Sample Practice Exam-Spring2019 PDF

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COST MANAGEMENT SYSTEMS22321FINAL EXAMINATIONPRACTICE EXAMSPRING 2019Question 1 – Environmental management accountingPart ADiscuss one activity (or cost) for each environment cost category that is (or potentially could be) related to the situation of OneSteel, as outlined in the article below (OneSt...

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COST MANAGEMENT SYSTEMS 22321

FINAL EXAMINATION PRACTICE EXAM SPRING 2019

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PRACTICE EXAM - SPRING 2019

Question 1 – Environmental management accounting Part A Discuss one activity (or cost) for each environment cost category that is (or potentially could be) related to the situation of OneSteel, as outlined in the article below (OneSteel is the largest manufacturer and distributor of steel products in Australia, and services industries such as construction, manufacturing, housing, mining and agriculture). OneSteel plead guilty to environmental hazard 28 September 2007 Yesterday at Broadmeadows Magistrates’ Court a steel processing company pleaded guilty to causing an environmental hazard following an incident where chromic acid spilled into a stormwater drain in 2005. The Broadmeadows Magistrates’ Court heard approximately 3,000 litres of acid spilled from Onesteel’s plant at Cliffords Road in Somerton between 29 October and 1 November in 2005. The Court heard the discharge resulted from an overflow of acid from the purification cell system at the site, when the power and air supply was turned off for a long weekend. Chromic acid is used to plate steel. Magistrate Spillane found the company guilty, and without conviction ordered it pay $75,000 to Merri Creek Management Committee Inc. EPA West Metropolitan Region Manager Scott Maloney said the potential impact of the acid could have harmed aquatic life in local waterways. “The community expects businesses to protect our local waterways as an essential part of their operations,” Mr Maloney said. “The acid spilled into a stormwater drain which then contaminated a Melbourne Water retarding basin.” “Onesteel has since improved their practices and modified equipment to prevent a recurrence of this incident,” Mr Maloney said. Onesteel was ordered by the Court to publicise the court findings and penalty to its shareholders and the wider community. Magistrate Spillane also ordered Onesteel to pay EPA legal costs in the amount of $10,000. Prevention cost ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________

Appraisal cost ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________

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______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________

Internal failure ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________

External failure ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________

Part B

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PRACTICE EXAM - SPRING 2019

OneSteel does not have a formal policy on environmental and social management. However a close competitor, BlueScope Steel, does, and publishes a Triple Bottom Line (TBL) report. The environmental responsibility statement for BlueScope Steel is outlined below: BlueScope Steel is committed to continual improvement of our environmental performance and the efficient use of natural resources. Wherever we operate, we develop, implement and maintain management systems for health, safety, environment and the community that are consistent with internationally recognised standards and enable us to: Meet or exceed applicable legal requirements Set and achieve improved profit targets while reducing waste and preventing pollution Develop our people and provide resources to meet our targets Respect the traditional rights of indigenous peoples Care for the environment and value cultural heritage Advise on the responsible use of our products Wherever possible, we seek to: Reduce the generation of waste materials at their sources Reuse waste materials onsite Recycle waste materials offsite Minimise the storage or disposal of these materials either on or offsite, pending the further development of processes to increase their practical reuse Required Use the article in Part A and the policy statement of Bluescope Steel as a basis to formulate six indicators that could be used in a TBL report for Onesteel. Economic dimension: Related Policy Objective

Environmental dimension: Page 4 of 18

Measure

PRACTICE EXAM - SPRING 2019

Related Policy Objective

Measure

Social dimension: Related Policy Objective

Measure

Question 2 – Standard costing and flexible budgets

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The standard costs and budget figures relating to production of Playfair’s single product are: Direct material Direct labour Factory Overhead Standard Cost

2 kgs @ $7.25 per kg ¼ of an hour @ $18 per hour

$ $ $ $

14.50 4.50 11.50 30.50

Normal production: 12,000 units Budgeted fixed overhead: $60,000 Overhead is applied on the basis of standard direct labour hours. Actual data for the period: Production: Material purchased: Material issued to production: Direct labour cost: Factory overhead:

12,250 units 30,000 kgs @ $7.30 per kg 24,515 kgs 3,064 hours @ $18.25 per hour $139,420 ($62,000 fixed)

Required a) Compute the following variances (show calculations), please refer to end of exam paper for supplied formulas: (i) Direct material price variance (ii) Direct material usage variance (iii) Direct labour rate variance (iv) Direct labour efficiency variance (v) Variable overhead spending variance (vi) Variable overhead efficiency variance (vii) Fixed overhead budget variance (viii) Fixed overhead volume variance b) Give one possible explanation for the direct variances computed in requirement (a).

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Part A (see end of exam paper for supplied formulas) (i)

Direct material price variance ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

(ii)

Direct material usage variance ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

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(iii)

Direct labour rate variance ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

(iv)

Direct labour efficiency variance ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

(v)

Variable overhead spending variance

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____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

(vi)

Variable overhead efficiency variance ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________

(vii)

Fixed overhead budget variance

____________________________________________________________________________________ ____________________________________________________________________________________

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____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

(viii)

Fixed overhead volume variance

____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Part B Give one possible explanation for the direct variances computed in requirement (a).

Variance: Direct Material Price Variance Page 10 of 18

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Explanation: 1:________________________________________________________________________________ __________________________________________________________________________________

Variance: Direct Material Usage Variance

Explanation: 2:________________________________________________________________________________ __________________________________________________________________________________

Variance: Direct Labour Rate Variance

Explanation: 3:________________________________________________________________________________ __________________________________________________________________________________

Variance: Direct Labour Efficiency Variance

Explanation: 4:________________________________________________________________________________ __________________________________________________________________________________

Question 3 – Cost-Volume-Profit Analysis Bond Products Limited is a small single product firm. For the next period the following budget data are available: Sales revenue (12,000 units)

$720,000

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Total costs and expenses

$708,350

Taxes (at 40% tax rate)

$ 4,660

Budgeted net profit (after tax)

$ 6,990

CVP analysis carried out for the above budget period shows a break even volume of 10,000 units.

Required: Using the above information: (i)

Calculate the variable costs per unit

(ii)

Calculate the fixed costs for the period

(iii)

Construct a Contribution margin statement

(iv)

Calculate unit contribution margin and contribution margin ratio.

(v)

Using the $80.00 unit selling price, calculate the number of units that need to be sold to earn a net profit after tax equal to 4% of total costs and expenses.

Required: (i)

Calculate the variable costs per unit ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ________________________________________________________________________...