Management Accounting F2

THIRD TEST

1 In a period, opening inventories were 10,000 units and closing inventories 11,000 units. Profits, based onmarginal costing, were $100,000 and profit under absorption costing was $105,000. The fixed overhead absorption rate per unit is

A $0.50B $5.00C $4.50D $5,000

2 If a company increases its inventory during the period which of the following statements is true?

A Absorption costing will produce lower profits than marginal costingB Absorption costing will produce higher profits than marginal costingC Absorption costing profits will be the same as marginal costing profitsD There is not enough information to know which method has the highest profits

The following information relates to questions 3 to 5 $Materials 12Labour 30Variable production overhead 13Distribution cost 5Total variable cost 60Selling price 100Contribution per unit 40 $Factory cost 100,000Administration costs 50,000Total fixed costs 150,000

3 What is the break-even point (BEP) in terms of units?

A 1,500B 2,500C 3,750D None of the answers.

4 What is the sales revenue that would yield a net profit of $30,000?

A $75,000B $180,000C $375,000D $450,000

Prepared by: Muzzammil Malik 1

Management Accounting F2

5 If budgeted sales are 5,000 units, the margin of safety is %

6 A company manufactures and sells a single product which has a standard variable cost per unit of $40 and a standard selling price per unit of $100. At the budgeted output level of 1,000 units per month, the standard fixed cost per unit is $10. What is the breakeven point in sales revenue per month (to the nearest thousand)?

A $10,000B $16,700C $20,000D $25,000

7 F Scuttle Ltd has fixed costs of $50,000 per annum. The company sells a single product for $25 per unit.The contribution to sales ratio is 40%. What is the breakeven point in revenue?

A $5,000B $50,000C $125,000D $83,333

8 Scorsatz Okker has a machine which it purchased two years ago for 15,000 and which now has a netbook value of $5,000. Perry Striker, the company's chief executive, is wondering whether to use themachine for a one-year project. If not used, it would have no other use, and although it could be sold,there would be a loss on disposal of $2,000. If used for the project, the machine would have a one-yearlife, after which it would have no resale value, but would cost $1,500 to dispose of. The variable operatingcosts of the machine would be $6,000 for the year. In deciding whether to go ahead with the one yearproject, and ignoring interest costs, the relevant costs of the machine would be

$_________

9 If the selling price and variable cost increase by 20% and 12% respectively, by how much must sales volume change compared with the original budgeted level in order to achieve the original budgeted profit for the period (assuming the original fixed costs)?

A 24.24% decreaseB 24.24% increaseC 36.72% decreaseD 36.72% increase

Prepared by: Muzzammil Malik 2

Management Accounting F2

10 The accountant of Eastlake plc has calculated the company’s break-even point from the following data: $Selling price per unit 6Variable production cost per unit 1.20Variable selling cost per unit 0.40

Fixed costs per unit, based on a budgeted 10,000 units p.a. 4

How many units must be sold if Lee wants to make a profit of $12,000?

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12 Annie is to set up a small hairdressing business at home. She anticipates working a 35-hour week and taking four weeks' holiday per year. Her expenses for materials and overheads are expected to be $3,000 per year, and she has set herself a target profit of $18,000 for the first year. Assuming that only 90% of her working time will be chargeable to clients, what price should she charge for a 'colour and cut' which would take 3 hours?

A $13.89B $35.71C $37.50D $41.67

13 A contract requires 100 hours of labour. The company pays their staff $6/hour. There is no spare capacity and if the company wishes to undertake the contract they will have to take staff away from their current production making vases. Each vase takes 4 hours to make and earns a contributions of $30 per unit. What is the relevant cost of labour for the contract?

A $600B $750C $1,350D $3,600

Prepared by: Muzzammil Malik 3

Management Accounting F2

14 The following information is available for a hotel company for the latest thirty day period.

Number of rooms available per night 40Percentage occupancy achieved 65%Room servicing cost incurred $3,900

The room servicing cost per occupied room-night last period, to the nearest penny, was:

A $3.25 B $5.00 C $97.50 D $150.00

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Prepared by: Muzzammil Malik 4