SECTION A: MULTIPLE CHOICE

1) B
2) C
3) D
4) C
5) D
6) A
7) C
8) B
9) D
10) A
11) D
12) B
13) C
14) C
15) B

SECTION B

PROBLEM SOLVING QUESTIONS

65 MARKS

QUESTION 11

JOB ORDER COSTING

15 MARKS

(a)
Oct. 31

Requisition slips
Work In Process Inventory ..........................................................................
Manufacturing Overhead .............................................................................
Raw Materials Inventory ...................................................................

10,800
1,800

Time tickets
Work in Process Inventory ..........................................................................
Manufacturing Overhead .............................................................................
Factory Labor ....................................................................................

19,600
2,000

Assignment of overhead
Work in Process Inventory ($19,600 90%) ..............................................
Manufacturing Overhead ..................................................................

17,640

Completion of Job R92

Finished Goods Inventory ............................................................................
Work in Process Inventory ................................................................
($1,600 + $2,200 + $7,100 + $6,390)
(b)

1.

Work in Process Inventory balance:

October 1 balance
Costs added in October
Completed jobs
October 31 balance

2.

Under- or overapplied overhead:

Overhead incurred ($1,800 + $2,000 + $13,000)
Overhead applied
Overhead overapplied

12,600

21,600

17,640

17,290
17,290

$ 4,200
48,040
52,240
17,290
$34,950

$16,800
17,640
$
840

QUESTION 12

PROCESS COSTING

15 MARKS

(a)
Physical Units
36,700*
3,500
40,200

Transferred out
Work in process, January 31
Total
*(2,200 + 38,000) 3,500

Materials
36,700
3,500
40,200

Equivalent Units
Conversion Costs
36,700
1,400**
38,100

**(3,500 .40)

(b)

Materials: [($3,160 + $29,000) 40,200] .............................................................................

Conversion Costs: [($4,685 + $19,000 + $16,320) 38,100] ..............................................

(c)

Costs accounted for

Transferred out (36,700 $1.85)
Work in process, 1/31
Materials (3,500 $0.80)
Conversion costs (1,400 $1.05)

$0.80
1.05
$1.85

$67,895

$2,800
1,470

$4,270

(d) The production cost report provides the basis for evaluating: (1) the productivity of a
department, (2) whether unit and total costs are reasonable, and (3) whether current
performance is meeting planned objectives.

QUESTION 13

ACTIVITY BASED COSTING

15 MARKS

(a) The overhead rates are:

Activity
Materials handling
Machine setups
Quality inspections
(b)

Total Driver Volume

40
25
250

Overhead Rate
$175
480
60

The assignment of the overhead costs to products is as follows:

Hand Soap
Number
Cost
25
$4,375
12
5,760
90
5,400
$15,535

Sanitizer
Number
Cost
15
$2,625
13
6,240
160
9,600
$18,465

Total units (b)

8,000

6,000

Cost per unit (a) (b)

$1.94

$3.08

Cost
Requisitions ($175)
Setups ($480)
Inspections ($60)
Total costs (a)

(c)

Total Cost
$7,000
12,000
15,000

Total Cost
$7,000
12,000
15,000
$34,000

Basic ABC has been enhanced by identifying activities as value-added and non-valueadded. Identifying non-value-added activities highlights for managers the activities that
should be reduced or eliminated because they are not essential and they add no value to
the product.

QUESTION 14

COST VOLUME PROFIT ANALYSIS

20 MARKS

a) Operating profit when 1,200 units are sold.

[(150 90) x 1,200] - 48,000
= 72,000 - 48,000
= $24,000
b) Break-even volume in units and sales dollars.
Break-even units = 48,000 / 60 = 800 units
Break-even $ = 800 x $150 = $120,000 or 48,000/0.4 = $120,000

c) Contribution margin ratio.

CM Ratio = CM/Sales = 60/150 = 40%

d) Margin of safety.
(1,200 X $150) - $120,000 = $60,000/ $120,000 = 33%
e) Sales dollars and units needed to generate an operating profit of $57,000.
Sales $ = (48,000 + 57,000) / 0.4 = $262,500
Q = FC + Target Profit / CM = (48,000 + 57,000) / 60 = 1,750 units

f) Number of units sold that would produce an operating profit of 15% of sales
dollars.
(4 marks)
Profit = SP VC FC
15%(150X) = (150-90)X 48,000
22.5X = 60X 48 000
48 000 = 60X - 22.5 X
48 000 = 37.5 X
X = 1,280 units