The following informatonis available fortwo projects. Only one projectcan be undertaken. Project A Project 8 Internal rate of return (IRR) 15% 17% Discounted payoack period 3.6 years 44 years Netpresentyalue (NFV) $18,300 $16,909 ‘inicn TWO of te foliowang statements are true? Ranking the projects based on discounted payback period would make preject B seem more favourable \U™ Ata costot capital of 17% project 8 wouldnave a zero NFV VU Project A should be accepted because it has the higher NPV Project 8 should be accapied because it has the highar IRR Is each of the following statements about scatter diagrams true or false? True False ‘Scatter ciagrams are graphs which show equations = ‘The xaxis on a scatter diacram is used to represent te independentvariaole _ Accompany uses standard marginal costing. Last month when all sales were atthe standard price, the ‘standard contiouticn from actual sales was $50,000 and the following variances arose $ Total variable costs variance 3800 Adv Total fied costs variance 4,009 Fav ‘Sales volume contibution variance 2000 Fav ‘What was the actual contribution for last month? sYe,S0]‘A company uses standard costing, This year the standard labour costof a products $180.60 per unit The ‘standard labour rte is 886,00 porhour Last menth 2.200 hours ware worked and there was an acverso labour effciency variance of $8,600. This variance was caused entirely by new working pracices introduced by the company. The full effect of tie new working practices is to be incorporated info the new standard cost of tho productfor noxt year. In adcition, alabour rato ineroaso of 10% i to bo built into the now standard cost. Whatis the standard cost per unit of the product for next year? Me s208.12 $198.66 $189.20 8207.28 Vihich TWO of the folowing statements about responsibilty centres are true? \Z Managers of cost centres should be accountable for contraltabe costs only The performance ofa proft centie is measured by its retum on capital A A cost which is not controllable by & junior manager may be controllable by a senior manager ‘There are onlytwo hypes of responsibilty centre Which ofthe fotowing methods of costing describes target costing? Amethod that tagats selected business dapartments and sims fo minimise theircosts “Amathodthat sels target rice by adcing a desired prot margin fo chil cost [Amethod whose targets to reduce unt costwitnout mparing value to he customer (7A method that sets 2 target cost by subtraciing a desired profit margin trom a competiive market price Apublishing companyis researching the reading habits ofthe United Kingdom's population. Itrandomly ‘selects a number of locations from around the Urited Kingdom andithen interviaws everyone whe lives in these locations. What is this approach to sampling known as? Systematic sampling Stratified sampling Quota sampling 7 Cluster sampingA company mantfactures and sells a single product. Next yearthe budgeted total fred production costs are ‘$300,000, the budgeted sales are 100,000 units and the budgeted production is 120,000 units. The budgeted profitfornext year using absorption costing principles is $80,000. ‘What is the budgeted profitfornext year using marginal costing principles? $140,000 $130,000, V7 $30,000 520,000 ‘Which of the following statements about non-financial measures are true? (1) Non-financial measures can be useful for indicating future financial performance (2) Non-financial measures may help t prevent shorttermism Both statments are false Bonn statements are rus Statement 1is rue and statement 2is false Statement tis false and statement? is true Acompany uses a standard absorotion costing system. Last month the actual proft was $600,000. The only variances recorded forthe month were as follows. $000 Sales volume profitvariance 40 adverse Fixed production overhead capacity variance 0 favourable Fixed production overhead efficiency variance 40 sdverse Fixed production overhead volume variance 10 adverse Fixed procuction overnead expenditure 20 favourable Direct labour effciencs variance 16 adverse ‘What was the budget profit forlast month? $505,000 A s.060 $495,000, $515,000Acompany rents its factory for $90,000 per annum. This year 60,000 units have been manufactured in the factory utilising 75% of ts total capacity. Ned yearthe plan is to manufacture 100,000 units oy usina the existing factory at full capacity and by renting just suficient adsitional capaci. The additional capacity is avaliable at the same rental cost per square metre 2s the existing factory \Vihat is the budgeted total rental cost for next year? Tas0o The following statements refer to quaities of goo¢ information’ (1) Itshould be clear and unambigucus to the recipient (2) Itshould be relevantto the needs ofthe recipient (3) ltmust be 100% accurate before the recipientuses it Rae saree mene enCarea Wagicnan Paase aeee8 ‘company uses absorption costing wit a predetermined hourly ed overhead absorption rate. The following situations arose last month: (1) Actual nours worked were less than the bucgeted ours usedto settme predetermined absorption rate 2) Actual overhead expenditure exceeded budgeted expenditure Which ofthe following statements is correct? Situation 1 would cause the overheads to be over absorbed an¢ situation 2 would cause the overheads tp be under absorbed Both situations would cause the overheads to be over absorbed Situation 1 would cause the overheads to be under adsoroed and situation 2 would cause the overheads to-be over absorbed [Both situations woula cause the overreads to be uncer ansoroedThe following statements are about the gracient ofa straight line: (1) The gradient of a straightline is the point atwhich the line crosses the y-ads (2) Ona graph which shows a semi-variable costthe variable cost per unit can be determined using the gradient ofthe line ‘Are the statements true or false? Boh statements re tue \M% Statement tis false anc statement? is true Both statements are false Statement {is rue and statement 2is alee Flexed budgats forthe costoof cleaning in a hotel depend on the number of beds occupiee. The following information is available for different levels of occupancy: Proportion of bads occupied (%) 3 285 Cleaning costs (S) 23241 28,445 In June 76% oteds were occupied. What should the cleaning costs be for June? 928,383 925,433 A 528,202 329,402 A facto consists of two production cost cenites (T 2nd V) and one sence cost cenive (W).The tial allocated ‘and apportioned overhead for each centr is as fllows: 18) vis) wis) 22,000 ‘54,000 30.000 “The seruce cost centre cverneaa is reappomioneate the producion cest centres based on the numper of employees. The number of employees in each cost centre is as follone: T v w 50 0 20 ‘After the reapportionment of service cost centre overhead what isthe total overhead for production cost centre? $7,000 }Vihich of the following statements about motivation are correct? (1) Allempioyees are motivated by money (2) Allemployees should ne mowvated ny ine employer to work towards the mission ofthe organisation 7 Sistomont 2 ony Statement 1 ony Both statements Neither statement ‘An organisation s using regression analysis fo establish the relaionship between two variables (x andy). tis Using six pairs of data forthe analysis. The linear equation forthe relationship is ofthe form +060: Preliminary calculationshave established that x= 00 and? ‘Whatis the value of ain the equation? 9825 40.350 10680 15.000 ‘What are the purposes of having strategic, tactical and operational objectives? (1) To comply with governmentlecislation (2) Toensure goal congruence (3) To neuro that te objectives arising from the mission statment are quantified and. fad downto the entire businass 4 and3 only 4,2and3 A 2nd only 4 and2 only Is each of the following statements about fixed and flexible budgets true or false? True False Flexible budgets can be used atthe planning stage of he budget period ‘The main purpose of a ved oucgetis atthe planning stage of he budget period =A process operates with a normal loss of 20% of input All losses have a netrealisable value of $5.60 per litre Last month 150,000 les were input into the process and the cutout of acod production was 130,000 lires Costs arising last month were $924,000 ‘What was the valuation of the 130,000 itres of output in the process account? (Bt%¥e00] Afiim has used linearregression analysis o establish the telatonship between fatal cost and acivtyin units, What does the gradient of the regression line represent? ‘The xed cost per unt ‘The average cost per unit ‘Total variable costs (7 The variable cost per unit Ahotel has 120 identical bedrooms. ituses labour eficiency percentages to compare the performance of four ‘groups of workers (A, 8, C and D) empioyedto clean the becrooms. The standard time to clean a bedroom is 40 minutes. ‘The following cata for last week are available: Group a Boo¢ D ‘Adtual hours worked 128 © 140124108 ‘Adual number of bedrooms cleaned yoo 207, 188185 Which aroup of workers was the most efficient last week? Group B Group ¢ Group D A croup A ZCohas long-term oan fatilites of $324,000 and shareholders’ funds of $402,000. Wihetis 2 Co's capital gearing ratio? ee ha8% 554% 194% sot| eaci of te following statements about aspects of budget administration true or false? True False ‘Abudget manual isa set finstructons govering aspects ofthe preparation of budgets ‘One ofthe responsioies ofe budget commitiae isto prepare ihe annual budgets a The following detalls have been extracted from the accounts of B Co for the quarter ended 30 June. 1 April -30 June $7000 Net profit 36 Non-currentassets 160 Inventory 12 Recenables 2 Payables 15 Cash at bank 14 Vina ste quick ati forthe quarter endes 30 June? os 10 124 32 ‘Which TWO of the following are most likely to use batch costing? fim making company 1 Abakery Afeotweer manufacturer An oil refinery Acompany uses an overhead absorption rate of $24 per machine hour which was calculated using 80,000, budgetad machine hours for the period. During the same period actual teal overhead expenditure was, ‘$2,100,000 and 84,000 machine hours were recorded on actual production By how much was the foal overhead under or ever absorbed in the period? 04,000 under absorbed ‘$80,000 over absorted ‘595,000 over cbsorted $180,000 under absorbed\Vihich TWO of the following statements about cost control and cost reduction are true? \ Cost control is concerned wit regulating the costs of operating a business Cost reduction is a planned gpprozch to reducing expenditure est reducion aims fo reduce casts te budget level Cest control starts with the assumption that current costlevels are too high ‘Lestmontn a company which uses standard costing purchased a larger quantiy of materia's than wes budgeted. The supplier gave the company a discount an the company's standard purchase price for materials. The company used highly skilled labour paid at arate above the standard wage rete to process all the materials purchased last morth, The wworlferce took less time than the standard tme alowed eutused more ‘material than standard in the production. Were the direct materials variances for fast month adverse or favourable? Adverse Favourable eons a Price variance a ‘Acompany operates a process in which nolosses are incurred. ituses the weighted average valuation method, The process account for last month was as follows: Process Account $ $s ‘Opening work-in-progress £5,000 Finished output 335800 (7.000 units: 65% complete) (14,600 units) input 380,160 Giosing workin-progress 99,360 (€,000 units) 235160, 2354160, \Vihat was the degree of completion of the 8,000 units in the closing work-in-progress? 40% 48% A 54% 50%‘An organisation operates a process that creates two joint products (T andV) Product T has a selling price of, ‘820 per litre and product has a selling price of $50 per ite. Last month joint costs of $600,000 were incurred and the completed production was as follows: Product Litres T 18,000 v 9,000 ‘The organisation uses the sales value method of apportioning joint costs. How much of the joint costs were apportioned to product V last month? $200,000 $360,000 $240,000 $450,000 Lastmonth the opening inventory cf a company was 2,000 units andthe closing inventory was 4,500 units. Using absorption costing this closing inventory was valued at $29,260. Using marginal costing last month's profiiwas $26,000 andusing absorption costing itwas $34,000. ‘nat was te vereble production cost pe unt lastmontn? $450 A s220 5200 5950= Background ‘Dancer Co wishes to buya new packaging machine. Two alternatives are available; Nachine Aand Machine B. Both have an expected fe ofthree years. Dancer Co's management accountanthas begun to prepare the following spreadsheet to evaluate the two machines but he has notyet completed t. The data entered to date Is correct. Machine Bes 2 purchase cost of $19,000 and an expected scrap value in three years time of $4,000. Itwill ‘ganerate 2 contribution of $7,000 per annum before incurring production overheads (including straight line depreciation) of $3,000 per year. In addition maintenance costs of $1,200 per year will be payable each yearin advance. All costs and revenuas, apart from the purchase cost and maintenance costs may be ‘assumedio occur atthe enc ofthe year. Dancer Co's cost of czpital is 10% per year In the spreadsheet, 10 represents the date of the initial investment, ti represents the frst anniversary of this date etc. = A ee 2 ow ee [5 etcaeh tow oqo, Sam) 5600 00 t E Mashine 8 5 o 4 ee 7 Puchaie et) ‘0 cabin 6) 7007000 7900 ieee [10 |Produetion overheads (8) 11 |Maistenance costs ($) 12 |Net cash flow (6) Tack 4 emake Whatis thenet presentvalue (NPV) ofMachine A(tothenearests)? —§ [SGC] What's the non-dacounted payback period of Machine A (tothe nearest [~2}-] —] Years ane docimal place)? What vale should be entered in cet! C102 $ Clono, What value should be entered in cell B11? $ 1.00, = Task? Amare Does each of the following advantages apply to the NPV method, the non-discounted payback method, both of these methods or neither of these methods? NPV Hon-discounted __Both_——_—etther Dayback methods -—_metnoa itconsiders the efiec on reported profits = ‘is cash low based - ‘Ulakes info account ine ame valus ofmoney Ue ‘tselects projects that quicily recoup ther inital vw investment= Background ProductA is one of te preducts that are manufactured by 2 compary. The following direct cast standarés ‘were set, for each batch of 60 units of Product 4 for the period just ended: Materials: 10 kg of Material X at $17.50 per ko Silitres of Material ¥ at $9.20 per lite Labour, 20 hours at $12.50 per hour Variable production overneads were absorbed at a standald rate of $370 per direct Iebour nour. Ficed production overheads were ebsorbedat a standard rate per machine hour using the following budgeted data for th factory: Budgetedfied production averneads 51,000 Budgeted machine hours 4,700 Each batch of Product A requires 8 machine hours. ‘40 batches of Product A were manufactured in the period just endec and the following dlrect resources were used. Material x 46K Material Y ‘p5 litres: Labour ‘e3ehoure =Task 4 marke What was the standard total variable production cost per unitof $ [19 do Product A (to tvro decimal places)? ‘What was the standard fixed production overhead costper unit of $ [—GYo Product A (to two decimal places)? What was the labour efficiency variance? sais Aov Task 2 2 marks Do each of the following fixed production overhead variances occur in a standard marginal costing system? Yes No Expenditure a Eficiency — Volume = = CapacityTask 3 Which of the following variances isiare required in order to reconcile the budgeted proft for a period with the standard profit on actual sales for the same period? (1) Sales volume revenue variance (2) Selling price variance (3) Sales volume profit arance (4) Tetal cost variance 4.204 4 only ‘3 only 2.3and4 — Background Donner Co operates for 365 days per year and makes all ofits cales on credit. A summary ofits current financial information is gven below. ‘Summarised statement of profit or loss Revenue Cost of sales: Operating expenses: Operating proft Finance charges Pron betore tat ‘Summarised statament of financial position Non curentassets Current assets (all receivables) Ordinary share capital Reserves Long term liabilities (69% bankloan) Current liabiities ‘s009] 150,000 60,000 0,000] 40,009] 42,000 28,000] ‘$000 0,000 36,000] 35,006] 16,000 30,000 45,000] 30,009] 20,000] 96,006]Task 4 Omarke Calculate the following based upon Donner Co's summarised financial information. All figures should bbe to one decimal place. Return on capital employed (ROCE) S33 1% ‘Asset tumover rato (based upon capital employed) So _]tmes Receivables days BS-2 says Capital gearing (debtto equity) (€0-F_]% Interest cover ratio SS _]times ~ Task 2 imerks ‘The performance of Donner Co's closest rval, Competitor A, together withthe industry average intheir ‘sector is given below. Competitor A Industry Average| ROCE (%) 35.0 40.0 ‘Asset turnover ratio based upon capital employed 20 2.0] Recewvables (days) 70 65 Capital gearing (debtto equity) (%) 75.0 50.9 Interest cover ratio 2.0 5 ‘Current ratio 15 2a] Based on the figures above, are the statements about Competitor A true or false? Tme False lis captal gearing is r'skierthan the industy averages a Hite operating proft were 20% lower it would make a net loss Ss Ithas 2 smaller operating prof margin than the industy average = Its liquidity postion is worse than the industry average =