Paper F2

Fundamentals Pilot Paper – Knowledge Module

Management
Accounting
Pilot Paper from December 2011 onwards

Time allowed: 2 hours

ALL 50 questions are compulsory and MUST be attempted.

Formulae Sheet, Present Value and Annuity Tables are on

pages 16, 17 and 18

Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

ALL 50 questions are compulsory and MUST be attempted
Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to
each multiple choice question.
Each question is worth 2 marks.

1 A manufacturing company benchmarks the performance of its accounts receivable department with that of a leading
credit card company.

What type of benchmarking is the company using?

A Internal benchmarking
B Competitive benchmarking
C Functional benchmarking
D Strategic benchmarking

2 Which of the following BEST describes target costing?

A Setting a cost by subtracting a desired profit margin from a competitive market price
B Setting a price by adding a desired profit margin to a production cost
C Setting a cost for the use in the calculation of variances
D Setting a selling price for the company to aim for in the long run

3 Information relating to two processes (F and G) was as follows:

Process Normal loss as Input Output
% of input (litres) (litres)
F 8 65,000 58,900
G 5 37,500 35,700

For each process, was there an abnormal loss or an abnormal gain?

Process F Process G
A Abnormal gain Abnormal gain
B Abnormal gain Abnormal loss
C Abnormal loss Abnormal gain
D Abnormal loss Abnormal loss

4 The following budgeted information relates to a manufacturing company for next period:
Units $
Production 14,000 Fixed production costs 63,000
Sales 12,000 Fixed selling costs 12,000
The normal level of activity is 14,000 units per period.
Using absorption costing the profit for next period has been calculated as $36,000.

What would be the profit for next period using marginal costing?
A $25,000
B $27,000
C $45,000
D $47,000

2
5 A company has a budgeted material cost of $125,000 for the production of 25,000 units per month. Each unit is
budgeted to use 2 kg of material. The standard cost of material is $2·50 per kg. Actual materials in the month cost
$136,000 for 27,000 units and 53,000 kg were purchased and used.

What was the adverse material price variance?

A $1,000
B $3,500
C $7,500
D $11,000

6 Under which sampling method does every member of the target population have an equal chance of being in the
sample?
A Stratified sampling
B Random sampling
C Systematic sampling
D Cluster sampling

7 The following statements refer to spreadsheets:

(1) A spreadsheet is the most suitable software for the storage of large volume of data
(2) A spreadsheet could be used to produce a flexible budget
(3) Most spreadsheets contain a facility to display the data within them in a graphical form

Which of these statements are correct?

A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3

3 [P.T.O.
8 Up to a given level of activity in each period the purchase price per unit of a raw material is constant. After that point
a lower price per unit applies both to further units purchased and also retrospectively to all units already purchased.

Which of the following graphs depicts the total cost of the raw materials for a period?

$ A $ B

0 0

$ C $ D

0 0
A Graph A
B Graph B
C Graph C
D Graph D

9 Which of the following are benefits of budgeting?

1 It helps coordinate the activities of different departments
2 It fulfils legal reporting obligations
3 It establishes a system of control
4 It is a starting point for strategic planning
A 1 and 4 only
B 1 and 3 only
C 2 and 3 only
D 2 and 4 only

10 The following statements relate to the participation of junior management in setting budgets:
1. It speeds up the setting of budgets
2. It increases the motivation of junior managers
3. It reduces the level of budget padding

Which statements are true?

A 1 only
B 2 only
C 2 and 3 only
D 1, 2 and 3

4
11 A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is
$36,000.

What is the company’s return on investment?

A 30%
B 12%
C 18%
D 22%

12 A company has calculated a $10,000 adverse direct material variance by subtracting its flexed budget direct material
cost from its actual direct material cost for the period.

Which of the following could have caused the variance?

(1) An increase in direct material prices
(2) An increase in raw material usage per unit
(3) Units produced being greater than budgeted
(4) Units sold being greater than budgeted
A 2 and 3 only
B 3 and 4 only
C 1 and 2 only
D 1 and 4 only

13 An organisation has the following total costs at two activity levels:

Activity level (units) 16,000 22,000
Total costs ($) 135,000 170,000
Variable costs per unit is constant within this range of activity but there is a step up of $5,000 in the total fixed costs
when the activity exceeds 17,500 units.

What is the total cost at an activity level of 20,000 units?

A $163,320
B $158,320
C $160,000
D $154,545

14 Which of the following are suitable measures of performance at the strategic level?
(1) Return on investment
(2) Market share
(3) Number of customer complaints
A 1 and 2
B 2 only
C 2 and 3
D 1 and 3

5
15 Which of the following are feasible values for the correlation coefficient?
1 +1·40
2 +1·04
3 0
4 –0·94

A 1 and 2 only
B 3 and 4 only
C 1, 2 and 4 only
D 1, 2, 3 and 4

16 A company’s operating costs are 60% variable and 40% fixed.

Which of the following variances’ values would change if the company switched from standard marginal costing
to standard absorption costing?
A Direct material efficiency variance
B Variable overhead efficiency variance
C Sales volume variance
D Fixed overhead expenditure variance

17 ABC Co has a manufacturing capacity of 10,000 units. The flexed production cost budget of the company is as
follows:
Capacity 60% 100%
Total production costs $11,280 $15,120

What is the budgeted total production cost if it operates at 85% capacity?

A $13,680
B $12,852
C $14,025
D $12,340

18 Using an interest rate of 10% per year the net present value (NPV) of a project has been correctly calculated as $50.
If the interest rate is increased by 1% the NPV of the project falls by $20.

What is the internal rate of return (IRR) of the project?

A 7·5%
B 11·7%
C 12·5%
D 20·0%

19 Which of the following BEST describes a principle budget factor?

A A factor that affects all budget centres
B A factor that is controllable by a budget centre manager
C A factor that the management accountant builds into all budgets
D A factor which limits the activities of an organisation

6
20 A company always determines its order quantity for a raw material by using the Economic Order Quantity (EOQ)
model.

What would be the effects on the EOQ and the total annual holding cost of a decrease in the cost of ordering a
batch of raw material?
EOQ Annual holding cost
A Higher Lower
B Higher Higher
C Lower Higher
D Lower Lower

21 A company which operates a process costing system had work-in-progress at the start of last month of 300 units
(valued at $1,710) which were 60% complete in respect of all costs. Last month a total of 2,000 units were
completed and transferred to the finished goods warehouse. The cost per equivalent unit for costs arising last month
was $10. The company uses the FIFO method of cost allocation.

What was the total value of the 2,000 units transferred to the finished goods warehouse last month?
A $19,910
B $20,000
C $20,510
D $21,710

22 A manufacturing company operates a standard absorption costing system. Last month 25,000 production hours were
budgeted and the budgeted fixed production cost was $125,000. Last month the actual hours worked were 24,000
and standard hours for actual production were 27,000.

What was the fixed production overhead capacity variance for last month?
A $5,000 Adverse
B $5,000 Favourable
C $10,000 Adverse
D $10,000 Favourable

23 The following statements have been made about value analysis.

(1) It seeks the lowest cost method of achieving a desired function
(2) It always results in inferior products
(3) It ignores esteem value
(4) It is applicable to both physical products and services

Which TWO of the above statements are true?

A 1 and 4
B 1 and 2
C 3 and 4
D 2 and 3

7 [P.T.O.
24 Net
present
value

0 Interest rate
5% 10% 15%

Which of the following is correct with regard to the above graph?

(1) The IRR is 10%
(2) The NPV at 15% is positive
(3) The project’s total inflows exceed the total outflows
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1,2 and 3

25 A company uses standard absorption costing. The following data relate to last month:
Budget Actual
Sales and production (units) 1,000 900
Standard ($) Actual ($)
Selling price per unit 50 52
Total production cost per unit 39 40

What was the adverse sales volume profit variance last month?
A $1,000
B $1,100
C $1,200
D $1,300

8
26 The following statements relate to the advantages that linear regression analysis has over the high low method in the
analysis of cost behaviour:
1. the reliability of the analysis can be statistically tested
2. it takes into account all of the data
3. it assumes linear cost behaviour

Which statements are true?

A 1 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3

27 Mr Manaton has recently won a competition where he has the choice between receiving $5,000 now or an annual
amount forever starting now (i.e. a level perpetuity starting immediately). The interest rate is 8% per annum.

What would be the value of the annual perpetuity to the nearest $?

A $370
B $500
C $400
D $620

28 Which of the following would not be expected to appear in an organisation’s mission statement?
A The organisation’s values and beliefs
B The products or services offered by the organisation
C Quantified short term targets the organisation seeks to achieve
D The organisation’s major stakeholders

29 An organisation operates a piecework system of remuneration, but also guarantees its employees 80% of a time-based
rate of pay which is based on $20 per hour for an eight hour working day. Three minutes is the standard time allowed
per unit of output. Piecework is paid at the rate of $18 per standard hour.

If an employee produces 200 units in eight hours on a particular day, what is the employee’s gross pay for that
day?
A $128
B $144
C $160
D $180

30 A company uses an overhead absorption rate of $3·50 per machine hour, based on 32,000 budgeted machine hours
for the period. During the same period the actual total overhead expenditure amounted to $108,875 and
30,000 machine hours were recorded on actual production.

By how much was the total overhead under or over absorbed for the period?
A Under absorbed by $3,875
B Under absorbed by $7,000
C Over absorbed by $3,875
D Over absorbed by $7,000

9
31 Which of the following statements relating to management information are true?
1. It is produced for parties external to the organisation
2. There is usually a legal requirement for the information to be produced
3. No strict rules govern the way in which the information is presented
4. It may be presented in monetary or non monetary terms
A 1 and 2
B 3 and 4
C 1 and 3
D 2 and 4

32 A company’s sales in the last year in its three different markets were as follows
$
Market 1 100,000
Market 2 150,000
Market 3 50,000
––––––––
Total 300,000
––––––––

In a pie chart representing the proportion of sales made by each region what would be the angle of the section
representing Market 3?
A 17 degrees
B 50 degrees
C 60 degrees
D 120 degrees

33 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

34 The Eastland Postal Service is government owned. The government requires it to provide a parcel delivery service to
every home and business in Eastland at a low price which is set by the government. Express Couriers Co is a privately
owned parcel delivery company that also operates in Eastland. It is not subject to government regulation and most of
its deliveries are to large businesses located in Eastland’s capital city. You have been asked to assess the relative
efficiency of the management of the two organisations.

Which of the following factors should NOT be allowed for when comparing the ROCE of the two organisations to
assess the efficiency of their management?
A Differences in prices charged
B Differences in objectives pursued
C Differences in workforce motivation
D Differences in geographic areas served

10
35 Two products G and H are created from a joint process. G can be sold immediately after split-off. H requires further
processing into product HH before it is in a saleable condition. There are no opening inventories and no work in
progress of products G, H or HH. The following data are available for last period:
$
Total joint production costs 350,000
Further processing costs of product H 66,000
Product Production Closing
units inventory
G 420,000 20,000
HH 330,000 30,000

Using the physical unit method for apportioning joint production costs, what was the cost value of the closing
inventory of product HH for last period?
A $16,640
B $18,625
C $20,000
D $21,600

36 Which TWO of the following are true for flexible budgets?

(1) A budget which is continually updated to reflect actual results
(2) A budget which has built in contingency to allow for unforeseen events
(3) A budget which identifies the cost behaviour of different cost items
(4) A budget which allows comparison of like with like
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4

37 A company manufactures and sells a single product. In two consecutive months the following levels of production and
sales (in units) occurred:
Month 1 Month 2
Sales 3,800 4,400
Production 3,900 4,200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for each month using both
absorption and marginal costing principles.

Which of the following combination of profits and losses for the two months is consistent with the above data?
Absorption costing profit/(loss) Marginal costing profit/(loss)
Month 1 Month 2 Month 1 Month 2
$ $ $ $
A 200 4,400 (400) 3,200
B (400) 4,400 200 3,200
C 200 3,200 (400) 4,400
D (400) 3,200 200 4,400

11 [P.T.O.
38 A company wishes to evaluate a division which has the following extracts from income statement and statement of
financial position.
Income statement:
$’000
Sales 500
Gross profit 200
Net profit 120
Statement of financial position:
$’000
Non current assets 750
Current assets 350
Current liabilities (450)
Net assets 650

What is the residual income for the division if the company has a cost of capital of 18%?
A $117,000
B $21,600
C $83,000
D $3,000

39 Under which of the following labour remuneration methods will direct labour cost always be a variable cost?
A Day rate
B Piece rate
C Differential piece rate
D Group bonus scheme

40 A firm uses marginal costing. The following table shows the variances for a period when the actual net profit was
$30,000.
Materials $300 adverse
Labour $800 favourable
Overheads $550 adverse
Sales price variance $400 favourable
Sales volume contribution variance $800 favourable

What was the budgeted net profit for the period?

A $28,850
B $31,150
C $30,050
D $28,800

41 The use of the balanced scorecard rather than a profit-based measure is likely to help solve the following problems:
(1) Subjectivity
(2) Short-termism

Which is/are true?

A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2

12
42 A company operates a process in which no losses are incurred. The process account for last month, when there was
no opening work-in-progress, was as follows:
Process Account
$ $
Costs arising 624,000 Finished output (10,000 units) 480,000
Closing work-in-progress (4,000 units) 144,000
–––––––– ––––––––
624,000 624,000
–––––––– ––––––––
The closing work in progress was complete to the same degree for all elements of cost.

What was the percentage degree of completion of the closing work-in-progress?

A 12%
B 30%
C 40%
D 75%

43 The purchase price of an item of inventory is $25 per unit. In each three month period the usage of the item is
20,000 units. The annual holding costs associated with one unit equate to 6% of its purchase price. The cost of
placing an order for the item is $20.

What is the Economic Order Quantity (EOQ) for the inventory item to the nearest whole unit?
A 730
B 894
C 1,461
D 1,633

44 A factory consists of two production cost centres (P and Q) and two service cost centres (X and Y). The total allocated
and apportioned overhead for each is as follows:
P Q X Y
$95,000 $82,000 $46,000 $30,000
It has been estimated that each service cost centre does work for other cost centres in the following proportions:
P Q X Y
Percentage of service cost centre X to 50 50 – –
Percentage of service cost centre Y to 30 60 10 –
The reapportionment of service cost centre costs to other cost centres fully reflects the above proportions.

After the reapportionment of service cost centre costs has been carried out, what is the total overhead for
production cost centre P?
A $124,500
B $126,100
C $127,000
D $128,500

13 [P.T.O.
45 The following statements relate to responsibility centres:
(1) Return on capital employed is a suitable measure of performance in both profit and investment centres.
(2) Cost centres are found in manufacturing organisations but not in service organisations.
(3) The manager of a revenue centre is responsible for both sales and costs in a part of an organisation.

Which of the statements, if any, is true?

A 1 only
B 2 only
C 3 only
D None of them

46 A company has recorded the following variances for a period:

Sales volume variance $10,000 adverse
Sales price variance $5,000 favourable
Total cost variance $12,000 adverse
Standard profit on actual sales for the period was $120,000.

What was the fixed budget profit for the period?

A $137,000
B $103,000
C $110,000
D $130,000

47 A Company manufactures and sells one product which requires 8 kg of raw material in its manufacture. The budgeted
data relating to the next period are as follows:
Units
Sales 19,000
Opening inventory of finished goods 4,000
Closing inventory of finished goods 3,000
Kg
Opening inventory of raw materials 50,000
Closing inventory of raw materials 53,000

What is the budgeted raw material purchases for next period (in kg)?
A 141,000
B 147,000
C 157,000
D 163,000

48 The following statements relate to performance evaluation methods:

(1) Residual income is not a relative measure
(2) The return on investment figure is a relative measure
(3) Residual income cannot be calculated for an individual project

Which of the above are correct?

A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3

14
49 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
Skilled labour at $10/hour 2 hours/unit 2 hours/unit
Unskilled labour at $7/hour 3 hours/unit 4 hours/unit

What is the budgeted cost of unskilled labour for the period?

A $105,000
B $135,000
C $176,750
D $252,500

50 Which TWO of the following are MOST likely to influence the motivation of budget holders?
(1) The contents of the budget manual
(2) The extent of participation in budget setting
(3) The level of difficulty at which budgets are set
(4) the structure of the budget committee
A 1 and 2
B 2 and 3
C 3 and 4
D 1 and 4

15 [P.T.O.
 Formulae Sheet

Regression analysis

y = a + bx

Economic order quantity

2C0D
=
Ch

Economic batch quantity

2C0D
=
D
Ch (1 – )
R

16
 Present Value Table

Present value of 1 i.e. (1 + r)–n

Where r = discount rate
n = number of periods until payment

Discount rate (r)

Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917 0·909 1
2 0·980 0·961 0·943 0·925 0·907 0·890 0·873 0·857 0·842 0·826 2
3 0·971 0·942 0·915 0·889 0·864 0·840 0·816 0·794 0·772 0·751 3
4 0·961 0·924 0·888 0·855 0·823 0·792 0·763 0·735 0·708 0·683 4
5 0·951 0·906 0·863 0·822 0·784 0·747 0·713 0·681 0·650 0·621 5

6 0·942 0·888 0·837 0·790 0·746 0·705 0·666 0·630 0·596 0·564 6
7 0·933 0·871 0·813 0·760 0·711 0·665 0·623 0·583 0·547 0·513 7
8 0·923 0·853 0·789 0·731 0·677 0·627 0·582 0·540 0·502 0·467 8
9 0·941 0·837 0·766 0·703 0·645 0·592 0·544 0·500 0·460 0·424 9
10 0·905 0·820 0·744 0·676 0·614 0·558 0·508 0·463 0·422 0·386 10

11 0·896 0·804 0·722 0·650 0·585 0·527 0·475 0·429 0·388 0·305 11
12 0·887 0·788 0·701 0·625 0·557 0·497 0·444 0·397 0·356 0·319 12
13 0·879 0·773 0·681 0·601 0·530 0·469 0·415 0·368 0·326 0·290 13
14 0·870 0·758 0·661 0·577 0·505 0·442 0·388 0·340 0·299 0·263 14
15 0·861 0·743 0·642 0·555 0·481 0·417 0·362 0·315 0·275 0·239 15

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0·901 0·893 0·885 0·877 0·870 0·862 0·855 0·847 0·840 0·833 1
2 0·812 0·797 0·783 0·769 0·756 0·743 0·731 0·718 0·706 0·694 2
3 0·731 0·712 0·693 0·675 0·658 0·641 0·624 0·609 0·593 0·579 3
4 0·659 0·636 0·613 0·592 0·572 0·552 0·534 0·516 0·499 0·482 4
5 0·593 0·567 0·543 0·519 0·497 0·476 0·456 0·437 0·419 0·402 5

6 0·535 0·507 0·480 0·456 0·432 0·410 0·390 0·370 0·352 0·335 6
7 0·482 0·452 0·425 0·400 0·376 0·354 0·333 0·314 0·296 0·279 7
8 0·434 0·404 0·376 0·351 0·327 0·305 0·285 0·266 0·249 0·233 8
9 0·391 0·361 0·333 0·308 0·284 0·263 0·243 0·225 0·209 0·194 9
10 0·352 0·322 0·295 0·270 0·247 0·227 0·208 0·191 0·176 0·162 10

11 0·317 0·287 0·261 0·237 0·215 0·195 0·178 0·162 0·148 0·135 11
12 0·286 0·257 0·231 0·208 0·187 0·168 0·152 0·137 0·124 0·112 12
13 0·258 0·229 0·204 0·182 0·163 0·145 0·130 0·116 0·104 0·093 13
14 0·232 0·205 0·181 0·160 0·141 0·125 0·111 0·099 0·088 0·078 14
15 0·209 0·183 0·160 0·140 0·123 0·108 0·095 0·084 0·074 0·065 15

17
 Annuity Table

– (1 + r)–n
Present value of an annuity of 1 i.e. 1————––
r

Where r = discount rate

n = number of periods

Discount rate (r)

Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917 0·909 1
2 1·970 1·942 1·913 1·886 1·859 1·833 1·808 1·783 1·759 1·736 2
3 2·941 2·884 2·829 2·775 2·723 2·673 2·624 2·577 2·531 2·487 3
4 3·902 3·808 3·717 3·630 3·546 3·465 3·387 3·312 3·240 3·170 4
5 4·853 4·713 4·580 4·452 4·329 4·212 4·100 3·993 3·890 3·791 5

6 5·795 5·601 5·417 5·242 5·076 4·917 4·767 4·623 4·486 4·355 6
7 6·728 6·472 6·230 6·002 5·786 5·582 5·389 5·206 5·033 4·868 7
8 7·652 7·325 7·020 6·733 6·463 6·210 5·971 5·747 5·535 5·335 8
9 8·566 8·162 7·786 7·435 7·108 6·802 6·515 6·247 5·995 5·759 9
10 9·471 8·983 8·530 8·111 7·722 7·360 7·024 6·710 6·418 6·145 10

11 10·37 9·787 9·253 8·760 8·306 7·887 7·499 7·139 6·805 6·495 11
12 11·26 10·58 9·954 9·385 8·863 8·384 7·943 7·536 7·161 6·814 12
13 12·13 11·35 10·63 9·986 9·394 8·853 8·358 7·904 7·487 7·103 13
14 13·00 12·11 11·30 10·56 9·899 9·295 8·745 8·244 7·786 7·367 14
15 13·87 12·85 11·94 11·12 10·38 9·712 9·108 8·559 8·061 7·606 15

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0·901 0·893 0·885 0·877 0·870 0·862 0·855 0·847 0·840 0·833 1
2 1·713 1·690 1·668 1·647 1·626 1·605 1·585 1·566 1·547 1·528 2
3 2·444 2·402 2·361 2·322 2·283 2·246 2·210 2·174 2·140 2·106 3
4 3·102 3·037 2·974 2·914 2·855 2·798 2·743 2·690 2·639 2·589 4
5 3·696 3·605 3·517 3·433 3·352 3·274 3·199 3·127 3·058 2·991 5

6 4·231 4·111 3·998 3·889 3·784 3·685 3·589 3·498 3·410 3·326 6
7 4·712 4·564 4·423 4·288 4·160 4·039 3·922 3·812 3·706 3·605 7
8 5·146 4·968 4·799 4·639 4·487 4·344 4·207 4·078 3·954 3·837 8
9 5·537 5·328 5·132 4·946 4·772 4·607 4·451 4·303 4·163 4·031 9
10 5·889 5·650 5·426 5·216 5·019 4·833 4·659 4·494 4·339 4·192 10

11 6·207 5·938 5·687 5·453 5·234 5·029 4·836 4·656 4·486 4·327 11
12 6·492 6·194 5·918 5·660 5·421 5·197 4·988 4·793 4·611 4·439 12
13 6·750 6·424 6·122 5·842 5·583 5·342 5·118 4·910 4·715 4·533 13
14 6·982 6·628 6·302 6·002 5·724 5·468 5·229 5·008 4·802 4·611 14
15 7·191 6·811 6·462 6·142 5·847 5·575 5·324 5·092 4·876 4·675 15

End of Question Paper

18
Answers
Fundamentals Pilot Paper – Knowledge Module, Paper F2
Management Accounting Pilot Paper Answers

1 C

2 A

3 C
(litres) Normal loss Actual loss Abnormal loss Abnormal gain
Process F 5,200 6,100 900 –
Process G 1,875 1,800 – 75

4 B
Marginal costing profit:
(36,000 – (2,000*(63,000/14,000))
$27,000

5 B
Did cost: $136,000
Should cost: (53,000 kg $2·50) $132,500
Price variance: $3,500

6 B

7 C

8 D

9 B

10 B

11 A
(36,000 + (200,000 x 12%))/200,000 = 30%

12 C

13 C
Using high low method:
Variable cost
(170,000 – 5,000 – 135,000)/(22,000 – 16,000) = $5
Fixed cost:
135,000 – (16,000*5) = 55,000
Cost for 20,000 units:
(20,000*5) + (55,000 + 5,000) = $160,000

14 A

15 B

16 C

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17 A
Variable production cost per unit = (15,120 – 11,280)/(10,000– 6,000) = 3,840/4,000 = $0·96
Fixed cost = 11,280 – (6,000 x 0·96) = $5,520
85% capacity = 8,500 units.
Flexible budget allowance for 8,500 units = $5,520 + (8,500 x 0·96) = $13,680

18 C
At 13% NPV should be –10
Using interpolation: 10% + (50/60)(10% – 13%) = 12·5%

19 D

20 D

21 A
1,700 units*10 $17,000
300 units*0·4*10 $1,200
Opening work in progress value $1,710
Total value $19,910

22 A
(Actual hours – Budgeted hours) * standard rate
(24,000 – 25,000)*5 = $5,000 adverse

23 A

24 A
(Note: The graph is showing NPV is rising as interest rate rises because the project may have unusual cash flow patterns such
as inflows followed by a series of outflows)

25 B
(budgeted quantity – actual quantity) * standard profit per unit
(1,000 – 900)*(50 – 39) = $1,100

26 B

27 A
5,000 = x + x/·08
5,000 = 13·5 x
Value of annual perpetuity = 5,000/13·5 = $370

28 C

29 D
200 units*(3/60)*18 = $180

30 A
Actual cost $108,875
Absorbed cost $105,000
Under absorbed $3,875

31 B

22
32 C
Total number of degrees = 360
Proportion of market 3 sales: (50,000/300,000)*360 = 60

33 C

34 C

35 C
Joint costs apportioned to H: ((330,000/(420,000 + 330,000))*350,000 = $154,000
Closing inventory valuation(HH): (30,000/330,000)*(154,000 + 66,000) = $20,000

36 D

37 C
Month 1: production >sales Absorption costing > marginal costing
Month 2: sales> production marginal costing profit> absorption costing profit
A and C satisfy month 1, C and D satisfy month 2; therefore C satisfies both

38 D
($120,000 – ($650,000*18%) = $3,000

39 B

40 A
(30,000 + 300 – 800 + 550 – 400 – 800) = $28,850

41 B

42 D
Cost per equivalent unit (480,000/10,000) = $48
Degree of completion= ((144,000/48)/4,000) = 75%

43 C
{(2*20*(4*20,000))/(0·06*25)}0·5
1,461 units

44 D
Direct cost $95,000
Proportion of cost centre X (46,000 + (0·10*30,000))*0·50 $24,500
Proportion of cost centre Y (30,000*0·3) $9,000
Total overhead cost for P $128,500

45 D

46 D
Sales volume variance:
(budgeted sales units – actual sales units) * standard profit per unit = 10,000 adverse
Standard profit on actual sales: (actual sales units * std profit per unit) = $120,000
Fixed budget profit: (120,000 +10,000) = $130,000

23
47 B
Budgeted production (19,000 + 3,000 – 4,000) = 18,000 units
RM required for production (18,000*8) = 144,000 kg
RM purchases (144,000 + 53,000 – 50,000) = 147,000 kg

48 A

49 C
(($1,750*3 hrs) + ($5,000*4 hrs))*7 = $176,750

50 B

24