10. Exam Paper for Managerial Accounting in BBA (With Answers), Exams of Management Accounting

Download 10. Exam Paper for Managerial Accounting in BBA (With Answers) and more Exams Management Accounting in PDF only on Docsity! Exam Paper With 2 Exam Paper for Managerial Accounting in BBA (With Answers) PAPER # 1 **Managerial Accounting Exam Paper** **Duration: 2 hours** **Instructions:** 1. This exam consists of two sections: Multiple Choice Questions (MCQs) and Short Answer Questions (SAQs). 2. Answer all the MCQs in Section A by circling the letter corresponding to your chosen answer. 3. Answer all the SAQs in Section B. Provide complete and concise answers. 4. Show all calculations and workings where applicable. 5. Write your answers in the provided space. If you need extra space, use the back of the paper. 6. Total marks for the exam: 100. **Section A: Multiple Choice Questions (MCQs) (40 marks)** Circle the letter corresponding to the correct answer. 1. Which of the following statements is true regarding managerial accounting? a. It is primarily used for external reporting. 5 accepting the special order increases material costs, these increased material costs are relevant to the decision of whether to accept the order or not. 7. Explain the concept of "activity-based costing" (ABC) and its advantages over traditional costing methods. **Answer:** Activity-based costing (ABC) is a costing method that allocates indirect costs to products or services based on the activities that drive those costs. It involves identifying and assigning costs to specific activities or cost drivers, and then allocating those costs to products or services based on their consumption of these activities. ABC provides a more accurate cost allocation compared to traditional costing methods, which often use a single cost driver, such as direct labor hours or machine hours. Advantages of ABC include better cost accuracy, improved decision-making, and a clearer understanding of the cost structure of products or services. 8. What is a budget, and why is it important in managerial accounting? **Answer:** A budget is a financial plan that outlines an organization's expected revenues, expenses, and financial goals for a specific period, typically a fiscal year. It serves as a roadmap for managing an organization's resources and helps in setting targets, controlling expenses, and evaluating performance. Budgets are crucial in managerial accounting because they enable organizations to plan for the future, allocate resources efficiently, and measure actual performance against planned performance. They also provide a basis for decision-making, cost control, and performance evaluation. 6 9. Describe the concept of a "master budget" and its components. **Answer:** A master budget is a comprehensive financial plan that combines various individual budgets into one integrated document. It typically includes the following components: a. **Sales Budget:** Estimates the expected sales revenue for a specific period. b. **Production Budget:** Plans the production levels needed to meet sales targets. c. **Direct Materials Budget:** Projects the quantity and cost of materials required for production. d. **Direct Labor Budget:** Estimates labor costs associated with production. e. **Operating Expense Budget:** Forecasts various operating expenses like rent, utilities, and marketing costs. f. **Cash Budget:** Predicts the organization's cash inflows and outflows to ensure sufficient liquidity. g. **Budgeted Income Statement:** Presents the expected financial performance, including revenues and expenses. h. **Budgeted Balance Sheet:** Provides a snapshot of the financial position at the end of the budget period. 10. Explain the concept of "cost-volume-profit (CVP) analysis" and how it can assist in decision-making. 7 **Answer:** Cost-volume-profit (CVP) analysis is a managerial accounting technique that examines the relationship between costs, volume of production or sales, and profit. It helps organizations make informed decisions by providing insights into the effects of changes in volume, selling price, variable costs, and fixed costs on profit. CVP analysis is particularly useful for determining the breakeven point (the level of sales at which total costs equal total revenue) and assessing the impact of different pricing strategies or cost reduction measures on profitability. It assists in decision-making by identifying the level of activity required to achieve specific financial goals and evaluating the potential risks and rewards associated with various options. PAPER # 2 Managerial Accounting Exam Paper for BBA Instructions: Answer all questions. Multiple Choice Questions (10 points each) 1. Which of the following is NOT a key objective of managerial accounting? o (a) To provide information for planning and decision-making o (b) To control costs and improve efficiency o (c) To prepare financial statements for external users o (d) To evaluate the performance of managers 2. Which of the following is a variable cost? o (a) Rent o (b) Depreciation o (c) Direct labor o (d) All of the above 3. What is the difference between a committed cost and a sunk cost? 10 concerned with the provision of information for planning and decision-making by internal users, such as managers. 2. Variable costs change with the level of activity, while fixed costs do not change with the level of activity. Examples of variable costs include direct materials, direct labor, and variable overhead. Examples of fixed costs include rent, depreciation, and insurance. 3. Marginal costing is a costing method that considers only variable costs when making decisions. It is based on the principle that only variable costs change in response to changes in activity levels. Marginal costing has the advantage of being more relevant to decision-making than absorption costing, but it has the disadvantage of being more difficult to implement. 4. There are many different types of budgets that can be used by businesses, but some of the most common include: o Operating budgets: These budgets forecast revenue PAPER # 3 Question 1: What is the break-even point in units and sales dollars for a company that sells a product for $50 per unit, has variable costs of $30 per unit, and fixed costs of $100,000? Question 2: A company has the following budgeted sales for the next six months: Month | Sales Jan | $200,000 Feb | $180,000 Mar | $220,000 Apr | $240,000 May | $260,000 Jun | $280,000 11 The company collects 60% of its sales in the month of sale, 30% in the following month, and 10% in the second following month. The company has no bad debts. What are the expected cash collections for April? Question 3: A company produces two products, A and B, using the same raw material. The company has a fixed supply of 10,000 kg of raw material per month. Product A requires 2 kg of raw material per unit and sells for $40 per unit. Product B requires 1 kg of raw material per unit and sells for $20 per unit. The variable costs per unit are $15 for product A and $10 for product B. The fixed costs are $50,000 per month. What is the optimal product mix that maximizes the company's profit? Question 4: A company has the following standard costs and actual costs for the month of June: Standard Costs | Actual Costs Direct materials (10 kg @ $5) | Direct materials (12 kg @ $6) Direct labor (5 hours @ $20) | Direct labor (6 hours @ $18) Variable overhead (5 hours @ $10) | Variable overhead (6 hours @ $12) Fixed overhead ($50,000) | Fixed overhead ($48,000) The company produced and sold 1,000 units in June. The standard output for June was 900 units. Calculate the following variances: a) Direct materials price variance b) Direct materials efficiency variance c) Direct labor rate variance d) Direct labor efficiency variance e) Variable overhead spending variance 12 f) Variable overhead efficiency variance g) Fixed overhead budget variance h) Fixed overhead volume variance Question 5: A company is considering whether to make or buy a component that it currently makes in-house. The annual demand for the component is 20,000 units. The cost to make the component is as follows: Direct materials | $80,000 Direct labor | $120,000 Variable overhead| $60,000 Fixed overhead | $100,000 The fixed overhead consists of $40,000 of avoidable costs and $60,000 of unavoidable costs. The company can buy the component from an outside supplier for $14 per unit. What is the relevant cost to make the component? What is the relevant cost to buy the component? What should the company do? Question 6: A company has two divisions, X and Y. Division X produces a component that can be sold externally for $25 per unit or transferred internally to Division Y for $15 per unit. Division X has a capacity of 10,000 units and a variable cost of $10 per unit. Division Y needs 8,000 units of the component for its own production. Division Y can buy the component from an external supplier for $20 per unit. What is the transfer price that maximizes the overall profit of the company? Question 7: A company has three products, P, Q, and R, with the following characteristics: Product | Selling Price | Variable Cost | Demand 15 Question 1: Break-even point in units = Fixed costs / Contribution margin per unit = $100,000 / ($50 - $30) = 5,000 units. Break-even point in sales dollars = Break-even point in units * Selling price per unit = 5,000 * $50 = $250,000. Question 2: Expected cash collections for April = (60% * Sales in April) + (30% * Sales in March) + (10% * Sales in February) = (0.6 * $240,000) + (0.3 * $220,000) + (0.1 * $180,000) = $214,000. Question 3: Let x be the number of units of product A and y be the number of units of product B. The objective function is to maximize profit = 40x + 20y - 15x - 10y - 50,000 = 25x + 10y - 50,000. The constraints are: - Raw material: 2x + y <= 10,000 - Non-negativity: x >= 0 and y >= 0 Using the graphical method or a solver, the optimal solution is x = 4,000 and y = 2,000. The optimal product mix is to produce and sell 4,000 units of product A and 2,000 units of product B. The maximum profit is 25(4,000) + 10(2,000) - 50,000 = $70,000. Question 4: a) Direct materials price variance = Actual quantity purchased * (Actual price - Standard price) = (12 * 1,000) * ($6 - $5) = -$12,000 (Unfavorable) b) Direct materials efficiency variance = Standard price * (Actual quantity used - Standard quantity allowed) = ($5) * ((12 * 1,000) - (10 * 1,000)) = -$10,000 (Unfavorable) 16 c) Direct labor rate variance = Actual hours worked * (Actual rate - Standard rate) = (6 * 1,000) * ($18 - $20) = $12,000 (Favorable) d) Direct labor efficiency variance = Standard rate * (Actual hours worked - Standard hours allowed) = ($20) * ((6 * 1,000) - (5 * 1,000)) = -$20,000 (Unfavorable) e) Variable overhead spending variance = Actual hours worked * (Actual rate - Standard rate) = (6 * 1,000) * ($12 - $10) = -$12,000 PAPER # 4 Section A: Multiple Choice Questions (20 marks) 1. Which of the following is NOT a key function of management accounting? o A. Planning o B. Control o C. Decision-making o D. Financial reporting 2. Which of the following is an example of a fixed cost? o A. Direct materials o B. Direct labor o C. Factory rent o D. Sales commissions 3. Which of the following is an example of a variable cost? o A. Packaging materials o B. Hourly wages o C. Insurance premiums o D. Depreciation 17 4. Which of the following is a key difference between managerial accounting and financial accounting? o A. Managerial accounting is used internally by management, while financial accounting is used externally by investors and creditors. o B. Managerial accounting focuses on historical data, while financial accounting focuses on future projections. o C. Managerial accounting uses different accounting standards than financial accounting. o D. Managerial accounting is not required by law, while financial accounting is. 5. Which of the following is NOT a benefit of using cost-volume-profit analysis? o A. It can help managers to determine how many units of a product or service they need to sell to break even. o B. It can help managers to determine how changes in price, volume, or costs will affect profits. o C. It can help managers to make better decisions about product mix, pricing, and marketing strategies. o D. It can help managers to identify and reduce costs. Section B: Short Answer Questions (30 marks) 1. Explain the different types of costs that managers need to be aware of. 2. Describe the three main types of budgets. 3. Explain how standard costing can be used to improve performance. 4. Discuss the different types of variance analysis. 5. Explain how marginal costing can be used to make better decision-making. Section C: Case Study (50 marks) Case Study: 20 o B. Direct costs are fixed, while indirect costs are variable. o C. Direct costs are expensed in the period in which they are incurred, while indirect costs are capitalized and amortized over time. o D. None of the above. 3. What is the purpose of a budget? o A. To provide a plan for the future and to help managers control costs. o B. To evaluate the performance of managers and employees. o C. To communicate the organization's goals to employees and stakeholders. o D. All of the above. 4. Which of the following is NOT a type of standard cost? o A. Direct material standard cost o B. Direct labor standard cost o C. Variable overhead standard cost o D. Fixed overhead standard cost 5. What is the purpose of variance analysis? o A. To identify and investigate differences between actual results and budgeted results. o B. To allocate costs to products or services. o C. To set standard costs. o D. None of the above. Section B: Short Answer Questions (30 marks) 1. Explain the difference between financial accounting and managerial accounting. 2. What are the different types of costs that a business may incur? 3. Explain the different types of budgets that a business may create. 4. What is the purpose of standard costing? 21 5. Explain the different types of variances that a business may experience in standard costing. Section C: Case Study (50 marks) Case Study: The ABC Company manufactures and sells a variety of products. The company has a standard costing system in place. For the month of March, the company produced and sold 10,000 units of its most popular product, Product X. The standard cost per unit of Product X is as follows:  Direct material: $5.00  Direct labor: $3.00  Variable overhead: $2.00  Fixed overhead: $1.00 The actual costs for the month of March were as follows:  Direct material: $52,000  Direct labor: $33,000  Variable overhead: $24,000  Fixed overhead: $10,000 Required: 1. Calculate the total standard cost of production for the month of March. 2. Calculate the total actual cost of production for the month of March. 3. Calculate the direct material variance, direct labor variance, variable overhead variance, and fixed overhead variance for the month of March. 4. Explain the possible causes of each variance and recommend corrective actions, if necessary. Answers: Section A: Multiple Choice Questions 1. D 22 2. A 3. D 4. D 5. A Section B: Short Answer Questions 1. Financial accounting is the process of recording, summarizing, and reporting financial transactions to external stakeholders, such as investors, creditors, and government agencies. Managerial accounting is the process of providing financial information to internal stakeholders, such as managers and employees, to help them make better decisions. 2. The different types of costs that a business may incur include direct costs, indirect costs, fixed costs, and variable costs. 3. The different types of budgets that a business may create include operating budgets, capital budgets, and cash flow budgets. 4. The purpose of standard costing is to provide a benchmark for comparing actual costs to expected costs. This can help managers to identify areas where costs are out of control and to take corrective action. 5. The different types of variances that a business may experience in standard costing include direct material variances, direct labor variances, variable overhead variances, and fixed overhead variances. Section C: Case Study 1. The total standard cost of production for the month of March is $110,000 (10,000 units x $11 per unit). 2. The total actual cost KEYWORDS: 1. Managerial Accounting 2. BBA Exam 3. Managerial Accounting Exam 4. BBA Program