QUESTIONS

Which is the coding for the issue of indirect materials issued from stores to the machining department?
A 10410
B 10440
C 13410
D 13440 (2 marks)

(Total = 24 marks)

4 Cost behaviour 43 mins

4.1 Fixed costs are conventionally deemed to be which of the following?
A Constant per unit of output
B Constant in total when production volume changes
C Outside the control of management
D Easily controlled (2 marks)

4.2 The following data relate to the overhead expenditure of a contract cleaners at two activity levels.
Square metres cleaned 13,500 15,950
Overheads $84,865 $97,850
What is the estimate of the overheads if 18,300 square metres are to be cleaned?
A $96,990
B $110,305
C $112,267
D $115,039 (2 marks)

The following information relates to questions 4.3 to 4.7.

Which one of the above graphs illustrates the costs described in questions 4.3 to 4.7?
4.3 A linear variable cost – when the vertical axis represents cost incurred.
A Graph 1
B Graph 2
C Graph 4
D Graph 5 (2 marks)

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 FMA/F2 MANAGEMENT ACCOUNTING

4.4 A fixed cost – when the vertical axis represents cost incurred.
A Graph 1
B Graph 2
C Graph 3
D Graph 6 (2 marks)

4.5 A linear variable cost – when the vertical axis represents cost per unit.
A Graph 1
B Graph 2
C Graph 3
D Graph 6 (2 marks)

4.6 A semi-variable cost – when the vertical axis represents cost incurred.
A Graph 1
B Graph 2
C Graph 4
D Graph 5 (2 marks)

4.7 A step fixed cost – when the vertical axis represents cost incurred.
A Graph 3
B Graph 4
C Graph 5
D Graph 6 (2 marks)

4.8 A company has recorded the following data in the two most recent periods.

Total costs Volume of

of production production
$ Units
13,500 700
18,300 1,100
What is the best estimate of the company's fixed costs per period?
A $13,500
B $13,200
C $5,100
D $4,800 (2 marks)

4.9 A production worker is paid a salary of $650 per month, plus an extra 5 cents for each unit produced
during the month. How is this type of labour cost best described?
A A variable cost
B A fixed cost
C A step cost
D A semi-variable cost (2 marks)

4.10 What type of cost is supervisor salary costs, where one supervisor is needed for every ten employees
added to the staff?
A A fixed cost
B A variable cost
C A mixed cost
D A step cost (2 marks)

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 QUESTIONS

4.11 The following information for advertising and sales has been established over the past six months:
Month Sales revenue Advertising expenditure
$'000 $'000
1 155 3
2 125 2.5
3 200 6
4 175 5.5
5 150 4.5
6 225 6.5
Using the high-low method which of the following is the correct equation for linking advertising and
sales from the above data?
A Sales revenue = 62,500 + (25 × advertising expenditure)
B Advertising expenditure = – 2,500 + (0.04 × sales revenue)
C Sales revenue = 95,000 + (20 × advertising expenditure)
D Advertising expenditure = – 4,750 + (0.05 × sales revenue) (2 marks)

4.12 A total cost is described as staying the same over a certain activity range and then increasing but
remaining stable over a revised activity range in the short term.
What type of cost is this?
A A fixed cost
B A variable cost
C A semi-variable cost
D A stepped fixed cost (2 marks)

4.13 A company incurs the following costs at various activity levels:

Total cost Activity level
$ units
250,000 5,000
312,500 7,500
400,000 10,000
Using the high-low method what is the variable cost per unit?
A $25
B $30
C $35
D $40 (2 marks)

4.14 The following diagram represents the behaviour of one element of cost:

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 FMA/F2 MANAGEMENT ACCOUNTING

Which ONE of the following statements is consistent with the above diagram?
A Annual factory power cost where the electricity supplier sets a tariff based on a fixed charge plus
a constant unit cost for consumption but subject to a maximum annual charge.
B Weekly total labour cost when there is a fixed wage for a standard 40 hour week but overtime is
paid at a premium rate.
C Total direct material cost for a period if the supplier charges a lower unit cost on all units once a
certain quantity has been purchased in that period.
D Total direct material cost for a period where the supplier charges a constant amount per unit for
all units supplied up to a maximum charge for the period. (2 marks)

4.15 An organisation manufactures a single product. The total cost of making 4,000 units is $20,000 and
the total cost of making 20,000 units is $40,000. Within this range of activity the total fixed costs
remain unchanged.
What is the variable cost per unit of the product?
A $0.80
B $1.20
C $1.25
D $2.00 (2 marks)

4.16 When total purchases of raw material exceed 30,000 units in any one period then all units purchased,
including the initial 30,000, are invoiced at a lower cost per unit.
Which of the following graphs is consistent with the behaviour of the total materials cost in a period?
$£ A $ B

UNITS UNITS
0 30,000 0 30,000
$ $
£ C D

UNITS UNITS
0 30,000 0 30,000
(2 marks)

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 QUESTIONS

4.17 The total cost of production for two levels of activity is as follows:
Level 1 Level 2
Production (units) 3,000 5,000
Total cost ($) 6,750 9,250
The variable production cost per unit and the total fixed production cost both remain constant in the
range of activity shown.
What is the level of fixed costs?
A $2,000 C $3,000
B $2,500 D $3,500 (2 marks)

4.18 The following question is taken from the December 2011 exam paper.
The following shows the total overhead costs for given levels of a company’s total output.
Cost Output
$ Units
4,000 1,000
7,000 2,000
10,000 3,000
9,500 4,000
A step up in fixed costs of $500 occurs at an output level of 3,500 units.
What would be the variable overhead cost per unit (to the nearest $0.01) using the high-low technique?
A $1.67 per unit
B $1.83 per unit
C $2.75 per unit
D $3.00 per unit (2 marks)

(Total = 36 marks)

5 Presenting information 10 mins

5.1 The cost of materials for product A are as follows.
Material W: $2,250
Material X: $3,000
Material Y: $3,600
Material Z: $150
If the material proportions were displayed on a pie chart, how many degrees would material Y represent?
A 90 degrees C 144 degrees
B 120 degrees D 204 degrees (2 marks)

The following information relates to questions 5.2 to 5.3.

Number of ice-creams sold
April May June July
Mint choc chip 600 760 725 900
Chocolate 300 335 360 525
Strawberry 175 260 310 475
Blueberry 75 90 100 90

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