q G H ACCA Approved Practice & Foundations in Management For from to 31 August Kit Accountancy/ACCA Accounting exams Free access Revision 1 September (FMA/MA) 2021 2022 to eBook & additional digital content Page 1 of 421 q Foundations in Accountancy/ ACCA Management G H Accounting (FMA/MA) Practice & Revision Kit For exams to 31 August from 1 September 2021 2022 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 2 of 421 G q First edition May2011 Tenth edition February 2021 Anoteabout copyright Dear Customer ISBN 9781 50973712 3 What does thelittle ©mean andwhydoes it (Previous ISBN 9781 509729906) matter? e-ISBN 9781 509739592 Your market-leading BPPbooks, course materials ande-learning materials donotwrite andupdate themselves. 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Page 3 of 421 H G q Contents Page Finding questions Questionindex v Helping you with your revision vii UsingyourBPPPractice&RevisionKit Passingthe FMA/MA exam Approachto examiningthe syllabus TheComputerBasedExamination TacklingMultipleChoiceQuestions UsingyourBPPproducts viii ix ix x xi xii Questions and answers Questions Answers 5 205 Mixedbank 1 Questions Answers 147 284 Mixedbank 2 Questions Answers 153 289 Mixedbank 3, 4 and 5 Questions Answers 158 291 Formula sheet and tables 323 Exam practice 329 Mockexam1– Specimenexam Questions Answers 331 347 Mockexam2 Questions Answers 357 373 Mockexam3 Questions Answers 385 399 Review form Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 4 of 421 Contents iii H q G H iv Page 5 of 421 q Question index Time allocation Page Marks Mins Question Answer 1Accountingformanagement 20 24 5 205 2 Data and presentinginformation 26 31 9 206 3 Cost classificationand behaviour 64 77 15 208 4 Forecasting 66 79 27 212 5 Summarisingand analysingdata 64 77 35 219 6 Accountingformaterials 42 50 45 228 7 Accountingforlabour 24 29 50 232 8 Accountingforoverheads 92 110 57 235 9 Processcosting 56 67 73 244 10Costingmethods 46 55 81 250 11Settingbudgets 82 98 91 253 12Implementingbudgets 10 12 103 261 13Projectappraisal 60 72 107 261 14Standard costing 14 17 117 267 15Varianceanalysis 98 118 118 268 16Target setting 32 38 135 279 17Financialperformancemeasurement 42 50 138 280 18Assessingnon-financialperformance 24 29 144 283 Part A: The nature, source and purpose of management information Part B: Data analysis and statistical techniques Part C: Cost accounting and systems methods G H Part D: Budgeting Part E: Standard costing Part F: Performance measurement Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 6 of 421 Questionindex v G q Time allocation Page Marks Mins Question Answer 19MixedBank1 40 48 147 284 20 MixedBank2 40 48 153 289 21MixedBank3 40 48 158 291 22 MixedBank4 30 36 164 294 23 MixedBank5 20 24 168 298 24 Budgeting 100 120 171 300 25 Standard costing 100 120 182 307 26 Performancemeasurement 100 120 191 314 MockExam1(SpecimenExam) 100 120 331 347 MockExam2 100 120 357 373 MockExam3 100 120 385 399 Mixed banks Multi-task questions Mock exams vi Questionindex Page 7 of 421 H G q Helping you BPP Learning with your revision Media – ACCA Approved Content Provider Asan ACCAApprovedContent Provider,BPPLearningMediagivesyou the opportunity to use revisionmaterialsreviewedby the ACCAexaminingteam. Byincorporatingthe ACCAexamining team's commentsand suggestionsregardingthe depth and breadth of syllabuscoverage,the BPPLearningMediaPractice&RevisionKitprovidesexcellent,ACCA-approvedsupportforyour revision. Thesematerialsare reviewedby the ACCAexaminingteam. Theobjectiveof the reviewis to ensurethat the materialproperlycoversthe syllabusand study guideoutcomes,used by the examiningteam insettingthe exams,inthe appropriatebreadth and depth. Thereviewdoes not ensurethat everyeventuality,combinationor applicationof examinabletopicsis addressed by the ACCAApprovedContent.Nordoes the reviewcomprisea detailedtechnicalcheckof the content as the ApprovedContentProviderhas its ownqualityassurance processesinplace in thisrespect. BPPLearningMediado everythingpossibleto ensurethe materialis accurate and up to date whensendingto print.Inthe eventthat any errorsare foundafter the printdate they are uploadedto the followingwebsite:www.bpp.com/learningmedia/Errata. Selecting questions We providesignpoststo helpyou plan yourrevision. Afullquestion indexlistingquestionsthat covereach part of the syllabus,so that you can locate the questionsthat providepracticeon keytopics,and see the differentwaysin whichthey mightbe tested Attempting mock exams H Thereare three mockexamsthat providepracticeat copingwiththe pressuresof the examday. We stronglyrecommendthat you attempt themunderexamconditions.MockExam1is the SpecimenExam.MockExam2 and 3 reflectthe syllabuscoverageof the exam. Helpingyou withyourrevision vii Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 8 of 421 q Using your BPP Aim of this Practice Practice & Revision Kit & Revision Kit Toprovidethe practiceto helpyou succeedincomputerbased examinationsforFMA/MA ManagementAccounting. Topass the examinationyou need a thoroughunderstandinginallareas coveredby the syllabus and teachingguide. Recommended approach Makesure you are able to answerquestionson everything specifiedby the syllabusand teachingguide.Youcannot makeany assumptionsabout what questionsmay comeup in yourexam.Theexaminingteam aimto discourage'questionspotting'. Learningis an active process.Usethe DOYOUKNOW?Checkliststo test yourknowledge and understandingof the topicscoveredinFMA/MA ManagementAccountingby fillingin the blankspaces. Thencheckyouranswersagainst the DIDYOUKNOW?Checklists.Do not attempt any questionsifyou are unableto fillinany of the blanks– go back to your BPPWorkbookand revisefirst. Whenyou are revisinga topic,thinkabout the mistakesthat you knowthat you should avoidby writingdownPOSSIBLE PITFALLS at the end of each DOYOUKNOW?Checklist. Onceyou have completedthe checklistssuccessfully,you shouldattempt the questionson that topic.Eachsectionhas a selectionof OBJECTIVE TESTQUESTIONS. Eachmarkcarrieswithit a timeallocationof 1.2minutes(includingtimeforselecting and readingquestions).A10markmultitask questionshouldthereforebe completedin 12minutes. Youshouldattempt each bank of questionsto ensureyou are familiarwiththeirstyles and to practiseyourtechnique.Ensureyou read TacklingMultipleChoice Questions on page xito get adviceon howbest to approach them. Onceyou have completedallof the questionsinthe body of thisPractice&RevisionKit, you shouldattempt the MOCKEXAMS underexaminationconditions.Checkyouranswers against our answersto findout howwellyou did. viii Helpingyou withyourrevision G H Page 9 of 421 G q Passing the FMA/MA exam Toaccess FoundationsinAccountingsyllabuses,visitthe ACCAwebsite www2.accaglobal.com/students/fia The exam Thisis a computer-basedexam.Allquestionsinthe examare compulsory.Thismeans you cannot avoidany topic,but also means that you do not need to waste timeinthe examdecidingwhich questionsto attempt. Thereare 35 MCQsand othertypes of objectivetest question(OTQ)inSectionA(forexample, numberentry, multipleresponseand multipleresponsematching)and three multi-taskquestions inSectionB. Themulti-taskquestionswillcomefromeach of syllabusareas DBudgeting,E Standard Costing and F PerformanceMeasurement.Note:BudgetingMTQsinSectionBcan also includetasks from B2Forecastingtechniques.B4Spreadsheetscouldbe includedinany of the MTQs,as eitherthe basis forpresentinginformationinthe questionor as a task withinthe MTQ. Thismeans that the examiningteam is able to test mostof the syllabusat each sitting,and that is what they aimto do. Soyou need to have revisedrightacross the syllabusforthisexam. Revision ThisKithas been reviewedby the FMA/MA examiningteam and containsthe SpecimenExam. Workingthroughthe questionsinthe Kitprovidesexcellentpreparationforthe exam.Itis importantto tacklequestionsunderexamconditions.Allowyourselfjustthe numberof minutes shownnextto the questionsinthe indexand don't lookat the answersuntilyou have finished.For questionsyou answerincorrectly,thinkabout youranswerand the correctanswer.Ifyou require furtherclarification,referto the explanationof the topicprovidedinyourWorkbook.Question practiceis an essentialpart of yourrevision,so don't neglectit. Passing the exam Thefollowingpointswillhelpyou pass the exam: Readthe questioncarefully. Don'tspend morethan the allottedtimeon each question.Don'tbecomebogged down.If you are havingtroublewitha question,stop, think,decideon yourbest optionand answer the question.Moveon! Approach to examining the syllabus FMA/MA is a two-hourexam. Theexamis structuredas follows. SectionA 35 compulsoryobjectivetest questionsof 2 markseach SectionB 3 compulsorymulti-taskquestionsof 10markseach Noof marks 70 30 100 Helpingyou withyourrevision ix Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 10 of 421 H q The computer-based examination Computer-based examinations (CBEs)areavailable foralloftheFoundations InAccountancy exams. TheCBEexams forthemodules canbetakenatanytimeandthesearereferred toas 'exams ondemand'. Computer-based examinations mustbetakenatanACCACBELicensed Centre. How do CBEs work? Questions aredisplayed ona monitor Candidates entertheiranswer directly ontothecomputer Candidates havetwohours tocomplete theexamination Candidates sitting exams ondemand areprovided witha Provisional Result Notification showing theirresults before leaving theexamination room. TheCBELicensed Centreuploads theresults totheACCA(asproofofthecandidate's performance) within 72hours. Candidates sitting theOption exams willreceive theirresults approximately fiveweeks aftertheexamsitting oncetheyhavebeenexpert marked Candidates canchecktheirexamstatusontheACCAwebsite byloggingintomyACCA Benefits Flexibility – thefirstseven modules, exams ondemand, canbesatatanytime Resits forthefirstseven modules canalsobetakenatanytimeandthereisnorestriction onthenumber oftimes a candidate cansita CBE G Instant feedback fortheexams ondemand asthecomputer displays theresults attheend oftheCBE Formoreinformation oncomputer-based exams, visittheACCAwebsite. www.accaglobal.com/gb/en/student/exam-entry-and-administration/computer-basedexams.html x Helping youwithyourrevision Page 11 of 421 H G q Tackling multiple choice questions ThisexamincludesMCQs.Youhave to choose the option that best answers the question. The incorrectoptionsare calleddistracters.Thereis a skillinansweringMCQsquicklyand correctly. BypractisingMCQsyou can developthisskill,givingyou a better chance of passingthe exam. Youmay wishto followthe approach outlinedbelow,or you may preferto adapt it. Step 1 Skimread allthe MCQsand identifywhat appear to be the easierquestions. Step 2 Attempteach question– starting withthe easier questions identifiedinStep 1. Readthe questionthoroughly. Youmay preferto workout the answerbefore lookingat the options,or you may preferto lookat the optionsat the beginning. Adoptthe methodthat worksbest foryou. Step 3 Readthe fouroptionsand see ifone matches yourownanswer.Becarefulwith numericalquestionsas the distractersare designedto match answersthat incorporatecommonerrors.Checkthat yourcalculationis correct.Haveyou followedthe requirementexactly?Haveyou includedeverystage of the calculation? Step 4 Youmay findthat noneof the optionsmatches youranswer. Re-readthe questionto ensurethat you understandit and are answering the requirement Eliminateany obviouslywronganswers Considerwhichof the remaininganswersis the mostlikelyto be correctand selectthe option Step 5 Ifyou are stillunsuremakea note and continueto the nextquestion. Step 6 Revisitunansweredquestions.Whenyou comeback to a questionafter a break you oftenfindyou are able to answerit correctlystraightaway. Ifyou are still unsurehave a guess. Youare not penalisedforincorrectanswers,so never leave a question unanswered! Afterextensivepracticeand revisionof MCQs,you may findthat you recognisea questionwhen you sit the exam.Beaware that the detailand/or requirementmay be different.Ifthe question seemsfamiliarread the requirementand optionscarefully– do not assumethat it is identical. Helpingyou withyourrevision xi Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 12 of 421 H q Using your BPP products ThisKitgivesyouthequestion practice andguidance youneedintheexam.Ourotherproducts canalsohelpyoupass: Workbook introduces andexplains theknowledge required foryourexam Youcanpurchase thisproduct byvisiting www.bpp.com/learningmedia. G H xii Helping youwithyourrevision Page 13 of 421 q Questions G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 14 of 421 q G H 2 Management Accounting (FMA/MA) Page 15 of 421 G q Do you know? – Accounting for management Checkthatyoucanfillintheblanksinthestatements belowbeforeyouattempt any questions. Ifindoubt,youshouldgobacktoyourBPPWorkbook andrevisefirst. Goodinformation should be………..,………..,………..,and…….Itshould inspire confidence, it should beappropriately communicated, itsvolume should bemanageable, itshould be timely anditscostshould belessthanthebenefits itprovides. Information formanagement islikelytobeusedfor – – – ........................................................ ........................................................ ........................................................ Themainobjective ofprofitmaking organisations isto…………………...A secondary objective ofprofitmaking organisations mightbetoincrease …………ofitsgoods/services. Themainobjective ofnon-profit making organisations isusually to……………..andservices. Asecondary objective ofnon-profit making organisations mightbetominimise the……. involved inproviding thegoods/services. Long-term ………planning, alsoknown ascorporate planning, involves selecting appropriate …………soastoprepare a long-term plantoattaintheobjectives. Anthony divides management activities into………..planning, …………control and…………. control. Tactical (ormanagement) control: 'theprocess bywhichmanagers assure that………..are obtained andusedeffectively andefficiently intheaccomplishment oftheorganisation's objectives'. Operational control: 'theprocess ofassuring thatspecific ………arecarried out……….and …………. …………… accounts areprepared forindividuals external toanorganisation: shareholders, customers, suppliers, taxauthorities, employees. ……………. accounts areprepared forinternal managers ofanorganisation. There isnolegalrequirement toprepare …………..accounts. Q U E T IO N S S ……………. accounts arebothanhistorical record anda future planning tool. ……………. accounts concentrate onthebusiness asa whole, aggregating revenues and costsfromdifferent operations, andareanendinthemselves. Costaccounting information is,ingeneral, unsuitable for……………….. Possible pitfalls Writedownthemistakes youknowyoushould avoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 16 of 421 Questions3 H G q Did you know? – Accounting for management Couldyoufillintheblanks?Theanswers areinbold.Usethispageforrevision purposes as youapproach theexam. Goodinformation should berelevant, complete, accurate, andclear.Itshould inspire confidence, itshould beappropriately communicated, itsvolume should bemanageable, it should betimely anditscostshould belessthanthebenefits itprovides. Information formanagement islikelytobeusedfor Planning – Control – – Decision making Themainobjective ofprofitmaking organisations istomaximise profits.Asecondary objective ofprofitmaking organisations mightbetoincrease outputofitsgoods/services. Themainobjective ofnon-profit making organisations isusually toprovide goodsand services. Asecondary objective ofnon-profit making organisations mightbetominimise thecostsinvolved inproviding thegoods/services. Long-term strategicplanning, alsoknown ascorporate planning, involves selecting appropriate strategies soastoprepare a long-term plantoattaintheobjectives. Anthony divides management activities intostrategicplanning, management control and operational control. Tactical (ormanagement) control: 'theprocess bywhichmanagers assure thatresources areobtained andusedeffectively andefficiently intheaccomplishment ofthe organisation's objectives'. Operational control: 'theprocess ofassuring thatspecific tasksarecarried outeffectively andefficiently'. Financialaccounts areprepared forindividuals external toanorganisation: shareholders, customers, suppliers, taxauthorities, employees. Management accounts areprepared forinternal managers ofanorganisation. There isnolegalrequirement toprepare management accounts. Management accounts arebothanhistorical record anda future planning tool. Financialaccounts concentrate onthebusiness asa whole, aggregating revenues and costsfromdifferent operations, andareanendinthemselves. Costaccounting information is,ingeneral, unsuitable fordecision making. Possible pitfalls – Forgetting thedifferences between financial andmanagement accounting 4 Management Accounting (FMA/MA) Page 17 of 421 H q 1 Accounting for management 1.1 WhichTWOofthefollowing statements aboutqualities ofgoodinformation aretrue? Itshould berelevant foritspurposes Itshould becommunicated totherightperson Itshould becompletely accurate Itshould beprovided whatever thecost (2 marks) Q U E T IO N S S 1.2 Thesalesmanager hasprepared a manpower plantoensure thatsalesquotas forthe forthcoming yearareachieved. Thisisanexample ofwhattypeofplanning? Strategic planning Tactical planning Operational planning Corporate planning (2 marks) 1.3 WhichTWOofthefollowing statements aboutmanagement accounting information are true? Itmayinclude non-financial information Itisrequired bylawtobeproduced Itisusedtoaidplanning Itisforusebyparties external totheorganisation (2 marks) G H 1.4 Whichofthefollowing statements is/arecorrect? (i) Amanagement control system isa termusedtodescribe thehardware andsoftware usedtodrivea database system whichproduces information outputs thatareeasily assimilated bymanagement. (ii) Anobjective isa course ofactionthatanorganisation mightpursue inorderto achieve itsstrategy. (iii) Information isdatathathasbeenprocessed intoa formmeaningful totherecipient. (i),(ii)and(iii) (i)and(iii)only (ii)and(iii)only (iii)only (2 marks) 1.5 Goodinformation should havecertain qualities. WhichTWOofthefollowing arerequired asqualities ofgoodmanagement information? Complete Extensive Trueandfair Accurate (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 18 of 421 Questions5 q 1.6 Monthly variance reports areanexample ofwhichoneofthefollowing typesof management information? Tactical Strategic Non-financial Operational (2 marks) 1.7 Whichofthefollowing statements is/arecorrect? (i) (ii) Information fordecision-making should incorporate uncertainty insomeway. Thedatausedtoprepare financial accounts andmanagement accounts arethesame. (i)istrueand(ii)isfalse (ii)istrueand(i)isfalse Botharetrue Botharefalse (2 marks) 1.8 Usethedropdownlisttoselectwhichofthefollowing processes occursatthebusiness planning stage. Select... Obtaining dataaboutactualresults Taking corrective action Comparing actualperformance withbudget Establishing objectives G H (2 marks) 1.9 Whichofthefollowing statements iscorrect? Management accounting systems provide information foruseinfulfilling legal requirements. Management accounting systems provide information fortheuseofdecision-makers within anorganisation. Management accounting systems provide information forusebyshareholders. Management accounting systems provide information forusebytaxauthorities. (2 marks) 1.10 WhichTWOofthefollowing would bedatarather thaninformation? Salesincrease/decrease perproduct inlastquarter Totalsalesvalueperproduct Totalmaterial usage Salesstaffcommission asa percentage oftotalsales (2 marks) (Total= 20 marks) 6 Management Accounting (FMA/MA) Page 19 of 421 G q Do you know? – Data and presenting information Checkthatyoucanfillintheblanksinthestatements belowbeforeyouattempt any questions. Ifindoubt,youshouldgobacktoyourBPPWorkbook andrevisefirst. Datamaybe………..(collected specifically forthepurpose ofa survey) or……….(collected forsomeotherpurpose). Youwillremember thatprimary dataaredatacollected especially fora specific purpose. Theadvantage ofsuchdataisthattheinvestigator knows where thedata……..………andis awareofanyinadequacies orlimitations inthedata.Itsdisadvantage isthatitcanbevery ………… tocollect primary data. Secondary datasources maybesatisfactory incertain situations, ortheymaybetheonly convenient means ofobtaining anitemofdata.Itisessential thatthereisgoodreason to believe thatthesecondary datausedis………and……….. Themainsources ofsecondary dataare: – – – – ..................................................... ..................................................... ..................................................... ..................................................... – – – – .................................................... .................................................... .................................................... .................................................... ………….. dataisdescriptive rather thannumerical. Itcanbe………………. or………………. ………….. datacanbethought ofasa label,andthe……….doesnotmatter. ………….. dataishierarchical. ………….. datacomes fromtheoutput ofdevices thatdetectinputfromtheirsurroundings ………….. datacomes fromthetransactions ofa business. ………….. dataisoftennon-numerical anddifficult fordataanalysis software tohandle. Asimple ………….. sample isa sample selected insucha waythateveryiteminthe population hasanequalchanceofbeingincluded andshould therefore befreefrom ………….. ………….. sampling isa sampling method thatworks byselecting everynthitemaftera random start. ………….. sampling isa method ofsampling thatinvolves dividing thepopulation into …………... ………….. sampling isa probability sampling method thatinvolves dividing thepopulation intoa number ofsub-populations andthenselecting a smallsample ofthesesubpopulations atrandom. ………….. sampling isa method ofsampling inwhichrandomness isforfeited intheinterests ofcheapness andsimplicity. ………….. sampling isa method ofnon-random sampling thatinvolves selecting one definable subsection ofthepopulation asthesample, thatsubsection takentobe representative ofthepopulation inquestion. Possible pitfalls Writedownthemistakes youknowyoushould avoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 20 of 421 Q U E T IO N S S Questions7 H G q Did you know? – Data and presenting information Couldyoufillintheblanks?Theanswers areinbold.Usethispageforrevision purposes as youapproach theexam. Datamaybeprimary (collected specifically forthepurpose ofa survey) orsecondary (collected forsomeotherpurpose). Youwillremember thatprimary dataaredatacollected especially fora specific purpose. Theadvantage ofsuchdataisthattheinvestigator knows where thedatacamefromand isawareofanyinadequacies orlimitations inthedata.Itsdisadvantage isthatitcanbe veryexpensive tocollect primary data. Secondary datasources maybesatisfactory incertain situations, ortheymaybetheonly convenient means ofobtaining anitemofdata.Itisessential thatthereisgoodreason to believe thatthesecondary datausedisaccurateandreliable. Themainsources ofsecondary dataare:Governments; banks;newspapers; trade journals; information bureaux; consultancies; libraries andinformation services. Categorical dataisdescriptive rather thannumerical. Itcanbenominal orordinal. Nominal datacanbethought ofasa label,andtheorderdoesnotmatter. Ordinaldataishierarchical. Machine/sensor datacomes fromtheoutput ofdevices thatdetectinputfromtheir surroundings Transactional datacomes fromthetransactions ofa business. Human/social dataisoftennon-numerical anddifficult fordataanalysis software to handle. Asimple random sample isa sample selected insucha waythateveryiteminthe population hasanequalchanceofbeingincluded andshould therefore befreefrombias. Systematic sampling isa sampling method thatworks byselecting everynthitemaftera random start. Stratified sampling isa method ofsampling thatinvolves dividing thepopulation into strata. Multistage sampling isa probability sampling method thatinvolves dividing thepopulation intoa number ofsub-populations andthenselecting a smallsample ofthesesubpopulations atrandom. Quotasampling isa method ofsampling inwhichrandomness isforfeited intheinterests of cheapness andsimplicity. Clustersampling isa method ofnon-random sampling thatinvolves selecting one definable subsection ofthepopulation asthesample, thatsubsection takentobe representative ofthepopulation inquestion. Possible pitfalls – Mixing upthedifferent typesofsampling. – Notknowing theadvantages anddisadvantages ofthesampling methods. 8 Management Accounting (FMA/MA) Page 21 of 421 H q 2 Data and presenting information 2.1 WhichTWOofthefollowing areprimary sources ofdata? 2.2 2.3 Historical records oftransport coststobeusedtoprepare forecasts forbudgetary planning TheAnnual Abstract ofStatistics, published bytheOfficeforNational Statistics in theUnited Kingdom Datacollected bya bankina telephone survey tomonitor theeffectiveness ofthe bank's customer services Focusgroupfeedback aboutpotential flavours ofa newbiscuit Q U E T IO N S S (2 marks) WhichTWOofthefollowing statements regarding different typesofdataaretrue? Secondary dataaredatacollected especially fora specific purpose. Discrete datacantakeonanyvalue. Ordinal dataisa formofcategorical data. Population dataaredataarising asa result ofinvestigating a groupofpeople or (2 marks) objects. Government statistics canbea useful source ofdataandinformation. Whichofthefollowing typesofdatainthedropdownlistismostlikelytobeobtained from government statistics? Select... G H Foreign exchange rates Population data Details ofindustry costs Interest rates 2.4 (2 marks) Abankhascollected datafromcustomers ontheirviewsofrecent changes toitsapp.The online questionnaire required customers toanswer fivequestions usinga scaleof1to10 with1denoting veryunsatisfied and10denoting verysatisfied. Whattypeofdataisthis? Numerical anddiscrete Numerical andcontinuous Categorical andordinal Categorical andnominal (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 22 of 421 Questions9 q 2.5 WhichTWOofthefollowing statements regarding datasources aretrue? Sensors allowfasteranomaly detection GPSsystem output isanexample ofa human datasource Transactional datacanallowa business tofocusonitsmostimportant customers (2 marks) Datafromsocialmedia isworthless tobusinesses 2.6 Thecostofmaterials forproduct Aareasfollows. Material W:$2,250 Material X:$3,000 Material Y:$3,600 Material Z:$150 Ifthematerial proportions weredisplayed ona piechart,howmanydegrees would material Yrepresent? (2 marks) degrees The following information relates to questions 2.7 to 2.8. Numberof ice-creams sold G April May June July Mintchocchip 600 760 725 900 Chocolate 300 335 360 525 Strawberry 175 260 310 475 100 90 Blueberry 75 90 ld o s s datamaybeillustrated 2.7 The bythefollowing chart. m a e r What c- typeofchartisit? e cif o .o1,000 N 800 600 April May June July 400 200 0 10 Mint-choc Chocolate StrawberryBlueberry Simple barchart Multiple barchart Component barchart Cumulative frequency distribution graph Management Accounting (FMA/MA) Page 23 of 421 (2 marks) H G q 2.8 2.9 Whichofthefollowing statements istrue? Salesofmintchocchiprosesteadily overthefourmonths Totalsalesfellinthemonth ofJuly InJune,thegapbetween salesofstrawberry andsalesofchocolate reduced Salesofblueberry roseinMayandJuly (2 marks) Q U E T IO N S S Thetablebelow shows AVCo'ssalesfigures forthefirstsixmonths oftheyear. Jan Feb Mar Apr May June Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 A 800 725 725 400 415 405 3,470 B 210 210 180 150 175 160 1,085 C 25 50 60 95 125 140 495 985 965 645 715 705 5,050 Product Total 1,035 Whatkindofgraphorchartwould youusetoshowthefluctuations oftotalmonthly sales figures acrossthesixmonths? Percentage component barchart Scatter diagram Linegraph Piechart (2 marks) question istakenfromtheJuly toDecember 2017examperiod 2.10 Thefollowing Whichofthefollowing would bebestsuited torepresent therelationship between a company’s advertising expenditure anditssalesrevenue? 1 Apiechart 2 Abarchart 3 Ascatter graph 1only 2 only 3 only 2 and3 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 24 of 421 Questions11 H q 2.11 Thefollowingquestion is taken from the July to August2020 exam period 1 Primarydata is usuallylessexpensiveto producethan secondarydata because it is availablefromwithinthe organisation 2 Alldata can be classifiedas eitherdiscreteor continuous Arethe abovestatements about data true or false? Bothstatements are true 2.12 Ifa sampleis selectedusingrandomsampling,it willbe freefrombias. Asamplingframeis a numberedlistof allitemsina sample. Inclustersamplingthere is verylittlepotentialforbias. Inquota sampling,investigatorsare toldto interviewallthe peoplethey meet up to a (2 marks) certainquota. Whichof the followingexplainsthe essenceof quota sampling? G (2 marks) WhichTWOof the followingstatements are true? 2.13 Bothstatements are false Statement1is true, statement 2 is false Statement1is false,statements 2 is true Eachelementof the populationhas an equal chance of beingchosen Everynth memberof the populationis selected Everyelementof one definablesub-sectionof the populationis selected Noneof the above H (2 marks) (Total = 26 marks) 12 ManagementAccounting(FMA/MA) Page 25 of 421 G q Do you know? – Cost classification and behaviour Checkthatyoucanfillintheblanksinthestatements belowbeforeyouattempt any questions. Ifindoubt,youshouldgobacktoyourBPPWorkbook andrevisefirst. A………..costisa costthatcanbetracedinfulltotheproduct, service ordepartment that isbeingcosted. An………..costisa costthatisincurred inthecourse ofmaking a product, providing a service orrunning a department butwhichcannot betraceddirectly andinfull totheproduct, service ordepartment. Inclassification byfunction, costsareclassified asfollows – ........................................................ These areassociated withthefactory. – ........................................................ These arecostsassociated withgeneral officedepartments. – ........................................................ These arecostsassociated withsales, marketing, warehousing andtransport departments. A…………costisa costwhichisincurred fora particular period oftimeandwhich, within certain activity levels, isunaffected bychanges inthelevelofactivity. A ………...costisa costwhichtendstovarywiththelevelofactivity. Manyitems ofexpenditure arepart …………andpart…………andarecalled…………costs. Thedistinction between production andnon-production costsisthebasisofvaluing ……… A………..centre isa department ororganisational function whose performance isthedirect responsibility ofa specific manager. ………..centres aresimilar tocostcentres butareaccountable forcostsandrevenues. An………..centre isa profitcentre withadditional responsibilities forcapitalinvestment and possibly forfinancing, andwhose performance ismeasured byitsreturn oninvestment. Thebasicprinciple ofcostbehaviour istheconsideration ofhowcostswillchangeasa result ofchanging….…..levels. Theeffectofincreasing activity levels onunitcostsisasfollows. (Tickasappropriate) Remains Rises Falls constant Variable costperunit Fixedcostperunit Totalcostperunit Thefixedandvariable elements ofsemi-variable costscanbedetermined bythe .........................method. Possible pitfalls Writedownthemistakes youknowyoushould avoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 26 of 421 Questions13 Q U E T IO N S S H G q Did you know? – Cost classification and behaviour Couldyoufillintheblanks?Theanswers areinbold.Usethispageforrevision purposes as youapproach theexam. Adirectcostisa costthatcanbetracedinfulltotheproduct, service ordepartment that isbeingcosted. Anindirect costisa costthatisincurred inthecourse ofmaking a product, providing a service orrunning a department butwhichcannot betraceddirectly andinfull totheproduct, service ordepartment. Inclassification byfunction, costsareclassified asfollows Production ormanufacturing costs.These areassociated withthefactory. – – Administration costs.These arecostsassociated withgeneral officedepartments. Marketing orsellinganddistribution costs.These arecostsassociated withsales, – marketing, warehousing andtransport departments. Afixedcostisa costwhichisincurred fora particular period oftimeandwhich, within certain activity levels, isunaffected bychanges inthelevelofactivity. Avariable costisa costwhichtendstovarywiththelevelofactivity. Manyitems ofexpenditure arepartfixed andpartvariable andarecalledsemi-variable costs. Thedistinction between production andnon-production costsisthebasisofvaluing inventory. Aresponsibility centre isa department ororganisational function whose performance is thedirectresponsibility ofa specific manager. Profitcentres aresimilar tocostcentres butareaccountable forcostsandrevenues. Aninvestment centre isa profitcentre withadditional responsibilities forcapitalinvestment andpossibly forfinancing, andwhose performance ismeasured byitsreturn on investment. Thebasicprinciple ofcostbehaviour istheconsideration ofhowcostswillchangeasa result ofchanging activitylevels. Theeffectofincreasing activity levels onunitcostsisasfollows. (Tickasappropriate) Rises Falls Variable costperunit Fixedcostperunit Totalcostperunit Thefixedandvariable elements ofsemi-variable costscanbedetermined bythehigh-low method. Possible pitfalls – Getting confused between fixedandvariable costs– particularly iftheyare expressed perunit. – 14 Remains constant Notgrasping thedifference between directandindirect costs. Management Accounting (FMA/MA) Page 27 of 421 H q 3 Cost classification and behaviour 3.1 Afirmhastopaya 20cperunitroyaltytotheinventor ofa device whichitmanufactures andsells. Howwould theroyaltychargebeclassified inthefirm's accounts? Select... Selling expense Q U E T IO N S S Directexpense Production overhead Administrative overhead 3.2 3.3 (2 marks) WhichTWOofthefollowing would beclassed asindirect labour? Assembly workers ina company manufacturing televisions Astores assistant ina factorystore Factorycleaning staff Plasterers ina construction company Aconsultant ina firmofmanagement consultants (2 marks) Amanufacturing firmisverybusyandovertime isbeingworked. Howwould theamount ofovertime premium contained indirectwagesnormally be classed? Partofprime cost G 3.4 Factoryoverheads Directlabour costs Administrative overheads (2 marks) WoodComakes chairsandtables. WhichTWOofthefollowing items would betreated asanindirect cost? Woodusedtomakea chair Metalusedforthelegsofa chair Stapletoattachfireretardant labelstochairs Fabrictocovertheseatofa chair Thesalaryofthesalesdirector ofthecompany Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 28 of 421 (2 marks) Questions15 H q 3.5 OverwhichTWOofthefollowing isthemanager ofa profitcentre likelytohavecontrol? 3.6 G 3.8 Acostwhicharisesfroma decision already taken,whichcannot, intheshortrun, bechanged. Acostforwhichthebehaviour pattern canbeeasilyanalysed tofacilitate valid budgetary control comparisons. Acostwhichcanbeinfluenced byitsbudget holder. Aspecific costofanactivity orbusiness whichwould beavoided iftheactivity or (2 marks) business didnotexist. WhichTWOofthefollowing items mightbea suitable costunitwithin thecreditcontrol department ofa company? Stationery cost Telephone bill Customer account Cheque received andprocessed (2 marks) Whichofthefollowing bestdescribes a period cost? Acostthatrelates toa timeperiod whichisdeducted asexpenses fortheperiod and isnotincluded intheinventory valuation. Acostthatcanbeeasilyallocated toa particular period, without theneedfor arbitrary apportionment between periods. Acostthatisidentified witha unitproduced during theperiod, andisincluded inthe valueofinventory. Thecostistreated asanexpense fortheperiod whenthe inventory isactually sold. Acostthatisincurred regularly everyperiod, egeverymonth orquarter. (2 marks) 3.9 (2 marks) Whichofthefollowing bestdescribes a controllable cost? 3.7 Selling prices Controllable costs Apportioned headofficecosts Capitalinvestment inthecentre Worker Coemploys foursupervisors tooversee thefactoryproduction ofallitsproducts. Howwould thesalaries paidtothesesupervisors beclassified? Asa directlabour cost Asa directproduction expense Asa production overhead Asanadministration overhead (2 marks) 16 Management Accounting (FMA/MA) Page 29 of 421 H G q 3.10 ToyComanufactures andsellstoys. WhichTWOofthesecostsareclassified asdistribution costs? Rental ofthefinished goodswarehouse Depreciation ofitsownfleetofdelivery vehicles Costsassociated witha marketing campaign Commission paidtosalesstaff (2 marks) Q U E T IO N S S 3.11 Whichofthefollowing describes a costcentre? Aunitofoutput orservice forwhichcostsareascertained Afunction orlocation forwhichcostsareascertained Asegment oftheorganisation forwhichbudgets areprepared Anamount ofexpenditure attributable toa particular activity (2 marks) 3.12 Theoverhead expenses ofMachining Coarecodedusinga fivedigitcodingsystem, an extract fromwhichisasfollows: Costcentre Machining Finishing Packing Stores Maintenance Codeno 10 11 12 13 14 Typesofexpense Codeno Indirect materials 410 Depreciation ofproduction machinery 420 Indirect wages 430 Maintenance materials 440 Machine hirecosts 450 Depreciation ofnon-production equipment 460 Thecodingforthehirecostsofa packing machine is12450. Whichisthecodingfortheissueofindirect materials issued fromstores tothemachining department? 10410 10440 13410 13440 (2 marks) 3.13 Fixedcostsareconventionally deemed tobewhichofthefollowing? Constant perunitofoutput Constant intotalwhenproduction volume changes Outside thecontrol ofmanagement Easilycontrolled (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 30 of 421 Questions17 H q 3.14 Thefollowing datarelate totheoverhead expenditure ofa contract cleaners attwoactivity levels. Square metres cleaned 13,500 15,950 Overheads $84,865 $97,850 Whatistheestimate oftheoverheads if18,300square metres aretobecleaned? $ (2 marks) The following information relates to questions 3.15 to 3.16. G H Whichoftheabovegraphsillustrates thecostsdescribed inquestions 3.15to3.19? 3.15 Alinear variable cost– whenthevertical axisrepresents costincurred. Graph1 Graph2 Graph4 Graph5 (2 marks) 3.16 Afixedcost– whenthevertical axisrepresents costincurred. 18 Graph1 Graph2 Graph3 Graph6 (2 marks) Management Accounting (FMA/MA) Page 31 of 421 G q 3.17 Alinear variable cost– whenthevertical axisrepresents costperunit. Graph1 Graph2 Graph3 Graph6 (2 marks) Q U E T IO N S S 3.18 Asemi-variable cost– whenthevertical axisrepresents costincurred. Graph1 Graph2 Graph4 Graph5 (2 marks) 3.19 Astepfixedcost– whenthevertical axisrepresents costincurred. 3.20 Graph3 Graph4 Graph5 Graph6 (2 marks) BakeCohasrecorded thefollowing datainthetwomostrecent periods. H Totalcosts Volume of ofproduction production $ Units 13,500 700 18,300 1,100 Whatisthebestestimate ofBakeCo'sfixedcostsperperiod? $ (2 marks) 3.21 Aproduction worker ispaida salaryof$650permonth, plusanextra5 centsforeachunit produced during themonth. Howisthistypeoflabour costbestdescribed? Avariable cost Afixedcost Astepcost Asemi-variable cost (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 32 of 421 Questions19 q 3.22 Whattype of cost is supervisorsalary costs, whereone supervisoris needed foreveryten employeesadded to the staff? Select... Afixedcost Avariablecost Amixedcost Astep cost (2 marks) 3.23 Thefollowinginformationforadvertisingand sales has been establishedoverthe past sixmonths: Month Salesrevenue Advertisingexpenditure $'000 $'000 1 155 3 2 125 2.5 3 200 6 4 175 5.5 5 150 4.5 6 225 6.5 Usingthe high-lowmethodwhichof the followingis the correctequationforlinking advertisingand sales fromthe abovedata? Salesrevenue=62,500 +(25advertisingexpenditure) G 3.24 Advertisingexpenditure=– 2,500 +(0.04 sales revenue) Salesrevenue=95,000 +(20 advertisingexpenditure) Advertisingexpenditure=– 4,750+(0.05 sales revenue) H (2 marks) Atotal cost isdescribedas stayingthe same overa certainactivityrange and then increasingbut remainingstable overa revisedactivityrange inthe shortterm. Whattype of cost is this? Afixedcost 20 Avariablecost Asemi-variablecost Astepped fixedcost (2 marks) ManagementAccounting(FMA/MA) Page 33 of 421 q 3.25 TentCo incursthe followingcosts at variousactivitylevels: Totalcost Activitylevel $ Units 250,000 5,000 312,500 7,500 400,000 10,000 Usingthe high-lowmethodwhatisthe variablecost per unit(tothe nearestwholenumber)? $ 3.26 (2 marks) Thefollowingdiagramrepresentsthe behaviourof one elementof cost: Whichof the followingstatements is consistentwiththe abovediagram? Annualfactory powercost wherethe electricitysuppliersets a tariffbased on a fixed charge plusa constant unitcost forconsumptionbut subjectto a maximumannual charge. Weeklytotal labourcost whenthere is a fixedwage fora standard 40 hourweekbut overtimeis paid at a premiumrate. Totaldirectmaterialcost fora periodifthe suppliercharges a lowerunitcost on all unitsonce a certainquantityhas been purchasedinthat period. Totaldirectmaterialcost fora periodwherethe suppliercharges a constant amount per unitforallunitssuppliedup to a maximumcharge forthe period. (2 marks) G 3.27 Q U E T IO N S S Anorganisationmanufacturesa singleproduct.Thetotal cost of making4,000 unitsis $20,000 and the total cost of making20,000 unitsis $40,000. Withinthisrange of activity the total fixedcosts remainunchanged. Whatis the variablecost per unitof the product(to 2 dp)? $ (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 34 of 421 Questions 21 H q 3.28 Whentotalpurchases ofrawmaterial exceed 30,000unitsinanyoneperiod thenallunits purchased, including theinitial 30,000,areinvoiced ata lower costperunit. Whichofthefollowing graphsisconsistent withthebehaviour ofthetotalmaterials costin a period? A $ 0 30,000 0 G Units 0 C $ 30,000 GraphA GraphB GraphC GraphD B $ Units D $ Units 30,000 0 30,000 Units H (2 marks) 3.29 Thetotalcostofproduction fortwolevels ofactivity isasfollows: Level1 Level2 Production (units) 3,000 5,000 Totalcost($) 6,750 9,250 Thevariable production costperunitandthetotalfixedproduction costbothremain constant intherangeofactivity shown. Whatistheleveloffixedcosts(tothenearest whole number)? $ 22 (2 marks) Management Accounting (FMA/MA) Page 35 of 421 q 3.30 3.31 G 3.32 Thefollowingquestion is taken from the December2011exam. Thefollowingshowsthe total overheadcosts forgivenlevelsof a company'stotal output. Cost Output $ Units 4,000 1,000 7,000 2,000 10,000 3,000 9,500 4,000 Astep up infixedcosts of $500 occursat an output levelof 3,500 units. Whatwouldbe the variableoverheadcost per unit(to the nearest $0.01)usingthe high-low technique? $1.67per unit $1.83per unit $2.75per unit $3.00 per unit (2 marks) Thefollowingquestion is taken from the January to June 2014exam period. Acompanyhas prepared flexedbudgets at twoactivitylevels.Thecost per unitof three costs is givenbelow.Allthree costs behaveina linearmannerwithrespect to activity. Activitylevel(units) 10,000 15,000 Cost X $3.0 per unit $2.0 per unit Y $1.0per unit $1.0per unit Z $3.5per unit $3.0 per unit Iseach of the costs variable,semi-variableor fixed? X Y Z Variable Variable Fixed Fixed Semi-variable Variable Fixed Fixed Variable Variable Semi-variable Fixed (2 marks) Thefollowingquestion is taken from the September to June 2018exam period. Thefollowingobservationsof output and cost have been made: Output Cost Units $ 8,000 39,400 20,000 68,000 Itis knownthat at output levelsabove15,000units,variablecost per unitdropsby $1per unitforallsubsequentunitsproduced. Whatis the variablecost foreach unitof output above15,000units? $1.80 $0.97 $2.80 $3.40 (2 marks) (Total = 64 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 36 of 421 Questions 23 Q U E T IO N S S H q G H 24 Management Accounting (FMA/MA) Page 37 of 421 G q Do you know? analysing – Forecasting, summarising and data Checkthatyoucanfillintheblanks inthestatements below before youattempt anyquestions. Ifindoubt,youshould gobacktoyourBPPWorkbook andrevise first. A..............isaplanofwhattheorganisation isaiming toachieve andwhatithassetasa target whereas a..............isanestimate ofwhatislikely tooccurinthefuture. Thedegree ofcorrelation between twovariables ismeasured bythe............................ r=+1means thatthevariables are...............................correlated. r=–1means thatthevariables are...............................correlated. r=0 means thatthevariables are.............. Thesquare ofthecorrelation coefficient iscalled the..............of.................Itmeasures the ..............ofthetotalvariation inthevalue ofonevariable (thedependent variable) thatcanbe explained byvariations inthevalue oftheother variable (theindependent value). Linear regression analysis isonemethod usedforestimating alineof.............Aswithall forecasting techniques, theresults from regression analysis willnotbewholly reliable. There are anumber offactors which affectthereliability offorecasts made using regression analysis. For example, itassumes thata ...............................exists between thetwovariables. Atimeseries isaseries offigures orvalues recorded overtime. Thetimeseries analysis forecasting technique isusually usedto ................................ There arefourcomponents ofatimeseries: ...........,..........................,.......................and …….....………….. Onewayoffinding thetrend istouse........................... .......................isdatawhere thefrequency isshown interms ofarange. ......................is datawhere thefrequency isshown interms ofaspecific measure orvalue. ......................can onlytakeonacountable number ofvalues. .......................cantakeonanyvalue. Thearithmetic mean isthebestknown typeofaverage andiswidely understood. Arithmetic mean ofungrouped data=............................... ÷......................... Arithmetic mean ofgrouped data=............................... ÷......................... or ............................... ÷......................... Theaverage which means 'themost frequently occurring value' iscalled the.............. Themode ofagrouped frequency distribution canbecalculated from a.............. The.............isthevalue ofthemiddle member ofanarray.Themiddle itemofanoddnumber ofitems iscalculated as............. The......................,which isthesquare rootofthe...........,isthemost important measure of spread usedinstatistics. Thespreads oftwodistributions canbecompared using the...........of...........calculated as ..................................÷......................... Properties ofthenormal distribution areasfollows: Itis................ and................ Ithasa................, (pronounced mew) Theareaunder thecurve totals exactly ...Theareatotheleftof=areatotherightof=.... Themaincharacteristics ofbigdataare……….. , ………., …………, ….……. and……….. ThekeyroleofBigDataistoanalyse allrelevant ……….. andtogenerate a……….. model ofwhat theoutcome ofthedecision willbe.Onlydatathathasbeen……….., orinadigital form, canbe analysed (forexample from social media, audio/video content, financial data,GPSdata, banking transactions andwebserver logs). Possible pitfalls Write down themistakes youknow youshould avoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 38 of 421 Questions25 Q U E T IO N S S H G q Did you know? analysing – Forecasting, summarising and data Couldyoufillintheblanks? Theanswers areinbold.Usethispageforrevision purposes asyou approach theexam. Abudget isaplanofwhattheorganisation isaiming toachieve andwhatithassetasatarget whereas aforecastisanestimate ofwhatislikely tooccurinthefuture. Thedegree ofcorrelation between twovariables ismeasured bythecorrelation coefficient. r=+1means thatthevariables areperfectly positively correlated r=-1means thatthevariables areperfectly negatively correlated r=0 means thatthevariables areuncorrelated Thesquare ofthecorrelation coefficient iscalled thecoefficient ofdetermination. Itmeasures theproportion ofthetotalvariation inthevalue ofonevariable (thedependent variable) that canbeexplained byvariations inthevalue oftheother variable (theindependent variable). Linear regression analysis isonemethod usedforestimating alineofbestfit.Aswithall forecasting techniques, theresults from regression analysis willnotbewholly reliable. There are anumber offactors which affectthereliability offorecasts made using regression analysis. For example, itassumes thata linearrelationship exists between thetwovariables. Atimeseries isaseries offigures orvalues recorded overtime. Thetimeseries analysis forecasting technique isusually usedtoforecast sales. There arefourcomponents ofatimeseries: trend,seasonal variations, cyclicalvariations andrandom variations. Onewayoffinding thetrend istousemoving averages. Grouped dataisdatawhere thefrequency isshown interms ofarange. Ungrouped datais datawhere thefrequency isshown interms ofaspecific measure orvalue. Discrete datacan onlytakeonacountable number ofvalues. Continuous datacantakeonanyvalue. Thearithmetic mean isthebestknown typeofaverage andiswidely understood. Arithmetic mean ofungrouped data=Sumofvalues ofitems÷ Number ofitems. Arithmetic mean ofgrouped data=Σfx÷nor Σfx÷Σf Theaverage which means 'themost frequently occurring value' iscalled themode. Themode ofagrouped frequency distribution canbecalculated from ahistogram. Themedian isthevalue ofthemiddle member ofanarray.Themiddle itemofanoddnumber of th (n+1) items iscalculated asthe item. 2 Thestandard deviation, which isthesquare rootofthevariance, isthemost important measure ofspread usedinstatistics. Thespreads oftwodistributions canbecompared using thecoefficient ofvariation calculated asstandard deviation ÷mean. Properties ofthenormal distribution areasfollows: Itissymmetrical andbell-shaped. Ithasamean, (pronounced mew) Theareaunder thecurve totals exactly 1.Theareatotheleftof=areatotherightof=0.5 Themaincharacteristics ofbigdataarevolume , velocity, variety, veracity andvalue. Thekeyroleofbigdataistoanalyse allrelevant information andtogenerate apredictive model ofwhattheoutcome ofthedecision willbe.Onlydatathathasbeendigitised, orina digital form, canbeanalysed (forexample from social media, audio/video content, financial data,GPSdata,banking transactions andwebserver logs). Possible pitfalls – Notunderstanding themeanings ofcorrelation coefficient andcoefficient ofdetermination – Forgetting thatlinear regression givesanestimate only.Itisnotwholly reliable 26 Management Accounting (FMA/MA) Page 39 of 421 H G q 4 Forecasting 77 mins 4.1 Thefollowing fourdatapairshavebeenobtained: (1,5),(2,6),(4,9),(5,11).Without carrying outanycalculations, whichofthefollowing correlation coefficients bestdescribes therelationship between xandy? 4.2 –0.98 –0.25 0.98 0.25 Q U E T IO N S S (2 marks) MakeCo'smanagement accountant isanalysing therejectratesachieved by100factory operatives working inidentical conditions. Rejectrates,Y%,arefoundtoberelated to months ofexperience, X,bythisregression equation: Y=20– 0.25X.(Thecorrelation coefficient wasr=–0.9.) Usingtheequation, whatisthepredicted rejectrateforanoperative with12months' experience? 17% 4.3 19% 20% 23% (2 marks) Aregression equation Y=a +bXisusedtoforecast thevalueofYfora givenvalueofX. WhichTWOofthefollowing increase thereliability oftheforecast? 4.4 Acorrelation coefficient numerically closeto1 Working toa higher number ofdecimal placesofaccuracy Forecasting forvalues ofXoutside therangeofthoseusedinthesample Alargesample isusedtocalculate theregression equation (2 marks) Ifx=12,y=42,x2=46,y2=542,xy=157andn=4,whatisthecorrelation coefficient? 0.98 –0.98 0.26 0.008 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 40 of 421 Questions27 H q 4.5 Usingdatafromtwelve European countries, ithasbeencalculated thatthecorrelation between thelevelofcarownership andthenumber ofroaddeaths is0.73. WhichTWOofthestatements shown follow fromthis? Highlevels ofcarownership causehighlevels ofroaddeaths There isa strong relationship between thelevelofcarownership andthenumber of roaddeaths 53%ofthevariation inthelevelofroaddeaths fromonecountry tothenextcanbe explained bythecorresponding variation inthelevelofcarownership 73%ofthevariation inthelevelofroaddeaths fromonecountry tothenextcanbe explained bythecorresponding variation inthelevelofcarownership (2 marks) 4.6 Theregression equation Y=3+2Xhasbeencalculated from6pairsofvalues, withXranging from1to10.Thecorrelation coefficient is0.8.Itisestimated thatY=43when X=20. WhichTWOofthefollowing aretrue? Theestimate isnotreliable because X isoutside therangeofthedata Theestimate isnotreliable because thecorrelation islow Theestimate isreliable Theestimate isnotreliable because thesample issmall 4.7 G (2 marks) Incalculating theregression equation linking twovariables, thestandard formulae forthe regression coefficients aregiveninterms ofXandY.Whichofthefollowing istrue? Xmustbethevariable whichwillbeforecast Itdoesnotmatter whichvariable iswhich Ymustbethedependent variable Ymustbethevariable shown onthevertical axisofa scatter diagram (2 marks) 4.8 SaveCousesregression analysis toestablish a totalcostequation forbudgeting purposes. Dataforthepastfourmonths isasfollows: Month Totalcost Quantity produced $'000 $'000 1 57.5 1.25 2 37.5 1.00 3 45.0 1.50 4 60.0 2.00 200.0 5.75 Thegradient oftheregression lineis17.14. Whatisthevalueofa? 25.36 48.56 74.64 101.45 (2 marks) 28 Management Accounting (FMA/MA) Page 41 of 421 H G q 4.9 Regression analysis isbeingusedtofinethelineofbestfit(y=a +bx)fromeleven pairsof data.Thecalculations haveproduced thefollowing information: x=440,y=330,x2=17,986, y2=10,366andxy=13,467 Whatisthevalueof'a'intheequation forthelineofbestfit(to2 decimal places)? 0.63 0.69 2.33 5.33 Q U E T IO N S S (2 marks) 4.10 Whichofthefollowing isa feasible valueforthecorrelation coefficient? – 2.0 – 1.2 0 +1.2 (2 marks) 4.11 Overan18-month period, saleshavebeenfoundtohaveanunderlying linear trendof y =7.112 + 3.949x,where y isthenumber ofitems soldandxrepresents themonth. Monthly deviations fromtrendhavebeencalculated andmonth 19isexpected tobe1.12times the trendvalue. Whatistheforecast number ofitems tobesoldinmonth 19? 91 92 93 94 H (2 marks) 4.12 Basedonthelast15periods theunderlying trendofsalesisy =345.12 – 1.35x. Ifthe16th period hasa seasonal factorof–23.62,assuming anadditive forecasting model, whatis theforecast forthatperiod, inwhole units? 300 301 324 325 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 42 of 421 Questions29 q 4.13 Monthly saleshavebeenfoundtofollow a linear trendofy =9.82+4.372x,where y isthe number ofitems soldandxisthenumber ofthemonth. Monthly deviations fromthetrend havebeencalculated andfollow anadditive model. Inmonth 24,theseasonal variation is estimated tobeplus8.5. Whatistheforecast number ofitems tobesoldinmonth 24?(tothenearest whole number.) 106 115 123 152 (2 marks) 4.14 WhichTWOofthefollowing arenecessary ifforecasts obtained froma timeseries analysis aretobereliable? There mustbenounforeseen events Themodel usedmustfitthepastdata Thetrendmustbeincreasing There mustbenoseasonal variation (2 marks) 4.15 Whatisthepurpose ofseasonally adjusting thevalues ina timeseries? G Toobtain aninstant estimate ofthedegree ofseasonal variation Toobtain aninstant estimate ofthetrend Toensure thatseasonal components totalzero Totakethefirststepina timeseries analysis ofthedata H (2 marks) 4.16 Thefollowing datarepresents a timeseries: X 36 Y 41 34 38 42 Aseries ofthree point moving averages produced from thisdatahasgiventhefirsttwovalues as38and39. Whatarethevalues of(X,Y)intheoriginal timeseries? 30 (38,39) (38,40) (40,38) (39,38) (2 marks) Management Accounting (FMA/MA) Page 43 of 421 q 4.17 Usinganadditive timeseries model, thequarterly trend(Y)isgivenbyY=65+7t,where t is thequarter (starting witht =1inthefirstquarter of20X5).Iftheseasonal component inthe fourth quarter is–30,whatistheforecast fortheactualvalueforthefourth quarter of 20X6,tothenearest whole number? 63 546 85 91 Q U E T IO N S S (2 marks) 4.18 Thetrendformonthly sales($Y)isrelated tothemonth (t)bytheequation Y=1,500– 3t where t =1inthefirstmonth of20X8.Whataretheforecast sales(tothenearest dollar) for thefirstmonth of20X9iftheseasonal component forthatmonth is0.92usinga multiplicative model? $1,377 $17,904 $1,344 $1,462 (2 marks) 4.19 WhichTWOofthefollowing arenecessary ifforecasts obtained froma timeseries analysis aretobereliable? G 4.20 Thetrendmustnotbeincreasing ordecreasing Thetrendmustcontinue asinthepast Extrapolation mustnotbeused Thesamepattern ofseasonal variation mustcontinue asinthepast H (2 marks) Under whichofthefollowing circumstances would a multiplicative model bepreferred toan additive model intimeseries analysis? Whena model easilyunderstood bynon-accountants isrequired Whenthetrendisincreasing ordecreasing Whenthetrendissteady Whenaccurate forecasts arerequired (2 marks) 4.21 BlueCo'sannual profits havea trendlinegivenbyY=20t– 10,where Y isthetrendin $'000andt istheyearwitht =0 in20X0. Whataretheforecast profits fortheyear20X9usinganadditive model ifthecyclical component forthatyearis–30? $160,000 $140,000 $119,000 $60,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 44 of 421 Questions31 q 4.22 4.23 InJanuary, the unemploymentinRuritaniais 567,800.Ifthe seasonalfactor usingan additivetimeseriesmodelis +90,100,what is the seasonally-adjustedlevelof unemployment(to the nearest wholenumber)? 90,100 477,700 567,800 657,900 (2 marks) Acountrymeasuresthe rate of inflationusinga base weightedindex,with20X1beingthe base year. Threedifferentproductsare used inthe index.Theunitpricesof these and the quantities purchased(unitsof each product)are shownbelow. Product Quantity purchased in 20X1 (millions) Price in 20X1 ($) Quantity purchased in 20X2 (millions) Price in 20X2 ($) Milk 300 1 320 1.10 Cola 150 2 120 2.50 Phones 50 80 75 100.00 Whatis the weightedaverage pricerisebetween20X1and 20X2,usingthe country'sbase weightedindex? 20.0% 24.0% 24.3% G 4.24 77.2% (2 marks) Thefollowinginformationisavailableforthe priceof materialsused at P Co. Laspeyreindexforpricein20X5(withbase year of 20X0) CorrespondingPaasche index Whatis Fisher'sidealindex? 12.00 32 16.98 144.00 288.24 150.0 138.24 (2 marks) ManagementAccounting(FMA/MA) Page 45 of 421 H G q 4.25 Alargebagofcement cost$0.80in20X3.Thepriceindices areasfollows. 20X3 91 20X4 95 20X5 103 20X6 106 Howmuchdoesa bagofcement costin20X6(to2 dp)? $ (2 marks) Q U E T IO N S S 4.26 Fouryearsagomaterial Xcost$5perkgandthepriceindexmostappropriate tothecost ofmaterial Xstoodat150. Thesameindexnowstands at430. Whatisthebestestimate ofthecurrent costofmaterial Xperkg? $1.74 $9.33 $14.33 $21.50 (2 marks) 4.27 Sixyearsagomaterial Mcost$10perkgandthepriceindexmostappropriate tothecost ofmaterial Mwas130.Thesameindexnowstands at510. Whatisthebestestimate ofthecurrent costofmaterial Mperkg? $2.55 $29.23 $39.23 $51.00 H (2 marks) 4.28 Thepriceindexina country isbasedonthepurchases ofthreeproducts: bread,meatand televisions. Thetablebelow shows thequantities (units) oftheproducts purchased andtheirunit prices,forthelasttwoyears. Product Quantity purchased in 20X1 (millions) Price in 20X1 ($) Quantity purchased in 20X2 (millions) Price in 20X2 ($) Bread 200 1 220 0.9 Meat 150 5 190 5.2 10 300 14 350.00 Televisions Whatisthepricerisebetween 20X1and20X2usinga current weightings approach? 3.6% 12.9% 13.3% 54.1% (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 46 of 421 Questions33 q 4.29 Thefollowingquestion is taken from the December2012exam. Thefollowingdata relatesto a company'soverheadcost. Time Output Overhead Price (units) cost ($) index 2 years ago 1,000 3,700 121 Currentyear 3,000 13,000 155 Usingthe highlowtechnique,what is the variablecost per unit(to the nearest $0.01) expressedincurrentyear prices? $3.22 $4.13 $4.65 $5.06 (2 marks) 4.30 Thefollowingquestion is taken from the June 2013exam. Anadditivetimeserieshas the followingtrend and seasonalvariations: Trend Y=4,000+6X where Y=sales inunits Xisthe numberofquarters,withthe firstquarterof2014being1,the secondquarterof2014 being2 etc. Seasonalvariation Quarter 1 2 3 4 Quarterlyvariation(units) –4 –2 +1 +5 Whatis the forecastsales volumeforthe fourthquarter of 2015? 4,029 4,043 4,048 4,053 (2 marks) G 4.31 Thefollowingquestion is taken from the July to December2015exam period. Thefollowingspreadsheet showspart of a timeseriesanalysisof a company’ssales. Year Quarter Sales(unit) Fourquarter movingtotal (unit) 2014 1 1,100 2015 2 1,700 3 1,900 4 2,300 1 3,100 2 3,700 7,000 9,000 11,000 13,200 3 4,100 Whatis the fourquarter centred movingaverage of sales unitsforquarter 4, 2014? 2,500 5,025 5,000 10,000 (2 marks) 34 ManagementAccounting(FMA/MA) Page 47 of 421 H q 4.32 Thefollowingquestion is taken from the January to June 2017exam period. Thefollowinginformationrelatesto a company’ssemi-variableproductionoverheads. Year Output Overhead Relevant units $ price index 2012 1,000 12,000 130 2013 1,200 14,000 140 Whatis the variableoverheadcost per unit,expressedin2013prices? 4.33 $5.00 $5.38 $10.00 $11.67 Q U E T IO N S S (2 marks) Thefollowingquestion is taken from the September to August2019exam period. Thesales trend of a productis representedby the equationy =a +bxwhere: y is the sales unitsina quarter a is 40,000 b is 1,000 x is the quarter number(forexampleyear 1quarter 1is 1,year 1quarter 2 is 2) Seasonalvariationsare appliedas a proportionof the trend and the actual sales inyear 1 quarter 1were47,560units.Ithas been decidedthat thisyear 1data is to be used to forecastsales inyear 2. G Usingthe multiplicativetimesseriesmodel,what are the forecastsales foryear 2 quarter 1? $ (2 marks) (Total = 66 marks) 5 5.1 Summarising and analysing data 77 mins Thearithmeticmean of the followingten invoicevaluesis $20: $X, $15, $22, $14, $21, $15, $20, $18, $27, $X. Whatdoes $Xequal? $15 $19 $24 $48 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 48 of 421 Questions 35 H q 5.2 Afactoryemploys staffinfourdepartments forwhichtheaverage (mean) wageper employee perweekisasfollows. Department W X Y Z Meanwage $50 $100 $70 $80 Number ofemployees 20 5 10 5 Whatistheaverage (mean) wageperemployee perweekinthisfactory? $50 5.3 $65 $70 $75 (2 marks) Acartravels 20miles at30mph,then10miles at60mph. Whatisthemeanspeedforthewhole journey of30miles? 36 5.4 40 42 45 (2 marks) Thefollowing scores areobserved forthetimes takentocomplete a task,inminutes. 12,34,14,15,21,24,9,17,11,8 Whatisthemedian score? G H $ 5.5 5.6 (2 marks) Whatisthemedian ofthescores 34,23,78,12,56,43,28,9,24and87? 26 28 31 34 (2 marks) Whichofthefollowing statements concerning bigdataanalytics iscorrect? Itrelies ondigitalinformation Itrelies onwritten information Itrelies onverbal information Itrelies onconfidential information (2 marks) 36 Management Accounting (FMA/MA) Page 49 of 421 q 5.7 Whichof the followingstatements are true? 1 Bigdata analyticsallowsbusinessesto analyse and revealinsightsindata which they have previouslybeen unableto analyse. 2 Inorderfororganisationsto analyse big data and to gain insightsfromit, the source data needs to be structuredwithina softwarepackage. One of the keyfeatures of big data is the speed withwhichdata flowsintoan organisation,and withwhichit isprocessed. 1and 2 only 1and 3 only 2 and 3 only 1,2 and 3 3 5.8 G 5.9 (2 marks) Whichof the followingstatements are true? 1 One of the uses of exploitingbig data analyticsforprofitmakingorganisationsis to lead to increasedprofitmargins. 2 3 One of the uses of exploitingbig data analyticsinnon profit-seekingorganisationsis to lead to reducedcosts. Bigdata analyticsshowcorrelationand causationbetweenvariables. 1and 2 only 1and 3 only 2 and 3 only 1,2 and 3 (2 marks) Bigdata is sometimesdefinedintermsof the fiveVs. Whichof the followingis NOTone of the fiveVs? Veracity Value Volatility 5.10 Q U E T IO N S S Variety (2 marks) Qualitycontrolof fourindependentproductionprocessesrevealsthe lengthof certain parts (inmm)to be as follows. Process Mean Standard deviation W 100 10 X 40 5 Y 80 8 Z 150 12 Whichprocesshas the largestrelativevariation,as measuredby the coefficientofvariation? ProcessW ProcessX ProcessY ProcessZ (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 50 of 421 Questions 37 H G q 5.11 Whichof the followingsets of data have the widestspread? Mean Standard deviation Data A 5.12 A 150 25 B 175 20 C 200 25 D 250 30 Data B Data C Data D (2 marks) Agroupof shopperswereinterviewedand asked howmany loavesof bread they would need to buy fromthe bakersovera one-weekperiod.Theresultsare as follows. Numberof loaves Numberof shoppers 0 2 1 22 2 32 3 2 4 34 5 6 6 12 Whatis the modeof the numberof loavesneeded per shopperina one-weekperiod? (2 marks) 5.13 Alarge publishingcompany, BookCo awards a 14%salary increaseto everyemployee. Whichof the followingstatements about the distributionof BookCo's salariesis/are correct? 5.14 38 1 2 3 Thestandard deviationwillremainunaltered Thestandard deviationwillincreaseby 14% Thecoefficientof variationwillremainunaltered 1and 2 only 1and 3 only 2 and 3 only 1,2 and 3 (2 marks) Thecoefficientof variationis used to measurewhichof the following? Thecorrelationbetweentwovariables. Thepercentage variationinone variablecaused by variationinanother. Thestrengthof a relationshipbetweentwovariables. Relativedispersion. (2 marks) ManagementAccounting(FMA/MA) Page 51 of 421 H G q 5.15 RyanComustdecide between twoprojects – Project AandProject B.Theprofits that mightbegenerated fromeachproject areasfollows. Project A Probability Project B Profit Probability Profit/(loss) $ $ 0.45 4,000 0.64 8,000 0.55 2,000 0.36 (1,000) Whichproject should bechosen andwhatistheassociated expected valueofprofit? Project Q U E T IO N S S Expected profit $ A 2,900 A 3,000 B 4,760 B 5,480 (2 marks) 5.16 BuildCoisbidding forthreecontracts whichareawarded independently ofeachother. Theboardestimates itschances ofwinning Contract Aas50%,ofwinning Contract Bas 1in5 andofwinning Contract C as1in3.Theprofits fromA,BandC areestimated tobe $500,000,$800,000and$900,000respectively. Theexpected valuetoBuildCooftheprofits fromallthreecontracts willbeclosest towhich ofthefollowing? $300,000 $710,000 $733,000 $900,000 H (2 marks) 5.17 Singers Coislaunching a newsewing machine. Withtelevision advertising, salesare estimated toachieve thefollowing levels, withassociated probabilities. Sales Probability Units 1,000 0.3 4,000 0.5 8,000 0.2 Whatistheexpected levelofsales? 4,000 4,333 13,000 3,900 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 52 of 421 Questions39 q The following information relates to questions 5.18 – 5.20 SavvasCosellsandmanufactures product SX.Theselling priceoftheproduct is$10perunitand estimates ofdemand andvariable costsofsalesareasfollows. Probability Demand Probability Variable costperunit Units $ 0.1 5,000 0.1 3.00 0.6 6,000 0.5 3.50 0.3 8,000 0.3 4.00 0.1 4.50 Theunitvariable costsdonotdepend onthevolume ofsales. Fixedcostswillbe$30,000. 5.18 WhatistheEVofdemand? (2 marks) units 5.19 WhatistheEVofunitvariable costs?$ (to2 decimal places) (2 marks) 5.20 WhatistheEVofprofit?$ (2 marks) G H 5.21 Anormal distribution hasa meanof55anda variance of14.44. Theprobability ofa scoreof59ormoreisapproximately whichofthefollowing? 0.15 0.35 0.50 0.85 (2 marks) 5.22 Anormal distribution hasa meanof75anda variance of25. Whatistheupperquartile ofthisdistribution? 40 58.25 71.65 78.35 91.75 (2 marks) Management Accounting (FMA/MA) Page 53 of 421 q 5.23 Anormaldistributionhas a mean of 150,and a standard deviationof 20. 80%of the distributionis belowwhichof the following(approximately)? 5.24 158 170 161 167 (2 marks) Q U E T IO N S S Anormaldistributionis to be splitintofourequal areas, twoto the rightof Z=0 and twoto the leftof Z=0 (Z=0 at the mean). Usingnormaldistributiontables, the |Z|valuethat splitsthe area inthisway is closestto whichof the following? 5.25 0.0987 0.1915 0.3333 0.675099 (2 marks) Productionof aluminiumtubes is normallydistributedwitha mean lengthof 50 cm and a standard deviationof 5 cm. Thepercentage of tubes at least 57 cm longis closestto whichof the following? G 5.26 8% 42% 58% 92% H (2 marks) Anormaldistributionhas a mean of 60 and a varianceof 25. Whatisthe probabilityof a scoreof 72or more?(to 4 decimalplaces) (2 marks) 5.27 Anormaldistributionhas a mean of 150and a varianceof 6,944. Whatpercentage of the populationis lessthan 210?(to twodecimalplaces.) 23.58% 26.42% 72.00% 76.42% (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 54 of 421 Questions 41 q 5.28 Anormaldistributionhas a mean of 650 and a varianceof 100. Whatis the upper quartileof thisdistribution? 643.3 5.29 656.7 717.0 812.5 (2 marks) Anormaldistributionis to be splitintoeightequal areas, fourto the rightof Z=0 and four to the leftof Z=0 (Z=0 at the mean). Usingnormaldistributiontables, the Zvaluethat splitsthe area inthisway is closestto whichof the following? 0.28 5.30 0.30 0.32 0.34 (2 marks) Theweightsof componentXare normallydistributed.Themean weightis5,200kgand the standard deviationis 430kg. Whatisthe probabilityof a componentXweighingmorethan 6,000kg? 0.0314 0.2343 G 5.31 5.32 0.4686 0.9686 H (2 marks) Whichof the followingtypes of analysisallowsa businessto makepredictionsfromdata? Descriptiveanalysis Prescriptiveanalysis Inferentialanalysis Diagnosticanalysis (2 marks) WhichTWOof the followingare examplesof structureddata? Customerdetails Videos Transactionhistory Webpages (2 marks) (Total = 64 marks) 42 ManagementAccounting(FMA/MA) Page 55 of 421 q Do you know? – Accounting for materials and labour Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. FIFOpricesmaterialsissuesat the pricesof the newest/oldestitemsininventory,and valuesclosinginventoryat the valueof the mostrecent/oldestitemsininventory.(Delete as appropriate) LIFOpricesmaterialsissuesat the pricesof the newest/oldestitemsininventoryand values closinginventoryat the valueof the mostrecent/oldestitems.(Deleteas appropriate) ………………………… is usuallycarriedout annually,whenallitemsof inventoryare counted on a specificdate. ………………………………… involvescountingand checkinga numberof inventoryitemson a regularbasis so that each itemis checkedat least once a year. Inventorycontrollevelsare calculatedinorderto maintaininventoryat the optimumlevel. Thefourcriticalcontrollevelsare as follows. Q U E T IO N S S ………………….….. (maximumusage maximumlead time) ……………………… (quantityofinventoryto be reorderedwheninventoryreachesreorderlevel) ……………………… (reorderlevel– (averageusage average lead time)) ……………………… (reorderlevel+reorderquantity– (minusage minlead time)) The………………………….. is the orderingquantitywhichminimisesinventorycosts (holding costs and orderingcosts),and is calculatedas follows. EOQ= 2C D 0 C h Where Ch =………………………………….. Co =………………………………….. G H D =………………………………….. EOQ=………………………………….. Labourattendance timeis recordedon an ……………… or on a ………………. Job timeis recordedon the followingdocuments: …………..… ……….……. …….………. Possiblepitfalls Writedownthe mistakesyou knowyou shouldavoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 56 of 421 Questions 43 q Did you know? – Accounting for materials and labour Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. FIFOpricesmaterialsissuesat the pricesof the newest/oldestitemsininventory,and valuesclosinginventoryat the valueof the most recent/oldest itemsininventory. LIFOpricesmaterialsissuesat the pricesof the newest/oldestitemsininventoryand values closinginventoryat the valueof the mostrecent/oldest items. Periodicinventorytaking is usuallycarriedout annually,whenallitemsof inventoryare countedon a specificdate. Continuous inventorytaking involvescountingand checking a numberof inventoryitemson a regularbasis so that each itemis checkedat least once a year. Inventorycontrollevelsare calculatedinorderto maintaininventoryat the optimumlevel. Thefourcriticalcontrollevelsare as follows. Reorderlevel(maximumusage maximumlead time) Reorder quantity (quantity of inventoryto be reorderedwheninventoryreaches reorder level) Minimuminventorylevel(reorderlevel– (averageusage average lead time)) Maximuminventorylevel(reorderlevel+reorderquantity– (minusage minlead time)) Theeconomicorder quantity is the orderingquantitywhichminimisesinventorycosts (holdingcosts and orderingcosts),and is calculatedas follows. EOQ= 2C D 0 Ch Where Ch =holdingcosts of one unit of inventoryfor one year Co =cost of ordering a consignment G D =annual demand EOQ=economicorder quantity Labourattendance timeis recordedon an attendance card or on a clockcard. Job time is recordedon the followingdocuments. Dailytime sheets Weeklytime sheets Job cards Possiblepitfalls – ConfusingFIFOwithLIFO. – Notbeingable to reproducethe inventorycontrolformulae. – Confusingthe meaningof 'c', 'd', and 'h' inthe economicorderquantityequation. 44 ManagementAccounting(FMA/MA) Page 57 of 421 H G q 6 6.1 Accounting for materials Whichof the followingfunctionsare fulfilledby a goodsreceivednote (GRN)? (i) Providesinformationto update the inventoryrecordson receiptof goods (ii) Providesinformationto checkthe quantityon the supplier'sinvoice Q U E T IO N S S (iii) Providesinformationto checkthe priceon the supplier'sinvoice 6.2 (i)and (ii)only (i)and (iii)only (ii)and (iii)only (i)only (2 marks) Thereare 27,500unitsof Part NumberX35on orderwiththe suppliersand 16,250units outstandingon existingcustomers'orders. Ifthe freeinventoryis 13,000units,what is the physicalinventory? (2 marks) units The following information relates to questions 6.3 and 6.4. Adomesticapplianceretailerwithmultipleoutletssellsa populartoaster knownas the Autocrisp 2000, forwhichthe followinginformationis available: Averagesales 75 per day Maximumsales 95 per day Minimumsales 50 per day Leadtime 12-18days Reorderquantity 1,750 6.3 Basedon the data above,at what levelof inventorywoulda replenishmentorderbe issued? (2 marks) units 6.4 6.5 Basedon the data above,what is the maximuminventorylevel? 1,750units 2,275units 2,860 units 2,900 units (2 marks) Theannual demand foran itemof inventoryis 2,500 units.Thecost of placingan orderis $80 and the cost of holdingan iteminstockforone year is $15.Whatis the economicorder quantity, to the nearest unit? units (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 58 of 421 Questions 45 H q 6.6 Whichof the followingis correctwithregard to inventories? (i) (ii) Stock-outsarisewhentoo littleinventoryis held. Safetyinventoriesare the levelof unitsmaintainedincase there is unexpected demand. (iii) Are-orderlevelcan be establishedby lookingat the maximumusage and the maximumlead-time. (i)and (ii)only (i)and (iii)only (ii)and (iii)only (i),(ii)and (iii) (2 marks) 6.7 Thedemand fora productis 12,500unitsfora three monthperiod.Eachunitof product has a purchase priceof $15and orderingcosts are $20 per orderplaced. Theannual holdingcost of one unitof productis 10%of its purchase price. Whatis the EconomicOrderQuantity(to the nearest unit)? 577 816 866 1,155 6.8 G (2 marks) MakeCo determinesits orderquantityfora raw materialby usingthe EconomicOrder Quantity(EOQ)model. Whatwouldbe the effectson the EOQand the total annual holdingcost of a decrease in the cost of orderinga batch of raw material? EOQ Totalannual holdingcost Higher Lower Higher Higher Lower Higher Lower Lower (2 marks) 6.9 Data relatingto a particularstoresitemare as follows: Averagedailyusage 400 units Maximumdailyusage 520 units Minimumdailyusage 180units Leadtimeforreplenishmentof inventory 10to 15days Reorderquantity 8,000 units Whatis the reorderlevel(inunits)whichavoidsstockouts(runningout of inventory)? 5,000 6,000 7,800 8,000 (2 marks) 46 ManagementAccounting(FMA/MA) Page 59 of 421 H G q 6.10 Thematerialstorescontrolaccount forStoreCo forMarchlookslikethis: Material stores control account $ 12,000 Workinprogress 49,000 Overheadcontrol 18,000 Balancec/d 79,000 27,000 Balanceb/d Suppliers Workinprogress Balanceb/d $ 40,000 12,000 27,000 79,000 Q U E T IO N S S Whichof the followingstatements are correct? (i) Issuesof directmaterialsduringMarchwere$18,000 (ii) Issuesof directmaterialsduringMarchwere$40,000 (iii) Issuesof indirectmaterialsduringMarchwere$12,000 (iv) Purchasesof materialsduringMarchwere$49,000 (i)only (ii)and (iv)only (ii),(iii)and (iv)only Allof them (2 marks) 6.11 ComputerCo uses 25,000 componentsat an evenrate duringa year. Eachorderplaced withthe supplierof the componentsis for2,000 components,whichis the economicorder quantity. Thecompanyholdsa bufferinventoryof 500 components.Theannual cost of holdingone componentininventoryis $2. Whatis the total annual cost of holdinginventoryof the component? 6.12 $2,000 $2,500 $3,000 $4,000 (2 marks) FruitCo wishesto minimiseits inventorycosts. Ordercosts are $10per orderand holding costs are $0.10per unitper month.FallCo estimatesannual demand to be 5,400 units. Whatis the economicorderquantity(to the nearest wholeunit)? (2 marks) units Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 60 of 421 Questions 47 H G q 6.13 Fora particularcomponent,the re-orderquantityis 6,000 unitsand the average inventory holdingis 3,400 units. Usingthe drop downlist,selectthe levelof safety inventory(inwholeunits). Select... 400 3,400 3,000 6,400 (2 marks) 6.14 Thefollowingdata relatesto componentL512: Orderingcosts $100per order Inventoryholdingcosts $8 per unitper year Annualdemand 1,225units Whatis the economicorderquantity(to the nearest wholeunit)? 6.15 175units 62 units 44 units 124units (2 marks) Thefollowingdata relate to inventoryitemA452: Averageusage Minimumusage Maximumusage Leadtime EOQ H 100unitsper day 60 unitsper day 130unitsper day 20-26 days 4,000 units Whatis the maximuminventorylevel? (2 marks) units 6.16 ACBCo graduallyreceivesits re-supplyof inventoryat a rate of 10,000unitsa week. Otherinformationis availableas follows. Weeklydemand Set-upcosts foreach productionrun Weeklycost of holdingone unit Whatis the economicproductionrun? 1,577units 7,071units 22,361units 31,623units 48 5,000 units $125 $0.0025 (2 marks) ManagementAccounting(FMA/MA) Page 61 of 421 G q 6.17 Total cost Holding cost D Cost $ Q U E T IO N S S B Ordering cost C A Order quantity (units) Whereon the graph wouldyou read offthe valueforthe economicorderquantity? 6.18 AtpointA AtpointB AtpointC AtpointD (2 marks) Cake Co uses an itemof inventoryas follows. Purchaseprice Annualdemand Orderingcost Annualholdingcost EOQ $25 per unit 1,800units $32 $4.50 per unit 160units H Whatis the minimumtotal cost assuminga discountof 2%appliesto the purchase price and to holdingcosts on ordersof 300 and over? $45,720.00 $44,953.50 $45,000.00 $44,967.00 The following information (2 marks) relates to questions 6.19 and 6.20. G Co makesthe followingpurchasesand sales. 1January Purchases 4,000 unitsfor$10,000 31January Purchases 1,000unitsfor$2,000 15February Sales 3,000 unitsfor$13,000 28 February Purchases 1,500unitsfor$3,750 14March Sales 500 unitsfor$1,200 6.19 At31Marchwhichof the followingclosinginventoryvaluationsusingFIFOis correct? $8,000 $7,500 $7,000 $6,500 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 62 of 421 Questions 49 q 6.20 6.21 At31Marchwhichof the followingclosinginventoryvaluationsusingLIFOis correct? $6,500 $7,000 $7,500 $8,000 (2 marks) Awholesalerhad openinginventoryof 300 unitsof productEmmvaluedat $25 per unitat the beginningof January. Thefollowingreceiptsand sales wererecordedduringJanuary. Date 2 Jan 12Jan 21Jan 29 Jan Receipts 400 Issues 250 200 75 Thepurchase cost of receiptswas $25.75per unit.Usinga weightedaverage methodof valuation,calculatethe valueof closinginventoryat the end of January. $11,550 $4,492 $4,192 $9,550 (2 marks) (Total = 42 marks) 7 Accounting for labour G H The following information relates to questions 7.1 and 7.2. Budgetedand actual productiondata forthe year that has justended are as follows. Product Budgetedproduction Actualproduction Units Standard machinehours Units W 15,000 3,000 12,000 X 20,000 8,000 25,000 Y 14,000 7,000 16,000 Z 6,000 9,000 5,000 Totalmachinehoursworkedinthe periodamountedto 29,000 hours. 7.1 Whatwas the capacity ratio inthe year, as a percentage to one decimalplace? (2 marks) % 7.2 Whatwas the efficiencyratio inthe year, as a percentage to one decimalplace? % 50 (2 marks) ManagementAccounting(FMA/MA) Page 63 of 421 q 7.3 Whatdoes the labourcost graph belowdepict? Q U E T IO N S S 7.4 Apiecerate schemewitha minimumguaranteed wage Astraightpiecerate scheme Astraighttimerate scheme Adifferentialpiecerate scheme (2 marks) Thefollowingdata relate to workinthe finishingdepartmentof a certainfactory. Normalworkingday 7 hours Basicrate of pay per hour $5 Standard timeallowedto produce1unit 4 minutes Premiumbonuspayable at the basic rate 60%of timesaved On a particularday one employeefinishes180units.Whatis hisgrosspay forthe day? $ 7.5 (2 marks) Anemployeeis paid on a pieceworkbasis. Thebasis of the pieceworkschemeis as follows: 1to 100units – $0.20 per unit 101to 200 units – $0.30 per unit 201to 299units – $0.40 per unit withonlythe additionalunitsqualifyingforthe higherrates. Rejectedunitsdo not qualify forpayment. G Duringa particularday the employeeproduced210unitsofwhich17wererejectedas faulty. Whatdid the employeeearn fortheirday's work? $47.90 $54.00 $57.90 $63.00 (2 marks) 7.6 EmployeeAis a carpenter and normallyworks36 hoursper week.Thestandard rate of pay is $3.60per hour. Apremiumof 50%of the basic hourlyrate is paid forallovertimehours worked.Duringthe last weekof October,EmployeeAworkedfor42 hours.Theovertime hoursworkedwereforthe followingreasons: Machinebreakdown: 4 hours Tocompletea specialjobat the requestof a customer: 2 hours Howmuchof EmployeeA'searningsforthe last weekof Octoberwouldhave been treated as directwages? $ (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 64 of 421 Questions 51 H q 7.7 WhichTWOof the followingstatements about groupbonusschemesare true? 7.8 Groupbonusschemesare appropriatewhenincreasedoutput depends on a number of peopleallmakingextra effort Witha groupbonusscheme,it is easierto award each individual'sperformance Non-productionemployeescan be rewardedas part of a groupbonusscheme Comparedwithindividualschemes,groupbonusschemesare difficultto administer (2 marks) XCo has recordedthe followingwagescosts fordirectproductionworkersforNovember. Basicpay Overtimepremium Holidaypay Grosswagesincurred $ 70,800 2,000 500 73,300 Theovertimewas not workedforany specificjob. Whatare the accountingentriesforthese wagescosts? G 7.9 52 Debit $ 72,800 500 Workinprogressaccount Overheadcontrolaccount Wages controlaccount Workinprogressaccount Overheadcontrolaccount Wages controlaccount Wages controlaccount Workinprogressaccount Overheadcontrolaccount Wages controlaccount Workinprogressaccount Overheadcontrolaccount 70,800 2,500 73,300 73,300 Credit $ 73,300 73,300 70,800 2,500 72,800 500 (2 marks) J Co had 30 directproductionemployeesat the beginningof last year and 20 direct productionemployeesat the end of the year. Duringthe year, a total of 15direct productionemployeeshad leftthe companyto workfora localcompetitor.Whatis the labourturnoverrate forlast year? 16.7% 20.0% 25.0% 60.0% (2 marks) ManagementAccounting(FMA/MA) Page 65 of 421 H G q 7.10 Jane worksas a memberof a three-personteam inthe assemblydepartmentof a factory. Theteam is rewardedby a groupbonusschemewherebythe team leaderreceives40 per cent of any bonusearned by the team, and the remainingbonusis shared evenlybetween Jane and the other team member.Detailsof output forone day are givenbelow. Q U E T IO N S S Hoursworkedby team 8 hours Teamproductionachieved 80 units Standard timeallowedto produceone unit 9 minutes Groupbonuspayable at $6 per hour 70%of timesaved Whatis the bonuselementof Jane's pay forthisparticularday? $5.04 $7.20 $10.08 $16.80 (2 marks) 7.11 Ina typicalcost ledger,what is the doubleentry forindirectlabourcost incurred? DR Wages control CR Overheadcontrol DR Adminoverheadcontrol CR Wages control DR Overheadcontrol CR Wages control DR Wages control CR Adminoverheadcontrol (2 marks) 7.12 KCo has 4,000 staff at the start of 20X6and at the end thishad reducedto 3,800 due to redundanciesbeingmade. 210staff tookvoluntaryredundancywhichwas 10morethan the companyhad anticipatedand these 10employeeswerereplaced. Whatis the labourturnoverrate per year (to twodecimalplaces)? % (2 marks) (Total = 24 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 66 of 421 Questions 53 H q G H 54 ManagementAccounting(FMA/MA) Page 67 of 421 q Do you know? – Accounting for overheads Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. Costs incurredduringproductionor whileprovidinga servicethat cannot be traced directly and infullto the productor serviceare knownas ………………….., and the fourmaintypes of …………….. are production,administration,……………….. and distribution. Thethree stages of calculatingthe costs of overheadsto be charged to manufactured output are as follows:………………………. ; ………………………. ; and ………………………. Theprocedurewherebyindirectcosts (overheads)are spread fairlybetweencost centresis knownas ………………………….. Servicecost centresmay be apportionedto productioncost centresby the ……………………… methodor by the .................... methodof reapportionment. Thethree maintypes of overheadabsorptionrate are as follows. Q U E T IO N S S ……………………………………………………. (calculatedby dividingbudgeted overheadby budgeted levelof activity) ……………………………………………………. (orblanketoverheadabsorptionrate, whichis used throughouta factory foralljobsand unitsof output irrespectiveof the departmentinwhich they wereproduced) …………………………………………………………… (a fairerrate whichisrepresentativeof the costs of the resourcesput intomakingproducts) G Underand overabsorptionof overheadoccurswhenactual overheadincurredis different to absorbed overhead.……………-absorbed overheadoccurswhenactual overheadis less than absorbed overhead,and thereforetoo …………….. overheadhas been charged to production.………-absorbed overheadoccurswhenactual overheadis greater than absorbed overhead,and thereforetoo ……….. overheadhas been charged to production. Underor overabsorptionof overheadsoccursbecause the predeterminedoverhead absorptionrates are based on forecasts(estimates). Marginalcost is the ………………… cost of one unitof productor service.……………… is the differencebetweenthe sales valueand the marginalcost of one unitof productor service. Inmarginalcosting,fixedproductioncosts are treated as …………… costs and are writtenoff as they are incurred.Inabsorptioncostingfixedproductioncosts are …….…………….. the cost of unitsand are carriedforwardininventoryto be charged against the sales revenue forthe nextperiod.Inventoryvaluesusingabsorptioncostingare therefore…………… than those calculatedusingmarginalcosting. Marginalcostingand absorptioncostingwillreportdifferentprofitfiguresifthere is any change inthe volumeof inventoryduringthe period.Ifclosinginventoryis greater than openinginventory,absorptioncostingwillreporta …………. profitthan marginalcosting.If openinginventoryis greater than closinginventory(ieinventorylevels…………….), then absorptioncostingwillreporta ………….. profitthan marginalcosting. Possiblepitfalls Writedownthe mistakesyou knowyou shouldavoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 68 of 421 Questions 55 H q Did you know? – Accounting for overheads Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Costs incurredduringproductionor whileprovidinga servicethat cannot be traced directly and infullto the productor serviceare knownas overheads, and the fourmaintypes of overhead are production,administration,sellingand distribution. Thethree stages of calculatingthe costs of overheadsto be charged to manufactured output are as follows:allocation; apportionment; and absorption. Theprocedurewherebyindirectcosts (overheads)are spread fairlybetweencost centresis knownas apportionment. Servicecost centresmay be apportionedto productioncost centresby the direct methodor by the step down methodof reapportionment. Thethree maintypes of overheadabsorptionrate are as follows. Predetermined overhead absorption rate (calculatedby dividingbudgeted overheadby budgeted levelof activity) Singlefactory-wide absorption rate (orblanketoverheadabsorptionrate, whichis used throughouta factory foralljobsand unitsof output irrespectiveof the departmentinwhich they wereproduced) Separate departmental overhead absorption rate (a fairerrate whichis representativeof the costs of the resourcesput intomakingproducts) G Underand overabsorptionof overheadoccurswhenactual overheadincurredisdifferent to absorbed overhead.Over-absorbedoverheadoccurswhenactual overheadis lessthan absorbed overhead,and thereforetoo much overheadhas been charged to production. Under-absorbedoverheadoccurswhenactual overheadis greater than absorbed overhead,and thereforetoo littleoverheadhas been charged to production.Underor overabsorptionof overheadsoccursbecause the predeterminedoverheadabsorptionrates are based on forecasts(estimates). Marginalcost is the variable cost of one unitof productor service.Contributionis the differencebetweenthe sales valueand the marginalcost of one unitof productor service. Inmarginalcosting,fixedproductioncosts are treated as period costs and are writtenoff as they are incurred.Inabsorptioncostingfixedproductioncosts are absorbed into the cost of unitsand are carriedforwardininventoryto be charged against the sales revenue forthe nextperiod.Inventoryvaluesusingabsorptioncostingare thereforegreater than those calculatedusingmarginalcosting. Marginalcostingand absorptioncostingwillreportdifferentprofitfiguresifthere is any change inthe volumeof inventoryduringthe period.Ifclosinginventoryis greater than openinginventory,absorptioncostingwillreporta higher profitthan marginalcosting.If openinginventoryis greater than closinginventory(ieinventorylevelsdecrease), then absorptioncostingwillreporta lowerprofitthan marginalcosting. Possiblepitfalls – Includingan elementof fixedoverheadsinthe inventoryvaluationinmarginal costingstatements – Selectinginappropriatebases whencalculatingoverheadabsorptionrates – 56 Confusingunderrecoveryand overrecoveryof overheads ManagementAccounting(FMA/MA) Page 69 of 421 H G q 8 8.1 Accounting for overheads Thefollowingextract of informationis availableconcerningthe fourcost centresof EGCo. Servicecost Productioncost centres centre Machinery Finishing Packing Canteen Numberof directemployees 7 6 2 – Numberof indirectemployees 3 2 1 4 Overheadallocatedand apportioned $28,500 $18,300 $8,960 $8,400 Theoverheadcost of the canteen is to be re-apportionedto the productioncost centres on the basis of the numberof employeesin each productioncost centre. Afterthe re-apportionment,what is the total overheadcost of the packingdepartment, to the nearest $? $1,200 $9,968 $10,080 $10,160 Q U E T IO N S S (2 marks) The following information relates to questions 8.2 and 8.3. Budgetedinformationrelatingto twodepartmentsinACo forthe nextperiodis as follows. Department 1 2 Production overhead $ 27,000 18,000 Direct materialcost $ 67,500 36,000 Direct labourcost $ 13,500 100,000 Direct labourhours Machine hours 2,700 25,000 45,000 300 Individualdirectlabouremployeeswithineach departmentearn differingrates of pay, according to theirskills,grade and experience. 8.2 8.3 Whatis the mostappropriateproductionoverheadabsorptionrate fordepartment1? 40%of directmaterialcost 200%of directlabourcost $10per directlabourhour $0.60 per machinehour (2 marks) Whatis the mostappropriateproductionoverheadabsorptionrate fordepartment2? 50%of directmaterialcost 18%of directlabourcost $0.72per directlabourhour $60 per machinehour (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 70 of 421 Questions 57 H G q 8.4 WhichTWOof the followingstatements about predeterminedoverheadabsorptionrates are true? 8.5 Usinga predeterminedabsorptionrate avoidsfluctuationsinunitcosts caused by abnormallyhighor lowoverheadexpenditureor activitylevels Usinga predeterminedabsorptionrate offersthe administrativeconvenienceof beingable to recordfullproductioncosts sooner Usinga predeterminedabsorptionrate avoidsproblemsof under/overabsorptionof overheadsbecause a constant overheadrate is available Usinga predeterminedabsorptionrate avoidsthe problemsassociated with choosingan appropriateabsorptionbase (2 marks) Over-absorbedoverheadsoccurwhen Absorbedoverheadsexceedactual overheads Absorbedoverheadsexceedbudgeted overheads Actualoverheadsexceedabsorbed overheads Actualoverheadsexceedbudgeted overheads The following information relates to questions (2 marks) 8.6 and 8.7. GreyCo has the followingactual and budgeted data foryear 4. Budget Actual Production 8,000 units 9,000 units Variableproductionoverheadper unit $3 $3 Fixedproductionoverheads $360,000 $432,000 Sales 6,000 units 8,000 units Overheadsare absorbed usinga rate per unit,based on budgeted output and expenditure. 8.6 Whatwas the fixedproductionoverheadabsorbed amountduringyear 4? $ 8.7 (2 marks) Usingthe drop downlistselecthowmuchthe fixedproductionoverheadwas underor over absorbed. Select... Underabsorbed by $27,000 Underabsorbed by $72,000 Underabsorbed by $75,000 Overabsorbed by $27,000 (2 marks) 58 ManagementAccounting(FMA/MA) Page 71 of 421 H q 8.8 8.9 Whichofthefollowing would bethemostappropriate basisforapportioning machinery insurance coststocostcentres within a factory? Thenumber ofmachines ineachcostcentre Thefloorareaoccupied bythemachinery ineachcostcentre Thevalueofthemachinery ineachcostcentre Theoperating hours ofthemachinery ineachcostcentre (2 marks) Q U E T IO N S S Adirectlabour hourbasisismostappropriate inwhichofthefollowing environments? Machine intensive Labour intensive Whenallunitsproduced areidentical Whenlabour ratesarehigh (2 marks) 8.10 Theproduction overhead control account forRCoattheendoftheperiod lookslikethis. Production overhead control account Stores control Wagescontrol Expense creditors $ 22,800 Workinprogress 180,400 Statement ofprofitorloss 210,000 413,200 $ 404,800 8,400 413,200 G H WhichTWOofthefollowing statements arecorrect? Indirect material issued frominventory was$22,800 Overhead absorbed during theperiod was$210,000 Overhead fortheperiod wasoverabsorbed by$8,400 Indirect wagescostsincurred were$180,400 (2 marks) 8.11 Whichofthefollowing iscorrect whenconsidering theallocation, apportionment and reapportionment ofoverheads inanabsorption costing situation? Onlyproduction related costsshould beconsidered Allocation isthesituation where partofanoverhead isassigned toa costcentre Costsmayonlybereapportioned fromproduction centres toservice centres Anyoverheads assigned toa singledepartment should beignored Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 72 of 421 (2 marks) Questions59 q 8.12 ZolaCo has over-absorbedfixedproductionoverheadsforthe periodby $6,000. Thefixed productionoverheadabsorptionrate was $8 per unitand is based on the normallevelof activityof 5,000 units.Actualproductionwas 4,500 units. Whatwas the actual fixedproductionoverheadsincurredforthe period? $30,000 8.13 $36,000 $40,000 $42,000 (2 marks) SheepCo manufacturerstwoproducts,Xand Y,ina factory dividedintotwoproduction cost centres,Primaryand Finishing.Thefollowingbudgeted data are available: Cost centre Primary Finishing Allocatedand apportionedfixedoverheadcosts $96,000 $82,500 Directlabourminutesper unit: – ProductX 36 25 – ProductY 48 35 Budgetedproductionis 6,000 unitsof productXand 7,500 unitsof productY.Fixed overheadcosts are to be absorbed on a directlabourhourbasis. Whatis the budgeted fixedoverheadcost per unitforproductY? $11 $12 G 8.14 $14 $15 (2 marks) BaileyCo companyuses an overheadabsorptionrate of $3.50 per machineour, based on 32,000 budgeted machinehoursforthe period.Duringthe same periodthe actual total overheadexpenditureamountedto $108,875and 30,000 machinehourswererecordedon actual production. Byhowmuchwas the total overheadunderor overabsorbed forthe period? Underabsorbed by $3,875 60 Underabsorbed by $7,000 Overabsorbed by $3,875 Overabsorbed by $7,000 (2 marks) ManagementAccounting(FMA/MA) Page 73 of 421 H G q 8.15 Afactory consistsof twoproductioncost centres(Pand Q)and twoservicecost centres (Xand Y).Thetotal allocatedand apportionedoverheadforeach is as follows: P Q X Y $95,000 $82,000 $46,000 $30,000 Ithas been estimatedthat each servicecost centre does workforthe othercost centresin the followingproportions: P Q X Y Percentageof servicecost centre Xto 40 40 – 20 Percentageof servicecost centre Yto 30 60 10 – Afterthe reapportionmentof servicecost centre costs has been carriedout usinga method that fullyrecognisesthe reciprocalservicearrangementsinthe factory, what is the total overheadforproductioncost centre P? $122,400 8.16 $124,716 $126,000 $127,000 Q U E T IO N S S (2 marks) Thefollowingdata is availablefora paint departmentforthe latest period. Budgetedproductionoverhead Actualproductionoverhead Budgetedmachinehours Actualmachinehours $150,000 $150,000 60,000 55,000 Whichof the followingstatements is correct? Therewas no underor overabsorptionof overhead Overheadwas $13,636overabsorbed Overheadwas $12,500overabsorbed Overheadwas $12,500underabsorbed H (2 marks) 8.17 Actualoverheads $496,980 Actualmachinehours 16,566 Budgetedoverheads $475,200 Basedon the data above,and assumingthat the budgeted overheadabsorptionrate was $32 per hour, what werethe budgeted numberof hours(to the nearest hour)budgeted to be worked? hours (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 74 of 421 Questions 61 q 8.18 Budgetedoverheads $690,480 Budgetedmachinehours 15,344 Actualmachinehours 14,128 Actualoverheads $679,550 Basedon the data above,what is the machinehourabsorptionrate (to the nearest $)? $44 per machinehour $45 per machinehour $48 per machinehour $49 per machinehour (2 marks) 8.19 SloanCo absorbs overheadson machinehours.Ina period,actual machinehourswere 22,435,actual overheadswere$496,500and there was overabsorptionof $64,375. Whatwas the budgeted overheadabsorptionrate per machinehour(to the nearest $)? $ 8.20 (2 marks) LCo absorbs fixedproductionoverheadsinone of its departmentson the basis of machine hours.Therewere100,000budgeted machinehoursforthe forthcomingperiod.Thefixed productionoverheadabsorptionrate was $2.50 per machinehour. Duringthe period,the followingactual resultswererecorded: Standard machinehours 110,000 Fixedproductionoverheads $300,000 Whatwas the fixedproductionoverheadunder/overabsorptionamount? Overabsorbed by $25,000 Underabsorbed by $50,000 Overabsorbed by $50,000 G 8.21 Underabsorbed by $25,000 H (2 marks) Considerthe followingstatements,regardingthe reapportionmentof servicecost centre overheadsto productioncost centres,wherereciprocalservicesexist. WhichTWOstatements are correct? Thedirectmethodresultsincosts beingreapportionedbetweenservicecost centres Ifthe directmethodis used, the orderinwhichthe servicecost centre overheadsare reapportionedis irrelevant Thestep downmethodresultsincosts beingreapportionedbetweenservicecost centres Ifthe step downmethodis used, the orderinwhichthe servicecost centre overheads are reapportionedisirrelevant (2 marks) 62 ManagementAccounting(FMA/MA) Page 75 of 421 q 8.22 CTFCo has twoservicecentresservingtwoproductiondepartments.Overheadcosts apportionedto each departmentare as follows. Production Service departments centres Mixing Stirring Stores Canteen $ $ $ $ 216,400 78,800 181,600 47,200 Allocatedand apportionedoverheads Estimatedworkdone by the service centresforotherdepartments Stores 50% Canteen 45% Thebusinessuses the directmethodof apportionment. 30% 40% – 15% Q U E T IO N S S 20% – Afterthe apportionmentof the servicecentresto the productiondepartments,what willthe total overheadcost be forthe mixingdepartment? 8.23 $328,440 $342,041 $351,416 $354,888 (2 marks) HMFCo has twoservicecentresservingtwoproductiondepartments.Overheadcosts apportionedto each departmentare as follows. Production Service departments centres Mixing Stirring Stores Canteen $ $ $ $ 216,400 78,800 181,600 47,200 G Allocatedand apportionedoverheads Estimatedworkdone by the service centresforotherdepartments Stores 50% Canteen 45% Thebusinessuses the step downmethodof apportionment. 30% 40% – 15% 20% – Afterthe apportionmentof the servicecentresto the productiondepartments,what willthe total overheadcost be forthe mixingdepartment? $325,968 $344,784 $351,416 $354,888 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 76 of 421 Questions 63 H q 8.24 Thefollowingquestion is taken from the June 2012exam. Acompanyuses standard absorptioncostingto valueinventory.Itsfixedoverhead absorptionrate is $12per labourhourand each unitof productionshouldtake fourhours. Ina recent periodwherethere was no openinginventoryof finishedgoods,20,000 units wereproducedusing100,000labourhours.18,000unitsweresold.Theactual profitwas $464,000. Whatprofitwouldhave been earned undera standard marginalcostingsystem? $368,000 $440,000 $344,000 $560,000 (2 marks) 8.25 Thefollowingquestion is taken from the January to June 2015exam period. Acompanyuses a blanketoverheadabsorptionrate of $5 per directlabourhour. Actual overheadexpenditureina periodwas as budgeted. Theunder/overabsorbed overheadaccount forthe periodhave the followingentries: DR CR $ $ 4,000 4,000 Productionoverhead Profitor lossaccount 4,000 4,000 Whichof the followingstatements is true? Actualdirectlabourhourswere800 lessthan budgeted Actualdirectlabourhourswere800 morethan budgeted Actualdirectlabourhourswere4,000 lessthan budgeted Productionoverheadwas overabsorbed by $4,000 (2 marks) G 8.26 Thefollowingquestion is taken from the January to June 2016exam period. Anaccountant is usingthe repeated distributionmethodto reapportionservicedepartment costs. Thefollowingtable showsthe workshe has done so far. Figuresthat are yet to be calculatedare shownas “???” Production Production Service Service department department department department 1 2 X Y $ $ $ $ Apportionedand allocated Productionoverheads 60,000 80,000 20,000 10,000 ServicedepartmentX 8,000 10,000 –20,000 2,000 ServicedepartmentY 7,200 4,200 600 –12,000 ServicedepartmentX ??? ??? –600 Totalproductionoverhead ??? ??? 0 Whatis the total productionoverheadforproductiondepartment1after the remaining reapportionmentof the overheadsof servicedepartmentX? $74,600 $75,200 $75,440 $75,467 (2 marks) 64 ManagementAccounting(FMA/MA) Page 77 of 421 H q 8.27 Thefollowingdata is availableforperiod9. Openinginventory 10,000units Closinginventory 8,000 units Absorptioncostingprofit $280,000 Whatwouldbe the profitforperiod9 usingmarginalcosting? $278,000 8.28 $280,000 $282,000 Impossibleto calculatewithoutmoreinformation Q U E T IO N S S (2 marks) Theoverheadabsorptionrate forproductTis$4 per machinehour. Eachunitof Trequires 3 machinehours.Inventoriesof productTlast periodwere: Units Openinginventory 2,400 Closinginventory 2,700 Comparedwiththe marginalcostingprofitforthe period,the absorptioncostingprofitfor productTwillbe whichof the following? $1,200higher $3,600 higher $1,200lower $3,600 lower (2 marks) G H 8.29 Ina periodwhereopeninginventorieswere15,000unitsand closinginventorieswere 20,000 units,a firmhad a profitof $130,000usingabsorptioncosting.Ifthe fixed overheadabsorptionrate was $8 per unit,the profitusingmarginalcostingwouldbe which of the following? $90,000 $130,000 $170,000 Impossibleto calculatewithoutmoreinformation Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 78 of 421 (2 marks) Questions 65 q The following information relates to questions 8.30 and 8.31. Cost and sellingpricedetailsforproductZare as follows. $ per unit 6.00 7.50 2.50 5.00 21.00 9.00 30.00 Directmaterials Directlabour Variableoverhead Fixedoverheadabsorptionrate Profit Sellingprice Budgetedproductionforthe monthwas 5,000 unitsalthoughthe companymanaged to produce 5,800 units,selling5,200 of themand incurringfixedoverheadcosts of $27,400. 8.30 Whatis the marginalcostingprofitforthe month? 8.31 8.32 (2 marks) Whatis the absorptioncostingprofitforthe month? G $45,400 $46,800 $53,800 $72,800 $45,200 $45,400 $46,800 $48,400 H (2 marks) Ina period,DCo had openinginventoryof 31,000unitsand closinginventoryof 34,000 units.Profitsbased on marginalcostingwere$850,500 and on absorption costingwere$955,500. Ifthe budgeted total fixedcosts forthe companywas $1,837,500,what was the budgeted levelof activityinunits? 32,500 52,500 65,000 105,000 (2 marks) 8.33 ECo had openinginventoryof 48,500 unitsand closinginventoryof 45,500 units.Profits based on marginalcostingwere$315,250and on absorptioncostingwere$288,250.What isthe fixedoverheadabsorptionrate per unit? 66 $5.94 $6.34 $6.50 $9.00 (2 marks) ManagementAccounting(FMA/MA) Page 79 of 421 q 8.34 Whichof the followingare acceptable bases forabsorbingproductionoverheads? (i) Directlabourhours (ii) Machinehours Q U E T IO N S S (iii) Asa percentage of the primecost (iv) Perunit 8.35 8.36 Methods(i)and (ii)only Methods(iii)and (iv)only Methods(i),(ii),(iii)and (iv) Methods(i),(ii)or (iii)only (2 marks) Underabsorptioncosting,the total cost of a productwillinclude: Directcosts only Variablecosts only Alldirectand indirectcosts excludinga share of fixedoverhead Alldirectand indirectcosts (2 marks) Seat Co has establisheda marginalcostingprofitof $72,300.Openinginventorywas 300 unitsand closinginventoryis 750 units.Thefixedproductionoverheadabsorptionrate has been calculatedas $5/unit. Whatwas the profitunderabsorptioncosting? G H $ 8.37 (2 marks) ChairCo producesand sellsa singleproductwhosevariablecost is $6 per unit. Fixedcosts have been absorbed overthe normallevelof activityof 200,000 unitsand have been calculatedas $2 per unit. Thecurrentsellingpriceis $10per unit. Howmuchprofitis made undermarginalcostingifthe companysells250,000 units? $500,000 $600,000 $900,000 $1,000,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 80 of 421 Questions 67 G q 8.38 ACo whichuses marginalcostinghas a profitof $37,500fora period.Openinginventory was 100unitsand closinginventorywas 350 units. Thefixedproductionoverheadabsorptionrate is $4 per unit. Whatis the profitunderabsorptioncosting? $35,700 $35,500 8.39 $38,500 $39,300 (2 marks) F Co manufacturesand sellsa singleproduct.Forthismonththe budgeted fixed productionoverheadsare $48,000, budgeted productionis 12,000unitsand budgeted sales are 11,720units. Thecompanycurrentlyuses absorptioncosting. Ifthe companyused marginalcostingprinciplesinstead of absorptioncostingforthis month,what wouldbe the effecton the budgeted profit? $1,120higher $1,120lower $3,920higher 8.40 $3,920lower (2 marks) MCo operates a standard marginalcostingsystem.Lastmonthits actual fixedoverhead expenditurewas 10%abovebudget resultingina fixedoverheadexpenditurevarianceof $36,000. Whatwas the actual expenditureon fixedoverheadslast month? $324,000 $360,000 $396,000 8.41 $400,000 (2 marks) Lastmonth,whena companyhad an openinginventoryof 16,500unitsand a closing inventoryof 18,000units,the profitusingabsorptioncostingwas $40,000. Thefixed productionoverheadrate was $10per unit. Whatwouldthe profitforlast monthhave been usingmarginalcosting? $ 68 (2 marks) ManagementAccounting(FMA/MA) Page 81 of 421 H G q 8.42 LastmonthWeb Co's profitwas $2,000, calculatedusingabsorptioncostingprinciples.If marginalcostingprincipleshas been used, a lossof $3,000 wouldhave occurred.The company'sfixedproductioncost is $2 per unit.Saleslast monthwere10,000units. Whatwas last month'sproduction(inunits)? 8.43 8.44 7,500 9,500 10,500 12,500 Q U E T IO N S S (2 marks) HMFCo producesa singleproduct.Thebudgeted fixedproductionoverheadsforthe periodare $500,000. Thebudgeted output forthe periodis 2,500 units.Openinginventory at the start of the periodconsistedof 900 unitsand closinginventoryat the end of the periodconsistedof 300 units.Ifabsorptioncostingprincipleswereapplied,the profitfor the periodcomparedto the marginalcostingprofitwouldbe whichof the following? $125,000higher $125,000lower $120,000higher $120,000lower (2 marks) Thefollowingquestion is taken from the June 2013exam. Acompanyhas the followingbudgeted costs and revenues: $ per unit Salesprice 50 Variableproductioncost 18 Fixedproductioncost 10 Inthe mostrecent period,2,000 unitswereproducedand 1,000unitsweresold.Actual sales price,variableproductioncost per unitand total fixedproductioncosts wereallas budgeted. Fixedproductioncosts wereover-absorbedby $4,000. Therewas no opening inventoryforthe period. Whatwouldbe the reductioninprofitforthe periodifthe companyhas used marginal costingrather than absorptioncosting? 4,000 6,000 10,000 14,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 82 of 421 Questions 69 H q 8.45 Thefollowing question istakenfromtheJuly toDecember 2014examperiod. Thefollowing dataisavailable ontheproduction andsalesforthefirstthreeyearsofa company’s newproduct. Year1 Year2 Year3 Production units 5,000 6,000 4,000 Salesunits 4,000 6,000 5,000 Variable costsperunit,selling priceandtotalfixedcostsperyearwereconstant overthe three-year period. Thecompany isconsidering theuseofeither marginal orabsorption costing. Whichofthefollowing statements is/aretrue? (1) Absorption costing willshowa lower profitthanmarginal costing inYear1 (2) Marginal costing willshowa lower closing inventory valuation thanabsorption costing inYear2 (3) Totalprofitoverthethree-year period willbethesameunder bothmethods 1only 2 only 3 only 2 and3 (2 marks) question istakenfromtheJuly toDecember 2015examperiod. 8.46 Thefollowing Acompany’s totaloperating costissemivariable. Itflexes itsprofitbudget fromanoutput levelof1,000unitstoanoutput levelof2,000units? Whichofthefollowing statements istrue? G Operating profitwilldouble between thetwooutput levels Fixedcostperunitatthetwooutput levels willbethesame Totalcontribution willdouble between thetwooutput levels Contribution perunitwillincrease between thetwooutput levels (2 marks) (Total= 92marks) 70 Management Accounting (FMA/MA) Page 83 of 421 H q Do you know? – Process costing and costing methods Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. ................... is a costingmethodused whereit is not possibleto identifyseparate unitsof productionusuallybecause of the continuousnature of the productionprocessesinvolved. ................... lossis the lossexpectedduringa processand it is not givena cost. Ifit has a scrap valuethen it is valuedat thisamount. .................... lossis the extra lossresultingwhenactual lossis greater than the loss anticipated.Itis givena cost. ................... may have a scrap value.Revenuefromnormalscrap is treated as a reduction incosts. Whenthereisclosingworkinprogressat the end ofa period,it isnecessaryto calculate the ........................................ of productionin order to determinethe cost of a completedunit. Thecosts of labourand overheadare sometimesreferredto as ..................... costs. ............. productsare twoor moreproductsseparated ina process,each of whichhas a significantvaluecomparedto the other. A.............................. is an incidentalproductfroma processwhichhas an insignificant valuecomparedto the mainproduct. Thepointat whichjointand by-productsbecomeseparately identifiableisknownas the .................................................. or the ..................................... point. Job costingis the costingmethodused whereeach cost unitis separatelyidentifiable. Costs foreach jobare collectedon a ……………………... or …………. Overheadis absorbed into the cost of jobsusingthe …………………………………………….. rate. Batchcostingis similarto jobcostinginthat each batch of similararticlesis separately identifiable.Thecost per unitmanufacturedin a batch is calculatedby dividingthe ……………………………….. by the ……………………………. inthe batch. Servicecostingis used by companiesoperatingina serviceindustryor by companies wishingto establishthe cost of servicescarriedout by someof theirdepartments. ............................... Characteristicsof Ifa serviceis a functionof twoactivityvariables,a .................. cost unitmightbe appropriate. Adifficultywithservicecostingis the selectionof an appropriatecost unit.Thecost per unit is calculatedby dividingthe ………………….………………… forthe periodby the ………………………………………... inthe period. Activitybased costinginvolvesthe identificationof factors,calledcost .........., whichcause costs. ...... ...... costingtracks and accumulatescosts and revenuesattributableto each product overthe entire.......... ........... ........... Possiblepitfalls Writedownthe mistakesyou knowyou shouldavoid. G ............................... ............................... ............................... Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 84 of 421 Questions 71 Q U E T IO N S S H G q Did you know? – Process costing and costing methods Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Process costing is a costingmethodused whereit isnot possibleto identifyseparate units of productionusuallybecause of the continuousnature of the productionprocesses involved. Normallossis the lossexpectedduringa processand it is not givena cost. Ifit has a scrap valuethen it is valuedat thisamount. Abnormallossis the extra lossresultingwhenactual lossis greater than the loss anticipated.Itis givena cost. Lossmay have a scrap value.Revenuefromnormalscrap is treated as a reductionincosts. Whenthere is closingworkinprogressat the end of a period,it is necessaryto calculate the equivalent units of productioninorderto determinethe cost of a completedunit. Thecosts of labourand overheadare sometimesreferredto as conversioncosts. Joint productsare twoor moreproductsseparated ina process,each of whichhas a significantvaluecomparedto the other. Aby-product is an incidentalproductfroma processwhichhas an insignificantvalue comparedto the mainproduct. Thepointat whichjointand by-productsbecomeseparately identifiableisknownas the point of separation or the split-off point. Job costingis the costingmethodused whereeach cost unitis separatelyidentifiable. Costs foreach jobare collectedon a job cost sheet or job card. Overheadis absorbed intothe cost of jobsusingthe predetermined overhead absorption rate. Batchcostingis similarto jobcostinginthat each batch of similararticlesis separately identifiable.Thecost per unitmanufacturedin a batch is calculatedby dividingthe total batch cost by the number of units inthe batch. Servicecostingis used by companiesoperatingina serviceindustryor by companies wishingto establishthe cost of servicescarriedout by someof theirdepartments. Characteristicsof services:Intangibility,Simultaneity, Perishability,Heterogeneity Ifa serviceis a functionof twoactivityvariables,a composite cost unitmightbe appropriate. Adifficultywithservicecostingis the selectionof an appropriatecost unit.Thecost per unit is calculatedby dividingthe total costs forthe periodby the number of serviceunits in the period. Activitybased costinginvolvesthe identificationof factors, calledcost drivers,whichcause costs. Lifecycle costingtracks and accumulatescosts and revenuesattributableto each product overthe entireproduct lifecycle Possiblepitfalls – Forgettingthat unitsarisingfromabnormallossare includedas equivalentunits, whereasthose arisingfromnormallossare not. – 72 Notusingthe suggestedfour-stepapproach whenansweringprocesscosting questions. ManagementAccounting(FMA/MA) Page 85 of 421 H q 9 9.1 Process costing Achemicalprocesshas a normalwastage of 10%of input.Ina period,2,500 kg of material wereinputand there was an abnormallossof 75 kg. Whatquantityof good productionwas achieved? kg The following information (2 marks) relates to questions Q U E T IO N S S 9.2 and 9.3. ChemicalCo manufactures ChemicalX,in a singleprocess. Atthe start of the monththere was no work-in-progress.Duringthe month300 litresof raw materialwereinput intothe process at a total cost of $6,000. Conversioncosts duringthe monthamounted to $4,500. Atthe end of the month250 litresof ChemicalXweretransferred to finishedgoods inventory.Theremaining work-in-progresswas 100%completewithrespect to materialsand 50%completewithrespect to conversioncosts. Therewereno lossesin the process and there is no scrap valueavailable duringmonthswhenlossesoccur. 9.2 Whatare the equivalentunitsforclosingwork-in-progressat the end of the month? Material 25 litres Conversioncosts 25 litres 25 litres 50 litres 50 litres 50 litres 25 litres 50 litres (2 marks) G H 9.3 9.4 Ifthere had been a normalprocesslossof 10%of inputduringthe monthwhat wouldthe valueof thislosshave been? Nil $450 $600 $1,050 (2 marks) Ina particularprocess,the inputforthe periodwas 2,000 units.Therewereno inventories at the beginningor end of the process.Normallossis 5%of input.Inwhichof the following circumstancesis there an abnormalgain? (i) Actualoutput =1,800units (ii) Actualoutput =1,950units (iii) Actualoutput =2,000 units (i)only (ii)only (i)and (ii)only (ii)and (iii)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 86 of 421 Questions 73 q 9.5 9.6 Ina processaccount, howare abnormallossesvalued? Attheirscrap value Thesame as good production Atthe cost of raw materials Thesame as normallosses (2 marks) C Co needs to produce340 litresof ChemicalX.Thereis a normallossof 10%of the materialinputintothe process.Duringa givenmonththe companydid produce340 litres of good production,althoughthere was an abnormallossof 5%of the materialinputinto the process. Howmany litresof materialwereinputintothe processduringthe month? (2 marks) litres The following information relates to questions 9.7 and 9.8. DCo produces a certain food itemin a manufacturingprocess. On 1November,there was no openinginventoryof workin process. DuringNovember,500 unitsof materialwereinput to the process,witha cost of$9,000.DirectlabourcostsinNovemberwere$3,840.Productionoverhead isabsorbedat the rate of200%ofdirectlabourcosts.Closinginventoryon 30 Novemberconsisted of 100unitswhichwere100%completeas to materialsand 80%completeas to labourand overhead.Therewas no lossinprocess. 9.7 Whatis the fullproductioncost of completedunitsduringNovember? G 9.8 74 $10,400 $16,416 $16,800 $20,520 H (2 marks) Whatis the valueof the closingworkinprogresson 30 November? $2,440 $3,720 $4,104 $20,520 (2 marks) ManagementAccounting(FMA/MA) Page 87 of 421 q The following information relates to questions 9.9 and 9.10. DSComakes a product intwoprocesses. Thefollowing dataisavailable forthelatestperiod, forprocess 1. Opening workinprogress of200unitswasvalued asfollows. Material $2,400 Labour $1,200 Overhead $400 Nolosses occurintheprocess. Unitsaddedandcostsincurred during theperiod: Material $6,000(500units) Labour $3,350 Overhead $1,490 Closingworkinprogress of100unitshadreached thefollowing degrees ofcompletion: Material 100% Labour 50% Overhead 30% DSCousestheweighted average method ofinventory valuation. 9.9 Howmanyequivalent unitsareusedwhencalculating thecostperunitinrelation to overhead? 500 600 630 700 Q U E T IO N S S (2 marks) G H 9.10 Whatisthevalueoftheunitstransferred toprocess 2? $7,200 $13,200 $14,840 $15,400 (2 marks) 9.11 MGCousesprocess costing toestablish thecostperunitofitsoutput. Thefollowing information wasavailable forthelastmonth: Inputunits 10,000 Output units 9,850 Opening inventory 300units,100%complete formaterials and 70%complete forconversion costs Closinginventory 450units,100%complete formaterials and 30%complete forconversion costs MGCousestheweighted average method ofvaluing inventory. Whatweretheequivalent unitsforconversion costs? 9,505units 9,715units 9,775units 9,985units (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 88 of 421 Questions75 q 9.12 EllisCo uses processcostingto valueits output. Thefollowingwas recordedforthe period: Inputmaterials 2,000 unitsat $4.50 per unit Conversioncosts 13,340 Normalloss 5%of inputvaluedat $3 per unit Actualloss 150units Therewereno openingor closinginventories. Whatwas the valuationof one unitof output to one decimalplace? $11.8 $11.6 $11.2 $11.0 (2 marks) 9.13 SquareCo operates a continuousprocessintowhich3,000 unitsof materialcosting $9,000 was inputina period.Conversioncosts forthisperiodwere$11,970and losses, whichhave a scrap valueof $1.50,are expectedat a rate of 10%of input.Therewereno openingor closinginventoriesand output forthe periodwas 2,900 units. Whatwas the output valuation? $20,271 $20,520 $20,970 $22,040 (2 marks) G H 9.14 Thefollowinginformationrelatesto a company'spolishingprocessforthe previousperiod. Output to finishedgoods 5,408 unitsvaluedat $29,744 Normalloss 276units Actualloss 112units Alllosseshave a scrap valueof $2.50 per unitand there was no openingor closingworkin progress. Whatwas the valueof the inputduringthe period? $28,842 9.15 76 $29,532 $29,744 $30,434 (2 marks) Whichof the followingstatements about processlossesare correct? (i) (ii) Unitsof normallossshouldbe valuedat fullcost per unit Unitsof abnormallossshouldbe valuedat theirscrap value (i)only (ii)only Bothof them Neitherof them (2 marks) ManagementAccounting(FMA/MA) Page 89 of 421 G q 9.16 Thefollowingquestionis taken fromthe January to June 2015examperiod. Normallyno lossesare expectedfroma process.Anyabnormallossesare soldforscrap. Whichof the followingcalculatesthe net cost to the companyof one unitof abnormalloss? Totalinputcost ÷actual output units Totalinputcost ÷expectedoutput units (Totalinputcost – total scrap value)÷expectedoutput units (Totalinputcost ÷expectedoutput units)– scrap valueper unit Q U E T IO N S S (2 marks) 9.17 Thefollowingquestionis taken fromthe Septemberto June 2018examperiod. Aprocessis subjectto a normallossof 12%of input.Lossescan be soldfor$5 per kg.Inthe last period10,000kg of materialcosting$100,000was inputto the process.Conversion costs forthe periodwere$50,000 and output was 9,200 kg. Whatis the creditto the statement of profitor lossfromthe abnormalgain account inthe last period? $4,260 $4,818 $4,545 $6,818 (2 marks) The following data relates to questions 9.18 and 9.19. CircleCo manufacturestwojointproducts,P and R,ina commonprocess.Data forJune are as follows. $ Openinginventory 1,000 Directmaterialsadded 10,000 Conversioncosts 12,000 Closinginventory 3,000 Production Units 4,000 6,000 P R 9.18 Sales Units 5,000 5,000 Salesprice $ per unit 5 10 Ifcosts are apportionedbetweenjointproductson a sales valuebasis, what was the cost per unitof productRinJune? $1.25 $2.22 $2.50 $2.75 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 90 of 421 Questions 77 H q 9.19 9.20 Ifcosts are apportionedbetweenjointproductson a physicalunitbasis, what was the total cost of productP productioninJune? $8,000 $8,800 $10,000 $12,000 (2 marks) Whichof the followingstatements is/are correct? (i) (ii) Aby-productis a productproducedat the same timeas other productswhichhas a relativelylowvolumecomparedwiththe otherproducts Sincea by-productis a saleableitemit shouldbe separately costed inthe process account, and shouldabsorb someof the processcosts (iii) Costs incurredpriorto the pointof separationare knownas commonor jointcosts (i)and (ii) 9.21 (i)and (iii) (ii)and (iii) (iii)only (2 marks) P Co manufacturestwojointproductsand one by-productina singleprocess.Data for Novemberare as follows. $ 216,000 72,000 G Rawmaterialinput Conversioncosts Therewereno inventoriesat the beginningor end of the period. Output Units Joint productE 21,000 Joint productQ 18,000 By-productX 2,000 H Salesprice $ per unit 15 10 2 By-productsales revenueis creditedto the processaccount. Joint costs are apportioned on a sales valuebasis. Whatwerethe fullproductioncosts of productQ inNovember (to the nearest $)? $102,445 78 $103,273 $104,727 $180,727 (2 marks) ManagementAccounting(FMA/MA) Page 91 of 421 G q 9.22 LMNCo manufacturesthree jointproductsand one by-productfroma singleprocess. Data forMayare as follows. Openingand closinginventories Rawmaterialsinput Conversioncosts Nil $180,000 $50,000 Output Joint product Units 3,000 L By-productR M N 2,000 4,000 1,000 Salesprice $ per unit 32 Q U E T IO N S S 42 38 2 By-productsales revenueis creditedto the sales account. Joint costs are apportionedon a sales valuebasis. Whatwerethe fullproductioncosts of productMinMay(to the nearest $)? $57,687 9.23 $57,844 $58,193 $66,506 (2 marks) TwoproductsG and Hare created froma jointprocess.G can be soldimmediatelyafter split-off.Hrequiresfurtherprocessingbeforeit isina saleablecondition.Thereare no openinginventoriesand no workinprogress.Thefollowingdata are availableforlast period: $ 384,000 159,600 Totaljointproductioncosts Furtherprocessingcosts (productH) Product Sellingprice Sales Production per unit Units Units G $0.84 400,000 412,000 H $1.82 200,000 228,000 Usingthe physicalunitmethodforapportioningjointproductioncosts, what was the cost valueof the closinginventoryof productHforlast period? $36,400 $37,520 $40,264 $45,181 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 92 of 421 Questions 79 H q 9.24 Twoproducts(Wand X)are created froma jointprocess.Bothproductscan be sold immediatelyafter split-off.Thereare no openinginventoriesor workinprogress.The followinginformationis availableforlast period: Totaljointproductioncosts $776,160 Product Productionunits Salesunits Sellingpriceper unit W 12,000 10,000 $10 X 10,000 8,000 $12 Usingthe sales valuemethodof apportioningjointproductioncosts, what was the valueof the closinginventoryof productXforlast period? $310,464 $388,080 $155,232 $77,616 (2 marks) 9.25 Thefollowingquestionis taken fromthe July to December2013examperiod. TwojointproductsAand Bare producedina process.Data forthe processforthe last periodare as follows: Product A B Tonnes Tonnes Sales 480 320 Production 600 400 Commonproductioncosts inthe periodwere$12,000.Therewas no openinginventory. Bothproductshad a grossprofitmarginof 40%.Commonproductioncosts were apportionedon a physicalbasis. Whatwas the grossprofitforproductAinthe period? $2,304 $2,880 $3,840 G 9.26 $4,800 (2 marks) Thefollowingquestionis taken fromthe July to December2015examperiod. AprocessproducestwojointproductsAand Binequal physicalquantities.Aand Bare soldat splitoffpointfor$5 per kg and $8 per kg respectively.Thereare no furthercosts after the splitoffpoint. Ifjointcosts are apportionedon a relativesales valuebasis, whichof the following statements is true? Bothproductswillhave the same returnon sales ratio (operatingmargin) ProductAwillhave the higherreturnon sales ratio (operatingmargin) Thecost per kg willbe the same forboth products Thecost per kg of productAwillbe higherthan that of productB (2 marks) 80 ManagementAccounting(FMA/MA) Page 93 of 421 H G q 9.27 Thefollowingquestionis taken fromthe July to December2016examperiod. Whichof the followingis NOTan acceptable methodof accountingforby-products? Netrealisablevalueof the by-productis deducted fromthe cost of the mainproduct 9.28 Pre-separationcosts are apportionedto the by-productto calculateits profit Salesvalueof the by-productis deducted fromthe cost of the mainproduct By-productincomelesspost-separationcosts is added to the sales of the main product (2 marks) Q U E T IO N S S Thefollowingquestionis taken fromthe January to June 2017examperiod. Ina period,a processproduced2,000 kg of a mainproductand 400 kg of a by-product. Thecost of productionwas $5,000. 1,800kg of the mainproductweresoldat $10per kg and allof the by-productproducedwas soldfor$1perkg. Therewas no openinginventory. Ifthe sales incomeof the by-productis deducted fromthe cost of production,what is the profitforthe period? $13,400 $13,860 $13,900 $15,860 (2 marks) (Total = 56 marks) 10 Costing methods H 10.1 Whichof the followingcostingmethodsis mostlikelyto be used by a companyinvolvedin the manufactureof liquidsoap? 10.2 Batchcosting Servicecosting Job costing Processcosting (2 marks) Co calculatesthe pricesof jobsby adding overheadsto the primecost and adding 30%to total costs as a markup. Job numberY256was soldfor$1,690and incurredoverheadsof $694.Whatwas the primecost of the job? $ (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 94 of 421 Questions 81 G q 10.3 Job Co operates a jobcostingsystem. Theestimatedcosts forjob173are as follows. Directmaterials 5 metres@$20 per metre Directlabour 14hours@$8 per hour Variableproductionoverheadsare recoveredat the rate of $3 per directlabourhour. Fixedproductionoverheadsforthe year are budgeted to be $200,000 and are to be recoveredon the basis of the total of 40,000 directlabourhoursforthe year. Otheroverheads,inrelationto selling,distribution and administration, are recoveredat therateof $80perjob. Whatis the total cost of job173? $ (2 marks) The following information relates to questions 10.4 and 10.5. JKCo makesspecialassembliesto customers'ordersand uses jobcosting. Thedata fora periodare: Job number Job number AA10 BB15 $ $ OpeningWIP 26,800 42,790 Materialadded inperiod 17,275 0 Labourforperiod 14,500 3,500 Thebudgeted overheadsforthe periodwere$126,000. Job numberBB15was completedon the last day of the period. 10.4 Whatoverheadshouldbe added to jobnumberCC20 forthe period? $ 10.5 (2 marks) $58,575 $101,675 $217,323 $227,675 (2 marks) Thefollowingitemsmay be used incostingbatches. (i) Actualmaterialcost (ii) Actualmanufacturingoverheads (iii) Absorbedmanufacturingoverheads (iv) Actuallabourcost Whichof the aboveare containedina typicalbatch cost? (i),(ii)and (iv)only (i)and (iv)only (i),(iii)and (iv)only (i),(ii),(iii)and (iv) 82 H Whatwas the approximatevalueof closingwork-in-progressat the end of the period? 10.6 Job number CC20 $ 0 18,500 24,600 ManagementAccounting(FMA/MA) Page 95 of 421 (2 marks) G q 10.7 Whichof the followingwouldbe appropriatecost unitsfora passenger coach company? (i) Vehiclecost per passenger-kilometre (ii) Fuelcost foreach vehicleper kilometre Q U E T IO N S S (iii) Fixedcost per kilometre 10.8 (i)only (i)and (ii)only (i)and (iii)only (ii)and (iii)only (2 marks) ThefollowinginformationisavailableforHotelCo forthe latest thirtyday period. Numberof roomsavailableper night 40 Percentageoccupancyachieved 65% Roomservicingcost incurred $3,900 Whatwas the roomservicingcost per occupiedroom-nightlast period,to the nearest cent? $ 10.9 (2 marks) Annieis to set up a smallhairdressingbusinessat home.Sheanticipatesworkinga 35-hour weekand takingfourweeks'holidayper year. Herexpensesformaterialsand overheads are expectedto be $3,000 per year, and she has set herselfa target profitof $18,000for the firstyear. Assumingthat only90%of her workingtimewillbe chargeable to clients,what priceshould she charge fora 'colourand cut' whichwouldtake 3 hours? $13.89 $35.71 $37.50 $41.67 (2 marks) 10.10 Whichof the followingare likelyto use servicecosting? (i) Acollege (ii) Ahotel (iii) Aplumber (i),(ii)and (iii) (i)and (ii) (ii)only (ii)and (iii)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 96 of 421 Questions 83 H q 10.11 Whichof the followingwouldbe considereda serviceindustry? (i) (ii) (iii) Anairlinecompany Arailwaycompany Afirmof accountants (i)and (ii)only (i)and (iii)only (i),(ii)and (iii) (ii)and (iii)only (2 marks) 10.12 Thefollowinginformationrelatesto a managementconsultancyorganisation: $ Salarycost per hourforseniorconsultants 40 Salarycost per hourforjuniorconsultants 25 Overheadabsorptionrate per hourappliedto allhours 20 Theorganisationadds 40%to total cost to arriveat the finalfee to be charged to a client. Assignmentnumber789took54 hoursof a seniorconsultant'stimeand 110hoursof junior consultants'time. Whatis the finalfee to be charged forAssignment789? $6,874 $10,696 $11,466 $12,642 (2 marks) G 10.13 ABCCo operates a jobcostingsystem.Job number1012requires$45 of directmaterials and $30 of directlabour.Directlabouris paid at the rate of $7.50per hour. Production overheadsare absorbed at a rate of $12.50per directlabourhourand non-production overheadsare absorbed at a rate of 60%of primecost. Whatisthe total cost of jobnumber1012? $ (2 marks) 10.14 Lastyear, BryanAircarriedexcessbaggage of 250,000 kg overa distanceof 7,500 kmat a cost of $3,750,000forthe extra fuel. Whatisthe cost per kg-km? $0.002 per kg-km 84 $2.00 per kg-km $33.33per kg-km $500.00 per kg-km (2 marks) ManagementAccounting(FMA/MA) Page 97 of 421 H G q 10.15 Thefollowingquestionis taken fromthe December2012exam. Atruckdeliveredsand to twocustomersina week.Thefollowingdetailsare available. Customer Weightof goods Distancecovered delivered(kilograms) (kilometres) X 500 200 Y 180 1,200 680 1,400 Q U E T IO N S S Thetruckcost $3,060 to operate inthe week.Eachcustomerdeliverywas carriedout separately, and the truckmade no otherdeliveriesinthe week. Whatis the cost per kilogram/kilometre of sand deliveredinthe week(to the nearest $0.001)? $0.003 $0.010 $2.186 $4.500 (2 marks) 10.16 Aproductis inthe stage of its lifecyclewhichis typifiedby fallingpricesbut good profit marginsdue to highsales volumes.Whatstage is it in? Growth Maturity Introduction Decline (2 marks) 10.17 Inwhat stage of the productlifecycleare initialcosts of the investmentinthe product typicallyrecovered? Introduction Decline Growth Maturity (2 marks) 10.18 Howis target cost calculated? Desiredsellingprice– actual profitmargin Marketprice– desiredprofitmargin Desiredsellingprice– desiredprofitmargin Marketprice– standard profitmargin Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 98 of 421 (2 marks) Questions 85 H q 10.19 Whichstage of the productlifecycledo the followingcharacteristicsreferto? Newcompetitors Customerfeedbackreceived Newdistributionoutletsbeingfound Productqualityimprovementsmade Growth Decline Maturity Introduction 10.20 (2 marks) Anewproductis beingdeveloped.Thedevelopmentwilltake one year and the productis expectedto have a lifecycleof twoyears beforeit is replaced. Whichof the followingstatements are true of lifecyclecosting? Statement1:Itisusefulforassessingwhethernewproductshave been successful. Statement2: Theindividualprofitabilityforproductsis lessaccurate. Bothstatements are true Bothstatements are false Statement1is true and statement 2 is false Statement2 is true and statement 1is false (2 marks) G H 10.21 Achainof coffeeshopshas implementeda TotalQualityManagementsystemto ensure highqualityand consistencyacross alloutlets.Aspart of the scheme,the chainoffersa freereplacementdrinkto any customernot completelysatisfiedwiththeirpurchase. Whichof the followingBESTdescribesthe cost of providingreplacementdrinks? Anexternalfailurecost Aninternalfailurecost 10.22 86 Apreventioncost Anappraisalcost (2 marks) Whichcostingmethodis based around a calculationinvolvinga desiredprofitmarginand a competitivemarketprice? ActivityBasedCosting TotalQualityManagement Target costing Lifecyclecosting (2 marks) ManagementAccounting(FMA/MA) Page 99 of 421 q 10.23 Thefollowingquestionis taken fromthe Septemberto August2019examperiod. Whichcostingtechniqueallocatescosts to productssuch as design,production, distribution,maintenance,marketing,and disposal,inorderto maximisereturnand minimisecosts? Traditionalabsorptioncosting Activitybased costing Target costing Lifecyclecosting Q U E T IO N S S (2 marks) (Total = 46 marks) G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 100 of 421 Questions 87 q G H 88 Management Accounting (FMA/MA) Page 101 of 421 q Do you know? – Budgeting Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. Managementaccountants willuse spreadsheet softwareinactivitiessuch as budgeting, forecasting,reportingperformanceand varianceanalysis.Spreadsheetpackages have the facilityto perform.......-... calculationsat great speed. The........... .............. ............ shouldbe identifiedat the beginningof the budgetary processand the budget forthisis prepared beforeallothers. ........... budgets includeproductionbudgets, marketingbudgets, sales budgets, personnel budgets, purchasingbudgets and researchand developmentbudgets. Possiblepitfalls Q U E T IO N S S Writedownthe mistakesyou knowyou shouldavoid. G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 102 of 421 Questions 89 q Did you know? – Budgeting Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Managementaccountants willuse spreadsheet softwareinactivitiessuch as budgeting, forecasting,reportingperformanceand varianceanalysis.Spreadsheetpackages have the facilityto performwhat-if calculationsat great speed. Theprincipal budget factor shouldbe identifiedat the beginningof the budgetary processand the budget forthisis prepared beforeallothers. Functionalbudgets includeproductionbudgets, marketingbudgets, sales budgets, personnelbudgets, purchasingbudgets and researchand developmentbudgets. Possiblepitfalls – Notknowingwhichbudgets are functionalbudgets – Notknowinghowto constructspreadsheet formulae G H 90 ManagementAccounting(FMA/MA) Page 103 of 421 q 11 Setting budgets 11.1 Whichof the followingmay be consideredto be objectivesof budgeting? (i) Co-ordination (ii) Communication Q U E T IO N S S (iii) Expansion (iv) Resourceallocation Allof them (i),(ii)and (iv) (iii)and (iv) (ii)and (iv) (2 marks) 11.2 Whatdoes the statement 'sales is the principalbudget factor' mean? Thelevelof sales willdeterminethe levelof cash at the end of the period Thelevelof sales willdeterminethe levelof profitat the end of the period Thecompany'sactivitiesare limitedby the levelof sales it can achieve Salesis the largest iteminthe budget (2 marks) 11.3 QTCo manufacturesa singleproductand an extract fromtheirflexedbudget for productioncosts is as follows. Activitylevel G 80% $ 2,400 2,120 4,060 8,580 Directmaterial Labour Productionoverhead H 90% $ 2,700 2,160 4,080 8,940 Whatwouldthe total productioncost allowancebe ina budget flexedat the 83%levelof activity?(to the nearest $) $ (2 marks) 11.4 Whichof these statements is untrue? Spreadsheetsmakethe calculationand manipulationof data easierand quicker Spreadsheetsare veryusefulforword-processing Budgetingcan be done veryeasilyusingspreadsheets Spreadsheetsare usefulforplottinggraphs Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 104 of 421 (2 marks) Questions 91 G q The following data applies 1 2 3 4 5 6 7 8 11.5 A Sales Cost of sales Grossprofit Expenses Netprofit to questions B Jan 15,000 11,090 3,910 1,500 2,410 11.5 to 11.7. C Feb 13,400 0,060 3,340 1,500 1,840 D Mar 16,100 12,040 4,060 1,500 2,560 F Apr 17,200 3,000 4,200 1,500 2,700 G May 15,300 11,100 4,200 1,500 2,700 Netprofit% Theformula=C2 – C3 willgivethe contentsof whichcellinthe drop downlist? Select... C6 C4 C5 C1 (2 marks) 11.6 Whatwouldbe the formulaforMarchnet profit? =D2– D3 =B6+C6 =D4– D5 =D3D8 H (2 marks) 11.7 Whatwillbe the formulato go inG8? =G6/G2 100 =G4/100G6 =G2/G6 100 =G6/G4 100 (2 marks) 11.8 SOCo manufacturesa singleproduct.Ina computerspreadsheet the cellsF1to F12 containthe budgeted monthlysales unitsforthe twelvemonthsof nextyear insequence, withJanuary sales incellF1and finishingwithDecembersales inF12.Thecompanypolicy is forthe closinginventoryof finishedgoodseach monthto be 10%of the budgeted sales unitsforthe followingmonth. Whichof the followingformulaewillgenerate the budgeted production(inunits)forMarch nextyear? =[F3+(0.1F4)] 92 =[F3– (0.1F4)] =[(1.1F3)– (0.1F4)] =[(0.9F3)+(0.1F4)] (2 marks) ManagementAccounting(FMA/MA) Page 105 of 421 G q 11.9 MistyCo's budgetary controlreportforlast monthis as follows: Directcosts Productionoverhead Otheroverhead Fixedbudget $ 61,100 55,000 10,000 126,100 Flexedbudget $ 64,155 56,700 10,000 130,855 Actualresults $ 67,130 54,950 11,500 133,580 Q U E T IO N S S Whatwas the volumevarianceforlast month? $4,755(A) $2,725(A) $4,755(F) $2,725(F) (2 marks) 11.10 MistyCo's budgetary controlreportforlast monthis as follows: Fixedbudget $ 61,100 55,000 10,000 126,100 Directcosts Productionoverhead Otheroverhead Flexedbudget $ 64,155 56,700 10,000 130,855 Actualresults $ 67,130 54,950 11,500 133,580 Whatwas the expenditurevarianceforlast month? $7,480(F) $2,725(F) $7,480(A) $2,725(A) H (2 marks) 11.11 Thefollowingquestion is taken from the July to December2014exam period. Thestandard cost card fora company’sonlyproductis givenbelow: $ per unit Sellingprice 118 Directlabour4 hoursat $20 per hour 80 Directmaterial3 kg at $7per hour 21 Fixedproductionoverhead 5 Profit 12 Fora period,budgeted productionand sales were8,000 units,whilstactual production and sales were6,000 units. Whatis the flexedbudget profit? $62,000 $72,000 $96,000 $102,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 106 of 421 Questions 93 q 11.12 Thefollowingquestion is taken from the January to June 2016exam period. Budgetedcosts and revenuesforan output levelof 4,000 unitsare givenbelow.Itis known that after an output levelof 5,000 unitsthere is a step up infixedcosts of $1,000: $ per unit Sellingprice 30 Variablecost 18 4 Fixedcost 8 Profit Whatis the flexedbudget profitat an output levelof 6,000 units? $47,000 $48,000 $55,000 $56,000 (2 marks) 11.13 Thefollowingquestion is taken from the July to December2016exam period. Thefollowingspreadsheet showsthe calculationof a company’sprofit. A B 1 $ 2 Salesrevenue 20,000 3 Variableproductioncosts 5,000 4 Fixedproductioncosts 3,000 5 Grossprofit 12,000 6 Variablesellingcosts 1,000 7 Fixedsellingcosts 500 8 Profit 10,500 G H Whichformulawouldcalculatecontribution? B2– B3 94 B5– B6 B8+B7 B8+B7+B4 (2 marks) ManagementAccounting(FMA/MA) Page 107 of 421 G q 11.14 Thefollowingquestion is taken from the July to December2017exam period. Thefollowingspreadsheet showsa profitcentre's variancesagainst budget fora period. Somefigureshave been omitted(omittedfiguresare labelled????). A B 1 Fixedbudget 2 Sales/productionunits 1,200 3 $ 4 Salesrevenue 60,000 5 Directmaterial 21,600 6 Directlabour 14,400 7 Contribution 24,000 8 Fixedcosts 17,000 9 Profit 7,000 Whatfigureshouldappear incellE5? –2,400 2,400 –3,000 3,000 C Flexedbudget 1,500 $ 75,000 ??? 18,000 ??? 17,000 13,000 D Actual 1,500 $ 74,000 24,000 22,000 28,000 16,500 11,500 E Variance 300 $ –1,000 ??? –4,000 ??? 500 na Q U E T IO N S S (2 marks) 11.15 Thefollowingquestion is taken from the September to August2019exam period and the September to August2020 exam period. Afirmsets its fixedbudget at 100%capacity. Thebudgeted sales are $300,000 and budgeted net profitis $50,000. Budgetedcosts are 70%fixedcosts and 30%variable costs. Whatis the flexedbudget fornet profitat 80%capacity? $5,000 $40,000 $25,000 $65,000 (2 marks) 11.16 Whatdoes a master budget comprise? Thebudgeted statement of profitor loss Thebudgeted cash flow,budgeted statement of profitor lossand budgeted statement of financialposition Thebudgeted cash flow Theentireset of budgets prepared Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 108 of 421 (2 marks) Questions 95 H q 11.17 Ifa companyhas no productionresourcelimitations,inwhichorderwouldthe following budgets be prepared? (i) (ii) Materialusage budget Salesbudget (iv) Finishedgoodsinventorybudget (v) Productionbudget (iii) Materialpurchase budget (v),(iv),(i),(vi),(iii),(ii) (ii),(iv),(v),(i),(vi),(iii) (vi) Materialinventorybudget (ii),(iv),(v),(i),(iii),(vi) (ii),(v),(iv),(i),(vi),(iii) (2 marks) 11.18 Ina situationwherethere are no productionresourcelimitations,whichTWOof the followingitemsof informationmustbe availableforthe productionbudget to be completed? Salesvolumefromthe sales budget Materialpurchasesfromthe purchasesbudget Budgetedchange infinishedgoodsinventory Standard directlabourcost per unit (2 marks) 11.19 Whenpreparinga productionbudget, what does the quantityto be producedequal? G Salesquantity+openinginventoryof finishedgoods+closinginventoryof finished goods Salesquantity– openinginventoryof finishedgoods+closinginventoryof finished goods Salesquantity– openinginventoryof finishedgoods– closinginventoryof finished goods Salesquantity+openinginventoryof finishedgoods– closinginventoryof finished goods (2 marks) 11.20 Thequantityof materialinthe materialpurchasesbudget is greater than the inferredfrom quantityof materialinthe materialusage budget. Whichof the followingstatements can be thissituation? Wastage of materialoccursinthe productionprocess Finishedgoodsinventoriesare budgeted to increase Rawmaterialsinventoriesare budgeted to increase Rawmaterialsinventoriesare budgeted to decrease (2 marks) 11.21 DownCo plans to sell24,000 unitsof productRnextyear. Openinginventoryof Ris expectedto be 2,000 unitsand PQCo plans to increaseinventoryby 25 per cent by the end of the year. Howmany unitsof productRshouldbe producednextyear? units 96 (2 marks) ManagementAccounting(FMA/MA) Page 109 of 421 H G q 11.22 Eachunitof productAlpharequires3 kg of raw material.Nextmonth'sproductionbudget forproductAlphais as follows. Openinginventories: Rawmaterials 15,000kg Finishedunitsof Alpha 2,000 units Budgetedsales of Alpha 60,000 units Plannedclosinginventories: Rawmaterials 7,000 kg Finishedunitsof Alpha 3,000 units Howmany kilogramsof raw materialsshouldbe purchasednextmonth? kgs Q U E T IO N S S (2 marks) 11.23 Budgetedsales of XforDecemberare 18,000units.Atthe end of the productionprocess forX,10%of productionunitsare scrapped as defective.Openinginventoriesof Xfor Decemberare budgeted to be 15,000unitsand closinginventorieswillbe 11,400units.All inventoriesof finishedgoodsmusthave successfullypassed the qualitycontrolcheck. Whatis the productionbudget forXforDecember? (2 marks) units 11.24 TCo manufacturesa singleproduct,M.Budgetedproductionoutput of productMduring Augustis 200 units.Eachunitof productMrequires6 labourhoursforcompletionand PRCo anticipates20 per cent idletime.Labouris paid at a rate of $7per hour. Whatis the directlabourcost budget forAugust? $6,720 $8,400 $10,080 $10,500 (2 marks) 11.25 Eachunitof productEchotakes fivedirectlabourhoursto make.Qualitystandards are high,and 8%of unitsare rejectedafter completionas sub-standard. Nextmonth'sbudgets are as follows. Openinginventoriesof finishedgoods 3,000 units Plannedclosinginventoriesof finishedgoods 7,600 units Budgetedsales of Echo 36,800 units Allinventoriesof finishedgoodsmusthave successfullypassed the qualitycontrolcheck. Whatis the directlabourhoursbudget forthe month? 190,440hours 207,000 hours 223,560hours 225,000 hours (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 110 of 421 Questions 97 H q 11.26 Budgetedproductionina factory fornextperiodis 4,800 units.Eachunitrequiresfive labourhoursto make.Labouris paid $10per hour. Idletimerepresents20%of the total labourtime. Whatis the budgeted total labourcost forthe nextperiod? $192,000 $240,000 $288,000 $300,000 (2 marks) 11.27 Whichof the followingstatements are true? (i) (ii) Aflexedbudget allowsbusinessesto evaluatea manager's performancemorefairly Afixedbudget is usefulfordefiningthe broad objectivesof the organisation (iii) Relyingon fixedbudgets alonewouldusuallygiveriseto massivevariances (i)and (iii)only (i)and (ii)only (ii)and (iii)only (i),(ii)and (iii) (2 marks) 11.28 Thefollowingdetailshave been extractedfromthe receivablescollectionrecordsof C Co. Invoicespaid inthe monthafter sale 60% Invoicespaid inthe secondmonthafter sale 25% Invoicespaid inthe thirdmonthafter sale 12% Baddebts 3% Invoicesare issuedon the last day of each month. Customerspayinginthe monthafter sale are entitledto deduct a 2%settlementdiscount. Creditsales valuesforJune to Septemberare budgeted as follows. June July August September $35,000 $40,000 $60,000 $45,000 Whatis the amountbudgeted to be receivedfromcreditsales inSeptember? $46,260 G 98 $49,480 $50,200 $50,530 (2 marks) ManagementAccounting(FMA/MA) Page 111 of 421 H G q 11.29 BDLCo is currentlypreparingits cash budget forthe year to 31March20X8.Anextract fromits sales budget forthe same year showsthe followingsales values. $ March 60,000 April 70,000 May 55,000 June 65,000 40%of its sales are expectedto be forcash. Of its creditsales, 70%are expectedto pay in the monthafter sale and take a 2%discount;27%are expectedto pay inthe secondmonth after the sale, and the remaining3%are expectedto be bad debts. Q U E T IO N S S Whatis the valueof sales receiptsto be showninthe cash budget forMay20X7? $60,532 $61,120 $66,532 $86,620 (2 marks) The following information relates to questions 11.30 and 11.31. Eachunitof productZeta requires3 kg of raw materialand 4 directlabourhours.Materialcosts $2 per kg and the directlabourrate is $7per hour. Theproductionbudget forZeta forAprilto June is as follows. Productionunits April 7,800 May 8,400 June 8,200 11.30 Rawmaterialopeninginventoriesare budgeted as follows. H April May June 3,800 kg 4,200 kg 4,100kg The closinginventorybudgeted forJune is 3,900 kg. Materialpurchasesare paid forinthe monthfollowingpurchase.Whatis the figureto be includedinthe cash budget forJune inrespect of paymentsforpurchases? $25,100 $48,800 $50,200 $50,600 (2 marks) 11.31 Wages are paid 75%inthe monthof productionand 25%inthe followingmonth.Whatis the figureto be includedinthe cash budget forMayinrespect of wages? $ (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 112 of 421 Questions 99 q 11.32 Anextract fromPLCo's sales budget is as follows: $ October 224,000 November 390,000 December 402,000 Tenper cent of sales are paid forimmediatelyincash. Of the creditcustomers,30 per cent pay inthe monthfollowingthe sale and are entitledto a one per cent discount.The remainingcustomerspay twomonthsafter the sale is made. Whatis the valueof sales receiptsshowninthe company'scash budget forDecember? $285,567 $286,620 $290,430 $312,830 (2 marks) 11.33 Extractsfroma PPCo's budget are as follows: August 12,600 $9,440 Productionunits Fixedproductionoverheadcost incurred September 5,500 $7,000 Thestandard variableproductionoverheadcost per unitis $5. Variableproduction overheadis paid 70 per cent inthe monthincurredand 30 per cent inthe followingmonth. Fixedproductionoverheadcost is paid inthe monthfollowingthat inwhichit is incurred and includesdepreciationof $2,280per month. Whatis the payment fortotal productionoverheadcost showninthe cash budget for September? $32,220 G $42,870 $45,310 $47,590 (2 marks) 11.34 Thefollowingextract is taken fromthe productioncost budget of S Co. Production(units) 2,000 3,000 Productioncost ($) 11,100 12,900 Whatis the budget cost allowanceforan activitylevelof 4,000 units? $7,200 $7,500 100 $13,460 $14,700 (2 marks) ManagementAccounting(FMA/MA) Page 113 of 421 H G q 11.35 Thefollowingdetailshave been extractedfromthe payables' recordsof XCo: Invoicespaid inthe monthof purchase 25% Invoicespaid inthe firstmonthafter purchase 70% Invoicespaid inthe secondmonthafter purchase 5% PurchasesforJuly to Septemberare budgeted as follows: July $250,000 August $300,000 September $280,000 Forsupplierspaid inthe monthof purchase,a settlementdiscountof 5%is received.What is the amountbudgeted to be paid to suppliersinSeptember? $278,500 $280,000 $289,000 $292,500 Q U E T IO N S S (2 marks) 11.36 Whichof the followingcontrolactionscouldbe taken to helpeliminatean adversedirect labourefficiencyvariance? (i) Employmorehighlyskilledlabour (ii) Ensurestrictersupervisionof labourworkers (iii) Askemployeesto workpaid overtime (i)and (iii)only (i)and (ii)only (i),(ii)and (iii) (ii)and (iii)only H (2 marks) 11.37 Xdepartmentis a divisionof WPlc.Xdepartmentusuallyhas a quarterlywagescost of $4,500,000. Quarterlymaterialcosts are usuallyaround $2,000,000. WPlcmade a centraldecisionto award allemployeesa wages increaseof 2%. Whichof the followingvariancesforthe latest quarter are worthinvestigating? (i) Directmaterialpricevariance$400 (A) (ii) Labourrate variance$90,000 (A) (iii) Salesvolumevariance$4,000,000 (F) (i)and (iii)only (i)and (ii)only (i),(ii)and (iii) (iii)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 114 of 421 Questions 101 q 11.38 Whichof the followingBESTdescribesthe purposeof a flexiblebudget? Toensuremanagers are motivated Tofacilitatecontrolby establishinga budget relevantto actual activitylevels Tofacilitatecontrolby preventingdiscretionaryexpenditure Toenable accurate reforecastingwhenactual costs are known (2 marks) 11.39 Thefollowingstatements relate to fixedbudgets and flexiblebudgets. (i) Ifproductionlevelsfar exceedthose anticipated,relyingon a fixedbudget islikelyto resultinmassivevariances (ii) Flexiblebudgets assist managementcontrolby providingdynamic,comparable information (iii) Flexiblebudgets are alwayssuperiorto fixedbudgets Whichstatements are true? (i)only (i)and (ii)only (ii)and (iii)only (i),(ii)and (iii) (2 marks) 11.40 Thefollowingquestion is taken from the January to June 2014exam period. Anaccountant wishesto use the followingspreadsheetto calculatebudgeted production units. A B C D 1 Jul Aug Sep 2 units units units 3 Sales 1,000 2,000 3,000 4 Openinginventoryfinishedgoods 100 200 300 5 Production 6 G Whichformulashouldbe entered incellB5? =B3– C4 +B4 =B3– B4 102 =B3+C4 =B3+C4 – B4 (2 marks) ManagementAccounting(FMA/MA) Page 115 of 421 H q 11.41 Thefollowingquestion is taken from the September to August2020 exam period. Cash sales of a companyare 10%of total sales revenuewiththe remainderon credit. Creditsales are settledas follows: 40%inthe monthof sales net of a 2%settlementdiscount 60%inthe monthafter sale Q U E T IO N S S Thefollowingsales revenuesare budgeted forthe nexttwomonths: Month $ 1 80,000 2 70,000 Cash customersdo not receivea discount. Whatamountwillbe budgeted to be receivedfromcustomersinmonth2? $ (2 marks) (Total = 82 marks) 12 Implementing budgets 12.1 Participationby staff inthe budgetingprocessis oftenseen as an aid to the creationof a realisticbudget and to the motivationof staff. Thereare, however,limitationsto the effectivenessof such participation. Whichof the followingillustratesone of these limitations? Participationallowsstaff to buy intothe budget G 12.2 Staff suggestionsmay be ignoredleadingto de-motivation Staff suggestionsmay be based on localknowledge Budgetaryslackcan be builtinby seniormanager as wellas staff H (2 marks) Whichof the followingstatements about budgetingand motivationare true? (i) Atarget is moremotivatingthan no target at all (ii) Theproblemwitha target is settingan appropriatedegree of difficulty (iii) Employeeswhoare challengedtend to withdrawtheircommitment Allof them (ii)and (iii)only (i)and (ii)only (iii)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 116 of 421 Questions 103 q 12.3 Whichof the followingbest describesa top-downbudget? 12.4 Abudget whichhas been set by scalingdownindividualexpenditureitemsuntilthe total budgeted expenditurecan be met fromavailableresources Abudget whichis set by delegatingauthorityfromtop management,allowing budget holdersto participateinsettingtheirownbudgets Abudget whichis set withoutpermittingthe ultimatebudget holderto participatein the budgetingprocess Abudget whichis set withinthe frameworkof strategicplans determinedby top management (2 marks) Inwhichof the followingcircumstancesis the use of a participativebudgetingprocess appropriate? (i) Indecentralisedorganisations (ii) Whenacceptance of the budget as fairand equitableis essential (iii) Whenan organisation'sdifferentunitsact autonomously 12.5 Allof (i),(ii)and (iii) (ii)and (iii)only (i)and (ii)only (iii)only (2 marks) Whichof the followingbest describesa controllablecost? G H Acost whichcan be easilyforecastand is thereforereadilycontrollableusing budgetary controltechniques Acost whichcan be specificallyidentifiedwitha particularcost object Acost whichis easilycontrolledbecause it is not affected by fluctuationsinthe level of activity Acost whichcan be influencedby its budget holder (2 marks) (Total = 10marks) 104 ManagementAccounting(FMA/MA) Page 117 of 421 q Do you know? – Project appraisal Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. Thebasic principleof ............................ involvescalculatingthe presentvalueof an investment.Thepresentvalueof an investmentis the amountof moneywhichmustbe investednow(fora numberof years)inorderto earn a futuresum(at a givenrate of interest). Aconstant sum of moneyreceivedor paid each year for a givennumberof years is knownas an ................... . Ifthis constant sum lasts forever,then it is knownas a ......................... . Annuityannuityfactor =............................................................ Annuityinterestrate =............................................................... Thetwomaindiscountedcash flowmethods – – Q U E T IO N S S NPV IRR Net present value (NPV)method. Ifan investmenthas a ............... NPVthen it is acceptable. Aninvestmentwitha .................... NPVshouldbe rejected. Internal rate of return (IRR)method. Thismethoddeterminesthe rate of interestat whichthe NPVof the investment=..... . Theprojectis viableifthe IRRexceedsthe minimumacceptable return. TheIRRformulais as follows. A IRR=a%+ (b a)% AB Where G a =........................................... H b =........................................... A=........................................... B=........................................... Thetimethat is requiredforthe cash inflowsfroma capital investmentprojectto equal the cash outflowsis knownas the ................................................ . Possiblepitfalls Writedownthe mistakesyou knowyou shouldavoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 118 of 421 Questions 105 q Did you know? – Project appraisal Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Thebasic principleof discountinginvolvescalculatingthe presentvalueof an investment. Thepresentvalueof an investmentis the amountof moneywhichmustbe investednow (fora numberof years)inorderto earn a futuresum(at a givenrate of interest). Aconstant sumof moneyreceivedor paid each year fora givennumberof years is known as an annuity. Ifthisconstant sumlasts forever,then it is knownas a perpetuity. Annuityannuityfactor =present value of an annuity Annuityinterestrate =present value of a perpetuity NPV Thetwomaindiscountedcash flowmethods IRR – Net present value (NPV)method. Ifan investmenthas a positiveNPVthen it is acceptable. Aninvestmentwitha negative NPVshouldbe rejected. – Internal rate of return (IRR)method. Thismethoddeterminesthe rate of interestat whichthe NPVof the investment=zero. Theprojectisviableifthe IRRexceedsthe minimumacceptable return. TheIRRformulais as follows. A IRR=a%+ AB (b a) % Where G a =one interest rate b = the other interest rate H A= NPVat rate a B= NPVat rate b Thetimethat is requiredforthe cash inflowsfroma capital investmentprojectto equal the cash outflowsisknownas the payback period. Possiblepitfalls – Notbeingable to calculateand distinguishbetweenthe nominalrate of interestand the effectiveannual rate of interest. – Notbeingable to calculatethe IRRof an investment,evenwhengiventhe IRR formula.(Youmustrememberwhat the symbolsinthe formulamean so that you can use the correctfiguresinyourcalculations.) 106 ManagementAccounting(FMA/MA) Page 119 of 421 q 13 Project appraisal 13.1 Youare currentlyemployedas a ManagementAccountantat InsureCo. Youare contemplatingstartingyourownbusiness.Inconsideringwhetheror not to start yourown business,what wouldyourcurrentsalary levelbe? 13.2 Asunkcost Anincrementalcost Anirrelevantcost Anopportunitycost Q U E T IO N S S (2 marks) Indecisionmaking,costs whichneed to be consideredare said to be relevantcosts. Which of the followingare characteristicsassociated withrelevantcosts? (i) Futurecosts (ii) Unavoidablecosts (iii) Incrementalcosts (iv) Differentialcosts (iii)only (i)and (ii)only (i),(iii)and (iv)only Allof them (2 marks) G H 13.3 Amachineownedby a companyhas been idleforsomemonthsbut couldnowbe used on a one year contract whichis underconsideration.Thecarryingvalueof the machineis $1,000.Ifnot used on thiscontract, the machinecouldbe soldnowfora net amountof $1,200.Afteruse on the contract, the machinewouldhave no saleablevalueand the cost of disposingof it inone year's timewouldbe $800. Whatis the total relevantcost of the machineto the contract? $ 13.4 (2 marks) Whichof the followingwouldbe part of the capital expenditurebudget? (i) Purchaseof a newfactory premises (ii) Replacementof existingmachinery (iii) Refurbishmentof existingfactory premises (iv) Purchasesof raw materials (i)and (ii)only (iii)and (iv)only (i),(ii)and (iii)only (ii)and (iv)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 120 of 421 Questions 107 q 13.5 Abuildingsocietyadds interestmonthlyto investors'accounts eventhoughinterestrates are expressedinannual terms.Thecurrentrate of interestis 6%per year. Aninvestordeposits$1,000on 1January. Howmuchinterestwillhave been earned by 30 June? $ 13.6 (2 marks) Aone-year investmentyieldsa returnof 15%.Thecash returnedfromthe investment, includingprincipaland interest,is $2,070.Whatis the interest? $250 $270 $300 $310.50 (2 marks) 13.7 Ifa singlesumof $12,000is investedat 8%per year withinterestcompoundedquarterly, what is the amountto whichthe principalwillhave grownby the end of year three? (approximately) $15,117 $9,528 $15,219 $30,924 (2 marks) G H 13.8 13.9 Whichis worthmost,at presentvalues,assumingan annual rate of interestof 8%? $1,200inexactlyone year fromnow $1,400inexactlytwoyears fromnow $1,600inexactlythree years fromnow $1,800inexactlyfouryears fromnow (2 marks) Abank offersdepositorsa nominal4%pa, withinterestpayable quarterly.Whatis the effectiveannual rate of interest(to twodecimalplaces)? % (2 marks) 13.10 Aprojectrequiringan investmentof $1,200is expectedto generate returnsof $400 in years 1and 2 and $350 inyears 3 and 4. Ifthe NPV=$22 at 9%and the NPV=–$4 at 10%, what is the IRRforthe project? 108 9.15% 9.85% 10.15% 10.85% (2 marks) ManagementAccounting(FMA/MA) Page 121 of 421 q 13.11 Asumof moneywas investedfor10years at 7%per year and is nowworth$2,000. What was the originalamountinvested(to the nearest $)? $1,026 $1,017 $3,937 $14,048 (2 marks) Q U E T IO N S S 13.12 Housepricesriseat 2%per calendar month.Whatis the annual rate of increasecorrectto one decimalplace? 24% 26.8% 12.7% 12.2% (2 marks) 13.13 Whatis the presentvalueof ten annual paymentsof $700,the firstpaid immediatelyand discountedat 8%,givingyouranswerto the nearest $? $4,697 $1,050 $4,435 $5,073 (2 marks) G H 13.14 Aninvestoris to receivean annuityof $19,260forsixyears commencingat the end of year 1.Ithas a presentvalueof $86,400. Whatisthe rate of interest(to the nearest wholepercent)? 4% 7% 9% 11% (2 marks) 13.15 Howmuchshouldbe investednow(to the nearest $) to receive$24,000 per year in perpetuityifthe annual rate of interestis 5%? $1,200 $25,200 $120,000 $480,000 (2 marks) 13.16 Thenet presentvalueof an investmentat 12%is $24,000, and at 20%is –$8,000. Whatis the internalrate of returnof thisinvestment? % State youranswerto the nearest wholepercent. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 122 of 421 (2 marks) Questions 109 G q The following data is relevant for questions 13.17 and 13.18. Diamond Cohasa payback period limitofthreeyearsandisconsidering investing inoneofthe following projects. Bothprojects require aninitial investment of$800,000.Cashinflows accrue evenly throughout theyear. Project Alpha Project Beta Year Cashinflow Year Cashinflow $ $ 1 250,000 1 250,000 2 250,000 2 350,000 3 400,000 3 400,000 4 300,000 4 200,000 5 200,000 5 150,000 6 50,000 6 150,000 Thecompany's costofcapitalis10%. 13.17 Whatisthenon-discounted payback period ofProject Beta? 2 yearsand2 months 2 yearsand4 months 2 yearsand5 months 2 yearsand6 months (2 marks) 13.18 Whatisthediscounted payback period ofProject Alpha? Between 1and2 years Between 3 and4 years Between 4 and5 years Between 5 and6 years H (2 marks) 13.19 Acapitalinvestment project hasaninitial investment followed byconstant annual returns. Howisthepayback period calculated? Initial investment ÷annual profit Initial investment ÷annual netcashinflow (Initial investment – residual value)÷annual profit (Initial investment – residual value)÷annual netcashinflow (2 marks) 13.20 Amachine hasaninvestment costof$60,000attime0. Thepresent values (attime0)of theexpected netcashinflows fromthemachine overitsuseful lifeare: Discount rate Present valueofcashinflows 10% $64,600 15% $58,200 20% $52,100 Whatistheinternal rateofreturn (IRR)ofthemachine investment? Below 10% Between 10%and15% Between 15%and20% Over20% (2 marks) 110 Management Accounting (FMA/MA) Page 123 of 421 q 13.21 Aninvestmentprojecthas a positivenet presentvalue(NPV)of $7,222whenits cash flows are discountedat the cost of capital of 10%per year. Netcash inflowsfromthe projectare expectedto be $18,000per year forfiveyears. Thecumulativediscount(annuity)factor for fiveyears at 10%is 3.791. Q U E T IO N S S Whatis the investmentat the start of the project? $61,016 $68,238 $75,460 $82,778 (2 marks) 13.22 Whichof the followingaccuratelydefinesthe internalrate of return(IRR)? Theaverage annual profitfroman investmentexpressedas a percentage of the investmentsum Thediscountrate (%)at whichthe net presentvalueof the cash flowsfroman investmentis zero Thenet presentvalueof the cash flowsfroman investmentdiscountedat the requiredrate of return Therate (%)at whichdiscountednet profitsfroman investmentare zero (2 marks) 13.23 Aninvestmentprojecthas the followingdiscountedcash flows($'000): Year 0% (90) 30 30 30 30 30 G 0 1 2 3 4 Discountrate 10% (90) 27.3 24.8 22.5 20.5 5.1 20% (90) 25.0 29.8 17.4 14.5 (12.3) H Therequiredrate of returnon investmentis 10%per year. Whatis the discountedpayback periodof the investmentproject? Lessthan 3.0 years 13.24 3.0 years Between3.0 years and 4.0 years Morethan 4.0 years (2 marks) Whatis the effectiveannual rate of interestof 2.1%compoundedeverythree months? 6.43% 8.40% 8.67% 10.87% (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 124 of 421 Questions 111 G q 13.25 Iftheinterest rateis8%,whatwould youpayfora perpetuity of$1,500starting inone year'stime?(tothenearest $) $ (2 marks) 13.26 Thefollowing question istakenfromtheJune2012exam. Aninvestor hasthechoicebetween twoinvestments. Investment Exeoffersinterest of4% peryearcompounded semi-annually fora period ofthreeyears.Investment Wyeoffersone interest payment of20%attheendofitsfour-year life. Whatistheannual effective interest rateoffered bythetwoinvestments? Investment Exe Investment Wye 4.00% 4.66% 4.00% 5.00% 4.04% 4.66% 4.04% 5.00% (2 marks) 13.27 Thefollowing question istakenfromtheJune2013exam. Aproject hasaninitial outflow of$12,000followed bysixequalannual cashinflows, commencing inoneyear'stime.Thepayback period isexactly fouryears.Thecostof capitalis12%peryear. Whatistheproject's netpresent value(tothenearest $)? $333 –$2,899 –$3,778 –$5,926 (2 marks) question istakenfromtheSeptember toAugust2019examperiod. 13.28 Thefollowing Amachine hasa carrying valueof$60,000.Itistobeusedtomanufacture a newproduct. Ithasnoalternative use.Depreciation ofthemachine willcontinue at$15,000perannum. Incremental netcashinflows of$40,000areexpected fromthenewproduct inthefirst year.Thecostofcapitalis10%perannum. Allcashflowsareassumed tooccurattheend oftheyear. Whatisthediscounted cashflowinthefirstyearforthenewproduct (tothenearest $100)? $ (2 marks) 13.29 Thefollowing question istakenfromtheSeptember toAugust2020examperiod. Aninvestor planstoinvest $5,000overthenextfiveyears.Thefirstamount of$1,000will beinvested todayfollowed byfourfurther amounts of$1,000eachatone-year intervals. Theinvestments willearn8%interest peryear. Whatwilltheinvestment beworth attheendofthefifthyear(tothenearest $)? $ (2 marks) 112 Management Accounting (FMA/MA) Page 125 of 421 H G q 13.30 Thefollowingquestion is taken from September to August2020 exam period. Thediscountedvaluesof a capital investmentprojectare shownon the followingchart. The cost of capital is 15%. 160 120 Q U E T IO N S S NPV ($'000) 80 40 0 2 4 6 8 10 12 14 16 18 20 –40 –80 Discount rate(%) Arethe followingstatements, relatingto the abovechart, true or false? (1) Thecapital investmentamountis $120,000 (2) TheIRRis morethan 15% Bothstatements are true Bothstatements are false Statement1is true, statement 2 is false Statement1is false,statement 2 is true H (2 marks) (Total = 60 marks) Important note Youhave nowreached the end of the multiplechoicequestionsforBudgeting.Makesure that you practisethe multi-taskquestionson BudgetinginSection24. Thereal examwillcontainthree 10-markmulti-taskquestionson Budgeting,Standard costingand Performancemeasurement. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 126 of 421 Questions 113 q G H 114 ManagementAccounting(FMA/MA) Page 127 of 421 q Do you know? – Standard costing Check that you can fillin the blanks in the statements belowbefore you attempt any questions. Ifin doubt, you should go back to your BPPWorkbookand revisefirst. Ifan organisationuses standard marginalcostinginstead of standard absorptioncosting, there willbe no ........................................varianceand the ................. ....................../.....….… varianceswillbe valuedat the standard contributionper unit (as opposedto standard profitper unit). Thereare many possiblereasonsforvariancesarisingincludingefficienciesand inefficienciesof operations,.....……… instandard settingand changes inexchangerates. Individualvariancesshouldnot be lookedat inisolation.Theymightbe interdependent/ interrelated.One may be .....….………… and one .....……… . An........................................providesa reconciliationbetweenbudgeted and actual profit. ........................................, ........................................and ........................................should be consideredbeforea decisionabout whetheror not to investigatea varianceis taken. One way of decidingwhetheror not to investigatea varianceis to investigateonlythose varianceswhichexceedpre-set tolerancelimits. Avarianceshouldonlybe investigatedifthe expectedvalueof .....…..….… from investigationand any controlactionexceedthe .....……of investigation. Ifthe cause of a varianceiscontrollable,actioncan be taken to bringthe systemback undercontrolinfuture.Ifthe varianceis uncontrollable,but not simplydue to chance, it willbe necessaryto review.....….…of expectedresults,and perhaps to revisethe .....….… . Q U E T IO N S S Possiblepitfalls Writedowna listof mistakesyou knowyou shouldavoid. G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 128 of 421 Questions 115 q Did you know? – Standard costing Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Ifan organisationuses standard marginalcostinginstead of standard absorptioncosting, there willbe no fixedoverhead volumevarianceand the sales volume/quantity variances willbe valuedat the standard contributionper unit(as opposedto standard profitper unit). Thereare many possiblereasonsforvariancesarisingincludingefficienciesand inefficienciesof operations,errors instandard settingand changes inexchangerates. Individualvariancesshouldnot be lookedat inisolation.Theymightbe interdependent/ interrelated.One may be adverse and one favourable. Anoperating statement providesa reconciliationbetweenbudgeted and actual profit. Materiality,controllabilityand variance trend shouldbe consideredbeforea decision about whetheror not to investigatea varianceis taken. One way of decidingwhetheror not to investigatea varianceis to investigateonlythose varianceswhichexceedpre-set tolerancelimits. Avarianceshouldonlybe investigatedifthe expectedvalueof benefits frominvestigation and any controlactionexceedthe costs of investigation. Ifthe cause of a varianceis controllable,action can be taken to bringthe system back under controlin future. Ifthe varianceis uncontrollable,but not simplydue to chance, it willbe necessary to reviewforecasts of expected results,and perhaps to revisethe budget. Possiblepitfalls – – Forgettingto state whetherthe varianceis adverseor favourable Notlearninghowto calculateeach type of variance G H 116 ManagementAccounting(FMA/MA) Page 129 of 421 G q 14 Standard costing 14.1 HTCo is inthe processof settingstandard unitcosts fornextperiod.ProductJ uses two types of material,P and S. 7 kg of materialP and 3 kg of materialS are needed, at a standard priceof $4 per kg and $9 per kg respectively. Directlabourwillcost $7per hourand each unitof J requires5 hoursof labour. Productionoverheadsare to be recoveredat the rate of $6 per directlabourhour, and generaloverheadis to be absorbed at a rate of ten per cent of productioncost. Whatis the standard primecost forone unitof productJ? $ 14.2 14.3 14.4 (2 marks) Whatis an attainable standard? Astandard whichincludesno allowanceforlosses,waste and inefficiencies.It representsthe levelof performancewhichis attainable underperfectoperating conditions Astandard whichincludessomeallowanceforlosses,waste and inefficiencies.It representsthe levelof performancewhichis attainable underefficientoperating conditions Astandard whichis based on currentlyattainable operatingconditions Astandard whichis kept unchanged,to showthe trend incosts (2 marks) Whichof the followingstatements is correct? H Theoperatingstandards set forproductionshouldbe the mostidealpossible Theoperatingstandards set forproductionshouldbe the minimallevel Theoperatingstandards set forproductionshouldbe the attainable level Theoperatingstandards set forproductionshouldbe the maximumlevel (2 marks) Acompanymanufacturesa carbonated drink,whichis soldin1litrebottles.Duringthe bottlingprocessthere is a 20%lossof liquidinputdue to spillageand evaporation.Whatis the standard usage of liquidper bottle(to twodecimalplaces)? litres 14.5 Q U E T IO N S S (2 marks) Whichof the followingbest describesmanagementby exception? Usingmanagementreportsto highlightexceptionallygood performance,so that favourableresultscan be builtuponto improvefutureoutcomes Sendingmanagementreportsonlyto those managers whoare able to act on the informationcontainedwithinthe reports Focusingmanagementreportson areas whichrequireattentionand ignoringthose whichappear to be performingwithinacceptable limits Focusingmanagementreportson areas whichare performingjustoutside (2 marks) acceptable limits Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 130 of 421 Questions 117 G q 14.6 Standard costingprovideswhichof the following? (i) (ii) (iii) (iv) Targetsand measuresof performance Informationforbudgeting Simplification of inventorycontrolsystems Actualfuturecosts (i),(ii)and (iii)only (ii),(iii)and (iv)only (i),(iii)and (iv)only (i),(ii)and (iv)only (2 marks) 14.7 Aunitof productLrequires9 activelabourhoursforcompletion.Theperformance standard forproductLallowsforten per cent of total labourtimeto be idle,due to machinedowntime.Thestandard wage rate is $9 per hour. Whatis the standard labour cost per unitof productL? $ (2 marks) (Total = 14marks) 15 Variance analysis 15.1 KWCo manufacturesa singleproductL,forwhichthe standard materialcost is as follows. $ per unit Material14kg $3 42 DuringJuly, 800 unitsof Lweremanufactured,12,000kg of materialwerepurchasedfor $33,600,of which11,500kg wereissuedto production. SMCo valuesallinventoryat standard cost. Whatare the materialpriceand usage variancesforJuly? 118 Price $2,300 (F) $2,300 (F) Usage $900 (A) $300 (A) $2,400 (F) $2,400 (F) $900 (A) $840 (A) ManagementAccounting(FMA/MA) Page 131 of 421 (2 marks) H q The following information relates to questions 15.2 and 15.3. DHCo expectedto produce200 unitsof its product,the Bone,in20X3.Infact 260 unitswere produced.Thestandard labourcost per unitwas $70(10hoursat a rate of $7per hour).The actual labourcost was $18,600and the labourforceworked2,200 hoursalthoughthey were paid for2,300 hours. 15.2 Whatis the directlabourrate varianceforthe companyin20X3? 15.3 (2 marks) Whatis the directlabourefficiencyvarianceforthe companyin20X3? 15.4 $400 (A) $2,500 (F) $2,500 (A) $3,200 (A) $400 (A) $2,100(F) $2,800 (A) $2,800 (F) (2 marks) ExtractsfromDogCo's recordsfromlast periodare as follows. Budget Actual Production 1,925units 2,070units Variableproductionoverheadcost $11,550 $14,904 Labourhoursworked 5,775 8,280 Whatare the variableproductionoverheadvariancesforlast period? Expenditure Efficiency $1,656(F) $2,070(A) $1,656(F) $3,726(A) $1,656(F) $4,140(A) $3,354(A) (2 marks) $4,140(A) G 15.5 Q U E T IO N S S DCCo has budgeted to makeand sell4,200 unitsof productXduringthe period. Thestandard fixedoverheadcost per unitis $4. Duringthe periodcoveredby the budget, the actual resultswereas follows. Productionand sales 5,000 units Fixedoverheadincurred $17,500 Whatare the fixedoverheadvariancesforthe period? Fixedoverhead Fixedoverhead expenditurevariance volumevariance $700 (F) $3,200 (F) $700 (F) $3,200 (A) $700 (A) $3,200 (F) $700 (A) $3,200 (A) (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 132 of 421 Questions 119 H G q 15.6 BBCo manufacturesa singleproduct,and relevantdata forDecemberis as follows. Budget/standard Actual Productionunits 1,800 1,900 Labourhours 9,000 9,400 Fixedproductionoverhead $36,000 $39,480 Whatare the fixedproductionoverheadcapacity and efficiencyvariancesforDecember? Capacity Efficiency $1,600(F) $400 (F) $1,600(A) $400 (A) $1,600(A) $400 (F) $400 (A) $1,600(F) (2 marks) 15.7 Whichof the followingwouldhelpto explaina favourabledirectlabourefficiencyvariance? (i) Employeeswereof a lowerskilllevelthan specifiedinthe standard (ii) Betterqualitymaterialwas easierto process (iii) Suggestionsforimprovedworkingmethodswereimplementedduringthe period (i),(ii)and (iii) (i)and (ii)only (ii)and (iii)only (i)and (iii)only (2 marks) 15.8 Whichof the followingstatements is correct? Anadversedirectmaterialcost variancewillalwaysbe a combinationof an adverse materialpricevarianceand an adversematerialusage variance Anadversedirectmaterialcost variancewillalwaysbe a combinationof an adverse materialpricevarianceand a favourablematerialusage variance Anadversedirectmaterialcost variancecan be a combinationof a favourable materialpricevarianceand a favourablematerialusage variance Anadversedirectmaterialcost variancecan be a combinationof a favourable materialpricevarianceand an adversematerialusage variance (2 marks) The following information relates to Questions 15.9 and 15.10. VCo has a budgeted materialcost of $125,000forthe productionof 25,000 unitsper month. Eachunitis budgeted to use 2 kg of material.Thestandard cost of materialis $2.50 per kg. Actualmaterialsinthe monthcost $136,000for27,000 unitsand 53,000 kg werepurchased and used. 15.9 Whatwas the adversematerialpricevariance? $ (2 marks) 15.10 Whatwas the favourablematerialusage variance? $ 120 (2 marks) ManagementAccounting(FMA/MA) Page 133 of 421 H G q 15.11 Thefollowinginformationrelatesto labourcosts forthe past month: Budget Labourrate Productiontime Timeper unit Productionunits Actual $10per hour 15,000hours 3 hours 5,000 units Wages paid Production Totalhoursworked $176,000 5,500 units 14,000hours Q U E T IO N S S Therewas no idletime. Whatwerethe labourrate and efficiencyvariances? Ratevariance $26,000 Adverse $26,000 Adverse $36,000 Adverse $36,000 Adverse Efficiencyvariance $25,000 Favourable $10,000Favourable $2,500 Favourable $25,000 Favourable (2 marks) 15.12 ManufacturingCo operates a standard absorptioncostingsystem.Lastmonth25,000 productionhourswerebudgeted and the budgeted fixedproductionoverheadcost was $125,000.Lastmonththe actual hoursworkedwere24,000 and the standard hoursfor actual productionwere27,000. Whatwas the fixedproductionoverheadcapacity varianceforlast month? $5,000 Adverse $5,000 Favourable $10,000Adverse $10,000Favourable The following information Numberof unitsproduced Directmaterials Directlabour Variableoverhead H (2 marks) relates to questions 2,200 Budget $ 110,000 286,000 132,000 15.13 to 15.15. 2,000 Actual $ 110,000 280,000 120,000 Theactual numberof unitsproducedwas 2,000. 15.13 Whatwas the total directmaterialsvariance? Nil $10,000Adverse $10,000Favourable $11,000Adverse (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 134 of 421 Questions 121 q 15.14 Whatwas the total directlabourvariance? $6,000 Favourable $20,000 Adverse $22,000 Favourable Nil (2 marks) 15.15 Whatwas the total directvariableoverheadsvariance? Nil $12,000Favourable $12,000Adverse $11,000Adverse (2 marks) 15.16 Whichof the followingstatements are true? (i) (ii) G Afavourablefixedoverheadvolumecapacity varianceoccurswhenactual hoursof workare greater than budgeted hoursof work Alabourforcethat produces5,000 standard hoursof workin5,500 actual hourswill givea favourablefixedoverheadvolumeefficiencyvariance (i)is true and (ii)is false Bothare true Bothare false (i)is falseand (ii)istrue (2 marks) 15.17 Whichof the followingstatements are true? (i) Thefixedoverheadvolumecapacity variancerepresentspart of the over/under absorptionof overheads (ii) Acompanyworksfewerhoursthan budgeted. Thiswillresultinan adversefixed overheadvolumecapacity variance (i)is true and (ii)is false Bothare true Bothare false (i)is falseand (ii)is true (2 marks) 15.18 Thecosts belowrelate to the monthof June. Fixedbudget Flexedbudget Actual 2,200 units 2,000 units 2,000 units Totaldirectmaterials $165,000 $150,000 $140,000 Whatwas the total directmaterialvariance? $10,000Adverse $10,000Favourable $25,000 Adverse $25,000 Favourable 122 ManagementAccounting(FMA/MA) Page 135 of 421 (2 marks) H q 15.19 Thegraph belowshowsthe standard fixedoverheadcost per unit,the total budgeted fixed overheadcost and the actual fixedoverheadcost forthe monthof December.Theactual numberof unitsproducedinJune was 2,500 units. Q U E T IO N S S 20000 17500 Budgeted fixed overhead cost 15000 Fixed overhead 12500 cost $ 10000 7500 dt ea cos h r e ov Actual fixed overhead cost ed rdfix a d an St 5000 2500 1000 2000 3000 4000 5000 6000 7000 8000 9000 x Number ofunits G H Whatis the total fixedoverheadvariance? $2,500 Adverse 15.20 $3,750Favourable $5,000 Adverse $6,250Favourable (2 marks) BCo currentlyuses a standard absorptioncostingsystem.Thefixedoverheadvariances extractedfromthe operatingstatement forNovemberare: Fixedproductionoverheadexpenditurevariance Fixedproductionoverheadcapacity variance Fixedproductionoverheadefficiencyvariance $ 5,800 adverse 4,200 favourable 1,400adverse PQCo is consideringusingstandard marginalcostingas the basis forvariancereportingin future.Whatvarianceforfixedproductionoverheadwouldbe shownina marginalcosting operatingstatement forNovember? Novariancewouldbe shownforfixedproductionoverhead Expenditurevariance:$5,800 adverse Volumevariance:$2,800 favourable Totalvariance:$3,000 adverse (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 136 of 421 Questions 123 G q 15.21 Whichof the followingsituationsis mostlikelyto resultina favourablesellingprice variance? Thesales directordecidedto change fromthe plannedpolicyof marketskimming pricingto one of marketpenetrationpricing. Fewercustomersthan expectedtookadvantage of the earlypayment discounts offered. Competitorscharged lowerpricesthan expected,thereforesellingpriceshad to be reducedinorderto competeeffectively. Demandforthe productwas higherthan expectedand pricescouldbe raised withoutadverseeffectson sales volumes. (2 marks) The following information relates to questions 15.22 to 15.25. GSCo manufacturesa singleproduct.Anextract froma variancecontrolreporttogetherwith relevantstandard cost data is shownbelow. Standard sellingpriceper unit $70 $10per unit Standard directmaterialcost (5 kg $2 per kg) Budgetedtotal materialcost of sales $2,300 per month Budgetedprofitmargin $6,900 per month ActualresultsforFebruary Salesrevenue $15,200 Totaldirectmaterialcost $2,400 Directmaterialpricevariance $800 adverse Directmaterialusage variance $400 favourable Therewas no change ininventorylevelsduringthe month. 15.22 Whatwas the actual productioninFebruary? (2 marks) units 15.23 Whatwas the actual usage of directmaterialduringFebruary? kg 15.24 15.25 124 (2 marks) Whatwas the sellingpricevarianceforFebruary? $120(F) $900 (A) $1,200(A) $1,200(F) (2 marks) Whatwas the sales volumeprofitvarianceforFebruary? $900 (F) $1,200(F) $900 (A) $2,100(A) (2 marks) ManagementAccounting(FMA/MA) Page 137 of 421 H q 15.26 ACo uses a standard absorptioncostingsystem.Thefollowingdetailshave been extracted fromits budget forApril. Fixedproductionoverheadcost $48,000 Production(units) 4,800 InAprilthe fixedproductionoverheadcost was underabsorbed by $8,000 and the fixed productionoverheadexpenditurevariancewas $2,000 adverse. Whatwas the actual numberof unitsproduced? units Q U E T IO N S S (2 marks) 15.27 DCo purchased6,850 kgsof materialat a total cost of $21,920.Thematerialprice variancewas $1,370favourable.Whatwas the standard priceper kg? $ 15.28 (2 marks) Thefollowingdata relatesto one of BCCo's products. $ per unit Sellingprice Variablecosts Fixedcosts 12.00 9.00 $ per unit 27.00 21.00 6.00 Profit Budgetedsales forcontrolperiod7 were2,400 units,but actual sales were2,550 units.The revenueearned fromthese sales was $67,320. Profitreconciliationstatements are drawnup usingmarginalcostingprinciples.Whatsales varianceswouldbe includedinsuch a statement forperiod7? Price Volume $900 (F) $1,530(A) $1,530(A) $2,250(F) G 15.29 $1,530(A) $1,530(F) $2,250(A) $2,250(F) (2 marks) SeattleCo uses varianceanalysisto controlcosts and revenues. Informationconcerningsales is as follows: Budgetedsellingprice $15per unit Budgetedsales units 10,000units Budgetedprofitper unit $5 per unit Actualsales revenue $151,500 Actualunitssold 9,800 units Whatis the sales volumeprofitvariance? $500 Favourable $1,000Favourable $1,000Adverse $3,000 Adverse (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 138 of 421 Questions 125 H q The following information relates to questions 15.30 and 15.31. Thestandard directmaterialcost per unitfora productis calculatedas follows: 10.5litresat $2.50 per litre Lastmonththe actual pricepaid for12,000litresof materialused was 4%abovestandard and the directmaterialusage variancewas $1,815favourable.Nostocksof materialare held. 15.30 Whatwas the adversedirectmaterialpricevarianceforlast month? $1,000 $1,200 $1,212 $1,260 (2 marks) 15.31 Whatwas the actual productionlast month(inunits)? 15.32 1,074 1,119 1,212 1,258 (2 marks) LastmonthZCo budgeted to sell8,000 unitsat a priceof $12.50per unit.Actualsales last monthwere9,000 unitsgivinga total sales revenueof $117,000. Whatwas the sales pricevarianceforlast month? $4,000 Favourable G 15.33 $4,000 Adverse $4,500 Favourable $4,500 Adverse H (2 marks) HCo uses a standard absorptioncostingsystem.Lastmonthbudgeted productionwas 8,000 unitsand the standard fixedproductionoverheadcost was $15per unit.Actual productionlast monthwas 8,500 unitsand the actual fixedproductionoverheadcost was $17per unit. Whatwas the total adversefixedproductionoverheadvarianceforlast month? $ 126 (2 marks) ManagementAccounting(FMA/MA) Page 139 of 421 G q 15.34 Acost centre had an overheadabsorptionrate of $4.25per machinehour, based on a budgeted activitylevelof 12,400machinehours. Inthe periodcoveredby the budget, actual machinehoursworkedwere2%morethan the budgeted hoursand the actual overheadexpenditureincurredinthe cost centre was $56,389. Whatwas the total overor underabsorptionof overheadsinthe cost centre forthe period? $1,054overabsorbed 15.35 $2,635underabsorbed $3,689overabsorbed $3,689underabsorbed Q U E T IO N S S (2 marks) Q Co uses standard marginalcosting.Lastmonththe standard contributionon actual sales was $10,000and the followingvariancesarose: $ Totalvariablecosts variance 2,000 Adverse Salespricevariance 500 Favourable Salesvolumecontributionvariance 1,000Adverse Whatwas the actual contributionforlast month? $ 15.36 (2 marks) ADCo manufacturesand sellsa singleproduct,E,and uses a standard absorptioncosting system.Standard cost and sellingpricedetailsforproductEare as follows. $ per unit 8 2 10 5 15 Variablecost Fixedcost Standard profit Standard sellingprice Thesales volumevariancereportedforlast periodwas $9,000 adverse. ADCo is consideringusingstandard marginalcostingas the basis forvariancereportingin future.Whatwouldbe the correctsales volumevarianceto be shownina marginalcosting operatingstatement forlast period? $6,428(A) $6,428(F) $12,600(F) $12,600(A) (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 140 of 421 Questions 127 H q 15.37 Whencomparingthe profitsreportedunderabsorptioncostingand marginalcosting duringa periodwhenthe levelof inventoryincreased,whichof the followingis true? 15.38 Absorptioncostingprofitswillbe higherand closinginventoryvaluationslowerthan those undermarginalcosting. Absorptioncostingprofitswillbe higherand closinginventoryvaluationshigherthan those undermarginalcosting. Marginalcostingprofitswillbe higherand closinginventoryvaluationslowerthan those underabsorptioncosting. Marginalcostingprofitswillbe higherand closinginventoryvaluationshigherthan those underabsorptioncosting. (2 marks) PHCo producesa singleproductand currentlyuses absorptioncostingforits internal managementaccountingreports.Thefixedproductionoverheadabsorptionrate is $34 per unit.Openinginventoriesforthe year were100unitsand closinginventorieswere180units. Thecompany'smanagementaccountant is consideringa switchto marginalcostingas the inventoryvaluationbasis. Ifmarginalcostingwereused, the marginalcostingprofitforthe year, comparedwiththe profitcalculatedby absorptioncosting,wouldbe whichof the following? $2,720lower $2,720higher $3,400 lower $3,400 higher (2 marks) G H 15.39 Thebudgeted contributionforHMFCo forJune was $290,000.Thefollowingvariances occurredduringthe month. $ Fixedoverheadexpenditurevariance 6,475 Totaldirectlabourvariance 11,323 Totalvariableoverheadvariance 21,665 Sellingpricevariance 21,875 Fixedoverheadvolumevariance 12,500 Salesvolumevariance 36,250 Totaldirectmaterialsvariance 6,335 Whatwas the actual contributionforthe month? $252,923 $258,948 $321,052 $327,077 128 ManagementAccounting(FMA/MA) Page 141 of 421 Favourable Favourable Adverse Favourable Adverse Adverse Adverse (2 marks) G q 15.40 Thefollowing question istakenfromtheDecember 2011exam. Acompany calculates thefollowing under a standard absorption costing system. (i) Thesalesvolume margin variance (ii) Thetotalfixedoverhead variance (iii) Thetotalvariable overhead variance Ifa company changed toa standard marginal costing system, whichvariances could changeinvalue? (i)only (ii)only (i)and(ii)only (i),(ii)and(iii) Q U E T IO N S S (2 marks) 15.41 Thefollowing question istakenfromtheDecember 2012exam. Acompany usesa standard absorption costing system. Thefollowing figures areavailable forthelastaccounting period inwhichactualprofitwas$108,000. $ Salesvolume profitvariance 6,000adverse Salespricevariance 5,000favourable Totalvariable costvariance 7,000adverse Fixedcostexpenditure variance 3,000favourable Fixedcostvolume variance 2,000adverse Whatwasthestandard profitforactualsalesinthelastaccounting period? $101,000 $107,000 $109,000 $115,000 H (2 marks) question istakenfromtheJuly toDecember 2013examperiod. 15.42 Thefollowing Acompany usesa standard absorption costing system. Lastmonth theactualprofitwas $500,000.Theonlyvariances recorded forthemonth wereasfollows: $'000 Salesvolume profitvariance 10adverse Fixedproduction overhead capacityvariance 30favourable Fixedproduction overhead efficiency variance 40adverse Fixedproduction overhead volume variance 10adverse Fixedproduction overhead expenditure variance 50favourable Directlabour efficiency variance 15adverse Whatwasthebudgeted profitforlastmonth? $485,000 $495,000 $505,000 $515,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 142 of 421 Questions129 q 15.43 Thefollowingquestion is taken from the January to June 2014exam period. Acompanyuses a standard absorptioncostingsystem.Actualprofitlast periodwas $25,000, whichwas $5,000 lessthan budgeted profit.Thestandard profiton actual sales forthe periodwas $15,000.Onlythree variancesoccurredinthe period:a sales volume profitvariance,a sales pricevarianceand a directmaterialpricevariance. Whichof the followingis a validcombinationof the three variances? Salesvolume Salesprice Directmaterial profitvariance variance pricevariance $15,000A $2,000 F $8,000 F $5,000 A $2,000 A $2,000 F $15,000A $2,000 A $8,000 A $5,000 A (2 marks) $5,000 F $5,000 A 15.44 Thefollowingquestion is taken from the July to December2014exam period. Acompany’sactual profitfora periodwas $27,000.Theonlyvariancesforthe period were: $ Salesprice 5,000 adverse Fixedoverheadvolume 3,000 favourable. Fixedoverheadcapacity 4,000 favourable Fixedoverheadefficiency 1,000adverse Whatwas the budgeted profitforthe period? $25,000 $26,000 $28,000 $29,000 (2 marks) G 15.45 Thefollowingquestion is taken from the January to June 2015exam period. Acompanyuses standard marginalcosting.Itsbudgeted contributionforthe last month was $20,000. Theactual contributionforthe monthwas $15,000,and the following varianceshave been calculated: Salesvolumecontributionvariance $5,000 adverse Salespricevariance $9,000 favourable Fixedoverheadexpenditurevariance $3,000 favourable Whatwas the total variablecost variance? $9,000 adverse $9,000 favourable 130 $12,000adverse $12,000favourable (2 marks) ManagementAccounting(FMA/MA) Page 143 of 421 H q 15.46 Thefollowingquestion is taken from the January to June 2016exam period. Thefollowingvariancesoccurredlast period. Salesvolumecontribution $20,000 favourable Salesprice $5,000 adverse Totalvariablecost $18,000favourable Fixedcost expenditure $12,000adverse Ifthe flexedbudget contributionwas $200,000, what was the actual contribution? $213,000 $218,000 $221,000 $233,000 Q U E T IO N S S (2 marks) 15.47 Thefollowingquestion is taken from the January to June 2017exam period. Afirmuses standard marginalcosting.Lastperiodthe followingresultswererecorded: Actualsales units 5,000 Standard contributionper unit $60 Salespricevariance $5,000 Adverse Salesvolumecontributionvariance $8,000 Favourable Noother variancesarose last period. Whatwas the actual contributionforthe period? $295,000 G 15.48 $305,000 $303,000 $297,000 H (2 marks) Thefollowingquestion is taken from the July to December2017exam period. Acompanyuses standard marginalcostingto monitorperformance.Thebudgeted profit and budgeted fixedoverheadfora monthwere$25,000 and $12,000respectively.Inthe month,the followingvariancesoccurred: $ Salesvolumecontribution 1,000Adverse Salesprice 2,000 Favourable Totalvariablecosts 4,000 Adverse Fixedproductionoverheadexpenditure 500 Adverse Whatwas the actual profitforthe month? $9,500 $21,500 $33,500 $40,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 144 of 421 Questions 131 G q 15.49 Thefollowingquestion is taken from the September to August2019exam period. Afirmuses standard absorptioncosting.Thefollowingvariancesoccurredlast period: $ Salesvolumeprofit 10,100 Adverse Salesprice 4,200 Favourable Materialprice 2,300 Favourable Labourefficiency 500 Adverse Fixedoverheadexpenditure 1,800 Adverse Fixedoverheadvolume 2,000 Adverse Fixedoverheadcapacity 1,500 Favourable Fixedoverheadefficiency 3,500 Adverse Thestandard profitfromactual sales forthe periodwas $240,000. Whatwas the actual profitforthe period? $232,100 $240,200 $230,100 $242,200 (2 marks) (Total = 98 marks) Important note Youhave nowreached the end of the multiplechoicequestionsforStandard costing.Makesure that you practisethe multi-taskquestionson Standard costinginSection25. Thereal examwill containthree 10-markmulti-taskquestionson Budgeting,Standard costingand Performance measurement. 132 ManagementAccounting(FMA/MA) Page 145 of 421 H G q Do you know? – Performance measurement Checkthatyoucanfillintheblanksinthestatements belowbeforeyouattempt any questions. Ifindoubt,youshouldgobacktoyourBPPWorkbook andrevisefirst. A...................................... isa formal statement ofthebusiness' aim.Itcanplayan important pointinthe………….. process. Cascading downwards fromthisisa hierarchy of goalsand……………. These maybesplitintooperational, tacticalandstrategic. Cascading downwards fromthisarethecritical success factors. Acritical success factorisa performance requirement thatisfundamental tocompetitive success. ……….………………. …………….. arequantifiable measurements whichreflect thecritical success factors. The3 Eswhicharegenerally desirable features oforganisational performance are ..................,...................., and………….... Theformula forreturn oncapitalemployed =(…………./………………) 100%. Q U E T IO N S S Capitalemployed =………………….. +………………. +………..……. – ……………… The.....….……ratio isthestandard testofliquidity andistheratioof .....……… ………….. to …………. ……………. Performance ofnon-profit-making organisations canbemeasured: ……………………. ……………………. ……………………. Thebalanced scorecard measures performance infourperspectives: …………….. ……………, …………… ……………, …………… ……………. and……………….. .....….………………... isa planned andpositive approach toreducing expenditure. Measures should beplanned programmes rather thancrashprogrammes tocutspending levels. Workstudyisa means ofraising the………………. ofanoperating unitbythe…………. of work.There aretwomainpartstoworkstudy:……………………. and………..……………. Valueanalysis considers fouraspects ofvalue:……..value,………….. value,……….valueand ………value. Possible pitfalls – Writedowna listofmistakes youknowyoushould avoid. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 146 of 421 Questions133 H q Did you know? – Performance measurement Could you fillin the blanks? Theanswers are in bold. Usethis page for revisionpurposes as you approach the exam. Amissionstatement is a formalstatement of the business'aim.Itcan play an important pointinthe planning process.Cascading downwardsfromthisis a hierarchyof goalsand objectives.Thesemay be splitintooperational,tactical and strategic.Cascading downwardsfromthisare the criticalsuccessfactors. Acriticalsuccessfactor is a performancerequirementthat is fundamentalto competitivesuccess.Keyperformance indicators are quantifiablemeasurementswhichreflectthe criticalsuccessfactors. The3 Eswhichare generallydesirablefeatures of organisationalperformanceare economy, efficiencyand effectiveness. Theformulaforreturnon capital employed=(profit/capital employed)100%. Capital employed=non-current assets +investments+current assets – current liabilities Thecurrent ratio is the standard test of liquidityand is the ratio current assets to current liabilities. Performanceof non-profit-makingorganisationscan be measured: In terms of inputs and outputs Byjudgement Bycomparison G Thebalanced scorecardmeasuresperformanceinfourperspectives:customer, financial, internal business process and innovationand learning. Cost reduction is a plannedand positiveapproach to reducingexpenditure.Measures shouldbe plannedprogrammesrather than crash programmesto cut spendinglevels. Workstudy is a means of raisingthe productivityof an operatingunitby the reorganisation of work.Thereare twomainparts to workstudy:method study and work measurement. Valueanalysisconsidersfouraspects of value:cost value,exchange value,use value and esteem value. Possiblepitfalls – Notrealisingthat missionstatements feed intoobjectiveswhichfeed intocritical successfactors whichare quantifiedby keyperformanceindicators. – Notknowingthe performancemeasureswhichare appropriateforserviceindustries. – Notknowingthe meaningof the efficiency,capacity and activityratios. – 134 Notknowingthe formulaeformeasuringprofitability,liquidityand gearing. ManagementAccounting(FMA/MA) Page 147 of 421 H G q 16 Target setting 16.1 Allofthefollowing, except one,aresound principles fordevising objectives inorderto enactthecorporate mission. Whichistheexception? Theyshould beobservable ormeasurable Theyshould beeasilyachievable Theyshould relate toa specified timeperiod Theyshould bespecific Q U E T IO N S S (2 marks) 16.2 Inorderfora business's strength tohavea realbenefit, ithastobelinked tocritical success factors. Whatarecritical success factors? Factors contributing toreduced costs Factors necessary tomatchstrengths toopportunities Factors necessary tobuildonstrengths Factors fundamental tostrategic success (2 marks) 16.3 Ingeneral terms, whichofthefollowing elements should organisations include intheir mission statements? (i) Policies andstandards ofbehaviour (ii) Values – a description oftheculture, assumptions andbeliefs regarded asimportant tothosemanaging thebusiness (iii) Profitability (iv) Strategy – thecommercial logicforthebusiness, defining thenature ofthebusiness (i)and(ii)only (ii)and(iv)only (i),(ii)and(iv)only (iii)and(iv)only (2 marks) 16.4 Whichofthefollowing short-term objectives mayinvolve thesacrifice oflonger-term objectives? (i) Reducing training costs (ii) Increasing quality control (iii) Increasing capitalexpenditure projects (i)only (i),(ii)and(iii) (ii)and(iii)only (i)and(ii)only (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 148 of 421 Questions135 H G q 16.5 Whatisshort-termism? Itiswhennon-financial performance indicators areusedformeasurement Itiswhenorganisations sacrifice shorttermobjectives Itiswhenthereisa biastowards shorttermrather thanlongtermperformance Itiswhenmanagers' performance ismeasured onlongtermresults (2 marks) 16.6 Whichoftheperformance measures inthedropdownlistbelow ismostlikelytobe recorded because ofgovernment regulations? Select... Salesgrowth Customer numbers CO2emissions Return oninvestment (2 marks) 16.7 Market conditions andeconomic conditions canimpact onperformance measurement. Whichofthefollowing statements aretrue? (i) (ii) Theentryofa newcompetitor inthemarket willcausea business toexamine sales performance measures moreclosely General economic conditions canraiseorlower overall demand andsupply (i)and(ii)aretrue (i)and(ii)arefalse (i)istrueand(ii)isfalse (i)isfalseand(ii)istrue (2 marks) 16.8 Whichofthefollowing BESTexplains therelationship between mission statements and performance measurement. Mission statements area marketing toolandhavenoparttoplayinperformance measurement Tobeofvalue,a performance measure musthaveanobvious linktothemission statement Performance measurement involves comparing actualperformance against a target andthemission statement represents theorganisation's overall target Mission statements include detailed performance standards thatactualperformance canbemeasured against (2 marks) 16.9 Whichofthefollowing describes theroleoftacticalobjectives? 'Middle tier'objectives tofacilitate theplanning andcontrol ofindividual functions within theorganisation Day-to-day performance targets related totheorganisation's operations Aclearvision oftheorganisation's reason forexisting Long-term objectives fortheorganisation asa whole (2 marks) 136 Management Accounting (FMA/MA) Page 149 of 421 H G q 16.10 MotorCo sellsnew, highqualitymotorvehiclesinmany countriesaround the world.Half way throughthe company'scurrentfinancialyear, the globaleconomyunexpectedlygoes into recession. Whatimpactwouldthe unexpectedrecessionhave on performancemeasurementrelating to sales and revenue? Theimpactof a recessionon the sales of new, highqualitymotorvehiclescannot be predicted Salesand revenueare likelyto decrease inthe secondhalfof the year and performanceshouldbe measuredinthat context Noimpactas a recessionis unlikelyto impactthe sales and revenueof motorvehicles Salesand revenueare likelyto increaseinthe secondhalfof the year and performanceshouldbe measuredinthat context (2 marks) Q U E T IO N S S 16.11 Whichof the followingdescribesthe roleof strategicobjectives? 'Middletier'objectivesto facilitatethe planningand controlof individualfunctions withinthe organisation Day-to-dayperformancetargets relatedto the organisation'soperations Aclear visionof the organisation'sreason forexisting Long-termobjectivesforthe organisationas a whole (2 marks) 16.12 Thefollowingstatements relate to benchmarking. WhichTWOstatements are true? Adanger of benchmarkingisthat inappropriatecomparisonslead to incorrect conclusions Benchmarkingmustinvolvecompetitorsto be effective Theultimateaimof benchmarkingis to improveperformance (2 marks) Benchmarkingis essentiallya cost cuttingexercise 16.13 FSCo is a financialservicescompanywhichbenchmarksthe performanceof its IT departmentwiththat of a leadingIToutsourcecompany. Whattype of benchmarkingis the companyusing? Strategic Competitive Functional Internal (2 marks) 16.14 ACo manufacturesmobilephones.Staff employedwithinthe Research&Development functionat CompanyAhave purchaseda mobilephonemanufacturedby CompanyBfor the purposeof reverseengineering. Whattype of benchmarkingis ACo using? Strategic Competitive Functional Internal (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 150 of 421 Questions 137 H G q 16.15 Whichof the followingare suitablemeasuresof performanceat the strategiclevel? (i) (ii) (iii) Machineidletime Employeesickdays Returnon capital employed (i)and (ii) (ii)only (ii)and (iii) (iii)only (2 marks) 16.16 Whatis 'short-termism'? Alegitimatefocuson short-termresults Abeliefthat seniormanagementhave a duty to maximiseprofit Prioritisingshort-termresultsabovethe organisation'slong-termprospects Amanagementphilosophylinkedto TQM (2 marks) (Total = 32 marks) 17 Financial performance measurement 17.1 Whichof the followingperformanceindicatorsis a financialperformancemeasure? Qualityrating Numberof customercomplaints Cash flow System(machine)downtime (2 marks) 17.2 Thefollowingsummarisedstatement of financialpositionis availableforLCo. $'000 $'000 Non-currentassets 31,250 Currentassets Inventory 35,000 Receivables 40,000 Cash 1,250 107,500 EQUITY ANDLIABILITIES Capital and reserves 47,500 Currentliabilities(payablesonly) 60,000 107,500 Whatis the valueof the acid test ratio? 0.6875 0.7093 1.2708 2.000 138 (2 marks) ManagementAccounting(FMA/MA) Page 151 of 421 H G q 17.3 Thefollowingquestion is taken from the December2011exam. BCo has currentassets of $1.8m,includinginventoryof $0.5m,and currentliabilitiesof $1.0m. Whatwouldbe the effecton the valueof the currentand acid test ratiosifthe company bought moreraw materialinventoryon three months'credit? Currentratio Increase Decrease Increase Decrease Acidtest Increase Increase Decrease Decrease Q U E T IO N S S (2 marks) 17.4 Thefollowingquestion is taken from the June 2012exam. Aninvestmentcentre earns a return on investmentof 18%and a residualincomeof $300,000. Thecost of capital is 15%.Anewprojectoffersa return on capital employed of 17%. Ifthe newprojectwereadopted, what wouldhappen to the investmentcentre's returnon investmentand residualincome? Returnon investment Residualincome Increase Decrease Increase Increase Decrease Decrease Decrease Increase (2 marks) 17.5 Anextract fromBGCo's financialresultsfor20X6are shownbelow. 20X6 $'000 5,400 1,950 3,450 Sales Lesscost of sales: Lessexpenses: Wages Repairsand maintenance Allotherexpenses Netprofit 1,700 240 490 1,020 Whatis the grossprofitpercentage for20X6,to one decimalplace? % (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 152 of 421 Questions 139 H q 17.6 KTCo's financialresultsfor20X4are shownbelow. 20X4 $'000 7,200 2,900 4,300 Sales Lesscost of sales: Grossprofit Lessexpenses: Wages Repairsand maintenance Directors'salaries Directors'bonuses Othercosts (includingdepreciation) Netprofit 1,600 360 150 55 400 1,735 Whatis the net profitpercentage for20X4,to one decimalplace? % (2 marks) 17.7 Whatis the mainfocusof the currentratio? Profitability Efficiency Liquidity Productivity (2 marks) G H 17.8 Thefollowinginformationhas been extractedfromthe statement of financialpositionof XCompany. EQUITY ANDLIABILITIES Capital and reserves Longtermliabilities(long-termloan) Currentliabilities(payablesonly) 585,000 670,000 84,000 ,339,000 Whatis the capital gearingratio,expressedas a percentage to one decimalplace? D (Usethe formula .) D+E (2 marks) % 17.9 Whatis the mainfocusof the acid test ratio? 140 Profitability Efficiency Liquidity Productivity (2 marks) ManagementAccounting(FMA/MA) Page 153 of 421 G q 17.10 Thefollowing information isavailable forXCo. Profit Sales Capitalemployed Calculate thechangeinROIfrom20X7to20X8? Decrease from20%to15% Increase from1.5%to2% Increase from7.5%to13.3% Decrease from100%to90% 20X7 $ 7,500 500,000 37,500 20X8 $ 9,000 450,000 60,000 Q U E T IO N S S (2 marks) 17.11 Usingthefigures inthequestion above,whatistheassetturnover for20X8,toonedecimal place? times (2 marks) 17.12 Division AofAigburth Coisconsidering a project whichwillincrease annual netprofitafter taxby$30,000butwillrequire average inventory levels toincrease by$200,000.The current targetrateofreturn oninvestments is13%andtheimputed interest costofcapital is12%. BasedontheROIand/orRIcriteria would theproject beaccepted? ROI– yes,RI– no ROI– yesRI– yes ROI– no,RI– yes ROI– no,RI– no H (2 marks) 17.13 Whichofthefollowing statements arevalidcriticisms ofreturn oninvestment (ROI)asa performance measure? (i) Itismisleading ifusedtocompare departments withdifferent levels ofrisk (ii) Itismisleading ifusedtocompare departments withassetsofdifferent ages (iii) Itsusemaydiscourage investment inneworreplacement assets (iv) Thefigures needed arenoteasilyavailable (ii)and(iii)only (ii)and(iv)only (i)and(iii)only (i),(ii)and(iii) (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 154 of 421 Questions141 G q 17.14 Ameans ofraising theproduction efficiency ofanoperating unitbythereorganisation of workisknown aswhichofthefollowing? Workmeasurement Workstudy Method study Method measurement (2 marks) 17.15 Valueanalysis canachieve whichTWOofthefollowing? Eliminate costs Reduce costs Increase quantity sold Increase salesprice (2 marks) 17.16 Valueanalysis considers fouraspects ofvalue.Whatarethey? Costvalue,exchange value,usevalueandesteem value Costvalue,tradevalue,usevalueandesteem value Costvalue,exchange value,usevalueandretailvalue Competitive value,exchange value,usevalueandesteem value (2 marks) question istakenfromtheJuly toDecember 2013examperiod. 17.17 Thefollowing Adivision currently earnsa return oninvestment (ROI)of20%.Itisconsidering investing in a project whichhasa residual income (RI)of$1,000atanimputed interest chargeof20%. Whatistheeffectonthedivision’s ROIiftheproject isundertaken? Increase Decrease Remain thesame Nopossible totellfromthisinformation (2 marks) 17.18 Thefollowing question istakenfromtheJuly toDecember 2016examperiod. Aretailer hastwodivisions, North andSouth.Bothsellsimilar products andallpricesareset centrally. Allshoppremises arerented. Shoprental costsintheSouthdivision arelower thanintheNorth division duetoa government subsidy giventolandlords. Whichofthefollowing measures would NOTprovide a faircomparison oftheperformance ofthemanagement ofthetwodivisions? Grossprofit Return oncapitalemployed Turnover persquare metre ofshopfloorspace Assetturnover 142 Management Accounting (FMA/MA) Page 155 of 421 (2 marks) H G q 17.19 Thefollowingquestion is taken from the September to June 2018exam period. Acompanyborrows$10,000repayable infiveyears’timeand immediatelyuses the loanto repay its overdraft. Whatwillbe the effect on the company’scapital gearingand currentratios? Capital gearing Currentratio Increase Increase Increase Decrease Decrease Increase Decrease Decrease Q U E T IO N S S (2 marks) 17.20 Thefollowingquestion is taken from the September to August2019exam period. DivisionAreportedsales of $400,000 and a contributionof $160,000forthe mostrecent period.Fixedcosts forthe periodwere$80,000, of which20%werecontrollableby the division'smanager. Whatis the amountof profitwhichis controllableby the division'smanager forthe most recent period? $ (2 marks) 17.21 Thefollowingquestion is taken from the September to August2019exam period. Theresultsfora divisionare as follows: Sales Directcosts Contribution Allocatedcosts (directlyrelatingto the division) Apportionedhead officecosts Divisionalprofits $ 24,000 (10,000) 14,000 (2,000) (1,000) 11,000 H $80,000 capital employedis controllableby the division. What is the controllablereturn on investmentfor the divisionfor the period(to the nearest %)? 15% 18% 14% 16% (2 marks) (Total = 42 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 156 of 421 Questions 143 q 18 Assessing non-financial performance 18.1 Agovernmentbody uses measuresbased uponthe 'three Es'to the measurevaluefor moneygenerated by a publiclyfundedhospital.Itconsidersthe mostimportant performancemeasureto be 'cost per successfullytreated patient'. Whichof the three E'sbest describesthe abovemeasure? Economy Effectiveness Efficiency Externality 18.2 Whichof the followingstatements are true? (i) (ii) 18.3 G 18.4 18.5 Non-financialperformanceindicatorsare lesslikelyto be manipulatedthan financial ones Non-financialperformanceindicatorsoffera means of counteractingshort-termism (i)and (ii)are true (i)and (ii)are false (i)is true and (ii)is false (i)is falseand (ii)is true (2 marks) Whichof the followingbest describesthe advantage of a balanced scorecardapproach? Thebalanced scorecardapproach enablesorganisationsthat are struggling financiallyto emphasiseotherareas Thebalanced scorecardapproach enablesorganisationsto considerallareas of performancerelevantto achievingtheirstrategicgoals Thebalanced scorecardapproach enablesorganisationsto moreeasilybenchmark theirperformanceagainst others Thebalanced scorecardapproach enablesorganisationsto demonstratetheir (2 marks) ethicalcredentials Whywouldan organisationuse non-financialperformancemeasures? Toappear sociallyresponsible Topreventa narrowfocuson short-termfinancialperformance Topreventscrutinyof financialperformance Toencourageshorttermism (2 marks) Thebalanced scorecardmeasuresperformancefromfourperspectives.Whatare they? 144 (2 marks) Customer,growth,financialstabilityand internalbusinessprocess Customerretention,innovationand learning,financialstabilityand process efficiency Customer,growth,financialsuccessand processeffectiveness Customer,innovationand learning,financialand internalbusinessprocess (2 marks) ManagementAccounting(FMA/MA) Page 157 of 421 H q 18.6 Innot forprofitbusinessesand state-run entities,a value-for-moneyaudit can be used to measureperformance.Itcoversthree keyareas: economy,efficiencyand effectiveness. Whichof the followingcouldbe used to describeeffectivenessinthiscontext? Avoidingwaste of inputs Achievingagreed targets Achievinga givenlevelof profit Obtainingsuitablequalityinputsat the lowestprice (2 marks) Q U E T IO N S S 18.7 BalanceCo is lookingto introducea balanced scorecardand isfinalisingthe measuresto use forthe 'innovationand learning'perspective.Whichof the followingis NOTrelevantfor thisperspective? 18.8 G Numberof ideas fromstaff Percentageof sales fromnewproducts Numberof newproductsintroduced Levelof refundsgiven (2 marks) QualCo is keento increasethe use they makeof non-financialperformancemeasuresin theiroverallperformancemeasurementactivities.Inparticular,they are keento improve customerretentionand so want to focuson the qualityof servicethey provideto their customers.Whichof the followingmeasureswouldbe mostappropriateas a measureof servicequality? (i) Numberof customercomplaints (ii) Numberof repeat ordersas a proportionof total orders H (iii) Salesvolumegrowth (i)and (ii) 18.9 (i),(ii)and (iii) (i)and (iii) (ii)and (iii) (2 marks) Whichof the followingare non-financialobjectives? (i) Growthof sales revenue (ii) Diversification (iii) Contentedworkforce (iv) Increaseearningsper share (ii)and (iii) (i),(ii)and (iii) (ii),(iii)and (iv) (i),(iii)and (iv) (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 158 of 421 Questions 145 q 18.10 WhichTWOof the followingperformancemeasureswouldbe helpfulfora serviceindustry company? Netprofitmargins Standard costs and varianceanalysis Employeeabsentee rates Numberof defectiveunits (2 marks) 18.11 Whichof the followingwouldbe suitableformeasuringresourceutilisation? (i) (ii) (iii) Efficiency Productivity Relativemarketshare (i)and (ii)only (ii)and (iii)only (i)and (iii)only (i),(ii)and (iii) (2 marks) 18.12 Whichof the followingwouldbe suitableformeasuringresourceutilisationina parcel deliverycompany? G Numberof customercomplaints Cost per consignment Depotprofitleaguetables Clientevaluationinterview H (2 marks) (Total = 24 marks) Important note Youhave nowreached the end of the multiplechoicequestionsforPerformancemeasurement. Makesure that you practisethe multi-taskquestionson PerformancemeasurementinSection26. Thereal examwillcontainthree 10-markmulti-taskquestionson Budgeting,Standard costing and Performancemeasurement. 146 ManagementAccounting(FMA/MA) Page 159 of 421 q 19 Mixed Bank 1 19.1 Thefollowingdata relate to ProductD. Materialcost per unit $20.00 Labourcost per unit Productionoverheadcost per machinehour Machinehoursper unit Generaloverheadabsorptionrate $69.40 $12.58 14 8%of total productioncost Q U E T IO N S S Whatis the total cost per unitof ProductD,to the nearest $0.01? $ 19.2 (2 marks) Aproductis made intwoconsecutiveprocesses.Data forthe latest periodare as follows: Process1 Process2 Input(kg) 47,000 42,000 Normalloss(%of input) 8 5 Output (kg) 42,000 38,915 Noworkinprogressis heldat any timeineitherprocess. Was there an abnormallossor abnormalgain arisingineach processduringthe period? G Process1 Abnormalloss Process2 Abnormalloss Abnormalloss Abnormalgain Abnormalgain Abnormalloss Abnormalgain Abnormalgain H (2 marks) 19.3 ThefollowinginformationisavailableforF Co inthe latest period. Salesand production(units) Salesrevenue Directmaterial Directlabour Overhead Profit Original budget 11,200 $'000 224.0 56.0 66.0 27.4 74.6 Flexed budget 9,500 $'000 190.0 47.5 57.5 24.0 61.0 Actualresults 9,500 $'000 209.0 57.0 56.1 28.0 67.9 Whichof the followingstatements is correct? Budgetedproductionvolumeswereachievedduringthe period. Directlabouris a variablecost. Theactual sellingpriceper unitexceededthe standard sellingpriceper unit. Directmaterialcost savingswereachievedagainst the budget cost allowance. (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 160 of 421 Questions 147 q 19.4 19.5 Variablecosts are conventionallydeemedto: Beconstant per unitof output Varyper unitof output as productionvolumechanges Beconstant intotal whenproductionvolumechanges Vary, intotal, fromperiodto periodwhenproductionis constant (2 marks) Whichof the followingcriticismsof standard costingapply inallcircumstances? (i) Standard costingcan onlybe used wherealloperationsare repetitiveand outputis homogeneous. (ii) Standard costingsystemscannot be used inenvironmentswhichare proneto change. Theyassumestable conditions. (iii) Standard costingsystemsassumethat performanceto standard is acceptable. They do not encouragecontinuousimprovement. 19.6 G Criticism(i) Criticism(ii) Criticism(iii) Noneof them (2 marks) Whichof the followingrelatesto capital expenditure? Cost of acquiringor enhancingnon-currentassets Expenditureon the manufactureof goodsor the provisionof services Recordedas an asset inthe statement of profitor loss Recordedas a liabilityinthe statement of financialposition H (2 marks) 19.7 Overheadsina factory are apportionedto fourproductioncost centres(A,B,C and D). Directlabourhoursare used to absorb overheadsinAand Band machinehoursare used inC and D.Thefollowinginformationis available: Productioncost centre A B C Overheadexpenditure($) 18,757 29,025 46,340 Directlabourhours 3,080 6,750 3,760 Machinehours 580 1,310 3,380 Whichcost centre has the highesthourlyoverheadabsorptionrate? ProductionCost Centre A ProductionCost Centre B 148 ProductionCost Centre C ProductionCost Centre D D 42,293 2,420 2,640 (2 marks) ManagementAccounting(FMA/MA) Page 161 of 421 q 19.8 MGCo sold56,000 unitsof its singleproductina periodfora total revenueof $700,000. Finishedinventoryincreasedby 4,000 unitsinthe period.Costs inthe periodwere: Variableproduction $3.60per unit Fixedproduction $258,000(absorbedon the actual numberof unitsproduced) Fixednon-production $144,000 Usingabsorptioncosting,what was the profitforthe period? $82,000 19.9 $96,400 $113,600 $123,200 Q U E T IO N S S (2 marks) Acompanywitha singleproductsellsmoreunitsthan it manufacturesina period. Whichof the followingcorrectlydescribesthe use of marginalcostingincomparisonwith absorptioncostinginthe abovesituation? Bothprofitand inventoryvalueswillbe higher Bothprofitand inventoryvalueswillbe lower Profitwillbe higher;inventoryvalueswillbe lower Profitwillbe lower;inventoryvalueswillbe higher (2 marks) 19.10 Whatis a by-product? Aproductproducedat the same timeas otherproductswhichhas no value Aproductproducedat the same timeas otherproductswhichrequiresfurther processingto put it ina saleablestate Aproductproducedat the same timeas other productswhichhas a relativelylow volumecomparedwiththe otherproducts Aproductproducedat the same timeas other productswhichhas a relativelylow valuecomparedwiththe otherproducts (2 marks) G H 19.11 CACo manufacturesa singleproductand has drawnup the followingflexedbudget for the year. Directmaterials Directlabour Productionoverhead Otheroverhead Totalcost 60% $ 120,000 90,000 54,000 40,000 304,000 70% $ 140,000 105,000 58,000 40,000 343,000 80% $ 160,000 120,000 62,000 40,000 382,000 Whatwouldbe the total cost ina budget that is flexedat the 77%levelof activity? $330,300 $370,300 $373,300 $377,300 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 162 of 421 Questions 149 q 19.12 Aninvestmentprojecthas net presentvaluesas follows: Ata discountrate of 10% Ata discountrate of 15% $2,700positive $3,740negative Usingthe abovefigures,what is the BESTapproximationof the internalrate of returnof the investmentproject? 2.1% 7.9% 12.1% 13.0% (2 marks) 19.13 CYCo has decidedto lease a machine.Sixannual paymentsof $8,000 willbe made with the firstpayment on receiptof the machine.Belowis an extract froman annuitytable: Year Annuityfactor 10% 1 0.909 2 1.736 3 2.487 4 3.170 5 3.791 6 4.355 Whatis the presentvalueof the lease paymentsat an interestrate of 10%? $30,328 $34,840 $38,328 G $48,000 H (2 marks) 19.14 Whichof the followingwouldbe best describedas a shorttermtactical plan? Reviewingcost variancesand investigateas appropriate Comparingactual marketshare to budget Loweringthe sellingpriceby 15% Monitoringactual sales to budget (2 marks) 19.15 Acompanymade 17,500unitsat a total cost of $16each. Threequarters of the costs were variableand one quarter fixed.15,000unitsweresoldat $25 each. Therewereno opening inventories. Byhowmuchwillthe profitcalculatedusingabsorptioncostingprinciplesdifferfromthe profitifmarginalcostingprincipleshad been used? Theabsorptioncostingprofitwouldbe $10,000less Theabsorptioncostingprofitwouldbe $10,000greater 150 Theabsorptioncostingprofitwouldbe $30,000 greater Theabsorptioncostingprofitwouldbe $40,000 greater ManagementAccounting(FMA/MA) Page 163 of 421 (2 marks) G q 19.16 Acompanyuses the EconomicOrderQuantity(EOQ)modelto establishreorderquantities. Thefollowinginformationrelatesto the forthcomingperiod: Ordercosts =$25 per order Holdingcosts Annualdemand Purchaseprice EOQ Q U E T IO N S S =10%of purchase price=$4/unit =20,000 units =$40 per unit =500 units Nosafety inventoryare held. Whatare the total annual costs of inventory(iethe total purchase cost plustotal ordercost plustotal holdingcosts)? $22,000 $33,500 $802,000 $803,000 (2 marks) 19.17 IfX=100,Y=400, X=2,040, Y=32,278,XY =8,104and n =5 whichof the 2 2 followingvaluesfora and b are correctinthe formulaY=a +bX? a b 28 –2.6 28 +2.6 –28 –2.6 –28 +2.6 H (2 marks) 19.18 GSCo is consideringacceptinga one-year contract whichwillrequirefourskilled employees.Thefourskilledemployeescouldbe recruitedon a one-year contract at a cost of $40,000 per employee.Theemployeeswouldbe supervisedby an existingmanager who earns $60,000 per year. Itis expectedthat supervisionof the contract wouldtake 10%of the manager's time. Insteadof recruitingnewemployeesthe companycouldretrainsomeexistingemployees whocurrentlyearn $30,000 per year. Thetrainingwouldcost $15,000intotal. Ifthese employeeswereused they wouldneed to be replacedat a total cost of $100,000. Whatis the relevantlabourcost of the contract? $115,000 $135,000 $160,000 $275,000 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 164 of 421 Questions 151 q 19.19 Fora set of sixdata pairs forthe variablex (profit)and y (sales)the followingvalueshave been found. x=2 y=15 x2=30 y2=130 xy=14 Whatis the correlationcoefficient? 0.0006 (to 4 dp) 0.02 (to 2 dp) 0.17( to 2 dp) 1.9973(to 4 dp) 19.20 (2 marks) ZCo wants to calculatethe total cost of a job.Theestimatedcost forthe jobis as follows. Directmaterials 10kg @$10per kg Directlabour 20 hours@$5 per hour Variableproductionoverheadsare recoveredat the rate of $2 per labourhour. Fixedproductionoverheadsforthe companyare budgeted to be $100,000each year and are recoveredon the basis of labourhours.Thereare 10,000budgeted labourhourseach year. Othercosts inrelationto selling,distributionand administrationare recoveredat the rate of $50 per job. Whatis the total productioncost of the job? $200 G $400 $440 $490 (2 marks) (Total = 40 marks) 152 ManagementAccounting(FMA/MA) Page 165 of 421 H q 20 Mixed Bank 2 20.1 Adivisionof a servicecompanyis aware that its recent poorperformancehas been attributableto a lowstandard of efficiencyamongstthe workforce,comparedto rival firms.Thecompanyis adoptinga balanced scorecardapproach to settingperformance targets. Aspart of its objectiveof closingthe skillsgap betweenitselfand rivalcompanies, the division'smanagementhas set a target of providingat least 40 hoursof trainingeach year forallits employees. Q U E T IO N S S Whatdoes thisperformancetarget reflect? 20.2 Acustomerperspective Aninnovationand learningperspective Aninternalbusinessprocessperspective Afinanceperspective (2 marks) Whichof the followingcouldbe includedina timeseriesbased sales forecast? (i) Trend (ii) Seasonalvariation (iii) Cyclicalvariation (iv) Randomfluctuation G 20.3 20.4 (i)only (ii)only (i),(ii)and (iii)only (i),(ii),(iii)and (iv) H (2 marks) Whichof the followingis the best definitionof returnon capital employed? Profitbeforeinterestand tax ÷Ordinaryshareholders'funds100 Profitbeforeinterestand tax ÷(Ordinaryshareholders'funds+Non-current liabilities)100 Profitafter interestand tax ÷Ordinaryshareholders'funds100 Profitafter interestand tax ÷(Ordinaryshareholders'funds+Non-currentliabilities) 100 (2 marks) Goodqualitysavesmoneybut the cost of qualitycan be analysed intocost of conformanceand cost of non-conformance. Whichone of the followingcosts is classedas a quality-relatedappraisal cost? Re-inspectioncost Administrationof customercomplaintssection Performancetesting Traininginqualitycontrol (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 166 of 421 Questions 153 q 20.5 WhichTWOof the followingcosts wouldbe consideredto be the responsibilityof the manager of a profitcentre? 20.6 Directlabour Variableproductionoverhead Imputedintereston capital invested Depreciationon machinery Ina period12,250unitsweremade and there was a favourablelabourefficiencyvariance of $11,250.If41,000labourhourswereworkedand the standard wage rate was $6 per hour, howmany standard hours(to twodecimalplaces)wereallowedper unit? hours 20.7 (2 marks) (2 marks) Inits firstyear of operationsa companyproduced100,000unitsof a productand sold 80,000 unitsat $9 per unit.Itearned a marginalcostingprofitof $200,000. Itcalculates that its fixedproductionoverheadper unitis $5. Whatprofitwouldit have earned underan absorptioncostingsystem? $ 20.8 (2 marks) Thetable belowcontainsdetailsof an airline'sexpenditureon aviationfuel. Year Totalexpenditure Totaldistance Fuelprice on aviationfuel flown index $ million kmmillion 20X8 600 4,200 120 20X9 1,440 4,620 240 Thefollowingstatements relate to the changes between20X8and 20X9. (i) Thequantityof fuelconsumedincreasedby 140% (ii) Thequantityof fuelconsumedincreasedby 20% G H (iii) Thequantityof fuelconsumedper kmflownincreasedby 20% (iv) Thequantityof fuelconsumedper kmflownincreasedby 109% Whichstatements are true? (i)only 154 (ii)only (ii)and (iii)only (ii)and (iv)only (2 marks) ManagementAccounting(FMA/MA) Page 167 of 421 q 20.9 Thefollowingstatements relate to spreadsheets. Whichstatement is false? Theyare an efficientmethodof storingtext based files 20.10 Theyfacilitate'what if'analysis Theyallowdata to be displayedgraphically Theyallowthe font,sizeand colourof text to be changed (2 marks) Q U E T IO N S S JKBCo budgeted to sell5,000 unitsof a productinNovemberat a standard priceof $30 per unitand to earn a profitof $25,000. Itactuallysold6,000 unitsat $28 per unitand earned a profitof $32,000. Whatwas the favourablesales volumeprofitvarianceforNovember? $5,000 $7,000 $12,000 $30,000 (2 marks) 20.11 Whichof the followingare benefitsof usingactivitybased costing? (i) Itrecognisesthat overheadcosts are not alwaysdrivenby the volumeof production (ii) Itdoes not resultinunderor overabsorptionof fixedoverheads (iii) Itavoidsallarbitrarycost apportionments G H (iv) Itis particularlyusefulinsingleproductbusinesses 20.12 (i)only (i)and (ii)only (ii)and (iii)only (i)and (iv)only (2 marks) Aninvestmentprojecthas net presentvaluesas follows. Ata discountrate of 5% $69,700positive Ata discountrate of 14% $16,000positive Ata discountrate of 20% $10,500negative Usingthe abovefigureswhat is the best approximationof the internalrate of returnof the investmentproject? 17.6% 17.9% 18.0% 22.7% (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 168 of 421 Questions 155 q 20.13 Acompany uses productionlabour hoursto absorb its fixedproductionoverheads. Astrikeby its workforceresultsin a lossof 30%of the period'sbudgeted production labour hours. Whichof the followingvarianceswilloccur as a resultof the lossin productionlabour hours? Adversefixedoverheadcapacity variance Adversefixedoverheadefficiencyvariance 20.14 Adversedirectlabourefficiencyvariance Adversedirectlabourrate variance (2 marks) Afirmwithcurrentassets of $40 millionand currentliabilitiesof $20 millionbuys $5 million of inventoryon creditwhichincreasesits inventorylevelto $10million. Whatwillthe effect be on its currentratio and quick(acidtest) ratio? 20.15 G Currentratio Increaseby 25% Reduceby 10% Increaseby 25% Reduceby 10% Quickratio Unchanged Unchanged Reduceby 20% Reduceby 20% (2 marks) Apublishingcompanyis researchingthe readinghabits of the UnitedKingdom's population.Itrandomlyselectsa numberof locationsfromaround the UKand then interviewseveryonewholivesinthese locations. Whatis thisapproach to samplingknownas? Systematicsampling Stratifiedsampling 20.16 Quota sampling Clustersampling (2 marks) BRCo has a singleproductwitha sellingpriceof $12per unit,whichis calculatedas variablecost per unit,plus20%.Atan output levelof 5,000 unitsit makesa lossof $8,000 Whatis the company'stotal fixedcost? $2,000 156 $4,000 $18,000 $20,000 (2 marks) ManagementAccounting(FMA/MA) Page 169 of 421 H G q The following information relates to questions 20.17 and 20.18. Thefollowingdata are availableforproductX Salesunits Salesrevenue Manufacturingcost Profit 20.17 Whatis the sales pricevariance? 20.18 Period actual 5,200 $ 57,200 31,200 26,000 $5,200 Adverse $5,000 Favourable $5,200 Favourable $7,200Favourable (2 marks) $800 Favourable $1,000Favourable $6,000 Favourable $7,200Adverse (2 marks) SJC Co has used linearregressionanalysisto establishthe relationshipbetweentotal cost and activityinunits. Whatdoes the slopeof the regressionlinerepresent? Thevariablecost per unit Thefixedcost per unit Theaverage cost per unit Totalvariablecosts 20.20 Q U E T IO N S S Whatis the sales volumeprofitvariance? 20.19 Period budget 5,000 $ 50,000 30,000 20,000 (2 marks) Adivisionhas a capital employedof $2,000,000 and earns an operatingprofitof $600,000. Itis consideringa projectthat willincreaseoperatingprofitby $20,000 but wouldincreaseits capital employedby $80,000. Arate of 15%is used to computeinterest on capital employed. Whatwillbe the effecton residualincomeand returnon capital employedifthe division accepts the project? Residualincome Returnon investment Increase Increase Increase Decrease Decrease Increase Decrease (2 marks) Decrease (Total = 40 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 170 of 421 Questions 157 H q 21 Mixed Bank 3 21.1 LCCo wishesto carry out a nationalsurveyof adults' readinghabits. Toreducetravelling costs, the countrywas dividedintoconstituencies.Asampleof 50 constituencieswas selectedat random.Witheach of these constituencies,5 pollingdistrictswereselected, again usingrandomtechniques.Interviewerswillvisita randomselectionof 30 peopleon the electoralregisterof each districtselected. Whatsamplingmethodis the companyusing? Stratified Systematic Multi-stage Simplerandom 21.2 Q U E T IO N S S (2 marks) Whenopeninginventorieswere8,500 litresand closinginventorieswere7,100litres, WilliamCo had a profitof $61,000usingmarginalcosting. Ifthe fixedoverheadabsorptionrate was $4 per litre,what was the profitusingabsorption costing? $61,000 $55,400 $56,500 $51,100 (2 marks) G H 21.3 Copy Co rents a photocopierwiththe followingcharges. Afixedrentalamountis payable up to a certainnumberof copieseach period.Ifthe numberof copiesexceedsthisamount, a constant charge per copy is made forallsubsequentcopiesduringthat period. Whichof the followinggraphs depictsthe total photocopierrentalcosts described? Graph A Total cost $ Levelofactivity Graph B Total cost $ Levelofactivity 158 ManagementAccounting(FMA/MA) Page 171 of 421 q Graph C Total cost $ Q U E T IO N S S Levelofactivity Graph D Total cost $ Levelofactivity (2 marks) 21.4 Thefollowingdata relate to the overheadexpenditureof an organisationat twoactivity levels. Squaremetres 12,750 15,100 Overheads $73,950 $83,585 Whatis the estimatedoverheadexpenditureif16,200square metresare to be cleaned? $25,626 G 21.5 $44,745 $88,095 $192,645 (2 marks) Amanagementconsultancyrecoversoverheadson the basis of chargeable consulting hours.Budgetedoverheadswere$615,000and actual consultinghourswere32,150. Overheadswereunder-recoveredby $35,000. Ifactual overheadswere$694,075,what was the budgeted overheadabsorptionrate per hour? $19.13 $20.50 $21.59 $22.68 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 172 of 421 Questions 159 H q 21.6 Apet foodcompanyincurredthe followingcosts last year foreach of its three different markets. $ Dogfood 1,345,000 Cat food 2,300,000 Foodsupplements 985,000 Ifa piechart wereused to representthe proportionof costs incurredby each area, what wouldbe the angle of the sectionrepresentingcat food? 179degrees 77degrees 120degrees 106degrees (2 marks) 21.7 Thefollowingextract froma spreadsheet representsmonthlyregionalsales figuresfor productAinthe firstquarter of the year. A 1 B C D E January February March Total Sales figures for Product A 2 3 South 135,000 141,000 174,000 450,000 4 North 78,000 45,000 191,000 314,000 5 East 45,000 57,000 87,000 189,000 G H 6 West 23,000 19,000 15,000 57,000 7 Total 281,000 262,000 467,000 1,010,000 Whichformulawouldbe used to calculatetotal sales inthe West? =SUM(B6:D6) =(B6:D6) 21.8 160 SUM(B6:D6) =TOTAL(B6:D6) (2 marks) WhichTWOof the followingstatements relatingto activity-basedcostingare true? Activity-basedcosts can be used to identifyrelevantcosts fordecisionmaking. Activity-basedcostingcannot be used to cost services. Activity-basedcostingis a formof absorptioncosting. Activity-basedcostingis an alternativeto traditionalvolume-basedcostingmodels. (2 marks) ManagementAccounting(FMA/MA) Page 173 of 421 G q 21.9 Whichofthefollowing isa disadvantage ofthepayback method ofinvestment appraisal? Itmayleadtoexcessive investment inshort-term projects Itsusewillhinder liquidity Itisa fairlycomplex technique andnoteasilyunderstood Ittendstomaximise financial andbusiness risk (2 marks) Q U E T IO N S S 21.10 Whichfourofthefollowing areaspects ofvalueanalysis? (i) Esteem value (ii) Exchange value (iii) Netrealisable value (iv) Usevalue (v) Costvalue (i),(ii),(iii),(iv) (ii),(iii),(iv),(v) (i),(iii),(iv),(v) (i),(ii),(iv),(v) (2 marks) 21.11 Thedirectmaterials involved inthemanufacture ofa Whoopie cost$2perunitandthe directlabour costis$2.50perunit.There arealsodirectexpenses of$0.50perWhoopie. Fixedcostsapportioned toa Whoopie amount to$3.15. Whatistheprime costofa Whoopie? $3.65 $4.50 $5.00 $8.15 (2 marks) 21.12 Absorption costing willresult inthesameprofitasmarginal costing inwhichTHREEofthe following situations? Wheninventory levels areconstant Whenopening andclosing inventory volumes arethesame Whennoinventory isheldasopening inventory andnoinventory isheldasclosing inventory Whenopening inventory isgreater thanclosing inventory Whenclosing inventory isgreater thanopening inventory Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 174 of 421 (2 marks) Questions161 H q 21.13 Inprocesscosting,what is an equivalentunit? Aunitof output inrelationto whichcosts may be ascertained Thequantityof workachievableinone hourat standard levelsof performance Notionalwholeunitswhichrepresentincompletework Aunitof output whichis identicalto otherspreviouslymanufacturedinthe same process (2 marks) 21.14 UCRCo has recordedthe followingcosts overthe last sixmonths. Month Totalcost Unitsproduced $ 1 74,000 3,000 2 72,750 1,750 3 73,250 2,000 4 75,000 2,500 5 69,500 1,500 6 72,750 2,000 Usingthe highlowmethod,what is the total cost equation? Totalcost =$65,000 +($3unitsproduced) Totalcost =$71,000+($3unitsproduced) Totalcost =$61,250+($1.25unitsproduced) Totalcost =$70,250+($1.25unitsproduced) (2 marks) G H 21.15 Whichof the followingstatements is/are correct? (i) (ii) Strategicplanningis carriedout by linemanagers. Non-financialinformationis relevantto managementaccounting. (i)is true and (ii)is false (ii)is true and (i)is false Bothare true Bothare false (2 marks) 21.16 Whichof the followingsamplingmethodsrequirea samplingframe? 162 (i) (ii) (iii) (iv) Random Stratified Quota Systematic (i)and (ii)only (i),(ii)and (iii)only (i),(ii)and (iv)only (iii)only (2 marks) ManagementAccounting(FMA/MA) Page 175 of 421 q The following information is to be used for questions 21.17 and 21.18. Ina timeseriesanalysis,the multiplicativemodelis used to forecastsales and the following seasonalvariationsapply: Quarter Seasonalvariation 1 1.2 2 1.3 3 0.4 4 ? Theactual sales valuesforthe firsttwoquarters of 2006 were: Quarter1:$125,000 Q U E T IO N S S Quarter2: $130,000 21.17 Whatis the seasonalvariationforthe fourthquarter? –2.9 0.9 1.0 1.1 (2 marks) 21.18 Whichof the followingis true? Thetrend lineforsales decreased betweenquarter 1and quarter 2. Thetrend lineforsales increasedbetweenquarter 1and quarter 2. Thetrend lineforsales remainedconstant betweenquarter 1and quarter 2. Thetrend lineforsales cannot be determinedfromthe informationgiven. (2 marks) G H 21.19 KCo has used linearregressionanalysisto establishthe relationshipbetweentotal cost and activityinunits. Whatdoes the interceptof the regressionlinerepresent? Thevariablecost per unit 21.20 Thefixedcost per unit Theaverage cost per unit Totalfixedcosts (2 marks) Whichof the followingstatements are true? (i) Flexiblebudgets helpmanagers to deal withuncertainty (ii) Flexedbudgets allowa moremeaningfulcomparisonto the made withactual results (i)is true and (ii)is false (ii)is true and (i)is false (i)and (ii)are true (i)and (ii)are false (2 marks) (Total = 40 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 176 of 421 Questions 163 q 22 Mixed Bank 4 22.1 Mostbusinessesassess the performanceof management. Whichof the followingis mostlikelyto lead to short-termism? Linkingmanagers' rewardsto share price 22.2 Settingqualitybased as wellas financialtargets formanagers Settingcost cuttingtargets Makingshort-termtargets realistic (2 marks) Whichof the followingbest describesTQM? Identifyingthe factors whichcause the costs of an organisation'smajoractivities Applyinga zerodefect philosophyto the managementof allresourcesand relationshipswithinan organisation Trackingand accumulatingcosts and revenuesattributableto each productoverits life Estimatingproductcosts by subtractinga desiredprofitmarginfroma sellingprice (2 marks) 22.3 Jay Co makesa productwhichpasses througha singlerefiningprocess.Thefollowing informationis availableforJune. Materials 15,000kgat $1.50per kg Labour $2,100 Normalloss 10%of input Scrap valueof loss 56c per kg Theoutput forthe periodwas 13,000kg fromthe process.Therewas no openingor closing inventoryduringJune. Whatis the valuecreditedto the processaccount forthe normallossand the abnormalloss forthe period? Normalloss Abnormalloss $840 $880 $840 $911 G 164 $Nil $840 $280 $Nil (2 marks) ManagementAccounting(FMA/MA) Page 177 of 421 H q 22.4 GoldCo makesand sellstwoproductscalledthe Aand the U.Thefollowinginformationis availableforMay. Production 4,500 units 3,100units Product A U $ $ 85 60 ProductA ProductU Sales 4,300 units 2,600 units Q U E T IO N S S Unitsellingprice Unitvariablecosts Directmaterials 20 10 Directlabour($3/hr) 15 18 Variableproductionoverheads 15 20 Fixedcosts were$75,000forMayand are recoveredon the basis of directlabourhours. Therewas no openinginventoryforeitherproduct. Whatis profitreportedforMayusingmarginalcostingprinciples? $72,700 22.5 $106,700 $153,700 $181,700 (2 marks) LastmonthZedCo purchased750 kg of raw materialsfor$13,500.Thematerialprice variancewas $1,125favourable. Whatwas the standard priceper kg of the raw materials? $15.00 G 22.6 22.7 $16.50 $17.00 $19.50 H (2 marks) Underwhichsamplingmethodis the populationdividedintocategories? Systematic Quota Random Stratified (2 marks) Thepriceindexfora commodityinthe currentyear is 125(base year =100).Thecurrent priceforthe commodityis $31.50per kg. Whatwas the priceper kg inthe base year? $23.63 $25.20 $31.50 $39.38 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 178 of 421 Questions 165 G q 22.8 Twostatements follow aboutdataandinformation. (i) Dataisa scientific termforfactsandfigures. (ii) Information isdatawhichhasbeenprocessed. Whichoneofthefollowing iscorrect withregardtotheabovetwostatements? Bothstatements arefalse Bothstatements aretrue Statement (i)istruebutstatement (ii)isfalse Statement (i)isfalsebutstatement (ii)istrue (2 marks) 22.9 DCoforecasts costsusingthemodel y = a +bx.Theintercept is$20.Wheny = $270 thenx= 50. Whatisthevalueofthegradient? –5 5 14.6 –14.6 (2 marks) The following information relates to questions 22.10 and 22.11 LMBCoproduces andsellsonetypeofproduct. Thedetails forlastyearwereasfollows: Production andSales Budget Actual Production (units) 26,000 26,000 Sales(units) 28,000 25,000 There wasnoinventory atthestartoftheyear. Selling priceandcosts Budget $ 80 60 143,000 69,000 Selling priceperunit Variable costsperunit Fixedproduction overhead Fixedselling costs Actual $ 80 60 113,000 69,000 22.10 Whatwould betheactualprofitfortheyearusingmarginal costing? $312,500 $318,000 $323,500 $682,000 (2 marks) 166 Management Accounting (FMA/MA) Page 179 of 421 H G q 22.11 Whatwouldbe the actual profitforthe year usingabsorptioncosting? 22.12 $312,500 $318,000 $323,500 $682,000 (2 marks) Q U E T IO N S S Thecosts of the factory maintenancedepartmentforFreerCo appear to have a variable elementdependentuponthe numberof unitsproduced.Thefixedelementof the costs steps up by $30,000 when32,000 or moreunitsare produced.Thevariablecost per unit is constant. Volumeof production Units $ 28,000 160,000 34,000 208,000 Whatwouldbe the total cost for29,000 unitsand the total cost for35,000 units? 35,000 units 29,000 units $163,000 $163,000 $211,000 $296,000 $344,000 $296,000 $181,000 The following information $181,000 relates (2 marks) to questions 22.13 and 22.14. H RyanCo is operatinga standard costingsystemhas the followingdirectlabourstandards per unitforone of its products: 4 hoursat $12.50per hour. Lastmonthwhen2,195unitsof the productweremanufactured,the actual directlabourcost for the 9,200 hoursworkedwas $110,750. 22.13 Whatwas the directlabourrate varianceforlast month? 22.14 $4,250Favourable $4,250Adverse $5,250Favourable $5,250Adverse (2 marks) Whatwas the directlabourefficiencyvarianceforlast month? $4,250Favourable $4,250Adverse $5,250Favourable $5,250Adverse (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 180 of 421 Questions 167 q 22.15 Thepurchase priceof an itemof inventoryis $110per unit.Ineach sixmonthperiodthe usage of the itemis 50,000 units.Theannual holdingcosts associated withone unitequate to 3%of its purchase price.Thecost of placingan orderforthe itemis $15. What is the EconomicOrder Quantity (EOQ)for the inventoryitemto the nearest wholeunit? 674 953 1,651 10,000 (2 marks) (Total = 30 marks) 23 Mixed Bank 5 23.1 Thecosts of the factory maintenancedepartmentforC Co appear to have a variable elementdependentupon the numberof unitsproduced.Thefixedelementof the costs steps up when20,000 or moreunitsare produced.Atan activitylevelof 22,000 units,the fixedelementof the cost is $25,000. Thevariablecost per unitis constant. Volumeof production Units $ 18,000 200,000 22,000 245,000 Whatwouldbe the total cost for19,000unitsand the total cost for21,000units? 19,000units 21,000units $210,000 $235,000 G 23.2 $215,000 $210,000 $235,000 $230,000 $231,660 $258,940 H (2 marks) WallCo has a capital employedof $300,000. Ithas a cost of capital of 10%per year. Its residualincomeis $30,000. Whatis the company'sreturnon investment? 1% 10% 18% 168 20% (2 marks) ManagementAccounting(FMA/MA) Page 181 of 421 q 23.3 23.4 Arethe followingstatements,whichreferto documentsused inthe materialprocurement proceduresof a company, true or false? (i) Allpurchase requisitionsare prepared inthe purchasingdepartmentand are then sent out to suppliers (ii) Allgoodsreceivednotes are prepared inthe goodsinwardsdepartment Statement(ii) Statement(i) False True True True False False True False Q U E T IO N S S (2 marks) Hat Co uses standard marginalcosting.Lastmonththe standard contributionon actual sales was $40,000 and the followingvariancesarose: Salespricevariance$1,000Favourable Salesvolumecontributionvariance$3,500 Adverse Fixedoverheadexpenditurevariance$2,000 Adverse Therewereno variablecost varianceslast month Whatwas the actual contributionforlast month? $35,500 G 23.5 $37,500 $39,000 $41,000 (2 marks) MBCo uses flexedbudgets. Thefixedbudget forlast monthwas based on 100%activity and showeddirectcosts of $100,000.Lastmonth'sactual directcosts werecomparedwith the flexedbudget to showthe following: Actual Variance Directcosts $93,600 $2,400 Adverse Whatwas the actual activityas a %of the fixedbudget last month? 91.2% 93.6% 96.0% 97.5% 23.6 (2 marks) Aprocessoperates witha normallossof 5%of input.Alllosseshave a realisablevalueof $38 per litre.Lastmonth10,000litreswereinputto the processand good productionwas 9,200litres.Processcostsarisinglast monthwere$456,000.Therewasno work-in-progress. Whatwas the creditentry inthe processaccount forabnormallosslast month? 11,400 13,440 13,800 14,400 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 182 of 421 Questions 169 H q 23.7 Thepriceindexfora commodityinthe currentyear is 175(base year =100).Thecurrent priceforthe commodityis $92.70per unit. Whatwas the priceper unitinthe base year? $92.70 $25.20 $52.97 $188.78 23.8 (2 marks) DeeCo uses a pie chart to showits sales forits variousproducts.One of the segmentson the piechart is 120degreesand thisrepresents$200,000 worthof sales of the productD. Whatisthe total sales valueforDeeCo? $250,000 23.9 $500,000 $600,000 $900,000 (2 marks) DCo forecastscosts usingthe modely =a +bx.Thegradientis $40. Wheny =$1,100then x =20. Whatisthe valueof the intercept? 300 1,100 G 23.10 1,500 1,900 H (2 marks) BeeCo has under-absorbedfixedproductionoverheadsforthe periodby $9,000. Thefixed productionoverheadabsorptionrate was $7per unitand is based on the normallevelof activityof 5,000 units.Actualproductionwas 5,500 units. Whatwas the actual fixedproductionoverheadsincurredforthe period? $26,000 $29,500 $44,000 $47,500 (2 marks) (Total = 20 marks) 170 ManagementAccounting(FMA/MA) Page 183 of 421 G q 24 Budgeting 120 mins 24.1 J Co makesseveralproducts,includingComponentM. Theopeninginventoryof ComponentMat the start of January is expectedto be 500 units. Salesof ComponentMforJanuary are budgeted at 4,000 units. Salesare expectedto increaseby 10%untilMaywhenthey stabilise. Closinginventoryat the end of each monthisbudgeted as 20%of nextmonth’ssales units. Task 1 Complete the THREEextracts from the materials budget for next year: (i) January closinginventoryunits (ii) Marchsales units Q U E T IO N S S (iii) Mayproductionunits Salesof M(units) Openinginventory Closinginventory Jan Feb Mar Apr 4,000 4,400 (ii) 5,324 May 5,856 500 1,171 (i) 1,171 Production Jun (iii) (6 marks) Task 2 J Co also makesComponentF. Eachunitof ComponentF uses 3 kgsof materialG. Budgetedsales of ComponentF are forecastto be 20,000 duringJanuary. Opening inventoryof materialG is 3,000 kgsand closinginventoryis goingto be 3,500 kgs. Each kg of materialG costs $2.50. Assumingproduction of finishedgoods equals sales of finishedgoods, what is the material G purchases budget for January in $? $ (2 marks) Task 3 Whichof the followingis NOTa reason why profit and cash flowmight be different? Purchaseof non-currentassets Saleof non-currentassets Depreciationof non-currentassets Timedelayswiththe issueof bank statements 2 marks) (Total = 10marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 184 of 421 Questions 171 H G q 24.2 Givenbelow istheforecast statement ofprofitorlossfora ABCCoforthethreemonths ending 31December together withforecast statements offinancial position atthatdate andalsoattheprevious 30September. FORECAST STATEMENT OFPROFIT ORLOSS FORTHETHREEMONTHS ENDING 31DECEMBER $'000 860 (600) 260 (20) (100) 140 Revenue Costofsales Grossprofit Depreciation Overheads Profitfromoperations FORECAST STATEMENTS OFFINANCIAL POSITION 31December $'000 $'000 Non-current assets 1,050 Current assets Inventory 100 Receivables 85 Cash 10 195 Totalassets 30September $'000 $'000 760 100 45 10 155 1,245 Equityandliabilities Equitysharecapital Retained earnings 600 500 Current liabilities Payables Accruals ofoverheads 100 45 Totalequityandliabilities 1,100 145 915 H 600 200 800 75 40 115 1,245 915 Task1 Calculatetheforecastcashreceipts andcashpayments forthequarter to 31December. $'000 Salesreceipts Purchase payments Overhead payments (6 marks) 172 Management Accounting (FMA/MA) Page 185 of 421 q Task 2 ABCCo currentlysellsits productfor$30 but it is anticipatedthat there willbe a price increaseof 4%from1February.Thesales quantitiesare expectedto be as follows: January 21,000units February 22,000 units March 22,800 units Allsales are on creditand 40%of cash is receivedinthe monthfollowingthe sale and the remainder,twomonthsafter the sale. What are the receipts from January and February sales that are received in March? Q U E T IO N S S $ ReceiptsinMarchrelatingto January sales ReceiptsinMarchrelatingto Februarysales (2 marks) Task 3 Whichof the followingstatements applies to a flexiblebudget? Itis continuouslyupdated by adding another accountingperiodwhenthe earliest accountingperiodhas cometo an end G Itis amendedinresponseto changes incosts Itis producedbeforethe controlperiodand not subsequentlychanged inresponseto changes inactivity,costs or revenues Itis amendedinresponseto changes inthe levelof activity (2 marks) (Total = 10marks) 24.3 HMCo commencedbusinesson 1October20X2,to providespecialistcontract cleaning servicesto industrialcustomers.Allsales are on credit. Morefavourablecredittermsare offeredto largercustomers(classA)than to smaller customers(classB).Allsales are invoicedat the end of the monthinwhichthe sale occurs. Class Acustomerswillbe givencredittermsrequiringpayment within60 days of invoicing, whileclass Bcustomerswillbe requiredto pay within30 days of invoicing. Sinceit is recognised,however,that not allcustomerscomplywiththe credittermsthey are allowed,receiptsfromcustomershave prudentlybeen estimatedas follows: Customertype Within30 days 31to 60 days 61to 90 days 91to 120days Baddebts Class A 50% 30% 15% 5% Class B 60% 25% 10% 5% Theabovetable showsthat customersare expectedeitherto pay within60 days of the end of the creditperiod,or not at all.Baddebts willthereforebe writtenoff60 days after the end of the creditperiod. Budgetedcreditsales foreach class of customerinthe first4 monthsof tradingare as follows: Customertype Class A Class B October $'000 100 60 November $'000 150 80 December $'000 200 40 January $'000 300 50 Assumeallmonthsare of 30 days. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 186 of 421 Questions 173 H q Task 1 Completethe followingbudgeted cash inflowsto be receivedby HMCo fromcustomersin each of the three monthsof November20X2,December20X2and January 20X3,based uponthe prudentlyestimatedreceiptsfromcustomers. Nov Dec Jan $'000 $'000 $'000 Class A Class B (6 marks) Task 2 Fixedoperationaloverheadcosts are estimatedto be $25,000 per month,whichincludes $10,000rent,$1,000vehiclerunningcosts,$3,000vehicledepreciationand $11,000wages. Whatamountshouldbe includedinthe cash budget forfixedoperationaloverheadsper month? $ (2 marks) Task 3 HMCo is planningto purchase a newpieceof cleaningequipment. Whichof the followingwouldNOTbe included in a cash budget in respect of the new equipment? Annualoverheadcharge fromHeadOfficebased on the floorspace occupiedby the machine Deliverycost of the newequipment Purchasepriceof the newequipment Disposalproceedsof the oldequipmentbeingreplaced (2 marks) G (Total = 10marks) 24.4 RJMCo manufacturesseveralproduct,one of whichis ProductM. ProductMuses fourdifferenttypes of materials.Thematerialsused and theirprices,in 20X6and 20X7,are as follows. 20X6 20X7 Kg $ per kg Kg $ per kg MaterialA 200 0.98 300 1.40 MaterialB 500 0.95 400 1.10 MaterialC 300 1.20 500 0.92 MaterialD 400 1.10 100 1.14 Task 1 Complete the table withthe value of the price indexfor each material for 20X7 (with20X6as the base year) to the nearest wholenumber. Price index MaterialA MaterialB MaterialC MaterialD (6 marks) 174 ManagementAccounting(FMA/MA) Page 187 of 421 H q Task 2 RJMalso manufacturesProductJ and has collectedthe followinginformationabout costs and volumesforthe past sixmonths: Month Volume Totalcost $ January 10,000 57,500 February 12,000 63,000 March 11,000 19,500 April 14,000 72,500 May 11,500 63,000 June 13,500 70,000 Usingthe high-lowmethod, what is the fixedcost per month? $ Q U E T IO N S S (2 marks) Task 3 In whichof the followingcircumstances could RJMuse the high-lowequation to forecast future costs most accurately? 15,000unitsof ProductJ beingmanufacturedinJuly 11,000unitsof ProductJ beingmanufacturedinJuly 11,000unitsof ProductRbeingmanufacturedinJuly 11,000unitsof ProductJ beingmanufacturedinJuly ina newfactory (2 marks) (Total = 10marks) G 24.5 MBCo whichmanufacturesa range of products,has decidedto introducea product costingsystem.Asa firststep it wishesto analyse the behaviourof its costs. Thefollowingdata is availableforthe previousfourperiods. A 1 2 3 Totalcosts ($) Totaloutput (units) B Period1 214,559 64,200 C Period2 239,970 76,350 D Period3 243,183 77,880 E Period4 259,541 85,620 Task 1 Usingthe high-lowmethod,selectfromthe drop downlistbelow,whichof the following formulaewillcorrectlycalculatethe cost of the variableelementper unit. Select... =E2- B2/E3– B3 =(D2– B2)/(D3– B3) =(E2– B2)/(E3– B3) =D2– B2/D3– B3 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 188 of 421 Questions 175 H q Task 2 Usingthe high-lowmethod, complete the followinglinear equation for total costs: y= + x (4 marks) Task 3 MBCo uses the followingspreadsheet to investigatethe inter-relationshipbetween advertisingexpenditureand sales inthe firstsixmonthsof the year. 1 2 3 4 5 6 7 8 9 A Monthlyadvertising Expenditure $’000 X 1.2 0.9 1.6 2.1 1.6 7.4 B C D E Sales $’000 Y 132.5 98.5 154.3 201.4 161.0 747.7 X2 1.44 0.81 2.56 4.41 2.56 11.78 Y2 17556.25 9702.25 23808.49 40561.96 25921.00 117549.95 XY 159 88.65 246.88 422.94 257.6 1175.07 ThecellE9showsthe total of the XYvalues. Whichof the followingwouldbe a correct entry for this cell? =A9B9 =SUM(E4:E8) =SUM(A9:D9) =C9 D9 G H (2 marks) Task 4 Inwhichof the followingcircumstanceswouldlinearregressionbe suitableforforecasting sales forMBCo forthe firstsixmonthsof nextyear? (selectallthat apply) Tickbox Whenadvertisingis $500 per month Whenadvertisingis $1,500per month Whenadvertisingis $1,800per month Whenadvertisingis $2,800 per month (2 marks) (Total = 10marks) 176 ManagementAccounting(FMA/MA) Page 189 of 421 G q 24.6 GreatSouthern Comanufactures hairdryers forthehotelindustry, whichitsellsfor$12 each.Variable costsofproduction arecurrently $6perunit.Newproduction technology is nowavailable whichwould cost$250,000,butwhichcouldbeusedtomakethehairdryers fora variable costofonly$4.50perunit. Fixedcostsareexpected toincrease by$20,000peryear,75%ofwhichwillbedirectly as a result ofinstalling thenewtechnology. GreatSouthern charges depreciation at20%and seeksa return onitsinvestments ofatleast10%. Thenewtechnology would haveanexpected lifeof5 yearsanda resale valueafterthat timeof$60,000.Salesofhairdryers areestimated tobe50,000unitsperyear. Themanagement accountant hasstarted preparing a spreadsheet tocalculate theNPVof theproject, andanextract isshown below: A 1 2 3 4 5 6 7 8 B C 0 Year Investment $ Salesproceeds $ Contribution $ Fixedcosts$ Depreciation $ Netcashflow$ Discount factor(to3dp) D 1 E 2 F 3 G 4 Q U E T IO N S S H 5 Task1 Whichfigures should beshown inthefollowing cells? C2 (1mark) $ H3(1mark) $ D4(2marks) $ D5(2marks) $ D6(1mark) $ E8(1mark) $ H (8 marks) Task2 WhichTWOofthefollowing areadvantages oftheIRRmethod ofinvestment appraisal? Ittakesintoaccount thetimevalueofmoney Itisthesuperior investment appraisal technique Itdoesnotrequire thecompany’s costofcapital Itisquickandsimple tocalculate Itisbasedonprofits (2 marks) (Total= 10marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 190 of 421 Questions177 q 24.7 FitCo ownsand runstwolocalsportsclub.Lastyear the largest clubmade sales of $500,000 but as membernumbersare decliningthey are thinkingabout refurbishingthe gymand upgradingthe equipment. Theexpectedcosts and benefitsof the refurbishmentare as follows: (i) Newfitnessequipmentwouldcost $450,000 to buy and install.Thisincludesa refurbishmentof the gymspace. (ii) Salesare expectedto riseto $550,000 inYear1ifthe changes are made, thereafter increasingby 5%per year. Ifthe changes are not made sales are expectedto fallby $40,000 per year. (iii) Depreciationwouldbe providedat $90,000 per year. (iv) Themanager of the gymhas been to a conferenceto researchthe newequipment and receivetrainingon the safe use of the equipment.Thecost of the conference was $3,000. Afurther$20,000 wouldbe spent on trainingthe rest of the gymstaff if the equipmentwas purchased. (v) Itis anticipatedthat electricitycosts wouldriseby 5%of the total sales as a resultof extra runningcosts of the newmachines. (vi) Themanager of the otherfitnesscentre wouldbe requiredto coverthe runningof the gymwhenthe newequipmentisfirstintroduced,whilethe currentmanager trains the remaininggymstaff. Itis anticipatedhe wouldstay forone month.Heis paid an annual salary of $48,000. Hewouldnot be replacedat the otherfitnesscentre duringthismonth. (vii) A5 year maintenancecontract wouldbe entered intoat a cost of $10,000per year. (viii) Intereston moneyborrowedto financethe refurbishmentwouldbe $6,000 per year. (ix) FitCo's cost of capital is 10%per year. Required Task 1 G Indicatewhethereach of the followingitemsare relevantor irrelevantcashflowsfora net presentvalue(NPV)evaluationof whetherto refurbishthe gym. Relevant Irrelevant Investmentof $450,000 inthe newequipment Depreciationof $90,000 overeach of the fiveyears Staff trainingcosts of $20,000 Temporarymanager's salary of $4,000 Conferenceand staff trainingcosts of $3,000 Interestcosts of $6,000 per year (6 marks) 178 ManagementAccounting(FMA/MA) Page 191 of 421 H q Task 2 Calculate the followingvalues if the gym is refurbished: Incrementalsales inYear1 $ Presentvalueof the maintenancecosts overthe lifeof the contract $ Additionalelectricitycosts inYear1 $ (4 marks) Q U E T IO N S S (Total = 10marks) 24.8 Thebookkeeperof HouseCo (a furnitureretailer)has prepared a listof itemsof expenditurefromlast month,but cannot decideifthey are capital or revenueand has asked foryourhelp. Task 1 Identifywhichof the followingitems are capital or revenue expenditure: Expenditure Capital Revenue Purchaseof newdeliveryvan Roadtax fornewdeliveryvan Repairsto customertoilets Extensionof customercar park (4 marks) G Task 2 HouseCo also manufacturesfurniture.Itanticipatesthat they willsell200 of theirbest sellingbeds inJune 20X6.Itis anticipatedthat sales willriseby 25%inJuly because of a plannedsales promotion. Inventorylevelsat the end of Mayare 15units,and because of the sales promotionthe sales manager has requestedthat inventoryat the end of June isequal to 20%of July's forecastsales. Usingthe drop down list, select the number of beds that should be manufactured in June to ensure that inventorylevelsare as required at the beginning of July. Select... 200 215 235 250 (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 192 of 421 Questions 179 H q Task 3 HouseCo also plans to manufacture90 sofas inJune. Beloware someextractsfromthe cost card fora sofa: $ Materials– 10m2of fabric@$50 per m2 500 Assemblylabour– 8 hours@$15per hour 120 Howmany metresof fabricshouldbe purchasedif10%of materialis wasted duringthe productionprocess? metres Howmuchshouldbe budgeted forlabourforsofa productioninJune? $ (4 marks) (Total = 10marks) 24.9 GemmaCo is preparing its budget for the comingyear. Its productioncapacity is 10,000units, but in the comingyear it expects productionand sales of its ProductQ to be limitedto 90%capacity. Cost estimates are made at GemmaCo usingthe high-low method and are based upon the followingdata. Unitsof output/sales Cost of sales $ 9,800 44,400 7,700 38,100 Thecompany'smanagementis not certainthat the estimateof sales is correct,and has asked forflexiblebudgets to be prepared at output and sales levelsof 80%and 100%of its capacity. Thesales priceper unithas been fixedat $5. Task 1 G Whatis the variablecost per unit? $ Whatare GemmaCo's fixedcosts? $ (4 marks) Task 2 Whatis the budgeted profitforproductionand sales of 9,000 units? $4,224 180 $3,000 $600 $1,000 (2 marks) ManagementAccounting(FMA/MA) Page 193 of 421 H G q Task 3 Prepare the flexiblebudgets that Gemma Co's management has requested. Flexedbudget Flexedbudget 80%capacity 100%capacity $ $ Sales Variablecosts Fixedcosts Profit (4 marks) Q U E T IO N S S (Total = 10marks) 24.10 TreeCo has decidedto use investmentappraisal techniqueswhenmakingdecisionsabout futureinvestmentopportunities. Task 1 WhichTWOof the followingtechniques take no account of the time value of money? Thepayback period Netpresentvalue Discountedpayback period Internalrate of return Returnon capital employed (2 marks) Task 2 One of the projectsTreeCo is consideringisProjectP. Ithas the followingcash flows: $ Capital investment 60,000 Profitsbeforedepreciation Year1 20,000 Year2 30,000 Year3 40,000 Year4 50,000 What is Project P's payback period? 2.75years 3 years 2 years 2.25 years (2 marks) Task 3 TreeCo has calculatedits cost of capital to be 15%. What are the NPVand discounted payback of Project P? NPV $ (to the nearest wholenumber) Discountedpayback years (to twodecimalplaces) (4 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 194 of 421 Questions 181 H q Task 4 Is the followingstatement true or false? Bycalculatingthe discountedpayback period,weestablishthe timeat whichthe NPVof an investmentbecomespositive. True False (2 marks) (Total = 10marks) 25 Standard costing 120 mins 25.1 CTCo uses a standard absorptioncostingsystemand manufacturesand sellsa single productcalledthe DG.Thestandard cost and sellingpricedetailsforthe DGare as follows. $ per unit 12 4 16 Standard profit 6 Standard sellingprice 22 Thesales volumevariancereportedinJune was $12,000adverse. CTCo is consideringusingstandard marginalcostingas the basis forvariancereportingin the future. Task 1 Calculate the sales volumevariance that wouldbe shown in a marginal costing operating statement for June. Variablecost Fixedcost G Salesvolumevariance $ Adverse/Favourable (4 marks) Task 2 Whichof the followingwouldcorrectly calculate the fixedoverhead volumevariance? Thedifferencebetweenbudgeted hoursof workand the actual hoursof work multipliedby the standard absorptionrate per unit. Thedifferencebetweenthe fixedoverheadincurredand the fixedoverhead absorbed Thedifferencebetweenthe budgeted fixedoverheadexpenditureand the actual fixedoverheadexpenditure. 182 Thedifferencebetweenactual and budgeted volumemultipliedby the standard absorptionrate per unit. (2 marks) ManagementAccounting(FMA/MA) Page 195 of 421 H q CTCo has foundthat it has had an increasingadverselabourefficiencyvarianceforthe last 6 months. Thecompanyuses lotsof temporaryworkersina bid to meet sales demand forits mainproduct. Task 3 WhichTWOof the followingcontrol actions could CTCo implementto try to eliminate this? Increasethe hourlyrate paid to temporaryworkers Offerovertimepay to the company’sexistingskilledemployeeson a pieceworkbasis Implementtrainingforthe temporaryemployees Reducethe numberof supervisors (2 marks) Q U E T IO N S S Task 4 CTCo has budgeted materialcosts of $125,000forthe productionof 25,000 unitsper month.Eachunitis budgeted to use 2 kg of material.Thestandard cost of materialis $2.50 per kg. Actualmaterialsinthe monthcost $136,000for27,000 unitsand 53,000 kg were purchasedand used. What was the adverse material price variance? $1,000 $3,500 $7,500 $11,000 (2 marks) (Total = 10marks) G H 25.2 Connollyuses standard costingto controlits costs and revenues.Astandard cost card for its onlyproduct,the FY,is givenbelowtogetherwitha standard cost operatingstatement forlast month. Standard cost card $ per unit Sellingprice 100 Directmaterials3kg@$10/kg 30 Directlabour1hours@$10per hour 10 Fixedoverhead2 hours@$5 per hour 10 Profit 50 Standard cost operating statement $ $ $ Budgetedprofit 500,000 Salesvolumevariance 50,000 (A) 450,000 Standard profiton actual sales Salespricevariance 10,000(F) 460,000 Productioncost variances Adverse Favourable $ $ Materialprice 10,000 Materialusage 8,000 Labourrate 2,000 Labourefficiency 1,000 Fixedoverheadexpenditure 2,000 Fixedoverheadvolume 1,000 13,000 11,000 2,000(A) Actualprofit 458,000 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 196 of 421 Questions 183 q Task 1 Select the appropriate words, phrases or numbers to correctly complete the commentary on the last month’s results. Connollyuses standard Picklist1costing.Inthe last monthactual sellingpricewas Picklist2 standard. ActualunitssoldwerePicklist3 budgeted and actual sales revenuewas $ Picklist4. Productionwas Picklist5 than budgeted. Materialscaused the biggestcost variance,wherea decisionto pay Picklist6 standard priceresultedinthe companyusingPicklist7 budget. Picklist1absorption,marginal Picklist2 higherthan, lowerthan, equal to Picklist3 1,000lessthan, 1,000morethan, 500 lessthan, 500 morethan Picklist4 $890,000, $910,000,$460,000, $458,000 Picklist5 100unitslessthan, 100unitsmorethan, 200 unitslessthan, 200 unitsmorethan Picklist6 lessthan, morethan Picklist7 800kgmorethan flexedbudget, 800kgmorethan originalbudget, 600kgmore than flexedbudget, 600kgmorethan originalbudget (10marks) (Total = 10marks) 25.3 G RingRinguses a standard cost operatingstatement to reconcilebudgeted contribution withactual contribution.Astandard cost operatingsystemforJanuary has been partly completedbut someinformationis missing. Standard cost card – Mobilephone $ per phone Sellingprice 100 Directmaterial 25 Directlabour 10 Productionoverhead 15 Standard contribution 50 Actualand budgeted activity levelsin units Budget Actual Sales 20,000 21,500 Production 20,000 22,000 Actualsales revenue and variable costs $ Sales 2,128,500 Directmaterials( purchasedand used) 565,000 Directlabour 210,000 Variableproductionoverhead 325,000 Variances Totaldirectmaterialsvariances 15,000 Adverse Totaldirectlabourvariances 10,000 Favourable Totalvariableproductionoverheadvariances 5,000 Favourable Task 1 Complete the missingfigures to be included in reconciliationfor the standard cost operating statement for January. $ Salesvolumevariance Adverse/Favourable Standard contributionon actual sales $ Salespricevariance $ Actualcontribution $ Adverse/Favourable (8 marks) 184 ManagementAccounting(FMA/MA) Page 197 of 421 H q Task 2 Whichof the followingwouldexplainthe sales volumevariance achieved by Ring Ring? Budgetedsales unitsweregreater than budgeted productionunits Actualsales unitsweregreater than budgeted productionunits Actualsales unitsweregreater than budgeted sales units Actualsales unitswerelessthan budgeted sales units Q U E T IO N S S (2 marks) (Total = 10marks) 25.4 Kubrickuses a standard absorptioncostingsystemto controlthe cost of its onlyproduct. Theflexedbudget forproductionoverheadforthe companyshowsa budgeted total overheadcost of $200,000 per periodwhen5,000 tonnesare producedand $264,000per periodwhen9,000 tonnesare produced. InPeriod9, whenthe actual output was 6,500 tonnes,total actual overheadcost was $245,000($125,000fixedand $120,000variable).Thestandard fixedoverheadabsorption rate is $24 per tonne. Task 1 Usingthe high-lowtechnique, calculate the following: $ Thebudgeted variableoverheadper tonne. $ Thebudgeted fixedoverheadper period. G (4 marks) Task 2 Calculate the following: Thefixedoverheadexpenditurevariance. $ Adverse/Favourable Thefixedoverheadvolumevariance. $ Adverse/Favourable (4 marks) Task 3 Whichof the followingwouldresult in an over absorption of overheads? Absorbedoverheadsexceedactual overheads Actualoverheadsexceedabsorbed overheads Budgetedoverheadsexceedabsorbed overheads Actualoverheadsexceedbudgeted overheads (2 marks) (Total = 10marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 198 of 421 Questions 185 H q 25.5 Mortensenmanufactureswoodentoys. Ituses a standard costingsystemto controlcosts. Thecuttingdepartmentcuts the shapes whichare soldas toy animals. Hardwood Directlabour Fixedoverhead 30 minutesat $9 per hour 30 minutesat $4 per directlabourhour $ 6.00 4.50 2.00 22.50 Fixedoverheadabsorptionrates are based uponmonthlyfixedoverheadsof $26,000 and a budgeted monthlyoutput of 13,000sets of animals. Inthe mostrecent month14,000sets of animalsweremade. 8,000 directlabourhours wereworkedand paid at $9.25per hour. Actualfixedoverheadswere$23,000 forthe month. Task 1 Complete the followingextract from the profit reconciliationfor the most recent month: Variance $ Favourable/Adverse Fixedoverheadexpenditure Fixedoverheadefficiency Fixedoverheadcapacity 6 marks) Task 2 Match the possible explanations of the cause of variances to the variance. Volumevariance Labourproductivitywas lowerthan expected Efficiencyvariance Labourproductivitywas higherthan expected Expenditurevariance Over-absorptionof fixedoverheads Capacity variance Under-absorptionof fixedoverheads Fixedoverheadexpenditurewas higherthan expected Fixedoverheadexpenditurewas lowerthan expected Labourworkedmorehoursthan expected Labourworkedfewerhoursthan expected (4 marks) G (Total = 10marks) 25.6 CC Co makesgarden chairs,whichhave a standard directmaterialcost as follows: 6 kg of MaterialWat $15per kg =$90 per chair DuringOctober20X5,2,500 chairsweremanufacturedusing12,000kg of MaterialW whichcost $175,000. Task 1 Calculate the followingvariances. 186 Thedirectmaterialtotal variance $ Adverse/Favourable Thedirectmaterialpricevariance $ Adverse/Favourable Thedirectmaterialusage variance $ Adverse/Favourable (6 marks) ManagementAccounting(FMA/MA) Page 199 of 421 H q Task 2 DCo uses standard marginalcosting.Itsbudgeted contributionforthe last monthwas $30,000. Theactual contributionforthe monthwas $20,000, and the followingvariances have been calculated: Q U E T IO N S S Salesvolumecontributionvariance$5,000 adverse Salespricevariance$10,000favourable Fixedoverheadexpenditurevariance$3,000 favourable Usethe drop down box to select the total variable cost variance. Select... $18,000adverse $18,000favourable $15,000adverse $15,000favourable (2 marks) Task 3 ECo has calculatedan adversedirectmaterialvarianceby subtractingits flexedbudgeted directmaterialcost fromits actual directmaterialcost forthe period. WhichTWOof the followingcould have caused the variance? Anincreaseindirectmaterialprices G Anincreaseinraw materialusage per unit Unitsproducedbeinggreater than budgeted Unitssoldbeinggreater than budgeted H (2 marks) (Total = 10marks) 25.7 DreamCo operates a standard costingsystem. Itexpectsto produce3,000 unitsof productXusing12,000hoursof labour. Thestandard cost of labouris $12.50per hour. InJanuary the companyactuallymade 2,195units. Theactual labourcost was $110,750 forthe 9,200 hoursworked. Task 1 Calculate the followingvariances for Dream Co for January. Totallabourvariance $ Adverse/Favourable Labourrate variance $ Adverse/Favourable Labourefficiencyvariance $ Adverse/Favourable (6 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 200 of 421 Questions 187 q Task 2 Whichof the followingcould give rise to an adverse labour efficiencyvariance? Therate actuallypaid to workerswas higherthan the standard Actualproductiontooklongerthan expected Therate actuallypaid to workerswas lowerthan the standard Actualproductionwas quickerthan expected 2 marks) Task 3 Dream Co’s operating costs are 70%variable and 30%fixed. Whichof the followingvariances’valueswouldchange ifthe companyswitchedfrom standard marginalcostingto standard absorptioncosting? Directmaterialefficiencyvariance Variableoverheadefficiencyvariance Salesvolumevariance Fixedoverheadexpenditurevariance (2 marks) (Total = 10marks) 25.8 G SwindleCo makeswidgets.Twotypes of labourare involvedinthe productionof a widget, skilledand unskilled.Skilledlabouris paid $15per hourand unskilled$3 per hour. Twiceas many unskilledlabourhoursas skilledlabourhoursare needed to producea widget,six unskilledlabourhoursbeingneeded. Awidgetis made up of twodifferentdirectmaterials.Fivekg of MaterialXand twometres of MaterialZare needed. MaterialXcosts $2 per kg and MaterialZ$5 per metre. Variableproductionoverheadsare incurredat Swindleat the rate of$3.00per directskilled labourhour. Thebasis of fixedcost absorptionis directskilledlabourhours.Forthe comingyear, budgeted fixedproductionoverheadsare $100,000and budgeted productionof widgetsis 10,000units. Administration,sellingand distributionoverheadsare added to productsat the rate of $20 per widget,and a mark-upof 15%is made on each. Task 1 Complete the standard cost card for a widget: Standard cost card fora widget $ Directmaterials- X Directmaterials- Z Directlabour- skilled Directlabour- unskilled Variableproductionoverhead Fixedproductionoverhead Adminsellingand distributionoverhead Standard cost of sale Standard profit Standard sales price (8 marks) 188 ManagementAccounting(FMA/MA) Page 201 of 421 H G q Task 2 Howis a sellingprice variance calculated? Thedifferencebetweenactual unitssoldand the budgeted quantity, valuedat the standard sellingprice Thedifferencebetweenthe actual unitssoldand the budgeted quantity, valuedat the standard profitper unit Thedifferencebetweenbudgeted and actual sales revenue Thedifferencebetweenwhat the sales revenueshouldhave been forthe quantity sold,and what it was 2 marks) Q U E T IO N S S (Total = 10marks) 25.9 Thestandard directlabourcost of productFab is as follows: 3 hoursof Grade Blabourat $5 per hour=$15per unit Duringthe last period,3,000 unitsof productFab weremade, and the directlabourcost of the Grade Blabourwas $43,700for10,000hoursof work. Task 1 Calculate the direct labour total variance, and analyse it into the direct labour rate variance and direct labour efficiencyvariance. Directlabourtotal variance $ Adverse/Favourable Directlabourrate variance $ Adverse/Favourable Directlabourefficiencyvariance $ Adverse/Favourable (6 marks) Task 2 Complete the followingsentence using the words listed. Notallof the wordslistedwill be needed and somemay be needed morethan once. Thedirect labour rate varianceis the differencebetweenthe _______cost and the ________cost for the _________numberof ________paid for. standard actual units hours (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 202 of 421 Questions 189 H q Task 3 Duringthe same period,12,000kgsof materialTopwas used to makethe 3,000 unitsof productFab, at a cost of $96,000.Thedirectmaterialtotal variancewas $3,000 (A). What is the standard direct material cost per unit of Fab? (giveyour answer to the nearest whole$) Standard directmaterialcost per unit $ (2 marks) (Total = 10marks) 25.10 Diamonduses standard costing.Thefollowingdata relatesto labourGrade C. Actualhoursworked Standard allowanceforactual production Standard rate per hour Ratevariance(favourable) Task 1 What was the actual rate of pay per hour? $7.75 $7.60 $7.44 $7.45 12,600hours 10,800hours $7.50 $675 (2 marks) G H Task 2 Thestandard materialcontentof one unitof Rubyis 5 kg of materialSparkle,whichshould cost $20 per kg. InDecember20X6,6,000 unitsof Rubywereproducedand there was an adversematerialusage varianceof $10,000. Calculate the quantity of Sparkle used in December20X6(to the nearest wholekg) Quantityof Sparkleused inDecember20X6 kg (2 marks) Task 3 CrystalCo uses a standard absorptioncostingsystem.Thefollowingfiguresare available forthe last accountingperiod,forwhichstandard profitwas $135,000. $ Salesvolumevariance 5,000 adverse Salespricevariance 0,500 favourable Totalvariablecost variance 7,500 adverse Fixedcost expenditurevariance 5,500 favourable Fixedcost volumevariance 4,000 adverse What was the actual profit for the period? $ 190 (4 marks) ManagementAccounting(FMA/MA) Page 203 of 421 G q Task 4 Emeralduses standard marginalcosting,instead of standard absorptioncosting. WhichTWOof the followingare differences in the way that Emeraldwillcalculate its variances, when compared withCrystal? Thesales volumevariancewillbe valuedat standard contributionmargin. Thesales volumevariancewillbe valuedat standard profitmargin. Therewillbe no fixedcost volumevariance. Therewillbe no fixedcost expenditurevariance. (2 marks) Q U E T IO N S S (Total = 10marks) 26 Performance measurement 120 mins 26.1 Flyriteis a lowcost airline.Itwas established5 years ago and has grownrapidly. It operates flightroutesto variouscountries. CustomersbookflightsmainlyusingFlyrite’s onlinebookingsystem. Thecompanyis keento benchmarktheirperformanceagainst those of otherlowcost airlinesand is consideringinstallinga balanced scorecard approach. Youhave been asked to assist withgatheringappropriateperformancemeasuresto use inthe balanced scorecard. Thefollowingdata is available: Flyrite Operatingdata forthe year ended 31December20X1 Salesrevenue $250 million Salesattributableto newroutes $13million Averagecapital employed $110million Profitbeforeinterestand tax $22 million Numberof customers 1,250,000 Numberof customercomplaints 37,500 Numberof flights 2,500,000 Numberof delayedflights 375,000 Task 1 Calculate the followingratios and other statistics for Flyritefor the year ended 31December20X1(giveyour answer to one decimal place). Returnon capital employed % Operatingprofitmargin % Assetturnover times Percentageof sales attributableto newroutes % (6 marks) Task 2 Calculate the followingstatistics for Flyrite(giveyou answer to the nearest whole percentage). Percentageof customerswhomakea complaint % Percentageof flightsdelayed % (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 204 of 421 Questions 191 H q Task 3 Complete the followingexplanation of a balanced scorecard. Abalanced scorecardmeasuresperformancefromfourperspectives:financial,internal businessprocess,innovationand learningand Picklist competitiveadvantage customer increasedmarketshare growth Flyrite’sperformancemeasureof wouldbe categorisedunderthe innovationand learningperspectiveof the balanced scorecard. Picklist percentage of flightsdelayed percentage of customercomplaints percentage of sales attributableto newroutes 2 marks) (Total = 10marks) 26.2 Thedirectorsof Nicolare reviewingthe performanceof its newestdivision,DivisionS. The divisionoperates inthe medicalsales industryand manufacturesand sellswoundcare productsforhospitals. Thefollowinginformationis availableforthe year ended 31December20X1forDivisionS. DivisionS $ Sales 100,000 Operatingprofit 5,000 Capital employed 20,000 Imputedinterestcharge per year 10% Totalwoundcare productsales inthe industryforthe year ended 31December20X1were $1,000,000. Task 1 Calculate the followingperformance measures for DivisionS (giveyour answer to the nearest wholenumber). Returnon sales % G Assetturnover times Marketshare % Returnon investment % Residualincome $ (6 marks) 192 ManagementAccounting(FMA/MA) Page 205 of 421 H G q Task 2 WhichTWOof the followingare advantages of residual incomeas a measure of divisionalperformance over return on investment? Itenablesthe performanceof divisionsof differentsizesto be compared Itrelatesthe sizeof the division’sincometo the sizeof the investment Itmakesdivisionmanagers aware of the cost of financingtheirdivisions Itgivesan absolutemeasureof performance (2 marks) Q U E T IO N S S Task 3 WhichTWOof the followingare non-financial measures that could be used by Nicol? Profitper product Numberof newproductslaunched Salesrevenueper product Numberof customercomplaints (2 marks) (Total = 10marks) 26.3 Hendersonmanufacturesand sellsactivewear. Belowis an extract fromthe financial statements forthe businessfor20X1: 20X1 $’000 3,500 1,750 500 80 3,200 800 2,800 400 250 180 Sales Cost of sales Expenses Interest Sharecapital and reserves Longtermborrowings Non-currentassets Receivables Inventory Payables Task 1 H Complete the table belowto calculate the performance measures for 20X6(please give your answer to two decimal places). Performancemeasure 20X1 Returnon capital employed Operatingprofitmargin Assetturnover Interestcover Gearing(debt/debt +equity) Inventorydays Receivablesdays Payablesday (8 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 206 of 421 Questions 193 q Task 2 Whichof the followingdrop down options is NOTone of the four perspectives in a balanced scorecard? Select... Financial Non-financialsuccess Internalbusiness process Customer (2 marks) (Total = 10marks) 26.4 DivisionKis a divisionof KWplc.Thefollowinginformationis relevantto DivisionK. Capital employed $40 million Sales $80 million Operatingprofit $10million Cost of capital 10%per year KWplcis consideringtwoproposals. Proposal 1 Investa further$5minnon-currentassets to earn additionalannual operatingprofitof $1 million. Proposal 2 Disposeof non-currentassets at theircarryingvalueof $10m.Thiswouldlead to annual operatingprofitsfallingby $1.5mper year. Proceedsfromthe disposalof these non-current assets wouldnot be creditedto DivisionK(but to the HoldingCompanyof KWplcinstead). Task 1 Calculate the followingperformance measures for DivisionKBEFOREconsideringthe two new proposals. G Returnon investment(ROI) Residualincome(RI) % $ million (4 marks) Task 2 Areeach of the followingstatement true or false in relation to the two proposals KW plc is considering? True False Proposal1willincreaseROI Proposal1willincreaseRI Proposal2 willdecreased ROI Proposal2 willdecrease RI 194 (4 marks) ManagementAccounting(FMA/MA) Page 207 of 421 H G q Task 3 WhichTWOof the followingare advantages of return on investmentas a measure of divisionalperformance compared to residual incomeresidual income? Itgivesan absolutemeasureof performance. Itmakesmanages aware of the cost of financingtheirdivision. Itis moreeasilyunderstoodby divisionalmanagers. Ithelpsincomparingthe performanceof the managers of divisionsof differentsizes. (2 marks) Q U E T IO N S S (Total = 10marks) 26.5 Pyllontraininghas twodivisionswhichitstreats as separate investmentcentres,JC and GC. Thefollowinginformationis availableforeach divisionforthe year ended 31March20X1: JC GC $ $ Sales 50,000 60,000 Operatingprofit 700 675 Capital employed 3,500 4,500 Totalsales inthe industryinwhichPyllonoperates were$2,500,000 forthe year ended 31March20X1. Pyllonuses an imputedinterestcharge of 10% Task 1 Calculate the followingperformance measures for Pyllon(giveyour answer to the nearest wholenumber). Returnon investmentfordivisionJC % Returnon investmentfordivisionGC % ResidualincomefordivisionJC $ ResidualincomefordivisionGC $ Marketshare fordivisionJC % AssetturnoverfordivisionGC times (6 marks) Task 2 WhichTWOof the followingare disadvantages of using residual incomeas a performance measure? Comparisonsbetweendivisionsof differentsizesis difficult Itdoes not relate the sizeof the centresincometo the sizeof the investment Itdoes not makedivisionalmanagers aware of the cost of financingtheirdivisions (2 marks) Itis not directlyrelated to net presentvalue(NPV). Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 208 of 421 Questions 195 H q Task 3 Pyllonwishesto introducethe use of somenon-financialperformancemeasuresto the divisions. WhichTWOof the followingwouldbe examples of non-financial performance indicators? Numberof newcustomers %increaseinmarketshare Returnon sales (2 marks) Salesto each newcustomer (Total = 10marks) 26.6 JBCo manufacturesand sellscar radios.Belowisa summaryof the financialstatements forthe businessfor20X6: 20X6 $'000 2,540 1,425 600 11 1,650 245 1650 347 180 318 36 Sales Cost of sales Expenses Interest Sharecapital and reserves Longtermloan Non-currentassets Receivables Inventory Payables Bankbalance Task 1 Complete the table belowto calculate the performance measures for 20X6.(Giveyour answers to two decimal places.) 20X6 (i) Grossprofitmargin G (ii) Returnon capital employed (iii) Assetturnover (iv) Currentratio (v) Quickratio (vi) Inventoryholdingperiodindays (vii) Payablespayment periodindays (viii) Receivablesperiodindays (8 marks) 196 ManagementAccounting(FMA/MA) Page 209 of 421 H G q Task 2 Product quality is associated withwhichperspective of performance in a balanced scorecard? Customer Financial Innovationand learning Internalbusinessprocess (2 marks) Q U E T IO N S S (Total = 10marks) 26.7 CycleCo, a mailordercompanyoperatingina verycompetitivemarket,has undergonea strategicreviewand has identifiedthe retentionof existingcustomersas one ifits critical successfactors.Toachievethis,it wants to installa newcallcentre to enable customersto place ordersoverthe phone.Ithas been estimatedthat the sales valueof ordersthat will be placed usingthe newsystemwillaverage $1,000per hour. Thesystemthat Cyclehas chosenwillrequirea regularannual softwareupdate, during whichtimecustomerswillnot be able to call,and orderswillbe lost.Thesystemmay be updated at one of fourlevels:W, X,Yor Z.Thecosts of the updates, and the estimatesof hourslost,are as follows. Level Updatecost $ 10,000 8,000 9,750 7,500 Hourslost W 15 X 21 Y 19 Z 27 Task 1 Usingthe data provided, recommend whichlevelof maintenance should be chosen. W X Y Z (3 marks) Task 2 Determinewhether each of the followingmeasures represents a CSFor a KPI: Measure CSF KPI 95%customercomplaintresolution Successfulrelationshipswithkeysuppliers Negotiationof favourabletermsfornewprojectfinance Gain inmarketshare by 2%each month Lowerthe cost of capital by 1.5% (5 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 210 of 421 Questions 197 H q Task 3 Whichof the followingis a definitionof a 'critical success factor' for an organisation? Astatement of what the organisationintendsto achieveovera periodof time Ameasurableindicatorof organisationalperformance Aperformancerequirementthat is fundamentalto competitivesuccess Abasic beliefof the peoplewhoworkinthe organisation (2 marks) (Total = 10marks) 26.8 G Thefollowinginformationisavailableforthe year ended 31December20X6forDivaCo. Revenue Cost of sales Othercosts Operating profit $ 220,000,000 110,130,000 85,670,000 24,200,000 Totalnon-currentassets Inventory Tradereceivables Cash Total assets 100,970,000 2,100,000 3,200,000 15,956,463 122,226,463 Tradepayables Othercurrentliabilities Longtermborrowings Sharecapital Reserves Equityand liabilities 15,200,000 9,500,000 28,000,000 10,000,000 59,526,463 122,226,463 H Task 1 Calculate the followingperformance measures for DivaCo for 20X6(to two decimal places): Assetturnover times Inventorydays days Payablesdays days Currentratio Quickratio Returnon capital employed % (6 marks) 198 ManagementAccounting(FMA/MA) Page 211 of 421 q Task 2 Forthe year end 31December20X5,Diva'sinventorydays werelowerthan in20X6. WhichTWOof the followingcould explainthis? Aslowdownintrading Alengtheningof the timetaken by customersto pay fortheirgoods Abuild-upininventorylevels Areductionof inventorylevels Alengtheningof the average timetaken to pay suppliers Q U E T IO N S S (2 marks) Task 3 Non-financialperformanceindicatorsare sometimesreferredto as 'leadingindicators'. What does this mean? Theyare moreimportantthan financialindicators Theytellthe firmthat somethinghas gone wrongafter it has gone wrong Theygiveearlywarningsignsof problems Theyare moreunderstandablefornon-financialstaff (2 marks) (Total = 10marks) G H 26.9 Task 1 Identifywhether the followingmeasures are financial or non-financial indicators Indicator Financial Non-financial Numberof customercomplaints %increaseinmarketshare Earningsper share Machinedowntime Employeeattitudes Residualincome (4 marks) Task 2 JungleCo sellscages and tanks forexoticpets. Itreportednet incomeof $150,000during the year, beforepreferencedividendsof $25,000. Junglehad 100,000$5.00 ordinary shares inissueduringthe year. Calculate Jungle's return on equity. % (2 marks) Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 212 of 421 Questions 199 q Task 3 Inthe last year Jungle'stank productiondivisionreporteda returnon investmentof 20%, and its controllableprofitwas $60,000. Itscost of financewas 15%per year. What was the division'sresidual income? $3,000 $57,000 $58,200 $15,000 (2 marks) Task 4 State whether these measures are absolute or relative. Residualincome absolute/ relative Returnon equity absolute/ relative (2 marks) (Total = 10marks) 26.10 G 3ECo has decidedto improveits performancemeasurementprocesses.Thefollowing informationrelatesto quarter 2: Budgetedhours 1,000standard hours Standard hoursforworkproduced 1,225standard hours Actualhoursworked 1,300 Task 1 Calculate the followingratios for 3ECo for quarter 2 (to the nearest wholepercent). Capacity ratio % Activityratio % Efficiencyratio % (6 marks) Task 2 Inquarter 3 the ratioswerecalculatedas follows: Capacity ratio:120% Efficiencyratio:110% Indicate, by tickingthe correct boxes in the table below, whichexplanations relate to each ratio. More labour hours were worked than budgeted Labour hours produced fewer units per hour than budgeted Labour hours produced more units per hour than budgeted Fewer labour hours were worked than budgeted Capacity ratio Efficiencyratio (2 marks) 200 ManagementAccounting(FMA/MA) Page 213 of 421 H q Task 3 WhichTWOof the followingstatements about benchmarking are true? Theultimateaimof benchmarkingis to improveperformance Competitivebenchmarkingcan be used to compareinternaldepartments Benchmarkingis suitablefornon-profitseekingentities Benchmarkingis quickand straightforward (2 marks) Q U E T IO N S S (Total = 10marks) G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 214 of 421 Questions 201 q G H 202 ManagementAccounting(FMA/MA) Page 215 of 421 q Answers G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 216 of 421 q G H 204 Management Accounting (FMA/MA) Page 217 of 421 G q 1 Accounting for management 1.1 Thecorrectanswersare: Itshouldbe relevantforits purposesand it shouldbe communicatedto the rightperson. Completeaccuracy isnot necessarilyan essential qualityof good information.Itneeds to be sufficientlyaccurate forits purpose,and oftenthere isno need to go intounnecessary detailforpointlessaccuracy. Thecosts of providinggood informationshouldnot outweigh the benefitstherefore'It shouldbe providedwhateverthe cost' is incorrect. 1.2 Thecorrectansweris:Tacticalplanning.Tacticalplanningis used by middlemanagement to decidehowthe resourcesof the businessshouldbe employedto achievespecific objectivesinthe mostefficientand effectiveway. 1.3 Thecorrectanswersare: Itis used to aid planningand it may includenon-financial information. Managementaccounts are prepared forinternaluse withinan organisationand there is no lawthat states that they mustbe prepared. Theirpurposeis to helpwithplanning,control and decisionmakingand thereforethey may use non-financialinformationas wellas financialinformation.. 1.4 Thecorrectansweris:(iii)only. Statement (i)is a descriptionof a managementinformationsystem,not a management controlsystem. Statement (ii)is the 'wrongway round'.Thestrategy is the courseof actionthat a business mightpursueinorderto achieveits objectives. Statement (iii)is correct.Data isthe 'raw material'whichis processedintouseful information. 1.5 Thecorrectanswersare: Completeand Accurate. Goodinformationis not necessarilyextensive.Toomuchinformationmay tend to obscure the importantpoints.Neitheris good informationtrue and fair, thisis an accounting concept,but managementaccountinginformationshouldbe correct. 1.6 Thecorrectansweris:Tactical. Monthlyvariancereportsare an exampleof tactical managementinformation. 1.7 Thecorrectansweris:Bothare true. Statement(i)is true and thisis whycost accountingis,ingeneral,unsuitablefordecisionmaking.Statement(ii)is true. However,the way the data is analysed is different. 1.8 Thecorrectansweris:Establishingobjectives. Theplanningstage involvesestablishingobjectivesand selectingappropriatestrategiesto achievethose objectives.Theotherbusinessprocessesoccurafter productionhas started or ended. 1.9 Thecorrectansweris:Managementaccountingsystemsprovideinformationforthe use of decision-makerswithinan organisation. Financialaccountingsystemsprovideinformationforlegalrequirements,shareholdersand tax authorities.Managementaccountingsystemsprovideinformationspecificallyforthe use of decision-makers(managers)withinthe organisation. 1.10 Thecorrectanswersare: Totalsales valueper productand total materialusage Theothertwoitemshave been processedinsomeway to providemeaningfulinformation whereastotal sales valueper productand total materialusage are the basic data for furtherprocessing. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 218 of 421 Answers 205 A N S W E R S H q 2 2.1 2.2 2.3 Data and presenting information Thecorrectanswersare: Data collectedby a bank ina telephonesurveyto monitorthe effectivenessof the bank's customerservicesand Focusgroupfeedbackabout potential flavoursof a newbiscuit. Data collectedby a surveyor focusgroupfora particularprojectare primarydata sources. Historicalrecordsof transport costs werenot collectedspecificallyforthe preparationof forecasts,thereforethese are secondarydata. TheAnnualAbstractof Statisticsis a sourceof secondaryexternaldata. Thecorrectanswersare: Ordinaldata is a formof categoricaldata and Populationdata are data arisingas a resultof investigatinga groupof peopleor objects. Itis primarydata that is collectedfora specificpurposenot secondarydata. Continuous data (ratherthan discretedata) can take on any value.Categoricaldata is data that is descriptiveand it can be ordinal(witha set order)or nominal(a name or label). Thecorrectansweris:Populationdata. Foreignexchangerates and interestrates are likelyto be obtainedfromfinancial newspapers.Detailsof industrycosts are morelikelyto be foundintrade journals. 2.4 G 2.5 Thecorrectansweris:Categoricaland ordinal Satisfactionis descriptiverather than numericalso the data is categorical.The questionnaireuses a scale, meaningthat the data is hierarchicaland thereforeordinal. Rememberthat nominaldata has no specificorderbuiltintoit, whereasordinaldata has a specificorder. Inthisexamplethe levelof satisfactioncouldclearlybe rankedinorder, even ifit was describedas goingfromverysatisfiedto verydissatisfiedrather than beinggivena numberon a scale, and so wouldbe describedas ordinal.Don'tbe put offby the numbers inthe scale. Categoricaldata can take on numericalvaluessuch as a scale of one to ten but these are simplyalternative'names' rather than havingmathematicalmeaning. Thecorrectanswersare: Sensorsallowfaster anomalydetectionand Transactionaldata can allowa businessto focuson its mostimportantcustomers Forexample,sensorson manufacturingmachinesallowmachinebreakdownsto be detected as soonas they occur. Transactionaldata is particularlyusefulto retailerswho can analyse customers'spendinghabits and target marketingtowardstheirmostvalued customers. Data fromsocialmediacan be veryusefulto businesses.Forexample,it can highlight populartrends or unpopularproducts. Data froma GPSsystemis an exampleof a machinedata source. 2.6 Thecorrectansweris:144degrees Material W X Y Z Cost $ 2,250 3,000 3,600 150 9,000 3,600/9,000 ×360o=144o 2.7 Percentage% 25 33.3 40 1.7 100 Degrees 90 120 144 6 360 Thecorrectansweris:Multiplebar chart. Thisis because the chart shownhas fourbars foreach flavourof ice-cream.Asimplebar chart wouldjustshowthe total numberof ice-creamssoldeach monthand a component bar chart wouldshoweach flavourseparately, but inone chart. 206 ManagementAccounting(FMA/MA) Page 219 of 421 H q 2.8 Thecorrectansweris:InJune, the gap betweenthe sales of strawberryand the sales of chocolatereduced. Salesof mintchoc chipdid not risesteadilyoverthe fourmonthsas there was a dip betweenMayand June. Totalsales roseinJuly – allof the products,apart fromblueberry,werehigherinJuly than inthe othermonths. Salesof blueberrydid not riseinMayand July, they onlyroseinMay. 2.9 Thecorrectansweris:Linegraph Alinegraph wouldbe mostsuitablehere. Apercentage componentbar chart wouldnot showhowthe total sales valueshave fluctuated.Ascatter diagramwouldshow fluctuationsbut it wouldnot be as clear as a linegraph. Apiechart wouldnot showthe fluctuations. 2.10 Thecorrectansweris:3 only ACCAexaminingteam comments Thisquestioncoverssyllabusarea Presentinginformationusingtables charts and graphs. Previousquestionsinthisarea have focussedon the constructionof charts and graphs and have been wellanswered.However,thisone was quitepoorlydone. Thissuggeststhat candidates are focussingon the mechanicsof constructingtables, charts and graphs and are not consideringthe best way of presentinginformationto an audience.Piecharts are best used to showthe relativesizeof the componentelementsof a total (eg a company’s total sales analysed by geographicmarkets).Barcharts are used to displayand compare the number,frequencyor other measure(eg mean)fordifferentdiscretecategoriesof data. Forexample,a company’ssales indifferentyears. Scatter diagramsare best used to exhibitdata inorderto comparehowtwovariablesvarywitheach other. Inthiscase the relationshipbetweendemand and advertisingexpenditurewouldbe best shownby a scatter diagram. G S 2.11 Thecorrectansweris:Bothstatements are false. ACCAexaminingteam comments Statement1:Primarydata is collectedfora specificpurposefromas closeas possibleto the originof an itemof data. Itcan be collectedfromwithinor fromoutsideof the organisation.Secondarydata is 'secondhand' data collectedby someoneelseand because of thisis usuallylessexpensivethan primarydata. Thestatement is false. Statement2: Numericdata can be classifiedas discreteor continuous,but not alldata is numeric.Somedata, forexamplecustomeropinionson a product,is descriptive.The statement is false. 2.12 Thecorrectanswersare: Ifa sampleis selectedusingrandomsampling,it willbe freefrom bias and Inquota sampling,investigatorsare toldto interviewallthe peoplethey meet up to a certainquota. Asampling frame is a numberedlistof allitemsina population (nota sample). Cluster sampling involvesselectingone definablesubsectionof the populationwhich thereforemakesthe potentialforbias considerable. 2.13 Thecorrectansweris:Noneof the above Inquota sampling,investigatorsare toldto interviewallof the peoplethey meet up to a certainquota. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 220 of 421 A N S W E R Answers 207 H q 3 Cost classification and behaviour 3.1 Thecorrectansweris:Directexpense 3.2 Theroyaltycost can be traced infullto the product,ie it has been incurredas a direct consequenceof makingthe product.Itis thereforea directexpense.Sellingexpense, productionoverheadand administrativeoverheadare alloverheadsor indirectcosts which cannot be traced directlyand infullto the product. Thecorrectanswersare: Astoresassistant infactory store and factory cleaningstaff 3.3 Thewages paid to the storesassistant and cleaningstaff inthe factory cannot be traced in fullto a productor service,thereforethese are indirectlabourcosts. Thecorrectansweris:Factoryoverheads Overtimepremiumis alwaysclassedas factory overheadsunlessit is: Workedat the specificrequestof a customerto get the ordercompleted. 3.4 Workedregularlyby a productiondepartmentinthe normalcourseof operations,in whichcase it is usuallyincorporatedintothe directlabourhourlyrate. Thecorrectanswersare: Stapleto attach fireretardant labelsto chairsand Thesalary of the sales director Ratherthan each staple beingallocatedto a particularproduct,a boxof staples wouldbe treated as a generalproductionoverhead.Thesalary of the sales directoris a selling overhead. Theothercosts can be directlytraced to each chairmanufactured. 3.5 Thecorrectanswersare: Sellingpricesand Controllablecosts Themanager of a profitcentre usuallyhas controloverhowrevenueis raised,ie selling pricesand overthe controllablecosts incurredinthe centre. Apportionedhead officecosts are uncontrollablefromthe pointof viewof the profitcentre manager. Aresponsibilitycentre manager does not have controloverthe capital investmentinthe centre unlessthe centre is designatedan investmentcentre. G 3.6 Thecorrectansweris:Acost whichcan be influencedby its budget holder. Controllablecosts are itemsof expenditurewhichcan be directlyinfluencedby a given manager withina giventimespan. 3.7 Thecorrectanswersare: Customeraccount and Chequereceivedand processed Itwouldbe appropriateto use the cost per customeraccount and the cost per cheque receivedand processedforcontrolpurposes. 3.8 Stationerycosts and the telephonebillare expensesof the department,thereforethey are not suitablecost units. Thecorrectansweris:Acost that relatesto a timeperiodwhichis deducted as expensesfor the periodand is not includedinthe inventoryvaluation. Aperiodcost is charged against the sales forthe period.Itis not carriedforwardin inventoryto a futureperiod. 3.9 Thecorrectansweris:Asa productionoverhead Thesupervisorsare engaged inthe productionactivity,thereforeas an administration overheadcan be eliminated.Theysupervisethe productionof allproducts,thereforetheir salariesare indirectcosts because they cannot be specificallyidentifiedwitha cost unit. Thiseliminates'as a directlabourcost' and 'as a directproductionexpense'.Thesalaries are indirectproductionoverheadcosts, thereforeas a productionoverheadis correct. 208 ManagementAccounting(FMA/MA) Page 221 of 421 H q 3.10 Thecorrect answers are:Rental ofthefinished goodswarehouse andDepreciation ofits ownfleetofdelivery vehicles Remember youareonlylooking forcoststhataredirectlyrelatedtogetting thefinished goodsfromtheproduction linetoyourcustomers. Before theycanbedistributed, finished goodsmayhavetobetemporarily storedina warehouse therefore therentalofthe warehouse willberegarded asa distribution cost.Inaddition, youwillneeddelivery vehicles fordistribution purposes – anycostsrelated tothesevehicles willbeclassed as distribution costs.Commission paidtosalesstaffandthemarketing campaign costsare sellingcosts. 3.11 Thecorrect answer is:Afunction orlocation forwhichcostsareascertained. Acostcentre actsasa 'collecting place'forcostsbefore theyareanalysed further. 3.12 Thecorrect answer is:10410 For(10)machining department useof(410)indirect materials thecodeis10410. 10440hasanincorrect expense type. 13410 and13440havetheincorrect costcentre code.Thecodeindicates thecostcentre incurring thecost,iereceiving thematerials. 3.13 Thecorrect answer is:Constant intotalwhenproduction volume changes Within therelevant range,fixedcostsarenotaffected bythelevelofactivity, therefore 'Constant intotalwhenproduction volume changes' iscorrect. Variable costs,notfixedcosts,areconstant perunitoutput. Whilefixedcostsmaynotbe changed easily,theyarenotcompletely outside thecontrol ofmanagement. 3.14 Thecorrect answer is:$110,305 97,85084,865 12,985 Variable 15,95013,500 2,450 =$5.30persquare metre Fixedoverhead =$84,865– ($5.3013,500) =$84,865– $71,550 = $13,315 Overheads on18,300square metres =$13,315 +($5.3018,300) =$13,315 +$96,990 =$110,305 overhead = G S 3.15 Thecorrect answer is:Graph2 shows thatcostsincrease inlinewithactivity levels. 3.16 Thecorrect answer is:Graph1shows thatfixedcostsremain thesamewhatever thelevel ofactivity. 3.17 Thecorrect answer is:Graph1shows thatcostperunitremains thesameatdifferent levels ofactivity. 3.18 Thecorrect answer is:Graph4 shows thatsemi-variable costshavea fixedelement anda variable element. 3.19 Thecorrect answer is:Graph3 shows thatthestepfixedcostsgoupin'steps' asthelevel ofactivity increases. 3.20 Thecorrect answer is:$5,100 Units 1,100 700 400 Highoutput Lowoutput Variable costof $ 18,300 13,500 4,800 Variable costperunit$4,800/400 = $12perunit Fixedcosts=$18,300 – ($121,100) =$5,100 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 222 of 421 A N S W E R Answers209 H G q 3.21 Thecorrect answer is:Asemi-variable cost. Thesalaryispartfixed($650permonth) andpartvariable (5centsperunit).Therefore itis a semi-variable cost. 3.22 Thecorrect answer is:Astepcost. Thecostdescribed willincrease insteps,remaining fixedateachstepuntilanother supervisor isrequired. Sucha costisknown asa stepcost. answer is:Salesrevenue =62,500+(25advertising expenditure) 3.23 Thecorrect Independent variable x=advertising expenditure Dependent variable y =salesrevenue Highest x=month 6 =$6,500 Highest y =month 6 =$225,000 Lowest x=month 2 =$2,500 Lowest y =month 2 =$125,000 Usingthehigh-low method: Highest Lowest Advertising expenditure $ 6,500 2,500 4,000 Salesrevenue $ 225,000 125,000 100,000 Salesrevenue generated forevery$1spentonadvertising = $100,000=$25per$1spent. $4,000 If$6,500isspentonadvertising, expected salesrevenue =$6,500$25=$162,500 Salesrevenue expected without anyexpenditure onadvertising =$225,000– $162,500 = $62,500 Salesrevenue =62,500+(25advertising expenditure) 3.24 Thecorrect answer is:Thecostdescribed isa stepped fixedcost. Astepped fixedcostisfixedinnature butonlywithin certain levels ofactivity. 3.25 Thecorrect answer is:$30 Highest Lowest Activity level Units 10,000 5,000 5,000 Cost $ 400,000 250,000 150,000 Variable costperunit= $150,000=$30 5,000units 3.26 Thecorrect answer is:Thediagram shown depicts annual factorypower costwhere the electricity supplier setsa tariffbasedona fixedchargeplusa constant unitcostfor consumption butsubject tomaximising annual charge.There isa fixedcostasthelinefor coststartspartwayupthey axis.Theslopeofthelinerepresents therisingvariable costs, butonceitreaches a certain levelofactivity thelineplateaus, whichmeans thatthetotal costisnolonger increasing. 210 Management Accounting (FMA/MA) Page 223 of 421 H G q 3.27 Thecorrect answer is:$1.25 Usingthehigh-low method: Units Cost $ 40,000 20,000 20,000 20,000 4,000 16,000 Variable costperunit= $20,000 16,000units =$1.25 3.28 Thecorrect answer is:GraphA GraphAshows thatupto30,000units,eachunitcostsa constant priceperunit.After 30,000units,thegradient ofthenewvariable costlineismoregentle whichindicates that thecostperunitislower thanthecostwhen0 – 30,000unitsarepurchased. 3.29 Thecorrect answer is:$3,000 Level2 Level1 Production Units 5,000 3,000 2,000 Totalcost $ 9,250 6,750 2,500 Variable costperunit= $2,500 2,000units A N S W E R =$1.25perunit Fixedoverhead =$9,250– ($1.255,000)=$3,000 S 3.30 Thecorrect answer is:$1.67perunit ACCAexamining teamcomments Thehigh-low technique estimates variable costperunitbylooking atthechangein costsbetween thehighest andlowest levelsofoutput. Thecorrect answer isA.Thiscan becalculated byfinding thechangeincostbetween thehighest andlowest output levelsnotexplained bythestepinfixedcosts($9,500– $4,000– $500= $5,000), and dividing bythechangeinoutput between thehighest andlowest output levels.($5,000/ (4,000units– 1,000units)= $1.67perunit. Manycandidates incorrectly basedtheircalculations onthechangeincostsbetween thehighest andlowest levels ofcost,andhenceselected option D (($10,000 – $4,000)/ (3,000units– 1,000units)orC (($10,000 – $4,000– $500)/(3,000units– 1,000units). Thismistake suggests someconfusion between theindependent variable, output, andthe dependent variable, cost. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 224 of 421 Answers211 H q 3.31 Thecorrect answer is:FixedVariable Semi-variable ACCAexamining teamcomments Thekeytothequestion istounderstand thatforvariable coststhecostperunitisconstant, whilst forfixedcoststhetotalcostisconstant. CostXcanquickly beidentified asa fixed costasthetotalcostbetween thetwooutput levels isunchanged (10,000units $3= 15,000units $2).CostYisa variable costbecause thecostperunitisconstant. CostZ meets neither ofthesecriteria because itcontains elements ofbothfixedandvariable cost, andtherefore isa semivariable cost. 3.32 Thecorrect answer is:$1.80 ACCAexamining teamcomments Sincethevariable costis$1lower perunitafter15,000units,thetotalcostfor20,000units mustbeadjusted firstbefore usingthehighlowmethod. Therefore, thetotalcostfor 20,000would be$68,000+(20,000– 15,000)units $1=$73,000 Variable costperunitcanthenbecalculated as(assuming thatthereisnochangein variable cost)= ($73,000– $39,400)/ (20,000units– 8,000units)=$2.80 Variable costperunitafter15,000unitswould thenneedtoadjusted forthe$1lower as= $2.80– $1.00=$1.80. Thesyllabus clearlyindicates thatcandidates needtobeabletocalculate semi-variable costs,stepped fixedcostsandchanges invariable costperunitwhenusingthehighlow technique. Candidates needtopractise thecalculations required inthisarea 4 Forecasting G H 4.1 Thecorrect answer is:0.98 Fromthedatagiven,itisclearthatthecorrelation ispositive andstrong.Thecorrelation coefficient describing a positive strong relationship is0.98. 4.2 –0.98would indicate strong, negative correlation. -0.25would indicate weaknegative correlation, whereas 0.25would indicate weakpositive correlation. Thecorrect answer is:17% Y=20– 0.25X X=12 Y=20– 0.25(12) =17% 4.3 Thecorrect answers are:A correlation coefficient numerically closeto1andAlargesample isusedtocalculate theregression equation Acorrelation coefficient numerically closeto1anda largesample isusedtocalculate the regression equation andincrease thereliability offorecasting. Acorrelation coefficient closeto+1or–1indicates a strong linear relationship between XandY.Theregression equation istherefore morereliable forforecasting. Working toa highnumber ofdecimal placesgivesspurious accuracy unless boththedata itselfisaccurate tothesamedegree andthemethods usedlendthemselves tosuchprecision. Forecasting forvalues ofXoutside therangeoftheoriginal dataleadstounreliable estimates, because thereisnoevidence thatthesameregression relationships holdfor suchvalues. Theregression equation isworthless unless a sufficiently largesample wasusedto calculate it.Inpractice, samples ofabouttenormoreareacceptable. 212 Management Accounting (FMA/MA) Page 225 of 421 q 4.4 Thecorrect answer is:0.98 Theformula forthecorrelation coefficient isprovided inyourexam.There arenoexcuses forgetting thisquestion wrong. Correlation coefficient, r= = nXY XY nX 2 2 2 2(X)][nY(Y) (4157) (1242) 2 2 44612][454242 = 628504 (184144)(2,1681,764) = 124 40404 = 124 127.12 =0.98(to2 decimal places) 4.5 Thecorrect answers are:There isa strong relationship between thelevelofcarownership andthenumber ofroaddeaths and53%ofthevariation inthelevelofroaddeaths from onecountry tothenextcanbeexplained bythecorresponding variation inthelevelofcar ownership Highlevels ofcorrelation donotprovethatthereiscauseandeffect. Acorrelation coefficient of0.73would generally beregarded asindicating a strong linear relationship between thevariables. G Thecoefficient ofdetermination provides thisinformation andisgivenbysquaring the correlation coefficient, resulting in53%inthiscase. Thecoefficient ofdetermination provides thisinformation andnotthecorrelation coefficient. Remember thatyoumustsquare thecorrelation coefficient inordertoobtain thecoefficient ofdetermination. 4.6 Thecorrect answers are:Theestimate isnotreliable because X isoutside therangeofthe dataandTheestimate isnotreliable because thesample issmall WhenX=20,wedon'tknowanything abouttherelationship between XandYsincethe sample dataonlygoesuptoX=10.'Theestimate isnotreliable because X isoutside the rangeofthedata'istherefore true. Sincea correlation coefficient of0.8would beregarded asstrong (itisa highvalue)the estimate would bereliable. 'Theestimate isnotreliable because thecorrelation islow'is therefore nottrue. Withsucha smallsample andtheextrapolation required, theestimate isunlikely tobe reliable. 'Theestimate isreliable' istherefore nottrue. Thesample ofonlysixpairsofvalues isverysmallandistherefore likelytoreduce the reliability oftheestimate. 'Theestimate isnotreliable because thesample issmall'is therefore true. 4.7 Thecorrect answer is:Ymustbethedependent variable Theindependent variable isdenoted byXandthedependent onebyY. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 226 of 421 Answers213 A N S W E R S H G q 4.8 Thecorrect answer is:25.36 a= y x –b n n where b =17.14 x=5.75 y=200 n=4 a= 200 – 17.14 5.75 4 4 =50– (17.14 1.4375) =50– 24.64 =25.36(to2 decimal places) 4.9 Thecorrect answer is:2.33 a= = b= = y x b n n 330b440 11 11 nxy xy nx(x) 2 2 (1113,467) (440330) (1117,986) 4402 148,137 145,200 = 197,846 193,600 H = 2,937 4,246 =0.6917 a= 330 440 – (0.6917 ) 11 11 =30– 27.668 =2.332 =2.33(to2 decimal places) 4.10 Thecorrect answer is:0 Thecorrelation coefficient cantakeonanyvaluefrom–1to+1. 4.11 Thecorrect answer is:92 y =7.112 + 3.949x Ifx=19,trendinsalesformonth 19=7.112 + (3.94919)= 82.143 Seasonally-adjusted trendvalue=82.143 1.12= 92 Ifyoufailedtoselectthecorrect option, rework thecalculation carefully. Youshouldn't havetoomuchtrouble withthisquestion sinceitisjusta matter ofplugging ina valueforx intotheequation giveninthequestion. 214 Management Accounting (FMA/MA) Page 227 of 421 G q 4.12 Thecorrect answer is:300 Ifx=16,y =345.12 – (1.3516)=323.52 Forecast =trend+seasonal component =323.52– 23.62=299.9=300(tonearest unit) 4.13 Thecorrect answer is:123 y =9.82+(4.37224) y =114.748 forecast =114.748 +8.5 =123.248 =123 4.14 Thecorrect answer is:There mustbenounforeseen events andThemodel usedmustfitthe pastdata Forecasts aremadeontheassumption thateverything continues asinthepast. Ifthemodel beingusedisinappropriate, forexample, ifanadditive model isusedwhenthe trendischanging sharply, forecasts willnotbeveryreliable. Provided a multiplicative model isused,thefactthatthetrendisincreasing neednothave anyadverse effectonthereliability offorecasts. Provided theseasonal variation remains thesameinthefuture asinthepast,itwillnot makeforecasts unreliable. 4.15 Thecorrect answer is:Toobtain aninstant estimate ofthetrend Seasonally adjusting thevalues ina timeseries removes theseasonal element fromthe datathereby givinganinstant estimate ofthetrend. 4.16 Thecorrect answer is:(38,40) X=38andY=40 X36Y 38 3 36 Y 41 39 3 Y=(339)– 36– 41=40 A N S W E R S X3640 38 3 X=(383)– 36– 40=38 4.17 Thecorrect answer is:91 If t =1inthefirstquarter of20X5 t =8 inthefourth quarter of20X6 Trend (Y)=65+(78) =121 Forecast =trend+seasonal component =121+(–30) =121– 30 =91 4.18 Thecorrect answer is:$1,344 Inthefirstmonth of20X9,t =13 Y =$1,500– $(313) =$1,461 Forecast =trend+seasonal component =$1,461 0.92 =$1,344 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 228 of 421 Answers215 H q 4.19 4.20 Thecorrectanswersare: Thetrend mustcontinueas inthe past and Thesame pattern of seasonalvariationmustcontinueas inthe past Providedthe multiplicativemodelis used, it does not matter ifthe trend isincreasingor decreasing. Forecastsare made on the assumptionthat the previoustrend willcontinue. Ingeneral,extrapolationdoes not producereliableestimatesbut inforecastingthe future usingtimeseriesanalysiswehave no optionbut to extrapolate. Forecastsare made on the assumptionthat previousseasonalvariationswillcontinue. Thecorrectansweris:Whenthe trend is increasingor decreasing Whenthe trend is increasingor decreasing,additiveseasonalcomponentschange intheir importancerelativeto the trend whereasmultiplicativecomponentsremaininthe same proportionto the trend. Thesecondoptionis thereforea circumstanceinwhichthe multiplicativemodelwouldbe preferredto the additivemodel. 4.21 Thecorrectansweris:$140,000 In20X9,t =9 y =20t – 10 y =(20 9)– 10 y =180– 10=170 Forecastprofitsfor20X9=170– 30 =140 =$140,000 4.22 Thecorrectansweris:477,700 Theadditivemodel Y=T+S where Y=actual series T=trend S =seasonal Theseasonally-adjustedvalueis an estimateof the trend. G Y=T+S T=Y– S T=567,800– (+90,100) T=477,700 4.23 Thecorrectansweris:24% Asyou have been asked to use the base weightingsapproach, the weightingsneed to be based on quantitiespurchasedin20X1(the base year),ie Laspeyrespriceindex. Quantity20X1 Q0 Milk 300 Cola 150 Phones 50 Pricein20X1 Pricein20X2 P0 P0Q0 Pn PnQ0 1 300 1.1 330 2 300 2.5 375 80 4,000 100 5,000 4,600 5,705 Indexin20X2=5,705/ 4,600 100=124.0 Sothe weightedaverage priceriseis 24.0%. Ifyou selected24.3%,thissuggestsyou used the quantitiesfromthe currentyear (20X2) to determineyourweightings,rather than the quantitiesfromthe base year (20X1). 216 ManagementAccounting(FMA/MA) Page 229 of 421 H G q Ifyou chose77.2%you incorrectlyused the quantityeach year instead of usingone year as the base year. Neitherthe Laspeyrenor Paasche methodschange both the quantity and pricewhencalculatingthe index. Ifyou chose20.0%you simplytookthe average of the growthineach productsprice [(10%+25%+25%)/3=20%]. 4.24 Thecorrectansweris:144 idealindex= Laspeyre indexPaasche indexFisher's = 150.00138.24 = 20,736 =144 4.25 Thecorrectansweris:$0.93 4.26 106 $0.80 =$0.93 91 Thecorrectansweris:$14.33 ($5430 ÷150)=$14.33 4.27 Thecorrectansweris:$39.23 $10510÷130=$39.23 4.28 Thecorrectansweris:13.3% Asyou have been asked to use the current weightingsapproach, the weightingsneed to be based on quantitiespurchased in 20X2(the most recent year), ie Paasche price index. Quantity– 20X2 Pricein20X1 Pricein20X2 Qn P0Qn Pn P0Qn P0 Bread 220 1 220 0.9 198 Meat 190 5 950 5.2 988 Televisions 14 300 4,200 350 4,900 5,370 6,086 Indexin20X2=6,086 / 5,370100=113.3 Sothe weightedaverage priceriseis 13.3%. Ifyou selected12.9%,thissuggestsyou used the quantitiesfrom20X1as the basis of your weightings,rather than the quantitiesfrom20X2. Ifyou selected3.6%then you calculateda simpleaverage of change inprice. Ifyou selected54.1%then you incorrectlyused the weightingand priceforeach year inthe calculation. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 230 of 421 Answers 217 A N S W E R S H G q 4.29 Thecorrect answer is:$4.13 ACCAexamining teamcomments Thecorrect answer is$4.13. Thisiscalculated byfirstly adjusting theoverhead costfrom2 yearsagotocurrent pricelevels bymultiplying by155/121, toobtain a costof$4,740.This figure isthenusedina highlowcalculation (change incostdivided bychange inactivity) to obtain thevariable costperunit(($13,000 – $4,740)/ (3,000units– 1,000units) =$4.13). Themostpopular choicewasalternative $4.65,whichwasselected bymajority of candidates. Thisindicates thatalthough competent inthehighlowtechnique theyfailedto adjustcoststocurrent pricelevels. Inanalysing costdataitisimportant thatinflation is allowed for.Those whochose$5.06indicated thateither theyguessed badly,orthatthey couldcompetently perform thehighlowcalculation andthattheyrealised a needtoadjust thefigures forinflation butfailedtodosocorrectly andmultiplied by121/155). Finallya minority chose$3.22,againpossibly suggesting a badguessoralternatively thatthey indexed coststopricelevels fromtwoyearsago. 4.30 Thecorrect answer is:4,053 ACCAexamining teamcomments Thecorrect answer is4,053.Thisiscalculated byfirstlycomputing thetrendforfourth quarter of2015(Y=4,000+6 8 =4,048)andthenaddinga seasonal adjustment of5,to giveforecast salesof4,053. Themostpopular choicewas4,048.Thisindicates thatmanycandidates wereableto calculate thetrendbutfailedtoapplytheseasonal adjustment. Distracters (theincorrect answers toobjective testquestions) areoftenbaseduponpartially complete calculations. Candidates areadvised nottostopthinking assoonastheygenerate a number that corresponds withoneoftheoptions offered. Agoodwayofavoiding thistrapisnottolook attheanswers untilyouaresatisfied thatyouhavefullycompleted yourcalculation. Answer 4,029useda valueof4forperiod 4 of2015andgenerated thewrong trend figure, butthencorrectly processed theseasonal adjustment. Finally a minority ofcandidates selected 4,043,indicating thattheycouldcorrectly calculate trend butsubtracted rather thanaddedtheseasonal adjustment. 4.31 Thecorrect answer is:2,500 ACCAexamining teamcomments Spreadsheet basedquestions arecommonly someoftheworst answered questions inthe examandthisoneproved noexception. Thecorrect answer is2,500.Thisisarrived atby averaging thefourquarter moving totalsthatstraddle quarter 4,2014.((9,000+11,000) ÷ 2 = 10,000).Thisgivesa centred moving total,whichwhenaveraged overthefour quarters (10,000÷4)gives2,500.Themostpopular choicewas10,000.Candidates herefailedtocomplete thefinalstepandchosethecentred moving totalrather thana centred moving average. Itiscommon practice bytheexamining team,whenwriting multiple choicequestions, toofferdistracters (wrong answers) basedona figurethat occurspartwaythrough thecalculation oftherightanswer. Withthisinmindcandidates should makesuretheircalculations arecomplete before looking atthe4 alternative answers onoffer. 218 Management Accounting (FMA/MA) Page 231 of 421 H q 4.32 Thecorrect answer is:$5.38 ACCAexamining teamcomments Thecorrect answer is$5.38,chosen byonlya smallminority ofcandidates. Toarriveat thisanswer candidates needed tofirstlyusethepriceindexdatatoexpress the2012 overhead costin2013prices($12,000 140/130 = $12,923). Thentheyneeded tousethe highlowmethod tocalculate variable costperunit.(($14,000 – $12,923)/(1,200 units– 1,000units)= $5.38). 4.33 Thecorrect answer is:$52,200 ACCAexamining teamcomments Themultiplicative timeseries model summarises a timeseries as(trend seasonal variation cyclicalvariation random variation). Inthiscasetherearenocyclicalorrandom variations. Thetrendforquarter 1year1=40,000+(1,0001)=41,000 Thetrendforquarter 1year2 =40,000+(1,0005)=45,000 Theseasonal variation factorforquarter 1is47,560/41,000 =1.16 Forecast salesforyear2 quarter 1are45,0001.16=52,200. 5 Summarising and analysing data 5.1 Thecorrect answer is:$24 G 5.2 Totalofinvoices =average 10=2010 15+22+14+21+15+20+18+27=152 2X+152=200 2X=200– 152=48 X =$24 $19isincorrect because itrepresents thearithmetic meanofthevalues (excluding theXs), ie152/ 8 =19.Italsorepresents themedian ofthevalues shown. Ifyouselected $48thenthisindicates thatyouonlyaccounted forone$Xinstead oftwo. $15represents themodeandistherefore incorrect. Thecorrect answer is:$65 Tocalculate a meanfactorywageweneedtodetermine totalwagesandtotalnumber of employees. Number of Department Meanwage employeesTotalwage $ $ 50 20 W = 1,000 100 5 X = 500 70 10 Y = 700 80 5 Z = 400 40 2,600 Meanfactorywage=$2,600/40=$65 $50represents themostfrequently occurring wage($50)orthemodeandistherefore incorrect. $70represents thesecond mostfrequently occurring wageandisalsoincorrect. $75issimply theaverage ofthemeanwages(anunweighted average), ie50+100+70+ 80=3004 =75.Thisoption isalsoincorrect. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 232 of 421 Answers219 A N S W E R S H q 5.3 Thecorrect answer is:36 Tocalculate a meanspeedweneedtoknowthedistance andthetimeofthejourney. Time=20/30hr+10/60hr=5/6hr Meanspeed=30miles ÷ 5/6hr=36mph 40isincorrectly calculated asfollows. (20miles 30mph)+ (10miles 60mph)= 600+600=1,200 Totaldistance travelled =30miles Meanspeed=1,200/ 30=40mph(incorrect) Remember thatyouneedtoknowthelength oftimethatittooktotravelthe30mile distance. 45mphrepresents anaverage of30mphand60mph(30+60=90/ 2 =45).Thisisalso incorrect. 5.4 Thecorrect answer is:14.50 Inorderofmagnitude scores are 8 9 11 12 14 15 17 21 24 34 10 1 =5½ andtherefore themedian istheaverage of5thand6th 2 items, thatisof14and15.Themedian istherefore 14.5. Thecorrect answer is:31 Position ofmedian is 5.5 Themedian isthemiddle valueinorderofmagnitude. 9 12 23 24 28 34 43 56 78 87 Inthiscasetherearetwomiddle values, 28and34,andsothemedian istheiraverage = (28+34)/2=31. G 5.6 28and34represent thetwomiddle values andaretherefore incorrect. Theaverage ofthe twomiddle values mustbecalculated whenestablishing themedian ofa setofscores. 26isincorrect sinceitrepresents theaverage between the4thand5thitems (24and28). Thecorrect answer is:Itrelies ondigitalinformation. Information maybewritten, verbal orconfidential, butifitisnotdigitised itcannot be analysed byBigDataanalytics. 5.7 Thecorrect answer is:1and3 only Bigdataiscollected fromdiverse sources andmuchoftheresulting dataisunstructured; forexample, onesignificant source ofbigdatacanbetheopinions andpreferences that people express viasocialmedia. SoOption 2 isincorrect. Bigdataanalytics isa recentdevelopment andenhances anorganisation's abilityto analyseandrevealinsights indatawhichhadpreviously beentoodifficult orcostlyto analyse– duetothevolume andvariability ofthedatainvolved. Option1correctly identifies thispoint.Oneofthekeyfeatures ofbigdataisthespeedwithwhichdata flowsintoanorganisation (withmuchdatabeingavailable inrealtime,oralmost inreal time).Ifanorganisation canthenalsoprocess thisdataquickly, thiscanimprove its abilitytorespond effectively tocustomer requirements ormarket conditions. Option3 identifies thispoint. 220 Management Accounting (FMA/MA) Page 233 of 421 H q 5.8 Thecorrect answer is:1and2 only Statements 1and2 aretrue. TheMcKinsey GlobalInstitute saidthat‘retailers exploiting dataanalytics atscaleacross theirorganisations couldincrease theiroperating margins bymorethan60percent’ and that‘theUShealthcare sector couldreduce costsby8 percent through data-analytics efficiency andquality improvements’ DavidMcCourt, ‘GettingBigImpact withBigData,’McKinsey Quarterly, January2015, www.mckinsey.com/insights/business_technology/getting_big_impact_from_big_dat Statement 3 isfalse.Oneofthecriticisms ofbigdataisthatthefocusisoftenonfinding correlations between datasetswithlessofanemphasis oncausation. Itiseasier toidentify correlations between twovariables thantodetermine whatisactually causing the correlation. 5.9 Thecorrect answer is:Volatility ThefiveVsarevolume, velocity, variety, veracity andvalue. 5.10 Thecorrect answer is:Process X Thecoefficient ofvariation = Standard deviation Mean Thecoefficients ofvariation arecalculated asfollows: W: 10 100=10% 100 X: 5 100=12½% 40 G Y: 8 100=10% 80 Z: 12 100=8% 150 A N S W E R S 5.11 Thecorrect answer is:DataA Mean Standard deviation Coefficient ofvariation* *Coefficient ofvariation = A 150 25 0.167 B 175 20 0.114 C 200 25 0.125 D 250 30 0.120 Standarddeviation Mean Thebiggerthecoefficient ofvariation, thewider thespread. Thelargest coefficient of variation isforthatofdatasetA.Thecorrect answer istherefore DataA. answer is: 5.12 Thecorrect 4 Themodeisthemostfrequently occurring number ofloaves required bya shopper, ie4 loaves. Remember, themodeisthemostfrequently occurring item. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 234 of 421 Answers221 H q 5.13 Thecorrect answer is:2 and3 only Thestandard deviation willincrease by14% Thecoefficient ofvariation willbeunaltered Ifeverybody's salaryrisesby14%,themeansalarywillalsoriseby14%.Incomputing thestandard deviation, weworkout(x– x)2foreachemployee, adduptheresults, dividebynandthentakethesquare root.Ifeachemployee's salaryandthemean salaryareallincreased by14%,each(x– x) willriseby14%.Because thesquaring isfollowed bysquare rooting, theoverall effectwillbetoincrease thestandard deviation by14%. Sinceboththestandard deviation andthemeanincrease by14%,thecoefficient of variation, whichistheonedivided bytheother, willbeunchanged. 5.14 Thecorrect answer is:Relative dispersion Thespreads oftwodistributions canbecompared byusingthecoefficient ofvariation (orthecoefficient ofrelative dispersion). 5.15 Thecorrect answer is:Project B$4,760 Theexpected valueforeachproject isasfollows. ProjectA (0.45$4,000)+ (0.55$2,000) =$1,800+$1,100 =$2,900 ProjectB (0.64$8,000)+ (0.36($1,000))=$5,120– $360 =$4,760 Project Bhasa higher expected valueofprofitwhichmeans thatitcouldoffera better return thanA,soProject Bshould bechosen (withanexpected profitof$4,760). Thefirsttwooptions areincorrect because project Adoesnothavethehighest expected value. Ifyouselected thelastoption, youforgottotakeaccount oftheexpected lossof$1,000 andtreated itasa profitinstead. G 5.16 Thecorrect answer is:$710,000 Expected value=probability profit Contract A B C Probability Estimated profits $ 500,000 800,000 900,000 2,200,000 1/2 1/5 1/3 Expected value $ 250,000 160,000 300,000 710,000 $300,000isincorrect because itisjustthehighest expected value(fromContract C). $733,000isthearithmetic meanoftheestimated profits ($2,200,000 3 =$733,000). $900,000isthemaximum expected profitfromanyonecontract, ie$900,000from Contract C. 5.17 Thecorrect answer is:3,900 Theexpected value=(1,0000.3)+(4,0000.5)+(8,0000.2)=3,900 4,000represents themostlikelysaleslevel,youforgottocalculate theexpected value. 4,333represents thearithmetic mean,youforgottocalculate theexpected value. 13,000isthetotalofestimated salesatdifferent levels ofprobability, youforgotto calculate theexpected levelofsales. 222 Management Accounting (FMA/MA) Page 235 of 421 H q 5.18 Thecorrect answer is:EVofdemand = 6,500 units Workings Demand Units 5,000 6,000 8,000 Probability 0.1 0.6 0.3 Expected value Units 500 3,600 2,400 6,500 5.19 Thecorrect answer is:EVofunitvariable costs=$ Workings Variable costs $ 3.00 3.50 4.00 4.50 5.20 Probability 3.70 (to2 decimal places) Expected value $ 0.30 1.75 1.20 0.45 3.70 0.1 0.5 0.3 0.1 Thecorrect answer is:EVofprofit= $ 10,950 Workings $ 65,000 24,050 40,950 30,000 10,950 Sales6,500$10 Lessvariable costs6,500$3.70 Contribution Lessfixedcosts G A N S W E R 5.21 Thecorrect answer is:0.15 S =55 59 Standard deviation ()= variance = 14.44 =3.8 Wearetherefore looking fortheprobability corresponding totheshaded areaonthegraph above. Usingnormal distribution tableswecancalculate thearea(1)above. z = x = 5955 3.8 =1.05 Azvalueof1.05corresponds toa probability of0.3531. Area(1)=0.3531andtherefore theshaded areathatweareinterested in=0.5– 0.3531= 0.1469= 0.15. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 236 of 421 Answers223 H q Ifyouincorrectly selected 0.35,youforgottodeduct theprobability ofarea(1)from0.5. Youcouldhaveeliminated 0.5immediately. Theprobability ofa scoreof55ormore (not59) isexactly 0.5. 0.85isalsoincorrect andrepresents theprobability ofa scoreof59orless,ie0.5+0.3531 = 0.8531 or0.85. 5.22 Thecorrect answer is:78.35 25%ofnormal frequencies willoccurbetween themeanandtheupperquartile. From normal distribution tables,25%offrequencies liebetween themeananda point0.67 standard deviations abovethemean. Thestandard deviation isthesquare rootofthevariance andis 25 =5 inthiscase. Theupperquartile istherefore 0.675 =3.35abovethemean Theupperquartile =3.35+75=78.35 Youshould havebeenabletoeliminate thefirsttwooptions straightaway since58.25and 71.65arebelowthemean.Theupperquartile ofanydistribution willbeabovethemean. 71.65represents thelowerquartile (75– 3.35). Ifyouhadforgotten totakethesquare rootofthevariance inordertoobtain thestandard deviation, youwould havecalculated theupperquartile asbeing0.6725=16.75above themean,ie75+16.75=91.75. 91.75istherefore alsoincorrect forthisreason. 5.23 Thecorrect answer is:167 Itisalwaysbesttosketch a roughdiagram firstwhentackling a normal distribution question suchasthis. G H x =150 =20 WeneedtofindthepointX suchthat30%ofthedistribution fallsbetween themeanandx. Fromnormal distribution tables,wecanseethat30%ofthedistribution liesbetween the meanand0.84standard deviations abovethemean. Ifz= x 0.84= x 150 20 x– 150=0.8420 x– 150=16.8 x =16.8+150 =166.8 Therefore 80%ofthedistribution liesbelow thepoint167(approximately). Youmustmakesurethatyouareconfident withreading normal distribution tablesin OTquestions – youareunlikely togainanymarks atallinsuchquestions ifyoureadthem incorrectly. 224 Management Accounting (FMA/MA) Page 237 of 421 q 5.24 Thecorrect answer is:0.675099 Totalareaunder normal curve=1 Therefore eachoffourareas=0.25 Thetableshows theareabetween 0 andthespecified valueofZ sowemustfindthevalue 0.25inthetableandtheZ valuethatcorresponds mostclosely toit. Z =0.67 Sketch a normal distribution curveanddivide itintofourareasifyouarenotconvinced abouttheanswer tothisquestion! 5.25 Thecorrect answer is:8% =50cm =5 cm 57cmis7cmabovethemean=1.4standard deviations abovethemean. Usingnormal distribution tables,theproportion between themeanand1.4standard deviations abovethemean=0.4192 Thepercentage oftubesatleast57cmlongis(0.5– 0.4192) =0.0808=8.08% Thepercentage isclosest to8%. 42%represents theproportion oftubesbetween 50and57cmlong. 58%represents theproportion oftubesbelow themeanandabove57cm. 92%represents theproportion oftubesbelow 57cm. 5.26 Thecorrect answer is: 0.0082 A N S W E R G S =60 72 Weareinterested intheshaded areashown inthegraphabove.Wecancalculate zscore usingthefollowing formula. z= = = x 7260 25 12 5 =2.4 Usingnormal distribution tables,wecancalculate thattheprobability ofa score between 60and72is0.4918(where z = 2.4).Theprobability ofa scoregreater than72 is0.5– 0.4918= 0.0082. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 238 of 421 Answers225 H G q 5.27 Thecorrect answer is:76.42% =150 210 Weareinterested intheshaded areashown inthegraphabove.Wecancalculate thez scoreusingthefollowing formula. z= = = x 210 150 6,944 60 0.72 83.33 Fromnormal distribution tables,theprobability ofa valuebetween 150and210is0.2642. Therefore theprobability ofa valuelessthan210=0.5+0.2642=0.7642or76.42%. Ifyouselected 23.58%,youincorrectly subtracted 0.2642from0.5instead ofaddingit. Ifyouselected 26.42%,youforgottoaddyouranswer to0.5. Ifyouselected 72.00%,youforgottoconvert yourzscoreintoa probability usingnormal distribution tables. 5.28 Thecorrect answer is:656.7 =650 25%ofnormal frequencies willoccurbetween themeanandtheupperquartile. From normal distribution tables,25%offrequencies liebetween themeananda point0.67 standard deviations abovethemean(ieourzscoreis0.67). Letx=upperquartile Ifz= x and = 100=10 x650 10 (0.6710)= x– 650 6.7 = x– 650 x = 650+6.7 = 656.7 0.67= Therefore theupperquartile =656.7andthecorrect answer istherefore 656.7. Ifyouselected 643.3,youcalculated thelower quartile ofthedistribution (thequestion required youtocalculate theupperquartile). 226 Management Accounting (FMA/MA) Page 239 of 421 H G q Ifyouchose717.0,youforgottocalculate thestandard deviation (andusedthevaluegiven forthevariance, ie100). Ifyouchose812.5,yousimply took25%ofthemean(65025%=162.5)andaddeditto themean(162.5+650=812.5)whichisnotthecorrect waytocalculate theupperquartile. 5.29 Thecorrect answer is:0.32 Totalareaunder normal curve=1. Therefore eachofeightareas=0.125(0.1258 =1). Normal distribution tablesshowtheareabetween 0 andthespecified valueofzsowemust findthevalueof0.125inthetablesandthezvaluethatcorresponds mostclosely toit. z=0.32 Sketch a normal distribution curveanddivide itintoeightareasifyouarenotconvinced abouttheanswer tothisquestion! 5.30 Thecorrect answer is:0.0314 5,200 6,000 Weareinterested incalculating theareaoftheshaded partofthegraphabove. Wecanfindtheareaofthegraphthatliesbetween 5,200kgand6,000kgasfollows. x Using z= z= 6,0005,200 430 A N S W E R S z=1.86 z=1.86corresponds toanareaof0.4686.However, weareinterested intheshaded area= 0.5– 0.4686=0.0314. Ifyouselected 0.2343,youdivided theprobability obtained (0.4686)by2 instead of subtracting itfrom0.5. Ifyouselected 0.4686,youforgottosubtract 0.4686from0.5. Ifyouselected 0.9686,youadded0.4686to0.5instead ofsubtracting it. 5.31 Thecorrect answer is:Inferential analysis Inferential analysis makes predictions abouta population basedona sample. Descriptive analysis summarises datatomakeitmeaningful. Forexample, calculating a meanor drawing a graphofa frequency distribution. Inferential anddescriptive analysis are specifically mentioned in yoursyllabus. 5.32 Thecorrect answers are:Customer details andTransaction history Structured dataiseasilysearchable because itisina standardised format suchasrows andcolumns ina spreadsheet. Unstructured dataisoftenqualitative andcannot be organised intoa database. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 240 of 421 Answers227 H q 6 6.1 6.2 6.3 Accounting for materials Thecorrectansweris:(i)and (ii)only Amongotherthings,the GRNis used to update the inventoryrecordsand to checkthat the quantityinvoicedby the supplierwas actuallyreceived.TheGRNdoes not usuallycontain priceinformation.Thereforethe correctansweris (i)and (ii)only. Thecorrectansweris:1,750 Freeinventorybalance = unitsininventory+unitson orderfromsuppliers– units outstandingon customers'orders 13,000 = unitsininventory+27,500– 16,250 Unitsininventory = 13,000– 27,500+16,250=1,750 6.4 Thecorrectansweris:1,710units Reorderlevel=maximumusage maximumlead time =95 18 =1,710units Thecorrectansweris:2,860 units 6.5 Maximumlevel=reorderlevel+reorderquantity– (minimumusage minimumlead time) =1,710+1,750– (50 12)=2,860 units Thecorrectansweris:163 2CoD 2 $80 2,500 = =163 C $15 h Thecorrectansweris:(i),(ii)and (iii) Stock-outsarisewhentoo littleinventoryis held(i);safety inventoriesare the levelof units maintainedincase there is unexpecteddemand (ii);and a reorderlevelcan be established by lookingat the maximumusage and the maximumlead-time(iii).Therefore,they are all correctstatements withregards to inventories. Thecorrectansweris:1,155 EOQ= 6.6 G 6.7 EOQ = 2CoD C H WhereCo =20 D=12,5004 =50,000 CH=10%$15=1.50 EOQ= 2 20 50,000 1.50 = 1,333,333 6.8 6.9 =1,155units Thecorrectansweris:EOQLowerTotalannual holdingcost Lower Ifthere is a decrease inthe cost of orderinga batch of raw material,then the EOQwillalso be lower(as the numeratorinthe EOQequationwillbe lower).Ifthe EOQis lower,than average inventoryheld(EOQ/2)withalso be lowerand thereforethe total annual holding costs willalso be lower. Thecorrectansweris:7,800 units Reorderlevel=maximumusage maximumlead time =520 15 =7,800 units 228 ManagementAccounting(FMA/MA) Page 241 of 421 H q 6.10 Thecorrectansweris:(ii),(iii)and (iv)only Statement(i)is not correct.Adebitto storeswitha correspondingcreditto workinprogress (WIP)indicatesthat direct materials returned fromproductionwere$18,000. Statement(ii)is correct.Directcosts of production are 'collected'inthe WIPaccount. Statement(iii)is correct.Indirectcosts of production or overhead are 'collected'inthe overheadcontrolaccount. Statement(iv)is correct.Thepurchasesof materialson creditare creditedto the creditors account and debitedto the materialstorescontrolaccount. Thereforethe correctansweris (ii),(iii)and (iv)only. 6.11 Thecorrectansweris:$3,000 Annualholdingcost =[buffer(safety)inventory+reorderlevel/2)]holdingcost per unit =[500 +(2,000/2)]$2 =$3,000 6.12 Thecorrectansweris:300 units Theeconomicorderquantityis 300 units. Theformulaforthe economicorderquantity(EOQ)is 2C D O C h WithCO=$10 D =5,400 12=450 per month Ch=$0.10 EOQ= G EOQ= A N S W E R 2 $10450 $0.10 S = 90,000 =300 units 6.13 Thecorrectansweris:400 Thelevelof safety inventoryis 400 units(to the nearest wholeunit). Letx =safety inventory Averageinventory=safety inventory(x)+ 3,400 = x + reorderquantity 2 6,000 2 3,400 = x +3,000 x = 3,400 – 3,000 x = 400 units Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 242 of 421 Answers 229 H G q 6.14 Thecorrectansweris:175units Theeconomicorderquantityis 175units(to the nearest wholeunit). EOQ= 2COD Ch = 2 $1001,225 $8 = 30,625 =175units 6.15 Thecorrectansweris:6,180units Reorderlevel =maximumusage maximumlead time =13026 =3,380 units Maximumlevel=reorderlevel+reorderquantity– (minimumusage minimumlead time) =3,380 +4,000 – (60 20) =6,180units 6.16 Thecorrectansweris:31,623units 2COD (1D/R)C h 2 1255,000 Q = 0.00251 5,000 / 10,000 EBQ= 1,250,000 0.00125 =31,623units 6.17 Thecorrectansweris:AtpointC TheEOQis foundwherethe holdingcosts equal the orderingcosts. Youneed to read the valueof unitson the x axisof the graph at pointC. PointAis the origin.Herezerounitsare orderedand as a resultthe cost is also zero. PointBis the total holdingcost and ordercost. Asthisis at the EOQthe costs are equal, whichis whyit is wherethe twolinesintersect. PointDis the holdingcosts at the EOQ. 6.18 Thecorrectansweris:$44,953.50 Thecompanycouldorderthe EOQamountof 160or it couldorder300 unitsand take a discountof 2%.We need to workout whichis the cheapest option. $ Purchases(nodiscount) 1,800$25 45,000 Holdingcosts (W1) 360 Orderingcosts (W2) 360 Totalannual costs 45,720 Workings 1 =average inventoryholdingcost forone unitof inventoryfor Holdingcosts one year Averageinventory=orderquantity÷2 =160÷2 =80 units Holdingcost forone unitof inventoryforone year =$4.50 holdingcosts =80 units$4.50 =$360 = 230 ManagementAccounting(FMA/MA) Page 243 of 421 H q 2 Orderingcosts =numberof ordersorderingcosts per order($32) Numberof orders =Annualdemand ÷orderquantity =1,800÷160 orderingcost =11.25orders =11.25orders$32 =$360 Witha discountof 2%and an orderquantityof 300 units,unitcosts are as follows. Purchases $45,000 98% Holdingcosts (W1) Orderingcosts (W2) Totalannual costs Workings Holdingcosts $ 44,100.00 661.50 192.00 44,953.50 =average inventoryholdingcost forone unitof inventoryfor one year Averageinventory=orderquantity÷2 =300 ÷2 =150units Holdingcost forone unitof inventoryforone year =$4.50 98%=$4.41 holdingcosts =150units$4.41=$661.50 2 Orderingcosts =numberof ordersorderingcosts per order($32) A N S W E R Numberof orders =Annualdemand ÷orderquantity G =1,800÷300 orderingcost =6 orders =6 orders$32 S =$192 Thecheapest optionis to order300 at a timeand accept the discount. Workingsfor both questions 6.19and 6.20. FIFO Purchase 1/1 31/1 Sales 15/2 Purchase 28/2 Sales 6.19 14/3 Units 4,000 1,000 5,000 (3,000) 2,000 1,500 3,500 (500) 3,000 $/unit 2.50 2.00 2.50 2.50 2.50 LIFO Value $ 10,000 2,000 12,000 (7,500) 4,500 3,750 8,250 (1,250) 7,000 Units 4,000 1,000 5,000 (1,000) (2,000) 2,000 1,500 3,500 (500) 3,000 $/Unit 2.50 2.00 2.00 2.50 2.50 2.50 Value $ 0,000 2,000 2,000 (2,000) 5,000) 5,000 3,750 8,750 1,250) 7,500 Thecorrectansweris:$7,000 Seeworkingsabove.Ifyou selectedthe wrongoptionthen checkyourworkingscarefully against the abovetable. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 244 of 421 Answers 231 H q 6.20 Thecorrectansweris:$7,500 Seeworkingsabove.Ifyou selectedthe wrongoptionthen checkyourworkingscarefully against the abovetable. 6.21 Thecorrectansweris:$4,492 Openinginventory Issueon 2 Jan 300 $25 256 $25 Receipton 12Jan Issueson 21Jan and 29 Jan (11,550/450)(200 +75) 7 7.1 Accounting Units 300 (250) 50 400 450 $ 7,500 (6,250) 1,250 10,300 11,550 (275) 175 (7,058) 4,492 for labour Thecorrectansweris:107.4% Budgetedhours=3,000 +8,000 +7,000 +9,000 =27,000 Capacity ratio = actualhours worked = 29,000 100%=107.4% budgetedhours 27,000 7.2 Thecorrectansweris:96.2% Product W X Y Z G Units 12,000 25,000 16,000 5,000 Standard hours (0.2) (0.4) (0.5) (1.5) 2,400 10,000 8,000 7,500 27,900 Efficiencyratio = Standardhoursproduced = 27,900 100%=96.2% Actualhoursworked 29,000 7.3 Thecorrectansweris:Apiecerate schemewitha minimumguaranteed wage Thegraph showsa constant wage up to a certainlevelof output, whichis payable evenat zerooutput. Thisis the minimumguaranteed wage. Abovea certainoutput the wage cost risesat a constant rate. Thisis the piecerate payable inadditionto the minimumwage. Graphs forthe otheroptionswouldlooklikethis: $ $ $ Astraightpiecerate scheme 232 Astraighttimerate scheme ManagementAccounting(FMA/MA) Page 245 of 421 Adifferentialpiecerate scheme H q 7.4 Thecorrectansweris:$50 Hours 12 7 5 Standard timefor180units(4/60) Actualtimetaken Timesaved Basicpay 7 hours$5 Bonus:60%5 hourssaved $5 per hour 7.5 $ 35 15 50 Thecorrectansweris:$47.90 Numberof unitsqualifyingforpayment=210– 17 =193 Pieceworkpayment to be made: $ 20.00 27.90 47.90 First100units@$0.20 Last93 units@$0.30 7.6 Thecorrectansweris:$140.40 Theovertimepremiumpaid at the specificrequestof a customerwouldbe treated as a directcost because it can be traced to a specificcost unit. Thefourhoursof machinebreakdownisidletime.Itcannot be traced to a specificcost unit thereforeit is an indirectcost. Thedirectwagescost is as follows. G Basicpay foractivehours(38hours$3.60) Overtimepremiumre: customerrequest(2 hours$1.80) 7.7 $ 136.80 3.60 140.40 Thecorrectanswersare: Groupbonusschemesare appropriatewhenincreasedoutput depends on a numberof peopleallmakingextra effortand Non-productionemployeescan be rewardedas part of a groupincentivescheme Groupbonusschemesare usefulto rewardperformancewhenproductionis integratedso that allmembersof the groupmustworkharder to increaseoutput, forexamplein productionlinemanufacture.'Groupbonusschemesare appropriatewhenincreased output depends on a numberof peopleallmakingextra effort'is thereforetrue. Groupbonusschemesare not effectiveinlinkingthe rewardto a particularindividual's performance.Evenifone individualmakesa supremeeffort,thiscan be negated by poor performancefromothermembersof the group.Therefore'Witha groupbonusscheme,it is easierto award each individual'sperformance'is not true. Non-productionemployeescan be includedina groupincentivescheme,forexamplewhen allemployeesina managementaccountingdepartmentmustworkharder to produce promptbudgetary controlreports.'Non-productionemployeescan be rewardedas part of a groupincentivescheme'is thereforetrue. Groupbonusschemesare easierto administerbecause they reduceclericaleffortrequired to measureoutput and calculateindividualbonuses.'Comparedwithindividualschemes, groupbonusschemesare difficultto administer'is thereforefalse. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 246 of 421 Answers 233 A N S W E R S H q 7.8 Thecorrectansweris: Debit 70,800 2,500 Workinprogressaccount Overheadcontrolaccount Wages controlaccount 7.9 Credit 73,300 Theovertimewas not workedforany specificjoband isthereforean indirect wages cost to be 'collected'inthe overheadcontrolaccount. Similarly,the holidaypay is an indirect cost, thereforethe total debit to the overhead control account is $2,500. Thedirect wages of $70,800is debited to the workin progress account and the total wagescost is credited to the wages control account. Thecorrectansweris:20% Reductioninnumberof employees=30 – 20 =10 Numberof employeesleaving =15 Numberof employeesreplaced =15– 10=5 Labourturnoverrate = replacements 100% averageno.of employeesinperiod = 5 100% (30 20)÷2 =20% 7.10 Thecorrectansweris:$5.04 Hours 12 8 4 Standard timefor80 units(9/60) Actualtimetaken Timesaved G Groupbonus: 70%4 hourssaved $6 per hour=$16.80 Jane's share of bonus=50%($16.8060%) =$5.04 7.11 Thecorrectansweris: DR Overheadcontrol CR Wages control Indirectwagesare 'collected'inthe overheadcontrolaccount, forsubsequentabsorption intoworkinprogress. 7.12 Thecorrectansweris:0.26% Labourturnoverrate = = Replacements 100% Averagenumberofemployeesinperiod 10 100 (4,000 +3,800)÷2 =0.26% 234 ManagementAccounting(FMA/MA) Page 247 of 421 H q 8 8.1 Accounting for overheads Thecorrectansweris:$10,160 Numberof employeesinpackingdepartment=2 direct+1indirect=3 Numberof employeesinallproductiondepartments=15direct+6 indirect=21 Packing department overhead 8.2 Canteen cost apportionedto packingdepartment = Originaloverheadallocatedand apportioned Totaloverheadafter apportionmentof canteen costs = = = $8,400 3 21 $1,200 $8,960 $10,160 Thecorrectansweris:$0.60 per machinehour Department1appears to undertakeprimarilymachine-basedwork,thereforea machinehourrate wouldbe mostappropriate. $27,000 =$0.60 per machinehour 45,000 8.3 Thecorrectansweris:$0.72per directlabourhour Department2 appears to be labour-intensivethereforea directlabour-hourrate wouldbe mostappropriate. $18,000 =$0.72per directlabourhour 25,000 8.4 G Thecorrectanswersare: Usinga predeterminedabsorptionrate avoidsfluctuationsinunit costs caused by abnormallyhighor lowoverheadexpenditureor activitylevelsand Usinga predeterminedabsorptionrate offersthe administrativeconvenienceof beingable to recordfullproductioncosts sooner 'Usinga predeterminedabsorptionrate avoidsfluctuationsinunitcosts caused by abnormallyhighor lowoverheadexpenditureor activitylevels'is correctbecause a constant unitabsorptionrate is used throughoutthe period.'Usinga predetermined absorptionrate offersthe administrativeconvenienceof beingable to recordfull productioncosts sooner'is correctbecause 'actual' overheadcosts, based on actual overheadexpenditureand actual activityforthe period,cannot be determineduntilafter the end of the period.'Usinga predeterminedabsorptionrate avoidsproblemsof under/overabsorptionof overheadsbecause a constant overheadrate is available'is incorrectbecause under/overabsorptionof overheadsis caused by the use of predeterminedoverheadabsorptionrates. Usinga predeterminedabsorptionrate stillrequiresthe use of an appropriatebase and so ' Usinga predeterminedabsorptionrate avoidsthe problemsassociated withchoosingan appropriateabsorptionbase' is false. 8.5 Thecorrectansweris:Absorbedoverheadsexceedactual overheads 'Absorbedoverheadsexceedbudgeted overheads'couldlead to under-absorbed overheadsifactual overheadsfar exceededboth budgeted overheadsand the overhead absorbed. 'Actualoverheadsexceedabsorbed overheads'couldlead to under-absorbed overheadsifoverheadabsorbed does not increaseinlinewithactual overheadincurred. 8.6 Thecorrectansweris:$405,000 Budgetedabsorptionrate forfixedoverhead=$360,000/8,000 =$45 per unit =9,000 units$45 =$405,000 Fixedoverheadabsorbed Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 248 of 421 Answers 235 A N S W E R S H G q 8.7 Thecorrect answer is:Under absorbed by$27,000 Actualfixedoverhead incurred $432,000 Fixedoverhead absorbed $405,000(fromprevious question) Fixedoverhead under absorbed $27,000 8.8 Thecorrect answer is:Thevalueofthemachinery ineachcostcentre 8.9 Theinsurance costislikelytobelinked tothecostofreplacing themachines, therefore the mostappropriate basisforapportionment isthevalueofmachinery. Thecorrect answer is:Labour intensive Directlabour hours, isa suitable basisforabsorption ina labour-intensive environment. 8.10 Thecorrect answer is:Indirect material issued frominventory was$22,800andIndirect wagescostsincurred were$180,400 'Indirect material issued frominventory was$22,800'iscorrect. Thecostofindirect material issued is'collected' intheoverhead control account pending absorption into workinprogress. 'Overhead absorbed during theperiod was$210,000' isincorrect. Theoverhead cost incurred was$210,000. Theoverhead absorbed intoworkinprogress during theperiod was$404,800. 'Overhead fortheperiod wasoverabsorbed by$8,400'isincorrect. The$8,400isdebited tothestatement ofprofitorloss,indicating anextrachargetocompensate forthe overhead underabsorbed. 'Indirect wagescostsincurred were$180,400' iscorrect. Theindirect wagecostis 'collected' intheoverhead control account pending absorption intoworkinprogress. 8.11 Thecorrect answer is:Onlyproduction related costsshould beconsidered Onlyproduction related costsshould beconsidered whenconsidering theallocation, apportionment andreapportionment ofoverhead inanabsorption costing situation. 8.12 Thecorrect answer is:$30,000 Actualfixedproduction overheads Absorbed fixedproduction overheads (4,500$8) Over-absorbed fixedproduction overheads $ X 36,000 6,000 Actualfixedproduction overheads =$36,000– $6,000 =$30,000 8.13 Thecorrect answer is:$15 Production costcentre Primary Finishing $96,000 $82,500 9,600hours 6,875hours $10perhour $12perhour Allocated andapportioned Totaldirectlabour hours Fixedoverhead absorption rate Workings (1) Totaldirectlabour hours – Primary =(6,00036/60)hours + (7,50048/60)hours =(3,600+6,000)hours =9,600hours (2) 236 Totaldirectlabour hours – Finishing =(6,00025/60)hours + (7,50035/60)hours =(2,500+4,375)hours =6,875hours Management Accounting (FMA/MA) Page 249 of 421 H q Budgeted fixedoverhead cost per unit for Product Y Primary =48 minutes/60minutes$10per hour =$8 per unit Finishing=35 minutes/60minutes$12per hour =$7per unit Total 8.14 =$8 +$7 =$15per unitof ProductY Thecorrectansweris:Underabsorbed by $3,875 Absorbedoverhead(30,000 hours$3.50) Actualoverhead Under-absorbedoverhead 8.15 $ 105,000 108,875 3,875 Thecorrectansweris:$127,000 Usingsimultaneousequations: LetP =overheadsfordepartmentP after reapportionment X =overheadsfordepartmentXafter reapportionment Y =overheadsfordepartmentYafter reapportionment P X Y =95,000 +0.4X+0.3Y =46,000 +0.1Y =30,000 +0.2X X =46,000 +0.1(30,000 +0.2X) X =46,000 +3,000 +0.02X X =49,000 +0.02X X – 0.02X=49,000 0.98X=49,000 X =49,000/0.98 =50,000 G IfX Y Y Y A N S W E R S =50,000 =30,000 +(0.250,000) =30,000 +10,000 =40,000 X =50,000 and Y=40,000 P 8.16 =95,000 +0.4X+0.3Y =95,000 +(0.4 50,000) +(0.340,000) =95,000 +20,000 +12,000 =127,000 Thecorrectansweris:Overheadwas $12,500underabsorbed Productionoverheadabsorptionrate =$150,000/60,000 =$2.50 per machinehour Productionoverheadabsorbed =$2.50 55,000 hours =$137,500 Productionoverheadincurred = $150,000 Productionoverheadunderabsorbed= $ 12,500 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 250 of 421 Answers 237 H q 8.17 Thecorrectansweris:14,850 Budgetedhours = Budgetedoverheads Budgetedoverheadabsorptionrate = $475,200 $32 8.18 = 14,850 Thecorrectansweris:$45 per machinehour Themachinehourabsorptionrate is (to the nearest $) $45 per machinehour. Machinehourabsorptionrate = Budgetedoverheads Budgetedmachinehours = $690,480 15,344 =$45 per machinehour 8.19 Thecorrectansweris:$25 Thebudgeted overheadabsorptionrate was $25 per machinehour(to the nearest $). $ 496,500 64,375 560,875 Actualoverheadsincurred Over-absorbedoverhead Actualoverheadsabsorbed Actualoverheadsabsorbed =Amountabsorbed per machinehour Actualmachinehours G H $560,875 =$25 per machinehour 22,435 8.20 Thecorrectansweris:Underabsorbed by $25,000 Fixedproductionoverheadwas underabsorbed by $25,000 Overheadabsorbed (110,000std hours$2.50) Overheadincurred Overheadunderabsorbed $ 275,000 300,000 25,000 Theoverheadis underabsorbed because the overheadabsorbed was lessthan the overheadincurred. 8.21 Thecorrectanswersare: Ifthe directmethodis used, the orderinwhichthe servicecost centre overheadsare reapportionedis irrelevantand Thestep downmethodresultsincosts beingreapportionedbetweenservicecost centres Thedirectmethodresultsincosts beingre-apportionedbetweenproductioncentres (notbetweenservicecentres)so 'Thedirectmethodresultsincosts beingreapportioned betweenservicecost centres' is false.Whenusingthe directmethod,it doesn't matter in whichorderthe serviceoverheadsare re-apportionedso 'Ifthe directmethodis used, the orderinwhichthe servicecost centre overheadsare reapportionedis irrelevant'is true. 'Thestep downmethodresultsincosts beingreapportionedbetweenservicecost centres' is true but 'Ifthe step downmethodis used, the orderinwhichthe servicecost centre overheadsare reapportionedis irrelevant'is falsebecause the orderdoes matter when usingthe step-downapproach. 238 ManagementAccounting(FMA/MA) Page 251 of 421 G q 8.22 Thecorrect answer is:$354,888 Directmethod Overheads Reapportion stores (50:30) Reapportion canteen (45:40) Production departments Service centres Mixing Stirring Stores Canteen 216,400 78,800 181,600 47,200 (5/8)113,500 (3/8)68,100 (181,600) – 24,988 22,212 – 47,200) 354,888 169,112 8.23 Thecorrect answer is:$351,416 Stepdownmethod Production departments Service centres Mixing Stirring Stores Canteen Overheads 216,400 78,800 181,600 47,200 Reapportion stores (50:30:20) 90,800 54,480 (181,600) 36,320 – 83,520 Reapportion canteen (45:40) 44,216 39,304 (83,520) 351,416 172,584 – 8.24 Thecorrect answer is:$368,000 ACCAexamining teamcomments Thecorrect answer is$368,000.Standard absorption costingwillinclude $96,000ofthe period's overhead (2,000units 4 labourhours $12perhour)inthevaluation ofclosing inventory. Under standard marginal costingthe$96,000wouldbecharged againstthe period's profitresulting ina profit$96,000lowerthan$464,000.Thistypeofquestion is included invirtually everycostingtextbook anditisdisappointing thatonlya minority of candidates selected thecorrect alternative. Themostcommon answer was$440,000, ($464,000– 2000units $12perlabourhour)suggesting somemisunderstanding of overhead absorption ratesorcareless reading ofthequestion. $344,000wasalsoa popular answer ($464,000– 2,000units÷20,000units 100,000hours $12perlabour hour)indicating thatmanycandidates believed thatinventories should bevaluedonthe basisofactuallabourhoursina standard absorption costingsystem. Onthebrightside, onlya smallproportion ofcandidates selected $560,000,whichindicates thatmost candidates understand thatinperiods ofrisingfinished goodsinventories, absorption costingwillshowhigherprofits thanmarginal costing. 8.25 Thecorrect answer is:Actualdirectlabour hours were800lessthanbudgeted ACCAexamining teamcomments Thedebittotheprofitorlossaccount implies thatoverheads wereunder absorbed. We aretoldthatactualoverhead expenditure wasinlinewithbudget, sotheonlycauseof theunder absorption hastobeactualactivity beinglessthanbudgeted. Ashortfall of 800directlabour hours would leadtoanunder absorption of800directlabour hours $5 perhour= $4,000.Overall candidates needtomakesuretheyunderstand thecausesof under oroverabsorption ofoverhead andthebookkeeping entries involved. 8.26 Thecorrect answer is:$75,467 ACCAexamining teamcomments Byexamining thesecond rowoffigures inthetableitisclearthatservice department X’scostsarereapportioned ona 40%, 50%, 10%.Onthefinalreapportionment no overhead isreapportioned toservice department Y,sothebalance ofoverhead should be reapportioned 40/90and50/90.Thisresults inthefollowing totalproduction overhead for production department 1.($60,000+$8,000+$7,200)+ 40/90$600=$75,467. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 252 of 421 Answers239 A N S W E R S H q 8.27 Thecorrectansweris:Impossibleto calculatewithoutmoreinformation We knowthat the profitusingmarginalcostingwouldbe higherthan the absorption costingprofit,because inventoriesare decreasing.However,wecannot calculatethe value of the differencewithoutthe fixedoverheadabsorptionrate per unit. 2,000 units fixedoverhead Differenceinprofit = inventoryreduction absorptionrate per unit 8.28 Thecorrectansweris:$3,600 higher Differenceinprofit=change ininventorylevelfixedoverheadper unit =(2,400– 2,700)($43) =$3,600 Theabsorptionprofitwillbe higherbecause inventorieshave increased,and fixed overheadshave been carriedforwardininventories. 8.29 Thecorrectansweris:$90,000 Differenceinprofit=change ininventorylevelfixedoverheadper unit =(15,000– 20,000) $8 =$40,000 Theinventorylevelincreasedduringthe periodthereforethe absorptioncostingprofitis higherthan the marginalcostingprofit. 8.30 Marginalcostingprofit=$130,000– $40,000 =$90,000 Thecorrectansweris:$45,400 Contributionper unit =$30 – $(6.00+7.50+2.50) =$14 Contributionformonth =$145,200 units =$72,800 Lessfixedcosts incurred = $27,400 Marginalcostingprofit = $45,400 G 8.31 H Thecorrectansweris:$48,400 $ Sales(5,200at $30) Materials(5,200at $6) Labour(5,200at $7.50) Variableoverhead(5,200at $2.50) Totalvariablecost Fixedoverhead($55,200) Over-absorbedoverhead(W) Absorptioncostingprofit 8.32 31,200 39,000 13,000 (83,200) (26,000) 1,600 48,400 Working $ 29,000 Overheadabsorbed (5,800$5) Overheadincurred 27,400 Over-absorbedoverhead 1,600 Thecorrectansweris:52,500 Inventorylevelsincreasedby 3,000 unitsand absorptioncostingprofitis $105,000higher ($955,500– $850,500). Fixedproductioncost includedininventoryincrease: = 240 $ 156,000 $105,000 =$35 per unitof inventory 3,000 ManagementAccounting(FMA/MA) Page 253 of 421 q Budgetedfixedcosts $1,837,500 = =52,500 units Fixedcostper unit $35 8.33 Thecorrectansweris:$9.00 Decreaseininventorylevels=48,500 – 45,500 =3,000 units Differenceinprofits =$315,250– $288,250=$27,000 Fixedoverheadper unit = $27,000 =$9 per unit 3,000 8.35 Ifyou selectedone of the otheroptionsyou attempted variousdivisionsof allthe data availableinthe question! Thecorrectansweris:Methods(i),(ii),(iii)and (iv) Allof the methodsare acceptable bases forabsorbingproductionoverheads.However,the percentage of prime cost has serious limitationsand the rate per unitcan onlybe used if allcost unitsare identical. Thecorrectansweris:Alldirectand indirectcosts 8.36 Underabsorptioncostingallassociated costs are includedinthe total cost of a product. Thecorrectansweris:$74,550 8.34 Ifinventorylevelsincreaseina period,absorptioncostingwillshowa higherprofitthan marginalcosting. Differenceinprofit=change ininventorylevelsoverheadabsorptionrate per unit =(750units– 300 units)$5 per unit =450 units$5 =$2,250 $ 72,300 2,250 74,550 G Marginalcostingprofit Increaseinprofit Absorptioncostingprofit 8.37 Thecorrectansweris:$600,000 Contributionper unit =sellingprice– variablecost =$10– $6 =$4 per unit Totalcontribution Totalfixedcosts =250,000 units$4 per unit=$1,000,000 =200,000 units$2 per unit =$400,000 Marginalcostingprofit=total contribution– total fixedcosts =$1,000,000– $400,000 =$600,000 8.38 Thecorrectansweris:$38,500 Ifinventorylevelsincreaseina period,absorptioncostingwillshowa higherprofitthan marginalcosting. Differenceinprofit=change ininventorylevelsoverheadabsorptionrate per unit =(350– 100)units$4 per unit =250 units$4 =$1,000 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 254 of 421 Answers 241 A N S W E R S H G q $ 37,500 1,000 38,500 Marginalcostingprofit Increaseinprofit Absorptioncostingprofit 8.39 Thecorrectansweris:$1,120lower $48,000 12,000units =$4 per unit Increaseininventorylevels=(12,000– 11,720)units =280 units Fixedproductionoverheadabsorptionrate = Differenceinprofit =280 units$4 per unit =$1,120 Marginalcostingprofitsare lowerthan absorptioncostingprofitswheninventorylevels increaseina period,thereforemarginalcostingprofitwillbe $1,120lowerthan absorption costingprofitsforthe same period. 8.40 Thecorrectansweris:$396,000 Ifbudgeted fixedoverheadexpenditure=100% Actualfixedoverheadexpenditure =110% Variance =10% Ifvariance=$36,000 =10%budgeted fixedoverheadexpenditure Budgetedfixedoverheadexpenditure =$36,000/0.1 =$360,000 Actualfixedoverheadexpenditure =110%$360,000 =$396,000 8.41 Thecorrectansweris:$25,000 8.42 Increaseininventory =(18,000– 16,500)units =1,500units Differenceinprofit =1,500units$10 =$15,000 Profitsundermarginalcostingwillbe $15,000lessthan profitsunderabsorptioncosting ie $40,000 – $15,000=$25,000. Thecorrectansweris:12,500 Anydifferencebetweenmarginaland absorptioncostingprofitis due to changes in inventory. $ Absorptioncostingprofit 2,000 Marginalcostingloss (3,000) Difference 5,000 Change ininventory= Differenceinprofit/fixedproductcost per unit = $5,000/$2 =2,500 units Marginalcostinglossis lowerthan absorptioncostingprofitthereforeinventoryhas gone up – that is,productionwas greater than sales by 2,500 units. Production=10,000units(sales)+2,500 units=12,500units 242 ManagementAccounting(FMA/MA) Page 255 of 421 H q 8.43 Thecorrectansweris:$120,000lower Openinginv Closinginv Decrease 8.44 Units 900 300 600 $500,000 =120,000lower 2,500 Thecorrectansweris:10,000 ACCAexaminingteam comments Thecorrectansweris 10,000.Thiscan be calculatedby multiplyingthe increaseinfinished goodsinventoryof 1,000units(2,000 unitsproducedless1,000unitssold)by the fixed productioncost per unitthat willbe includedinabsorptioncostingclosinginventory valuation. Thedistracters wereall based around the $4,000 over-absorptionof fixedproduction cost. Thefirstdistracter of 4,000 suggests that the differencein profitswillbe equal to the over-absorptionof fixedproductioncost, whereas6,000 and 14,000suggest that it is due to a differencein inventoryvaluationand over-absorptionof fixed productioncost. Incorrectanswerswereroughlyevenlyspread around the 3 distracters, suggestinga misunderstandingof under- or over-absorption(orpossiblya highlevel of guessing). Under-or over-absorptionadjustmentsto profitdo not cause a differencebetween marginaland absorptioncostingprofits.Theysimplyensure that absorptioncosting charges the same amount of fixedoverheadas marginalcosting. Ifwelookinmoredetailat the situationit is apparent that the over-absorptionof $4,000 was caused by the productionof 400 unitsmorethan budgeted ($4,000÷$10per unit). Budgetedproductionwouldthereforebe 1,600units(2,000 unitsactuallyproducedless the 400 unitsabove). G Itfollowsthat budgeted fixedproductioncost was therefore1,600units$10per unit= $16,000.Asactual fixedproductioncost was equal to budgeted, marginalcost fixed productioncostingwouldhave recordedan actual fixedproductioncost of $16,000. Absorptioncostingwouldhave charged $20,000 of fixedproductioncost to product (2,000 unitsproduced×$10per unit),howeverthe adjustmentforover-absorptionwould have correctedthisoverchargeand reducedthiscost by $4,000, resultinginthe same fixedproductioncost as marginalcosting. Theimportantpointis that it is not under- or over-absorptionthat causes the difference betweenprofitsunderabsorptionand marginalcostingprinciples.Thedifferenceinprofits is caused by the differenceinfinishedgoodsinventoryvaluations. 8.45 Thecorrectansweris:2 and 3 ACCAexaminingteam comments Themost popular answerwas '3 only'.Thissuggests that these candidates correctly understoodtwothings:(i)overa periodof timein whichtotal productionlevelsare equal to total sales levels,the profitcalculated under marginaland absorptioncosting principleswillbe the same. Overthe three years involvedtotal sales are 15,000units and total productionis 15,000unitsAnd(ii)in a periodwhenproductionis greater than sales the profitscalculated under absorptioncostingprincipleswouldshowa higher profitthan under marginalcostingprinciples,rather than a lowerprofitas suggested in the questionHoweverthese candidates failedto appreciate that marginalcosting inventoryvaluations(marginalproductioncost) are lowerthan those under absorption costing(fullproductioncost). Thecorrect answeris '2 and 3', selected by veryfew candidates, suggestingthat most candidates have verylittleunderstandingof the area. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 256 of 421 Answers 243 A N S W E R S H G q 8.46 Thecorrectansweris:Totalcontributionwilldoublebetweenthe twooutput levels ACCAexaminingteam comments Thiswas a badly answeredquestionwithonly20%of candidates choosingthe correct answer.Itcoverssyllabusarea B2 a and A3g. Candidates oftenappear to findquestions that ask forthe effect of a change ininputdata on performanceindicatorsdifficult.Itmay helpthemto “invent”simplefiguresto test the validityof the statements on offer.For exampleifweassumea sales priceof $10per unit,a variablecost of $2 per unitand a fixed cost of $4,000 per period,then the followingfigurescan be quicklyproduced. Salesunits Salesrevenue Variablecost Totalcontribution Fixedcost Operatingprofit 1,000 $ 10,000 2,000 8,000 2,000 6,000 2,000 $ 20,000 4,000 16,000 2,000 14,000 Itis soonapparent that 'Totalcontributionwilldoublebetweenthe twooutput levels'is correct,and that the rest are incorrect. 9 9.1 9.2 9.3 9.4 9.5 9.6 244 Process costing Thecorrectansweris:2,175kgs Goodproduction= input– normalloss– abnormalloss =(2,500– (2,50010%)– 75)kg = 2,500 – 250 – 75 = 2,175kg Thecorrectansweris: Material50 litresConversioncosts 25 litres Workinprogress=300 litresinput– 250 litresto finishedgoods =50 litres Equivalentlitresforeach cost elementare as follows. Material Conversioncosts % Equiv.litres % Equiv.litres 50 litresinprogress 100 50 50 25 Thecorrectansweris:Nil Thereis no scrap valueavailableforany lossesthereforethe normallosswouldhave a zero value.Thenormallossdoes not carry any of the processcosts thereforethe otheroptions are allincorrect. Thecorrectansweris:(ii)and (iii)only Expectedoutput =2,000 unitsless normalloss(5%)100units=1,900units Insituation(i)there is an abnormal loss of 1,900– 1,800=100units Insituation(ii)there is an abnormal gain of 1,950– 1,900=50 units Insituation(iii)there is an abnormal gain of 2,000 – 1,900=100units Thereforethe correctansweris (ii)and (iii)only. Thecorrectansweris:Thesame as good production Abnormallossesare valuedat the same unitrate as good production,so that their occurrencedoes not affect the cost of good production. Thecorrectansweris:400 litres Thetotal losswas 15%of the materialinput.The340 litresof good output therefore represents85%of the total materialinput. ManagementAccounting(FMA/MA) Page 257 of 421 H q 340 =400litres 0.85 9.7 Thecorrect answer is:$16,800 Step1. Determine outputandlosses Therefore, material input= Input Units 500 500 Output Total Units 400 100 500 Finished units(balance) Closinginventory Equivalent units Materials Labour andoverhead Units % Units % 400 100 400 00 100 100 80 80 500 480 Step2. Calculatethecostperequivalent unit Equivalent production Input Cost inunits $ Materials 9,000 500 Labour andoverhead 11,520 480 Costper unit $ 18 24 42 Step3. Calculatetotalcostofoutput Costofcompleted units= $42400units= $16,800 9.8 Thecorrect answer is:$3,720 Usingthedatafromanswer 7above,extend step3 tocalculate thevalueoftheworkin progress. Cost Number of Costper element equivalent units equivalent unit Total $ $ Workinprogress:Materials 100 18 1,800 Labour &overhead 80 24 1,920 3,720 G 9.9 Thecorrect answer is:630 STATEMENT OFEQUIVALENT UNITS Equivalent units Materials Labour Overheads Total Units Output toprocess 2* 600 ClosingWIP 100 (100%) 700 600 100 700 600 (50%) 50 (30%) 650 600 30 630 *500unitsinput+ opening WIP200units– closing WIP100units. 9.10 Thecorrect answer is:$13,200 STATEMENT OFCOSTSPEREQUIVALENT UNIT Materials Labour $ $ Opening stock 2,400 1,200 Added during period 6,000 3,350 Totalcost 8,400 4,550 Equivalent units 700 650 Costperequivalent unit $12 $7 Overheads $ 400 1,490 1,890 630 $3 Total $22 Valueofunitstransferred toprocess 2 =600units $22=$13,200 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 258 of 421 Answers245 A N S W E R S H q 9.11 Thecorrectansweris:9,985units Equivalentunits Total Materials Units Units 9,850 9,850 Output to finished goods Closinginventory 9.12 450 10,300 (100%) 450 10,300 Conversioncosts Units 9,850 (30%) 135 9,985 Thecorrectansweris:$11.6 Inputcosts =2,000 units$4.50 =$9,000 Conversationcosts =$13,340 Normalloss =5%2,000 units$3 =$300 Expectedoutput =2,000 units– 100units=1,900units Inputcosts Cost per unitof output = Expectedoutput 9.13 = $9,000+$13,340 $300 1,900units = $22,040 =$11.6(to one decimalplace) 1,900units Thecorrectansweris:$22,040 $ 9,000 11,970 (450) 20,520 Material Conversioncosts Lessscrap valueof normalloss(300 $1.50) Cost of process G Expectedoutput =3,000 – (10%3,000) =3,000 – 300 =2,700units Costs per unit = Inputcosts scrap valueof normalloss $20,520 = =$7.60 Expectedoutput 2,700 Valueof output =2,900 $7.60=$22,040 9.14 Thecorrectansweris:$29,532 Abnormalgain =276units– 112units=164units Cost per unitof good production=$29,744/5,408=$5.50 Valueof abnormalgain =164units$5.50 =$902 Thevalueof the inputcan be foundas the balancingfigureinthe valuecolumnsof the processaccount. Polishing Input(balancingfigure) Abnormalgain 246 process $ 29,532 902 30,434 ManagementAccounting(FMA/MA) Page 259 of 421 account Output Normalloss(276$2.50) $ 29,744 690 30,434 H q 9.15 Thecorrectansweris:Neitherof them Statement (i)is incorrect.Unitsof normallossare valuedat theirscrap value(whichmay be nil). Statement(ii)is incorrect.Unitsof abnormallossare valuedat the same rate as good units. Thereforethe correctansweris neitherof them. 9.16 Thecorrectansweris:(Totalinputcost ÷expectedoutput units)– scrap valueper unit ACCAexaminingteam comments Theprinciplehere is that whilstit is reasonableto buildthe net cost of normal(expected) lossesintoproductioncost (becausethey are a normalfeature of the process),it is not reasonableto do the same withabnormallosses,because, as theirname suggests,they are not a normalfeature of the process.Theproductioncost of abnormallylostunitsisthe same as the cost of good production(Totalinputcost lessthe revenuefromthe sale of normallosses÷expectedoutput).Inthiscase no lossesare expected,so thisis equal to total inputcost ÷expectedoutput. Becausethe abnormallossescan be soldforscrap, their net cost is the cost per unitof makingthem,lessthe revenuederivedfromtheirsale that is (Totalinputcost ÷expectedoutput)– scrap valueper unit. 9.17 Thecorrectansweris:$4,545 ACCAexaminingteam comments Thisis arrivedat as follows:Firstcalculatethe expectedoutput fromthe inputof 10,000kg =(100%-12% of Normalloss)=8,800 kg Sincethe actual output was 9,200 kg and expectedoutput is8,800 kg, then the abnormal gain is 400 kg Thecost per kg of output mustbe calculatednext: Materialinput(10,000kg)= $100,000 $50,000 Conversion= G Totalcost LessNormalloss $150,000 ($6,000) (12%*10,000*$5) Nettotal cost of output $144,000 Thecost per kg of output =(($144,000/10,000kg 88%(expectedoutput))=$16.36 Thenet valueof the abnormalgain after the amountforthe normallossis deducted from the cost per kg output =($16.36– $5.00)400 kg =$4,545. 9.18 Thecorrectansweris:$2.50 Total production inventory $ 1,000 10,000 12,000 23,000 3,000 20,000 Openinginventory Directmaterialsadded Conversioncosts Lessclosinginventory Totalproductioncost Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 260 of 421 Answers 247 A N S W E R S H q Apportioned Salesvalue cost $ $ P ($5) 20,000 ($20,00020/80) 5,000 ($10) 60,000 ($20,00060/80) R 15,000 80,000 20,000 ProductRcost per unit=$15,000/6,000=$2.50 per unit. 9.19 Thecorrectansweris:$8,000 Fromthe previousanswer,total productioncost to be apportioned=$20,000. Production Apportionedcost Units $ 4,000 ($20,0004/10) P 8,000 6,000 ($20,0006/10) R 12,000 10,000 20,000 9.20 Thecorrectansweris:(iii)only Production Units 4,000 6,000 Statement (i)is incorrectbecause the valueof the productdescribedcouldbe relatively higheventhoughthe output volumeis relativelylow.Thisproductwouldthen be classified as a jointproduct. Statement (ii)is incorrect.Sincea by-productisnot importantas a saleableitem,it is not separately costed and does not absorb any processcosts. Statement (iii)iscorrect.Thesecommonorjointcostsare allocatedorapportionedto the joint products. 9.21 Thecorrectansweris:$103,273 Net process costs $ 216,000 72,000 (4,000) 284,000 Rawmaterialinput Conversioncosts Lessby-productrevenue Netprocesscost G E Q 9.22 Production Units 21,000 18,000 ($15) ($10) Salesvalue $ 315,000 ($284,000315/495) 180,000 ($284,000180/495) 495,000 Apportioned cost $ 180,727 103,273 284,000 Thecorrectansweris:$58,193 Nocosts are apportionedto the by-product.Theby-productrevenueis creditedto the sales account, and so does not affect the processcosts. Units L M N 248 3,000 2,000 4,000 ($32) ($42) ($38) Salesvalue $ 96,000 ($230,00096/332) 84,000 ($230,00084/332) 152,000 ($230,000152/332) 332,000 ManagementAccounting(FMA/MA) Page 261 of 421 Apportioned cost $ 66,506 58,193 105,301 230,000 H q 9.23 Thecorrectansweris:$36,400 Totalproductionunits=412,000+228,000 =640,000 units Joint costs apportionedto ProductH = 228,000 $384,000=$136,800 640,000 Furtherprocessingcosts =$159,600 Totalproductcost of ProductH =$(136,800+159,600)=$296,400 Closinginventoryvalueof ProductH= 28,000 $296,400=$36,400 228,000 9.24 Thecorrectansweris:$77,616 Salesvalueof production W X (12,000units$10) (10,000units$12) $120,000 $120,000 Joint productioncosts willbe apportionedequallybetweenthe twoproductsas the sales valueof productionis the same foreach product. Joint productioncosts allocatedto X=$776,160/2=$388,080 9.25 Valueof closinginventory= 2,000 $388,080=$77,616 10,000 Thecorrectansweris:$3,840 ACCAexaminingteam comments ThisquestioncoverssyllabusheadingB3bxiiToget the correctanswercandidates had to negotiatethree steps: (i)calculatethe amountof cost apportionedto productA($12,000 600/(600 +400) =$7,200)(ii)then calculatehowmuchof thiscost is to be charged against A’ssales inthe period($7,200480/600 =$5,760)(iii)then calculatethe gross profitearned usingthe grossprofitmargingiven($5,76040/60 =$3,840). Themostpopularanswerwas $2,880.Thesecandidates appear to have correctly calculatedstep (i)($12,000600/(600 +400) =$7,200)but then incorrectlyappliedthe grossprofitmarginof 40%to thisfigure.($7,20040%=$2,880)Thisapproach failsto match productioncosts against sales and secondlyappliesthe grossprofitmarginto cost rather than sales revenue. G 9.26 Thecorrectansweris:Bothproductswillhave the same returnon sales ratio (operating margin) ACCAexaminingteam comments Thisquestioncoverssyllabusarea B3b(xi)and requiredknowledgeof the differentmethods of apportioningjointcosts. Ifjointcosts are apportionedon a relativesales valuebasis and there are no furthercosts after splitoffpointthen alljointproductswillhave the same amountof profitsper $ of sales.Thisisarguably the majorbenefitof thismethod.Because one productcannot be producedwithoutthe other, it makessense to makethemappear equallyprofitable. Thismeans that the firststatement is correct. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 262 of 421 Answers 249 A N S W E R S H q 9.27 Thecorrectansweris:Pre-separationcosts are apportionedto the by-productto calculate its profit ACCAexaminingteam comments Joint productsand by-productsarisewherethe manufactureof one productmakes inevitablethe manufactureof otherproducts.Whilstjointproductshave significantsales value,by –productsales valueis relativelyinsignificant.Thereare twobasic approaches to accountingforby products.Eithertheirnet realisablevaluecan be netted offagainst preseparationpointcosts (effectivelythe same as the treatment of a normalloss).Thefirsttwo optionsare examplesof thisapproach, and werechosenmajorityof candidates. Alternativelytheirincomecan be added to the revenueof the mainproduct.'By-product incomelesspost-separationcosts is added to the sales of the mainproduct'is an example of thisapproach. 'Pre-separationcosts are apportionedto the by-productto calculateits profit'involvesapportioningpre separationcosts to the by-product.Thistreats the byproductinthe same way as a jointproductand is clearlyinappropriate.Noknowledgeof the otherapproaches is requiredto appreciate that thisapproach is incorrect. 9.28 Thecorrectansweris:$13,860 ACCAexaminingteam comments Thecorrectansweris$13,860,whichwas the secondmostpopularselectionby candidates. Tocalculatethiscandidates need firstlyto calculatea unitcost ($5,000– 400 kg $1)/2000units=$2.30per unit).Thiscan then be used to calculatea profiton the 1,800 unitssold(1,800units($10- $2.30)=$13,860).$13,400was the mostpopularselection. Candidates whochosethisalternativeignoredclosinginventoryand charged allcosts to unitssold(insteadof unitsproduced).Hencetheirunitcost was ($5,000– 400 kg $1)/1800units=$2.55per unit).Profitunderthisunitcost becomes(1,800units($10– $2.555)=$13,400).Candidates whoselectedthisanswerappear to have a problemin distinguishingbetweencost of productionand cost of sales. G 10 Costing methods 10.1 Thecorrectansweris:Processcosting Process costing is a costingmethodused whereit is not possibleto identifyseparate units of production,or jobs,usuallybecause of the continuousnature of the productionprocess. Themanufactureof liquidsoap is a continuous production process. 10.2 Thecorrectansweris:$606 $ 1,690 390 1,300 694 606 Sellingpriceof job Lessprofitmarkup (30/130) Totalcost of job Lessoverhead Primecost 10.3 Thecorrectansweris:$404 $ 100 112 42 70 80 404 Directmaterials(5 $20) Directlabour(14$8) Variableoverhead(14$3) Fixedoverhead(14$5*) Otheroverhead Totalcost of job173 250 ManagementAccounting(FMA/MA) Page 263 of 421 H q *Fixedproductionoverheadabsorptionrate = $200,000 40,000 =$5 per directlabourhour 10.4 Thecorrectansweris:$72,761 Themostlogicalbasis forabsorbingthe overheadjobcosts is to use a percentage of direct labourcost. Overhead = = $24,600 $126,000 $(14,5003,500 24,600) $24,600 $126,000 $42,600 = $72,761 10.5 Thecorrectansweris:$217,323 Job number AA10(26,800+17,275+14,500)+( 14,500 126,000) 42,600 CC20 (18,500+24,600 +72,761) 10.6 WIP $ 101,462 115,861 217,323 Thecorrectansweris:(i),(iii)and (iv)only Theactual materialand labourcosts fora batch (i and iv)can be determinedfromthe materialand labourrecordingsystem.Actualmanufacturingoverheadscannot be determinedfora specificbatch because of the need forallocationand apportionmentof each itemof overheadexpenditure,and the subsequentcalculationof a predetermined overheadabsorptionrate. Thereforeitem (ii)is incorrectand item (iii)is correct. G 10.7 Thecorrectansweris:(i)and (ii)only 10.8 Thevehiclecost per passenger-kilometre(i)is appropriateforcost controlpurposes because it combines the distancetravelledand the numberof passengerscarried,both of whichaffect cost. Thefuelcost foreach vehicleper kilometre(ii)can be usefulforcontrolpurposesbecause it focuses on a particular aspect of the cost of operatingeach vehicle. Thefixedcost per kilometre(iii)is not particularlyusefulforcontrolpurposesbecause it varies withthe number of kilometrestravelled. Thecorrectansweris:$5.00 10.9 Numberof occupiedroom-nights=40 rooms30 nights65% =780 Roomservicingcost per occupiedroom-night= $3,900 =$5 780 Thecorrectansweris:$41.67 Weeksduringyear Hoursworkedper year =52 – 4 =48 =48 35 hours =1,680hours Hourschargeable to clients =1,68090%=1,512 $3,000 $18,000 $21,000 Hourlycharge rate = = 1,512 1,512 =$13.89per hour Pricefor3-hour'colourand cut' =$13.893 =$41.67 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 264 of 421 Answers 251 A N S W E R S H q 10.10 Thecorrectansweris:(i)and (ii) Acollegeand a hotelare likelyto use servicecosting.Aplumberworkson separately identifiablejobsand is thereforemorelikelyto use jobcosting. 10.11 Thecorrectansweris:(i),(ii)and (iii) Anairlinecompany, a railwaycompanyand a firmof accountants are all consideredto be serviceindustries. 10.12 Thecorrectansweris:$11,466 Assignment789 $ 2,160 2,750 3,280 8,190 3,276 11,466 Seniorconsultant– 54 hours$40 Juniorconsultant– 110hours$25 Overheadabsorption– 164hours$20 Totalcost 40%total cost =40%$8,190 Finalfee 10.13 Thecorrectansweris:$170 Totalcost – jobnumber1012 $ 45 30 75 50 125 45 170 Directmaterials Directlabour Primecost Productionoverheads(30/7.5$12.50) Totalproductioncost Non-productionoverheads(0.6 $75) Totalcost – jobnumber1012 G 10.14 Thecorrectansweris:$0.002 per kg-km Firstwecalculatethe total numberof kg-km. Kgkmtaken =250,000 kg 7,500 km =1,875,000,000kg-km cost per kg-km=$3,750,000/1,875,000,000=$0.002 per kg-km 10.15 Thecorrectansweris:$0.010 ACCAexaminingteam comments Thecorrectansweris $0.010.Thecost per kilogram/kilometre of sand deliveredis the cost of carryingone kilogramof sand forone kilometre.Kilogramkilometrescan be calculated by multiplyingthe weightof goodsdeliveredto each customerby the distancecovered. (500 kg 200km+180kg 1200km=316,000kilogramkilometres.)Iftruckcosts are dividedby thisfigurea cost of $0.010is obtained.$2.186representsthe cost per kilometre travelled(($3,060/ 1,400km).$0.003 can be obtainedby dividingtruckcost by 680 kg 1,400kilometres=952,000.Thisis a meaninglessfigureas it does not allowfordifferent weightstravellingdifferentdistances.Finally$4.500 representsthe average cost per kilogramdelivered($3,060/ 680 kg =$4.50). 10.16 Thecorrectansweris:Maturity. Duringthisperiod,pricestend to fallbut profitsremainhighdue to good sales volume. 10.17 Thecorrectansweris:Growth. Duringthe growthphase the productbeginsto makea profit.Thisis due to economiesof scale beingreceivedas increaseddemand forthe productoccurs. 252 ManagementAccounting(FMA/MA) Page 265 of 421 H q 10.18 Thecorrectansweris:Marketprice– desiredprofitmargin Target cost means a productcost estimatederivedby subtractinga desiredprofitmargin froma competitivemarketprice. 10.19 Thecorrectansweris:Growth. Theproductlifecyclestages can be summarisedas follows: Introduction:Basicquality,fewcompetitors,highpromotioncosts Growth:Asstated inquestion Maturity:Mostcompetitivestage, productextensionstrategies,forexample,newmarkets Decline:Exitstrategy needs to be identified. 10.20 Thecorrectansweris:Statement1is true and statement 2 is false Statement1is true. Moreaccurate feedbackcan be obtainedsincethe costs of research and developmentare also taken intoaccount. Statement2 is false.Individualprofitability forproductsis moreaccurate. 10.21 Thecorrectansweris:Anexternalfailurecost Thisis a cost arisingfrominadequate qualitydiscoveredafter the transferof ownership,an externalfailurecost. 10.22 Thecorrectansweris:Target costing Target costinginvolvessettinga target cost by subtractinga desiredprofitmarginfroma competitivemarketprice. 10.23 Thecorrectansweris:Lifecyclecosting ACCAexaminingteam comments G Traditionalabsorptioncostingassignsdirectcosts and productionoverheadto cost units, oftenignoringcosts such as designand disposalcosts. Activity-basedcostingis an alternativeapproach to the traditionalmethodsof absorption costingwhichidentifiescost driverswhichcause the costs of an organisation’sactivities. Likeabsorptioncostingit usuallyfocusseson productioncosts, oftenignoringcosts such as designand disposalcosts. Target costinginvolvessettinga target cost by subtractinga desiredprofitmarginfroma competitivemarketprice. Lifecyclecostingtracks and accumulatescosts and revenuesattributableto a product overits entirelifecycleallowingthe measurementof a productsprofitabilityoverits entire life.Itencompassesallof the costs listedinthe statement. 11 Setting budgets 11.1 Thecorrectansweris:(i),(ii)and (iv) Coordination (i)is an objectiveof budgeting.Budgetshelpto ensurethat the activities of all parts of the organisation are coordinated towards a single plan. Communication(ii)is an objectiveof budgeting.Thebudgetary planningprocess communicates targets to the managers responsibleforachievingthem,and it shouldalso providea mechanism for juniormanagers to communicate to more senior staff their estimatesof what may be achievableintheirpart of the business. Expansion(iii)isnot initselfan objectiveof budgeting.Althougha budget may be set withina frameworkof expansion plans, it is perfectlypossibleforan organisationto plan for a reduction in activity. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 266 of 421 Answers 253 A N S W E R S H q Resourceallocation (iv)isan objectiveof budgeting.Mostorganisationsface a situationof limitedresources and an objectiveof the budgetingprocessis to ensurethat these resourcesare allocatedamongbudget centresinthe mostefficientway. 11.2 Thecorrectansweris:Thecompany'sactivitiesare limitedby the levelof sales it can achieve Theprincipal budget factor is the factor whichlimitsthe activitiesof an organisation. Althoughcash and profitare affected by the levelof sales, sales is not the onlyfactor whichdeterminesthe levelof cash and profit. 11.3 Thecorrectansweris:$8,688 Thetotal productioncost allowanceina budget flexedat the 83%levelof activitywouldbe $8,688 (to the nearest $) Directmaterialcost per 1%=$30 Labourand productionoverhead: $ At 90% activity 6,240 At 80% activity 6,180 Change 10% 60 Variablecost per 1%activity=$60/10%=$6 Substitutingin80%activity: Fixedcost of labourand productionoverhead = $6,180– (80 $6) = $5,700 Flexedbudget cost allowance: $ 2,490 Directmaterial$30 83 G Labourand productionoverhead: variable$6 83 fixed 498 5,700 8,688 11.4 Thecorrectansweris:Spreadsheetsare veryusefulforword-processing Spreadsheetsare not usefulforwordprocessing 11.5 Thecorrectansweris:C4 ThegrossprofitforFebwillbe calculatedby takingthe cost ofsales(C3)fromthe sales(C2). 11.6 Thecorrectansweris:=D4– D5 Thenet profitforMarchwillbe calculatedby takingthe expenses(D5)fromthe grossprofit (D4). 11.7 Thecorrectansweris:=G6/G2100 G8 is the percentage net profitfor May, whichmeans the net profitfor May(G6)must be dividedby the sales for May(G2)and then multipliedby 100to givea percentage figure. +(0.1F4)] 11.8 Thecorrectansweris:=[(0.9F3) Budgetedproduction=budgeted sales +closinginventory– openinginventory.InMarch, 10%of March'ssales (foundincellF3)willstillbe inventoryat the beginningof the month and 10%of April'ssales (cellF4)willbe ininventoryat the end of the month.Productionfor Marchwillthereforebe 254 ManagementAccounting(FMA/MA) Page 267 of 421 H G q March'ssales (F3)+10%of April'ssales (F4)– 10%of March'ssales (F3) Or =[(0.9F3)+(0.1F4)] 11.9 Thecorrectansweris:$4,755(A) Thevolumevarianceforlast monthwas $4,755Adverse Thevolumevarianceis the increaseincost resultingfroma change inthe volumeof activity,ie the differencebetweenthe originalbudget and the flexedbudget. Volumevariance=$126,100– $130,855 =$4,755(A) 11.10 Thecorrectansweris:$2,725(A) Theexpenditurevarianceforlast monthwas $2,725Adverse Theexpenditurevarianceis the differencebetweenthe flexedbudget and the actual results. Expenditurevariance=$130,855– $133,580 =$2,725(A) 11.11 Thecorrectansweris:$62,000 ACCAexaminingteam comments Majorityof candidates incorrectlyselected$72,000(profitper unitactual sales).This suggests that these candidates knewthat the budget shouldbe flexedto the actual output levelof 6,000 unitsbut that they failedto appreciate that total fixedcosts (inthiscase fixedproductionoverhead)do not varywithoutput. Thefixedproductionoverheadcost per unitcontainedinthe standard cost is an average fixedcost per unitbased on the budgeted output levelof 8,000 units.Thisimpliesa total fixedproductionoverheadof $40,000 ($5per unit8,000 units).Thistotal budgeted fixedproductionoverheadwillnot change withvolume.Thecorrectanswerof $62,000 can be calculatedby multiplyingthe standard contributionper unitby the actual output leveland the subtractingthe budgeted fixedproductionoverhead.(($118– $80 – $21)6,000 units– $40,000 =$62,000).Onlya minorityof candidates selectedthisalternative. 11.12 Thecorrectansweris:$55,000 ACCAexaminingteam comments Thisquestioncoverssyllabusarea C4d budget flexing.Thecorrectansweris 55,000. To arriveat thisanswera candidate needs to understandthat contributionvariesinlinear proportionto volume,but that fixedcosts do not. Accordinglythey need to calculatethat the contributionat 6,000 unitswillbe $72,000(6,000 ($30-$18)),and that fixedcosts willbe made up of the budgeted fixedcosts at 4,000 units(4,000 $4 =$16,000)plus the step up fixedcosts of $1,000,making$17,000intotal. Profitat an output levelof 6,000 unitsis therefore$72,000- $17,000=$55,000. Inshort6,000 units($30– $18)– 4,000 units$4 - $1,000=$55,000. $56,000, chosenby a minorityof candidates, was nearlycorrect,candidates simplydid not deduct the step infixedcosts. Notethat distracters(incorrectanswers)inobjectivetestingquestionssometimesare based on figuresarrivedat by incompletecalculations.Candidates shouldtry to avoidchoosing answersuntilthey are sure that theircalculationsare complete. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 268 of 421 Answers 255 A N S W E R S H q 11.13 Thecorrectansweris:B8+B7+B4 ACCAexaminingteam comments Contributionis equal to sales revenuelessvariablecost. B8+B7+B4representssales revenuelessvariableproductioncosts and variablesellingcosts and is correct.Itis worryingthat onlya minorityof candidates can correctlydefinecontribution. 11.14 Thecorrectansweris:3,000 ACCAexaminingteam comments Directmaterialis alwaysa variablecost. Thisis confirmedinthiscase by its deductionfrom sales to calculatecontribution.Themostsensibleway to calculatea total variablecost varianceis against a flexedbudget figure.(Itcan be seen that the directlabourvariance has been calculatedagainst flexedbudget cost inthe spreadsheet.) Theflexedbudget directmaterialcost (cellC5)has a valueof $27,000($21,600/1,200units 1,500units).Thedirectmaterialvariancebecomes$27,000– $24,000 =$3,000 favourable. 11.15 Thecorrectansweris:$5,000 ACCAexaminingteam comments Todeterminethe flexedbudget, the sales and costs need to be adjustedto 80%capacity, notingthat 70%of the costs are fixedand thereforewillnot be flexedbut willremainthe same as inthe fixedbudget. Flexedbudget $ Sales($300,00080%) 240,000 Variablecosts (($300,000– $50,000)30%80%) (60,000) (175,000) Fixedcosts (($300,000– $50,000)70% Netprofit 5,000 G Alternative2 is arrivedat by adjustingboth the sales and total cost figuresfor80%and forgettingthat the fixedcost elementshouldnot be flexedAlternative3 is the adjusted total cost figurelessthe fixedcost elementAlternative4 is the adjustedsales figurelessthe fixed cost elementonly. 11.16 Thecorrectansweris:Thebudgeted cash flow,budgeted statement of profitor lossand budgeted statement of financialposition Themaster budget is the summarybudget intowhichallsubsidiarybudgets are consolidated.Itusuallycomprisesthe budgeted statement of profit or loss, budgeted statement of financial positionand budgeted cash flowstatement. Themaster budget is used in conjunctionwiththe supporting subsidiary budgets, to plan and controlactivities.Thesubsidiarybudgets are not inthemselvesa part of the master budget. 11.17 Thecorrectansweris:(ii),(iv),(v),(i),(vi),(iii) Sincethere are no productionresourcelimitations,sales wouldbe the principalbudget factor and the sales budget (ii)wouldbe prepared first.Budgetedinventorychanges includedinthe finishedgoodsinventorybudget (iv)wouldthen indicatethe required productionforthe productionbudget (v).Thiswouldlead to the calculationof the material usage (i)whichwouldthen be adjustedforthe budgeted change inmaterialinventory(vi) to determinethe requiredlevelof budgeted materialpurchases(iii).Therefore the correct answeris (ii),(iv),(v),(i),(vi),(iii). 256 ManagementAccounting(FMA/MA) Page 269 of 421 H G q 11.18 Thecorrectanswersare: Salesvolumefromthe sales budget and Budgetedchange in finishedgoodsinventory Sincethere are no productionresourcelimitations,sales wouldbe the principalbudget factor thereforethe sales budget mustbe prepared beforethe productionbudget . The budgeted change infinishedgoodsinventorywouldthen indicatethe requiredvolumefor the productionbudget. Thematerialpurchases,wouldbe informationderivedfromthe productionbudget after adjustingformaterialinventorychanges, and the standard directlabourcost per unit, wouldbe requiredforthe production cost budget, but not forthe productionbudget, whichis expressed in volumeterms. 11.19 Thecorrectansweris:Salesquantity– openinginventoryof finishedgoods+closing inventoryof finishedgoods Anyopeninginventoryavailableat the beginningof a periodwillreduce the additional quantityrequiredfromproductioninorderto satisfya givensales volume.Anyclosing inventoryrequiredat the end of a periodwillincrease the quantityrequiredfrom productioninorderto satisfysales and leavea sufficientvolumeininventory.Thereforewe need to deduct the openinginventoryand add the requiredclosinginventory. 11.20 Thecorrectansweris:Rawmaterialsinventoriesare budgeted to increase Oncethe materialusage budget has been prepared, based on the budgeted production volume,the usage is adjusted forthe budgeted change inmaterialsinventoriesinorderto determinethe requiredbudgeted purchases.Ifpurchasesexceedproductionrequirements thismeans that raw materialinventoriesare beingincreased,and the correctansweris C. 11.21 Thecorrectansweris:24,500 units Units Requiredforsales 24,000 Requiredto increaseinventory(2,000 0.25) 500 24,500 A N S W E R 11.22 Thecorrectansweris:175,000kgs S Requiredincreaseinfinishedgoodsinventory Budgetedsales of Alpha Requiredproduction Units 1,000 60,000 61,000 Rawmaterialsusage budget (3 kg) Budgeteddecrease inraw materialsinventory Rawmaterialspurchase budget kg 183,000 (8,000) 175,000 11.23 Thecorrectansweris:16,000units Budgetedsales Budgetedreductioninfinishedgoods Budgetedproductionof completedunits Allowancefordefectiveunits(10%of output =1/9of input) Productionbudget 11.24 Thecorrectansweris:$10,500 Activehoursrequiredforproduction=200 6 hours= Allowanceforidletime(20%of total time=25%of activetime) Totalhoursto be paid for $7per hour Directlabourcost budget Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 270 of 421 Units 18,000 (3,600) 14,400 1,600 16,000 Hours 1,200 300 1,500 $10,500 Answers 257 H q 11.25 Thecorrect answer is:225,000hours Planned increase ininventories offinished goods Budgeted sales Budgeted production (topassquality control check) Units 4,600 36,800 41,400 Thisis92%oftotalproduction, allowing foran8%rejection rate. Budgeted production = 10041,400=45,000units 92 Budgeted directlabour hours = (5 hours perunit)225,000hours 11.26 Thecorrect answer is:$300,000 Before youcanworkoutthetotalcost,youhavetodetermine howmanylabour hours are required. Youcancalculate thenumber ofhours required fortheunitsquiteeasily:4,800 5 =24,000hours. However 20%oflabour timeisidle,whichmeans that24,000hours is only80%ofthetotalhours required toproduce 4,800units.Totalhours = 24,000 (100/80) =30,000hours. Totalcost=30,000hours $10perhour= $300,000 11.27 Thecorrect answer is:(i),(ii)and(iii) Statement (i)istruebecause certain factors areoftenoutofthemanager's control. The levelofsales(orproduction) willbeoutofthemanager's control anda flexed budget will account forthis.Statement (ii)istrue.Themajor purpose ofa fixedbudget isatthe planning stagewhenitseekstodefine thebroadobjectives oftheorganisation. Statement (iii)istruebecause forecast volumes areveryunlikely tobeequaltoactualvolumes andso thevariances willcontain largevolume differences. 11.28 Thecorrect answer is:$49,480 Received inSeptember $ 35,280 10,000 4,200 49,480 G August sales $60,00060%98%* Julysales $40,00025% Junesales $35,00012% *Thisreduction allows forthe2%settlement discount. Ifyouselected $46,260youmisinterpreted 'month aftersale'tobethemonth thesalewas made.Theinvoices areissued onthelastdayofeachmonth, therefore cashreceipts in respect ofeachmonth's saleswillbegininthefollowing month. $50,200makes noallowance forthesettlement discount and$50,530includes thereceipt ofbaddebts;thoseamounts willnever bereceived cash. 11.29 Thecorrect answer is:$60,532 $ 40%ofMaysalesforcash(40%$55,000) 22,000 70%ofAprilcreditsalesless2%discount (70%60%$70,00098%) 28,812 27%ofMarchcreditsales(27%60%$60,000) 9,720 60,532 Ifyouselected $61,120 youforgottoallowforthetwopercentdiscount. $66,532works on theassumption thatreceipts fromcashsalesoccurinthemonth aftersale;bydefinition, cashsalesreceipts occurassoonasthesaleismade.Ifyouselected $86,620you calculated thecreditreceipts onthebasisthatallsalesweremadeoncredit; only60 per centofsaleswereona creditbasis. 258 Management Accounting (FMA/MA) Page 271 of 421 H G q 11.30 Thecorrectansweris:$50,200 PaymentsinJune willbe inrespect of Maypurchases. Lessopeninginventory Purchasebudget May 25,200 kg 4,100kg 29,300kg 4,200 kg 25,100kg $2 per kg =payment forpurchasesinJune $50,200 Productionrequirements(8,400units3 kg) Closinginventory $25,100is the figureforthe quantityof materialto be paid for, not its value.$48,800is the valueof June purchases,whichwillbe paid forinJuly. Ifyou selected$50,600 your adjustmentsforopeningand closingmaterialinventorieswerethe wrongway round. 11.31 Thecorrectansweris:$231,000 $ 76,400 54,600 231,000 75%Maywagescost =75%8,400 $74 hours 25%Aprilwagescost =25%7,800 $74 hours Wage paymentsforMay 11.32 Thecorrectansweris:$285,567 Cash sales inDecember($402,00010%) ReceiptsfromNovembercreditsales ($390,00090%30%99%) ReceiptsfromOctobercreditsales ($224,00090%70%) Totalsales receiptsinDecember 11.33 Thecorrectansweris:$45,310 $ Variableproductionoverheadpayment: forAugustproduction(12,600$5 30%) forSeptemberproduction(5,500$5 70%) Totalvariableproductionoverheadpayment Fixedoverheadcash payment ($9,440– $2,280) Totalcash payment 11.34 Thecorrectansweris:$14,700 18,900 19,250 38,150 7,160 45,310 Units 3,000 2,000 1,000 Highactivity Lowactivity Increase Variablecost per unit = $ 40,200 104,247 141,120 285,567 $ 12,900 11,100 1,800 $1,800 =$1.80per unit 1,000 Fixedcost, substitutinginhighactivity=$12,900– (3,000 $1.80) =$7,500 Budgetcost allowancefor4,000 units: Variablecost (4,000 $1.80) Fixedcost $ 7,200 7,500 14,700 $7,200is the variablecost allowanceonlyand $7,500is the fixedcost allowanceonly.If you selected$13,460yourvariablecost per unitcalculationwas upsidedown ($1,000/1,800instead of $1,800/1,000). Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 272 of 421 Answers 259 A N S W E R S H q 11.35 Thecorrectansweris:$289,000 Workings 11.36 G 11.37 11.38 11.39 11.40 PaidinMonth July August September October November Purchases $ $ $ $ $ July $250,000 59,375(1) 175,000(2) 12,500(3) August$300,000 71,250(4) 210,000(5) 15,000(6) September$280,000 66,500(7) 196,000(8) 14,000(9) 289,000 1 $250,000 25%0.95 =$59,375 $250,000 70% 2 =$175,000 3 $250,000 5% =$12,500 $300,000 25%0.95 =$71,250 4 $300,000 70% 5 =$210,000 $300,000 5% 6 =$15,000 7 $280,000 25%0.95 =$66,500 $280,000 70% 8 =$196,000 9 $280,000 5% =$14,000 Thecorrectansweris:(i)and (ii)only Anadverselabourefficiencyvariancemeans that employeesare takingtoo longto producethe products.Employingmorehighlyskilledlabourshouldhelpto speed up the processso statement (i)isapplicable.Supervisionof employeesmay helpto improve efficiencystandards by ensuringlesstimeiswasted by employees.Sostatement (ii)is applicable.Askingemployeesto workpaid overtimewillnot helpto improvethe efficiency because it is unlikelyto reducethe numberof hoursworked.Employeesmay evenslow downfurtherand becomemoreinefficientifthey thinkthat they can workovertimeand be paid extra wages.Sostatement (iii)is not applicable. Thecorrectansweris:(iii)only Thedirectmaterialpricevarianceis too smallto be materialand is thereforenot worth investigating. Thelabourrate variancecan be explainedby the companywideincreaseof 2%and so it is not worthyof investigation. Thesales volumevarianceis large and shouldbe investigated,eventhoughit isfavourable. Managersneed to plan forthe futureand need to knowwhetherthe increaseinsales is a one offor likelyto continueintothe nextquarter. Thecorrectansweris:Tofacilitatecontrolby establishinga budget relevantto actual activitylevels Aflexiblebudgetfacilitatescontrolby establishinga budgetrelevantto actual activitylevels. Thecorrectansweris:(i)and (ii)only Statement(iii)is false.Ifoutput levelsare stable, a fixedbudget is appropriateas the additionaltimeand effortrequiredto producea flexiblebudget wouldnot be justified. Thecorrectansweris:=B3+C4 – B4 ACCAexaminingteam comments Toarriveat thisanswercandidates had to understandthat productionunits=sales units+ closinginventoryof finishedgoods– openinginventoryof finishedgoods,and that the openinginventoryforAugustwas the closinginventoryforJuly. =B3– B4was the most popularanswerpresumablyon the basis that it totalledthe column. 260 ManagementAccounting(FMA/MA) Page 273 of 421 H G q 11.41 Thecorrectansweris:$74,896 ACCAexaminingteam comments Theanswermay be calculatedas follows: Receiptsfrommonth1sales $80,000 90%60% Month2 cash sales $70,000 10% $70,000 90%40%98% Month2 creditsales Totalreceiptsmonth2 12 Implementing $43,200 $7,000 $24,696 $74,896 budgets 12.1 Thecorrectansweris:Staff suggestionsmay be ignoredleadingto de-motivation Staff suggestionsmay be ignoredleadingto de-motivation.Psuedo-participationoccurs whenmanagers pretend to involvestaff but actuallyignoretheirinput.Thismay lead to a lessrealisticbudget and willcertainlybe de-motivatingifthe staff involvedfindout what is goingon. 12.2 Thecorrectansweris:(i)and (ii)only Itis generallyagreed that the existenceof someformof target or expectedoutcomeis a greater motivationthan no target at all.Therefore(i)is true. Theestablishmentof a target, however,raisesthe questionof the degree of difficultyor challengeof the target. Therefore (ii)is true. Ifthe performancestandard is set too highor too lowsub-optimalperformance couldbe the result.Thedegree of budget difficultyis not easy to establish.Itis influenced by the nature of the task, the organisationalcultureand personalityfactors.Somepeople respondpositivelyto a difficulttarget. Others,ifchallenged,tend to withdrawtheir commitment.So(iii)is not true. 12.3 Thecorrectansweris:Abudget whichis set withoutpermittingthe ultimatebudget holder to participateinthe budgetingprocess Abudget whichis set withoutpermittingthe ultimatebudget holderto participateinthe budgetingprocess. 12.4 Thecorrectansweris:Allof (i),(ii)and (iii) Participativebudgetingshouldbe used inallthree circumstances. 12.5 13 Thecorrectansweris:Acost whichcan be influencedby its budget holder. Project appraisal 13.1 Thecorrectansweris:Anopportunitycost Anopportunitycost is the valueof the benefitsacrificedwhenone courseof actionis chosen,inpreferenceto another. 13.2 Thecorrectansweris:(i),(iii)and (iv)only Adecisionis about the future,thereforerelevantcosts are futurecosts (i).Ifa cost is unavoidablethen any decisiontaken about the futurewillnot affect the cost, therefore unavoidablecosts are not relevantcosts (ii).Incrementalcosts are extra costs whichwillbe incurredinthe futurethereforerelevantcosts are incrementalcosts (iii).Differentialcosts are the differenceintotal costs betweenalternativesand they are thereforeaffected by a decisiontaken nowand they are associated withrelevantcosts (iv). Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 274 of 421 Answers 261 A N S W E R S H q 13.3 Thecorrectansweris:$2,000 $ 1,200 800 2,000 Opportunitycost (net realisablevalue) Cost of disposalinone year's time Totalrelevantcost of machine 13.4 Thecorrectansweris:(i),(ii)and (iii)only Purchasesof raw materialswouldbe classedas revenueexpenditure,not capital expenditure.Theothersare capital expenditure. 13.5 Thecorrectansweris:$30.38 Currentrate is 6%pa payable monthly Effectiverate is 6/12%=½%compoundeverymonth Inthe sixmonthsfromJanuary to June, interestearned = ($1,000[1.005]) 6 – $1,000=$30.38 13.6 Thecorrectansweris:$270 $2,070=115%of the originalinvestment 100 Originalinvestment= 115$2,070 =$1,800 Interest =$2,070– $1,800 =$270 $310.50iscalculated(incorrectly)as follows. G H x $2,070 =15% x =0.15$2,070 =$310.50 Makesure that you alwaystacklethistype of questionby establishingwhat the original investmentwas first. 13.7 Thecorrectansweris:$15,219 We need to calculatethe effectiverate of interest. 8%per year (nominal)is 2%per quarter. Theeffectiveannual rate of interestis [1.024– 1]= 0.08243=8.243%. Nowwecan use S =X(1+r)n S =12,000(1.08243)3 S =$15,218.81 Theprincipalwillhave grownto approximately$15,219. 13.8 Thecorrectansweris:$1,800inexactlyfouryears fromnow PVof $1,200inone year PVof $1,400intwoyears PVof $1,600inthree years PVof $1,800infouryears 262 =$1,2000.926= =$1,4000.857= =$1,6000.794= =$1,8000.735= ManagementAccounting(FMA/MA) Page 275 of 421 $ 1,111.20 1,199.80 1,270.40 1,323.00 G q 13.9 Thecorrect answer is:4.06% Effective quarterly rate Effective annual rate =1%(4%4) =[(1.01) 4– 1] =0.0406=4.06%pa 13.10 Thecorrect answer is:9.85% A (ba)% Theformula tocalculate theIRRisa%+ AB where a =oneinterest rate b=otherinterest rate A=NPVatratea B=NPVatrateb IRR 22 =9%+ 1% 224 =9+0.85=9.85% 13.11 Thecorrect answer is:$1,017 Thediscount factorfor10yearsat7%is0.508. Original amount invested =$2,0000.508 =$1,016 But$1,016 1.07 $2,000so$1,017 isthecorrect answer. 10isjustunder 13.12 Thecorrect answer is:26.8% Ifhouse pricesriseat2%percalendar month, thisisequivalent to(1.02)=1.268 12 or26.8% peryear. 13.13 Thecorrect answer is:$5,073 S Annuity = $700 Annuity factor= 1+6.247(cumulative factorfor9years,firstpayment isnow) = 7.247 Annuity = $700= PVofannuity Annuityfactor PVofannuity 7.247 $7007.247= PVofannuity PVofannuity= $5,073(tothenearest $) 13.14 Thecorrect answer is:9% Annuity = A N S W E R Present valueofannuity Annuityfactor Annuity factor= 86,400=4.486 19,260 Fromtables,thisannuity factorcorresponds toaninterest rateof9%oversixyears. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 276 of 421 Answers263 H G q 13.15 Thecorrectansweris:$480,000 Thepresentvalueof a perpetuityis: a r where PV= a =annuity=$24,000 r =cost of capital as a proportion=5%=0.05 = 24,000 0.05 =$480,000 13.16 Thecorrectansweris:18% PV Theinternalrate of return(IRR)of the investmentcan be calculatedusingthe following formula. A (b a)% IRR=a%+ AB where a =firstinterestrate =12% b =secondinterestrate =20% A=firstNPV=$24,000 B=secondNPV=$(8,000) 24,000 (20 12)% =12%+ 24,0008,000 =12%+6% =18% 13.17 Thecorrectansweris:2 years and 6 months IRR Workings Project Beta Year Cash inflow Cumulativecash inflow $ $ 1 250,000 250,000 2 350,000 600,000 3 400,000 1,000,000 4 200,000 1,200,000 5 150,000 1,350,000 6 150,000 1,500,000 ProjectBetahas a payback periodof between2 and 3 years. $200,000 12months Paybackperiod=2 years + $400,000 =2 years +6 months 264 ManagementAccounting(FMA/MA) Page 277 of 421 H G q 13.18 Thecorrectansweris:Between3 and 4 years. Workings Project Alpha Year Cash flow $ (800,000) 250,000 250,000 400,000 300,000 200,000 50,000 0 1 2 3 4 5 6 Discountfactor 10% 1.000 0.909 0.826 0.751 0.683 0.621 0.564 PV $ (800,000) 227,250 206,500 300,400 204,900 124,200 28,200 Cum.PV $ (800,000) (572,750) (366,250) (65,850) 139,050 263,250 291,450 Thediscountedpayback periodis thereforebetweenthree and fouryears. 13.19 Thecorrectansweris:Initialinvestment÷annual net cash inflow Thepayback periodis the timethat is requiredforthe total of the cash inflowsof a capital investmentprojectto equal the total of the cash outflows,ie initialinvestment÷annual net cash inflow. 13.20 Thecorrectansweris:Between10%and 15% Investment PVof cash inflow NPV@10% $ (60,000) 64,600 4,600 Investment PVof cash inflow NPV@15% $ (60,000) 58,200 (1,800) TheIRRof the machineinvestmentis thereforebetween10%and 15%because the NPVfalls from$4,600 at 10%to –$1,800at 15%.Thereforeat somepointbetween10%and 15%the NPV=0. Whenthe NPV=0, the internalrate of returnis reached. 13.21 Thecorrectansweris:$61,016 Letx =investmentat start of project. Year 0 1– 5 Cash flow $ x 18,000 Discountfactor 10% 1.000 3.791 Presentvalue $ (x) 68,238 7,222 –x+$68,238=$7,222 x =$68,238– $7,222 x =$61,016 13.22 Thecorrectansweris:Thediscountrate (%)at whichthe net presentvalueof the cash flowsfroman investmentis zero IRRis the discountrate at whichthe net presentvalueof the cash flowsfroman investment is zero. 13.23 Thecorrectansweris:Between3.0 years and 4.0 years Atthe end of year 3, $74,600has been 'paid back'. Theremaining$15,400forpayback will be receivedduringyear 4. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 278 of 421 Answers 265 A N S W E R S H q 13.24 Thecorrectansweris:8.67% (1.021)– 4 1=0.0867=8.67% 13.25 Thecorrectansweris:$18,750 1,500/0.08=18,750 13.26 Thecorrectansweris:InvestmentExe4.04%InvestmentWye4.66% ACCAexaminingteam comments Theanswercan be arrivedat by calculation(InvestmentExeannual effectivereturn=1.022 – 1=0.0404 or 4.04%and investmentWyeannual effectivereturn=1.200.25 – 1=0.0466 or 4.66%).Alternativelythe answercan be 'reasoned' out: investmentExe'ssemiannual compoundingmustresultina highereffectiveannual rate than 4%(2 2%)and a 20% returnovera 4 year periodmusthave an effectiveannual rate of lessthan 5%(20%÷4 years)whenthe compoundingeffectis allowedfor. 13.27 Thecorrectansweris:$333 ACCAexaminingteam comments Thecorrectansweris $333. Afouryear paybackperiodimpliesan (equal)annualcash flowof$12,000÷4 years = $3,000per year. Asthesecash flowsrunfor6 years the NPVisequalto $333( –$12,000 +annuityfactor for6 years @12%$3,000 =–$12,000+4.111$3,000 =$333).The –$3,778distracteris based uponan incorrectcalculationof annual cash flow($12,000÷ 6 years =$2,000 per year),suggestinga misunderstandingof the payback method. Inthe –$2,899distracterthe NPVwas based on a projectlifeof 4 years rather than 6 suggestinga failureto read the questioncarefully. Finally–$5,926'sNPVwas based upona combinationof the othertwodistracters,that is, an annual cash flowof $2,000 for4 years. G 13.28 Thecorrectansweris:$36,400 ACCAexaminingteam comments Theincrementalnet cash flowinthe firstyear is givenas $40,000. Thedepreciationcharge is not a cash flowand does not need to be consideredina discountedcash flow calculation.Nofurthercash flowsare mentioned. Thediscountedcash flowis =$40,000 presentvaluefactor forYear1at 10%per annum= $40,000 0.909 =$36,360 Tothe nearest $100,thiswouldbe =$36,400 Note:Candidates whoused a calculatorrather than presentvaluetables wouldcalculate the discountedcash flowas $40,000/1.10=$36,364whichwouldstillroundto $36,400. 13.29 Thecorrectansweris:$6,336 ACCAexaminingteam comments Theanswercan be calculatedindifferentways. Twopossibleapproaches are as follows: Usinga scientificcalculator:$1,0001.085+$1,0001.084+$1,0001.083+$1,000 1 1.082+$1,0001.08=$6,336 or 266 ManagementAccounting(FMA/MA) Page 279 of 421 H G q 2 Usingpresent valuetables: Thepresent valueof$1,000invested nowandfourfurther amounts of$1,000atannual intervals is$1,000+$1,000Annuity factorfor4 periods at8%=$1,000+$1,0003.312= $4,312. Theterminal valueof$4,312 invested for5 yearsat8%=$4,312 1/5yearpresent value factorat8%=$4,312 1/0.681 = $6,332. Thedifference between thetwoanswers isdowntorounding inthepresent value tables.Bothwouldbeaccepted ascorrect astheyarewithin thetolerance limitsetfor theanswer. 13.30 Thecorrect answer is:Bothstatements arefalse. ACCAexamining teamcomments Statement 1isfalsebecause thepointwhere thecurveintersects withtheYaxisat $120,000 represents thenetpresent valueoftheproject ata discount rateof0%,notthe initial investment. Statement 2 isfalsebecause theIRRrepresents thediscount ratethatwould result inan NPVofzero.Byinspecting thegraph,theIRRforthisproject is13%. 14 Standard costing 14.1 Thecorrect answer is:$90 Material P Material S $ perunit 28 27 7kg$4 3 kg$9 Directlabour5hr$7 Standard primecostofproductJ $ perunit 55 35 90 14.2 Thecorrect answer is:Astandard whichincludes someallowance forlosses, wasteand inefficiencies. Itrepresents thelevelofperformance whichisattainable under efficient operating conditions Anattainable standard assumes efficient levels ofoperation, butincludes allowances for normal loss,wasteandmachine downtime. 14.3 Thecorrect answer is:Theoperating standards setforproduction should betheattainable level Itisgenerally accepted thattheuseofattainable standards hastheoptimum motivational impactonemployees. Someallowance ismadeforunavoidable wastage andinefficiencies, buttheattainable levelcanbereached ifproduction iscarried out efficiently. 14.4 Thecorrect answer is:1.25litres 100 =1.25litres 80 14.5 Thecorrect answer is:Focusing management reports onareaswhichrequire attention and ignoring thosewhichappear tobeperforming within acceptable limits Whenmanagement byexception isoperated within a standard costing system, only thevariances whichexceed acceptable tolerance limits needtobeinvestigated by management witha viewtocontrol action.Adverse andfavourable variances alikemaybe subject toinvestigation, therefore 'Usingmanagement reports tohighlight exceptionally goodperformance, sothatfavourable results canbebuiltupontoimprove future outcomes' isincorrect. Required liquidinput= 1litre Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 280 of 421 Answers267 A N S W E R S H q Anyefficientinformationsystem wouldensure that onlymanagers whoare able to act on the informationreceivemanagement reports, evenifthey are not prepared on the basis of management by exception.Therefore'Sendingmanagement reports onlyto those managers whoare able to act on the informationcontained withinthe reports' is incorrect. 14.6 Thecorrectansweris:(i),(ii)and (iii)only Standard costingprovidestargets forachievement,and yardsticksagainst whichactual performancecan be monitored(item(i)).Italso providesthe unitcost informationfor evaluatingthe volumefigurescontainedina budget (item(ii)).Inventorycontrolsystems are simplifiedwithstandard costing.Oncethe varianceshave been eliminated,all inventoryunitsare valuedat standard price(item(ii)). Item(iv)is incorrectbecause standard costs are an estimate of what willhappen inthe future,and a unitcost target that the organisationis aimingto achieve. 14.7 Thecorrectansweris:$90.00 Standard labourcost per unit=9 hours 15 Variance 100 $9 =$90 90 analysis 15.1 Thecorrectansweris:Price$2,400 (F) Usage$900 (A) Sinceinventoriesare valuedat standard cost, the materialpricevarianceisbased on the materialspurchased. $ 12,000kg materialpurchasedshouldcost ($3) 36,000 but did cost 33,600 Materialpricevariance 2,400 (F) G 800 unitsmanufacturedshoulduse (14kg) but did use Usagevarianceinkg standard priceper kg Usagevariancein$ 15.2 11,200kg 11,500kg 300 kg (A) $3 $900 (A) Thecorrectansweris:$2,500 (A) $ 16,100 18,600 2,500 (A) 2,300 hoursshouldhave cost ($7) but did cost Ratevariance 15.3 Thecorrectansweris:$2,800 (F) 260 unitsshouldhave taken (10hrs) but took(activehours) Efficiencyvarianceinhours standard rate per hour Efficiencyvariancein$ 15.4 2,600 hrs 2,200 hrs 400 hrs (F) $7 $2,800 (F) Thecorrectansweris:Expenditure$1,656(F)Efficiency$4,140(A) Standard variableproductionoverheadcost per hour=$11,5505,775=$2 8,280 hoursof variableproductionoverheadshouldcost ($2) but did cost Variableproductionoverheadexpenditurevariance 268 H ManagementAccounting(FMA/MA) Page 281 of 421 $ 16,560 14,904 1,656(F) G q Standard timeallowedforone unit=5,775hours1,925units=3 hours 2,070unitsshouldtake (3 hours) but did take Efficiencyvarianceinhours standard variableproductionoverheadcost per hour Variableproductionoverheadefficiencyvariance 15.5 6,210hours 8,280 hours 2,070hours(A) $2 $4,140(A) Thecorrectansweris:Expenditure$700 (A)Volume$3,200 (F) Fixedoverhead expenditure variance Budgetedfixedoverheadexpenditure(4,200units$4 per unit) Actualfixedoverheadexpenditure Fixedoverheadexpenditurevariance $ 16,800 17,500 700 (A) Thevarianceis adversebecause the actual expenditurewas higherthan the amount budgeted. Fixedoverhead volumevariance Actualproductionat standard rate (5,000 $4 per unit) Budgetedproductionat standard rate (4,200$4 per unit) Fixedoverheadvolumevariance $ 20,000 16,800 3,200 (F) Thevarianceis favourablebecause the actual volumeof output was greater than the budgeted volumeof output. Ifyou selectedan incorrectoptionyou misinterpretedthe directionof one or both of the variances. 15.6 Thecorrectansweris:Capacity $1,600(F)Efficiency$400 (F) Capacity variance Budgetedhoursof work Actualhoursof work Capacity varianceinhours standard fixedoverheadabsorptionrate per hour* Fixedproductionoverheadcapacity variance 9,000 hours 9,400 hours 400 hours(F) $4 $1,600(F) *$36,000/9,000 =$4 per hour Efficiencyvariance 1,900unitsof productshouldtake (9,000/1,800hrs) but did take Efficiencyvarianceinhours standard fixedoverheadabsorptionrate per hour* Fixedproductionoverheadefficiencyvariancein$ 9,500 hours 9,400 hours 100hours(F) $4 $400 (F) *$36,000/9,000 =$4 per hour 15.7 Thecorrectansweris:(ii)and (iii)only Statement (i)is not consistentwitha favourablelabourefficiencyvariance.Employeesof a lowerskilllevelare likelyto worklessefficiently,resultinginan adverse efficiency variance. Statement (ii)is consistentwitha favourablelabourefficiencyvariance.Timewouldbe saved in processing ifthe materialwas easierto process. Statement (iii)is consistentwitha favourablelabourefficiencyvariance.Timewouldbe saved in processing ifworkingmethodswereimproved. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 282 of 421 Answers 269 A N S W E R S H q 15.8 Thecorrectansweris:Anadversedirectmaterialcost variancecan be a combinationof a favourablematerialpricevarianceand an adversematerialusage variance Directmaterialcost variance=materialpricevariance+materialusage variance Theadversematerialusage variancecouldbe largerthan the favourablematerialprice variance.Thetotal of the twovarianceswouldthereforerepresenta net resultof an adversetotal directmaterialcost variance. 15.9 Thecorrectansweris:$3,500 $ 132,500 136,000 3,500 (A) 53,000 kg shouldcost ($2.50) but did cost Materialpricevariance 15.10 Thecorrectansweris:$2,500 $ 54,000 kg 53,000 kg 1,000kg (F) 2.5 2,500 (F) 27,000 unitsshoulduse (2 kg) but did use standard cost per kg Materialusage variance 15.11 Thecorrectansweris:$36,000 Adverse$25,000 Favourable Labour rate variance 14,000hoursshouldhave cost ($10per hour) but did cost Labourrate variance G $ 140,000 176,000 36,000 (A) Labour efficiencyvariance 5,500 unitsshouldhave taken (3 hoursper unit) but did take Labourefficiencyvariance(inhours) standard rate per unit $ 16,500 hrs 14,000 hrs 2,500 hrs (F) $10 $25,000 (F) 15.12 Thecorrectansweris:$5,000 Adverse Standard fixedoverheadabsorptionrate per hour=$125,000/25,000=$5 per hour Fixedoverheadvolumecapacity variance Budgetedhoursof work 25,000 hrs Actualhoursof work 24,000 hrs Fixedoverheadvolumecapacity variance 1,000 hrs (A) standard fixedoverheadabsorptionrate per hour $5 Fixedoverheadvolumecapacity variancein$ $5,000 (A) 15.13 Thecorrectansweris:$10,000Adverse Thetotal directmaterialsvariancecan be foundby comparingthe flexedbudget figures withthe actual figures. Budgetedmaterialcost per unit=$110,000/2,200 =$50 =$50 2,000 Flexedfor2,000 units =$100,000 270 ManagementAccounting(FMA/MA) Page 283 of 421 H q Totaldirectmaterialsvariance $ 100,000 110,000 10,000 (A) Flexeddirectmaterialcost but did cost Totaldirectmaterialsvariance 15.14 Thecorrectansweris:$20,000 Adverse Thetotal directlabourvariancecan be foundby comparingthe flexedbudget figureswith the actual figures. Budgetedlabourcost per unit =$286,000/2,200 =$130 Flexedfor2,000 units =$1302,000 =$260,000 Totaldirectlabourvariance $ 260,000 280,000 20,000 (A) Flexeddirectlabourcost but did cost Totaldirectlabourvariance 15.15 Thecorrectansweris:Nil Thetotal directvariableoverheadvariancescan be foundby comparingthe flexedbudget figureswiththe actual figures. Budgetedvariableoverheadcost per unit =$132,000/2,200 =$60 A N S W E R =$60 2,000 =$120,000 Flexedfor2,000 units G Totaldirectvariableoverheadvariance S $ 120,000 120,000 nil Flexeddirectvariableoverheadcost but did cost Totaldirectvariableoverheadvariance 15.16 Thecorrectansweris:(i)is true and (ii)is false Statement(i)is true. Statement(ii)is false.Producing5,000 standard hoursof workin 5,500 hourswouldgiveriseto an adversefixedoverheadvolumeefficiencyvariance. 15.17 Thecorrectansweris:Bothstatements are true. 15.18 Thecorrectansweris:$10,000Favourable. Thetotal directmaterialsvariancecan be foundby comparingthe flexedbudget figures withthe actual figures. $ 50,000 140,000 10,000(F) Totalmaterialscost shouldhave been Butwas Variance Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 284 of 421 Answers 271 H q 15.19 Thecorrectansweris:$2,500 Adverse 20000 17500 Budgeted fixed overhead cost 15000Volume variance Fixed 12500 overhead cost $ 10000 Fixed overhead expenditure variance Actual fixed overhead cost Total variance 7500 5000 2500 1000 2000 3000 4000 5000 6000 7000 8000 9000 x Number ofunits Totalfixedoverheadvariance=$12,500– $10,000=$2,500 Adverse. 15.20 Thecorrectansweris:Expenditurevariance:$5,800 adverse Theonlyfixedoverheadvarianceina marginalcostingstatement is the fixedoverhead expenditurevariance.Thisis the differencebetweenbudgeted and actual overhead expenditure,calculatedinthe same way as foran absorptioncostingsystem. G Thereis no volumevariancewithmarginalcosting,because underor overabsorptiondue to volumechanges cannot arise. 15.21 Thecorrectansweris:Demandforthe productwas higherthan expectedand pricescould be raisedwithoutadverseeffectson sales volumes. Raisingpricesinresponseto higherdemand wouldresultina favourablesellingprice variance. 15.22 Thecorrectansweris:200 units Totalactual directmaterialcost Addback variances:directmaterialprice directmaterialusage Standard directmaterialcost of production Standard materialcost per unit Numberof unitsproduced(2,000 $10) 272 ManagementAccounting(FMA/MA) Page 285 of 421 $ 2,400 (800) 400 2,000 $10 200 H q 15.23 Thecorrectansweris:800 kg Sincethere was no change ininventories,the usage variancecan be used to calculatethe materialusage. Savinginmaterialused comparedwithstandard = $400(F) =200 kg $2per kg Standard materialusage foractual production(200 units5kg) Usagevarianceinkg Actualusage of material 15.24 Thecorrectansweris:$1,200(F) $ 14,000 15,200 1,200(F) 200 unitsshouldsellfor($70) but did sellfor Sellingpricevariance 15.25 1,000kg 200 kg (F) 800 kg Thecorrectansweris:$900 (A) Budgetedsales volumeper month= = Budgetedprofitmarginper unit = Budgetedmaterialcostof sales Standardmaterialcost per unit $2,300 =230 units $10 Budgetedmonthlyprofitmargin Budgetedmonthlysalesvolume = $6,900 =$30 per unit 230 G Budgetedsales volume Actualsales volume Salesvolumevarianceinunits Standard profitper unit Salesvolumevariancein$ 15.26 Thecorrectansweris:4,200 230 units 200 units 30 units(A) $30 $900 (A) Actualexpenditure=$(48,000+2,000) =$50,000 Overheadabsorbed =$(50,000– 8,000) =$42,000 Overheadabsorptionrate per unit=$48,000 4,800 =$10 Numberof unitsproduced=$42,000 $10=4,200 15.27 Thecorrectansweris:$3.40 Totalstandard cost of materialpurchased– actual cost of materialpurchased=Price variance Totalstandard cost = $21,920+$1,370 = $23,290 Standard priceper kg = $23,290/6,850 = $3.40 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 286 of 421 Answers 273 A N S W E R S H G q 15.28 Thecorrectansweris:Price$1,530(A) Volume$2,250(F) Actualsales Budgetedsales Varianceinunits standard contributionper unit($(27– 12)) Salesvolumevariancein$ Revenuefrom2,550 unitsshouldhave been ($27) but was Sellingpricevariance 2,550 units 2,400 units 150units(F) $15 $2,250(F) $ 68,850 67,320 1,530(A) 15.29 Thecorrectansweris:$1,000Adverse $ 10,000 units 9,800 units 200 units(A) $5 $1,000 (A) Budgetedsales volume Actualsales volume Salesvolumevariance(units) standard profitper unit Salesvolumeprofitvariance(in$) 15.30 Thecorrectansweris:$1,200 Directmaterial price variance $ 30,000 31,200 1,200(A) 12,000litresshouldhave cost ($2.50) Butdid cost (12,000$2.50 1.04) Directmaterialpricevariance 15.31 Thecorrectansweris:1,212 H Standard cost per unit=10.5litres$2.50 per litre =$26.25per unit Standard cost of actual production=standard cost +variance =$(12,000litres$2.50)+1,815 =$(30,000+1,815) =$31,815 Actualproduction=standard cost of actual production/standardcost per unit =31,815/$26.25 =1,212units 15.32 Thecorrectansweris:$4,500 Favourable Salesrevenuefor9,000 unitsshouldhave been ($12.50) but was Salespricevariance 15.33 Thecorrectansweris:$17,000 $ 127,500 144,500 17,000(A) 8,500 unitsshouldhave cost ($15) but did cost (8,500$17) 274 $ 112,500 117,000 4,500 (F) ManagementAccounting(FMA/MA) Page 287 of 421 q 15.34 Thecorrectansweris:$2,635underabsorbed Absorbedoverhead(12,4001.02$4.25) Actualoverhead Under-absorbedoverhead 15.35 Thecorrectansweris:$8,500 $ 10,000 500 (2,000) 8,500 Standard contribution Salespricevariance Variablecost variance 15.36 $ 53,754 56,389 2,635 Thecorrectansweris:$12,600(A) Thesales volumevarianceina marginalcostingsystemis valuedat standard contribution per unit,rather than standard profitper unit. Contributionper unitof E=$15– $8 =$7 Salesvolumevarianceintermsof contribution= $9,000(A) $7=$12,600(A) $5 15.37 Thecorrectansweris:Absorptioncostingprofitswillbe higherand closinginventory valuationshigherthan those undermarginalcosting. Closinginventoryvaluationunderabsorptioncostingwillalwaysbe higherthan under marginalcostingbecauseofthe absorptionoffixedoverheadsintoclosinginventoryvalues. Theprofitunderabsorptioncostingwillbe greaterbecausethe fixedoverheadbeingcarried forwardinclosinginventoryisgreaterthan the fixedoverheadbeingwrittenoffinopening inventory. G 15.38 Thecorrectansweris:$2,720lower Ifmarginalcostingis used to valueinventoryinstead of absorptioncosting,the difference inprofitswillbe equal to the change ininventoryvolumemultipliedby the fixedproduction overheadabsorptionrate =80 units$34 =$2,720 Sinceclosinginventoryare higherthan openinginventories,the marginalcostingprofitwill be lowerthat the absorptioncostingprofit(so$2,720higheris incorrect).Thisis because the marginalcostingprofitdoes not 'benefit'fromthe increaseinthe amountof fixed productionoverheadtaken to inventory(ratherthan to the statement of profitor loss). Ifyou selected$3,400 loweror higheryou based the differenceon 100unitsof opening inventory. 15.39 Thecorrectansweris:$258,948 Standard marginalcostingreconciliation Originalbudgeted contribution Salesvolumevariance Standard contributionfromactual sales Sellingpricevariance Variablecost variances Totaldirectmaterialvariance Totaldirectlabourvariance Totalvariableoverheadvariance Actualcontribution $ 290,000 (36,250) 253,750 21,875 275,625 (6,335) 11,323 (21,665) 258,948 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 288 of 421 Answers 275 A N S W E R S H q 15.40 Thecorrectansweris:(i)and (ii)only ACCAexaminingteam comments Thisquestionrelatesto study guideheadingD1(b). Thecorrectansweris (i)and (ii)only.Ina standard absorptioncostingsystemthe sales volumemarginvarianceis based upon profitper unit,whereasundera marginalcosting systemit is based uponcontributionper unit.Ina standard absorptioncostingsystemthe total fixedoverheadvarianceincludesexpenditureand volumevariances.Undermarginal costingonlythe expenditurevarianceis included.Variablecost variancesare the same underboth systems.Only15%of candidates selectedthe correctalternative.Themost frequentanswerswere(i)only(37%of candidates),and (ii)only(30%of candidates).This is essentiallya knowledgebased question,and the poorresultssuggest that candidates need to do moreworkinthisarea. 15.41 Thecorrectansweris:$109,000 ACCAexaminingteam comments Thecorrectansweris $109,000,but was chosenby onlya handfulof candidates. The correctanswercan be obtainedby workingbackwardsby adding appropriateadverse variancesand subtractingappropriatefavourablevariancesfromactual profit.Standard profiton actual sales is exactlywhat it says, actual unitsmultipliedby standard profitper unit.Asit is based on actual units,a profitadjustmentforthe differencebetweenbudgeted and actual volumesis not required,and hence the sales volumevarianceshouldbe ignored.Thecalculationcan be mosteasilyunderstoodby lookingat the standard cost operatingstatement below. $ Budgetedprofit not required Salesvolumevariance not needed Standard profiton actual 109,000 Salespricevariance 5,000 favourable Totalvariablecost variance 7,000 adverse Fixedcost expenditurevariance 3,000 favourable Fixedcost volumevariance 2,000 adverse Actualprofit 108,000 Ifcandidates understandhowthe operatingstatement worksthe correctanswercan be quicklycalculatedas $108,000+$2,000 – $3,000 +$7,000 – $5,000 =$109,000. Incorrectanswerswerefairlyevenlyspread across the other3 alternatives,suggestinga large amountof guessingby candidates. $115,000representsthe correctcalculationof budgeted profit(that is the standard profitfigureforbudgeted volume).Thiswas not the questionasked. G $107,000representsthe answerobtainedifcandidates added back favourablevariances and subtracted adversevariances.Finally$101,000representsa calculationof budgeted profitifcandidates added back favourablevariancesand subtracted adversevariances. Performanceon another questioninvolvingstandard cost operatingstatements inthe same examwas also poor. Thissuggestsa lackof understandinginthisarea. 276 ManagementAccounting(FMA/MA) Page 289 of 421 H q 15.42 Thecorrectansweris:$485,000 ACCAexaminingteam comments Thisquestioncoverssyllabusarea D3a.Thecorrectanswercan be obtainedby working backwardsfromthe actual profitfigure.Becauseweare workingbackwards,adverse variancesmustbe added back and favourablevariancesmustbe deducted to get to the budgeted profitfigure.Itis also importantto rememberthat the fixedproductionoverhead capacity and efficiencyvariancesare subdivisionsof the fixedproductionoverheadvolume variance,and it is importantto avoiddoublecounting. Thecorrectansweris therefore Actualprofit Add:Salesvolumeprofitvariance Add:Directlabourefficiencyvariance Add:Fixedproductionoverheadvolumevariance Less:Fixedproductionoverheadexpenditure Budgetedprofit $000 500 10adverse 15adverse 10adverse 50 favourable 485 Only19%of candidates correctlyselectedthisfigure,makingthisquestionthe worst answeredinthe exam. 15.43 Thecorrectansweris:$15,000A $2,000 F $8,000 F ACCAexaminingteam comments Thecorrectanswercan be arrivedat by lookingfora combinationof variancesthat satisfy twocriteria(i)Thetotal of the variancesmustadd to $5,000 adverseas actual profitis $5,000 lessthan budgeted profit(ii)Asbudgeted profitis $30,000 ($25,000actual plusa $5,000 adversevariance)and standard profiton actual sales is $15,000(given)then the sales volumevariancemustbe $15,000adverse.Questionson standard cost operating statements have been mentionedinpreviousreportsand are commonlyamongstthe worst answeredquestionsinthe exam. G 15.44 Thecorrectansweris:$29,000 ACCAexaminingteam comments Ihave mentionedinpreviousreportsthat candidates appear to experiencedifficulties withquestionsinvolvingstandard costingoperatingstatements and the reconciliationof budgeted and actual performance.Inthisquestioncandidates weregivenan actual profit figureand a listof variances.Toget to budgeted profitthey needed to (i)add back adverse variancesand to deduct favourablevariancesto actual profitto arriveat budgeted profit. And(ii)indoingso they also needed to avoiddoublecounting.Thefixedoverheadvolume variance($3,000F)is equal to the sumof the fixedoverheadcapacity variance($4,000F) and the fixedoverheadefficiencyvariance($1,000A),so it is importantnot to includeall three and onlyto deduct $3,000 not $6,000. 15.45 Thecorrectansweris:$9,000 adverse ACCAexaminingteam comments Thisis calculatedby findingthe balancingfigure.Thetotal variancebetweenbudgeted contributionand actual contributionis $5,000 adverse($20,000– $15,000).Thesales volumeand sales pricevariancessumto $4,000 favourable,so to balance, the variable cost variancemustbe $9,000 adverse.Questionson the reconciliationof budgeted and actual profitsor contributionsregularlycause candidates difficultyinthisexamand future candidates are recommendedto study thisarea carefully. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 290 of 421 Answers 277 A N S W E R S H q 15.46 Thecorrectansweris:$213,000 ACCAexaminingteam comments Thisquestiontests syllabusarea D3b, the reconciliationof budgeted and actual contributionunderstandard marginalcosting.Itis an area that candidates have found difficultin the past, and once again it generated the worstansweredquestionin the exam.Thesafest way to answerthis type of questionis to layout the relevantsection of the standard costingoperating statement and to 'plug in' the figuresprovided,as shownbelow: Flexedbudget contribution (=actual sales unitsstandard contribution) Salespricevariance Totalvariablecost variance Actualcontributionis therefore Thisresultsinthe correctanswer,213,000. $ 200,000 (5,000) 18,000 213,000 15.47 Thecorrectansweris:$295,000 ACCAexaminingteam comments Thisquestioncoverssyllabusarea D3b.Thisis commonlythe worstansweredsectionof the exam.Thecorrectansweris $295,000,and was the secondmostpopularchoiceamongst candidates. Thiscouldbe arrivedat by calculatingthe standard contributionforactual sales (5,000 units$60 =$300,000)and then deductingthe adversesales pricevariance ($300,000– $5000 =$295,000).$303,000 was the mostpopularselection.Candidates choosingthisalternativeincorrectlyadjustedstandard contributionon actual sales for both the sales pricevarianceand the sales volumecontributionvariance.Thisis incorrect because the sales volumecontributionvariancelinksstandard contributionon budgeted sales withthat on actual sales.Inotherwordsthey weredoublecountingthe effect of the sales volumecontributionvariance. G 15.48 Thecorrectansweris:$21,500 ACCAexaminingteam comments Toarriveat the correctanswercandidates had to adjust the budgeted profitforallthe variancesgiven.($25,000– $1,000+$2,000 – $4,000 – $500 =$21,500. Somecandidates went on to deduct budgeted fixedoverheadsfromthis figureto get $9,500. Thiswas incorrectbecause budgeted fixedoverheadswouldhave been already deducted in calculatingbudgeted profitand hence these candidates weredouble counting. Candidates whoselected$33,500adjusted budgeted profitforallof the variances,but then wenton to add back fixedoverheadfigureas ifcalculatingactual contribution. Lastlycandidates whoselected$40,000 attempted to calculateactual contribution,but got the variancesignagethe wrongway round.($25,000+$1,000– $2,000 +$4,000 +$12,000=$40,000 278 ManagementAccounting(FMA/MA) Page 291 of 421 H q 15.49 Thecorrectansweris:$242,200 ACCAexaminingteam comments Previousexaminerreportshave mentionedcandidate’spoorperformanceinthisarea of the syllabus. Standard profitfromactual sales is calculatedby subtractingthe adversesales volume variancefromthe budgeted profit(standard profitforbudgeted sales).Thereforethe sales volumevarianceis not needed inthiscalculation,as it has already been accounted forin calculatingthe standard profitforactual sales ($240,000).Usingit again wouldbe double counting. Actualprofitcan be calculatedby adjustingstandard profitforactual sales forthe sales priceand productioncost variances. Notethat inthiscase there are fourfixedoverheadvariancesgiven.Asthe fixedoverhead volumevarianceis the summationof the capacity and efficiencyvariances,care mustbe taken not to doublecount. Actualprofitis therefore=$240,000 +$4,200 +$2,300 – $500 – $1,800– $2,000 = $242,200 Alternative1includesthe sales volumeprofitvarianceand hence doublecountsit. Alternative2 doublecountsthe fixedoverheadvolumevariance.Alternative3 double countsboth the sales volumeprofitvarianceand the fixedoverheadvolumevariance. 16 Target setting 16.1 Thecorrectansweris:Theyshouldbe easilyachievable Attainable(whichis part of the SMART objectivesframework)is differentfrom'easily achievable'.Theobjectivesshouldbe motivationalwhichmeans that they shouldbe at least a littlebit challenging. G 16.2 Thecorrectansweris:Factorsfundamentalto strategicsuccess 16.3 Thecorrectansweris:(i),(ii)and (iv)only. Themissionstates the aimsof the organisation.Thestrategy outlineswhat the organisation shouldbe doing;the valuesand the policiesset limitsto the waysthe strategy may be convertedintoperformance.Profitabilityis an objectiveand relatesto the criticalsuccess factors forbusinesssuccess. 16.4 Thecorrectansweris:(i)only Reducingtrainingcosts may mean that the businessis faced witha skillsshortage inthe longterm.(ii)and (iii)shouldbenefitthe businessinthe longterm. 16.5 Thecorrectansweris:Itis whenthere is a bias towardsshorttermrather than longterm performance. Longertermobjectivesare sacrificed. 16.6 Thecorrectansweris:CO2emissions CO2emissionsare probablymorelikelyto be measuredbecause of governmentlegislation. Theyare not one of the usualmeasuresof performance(dependingon the industry). 16.7 Thecorrectansweris:Bothstatements are true. 16.8 Thecorrectansweris:Performancemeasurementinvolvescomparingactual performance against a target and the missionstatement representsthe organisation'soveralltarget. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 292 of 421 Answers 279 A N S W E R S H G q 16.9 Thecorrectansweris:'Middletier'objectivesto facilitatethe planningand controlof individualfunctionswithinthe organisation Tacticalobjectivesare middle-tierobjectivesthat facilitatethe planningand controlof individualfunctionswithinthe organisation. 16.10 Thecorrectansweris:Salesand revenueare likelyto decrease inthe secondhalfof the year and performanceshouldbe measuredinthat context. 16.11 Thecorrectansweris:Long-termobjectivesforthe organisationas a whole Strategicobjectivesare long-termobjectivesforthe organisationas a whole. 16.12 Thecorrectanswersare: Adanger of benchmarkingis that inappropriatecomparisonslead to incorrectconclusionsand Theultimateaimof benchmarkingis to improveperformance. Benchmarkingcan be internal,forexamplecomparisonagainst another department.The mainaimof benchmarkingis improvedperformance,whichcouldjustas readilybe inthe area of qualityas incost. 16.13 Thecorrectansweris:Functional Thisis an exampleof functionalbenchmarking. 16.14 Thecorrectansweris:Competitive Thisis an exampleof competitivebenchmarking. 16.15 Thecorrectansweris:(iii)onlyReturnon capital employed. 16.16 Thecorrectansweris:Short-termisminvolvesprioritisingshort-termresultsabovethe organisation'slong-termprospects. 17 Financial performance measurement 17.1 Thecorrectansweris:Cash flow Cash flowinformationisa financialperformancemeasure.Theotheroptionsare allnonfinancialindicators(NFIs). 17.2 Thecorrectansweris:0.6875 Acidtest ratio = = Currentassets inventory Currentliabilities 40,000 1,250 60,000 =0.6875 17.3 Thecorrectansweris:Currentratio:Decrease Acidtest: Decrease ACCAexaminingteam comments Thecorrectansweris- both ratioswilldecrease. Theopeningcurrentratio(current assets/current liabilities)is$1.8m/$1.0m=1.8,and the openingacid test (currentassets less stock/ currentliabilities)is $1.3m/$1.0m=1.3.Purchasing(say)$1.0mof inventoryon short termcreditwilldecrease the currentratio to ($1.8m+$1m)/($1.0m+$1.0m)=1.4.Theacid test wouldalso decrease to $1.8m/($1.0m+$1.0m)=0.9. Only23%of candidates selected thisalternative.On thistype of questionifthe answeris not immediatelyclear candidates shouldsubstituteinsomesimplenumbersto test out the effectsof a transaction. 280 ManagementAccounting(FMA/MA) Page 293 of 421 H G q 17.4 Thecorrectansweris:Returnon investment:Decrease Residualincome:Increase ACCAexaminingteam comments Thecorrectansweris Returnon investment:Decrease Residualincome:Increase.Thenew project'sreturnon investmentis lessthan that of the investmentcentre and thiswillresultin a reductioninits returnon investment.Howeverbecause the projectoffersa returnhigher than the cost of capital it willincreasethe investmentcentre's residualincome.Themost popularanswerwas Returnon investment:Decrease Residualincome:Decrease,with 29%of candidates mistakenlybelievingthat the newprojectwouldresultina decrease in both returnon investmentand residualincome.Thismistakesuggestsa lackof understandingof residualincome. 17.5 Thecorrectansweris:63.9% $3,450,000/ $5,400,000 =63.9% 17.6 Thecorrectansweris:24.1% $1,735,000/ $7,200,000=24.1% 17.7 Thecorrectansweris:Liquidity Thecurrentratio measuresliquidity. 17.8 Thecorrectansweris:53.4% $670,000/ ($670,000+$585,000)=53.4% 17.9 Thecorrectansweris:Liquidity Theacid test ratio measuresliquidity. A N S W E R 17.10 Thecorrectansweris:Decreasefrom20%to 15% Profit 100% Returnon investment= Capitalemployed For20X7ROI = 7,500 100%=20% 37,500 For20X8ROI = 9,000 100%=15% 60,000 S 17.11 Thecorrectansweris:7.5times Assetturnover = = Sales Capitalemployed 450,000 60,000 =7.5times 17.12 Thecorrectansweris:ROI– yes RI– yes TheROItarget is13%and the cost of capital is 12%.TheROIis calculatedas $30,000/$200,000 100%=15%and so the projectwouldbe accepted. TheRIis calculatedas $30,000 – (12%$200,000)=$6,000. Theprojectwouldbe accepted. 17.13 Thecorrectansweris: (i),(ii)and (iii). Thefiguresneeded to calculateROIare easilyavailablefromthe financialaccounting records. 17.14 Thecorrectansweris:Workstudy. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 294 of 421 Answers 281 H q 17.15 Thecorrectansweris:Eliminatecosts and Reducecosts Valueanalysisfocuseson costs, not sales volumesor prices. 17.16 Thecorrectansweris:Valueanalysisconsiderscost value,exchangevalue,use valueand esteemvalue. 17.17 Thecorrectansweris:Increase ACCAexaminingteam comments Thisquestiontests SyllabusheadingE2f. Thecorrectanswerwas selectedby a minorityof candidates. Ausefulway of answeringmany ratioanalysisquestionsis to substitutesome simplenumbersintothe problem.Forexample,ifthe divisioncurrentlyearns an ROI (operatingprofitovernet assets) of 20%,thiscouldbe representedby operatingprofitof $20,000 and net assets of $100,000.Residualincomeis calculatedby operatingprofit– (net assets imputedinterestrate). Aresidualincomeof $1,000couldbe representedby an operatingprofitof $11,000lessan imputedinterestcharge of $50,000 20%.Therefore the newROIwouldbecome(existingoperatingprofit+projectoperatingprofit)÷(existing net assets +projectnet assets) =($20,000+$11,000)÷ ($100,000+$20,000)=25.83%= an increaseinROI.Far quickerthoughis to realisethat a projectofferinga positiveresidual incomeat an imputedinterestrate of 20%mustbe offeringa returnhigherthan 20%,and thereforemustimprovethe existingROIof 20%. Alternative‘notpossibleto tellfromthisinformation’was the mostpopularchoice.This possiblysays moreabout candidates’knowledgeof residualincomethan the sufficiencyof informationinthe question.Residualincomehas been highlightedas an area of weakness inpreviousreports. 17.18 Thecorrectansweris:Returnon capital employed ACCAexaminingteam comments G H Governmentactionshave a huge potentialeffect on the performanceof companies. Governmentsubsidies,such as the rent subsidyinthisquestion,need to be excludedfrom managerialperformanceindicatorsto allowfaircomparisons.Thisis because they are not controllableby shop managers.ROCEwouldnot providea faircomparisonof managerial performancebecause the operatingprofitused to calculatereturnon capital employed,is calculatedafter deductingrentalcharges. Managersinthe Southdivisionwouldhave an in builtadvantage overthose inthe Northdivisionbecause of this.Noneof the other measures includerentalcost so wouldnot sufferfromthisdisadvantage. 17.19 Thecorrectansweris:Capital gearing- IncreaseCurrentratio - Increase ACCAexaminingteam comments Thecapital gearingratio is calculatedas non-currentliabilities÷ ordinaryshareholders funds(thisis sometimesdescribedas the debt to equityratio)or non-currentliabilities÷ (ordinaryshareholdersfunds+non-currentliabilities)(sometimesdescribedas debt to equity+debt ratio) Afiveyear bank loanwillincreasethe company'snon-current liabilities.Undereitherdefinitionabovethiswillincreasecapital gearing. Thecurrentratio is calculatedas currentassets ÷currentliabilities.Areductioninoverdraftwillreducea company'scurrentliabilitieswillthereforeincreasethe valueof the currentratio. Forthose havingdifficultyinprocessingthe data giveninthe questionIwouldsuggest that they 'invent'somesimplenumbersto representthe existingpositionand then processthe data inthe questionto see the effect on the ratios.Thisapproach is usefulinmany ratio analysisproblems 282 ManagementAccounting(FMA/MA) Page 295 of 421 G q 17.20 Thecorrectansweris:$144,000 ACCAexaminingteam comments Controllableprofitis calculatedby deductingcontrollableexpensesfromcontrollable revenues.Revenuesand variablecosts are usuallycontrollableby the divisionalmanager. Thecontrollabilityof fixedcosts depends uponthe responsibilitiesgivento the divisional manager. Inthiscase weare toldthat only20%of the fixedcosts (20%$80,000 = $16,000)are controllableby the divisionalmanager. Controllableprofitis therefore $160,000– $16,000=$144,000. 17.21 Thecorrectansweris:15% ACCAexaminingteam comments Controllablereturnon investment(ROI)is calculatedas (controllableprofit/controllable investment)100. Salesand directcosts are normallycontrollableat divisionallevel.Allocatedcosts referto costs that are charged directlyto the divisionand are usuallycontrollableat divisional level.Apportionedcosts referto indirectcosts that are charged to cost centreson a logical but arbitrarybasis. Headofficecosts are not controllableat divisionallevel. Controllableprofitis therefore$14,000– $2,000 =$12,000 ControllableROI=$12,000/$80,000=15% Alternative2 representscontribution/controllable investment.Alternative3 represents divisionalprofit/controllableinvestmentAlternative4 represents(contribution– apportioned head officecosts)/controllableinvestment. 18 Assessing non-financial performance A N S W E R S 18.1 Thecorrectansweris:Efficiency 18.2 Thecorrectansweris:Bothare true. 18.3 Thecorrectansweris:Thebalanced scorecardapproach enablesorganisationsto consider allareas of performancerelevantto achievingtheirstrategicgoals. TheBalancedScorecardapproach enablesorganisationsto considerallareas of performancerelevantto achievingtheirstrategicgoals. 18.4 Thecorrectansweris:Topreventa narrowfocuson short-termfinancialperformance. 18.5 Thecorrectansweris:Customer,innovationand learning,financialand internalbusiness process. 18.6 Thecorrectansweris:Achievingagreed targets Effectivenesscan onlybe measuredintermsof achievedperformance.Economyconsists of minimisingcosts,forexample,by obtainingsuitableinputsat the lowestprice.Efficiency, inthe narrowsenseused here,consistsof achievingthe greatest outputper unitof input: avoidingwasteof inputswouldcontributeto this.Achievinga givenlevelof profitisa measureof overallefficiencyinitswidersenseand wouldrequireproperattentionto all three of these matters. 18.7 Thecorrectansweris:Levelof refundsgiven Thelevelof refundsgivenshouldbe used inthe customerperspective.IfBalanceCo has to offera highlevelof refunds,thisis likelyto indicatea lowlevelof customersatisfactionwith its product. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 296 of 421 Answers 283 H q 18.8 Thecorrectansweris:(i)and (ii) Thenumberof customercomplaintsand the numberof repeat ordersas a proportionof total orderswillreflectthe qualityof servicecustomersfeelthey have receivedfromthe business.Althoughsales volumewillbe affected by the business'sabilityto retain customers,increasingsales is a moredirectmeasureof the business'smarketing effectivenessthan its servicequality. 18.9 Thecorrectansweris:(ii)and (iii)are non-financialobjectives. 18.10 Thecorrectanswersare: Netprofitmarginsand Employeeabsentee rates Varianceanalysisand defectiveunitswouldbe moreappropriateformanufacturing organisationswithlarge productionvolumes. 18.11 Thecorrectansweris:(i)and (ii)only Relativemarketshare is usuallya measureof competitiveness.Efficiencyand productivity are measuresof resourceutilisation. 18.12 Thecorrectansweris:Cost per consignment. Numberof customercomplaintsand clientevaluationinterviewswouldbe measuresof quality.Depotprofitleaguetables is a measureof profit. 19 Mixed Bank 1 19.1 Thecorrectansweris:$286.76 $ per unit 20.00 69.40 176.12 265.52 21.24 286.76 Material Labour Productionoverhead(14hours$12.58) Totalproductioncost Generaloverhead(8%$265.52) G 19.2 Thecorrectansweris:Process1Abnormalloss Process2 Abnormalloss Input Normalloss Expectedoutput Actualoutput Abnormalloss 19.3 (8%) Process1 kg 47,000 3,760 43,240 42,000 1,240 (5%) Process2 kg 42,000 2,100 39,900 38,915 985 Thecorrectansweris:Theactual sellingpriceper unitexceededthe standard sellingprice per unit. Theactual sales revenueis higherthan the flexedbudget sales revenue.Sincethe effect of a sales volumechange has been removedfromthiscomparisonthe higherrevenuemustbe caused by a higherthan standard sellingprice. 19.4 Thecorrectansweris:Beconstant per unitof output Variablecosts are conventionallydeemed to increase or decrease in direct proportionto changes in output. Thereforethe correct answeris Beconstant per unit of output. 'Vary per unit of output as productionvolumechanges' and 'Vary, in total, fromperiodto periodwhenproductionis constant' implya changing unit rate, whichdoes not comply withthis convention.'Beconstant in total whenproductionvolumechanges' relates to a fixedcost. 284 ManagementAccounting(FMA/MA) Page 297 of 421 H q 19.5 Thecorrectansweris:Noneof them Noneof the criticismsapply inallcircumstances. Criticism(i)has somevaliditybut evenwhereoutput is not standardisedit may be possible to identifya numberof standard componentsand activitieswhosecosts may be controlled effectivelyby the use of standard costs. Criticism(ii)also has somevaliditybut the use of informationtechnologymeans that standards can be updated rapidlyand more frequently,so that they may be usefulforthe purposesof controlby comparison.Criticism (iii)can also be addressed insomecircumstances.Theuse of idealstandards and more demandingperformancelevelscan combinethe benefitsof continuousimprovementand standard costingcontrol. 19.6 Thecorrectansweris:Cost of acquiringor enhancingnon-currentassets Capital expenditureis the cost of acquiringor enhancingnon-currentassets. 19.7 Thecorrectansweris:ProductionCost Centre D Overheadexpenditure Directlabourhours Machinehours Overheadabsorptionrate 19.8 Thecorrectansweris:$113,600 A 18,757 3,080 B 29,025 6,750 $6.09 $4.30 C 46,340 D 42,293 3,380 $13.71 2,640 $16.02 Productioncost per unit=$3.60+($258,000/60,000)=$7.90 Profit=700,000 – (56,0007.90)– 144,000=$113,600 $ Revenue Productioncosts: Variable (56,000+4,000) $3.60 Fixed Closinginventory(4,000 $7.90) G 216,000 258,000 (31,600) Thecorrectansweris:Profitwillbe higher;inventoryvalueswillbe lower Inventorylevelshave decreased so marginalcostingwillresultinhigherprofitsand lower inventoryvaluesthan absorptioncosting. 19.10 Thecorrectansweris:Aproductproducedat the same timeas otherproductswhichhas a relativelylowvaluecomparedwiththe otherproducts Aby-productcan be definedas being'output of somevalue,producedincidentallywhile manufacturingthe mainproduct'. 'Aproductproducedat the same timeas other productswhichhas no value'is incorrect because a by-producthas somevalue. 'Aproductproducedat the same timeas other productswhichrequiresfurtherprocessing to put it ina saleablestate' is incorrectbecause thisdescriptioncouldalso apply to a joint product. 'Aproductproducedat the same timeas other productswhichhas a relativelylowvolume comparedwiththe otherproducts'is incorrectbecause the valueof the productdescribed couldbe relativelyhigh,eventhoughthe output volumeis relativelylow. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 298 of 421 A N S W E R S (442,200) 257,600 (144,000) 113,600 Fixednon-productioncosts 19.9 $ 700,000 Answers 285 H q 19.11 Thecorrectansweris:$370,300 Directmaterialcost per 1%activity=$2,000 Directlabourcost per 1%activity =$1,500 Productionoverhead At 60% activity At 80% activity Change 20% Variablecost per 1%change inactivity= $8,000 =$400 20 Substitutingin80%activity: Variablecost =80 $400 Totalcost Fixedcost $ 54,000 62,000 8,000 $ 32,000 62,000 30,000 Otheroverheadis a whollyfixedcost Budget flexedat 77%levelof activity $'000 154.0 115.5 Directmaterial77$2,000 Directlabour77$1,500 Productionoverhead: Variable77$400 Fixed Otheroverhead 30.8 30.0 40.0 370.3 G Ifyou selected$330,300you did not includea fixedcost allowanceforthe otheroverhead. $373,300ignoresthe fact that productionoverheadis a semi-variablecost and $377,300 simplymultipliesthe total cost for70%activityby a factor of 1.1.Thismakesno allowance forthe fact that there is an elementof fixedcosts withinproductionoverhead,and other overheadis whollyfixed. 19.12 Thecorrectansweris:12.1% % = a%+ A baIRR AB wherea is one interestrate b isthe otherinterestrate Ais the NPVat rate a Bis the NPVat rate b IRR =10%+ 2,700 1510 3,7402,700 % =10%+2.1% =12.1% 19.13 Thecorrectansweris:$38,328 Presentvalue=$8,000 +($8,0003.791)= $38,328 286 ManagementAccounting(FMA/MA) Page 299 of 421 H q 19.14 Thecorrectansweris:Loweringthe sellingpriceby 15% Loweringthe sellingpriceby 15%is best describedas a shorttermtactical plan. 19.15 Thecorrectansweris:Theabsorptioncostingprofitwouldbe $10,000greater Fixedcosts per unit =$164 =$4 Unitsinclosinginventory=17,500– 15,000=2,500 units Profitdifference =inventoryincreaseinunitsfixedoverheadper unit =2,500 $4 =$10,000 Inventoriesincreased,thereforefixedoverheadwouldhave been carriedforwardin inventoryusingabsorptioncostingand the profitwouldbe higherthan withmarginal costing. Ifyou selected'Theabsorptioncostingprofitwouldbe $10,000less'you calculatedthe correctprofitdifference,but misinterpretedthe 'direction'of the difference. Ifyou selectedeitherof the othertwooptions,you evaluatedthe inventorydifferenceat variablecost and fullcost respectively. 19.16 Thecorrectansweris:$802,000 Totalpurchase costs =annual demand purchase price =20,000 $40 per unit =$800,000 Order costs Numberof orders= Annualdemand 20,000units = =40 ordersper year 500unitsEOQ A N S W E R G Cost per =40 orders$25 per order S Totalordercosts =$1,000 Holdingcosts Averageinventoryheld=EOQ/2=500/2 =250 units Itcosts $4 to holdeach unitof inventory Holdingcosts =average inventoryheld$4 per unit =250 units$4 per unit=$1,000 Total annual costs of inventory $ 800,000 1,000 1,000 802,000 Purchasecosts Ordercosts Holdingcosts Total Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 300 of 421 Answers 287 H G q 19.17 Thecorrectansweris:a =28 and b =+2.6 Theleast squares methodof linearregressionanalysisinvolvesusingthe followingformulae fora and b inY=a +bX. nXY XY b = nX(X) 2 2 58,104 100400 = 5 2,0401002 40,520 40,000 = 10,20010,000 520 200 =2.6 Atthisstage, you can eliminatethe firstand thirdoptions. Yb X a= n b 400 – 2.6 100 = 5 5 =28. 19.18 Thecorrectansweris:$115,000 Recruit Retrain $'000 $'000 4 newemployees(4 $40,000) 160 Trainingcost 15 Replacements 00 160 115 Thesupervisioncost wouldbe incurredanyway and isnot a relevantcost, sincean existing manager is used. Similarly,the salariesof the existingemployeesare not relevant. Thelowestcost optionis to retrainthe existingemployees,at a total relevantcost of $115,000. 19.19 Thecorrectansweris:0.17 nxyxy r= 2 2 2 2 nxx nyy 6 14 2 15 84 30 54 = = = =0.172778=0.17 312.54 6 30 2 6 130 15 176 555 2 2 (to 2 dec places) 19.20 Thecorrectansweris:Thetotal productioncost of the jobis $440 (to the nearest $) $ Directmaterials10kg $10 00 Directlabour20 hours$5 00 Primecost 200 Variableproductionoverhead20 hours$2 40 Fixedproductionoverhead20 hours$10* 200 Totalproductioncost 440 Selling,distributionand administration 50 Totalcost 490 = *Overheadabsorptionrate = 288 $100,000 =$10per labourhour 10,000 ManagementAccounting(FMA/MA) Page 301 of 421 H q 20 Mixed Bank 2 20.1 Thecorrectansweris:Aninnovationand learningperspective Atarget of providingat least 40 hoursof trainingeveryyear to improveskillsand productivityhas a learningand growthperspective. Thecorrectansweris:(i),(ii)and (iii)only 20.2 20.3 20.4 Trend,seasonalvariationand cyclicalvariationare allcomponentsof timeseriesforecasts. Randomvariationcannot be includedbecause it can neverbe predicteddue to the random nature. Thecorrect answeris:Profitbefore interest and tax ÷ (Ordinaryshareholders'funds + Non-currentliabilities)100 20.5 Thecorrectansweris:Performancetesting. Performancetestingaimsto ensurethe desiredlevelof qualityis achieved.Re-inspection cost is an internalfailurecost. Administrationof customercomplaintssectionis an external failurecost and traininginqualitycontrolis a preventioncost. Thecorrectanswersare: Directlabourand variableproductionoverhead 20.6 Theproductionmanagerisnot goingto be able to controlimputedinterestofcapitalinvested or depreciationon machineryas theseare decisionsmade by the managementaccountant. Thecorrectansweris:3.50 Letx =the numberof hours12,250unitsshouldhave taken 12,250unitsshouldhave taken but did take Labourefficiencyvariance(inhrs) Labourefficiencyvariance(in$) G x hrs 41,000hrs x – 41,000hrs = $11,250(F) $11,250(F) Labourefficiencyvariance(inhrs) = $6 S = 1,875(F) 1,875hrs standard hoursfor12,250units =(x– 41,000)hrs = 41,000+1,875 = 42,875hrs Standard hoursper unit = 42,875hrs 12,250units = 3.50 hrs 20.7 Thecorrectansweris:$300,000 20.8 ($200,000+((100,000– 80,000) $5)=$300,000 Thecorrectansweris:(ii)only Youare not givenany informationinthe questionabout the actual quantityof fuelused. Youare onlytoldabout the total cost. Don'tbe put offby the differentnumberof km– all wewant is the differenceinfuelquantity. So,to decidehowthe quantityhas changed from20 8 to 20 9 weneed to take account of the priceincrease. First,wecan re-state the 20X9priceintermsof 20X8prices.Thisiswherethe index numberscomein. $1,440million120/240=$720 Sonowweknowthat in20X8prices,the fuelcost $600 in20X8and $720in20X9.The increase=720– 600 =120.Thisis a percentage increaseof 120/600100%=20% Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 302 of 421 A N S W E R Answers 289 H q 20.9 20.10 Thecorrectansweris:Theyare an efficientmethodof storingtext based files Theyare not an efficientmethodof storingtext based files. Thecorrectansweris:$5,000 (6,000 units– 5,000 units)$25,000 ÷5,000 units 20.11 Thecorrectansweris:(i)only Itrecognisesthat overheadcosts are not alwaysdrivenby the volumeof production 20.12 Thecorrectansweris:17.6% IRR= a%+ A ba% AB where a is one interestrate Ais the NPVat rate a b is the otherinterestrate Bis the NPVat rate b IRR =14%+[(16,000/(16,000+10,500)) 6% =14%+3.6% =17.6% 20.13 Thecorrectansweris:Adversefixedoverheadcapacity variance. 20.14 Thecorrectansweris: Currentratio Quick Reduceby 10% Reduceby 20% Beforethe newinventoryis bought the currentratiois as follows: Currentassets of $40mdividedby currentliabilitiesof $20m=$40/$20 =2 Whenthe inventoryof$5mispurchased,thisincreasesthe currentassets (inventory)and the currentliabilities(payables– becauseit wasbought'on credit')so the newcurrentratio= G 40 +5 =1.8 20 +5 Soyou can see that the ratiohas reducedfrom2 to 1.8.Adifferenceof 0.2. Asa percentage thisis 0.2/2 100=10% Thequickratio involvesremovinginventory.We are toldinthe questionthat after buying $5m,there is $10mso wecan deduce that beforethe newinventorypurchase,there is$5m of inventory. 40 5 =1.75 20 Afterthe purchase,the currentliabilitiesincreaseby 5 so the quickratiobecomes: 40 5 =1.4 25 Soyou can see that the quickratiohas reducedby 0.35. Asa percentage thisis 0.35/1.75 100=20% 20.15 Thecorrectansweris:Clustersampling 20.16 Thecorrectansweris: $18,000 (5,000 $1220 ÷120)+8,000 =$18,000 20.17 Thecorrectansweris:$5,200 Favourable $57,200– (5,200$50,000 ÷5,000 units)=$5,200 favourable 290 ManagementAccounting(FMA/MA) Page 303 of 421 H G q 20.18 Thecorrectansweris:$800 Favourable (5,200units– 5,000 units)$20,000 ÷5,000 units=$800 20.19 Thecorrectansweris:Thevariablecost per unit. 20.20 Thecorrectansweris:RIwillincreaseand ROIwilldecrease. 21 Mixed Bank 3 21.1 Thecorrectansweris:Multi-stage Thesampleis selectedinstages, firstlyby constituencies.Thecorrectansweris multi-stage samplingas thismethodinvolvesdividingthe populationintoa numberof sub-populations and then selectinga smallsampleof these sub-populationsat random.Eachsubpopulationis then dividedfurther.Stratifiedsamplinginvolvesdividingthe populationinto strata and then takinga randomsamplefromeach stratum.Randomsamplingis where everymemberof the populationhas an equal chance of beingselectedand systematic samplingis whereeverynth itemafter a randomstart is selected. 21.2 Thecorrectansweris:$55,400 Change ininventories=(8,500– 7,100)litres =1,400litres Differenceinprofit =1,400$4 =$5,600 Absorptioncostingprofitwillbe lowerthan marginalcostingprofitsby $5,600. Thereforeabsorptioncostingprofit=$61,000– $5,600 =$55,400 21.3 Thecorrectansweris:Graph C Thecost describedis knownas a semi-variablecost. Semi-variablecosts consistof a fixed amountup to a certainlevelof activitywhichisrepresentedby a straighthorizontallineon the graph. Ata certainpointa variableelementinintroducedand the cost lineslopes upwardsat a constant rate as the levelof activityincreases. 21.4 Thecorrectansweris:$88,095 Variableoverhead =($83,585– $73,950)/ (15,100– 12,750) =$9,635/ 2,350 =$4.10per square metre Fixedoverhead =$73,950– ($4.1012,750) =$73,950– $52,275 =$21,675 Overheadsfor16,200m2=$21,675+($4.1016,200) =$21,675+$66,420 =$88,095 21.5 Thecorrectansweris:$20.50 Actualoverheadswere$694,075and under-recoveredoverheadswere$35,000. Sooverheadrecoveredfor32,150hoursat absorptionrate x =$(694,075– 35,000)= $659,075. 32,150x=$659,075 x =$659,075/ 32,150 =$20.50 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 304 of 421 Answers 291 A N S W E R S H G q 21.6 Thecorrectansweris:179degrees Totalcost =$4,630,000 Cat food=$2,300,000 / $4,630,000360 degrees=179degrees 21.7 Thecorrectansweris:=SUM(B6:D6) Allformulaeinspreadsheetsneed to start withan equalssign.TheSUMfunctionis used to total valuesinspreadsheets. 21.8 Thecorrectanswersare: Activity-basedcostingis a formof absorptioncosting. Activity-basedcostingis an alternativeto traditionalvolume-basedcostingmodels. ABCis an alternativeto traditionalvolume-basedcostingmodels,whereproduction overheadis absorbed on the basis of the volumeof direct labour hours or machinehours worked.However,it is stilla formof absorptioncostingbecause productionoverheads are absorbed into product costs. ABCidentifiescosts withsupport activitiesand the overheadcosts of a product or servicecouldreflectthe long-runvariablecost of that product or service.ABCcan be used for costingservicesas wellas products. Although ABClooksat the costs of activities,it is not a costingmethod for identifyingrelevant costs for decision-making. 21.9 Thecorrectansweris:Itmay lead to excessiveinvestmentinshort-termprojects Itmay lead to excessiveinvestmentinshort-termprojects.Focusingon payback willlead to choosingshort-termprojects.Ittends to emphasisethose projectswhichmakea quick return. 21.10 Thecorrectansweris:(i),(ii),(iv),(v)esteemvalue,exchangevalue,use value,cost value. 21.11 Thecorrectansweris:$5 Whoopieprimecost $ per unit Directmaterial 2.00 Directlabour 2.50 Directexpense 0.50 5.00 Rememberthat primecost is the total of alldirectcosts. Thefixedcost of $3.15per unitis excludedfromthe primecost calculation. 21.12 Thecorrectanswersare: Wheninventorylevelsare constant Whenopeningand closinginventoryvolumesare the same Whenno inventoryis heldas openinginventoryand no inventoryis heldas closing inventory Absorptioncostingand marginalcostingwillgiveriseto the same profitsifinventorylevels do not change, ie, whenopeningand closinginventoryvolumesare the same, whenno inventoryis heldas openinginventoryand no inventoryisheldas closinginventoryand wheninventorylevelsare constant. 21.13 Thecorrectansweris:Notionalwholeunitswhichrepresentincompletework Notionalwholeunitswhichrepresentincompletework.Aunitof output inrelationto which costs may be ascertaineddescribesa cost unit.Thequantityof workachievableinone hourat standard levelsof performancedescribesa standard hour. Aunitof output whichis identicalto otherspreviouslymanufacturedinthe same processis incorrectbecause all completedunitsinprocesscostingare identical. 292 ManagementAccounting(FMA/MA) Page 305 of 421 H q 21.14 Thecorrectansweris:Totalcost =$65,000 +($3unitsproduced) Highestproduction 3,000 units $74,000 Lowestproduction 1,500units $69,500 1,500units $4,500 Variablecost per unit=$4,500 / 1,500=$3 per unit Totalcost =fixedcost +($3unitsproduced) $74,000 =fixedcost +($33,000) Fixedcost =$74,000– $9,000 Fixedcost =$65,000 21.15 Thecorrectansweris:(ii)is true and (i)is false (i)is false.Strategic planning is carriedout by seniormanagement.Linemanagers willbe concernedwithoperational planning. (ii)is true. Themanagementaccountant may frequentlyhave to take intoaccount non-financialinformation. 21.16 Thecorrectansweris:(i),(ii)and (iv)only Theonlysamplingmethodthat does not requirea samplingframeis quota sampling, therefore(i),(ii)and (iv)onlyis the correctoption. 21.17 Thecorrectansweris:1.1 Asthisis a multiplicativemodel,the seasonalvariationsshouldsum(inthiscase) to 4 (an average of 1)as there are fourquarters. LetX=seasonalvariationinquarter 4 1.2+1.3+0.4 +X=4 A N S W E R 2.9 + X=4 X=4 – 2.9 G X=1.1 21.18 Thecorrectansweris:Thetrend lineforsales decreased betweenquarter 1and quarter 2. Fora multiplicativemodel,the seasonalcomponentS =Y/T T=Y/S 1 Quarter 2 Seasonalcomponent(S) 1.2 1.3 Actualseries(Y) $125,000 $130,000 Trend(T)(=Y/S) $104,167 $100,000 Thetrend lineforsales has thereforedecreased betweenquarter 1and quarter 2. 21.19 Thecorrectansweris:Totalfixedcosts Theinterceptis the pointat whichthe lineon a graph crossesthe y axis.Itrepresentsthe total fixedcosts. 21.20 Thecorrectansweris:(i)and (ii)are true Flexiblebudgets helpmanagers to deal withuncertaintyby allowingthemto see the expectedoutcomesfora range of activitylevels.SoStatement(i)is true. Aflexedbudget providesa moremeaningfulcomparisonbecause it showswhat costs shouldhave been for the actual levelof activityachieved. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 306 of 421 Answers 293 S H q 22 Mixed Bank 4 22.1 Thecorrectansweris:Settingcost cuttingtargets 22.2 Short-termismiswhenthereisa biastowardsthe short-termratherlong-termperformance. OptionAencouragesa long-termviewand goalcongruence.OptionBusesmultipletargets to encouragea long-termview.Ifbudgettargets are unrealisticallytough,a managerwillbe forcedto maketread-offsbetweenthe shortand long-term,thereforeoptionDisusefulfor encouraginga long-termview.Settingcost cuttingtargets couldlead to a reductioninR&D expenditure,qualitycontrol,customerserviceand staff training.Thesecouldallhinderthe long-termperformanceofthe business. Thecorrectansweris:Applyinga zerodefect philosophyto the managementof all resourcesand relationshipswithinan organisation 'Identifyingthe factors whichcause the costs of an organisation'smajoractivities' describesABC.'Trackingand accumulatingcosts and revenuesattributableto each productoverits life'describeslife-cyclecostingand 'Estimatingproductcosts by subtractinga desiredprofitmarginfroma sellingprice'describestarget costing. 22.3 Thecorrectansweris:Normalloss=$840 Abnormalloss=$880 Step 1Determineoutput and losses Input 15,000 kg Normalloss(10%) 1,500 kg Expectedoutput 13,500 kg Actualoutput 13,000 kg Abnormalloss 500 kg Step 2 Calculate cost per unit of output and losses Scrap valueof normalloss(1,500$0.56) $840 Scrap valueof abnormalloss(500 $0.56) $280 $1,120 G Cost per expectedunit= $22,500 $2,100$840 =$1.76 13,500 Step 3 Calculate total cost of output and losses Output (13,000$1.76) $22,880 Normalloss (1,500$0.56) $840 Abnormalloss (500 $1.76) $880 $24,600 294 ManagementAccounting(FMA/MA) Page 307 of 421 H q 22.4 Thecorrectansweris:$106,700 Statementof profitor lossforMayundermarginalcosting May $ Sales A(4,300$85) U(2,600$60) Openinginventory A U Variablecosts A(4,500$50) U(3,100$48) 225,000 148,800 373,800 Lessclosinginventory A(200 $50) U(500 $48) (10,000) (24,000) 0 0 0 Variablecost of goodssold Contribution Fixedcosts Profit 22.5 $ 365,500 156,000 521,500 339,800 181,700 75,000 106,700 Thecorrectansweris:$19.50 Thisis a questioninwhichyou have to workbackwards. 750 kg shouldhave cost ($p) Butdid cost Materialpricevariance G A N S W E R ? $13,500 $1,125 (F) The750 kg shouldhave cost $13,500+$1,125=$14,625 S Thestandard cost per kg is therefore$14,625/750=$19.50 22.6 Thecorrectansweris:Stratified Stratifiedsamplingis a methodof samplingwhichinvolvesdividingthe populationinto strata or categories. 22.7 Thecorrectansweris:$25.20 P 100× 1 =125 P 0 P =$31.50 1 22.8 100$31.50 =125 P 0 100$31.50 = P0 =$25.20 125 Thecorrectansweris:Bothstatements are true. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 308 of 421 Answers 295 H q 22.9 Thecorrectansweris:5 Thepointat whichthe straightlinecrossesthe y axisis the interceptand thisis the value of a. Thegradientis b. y =a +bx $270=$20 +(b ×50) $270– $20 =50b $250 =b 50 b =5 22.10 Thecorrectansweris:$318,000 Marginalcosting: $'000 Sales(25,000$80) Openinginventory Variableproductionoverhead(W1) 0 1,560 , 1,560 (60) Lessclosinginventory(W2) Variablecost of sales Contribution Lessfixedcosts (W3) Profit $'000 2,000 . ,500 500 182 318 Workings (1) 26,000 units$60 =$1,560,000 (2) Productionunits+openinginventory– sales G Valuedat marginalcost: =closinginventory =26,000 +0 – 25,000 =1,000units 1,000$60 =$60,000 (3) Fixedproductionoverhead+fixedsellingcosts =$113,000+$69,000 =$182,000 22.11 Thecorrectansweris:$323,500 Absorptioncosting OAR=Budgetedoverhead/ budgeted production=$143,000/26,000=$5.5/unit Asinventoryhas increased,absorptioncostingwillreporta higherprofitthan marginal costing. Thedifferenceinprofit= change ininventoryvolumefixedproductionoverheadper unit = 1,000$5.5 = $5,500 Marginalprofit = $318,000 absorptionprofit = $318,000+$5,500 =$323,500 22.12 Thecorrectansweris: 29,000 units 35,000 units $163,000 $211,000 Step 1Findthe highestand lowestlevelsof activity(notethat thisis the activityleveland is not necessarilythe highestand lowestcost). Inthiscase weonlyhave twolevelsof activityso wehave to use those. 296 ManagementAccounting(FMA/MA) Page 309 of 421 H q Step 2 Comparethe activityleveland costs foreach of these but deduct the extra step up fixedcost for34,000 units Numberof units 34,000 28,000 6,000 Highest Lowest Increase Cost $ 208,000 – 30,000 =178,000 160,000 18,000 Thisshowsthat foran increasein6,000 unitsthere has been a cost increaseof $18,000. Thereforethe variablecost per unitcan be estimatedas: Variablerate of increase = $18,000/6,000units = $3 per unit Step 3 We can nowfindthe fixedelementof the cost at each activitylevel,by substituting the variablerate intothe activitylevels,withthe fixedelementappearing as the balancing figure. Fixedcost at 28,000 units=$160,000– (28,000$3)=$76,000 Fixedcost at 34,000 units=$208,000 – (34,000$3)=$106,000 Noticethat the fixedcost at 34,000 unitsis $30,000 higherthan at 28,000 units.Thisis reassuringas weweretoldthisoriginally.Alternativelyto findthe fixedcost at 34,000 units wecouldhave justcalculatedthe fixedcost at 28,000 unitsand then added on the extra $30,000. Cost at 29,000 units=$76,000+(29,000$3)=$163,000 Cost at 35,000 units=$106,000+(35,000$3)=$211,000 22.13 Thecorrectansweris:$4,250Favourable G 9,200 hoursshouldhave cost ($12.50) but did cost Directlabourrate variance 22.14 Thecorrectansweris:$5,250Adverse 2,195unitsshouldhave taken (4 hours) but did take Directlabourefficiencyvariance(inhours) standard rate pre hour 22.15 $ 115,000 110,750 4,250 (F) 8,780hours 9,200 hours 420 hours(A) 12.50 5,250 (A) Thecorrectansweris:953 = Ch = 2 15250,0002CoD 3,000,000 =EOQ =953 (to the nearest wholeunit) 3.3 1103% Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 310 of 421 Answers 297 A N S W E R S H q 23 Mixed Bank 5 23.1 Thecorrectansweris: 19,000units 21,000units $210,000 $235,000 Step 1We have been toldwhat the fixedcost elementisfor22,000 unitsso wecan break the total cost intoits fixedand variableelementsand then findthe variablecost per unit fromthis. Variablecost of 22,000 units=$245,000– $25,000 Variablecost per unit= $245,000 $25,000 $10 22,000 Step 2 Nowthat wehave the variablecost per unit,wecan substitutethisintothe lower levelactivityto findthe fixedelementforan activitylevelbelow20,000. Fixedelementforloweractivitylevel=$200,000 – (18,000$10)=$20,000. Step 3 We can nowfindthe cost at activitylevelsof 19,000and 21,000units.Remember the fixedelementwillbe differentineach case because of the step. Cost at 19,000units=$20,000 +(19,000$10)=$210,000 Cost at 21,000units=$25,000 +(21,000$10)=$235,000 23.2 Thecorrectansweris:20% Returnon investment=Profit/capitalemployed Profit =$30,000 +($300,00010%) =$60,000 G H ROI 23.3 =$60,000/$300,000 =20% Thecorrectansweris: Statement(i) False Statement(ii) True 23.4 Apurchase requisitioniscompletedinthe departmentwhichrequiresthe goodsand then sent to the purchasingdepartmentwherea purchase orderisraisedto send to the supplier. Thereforestatement (i)isfalse.Statement(ii)is true. Thecorrectansweris:$41,000 23.5 Thefixedoverheadexpenditurevarianceisnot relevantto a reconciliationofbudgetedand actual contributions.Fixedcostsare deductedafterwardsfromcontributionto arriveat profit.Thefigureof$40,000giveninthe questionas the 'standard contributionon actual sales'meansthat the effectofthe salesvolumecontributionvariancehas alreadybeen taken intoaccountinarrivingat that figureof$40,000.Budgetedcontributionisadjustedforthe salesvolumecontributionvarianceto arriveat the figurefor'standard contributionon actual sales'.Thereforethe onlyvariancethat needsto be takenintoaccountinthisparticular questionisthe favourablesalespricevarianceas follows:[40,000+1,000]=$41,000. Thecorrectansweris:91.2% Theactual costs were$93,600and whencomparedwiththe flexedbudget thisgave an adverse varianceof $2,400. Thereforethe flexedbudget was [93,600−2,400]=$91,200. Budgetsare flexedbased on activity levels.As$100,000of directcosts representeda 100% activitylevelthen flexedbudget directcosts of $91,200representsa 91.2%levelof activity [actualactivityas a %of the fixedbudget]. 298 ManagementAccounting(FMA/MA) Page 311 of 421 q 23.6 Thecorrectansweris:$13,800 Step 1Determineoutput and losses Input 10,000 litres Normalloss(5%) 500 litres Expectedoutput 9,500 litres Actualoutput 9,200 litres Abnormalloss 300 litres Step 2 Calculate cost per unit of output and losses Scrap valueof normalloss(500 $38) $19,000 Scrap valueof abnormalloss(300 $38) $11,400 $30,400 Cost per expectedunit= $456,000 $19,000 =$46 9,500 Step 3 Calculate total cost of output and losses Output (9,200$46) $423,200 Normalloss (500 $38) $19,000 Abnormalloss (300 $46) $13,800 $456,000 23.7 Thecorrectansweris:$52.97 P 100 1 =175 P 0 A N S W E R P =$92.70 1 G 23.8 100$92.70 =175 P 0 100$92.70 = P =$52.97 0 175 Thecorrectansweris:$600,000 $200,000 ÷ 23.9 S 120 =$600,000 360 Thecorrectansweris:300 Thepointat whichthe straightlinecrossesthe y axisis the interceptand thisis the value of a. Thegradientis b =$40. y =a +bx $1,100=a +($4020) $1,100– $800 =a a =300 23.10 Thecorrectansweris:$47,500 $ Actualfixedproductionoverheads Absorbedfixedproductionoverheads(5,500×$7) Under-absorbedfixedproductionoverheads X 38,500 9,000 Actualfixedproductionoverheads =$38,500+$9,000 =$47,500 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 312 of 421 Answers 299 H q 24 Budgeting 24.1 Task 1 (i) January closinginventoryunits=880 units(4,400units20%) (ii) Marchsales units=4,840 units(4,4001.1) (iii) Mayproductionunits=5,856units(5,3241.1),as sales forJune are the same as Maythere willnot be any change ininventorylevels(giventhat closinginventoryis to remainat 20%of sales)so sales equal production. Jan Feb Mar Apr May Jun Salesof M(units) 4,000 4,400 4,840 5,324 5,856 5,856 Opening 500 880 968 1065 1,171 1,171 inventory Closing 880 968 1065 1,171 1,171 ,171 inventory Production 4,380 4,488 4937 5,430 5,856 5,856 Task 2 Thecorrectansweris:$151,250 Kg MaterialG requiredforproduction:20,000 units3kg 60,000 Openinginventory (3,000) Closinginventory 3,500 Purchases 60,500 Costs of purchases@$2.50 per kg $151,250 Task 3 Thecorrectansweris:Timedelayswiththe issueof bank statements Purchase of non-current assets Forexample,supposean asset is purchasedfor$20,000 and depreciationis charged at 10%of the originalcost. Thecash outflowduringthe year is $20,000 (and thisdoes not appear inthe statement of profitor loss).Thedepreciationcharge =10%$20,000 = $2,000. Thisis charged to the statement of profitor lossand willreduceoverallprofits. Sale of non-current assets Whenan asset issoldthereisusuallya profitor losson sale.Forexample,an asset witha net bookvalueof$15,000couldbe soldfor$11,000,givingriseto a losson disposalof$4,000. Theincreaseincash flowduringthe year =$11,000sale proceeds.Therewillbe no effect on the statement of profitor loss. Thelosson sale of non-currentassets =$4,000. Thiswillbe recordedinthe firm's statement of profitor lossand willreduceoverallprofits. Depreciationof non-current assets Depreciationis a non-cash itemand willthereforebe a reason whyprofitand cash flow differ. Task 1 G 24.2 $'000 Salesreceipts 820 Purchasepayments 575 Overheadpayments 95 Workings Salesreceipts Purchasepayments Overheadpayments 300 =860 +45 – 85 =820 =600 +75 – 100=575 =100+40 – 45 =95 ManagementAccounting(FMA/MA) Page 313 of 421 H q Task 2 $ ReceiptsinMarchrelatingto January sales 21,000$30 60% 378,000 ReceiptsinMarchrelatingto Februarysales 22,000 $30 1.04×40% 274,560 TotalMarchreceipts 652,560 Task 3 Thecorrectansweris: 24.3 Itis amendedinresponseto changes inthe levelof activity Aflexiblebudget is a budget whichis designedto change as volumesof output change. Task 1 Top tips. Makesure that you alwaysread the questioncarefully.Notethat sales are invoicedat the end of the month. Class A(W1) Class B(W2) Workings (1) Class Acustomers Nov $'000 Dec $'000 50 63 36 Jan $'000 105 50 A N S W E R Octobersales 50%receivedDecember$100,00050%=$50,000 30%receivedJanuary $100,00030%=30,000 G S Novembersales 50%receivedJanuary $150,00050%=$75,000 (2) Class Bcustomers Octobersales 60%receivedNovember$60,000 60%=$36,000 25%receivedDecember$60,000 25%=$15,000 10%receivedJanuary $60,000 10%=$6,000 Novembersales 60%receivedDecember$80,000 60%=$48,000 25%receivedJanuary $80,000 25%=$20,000 Decembersales 60%receivedJanuary $40,000 60%=$24,000 Task 2 Thecorrectansweris:$22,000 Onlyitemsof cash outflowsshouldbe includedinthe cash budget. Forfixedoverheadsat HMCo thisis comprises:$10,000rent, $1,000vehiclerunningcosts and $11,000wages. Deprecationis not a cash flow. Task 3 Thecorrectansweris:Annualoverheadcharge fromHeadOfficebased on the floor space occupiedby the machine Thisis not a cash flow,whereasthe purchase priceof the asset alongwiththe delivery costs are cash out flowsand the proceedsfromthe sale of the oldasset is a cash inflow. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 314 of 421 Answers 301 H q 24.4 Task 1 Price index Working MaterialA 143 (1.40/0.98)100 MaterialB 116 (1.10/0.95)100 MaterialC 77 (0.92/1.20)100 MaterialD 104 (1.14/1.10) 100 Task 2 Thecorrectansweris:$20,000 Usingthe high-lowmethod: Units $ High 14,000 72,500 Low 10,000 57,500 Difference 4,000 15,000 Variablecost per unit:$15,000/4,000=$3.75 Substitutevariablecost intototal cost equationto givefixedcost 72,500– (3.7514,000)=20,000 Task 3 G 24.5 Thecorrectansweris:11,000unitsof ProductJ beingmanufacturedinJuly Thehigh-lowequationshouldbe used foractivitylevelswithinthe range of data levels already observed.IfRJMmade 15,000units,the forecastusingthe highlowequation wouldbe lessaccurate because it wouldinvolveextrapolation,whereas11,000unitswould not. Similarlymakinga differentproduct(R)or producingthemina differentfactory would be likelyto alter the cost structure. Task 1 Thecorrectansweris:=(E2– B2)/ (E3– B3) Ifbracketsare NOTused ie E2– B2/ E3– B3then the divisionie B2/ E3willbe done before the subtractionand thiswillgivethe wronganswer. Task 2 Thecorrectansweris: y =$79,739+2.1x High Low Variablecost = $ 259,541 (214,559) 44,982 Units 85,620 (64,200) 21,420 Fixedcost =$259,541– (85,620$2.1)=$79,739 Task 3 Thecorrectansweris:=SUM(E4:E8) Thisformulawilladd up the valuesof XYinthe columnaboveto givea total. 302 ManagementAccounting(FMA/MA) Page 315 of 421 =$2.1/unit H G q Task 4 Whenadvertisingis $500 per month Whenadvertisingis $1,500per month Whenadvertisingis $1,800per month Whenadvertisingis $2,800 per month 24.6 Regressionanalysisshouldonlybe used forforecastingwithinthe relevantrange. HereMB Co has experienceof spendingbetween$900 and $2,100.Anythingaboveor belowthis levelisextrapolationand wouldmakethe forecastlessreliable. Task 1 Thecorrectansweris: C2: $250,000 H3:$60,000 D4:$75,000(w1) D5:$15,000(w2) D6:0 – depreciationis not a cash flowand shouldthereforenot be included E8:0.826 Workings 1 Extracontributionper unit$6 – $4.50 =$1.50 $1.5050,000 units=$75,000 2 Extrafixedcosts attributableto newtechnologyare $15,000per year (75%$20,000) Task 2 A N S W E R Thecorrectansweris: Ittakes intoaccount the timevalueof money Itdoes not requirethe company’scost of capital AsIRRdiscountsfuturecash flowsit takes intoaccount the timevalueof money.TheIRR calculatesthe breakevencost of capital, whichmeans that it does not requirea cost of capital to be calculated.Thisis a benefitas inrealitycalculatinga cost of capital can be complicatedand timeconsuming. ItisNPV,not IRRwhichisconsideredto be the superiorinvestmentappraisaltechnique because NPValwayscorrectlyranksprojects IRRis not quickand simpleto calculatecomparedto techniquessuch as the payback periodand it is based on cash flowsand not profits. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 316 of 421 Answers 303 S H q 24.7 Task 1 Relevant Investmentof $450,000 inthe newequipment X Depreciationof $90,000 overeach of the fiveyears Staff trainingcosts of $20,000 Irrelevant X X Temporarymanager's salary of $4,000 X Conferencecosts of $3,000 X Interestcosts of $6,000 per year X Investmentof $450,000 inthe newequipment is relevant– because ifthe investmentis not made thisequipmentwouldnot be purchased. Depreciationof $90,000 overeach of the fiveyears is irrelevant– depreciationis a notional amount(iean accountingentry)and not a cash flow,thereforeit is nevera relevantcost. Staff trainingcosts of $20,000 are relevant– thistrainingis a futurecost because it will onlyneed to be incurredifthe equipmentis purchased. Temporarymanager's salary of $4,000 is irrelevant– the manager is not goingto be paid any extra salary as a resultof the project.Asthere is no incrementalcost to the company as a whole,thisis not a relevantcost. Conferencecosts of $3,000 are irrelevant– the conferenceand thistraininghas already happened and the cost of it is a sunkcost. Thecompanywillnot get the moneyback ifthe equipmentis not purchased. Interestcosts of $6,000 per year are irrelevant– interestisa financecost. Thediscount rate providesthe investorcompensationforinterest,whichmeans that interestis nevera relevantcost. Task 2 Incrementalsales inYear1=$90,000 PVof maintenancecosts overthe lifeof the contract =$37,910 Additionalelectricitycosts =$27,500 Workings 1 Increaseinsales =($550,000- $500,000)=$50,000 Increasedue to the project=($50,000+$40,000)=$90,000 G 304 2 Annuityfactor forfiveyears at 10%=3.791 Presentvalue=(3.791$10,000)=$37,910 3 Totalsales inYear1=$550,000 Additionalelectricity=($550,0000.05) =$27,500 ManagementAccounting(FMA/MA) Page 317 of 421 H q 24.8 Task 1 Expenditure Capital Purchaseof newdeliveryvan Revenue x Roadtax fornewdeliveryvan x Repairsto customertoilets x Extensionof customercar park x Thepurchase of the newdeliveryvan and the extensionto the customercar park are both classifiedas capital expenditurebecause they willdeliverbenefitsto the company, for morethan one year. Theroad tax is a runningcost of the van and shouldbe treated as revenueforthe period, alongwiththe repairsto the toilets.Thetoiletshave not been improvedor enhanced by the expenditure,theiruse has merelybeen maintained. Task 2 Thecorrectansweris:235 Sales Less:openinginventory Add:closinginventory(W1) Manufacture W1:SalesforJuly:200 1.25=250 units Units 200 (15) 50 235 Closinginventoryis 20%July's sales =0.2 250 =50 units A N S W E R Task 3 G (i) 1,000m2 (ii) Requiredforproduction(9010m) 2 Pluswaste Purchase $10,800 m2 900 100 1,000 S 90 units8 hours$15per hour=$10,800 24.9 Task 1 Totalcost of 9,800 units Totalcost of 7,700units Variablecost of 2,100units Thevariablecost per unitis $3. = = = $ 44,400 38,100 6,300 Totalcost of 9,800 units Variablecost of 9,800 units(9,800$3) Fixedcosts = = = $ 44,400 29,400 15,000 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 318 of 421 Answers 305 H q Task 2 Thecorrectansweris $3,000 Budget 9,000 units $ Sales($5) 45,000 Variablecosts ($3) 27,000 Contribution 18,000 Fixedcosts 15,000 Profit 3,000 Task 3 80%of capacity =8,000 units 100%of capacity =10,000units Sales($5) Variablecosts ($3) Contribution Fixedcosts Profit 24.10 Flexiblebudget 8,000 units $ 40,000 24,000 16,000 15,000 1,000 Flexiblebudget 10,000units $ 50,000 30,000 20,000 15,000 5,000 Task 1 Thepayback period X Netpresentvalue G H Discountedpayback period Internalrate of return Returnon capital employed X Returnon capital employedand payback take no account of whencosts or revenuesare incurredor receivedwhendeterminingtheirvalue.Approachesthat use discountedcash flow(net presentvalue,IRRand discountedpayback)are consideredto be more sophisticated,based on the principlethat cash receivedinthe futureis not worthas much as cash receivedtoday. Task 2 Thecorrectansweris:2.25 years 20,000 +30,000 =50,000 willbe paid back at the end of year 2, leaving10,000to be repaid inyear 3.10,000/40,000=0.25, so payback occursafter 2.25 years 306 ManagementAccounting(FMA/MA) Page 319 of 421 G q Task 3 $ NPV Discountedpayback Year 0 1 2 3 4 35,000 2.76 years Cash flow (60,000) 20,000 30,000 40,000 50,000 15% 1 0.870 0.756 0.658 0.572 NPV (60,000) 17,400 22,680 26,320 28,600 CumulativePV (60,000) (42,600) (19,920) 6,400 35,000 35,000 Discountedpayback period = 2 +(19,920/26,320)years = 2.76years (approximately2 years and 9 months) Thiscompareswitha non-discountedpayback periodof 2.25 years forthe same project. Task 4 Thecorrectansweris:True 25 Standard 25.1 Task 1 costing Thecorrectansweris:$20,000 Adverse Thesales volumevarianceina marginalcostingsystemis valuedat standard contribution per unitrather than standard profitper unit. Contributionper unitof DG=$22 – $12=$10 Salesvolumevarianceintermsof contribution= $12,000 $10=$20,000 Adverse. $6 Task 2 Thecorrectansweris: Thedifferencebetweenactual and budgeted volumemultipliedby the standard absorption rate per unit. Incorrectanswers: Thedifferencebetweenbudgeted hoursof workand the actual hoursof workmultipliedby the standard absorptionrate per unit– thisis the fixedoverheadvolumecapacity variance Thedifferencebetweenthe fixedoverheadincurredand the fixedoverheadabsorbed – this is howto calculatethe fixedoverheadtotal variance Thedifferencebetweenthe budgeted fixedoverheadexpenditureand the actual fixed overheadexpenditure– thisis howto calculatethe fixedoverheadexpenditure variance Task 3 Thecorrectanswersare: Offerovertimepay to the company’sexistingskilledemployeeson a pieceworkbasis – this wouldencourageexistingemployeesto workmoreefficiently. Implementtrainingforthe temporaryemployees– thiswouldenable temporaryemployees to workmoreefficiently. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 320 of 421 Answers 307 A N S W E R S H G q Incorrect answers Increase thehourly ratepaidtotemporary workers – increasing thehourly paywillnot directly increase efficiency. Reduce thenumber ofsupervisors – thiscouldinfactreduce efficiency ifemployees are notbeingmonitored. Task4 $3,500(A) $ 53,000kgshould havecost(×$2.50*) 132,500 Butwas 136,000 Material pricevariance 3,500(A) *Budgeted material costperkg=$125,000/(25,000 units 2 kg) 25.2 Task1 Thecorrect answer is: Connolly usesstandard absorption costing. Inthelastmonth actualselling pricewas higherthanstandard. Actualunitssoldwere1,000lessthanbudgeted andactualsalesrevenue was$910,000 Production was100unitslessthanbudgeted. Materials caused thebiggest costvariance, where a decision topaylessthanstandard priceresulted inthecompany using800kgmorethanflexedbudget. Explanation ofanswers Absorption costing – fixedoverheads areincluded inthestandard costcard. Selling pricewashigher thanstandard duetothefavourable selling pricevariance. Actualunitssoldwere1,000lessthanbudget duetotheadverse salesvolume variance of $50,000($50,000/$50 standard profit= 1,000units). Salesrevenue =$910,000. Thiscanbecalculated bytakingtheactualunits thebudgeted SP(9,000$100)andaddingthe$10,000favourable salespricevariance. Production of100unitslessthanbudget canbecalculated bytakingthefixedoverhead volume variance anddividing itbythefixedoverhead standard costperunit($1,000/$10) = 100units Materials pricewasfavourable therefore Connolly musthavepaidlessthanstandard price. 800kgmorethanflexed budget canbecalculated bytakingthe$8,000material usage variance anddividing itbythe$10standard costperkg. 25.3 Task1 Salesvolume variance Standard contribution onactualsales Salespricevariance Actualsalesrevenue generated fromactualsalesunits Actualsalesunitsshould havegenerated revenue of Therefore anadverse variance of Actualcontribution Budgeted contribution (20,000$50) Salesvolume variance Standard contribution onactualsales Salespricevariance 308 Management Accounting (FMA/MA) Page 321 of 421 $75,000Favourable (21,500–20,000) $50 $1,075,000 ($1,000,000 + $75,000) $21,500 Adverse $2,128,500 $2,150,000 (21,500$100) $21,500 $1,053,500 1,000,000 75,000 F 1,075,000 21,500 A 1,053,500 H G q Costvariances Totaldirectmaterial variances Totaldirectlabour variances Totalvariable production overhead variances 15,000 10,000 5,000 Actualcontribution Alternative method: Actualsalesrevenue andcostsperunit Sales Directmaterials Directlabour Variable overheads Contribution Actualcontribution: $ perunit 25.68 9.55 14.77 Sales 21,500@$99 Opening inventory Variable production cost 22,000@$50 Lessclosing inventory 22,000–21,500 @$50 Contribution Task2 Adverse Favourable Favourable 1,053,500 $ perunit 99.00 (50.00) 49.00 $ – (2,128,500/21,500) (565,000/22,000) (210,000/22,000) (325,000/22,000) $ 2,128,500 1,100,000 25,000 (1,075,000) 1,053,500 Thecorrectansweris: Actualsalesunitsweregreater thanbudgeted salesunits Salesvolume variance looksatthedifference between actualsalesunitsandbudgeted salesunitsmultiplied bybudgeted contribution. 25.4 Task1 High-low method Budgeted variable overhead pertonne Usingthehigh-low technique: Changeintotalbudgetedoverhead Changeinvolume $264,000 $200,000 = 9,000 5,000tonnes Budgeted variable overhead pertonne= =$16pertonne Budgeted fixedoverhead fortheperiod Iftotaloverhead at9,000tonnes = Variable overhead =9,000tonnes $16pertonne = Budgeted fixedoverheads $ 264,000 (144,000) 120,000 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 322 of 421 Answers309 A N S W E R S H q Task 2 Variances Fixedoverhead expenditure variance Budgetedexpenditure Actualexpenditure Fixedoverheadexpenditurevariance Fixedoverhead volumevariance Actualproductionat standard rate (6,500$24) Budgetedproductionat standard rate Fixedoverheadvolumevariance Task 3 $120,000 $125,000 $5,000 (A) $156,000 $120,000 $ 36,000 (F) Thecorrectansweris:Absorbedoverheadsexceedactual overheads Overabsorptionwilloccurwhenthe amountof overheadsabsorbed exceedthe actual amountof overheads. 25.5 Task 1 Variances Variance $ Fixedoverheadexpenditure 3,000 (W1) Fixedoverheadefficiency 4,000 (W2) Fixedoverheadcapacity 6,000 (W3) (W1)Fixedoverheadexpenditurevariance Budgetedfixedoverheads Actualfixedoverheads Fixedoverheadexpenditurevariance G Favourableor Adverse F A F $ 26,000 23,000 3,000 H F (W2)Fixedoverheadefficiencyvariance 14,000sets shouldhave taken ( 0.5 hrs) Butdid take std fixedoverheadabs rate per hour 7,000 hrs 8,000 hrs 1,000hrs $4 $4,000 A A (W3)Fixedoverheadcapacity variance Budgetedhoursof work(13,0000.5 hrs) Actualhoursof work std fixedoverheadabs rate per hour 6,500 hrs 8,000 hrs 1,500hrs $4 6,000 F F Task 2 Volumevariance Efficiencyvariance Expenditurevariance Over-absorptionof fixedoverheads Labourproductivitywas lowerthan expected Fixedoverheadexpenditurewas lowerthan expected Capacity variance Labourworkedmorehoursthan expected Thecapacity and efficiencyvariances attempt to explainthe cause of over-absorption indicatedby the volumevariance. 310 ManagementAccounting(FMA/MA) Page 323 of 421 q 25.6 Thehighernumberof labourhoursworkedcomparedto budget resultedin$6,000 more overheadabsorbed than budgeted. However,the higherhoursof labourworkedwerea resultof inefficientlabouruse as indicatedby the labourefficiencyvariance.Thisresulted inthe $4,000 adversefixedoverheadefficiencyvariance.Thereforethe overallvolume varianceis only$2,000 favourable. Task 1 Thedirect material total variance $ 225,000 175,000 50,000 (F) 2,500 unitsshouldhave cost but did cost Directmaterialtotal variance Thedirect material price variance 12,000kg of Wshouldhave cost but did cost MaterialWpricevariance $ 180,000 175,000 5,000 (F) Thedirect material usage variance 2,500 unitsshouldhave used (6 kg) but did use Usagevarianceinkg Standard cost per kg Usagevariancein$ 5,000 kg 2,000 kg 3,000 kg (F) $15 $45,000 (F) Summary $ 5,000 (F) 45,000 (F) 50,000 (F) Pricevariance Usagevariance Totalvariance Task 2 G Thecorrectansweris:$15,000adverse. Thisis calculatedby findingthe balancingfigure.Thetotal variancebetweenbudgeted contributionand actual contributionis $10,000adverse($30,000– $20,000).Thesales volumeand sales pricevariancessumto $5,000 favourable,so to balance, the variable cost variancemustbe $15,000adverse. Task 3 Thecorrectanswersare: 25.7 Anincreaseindirectmaterialprices Anincreaseinraw materialusage per unit Incorrectanswers: Unitsproducedbeinggreater than budgeted – thiswouldnot cause the variancedue to the variancebeingbased on the flexedbudget Unitssoldbeinggreater than budgeted – unitssoldare not a cause of a directmaterial variance,it wouldbe based on unitsproduced. Task 1 Totallabourvariance $1,000Adverse(W1) Labourrate variance $4,250Favourable(W2) Labourefficiencyvariance $5,250Adverse(W3) W1Totallabourvariance Actualunitsshouldcost 2,1954 hours$12.20=$109,750 Actuallabourdid cost =$110,750 Therefore$1,000Adversevariance Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 324 of 421 Answers 311 A N S W E R S H G q W2Labour ratevariance Actualhours paidshould cost9,200$12.50=$115,500 Actuallabour didcost=$110,750. Therefore $4,250favourable W3Labour efficiency variance Actualproduction should use2,1954 hours = 8,780hours Actualproduction diduse9,200hours Therefore 420hours adverse variance valued atstandard costof$12.50=$5,250 Task2 Thecorrect answer is: Actualproduction tooklonger thanexpected Incorrect answers: Therateactually paidtoworkers washigher thanthestandard – thiswould notimpact on theefficiency variance asthedifference inproduction timeisvalued atthestandard rate perhour. Therateactually paidtoworkers waslower thanthestandard - thiswould notimpact on theefficiency variance asthedifference inproduction timeisvalued atthestandard rate perhour. Actualproduction wasquicker thanexpected – thiswould result ina favourable efficiency variance Task3 Thecorrect answer is: Salesvolume variance Thesalesvolume variance would bevalued atstandard contribution under marginal costing butatstandard profitunder absorption costing. 25.8 Task1 STANDARD COSTCARDFORAWIDGET Directmaterials $ $ X– 5 kg$2 10 Z – 2 metres $5 10 20 Directlabour Skilled – 3 $15 45 Unskilled – 6 $3 18 63 Standard directcost 83 Variable production overhead – 3 $3.00 Standard variable costofproduction 9 92 Fixedproduction overhead – 3 $3.33(W) Standard fullproduction cost 10 102 Administration, selling anddistribution overhead Standard costofsale 20 122 Standard profit(15%122) 18.30 Standard salesprice 40.30 Working Fixedoverhead absorption rate=($100,000/(10,000 3))=$3.33perskilled labour hour 312 Management Accounting (FMA/MA) Page 325 of 421 H q 25.9 Task 2 Thecorrectansweris: Thedifferencebetweenwhat the sales revenueshouldhave been forthe quantitysold,and what it was Task 1 Directlabourtotal variance Thisis the differencebetweenwhat 3,000 unitsshouldhave cost and what they did cost. $ 3,000 unitsshouldhave cost (3 hrs $5) 45,000 but did cost 43,700 Directlabourtotal variance 1,300(F) Thetotal variancecan then be analysed intothe rate varianceand the efficiencyvariance as follows: Directlabour rate variance $ 10,000hoursof workshouldhave cost 50,000 but did cost 43,700 Directlabourrate variance 6,300 (F) Directlabourefficiencyvariance 3,000 unitsof Fab shouldhave taken (3 hrs) but did take Efficiencyvarianceinhours standard rate per hour Efficiencyvariancein$ 9,000 hrs 10,000hrs 1,000hrs (A) $5 $5,000 (A) $ 6,300 (F) 5,000 (A) 1,300(F) G Ratevariance Efficiencyvariance Totalvariance Task 2 Thedirectlabourrate varianceis the differencebetweenthe standard cost and the actual cost forthe actual numberof hours paid for. Task 3 Thecorrectansweris:$31 25.10 $ Actualmaterialcost 96,000 Variance (3,000)(A) Shouldhave cost 93,000 $93,000/ 3,000 units=$31per unit Task 1 Thecorrectansweris $7.45 12,600hrs shouldhave cost ($7.50)=$94,500 Butdid cost $93,825 ($94,500– $675) Cost per hr =$93,825/ 12,600=$7.446 ($7.45) $7.75and $7.60are incorrectbecause they are both abovethe standard rate per hour, and the rate variancewas favourable.Ifthe rate varianceis favourable,then the actual rate mustbe belowstandard. $7.44is incorrectbecause it resultsfromusing10,800hours inthe calculations,rather than the actual hours. Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 326 of 421 Answers 313 A N S W E R S H q Task 2 Thecorrectansweris:30,500 kg Quantityof Sparkleused =Y 6,000 unitsshouldhave used (5 kg) 30,000 kg but did use Ykg Usagevarianceinkg (Y– 30,000) kg standard priceper kg $20 Usagevariancein$ $10,000(A) 20(Y– 30,000)=10,000 Y– 30,000 =500 Y =30,500 kg Task 3 Thecorrectansweris:$139,500 Thecorrectansweris arrivedat by deductingappropriateadversevariancesand adding appropriatefavourablevariancesfromstandard profit.Aprofitadjustmentforthe differencebetweenbudgeted and actual volumesis not required,and so the sales volume varianceshouldbe ignored.Theanswercan thereforebe calculatedas: $135,000– $4,000 +$5,500 – $7,500+$10,500=$139,500. Task 4 Thecorrectanswersare: Thesales volumevariancewillbe valuedat standard contributionmargin. Therewillbe no fixedcost volumevariance. Thesales volumevariancewillbe valuedat standard contributionmargin(salespriceper unitminusvariablecosts of sale per unit),not standard profitmargin. Inmarginalcosting,fixedcosts are not absorbed intoproductcosts and so there are no fixedcost variancesto explainunder- or over-absorptionof overheads.Thereis therefore no fixedcost volumevariance(althoughthere willbe a fixedcost expenditurevariance). G 26 Performance 26.1 Task 1 measurement Returnon capital employed Operatingprofitmargin Assetturnover Percentageof sales attributableto newroutes Task 2 20.0%($22million/$110 million) 8.8%($22million/$250million) 2.3 times($250million/$110 million) 5.2%($13million/$250million) Percentageof customerwhomakea complaint 3%(37,500/1,250,000) Percentageof flightsdelayed 15%(375,000/2,500,000) Task 3 Abalanced scoredcard measuresperformancefromfourperspectives:financial,internal businessprocess,innovationand learningand customer. Flyrite’sperformancemeasureof percentage of sales attributable to new routes would be categorisedunderthe innovationand learningperspectiveof the balanced scorecard. 314 ManagementAccounting(FMA/MA) Page 327 of 421 H G q 26.2 Task 1 Returnon sales 5% ($5,000/$100,000) Assetturnover 5 times ($100,000/$20,000) Marketshare 10% ($100,000/$1,000,000) Returnon investment 25% ($5,000/$20,000) $3,000 $5,000 – (10%$20,000) Residualincome Task 2 Thecorrectanswersare: Itmakesdivisionmanagers aware of the cost of financingtheirdivisions– thisis correctas imputedinterestis deducted fromprofit Itgivesan absolutemeasureof performance– thisis correctas it providesa monetary measurein$’s Incorrectanswers: Itenablesthe performanceof divisionsof differentsizesto be compared– thisis and advantage of ROInot RI Itrelatesthe sizeof the division’sincometo the sizeof the investment– thisis an advantage of ROInot RI Task 3 26.3 Thecorrectanswersare: Numberof newproductslaunched– thisis a measureof growth Numberof customercomplaints– thisis a measureof customersatisfaction Incorrectanswers: Profitper productand Salesrevenueper productthese are measuresof financialsuccess. Task 1 Performance measure 20X1 Returnon capital employed(to twodecimalplaces) Operatingprofitmargin(to twodecimalplaces) 31.25% (3,500– 1,750-500)/(3,200+800) 35.71% (3,500– 1,750-500)/3,500 Assetturnover(to twodecimalplaces) 0.875times 3,500/(3,200+800) Interestcover(to twodecimalplaces) 15.63 (3,500– 1,750– 500)/80 Gearing(debt/debt +equity) (to twodecimalplaces) 20.00% 800/(3,200+800) Inventorydays (to the nearest wholeday) 52 days (250/1,750)365 Receivablesdays (to the nearest wholeday) 42 days (400/3,500)365 Payablesday (to the nearest wholeday) 38 days (180/1,750)365 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 328 of 421 Answers 315 A N S W E R S H q 26.4 Task 2 Thecorrectansweris:Non-financialsuccess. Thisis not a perspectiveof the balanced scorecard.Thefourperspectivesare: Financial Innovationand learning Internalbusinessprocess Customer Task 1 ROI=$10m/$40m=25% RI=$10m– (10%$40m)=$6m Task 2 Thecorrectanswersare: Proposal1willincreaseROI- false Proposal1willincreaseRI- true Proposal2 willdecreased ROI- false Proposal2 willdecrease RI- true Proposal 1 Newprofit=$10m+$1m=$11m Newcapital employed=$40m+$5m=$45m NewROI=11/45=24%thereforeROIwilldecrease NewRI=$11m– (10%$45m)=$6.5mthereforeRIwillincrease Proposal 2 Newprofit=$10m– $1.5m =$8.5m Newcapital employed=$40m– $10m=$30m NewROI=$8.5/$30 =28%– thereforeROIwillincrease NewRI=$8.5 – (10%$30m)=$5.5m– thereforeRIwilldecrease G 26.5 Task 3 Thecorrectanswersare: Itis moreeasilyunderstoodby divisionalmanagers.– Thisis true as it is quoted as a simple %returnas opposedto dealingwithan appliedfinancingcost inRI Ithelpsincomparingthe performanceof the managers of divisionsof differentsizes.– This is true due to the fact that ROIis a relativemeasureshowingprofitas a percentage of the investment. Incorrectanswers: Itgivesan absolutemeasureof performance.– Thisis not true as it givesa percentage return. RIgivesan absolutemeasureof performance Itmakesmanages aware of the cost of financingtheirdivision.– Thisis not true. Thisis an advantage of RI Task 1 Returnon investmentfordivisionJC Returnon investmentfordivisionGC ResidualincomefordivisionJC ResidualincomefordivisionGC Marketshare fordivisionJC AssetturnoverfordivisionGC 316 20% (700/3,500) 15% (675/4,500) $350 ($700– (10%$3,500)) $225 ($675– (10%$4,500)) 2% ($50,000/$2,500,000) 13times($60,000/$4,500) ManagementAccounting(FMA/MA) Page 329 of 421 H G q Task 2 Thecorrectanswersare: Comparisonsbetweendivisionsof differentsizesis difficult- Forexampleone divisionmay have a higherRI,but thiscouldbe because it’slargera largerdivision. Itdoes not relate the sizeof the centresincometo the sizeof the investment Incorrectanswers: Itdoes not makedivisionalmanagers aware of the cost of financingtheirdivisions– it does by applyingan imputedinterestcharge Itis not directlyrelated to net presentvalue(NPV)– it is by incorporatingthe cost of capital viathe imputedinterestcharge. Task 3 Thecorrectanswersare: Numberof newcustomers– thisis a measureof growth %increaseinmarketshare – thisis also a measureof growth Incorrectanswers 26.6 Returnon sales Salesto each newcustomer Theseare both examplesof financialperformancemeasures. Task 1 20X6 (i) Grossprofitmargin 43.90% (ii) Returnon capital employed 27.18% (iii) Assetturnover 1.34times (iv) Currentratio 1.77 (v) 1.20 Quickratio (vi) Inventoryholdingperiodindays 46.11days (vii) Payablespayment periodindays 81.45days (viii) Receivablesperiodindays 49.86days A N S W E R S Workings 20X6 (i) Grossprofitmargin (ii) Returnon capital employed (2,540– 1,425/2,540)100%=43.90 (2,540–1,425– 600)/(1,650+36 +347+180– 318)100%=27.18 (iii) Assetturnover (2,540/1,650+36 +347+180- 318)=1.34 (iv) Currentratio (347+180+36/318)=1.77 (v) Quickratio (347+36/318)=1.20 (vi) Inventoryholdingperiodindays (180/1,425)365 =46.11 (vii) Payablespayment periodindays (318/1,425)365 =81.45 (viii) Receivablesperiodindays (347/2,540)365 =49.86 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 330 of 421 Answers 317 H q Task 2 26.7 Thecorrectansweris: Internalbusinessprocess Thequalityof productsor servicesis an aspect of operationalperformance.Qualityaffects customerperceptions,but is underthe controlof management. Task 1 Thecorrectansweris:W Level Maintenancecost $ W 10,000 8,000 X Y 9,750 7,500 Z Salesvaluelost $ 15$1,000 21$1,000 19$1,000 27$1,000 Totalcost $ 25,000 29,000 28,750 34,500 LevelW shouldbe chosengiventhat it is the lowestcost option. Task 2 Measure CSF 95%customercomplaintresolution G 26.8 X Successfulrelationshipswithkeysuppliers X Negotiationof favourabletermsfornewprojectfinance X Gain inmarketshare by 2%each month X Lowerthe cost of capital by 1.5% X Task 3 Thecorrectansweris:Aperformancerequirementthat is fundamentalto competitive success– thisdescribesa CSF. Incorrectanswers: Astatement of what the organisationintendsto achieveovera periodof time- describes strategicobjectives. Ameasurableindicatorof organisationalperformance- describesa KPI. Abasic beliefof the peoplewhoworkinthe organisation- describesorganisationalvalues and culture. Task 1 Assetturnover Inventorydays Payablesdays Currentratio Quickratio Returnon capital employed 318 KPI 2.26times 6.96days 50.38 days 0.86 0.78 24.81% ManagementAccounting(FMA/MA) Page 331 of 421 H G q Task 2 X Aslowdownintrading Alengtheningof the timetaken by customersto pay fortheirgoods X Abuild-upininventorylevels Areductionininventorylevels Alengtheningof the average timetaken to pay suppliers 26.9 Alengtheninginventoryturnoverperiodfromone year to the nextindicateseithera slowdownintradingor a build-upininventorylevels,suggestingthat investmentin inventoriesis becomingexcessive.Paymentsfromcustomersand paymentsto suppliersare not relevantto inventoryratio calculations. Task 3 Thecorrectansweris: Theygiveearlywarningsignsof problems Animportantreason forthe use of non-financialperformancemeasuresis that they give earlywarningsignalsof problems.Forthisreason, they are oftenreferredto as 'leading indicators'. Incorrectanswers: Financialperformancemeasuresare oftendescribedas 'laggingindicators';that is,they tellthe firmthat somethinghas gone wrongafter it has gone wrong.Itis not necessarily true that non-financialindicatorsare moreimportantthan financialones,but the use of non-financialperformancemeasuresgivesa firma chance of correctingproblemsbefore they go too far. Theymay be moreunderstandablefornon-financialstaff, but that is not the reason whythey are termed'leadingindicators'. Task 1 Indicator Financial Numberof customercomplaints %increaseinmarketshare Earningsper share Machinedowntime Employeeattitudes Residualincome Non-financial S X X X X X X Task 2 Thecorrectansweris:25% ($150,000– $25,000)/ $500,000 =25% Task 3 Thecorrectansweris:$15,000 Residualincome(RI)= profit– imputedinterestcharge on investment We need to findthe levelof investment Ifthe returnon investment=20%,then $60,000 represents20%,so the investmentmust be $60,000/20%=$300,000. ThereforeRI=$60,000 – ($300,0000.15)=($60,000– $45,000)=$15,000 Task 4 Residualincomeis an absolutemeasure Returnon equityis a relativemeasure Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 332 of 421 A N S W E R Answers 319 H q 26.10 Task 1 Capacity ratio = Actualhours worked100%= 1,300 100%=130% hours 1,000Budgeted Activityratio = Standard hoursproduced 100%= 1,225 100%=123% Budgetedhours 1,000 Efficiencyratio= Standard hoursproduced 100%= 1,225 100%=94% hoursworked 1,300Actual Task 2 More labour hours were worked than budgeted Capacity ratio Labour hours produced fewer units per hour than budgeted Labour hours produced more units per hour than budgeted Fewer labour hours were worked than budgeted X Efficiencyratio X Acapacity ratio of over100%means that morelabourhourswereworkedthan budgeted. Anefficiencyratio of over100%means that efficiencywas greater than budgeted ie the labourforceproducedmoreunitsper hourthan budgeted. Task 3 Thecorrectanswersare: Theultimateaimof benchmarkingis to improveperformanceand Benchmarkingis suitablefornon-profitseekingentities. ‘Competitivebenchmarkingcan be used to compareinternaldepartments’is incorrect. Competitivebenchmarkingis used to comparemeasureswitha competitor’s(ieit is externalto the companyas opposedto beinginternal). ‘Benchmarkingis quickand straightforward’is incorrect.Thereare severallimitationsto benchmarkingincludingthe difficultyindecidingwhichactivitiesto benchmark.Itcan thereforebe timeconsuming. G 320 ManagementAccounting(FMA/MA) Page 333 of 421 H q Appendix sheet – and Formulae tables G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 334 of 421 q G H 322 ManagementAccounting(FMA/MA) Page 335 of 421 G q Formulae sheet given in the exam Regressionanalysis y=a +bx a= Y bx n n b= nxyxy nx(x) 2 2 r= nxyxy (nx(x))(ny(y)) 2 2 2 2 Economicorder quantity 2C D 0 C h Economicbatch quantity 2C D 0 1D h RC Arithmeticmean x fx X= X= (frequencydistribution) fn Standard deviation 2 (xx)2 fx2 fx = (frequencydistribution) f f n H Variance 2 Co-efficient of variation CV= x Expected value EVpx Formulasheet and tables Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 336 of 421 323 G q Present value table -n Presentvalueof £1ie (1+r) wherer =interestrate, n =numberof periodsuntilpayment Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Discountrates 1% 2% 0.990 0.980 0.980 0.961 0.971 0.942 0.961 0.924 0.951 0.906 0.942 0.888 0.933 0.871 0.923 0.853 0.914 0.837 0.905 0.820 0.896 0.804 0.887 0.788 0.879 0.773 0.870 0.758 0.861 0.743 (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 324 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 (r) 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 0.125 0.108 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.074 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 ManagementAccounting(FMA/MA) Page 337 of 421 H G q Annuity table Presentvalueof an annuityof 1ie 11 r n r wherer =interestrate, n =numberof periods Periods Discountrates (r) (n) 1% 2% 3% 1 0.990 0.980 0.971 2 1.970 1.942 1.913 3 2.941 2.884 2.829 4 3.902 3.808 3.717 5 4.853 4.713 4.580 6 5.795 5.601 5.417 7 6.728 6.472 6.230 8 7.652 7.325 7.020 9 8.566 8.162 7.786 10 9.471 8.983 8.530 11 10.368 9.787 9.253 12 11.255 10.575 9.954 13 12.134 11.34810.635 14 13.004 12.106 11.296 15 13.865 12.849 11.938 (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 11% 12% 0.901 0.893 1.713 1.690 2.444 2.402 3.102 3.037 3.696 3.605 4.231 4.111 4.712 4.564 5.146 4.968 5.537 5.328 5.889 5.650 6.207 5.938 6.492 6.194 6.750 6.424 6.982 6.628 7.191 6.811 13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 4% 5% 0.962 0.952 1.886 1.859 2.775 2.723 3.630 3.546 4.452 4.329 5.242 5.076 6.002 5.786 6.733 6.463 7.435 7.108 8.111 7.722 8.760 8.306 9.385 8.863 9.986 9.394 10.563 9.899 11.118 10.380 14% 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 9.712 7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9.108 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 4.988 5.118 5.229 5.324 18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 Formulasheet and tables Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 338 of 421 325 H G q Area under the normal curve Tofindthe area underthe normalcurvebetweenthe mean and a pointZstandard deviations abovethe mean, use the table below.Thecorrespondingarea fora pointZstandard deviations belowthe mean can be foundthroughusingsymmetry. x Z Standard normaldistributiontable 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359 0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753 0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141 0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517 0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879 0.5 0.6 0.7 0.8 0.9 0.1915 0.2257 0.2580 0.2881 0.3159 0.1950 0.2291 0.2611 0.2910 0.3186 0.1985 0.2324 0.2642 0.2939 0.3212 0.2019 0.2357 0.2673 0.2967 0.3238 0.2054 0.2389 0.2704 0.2995 0.3264 0.2088 0.2422 0.2734 0.3023 0.3289 0.2123 0.2454 0.2764 0.3051 0.3315 0.2157 0.2486 0.2794 0.3078 0.3340 0.2190 0.2517 0.2823 0.3106 0.3365 0.2224 0.2549 0.2852 0.3133 0.3389 1.0 1.1 1.2 1.3 1.4 0.3413 0.3643 0.3849 0.4032 0.4192 0.3438 0.3665 0.3869 0.4049 0.4207 0.3461 0.3686 0.3888 0.4066 0.4222 0.3485 0.3708 0.3907 0.4082 0.4236 0.3508 0.3729 0.3925 0.4099 0.4251 0.3531 0.3749 0.3944 0.4115 0.4265 0.3554 0.3770 0.3962 0.4131 0.4279 0.3577 0.3790 0.3980 0.4147 0.4292 0.3599 0.3810 0.3997 0.4162 0.4306 0.3621 0.3830 0.4015 0.4177 0.4319 1.5 1.6 1.7 1.8 1.9 0.4332 0.4452 0.4554 0.4641 0.4713 0.4345 0.4463 0.4564 0.4649 0.4719 0.4357 0.4474 0.4573 0.4656 0.4726 0.4370 0.4484 0.4582 0.4664 0.4732 0.4382 0.4495 0.4591 0.4671 0.4738 0.4394 0.4505 0.4599 0.4678 0.4744 0.4406 0.4515 0.4608 0.4686 0.4750 0.4418 0.4525 0.4616 0.4693 0.4756 0.4429 0.4535 0.4625 0.4699 0.4761 0.4441 0.4545 0.4633 0.4706 0.4767 2.0 2.1 2.2 2.3 2.4 0.4772 0.4821 0.4861 0.4893 0.4918 0.4778 0.4826 0.4864 0.4896 0.4920 0.4783 0.4830 0.4868 0.4898 0.4922 0.4788 0.4834 0.4871 0.4901 0.4925 0.4793 0.4838 0.4875 0.4904 0.4927 0.4798 0.4842 0.4878 0.4906 0.4929 0.4803 0.4846 0.4881 0.4909 0.4931 0.4808 0.4850 0.4884 0.4911 0.4932 0.4812 0.4854 0.4887 0.4913 0.4934 0.4817 0.4857 0.4890 0.4916 0.4936 2.5 2.6 2.7 2.8 2.9 0.4938 0.4953 0.4965 0.4974 0.4981 0.4940 0.4955 0.4966 0.4975 0.4982 0.4941 0.4956 0.4967 0.4976 0.4982 0.4943 0.4957 0.4968 0.4977 0.4983 0.4945 0.4959 0.4969 0.4977 0.4984 0.4946 0.4960 0.4970 0.4978 0.4984 0.4948 0.4961 0.4971 0.4979 0.4985 0.4949 0.4962 0.4972 0.4979 0.4985 0.4951 0.4963 0.4973 0.4980 0.4986 0.4952 0.4964 0.4974 0.4981 0.4986 3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990 326 ManagementAccounting(FMA/MA) Page 339 of 421 H q Mock Exam 1 (Specimen Exam) G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 340 of 421 q G H 328 ManagementAccounting(FMA/MA) Page 341 of 421 q Foundations in Accountancy /ACCA FMA/MA Management Mock Accounting Examination (Specimen 1 Exam) G H Questions Time allowed This examination 2 hours is divided into two sections: Section A – 35 questions, Section B – 3 questions, each worth 2 marks each worth 10 marks All questions within each section are compulsory DO NOT OPEN THIS EXAMINATION UNTIL YOU ARE READY TO START UNDER EXAMINATION CONDITIONS Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 342 of 421 329 q G H 330 Management Accounting (FMA/MA) Page 343 of 421 q Section A – ALL35 questions 1 are compulsory and MUST be attempted Amanufacturingcompanybenchmarksthe performanceof its accounts receivable departmentwiththat of a leadingcreditcard company. Q U E T IO N S S Whattype of benchmarkingis the companyusing? Internalbenchmarking 2 3 Competitivebenchmarking Functionalbenchmarking Strategicbenchmarking (2 marks) Whichof the followingBESTdescribestarget costing? Settinga cost by subtractinga desiredprofitmarginfroma competitivemarketprice Settinga priceby adding a desiredprofitmarginto a productioncost Settinga cost forthe use inthe calculationof variances Settinga sellingpriceforthe companyto aimforinthe longrun (2 marks) Informationrelatingto twoprocesses(Fand G) was as follows: Process Normallossas Input Output %of input (litres) (litres) F 8 65,000 58,900 G 5 37,500 35,700 Foreach process,was there an abnormallossor an abnormalgain? G ProcessF ProcessG H Abnormalloss Abnormalgain (2 marks) 4 Thefollowingbudgeted informationrelatesto a manufacturingcompanyfornextperiod: Units $ Production 14,000 Fixedproductioncosts 63,000 Sales 12,000 Fixedsellingcosts 12,000 Thenormallevelof activityis 14,000unitsper period. Usingabsorptioncostingthe profitfornextperiodhas been calculatedas $36,000 Whatwouldbe the profitfornextperiodusingmarginalcosting? $ (2 marks) Mockexam1(Specimenexam):Questions 331 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 344 of 421 q 5 TheEastlandPostalServiceis governmentowned.Thegovernmentrequiresit to providea parceldeliveryserviceto everyhomeand businessinEastlandat a lowpricewhichis set by the government.ExpressCouriersCo is a privatelyownedparceldeliverycompanythat also operates inEastland.Itis not subjectto governmentregulationand mostof its deliveriesare to large businesseslocatedinEastland'scapital city. Youhave been asked to assess the relativeefficiencyof the managementof the twoorganisations. Whichof the followingfactors shouldNOTbe allowedforwhencomparingthe ROCEof the twoorganisationsto assess the efficiencyof theirmanagement? Differencesinpricescharged Differencesinobjectivespursued Differencesinworkforcemotivation Differencesingeographicareas served (2 marks) 6 7 G Underwhichsamplingmethoddoes everymemberof the target populationhave an equal chance of beinginthe sample? Stratifiedsampling Randomsampling Systematicsampling Clustersampling (2 marks) ACompanymanufacturesand sellsone productwhichrequires8 kg of raw materialinits manufacture.Thebudgeted data relatingto the nextperiodare as follows: Units 19,000 4,000 3,000 Sales Openinginventoryof finishedgoods Closinginventoryof finishedgoods Kg Openinginventoryof raw materials 50,000 Closinginventoryof raw materials 53,000 Whatis the budgeted raw materialpurchasesfornextperiod? kg (2 marks) 332 ManagementAccounting(FMA/MA) Page 345 of 421 H q 8 Upto a givenlevelof activityineach periodthe purchase priceper unitof a raw materialis constant. Afterthat pointa lowerpriceper unitappliesboth to furtherunitspurchasedand also retrospectivelyto allunitsalready purchased. Whichof the followinggraphs depictsthe total cost of the raw materialsfora period? $ $ BA 0 0 $ G 9 10 $ C 0 Graph A Graph B Graph C Graph D D 0 H (2 marks) WhichTWOof the followingare benefitsof budgeting? Ithelpscoordinatethe activitiesof differentdepartments Itfulfilslegalreportingobligations Itestablishesa systemof control Itis a startingpointforstrategicplanning (2 marks) Thefollowingstatementsrelateto the participationofjuniormanagementinsettingbudgets: 1 2 3 Q U E T IO N S S Itspeeds up the settingof budgets Itincreasesthe motivationof juniormanagers Itreducesthe levelof budget padding Whichof the abovestatements are true? 1only 2 only 2 and 3 only 1,2 and 3 (2 marks) Mockexam1(Specimenexam):Questions 333 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 346 of 421 q 11 Acompanyhas a capital employedof $200,000. Ithas a cost of capital of 12%per year. Itsresidualincomeis $36,000. Whatis the company'sreturnon investment? % 12 (2 marks) Acompanyhas calculateda $10,000adversedirectmaterialvarianceby subtractingits flexedbudget directmaterialcost fromits actual directmaterialcost forthe period. WhichTWOof the followingcouldhave caused the variance? Anincreaseindirectmaterialprices Anincreaseinraw materialusage per unit Unitsproducedbeinggreater than budgeted Unitssoldbeinggreater than budgeted 13 (2 marks) Acompanyhas recordedthe followingvariancesfora period: Salesvolumevariance $10,000Adverse Salespricevariance $5,000 Favourable Totalcost variance $12,000Adverse Standard profiton actual sales forthe periodwas $120,000. Whatwas the fixedbudget profitforthe period? $137,000 $103,000 G 14 15 334 $110,000 $130,000 H (2 marks) Whichof the followingare suitablemeasuresof performanceat the strategiclevel? 1 2 3 Returnon investment Marketshare Numberof customercomplaints 1and 2 2 only 2 and 3 1and 3 (2 marks) WhichTWOof the followingare feasiblevaluesforthe correlationcoefficient? +1.40 +1.04 0 –0.94 (2 marks) ManagementAccounting(FMA/MA) Page 347 of 421 q 16 Acompany'soperatingcosts are 60%variableand 40%fixed. Whichof the followingvariances'valueswouldchange ifthe companyswitchedfrom standard marginalcostingto standard absorptioncosting? Directmaterialefficiencyvariance 17 Variableoverheadefficiencyvariance Salesvolumevariance Fixedoverheadexpenditurevariance (2 marks) Q U E T IO N S S ABCCo has a manufacturingcapacity of 10,000units.Theflexedproductioncost budget of the companyis as follows: Capacity 60% 100% Totalproductioncosts $11,280 $15,120 Whatis the budgeted total productioncost ifit operates at 85%capacity? $ 18 (2 marks) Usingan interestrate of 10%per year the net presentvalue(NPV)of a projecthas been correctlycalculatedas $50. Ifthe interestrate is increasedby 1%the NPVof the project fallsby $20. Whatis the internalrate of return(IRR)of the project? 7.5% G 19 11.7% 12.5% 20.0% H (2 marks) Afactory consistsof twoproductioncost centres(Pand Q)and twoservicecost centres (Xand Y).Thetotal allocatedand apportionedoverheadforeach is as follows: P $95,000 Q $82,000 X $46,000 Y $30,000 Ithas been estimatedthat each servicecost centre does workforothercost centresinthe followingproportions: P Q X Y Percentageof servicecost centre Xto 50 50 – – Percentageof servicecost centre Yto 30 60 10 – Thereapportionmentof servicecost centre costs to othercost centresfullyreflectsthe aboveproportions. Afterthe reapportionmentof servicecost centre costs has been carriedout, what is the total overheadforproductioncost centre P? $124,500 $126,100 $127,000 $128,500 (2 marks) Mockexam1(Specimenexam):Questions 335 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 348 of 421 q 20 Acompanyalwaysdeterminesits orderquantityfora raw materialby usingthe Economic OrderQuantity(EOQ)model. Whatwouldbe the effectson the EOQand the total annual holdingcost of a decrease in the cost of orderinga batch of raw material? Higher Lower EOQ Annualholdingcost (2 marks) 21 Acompanywhichoperates a processcostingsystemhad work-in-progressat the start of last monthof 300 units(valuedat $1,710)whichwere60%completeinrespect of allcosts. Lastmontha total of 2,000 unitswerecompletedand transferredto the finishedgoods warehouse.Thecost per equivalentunitforcosts arisinglast monthwas $10.Thecompany uses the FIFOmethodof cost allocation. Whatwas the total valueof the 2,000 unitstransferredto the finishedgoodswarehouse last month? $19,910 22 G $20,000 $20,510 $21,710 (2 marks) Identifywhethereach of the followingstatements about the uses of BigData analyticsin organisationsis true or false. Ithelpsto better understandcustomerbehaviourand preferences Ithelpsto analyse the efficiencyof businessprocessesin real time 23 True False (2 marks) Thenumberof dailycomplaintsto a localgovernmentofficehas a mean of 12and a standard deviationof 3 complaints. Whatis the coefficientof variationas a %? % 24 336 (2 marks) Underwhichof the followinglabourremunerationmethodswilldirectlabourcost alwaysbe a variablecost? Dayrate Piecerate Differentialpiecerate Groupbonusscheme (2 marks) ManagementAccounting(FMA/MA) Page 349 of 421 H q 25 Acompanymanufacturesand sellsa singleproduct.Intwoconsecutivemonthsthe followinglevelsof productionand sales (inunits)occurred: Month1 Month2 Sales 3,800 4,400 Production 3,900 4,200 TheopeninginventoryforMonth1was 400 units.Profitsor losseshave been calculatedfor each monthusingboth absorptionand marginalcostingprinciples. Whichof the followingcombinationsof profitsand lossesforthe twomonthsis consistent withthe abovedata? Absorptioncostingprofit/(loss) Marginalcostingprofit/(loss) Month1 Month2 Month1 Month2 $ $ $ $ 26 200 4,400 (400) 3,200 (400) 4,400 200 3,200 200 3,200 (400) 4,400 (400) 3,200 200 4,400 Q U E T IO N S S (2 marks) Thefollowingstatements relate to the advantages that linearregressionanalysishas over the highlowmethodinthe analysisof cost behaviour: 1 2 3 Thereliabilityof the analysiscan be statisticallytested Ittakes intoaccount allof the data Itassumeslinearcost behaviour Whichof the abovestatements are TRUE? G 27 H 1only 1and 2 only 2 and 3 only 1,2 and 3 (2 marks) Acompanyoperates a processinwhichno lossesare incurred.Theprocessaccount forlast month,whenthere was no openingwork-in-progress,was as follows: Processaccount Costs arising $ 624,000 Finishedoutput (10,000units) Closingwork-in-progress(4,000 units) ––––––––––– 624,000 ––––––––––– $ 480,000 144,000 ––––––––––– 624,000 ––––––––––– Theclosingworkinprogresswas completeto the same degree forallelementsof cost. Whatwas the percentage degree of completionof the closingwork-in-progress? 12% 30% 40% 75% (2 marks) Mockexam1(Specimenexam):Questions 337 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 350 of 421 q 28 Whichof the followingwouldNOTbe expectedto appear inan organisation'smission statement? Theorganisation'svaluesand beliefs Theproductsor servicesofferedby the organisation Quantifiedshorttermtargets the organisationseeksto achieve Theorganisation'smajorstakeholders (2 marks) 29 Anorganisationoperates a pieceworksystemof remuneration,but also guarantees its employees80%of a time-basedrate of pay whichis based on $20 per hourforan eight hourworkingday. Threeminutesis the standard timeallowedper unitof output. Piecework is paid at the rate of $18per standard hour. Ifan employeeproduces200 unitsineighthourson a particularday, what is the employee'sgrosspay forthat day? $ 30 G 31 Acompany uses an overheadabsorptionrate of $3.50 per machinehour, based on 32,000 budgeted machinehours for the period.Duringthe same periodthe actual total overheadexpenditureamounted to $108,875and 30,000 machinehours wererecorded on actual production. Byhowmuchwas the total overheadunderor overabsorbed forthe period? Underabsorbed by $3,875 Underabsorbed by $7,000 Overabsorbed by $3,875 Overabsorbed by $7,000 (2 marks) WhichTWOof the followingstatements relatingto managementinformationare true? 32 (2 marks) Itis producedforpartiesexternalto the organisation Thereis usuallya legalrequirementforthe informationto be produced Nostrictrulesgovernthe way inwhichthe informationis presented Itmay be presentedinmonetaryor non monetaryterms (2 marks) Acompany'ssales inthe last year inits three differentmarketswereas follows $ Market1 100,000 Market2 149,000 Market3 51,000 Total 300,000 Ina pie chart representingthe proportionof sales made by each regionwhat wouldbe the angle of the sectionrepresentingMarket3? 17degrees 50 degrees 61degrees 120degrees (2 marks) 338 ManagementAccounting(FMA/MA) Page 351 of 421 H G q 33 Theresultsof a chemistryexaminationare normallydistributedwitha mean scoreof 56 and a standard deviationof 12. Whatis the percentage probabilitythat a student willscoremorethan 80? % 34 (2 marks) Thepurchase priceof an itemof inventoryis $25 per unit.Ineach three monthperiodthe usage of the itemis 20,000 units.Theannual holdingcosts associated withone unitequate to 6%of its purchase price.Thecost of placingan orderforthe itemis $20. Q U E T IO N S S Whatisthe economicorderquantity forthe inventoryitem(to the nearest wholeunit)? (2 marks) % 35 Acompanyuses marginalcosting.Thefollowingvariancesoccurredinthe last periodwhen the actual net profitwas $40,000. Materials Labour Overheads Salesprice Salesvolumecontribution $900 adverse $1,000favourable $700 adverse $500 favourable $900 favourable Whatwas the budgeted net profitforthe last period? $41,500 $40,800 $38,500 $39,200 H (2 marks) Mockexam1(Specimenexam):Questions 339 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 352 of 421 q Section B – ALLTHREE questions attempted 36 are compulsory and MUST be Cab Co ownsand runs350 taxisand had sales of $10millioninthe last year. Cab Co is consideringintroducinga newcomputerisedtaxitrackingsystem. Theexpectedcosts and benefitsof the newcomputerisedtrackingsystemare as follows: (a) Thesystemwouldcost $2,100,000to implement. (b) Depreciationwouldbe providedat $420,000 per year. (c) $75,000has already been spent on staff traininginorderto evaluatethe potentialof the newsystem.Furthertrainingcosts of $425,000wouldbe requiredinthe first year ifthe newsystemis implemented. (d) (e) (f) (g) (h) Salesare expectedto riseto $11millioninYear1ifthe newsystemis implemented, thereafterincreasingby 5%per year. Ifthe newsystemis not implemented,sales wouldbe expectedto increaseby $200,000 per year. Despiteincreasedsales, savingsinvehiclerunningcosts are expectedas a resultof the newsystem.Theseare estimatedat 1%of total sales. Sixnewmembersof staff wouldbe recruitedto manage the newsystemat a total cost of $120,000per year. Cab Co wouldhave to take out a maintenancecontract forthe newsystemat a cost of $75,000per year forfiveyears. Intereston moneyborrowedto financethe projectwouldcost $150,000per year. (i) Cab Co's cost of capital is 10%per year. Task 1 Inorderto determinewhethera computerisedtrackingsystemshouldbe introduced, indicatewhethereach of the followingis a relevantor an irrelevantcost fora net present value(NPV)evaluation. G Computerisedtrackingsysteminvestmentof $2,100,000 Depreciationof $420,000 ineach of the fiveyears Staff trainingcosts of $425,000 Newstaff total salary of $120,000per annum Staff trainingcosts of $75,000 Interestcost of $150,000per annum Picklist Relevant Irrelevant (5 marks) Task 2 Calculatethe followingvaluesifthe computerisedtrackingsystemis implemented. Incrementalsales inYear1 $ Savingsinvehiclerunningcosts inYear1 $ Presentvalueof the maintenancecosts overthe lifeof the contract $ (3 marks) 340 ManagementAccounting(FMA/MA) Page 353 of 421 H G q Task 3 Cab Co wishesto maximisethe wealthof its shareholders.Ithas correctlycalculatedthe followingmeasuresforthe proposedcomputerisedtrackingsystemproject: – Theinternalrate of return(IRR)is 14% – Thereturnon average capital employed(ROCE)is 20% – Thepayback periodis fouryears Required Q U E T IO N S S Whichof the followingis TRUE? Theprojectis worthwhilebecause the IRRis a positivevalue 37 Theprojectis worthwhilebecause the IRRis greater than the cost of capital Theprojectis not worthwhilebecause the IRRis lessthan the ROCE Theprojectis not worthwhilebecause the payback is lessthan fiveyears (2 marks) CastildaCo manufacturestoy robots.Thecompanyoperates a standard marginalcosting systemand valuesinventoryat standard cost. Thefollowingis an extract of a partly completedspreadsheetforcalculatingvariances. A B C 1 Standard Cost Card – Toy Robot $ per robot 2 Sellingprice 3 Directmaterial 1materialper unit 20 4 Directlabour 6 hours@$8 per hour 48 5 Productionoverhead 24 6 Standard contribution 28 7 Actualand budgeted activity levelsin units 8 Sales 25,000 25,600 9 Production 25,000 26,000 120 10 Actualsales revenue and variable costs 11 Sales Budget Actual $ 3,066,880 12 Directmaterial(purchasedand used) 532,800 13 Directlabour(150,000hours) 1,221,000 14 Variableproductionoverhead 614,000 15 Variances $ 16 Totaldirectmaterialsvariances 12,800 Adverse 17 Directlabourrate variances 21,000 Adverse 18 Directlabourefficiencyvariances 48,000 Favourable 19 Totalvariableproductionoverheadvariances 10,000 Favourable Mockexam1(Specimenexam):Questions 341 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 354 of 421 H q Task 1 Whichformulawillcorrectlycalculatethe directlabourefficiencyvarianceincellB18? =(C9C4)– B13 =B13– (C9C4) =(C9C4)– (150,0008) =(150,000– (C96))8 (2 marks) Task 2 CastildaCo uses a standard cost operatingstatement to reconcilebudgeted contribution withactual contribution.Astandard cost operatingstatement forMonth1is givenbelow withsomeinformationmissing. Completethe reconciliationforthe standard cost operatingstatement forMonth1shown below. Standard cost operatingstatement Month1 $ $ Budgetedcontribution 700,000 Standard contributionon actual sales Salespricevariance 711,680 Cost variances Totaldirectmaterialsvariance Directlabourrate variance Directlabourefficiencyvariance Totalvariableproductionoverheadvariance G 12,800Adv 21,000Adv 48,000 Fav 10,000Fav 24,200 Fav Fav Actualcontribution 735,880 Picklist Fixedoverheadvolumevariance Totalsales variance Salesvolumevariance Adv (6 marks) Fav Task 3 Castilda'smanagementaccountant thinksthat the directlabourrate and efficiency variancesforMonth1couldbe interrelated. WhichTWOof the followingcouldexplaintheirinterrelationship? Lowergrade labourperformedtasks lessefficiently Aproductivitybonuswas paid to directlabour Highergrade labourperformedtasks moreefficiently (2 marks) Actualproductionwas lessthan budgeted 342 ManagementAccounting(FMA/MA) Page 355 of 421 H G q 38 NicholsonCo sellsmobiletelephones.Itsuppliesits customerswithtelephonesand wireless telephoneconnections.Customerspay an annual fee plusa monthlycharge based on calls made. Thecompanyhas recentlyemployeda consultantto installa balanced scorecardsystem of performancemeasurementand to benchmarkthe resultsagainst those of Nicholson Co's competitors.Unfortunatelythe consultantwas calledaway beforethe workwas finished.Youhave been asked to completethe work.Thefollowingdata is available. NicholsonCo Q U E T IO N S S Operating data for the year ended 30 November20X0 Salesrevenue $480 million Salesattributableto newproducts $8 million Averagecapital employed $192million Profitbeforeinterestand tax $48 million Averagenumberof customers ,960,000 Averagenumberof telephonesreturnedforrepaireach day 0,000 Numberof billqueries 2,000 Numberof customercomplaints 21,600 Numberof customerslost 17,600 Averagenumberof telephonesunrepairedat the end of each day 804 Task 1 Calculatethe followingratiosand otherstatisticsforNicholsonCo forthe year ended 30 November20X0. Returnon capital employed % Returnon sales (net profitpercentage) % Assetturnover times Averagewaitfortelephonerepair days 6 marks) Task 2 Calculatethe followingstatisticsforNicholsonCo. (Giveyouranswersto twodecimal places.) Percentageof customerslostper annum % Percentageof sales attributableto newproducts % (2 marks) Task 3 Completethe followingexplanationof a balanced scorecard. Abalanced scorecardmeasuresperformancefromfourperspectives:customer,innovation and learning,financialand Picklist processflexibility internalbusinessprocess non-financialsuccess Mockexam1(Specimenexam):Questions 343 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 356 of 421 H q Thescorecardis balanced inthat it requiresmanagers to: Picklist offsetbad performanceinone area withgood performanceinanother deliverperformanceinallfourareas achieveon an equal numberof KPIsineach perspective (2 marks) (Total = 100 marks) G H 344 ManagementAccounting(FMA/MA) Page 357 of 421 q Answers Mock to Exam 1 G H DO NOT TURN THIS PAGE UNTIL YOU HAVE COMPLETED THE MOCK EXAM Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 358 of 421 q G H 346 ManagementAccounting(FMA/MA) Page 359 of 421 q Section A 1 Thecorrectansweris:Functionalbenchmarking 2 Thecorrectansweris:Settinga cost by subtractinga desiredprofitmarginfroma competitivemarketprice 3 Thecorrectanswersare: ProcessF AbnormallossProcessG Abnormalgain F:normalloss=65,000 8%=5,200. Actualloss(65,000– 58900)=6,100 G: normalloss=37,5005%=1,875.Actualloss(37,500– 35,700)=1,800 Therefore,F showsan abnormallossand G showsan abnormalgain 4 Thecorrectansweris:$27,000 OAR=Budgetedoverhead/budgetedproduction=$63,000/14,000=$4.50 per unit Inventoryhas risenby 2,000 unitsso absorptioncostingwillreporta higherprofitthan marginalcosting.2,000 $4.50 =$9,000 Absorptioncostingprofit $36,000 $9,000 $27,000 Marginalcostingprofit 5 Thecorrectansweris:Differencesinworkforcemotivation 6 Thecorrectansweris:Randomsampling 7 Thecorrectansweris:147,000kg Production(units) =Closinginventory+sales – openinginventory =3,000 +19,000– 4,000 G =18,000 Rawmaterialpurchases =Closinginventory+production– openinginventory =53,000 kg +(18,0008 kg)– 50,000 kg 8 9 =147,000kg Thecorrectansweris:Graph D Thecorrectanswersare: Ithelpscoordinatethe activitiesof differentdepartmentsand It establishesa systemof control 10 Thecorrectansweris:2 only 11 Participativebudgetingincreasesthe motivationof juniormanagers Thecorrectansweris:30% Returnon investment =Profit/capitalemployed Profit =$36,000 +($200,00012%) =$60,000 ROI 12 =$60,000/$200,000 =30% Thecorrectanswersare: Anincreaseinmaterialpricesand Anincreaseinraw material usage per unit Mockexam1:Answers 347 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 360 of 421 A N S W E R S H q 13 Thecorrectansweris:$130,000 (Budgetedsales volume– actual sales volume)standard profitper unit=$10,000(A) 14 Standard profiton actual sales =(actual sales unitsstandard profitper unit)=$120,000 Fixedbudget profit=$120,000+$10,000=$130,000 Thecorrectanswersare: 1and 2 15 Returnon investmentand marketshare Thecorrectanswersare: 0 and -0.94 16 Thecorrelationcoefficientshouldbe between-1and 1 Thecorrectansweris:Salesvolumevariance 17 Thecorrectansweris:$13,680 Usethe high-lowmethodto determinethe fixedand variableelements 100 $15,120 60 $11,280 40 $3,840 $3,840/40 =$96per % Fixedelement:$15,120– (10096)=$5,520 For85%capacity, productioncost wouldbe 5,520 +(85$96)=$13,680 18 Thecorrectansweris:12.5% a (BA) IRR=A+ a b 50 =10+ 50 30 1 G 19 =12.5% Thecorrectansweris:$128,500 Totaloverhead ReallocateY ReallocateX 20 H P 95,000 9,000 Q 82,000 18,000 24,500 128,500 24,500 X 46,000 3,000 49,000 (49,000) Y 30,000 (30,000) Thecorrectansweris:EOQ:LowerAnnualholdingcost: Lower Adecrease inthe orderingcost wouldreducethe EOQ(as smallerquantitiescouldnowbe ordered)and also the holdingcost (as lowerinventorieswouldbe kept) 21 Thecorrectansweris:$19,910 22 OpeningWIP Completionof 300 units(300 40%10) 1,700units@$10 Totalvalue2,000 units Thecorrectanswersare: Trueand True. $ 1,710 1,200 7,000 19,910 One of the mainuses of BigData analyticsis to helpunderstandcustomers.Beingable to processBigData means that businessprocessescan be analysed inreal time. 348 ManagementAccounting(FMA/MA) Page 361 of 421 q 23 Thecorrectansweris:25% Coefficientof variation=(Standarddeviation/mean)100=(3/12)100=25% 24 Thecorrectansweris:Piecerate 25 Thecorrectanswersare: Absorptioncostingprofit/(loss) Marginalcostingprofit/(loss) Month1 Month2 Month1 Month2 $ $ $ $ 200 3,200 (400) 4,400 26 Closinginventoryat the end of Month1=openinginventory+production– sales Thecorrectansweris:1and 2 only 27 Thecorrectansweris:75% Cost per unitof finishedoutput (480,000/10,000) $48 28 Cost per unitof work-in-progress(144,000/4,000) $36 Thereforethe WIPis 75%completed Thecorrectansweris:Quantifiedshorttermtargets the organisationseeksto achieve 29 Thecorrectansweris:$180 Productioninone standard hour=20 units Pay for200 units=200/20 18=$180 30 G 31 32 Thisis abovethe guaranteed rate. Thecorrectansweris:Underabsorbed by $3,875 Overheadabsorbed (30,000 $3.5) 105,000 Actualoverhead 108,875 Under-absorbed 3,875 Thecorrectanswersare: Nostrictrulesgovernthe way inwhichthe informationis presented.Itmay be presentedinmonetaryor non-monetaryterms Thecorrectansweris:61degrees 51,000 360 =61 o o 300,000 33 Thecorrectansweris:2.28% 34 Z-score=(80 – 56)/12=2 Fromthe normaldistributiontable, 2 =0.4772 Tofindthe probabilityof scoringmorethan 80: 0.5 – 0.4772=0.0228 Thecorrectansweris:1,461 EOQ= 35 Ch 2 20 420,0002CoD 3,200,000 == =1,460.59 25 6% 1.5 Thecorrectansweris:$39,200 $40,000 +$900 – $1,000+$700 – $500 – $900 =$39,200 $38,500is arrivedat by not includingoverheads. $40,800 is arrivedat by deductingadversevariancesand adding favourablevariances. $41,500is arrivedat by deductingadversevariancesand adding favourablevariancesand not includingoverheads. Mockexam1:Answers 349 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 362 of 421 A N S W E R S H q Section B 36 Task 1 (i) Computerisedtrackingsysteminvestmentof $2,100,000 Relevant (ii) Depreciationof $420,000 ineach of the fiveyears rrelevant (iii) Staff trainingcosts of $425,000 Relevant (iv) Newstaff total salary of $120,000per year Relevant (v) rrelevant Staff trainingcosts of $75,000 (vi) Interestcost of $150,000per year rrelevant Relevantcosts are futureincrementalcash flows.Non-relevantcosts includesunkcosts, committedcosts and notional(imputed)costs. (i) Relevant.Thisisa futureincrementalcash outflow. (ii) Irrelevant.Thisisnot a cash flow. (iii) Relevant.Thisis a futureincrementalcash outflow. (iv) Relevant.Thisis a futureincrementalcash outflow. (v) Irrelevant.Thiscost has already been incurredand is thereforea sunkcost. (vi) Irrelevant.Theinterestis onlyrelevantifit representsan identifiedlostopportunityto use the financeforsomealternativepurpose. Task 2 Incrementalsales inYear1(W1) $800,000 Savingsinvehiclerunningcosts inYear1 (W2) $110,000 Presentvalueofthe maintenancecostsoverthe lifeofthe contract(W3) Answerrange: $284,000- $285,000 Workings 1 Ifthe trackingsystemdid not go ahead then the sales inYear1wouldbe $10million+ $200,000 =$10,200,000. Ifthe trackingsystemdid go ahead then the sales inYear1wouldbe $11,000,000. Theincrementalsales are the differencebetweenwhat the sales wouldhave been withoutthe trackingsystemand what they wouldbe withthe trackingsystem. $11,000,000– $10,200,000=$800,000. 2 Year1 $'000 Sales 11,000 Vehiclerunningsavings(1%) 110 3 Themaintenancecost is an annuity, ie,it is the same amounteveryyear forthe five years. We can thereforeuse the cumulativediscountfactor for5 years at 10%. G NPV=$75,0003.791=$284,325. Itis also possibleto calculatethe presentvalueof each year and add themup. There willbe a smallroundingdifference. Year1 Year2 Year3 Year4 Year5 $ $ $ $ $ Maintenancecost 75,000 75,000 75,000 75,000 75,000 Discountfactor 0.909 0.826 0.751 0.683 0.621 Presentvalue 68,175 61,950 56,325 51,225 46,575 NPV 284,250 350 ManagementAccounting(FMA/MA) Page 363 of 421 H G q Task 3 37 Thecorrectansweris:Theprojectis worthwhilebecause the IRRis greater than the cost of capital. 'Theprojectis worthwhilebecause the IRRis a positivevalue'is incorrectbecause the IRR needs to exceedthe cost of capital to makethe projectworthwhile. 'Theprojectis not worthwhilebecause the IRRis lessthan the ROCE'is incorrectbecause the IRRneeds to exceedthe cost of capital to makethe projectworthwhile. 'Theprojectis not worthwhilebecause the payback is lessthan fiveyears' is incorrect because the cut-offperiodfordecidingon the payback periodis arbitraryand wedon't knowwhat Cab Co considersto be acceptable. Task 1 =(C9C4)– (150,0008) Task 2 Standard cost operatingstatement Month1 Budgetedcontribution $ $ 700,000 16,800 Fav Sales volumevariance (W1) Standard contributionon actual sales Salespricevariance(W2) 716,800 5,120 Adv 711,680 Cost variances Totaldirectmaterialsvariance Directlabourrate variance Directlabourefficiencyvariance Totalvariableproductionoverheadvariance 12,800Adv 21,000Adv 48,000 Fav 10,000Fav Actualcontribution Workings 1 Budgetedsales volume Actualsales volume Salesvolumevarianceinunits standard contributionper unit Salesvolumevariance 24,200 Fav 735,880 25,000 units 25,600 units 600 units(F) $28 $16,800(F) 2 Salesrevenuefrom25,600 unitsshouldhave been ($120) but was ($15.30) Sellingpricevariance $ 3,072,000 3,066,880 5,120(A) Task 3 Thecorrectanswersare: Aproductivitybonuswas paid to directlabour Highergrade labourperformedtasks moreefficiently Whentwovariancesare interdependent(interrelated)one willusuallybe adverse and the other one favourable. Ifemployeesina workforceare paid higher rates forexperience and skill,usinga highly skilledteam shouldincuran adverse rate variance at the same timeas a favourable efficiencyvariance. Mockexam1:Answers 351 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 364 of 421 A N S W E R S H q 38 Task 1 Returnon capital employed(W1) Returnon sales (net profitpercentage)(W2) Assetturnover(W3) Averagewaitfortelephonerepair(W4) Task 2 Percentageof customerslostper year (W5) Percentageof sales attributableto newproducts(W6) 25% 10% 2.5 times Answerrange: 29-30 days 6.00% Answerrange: 1.66-1.67% Task 3 Completethe followingexplanationof a balanced scorecard. Abalanced scorecardmeasuresperformancefromfourperspectives:customer,innovation and learning,financialand internal business process Thescorecardis balanced inthat it requiresmanagers to: deliverperformance in all four areas Workings G $48 millionProfit 100%=25% = Capitalemployed $192million 1 Returnon capital employed = 2 Netprofitpercentage = 3 Assetturnover= 4 Averagewaitfortelephonerepair= Netprofit 100%= $48 million100%=10% Sales $480 million Sales 100%= $480 million=2.5 Capitalemployed $192million H Averagenumberof telephonesunrepairedat end of day 365 days Numberof telephonesreturnedforrepair = 5 Percentageof customerslostper year = = 6 804 365=29.3days 10,000 Numberof customerslost 100% Totalnumberof customers 117,600 100%=6% 1,960,000 Percentageof sales attributableto newproducts= Salesattributableto newproducts 100% Totalsales = 352 $8m 100%=1.67% $480m ManagementAccounting(FMA/MA) Page 365 of 421 q Mock Exam 2 G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 366 of 421 q G H 354 ManagementAccounting(FMA/MA) Page 367 of 421 q Foundations in Accountancy /ACCA FMA/MA Management Mock Accounting Examination 2 G H Questions Time allowed This examination 2 hours is divided into two sections: Section A – 35 questions, Section B – 3 questions, each worth 2 marks each worth 10 marks All questions within each section are compulsory DO NOT OPEN THIS EXAMINATION UNTIL YOU ARE READY TO START UNDER EXAMINATION CONDITIONS Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 368 of 421 355 q G H 356 Management Accounting (FMA/MA) Page 369 of 421 G q Section A – ALL35 questions 1 2 3 are compulsory and MUST be attempted Threeyears ago the priceindexappropriateto MaterialZhad a valueof 140.Itnowhas a valueof 180.Thematerialcosts $3,500 per kg today. Whatwas its cost per kg three years ago? $1,167 $2,722 $4,500 $6,222 Q U E T IO N S S (2 marks) Whichof the followingstatements is/are true? (i) (ii) Quota samplingis a non-probabilitysamplingmethod Stratifiedrandomsamplinginvolvesdividingthe populationintocategories Statement(i)is true and statement (ii)is false Statement(i)is falseand statement (ii)is true Bothstatements are true Bothstatements are false (2 marks) Amanufacturingcompanyhas fourtypes of cost (identifiedas T1,T2,T3and T4) Thetotal cost foreach type at twodifferentproductionlevelsis: Cost type Totalcost for125units Totalcost for180units $ $ T1 1,000 1,260 T2 1,750 2,520 T3 2,475 2,826 T4 3,225 4,644 WhichTWOcost types wouldbe classifiedas beingsemi-variable? T1 T2 T3 T4 H (2 marks) Mockexam2: Questions 357 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 370 of 421 q 4 DCo has presentedinformationon a particularcost inthe formof a linegraph. 500 450 400 350 Cost $ 300 250 200 10 20 30 40 Level ofactivity (units) Basedon the graph, whichTWOof the followingstatements are correct? Ata levelof activityof 30 unitsthe total cost is $350 Thefixedelementof the cost is $200 Thecost appears to be non-linear 5 G Thevariableelementof the cost is$10per unit (2 marks) Theperformanceof a publiclyfundedhospitalis monitoredusingmeasuresbased upon the 'three Es'.Themostimportantperformancemeasureis consideredto be the achievementof hospitaltargets forthe successfultreatment of patients. Whichof the three Esbest describesthisabovemeasure? Economy Externality 6 358 Effectiveness Efficiency (2 marks) Arethe followingstatements true or false? (i) (ii) Lifecyclecostingassesses a product'sprofitabilityoverits entirelife Theaimof lifecyclecostingis to understandproductprofitabilitymorefully Statement(i)is true and statement (ii)is false Statement(i)is falseand statement (ii)is true Bothstatements are true Bothstatements are false (2 marks) ManagementAccounting(FMA/MA) Page 371 of 421 H q 7 8 Whichof the followingtasks wouldusuallybe carriedout firstinthe budgetary planning process? Identifythe principalbudget factor Establishthe levelof sales demand Calculatethe predeterminedoverheadabsorptionrate Establishthe organisation'slongtermobjectives (2 marks) Q U E T IO N S S Whichof the followingstatements are correct? (i) Strategicinformationis mainlyused by seniormanagementinan organisation (ii) Productivitymeasurementsare examplesof tactical information (iii) Operationalinformationis requiredfrequentlyby its mainusers 9 (i)and (ii)only (i)and (iii)only (i)only (i),(ii)and (iii) (2 marks) AcompanymanufacturestwoproductsP1and P2 ina factory dividedintotwocost centres,Xand Y.Thefollowingbudgeted data are available: Cost centre X Y $88,000 $96,000 Allocatedand apportionedfixedoverheadcosts Directlabourhoursper unit: ProductP1 3.0 1.0 ProductP2 2.5 2.0 Budgetedoutput is 8,000 unitsof each product.Fixedoverheadcosts are absorbed on a directlabourhourbasis. Whatis the budgeted fixedoverheadcost per unitforProductP2? $10 G 10 $11 $12 $13 (2 marks) Amanufacturingcompanyuses a machinehourrate to absorb productionoverheads, whichwerebudgeted to be $130,500for9,000 machinehours.Actualoverheadincurred were$128,480and 8,800 machinehourswererecorded. Whatwas the total underabsorptionof productionoverheads(to the nearest whole number)? $ (2 marks) Mockexam2: Questions 359 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 372 of 421 H q 11 WhichTWOof the followingare disadvantagesof flexiblebudgets? Theyare not veryusefulfordecision-making Theyare moretimeconsumingto prepare than fixedbudgets Theyfailto providean appropriateyardstickforcost controlpurposes Theyare based on a set of assumptionswhichmay be oversimplistic (2 marks) 12 Acompanyoperatesa jobcostingsystem.Job number605 requires$300 ofdirectmaterials and $400 of directlabour.Directlabouris paid at the rate of $8 per hour. Production overheadsare absorbed at a rate of $26 per directlabourhourand non-production overheadsare absorbed at a rate of 120%of primecost. Whatis the total cost of jobnumber605? $2,000 $2,400 $2,840 $4,400 (2 marks) 13 WhichTWOof the followingare advantages of a participativeapproach to budgeting? Improvedacceptance of the budget Budgetaryslackis reduced Improvedmotivation Relativelyfast budget preparation (2 marks) G H 14 Whichof the followingvarianceswouldbe showninan operatingstatement prepared undera standard marginalcostingsystem? (i) Variableoverheadexpenditurevariance (ii) Variableoverheadefficiencyvariance (iii) Fixedoverheadexpenditurevariance (iv) Fixedoverheadvolumevariance (i),(ii)and (iv) (i),(iii)and (iv) (i),(ii)and (iii) (ii),(iii)and (iv) (2 marks) 15 Acompany'sbudgeted sales forlast monthwere10,000unitswitha standard selling priceof $20 per unitand a contributionto sales ratio of 40%.Lastmonthactual sales of 10,500unitswithtotal revenueof $204,750wereachieved. Whatwerethe sales priceand sales volumecontributionvariances? Salespricevariance($) Salesvolumecontributionvariance($) 5,250 Adverse 4,000 Favourable 5,250 Adverse 4,000 Adverse 5,000 Adverse 4,000 Favourable 5,000 Adverse 4,000 Adverse (2 marks) 360 ManagementAccounting(FMA/MA) Page 373 of 421 q 16 Acompany operates a standard absorption costing system. Thestandard fixedproduction overhead rateis$15perhour. Thefollowing datarelate tolastmonth: Actualhours worked Budgeted hours Standard hours foractualproduction 5,500 5,000 4,800 Q U E T IO N S S Whatwasthefixedproduction overhead capacityvariance? $7,500Adverse 17 18 G 19 20 $7,500Favourable $10,500Adverse $10,500Favourable (2 marks) Valueanalysis canachieve whichTWOofthefollowing? Eliminate costs Reduce costs Increase quantity sold Increase salesprice (2 marks) Howdoessetting objectives relate tothemission statement ofanorganisation? Themission givesmanagers a focusforsetting objectives Themission stateswhattheobjectives are Themission hasnothing todowithsetting objectives Themission andtheobjectives areidentical H (2 marks) Whichofthefollowing statements bestdescribe critical success factors? (i) (ii) (iii) (iv) Thefinancial ratiosusedbyanalysts toevaluate theorganisation Thepersonal objectives ofthestrategic management team Derived fromthemission statement andobjectives oftheorganisation Thekeyareasthata business needstosucceed in,toensure itachieves overall aims (i),(ii),(iii)and(iv) (ii)and(iv)only (i)and(iii)only (iii)and(iv)only (2 marks) Whichofthefollowing bestdescribes tacticalinformation? Mainly qualitative withsomenumerical analysis Sourced largelyfromexternal andinformal sources Mainly quantitative, internal andgenerated frequently Basedonoperational information withsomeinterpretation applied (2 marks) Mockexam2:Questions361 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 374 of 421 q 21 Acompanyhas twoproductiondepartmentsand twoservicedepartmentswiththe followingfixedoverheads: Production Service A B C D $'000 $'000 $'000 $'000 1,000 1,200 1,200 1,600 ServicedepartmentC dividesits timebetweenthe otherdepartmentsinthe ratio3:2:1 (forA,B,and Drespectively).DepartmentDspends 40%of its timeservicingDepartmentA and 60%servicingDepartmentB.Ifallservicedepartments'overheadsare allocatedto productiondepartments,the total fixedoverheadcost of DepartmentAis: $2,400,000 $2,200,000 22 23 (2 marks) WhichTWOof the followingwilllead to an abnormallossarising? G $1,320,000 $2,320,000 Totallossesare lessthan expected Totallossesare greater than expected Totaloutput is lessthan expected Totaloutput is greater than expected (2 marks) Aninvestmentwillproducean annual returnof $1,500inperpetuitywiththe firstreceipt startingin3 years' time. Whatis the presentvalueof thisperpetuitydiscountedat 6%? $21,000 $22,250 $25,000 $25,250 (2 marks) 24 Organisationsoftenhave to makea trade-offbetweenshort-termand long-term objectives.Whichof the followingstatements are correct? True False Makingshort-termtargets realisticcan encouragea long-termview Linkingmanagers' rewardsto share pricemay encouragea long-termview (2 marks) 25 Acompanyuses 9,000 unitsof a componentper year. Thecomponenthas a purchase priceof $40 per unitand the cost of placingan orderis $160.Theannual holdingcost of one componentis equal to 8%of its purchase price. Whatis the EconomicOrderQuantity(to the nearest unit)of the component? units 362 (2 marks) ManagementAccounting(FMA/MA) Page 375 of 421 H q 26 Considerthe followingstatements: (i) Job costingis onlyapplicableto serviceorganisations. (ii) Batchcostingcan be used whena numberof identicalproductsare manufactured togetherto go intofinishedinventory. Iseach statement TRUEor FALSE? Statement(i) Statement(ii) 27 False False False True True True True False Q U E T IO N S S (2 marks) Anorganisationabsorbs overheadson a machinehourbasis. Theplannedlevelof activity forlast monthwas 30,000 machinehourswitha total overheadcost of $247,500.Actual resultsshowedthat 28,000 machinehourswererecordedwitha total overheadcost of $238,000. Whatwas the total underabsorptionof overheadlast month? $ 28 (2 marks) Thefollowinginformationrelatesto a manufacturingcompanyfornextperiod: units $ Production 14,000 Fixedproductioncosts 63,000 Sales 12,000 Fixedsellingcosts 12,000 Usingabsorptioncostingforthe profitfornextperiodhas been calculatedas $36,000. Whatwouldthe profitfornextperiodbe usingmarginalcosting? G $ 29 (2 marks) Informationrelatingto twoprocesses(Fand G) was as follows: Process Normallossas %of input Inputlitres F 8 65,000 G 5 37,500 Foreach process,was there an abnormallossor an abnormalgain? ProcessF ProcessG Output litres 58,900 35,700 Abnormalgain Abnormalloss (2 marks) Mockexam2: Questions 363 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 376 of 421 H G q 30 Lastmonth27,000 directlabourhourswereworkedat an actual cost of $236,385and the standard directlabourhoursof productionwere29,880.Thestandard directlabourcost per hourwas $8.50. Whatwas the labourefficiencyvariance? $17,595Adverse 31 $17,595Favourable $24,480Adverse $24,480Favourable (2 marks) Thepharmacy ina busy hospitaluses pre-determinedrates forabsorbingtotal overheads, based on the budgeted numberof prescriptionsto be handled.Arate of $7per prescription has been calculated,and the followingoverheadexpenditureshave been estimatedat two activitylevels. Totaloverheads $ 97,000 109,000 Numberof prescriptions 13,000 16,000 Duringa particularperiodfixedoverheadswere$45,000. Basedon the data above,what was the budgeted levelof activityinprescriptionsto be handledduringthe periodinquestion? prescriptions 32 33 (2 marks) H Whichone of the followingwouldbe classifiedas indirectlabour? Assemblyworkerson a car productionline Bricklayersina housebuildingcompany Forklifttruckdriversinthe storesof an engineeringcompany Tutorsina privateeducationbusiness (2 marks) Thecorrelationcoefficient(r)formeasuringthe connectionbetweentwovariables(xand y) has been calculatedas 0.6. Howmuchof the variationinthe dependentvariable(y)is explainedby the variationinthe independentvariable(x)? % 364 (2 marks) ManagementAccounting(FMA/MA) Page 377 of 421 G q 34 Ina processwherethere are no work–in–progressinventories,twojointproducts(J and K) are created. Information(inunits)relatingto last monthis as follows: Product J K Openinginventoryof finishedgoods 100 400 Sales 6,000 4,000 Closinginventoryof finishedgoods 300 200 Joint productioncosts last monthwere$110,000and these wereapportionedto joint productsbased on the numberof unitsproduced. Whatwerethe jointproductioncosts apportionedto productJ forlast month? $63,800 35 $64,000 $66,000 $68,200 Q U E T IO N S S (2 marks) Budgetedresultsand actual resultsforSeptemberare shownbelow. Fixedbudget 12,000units $ Sales 600,000 Directcosts (144,000) Fixedcosts (70,000) Profit/(loss) 386,000 Whatis the profitforthe flexedbudget? $360,267 $355,600 $356,100 $425,600 Actual 11,200units $ 571,200 (145,600) (69,500) 356,100 H (2 marks) Mockexam2: Questions 365 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 378 of 421 q Section B – ALL THREE questions are compulsory and MUST be attempted 36 GraffsCohasproduced thegraphbelow showing thestandard fixedoverhead costper unit,thetotalbudgeted fixedoverhead costandtheactualfixedoverhead costforthe month ofJune.Theactualnumber ofunitsproduced inJunewas7,500units. 20000 17500 Actual fixed overhead cost 15000 Fixed 12500 overhead cost $ 10000 Budget fixed overhead cost 7500 5000 2500 G H 1000 2000 3000 4000 5000 6000 7000 8000 9000 x Number ofunits produced Task1 Calculatethefollowing figures. Theover-orunder-absorbed overhead forJune $ Over-/Under- Thefixedoverhead expenditure variance forJune $ Adverse/Favourable $ Adverse/Favourable Thefixedoverhead volume variance forJune (6 marks) Task2 WhichTWOofthefollowing factorsshouldbeconsidered beforeinvestigating an adverse material usagevariance? Worldwide increase incostofrawmaterial Tolerance limits Interrelationship withadverse labour ratevariance 366 Costinvolved intheinvestigation Management Accounting (FMA/MA) Page 379 of 421 (2 marks) G q Task 3 GraffsCo is consideringusingstandard marginalcostingas the basis forvariance reportinginthe future.Whichvariances for fixedproduction overhead wouldbe shown in a marginal costing operating statement? 37 Yes No Fixedproductionoverheadexpenditurevariance Fixedproductionoverheadcapacity variance Fixedproductionoverheadefficiencyvariance (2 marks) Q U E T IO N S S HFCo is consideringtwodifferent(mutuallyexclusive)investmentoptions,investmentA and investmentB. Task 1 Anet presentvalue(NPV)table has been partiallycompletedforinvestmentA.Complete the presentvaluesto twodecimalplaces foreach cash flow,usinga discountrate of 10%. Present Year Cash flow value $'000 $'000 0 (350) 1 50 2 110 3 130 4 150 5 100 (3 marks) What is the net present value of investmentAto the nearest wholethousand dollars? $ 2 marks) Task 2 InvestmentBrequiresan initialinvestmentof $250,000, and has a net presentvalueof $40,000 usinga cost of capital of 10%.Ata cost of capital of 15%,the net presentvalue is $(1,000). Calculate the InternalRate of Return(IRR)of investmentBto the nearest wholenumber. 3 marks) % Task 3 TheIRRsand NPVsforinvestmentsAand Bhave been compared. Arethe followingstatements true or false? True False Investmentswitha positiveNPVare worthwhile. On the basis of NPV,the investmentwiththe higherNPV shouldbe chosen. InvestmentswithIRRabovezeroare alwaysworthwhile. (2 marks) Mockexam2: Questions 367 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 380 of 421 H q 38 Themanagementaccountant of VinCo has collectedthe followinginformationforthe year ending31December20X8. VinCo operating data for the year ended 31December20X8 Capital employed $4,000,000 Operatingprofit $600,000 Salesrevenue $3,600,000 Numberof buses inoperation 40 buses Totalnumberof passenger seats available 1,920seats Totalnumberof passenger kilometrestravelled 39,000,000 passenger kilometres Totalbus kilometrestravelled 3,250,000 kilometres Totalfuelconsumed 764,705litres Required Task 1 Calculate the followingratios and other statistics for VinCo for the year ended 31December20X8. Returnon capitalemployed(tothe nearestwholenumber) % Returnon sales (to the nearest wholenumber) Averagemaximumcapacity per bus (to the nearest wholenumber) % Averagebus occupancyas a percentage of maximumcapacity (to the nearest wholenumber) Averagebus kmtravelledper litreof fuel (to twodecimalplaces) G seats per bus % km/litre (6 marks) Task 2 WhichTWOof the followingare reasons for using non-financial performance measures? Todiscourageshort-termism Topreventscrutinyof financialperformance Toprovideleadingindicatorsforfinancialperformance (2 marks) Toappear sociallyresponsible Task 3 Selectthe correcttype of benchmarkingforeach scenariofromthe drop downlist. Comparingthe fuelconsumptionof vehicleswiththose of a road haulage company. Select... Internal Functional Competitive Strategic 368 ManagementAccounting(FMA/MA) Page 381 of 421 H q Comparingbus kilometrestravelledwiththose of a rivalbus company. Select... Internal Functional Competitive Strategic (2 marks) Q U E T IO N S S (Total = 100 marks) G H Mockexam2: Questions 369 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 382 of 421 q G H 370 ManagementAccounting(FMA/MA) Page 383 of 421 q Answers Mock to Exam 2 G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 384 of 421 q G H 372 ManagementAccounting(FMA/MA) Page 385 of 421 q Section A 1 Thecorrectansweris:$2,722 2 $3,500 140 =$2,722 180 Thecorrectansweris:Bothstatements are true. 3 Thecorrectanswersare: T1and T3 Cost type T1 T2 T3 T4 Totalcost for 125units $ 1,000 1,750 2,475 3,225 Cost per unit @125units $ 8.00 14.00 19.80 25.80 Totalcost for 180units $ 1,260 2,520 2,826 4,644 Cost per unit @180units $ 7.00 4.00 13.75 25.80 Cost types T1and T3have differentcosts per unitat differentactivitylevelsand are thereforemostlikelyto be classifiedas semi-variablecosts. Cost types T2and T4have the same cost per unitat differentlevelsof activityand are thereforewhollyvariablecosts. 4 Thecorrectanswersare: Statements1and 2. Thevariableelementof the cost iscalculatedusingany numberof units. Using10units,total cost lessfixedelement=$250 – $200 =$50 $50 / 10=$5 per unit. Thereforestatement 4 is incorrect.Statement3 is incorrectbecause a straightlineon a graph showsthat the cost is linear. G 5 Thecorrectansweris:Effectiveness 6 Thecorrectansweris:Bothstatements are true. S Lifecyclecostingtracks and accumulatedcosts and revenuesattributableto each product overthe entireproductlifecycle.Thismeans that moreaccurate feedbackinformationis availableon the organisation'ssuccessor failureindevelopingnewproducts. 7 Thecorrectansweris:Establishthe organisation'slongtermobjectives 8 Theannual budget is set withinthe frameworkof the long-term plan. It acts as the firststep towards the achievement of the organisation's long-term objectives. Therefore,the longterm objectivesmust be establishedbefore any of the other budget tasks can be undertaken and the correct answeris 'Establishthe organisation'slongterm objectives'. Thecorrectanswersare: (i),(ii)and (iii) 9 Statements(i),(ii)and (iii)are allcorrect. Thecorrectansweris:$13 Cost centre x $ 88,000 Overheads Budgeteddirectlabourhours ProductP1 24,000 hours ProductP2 20,000 hours 44,000 hours y $ 96,000 8,000 hours 16,000hours 24,000 hours Mockexam2: Answers 373 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 386 of 421 A N S W E R H q Budgetedoverheadabsorptionrate Cost centre X= $88,000 =$2 per directlabourhour 44,000 hours Cost centre Y= $96,000 =$4 per directlabourhour 24,000 hours Budgetedfixedoverheadcost per unit– ProductP2 Cost centre x =2.5 hours$2 per directlabourhour =$5 Cost centre y =2 hours@$4 per directlabourhour =$8 10 fixedoverheadper unitof ProductP2 =$(5+8) =$13 Thecorrectansweris:$880 Overheadabsorbed (8,800machinehours$14.50*) Actualoverhead Under-absorbedoverhead *Budgetedoverheadabsorptionrate = 11 G 12 $ 127,600 128,480 880 $130,500 =$14.50per machinehour 9,000 machinehours Thecorrectanswersare: Theyare moretimeconsumingto prepare than fixedbudgets and Theyare based on a set of assumptionswhichmay be oversimplistic Managersmay not have timeavailableto prepare flexiblebudgets to coverallpossible scenarios.Therefore,they willoftenmakesimplifyingassumptions.Theyare usefulfor decisionmakingas they are flexedto the actual levelof activity,and thereforeallowactual costs to be comparedagainst the standard costs forthat actual activity. Thecorrectansweris:$2,840 Totalcost – jobnumber605 Directmaterials Directlabour Primecost Productionoverheads($26$400/$8) Non-productionoverheads(120%$700) Totalcost – jobnumber605 $ 300 400 700 1,300 2,000 840 2,840 13 Thecorrectanswersare: Improvedacceptance of the budget and Improvedmotivation. 14 Itusuallytakes longerto producea participativebudget than to producean imposed budget. Inthe processof participativebudgeting,managers may deliberatelyoverestimate costs, introducingbudgetary slack,so that they willnot be blamedforpossiblefuturepoor results. Thecorrectanswersare: (i),(ii)and (iii). Thefixedoverheadvolumevariancerepresentsthe over-or under-absorptionof overheads caused by a change inproductionvolume.Thismeans that the fixedoverheadvolume variancecannot ariseina standard marginalcostingsystem,onlyinan absorptioncosting system. 374 ManagementAccounting(FMA/MA) Page 387 of 421 H G q 15 Thecorrect answers are:Salespricevariance $5,250Adverse. Salesvolume contribution variance $4,000Favourable. $ 210,000 204,750 5,250(A) Salesrevenue from10,500unitsshould havebeen$20) butwas Salespricevariance contribution perunit =0.4 $20 contribution perunit=0.4$20 =$8 Budgeted sales Actualsales Salesvolume variance standard contribution perunit Salesvolume contribution variance 16 10,000units 10,500units 500units(F) $8 $4,000(F) Thecorrect answer is:$7,500Favourable Budgeted hours ofwork Actualhours ofwork Fixedproduction overhead capacityvariance standard fixedproduction overhead rate Fixedproduction overhead capacityvariance (in$) 5,000hours 5,500hours 500hours (F) $15 7,500(F) 17 Thecorrect answers are:Eliminate costsandReduce costs 18 Valueanalysis focuses oncosts,notsalesvolumes orprices. Thecorrect answer is:Themission givesmanagers a focusforsetting objectives 19 Themission statement givesthepurpose andstrategy oftheorganisation. Thebusiness willthenusethisasa focusforsetting appropriate objectives. Thecorrect answer is:(iii)and(iv)only 20 Bymonitoring thecritical success factors, management ensure thattheyareontrack tosucceed intheirmission andobjectives. Thepersonal objectives ofthestrategic management teamshould mirror thecritical success factors oftheorganisation, butare likelytocontain personal objectives suchasindividual development targets. TheCSFsmay contain someofthefinancial ratiosusedbyanalysts toevaluate theorganisation butthere willbeotherqualitative factors aswell.TheCSFsshould drivetheinformation requirements oftheorganisation – nottheotherwayround. Thecorrect answer is:Basedonoperational information withsomeinterpretation applied 21 Tactical information ismedium termanddrawn largelyfrominternal/operational sources. Itisthejobofmiddle management toanalyse itfurther inordertouseitfordecision making. Quantitative information thatisgenerated frequently isnormally foundatthe operational levelandqualitative information froma rangeofsources willbefoundmoreat thestrategic level. Thecorrect answer is:$2,320,000 Fixedoverheads C (3:2:1) D(40:60) A $'000 1,000 600 B $'000 1,200 400 720 2,320 1,080 C $'000 1,200 (1,200) D $'000 1,600 200 1,800 (1,800) Mockexam2:Answers375 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 388 of 421 A N S W E R S H G q 22 23 Thecorrectanswersare: Ifmorelosseshave been incurredthan expected,the lossis abnormallyhigh. Ifoutput islessthan expected,lossesmustbe higherthan expected. Thecorrectansweris:$22,250 Valueof incomeone year beforefirstreceiptis due: $1,500/0.06=$25,000 Discountingback to today usinga discountfactor of 6%over2 years: PV=$25,000 0.890 24 =$22,250 Thecorrectansweris:Bothare true. 25 Ifbudget targets are unrealisticallytough, a manager willbe forcedto maketrade-offs betweenthe shortand longterm.Linkingmanagers' rewardsto share pricemay encourage goal congruence. Thecorrectansweris:949units EOQ= 2 Co D/ Ch Co=$160 D=9,000 units Ch=8%$40 =$3.20 EOQ= 2 1609,000/3.2 26 =949units Thecorrectansweris:Statement(i)is falseand statement (ii)is true. 27 Job costingcan also be used inmanufacturingorganisations. Thecorrectansweris:$7,000 28 Overheadabsorptionrate =$247,500/30,000=$8.25 Absorbedoverheads=28,000 $8.25=$231,000 Actualcost =$238,000 Underabsorption=238,000 – 231,000=$7,000 Thecorrectansweris:$27,000 29 Thefixedoverheadabsorbed intothe inventoryvaluationis the differenceinthe marginal costingprofit. Inventory=14,000– 12,000=2,000 units Valueof fixedproductioncosts absorbed intoinventory =2,000 63,000/14,000 =$9,000 Marginalcostingprofit=36,000 – 9,000 =$27,000 Thecorrectansweris:ProcessF Abnormalloss.ProcessG Abnormalgain. ProcessF: ProcessG: Expectedoutput =92%65,000 =59,800 litres Actualoutput =58,900 litres Thereis an abnormalloss Expectedoutput =95%37,500=35,625litres Actualoutput =35,700litres Thereis an abnormalgain 376 ManagementAccounting(FMA/MA) Page 389 of 421 H q 30 Thecorrectansweris:$24,480Favourable Labour efficiencyvariance 5,500 unitsshouldhave taken (3 hoursper unit) but did take Labourefficiencyvariance(inhours) standard rate per unit 31 $ 29,880 27,000 2,880 $8.50 $24,480 hrs hrs hrs (F) (F) Thecorrectansweris:15,000 Variableoverhead+fixedoverhead=total overhead Fixedoverheadper prescription=$7– $4 =$3 Totalfixedoverheads =$45,000 Budgetedactivitylevel= $45,000 =15,000prescriptions $3 32 Thecorrectansweris:Forklifttruckdriversinthe storesof an engineeringcompany Thedriversare not workingdirectlyon engineeringprojects 33 Thecorrectansweris:36% Thevariationis givenby the coefficentof determination,r2 r2=0.6 0.6 =0.36 =36% 34 Thecorrectansweris:$68,200 A N S W E R Productioninunits: J: 6,000 – 100+300 = K:4,000 – 400 +200 = G 6,200 3,800 10,000 S Joint costs apportionedto J: 6,200/10,000$110,000=$68,200 35 Thecorrectansweris:$355,600 Budgetedsales per unit=$600,000/12,000=$50 per unit Budgeteddirectcosts per unit=$144,000/12,000=$12per unit Budgetedfixedcosts are $70,000 Flexedbudget for11,200units $ Sales(11,200$50) 560,000 Directcosts (11,200$12) (134,400) Fixedcosts (70,000) Profit 355,600 Mockexam2: Answers 377 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 390 of 421 H q Section B 36 Fixed overhead cost $ G H Task1 Theover-orunder-absorbed overhead forJune(W1) $2,500 UnderThefixedoverhead expenditure variance forJune(W2) $5,000 Adverse Thefixedoverhead volume variance forJune(W3) $2,500 Favourable Workings 1 Actualfixedoverhead cost– fixedoverhead absorbed =$17,500 – $15,000= $2,500 Under absorbed 2 Fixedoverhead expenditure variance =$12,500 – $17,500 = $5,000Adverse 3 Fixedoverhead volume variance =$15,000– $12,500 = $2,500Favourable Task2 Thecorrect answers are:Tolerance limits andCostinvolved intheinvestigation. Tolerance limits relate tomateriality. Variances should onlybeinvestigated iftheyare significant andworthy ofinvestigation. Similarly, a variance should onlybeinvestigated ifthebenefits outweigh thecostsand therefore thecostsinvolved intheinvestigation needtobeconsidered. Aworldwide increase inthecostofrawmaterial should notaffectthematerial usageand therefore doesnotneedtobeconsidered. Anadverse labour ratevariance willnotbe related toanadverse material usagevariance andtherefore doesnotneedtobe considered. 378 Management Accounting (FMA/MA) Page 391 of 421 q Task 3 Thecorrectanswersare: Fixedproductionoverheadexpenditurevariance Fixedproductionoverheadcapacity variance 37 Yes No Fixedproductionoverheadefficiencyvariance No Ina marginalcostingsystemthe onlyfixedoverheadvarianceis an expenditurevariance Task 1 Calculationof net presentvalueat a discountrate of 10%. Discount Year Cash flow factor $'000 10% 0 (350) 1.000 1 50 0.909 2 110 0.826 3 130 0.751 4 150 0.683 5 100 0.621 Present value $'000 (350.00) 45.45 90.86 97.63 102.45 62.10 48.49 TheNPVis $49,000 (to the nearest $'000) Task 2 Thecorrectansweris:15% =10+ 40 15 10IRR 401 % =14.9%(15%to the nearest wholenumber) A N S W E R G Task 3 Investmentswitha positiveNPVare worthwhile. On the basis of NPV,the investmentwiththe higherNPVshouldbe chosen. TRUE TRUE InvestmentswithIRRabovezeroare worthwhile. FALSE Statement1istrue. ApositiveNPVmeans that the present value of the cash inflowsfroma projectis greater than the present value of the cash outflows. Statement2 istrue. On the basis of NPValone,the projectwiththe higher NPVshould be chosen. 38 Statement3 is false.Ifa projectearns a higherrate of returnthan the cost of capital, it will be worthwhileundertaking. Task 1 Returnon capital employed(W1) Returnon sales (W2) Averagemaximumcapacity per bus (W3) Averagebus occupancyas a percentage of maximumcapacity (W4) Averagebus kmtravelledper litreof fuel(W5) 5% 7% 48 seats per bus 25% 4.25 km/litre Mockexam2: Answers 379 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 392 of 421 S H q Workings 1 Returnon capital employed (Operatingprofit÷Capital employed100) $600,000 ÷$4,000,000 100= 2 3 4 5 15% Returnon sales (net profitpercentage) Operatingprofit÷Salesrevenue100 $600,000 ÷$3,600,000 100 Averagemaximumbus capacity Totalnumberof passenger seats available÷numberof buses 1,920seats ÷40 buses Averagebus occupancy Totalnumberof passenger kmtravelled÷ (TotalkmtravelledAveragemaximumbus capacity) 39,000,000 km÷(3,250,00048 seats) 100% Averagekmtravelledper litreof fuel Totalkmtravelled÷Totalfuelconsumed 3,250,000 kilometres÷764,705litres 17% 48 seats per bus 25%of maximum capacity 4.25 km/litre Task 2 Thecorrectanswersare: Todiscourageshort-termismand Toprovideleadingindicatorsfor financialperformance. Akeyreason whynon-financialperformancemeasuresare used is that they are consideredto be a leadingindicatorof financialperformance.Forexample,ifcustomer satisfactionis low,thiscouldimplya futurefallinprofitsdue to decreased sales demand. Thenon-financialmeasureof poorcustomersatisfactionhas givenan indicationthat the financialmeasureof futuresales (and thereforeprofit)may change. Task 3 Comparingthe fuelconsumptionof vehicleswiththose of a road haulage company= Functionalbenchmarking. G Comparingbus kilometrestravelledwiththose of a rivalbus company=Competitive benchmarking 380 ManagementAccounting(FMA/MA) Page 393 of 421 H q Mock Exam 3 G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 394 of 421 q G H 382 ManagementAccounting(FMA/MA) Page 395 of 421 q Foundations in Accountancy /ACCA FMA/MA Management Mock Accounting Examination 3 G H Questions Time allowed This examination 2 hours is divided into two sections: Section A – 35 questions, Section B – 3 questions, each worth 2 marks each worth 10 marks All questions within each section are compulsory DO NOT OPEN THIS EXAMINATION UNTIL YOU ARE READY TO START UNDER EXAMINATION CONDITIONS Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 396 of 421 383 q G H 384 ManagementAccounting(FMA/MA) Page 397 of 421 q Section A – ALL35 questions 1 Q U E T IO N S S Tohelpconsumersunderstandthe purposeof an organisation Tocomplywithgovernmentregulations Toguidethe actionsof an organisation 3 only 1and 3 only 1and 2 only 1,2 and 3 (2 marks) WhichTWOof the followingstatements about top-downbudgets are true? G Spreadsheetscan be used to depictdata graphically Spreadsheetscannot be used forsensitivityanalysis Theformula=B5+B6+B7can also be representedby the formulaSUM(B5:B7) The formula=9^2 wouldgivethe answer3 (2 marks) Whichof the followingdescribethe purposesof missionstatements? (1) (2) (3) 3 and MUST be attempted Whichof the followingstatements about spreadsheetsis true? 2 are compulsory Thereis littleor no inputfromoperatingstaff Theyare effectiveinlarge organisations Theyimproveteam morale Theyare relativelyquickto produce (2 marks) 4 WhichTWOof the followingwouldbe showninan operatingstatement prepared undera standard marginalcostingsystem? Fixedproductionoverheadefficiencyvariance Fixedproductionoverheadcapacity variance Fixedproductionoverheadexpenditurevariance (2 marks) Salesvolumevariance 5 Budgetedresultsand actual resultsforSeptemberare shownbelow: Flexedbudget 2,000 units $ Sales 60,000 Directcosts (24,000) Fixedcosts (10,000) Profit/(loss) 26,000 Whatis the profitforthe flexedbudget? $19,400 $20,600 $21,100 $22,100 Actual 1,700units $ 52,700 (23,800) (9,500) 19,400 (2 marks) Mockexam3: Questions 385 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 398 of 421 H q 6 Whichof the followingcontrolactionscouldbe used to eliminatean adversedirectlabour efficiencyvariance? (1) (2) (3) 7 Recruitmorehighlyskilledlabour Purchasecheaper materials Checkthat the standard is accurate 1and 2 only 1and 3 only 2 only 3 only Ina period,openinginventorieswere12,600unitsand closinginventorieswere14,100units. Theprofitbased on marginalcostingwas $50,400 and profitbased on absorptioncosting was $60,150. Whatis the fixedoverheadabsorptionrate per unit(to the nearest cent)? $4.00 $4.27 $4.77 $6.50 8 G (2 marks) LGis inthe processof settingstandard costs fornextperiod.ProductF uses twotypes of material,Mand N.6 kg of materialMand 5 kg of materialNare to be used, at a standard priceof $2 per kg and $3 per kg respectively. Threehoursof skilledlabourand one hourof semi-skilledlabourwillbe requiredforeach unitof F. Wage rates willbe $8 per hourand $6 per hourrespectively. Productionoverheadis to be absorbed at a rate of $4 per labourhour. 10%is to be added to total productioncost to absorb administration,sellingand distributioncosts. Whatis the standard cost of productionforone unitof F? $57.00 $69.00 $73.00 9 (2 marks) $80.30 (2 marks) Amanufacturingcompanyproducesa productthat has to pass throughtwoprocesses, ProcessIand ProcessII,beforecompletion. InProcessI10%of unitsinputare lostviaevaporation,and allgood output is transferredto ProcessII. InJune, 2,000 unitswereinputto ProcessIat a cost of $6.50 per unitand conversioncosts were$5,000. Output transferredto ProcessIIwas 1,500units. Whatwas the valueof the abnormallossinJune? $2,000 $3,000 $4,000 $5,000 (2 marks) 386 ManagementAccounting(FMA/MA) Page 399 of 421 H q 10 Thefollowinginformationrelatesto the machiningdepartmentof a manufacturing organisation: Period1 Machinehours Budget Actual 20,000 19,000 Overheads $ 400,000 350,000 Overheadsare absorbed on the basis of machinehours. Whatwas the total overabsorptionof productionoverheadsforPeriod1(to the nearest wholenumber)? $ 11 12 G (2 marks) WhichTWOof the followingsituationswouldhelpto explaina favourablesales volume variance? Increasedcompetitoractivityledto a reductioninthe numberof unitssold Customersweregivendiscountsat a higherlevelthan standard inorderto encourageincreasedsales volume Theunitcost of productionwas lowerthan standard and sellingpriceswere maintainedat the standard level,so that a higherprofitwas achievedper unitsold Higherqualitymaterialsuppliesledto improvementsinthe qualityof the final (2 marks) output, whichcustomersfoundattractive Acompanyhas identifiedtwomutuallyexclusiveprojectswhichhave an equivalenteffect on the riskprofileof the company. Project1 2.8 years $17,200 23% 19% Discountedpayback period Netpresentvalue Internalrate of return Returnon investment Project2 3.2 years $18,700 22% 21% Thecost of capital is 15%. Assumingthat the directorswishto maximiseshareholderwealthand no shortage of capital is expected,whichprojectshouldthe companychoose? 1because it has the shorterpayback period 13 Q U E T IO N S S 2 because it has the highernet presentvalue 1because it has the higherinternalrate of return Bothprojectsbecause they both have a positivenet presentvalue (2 marks) WhichTWOof the followingwouldbe part of the capital expenditurebudget? Purchasesof raw materials Refurbishmentof existingfactory premises Annualmaintenancecosts of an existingasset Replacementof existingmachinery (2 marks) Mockexam3: Questions 387 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 400 of 421 H G q 14 15 Whatare the five'V'sassociated withbig data? Volume,velocity,visibility,veracity,value Variability,volume,verification,veracity,value Value,volume,velocity,variety,veracity Velocity,visibility,variety,volume,verification (2 marks) Asales analyst has establishedthe followingtrend figuresand seasonalvariationsfora company'ssales: Year7 Year8 Averageseasonalvariation 1 $'000 1,500 1,557 –18 2 $'000 1,528 1,580 +3 3 $'000 1,552 1,608 +29 4 $'000 1,530 1,632 –14 Theanalyst forecaststhat the trend willincreaseby $25,000 per quarter inyears 9 and 10. Whatis the forecastsales valueforthe firstquarter of year 10($'000)? $1,714 $1,739 16 $1,757 $1,775 (2 marks) ExtractsfromD'srecordsfromlast periodare as follows: Budget 1,925units $11,550 5,775 Production Variableproductionoverheadcosts Labourhoursworked H Actual 2,070units $14,904 8,280 Whatis the variableproductionoverheadefficiencyvariance? $1,656Adverse 17 (2 marks) WhichTWOof the followingcharacteristicsrelate to managementaccounts as opposedto financialaccounts? 388 $4,140Favourable $3,726Adverse $4,140Adverse Theyare used forexternalreporting Thereis no legalrequirementto prepare them Theyare concernedonlywithpast, historicdata Theyincludeboth financialand non-financialdata ManagementAccounting(FMA/MA) Page 401 of 421 (2 marks) q 18 Thefollowingtimestaken to producea batch of 100unitsof ProductXhave been recorded: 12,34, 14,15,21,24, 9, 17,11,8 Whatis the mediantime? 14.00 19 14.10 14.50 14.60 Q U E T IO N S S (2 marks) MistletoeCo has long-termloanliabilitiesof $253,400and shareholders'fundsof $511,000. Whatis MistletoeCo's capital gearingratio? 49.6% 20 33.2% 201.7% 98.4% Whichof the followingis NOTa feature of activitybased costing? Itrecognisesthat a singlefactor such as machinehourscannot be the driverof all overheadcosts Itseeksto recognisethe causes of the costs of activitiesthroughthe use of cost drivers G 21 (2 marks) Itallocatesthe costs associated withcost driversintocost pools Ituses a basis such as labourhoursto incorporateoverheadsintoproductcosts (2 marks) Thefollowinginformationrelatesto water consumptionduringApril,May,June and July: Month Litres consumed April 2,750 37,500 May 3,100 39,600 June 2,900 38,750 July 3,035 43,200 Usingthe high-lowmethod,what is the cost of water consumedinAugustif45,800 litres are used? $4,133 $3,385 $3,517 $3,165 Cost ($) (2 marks) Mockexam3: Questions 389 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 402 of 421 H q 22 23 WhichTWOof the followingare examplesof unstructureddata? Telephonebills Images Transactionhistory Videos (2 marks) Afoodcompanyincurredthe followingcosts last year foreach of its three different markets: Confectionery $3,750,000 Beverages $5,300,000 Nutrition $1,470,000 Ifa piechart wereused to representthe proportionof costs incurredby each area, what wouldbe the angle of the sectionrepresentingconfectionery? 50 degrees 24 128degrees 181degrees 270degrees (2 marks) Whichof the followingstatements are correct? True False Functionalbenchmarkingis a methodof comparingone operatingunit or functionwithanother withinthe same industry Competitivebenchmarkingis a type of benchmarkingaimedat strategic actionand organisationalchange G 25 (2 marks) Anextract fromTCo's sales budget showsthe followingsales values: June $80,000 July $70,000 August $90,000 50%of T'ssales are forcash. Of the creditsales, 60%are expectedto pay inthe month after sale and take a 2%discount;39%are expectedto pay inthe secondmonthafter sale, and the remaining1%are expectedto be bad debts. Whatis the valueof sales receiptsfromcreditcustomersto be showninthe cash budget forAugust(to the nearest $)? $ 390 (2 marks) ManagementAccounting(FMA/MA) Page 403 of 421 H q 26 Economy,efficiencyand effectivenesscan be studiedand measuredintermsof inputs, outputsand impacts. Arethe followingstatements true or false? (1) Aschoolmay measureinputsintermsof pupil/teacherratio. 27 (2) Aschoolmay measureoutputs by monitoringwhethertrainedteachers are being fullyused to teach the subjectsthey have been trainedfor. Bothstatements are true Bothstatements are false Statement1is true and statement 2 is false Statement2 is true and statement 1is false (2 marks) WhichTWOof the followingare propertiesof the normaldistributioncurve? 28 Thearea underthe curvetotals 100%of the probabilities Themean is denoted by sigma Thearea to the leftof the mean is 1 Itis symmetrical (2 marks) Thefollowingdata relatesto inventoryitemSK024: Usage 600 - 1,400unitsper day Leadtime 5 - 10days EOQ 40,000 units Whatis the re-orderlevel? G H units 29 (2 marks) Arethe followingstatements true or false? Theobjectiveof a budgetary planningand control systemis to maximiseprofit Identifyingobjectivesis the firststage inthe planning and controlcycle 30 Q U E T IO N S S True False (2 marks) Anaccountant is selectinga sampleof invoicesforchecking.Theinvoicesare numbered sequentially.Thefirstinvoiceis selectedrandomlyand is invoicenumber3. Theythen selecteveryfourthinvoiceto completethe sample. Whatis thistype of samplecalled? Multi-stage Simplerandom Stratified Systematic (2 marks) Mockexam3: Questions 391 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 404 of 421 q 31 Ina period,there was a favourablelabourefficiencyvarianceof $27,000.Thestandard wagesrate per hourwas $6 and 30 hourswereallowedforeach unitas standard. Giventhat the actual labourhoursworkedwere43,500, howmany unitswereactually produced? units 32 Whichof the followingdata sourceswouldsocialmediabe classedas? 33 (2 marks) Sensor Machine Transactional Human (2 marks) Thefollowinginformationrelatesto Job 3579,whichis beingcarriedout by MHCo to meet a customer'sorder. Materialsissuedto job3579 Materialstransferredto job3579 Overtimepremium Productionoverhead $5,000 $400 $1per hour $5 per directlabourhour Grade Xlabour(directlabour):200 hoursat $3 per hourbasic rate. 100of these hours wereworkedinovertime,at the requestof the customer,inorderto completethe jobas earlyas possible. Asupervisorrecordedon theirjobsheet that 20 hoursof theirtimewas spent on thisjob. Theyare paid $5 per hour, and the cost of theirtimeis treated as a directlabourcost inthe company'scost accounts. Whatis the fullproductioncost of Job 3579? $6,200 G 34 $6,400 $7,100 $7,300 Whichof the followingis consideredto be an inventoryholdingcost? 392 (2 marks) Disruptionto productionschedules Lossof customergoodwill Shippingand handlingcosts Inventoryobsolescence ManagementAccounting(FMA/MA) Page 405 of 421 (2 marks) H q 35 ThewholesalepriceindexinEastlandis made up fromthe pricesof thirtyfiveitems.The quantitiesand pricesfor20X1and 20X3wererecordedand the followingis informationis available: P0Q0 PnQ0 P0Qn PnQn 450 555 475 540 Q U E T IO N S S Whatis the priceindexin20X3usinga Laspeyres'index? 97.3 105.6 113.7 123.3 (2 marks) G H Mockexam3: Questions 393 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 406 of 421 q Section B – ALLTHREE questions 36 are compulsory and MUST be attempted WeasleyCo makescomputersand suppliesa helpdeskserviceto its customers.Customers pay an initialfee forthe computerand a monthlyfee forthe supporthelpdesk. Operatingdata forthe year ended 31December20X2 Salesrevenue $375million Salesattributableto newproducts $7.5million Averagecapital employed $225million Profitbeforeinterestand tax $45 million Averagenumberof customers 1,900,000 Averagenumberof computersreturnedforrepaireach day 9,000 Numberof customerslost 95,000 Averagenumberof computersunrepairedat the end of the day 300 Task 1 Calculate the followingratios and other statistics for Weasley Co for the year ended 31December20X2. Returnon capital employed % Returnon sales (net profitpercentage) % Assetturnover G Averagewaitforcomputerrepair(indays to 1dp) days Percentageof customerslostper year % Percentageof sales attributableto newproducts % (6 marks) Task 2 WhichTWOof the followingstatements about the use of non-financial indicators are true? Theyare lesslikelyto be manipulatedthan financialones Theyprovideshorttermincentivesformanagers Theyare leadingindicatorsof financialperformance Theyare easierformanagers to understandthan financialratios (2 marks) Task 3 WeasleyCo is consideringthe use of valueanalysis. (1) Valueanalysisinvolvesthe systematicinvestigationof everysourceof cost (2) Valueanalysisconsidersthree aspects of value Whichof the statements is/are true? Statement1is true and statement 2 is false Statement2 is true and statement 1is false Bothstatements are true 394 Bothstatements are false (2 marks) ManagementAccounting(FMA/MA) Page 407 of 421 H q 37 KleanCo has produceda scatter diagramshowingthe weeklytotal costs of production ($)plottedagainst the weeklyoutputs(units).Abroadlylinearpattern is evident,with r =0.9. Theregressionequationis: Costs =$1,500+($15unitsof output) Fiftydata pointshave been includedinthe analysis,withoutput rangingfrom100unitsto 1,000units.Output nextweekis plannedto be 500 units. Task 1 Q U E T IO N S S Weeklyfixedcosts are approximately $ Variablecosts per unitare on average $ Nextweek'sproductioncosts are likelyto be approximately $ (4 marks) Task 2 Arethe followingstatements true or false? True False Thereisverylittlecorrelationbetweenweeklycostsofproductionand production level 90%of the variationinweeklycosts can be explainedby the amountproduced Giventhe information,any forecastusingthe regressionequationis likely to be veryunreliable (3 marks) Task 3 KleanCo sets itsfixedbudgetat 100%capacity. Thebudgetedsalesare $600,000and budgetednet profitis$50,000.Budgetedcostsare 20%fixedcostsand 80%variablecosts. Whatis the flexedbudget fornet profitat 70%capacity? G $ 38 (3 marks) PJRCo operates a standard costingsystemforits singleproductand allinventoriesare maintainedat standard cost. Duringa periodthe followingdetailswererecorded. Therewas no openingand closingworkinprogress. Thestandard cost forthe productwas: $ per unit Materials(8kgat $5 per kg) 40 Labour(5 hoursat $7per hour) 35 Fixedproductionoverheads 25 100 Thestandard unitrate foroverheadsis based on budgeted productionof 2,600 unitsfor the period. $ Purchaseof materialson credit(19,748kg) 118,488 Wages paid (14,100hours) 101,520 Fixedproductionoverheadspaid 72,490 Materialissuesto production(at standard cost) 106,075 2,700unitswerecompletedduringthe period. Mockexam3: Questions 395 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 408 of 421 H q Salesvariancesare as follows. $ per unit Salespricevariance $4,167 (A) Salesvolumeprofitvariance $27,500 (A) Fillinthe appropriateboxesinthe operatingstatement to calculatethe standard profit fromactual sales and the actual profit.SelectAto denote adverseand F to denote favourable. $ Budgetedprofit 210,000 Salesvolumeprofitvariance A/F Standard profitfromactual sales Variances Salesprice $ A/F Materialprice Materialusage Labourrate Labourefficiency 1,925 2,820 A/F A/F A/F A/F Fixedoverheadexpenditure A/F Fixedoverheadvolume A/F A/F Actualprofit G H (10marks) 396 ManagementAccounting(FMA/MA) Page 409 of 421 q Answers Mock to Exam 3 G H Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 410 of 421 q G H 398 Management Accounting (FMA/MA) Page 411 of 421 G q Section A 1 Thecorrectansweris:Spreadsheetscan be used to depictinformationgraphically Spreadsheetsare veryusefulforsensitivityanalysis.Theformula=B5+B6+B7can also be representedby the formula=SUM(B5:B7).Theequalssignis missinginthe question.The formula=9^2 wouldgivethe answer81as it is 9 9. 2 Thecorrectansweris:1and 3 only. 3 Thereare no governmentregulationsthat state that an organisationmusthave a mission statement. Thecorrectanswersare: 4 Thereis littleor no inputfromoperatingstaff Theyare relativelyquickto produce Topdownbudgetingis moreeffectiveis smallorganisations.One of the problemsof top downbudgetingis that is can reducethe feelingof team spiritand morale. Thecorrectanswersare: 5 Fixedproductionoverheadexpenditurevariance Salesvolumevariance Thefixedproductionoverheadefficiencyvarianceand the fixedproductionoverhead capacity variancecannot ariseina standard marginalcostingsystem.Theyare subdivisionsof the fixedproductionoverheadvolumevariancewhichrepresentsthe under or overabsorptionof fixedoverheadscaused by a change inthe productionvolume.Since fixedoverheadis not absorbed intoproductioncosts ina marginalcostingsystem,this situationcannot arise. Thefixedproductionoverheadexpenditurevarianceis the onlyvarianceforfixed productionoverheadthat arisesina standard marginalcostingsystem. Thecorrectansweris:$20,600 Budgetedsales per unit=$60,000 / 2,000 =$30 per unit Budgeteddirectcosts per unit=$24,000 / 2,000 =$12per unit Budgetedfixedcosts are $10,000 Flexedbudget for1,700units: Sales(1,700$30) Directcosts (1,700$12) Fixedcosts Profit S $ 51,000 (20,400) (10,000) 20,600 6 Thecorrectansweris:1and 3 only. 7 Anadversedirectlabourefficiencyvariancecouldbe due to lowerskilledlabourtherefore usinghigherskilledlabourcouldhelp. Thecheaper materialsmay affect the labourefficiencyvariance,because cheaper materialsmay be moredifficultto handle.However,thiswouldlead to an adverselabour efficiencyvarianceand thereforestatement 2 is incorrect. Anotherreason forvariancesis out of date standards so it is usefulto checkthese. Thecorrectansweris:$6.50 Increaseininventoryduringthe period=14,100– 12,600=1,500units Differenceinprofits=$60,150– $50,400 =$9,750 Profitsundermarginaland absorptioncostingbases are differentbecause of the fixed overheadsincludedininventories. Fixedoverheadabsorptionrate =Differenceinprofits/ Change ininventory =$9,750/ 1,500units=$6.50 Mockexam3: Answers 399 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 412 of 421 A N S W E R H q 8 Thecorrectansweris:$73.00 $ Perunit 12 15 MaterialM6kg$2 MaterialN5kg$3 Skilledlabour3 hours$8 Semi-skilledlabour1hour$6 Productionoverhead4 labourhours$4 Standard productioncost 9 $ Perunit 24 6 27 30 16 73 Ifyou selected$57.00you did not includeany productionoverhead,whichis a part of productioncost. $69.00bases the absorptionon the skilledlabourhoursonly. $80.30 includesthe absorptionof administrationoverhead;however,the questionasks for the standard cost of production;alwaysread the questioncarefully! Thecorrectansweris:$3,000 Process1costs =inputcosts +conversioncosts =(2,000 $6.50)+$5,000 =$18,000 Expectedoutput =input– normalloss=2,000 – (2,000 10%)= 1,800units Therefore,cost per unitforProcess1=$18,000/ 1,800units=$10per unit Abnormalloss=input– normalloss– output =2,000 – 200 – 1,500=300 units Valueof abnormalloss=300 units$10=$3,000 10 Thecorrectansweris:$30,000 Overheadabsorbed (19,000machinehours$20*) Actualoverhead Over-absorbedoverhead G *Budgetedoverheadabsorptionrate = 11 $ 380,000 350,000 30,000 $400,000 =$20 per machinehour 20,000 machinehours Thecorrectanswersare: Customersweregivendiscountsat a higherlevelthan standard inorderto encourageincreasedsales volumeand Higherqualitymaterialsuppliesledto improvementsinthe qualityof the finaloutput, whichcustomersfoundattractive. Increasedcompetitoractivitywouldresultinan adversesales volumevariancebecause volumesare reduced. 12 13 Ahigherprofitper unitwouldnot affect the sales volumevariancebecause the varianceis evaluatedat the standard profitper unit. Thecorrectansweris:2 because it has the highernet presentvalue. NPVis the best methodwheremutuallyexclusiveprojectsexist,and its use willalways ensureshareholderwealthis maximised. Notethat the questionstates that the projectsare mutuallyexclusive.Thismeans that only one projectcan be undertakenand thereforethe answer'both projects'is incorrect. Thecorrectanswersare: Refurbishmentof existingfactory premisesand Replacementof existingmachinery. Purchasesof raw materialsand the annual maintenancecosts of an existingasset are formsof revenueexpenditureand wouldnot formpart of the capital expenditurebudget. Refurbishmentof an existingfactory wouldbe classifiedas capital expenditure,as would the replacementof existingmachineryand thereforeformpart of the capital expenditure budget. 400 ManagementAccounting(FMA/MA) Page 413 of 421 H q 14 Thecorrectansweris:Volume,velocity,variety,veracity,value 15 Thewidelyquoted definitionprovidedby Gartner refersto high-volume,high-velocityand high-varietyinformation.Veracity(trustinthe data) and value(valueto the business)are oftenconsideredto be the fourthand fifthVs. Thecorrectansweris:$1,739. TrendforYear10quarter 1=$1,632,000(Year8 quarter 4) +($25,0005) =$1,757,000 16 Forecast=Trend+seasonalvariation=$1,757,000- $18,000=$1,739,000 Thecorrectansweris:$4,140(A) Std variableproductionoverheadcost per hour=Budgetedvariableoverheadproduction costs / Budgetedlabourhours=$11,550/ 5,775=$2 per hour. Std timeallowedper unit=Budgetedlabourhours/ budgeted production=5,775/ 1,925= 3 hoursper unit 2,070unitsshouldtake (3 hours) 6,210hours Butdid take 8,280 hours Efficiencyvarianceinhours 2,070hours(A) standard variableproductionoverheadrate $2 Efficiencyvariance(in$) 4,140(A) 17 Thecorrectanswersare: Thereis no legalrequirementto prepare them Theyincludeboth financialand non-financialdata Characteristicsof managementaccounts include: Theyare distributedinternally. G 18 Theydo lookat past data but also includeforecastsof the futureforplanning purposes. Thereis no legalrequirementto prepare them. Theyincludeboth financialand non-financialdata. Theperiodcovered,theircontents,formatetc are decidedby management. Theyhelpmanagementplan, controland makedecisions. Thecorrectansweris:14.50 Thefirstthingto do is to arrange the timesinthe orderof magnitude. 8, 9, 11,12,14,15,17,21,24, 34 Thereare ten itemsand the medianis the arithmeticmean of the 5th and 6th items. 19 (14+15)/ 2 =14.50 Thecorrectansweris:33.2% Gearing=Priorchargecapital(long-termdebt)/ (Priorchargecapital+shareholders'equity) 20 =$253,400/ ($253,400+$511,000) =33.2% Thecorrectansweris:Ituses a basis such as labourhoursto incorporateoverheadsinto productcosts Thisis a feature of traditionalabsorptioncostingmethods. Mockexam3: Answers 401 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 414 of 421 A N S W E R S H q 21 Thecorrectansweris:$3,165 Variablecost per unit=($3,035– $2,750)/ (43,200– 37,500)=$0.05 per unit Fixedcost =$3,035– (43,200$0.05)=$875 Totalcost inAugust=$875+(45,800$0.05)=$3,165 22 Thecorrectanswersare: Images. Videos. 23 Structureddata is easilysearchablebecause it is usuallyinrowsand columns,such as data stored ina spreadsheet.Unstructureddata is oftenqualitativeand cannot be organisedintoa database. Thecorrectansweris:128degrees Totalcosts are $10,520,000. Confectionery=3,750,000/10,520,000360 =128 24 Thecorrectansweris:Bothare false. 25 Internalbenchmarking(notfunctionalbenchmarking)is a methodof comparingone operatingunitor functionwithanother withinthe same organisation.Strategic benchmarking(notcompetitivebenchmarking)isa type of benchmarkingaimedat strategicactionand organisationalchange. Thecorrectansweris:$36,180 60%of July creditsales less2%discount($70,000 50%60%98%) 39%of June creditsales ($80,00050%39%) G 26 27 $ 20,580 15,600 36,180 Thecorrectansweris:Statement1is true and Statement2 is false. Outputsare the resultsof an activity,measurableas the servicesactuallyproducedand the qualityof the services.Statement2 looksat whetherresourcesare beingused fortheir purposeand thereforecoverinputsrather than outputs.Anexampleof an output measure fora schoolwouldbe howmany students go on to furthereducation. Thecorrectanswersare: Thearea underthe curvetotals 100%of the probabilitiesand Itis symmetrical Themean is denoted by mew().Thearea to the leftof the mean is 0.5. 28 Thecorrectansweris:14,000units 29 Thereorderlevel=maximumusage per day maximumlead time =1,400units10days =14,000units Thecorrectansweris:False.True. 30 Thereasonsforhavingthe planningand controlsystemincludeensuringthat the organisationachievesits objectives.However,not allbusinessesstriveforprofit maximisation,eg non-profitseekingbusinesses. Thecorrectansweris:Systematic Themethoddescribedis systematicsampling,wherebyeveryfourthitemis selectedafter a randomstart. Inmulti-stagesampling,the populationisdividedintosmallerand smallergroups,a randomsampleof groupsbeingtaken at each stage of division. 402 ManagementAccounting(FMA/MA) Page 415 of 421 H q Ina simplerandomsample,everyiteminthe populationhas an equal chance of being includedinthe sample. Instratifiedsampling,the populationis dividedintostrata/categories and a random sampletaken fromeach stratum beingproportionalto the total ineach stratum. 31 Thecorrectansweris:1,600units Actualhoursworked Hourssaved comparedwithstandard* 43,500 hours 4,500 hours Standard hoursforunitsproduced 48,000 hours 48,000 / 30 hours=1,600units *Asthere was a favourablelabourefficiencyvarianceof $27,000,thisis equivalentto a savingof $27,000/$6=4,500 hours 32 Thecorrectansweris:Human 33 Machineor sensordata is data that comesfromthe output of devicesthat detect input fromtheirsurroundings.Transactionaldata is data that comesfromthe transactionsof an organisation.Humanor socialdata sourcesare fromhumans,such as socialmediaposts. Thecorrectansweris:$7,300 Materialsissuedto Job 3579 Materialstransferredto Job Grade Xlabour(200 hours$3 per hour) Overtimepremium(seenote) Supervisorcost (20 hours$5 per hour) Productionoverhead($5220 hours) Totalproductioncost $5,000 $400 $600 $100 $100 $1,100 $7,300 Note Sincethe overtimewas workedat the specificrequestof the customer,inorderto complete hisjobmorequickly,it is treated as a directproductioncost. Thereforethe overtime premium=100hours$1=$100 G 34 Thecorrectansweris:Inventoryobsolescence 35 Ifinventoryis heldforlongperiodsthere is a higherriskof it becomingobsoletebeforeit can be sold.Disruptionof productionschedulesand lossof customergoodwill(forexample customersdecidingto try an alternativesupplier)are morelikelyto occurifthere is a stock out, the likelihoodof whichis increasedby holdingloweramountsof inventory.Shipping and handlingcosts are orderingcosts and are likelyto increaseifa reductioninthe inventoryholdingperiodis achievedby placingsmaller,morefrequentorders. Thecorrectansweris:123.3 Laspeyres'priceindex= PnQ0P0Q0 / =(555/ 450)100=123.3 Ifgot thisquestionwrong,you calculatedthe wrongindex: Laspeyres'quantityindex= P0QnP0Q0 / =(475/ 450)100=105.6 / P0Qn Paasche priceindex= PnQn =(540/ 475)100=113.7 Paasche quantityindex= PnQnPnQ0 / =(540/ 555)100=97.3 Mockexam3: Answers 403 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 416 of 421 A N S W E R S H q Section B 36 G 37 Task 1 Returnon capital employed ($45m/ $225m) 20% (Profit/ Capital employed)100 100 Netprofitpercentage ($45m/ $375m) 12% (Netprofit/ Sales)100 100 Assetturnover $375m/ $225m 1.7 (Sales/ Capital employed) Averagewaitforrepair (300 / 9,000) 12.2days (Numberof unrepaired/ Numberreturned)365 days 365 Percentageof customerslostper year (95,000/ 5% (Numberof customerslost/ Totalnumberof customers) 1,900,000)100 100 Percentageof sales attributableto newproducts ($7.5m/ $375m) 2% (Salesattributableto newproducts/ Totalsales)100 100 Task 2 Thecorrectanswersare: Theyare lesslikelyto be manipulatedthan financialones and Theyare leadingindicatorsof financialperformance. Non-financialperformancemeasuresare leadingindicatorsof financialperformance- as an example,ifcustomersatisfactionis lowthiscan implya futurefallinsales demand. Itis financialperformancemeasuresthat provideshorttermincentivesformanagers, so option2 is not correct. Itis not necessarilythe case that managers willfindnon-financialmeasureseasierto understandthan ratios(option4) - there are a range of possiblenon-financialmeasures, somemorecomplicatedthan others,and many financialratiosare veryeasy to understand. Task3 Thecorrectansweris:Statement1is true and statement 2 is false Statement2 isfalsebecause there are fouraspects of value:cost value,exchangevalue, use valueand esteemvalue. Task 1 Weeklyfixedcosts =$1,500 Variablecosts per unitare on average =$15 Nextweek'sproductioncosts =$9,000 Workings Alinearequationof the formy =a +bxhas fixedcosts of a and variablecosts per unitof b. Therefore,fixedcosts =$1,500and variablecost =$15per unit If500 unitsare producedthen the total cost wouldbe $1,500+($15500) =$9,000 Task 2 Thereis verylittlecorrelationbetweenweeklycosts of productionand production level FALSE 90%of the variationinweeklycosts can be explainedby the amountproduced FALSE Giventhe information,any forecastusingthe regressionequationis likelyto be veryunreliable FALSE Ifr =0.9, there is a highdegree of correlationbetweenweeklycosts of productionand productionlevel.Statement(i)is not correct. Ifr =0.9, r2(coefficientof determination)= 81%(0.9^2)and 81%of the variationinweekly costs can be explainedby the amountproduced.Statement(ii)is not correct. Ifr =0.9 and a linearpattern is evident,forecastsare likelyto be reliable,not unreliable. Statement(iii)is not correct. 404 ManagementAccounting(FMA/MA) Page 417 of 421 H G q Task 3 Thecorrectansweris $2,000 Flexedbudget $ 420,000 (308,000) (110,000) 2,000 Sales($600,00070%) Variablecosts (($600,000– $50,000)80%70%) Fixedcosts (($600,000– $50,000)20% Netprofit 38 Task 1 $ 210,000 27,500 (A) 182,500 Budgetedprofit Salesvolumeprofitvariance Standard profitfromactual sales Variances Salesprice Materialprice Materialusage Labourrate Labourefficiency Fixedoverheadexpenditure Fixedoverheadvolume $ 4,167 19,748 1,925 2,820 4,200 7,490 2,500 Adverse Adverse Favourable Adverse Adverse Adverse Favourable 34,000 (A) 148,500 Actualprofit Directmaterial price variance A N S W E R $ 98,740 118,488 19,748 (A) 19,748kgof materialshouldcost ($5) Butdid cost Directlabour efficiencyvariance 2,700unitscompletedshouldtake (5 hours) Butdid take Efficiencyvarianceinhours standard rate per hour S $ 13,500 hours 14,100 hours 600 hours (A) $7 $4,200 (A) Thematerialusage varianceisfavourablebecause 2,700unitsshouldhave used 2,700 8kg=21,600kg but the actual usage was only19,748kg. Thelabourrate varianceis adversebecause 14,100hoursshouldhave cost 14,100$7= $98,700but the actual cost was $101,520. Fixedproduction overhead expenditure variance $ Budgetedfixedproductionoverheadexpenditure(2,600$25) 65,000 Actualfixedproductionoverheadexpenditure 72,490 7,490 (A) Fixedproduction overhead volumevariance $ Actualproductionachievedat standard rate (2,700$25 per unit) 67,500 Budgetedproductionat standard rate (2,600$25 per unit) 65,000 2,500 (F) Mockexam3: Answers 405 Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 418 of 421 H q G H 406 ManagementAccounting(FMA/MA) Page 419 of 421 FMA/MA MANAGEMENT ACCOUNTING (02/21) q REVIEWFORM Name: Address: Date: HowhaveyouusedthisPractice&Revision Kit? (Tickoneboxonly) Onitsown(bookonly) Ona BPPin-centrecourse Ona BPPonlinecourse Ona coursewithanothercollege Other Duringthe past sixmonthsdo yourecall seeing/receiving any ofthe following? (Tickas manyboxesas arerelevant) Ouradvertisement inACCA Student Accountant Ouradvertisement inTeachAccounting Otheradvertisement Ourbrochurewitha letterthroughthepost ACCA E-Gainemail BPPemail Ourwebsitewww.bpp.com Whydidyoudecideto purchasethisPractice &RevisionKit?(Tickoneboxonly) Haveusedcomplementary Workbook HaveusedBPPTexts/Workbooks inthepast Recommendation byfriend/colleague Recommendation bya lecturerat college Sawadvertising Other Which(ifany)aspectsofouradvertisingdo youfinduseful? (Tickas manyboxesas arerelevant) Pricesandpublication datesofneweditions Information onPractice&Revision Kit content Facilitytoorderbooks Noneoftheabove G H Haveyouusedthe companionWorkbookforthissubject? Yes No Yourratings,commentsand suggestionswouldbe appreciatedonthe following areas Veryuseful Useful Notuseful Good Adequate Poor Introductory section(HowtousethisPractice& Revision Kit) 'DoYouKnow'checklists 'DidYouKnow'checklists Possiblepitfalls Questions Answers Mockexams Structure&presentation Icons Excellent OverallopinionofthisKit Doyouintendto continueusingBPPproducts? Yes No Pleasevisithttps://www.bpp.com/request-support to provideyourfeedbackforthismaterial Cùng ôn tập ACCA - ACCA Revision facebook.com/groups/accarevision Page 420 of 421 q FMA/MA MANAGEMENT ACCOUNTING (02/21) REVIEWFORM(continued) Please noteanyfurther comments andsuggestions/errors below G H Page 421 of 421
