ca_exm_ma1_2008-03

ca_exm_ma1_2008-03 - CGA-CANADA MANAGEMENT ACCOUNTING...

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EMA1M08 ©CGA-Canada, 2008 Page 1 of 8 CGA-CANADA MANAGEMENT ACCOUNTING FUNDAMENTALS [MA1] EXAMINATION March 2008 Marks Time: 3 Hours Note: Except for multiple-choice questions, all calculations must be shown to obtain full marks. 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 3 marks each a. Boomer Company has reported an operating loss of $40,000 on sales of $20,000. The contribution margin was negative $10,000. The company has proposed the purchase of a new machine. Fixed costs are expected to increase by $10,000 per year. However, variable costs are forecasted to be $15,000 lower than last year at the sales level of $20,000. If costs behave as predicted and the proposal is accepted, what will the break-even sales in dollars be? 1) $ 40,000 2) $ 80,000 3) $ 160,000 4) $ 200,000 b. The INF Company and the DFL Company sell identical products at identical prices. INF has a lower unit variable cost and a higher fixed cost relative to DFL. Currently both companies have identical sales revenues and the same positive operating income. Which of the following statements is incorrect ? 1) Break-even sales for INF will be higher than that for DFL. 2) If sales increase at both companies, DFL will experience a higher level of net operating income than INF. 3) The degree of operating leverage at the current level of sales for INF will be higher than that of DFL. 4) At very high margins of safety, the advantage of INF over DFL will not be as great as it would be at a lower margin of safety. c. Which of the following statements concerning the approach of target costing is correct? 1) This approach is based on the observation that the firm should set its price so as to be able to cover its costs. 2) The firm should devote resources to effectively market the product to improve profitability. 3) The firm should not expect to significantly improve profitability through cost reductions after the product has entered production. 4) The cost of the product cannot be calculated until it has been produced. Continued. ..
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EMA1M08 ©CGA-Canada, 2008 Page 2 of 8 Note: Use the following information to answer parts (d) and (e). At the end of April, department A at Carson Company transferred all production to finished goods inventory. During May, the department started and fully completed 80 units. The month end work in process (WIP) was 100% complete with respect to direct materials and 0% complete with respect to conversion costs. Manufacturing costs for May were as follows: Direct materials (DM) $ 12,125,000 Conversion $ 9,750,000 The cost per equivalent unit (EU) for direct materials was $97,000.
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ca_exm_ma1_2008-03 - CGA-CANADA MANAGEMENT ACCOUNTING...

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