.

:
:
15/06/2005 :

...................: .......................................:
( ) :
Question One:
Each Multiple choice question has four suggested answers, letter (A), (B),
(C), or (D). You should read each question and then decide which choice is
best.
1) Beginning raw material inventory was $32,000. During the month,
$276,000 of raw material was purchased. Account at the end of the month
revealed that $28,000 of raw material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000

2) Questions (2-6). Refer to the following: The average selling price of a cup
of coffee is $1.49 and the average variable expense per cup is $0.36. The
average fixed expense per month is $1,300.
2,100 cups are sold each month on average. What are the break-even sales in
units?
A. 872 cups
B. 3,611 cups
C. 1,200 cups
D. 1,150 cups

3) How many cups of coffee would have to be sold to attain target profits of
$2,500 per month?
A. 3,363 cups
B. 2,212 cups
C. 1,150 cups
D. 4,200 cups

4) What is the margin of safety?

A. 3,250 cups
B. 950 cups
C. 1,150 cups
1
 D. 2,100 cups
5) What is the operating leverage?
A. 2.21
B. 0.45
C. 0.34
D. 2.92

6) If sales increase by 20%, by how much should net operating income

increase?
A. 30.0%
B. 20.0%
C. 22.1%
D. 44.2%

7) Questions (7-8). Refer to the following: (Gaza Inc. has the following direct
material standard to manufacture one unit: 1.5 pounds per unit at $4.00 per
pound. Last week 1,700 pounds of material were purchased and used to make
1,000 units. The material cost a total of $6,630. Gaza's material price
variance (MPV) for the week was:
A. $ 170 unfavorable.
B. $ 170 favorable.
C. $ 800 unfavorable.
D. $ 800 favorable

8) Gaza's material quantity variance (MQV) for the week was:

A. $ 170 unfavorable.
B. $ 170 favorable.
C. $ 800 unfavorable.
D. $ 800 favorable

9) Questions (9-10). Refer to the following: Gaza Inc. has the following direct
labor standard to manufacture one Unit: 1.5 standard hours per Unit at $12.00
per direct labor hour. Last week 1,550 direct labor hours were worked at a total
cost of $18,910 to make 1,000 Units. Gaza's labor rate variance (LRV) for
the week was:
A. $ 310 unfavorable.
B. $ 310 favorable.
C. $ 300 unfavorable.
D. $ 300 favorable

10) Gaza's labor efficiency variance (LEV) for the week was:
A. $ 590 unfavorable.
B. $ 590 favorable.
C. $ 600 unfavorable.

2
D. $ 600 favorable

3
11)Questions (11-12). Refer to the following: Actual production for the period
required 1500 standard direct labor hours. Actual variable overhead for the
period was $5120. Actual direct labor hours worked were 1550. The
predetermined variable overhead rate is $3 per direct labor hour. Gaza's
spending variance for variable manufacturing overhead for the week was:
A. $ 465 unfavorable.
B. $ 400 favorable.
C. $ 335 unfavorable.
D. $ 300 favorable.
12) Gaza's efficiency variance for variable manufacturing overhead for the week
was:
A. $ 435 unfavorable.
B. $ 435 favorable.
C. $ 150 unfavorable.
D. $ 150 favorable.
13) Questions (13-16). Refer to the following: Palestine Enterprises' actual
production for the period required 2,100 standard direct labor hours. Actual
variable overhead for the period was $10,950. Actual direct labor hours worked
were 2,050. The predetermined variable overhead rate is $5 per direct labor
hour. What was the spending variance?
A. $ 450 U
B. $ 450 F
C. $ 700 F
D. $ 700 U

14) What was the efficiency variance?

A. $ 450 U
B. $ 450 F
C. $ 250 F
D. $ 250 U

15) Palestine Enterprises actual production for the period required 2,100 standard
direct labor hours. Actual fixed overhead for the period was $14,800. The
budgeted fixed overhead was $14,450. The predetermined fixed overhead rate
was $7 per direct labor hour. What was the budget variance?
A. $ 350 U
B. $ 350 F
C. $ 100 F
D. $ 100 U

16) What was the volume variance?

A. $ 250 U
B. $ 250 F
C. $ 100 F
4
D. $ 100 U

5
17) Questions (17-18). Refer to the following: Redmond Awnings, a division of
Wrapup Corp., has a net operating income of $60,000 and average operating
assets of $ 300,000. The required rate of return for the company is 15%. What
is the division's ROI?
A. 25%
B. 5%
C. 15%
D. 20%

18) What is the division's residual income?

A. $ 240,000
B. $ 45,000
C. $ 15,000
D. $ 51,000

19) Cost that can be eliminated (in whole or in part) by choosing one alternative
over another are:
A. Relevant Costs.
B. Unavoidable Costs.
C. Sunk Costs.
D. Irrelevant Costs.

20) The amount remaining from sales revenue after variable expenses have been
deducted:
A. Contribution Margin.
B. Operating Income.
C. Fixed Expenses.
D. CVP relationship.

21) A measure of how sensitive net operating income is to percentage changes in

sales:
A. Sensitivity Analysis.
B. Operating leverage.
C. Margin of Safety.
D. None.

22) The expected annual net cash inflow from a project is $22,000 over the next 5
years. The required investment now in the project is $79,310. what is the
internal rate of return on the project?
A. 10%
B. 12%
C. 14%
D. Cannot be Determined

6



250
500
750
1000

)





40,000
75,000
375,000
400,000

25) Interdepartmental services are given full recognition in case of using:

A. Direct Method
B. Step Method
C. Reciprocal Method
D. B + C

( ) )
:
1) ( ) Actual Costs should be allocated to avoid passing on inefficiencies
from the service departments.
2) ( ) Fixed cost allocations are the same at the end and at the beginning
because they are based on capacity of usage.
3) ( ) Residual income encourages managers to make profitable
investments that would be rejected by managers using ROI.
4) ( ) Opportunity Costs are actual dollar outlays and are recorded in the
formal accounts of an organization.

7
 :
:
1) Short Comings of the Payback period.
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
2) Three ways to improve Return on Investment (ROI).
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
3) Factors that increase the need for managerial accounting information.
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------

:
:
Question Four:
GMC Associates has been offered a four-year contract to supply the
computing requirements for Arab bank.
Cash flow information
Cost of computer equipment $ 250,000
Working capital required 20,000
Upgrading of equipment in 2 years 90,000
Salvage value of equipment in 4 years 10,000
Annual net cash inflow 120,000

The working capital would be released at the end of the contract.

GMC Associated requires a 14% return.
What is the net present value of the contract with Arab Bank?

8


31/12/2004

- 1200 15 25000

- 600 6 10,00
0
2200 2400 12 38,00
0
1100 2200 12 52,000
3300 6400 45 125,0
00

-:
)(
114,000
236,000
24,000
374000

-:
. .1
) (%20 .2
) (%40

.
. .3

9
Question Six
Computer Sales, Inc., Sells Computer supplies. Management is planning its cash
needs for the second quarter. The company usually has to borrow money during
this quarter to support peak sales, which occur during May. The following
information has been assembled to assist in preparing a cash budget for the
quarter:
A. Budgeted monthly income statements for April- July are:
April May June July
Sales.. $ 600,000 $ 900,000 $ 500,000 $ 400,000
Cost of goods sold. 420,000 630,000 350,000 280,000
Gross Margin.. 180,000 270,000 150,000 120,000
Less operating expenses:
- Selling expense. 79,000 120,000 62,000 51,000
- Administrative expense* 45,000 52,000 41,000 38,000
Total expenses 124,000 172,000 103,000 89,000
Net income. $ 56,000 $ 98,000 $ 47,000 $ 31,000
* Includes $ 20,000 depreciation each month.

B. Sales are 20% for cash and 80% on account,

C. Sales on account are collected over a three- month period in the following
ratio: 10% collected in the month of sale, 70% collected in the first month
following the month of sale, the remaining 20% collected in the second
month following the month of sale. Februarys sales totaled $200,000, and
Marchs sales totaled $300,000
D. Inventory purchases are paid for within 15 days. Therefore, 50% of a months
inventory purchases are paid for in the month of purchase. The remaining
50% is paid in the following month. Accounts payable at March 31 for
inventory purchases during March total $126,000
E. At the end of each month, inventory must be on hand equal to 20% of the
cost of the merchandise to be sold in the following month. The merchandise
inventory at March 31 is $ 84,000
F. Dividends of $ 49,000 will be declared and paid in April.
G. Equipment costing $16,000 will be purchased for cash in May.
H. The cash balance at March 31 is $52,000, the company must maintain a cash
balance of at least $40,000 at all times.
I. The company can borrow from its bank as needed to bolster the cash
account. Borrowings and repayments must be in multiples of $1,000. All
borrowings take place at the beginning of a month, and all repayments are
made at the end of a month. The annual interest rate is 12%. Compute
interest on whole months (1/12, 2/12, and so forth).

Required:-
Prepare a cash budget for the second quarter, by month as well as in total for
the quarter. Show borrowing from the companys bank and repayments to
the bank as needed to maintain the minimum cash balance.

10
 :
) (200,000
) ($1 ). ($60
) ($0.06 250
5 .

15 .
.1 -: .
.2 .
.3 .

:

.
:
7500
1700
600
9800
.
100,000
:
15,000
24,000
7400
7200
53,600
20,000.
.1 -:
.%20
.2
.%10

GOOD LUCK

11