Soal Lat UAS Management Accounting
Problem I (25%)
Surf’s Up, Inc. manufacturers fiberglass boards used for riding the waves at the beach. The standard cost for material and labor is $89.20 per board. This include 8 kilograms of direct material at standard cost of $5.00 per kilogram and 6 hours of direct labor at $8.20 per hour.
The following data pertain to November :
• Units completed : 5,600 units
• Purchase of Material : 50,000 kilograms for $249,250
• Total actual labor cost : $300,760
• Actual hours of labor : 36,500 hours
• Direct Material quantity variance : $1,500 unfavorable
• Work in process inventory on November 1 : none
• Work in process inventory on November 30 : 800 units (75 percent complete as to labor; material is issued at the beginning of processing)
Surf’s Up, Inc. prepare budgeted overhead for three activity levels :
4500 6000 7500
Variable Cost $27,000 $36,000 $45,000
Fixed Cost $30,000 $30,000 $30,000
Total Overhead Cost $57,000 $66,000 $75,000
In December Surf’s up produced 3,600 units fiberglass, used 5,700 machine hours, and incurred the following manufacturing overhead costs:
Variable overhead $37,050
Fixed overhead 29,000
Compute the following amounts. Indicate whether each variance is favorable or unfavorable.
1. Direct labor price variance
2. Direct labor efficiency variance
3. Actual kilograms of material used in the production process
4. Actual price paid per kilogram of direct material
5. Total amounts of direct material and direct labor cost transferred to finished goods inventory
6. Total amount of direct material and direct labor cost in the balance of work In process inventory at the end of November
7. Compute variable overhead spending and efficiency variance for December
8. Compute production volume variance and fixed overhead spending variance for December
Problem II (25%)
Channel Inc has decided to use EVA to evaluate its performance. Last year, Channel had after-tax operating income of $350,000. Two sources of financing were used by the company: $3 million of mortgage bonds paying 6% interest and $9 million in common stock, which was considered to be relatively more risky than other stocks, and had a risk premium of 8%. The rate on long-term treasury bonds (risk free rate) is 3%. Channel has $4,000,000 in operating assets and pays a marginal tax rate of 40%.
1. Calculate the weighted average costs of capital for Channel, Inc.
2. Calculate EVA for Channel. Is Channel creating wealth? Explain.
3. Now, suppose that Channel is considering borrowing $2,000,000 in unsecured bonds at rate 9%. The money will be used to purchase additional operating assets of $1,000,000 (making total operating assets of $5,000,000). This added investment will enable the company to manufacture products that are budgeted to increase after-tax operating income by $80,000 (Total after-tax operating income will be $430,000). With this additional information, compute the new weighted average cost of capital and EVA for Channel, Inc including new products. Is the new investment a good idea?
Problem III (25%)
Tornado Electronics operates as a decentralized multi-division company. The Refrigerator division of Tornado purchases most of its compressor division. The compressor division’s incremental cost for manufacturing the compressor is $90 per unit. The Compressor Division is currently working at 80% capacity. The current market price of the compressor is $125 per unit.
1. What is the minimum price at which the Compressor division would sell the compressor to the Refrigerator division?
2.Suppose that Tornado requires that whenever divisions with unused capacity sell products internally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort and preserving division autonomy
3.If the two divisions were to negotiate a transfer price, what is the range of possible transfer prices? Evaluate this negotiated transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort and preserving division autonomy.
Problem IV (25%)
IV The Balance Scorecard is considered to be a very useful tool in evaluating performance and in bridging the gap between strategy and managerial actions. It has four Perspectives; the shareholder (financial) perspective, the Customer perspective, the Internal process perspective, and the Learning & Growth perspective, which as we know, contains not only financial performance measures but also non-financial measures.
Answer the questions below in a concise and clear manner :
1.What are the advantages of focusing also on non financial performance measures?
2.How can employee capabilities be measured?
3.How can improvements in employee capabilities affect process efficiency?
4.How can improvements in process efficiency affect customer value?
5.How can improvements in customer value affect financial performance?