CONTABILIDADE DE GESTÃO/MANAGEMENT ACCOUNTING
Spring semester 2010/2011 – Final Exam
DATE: June 17, 2011 LENGTH: 2 h
SURNAME AND NAME: ____________________________________________
NUMBER: ______
Procedures:
The final exam is composed of Parts A and B;
The questions must be answered in the following stapled sheets, which
must not be separated;
You can use the back of each sheet for rough draft, except in the last one.
(Final solutions in the last page)
PART A
QUESTION I
(2 marks)
Which analysis is of assistance to managers to answer the following question:
“What will be the effect on profits if we reduce our selling price and
sell more units?”
Define the analysis by stating1 its objective and the circumstance where this
analysis applies. Be precise.
1
Referindo
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QUESTION II
Multiple choice
(Make sure the chosen letter is legible; otherwise your answer will not be marked)
a) (2 marks) Which of the following costs or revenues is NOT relevant to a make-or-buy
decision?
a. 10.000 € of piecework labour used to manufacture the components
b. 30.000 € of depreciation on the plant used to manufacture the components
c. the supervisor's salary of 25.000 € that will be avoided if the component is
purchased from an outside supplier
d. 15.000 € in rent from the production space that is rented to another company
if the component is purchased from an outside supplier
Your answer:
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b) (2 marks) Q Manufacturing uses an activity-based costing system. The company
produces Model 1 and Model 2.
Information relating to the two products is as follows:
Model 1 Model 2
Units produced 24.000 30.000
Machine hours 7.500 8.500
Direct labour hours 8.000 12.000
Material handling (number of moves) 4.000 6.000
Nr of setups 5.000 7.000
The following costs are reported:
Material handling € 40.000
Labour-related overhead € 120.000
Setups € 60.000
Setup costs assigned to Model 2 are
a. € 25.000
b. € 28.000
c. € 35.000
d. € 36.000
Your answer:
c) (2 marks) The DeltaFlor Co has prepared the following sales budget:
July August September
Expected sales 105.000€ 211.000€ 134.000€
80% of these expected sales are at credit, of which 20% will be collected in the same
month of sale, 60% will be collected in the following month and 15% two months after
(the company expects that 5% of its sales will not be collected). The expected receipts
from sales in September will be:
a. € 169.150.
b. € 162.120.
c. € 135.320.
d. € 107.200.
Your answer:
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d) (2 marks) Which of the following sentences best characterize the performance
measure Return on Investment (ROI):
a. It is short-term focused and can lead to goal incongruence
b. It is calculated by the ratio between operating profit and capital employed
c. It is a measure that represents an absolute value
d. All of the above.
Your answer:
PART B
QUESTION III
(3,5 marks)
Transfer Company is divided into two business units, each with autonomous
management and each manager is responsible for the profits of the business unit she/he
manages.
Currently, Division A sells monthly 10.000 units of product X to Division B at a unit
selling price of 20 €. Division B doesn’t need to have any stock of product X.
But, for future purposes, and according to the manufacturing costs of product X (18€ per
unit), Division A wants to start charging a higher price which is equal to 18€ plus a
margin of 20% over the manufacturing cost per unit (i.e., 18€ + 20%*18€ = 21,6 €).
The manufacturing fixed cost per unit is 8 €.
The installed capacity of Division A is equal to 16.000 units monthly and external
monthly demand is only 9.000 units at the following conditions:
Unit selling price = 20€
Unit transport cost = 2€
External demand may be only partially met.
The manager of Division B will not accept to pay the new price Division A wants to
charge since he can go to the market and purchase 10.000 units of product X in the
following conditions:
Unit purchasing price = 20€
Unit cost concerning the receipt of goods from external supplier = 1 €
The need for a permanent (reserve) stock of 15.000 units (There is space
available at the warehouse of the company for these additional units).
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The manager of Division B is so angry that he proposes to pay only 12 €.for each unit
purchased in house (i.e., internally).
The annual cost of capital of the company is 10%.
1. Do you agree with the inflexible opinion of the manager of Division B? Justify your
answer by showing your calculations.
2. Knowing that the manager of Division B intends to acquire all the 10.000 units of
product X to only one supplier, do you think the manager of Division A should accept
the proposal of the manager of Division B to pay 12€ per unit of product X?
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3. Will your answer be the same as in 2. if the manager of Division B decides to
purchase part of product X’s units internally and the other part to external suppliers?
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QUESTION IV
(3 marks)
Happy Company sells Commodity A.
During the month of January, the General Manager congratulated the 3 managers of
the company, because, even in crisis times, actual profit was higher in 1% compared
with the expected profit in the static budget, i.e., (3.030 - 3.000)/3.000 = + 1%.
Actual and static budget P&Ls for January were as follows:
(amounts in Euros) Actual P&L Budgeted P&L
Sales 13.500 10.000
Direct Materials (5.100) (3.000)
Conversion Costs (3.360) (2.000)
Contribution Margin 5.040 5.000
Fixed Costs (2.010) (2.000)
Operating profit 3.030 3.000
Other available information:
The expected quantity of sales was 1.000 units.
The actual unit selling price was 9€.
Determine:
1. The sales margin volume variance (show your calculations)
2. Knowing that the Direct Materials Cost (Price) Variance was 0€ and that the
actual relationship between the usage (efficiency) of the resource and its
purchasing price is the same as the expected relationship in the static budget, do
you agree that the Purchasing Manager receives congratulations? And the
Production Manager? Justify your answer with values and explain them.
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3. What is the actual unit cost of the conversion costs, knowing that the expected
unit cost is 4€ and the Conversion Cost Efficiency Variance is unfavourable in
200€? Show your calculations
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QUESTION V
(3,5 marks)
The Inclined Company manufactures bags for mountaineers.
Regarding the month of November, the following information is available:
A. Inventory
Opening stocks 0 Units
Sales 7.500 Units
Closing stocks 500 Units
Method for inventory valuation LIFO
B. Non-manufacturing costs
Fixed ... ... ... ... ... ... ... ... ... ... ...30.000 €
Variable ... ... ... ... ... ... ... ... ... .25.000 €
C. The Contribution Margin is 200.000€.
D. The difference in profits between variable costing and full costing based on practical
capacity is 5.000€.
E. The cost of goods manufactured per unit determined by using total full costing is
28,75€.
F. The unit selling price is 50€.
Determine, by showing your calculations:
1. The volume of production corresponding to the practical capacity.
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Only, for the next question consider the assumption that the manufacturing fixed
costs are 100.000€
2. The profit by the variable costing.
3. The Break Even Point in quantities.
(If necessary continue your answer in the back of this sheet)
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Final solution of some questions
QUESTION II
Multiple choice
a) b
b) c
c) b
d) a
QUESTION III
1. Should not agree as the price of 12€ proposed by the manager of Division B is too low
compared with the cost of 21,2625€ per unit that this manager has to pay if he/she buys
externally and which is lower than 21,6€ that Division A wants to charge.
2. Should not accept as cost of producing if accepting = 12,4€ which is > than 12€.
3. No, because as 12€ is above unit VC, any quantity Div A sells to Div B contributes to
cover fixed costs as external demand is limited to 9.000 units;
QUESTION IV
1. = (13.500/9 - 10.000/1.000) x 5000/1000 = 2.500 € F
2. If the actual relationship between the usage (efficiency) of the resource and its
purchasing price is the same as the expected relationship in the static budget, the
Purchasing Manager did its jobs according to the budget as deserves congratulations.
However, the Production Manager did a bad job as the DM usage variance was
unfavourable in 1.500€.
3. = 4,2€
QUESTION V
1. PC = 7.000 units
2. Profit using Variable Costing = 100.000€
3. The Break Even Point in quantities.= 3.750 units
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