Mock Exam: 1

Question#1:
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 organization
(2) The degree of government regulation should be considered when comparing the performance of
public sector and private sector organizations
(3) Financial performance indicators are only relevant to private sector organizations
A. 2 and 3
B. 2 only
C. 1
D. 3 only
Question#2:
Three activities associated with budgeting are as follows:
(1)Preparing the master budget
(2)Determining the principal budget factor
(3)Flexing the budget in line with the actual
What is the correct sequence for these activities?
A. 1, then 2, then 3
B. 2, then 3, then 1
C. 2, then 1, then 3
D. 1, then 3, then 2
Question#3:
The following data for last month relate to a production process in which no work-in-progress is held:
Input 12,800 litres
Normal loss 4% of input
Output 12,500 litres
What was the abnormal loss or abnormal gain for last month?
A. Abnormal loss of 212 litres
B. Abnormal gain of 212 litres
C. Abnormal loss of 300 litres
D. Abnormal gain of 200 litres
Question#4:
The following statements refer to different types of planning in a large organisation:
(1)Strategic planning is concerned with both quantitative and qualitative matters
(2)Tactical planning is concerned with setting long term objectives
(3)Operational planning is concerned with a time horizon starting one year from now
Which of these statement(s) is/are correct?
A. 2 only
B. 2 and 3
C. 1 and 2
D. 1 only
Question#5:
A company used government 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?
A. Secondary and discrete
B. Primary and discrete
C. Primary and continuous
D. Secondary and continuous
Question#6:
The value for money framework used by many organisations, particularly non-profit
organisations.
Which of the following performance management techniques has value for money
as its main objective?
A. The Balanced Scorecard
B. Benchmarking
C. Value management
D. The “three Es”

Question#7:
Which of the following is NOT a dimension which is used to measure performance in service
organizations?
A. Financial performance
B. Resource utilization
C. Innovation
D. Quality inspection in advance
Question#8:
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 to June are worth investigating as the reasons for the
variance are unknown?
A. Overhead expenditure variance of $4,000,000 adverse
B. Materials price variance of $450,000 adverse
C. Sales volume variance of $3,000,000 favorable
D. Total direct labour variance of $400 adverse

Question#9:
Which of the following defines the prime cost of a product?
A. The total production cost of a product
B. The material cost of a product
C. The cost of making the first unit of a product
D. The total direct costs of a product
Question#10:
Which TWO of the following statements relating to value analysis are true?
A. Value analysis attempts to enhance the esteem value of a product at the lowest cost
B. Value analysis is a planned, scientific approach to cost reduction
C. Cost value is the market value of the product or service
D. One of the problems with value analysis is that it discourages innovation
Question#11:
Last month the opening inventory was 6,000 units and the closing inventory was 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?
A. $6.00
B. $4.50
C. $8.25
D. $3.75
Question#12:
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 favorable respectively and 1,000 units were manufactured.
What is the standard direct material cost per unit for product X?
A. $3.80
B. $3.90
C. $4.10
D. $4.30
Question#13:
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 $ ?
Question#14:
Which of the following statements about payback is TRUE?
A. Payback is technically superior to NPV
B. Payback takes into account the time value of money
C. Payback is useful as an initial screening device
D. A change in the cost of capital will affect the payback

Question#15:
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
Question#16:
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?
A. Economy
B. Externality
C. Effectiveness
D. Efficiency
Question#17:
A time 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 20X1= quarter 18 etc)
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 20X2?
A. 79,500
B. 98,500
C. 95,500
D. 97,000
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
Question#19:
Which TWO of the following are true of imposed budgeting?
A. It increases operational managers' commitment to organizational objectives
B. It reduces deliberate overestimation of costs and underestimation of revenues in a budget
C. It is most effective in large organizations
D. Top management prepare a budget with little or no input from operating staff
Question#20:
A company uses the Economic Order Quantity (EOQ) 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 in holding costs on the EOQ and on the total annual cost of
placing orders?
Increase Decrease No effect
EOQ
Total annual cost of placing orders
Question#21:
Which of the following are benefits of using activity based costing?
(1)It recognises that overhead costs are not always driven by the volume of production
(2)It does not result in under or over absorption of fixed overheads
(3) It avoids all arbitrary cost apportionments
(4) It is particularly useful in single product businesses
A. 1 and 2
B. 1 only
C. 1 and 4
D. 2 and 3
Question#22:
Which of the following statements about standard costing are TRUE?
(1) A standard cost is a predetermined estimated unit cost
(2) A standard cost can be used as a control device to help improve performance
(3)A standard cost card shows the unit cost details only of each product
A. 1, 2 and 3
B. 1 and 3 only
C. 2 and 3 only
D. 1 and 2 only
Question#23:
Which of the following 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
A. 1 only
B. 1, 2 and 3
C. 2 only
D. D. 2 and 3 only
Question#24:
A company 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?
A. $37,500
B. $38,300
C. $77,500
D. $76,700
Question#25:
A company uses absorption costing with a 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 absorbed Over absorbed
Actual overhead expenditure was less than the budgeted expenditure
Actual hours worked were less than the budgeted hours used to set
the predetermined overhead absorption rate

Question#26:
In the last period an organization 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.
What was the labour efficiency ratio for the last period (expressed as a % correct to one decimal
place)?
A. 93.1%
B. 103.3%
C. 89.7%
D. 96.3%
Question#27:
Which of the following statements about big data analytics in organisations is/are TRUE?
(1) It will provide a deeper understanding of customer behaviour and purchasing preferences
(2) It will require investment in technology to manage the volume and speed of information accumulated
A. 2 only
B. 1 only
C. Neither 1 nor 2
D. Both 1 and 2
Question#28:
Which TWO of the following data entries are used to record the movement of
inventory in an organisation?
A. Materials purchase requisition
B. Materials purchase order
C. Materials returned
D. Materials transfer

Question#29:
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 2,000Adv
Sales price variance 500Fav
Sales volume contribution variance 1,000Adv
What was the actual contribution for last month?
A. $8,000
B. $7,000
C. $8,500
D. $7,500
Question#30:
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) %?
Question#31:
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
A spreadsheet could be used for preparing flexible budgets for different activity levels
Question#32:
Last month an organization’s direct workers were paid $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 $ ?
Question#33:
A company 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 ?
Question#34:
Which TWO of the following statements about fixed and flexible budgets are true?
A. Comparison of a fixed budget with the actual results is useful for budgetary control purposes
B. Flexible budgeting assumes that most costs are semi-variable
C. Flexible budgets are prepared using marginal costing techniques D. budgets are useful for
monitoring fixed costs Question#35:
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 %?
Section ‘B’
Question#36:
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 additional 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: 1 Marks
Calculate the budgeted inventory of finished goods at the beginning of Period 1. units
Task 2:
Calculate the budgeted production volume of the product in Period 2. units 2 Marks
Task 3: 3 Marks
If the 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 3? kg
What is the budgeted cost of the raw material usage requirement in Period 4? $
Task 4 and 5: 4 Marks
It is possible that raw material availability 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:
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:
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
A. 2, 3 and 4
B. 1, 2 and 4
C. 3 only
D. 1 and 3

Question#37:
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 kg 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

Task 1: 8 Marks
Calculate the following variances and also state weather they are favorable or adverse:
Direct material price $
Direct material usage $
Direct labour efficiency $ Total
variable production overhead $
Fixed production overhead expenditure $
Task 2 2 Marks
The direct labour rate variance in the month just ended was $1,908 favorable. What was the total direct
labour cost in the month?
A. $139,100
B. $142,916
C. $283,924
D. $280,108

Question#38:
The following information, for the year to 31 December 20X9, is available for Fun Co
which operates in the toys and games industry.

$'000

Sales 7,660

Gross profit 1,200

Operating profit 590

Capital employed 3,330

 Mirchawala’s Hub of Accountancy

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 20X9. Total sales for the
toys and games industry for the year were $61,280,000.
Task 1: 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 turnover (to one decimal place) times

Return on investment (to one decimal place) %

Residual income (to nearest $'000) $ '000

Market share (to one decimal place) %

Task 2: 2 Marks
Return 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
ROI and RI or neither of the two measures?
. ROI RI Both Neither
only only
Based on profit rather than cash flow

Provide(s) a relative measure of investment performance

Facilitates the comparison of performance of business units of

different size
Ensure(s) that managers will select investment projects with
positive NPV

From the Desk Of Sir Ahmed Shafi 11

 Mirchawala’s Hub of Accountancy

Task 3: 2 Marks

An analyst has calculated the following ratios for Fun Co for comparison with the toys
and games industry average.

Fun Co Toys and games

industry average
Current ratio 1.4:1 1.2:1
Gearing 55% 30%
Interest cover 6 5
Acid test 0.8:1 0.8:1
Complete the following commentary on Fun Co's performance relative to the industry average.

Fun Co's liquidity is than the industry average.

A. Worse
B. Better

Its capital gearing is than the industry average.

A. Riskier

B. Safer

Its ability to service its loans is (worse/better) than the industry average, which could mean that
Fun Co is having a (lower/higher) level of profitability than the industry average.

End Paper

Best of Luck

From the Desk Of Sir Ahmed Shafi 12