MA1 LRP Questions D11

KAPLAN PU BL ISHING 1

QUESTIONS

MA1 : MANAGEMENT INFORMATIO N

2 KAPLAN PU BL ISHING

BUSINESS ORGANISATION

1 Which of the following best summarises the differences between financial and management accounting?

A Financial accounting has a historical emphasis and is most useful to company management; management accounting is forward looking and is most useful to shareholders

B Financial accounting is forward looking and is most useful to company management; management accounting has a historical emphasis and is most useful to shareholders

C Financial accounting is forward looking and is most useful to shareholders; management accounting has a historical emphasis and is most useful to company management

D Financial accounting has a historical emphasis and is most useful to shareholders; management accounting is forward looking and is most useful to company management

2 Information and data

(a) Briefly explain the relationship of information to data. (4 marks)

(b) Explain the following attributes that you might use to measure the quality of information:

(i) Timeliness (4 marks)

(ii) Accuracy (4 marks)

(iii) Relevance (4 marks)

(iv) Economy (4 marks)

(v) Understandability (16 marks)

(Total: 20 marks)

3 Which of the following documents is not associated with the sales records of a company?

A Delivery note

B Quotation

C Petty cash claim

D Invoice

4 For which of the following is a cost centre manager responsible?

A Costs only

B Revenues only

C Costs and revenues

D Costs, revenues and capital investment

LECTURER RESOURCE PACK : QUESTIO NS


MANAGEMENT INFORMATION

5 Which of the following is data?

A budgeted labour hours

B labour turnover by department

C Employees timesheets

D Days sick leave by type of employee

6 All of the following are cost units except:

A a guestnight in an hotel

B the assembly department in a car factory

C a batch of cakes in a bakery

D a litre of paint in a paint factory

7 Which of the following statements is NOT correct?

A Cost accounts should be timely

B Cost accounts can assist in providing estimates for the future

C Cost accounts must comply with accounting standards

D Cost accounts can assist with budgeting

8 Cost centres are:

A units of product or service for which costs are ascertained

B amounts of expenditure attributable to various activities

C functions or locations for which costs are ascertained and related to cost units

D a section of an organisation for which budgets are prepared and control exercised

9 CHARACTERISTICS

(a) Briefly describe three characteristics of useful information, giving one example of how each would apply to cost accounting information. (5 marks)

(b) Discuss the importance of non-financial information within a management information system. (5 marks)

(Total: 10 marks)



CLASSIFICATION OT COSTS AND COST BEHAVIOUR

10 Which of the following is most likely to be classified as a direct cost?

A factory rent

B supervisor costs

C depreciation

D material

11 Which of the following graphs depicts total variable cost?

(a) (b)

(c) (d)

12 The table shows the total of Cost Y at different production levels of Product X:

Units of Product X Total Cost Y ($000)

50 60

100 60

150 60

200 90

250 90

What could have been the cause of the increase in cost?

A Increased fuel and maintenance costs for delivery vehicles

B Increased storage requirements

C Loss of discounts on raw materials

D Pay increase for direct labour.

13 Which of the following describes a cost unit?

A cost per unit of output

B direct costs

C unit of product

D production department



14 The following classifications may be applied to costs:

(i) direct

(ii) fixed

(iii) period

(iv) production

Which of the above classifications could be applied to the cost of raw materials used by a company in the manufacture of its range of products?

A (i) only

B (i) and (iv) only

C (ii) and (iii) only

D (ii), (iii) and (iv) only

15 COST ANALYSIS

The analysis of total cost into its behavioural elements is essential for effective cost and management accounting.

Required:

Comment on the statement above, illustrating your answer with examples of cost behaviour patterns. (5 marks)



CODING OF COSTS AND INCOME

16 CODING SYSTEMS

Explain, using examples, the following types of coding systems:

(a) sequence codes

(b) block codes

(c) significant digit codes

(d) faceted codes. (12 marks)

17 Which of the following are used in a coding system for accounting transactions?

A Department code

B General (Nominal) ledger code

C Product code

D All of the above



MATERIALS COST

This information is relevant for questions 18 to 23.

A business has inventories of material A of 400 units valued at $2.20 per unit at 1 September. During the month of September the movements of material A were as follows:

5 September Issue 250 units

10 September Receipt 500 units @ $2.50 per unit


18 September Receipt 400 units @ $2.70 per unit


18 What is the cost of issues using the FIFO method?

A $2,913

B $2,980

C $2,975

D $2,990

19 What is the value of the closing inventory using the FIFO method?

A $242

B $251

C $286

D $297

20 What is the value of issues using the LIFO method?

A $2,913

B $2,924

C $2,980

D $2,968

21 What is the value of closing inventory using the LIFO method?

A $242

B $251

C $286

D $297



22 What is the cost of issues using the weighted average cost method?

A $2,913

B $2,926

C $2,980

D $2,968

23 What is the value of closing inventory using the weighted average cost method?

A $242

B $251

C $284

D $297

24 An enterprise uses a raw material T. Movements in T for the month of August are set out below.

Goods received Issued to production Date kilos price per kilo Date kilos

12 August 4,000 $5.00 15 August 3,900 19 August 1,200 $6.00 21 August 1,100 24 August 2,800 $7.50

There were no inventories of T held at 1 August.

What would be the inventory valuation at 31 August on a FIFO basis, to the nearest $?

A $22,200

B $22,500

C $15,000

D $18,000

25 Aberdeen Ltd holds inventories of ratchets that it uses in production. Over the last month receipts and issues were as follows:

Receipts Issues

Opening balance 200 at $5 7 May 400

5 May 300 at $4.50 23 May 400

12 May 100 at $6 30 May 200

22 May 400 at $5.50

29 May 200 at $7

If a LIFO inventory valuation method were used, the cost of ratchets issued to production in the month would be:

A $5,150

B $5,350

C $5,450

D $,550



26 The following statements relate to raw material pricing:

1 Profit will be lower using FIFO rather than LIFO.

2 Production costs will be higher using weighted average pricing rather than FIFO.

Are the above statements true or false in a situation where raw material prices are rising consistently over time?

Statement 1 Statement 2

A False False

B False True

C True False

D True True

27 OMEGA

Omega Limited uses the weighted average method of pricing raw material issues. A weighted average price (to three decimal places of a dollar) is calculated after each purchase of material.

Receipts and issues of material Alpha for a week were as follows:

Receipts into inventory Issues to production Day Kg $ Day Kgs

1 2,800 2,184.00 2 3,400 4 3,260 2,536.28 5 2,500

At the beginning of the week, material Alpha inventory was 6,080 kgs at a cost of $0.765 per kg. Of the issues of material on Day 2, 120 kgs were returned to inventory on Day 3. Of the receipts of inventory on Day 1 there were 440 kgs returned to the supplier on Day 4.

(a) Calculate the value of net issues to production for the week.. (3 marks)

(b) Calculate the value of the closing inventory. (2 marks)

(c) Calculate the value of issues and closing inventory if the FIFO method had been used. (5 marks)

(Total: 10 marks)



28 INVENTORY TRANSACTIONS

Listed below is a record of a series of inventory transactions undertaken by a wholesale business during the month of March for one of its inventory items.

Inventory Item ABC Units Value $

1 March opening inventory 350 2,800 3 March receipt 500 4,125 8 March issue 650 10 March receipt 500 4,325 18 March issue 425 23 March issue 100 25 March receipt 500 3,950

Required:

(a) Calculate the value of each of the three issues of Inventory Item ABC using the last in, first out (LIFO) method and the first in, first out (FIFO) method. (12 marks)

(b) Assuming there were no further transactions for Inventory Item ABC calculate the closing inventory values which would result from the LIFO and from the FIFO methods. (4 marks)

(Total: 16 marks)

29 BROADVALE

It is difficult for a company to identify the actual price paid for an individual item of material held in inventory. As a result a company can use a number of different methods for pricing materials issued to production.

Required:

Give the names of three methods of pricing materials issues. (3 marks)



LABOUR COSTS

30 Given below is a graph of a labour cost:

Activity level

$

What type of labour cost is this?

A A straight piece rate system.

B A straight time rate system.

C A differential piece rate system.

D A piece rate scheme with a minimum guaranteed amount

31 A company has a budget for two products A and B as follows:

Product A Product B

Sales (units) 2,000 4,500

Production (units) 1,750 5,000

Labour:

Skilled at $10/hour 2 hours/unit 2 hours/unit

Unskilled at $7/hour

3 hours/unit 4 hours/unit

What is the budgeted cost for labour for the period?

A $135,000

B $176,750

C $298,000

D $311,750



32 At the beginning of the year, a company employed 4,600 individuals. During the year, 1,800 individuals were recruited and at the end of the year, the company employed a total of 5,500 individuals.

What was labour turnover during the year, as a percentage of the average employment level? Give your answer to the nearest 1%.

A 9%

B 17%

C 18%

D 20%

33 An employee is paid on a piecework basis. The basis of the piecework scheme is as follows:

1 to 100 units $0.20 per unit



with only the additional units qualifying for the higher rates. Rejected units do not qualify for payment.

During a particular day the employee produced 210 units of which 17 were rejected as faulty.

What did the employee earn for their days work?

A $47.90

B $53.00

C $57.90

D $63.00

34 TWISTER

Twister Limited operates a factory which employed 80 workers throughout the four week period just ended. Direct employees were paid at a basic rate of $8.00 per hour for a 38 hour week. Total hours of the direct workers in the four week period were 13,056. Overtime is paid at a premium of 35%. During the period 376 hours of direct workers time was registered as idle.

Calculate:

(a) The total wages cost. (3 marks)

(b) The labour overheads. (3 marks)

(Total: 6 marks)



35 PIECEWORK BONUS

The following information is available:

Normal working day 8 hours

Guaranteed rate of pay (on time basis) $5.50 per hour

Standard time allowed to produce one unit 3 minutes

Piecework price $0.1 per standard minute

Premium bonus 75% of time saved, in addition to hourly pay

Required:

For levels of output of 80 units, 120 units and 210 units produced in one day, calculate earnings based on:

(a) piecework, where earnings are guaranteed at 80% of time-based pay;

(b) premium bonus system. (8 marks)



EXPENSES AND ABSORPTION OF OVERHEADS

36 EXPENSE CLASSIFICATION

Within the costing system of a manufacturing company the following types of expense are incurred:

Reference number

1 Cost of oils used to lubricate production machinery 2 Motor vehicle licences for lorries 3 Depreciation of factory plant and equipment 4 Cost of chemicals used in the laboratory 5 Commission paid to sales representatives 6 Salary of the secretary to the Finance Director 7 Trade discount given to customers 8 Holiday pay of machine operatives 9 Salary of security guard in raw material warehouse

10 Fees to advertising agency 11 Rent of finished goods warehouse 12 Salary of scientist in laboratory 13 Insurance of the company's premises 14 Salary of supervisor working in the factory 15 Cost of typewriter ribbons in the general office 16 Protective clothing for machine operatives

Required:

(a) Place each expense within the following classifications:

production overhead; selling and distribution overhead; administration overhead; research and development overhead.

Each type of expense should appear only once in your answer. You may use the reference numbers in your answer. (8 marks)

(b) Give three reasons why direct production labour cost might be regarded as a fixed cost rather than as a variable cost. (7 marks)

(Total: 15 marks)



The following information is to be used for questions 37 and 38 below.

Budgeted labour hours 48,500 Actual labour hours 49,775 Budgeted overheads $691,125 Actual overheads $746,625

37 Based on the data above, what is the labour hour absorption rate (to 2 decimal places) as conventionally calculated?

A $13.88

B $14.25

C $15.00

D $15.39

38 The amount of under or over absorption is:

A 55,500 over absorbed

B 55,500 under absorbed

C 37,331 under absorbed

D 37,331 over absorbed

The following information is to be used for questions 39 and 40 below.

Actual overheads 225,900 Actual machine hours 7,530 Budgeted overheads 216,000

39 Based on the data above and assuming that the budgeted overhead absorption rate was $32 per machine hour, how many machine hours (to the nearest hour) were budgeted to be worked?

A 6,750

B 7,059

C 7,200

D 7,530

40 The amount of under or over absorption is:

A $15,060 under absorption

B $15,060 over absorption

C $9,900 under absorption

D $9,900 over absorption



41 A business absorbs its overheads on the basis of direct labour hours. The budgeted overhead was $156,000 and during the period there was an over-absorption of overhead of $6,000. The actual direct labour hours worked in the period were 34,000 and the actual fixed overhead was $170,800.

What was the budgeted number of direct labour hours (to the nearest 100)?

A 30,000

B 32,100

C 34,000

D 34,200

42 Z Ltd has two production cost centres A and B. Its budget for 20X1 showed:

Cost centre A B

Production overhead $140,00 $160,000 Direct labour hours 50,000 Machine hours 40,000

It absorbs overheads on the basis of direct labour hours in B and machine hours in A.

For the period ended 30 June 20X1, the actual overhead incurred in cost centre A was $73,500 and 21,500 machine hours had been worked.

The under or over-recovery of overhead for the period was:

A $1,800 under-recovered

B $1,800 over-recovered

C $1,750 over-recovered

D $1,750 under-recovered

43 Production supervisory salaries are classed as production overhead. Which is the most appropriate basis of apportioning this cost to cost centres?

A Number of employees (both full-time and part-time)

B Machine hours

C Direct labour hours

D Number of machines

44 A manufacturing company absorbs overheads based on units produced. In one period 110,000 units were produced and the actual overheads were $500,000. Overheads were $50,000 over-absorbed in the period.

The overhead absorption rate was:

A $4.00 per unit

B $4.50 per unit

C $5.00 per unit

D $5.50 per unit



45 PRIDE CERAMICS

Pride Ceramics has two production departments A and B and two service departments X and Y.

Some of the budgeted overheads for the year ending 30 June 20X3 have already been allocated to the departments as shown below:

Production Production Service Service Total Dept A Dept B Dept X Dept Y

$ $ $ $ $

Allocated overheads 280,000 141,345 82,655 32,000 24,000

However, the remaining overheads, as detailed below still have to be apportioned to each of the departments:

Electricity $24,000 Indirect labour $36,000 Rent $64,000 Machine maintenance $12,000

The following information is also available:

Dept A Dept B Dept X Dept Y Machine operating hours 12,000 10,000 1,500 500 No of indirect employees 2 2 1 1 Floor area (m2) 21,000 19,500 4,500 3,000

The service departments are expected to spend their time as follows:

Dept A Dept B Dept X Dept Y Department X 40% 60% Nil Department Y 50% 30% 20%

Required:

(a) Prepare an overhead apportionment schedule. The schedule should include the overheads already allocated and the overheads that still require apportionment. (8 marks)

(b) Re-apportion the service department overheads to the other departments. (7 marks)

Note: You are not required to calculate overhead absorption rates. (Total: 15 marks)



46 XJ PRODUCTS

An organisation has two production departments, cutting and assembly, and two products XJ1 and XJ2.

Information about the departments and products is as follows:

Cutting Assembly

Budgeted overhead $67,000 $42,000 Labour hours for one unit of Product XJ1 2.50 0.75 Labour hours for one unit of Product XJ2 1.00 1.00 Product XJ1 Product XJ2

Budgeted production (units) 20,000 10,000

Required:

Calculate:

(a) the overhead absorption rate per labour hour for each department; (6 marks)

(b) the total amount of overhead to be included in the cost of each of the two products.

(4 marks)

(Total: 10 marks)

47 REDGATE

Redgate is a manufacturing company. The budgeted factory overheads for next year, ending on 31 December 20X2, have already been apportioned as shown below:

Production departments Service departments

Total $ Cutting $ Assembly $ Storeroom $ Maintenance $

Apportioned overheads

340,000 210,000 80,000 22,000 28,000

The following information is also relevant:

Cutting department

Assembly department

Storeroom Maintenance

Material requisitions 140 60 20

Maintenance hours 210 90

Machine hours 8,750 1,750

Labour hours 7,000 19,000

Required:

(a) Re-apportion the service departments overheads using an appropriate basis in each case. (6 marks)

(b) Calculate overhead absorption rates for the production departments based on the information provided. (4 marks)

(Total: 10 marks)



MARGINAL COSTING AND ABSORPTION COSTING

48 A business reported an absorption costing profit of $26,500 for the latest period where inventory levels decreased by 200 units during the period. If the fixed overhead absorption rate is $7.40 per unit what would the profit be under marginal costing principles?

A $25,020

B $26,500

C $27,980

D $28,200

49 A business has opening inventory levels of 1,270 units. During the period 13,500 units were sold and 14,200 units were produced. The profit under absorption costing was $84,500 and under marginal costing was $78,550.

What is the fixed overhead absorption rate per unit (to the nearest penny)?

A $5.95

B $6.26

C $8.50

D $9.23

50 A business made 24,000 units of its product at a total cost of $40. The product was sold at $55 and 55% of its costs were variable. The sales for the period were 20,000 units.

If there were no opening inventories what will be the difference between the profit calculated using absorption costing principles and marginal costing principles?

A Absorption costing profit will be higher by $72,000.

B Absorption costing profit will be lower by $72,000.

C Absorption costing profit will be higher by $88,000.

D Absorption costing profit will be lower by $88,000.



The following information relates to questions 51 to 55.

RCW Ltd manufactures a single product. Its planned output for 20X1 was 50,000 units. Its unit product cost comprises:

$ Direct labour 7.50 Direct material 4.50 Variable overhead 1.5 hrs $10.50/hr 15.75 Fixed overhead 1.5 hrs $4.00/hr 6.00 33.75

Its selling price is $50 per unit.

51 If it uses a marginal costing approach to producing its income statement, what would be the amount of total contribution shown in the budget statement for 20X1? (Assuming no closing and opening inventories were held)

A $812,500

B $1,112,500

C $1,900,000

D None of these

52 If the forecast inventory at 31 December was 4,200 units and it was valued on the basis of marginal cost, what would be the value of inventory?

A $50,400

B $141,750

C $91,350

D $116,550

53 What is the value of the total budgeted fixed overhead for the year?

A $250,000

B $280,000

C $300,000

D $290,000



54 What would be the budgeted profit for the year based on marginal costing technique? (Assuming it holds 4,200 in closing inventory)

A $1,019,050

B $719,050

C $1,270,950

D None of these

55 What would be the budgeted profit based on full absorption costing? (Assuming that closing inventory was 4,200 units)

A $719,050

B $744,250

C $1,545,750

D $750,100

56 BUHNER

Buhner Limited makes and sells a single product called the Royal.

The cost card for one unit of Royal is shown below.

$ Direct materials 3 Direct labour 6 Variable production overhead 2 Fixed production overhead 4 Variable selling cost 5

The sales price of one unit of Royal is $21.

Budgeted fixed overheads are based on budgeted production of 5,000 units.

Inventory of finished goods at the start of the period was 1,000 units. This had risen to 4,000 units by the end of the period.

During the period 3,000 units were sold and actual fixed production overheads were $25,000.

Required:

(a) Prepare an income statement.

(i) Using marginal costing. (4 marks)

(ii) Using absorption costing. (4 marks)

(b) Explain why there is a difference between the two profit/loss figures calculated in part (a). (2 marks)

(Total: 10 marks)



57 PERIOD 1 AND PERIOD 2

A company manufactures a single product with the following unit costs:

Variable manufacturing $4.50 Fixed manufacturing $3.50 Variable selling and administration $0.80 Fixed selling and administration $3.00

Fixed manufacturing costs per unit are based on a predetermined absorption rate, established at normal activity of 90,000 production units per period. Fixed selling and administration costs are absorbed into the cost of sales at 20% of selling price. Under-/over- absorbed overhead balances are transferred to the income statement at the end of each period.

The following information is available for two consecutive periods:

Period 1 Period 2 Units $ Units $

Sales 85,000 1,275,000 90,000 1,350,000 Production 80,000 92,000 Variable manufacturing costs 360,000 414,000 Fixed manufacturing costs 320,000 315,000 Variable selling and administration costs 68,000 72,000 Fixed selling and administration costs 270,000 270,000

Required:

(a) Prepare the income statement for each of the two periods showing clearly both gross and net profit and any over-/under- absorbed overheads. (7 marks)

(b) Explain how the profits would differ from those calculated in (a) above if a marginal costing system were employed. (3 marks)

(Total: 10 marks)



58 DUO

Duo makes and sells two products, Alpha and Beta. The following information is available for the period just gone:

Production (units) Alpha 2,500 Beta 1,750 Sales (units) Alpha 2,300 Beta 1,600

Financial data: Alpha Beta $ $

Unit selling price 90 75 Unit variable costs Direct materials 15 12 Direct labour ($6/hr) 18 12 Variable production overheads 12 8

Fixed costs for the company in total were $110,000 in the period. Fixed costs are recovered on direct labour hours.

Required:

(a) Prepare an income statement for the period based on marginal cost principles. (5 marks)

(b) Prepare an income statement for the period based on absorption cost principles. (6 marks)

(c) Comment on the position shown by your statements. (4 marks)

(Total: 15 marks)



JOB, BATCH AND PROCESS COSTING

The following data are to be used for questions 59 to 61 below.

A firm makes special assemblies to customers orders and uses job costing. The data for a period is:

Job number Job number Job number AA10 BB15 CC20 $ $ $ Opening WIP 26,800 42,790 0 Material added in period 17,275 0 18,500 Labour for period 14,500 3,500 24,600

The budgeted overheads for the period were $126,000.

59 What overhead should be added to job number CC20 for the period?

A $24,600

B $65,157

C $72,761

D $126,000

60 Job number BB15 was completed and delivered during the period and the firm wishes to earn 33 31 % profit on sales.

What is the selling price of job number BB15?

A $69,435

B $75,521

C $84,963

D $138,870

61 If jobs AA10 and CC20 are not completed, what was the approximate value of closing work-in-progress at the end of the period?

A $58,575

B $101,675

C $147,965

D $217,323



62 JOB X

A company has been requested by one of its customers to quote a price to make a particular product, Product X. The following information has been obtained with respect to the cost of manufacturing the item:

Direct costs Department

Direct materials Direct labour hours Hourly rate of pay

A $700 210 $6.00 B $800 70 $5.00 C $850 50 $4.00

Factory overhead is added to direct costs to obtain the total factory cost and is calculated using a pre-determined absorption rate based on labour hours. These rates can be obtained from the following information:

Department Budgeted factory overheads Budgeted direct labour hours A $72,000 24,000 B $80,000 20,000 C $60,000 12,000

Administration overhead is added to the total production cost at a rate of 12% of the total production cost to obtain the total cost of Product X.

It is company policy to earn a profit that is equivalent to 20% of the selling price.

Required:

Prepare a job cost card for Product X, clearly showing sub-totals for direct materials, direct labour, factory overhead, total production cost, administration overhead, total cost, profit and selling price. (15 marks)



The following data are relevant for questions 63 to 65.

F Ltd uses process costing. In Process 2 the normal loss is 4% of input and all losses have a scrap value of $0.20 per kg.

Last period the input from Process 1 was 8,500 kg valued at $2.68 per kg and the following additional costs were incurred:

Additional material 4,250 kg Total cost $1,615

Labour cost $2,278

Overheads Absorbed at 150% of labour cost

Actual output to finished goods was 12,700 kg.

There was no opening or closing work-in-progress in the period.

63 The scrap value of normal loss in the period was:

A $0

B $34

C $68

D $102

64 The abnormal gain or loss for the period was:

A Abnormal loss of 50 kg

B Abnormal gain of 120 kg

C Abnormal gain of 290 kg

D Abnormal gain of 460 kg

65 The average cost per kg of output was:

A $2.36

B $2.45

C $2.68

D $5.13

66 An abnormal gain arises in a process when:

A the output from the process is in excess of normal production (inputs less normal loss allowance)

B the output from the process is less than normal production (inputs less normal loss allowance)

C the amount of loss is as expected

D losses have a scrap value



67 When valuing WIP in process costing, partly finished units are converted to:

A cost units

B equivalent units

C unit costs

D waste units

68 A company manufactures Chemical X, in a single process.

At the start of the month there was no work-in-progress. During the month, 300 litres of raw material were input into the process at a total cost of $6,000. Conversion costs during the month amounted to $4,500. At the end of the month, 250 litres of Chemical X was transferred to finished goods inventory. The remaining work-in-progress was 100% complete with respect to materials and 50% complete with respect to conversion costs. There were no losses in the process.

The equivalent units for closing work-in-progress at the end of the month would have been:

Material Conversion costs

A 25 litres 25 litres

B 25 litres 50 litres

C 50 litres 25 litres

D 50 litres 50 litres

69 A company needs to produce 340 litres of Chemical X. There is a normal loss of 10% of the material input into the process. During a given month the company did produce 340 litres of good production, although there was an abnormal loss of 5% of the material input into the process.

How many litres of material were input into the process during the month?

A 357 litres

B 374 litres

C 391 litres

D 400 litres



70 INDUSTRIAL SOLVENTS LIMITED

Industrial Solvents Limited mixes together three chemicals A, B and C in the ratio 3 : 2 : 1 to produce Allklean, a specialised anti-static fluid. The chemicals cost 8, 6 and 3.90 per litre respectively.

In a period, 12,000 litres in total were input to the mixing process. The normal process loss is 5% of input and in the period there was an abnormal loss of 100 litres whilst the completed production was 9,500 litres.

There was no opening work-in-progress (WIP) and the closing WIP was 100% complete for materials and 40% complete for labour and overheads. Labour and overheads were 41,280 in total for the period. Materials lost in production are scrapped.

Required:

Prepare the mixing process account for the period. (Total: 10 marks)

71 PRODUCT XK

A chemical producer manufactures Product XK by means of two successive processes, Process 1 and Process 2. The information provided below relates to the most recent accounting period, period 10.

Process 1 Process 2 Opening work-in-progress Nil Nil Material input during period 2,400 units cost $5,280 Nil Added material $9,460 Direct labour $2,260 $10,560 Factory overhead 100% of labour cost 2/3 of labour cost Transfer to Process 2 2,200 units Transfer to finished goods 2,200 units Closing work-in-progress 200 units Nil 100% complete with respect to

materials and 30% complete with respect to labour and production overhead.

Required:

(a) Calculate the value of the goods transferred from Process 1 to Process 2 during period 10 and the value of the closing work-in-progress left in Process 1 at the end of period 10. (12 marks)

(b) Calculate the value of the goods transferred from Process 2, to finished goods, during period 10, and the value of 1 unit of production. (6 marks)

(Total: 18 marks)

72 LUDLUM PLC

In a process costing system state what is meant by: (i) normal loss, and (ii) abnormal loss, and indicate how you would treat these items in the cost accounts. (4 marks)



BASIC BUDGETING

73 Which of the following terms best defines the process of comparing actual figures with budgets?

A Accounting

B Control

C Decision making

D Planning

74 Which of the following terms best defines the process of setting the annual budget?

A Accounting

B Control

C Decision making

D Planning

75 Which of the following terms best defines the process of selecting an appropriate strategy for the next five years?

A Accounting

B Control

C Decision making

D Planning

76 A manufacturing company has budgeted sales next year of 5,000 units of product T. Each unit of product T uses 3 units of a component X. The company plans to increase inventories of finished goods by 200 units by the end of the year, and to increase inventories of component X by 400 units.

What will be the budgeted purchase quantities of component X?

A 15,200 units

B 15,400 units

C 15,600 units

D 16,000 units



77 A manufacturing company makes and sells a single product. The sales budget for the year is 8,000 units. Each unit of the product requires 1.2 kilograms of raw materials. The company has budgeted to reduce inventories of finished goods from 2,000 units at the start of the year to 1,500 units at the end of the year, but it plans to increase inventories of raw material from 1,500 kilograms to 2,400 kilograms.

How many kilograms of raw materials does the company need to purchase?

A 8,100 kg

B 8,300 kg

C 9,900 kg

D 10,200 kg

78 What term describes: 'the forecasting of differences between actual and planned outcomes, and the implementation of action, before the event, to avoid such differences'?

A Feedforward control

B Variance analysis

C Budgeting

D Feedback control

79 Which of the following best describes a flexible budget?

A A budget which shows variable production costs only

B A monthly budget which is changed to reflect the number of days in the month

C A budget which shows sales revenue and costs at different levels of activity

D A budget that is updated halfway through the year to incorporate the actual results for the first half of the year

80 A manufacturer holds inventory of a key component. The manufacturer makes and sells a single product, and each unit of product uses 3 components. The budgeted production volume for the month is 5,000 units of the product. At the start of the year, the manufacturer expects to have 1,600 components in inventory, but plans to increase inventory levels by 200 components by the end of the month.

What will be the budgeted purchase quantities of the component in the month?

A 9,800

B 10,000

C 15,200

D 11,600



COMPARISON OF INFORMATION AND PERFORMANCE INDICATORS

81 For which of the following type of business unit would residual income be a suitable measure of performance?

A Cost centre

B Revenue centre

C Profit centre

D Investment centre

82 During a period, the actual hours worked by professional staff totalled 3,630 of which 3,471 hours were spent on client business. The standard hours for the work totalled 3,502.

Calculate the production volume (or activity), efficiency (or productivity) and capacity utilisation ratios to one decimal place.



83 Tees R Us Ltd operates a tea plantation in Kenya. The plantation produces tea for sale to Tees R Us tea bagging division and other wholesalers. The tea crop has been lower than expected due to bad weather. The actual and budgeted information is produced below.

Actual Budgeted

$ $

Turnover 787,500 1,125,000

Cost of sales:

Tea pickers 132,000 150,000

Tea processor operators 35,000 50,000

Depreciation of tea machines 60,000 60,000

Seeds and fertilizer 75,000 75,000

Total cost of sales 302,000 335,000

Gross profit 485,500 790,000

Administration costs 150,000 150,000

Distribution costs 300,000 350,000

Operating profit 35,500 290,000

Amount of tea in kilograms harvested and sold 1,750,000 2,500,000

Number of harvest days 100 100

Number of tea pickers 440 500

Daily cost of a tea picker $3 $3

Capital employed $935,500 $1,190,000

Calculate the following performance indicators for the actual and budgeted information (give answers to two decimal places):

Budgeted Actual

Cost of tea pickers as a % of turnover

Cost of tea processor operators as a % of turnover

Cost of seeds and fertilizer as a % of turnover

Gross profit margin

Operating profit margin

Return on capital employed

Asset turnover



84 Beautiful Girls Limited manufactures a range of lower price, value for money beauty products for distribution to beauty salons. The company is comparing sales of its best-selling Glow Girl tanning lotion with similar products on the market.

Your Body Limited is the market leader in beauty products, with a very strong brand image and a good reputation. As a result of this it also benefits from economies of scale. One of its most recent launches is a tanning mousse Your Factor which dries in 60 seconds, promises no streaks and lasts for 7 to 10 days.

The following information has been collated on the performance of the two tanning products for the last financial year.

Glow Girl Your Factor

Sales in units 10,000,000 90,000,000

$ $

Sales revenue 12,000,000 140,000,000

Cost of sales

Direct materials 2,500,000 18,000,000

Direct labour 2,000,000 18,000,000

Fixed production overheads 4,000,000 30,000,000

Total cost of sales 8,500,000 66,000,000

Gross profit 3,500,000 74,000,000

Selling and distribution costs 2,000,000 8,500,000

Administration costs 400,000 12,000,000

Advertising costs 600,000 35,000,000

Net profit 500,000 18,500,000

Capital employed 30,000,000 120,000,000

Calculate the following performance indicators for Glow Girl and Your Factor, giving your answers to 2 decimal places:

GG YF

Sales price per unit $

Direct material cost per unit of sales $

Direct labour cost per unit of sales $

Fixed production overheads cost per unit of sales $

Advertising cost as a percentage of turnover %

Net profit margin %

Return on capital employed %



EXCEPTION REPORTING AND VARIANCES

85 The following information relates to a months production of product CN:

Budget Actual

Units produced 600 580

Input of material P (kg) 1,500 1,566

Cost of material P purchased and input $25,500 $25,839

What is the total material variance for material P due to price and usage issues?

A $783 F

B $339 A

C $1,189 A

D $1,972 A

86 A product has a budgeted direct material labour cost of 6 per unit. In a period, production volume was as follows:

Budget 8,000 Actual 7,700

Actual direct labour costs for the period were $47,600.

What was the total direct labour cost variance?

A $400 favourable

B $400 adverse

C $1,400 favourable

D $1,400 adverse

87 A product has budgeted direct materials cost of $12 per unit. Production volume for the period was:

Actual 6,750 units Budget 6,500 units

Actual direct materials cost for the period was $79,840.

What was the total direct material cost variance?

A $1,160 favourable

B $1,160 adverse

C $1,840 favourable

D $1,840 adverse



88 A product has a budgeted direct material cost of $5 per unit. In a period production of the product was:

Budget 9,000 units Actual 8,800 units

$44,380 was incurred on direct materials for the periods production.

What was the direct materials activity (volume) variance?

A $1,000 adverse

B $1,000 favourable

C $620 adverse

D $620 favourable

89 A company had the following results for May:

Budgeted sales revenue: 10,000 units @ price of $20 Actual sales revenue: 12,000 units @ price of $21

Determine the total variance due to the change in selling price

A $10,000

B $12,000

C $52,000

D $84,000

90 A total direct materials cost variance is calculated by comparing which two figures:

A Actual cost and original (fixed) budget cost

B Actual cost and flexed budget cost

C Original (fixed) budget cost and flexed budget cost

91 Which of the following variances is least likely to have been caused by the use of lower quality materials?

A A favourable materials price variance

B A favourable materials usage variance

C An adverse labour efficiency variance

D An adverse sales price variance



REPORTING AND DATA PRESENTATION

92 A sales manager is preparing a talk to the board of directors and is considering using a presentation package. Which of the following will be the most effective way of presenting this talk?

A With a spectacular set of slides containing animated special effects, transitions between slides and sound effects, projected using an LCD projector and speakers

B With a set of bright and colourful set of slides, projected using an LCD projector

C With a set of clear slides containing a few key points and only the minimum number of visual aids, projected using an LCD projector

D With a set of hand written slides drawn on to acetate sheets

93 FAMILIES

The following data shows a breakdown of two families' monthly expenditure:

Expenditure

Item Family 1 Family 2

$ $

Food and drink 540 180

Housing 730 370

Fuel and light 125 84

Transport 600 124

Other 315 32 ____ ___

Net monthly income 2,310 790 ____ ___

You are required:

(a) to draw a suitable chart to represent the above data to enable a comparison between the two families' expenditure; (8 marks)

(b) to briefly compare each family's expenditure. (4 marks)

(Total: 12 marks)



94 When communicating information, which of the following determines the choice of method used?

(1) Comparative costs

(2) Degree of confidentiality

(3) Speed of delivery

A (1) only

B (3) only

C (1) and (2) only

D (1), (2) and (3) only

95 Which one of the following is not an attribute of effective communication?

A Clarity

B Completeness

C Complexity

D Relevance



SPREADSHEETS

96 Spreadsheets

Discuss the advantages and limitations of spreadsheets. (10 marks)

97 PRESENTATION (1)

Name the following presentation technique:

98 PRESENTATION (2)




99 PRESENTATION (3)


100 PRESENTATION (4)




101 FORMULAE (1)

What would be the formula for summing the column of data below (for entry into cell B9)?

102 FORMULAE (2)

What would be the formula for averaging the column of data below (for entry into cell B10)?

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MA1 LRP Questions D11