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# MEKELLE UNIVERSITY

## COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
Final exam for Cost and Management Accounting II Time allowed:-2:30
Name_____________________________________ ID.No._________ Section______ 21/06/16
Instructions:
Make sure that exam paper has 4 pages (18 multiple choice, and 3 workout
questions).
Using mobile and sharing of calculator is not allowed.
Put all the answers only on the answer sheet provided.
Part I:- Multiple Choice
Choose the best answer and put the letter of your choice on the separate answer sheet (1.5
point each)
1. Which one of the following is not true about breakeven point?
A. It is the point at which total revenues are equal to total costs
B. It is the point at which total variable costs are equal to total revenues
C. It is the point at which contribution margin is equal to total fixed cost
D. It is the point at which operating income is equal to zero.
2. Budget has the following advantages except.
A. Provides a framework for judging performance
B. Motivates managers and other employees
C. Promotes coordination and communication among subunits within the company
D. None

## A. 8,000F B. 8,000U C. 17,600F D. 17,000U

5. When using a flexible budget, what will occur to fixed costs as the activity level increases
within the relevant range?
A. Fixed costs per unit will decrease.
B. Fixed costs per unit will remain unchanged.
C. Fixed costs per unit will increase.

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D. Fixed costs are not considered in flexible budgeting.

6. Comparing actual results to a budget based on actual activity for the period is possible with
the use of a:
A. Monthly budget. C. Flexible budget.
B. Master budget. D. Rolling budget.

7. For January 2012, ABC Co. standard input allowed for a single output is 0.25 pounds of
pumpkin at \$0.89 per pound. Actual purchases and usage for January 2012 were 16,000
pounds at \$0.82 a pound. Actual output was 60,800 pumpkin scones.
8. Using the above data compute price variance for ABC Co.
A. 1,120F B. 1,120U C. 712U D. 712F
9. Using the above data compute price variance for ABC Co.
A. 1,120F B. 1,120U C. 712F D. 712U
9. If the price a company paid for overhead items, such as utilities, decreased during the year,
the company would probably report a(n):
A. Favorable efficiency variance. C. Unfavorable efficiency variance.
B. Favorable spending variance. D. unfavorable spending variance
10. Which one of the following is true about variance;
A. Favorable variance for cost items refers to actual amounts are greater than budgeted
amounts
B. Unfavorable variance for cost items refers to actual amounts are greater than
budgeted amounts
C. Unfavorable variance for cost items refers to actual amounts are less than budgeted
amounts
D. A&C
11. The fixed overhead budget variance is measured by:
A. The difference between budgeted fixed overhead cost and actual fixed overhead cost.
B. The difference between actual fixed overhead cost and variable overhead cost.
C. the difference between budgeted fixed overhead cost and applied fixed overhead cost
D. None of these.
12. Which one of the following is relevant information for decision making?
A. Sunk(Historical) cost
B. Future costs similar among alternatives
C. Future revenues similar among alternatives
D. Future costs differ among alternatives.
13. In a make-or-buy decision, relevant costs include:
A. unavoidable fixed costs C. common costs
B. avoidable fixed costs D. All except C
14. When a multi-product factory operates at full capacity, decisions must be made about what
products to emphasize. In making such decisions, products should be ranked based on:
A. selling price per unit
B. contribution margin per unit
C. contribution margin per unit of the constraining resource

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D. unit sales volume
15. Using the given data answer question number 15 and 16
16. The Flint Fan Company is considering the addition of a new model fan, the F-27, to its
current product lines. The expected cost and revenue data for the F-27 fan are as follows:
17. Annual sales .............................................. 4,000 units
18. Unit selling price ....................................... \$58
19. Unit variable costs:
20. Production .............................................. \$34
21. Selling .................................................... \$4
22. Avoidable fixed costs per year:
23. Production .............................................. \$20,000
24. Selling .................................................... \$30,000
25. If the F-27 model is added as a new product line, it is expected that the contribution margin
of other product lines at Flint will drop by \$7,000 per year.
26. If the F-27 product line is added next year, the change in operating income should be:
A. \$30,000 increase C. \$23,000 increase
B. \$5,000 decrease D. \$15,000 increase
27. What is the lowest unit selling price that could be charged for the F-27 model and still make
it economically desirable for Flint to add the new product line?
A. \$52.25 B. \$50.50 C. \$55.75 D. \$49.00
28. Which of the following are factors affecting the pricing decisions of a company?
A. Customers B. Competitors C. Costs D. All

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29. Which of the following is true about short run pricing decisions?
A. Most costs are relevant in the short run pricing decision.
B. Short run pricing decision is opportunistic.
C. It has a time horizon of more than a year.
D. A and B
30. Part II- Workout: Show all the necessary steps clearly
1. The Clarkson Company produces engine parts for car manufacturers. The following are the
actual and budgeted data for 2015.

36. Required:-

## A. Prepare flexible budget and compute flexible budget variance(3 points)

B. Compute sales volume variance(2 points)
2. YZ produces three products. Data concerning the selling prices and unit costs of the three
products appear below:
37. Product
38. A B C
39. Selling price............................................... \$100 \$40 \$70
40. Variable costs.............................................. \$30 \$5 \$15
41. Fixed costs ................................................. \$45 \$15 \$30
42. Tapping machine time (minutes) ............... 6 5 3
43. Fixed costs are applied to the products on the basis of direct labor hours. Demand for the
three products exceeds the company's productive capacity. The tapping machine is the
constraint, with only 2,000 minutes of tapping machine time available this week.
44. Required:
A. Given the tapping machine constraint, which product should be emphasized? Support
B. Assuming that there is still unfilled demand for the product that the company should
emphasize in part (a) above, up to how much should the company be willing to pay for an
additional two(2) hours of tapping machine time?(3 points)
3. WKT Company makes 50,000 units per year of a part it uses in the products it manufactures.
The unit product cost of this part is computed as follows:
45. Variable manufacturing cost per unit..57.00
46. Fixed manufacturing overhead .................. 24.60
47. Unit product cost ....................................... \$81.60
48. An outside supplier has offered to sell the company all of these parts it needs for \$60 a unit.
If the company accepts this offer, the facilities now being used to make the part could be used
to make more units of a product that is in high demand. The additional contribution margin
on this other product would be \$400,000 per year. However, \$20 of the fixed manufacturing
overhead cost being applied to the part would continue even if the part were purchased from
the outside supplier. This fixed manufacturing overhead cost would be applied to the
company's remaining products.
49. Required:
A. How much of the unit product cost of \$81.60 is relevant in the decision of whether to
make or buy the part?(2 point)
B. What is the net total dollar advantage (disadvantage) of purchasing the part rather than
making it? Show all the necessary computations(5 points)
C. What is the maximum amount the company should be willing to pay an outside supplier
per unit for the part if the supplier commits to supplying all 40,000 units required each
year?(4 points)
50.