Student I Number ...................

D (to be completed by student)

........

Universitv of Canberra

Examination
Time allowed: 3 hours

permitted any materials in the examination This is a closed book examination. You are room, with the exception of a non-programmable calculator and an unannotated dictionary. Please place your ID number on the top of this page and on the h n t cover of each examination booklet you use.

T i examination paper has 8 questions. Marks for individual questions are noted against hs
each one. This examination contributes a maximum of 50% towards your assessment in this subject. This exam paper MUST be returned with your answer booklet. Separate booklet. are NOT required for each question. Start each question on a new page. Number your answers clearly. It is strongly advised that you do not sit this exam if you are ill or hold a current medical certificate. No consideration will be given for illness when the examination is marked. Examiner: Contact:

Alan Dunk 620 1 5639

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Answer ALL EIGHT of the following questions. Question 1: (6 marks)

The statement of financial performance of Garstka Ltd for the month of July 2004 shows profit of $1400 based on service revenue $5500; wages expense $2300; supplies expense $1200; and electricity expense $600. In reviewing the statement, you discover the following. l . Insurance expired during July of $300 was omitted. 2. Supplies expense includes $400 of supplies that are still on hand at 3 1 July. 3. Depreciation on equipment of $150 was omitted. 4. Accrued but unpaid wages at 3 1 July of $300 was not included. 5. Services totalling $750 were performed but not invoiced. REQUIRED Prepare a correct statement of financial performance for July 2004.

Question 2:

(6 marks)

Balls R Us manufactures basketballs for the National Basketball League (NBL). For the first six months of 2004, the following operating results were reported while operating at 90% of factory capacity. Sales Cost of goods sold Selling and administrative expenses Net profit Amount $4 500 000 (3 600 000) (360 000) $ 540 000 Per Unit $50.00 (40.00) (4.00)

$6.00

Fixed costs for the period were: cost of goods sold $900 000, and selling and administrative expenses $180 000. In July, normally a slack manufacturing month, Balls R Us receives a special order for 10 000 basketballs at $34 each. Acceptance of the order would increase variable selling and administrative expenses $0.35 per unit because of shipping costs but would not increase fixed costs and expenses. REQUIRED a. Should Balls R Us accept the special order? b. What is the minimum selling price on the special order to produce a net profit of $2.50 per ball? c. What non-financial factors should management consider in making its decision?

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Question 3:

(7 marks)

Powder Ltd sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Below is information relating to Powder's purchases of Xpert snowboards during May. During the same month, 124 Xpert snowboards were sold. Powder uses a periodic inventory system. May 1
12 19 26

Explanation Inventory Purchases Purchases Purchases

Units 26 45 28 40
139

Unit Cost $97 102 104 105

Total Cost $2 522 4 590 2 912 4 200

$14 224

Totals
REQUIRED

a. Calculate the ending inventory at 3 1 May using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method. b. For both FIFO and LEO, calculate the sum of ending inventory and cost of goods sold. c. What do you notice about the answers you found for each method?

Question 4:

(8 marks)

Griffen Manufacturing had a bad year in 2004. For the first time in its history it operated at a loss. The statement of financial performance showed the following results from selling 60 000 units of product: net sales $1 500 000; total costs and expenses $1 890 000; and net loss $390 000, Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses
Total $1 350 000 $ 420 000 120 000 $1 890 000 Variable $930 000 75 000 45 000 $1 050 000 Fixed $420 000 345 000 75 000 $840 000

Management is considering the following independent alternatives for 2005. 1. Increase the unit selling price 40% with no change in costs, expenses and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totalling $200 000 to total salaries of $50 000 plus a 6% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.
REQUIRED

a. Calculate the breakeven point in dollars for the year 2004. b. Calculate the breakeven point in dollars under each of the alternative courses of action. Which course of action do you recommend?

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Question 5:

(5 marks)

An analysis of the accounts of Salazar Manufacturing reveals the following manufacturing cost data for the month ended 30 June 2004. Inventories Raw materials Work in process Finished goods Beginning $9 000 5 000 8 000 Ending $10 000 8 000 6 000

Costs incurred: Raw material purchases $64 000, direct labour $50 000, manufacturing overhead $19 200. The specific overhead costs were: indirect labour $5500, factory insurance $4000, machinery depreciation $4000, machinery repairs $1800, factory power $2400, miscellaneous factory costs $1500.

REQUIRED Prepare the cost of goods manufactured schedule for the month ended 30 June 2004.

Question 6:

(6 marks)

CinMark, the manufacturer of printers, was organised in September 2004. CinMark purchases the toner cartridges used in the printers fiom a local distributor. Early in September, CinMark bought 50,000 cartridges at a cost of $20 each. During September, 40,000 cartridges were transferred from Raw Materials Inventory. Of the 40,000 cartridges withdrawn fiom Raw Materials Inventory, 8,000 were given to sales personnel to be given to customers as an incentive to buy a large quantity of printers. Another 2,000 cartridges were transferred to the corporate office to be used by members of the clerical staff. The remaining 30,000 cartridges were transferred to Work in Process Inventory. Of the units started into production during September, 90 percent of them were completed. Seventy percent of the units completed during September were sold and shipped to customers. REQUIRED: Determine the cost of cartridges to be found in each of the following accounts. a. Raw Materials Inventory b. Work in Process Inventory c. Finished Goods Inventory d. Cost of Goods Sold e. Selling Expenses f. Administrative Expenses

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Question 7:

(6 marks)

Tory Ltd purchased a new machine on 1 October 2004 at a cost of $96 000. The company estimated that the machine has a residual value of $12 000. The machine is expected to be used for 70 000 working hours during its five year life. Assume a 3 1 December year-end.

REQUIRED
Calculate the depreciation expense using the following methods in the year indicated. a. The straight line method for 2004 and 2005. b. The reducing balance method using double the straight line rate for 2004 and 2005. c. The units of production method for 2004, assuming the machine usage was 1700 hours.

Question 8:

(6 marks)

Dickson Manufacturing Company employs a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations: 1. Direct materials requisitioned during the month: Job 101 $22 000 Job 102 16 000 Job 103 24 000 $62 000 2. Direct labour incurred and charged to jobs during the month was: Job 101 $30 000 Job 102 26 000 Job 103 20 000 $76 000 3. Manufacturing overhead was applied to jobs worked on using a predetermined overhead rate based on 75% of direct labour costs. 4. Actual manufacturing overhead costs incurred during the month amounted to $66,000. 5. Job 101 consisting of 1000 units and Job 103 consisting of 200 units were completed during the month.

REQUIRED
1. How much manufacturing overhead was applied to Job 103 during the month? 2. Compute the unit cost of Jobs 101 and 103. 3. What is the balance in Work In Process Inventory at the end of the month? 4. Determine if manufacturing overhead was under- or over-applied during the month and by how much.

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