Revision

Which of the following statement/s about management accounting is/are true?

i It is a part of an organisation's management information system.

ii It is relied on by managers to plan and control an organisation's operations.

iii It is relied on by external users to make investment decisions.

• i and ii

• i, ii and iii

• iii

• ii

As activity level increases, total variable costs:

• increase by a fixed amount

• decrease by a fixed amount

• increase proportionately with activity

• decrease proportionately with activity

Whether a cost is classified as direct or indirect will depend on:

• the nature of the cost object

• whether the cost can be economically traced to the cost object

• whether the organisation is in a manufacturing or service industry

• the nature of the cost object AND whether the cost can be economically traced to the cost object

Which of the following is not an example of a manufacturing overhead?

• Assembly line workers' wages

• Factory rent

• Depreciation of factory machinery

• Factory lighting

A firm is reorganising and reclassifying its cost structure. The firm previously classified the item ‘glue and nails' as indirect material. The firm is considering now tracing this cost directly to products and treating ‘glue and nails' as direct material. What is the effect on the break-even point (if any) of that change, provided all other items remain unchanged?

• The break-even point will increase

• The break-even point will not change

• The break-even point will change but without actual figures, it is impossible to say in what direction the change will be.

• The break-even point will decrease

Suppose variable expenses were to decrease by $3.00 per unit. What effect would this have on the cost volume profit analysis?

• The unit contribution margin would rise by $3.00.

• The break-even point in units would increase.

• The break-even point in units would decrease.

• The unit contribution margin would rise by $3.00 AND the break-even point in units would decrease.

Alclear Pool & Spa presently provides a weekly maintenance service to 150 homes. Variable costs amount to approximately $12 per week for labour, mileage, chemicals and other supplies. Fixed costs are approximately $13 000 per quarter (13 weeks). Customers pay $270 per quarter for the weekly service. All contracts are written for one quarter (13 weeks).

Determine the number of customers (rounded) to break even.

• 95

• 103

• 114

• 197

Jason Zammit a recently appointed trainee accountant has been assigned the task of accounting for manufacturing overhead for a large multinational manufacturing organisation. Jason is reading information contained in the general ledger for the past three months and he asks you the following question: When I am looking at the right side (credit side) of the manufacturing overhead account, what do these credits represent? You reply with the correct answer, which is:

• the right side (credit side) of the manufacturing overhead account represents the actual manufacturing overhead costs incurred throughout the accounting period, in this case the past three months.

• the right side (credit side) of the manufacturing overhead account represents the overapplied manufacturing overhead.

• the right side (credit side) of the manufacturing overhead account represents the manufacturing overhead applied to work in process inventory over the past three months.

• the right side (credit side) of the manufacturing overhead account represents the underapplied manufacturing overhead.

The Components Manufacturing Company uses a predetermined manufacturing overhead application rate of $4 per direct labour hour. During the year, 40 000 direct labour hours were worked. Actual manufacturing overhead costs for the year were $150 000. The Components Manufacturing Company's manufacturing overhead was:

• $10 000 overapplied

• $10 000 underapplied

• $5000 underapplied

• $5000 overapplied

Scarlett Company uses a job costing system and an overhead application rate of 120 per cent of direct labour cost ($s). Job 22 is charged with direct materials of $24 000 and manufacturing overhead of $9000. Job 23 has direct materials of $2400 and direct labour cost of $6500. The amount of direct labour charged to Job 22 is:

• $5417

• $7800

• $7500

• $6500