Mock 1 - acc 64 - MC

First and last name

Question 1/32
Information provided by cost accounting assists management to:
(1) make pricing decisions
(2) put a value on inventory
(3) assess the profitability of the whole organisation
(4) compare performance with other organisations
Which of the options are correct?
A. (1), (2) and (3) only
B. (1), (2) and (4) only
C. (2), (3) and (4) only
D. All of them

Question 2/32
Which of the following ICAEW fundamental principles requires professional accountants should act in
accordance with applicable technical and professional standards?
A. Integrity
B. Professional Competence and due care
C. Confidentiality
D. Professional behaviour

Question 3/32
Details of gross pay for the week of Molly, who is a production line worker of a manufacturing firm are as
follows:
- Basic hour (38 hours @ £10/h)
- Overtime (10 hours at time and a half)
During the week, Molly had been idle for 6 hours due to the absence of materials which was still paid as normal
hours in full.
The direct labour costs included in his gross pay are:
A. £320
B. £480
C. £110
D. £420

Question 4/32
An 'inward-out' approach to sustainability is developed to:
A. Understand how an entity impacts on earth systems
B. Find the negative and positive impacts of ESG issues on an organisation
C. Explore the planetary limits and social foundation which humans can survive
D. Consider the safe operating space within which companies can sustainably operate

1
 Mock 1 - acc 64 - MC

Question 5/32
Which two of the following statements are correct?
A. Activity based costing (ABC) avoids under allocating overhead costs to low volume items and over
allocating overhead costs to higher volume items
B. Activity based costing (ABC) does not use labour hours or machine hours to assign costs of an activity to
products
C. Just in time (JIT) system does not require production planning because production is produced only
when needed
D. Target costing approach begins with required selling price and determines costs by deducting designed
profit
E. Life cycle costing takes into account all of the costs and revenue of a product from the research and
development state to production and sales stage

Question 6/32
Which of the following statements about continuous operation costing is not true?
A. Output of one process becomes the input of the subsequent process
B. Cost per unit of finished goods is derived by average calculation of accummulated costs
C. Each process acts as a cost centre
D. It is appropriate when organisations produce specific order of products or services

Question 7/32
A product has a variable material cost of £6.00 per unit, a variable labour cost of £8.25 per unit, variable selling
cost of £2.8 per unit, fixed production overhead absorption rate of £1.05 per unit and fixed selling cost per unit
of £2
Calculate the inventory valuation under marginal costing
A. £14.25
B. £17.05
C. £18.01
D. £20.1

2
 Mock 1 - acc 64 - MC

Question 8/32
A company manufactures a single product for which budgeted data are as follows:
Sales revenue £120,000
Variable production costs £54,000
Fixed production costs £27,000
Variable selling costs £1,800
Fixed selling cost £4,800
Production volume (units) 1,000
Closing inventory (units) 200
The profits calculated under marginal costing in comparation with those calculated under absorption costing will
be:

A. £5,400 lower
B. £5,400 higher
C. £6360 lower
D. £6,360 higher

Question 9/32
The budget for Lily Ltd which produces a single product, for the current year is as follows:
Sales revenue £868,000
Variable materials (£20/kg) £420,000
Variable labour (£10/h) £200,000
Fixed overhead £86,000
Total cost £706,000
Budgeted net profit £162,000
Lily has substantial excess production capacity. It has received a special order later in the year. The order
requires extra sales and production for the year by 20% over budget.
Lily is able to purchase further 5,000 kg of materials at a discount of 2% on its normal buying price. The remain
material purchased at discount price after producing the special order will be used for budgeted production of the
year. However, it has to pay for the required overtime of 4,000 hours at time and a half to complete the order on
time.
What price should be charged for the special order if Lily requires to earn the same percentage mark-up on
marginal costs?
A. £170,800
B. £199,248
C. £198,800
D. £284,800

3
 Mock 1 - acc 64 - MC

Question 10/32
Division B purchases component X form Division A. The costs budget for X are as follows:
Direct materia cost/unit £2.00
Direct labour cost/unit £5.00
Variable overhead/unit £1.00
Fixed overhead costs per quarter £40,000
Annual demand from Division B 20,000 units
Fixed overhead incurs evenly throughout the year. Devision A requires a profit mark-up of 20% at full costs
The transfer prices per unit of X will be charged for B and credited for A using dual pricing method are:
A. A:£12 B:£10
B. A:£12 B:£8
C. A:£19.2 B:£10
D. A:£19.2 B:£8

Question 11/32
Which 2 of the following are true about cost centres:
A. The performance report of a profit centre must highlight 2 different profit levels: contribution and net
profit
B. The manager of revenue centre has no responsibility for number of products manufactured in a period
C. Performance of investment centre should not based on profit alone
D. The amount of capital employed attributed to an investment centre should consist only of working capital
E. Manager of a cost centre has responsibility for controlling the costs, assets and liabilities of the centre.

Question 12/32
Which of the following statements are true about time series analysis
(a) Time series analysis can forecast future by measuring the trend and amending for seasonal variations
(b) Seasonal variations can be expressed as absolute amount to be added to the trend
(c) The additive model is more useful if the size of the seasonal pattern changes as the long-term movement goes
up or down
(d) The multiplicative model is more useful when the trend increases or decreases overtime
(e) The moving average cannot predict underlying movement in the data since it removes the effect of seasonal
variations
A. (a), (b) and (c) only
B. (a), (b) and (d) only
C. (b), (c) and (d) only
D. (b), (c) and (e) only

Question 13/32
Which of the following principles is not related to Leadership principles as being suggested by the Beyond
Budgeting round table?
A. Transparency
B. Autonomy
C. Customers
D. Plans and forecasts

4
 Mock 1 - acc 64 - MC

Question 14/32
Which of the following represents the correct order of preparing budgets if sales demand is the principal factor?
A. Sales budget; Production budget; raw material purchases budget, budgeted income statement
B. Budgeted income statement; sales budget; production budget; raw material purchases budget
C. Production budget; sales budget; raw material purchases budget; Budgeted income statement
D. Production budget; raw material purchases budget; sales budget; Budgeted income statement

Question 15/32
Which approach to budgeting encourages slack, which is unnecessary expenditure buit into the budget?
A. Rolling budget
B. Zero-based budgeting
C. Incremental budgeting
D. All of them

Question 16/32
Business A, B and C have the same length of cash operating cycle of 67 days. The details of their cycles are as
follows:
A B C
Inventory days 52 42 22
Receivables days 30 40 60
Payables days 15 15 15
Which one has the highest level of investment in working capital?
A. Business A
B. Business B
C. Business C
D. They have the same level of investment in working capital

Question 17/32
A company expects to sell 10,000 units of its single product at £25/unit in January. The costs budget for January
are as follows:
Variable material cost 8.4/unit
Variable labour cost 6/unit
Variable overhead 2.1/unit
Fixed overhead 2.5/unit
The company's management considers to change materials into the higher quality specification of which price is
higher than the current materials by 10%. The increase in material price would necessitate a 5% increase in the
selling price. However, sales volume would also increase by 8% due to the higher quality of product.
The budgeted net profit after the changes would be:
A. £85,100
B. £71,228
C. £69,228
D. £57,728

5
 Mock 1 - acc 64 - MC

Question 18/32
Lola Ltd begins to manufacture 2 products in 2022: Lo and La, which use the same materials X. One unit of Lo
uses 1.2kg of X, one unit of La uses 2kg of X. Expected cost of X is £20/kg.
Budgeted sales for 2022 are 1,000 units of Lo and 1,500 units of La. The company plans to hold inventory of
200 units of each product at 31/12/2022. The store manager has suggested that a provision should be made for
damages of items held in store as follows:
Product Lo: 50 units
Product La: 100 units
Material X: 20kg
The purchases budget for material for the year 2022 should be:
A. £102,000
B. £5,120
C. £102,400
D. £96,800

Question 19/32
Lily Ltd has opening cash of £15,000 at 1 January 2022 and forecasts to achieve £121,000 for credit sales and
£280,000 for cash sales in January 2022. The credit sales and cash sales are expected to increase by 10% each
month as the same results of last year. 50% of customers are expected to pay in the month after sales.
It plans to sell a machine bought in January 2018 for £15,000 in January 2022. The machine has original cost of
£52,000, residual value of 2,000 and been depreciated at 20% per year. Payments information for January and
February 2022 are as follows:
January (£) February (£)
Suppliers 32,000 35,000
Wages 18,200 18,200
Overheads 25,000 25,000
The closing cash balance for February is budgeted to be:
A. £580,100
B. £574,150
C. £586,150
D. £591,650

Question 20/32
A company has monthly sales of £200,000 and gross profit margin of 30% on its sales. The inventory is
maintained as 10% of next month's sales volume. The company intends to delay its payment to supplier from 1
month to 1.5 months and at the same time extends the credit term from 1 month to 1.2 months.
The cash changes due to the proposed policy will be:
A. £37,000 decrease
B. £37,000 increase
C. £30,000 increase
D. £30,000 decrease

6
 Mock 1 - acc 64 - MC

Question 21/32
The daily demand for materials of Momo Ltd is steady at 48kg a day for each of the 250 working days (50
weeks) of the year.
The material price is £2/kg, the cost of ordering the box from the supplier is £40 per order, regardless of the size
of the order. The carrying cost per month is £9.9/kg. The Economic order quantity (EOQ) formula is square root
of ((2*c*d)/h)
The correct EOQ to the nearest kg is:
A. 2,191kg
B. 310kg
C. 9,798 kg
D. 90kg

Question 22/32
Which of the following statements are not correct?
A. The fluctuation of discount rates over the life of the project can be incorporated into NPV calculation,
but not into IRR calculations
B. NPV method based on the assumption that any net cash inflow generated during the life of the project
will be reinvested elsewhere at the cost of capital
C. ARR is based on objective accounting profits
D. The decision rule of discounted payback method is to accept projects that have the payback period less
than target period of the organisation

Question 23/32
Sisi Ltd is considering project X which have an initial outlay followed by the variation of cash inflows and
outflows
(1) Project X has 2 IRRs
(2) IRR and NPV methods may not give the same accept or reject decision
(3) If cost of capital is lower than IRR, project X will be accepted
(4) Project X will be not accepted if the sum of its total cash outflows and inflows is negative
Which statements are not correct?
A. (1), (2) and (3)
B. (2) and (3)
C. (1), (3) and (4)
D. (1) and (4)

Question 24/32
Which of the following is not true about internal rate of return method?
A. It does not require to specify a discount rate before calculating IRR
B. It allows for the time value of money
C. It allows for the incorporation of variations of discount rates over the life of project
D. It ignores the relative size of investment

7
 Mock 1 - acc 64 - MC

Question 25/32
The product M and N have the followings costs
M (£/unit) N (£/unit)
Material (@ £2/kg) 10 18
Labour (@ 10/h) 30 15
Variable overheads 5 7
Maximum demand (units) 1,000 2,200
Selling price 60 58
Labour hours have limited to 3,000 hours. If another 1,500 hours available, the maximum price per hour that
should be paid for the extra labour is:
A. £16.40
B. £6.40
C. £15
D. £22

Question 26/32
The variable production costs per unit of product A and product B are as follows:
A B
Machine hours/ unit 2 3
Variable production cost (£) 18 24
Maximum demands 2,000 2,000
Only 7,000 hours will be available next year
A subcontractor has quoted £28/unit and £36/unit for supplying A and B respectively.
The most profitable plan is:
A. Produce: 2000 A, 0 B - Purchase: 0 A, 2000 B
B. Produce: 2000 A, 1000 B - Purchase: 0 A, 1000 B
C. Produce: 500 A, 2000 B - Purchase: 1500 A, 0 B
D. Produce: 0 A, 2000 B - Purchase: 2000 A, 0 B

Question 27/32
A company produces and sells a single product with variable material cost of £4/unit, variable labour cost of
£6/unit and variable selling cost of £2/unit. The mark-up percentage on marginal production costs is 40%.
Monthly fixed cost incurs evenly at £1,200 through the year. Calculate the yearly breakeven point
A. 600
B. 3600
C. 3000
D. 7200

8
 Mock 1 - acc 64 - MC

Question 28/32
The company has the following data:
Selling price £20/unit
Variable costs £8/unit
Fixed overhead for the next month £70,764
It is expected to produce and sell 8,200 units
The margin of safety expressed as a % of budgeted monthly sales is
A. -8%
B. 39%
C. 28%
D. 57%

Question 29/32
A project has an initial cash outflow to be made on 1 January
2020. It will produce an annual return of £15,000 in perpetuity with the
first income occurring on 31 December 2021. The project's IRR is 15%. The
cost of captial is 10%. The initial cash outflow is (to the nearest £10):
A. 148,520
B. £150,000
C. £86,960
D. £100,000

Question 30/32
A 4-year project requires machine set-up costs of £120,000 payable on 1 January 2020. Working capital of
£25,000 is required on 1 December 2020 and will be released at the end of the project on 31 December 2023.
Given a cost of capital of 10% and rounding to the nearest £10, what is the minimum acceptable contract price to
be received each year till the end of the project (if the first inflow occurs on 31 December 2020)?
A. £40,360
B. £45,030
C. £45,030
D. £39,640

Question 31/32
A company is expecting to receive a rental income for £10,000 p.a for the
foreseeable future. The first receipt occurs now. The interest rate is
expected to be 8% for the 1st year and then change to the fixed rate of 10%
from the 2nd year. The present value of the rental income is (to the nearest
£100)
A. £111,900
B. £92,600
C. £101,900
D. £102,600

9
 Mock 1 - acc 64 - MC

Question 32/32
Lily Ltd has budgeted cost information for February as follows:
Sales (@ £2/unit) £121,000
Gross profit 40% margin on sales
Sales volume are increasing 10% per month over the year and company policy to maintain 20% of next month's
sales volume as closing inventory.
The budgeted cost of production for January is
A. £74,052
B. £80,520
C. £67,320
D. £88,572

10