Management Accounting v6.0

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Exam contains 80 questions

Quastir Co manufactures a single product which sells for $48.80 per unit. At this selling price, theprofitper unit is $5.35, after apportionment of the $65,000 of fixed costs. The budgeted production and sales volume is 20,000 units.
What is the margin of safety, expressed in units (to the nearest unit)?

  • A. 7,559
  • B. 7,850
  • C. 12,150
  • D. 12,441


Answer : D

At the beginning of March 2012, INS Plc has an opening balance of $60,000 on its receivables ledger. Sales of $160,000 have been budgeted for March and it is budgeted that 60% of these will be settled in March after a cash discount of 2.5%.
If 23% of the opening receivables are still outstanding at the end of March, what will be the budgeted receivables figure at that date?

  • A. $76,200
  • B. $77,800
  • C. $80,200
  • D. $110,200


Answer : B

Which of the following statements about transfer pricing is correct?

  • A. Market price should always be used as the transfer price
  • B. Transfer prices allow divisions to operate with complete autonomy
  • C. Cost-based transfer prices should be based on full cost
  • D. The use of transfer prices is intended to focus attention on corporate performance


Answer : D

The budgeted overheads of Nambro for the next year have beenanalyzedas follows:
$000
Purchase order processing costs450

Production run set up costs180 -

Machine running costs640 -
In the next year, it is anticipated that machines will run for 32,000 hours, 6,000 purchase orders will be processed and there will be 450 production runs.
One of the companys products is produced in batches of 500. Each batch requires a separate production run, 30 purchase orders and 750 machine hours.
Using Activity Based Costing, what is the overhead cost per unit of the product?

  • A. $0.99
  • B. $1.59
  • C. $35.30
  • D. $495.00


Answer : C

Revue plc uses a standard costing system. The budget for one of its products for
September includeslaborcost (based on 4 hours per unit) of $117,600. During September
3,350 units were made which was 150 units less than budgeted. Thelaborcost incurred was
$111,850 and the number oflaborhours worked was 13,450.
Thelaborrate variance for the month was:

  • A. $710 (F)
  • B. $1,130 (F)
  • C. $1,130 (A)
  • D. $5,750 (A)


Answer : B

Toshi Ltd currently sets its selling price at $10, which achieves a 25% mark-up on variable cost.
Annual production and sales volume is 100,000 units and annual fixed costs are $80,000.
How much would the selling price need to be increased in order to double profit if costs, production and sales volume remain unchanged?

  • A. 12%
  • B. 17%
  • C. 20%
  • D. 25%


Answer : A

A hospital management team assess performance using value for money. The following performance measures are reported by surgical departments: i) The number of patients who need to be re-admitted following surgery. ii) The staff cost of each surgical procedure.
Which element of value for money is assessed by each measure?

  • A. i) Economy, ii) Efficiency
  • B. i) Efficiency, ii) Effectiveness
  • C. i) Effectiveness, ii) Efficiency
  • D. i) Effectiveness, ii) Economy


Answer : D

Which of the following statements about approaches to pricing is correct?

  • A. Price skimming involves setting a low price on initial entry to a market.
  • B. Cost-plus pricing contracts take account of anticipated demand for the product.
  • C. Penetration pricing is appropriate when there are similar competing products.
  • D. Penetration pricing involves setting a high price on initial entry to a market.


Answer : C

Bush has been asked by his bank to produce a budgeted income statement for the six months ending on 31 March 2014. He forecasts that monthly sales will be $3,000 for
October, $4,500 for each of November and December, 2013 and $5,000 per month from
January 2014 onwards.
Selling price is fixed to generate a margin on sales of 33.33%.
Overhead expenses (excluding depreciation) are estimated at $800 per month. He plans to purchase non-current assets on 1st October costing $5,000, which will be paid for at the end of December and are expected to have a five-year life, at the end of which they will possess a nil residual value.
The budgeted net profit for the six months ending 31 March 2014 is:

  • A. $3,200
  • B. $3,700
  • C. $3,950
  • D. $8,200


Answer : B

The accountant of Repati Co has discovered that the value of a prepayment has been understated.
How are the financial statements affected when the prepayment is corrected?

  • A. Assets: No change, Liabilities: Reduced, Capital: Increased
  • B. Assets: Increased, Liabilities: No change, Capital: Reduced
  • C. Assets: Reduced, Liabilities: Reduced, Capital: No change
  • D. Assets: Increased, Liabilities: No change, Capital: Increased


Answer : D

The directors of Sec Co are carrying out an impairment review of the companys non- current assets for the financial statements for the year to 31 October 2010. They have the following information about a particular asset:
Carrying amount (at 1 November 2009)$380,000
Depreciation charge for year to 31 October 2010$76,000

Market value$285,000 -
Expected costs of selling$20,000

Value in use$250,000 -
What carrying value should be included in the statement of financial position at 31 October
2010?

  • A. $250,000
  • B. $265,000
  • C. $285,000
  • D. $304,000


Answer : B

The annual salary paid to a business's financial accountant would best be described as:

  • A. A variable cost.
  • B. A fixed production cost.
  • C. Part of prime cost.
  • D. A fixed administrative cost.


Answer : D

The cost of one of the products produced by Veetee Co is currently calculated as follows:

Direct costs$5.78 -
Overheads$9.38 (based on 0.4laborhours per unit)

Total cost$15.16 -
A cost analysis exercise indicated that there are two categories of overhead costs, processing and handling. The table below shows the total cost of each activity, and the volume of the associated cost drivers.
ActivityCostCost driversVolume of cost driver
Processing$17,500Laborhours2,187.5
Handling$33,810Purchase orders48,300
Six purchase orders are required for each unit produced.
If the data from the cost analysis exercise is used as the basis for Activity Based Costing, what is the revised cost per unit?

  • A. $7·40
  • B. $13·18
  • C. $14·48
  • D. $8·70


Answer : B

Devin Co sells a single product at a selling price of $85. Direct costs are $38 per unit and overheads are $24 per unit. 60% of overheads represent the recovery of fixed costs. Both sales and production are budgeted to be 50,000 units.
How many units to be sold to reach at the breakeven point (to the nearest unit)?

  • A. 14,724
  • B. 19,251
  • C. 25,532
  • D. 31,304


Answer : B

The debt/equity ratio of Cretac Co at 31 May 2009 is higher than the debt/equity ratio at 31
May 2008.
Which of the following choices would be a reason for the increase?

  • A. A loan due for repayment in 2010 has been replaced by a loan due over the three years to 2012.
  • B. The terms of a fixed rate loan have been renegotiated and the interest rate will increase from June 2009.
  • C. In February 2009 the company reduced the number of shares in issue by buying back a number of shares.
  • D. In March 2009 the shareholders agreed to an increase in the amount the company can borrow to finance expansion.


Answer : C

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Exam contains 80 questions

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