One of your colleagues at FUI named June is concerned whether what she has done something wrong or not
at work. June is a management accountant working at FUI, and one of June’s close family members owns a
small company, Company A, which provides service to FUI. When preparing the performance report for the
service providers, June noticed Company A was underperforming, and it was likely to have its contract
terminated by FUI. Before finalising the performance report, June calls her relative and tells him regarding the
report she is preparing, and the risk Company A might have its contract terminated. She also tells her relative
what the other service providers are doing for avoiding being underperforming and keeping their contracts
Please state two of the ethical standards, as provided by the Institute of Management Accountants (IMA)
Statement of Ethical Professional Practice1
, which are being jeopardized and justify why these two standards
are being jeopardized. Please explain how June could help her relative without jeopardizing these two ethical
standards. (For an answer with more than two ethical standards the first two standards will be marked, and
the remainder will be ignored). (Chapter 1, 10 marks)
Deliziosa Purea & Succhi (DP&S) has a whole plant for processing tomatoes. The plant processes tomatoes into
tomato sauce, tomato paste, and tomato puree. As part of the cost planning and cost control of operations
and activities, FUI is currently reviewing the gross-margin percentage of each of its products, using the
estimated net realisable value (NRV) method for allocating joint costs. The company processes tomatoes in
Department #1, out of which come three products: tomato sauce, tomato paste, and tomato puree. Processing
700,000 kg in Department #1 results in 50,000 kg of tomato sauce, 300,000 kg of tomato paste and 100,000
kg of tomato puree, and the costs in Department #1 are $400,000 in total.
Tomato paste is sold without further processing. Tomato sauce is processed further through Department #2
and the costs are $50,000. Tomato puree is considered a by-product and is processed further through
Department #3 and the costs are $13,000. Tomato sauce sells for $4 per kg, tomato paste sells for $2 per kg,
and tomato puree sells for $3 per kg.
a) Calculate the gross-margin percentage of each product using unit costs per kilogram for tomato sauce,
tomato paste, and tomato puree, treating tomato puree as a by-product. Deduct the estimated NRV
of the by-product produced from the joint cost of tomato sauce and tomato paste. (e.g., Exercise 6.15,
Chapter 6, 10 marks)
b) Calculate the gross-margin percentage of each product using unit costs per kilogram for tomato sauce,
tomato paste, and tomato puree, treating all three as joint products. (e.g., Exercise 6.15, Chapter 6,
Deliziosa Purea & Succhi (DP&S) has a department specialised in two products (juice and puree) from a joint
process using fruits. The joint cost of production is $50,000. A total of 5,000 units of juice can be sold at splitoff for $18 per unit or processed further as juice plus at an additional cost of $23,000 and sold for $20 per unit.
A total of 10,000 units of puree can be sold at split-off for $16 per unit or processed further as puree plus at
an additional cost of $15,000 and sold for $22 per unit.
a) What is the difference in profit if the company decides to process further the juice, instead of selling
it at split-off? (e.g., Sell or process further, Chapter 6, 5 marks)
b) What is the difference in profit if the company decides to process further the puree, instead of selling
it at split-off? (e.g., Sell or process further, Chapter 6, 5 marks)
c) How does a reduction on the joint cost of production from $50,000 to $25,000 influences the decision
whether to process further the juice and the puree instead of selling them at split-off? Justify your
answer. (e.g., Sell or process further, Chapter 6, 10 marks)
Regarding the manufacture of standard scooters at Monopattino Veloce (MV), the standard costs per unit
being variable manufacturing $8, fixed manufacturing $7. Selling and administrative costs are $3 per unit sold.
Page 6 of 9
The selling price is $20 per unit. Actual and budgeted overhead are the same for the year. Information about
the company production activity for the year is:
Sales 125,000 units
Units produced 155,000 units
Beginning Inventory 5,000 units
As part of the company cost planning and cost control of operations and activities, FIU is now reviewing its
production activity and the potential impact of different stock-costing methods.
a) What is the value of closing inventory of finished goods under absorption costing? (Chapter 7, 10
b) What is the difference in profit between absorption and variable costing and, for this specific year for
this company, which of the two stock-costing methods has the higher profit and why? (Chapter 7, 10
You have been assigned for reviewing the actual and budgeted figures of the variable manufacturing overhead
of standard scooters at Monopattino Veloce (MV). The management at MV argues there are no evident issues
with the variable manufacturing overhead budget as the static-budget variance is often favourable, which
proves the budgeting process works quite well. The management at MV also argues the employees at the
production line of standard scooters are always highly efficient because of the consistently favourable
Your analysis is for a specific month of the year, comparing the budgeted and actual figures. The variable
manufacturing overhead cost is allocated to each standard scooter based on budgeted direct manufacturing
labour-hours per standard scooter. For the specific month of the year, each standard scooter is budgeted to
take 5 labour-hours. Budgeted variable manufacturing overhead cost per labour-hour is $20. The budgeted
number of standard scooters to be manufactured in this given month is 100.
Actual variable manufacturing overhead costs in the given month were $12,000 for 90 standard scooters
started and completed. There was no opening or closing stock. Actual direct manufacturing labour-hours for
this given month were 490.
a) Calculate the static-budget variance, the flexible-budget variance, the sales-volume variance and the
spending and efficiency variances for the given month for the variable manufacturing overhead. (e.g.,
Exercise 16.11, Chapter 16, 10 marks)
b) Explain whether the management is correct or not regarding having a good budgeting process due to
often having a favourable static-budget variance and a consistently favourable efficiency variance. Use
your calculations for supporting your argument. (Chapter 16, 10 marks)
Page 7 of 9
Monopattino Veloce (MV) has a division of electric scooters which can produce two different types of scooters,
the Monopattino Elettrico Veloce (MEV), which is faster, and the Monopattino Elettrico Economico (MEE),
which has a longest-lasting battery. There is a question regarding how much should the company produce of
Table 1 – Scooters Production
Per batch MEV MEE
Sales price $2.00 $5.00
Variable expenses $0.50 $3.00
Contribution margin $1.50 $2.00
Contribution margin ratio 75% 40%
You are analysing the product-mix options under specific capacity constraints: one batch of MEV requires 7
machine hours and one batch of MEE requires 8 machine hours; the company has 12,000 machine hours
available to produce these products.
How many of each batch should Monopattino Veloce (MV) produce for maximizing the profit of the division
of electric scooters and why? Use your calculations for supporting your argument and showing the maximum
contribution margin (i.e., total revenues minus variable expenses) the division of electric scooters can achieve.
(Product-mix decisions under capacity constraints, 10 marks)
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