A company manufactures a single product and absorbs fixed production overheads at a predetermined rate based on budgeted expenditure and budgeted units.

Which TWO of the following would definitely lead to an over absorption of fixed production overheads?

TP makes wedding cakes that are sold to specialist retail outlets which decorate the cakes according to the customers’ specific requirements. The standard cost per unit of its most popular cake is as follows:

The general market prices at the time of purchase for Ingredient A and Ingredient B were $23 per kg and $20 per kg respectively. TP operates a JIT purchasing system for ingredients and a JIT production system; therefore, there was no inventory during the period.

What was the material price planning variance for ingredient B?

Calculate the sensitivity of the investment decision to a change in the annual fixed costs.

By how much should the present value of the fixed cost increase, before this project is not viable?

RST is preparing a quotation, on a relevant cost basis, for a special order.

Which TWO of the following are relevant costs that should be included in the quotation?

Since there is no likelihood of them receiving a pay rise in the foreseeable future, your colleagues are considering leaving their current employment and starting their own business.

When preparing the data to evaluate their decision, their current salaries would be:

A manufacturing company produces and sells a single product.

It is preparing its budget for the next period and expects to breakeven.

Budgeted fixed costs are the same as budgeted variable costs and the budgeted contribution to sales ratio is 50%.

If all budgeted costs decreased by 10%, which of the following statements is true?

A company uses limiting factor analysis to identify its optimal production plan. All of the company's products are manufactured in house and cannot be bought in.

What objective is assumed with limited factor analysis?

Which one of the following would NOT be included in a decision to close a division of an organization?

The manager of a recently opened cafe is deciding how many sandwiches to make each day.

The sandwiches are made in the morning before the cafe opens.

If demand exceeds the number of sandwiches made in the morning no extra sandwiches can be made during the day. Any unsold sandwiches are thrown away at the end of each day.

Daily demand is uncertain but is predicted to be 10, 20, 30 or 40 sandwiches.

The following regret matrix has been prepared:

If the minimax regret criterion is used to make the decision, the manager will choose to make:

Company LGF seeks to maximize profits and has a 'risk seeker' attitude when making decisions. The company has to choose between mutually exclusive projects. A range of possible profit outcomes has been estimated for each project along with their associated probabilities.

Company LGF would choose the project with the:

A company reports planning and operational variances to its managers. The following data are available concerning the price of direct material M in the last period. Material M is the only material used by the company. The company operates a just-in-time (JIT) purchasing system.

Which TWO of the following statements about last period are definitely correct based on this information?

The direct material price operational variance was adverse.

Explain the advantages of management participation in budget setting and the potential problems that may arise in the use of the resulting budget as a control mechanism.

Select all the correct answers.

A company is preparing its annual budget and is estimating the number of units of Product A that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

y = a + bx where

y = number of sales units in the quarter a = 10,000 units b = 3,000 units x = the quarter number where 1 = quarter 1 of year 1

Actual sales of Product A in Year 1 were affected by seasonal variations and were as follows:

Quarter 1:14,000 units Quarter2: 18,000 units Quarter 3: 18,000 units Quarter 4: 20,000 units

Calculate the expected sales of Product A (in units) for each quarter of year 2, after adjusting for seasonal variations using the additive model.

A manager in your organisation says, "I have spare capacity and I need a unit cost as a basis for pricing a special one-off contract. You have provided me with a relevant cost of $6.50 per unit and a full production cost of $8.00 per unit. Please explain which unit cost I should use."

Which cost should be used in this decision and why?

Which of the following statements about expected value is NOT correct?

Which ONE of the following describes full cost-plus pricing?

A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.

The company’s existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department’s support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company’s accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:

Calculate the annual profit per machine for each of the three sizes of machine, using the current basis for charging the costs of support activities to machines.

A company produces and sells two products, product A and product B.

What are the total fixed costs when the weighted average contribution per unit is $5 and the breakeven points for product A and product B are 10,000 units and 5,000 units respectively?

Give your answer as a whole number (in 000's).

A decision maker that makes decisions using the minimax regret criterion would be classified as:

Company X is deciding which of Projects A, B or C to undertake. The profit earned from each of the projects is dependent on economic conditions.

The table below details the profit for each of the possible outcomes and the expected value of each of the projects.

What is the maximum amount that should be paid for perfect information about the economic conditions?

For the forthcoming period, the number of units of product L produced must be no more than four times the number of units of product M produced.

The equation to represent this constraint in a linear programming exercise is:

A company produces a product that requires two materials, Material A and Material B. Details of the material quantities and costs for August are given in the table below.

Budgeted and actual output of the product for August was 12,000 units.

The material mix variance for August is:

Changing to a just-in-time, from a traditional, manufacturing environment can affect cost accounting systems.

Which of the following statements is correct?

A company makes and sells three products A, B and C.

The selling prices and costs of the three products, using a traditional absoprtion costing system, are shown in the table below.

The company has undertaken an analysis of overhead costs using activity-based costing (ABC).

The revised overhead costs for products A, B and C are $6, $32 and $55 respectively.

When comparing the figures obtained under the two costing methods, which of the following statements are true?

Select ALL that apply.

A company sells two products, X and Y, which are always sold in the same ratio.

No inventories are held.

The following budgeted data relate to month 10:

What is the budgeted margin of safety in month 10?

EFG is a small business making raspberry jam to sell at local markets. It has recently been approached by a major supermarket to produce a special order for the supply of lemon curd.

Two of the ingredients required are sugar and preservatives, both of which are in inventory.

The sugar has a historic cost of $4 per kg and a replacement cost of $5. It is in regular use for the production of the raspberry jam.

The factory has switched to organic processes and the preservatives are no longer required.

The historic cost of the preservatives was $3 per kg and the replacement cost is $2.50 per kg.

The preservatives can be re-sold to a local competitor for $1 per kg if they are not used in this order.

Which TWO of the following should be included in determining the relevant cost of the special order?

For the past year a manufacturing company has recorded the number of units produced (x) each week and the total production cost (y) for that week. The company intends to use this data to predict future costs.

For the circumstance described above, linear regression is more useful and accurate than the high-low method because:

1. It uses all the sets of data observed to calculate the line of best fit.

2. The coefficient of variation can estimate what percentage of x is due to a change in y.

3. Forecasts remain valid for values for x outside of the observed range.

Which of the above statements are true?

What type of budget is prepared on an annual basis taking current year operating results and adjusting them for expected growth and inflation?

D3 makes 2 types of toilets - the Executive (Ex) and the Classic (CI). Direct labour costs $6 per hr and overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is $28 per machine hour. What is the traditional cost per unit for (Ex) and (CI)?

Product G has the following sales information:

If moving averages of annual sales over 3-year periods are calculated, what is the moving average at Year 3?

When preparing data for a short term decision, which THREE of the following are relevant costs?

The following 5 statements apply the principles of either, both or neither absorption costing and marginal costing.

Place the option labels against the relevant statements.

PL currently earns an annual contribution of $2,880,000 from the sale of 90,000 units of product B. Fixed costs are $800,000 per annum.

The management of PL is considering reducing the selling price per unit to $48. The estimated levels of demand at the revised selling price and the probabilities of them occurring are as follows:

Calculate the probability that the profit will increase from its current level if the selling price is reduced to $48.

The performance of a production manager is assessed on efficient use of materials during the production process.

Actual data and data from the fixed budget for Month 4 are as follows:

What figures should be compared in order to assess the production manager's performance for Month 4?

JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

Identify, using graphical linear programming, the weekly production schedule for products J and L that will maximize the profits of JRL during the next four weeks.

A special contract requires 640 units of component T.

The inventory of 280 units of component T cost $0.20 per unit but the component is not currently used by the company.

The current market price of component T is $0.24 per unit but the inventory could be sold for $0.15 per unit.

The relevant cost of the units of component T required for the special contract is:

Demand for two products, A and B is 1,000 units and 2,000 units respectively. Each unit of Product A requires 8 kg of material and each unit of Product B requires 5 kg of material. The maximum availability of material is 17,200 kg. Contribution per unit of A is $10 and per unit of B is $9.

Place the production volumes of Product A and Product B, that will maximize contribution, in the table.

The simplex method has been used to determine the optimum output of products P, Q, R and S with constraints on resources J, K and L.

In the final simplex tableau, the figure in the product R row and the column for slack variable K is 80.

Which of the following statements is correct?

A company makes a product using two materials, X and Y.

The standard materials required for one unit of the product are:

What is the direct material mix variance for Material X, using the individual valuation basis?