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EMA1M09 ©CGA-Canada, 2009 Page 1 of 7 CGA-CANADA MANAGEMENT ACCOUNTING FUNDAMENTALS [MA1] EXAMINATION March 2009 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. Which of the following statements is correct about the costs of quality? 1) Appraisal costs include external failure costs. 2) Prevention costs always exceed appraisal costs. 3) External failure costs typically are greater than internal failure costs because they are unpredictable. 4) Incurring prevention costs can lead to reductions in appraisal costs and internal and external failure costs. b. Which of the following statements is incorrect for a manufacturing firm? 1) Inventoriable costs consist only of prime costs. 2) Inventoriable costs consist of prime costs and manufacturing overhead costs. 3) Inventoriable costs include both variable manufacturing and fixed manufacturing costs. 4) Inventoriable costs will never include any period costs. c. Which of the following statements about responsibility centres is correct? 1) A cost centre is a segment of a business in which the manager has control over costs as well as the investments in operating assets of the segment. 2) A profit centre is a segment of a business in which the manager is responsible for the investments in the operating assets of this segment since he or she has control over both cost and revenue. 3) A profit centre manager is usually not evaluated using measures such as return on investment or residual income. 4) Only managers of cost centres are evaluated using variance analysis. Continued. ..
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EMA1M09 ©CGA-Canada, 2009 Page 2 of 7 Note: Use the following information to answer parts (d) and (e). PrufRite Company applies manufacturing overhead on the basis of direct labour-hours. On December 31, the company’s manufacturing overhead account showed a $20,000 credit balance. The company estimated that it would incur 200,000 direct labour-hours during the year. The actual number of direct labour-hours was 220,000. Completed job cost sheets show that $330,000 in manufacturing overhead was transferred to the finished goods account. There were no jobs in process at the beginning of the year and 1 job was partially completed at the end of the year, with $110,000 in applied overhead.
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