1
MidSession Examination Practice Questions
Time allowed: 60 minutes, plus 5 minutes reading time
Total of 40 marks
Tip:
You have 60 minutes to complete an exam worth 40 marks.
This means that, on
average, you should spend no more than 60/40 = 1.5 minutes per mark.
For example, you
should spend no more then 18 minutes on Part A (a 12 mark question).
•
Please keep all numbers to 2 decimal points at all stages of your calculations
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Pyro Phoenix Ltd (Pyro) manufactures firecrackers.
It has two manufacturing departments:
PowderPuff Department (Powder), and PowerCracker Department (Cracker).
Powder
manufactures black powder, 1/3 of which is sold to Cracker at an internal transfer price.
Cracker then mixes this black powder with other components to make over 50 firecracker
product lines.
The remainder of Powder’s black powder is sold to outside customers at the
market price.
Powder has no excess capacity.
Powder’s estimated sales and standard cost data for the year ended 30 June 2007, based on its
capacity of 120,000 kilograms of black powder, are as follows:
$
Sales to external customers
2,000,000
Transfer to Cracker
440,000
Variable costs
(1,320,000)
Fixed Costs
(
700,000)
Gross Margin
420,000
PART A
(12 marks)
Cracker has recently developed a new product called Abydos.
The production manager is
trying to develop a standard cost for the new product.
The following information is available:
* Each Abydos firecracker requires 2 kilograms of black powder, 0.5 kilograms of red dye,
and 0.1 kilograms of secret ingredient (SI).
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 Three '11
 a
 Regression Analysis, Cost driver, Fireworks

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