29222208 acca f2 financial management question bank

QuestionsMULTIPLE CHOICE QUESTIONS

Q.1

F2_MA_Qs.qxp 16/4/07 6:17 pm Page Q.1

Chapter 1: The nature and purpose of management accounting

1 Data is information that has been processed in such a way asto make it meaningful for use by management in makingdecisions. Is this statement TRUE or FALSE?

(1 mark)

2 Which of the following is not a fundamental attribute of goodinformation?A Complete

B Concise

C Cost effective(1 mark)

3 Which of the following steps does not form part of theplanning process?A Set objectives for achievement

B Identify ways in which objectives can be achieved

C Take corrective action to improve chances of achievingobjectives

(1 mark)

4 Which of the following is the appropriate name for planningwhich considers how the functional heads within a businessunit will coordinate employees on a day-to-day basis?A Strategic planning

B Tactical planning

C Operational planning(1 mark)

5 The manager of a division is responsible for costs andrevenues as well as capital invested. Which is the appropriate classification for the division?

A Revenue centre

B Investment centre

C Profit centre(1 mark)

Multiple choice questions

Q.2 KAPLAN PUBLISHING

Q

Q

Q

Q

Q


6 The following assertions relate to management accounting:i) The purpose of management accounting is to provide accounting

information to the managers of the business and other internalusers.

ii) Management accounts are only concerned with the cost ofgoods, services and operations.

Which of the following statements are true?

A Assertion i) and ii) are both correct

B Only assertion i) is correct

C Only assertion ii) is correct (1 mark)

Chapter 2: Types of Cost and Cost Behaviour

7 Which of the following costs should not be included in thestock valuation of a manufacturing business? A Depreciation on the plant and machinery

B Salary of salesman

C Factory supervisor's salary

D Electricity for factory(2 marks)

8 A shop carries out repairs on customers' electrical items, egtelevisions, video recorders, etc. Which of the following is an example of an indirect variable cost?

A Business rates for repair shop

B Salary of repair shop supervisor

C Repair person paid per hour worked

D Electricity for recharging repair tools(2 marks)

9 The following diagram represents a cost behaviour pattern.TotalCost$

0 Volume of activity

questions

KAPLAN PUBLISHING Q.3

Q

Q

Q

Q




Which of the following statements is consistent with theabove diagram?

A Annual factory costs when the electricity supplier sets a tariffbased on a fixed charge plus a constant unit cost forconsumption but subject to a maximum annual charge.

B Weekly total labour cost when workers are paid an hourlywage during normal working hours and a higher hourly rate ifthey are required to work outside those hours.

C Total direct material cost for a period if the supplier charges alower unit cost on all units once a certain quantity has beenpurchased in that period.

D Total direct material cost for a period if the supplier has agreedto a maximum charge for that period.

(2 marks)

10 The following diagram represents a cost behaviour pattern.TotalCost$

0 Volume of activity

Which of the following statements is consistent with theabove diagram?

A Annual factory costs when the electricity supplier sets a tariffbased on a fixed charge plus a constant unit cost forconsumption but subject to a maximum annual charge

B Weekly total labour cost when workers are paid an hourlywage during normal working hours and a higher hourly rate ifthey are required to work outside those hours

C Total direct material cost for a period if the supplier charges alower unit cost on all units once a certain quantity has beenpurchased in that period

D Total direct material cost for a period if the supplier has agreedto a maximum charge for that period

(2 marks)

Q


11 The telephone costs of a business are likely to be classifiedas a stepped fixed cost.Is this statement TRUE or FALSE?

A True

B False(1 mark)

12 A company has a performance related pay scheme inoperation. What is the most appropriate cost classification for the salaries ofthe managers?

A Fixed cost

B Stepped fixed cost

C Semi-variable cost(1 mark)

13 Which of the following statements is correct?A Only direct production costs should be included in stock

valuation

B All indirect costs should be treated as non-production costs.

C The sum of direct costs is known as prime cost.

D Indirect costs per unit are always larger than direct costs perunit.

(2 marks)

14 The costs and output of a business for the last quarter of theyear were as follows:

Output Cost(units) ($)

Oct 1800 8850Nov 2000 8750Dec 800 3950

Using the high low method which of the following representsthe estimated cost in January of producing 1500 units if themonthly fixed costs are expected to increase by $100 at thestart of next year?

A 6750

B 6850

C 7380

D 7480(2 marks)

questions


Q

Q

Q

Q




15 A business has experienced the following labour costs:Output Cost(units) ($)7000 86,000

12000 141,0009000 97,500

Fixed costs increase by $15000 for output in excess of 10,000units.

Using the high low method what is the estimated cost ofproducing 14000 units ?

A 142000

B 157,000

C 163,000

D 178,000(2 marks)

Chapter 3: Business mathematics

16 Expected values are of most use as a prediction tool whenconsidering the result of a one-off outcome.Is this statement TRUE or FALSE?

A True

B False(1 mark)

17 A company has estimated that sales next year may be$200,000 (probablility 0.6), $300,000 (probablility 0.3) or$400,000. What is the expected value of sales to be used in next year'sforecast?

A 250,000

B 305,000

C 450,000(1 mark)

Q

Q

Q


18 Regression analysis has been used to find the line of best fitfor two variables, x and y and the correlation coefficient hasthen been calculated to assess the reliability of the line as aforecasting tool.What is the value of the correlation coefficient for the line that willprovide the most reliable forecast?

A -0.9

B 0

C +0.2

(1 mark)

19 Regression analysis has been used to calculate the line ofbest fit from a series of data. Using this line to predict a valuewhich lies between the two extreme values observedhistorically is known as extrapolation.Is this statement TRUE or FALSE?

A True

B False(1 mark)

20 Regression analysis has produced the following results fromthe batch production costs for each of the past 5 months.�x=540, �y=755, �x2 = 61,000, �xy = 83,920

Which of the following is the appropriate value for b in theregression line to 2 decimal places?

A -1.40

B 0.01

C 0.89

D 1.40(2 marks)

questions


Q

Q

Q




21 A company is preparing its budgets for next year. Thefollowing regression equation has been found to be a reliableestimate of XYZ's deseasonalised sales in units:y =10x + 150

Where y = total sales units and x refers to the accountancy period.

What is the expected figure for actual sales in accountingperiod 19 (which is Q1)?

A 255

B 315

C 340(1 mark)

Chapter 4: Ordering and accounting for inventory

22 Which of the following could be used to document thetransfer of materials from one production department toanother?A Materials requisition note

B Materials returned note

C Materials transfer note(1 mark)

23 The following represent the materials transactions for acompany for a year:

$'000Materials purchases 240Issued to production 215Materials written off 12Returned to stores 6Returned to suppliers 2

The material stock at 31 December 20X1 was $42,000.

What was the opening balance on the materials inventory accountat 1 January 20X1?

A $1,000

B $25,000

C $33,000

D $59,000(2 marks)

Q

Q

Q


24 Continuous stocktaking is the process of checking thebalance of every item of inventory on the same date, usuallyat the end of an accounting period.Is this statement TRUE or FALSE?

A True

B False(1 mark)

25 Wasted inventory that is expected to arise due to the breakingup of bulk material receipts into smaller quantities must bewritten off against profits in the period incurred.Is this statement TRUE or FALSE?

A True

B False(1 mark)

Chapter 5: Order quantities and reorder levels

26 The objective of holding buffer inventory is to take advantageof quantity discounts.Is this statement TRUE or FALSE ?

A True

B False(1 mark)

27 Which of the following is not a stockholding cost:A The opportunity cost of capital tied up

B The cost of insurance

C Shipping and handling costs

D Stock obsolescence(2 marks)

28 A manufacturer uses 100,000 components costing $1each at aconstant rate throughout the year. The cost of making asingle order for more components is $10 and the holdingcosts for each component are 0.5% of the average inventoryvalue. What is the EOQ?

A 1,411

B 14,142

C 20,000(1 mark)

questions


Q

Q

Q

Q

Q


29 A retailer has a steady demand for rugby balls at 50 a month.Each ball costs $6 from the supplier. The costs involved inplacing an order are $10 and the stockholding costs are 20%of the stockholding value per annum.How many orders will be placed per annum?

A 1.73

B 6

C 8.48

D 100(2 marks)

30 Annual demand for raw material is 1,000,000 units. Each unitcosts 15 cents. Procurement costs for each order are $20 andlead time has been estimated as 2 days. There are 250working days per annum, the carrying cost of inventory is 10cents per unit and the cost of a stockout is 20 cents per unit.What is the optimal reorder level?A 125

B 8,000

C 20,000(1 mark)

31 A company buys each item of inventory at a purchase price of$30. The cost of capital is 9% p.a. The company pays rent of$10,000 p.a. for the warehouse. Each item takes up 1.5square metres in the warehouse which could be sublet at $10per square metre per annum. Admin costs associated witheach order are $0.50 per unit. In addition the company pays$15,000 p.a. salary to the storeman.What is the correct value of h in the EOQ formula?

A $27.70

B $28.20

C $32.70

D $33.20(2 marks)

Chapter 6: Accounting for labour

32 Which of the following should be classified as direct labour?A The site foreman of a building company

B Workers assembling components on a production line

C The storeman handling parts requisitions in a factory.(1 mark)



Q

Q

Q

Q


questions


33 Task-related activity time records are more commonly used torecord time spent working in manufacturing industries ratherthan service industries.Is this statement TRUE or FALSE?

A True

B False(1 mark)

34 A company employs 100 direct workers in the factory, who arepaid a basic rate of $5 per hour for a 35 hour week. In additionto working their normal hours last month, each worker wasasked to work an additional 5 hours overtime per week tomeet general production requirements. All overtime hours arepaid at time and a half. As a result of some faulty material, 150hours of direct labour time were registered as idle. What is the indirect labour cost for last month, assuming a 4 weekperiod?

A $750

B $2,000

C $5,750

D $15,750(2 marks)

35 An employee receives a bonus according to the Rowanscheme. The employee's basic rate of pay is $6 per hour. The allowed time for the job was 1 hour and the employeecompleted it in 40 minutes.What is the total payment for the job (to the nearest cent) ?

A $1.33

B $ 4.00

C $ 5.00

D $ 5.33(2 marks)

Q

Q

Q




36 At 31 March 20x1 an organisation had 5,400 employees.During the previous year 750 had left the organisation,although the management had decided that only 600 neededreplacing and had recruited accordingly.What was the labour turnover rate for the year to 31 March 20X1(to 2 decimal places) ?

A 10.96%

B 11.11%

C 11.27%

D 13.89%(2 marks)

37 The data below relates to last month's production of product Z:Standard time allowed per unit = 20 minutes

Budgeted hours available = 210 hours

Actual output = 600 units in 220 hours

Which of the following is the correct labour capacity andefficiency ratio?

Labour Labourcapacity efficiency

A 95.24% 90.91%

B 95.24% 104.76%

C 104.76% 90.91%

D 104.76% 95.24%(2 marks)

Chapter 7: Accounting for overheads

38 A company manufactures two products, E and F, in a factorydivided into two production cost centres, Primary andFinishing. In order to determine a budgeted fixed overheadcost per unit of product, the following budgeted data arerelevant.

Primary FinishingAllocated and apportionedfixed costs $84,000 $93,000

Direct labour - minutes per unitE 36 25F 30 40

Budgeted production is 9,000 units of E and 6,000 units of F.Fixed overheads are to be absorbed on a direct labour hour basis.

Q

Q

Q


questions


What is the budgeted fixed overhead cost of a unit of productE?

A $10

B $11

C $12

D $13(2 marks)

39 Billecarte Ltd manufactures two products, Zonk and Tink, in afactory divided into two production cost centres, Machining andAssembly. In order to find a fixed overhead cost per unit, thefollowing budgeted data are relevant.

Machining AssemblyDirect and allocated fixed costs $120,000 $72,000Labour hours per unitZonk 0.50 hours 0.20 hoursTink 1.00 hours 0.25 hours

Budgeted production is 4,000 units of each product (8,000 units in all)and fixed overheads are to be absorbed by reference to labour hours.

What should be the budgeted fixed overhead cost of a unit ofZonk?

A $28

B $24

C $20

D $18(2 marks)

40 A manufacturing company has three production departmentsand needs to apportion budgeted fixed overheads betweenthem.Budgeted costs for the year are as follows:

$Rent & Rates 36,000Supervisors salary 84,000Machine depreciation 132,000

252,000–––––––

Q

Q




The following additional information is available:

What is the total budgeted monthly fixed cost for departmentY, to the nearest $?

A $71,250

B $65,400

C $5,938

D $5,450(2 marks)

41 Products alpha and beta are made in a factory that has twoproduction cost centres: assembly and finishing. Budgetedproduction is 8,000 alpha and 10,000 beta. Fixed overheadsare absorbed on a labour hour basis. The following budgeted information is available:

What is the budgeted fixed cost per unit for product beta?

A $3.46

B $4.00

C $9.75

D $10.425(2 marks)

Dept X Dept Y Dept Z

Number of employees 10 8 17

Area (sq m) 1,050 5,250 5,700

Value of plant and machinery 200 275 525

Production Finishing

Allocated and apportioned fixed costs $ 55,000 $ 63,000

Direct labour hours per unit

Product alpha 1.5 hrs 2 hrs

Product beta 1 hr 0.5 hrs

Q


42 Here are three statements on the determination of overheadabsorption rates:(1) Costs can be allocated where it is possible to identify the

department that caused them.

(2) Costs need to be apportioned where they are shared by morethan one department.

(3) Service centre costs should not be included in unit overheadcosts.

Which of these statements are correct?

A (1) and (2) only

B (1) and (3) only

C (2) and (3) only

D (1), (2) and (3)(2 marks)

43 The following statements refer to overhead absorption:(1) Factory rent and rates are typically allocated to departments

rather than apportioned.

(2) A single product firm does not need to apportion overhead tofind a cost per unit.

(3) If departmental overhead recovery rates are similar it makeslittle difference if overheads are applied on a departmental orbusiness wide basis.

Which of these statements are correct?

A (1) and (2) only

B (1) and (3) only

C (2) and (3) only

D (1), (2) and (3)(2 marks)

44 A manufacturing company has the following budgeted andactual results for the year:Budgeted fixed overhead expenditure $504,000

Budgeted activity 42,000 machine hours

Actual fixed overhead expenditure $515,000

Actual activity 45,000 machine hours

questions


Q

Q

Q




What is the result of using the pre-determined fixed overheadrate for the year?

A $11,000 under-absorbed

B $25,000 under-absorbed

C $25,000 over-absorbed

D $36,000 overabsorbed(2 marks)

45 A manufacturing organisation has two productiondepartments (Machining and finishing) and two servicedepartments (Quality controL and Maintenance). After primaryapportionment the overheads for the factory are as follows: What is the total overhead to be apportioned to the Finishingdepartment?

A $124,750

B $284,750

C $285,821

D $348,250(2 marks)

Chapter 8: Marginal and absorption costing

46 Annual fixed costs are expected to be $120,000. Thecompany's product sells for $20 per unit with variable costs of$12 per unit.

What is the break-even point?A 5,000 units

B 10,000 units

C 15,000 units

D 20,000 units(2 marks)

Total Machining Finishing QC Maintenance

Overheads $633,000 $220,000 $160,000 $140,000 $113,000

Work doneby QC

45% 35% - 20%

Work doneby Maint'ce

30% 40% 30% -

Q

Q


47 A company manufactures and sells a single product with avariable cost per unit of $36. It has a contribution to salesratio of 25%. The company has weekly fixed costs of $18,000.What is the weekly break-even point (in units)?

A 1,500

B 1,600

C 1,800

D 2,000(2 marks)

48 The management accountant of a company has calculated hisfirm's break-even point from the following data:

$Selling price per unit 20Variable costs per unit 8Fixed overheads for next year 79,104

It is expected that next year the firm will produce and sell 7500units.

What is the margin of safety?

A 12.1%

B 13.8%

C 47.3%

D 89.6%(2 marks)

49 An organisation manufactures and sells a single product andhas produced the following budget for the coming year:-

$000 $000Sales revenue (20,000 units) 5,000Manufacturing costs

Variable 1,400Fixed 1,600

Selling costsFixed 1,200Variable 400

–––––Cost of sales (4,600)

––––––Profit 400

––––––

questions


Q

Q

Q




If negligible inventories are held, what is the break-even point(in units)?

A 8,890

B 10,000

C 15,556

D 17,500(2 marks)

50 A company manufactures two products, Alpha and Beta. Forevery one alpha, it must sell two beta. Product information, based on producing the maximum number ofeach product, is as follows:

What is the break even point in units ?

Alpha Beta

A 5,000 10,000

B 10,000 20,000

C 15,000 30,000

D 30,000 60,000(2 marks)

51 The following statements relate to costing and overheads:i) Products create a demand for support activities in service cost

centres in direct proportion to the volume of each productmanufactured

ii) Where overheads form a large proportion of total costs, thenthe arbitrary nature of apportionment is more of an issue

iii) When closing inventory levels are lower than openinginventory levels, marginal costing gives a lower profit thanabsorption costing

iv) Only fixed and variable production costs should be included inunit costs for inventory valuation purposes under absorptioncosting

Alpha$ per unit

Beta$ per unit

Sales price 58 36

Variable overhead 28 20

Fixed overhead 13 9

Profit per unit 17 7

Maximum demand 30,000 units 60,000 units

Q

Q


Which TWO of the statements are correct?

A Statements i) and iii)

B Statements i) and iv)

C Statements ii) and iii)

D Statements ii) and iv)(2 marks)

52 The number of units of finished goods inventory at the end ofa period is greater than at the beginning. What would the effect be of using the marginal costingmethod of inventory valuation?

A less operating profit than the absorption costing method

B the same operating profit as the absorption costing method

C more operating profit than the absorption costing method

D more or less operating profit than the absorption costingmethod depending on the ratio of fixed to variable costs

(2 marks)

53 Accounting standards support the use of the marginal costingapproach to inventory valuation when preparing the publishedaccounts of a company, as it achieves a better matching ofsales and expenses for the period. Is this statement TRUE or FALSE?

A True

B False(2 marks)

54 A business has just completed its first year of trading. Thefollowing information has been collected from the accountingrecords.

$Variable cost per unit

Manufacturing 6.00Selling and administration 0.20

Fixed costsManufacturing 90,000Selling and administration 22,500

Production was 75,000 units and sales were 70,000 units. Theselling price was $8 per unit throughout the year.

questions


Q

Q

Q




What is the difference in annual net income using marginalcosting for inventory valuation, rather than absorptioncosting?A $8,500

B $7,500

C $6,000

D $2,500 (2 marks)

Chapter 9: Relevant Costing

55 Which of the following costs is relevant for decision making?A Common costs

B Avoidable fixed overheads

C Committed costs(1 mark)

56 A company is evaluating a project that requires three types ofmaterial (A, B and C). All material is required at thecommencement of the project. Data relating to the materialrequirements are as follows.

Material Quantity Quantity Original Current Currenttype needed currently purchase purchase resale

for the in inventory price of price priceproject inventorytonnes tonnes $/tonne $/tonne $/tonne

A 200 300 19 22 20B 700 200 26 36 32C 400 100 10 14 12

Material types A and C are used regularly by the company innormal production. There is no current use for Material type B.

What is the total relevant cost of materials that should beincluded in the evaluation of the project?

A $33,800

B $34,400

C $35,200

D $37,400(2 marks)

Q

Q


questions


57 The following data relates of 200 kg of material ZX ininventory and needed immediately for a contract.

$Standard cost 3,220Replacement cost 3,080Realisable value 2,800

Within the firm the 200kg of material ZX can be converted into 200kg of material RP at a cost of $140. Material RP has many uses inthe firm and 200 kg costs $3,080.

What cost should be included for material ZX when assessingthe viability of the contract?

A $3,220

B $3,080

C $2,940

D $2,800(2 marks)

58 100 hours of skilled labour and 200 hours of unskilled arerequired for a project. The company has plenty of sparecapacity for unskilled workers who are paid at $5 per hour.The skilled workers are fully utilised. They are paid $8 perhour but the contract could be done in overtime which is paidat time and a half. The project will also require 10 hours of theexisting supervisor's time. The supervisor receives a salaryof $25,000 p.a which equates to an hourly rate of $14.What is the relevant cost of labour for the project?

A $400

B $1200

C $1340

D $2340(2 marks)

Q

Q


59 A contract is under consideration that will require 250machine hours. The variable overhead rate is $6 per machinehour and the company traditionally absorbs fixed overhead at50% of the variable overhead rate. If the contract is accepted,$800 of other indirect costs specific to the project will beincurred.What is the relevant cost of overheads for the project?

A $800

B $1550

C $2300

D $3050(2 marks)

60 The following data apply to a non-current asset.$

Net realisable value 5,000Historic cost 6,000Net present value in use 7,500Replacement cost 10,000

What is the relevant cost of the asset for decision makingpurposes?

A $10,000

B $7,500

C $6,000

D $5,000(2 marks)

61 A company is considering undertaking a project which will require400 kg of a special material, Anignora. The company has 400 kgof Anignora in inventory but cannot obtain any further supplies. Ifthis project is not undertaken, then the company could undertakeproject II which would also require 400 kg of Anignora. Therevenues and costs associated with project II are as follows.Project II revenues and costs

$ $Revenues 55,000Less Costs – original purchase

cost of 400 kg of Anignora 20,000Costs – other direct costs 25,000 (45,000)

–––––– –––––––Profit 10,000

–––––––

The 400 kg of Anignora could also be sold as it is for $16,000.



Q

Q

Q


What is the opportunity cost of using 400 kg of Anignora inthe first project?

A $10,000

B $16,000

C $20,000

D $30,000(2 marks)

62 In the recently prepared annual accounts of an organisation,closing inventory of finished goods includes $5,800 for item Q,calculated as follows:

$Materials at cost 2,300Direct labour 2,200Production overhead

Variable with labour cost 440Fixed 860

–––––Factory cost of producing item Q 5,800

–––––Soon after the year end, item Q was stolen and the managementwishes to know the relevant cost. A replacement could be madeduring normal working hours as Adam has spare capacity. Labouris paid on the basis of hours worked. The cost of replacementwould be as in the schedule above except for materials, thereplacement cost of which is now $2,600. The item sells for$9,000.

What is the relevant cost of item Q?

A $9,000

B $6,200

C $5,240

D $4,940(2 marks)

questions


Q




63 The budget for the year for a single product firm, was asfollows:

$000Materials (replacement cost) 3Direct labour 5Fixed overheads 4

––––12

Sales 16––––

Profit 4––––

10% of the year's production was lost due to a strike by directlabour. Sales were made from inventory during the strike. The lostproduction is not to be made up due to excessive inventoryholdings.

What was the incremental cost of the strike?

A $1,200 benefit

B $800 benefit

C $400 cost

D $800 cost(2 marks)

Chapter 10: Dealing with limiting factors

64 A company makes four products W, X, Y and Z. Labour islimited in the forthcoming year to 125,000 man-hours. Each Wtakes 1 hour to produce, each X takes 2 hours, each Y takes2_ hours and each Z takes 6 hours. Equal numbers of W andZ must be produced and equal numbers of X and Y must beproduced.

W X Y ZContribution per unit ($) 10 18 20 50Maximum demand 15,000 10,000 10,000 15,000

What is the optimum production plan?

W X Y ZA 15,000 4,444 4,444 15,000

B 11,429 10,000 10,000 11,429

C 15,000 10,000 10,000 15,000

D - 5,000 10,000 15,000(2 marks)

Q

Q


65 A company has the following production plan for the comingfour weeks. The plan utilises capacity fully. Planned output isequal to the maximum demand per product. Productinformation is as follows:

Per Unit ($) W X Y ZSelling price 40 50 25 35Direct labour 12 18 9 6Raw material 7 14 5 13Variable overhead 8 6 8 6Allocated fixed costs 4 5 2 6

Output (units) 100 500 250 400

Direct labour is currently paid $3 per hour and the number oflabour hours is expected to be severely curtailed during the comingmonth due to industrial action.

Which product should be placed first in the productionscheduling for the next month?

A W

B X

C Y

D Z (2 marks)

66 A company has a maximum demand of 1,000 units for each ofits four products W, X, Y and Z. Selling prices and costs aregiven below: Per Unit ($) W X Y ZSelling price 80 60 65 90Direct labour (@ $5 per hr) 10 15 5 15Raw material (@ $6 per unit) 18 6 18 24Variable overhead 12 7 7 6Allocated fixed costs 9 7 7 6Labour and materials are in short supply. Labour is limited to10,000 hours and materials to 9,000 units.

Which garment should be chosen first in the productionschedule?

A Garment W

B Garment X

C Garment Y

D Garment Z(2 marks)

questions


Q

Q


67 A manufacturing business has correctly scheduled production of itstwo products, so as to maximise profits, using the 7,500 labourhours currently available.

What is the effect on profit if another 500 hours becomeavailable at the normal rate of $10 per hour?

A 6,000

B 8,400

C 9,200

D 10,000(2 marks)

68 A company is faced with a scarce labour resource. Profit willbe maximised by allocating that resource to the products thatmake the most profit per labour hour.Is this statement TRUE or FALSE?

A True

B False(1 mark)

69 A company, which aims to maximise profit, manufactures twoproducts, X and Y.Product information is as follows:

Per unit Product X Product Y$ $

Selling price 55 45Material 10 20Labour 15 10

Spending is limited to $400,000 and $300,000 on material andlabour respectively.



Product A$ per unit

Product B$ per unit

Material 25 15

Labour (@ $10 per hr) 15 20

Variable overhead 12 16

Selling price 82 75

Maximum demand (units) 5200 3800

Q

Q

Q


What is the optimal mix of production (in thousands of units)for the next period?

Product X Product YA 0 20B 10 15C 20 0D 40 0

(2 marks)

The following information relates to questions 70 and 71

The following diagram is an accurate representation of a linearprogramming problem for a company facing a shortage of both labour(600 hours) and material (560 litres).

The company manufactures two liquid products, X and Y which havecontributions of $25 and $10 respectively. There is a maximumdemand for product X of 45 units.

70 What is the amount of labour (in hours) used in each unit ofproduct?

Product X Product YHrs per unit Hrs per unit

A 6 7

B 6 10

C 10 6

D 10 8(2 marks)

questions


Y

X

Labourconstraint

C=500

Max demandfor X

Materialsconstraint

100 -

80 -

50 -

I20

I45

I60

I70

Q




71 What is the contribution for the period if the company selectsthe optimal production plan?A $800

B $1318

C $1375

D $1500(2 marks)

Chapter 11: Job batch and process costing

72 The cost of output goods is found by calculating the costs ofthe manufacturing process and dividing by the number ofunits produced. What is this approach known as?

A Job costing

B Batch costing

C Process costing(1 mark)

73 Which one of the following industries is most likely to usebatch costing as the method for establishing the cost ofproducts?A Car repairs

B Clothing

C Oil refining(1 mark)

74 The following statements refer to calculating the cost of a unitof output:(1) In process and batch costing the cost per unit of output is

found by dividing total costs by the number of units produced.

(2) In process and job costing the cost per unit of output is founddirectly by accumulating costs for each unit.

Which of the following is true?

A Only statement (1) is correct.

B Only statement (2) is correct.

C Both statement (1) and statement (2) are correct.(1 mark)

Q

Q

Q

Q


75 The following data relates to a process for the month of May:$

Input materials (500 litres) 3000Labour and overhead 2670

Normal output is expected to be 9 litres for every 10 litres input.

Actual output was 460 litres.

What is the cost per unit of finished output (to 2 decimalplaces)?

A $11.33

B $11.67

C $12.33

D $12.60(2 marks)

76 4000kg of material are input to a chemical process. Normallosses are expected to be 10% of input and because of theirtoxic nature will incur a disposal cost of $2 per kg.The process cost $11,800 and actual output was 3550kg

What is the total cost of the abnormal loss (to the nearest $)?

A $53

B $153

C $175

D $275(2 marks)

The following information available for a process for the month ofDecember relates to questions 77 and 78.

All material is input at the start of the process whereas conversionoccurs evenly through the process.

questions


WIP @ 1 December 12,000 units (40% converted)Material element $33,600Conversion costs $22,980

Materials added 48,000 units at a cost of $144,000

Conversion costs $307,500

WIP @ 31 December 15,000 units (60% converted)

Q

Q




77 What is the value of closing WIP @ 31 December, using theWeighted average method of valuation?

A $84,680

B $99,480

C $101,250

D $136,200(2 marks)

78 What is the value of finished production in December, usingthe FIFO method of valuation?A $305,250

B $406,830

C $408,600

D $416,250(2 marks)

79 Which of the following is not a possible method ofapportioning the joint costs of a manufacturing process?A Physical quantity

B Market value at point of separation

C Net book value(1 mark)

80 A process produces 3 chemicals X,Y and Z and a by product,B. Joint process costs in February were $22,500 andoverhead is absorbed at 25% of process costs. Products X,Yand Z can only be sold after further processing and Data forthe period is as follows:

Joint costs are apportioned based on net realisable value and thesales proceeds of the by-product are used to reduce the cost ofthe main products.

OutputTonnes

Futher processing costs $ per tonne

Final sales value$ per tonne

X 600 15 50

Y 500 10 40

Z 700 20 35

B 200 - 5

Q

Q

Q

Q


questions


What are the costs of the joint process attributable tochemical Y ?

A $6935

B $7282

C $8750

D $9073(2 marks)

Chapter 12: Service and operation costing

81 The principles used to calculate unit costs in manufacturingindustries can equally be applied to service industries.Is this statement TRUE or FALSE?

A True

B False(1 mark)

82 Which of the following would not be an appropriate situationfor the use of service costing?A Power supply industry

B Oil refinery

C Restaurant in a factory

D Haulage business(2 marks)

83 Which of the following statistics is unlikely to be used by theRooms department of a hotel business?A Room occupancy

B Cleaning cost per room

C Meals served per guest

D Average cost per occupied bed(2 marks)

84 Many service applications involve high fixed costs and thehigher the number of cost units produced the higher the fixedcosts per unit.Is this statement TRUE or FALSE?

A True

B False(1 mark)

Q

Q

Q

Q


85 A transport business has 6 lorries in operation, 5 days a week for50 weeks of the year. Each vehicle is expected to make 4journeys a day, delivering an average load of 5 tonnes to eachcustomer. The average customer is located 25 kilometres from thetransport headquarters. Fuel and other variable running costs perkilometre travelled (laden or unladen) are budgeted to be $0.50.Other fixed running costs amount to $225,000 per annum.What is the standard running cost per tonne kilometre?

A $ 0.45

B $0.50

C $0.77

D $1.25(2 marks)

Chapter 13: Budgeting

86 The following statements relate to budgeting:i A forecast is an attempt to predict what will happen

ii A budget is a plan of what is intended to happen

iii All budgets are prepared in financial terms

iv The master budget consists of a budgeted profit and lossaccount and budgeted balance sheet

v A flexible budget adjusts both fixed and variable costs for thelevel of activity

Which of the following is true?

A All statements are correct

B Statements i and ii are correct

C Statements ii, iii and iv are correct

D Statements i, iii and v are correct(2 marks)

87 Which of the following statements is true?A The principal budget factor is the person who is responsible for

controlling and coordinating the budget process

B A business must always produce its sales budget first, beforeany other budgets can be decided on.

C The budget committee consists of managers with finalresponsibility for agreeing the budget.

(1 mark)



Q

Q

Q


88 An organisation is preparing its sales budget for the year ended 31December 20Y1. It expects to sell 2000 units of product A permonth. The current sale price is $500 per unit and this willincrease by 10% in June. Demand for Product B is declining. Firstquarter sales are expected to be 4000 units in total and this willdrop by 1000 units per quarter for each of the next three quarters.The selling price will be constant at $300 per unit. Product C willbe introduced in September. Sales are expected to be 500 unitsper month at a selling price of $100 per unit.What is the budgeted sales revenue for the year?

A $15,800,000

B $15,850,000

C $15,900,000

D $16,800,000(2 marks)

89 An organisation is preparing its quarterly budget. It has consistentlymaintained stock levels at 10% of the following month's sales.Budgeted sales for January are 2000 units and sales are expectedto increase by 500 units per month for the following three months.What is the budgeted production in units for February?

A 2050

B 2450

C 2500

D 2550(2 marks)

90 The management accountant is preparing the master budgetfor her retail firm. The following information has beensupplied.Sales $300,000Opening stock $40,000Closing stock $60,000Mark-up 25%

What amount should be budgeted for purchases?

A $220,000

B $225,000

C $240,000

D $260,000(2 marks)

questions


Q

Q

Q


91 An extract from next year's budget for a manufacturingcompany is shown below.

Month 3 Month 4Sales 100,000units 120,000unitsClosing stocks of finished goods 6,000units 8,000unitsClosing stocks of raw materials 22,000kg 12,000kgEach unit requires 2kg material.

What is the budgeted material usage for month 4?

A 230,000 kg

B 234,000 kg

C 240,000 kg

D 244,000 kg(2 marks)

92 The following information has been supplied in connection with anorganisation's labour and overhead budget:

Product alpha Product betaCost per unit Cost per unit

$ $Unskilled labour (@$5/hr) 15 10Skilled labour (@ $8/hr) 16 24

––– –––Total labour cost 31 34

––– –––Budgeted production 8,000 units 12,000 units

What is the total amount of skilled labour hours required inthe period?

A 40,000 hours

B 48,000 hours

C 52,000 hours

D 60,000 hours(2 marks)



Q

Q


Chapter 14: Standard costing

93 A company's standard labour rate for its factory workers is setat $5 per hour.The standard time allowed for producing one unit is 20 minutes.

During the period 4,800 units were produced and the factoryworkers were paid $5.25 per hour. The actual hours worked were1,560.

What was the total labour cost variance?

A $390 adverse

B $190 adverse

C $190 favourable

D $390 favourable(2 marks)

94 Which of the following would explain an adverse materialsusage variance?A The volume of activity was more than originally expected

B A higher quality of materials than anticipated was used

C There was a major spillage resulting in the loss of rawmaterials

(1 mark)

The following information relates to questions 95 and 96:The materials budget for producing 5,000 units of product is 25,000litres at $3.30 per litre. In the first month of production the companypurchased 30,000 litres at a cost of $105,000, of which 28,000 litreswere used to produce an actual output of 5,900 units.

95 What was the material usage variance? A $9,900 adverse

B $650 adverse

C $4,950 favourable

D $5,250 favourable(2 marks)

96 What was the material price variance? A $6,000 adverse

B $12,600 adverse

C $6,000 favourable


questions


Q

Q

Q

Q




The following information relates to questions 97 and 98:A company’s product results for the month are as follows:

Actual BudgetSales units 9,500 9,000

$ $Sales revenue 104,500 108,000Manufacturingcosts at standard 76,000 72,000

–––––– ––––––Contribution 28,500 36,000

–––––– ––––––

97 What was the sales price variance? A $3,500 adverse

B $9,000 adverse

C $9,500 adverse


98 What was the sales volume contribution variance? A $1,500 favourable

B $2,000 favourable

C $6,000 favourable

D $7,500 adverse(2 marks)

99 A company's standard variable overhead rate formanufacturing is $7 per hour and the standard time allowedfor production is 2.5 hours per unit.During the period 3,200 units were produced in 8,320 hours. Thevariable overhead expenditure variance was $1,664 favourable.

What was the actual variable overhead rate per hour?

A $6.53

B $6.80

C $6.93

D $7.20(2 marks)

Q

Q

Q


100 If a manufacturing organisation is absorbing fixed overheadson a labour hour basis, the fixed overhead volume variancecan be split into expenditure and efficiency variances. Is this statement TRUE or FALSE?

A True

B False(1 mark)

101 A company's budgeted fixed overhead for the last quarter ofthe financial year was $280,000 for 7,000 units of output. Itactually spent $284,400 manufacturing 7,200 units. What was the fixed overhead volume variance?

A $ 8,000 adverse

B $ 4,400 adverse

C $ 7,900 favourable

D $ 8,000 favourable(2 marks)

Appendix: spreadsheets

102 The benefit of using a spreadsheet to prepare a budget is thatestimates can be varied without everything having to berecalculated manually.

Is this statement TRUE or FALSE?A True

B False(1 mark)

103 A spreadsheet is more useful that a database when theprimary objective is to store large amounts of raw data thatneeds to be accessed by multiple users.

Is this statement TRUE or FALSE?A True

B False(1 mark)

questions


Q

Q

Q

Q


104 Which of the following is not a disadvantage of usingspreadsheets?A Spreadsheets are restricted to a finite number of records, and

can require a large amount of hard-drive space for datastorage.

B There can be sharing violations among users wishing to viewor change data at the same time.

C Spreadsheets do not have the ability to generate graphs andcharts for the analysis of data.

(1 mark)

105 Which of the following is the least suitable application of aspreadsheet package?

A Budgeting and forecasting

B Maintenance of customer records

C Inventory valuation

D Variance analysis(2 marks)



Q

Q


29222208 acca f2 financial management question bank

Documents