patients should be dropped as a cost driver.
D. A and C
E. B and C

3. The root cause(s) of a car manufacturer ‘having very high inspection costs’ is likely to
include:

A. Having poor hiring processes

B. Having a high number of defects
C. Not doing the inspections well
D. A and B
E. A, B and C

4. Which of the following activities for a tuition centre are correctly classified?

Value-adding Non-value adding

A. Teaching students Checking marked exam papers
B. Correcting students’ mistakes Filing taxes
C. Invoicing students Marking exam papers
D. Preparing financial statements Training new tutors
E. Writing teaching material Collecting assignments

5. A pareto diagram can best address which of the four objectives of Process Analysis?

A. Understanding
B. Monitoring
C. Prioritising
D. Problem Solving
E. Problem Assessment

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6. The major costs of operating a clinic for the month of May is as follows:

Item Amount ($)

Rental of Clinic 400,000
Wages paid to nurses (paid on an hourly basis 50,000
and depending on their shifts)
Cost of procedures performed on patients 250,000
Total cost 700,000

Which of the following would be the best cost driver of the cost of operating a clinic?

A. No. of hours worked by nurses

B. No. of patients
C. No. of hours the clinic is opened
D. No. of procedures
E. No. of shifts

7. Which of the following are direct costs of the warehousing department in a car
manufacturer?

A. Cost of assembling cars

B. Salary of the warehousing manager
C. Wages paid to delivery personnel who also works in the manufacturing department
D. A and B
E. B and C

8. A restaurant decides to improve its hiring processes in order to avoid having to train any
new chefs. This is best described as:

A. Activity elimination
B. Activity reduction
C. Activity selection
D. Activity sharing
E. Business process re-engineering

9. Which of the following methods of setting standard costs is the most INAPPROPRIATE
for a firm that has just re-engineered its production processes?

A. Engineering method
B. Analysis of historical data
C. Participative standard setting
D. Industry benchmarking
E. All of the above are acceptable standard setting methods

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10. Which of the following variances, if any, should be investigated?

Standard Monthly Size of

Standard Favourable Variances
I. Direct materials quantity $12,357,000 $200,000 for April
II. Direct materials price $1,200,000 $150,000 for April
III. Direct labour efficiency $1,986,000 $85,000/month for the last 5 months

A. I and II
B. I and III
C. II and III
D. None of the variances should be investigated
E. All of the variances should be investigated

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Short Calculation Questions (5 marks)

The information below is used for Questions 11 and 12.

Sunshine Pty Ltd manufactures curtains and establishes the following standards:

Standard direct materials for each curtain (15 metres @ $35 per metre) $525
Budgeted number of curtains to be produced per month 2,200

The following information relates to the month of April 2018:

Purchase of direct materials 24,000 metres for $888,000

Actual direct material used 27,300 metres
Actual production 2,100 curtains

11. What is the direct material price variance? (1 mark)

12. What is the direct material quantity variance? (1 mark)

The information below is used for Questions 13 to 15.

Cooks Galore (CG) manufactures pots. CG has two production departments - Moulding and
Assembly; and two support departments - Human Resources and Quality Control. CG uses a
traditional costing system. The estimated usage of the two support departments and their
budgeted costs for March 2018 is as follows:

Provider of Service
User of Support Service Human Resources Quality Control
Human Resources - 10%
Quality Control 20% -
Moulding 30% 60%
Assembly 50% 30%
100% 100%
Budgeted support department
costs: $ $
Materials and labour (variable) 80,000 50,000
Fixed overhead 120,000 200,000
200,000 250,000

13. Calculate the cost that would be allocated from the Human Resource department to the
Moulding department if the direct method is used to allocate support department costs. (1
mark)

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14. Calculate total cost that would be allocated from the Human Resource department to the
other production and support departments if the reciprocal method is used to allocate
support department costs. (1 mark)

15. The theoretical capacity of all machines in the production departments is 40,000 machine
hours. Calculate practical capacity if downtime of machines is 10%; and FC’s business
cycle is 2 years with the past year having a budget of 20,000 machine hours. (1 mark)

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