Management Accounting F2

TEST

1 A business has collected data about a cost, at four different levels of production: when production was100 units, the cost totalled $1,000; when production was 150 units, the cost totalled $1,500; when production was 200 units, the cost totalled $1,500 and when production was 250 units, the cost totalled$2,000. Which of the following best describes the behaviour of this cost?

A A step costB A fixed costC A variable costD A semi-variable (or mixed cost)

2 Which of the following are indirect expenses?

(i) The depreciation of a machine on an assembly line(ii) The hire cost of maintenance tools or equipment for a factory(iii) The salary of a supervisor for the assembly line(iv) Primary packing materials (eg. cartons and boxes)

A (i) onlyB (i) and (ii)C (i), (ii) and (iii)D (i), (ii), (iii) and (iv)

3 Which of the following items would not be suitable as a cost centre within the management accountingsystem of a university?

A A studentB A departmentC A college building

4 The following data relates to the overhead expenditure of a control cleaner at two activity levels: when12,750m2 is cleaned, the overheads incurred were $73,950 and when 15,100m2 is cleaned, the overheads incurred were $83,585. What is the best estimate of the overheads if 16,200m2 are to be cleaned?

A $88,095 B $89,674C $93,960D $98,095

5 A company makes computers. Which one of the following is likely to be a Variable Cost?

a) The salary of the managing director b) The salary of the factory manager c) The wages of shop floor workers paid by piece rate d) The Business rates of the factory

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Management Accounting F2

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7 Which of the following is the appropriate name for planning which considers how the functional heads within a business unit will coordinate employees on a day-to-day basis?

A Strategic planningB Tactical planningC Operational planning

8 A company has the following information about its total production costs:

Output Total costs $ 2,000 10,000 4,000 15,000 6,000 20,500 8,000 28,000

What are the company's fixed costs?A $2,000B $4,000C $10,000D $18,000

9 A business has collected data relating to a particular costs incurred at four different activity levels: when the output was 5 units the cost totalled $20; when the output was 10 units the cost totalled $35; when the output was 50 units the cost totalled $155 and when the output was 75 units the cost totalled $230. Which of the following best describes the behaviour of this cost?

A A semi-variable costB A fixed costC A production costD A variable cost

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Management Accounting F2

10 Which of the following are examples of secondary data?

(i) A count of the number of invoices that we are issuing each week(ii) The average wage of the population taken from government census results(iii) The average wage paid to our employees(iv) The sales for the month as reported on a websiteA (i) and (ii)B (iii) and (iv)C (i) and (iii)D (ii) and (iv)Question 2

11 A sample of people is taken with the same proportion of individuals in separate age bands as in the population as a whole.

This is an example of which type of sampling?

A Random samplingB Systematic samplingC Stratified samplingD Cluster samplingQuestion 3

12 It was decided to take a sample by selecting the 12th item and thereafter every 20th item.

This is an example of which type of sampling?

A Random samplingB Systematic samplingC Stratified samplingD Cluster samplingQuestion 4

13 Which of the following statements about stratified sampling is true?

A The sample will not be representativeB The structure of the sample will not reflect that of the populationC Knowledge is needed of each item in the populationD The sample is chosen entirely at random

14 What is the Economic Order Quantity (EOQ) where monthly demand is 2,000 units, order costs are $45per order, inventory costs $2,160 per unit and the company's cost of capital is 10%.

A 70 unitsB 80 unitsC 90 unitsD 100 units

15 Annual demand for raw material is 1,000,000 units. Each unit costs 15 cents. Procurement costs for each order are $20 and lead time has been estimated as 2 days. There are 250 working days per annum, the carrying cost of inventory is 10 cents per unit and the cost of a stockout is 20 cents per unit.What is the optimal reorder level?A 125B 8,000C 20,000

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Management Accounting F2

Data for a component part with stock number B1422 is as follows:

Minimum usage 1,000 unitsMaximum usage 2,250 unitsLead time (delivery time) 8-16 daysReorder Quantity 14,500 units

16 The Minimum inventory holding below which inventory should not fall (in units) is

17 What is the maximum inventory holding above which inventory should not rise?

18 (a) A company uses 15,000 units of stock item 6786 each year. The item has a purchase cost of $4 per unit. The cost of placing an order for re-supply is $220. The annual holding cost of one unit of the item is 10% of its purchase cost.

Required

(i) What is the economic order quantity for item 6786, to the nearest unit?(ii) What would be the effect of an increase in the annual holding cost per unit on (1) the EOQ and (2) total annual ordering costs?

(b) Data relating to stores item 6787 are as follows.Daily use: 300 unitsLead time for re-supply: 5 – 20 daysReorder quantity: 10,000 units

RequiredWhat should be the reorder level for this stock item, to avoid the possibility of inventory-outs?

19 Entity G uses 105 units of an item of inventory every week. These cost $150 per unit. They are stored in special storage units and the variable costs of holding the item is $4 per unit each year plus 2% of the inventory’s cost.

Required

(a) If placing an order for this item of material costs $390 for each order, what is the optimum order quantity to minimise annual costs? Assume that there are 52 weeks in each year.(b) Suppose that the supplier offers a discount of 1% on the purchase price for order sizes of 2,000 units or more. What will be the order size to minimize total annual costs?

20 A machine has the capacity to operate for 40 weeks each year during a 50-week year. It is used to manufacture several items, including component 3456. Component 3456 is produced in batches. The machine is able to produce 8,000 units of item 3456 per hour. The cost of set-up for each batch is $6,000. Demand for the component occurs at an even rate throughout the year, and totals 2.5 million units per year. The cost of holding one unit of component 3456 in inventory is $1.50 per unit per year.

Required

(a) Calculate the economic batch production quantity for component 3456 to the nearest 10,000 units.

(b) Calculate the total costs per year of setting up the batches and inventory holding costs for this component, assuming the item is produced in batches of the size calculated in your answer to part (a).

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Management Accounting F2

21 A company budgeted to produce 3,000 units of a single product in a period at a budgeted cost per unit built up as follows.

$Direct costs 12Variable overhead 5Fixed overhead 9 —– 26 —–

In the period covered by the budget

(1) Actual production was 3,200 units(2) Actual fixed overhead expenditure was $28,350

Which of the following statements is correct?

A Overheads in the period were $450 over-absorbedB Overheads in the period were $450 under-absorbedC Overheads in the period were $1,450 over-absorbedD Overheads in the period were $1,450 under-absorbed

22 A business has two production cost centres (P and Q) and two service cost centres (X and Y).The total overheads allocated and apportioned to each centre are as follows:

P Q X Y $140,000 $150,000 $60,000 $36,000

Service cost centres are to be apportioned as follows: P Q X YX 30% 70% – – Y 50% 40% 10% –

What are the total overheads for production cost centre P after the reapportionment ofall service cost centre costs?

A $176,000B $177,080C $206,400D $208,920

23 Lerna Co has three production departments and needs to apportion budgeted monthly fixed costs between them. Budgeted costs are as follows: $Rent 3,000Depreciation of machinery 11,000Supervisor’s salary 7,000

The following additional information is available for the apportionment of overheads: Department A Department B Department CArea (square metres) 3,800 3,500 700Value of machinery ($000) 210 110 80

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Management Accounting F2

Number of employees 34 16 20

What is the total budgeted monthly fixed overhead cost for Department C ?

A $1,837.50B $4,462.50C $7,000.00D $10,600.00

24 The production overhead of department P is absorbed using a machine hour rate. Budgeted production overheads for the department were $280,000 and the actual machine hours were 70,000. Production overheads were under absorbed by $9,400.

If actual production overheads were $295,000 what was the overhead absorption rate per machine hour?A $4.00B $4.08C $4.21D $4.35

25 JIT limited manufactures several products at its factory in Spain. The factory has three cost centers manufacturing, finishing and maintenance. The maintenance department is a service department which supports the other two cost centers. Overheads are absorbed into production based on predetermined overhead absorption rates, based on budgeted costs and budgeted levels of activity. Budgeted information for the next financial year is as follows:

Manufacturing Finishing Maintenance $ $ $Budgeted overheads 1,500,000 1,000,000 50,000Use of maintenance dept 75% 25%Budgeted man hours 25,000 10,000 4,000

What is the budgeted overhead cost of one unit of product Q, which requires 1 hour in the manufacturing department and half an hour in the finishing department? (To the nearest $)

A 112B 110C 109D 107

The following information relates to questions 26, 27 and 28

A company budgeted to produce 10,000 items at a rate of 5 hours per unit for January. It actually made 11,000 items in January consuming 52,500 labour hours.

26 What is the labour efficiency ratio (expressed to the nearest whole percentage)?

A 105%B 110%C 95%D 91%

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Management Accounting F2

27 What is the labour capacity ratio (expressed to the nearest whole percentage)?

28 What is the labour production volume ratio (expressed to the nearest whole percentage)?

A 105%B 110%C 95%D 91%

29 An internet service provider operates a customer service centre to deal with domestic and industrialcustomers' enquiries about their internet connection. A standard time is allowed for dealing with each enquiry and employees are paid a bonus for any time saved compared with the standard allowance

The following data relates to the bonus scheme.Basic daily pay for each employee 8 hours @ $15 per hourStandard time allowed to deal with one enquiry 10 minutesBonus payable at basic hourly rate 30% of time saved

The bonus payable to an employee who deals with 60 enquiries in a single day would be $ .

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