Note:

The purpose of the following practice examination is to provide an opportunity for review and to provide some indication of the form,
rather than the content, of the course examination.

MANAGEMENT ACCOUNTING 1 [MA1]
PRACTICE EXAMINATION

IMPORTANT
Before starting to write the examination, make sure that it is complete. This examination consists
of 9 pages. There are 6 questions for a total of 100 marks.

READ THE QUESTIONS CAREFULLY AND ANSWER WHAT IS ASKED.
To assist you in answering the examination questions, CGA-Canada includes the following glossary
of terms.
Glossary
From David Palmer, Study Guide: Developing Effective Study Methods (Vancouver: CGA-Canada, 1996).
Copyright David Palmer.
Compare Examine qualities or characteristics that
resemble each other. Emphasize similarities,
although differences may be mentioned.
Contrast Compare by observing differences. Stress
the dissimilarities of qualities or
characteristics. (Also Distinguish between)
Criticize Express your own judgment concerning the
topic or viewpoint in question. Discuss both
pros and cons.
Define Clearly state the meaning of the word or
term. Relate the meaning specifically to the
way it is used in the subject area under
discussion. Perhaps also show how the item
defined differs from items in other classes.
Describe Tell the whole story in narrative form.
Diagram Give a drawing, chart, plan or graphic
answer. Usually you should label a diagram.
In some cases, add a brief explanation or
description.
Discuss This calls for the most complete and detailed
answer. Examine and analyze carefully and
present both pros and cons. To discuss
briefly requires you to state in a few
sentences the critical factors.
Evaluate This requires making an informed judgment.
Your judgment must be shown to be based
on knowledge and information about the
subject. (Just stating your own ideas is not
sufficient.) Cite authorities. Cite advantages
and limitations.
Explain In explanatory answers you must clarify the
cause(s), or reasons(s). State the how and
why of the subject. Give reasons for
differences of opinions or of results.
Illustrate Make clear by giving an example, e.g., a
figure, diagram or concrete example.
Indicate Provide a short explanation.
Interpret Translate, give examples of, solve, or
comment on, a subject, usually making a
judgment on it.
Justify Prove or give reasons for decisions or
conclusions.
List Present an itemized series or tabulation.
Be concise. Point form is often
acceptable. (Also Enumerate or Identify)
Outline This is an organized description. Give a
general overview, stating main and
supporting ideas. Use headings and
sub-headings, usually in point form. Omit
minor details.
Prove Establish that something is true by citing
evidence or giving clear logical reasons.
Relate Show how things are connected with each
other or how one causes another,
correlates with another, or is like another.
Review Examine a subject critically, analyzing
and commenting on the important
statements to be made about it.
State Present the main points in brief, clear
sequence, usually omitting details,
illustrations, or examples.
Summarize Give the main points or facts in condensed
form, like the summary of a chapter,
omitting details and illustrations.
Trace In narrative form, describe progress,
development, or historical events from
some point of origin.

PEMA1 Page 1 of 9
CGA-CANADA

MANAGEMENT ACCOUNTING 1
PRACTICE EXAMINATION

Marks Time: 3 Hours

30 Question 1
Select the best answer for each of the following unrelated items. Answer each of these items in your
examination booklet by giving the number of your choice. For example, if (1) is the best answer for
item (a), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item
will not be marked. Incorrect answers will be marked as zero. No account will be taken of any
explanations you offer.

Note:
2 marks each

Note:
Parts (a), (b), and (c) are based on the following information pertaining to Gladstone Manufacturing for Year 2.

Raw materials used in production $ 2,800
Total manufacturing costs added 16,000
Applied factory overhead 6,600
Selling and administrative expenses 4,300
Inventories:
Raw materials, J anuary 1 $ 960 Work in process, December 31 $ 1,300
Raw materials, December 31 1,040 Finished goods, J anuary 1 960
Work in process, J anuary 1 1,460 Finished goods, December 31 920

a. For Year 2, what was the cost of raw materials purchased?
1) $2,720
2) $2,800
3) $2,880
4) $3,760

b. For Year 2, what predetermined overhead rate was used (overhead is applied on the basis of direct
labour costs)?
1) 80%
2) 100%
3) 120%
4) 200%

c. For Year 2, what was the cost of goods sold?
1) $16,000
2) $16,040
3) $16,200
4) $16,960




Continued...

PEMA1 Page 2 of 9
d. IPM Co. is considering closing down one of its divisions. The division presently has a contribution
margin of $500,000. Overhead allocated to the division is $1,250,000, of which $125,000 cannot be
eliminated. If this division were discontinued, by what amount would IPMs pretax income increase?
1) $125,000
2) $500,000
3) $625,000
4) $750,000

e. PCP Co. produces and sells two products A and B. These two products are the result of a joint
process. J oint costs are incurred until split-off. After split-off, separate costs are incurred in refining
each product. The joint costs are allocated to each of the two products based on their respective
market values at split-off. If the market value of Product A at split-off increases and all other costs and
selling prices remain unchanged, what will be the effect on the gross margin of the two products?
1) Product A will decrease and Product B will increase.
2) Product A will increase and Product B will decrease.
3) Product A will increase and Product B will increase.
4) Product A will decrease and Product B will decrease.

f. Fiddling Enterprises entered into a contract with one of its customers. The contract provided for a
formula price of actual cost plus 20%. Fiddling is also entitled to receive 50% of any savings from the
formula price being less than the target price of $4,500,000. Fiddling incurred actual costs of
$3,600,000. How much should Fiddling receive from the contract?
1) $4,050,000
2) $4,320,000
3) $4,410,000
4) $4,500,000

g. Consider the following incomplete production budget:
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
Expected sales units 7,000 5,000 8,000 6,000
Units to be produced 6,800

The previous year's fourth quarter ending inventory was 700 units, which meets the minimum
requirement for ending inventories. What is the expected production in the current second quarter?
1. 4,500 units
2. 5,200 units
3. 5,300 units
4. 6,800 units











Continued...



PEMA1 Page 3 of 9

Note:
Use the following information to answer parts (h), (i), and (j).

The following information pertains to production activities at Burn Corp. All units in work in process
(WIP) were costed using the FIFO cost flow assumption.

Percentage of Conversion
Refining Department Units Completion Costs
WIP, February 1 25,000 80% $ 22,000
Units started and costs incurred in February 135,000 $ 143,000
Units completed and transferred out 100,000
WIP, February 28 ? 50% $ ?

h. What were the conversion costs per equivalent unit of production last period and this period,
respectively?
1) $1.10 and $1.30
2) $1.10 and $1.45
3) $1.30 and $1.30
4) $1.30 and $1.45

i. What was the conversion cost of the work in process inventory account at February 28?
1) $39,000
2) $39,600
3) $42,500
4) $45,000

j. What was the per-unit conversion cost of the units started last period and completed this period?
1) $0.86
2) $1.14
3) $1.25
4) $1.30


Note:
Use the following information to answer parts (k) and (l):

Pots Unlimited manufactures flower pots. It expects to sell 40,000 flower pots in Year 2. At the start of
Year 2, the company had enough beginning inventory of raw materials to produce 48,000 units. Beginning
inventory of finished units totalled 4,000, with a target ending inventory of 5,000 units. The company
keeps no work in process inventory. The flower pots sell for $6.00 per unit, direct materials costs are
$2.00 per unit, and direct labour is $1.00 per unit. Factory overhead is $0.40 per unit.

k. What will be the amount of cost of goods sold for Year 2?
1) $122,400
2) $136,000
3) $139,000
4) $149,600


Continued...

PEMA1 Page 4 of 9
l. What will be the total costs incurred for direct materials, direct manufacturing labour, and
manufacturing overhead, respectively, for Year 2?
1) $0; $40,000; $16,000
2) $0; $41,000; $16,000
3) $80,000; $40,000; $16,000
4) $82,000; $41,000; $16,400

Note:
Use the following information to answer parts (m), (n), and (o).

Ron C. Kalten operates RoCK Ltd., a mobile discotheque. His customers are local residents hosting
private parties. The activities involved in his services and the time required for each activity are as
follows:

Activity Time (in Hours)
Discuss the type of music with customer 0.5
Prepare song list 1.0
Travel time to and from location (average) 1.0
Set up and take down equipment 1.5
Play music at party depends on customer

Ron has determined that his time should be priced at $25.00 per hour to make the business economically
viable. Ron charges a travel fee of $0.50 per kilometre (one way only) from the city centre to the
customer. He also pays an assistant $10.00 per hour for the duration of the party, but does not pay the
assistant for travel or set-up and take-down time.

m. How much should Ron charge a customer who lives 10 kilometres from the city centre and gives a
party that lasts 7 hours?
1) $280
2) $325
3) $345
4) $350

n. A customer requires special lighting that Ron will have to rent for $50 and that will increase the set-up
and take-down time by 2 hours. How much should Ron charge this customer if she lives 10 kilometres
from the city centre and gives a party that lasts 8 hours?
1) $425
2) $450
3) $485
4) $490

o. Another customer is on a limited budget and offers to supply an assistant to take the place of Rons
regular assistant. This would decrease the set-up and take-down time by 50%. How much should Ron
charge this customer if the party lasts 8 hours and the customer lives 20 kilometres from the city
centre?
1) $281.25
2) $291.25
3) $310.00
4) $371.25


PEMA1 Page 5 of 9
15 Question 2
J ane left her job as the production manager of a medium-sized firm two years ago to join a new firm that
manufactures a revolutionary type of fitness equipment. J ane was made the general manager at the start of
operations, and the firm seemed to be doing extremely well. The president was pleased with the
companys first-year performance and at the beginning of the second year promised J ane a $20,000 bonus
if the companys net income were to increase by 25% in Year 2.

During Year 2, J ane sold 25% more units than she had in Year 1 and was so confident that she would
receive her bonus that she bought non-refundable airline tickets to Europe for her husband and her three
sons.

At the end of Year 2, J ane received the income statement for Year 2, which showed that the companys
income had decreased from Year 1 even though the company had sold considerably more units. J ane did
not get along very well with the accountant and felt that he had deliberately distorted the financial
statements for Year 2.

Following are the reports J ane received:

Year 1 Year 2
Production (in units) 6,000 3,000
Sales (in units) 4,000 5,000
Unit selling price $ 500 $ 500
Unit costs:
Variable manufacturing $ 300 $ 300
Variable selling 20 20
Fixed manufacturing 180,000 210,000
Fixed selling 100,000 140,000

Income Statement (FIFO) Year 1 Year 2
Sales $ 2,000,000 $ 2,500,000
Cost of goods sold 1,320,000 1,770,000
Gross margin 680,000 730,000
Selling 180,000 240,000
Net income $ 500,000 $ 490,000

Required
9 a. Prepare variable costing income statements for Years 1 and 2.
6 b. For Years 1 and 2, prepare a reconciliation for the differences between the net income as determined
by the variable costing income statements you prepared in part (a) and the income statements prepared
by the accountant.

PEMA1 Page 6 of 9
16 Question 3
Whiskey-J ack Adventures offers guided tours and wilderness experiences in the mountains and lakes
around Whistler, B.C. Whiskey-J ack provides a guide, all the necessary provisions, and equipment for a
fee of $75 per person per day. Based on available equipment and guides, the maximum capacity is
800 tour-days per month (customers are taken on the equivalent of an all-day tour). The company is
presently operating at a level of an average of 600 tour-days per month.

Variable costs per tour-day for Year 2 were as follows:
Food $ 7.50
Supplies 3.00
Guides salary 37.50
Insurance 12.00
Total $ 60.00

Annual fixed costs for Year 2 were as follows:
Equipment rental $ 7,500
Marketing 3,000
Customer service 1,500
Administration 6,000
Total $ 18,000

Required
Answer the following questions independently of each other.

7 a. Assuming that the fee is increased by $18.00 per person per day in Year 3 and the number of tour-
days declines by 200 per month, calculate the effect on the monthly operating income.

9 b. A group of foreign travellers has offered Whiskey-J ack a proposal for 300 tour-days in July if
Whiskey-J ack will reduce the fee to $67.50 per tour-day. The group would provide its own food.
Whiskey-J ack would incur $300 in additional costs for bussing the tourists back and forth to the camp
site. Determine whether Whiskey-J ack should accept the proposal. (Hint: Calculate the effect on
operating income.)

PEMA1 Page 7 of 9
15 Question 4
Alpha Inc. manufactures digital compasses for navigation. The companys total overhead budget for
J anuary, for the manufacture of 2,000 units, was $49,600. Overhead is applied on the basis of direct
labour-hours. On the last day of the month, just as the 2,000th unit was completed after a total of
752 actual direct labour-hours, the hard-drive on the microcomputer that contained the months detailed
cost information crashed. With the computer out of commission, the cost accountant has had difficulty
completing the variance analysis report. He has managed to assemble the incomplete information below
for J anuary:

Variable overhead:
0.4 direct labour-hours @ $8.00 per hour (from the standard cost card)
Actual cost: variable overhead cost $8,400
Fixed overhead:
Budget variance $2,000 favourable

Required
13 a. Compute the following for January:
(3) i) Variable overhead flexible budget allowance for the manufacture of the 2,000 units
(3) ii) Variable overhead spending variance
(3) iii) Variable overhead efficiency variance
(2) iv) Budgeted fixed overhead
(2) v) Actual fixed overhead

2 b. List an advantage of flexible budgets over static budgets as a tool for planning and as a tool for
control.

PEMA1 Page 8 of 9
10 Question 5
BabyGoGo Ltd. manufactures three models of childrens swing sets: standard, deluxe, and super. The
standard set is made of steel, the deluxe set is made of aluminium, and the super set is made of a titanium-
aluminum alloy. Because of the different materials used, production requirements differ significantly
across models in terms of machine types and time requirements. However, once the parts are produced,
assembly time per set for the three models is similar. For this reason, BabyGoGo allocates overhead costs
on the basis of machine-hours. In Year 2, the company produced 5,000 standard sets, 500 deluxe sets, and
2,000 super sets. The company had the following revenues and expenses for the year.

BABYGOGO LTD.
Income Statement
year ended December 31, Year 2

Standard Deluxe Super Total
Sales $ 475,000 $ 380,000 $ 560,000 $ 1,415,000
Direct Costs:
Direct material 200,000 150,000 240,000 590,000
Direct labour 54,000 14,400 24,000 92,400
Variable overhead costs:
Machine setup ? ? ? 26,000
Orders processed ? ? ? 64,000
Warehouse ? ? ? 93,000
Shipping ? ? ? 36,000
Contribution margin $ ? $ ? $ ? 513,600
Fixed overhead costs:
Plant administration 88,000
Other 182,000
Gross profit $ 243,600

The chief financial officer of BabyGoGo has hired a consultant to recommend cost allocation bases. The
consultant has recommended the following:

Activity Level
Activity Cost Driver Standard Deluxe Super Total
Machine setup Number of production runs 22 11 17 50
Sales order processing Number of sales orders received 300 200 300 800
Warehouse costs Number of units in inventory 200 100 100 400
Shipping Number of units shipped 5,000 500 2,000 7,500

The consultant found no basis for allocating the plant administration and other fixed overhead costs, and
recommended that they not be applied to products.

Required
8 a. In your examination booklet, complete the income statement using the cost allocation bases
recommended by the consultant. Do not allocate any fixed overhead costs.

2 b. Explain how activity-based costing might result in better decisions by BabyGoGo management.

PEMA1 Page 9 of 9
9 Question 6
You have been given the following production information for Gamma Co., and are asked to provide the
plant manager with information for a meeting with the vice-president of operations.

Standard Cost Card
Direct materials (DM) (6 kg @ $3) $ 18.00
Direct labour (DL) (0.8 hr @ $5) 4.00
Variable overhead (VOH) (0.8 hr @ $3) 2.40
Fixed overhead (FOH) (0.8 hr @ $7) 5.60
$ 30.00

Following is a production report for the last period of operations:

Variances
Total Price/ Spending/ Quantity/
Costs Standard Cost Rate Budget Efficiency Volume
DM $ 405,000 $ 6,900F $9,000U
DL 90,000 4,850U 7,000U
VOH 54,000 $ 1,300F
FOH 126,000 500F $14,000U

Note:
F = Favourable; U = Unfavourable

Required
2 a. Calculate the number of units produced last period.
2 b. Calculate the number of kilograms of raw material purchased and used during the period.
3 c. Calculate the actual cost per kilogram of raw material.
2 d. Calculate the number of actual direct labour-hours worked during the period.

5 Question 7 (5 marks)
Larch Electrical provides electrical services and uses time and materials pricing. The company has
budgeted the following costs for next year:

Electricians wages and benefits......................................... $420,000
Other costs, except for parts-related costs........................... $120,000
Costs of ordering, handling, and storing parts..................... 5% of invoice cost

Larch expects to log 10,000 hours of billable time next year and aims for a profit of $10 per hour of each
electricians time. The markup on parts is 15% of invoice cost.

Required
1. Compute the time rate and the material loading charge that would be used to bill jobs.
2. One of the companys electricians has just completed a job that required 18 hours of time and $520 in
parts (invoice cost). Compute the amount that would be billed for the job.


END OF EXAMINATION



100

PSMA1 Page 1 of 5
CGA-CANADA

MANAGEMENT ACCOUNTING 1 PRACTICE EXAMINATION
SUGGESTED SOLUTIONS

Marks Time: 3 Hours

30 Question 1
Note:
2 marks each

Sources/Calculations:
a. 3) Topic 1.6 (Level 2)
Raw materials, beginning inventory $ 960
Raw materials purchased x
3,840
Raw materials, ending inventory (1,040)
Raw materials used in production $ 2,800

x =$2,880

b. 2) Topic 2.1 (Level 1)

c. 3) Topic 1.6 (Level 2)
Work in process, beginning inventory $ 1,460
Finished goods, beginning inventory 960
Manufacturing costs added 16,000
18,420
Work in process, ending inventory (1,300)
Finished goods, ending inventory (920)
Cost of goods sold $ 16,200

d. 3) Topic 9.2 (Level 1)
Overhead which can be eliminated ($1,250,000 $125,000) $ 1,125,000
Less: Contribution margin (500,000)
$ 625,000
e. 1) Topic 9.7 (Level 1)

f. 3) Topic 10.1 (Level 1)
Formula price ($3,600,000 1.20) $ 4,320,000
Share of cost savings {[$4,500,000 ($3,600,000 1.20)] 0.50} 90,000
$ 4,410,000

g. 3) Topic 6.7 (Level 1)
Ending inventory for one period is 10% of the next periods sales. Therefore, for the second
quarter, beginning inventory must be 500 units (10% of 5,000) subtracted from 5,000 units to be
sold plus desired ending inventory of 800 units (10% of 8,000) =5,300 units to be produced in the
second quarter.






Continued...
PSMA1 Page 2 of 5
h. 1) Topics 3.3-3.5 (Level 1)
Conversion cost per unit last period $22,000/(25,000 0.8) $1.10
Conversion cost per unit this period $143,000/110,000 $1.30

Calculation of equivalent units:
Production Report
WIP, February 1 25,000 units
Started 135,000
Less: transferred out 100,000
WIP, February 28 60,000 units

Equivalent units (EU) of production:
EU in WIP, February 28, @50% 30,000 units
Plus: completed and transferred out 100,000
Less: EU in WIP, February 1, @ 80% 20,000
Equivalent units of production in February 110,000 units


i. 1) Topics 3.3-3.5 (Level 1)
($143,000/110,000) 30,000 =$39,000

j. 2) Topics 3.3-3.5 (Level 1)
($1.10 0.8) +($1.30 0.2) =$1.14
or ($1.10 0.8) +[(25,000 0.2) $1.30]/25,000 =$1.14

k. 2) Topic 2.2-2.3 (Level 1)
40,000 ($2.00 +$1.00 +$0.40) =$136,000

l. 4) Topic 2.2-2.3 (Level 1)
(40,000 +5,000 4,000) $2.00 =$82,000
(40,000 +5,000 4,000) $1.00 =$41,000
(40,000 +5,000 4,000) $0.40 =$16,400

m. 4) Topics 10.1 and 10.4 (Level 1)
($0.50 10) +($25 7) +($10 7) +($25 4) =$350

n. 3) Topics 10.1 and 10.4 (Level 1)
$350 +$50 +($25 2) +$25 +$10 =$485

o. 2) Topics 10.1 and 10.4 (Level 1)
($0.50 20) +($25 8) + ($25 2.5) + (1.5/2 $25) =$291.25

PSMA1 Page 3 of 5
15 Question 2
Source: Topics 6.1 and 6.2 (Level 1)

9 a. Year 1 Year 2
(1) Sales $ 2,000,000 $ 2,500,000
(2) Variable costs (4,000 $320) 1,280,000 (5,000 $320) 1,600,000
(2) Contribution margin 720,000 900,000
(2) Fixed costs ($180,000 +$100,000) 280,000 ($210,000 +$140,000) 350,000
(2) Net income $ 440,000 $ 550,000

6 b. Year 1 Year 2
Absorption costing net income $ 500,000 $ 490,000
Add:
Fixed manufacturing overhead released
from operating inventory (2,000 $30) 0 60,000
Less:
Fixed manufacturing overhead deferred
to closing inventory (2,000 $30) 60,000 0
Variable costing net income $ 440,000 $ 550,000

16 Question 3
7 a. Source: Topics 4.4 and 4.7 (Level 1)
Guide fee $ 75.00
Variable costs:
Food $ 7.50
Supplies 3.00
Insurance 12.00
Guide salary 37.50 60.00
Contribution margin $ 15.00

Increase in profit due to increase in selling price (400 tour-days $18) $ 7,200
Decrease in profits due to reduced sales volume (200 tour-days $15) (3,000)
Increase in monthly operating income $ 4,200

9 b. Source: Topics 4.4 and 4.7 (Level 1)
Additional tour-days (300 $67.50) $20,250
Additional costs:
Guide salaries (300 $37.50) $ 11,250
Supplies (300 $3) 900
Insurance (300 $12) 3,600
Bussing 300 16,050
Contribution margin 4,200

Opportunity cost (600 +300 tour-days 800 capacity) $15 1,500
Increase in operating income $ 2,700

Since operating income would increase, Whiskey-J ack should accept the proposal.

PSMA1 Page 4 of 5
15 Question 4
13 a. Source: Topics 8.1-8.4 (Level 1)
(3) i) 2,000 0.40 $8.00 =$6,400
(3) ii) $8,400 (752 $8.00) =$2,384 unfavourable
(3) iii) (752 $8.00) $6,400 =$384 favourable
(2) iv) $49,600 $6,400 =$43,200
(2) v) $43,200 $2,000 favourable =$41,200

2 b. Source: Topic 8.1 (Level 1)
Two advantages of flexible budgets over static budgets:
As an aid to planning, flexible budgets assist in allocating resources by helping managers to predict
what future costs should be at different activity levels
As an aid to the control of costs, flexible budgets help managers gain more insight into the cause of
variances than is available with static budgets.

Note:
1 mark each for any two valid responses

10 Question 5
Source: Topics 5.2 and 5.3 (Level 1)

8 a. BABYGOGO LTD.
Income Statement
year ended December 31, Year 2

Standard Deluxe Super Total
Sales $ 475,000 $ 380,000 $ 560,000 $ 1,415,000
Direct costs:
Direct material 200,000 150,000 240,000 590,000
Direct labour 54,000 14,400 24,000 92,400
Variable overhead:
Machine setup 11,440
1
5,720 8,840 26,000
Order processing 24,000
2
16,000 24,000 64,000
Warehouse costs 46,500 23,250 23,250 93,000
Shipping 24,000 2,400 9,600 36,000
Contribution margin $ 115,060 $ 168,230 $ 230,310 513,600
Fixed overhead:
Plant administration 88,000
Other fixed 182,000
Gross profit $ 243,600


Sample calculations:

1
$26,000 22/50 =$11,440

2
$64,000 300/800 =$24,000

2 b. Activity-based costing (ABC) provides a more detailed breakdown of costs and better matches each
cost with the activity that incurred the cost. This additional information should enable BabyGoGo to
make more accurate decisions. For example, if BabyGoGo wants to reduce costs, with ABC it can
identify the most costly activities and/or which costs are most amenable to reduction. Also, The
company will also be able to determine more accurate product cost information for product pricing.
PSMA1 Page 5 of 5
9 Question 6
Source: Topics 7.3, 8.2, and 8.4 (Level 1)

2 a. $405,000 (6 $3) =22,500 units
2 b. (22,500 6) +($9,000 $3) =138,000 kg
1

3 c. ($405,000 +$9,000 $6,900) 138,000 =$2.95 per kg
2 d. (22,500 0.8) +($7,000 $5) =19,400 hours
2


1
Alternative calculation: ($405,000 +$9,000) $3 =138,000 kg
2
Alternative calculation: ($90,000 +$7,000) $5 =19,400 hours

5 Question 7
Topic 10.4 (Level 1)
1. Time rate to be used:
Electricians wages and benefits
($420,000 10,000 hours) $42
Other repair costs ($120,000 10,000 hours) 12
Desired profit per hour of electrician time 10
Total charging rate per hour for service $64

Material loading charge:

Ordering, handling, and storage cost 5% of invoice cost
Desired profit on parts 15% of invoice cost
Material loading charge 20% of invoice cost

2. Time charge: 18 hours $64 per hour $1,152

Material charge:

Invoice cost of parts $520
Material loading charge (20% $520) 104 624

Billed cost of the job
$1,776


END OF SOLUTIONS


100