Advanced Managerial Accounting Mid-Term Exam
Answer all the questions.
Question 1 - List and describe the four standards in the IMA's Statement of Ethical Practice. As part of your answer, be sure to provide an example of an action that violates the standard.
Question 2 - Consider the following information, prepared based on a capacity of 60,000 units:
|
Category
|
Cost per Unit
|
|
Variable manufacturing costs
|
$15.00
|
|
Fixed manufacturing costs
|
$1.00
|
|
Variable marketing costs
|
$6.00
|
|
Fixed marketing costs
|
$2.00
|
Capacity cannot be added in the short run and the firm currently sells the product for $25 per unit.
Consider each of these scenarios independent of each other.
a) The company is currently producing 60,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $21 per unit. Since the potential customer approached the firm, there will be no variable marketing costs incurred. Should the company accept the special order? Why or why not? Be specific.
b) The company is currently producing 45,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. What is the minimum amount that the firm should be willing to accept for this order?
c) The company is considering selling 1,000 units that are in danger of becoming obsolete. What is the minimum price it would be willing to take for the 1,000 units?
Question 3 - Consider the following information:
|
Q1
|
Q2
|
Q3
|
|
Beginning inventory (units)
|
0
|
J
|
100
|
|
Budgeted units to be produced
|
10,000
|
10,000
|
10,000
|
|
Actual units produced
|
9,000
|
10,300
|
Q
|
|
Units sold
|
A
|
10,300
|
R
|
|
Variable manufacturing costs per unit produced
|
$200
|
$200
|
$200
|
|
Variable marketing costs per unit sold
|
$50
|
$50
|
$50
|
|
Budgeted fixed manufacturing costs
|
$1,000,000
|
$1,000,000
|
$1,000,000
|
|
Fixed marketing costs
|
$200,000
|
$200,000
|
$200,000
|
|
Selling price per unit
|
$400
|
$400
|
$400
|
|
Variable costing operating income
|
B
|
$345,000
|
S
|
|
Absorption costing operating income
|
C
|
K
|
$280,000
|
|
Variable costing beginning inventory
|
D
|
$20,000
|
T
|
|
Absorption costing beginning inventory
|
E
|
L
|
U
|
|
Variable costing ending inventory
|
F
|
M
|
$10,000
|
|
Absorption costing ending inventory
|
G
|
N
|
$15,000
|
|
PVV
|
H
|
O
|
V
|
|
Allocated fixed manufacturing costs
|
I
|
P
|
$985,000
|
There are no price, efficiency, or spending variances, and any production-volume variance is directly written off to cost of goods in the quarter in which it occurs.
Complete the missing figures from the above Table. You need to show your work in order to be eligible for partial credit.
|
Q1
|
Q2
|
Q3
|
|
A
|
J
|
Q
|
|
B
|
K
|
R
|
|
C
|
L
|
S
|
|
D
|
M
|
T
|
|
E
|
N
|
U
|
|
F
|
O
|
V
|
|
G
|
P
|
|
|
H
|
|
|
|
I
|
|
|
Question 4 -
a) What is the goal of the EOQ model?
b) Why does a firm hold "safety stock?"
c) What costs are a firm trying to balance when it decides on how much safety stock to hold?
Question 5 - What are some accounting changes that a firm should make if it decides to implement a JIT inventory management system? Why are those changes necessary? Be specific!
Question 6 - What is the justification for using backflush costing? Be specific!