‘Seton A Fon ‘Time Remaining FMA-Management Accounting ‘Question 4 Zmarks 1:89:08 th Test Progress Detai's @ wa Which of the following statement(s), relating to performance measurement, is/are true? (1) External data are never required to assess the performance of an organisation (2) The degree of government regulation should be considered when comparing the performance of public sector and private sector organisations (3) Financial performance indicators are only relevant to private sector organisationsCorrect Answer 2only External data may be required to assess the performance of an organisation, such as through benchmarking. The degree of government regulation does need to be considered to make a meaningful comparison between the performance of public sector and private sector organisations and financial performance indicators can also be useful to not-for-profit organisationsSecon a “ine Remaining Funstnasomntnecouning ‘Sep 20 -Aug 24 lpia) sein? amet, 1057 Tet ProgressDealn@) mop 20-mug7) ee Three activities associated with budgeting are as follaws: (1). Preparing the master budget (2) Determining the principal budget factor (3). Flexing the budget in ine with the actual level of activity What is the correct sequence for these activities? 2, then 3, then 4 © 2, then 4, then 3 © 4, then 3, then 2 © 4, then 2, then 3Correct Answer 2, then 1, then 3 The first activity that needs to be done is to determine the principle budget factor as this is the constraining factor that will affect all budgets. The master budget is prepared next. Flexing the budget occurs after the budgeting process when the actual results are known.‘Seton A ‘Tine Remaining Fuastanagement Accounting ‘Sep 20 -Aug 24 Queens 2maks THES Test Progresn Denn ea [efor The following data for last month relate to a production process in which no work-in-progress is held: Input 12,800 itres. Normal loss 4% of input Output 12,500 itres What was the abnormal loss or abnormal gain for last month? (©. Abnormal gain of 212 litres (©. Abnormal loss of 212 litres Abnormal loss of 300 litres (© Abnormal gain of 200 litresCorrect Answer Abnormal gain of 212 litres Abnormal gains and losses occur where the output of a process is greater or less than what would be expected after normal losses are applied to inputs Actual output = 12,500 litres Expected output = 12,288 (12,800 x 0.96) Abnormal gain = 212 litres (12,500 - 12,288)Fon ‘Section A ‘Time Remaining FMA-Management Accounting oe Quwiond rt 8AM Tet Prgren Dele sepataugn The following statements refer to different types of planning in a large organisation: (1) Strategic planning is concemed with bath quantitative and qualtative matters, (2) Tactical planning is concerned with setting long term objectives (3). Operational planning is concemed with a time horizon starting one year from now Which of these statement(s) is/are correct? © 2and3 © tand2 © 2only © tonlyCorrect Answer 1 only Strategic planning is concerned with quantitative and qualitative matters. It also Is concerned with setting long term objectives and long term time horizons.‘Seton A Fon ‘Time Remaining FMA-Management Accounting ‘Question Zmarks 1:88:38 th Test Progress Detai's @ wa ‘Acompany used goverment produced data that showed the economy grew by 4.6% in the last year. Which of the following describes the data used by the company? ‘Secondary and continuous (© Primary and discrete (© Primary and continuous © Secondary and discretCorrect Answer Secondary and continuous Secondary data are data which have been collected elsewhere for another purpose, but can be adapted. Economic growth can take on any value and therefore is continuous.Section A “Tene Remaining a Fore Fuattanagement Accounting et Qusioné mans 18425 1h Tet Progress Dee @ ‘Acompany manufactures two main products, J and K, and the by-product L. The by-product has a net realisable value of $2 per litre. The following information relates to last month, when there were no opening inventories. Product J K L Litres Litres Litres Produetion| 50,000 40,000 10,000 Sales, 45,000 30,000 10,000 Joint costs last month were $290,000. Company policy is to apportion joint costs on a physical measure basis ‘and to treat the net realisable value of the by-product as a deduction from the cost of the main products. ‘What was the cost value of last month's closing inventory of product J? > $16,400 $16,200 > $15,000 2 $13,500 ~Correct Answer $15,000 Net realisable value of by-product L = $20,000 (10,000 x $2) Joint costs of products J and K = $270,000 (290,000 - 20,000) Costs allocated to product J = $150,000 (270,000 x (50,000 / (60,000 + 40,000))) Production of J = 50,000 litres Costs allocated to J = $3 per litre ($150,000 50,000) Cost value in product J inventory at the end of the month = $15,000 ($3 x 5,000)Sedona TeneRemaning ETE Funsionagomertreconing @ ‘Sep 20-Aug 74 [efor Question 7 2marke 1158-40 th Test Progress Detals @ een Which of the following could NOT be used to measure performance in a service organisation? © Innovation © Resource utilisation (© Quaity inspection in advance © Financial performanceCorrect Answer Quality inspection in advance One of the problems with services is that the production and consumption are simultaneous and so it cannot be inspected for quality in advance.Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Question? amare 18834 1h TeetProgressDetale @) sen0-vugat T Co usually has a quarterly labour cost of $2,500,000, Material costs (mainly copper) were $3,000,000 in January to March. The worldwide cost of copper has increased in the second quarter by 15%. Overheads were ‘$45,000,000 in January to March Which TWO of the following variances for April 0 June are worth investigating as the reasons for the variance are unknown? Total direct labour variance of $400 adverse © Materials price variance of $450,000 adverse © Ovethead expenditure variance of $4,000,000 adverse Sales volume variance of $3,000,000 favourableCorrect Answer Overhead expenditure variance of $4,000,000 adverse and sales volume variance of $3,000,000 favourable The direct labour variance is too small to be material and is therefore not worth investigating. The materials price variance can be explained by the worldwide increase of 15% and so itis not worthy of investigation. The overhead variance is large and there is no obvious explanation so this should be investigated. The sales volume variance is large and should be investigated even though it is favourable. Managers need to plan for the future and need to know whether the increase in sales is a one off or likely to continue into the next quarter.Quesions mars 15828 ih TestProgress Detain @ ay Tokens A Which of the following defines the prime cost of a product? © The total direct costs of a product > The material cost of a product The cost of making the fist unit of a product ©. The total production cost of a product FMA.Management Accounting ‘Sep 20 -Aug 21 ‘Test Number 4Correct Answer The total direct costs of a product The prime cost of a product is the total of all the direct costs of the product.Sedona TeneRemaning ETE anagemont Accou hes ° FUa-Manayomont Accounting Questor 2marke 15018 TstProgrss Onn) Sen20-Aug 21 Which TWO of the following statements relating to value analysis are true? Value analysis is a planned, sclentific approach to cost reduction Cost value is the market value of the product or service ‘Value analysis attempts to enhance the esteem value of a product at the lowest cost ‘One of the problems with value analysis is that it discourages innovationCorrect Answer Value analysis is a planned, scientific approach to cost reduction and Value analysis attempts to enhance the esteem value of a product at the lowest cost Value analysis is a planned, scientific approach to cost reduction. It considers four aspects of value: cost, exchange, use and esteem. Market value of the product or service refers to exchange value, not cost value. Cost value is the cost of producing and selling an item. Value analysis is different from other cost reduction approaches because it encourages innovation and a more radical outlook for ways of reducing costs.Question! amare 18:10 ih Tost Progress Detala @ eee eeae ee Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Last month, a company had an opening inventory of finished goods of 6,000 units and a closing inventory of 4,000 units. Using absorption costing, this closing inventory was valued at $33,000. Using marginal costing last. month's profit was $50,000 and using absorption costing it was $41,000. What was the variable production cost per unit last month? © $4.50 © $3.75 © $8.25 $6.00Correct Answer $3.75 Inventory value per unit = $8.25 (33,000 / 4,000) This value is made up of variable and fixed costs as it was calculated under the absorption costing method. The difference between marginal and absorption costing profit is fixed cost. Fixed cost per unit = $4.50 (60,000 - 41,000) / 2,000) Variable cost per unit = $3.75 (8.25 - 4.50)Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ ueston'2 amare 18802 1h TeetProgressDetale @) sen0-vugat ‘One material is used in the manufacture of product X. The total cost of the material (purchased and used) in a period was $4,000, In the period, the direct material price and usage variances were $200 adverse and $300 favourable respectively and 1,000 units were manufactured. What is the standard direct material cost per unit for product X? © $4.10 © $3.80 © $3.90 $430Correct Answer $4.10 Total cost = $4,000 Less the adverse direct material price variance $200 plus the favourable direct material usage variance = $4,100 (total standard material cost) Total standard cost per unit = $4.10 (4,100 /1,000)Tokens unatogonmtnccouing @ eae ‘Test Number 1 ~ Secon [veer Quemion’3 mana 18757 ia TestProgrese dette @ Last month the total sales for XYZ Co were $960,000. A pie chart is used to show the breakdown of sales by region for the month. South region is represented by 60 degrees on the pie chart, What are the sales for the month for the south region? |Correct Answer $160,000 The total pie chart is made up of 360 degrees. The south region represents 60 / 360 of the total. (60 / 360) x $960,000 = $160,000Sedona TeneRemaning ETE Funsionagomertreconing @ ‘Sep 20-Aug 74 [veer Quesionté mars 19759 rey) sep20-Aug it | EY Which of the following statements about payback is TRUE? © Payback takes into account the time value of money (© Achange in the cost of capital will affect the payback (© Payback is useful as an intial screening device (©. Payback is technically superior to NPVCorrect Answer Payback is useful as an initial screening device Payback is useful as an initial screening device. The NPV method is technically superior to the payback method, not vice versa. The other options are both false because the payback method does not discount and so does not use a cost of capital. This time value of money is therefore not taken into account.Seaton A ros ST oa Teensonne Quesion’s mans 18749 ih TestProgress Detain @ unataragementecauning ‘Sep 20-Aug 24 ‘Test Number 1 ~ The following statements refer to documents used in the material procurement procedures of XYZ Co. Is ‘each of these statements true or false? True False ‘A purchase requisition is prepared in the purchasing department of XYZ Co and then sent to the ‘supplier ‘A goods received note is prepared by the supplier and sent with the material to XYZ CoCorrect Answer Apurchase requisition is prepared in the purchasing department of XYZ Co and then sent to the supplier Agoods received note is prepared by the supplier and sent with the material to XYZCo False False Purchase requisitions are sent by the department that is requesting the material to the purchasing department. Itis the purchasing department that will place the order with the supplier. Goods received notes are prepared by the goods received department and sent to the department that ordered the materials to advise them that their order has arrivedSeaton A Toerensing ST unataragementecauning Mie) eecion © aman trae ia TestProges Dette @ eet Aa er The performance of a publicly funded hospital is monitored using measures based upon the ‘three Es’. The most important performance measure is considered to be the achievement of hospital targets for the successful treatment of patients, Which of the three Es best describes the above measure? (© Economy Effectiveness: © Extemalty © EfficiencyCorrect Answer Effectiveness Successful treatment of patients would be classified as being effective.Section ‘Time Remaining FMA-Management Accounting Sop 20 -Aug 21 ‘uestion 17 Bmarks 1:88:00, “Tost Number { Aime series model of sales volume has the following trend and additive seasonal variation: Trend: Y =5,000 + 4,000 X where Y = quarterly sales volume in units, X= the quarter number (where the first quarter of 20X1 = quarter 17, the second quarter of 20X+ = quarter 18, ete) Quarter Seasonal variation (units) First +3,000 Second 1,000 Third 1,500 Fourth -2,500 ‘What would be the time series forecast of sales units for the third quarter of 20X27 © 79,800 © 95,500 97,000 © 98,500Correct Answer 95,500 Quarter number for third quarter of 20X2 = 23 (18 +14+14+14141) Forecasted sales units for third quarter of 20X2 = 95,500 ((5,000 + (4,000 x 23)) - 1,500)ay Toekeosne unataragementecauning amare 197-28 ih Tost Progress Detala @ eee eeae ee Question 18 Which accounts should be debited and credited to form the correct journal entry to record the direct labour costs charged to production? Wages control Production overhead control Work-in-progress control ‘Account to be credited ° ° Account to be debited C °Correct Answer Account to be debited Work-in-progress control Account to be credited Wages control Direct costs should be recorded in the relevant control accounts, and for direct labour in this scenario this, would be wages control and work-in-progress control as the cost is not an overhead. The cost account is the work-in-progress account and should be debited and therefore the credit should go to the wages control account.Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Questions 2marks 1:57:18 th TestProgress etal @ eee eeae ee Which TWO of the following are true of imposed budgeting? itis most effective in large organisations “Top management prepare a budget with litle or no input from operating staff It increases operational managers commitment to organisational ebjectives It reduces deliberate overestimation of costs and underestimation of revenues in a budgetCorrect Answer Top management prepare a budget with little or no input from operating staff and It reduces deliberate overestimation of costs and underestimation of revenues in a budget Imposed budgets are prepared with insignificant input from operational levels. This way the management is able to prevent intentional creation of cost buffers or power revenue target setting at operational level. One of the disadvantages of imposed budgeting is that it may hinder motivation so it will not increase operational managers' commitment. Imposed budgets are most effective in small organisations, not large organisations.Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ ueston20 amare 187-4 1h TeetProgressDetale @) sen0-vugat ‘A company uses the Economie Order Quantity (EO) model and holds no buffer inventory. Its annual cost of holding one unit in inventory has decreased. What is the effect, if any, of this decrease placing orders? holding costs on the EOQ and on the total annual cost of Increase Decrease No effect 0a Total annual cost of placing orders ° 0Correct Answer EoQ Increase Total annual cost of placing orders Decrease The EQO is the number of items of inventory which it is most economic to order. If holding costs fall then more items of inventory can be held for the same cost and the EOO will increase The annual cost of placing orders will decrease as by ordering more inventory at a time the organisation will make fewer orders during the year.‘Question 21 2marks 1:57:10 th TestProgress etal @ eee eeae ee Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Which of the following are benefits of using activity based costing? (1) Itrecognises that overhead costs are not always driven by the volume of production (2) It does not result in under or aver absorption of fixed overheads (8) It avoids all arbitrary cost apportionments (4) Its particulary useful in single product businesses tand 4 © tand2 © 2and3 © tonlyCorrect Answer 1 only Activity based costing recognises that there are other factors than production volume which drive overheads. Overheads may still be under or over absorbed and arbitrary cost apportionments may still be required if activity based costing is used. Activity based costing is most likely to be useful where there is a wide and diverse product range.Question22 © 2marks 1187.05 th TestProgress etal @ eee eeae ee Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Which of the following statements about standard costing are TRUE? (1) Astandard cost is a predetermined estimated unit cost (2) standard cost ean be used as a control device to help improve performance: (3) Astandard cost card shows the unit cost details only of each product © 2and3 only © and 2 only © tand 3 only 4, 2and3Correct Answer 1 and 2 only Astandard cost is a predetermined unit cost used for inventory valuation and control. The difference between a standard figure and an actual figure is a variance and variance analysis is a control device. So statements 1 and 2 are true. Astandard cost card shows the standard quantities of materials and labour time as well as the unit cost details so statement 3 is false.Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Questonzs —2marks 1:67.01 th TestProgress etal @ eee eeae ee Which of the following statements about mission statements is/are TRUE? (1) They are stated in a standard format (2) They play an important role in the planning process (3) They help ensure consistency in decision-making © 2and3 only © 2only © only 1, 2and3Correct Answer 2 and 3 only Mission statements do not have a standard format. Statement 1 is therefore false. They do play an important role in the planning process. They can be used to help evaluate and implement plans. They help to ensure consistency in decision making and goal congruence.Queston2# amare 18859 1h TeetProgressDetale @) sen0-vugat Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ ‘Acompany manufactures and sells a single product. Next year the budgeted total fixed production costs are ‘$480,000, budgeted sales are 24,000 units and budgeted production is 25,000 units, The budgeted profit for next year using absorption costing principles is $57,500. What is the budgeted profit for next year using marginal costing principles? © $77,500 © $74,700 © $38,300 $37,500,Correct Answer $38,300 Budgeted fixed production cost per unit = $19.2 (480,000 / 25,000) Marginal costing profit = $38,300 (67,500 - (25,000 - 24,000) x 19.2)Sedona EE resosconne | Fuastanagoment Accounting Peart cucsion 2s 2mana 18658 1k Testrogrese Detain @ scx @ Text timber! ‘Acompany uses absorption costing with @ predetermined hourly fixed overhead rate. The following situations arose last year. Would each of these situations cause overheads to be under absorbed or over absorbed? Under Over absorbed absorbed ‘Actual averhead expenditure was less than the budgeted expenciture and actual activity level was as budgeted Actual hours worked were less than the budgeted hours used to set the c predetermined overhead absorption rate and actual overhead expense was as budgetedCorrect Answer Actual overhead expenditure was less than the budgeted Over absorbed expenditure and actual activity level was as budgeted Actual hours worked were less than the budgeted hours used to set. _ Under absorbed the predetermined overhead absorption rate and actual overhead expense was as budgeted Absorption rates are calculated by dividing the budgeted overhead by the budgeted level of activity. These rates are then applied to actual activity levels to calculate how much overhead is absorbed. Where the actual overhead is less than budget but the actual activity level was as budgeted, then the overhead will be over absorbed because the absorption rate is based on a higher value of overhead. Where actual activity levels are less than budget then the overhead will be under absorbed as not enough activity has occured at the budgeted rate to cover the overhead, assuming the actual overhead expense was as budgeted.Seaton Toerensnns ST TN * ueston 26 FMA-Management Accounting e amare 18646 TotProgreee doin @) sent In the last period an organisation budgeted to work 116,000 hours manufacturing 29,000 units. Actual output last period was 26,000 units which took 108,000 hours to manufacture. 96.3% 103.3% What was the labour efficiency ratio for the last period (expressed as a % correct to one decimal place)? © 93.1% © 89.7%Correct Answer 96.3% Budgeted hours per unit = 4 (116,000 / 29,000) Actual hours per unit = 4.15 (108,000 / 26,000) Labour efficiency ratio = 96.3% (44.15)Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Queston27 amare 1862 1h TeetProgressDetale @) sen0-vugat Which of the following statements about big data analytics in organisations is/are TRUE? (1) Itwill provide a deeper understanding of customer behaviour and purchasing preferences, (2) twill require investment in technology to manage the volume and speed of information accumulated © 2only © tonly © Nelther 1 nor 2 © Both 1 and 2Correct Answer It will provide a deeper understanding of customer behaviour and purchasing preferences - TRUE It will require investment in technology to manage the volume and speed of information accumulated - TRUE The analysis of big data allows organisations to gain a better understanding of how customers behave and what they purchase. This information allows organisations to make better plans for the future. In order to properly analyse big data, some investment in technology will be required.Sedona TeneRemaning ETE Funsionagomertreconing @ ‘Sep 20-Aug 74 [efor Question2s — 2marks 1158.57 th Test Progress Detals @ een ‘The folowing data relate to a process for ast month: Opening inventory 200 units (70% complete) Completed output 2,450 units losing inventory 300 units (40% complete) Using the FIFO method, what wore the equivalent units of production last month? janisCorrect Answer 2,430 Opening inventory (equiv units) = 140 (200 x 70%} Closing inventory (equiv units) = 120 (300 x 40%) Total equivalent units produced = 2,450 - 140 + 120 = 2,430Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Question29 2marks 1158.33 th TestProgress etal @ eee eeae ee ‘A.company uses standard marginal costing. Last month the standard contribution on actual sales was $10,000 ‘and the following variances arose: $ Total variable costs variance 2,000 Adv Sales price variance 500 Fav Sales volume contribution variance 1,000 Adv What was the actual contribution for last month? $7,000 © $8,500 > $7,500 $8,000Correct Answer $8,500 Contribution is calculated as sales price per unit less variable cost per unit multiplied by number of units. The sales volume contribution variance is irrelevant in this scenario as actual sales have already been reflected in the $10,000. It is the standard contribution element that should be adjusted using the other two variances to calculate actual contribution. Actual contribution = $8,500 (10,000 - 2,000 + 500)Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Queston%0 amare 18628 1h TeetProgressDetale @) sen0-vugat The results of an accountancy exam are normally distributed with a mean score of 58 and a standard deviation of 10. What is the percentage probability that a student will score more than 80 (to 2 decimal places)? [|Correct Answer The percentage probability that a student will score more than 80 is 1.39% Calculate the Z score: Z-score = (X- pio Z= (80 - 58/10= 2.2 Look up this number on the standard normal distribution table: 0.4861 This gives us the area under the normal curve between the mean and 80. The area under the curve above 80 will therefore be 0.5 - 0.4861 = 0.0139, or 1.39%Sedona TeneRemaning ETE anagemont Accou hes ° Funsionagomertreconing @ Queston’! amare 18624 1h TeetProgressDetale @) sen0-vugat Is each of these statements about spreadsheets true or false? True False A spreadsheet is the most suitable software for the long term storage of large volumes of data oO A spreadsheet could be used for preparing flexible budgets for different activity levels oOCorrect Answer Aspreadsheet could be used for preparing flexible budgets for different activity levels True Aspreadsheet is the most suitable software for the long term storage of large volumes False of data A spreadsheet can quickly and easily manipulate data contained within it and is therefore especially useful for preparing flexible budgets. The most appropriate software for storing large volumes of data is a database.Sedona TeneRemaning ETE anagemont Accou hes ° FUa-Manayomont Accounting Questons? §—2marke 15621 TstProgrss Onn) Sen20-Aug 21 Last month an organisation's direct workers were pald $40,000 for normal working. In addition they were paid a total of $12,000 for overtime working, Overtime hours which were required due to a general shortage of labour were paid at time and a half. What was the total direct labour cost for last month? |Correct Answer $48,000 In this particular situation direct labour cost only includes pay at normal rate and not a premium for overtime. Direct labour cost for normal working = $40,000 Overtime working at normal pay rate = $8,000 (12,000 / 1.5) Total direct labour cost = $48,000[efor Sedona TeneRemaning ETE Funsionagomertreconing @ Questions 2marks 1166.17 th TestProgress etal @ eee eeae ee ‘Acompany manufactures and sells a single product. At the end of the manufacturing process all units are inspected and 20% are rejected and scrapped. Next year the budgeted sales are 192,000 units and the Inventory of finished units will increase by 2,000 units, What is next year’s budgeted production (in units) which will be subject to inspection? |Correct Answer 242,500 Total units required for sales and inventory = 194,000 (192,000 + 2,000) 194,000 represents 80% of the total output required (as 20% of output is rejected). Total output required = 242,500 (194,000 /0.8)Sedona TeneRemaning ETE anagemont Accou hes ° FUa-Manayomont Accounting Questonse 2s 15619 TestProgrss Onn Sen20-Aug 21 Which TWO of the following statements about fixed and flexible budgets are true? Flexible budgets are prepared using marginal costing techniques Flexible budgeting assumes that most costs are semi-variable Comparison ofa fixed budget withthe actual results is useful for budgetary control purposes Fixed budgets are useful for monttring xed costsCorrect Answer Flexible budgets are prepared using marginal costing techniques and Fixed budgets are useful for monitoring fixed costs Flexible budgets are prepared using marginal costing techniques and knowledge of cost behaviour. The flexible budget shows the expected cost or revenue for each item for the relevant level of activity. Fixed budgets are not useful for budgetary control purposes because actual activity levels rarely match budgeted activity levels. Fixed costs should be fixed at any level so a fixed budget is useful for monitoring fixed costs.Sedona Tone Remain anagemont Accou hes ° FUa-Manayomont Accounting Questonss §—2marks 18608 TstProgrss Onn) Sen20-Aug 21 ‘The number of daily enquiries to a local charity has a mean of 18 and a standard deviation of 4 complaints. What is the coefficient of variation to the nearest whole %7 7Correct Answer The coefficient of variation is 22% Coefficient of variation = standard deviationfmean = 4/18 = 0.22, or 22%Section Time Rematring FuixManagoment Accounting Questionss marks, 1:98:88 ih Test Progress Details @ sep20-augzi ‘Test Number 1 = = Background | The single product manufactured by Allegrop Co requires 2.5 kg of a single raw material per unit of product. The material costs $9.00 per kg, Budgets are being prepared and the following adsitional information is available: (1) Budgeted sales for the next three periods are: Period 1 38,600 units Period 2 26,500 units Period 3 32,100 units (2) Opening inventory of finished goods in each period is budgeted to be 25% of the budgeted sales demand in that period (3) Opening inventory of raw material in each period is budgeted to be one third of the budgeted material usage in that period, = Task 1 mark “ Calculate the budgeted Inventory of finished goods at the beginning of Period 1. units: = Task 2 2marks Calculate the budgeted production volume of the product in Period 2. units: = Task 3 3 marks Ifthe budgeted production in Period 3 is 31,600 units and in Period 4 Is 28,900 units: ‘What are the budgeted purchases of the raw material in Period 32 kg ‘What is the budgeted cost of the raw material usage requirement in. $ Period 4? —_—— = Tasks 4 and 5 4marks Itis possible that raw material availabilty will be restricted to 75,000 kg per period. If this situation arises, 75,000 kg of the material willbe purchased and used in each period. Any sales demand not satisfied in a Period would be lost. Task 4 2 marks Assume that the restriction on raw material supply occurs throughout the budget period and that there would be no inventory of raw material or finished goods at the beginning of Period 1. In this circumstance: ‘What would be the finished goods inventory at the end of Period 2? units Task 5 2 marks. Which of the following may enable Allegrop Co to increase output? (1) Introduce a perpetual inventory system. (2) Introduce continuous stocktaking (3) Use raw material more efficiently (4) Take advantage of settlement discount ony © 2,3and4 tand3 1,2and4= Background ‘The single product manufactured by Allegrop Co requires 2.5 kg of a single raw material per unit of product ‘The material costs $9.00 per kg. Budgets are being prepared and the folowing additional information is available: (1) Budgeted sales for the next three periods are: Petiod 1 38,600 units Petiod2 26,500 units Period3 32,100 units (2) Opening inventory of finished goods in each period is budgeted to be 25% of the budgeted sales demand in that period. (3) Opening inventory of raw material in each period is budgeted to be one third of the budgeted material usage in that period = Task 1 X 9 ort mark. Calculate the budgeted inventory of finished goods at the beginning of Period 1. Correct Answer The inventory of finished goods at the beginning of Peried 1 will be 25% of the sales in that period: 38,600 units x 0.25 = 9,850 units = Task 2 XK 8082 marks Calculate the budgeted production volume of the product in Period 2. Correct Answer ‘The production volume in Period 2 will be the sales in that period, adjusted for any change in the finished ‘goods inventory: Sales in Period 2 26,500 units + Finished goods inventory at the end of Period 2 18,026 units (32,100 units x 0,25) - Finished goods inventory at the start of Period 2 6,625 units (26,500 units x 0.25) = Production in Period 2 27,900 units Task 3 XK 00F3 marks Ifthe budgeted production in Period 3 is 31,600 units and in Period 4 is 28,900 units: Correct Answer ‘The purchases of raw material in Period 3 will be the usage in production in that period, adjusted for any change in raw material inventory: Raw material usage In Period 3 79,000 kg (31,600 unts x 2.5 kg/unt) + Raw material inventory at the end of Period 3 24,083 kg (28,900 units « 2.5 kgAit + 3) ~ Raw material inventory at the start of Period 3 26,333 kg (31,600 units « 25 ko/nit + 3) = Raw material purchases in Period 3 76,750 kg ‘The cost of the raw material used in Period 4 will be: Production in Period 4, 28,900 units x 2.5 kg/unit x $9.00/kg = $650,250 = Tasks 4 and 5 XK 0 ora marks itis possible that raw material availabilty will be restricted to 75,000 kg per period. If this situation arises, 75,000 kg of the material will be purchased and used in each period. Any sales demand not satisfied in a Period would be lost. FIOUUCUON I FeNOU 4, 20,9UU URES X 2.9 RY/UTIL * 99.UUINY = 980U,200 = Tasks 4 and 5 XK 9 of 4 marks {tis possible that raw material availabilty will be restricted to 75,000 kg per period. If this situation arises, 75,000 kg of the material will be purchased and used in each period. Any sales demand not satisfied in a Period would be lost. Task 4 XK 9012 mares Assume that the restriction on raw material supply occurs throughout the budget period and that there would be no inventory of raw material or finished goods at the beginning of Period 1. In this circumstance: ‘What would be the finished goods inventory at the end of Period 2? Correct Answer Because of the restriction on raw materiel supply, the maximum production quantity per period is ow: 75,000 kg / 2.5 kgfunit = 30,000 units. ‘The finished goods inventory at the end of Period 2 will be any excess of production over sales in that period plus the inventory at the start ofthe period (if any): There will nt be any finished goods inventory at the start of Period 2 because sales demand in Period 1 exceeds the maximum production. Sales demand in Period 2 is 26,500 units which is 3.500 units less than production, Finished goods inventory at the end of Period 2s therefore 3,500 units Task 5 XK 9012 mares h of the following may enable Allearop Co to increase output? (1) Introduce a perpetual inventory system (2) Introduce continuous stocktaking (3) Use raw material more efficiently (4) Take advantage of settlement discount Correct Answer only If Allegrop Co uses raw material more efficiently increased production wil result. None of the other listed items will have an effect on output quantity.section Tine Remsning FatA.Management Accounting ACCA . eee i eco a sepa = = Background Kidling Co uses a standard marginal costing system for cost control of its single product. The standard cost ‘card for the product is: $ per unit Direct material 2.5 kg at $12.60 per ko 31.50 Direct labour 2 hours at $11.20 per hour 22.40 Variable production overhead 8.80 62.70 Fixed production overheads are budgeted at $160,200 per month ‘Actual results for the month just ended included: Production 6,200 units, Direct materials 15,240 kg purchased and used at a total cost of $195,920 Direct labour 12,590 hours worked ‘Variable production overhead $52,820 Fixed production overhead $158,670 —Task1 emarks Calculate the following variances: Direct material price 8 v Direct material usage 8 v Direct labour efficiency s v Total variable production overhead 8 v Fixed production overhead expenditure § v = Task 2 marks ‘The direct labour rate variance in the month just ended was $1,908 favourable. ‘What was the total direct labour cost in the month? © $263,924 $280,108 $142,916 > $139,100= Background Kiding Co uses a standard marginal costing system for cost control of its single product. The standard cost ‘card for the product is: $ per unit Direct material 2.5 kg at $12.60 per kg 31.50 Direct labour 2 hours at $17.20 per hour 22.40 ‘Variable production overhead, 8.80 62.70 Fixed production overheads are budgeted at $160,200 per month. ‘Actual results for the month just ended included: Production’ 6,200 units Direct materials 15,240 kg purchased and used at a total cost of $195,920, Direct labour 12,590 hours worked Variable production overnead $52,820 Fixed production overhead $158,670 = Task 4 9% 10F8 marks Calculate the following variances: Correct Answer Notes Direct material price $3,896 Adverse a Direct material usage $3,276 Favourable @ Direct labour efficiency $2,128 Adverse ® Total variable production overhead. $1,740 Favourable @ Fixed production overhead expenditure $1,530 Favourable 6) Notes: (1) Direct material price variance: Actual expenditure on direct materials ~ (actual quantity x standard price) $195,920 — (15,240 kg * $12.60/kg = $192,024) = $3,896 ‘The airect material price variance is ADVERSE because the actual price exceeds the standard . (2) Direct material usage variance: (Actual usage of raw material - standard usage for the actual output) x standard material price: [18,240 kg ~ (6,200 units x 2.5 kg/unit = 1,500 kg)] x $12.60kg = $3,276 The direct material usage variance is FAVOURABLE because the actual usage is less than the standard. (9) Direct labour efficiency variance: (Actual direct labour hours worked — standard hours for the actual output) x standard labour rate [12,590 hours ~ (6,200 units x 2 hours/unit = 12,400 hours)] x $11 20hhour = $2,128 ‘The direct labour efficiency variance is ADVERSE because the actual hours worked exceed the standard, (4) Total variable production overhead variance: Actual variable production overhead expenditure — (actual output « standard variable production overhead rate per unit) $52,820 ~ (6,200 units x $8.80/unit = $54,560) = $1,740 ‘The total variable production overhead variance is FAVOURABLE because the actual expenditure is less than the standard (6) The fixed production overhead expenditure variance is the difference between the actual expenditure and the budgeted expenditure. $158,670 - $160,200 = $1,530, ‘The fixed production overhead expenciture variance is FAVOURABLE because actual expenditure is less than budget. = Task 2 J 2 of marks ‘The direct labour rate variance in the month just ended was $1,908 favourable. hat was the total direct labour cost in the month? $142,916 $139,100 $280,108 $283,924 Correct Answer $139,100 ‘The total direct labour cost is the standard cost of the actual hours worked less the rate variance (deducted because it is favourable and thus actual expenditure is below standard). (12,590 hours x $11 20/hour) - $1,908 = $139,100,Quesions® —tomake 1:81:49 1h TostProgress Details @ Ser mse es aces sections Time Remaining ASE Funsarasomentrecontng = = Background The following information, for the year to 31 December 20XS, is available for Fun Co which operates in the toys and games industry. $7000 Sales 7,860 Gross profit 4,200 Operating profit 590 Capital employed 3,330 (Current assets, 400 The cost of capital of Fun Co is 12% per annum, Fun Co sold 350,000 units in the year ended 31 December 20X8. Total sales for the toys and games industry for the year were $61,280,000. = Task 4 6 marks Calculate the following performance measures for Fun Co for the year ended 31 December 20X9: : Operating profit margin (to one decimal place) % Asset tumover (to one decimal place) [J times. Retun on investment (to one decimal place) % Residual income (to nearest $000) $ ‘000 ‘Market share (to one decimal place) [| % = Task 2 marks Retum on investment (ROI) and residual income (RI) are both measures of investment performance, Does each of the following statements describe a feature of ROI only, RI only, both RO! and RI or neither of the two measures? RO! RI_ Both Nelther only only . Ensure(s) that managers will select investment projects with positive NPV > ae oC ° size Provide(s) a relative measure of investment performance ° 0 0 O Based on profit rather than cash flow 0 0 0 O Task 3 marks ‘An analyst has calculated the folowing ratios for Fun Co for comparison with the toys and games industry S average. Fun Co Toys and games Industry average Current ratio 144 124 Gearing 55% 30% Interest cover 6 5 Acid test 084 oe: Complete the following commentary on Fun Co's performance relative to the industry average. Fun Co's liquicty is, than the industry average. Its capital gearing is, than the industry average, Its abilty to service its loans is \)_ than the industry average, which could mean that Fun Co is, having a V)_ level of profitability than the industry average.= Task 1 XK 806 marks Calculate the following performance measures for Fun Co for the year ended 31 December 20X9: Correct Answer Notes Operating profit margin (to one decimal place) 7.7% a Asset tumover (to one decimal place) 23° times (2) Retum on investment (to one decimal place) 77% @ Residual income (to nearest $'000) $190 0004) Market share (to one decimal place) 125% 6) Notes: (1) Operating profit margin = (operating profit / sales) x 100% (690 /7,680) x 100% = 7.7% (2)Asset turnover = sales / capital employed 7,860 /3,330 = 2.3 times (3) Retum on investment = (operating profit / capital employed) x 100% (690 /3,330) x 100% = 17.7% (4) Residual income = operating profit - interest on capital employed 590 ~ (3,330 x 0.12) = $180 (5) Market share = (Fun Co sales / industry sales) x 100% (7,660 /61,280) x 100% = 12.5% = Task 2 96 0:5 08 2 marks Return on investment (ROI) and residual income (Rl) are both measures of investment performance. Does each of the following statements describe a feature of ROI only, RI only, both ROI and Rl or either of the two measures? Correct Answer ROlonly Rlonly Both —_Nelther Ensure(s) that managers will select investment projects x vith positive NPV Facilitates the comparison of performance of business x units of different size Provide(s) a relative measure of investment performance -X. Based on profit rather than cash flow x ‘Only ROI provides a relative (2%) measure of investment performance and thus facilitates comparison of performance of business units of different size. Both RO! and Rl are based on profit rather than cash flow. Neither ROI nor RI will ensure that managers will select investment projects with a positive NPV. This is because NPV is a discounted cash flow (not profit) evaluation method which takes account of the timing ‘of the cash flows over the life of an investment project. = Task3 9% oF marks ‘An analyst has calculated the following ratios for Fun Co for comparison with the toys and games industry average, Correct Answer Fun Co's liquidity is better than the industry average, Its capital gearing is riskier than the industry average, Its ability to service its loans is better than the industry average, which could mean that Fun Co is having ‘ higher level of profitabiity than the Industry average. Fun Co's liquidity is better than the industry average because, although its acid test ratio is the same, its current ratio is higher. Fun Co's capital gearing Is riskier than the industry average because its gearing ratio indicates a higher proportion of debt, and thus fixed interest commitments, in the capital mix. Fun Co's ability to service its loans is better because its interest cover is higher. Fun Co's higher interest cover could mean that it has a higher level of profitability than the industry average. Despite having more debt the level of profit is able to cover the interest on that debt better.