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EMA1J08 ©CGA-Canada, 2008 Page 1 of 8 CGA-CANADA MANAGEMENT ACCOUNTING FUNDAMENTALS [MA1] EXAMINATION June 2008 Marks Time: 3 Hours Note: Except for multiple-choice questions, all calculations must be shown to obtain full marks. 21 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. Bill is the manager of the product development division at Fiao Company. He has been invited to a company lunch with several colleagues. He is also expected to prepare a quarterly financial performance report on his division. The report is due in 2 days and Bill estimates that there is approximately 16-20 hours of work remaining. A colleague remarks to Bill while they discuss if Bill should attend the lunch, “You are not one to refuse a free lunch! You should go.” Bill responds by saying, “In this case, I am not sure there is such a thing as a free lunch.” Which cost concept best applies to Bill’s response? 1) Sunk cost 2) Opportunity cost 3) Period cost 4) Fixed cost b. On the year-end trial balance of Jo Company, the credit entry in the finished goods inventory account was $2,280,000 and the credit entry to the manufacturing overhead (MOH) control account was $985,000. The company’s income statement after adjustments shows that the cost of goods sold (COGS) was $2,300,000. The company uses a normal cost system and closes the balance in the manufacturing overhead control account to the cost of goods sold. Which of the following is correct? 1) The company’s manufacturing overhead account prior to closing would have a credit balance of $20,000. 2) The normal cost system over applied manufacturing overhead by $20,000. 3) The normal cost system under applied manufacturing overhead by $20,000. 4) The company’s manufacturing overhead control account will show a debit balance of $20,000 after closing entries have been made. c. Internal failure costs incurred by a company manufacturing cooling fans for computers are which of the following? 1) Product costs 2) Opportunity costs 3) Period costs 4) Variable costs Continued. ..
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EMA1J08 ©CGA-Canada, 2008 Page 2 of 8 d. In which production setting is operation costing most appropriate? 1) Custom automobile repair shop 2) Landscaping business 3) Oil refinery 4) Clothing manufacturer e. A film studio completed its first movie for a total production cost of $33,343,100, including an allocation of studio overhead costs of $8,273,100. The studio is considering producing a CD containing the songs featured in the movie, as well as a special “director’s cut” DVD. The licensing and production costs for the DVD and CD will be $2,765,000 and $676,000 respectively. The studio
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