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ACCA Paper F2 / FMA:
MANAGEMENT ACCOUNTING
Practice Questions and Answers
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Present value of 1 i.e. (1 + r)- n
Where
r = discount rate
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Present value of an annuity of 1 i.e.
Where r = discount rate
n = number of periods
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1 - 1 + r)- n
r
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A
Up to a given level of activity in each period the purchase price per unit of a raw material is
constant. After that point a lower price per unit applies both to further units purchased and also
retrospectively to all units already purchased.
Which of the following graphs depicts the total cost of the raw materials for a period?
$
$
A
B
Units
Units
$
C
$
D
Units
A
B
C
D
2
Units
Graph A
Graph B
Graph C
Graph D
A
The following pie chart represents the total cost of sales for one month:
Production
overhead
$37,000
z
y
Direct materials
$83,250
x
Direct labour
$64,750
How large are the following angles?
x
A
B
C
D
152°
160°
162°
166°
y
z
124°
120°
126°
122°
84°
80°
72°
72°
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ACCA F2 / FMA Q&A
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Which of the following is NOT correct?
A
A
Management accounting provides appropriate information for decision-making, planning,
control and performance evaluation.
Financial accounting information can be used for internal reporting purposes.
Routine information can be used for both short-term and long-term decisions.
Cost accounting can be used for inventory valuation to meet the requirements of internal
reporting only.
B
C
D
4
MAIN PAGE
An organisation has the following total costs at two activity levels:
Activity level (units)
Total costs ($)
17,000
140,000
A
22,000
170,000
Variable cost per unit is constant in this range of activity and there is a step up of $5,000 in the
total fixed costs when activity exceeds 18,000 units.
What is the total cost at an activity level of 20,000 units?
A
B
C
D
5
$155,000
$158,000
$160,000
$163,000
The following statements relate to financial accounting or to cost and management accounting:
(i)
(ii)
(iii)
A
The main users of financial accounting information are external to an organisation.
Cost accounting is part of financial accounting and establishes costs incurred by an
organisation.
Management accounting is used to aid planning, control and decision making.
Which of the statements are correct?
A
B
C
D
6
(i) and (ii) only
(i) and (iii) only
(ii) and (iii) only
(i), (ii) and (iii)
The following terms relate to computers:
(i)
(ii)
(iii)
A
Application package
Operating system
Spreadsheet
Which of the above terms are examples of computer software?
A
B
C
D
(i) and (ii) only
(i) and (iii) only
(ii) and (iii) only
(i), (ii) and (iii)
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The following assertions relate to financial accounting and to cost accounting:
(i)
(ii)
A
The main users of financial accounting information are external to an organisation.
Cost accounting is that part of financial accounting which records the cash received and
payments made by an organisation.
Which of the following statements are true?
A
B
C
8
Assertions (i) and (ii) are both correct.
Only assertion (i) is correct.
Only assertion (ii) is correct.
A company uses 9,000 units of a component per annum. The component has a purchase price
of $40 per unit and the cost of placing an order is $160. The annual holding cost of one
component is equal to 8% of its purchase price.
A
What is the Economic Order Quantity (to the nearest unit) of the component?
A
B
C
D
9
530
671
949
1,342
A
A company determines its order quantity for a component using the Economic Order Quantity
(EOQ) model.
What would be the effects on the EOQ and the total annual ordering cost of an increase in
the annual cost of holding one unit of the component in inventory?
A
B
C
D
10
EOQ
Lower
Higher
Lower
Higher
Total annual ordering cost
Higher
Lower
No effect
No effect
A
Consider the following statements:
(i)
(ii)
Job costing is only applicable to service organisations.
Batch costing can be used when a number of identical products are manufactured together
to go into finished inventory.
Is each statement TRUE or FALSE?
A
B
C
D
Statement (i)
False
False
True
True
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True
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ACCA F2 / FMA Q&A
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Management Accounting
An organisation absorbs overheads on a machine hour basis. The planned level of activity for
last month was 30,000 machine hours with a total overhead cost of $247,500. Actual results
showed that 28,000 machine hours were recorded with a total overhead cost of $238,000.
A
What was the total under absorption of overheads last month?
A
B
C
D
12
$7,000
$7,500
$9,500
$16,500
The following information relates to a manufacturing company for next period:
Units
14,000
12,000
Production
Sales
Fixed production costs
Fixed selling costs
A
$
63,000
12,000
Using absorption costing the profit for next period has been calculated as $36,000.
What would the profit for next period be using marginal costing?
A
B
C
D
13
$25,000
$27,000
$45,000
$47,000
Information relating to two processes (F and G) was as follows:
Process
F
G
Normal loss as
% of input
8
5
Input
litres
65,000
37,500
A
Output
litres
58,900
35,700
For each process, was there an abnormal loss or an abnormal gain?
A
B
C
D
14
Process F
Abnormal gain
Abnormal gain
Abnormal loss
Abnormal loss
Process G
Abnormal gain
Abnormal loss
Abnormal gain
Abnormal loss
Last month 27,000 direct labour hours were worked at an actual cost of $236,385 and the
standard direct labour hours of production were 29,880. The standard direct labour cost per
hour was $8·50.
A
What was the labour efficiency variance?
A
B
C
D
$17,595
$17,595
$24,480
$24,480
Adverse
Favourable
Adverse
Favourable
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A
Last month a company’s budgeted sales were 5,000 units. The standard selling price was $6
per unit with a standard contribution to sales ratio of 60%. Actual sales were 4,650 units with a
total revenue of $30,225.
What were the favourable sales price and adverse sales volume contribution variances?
A
B
C
D
16
A
Establishing the standard to be achieved
Measuring the actual performance
Setting organisational objectives
Taking appropriate corrective action
A
Which one of the following would be classified as indirect labour?
A
B
C
D
18
Sales volume contribution
$
1,260
1,260
2,100
2,100
Which of the following is an initial requirement of a management control system?
A
B
C
D
17
Sales price
$
2,325
2,500
2,325
2,500
Assembly workers on a car production line
Bricklayers in a house building company
Machinists in a factory producing clothes
Forklift truck drivers in the stores of an engineering company
A
The following statements relate to the calculation of the regression line y = a + bx using the
information on the formulae sheet provided in the exam.
(i)
(ii)
(iii)
n represents the number of pairs of data items used
(Σx)2 is calculated by multiplying Σx by Σx
Σxy is calculated by multiplying Σx by Σy
Which statements are correct?
A
B
C
D
(i) and (ii) only
(i) and (iii) only
(ii) and (iii) only
(i), (ii) and (iii)
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The correlation coefficient (r) for measuring the connection between two variables (x and y) has
been calculated as 0·6.
A
How much of the variation in the dependent variable (y) is explained by the variation in the
independent variable (x)?
A
B
C
D
36%
40%
60%
64%
20 Which of the following statements are correct?
A
(i) A cost driver is any factor that causes a change in the cost of an activity.
(ii) For long-term variable overhead costs, the cost driver will be the volume of activity.
(iii) Traditional absorption costing tends to under-allocate overhead costs to low-volume products.
A
B
C
D
21
(i) and (iii) only
(ii) and (iii) only
(i) and (ii) only
(i), (ii) and (iii)
Sales of product Z in October and November were 58,000 units and 48,000 units respectively.
The arithmetic mean of monthly sales for the period June to September was 44,000 units per
month.
A
The arithmetic mean of monthly sales for the period June to November is
A
B
C
D
22
39,000 units
40,000 units
47,000 units
50,000 units
A
In a process where there are no work-in-progress inventories, two joint products (J and K) are
created.
Information (in units) relating to last month is as follows:
Product
J
K
Sales
6,000
4,000
Opening inventory of
finished goods
100
400
Closing inventory of
finished goods
300
200
Joint production costs last month were $110,000 and these were apportioned to joint products
based on the number of units produced.
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What were the joint production costs apportioned to product J for last month?
A
B
C
D
23
A
$63,800
$64,000
$66,000
$68,200
A company uses the payback method of capital investment appraisal and is evaluating an
investment proposal , for which the following are estimated:
Initial cost
Expected life
Disposal value expected
(after 6 years)
A
$490,000
6 years
$10,000
Expected net cash inflows (inflows - outflows)
Year
1
2
3
4
5
6
$
160,000
140,000
130,000
120,000
110,000
45,000
What is the payback period for the investment, assuming that all annual cash flows occur
evenly?
A
B
C
D
24
3 years
3 years and 3 months
3 years and 6 months
3 years and 9 months
A
The purchase price of a stock item is $25 per unit. In each three month period the usage of the
item is 20,000 units. The annual holding costs associated with one unit equate to 6% of its
purchase price. The cost of placing an order for the item is $20.
What is the Economic Order Quantity (EOQ) for the stock item to the nearest whole unit?
A
B
C
D
25
730
894
1,461
1,633
A
A company uses an overhead absorption rate of $3.50 per machine hour, based on 32,000
budgeted machine hours for the period. During the same period the actual total overhead
expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual
production.
By how much was the total overhead under or over absorbed for the period?
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ACCA F2 / FMA Q&A
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B
C
D
26
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Under absorbed by $3,875
Under absorbed by $7,000
Over absorbed by $3,875
Over absorbed by $7,000
A
Which of the following is a feasible value for the correlation coefficient?
A
B
C
D
27
MAIN PAGE
A
– 2·0
– 1·2
0
+ 1·2
When total purchases of raw material exceed 30,000 units in any one period then all units
purchased, including the initial 30,000, are invoiced at a lower cost per unit.
A
Which of the following graphs is consistent with the behaviour of the total materials cost in
a period?
$
A
$
B
Units
$
Units
$
C
Units
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D
Units
17
ACCA F2 / FMA Q&A
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Management Accounting
The company New Green has prepared a capital budget programme with four possible projects.
The company’s cost of capital is 18%, and the four projects have been evaluated as follows:
Project
1
2
3
4
Capital outlay
$ 240,000
$ 600,000
$ 120,000
$ 360,000
NPV at 18%
$36,000
$54,000
$25,200
$48,000
A
Internal rate of return
24%
20%
30%
28%
Which project should the company undertake if there is no lack of investment funds and if,
of the four projects, projects 1 and 3 are mutually exclusive and projects 2 and 4 are
mutually exclusive?
A
B
C
D
29
Projects 1 and 2
Projects 1 and 4
Projects 2 and 3
Projects 3 and 4
A
An organisation has the following total costs at two activity levels:
Activity level (units)
Total costs ($)
19,200
162,000
26,400
204,000
Variable cost per unit is constant within this range of activity but there is a step up of $6,000 in the
total fixed costs when the activity exceeds 21,000 units.
What is the total cost at an activity of 24,000 units?
A
B
C
D
$184,000
$189,600
$192,000
$195,600
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Management Accounting
The total cost of production for two levels of activity is as follows:
Production (units)
Total cost ($)
Level 1
3,000
6,750
A
Level 2
5,000
9,250
The variable production cost per unit and the total fixed production cost both remain constant in the
range of activity shown.
What is the variable production cost per unit?
A
B
C
D
31
A
Monthly variance reports are an example of which one of the following types of
management information?
A
B
C
D
32
$0·80
$1·25
$1·85
$2·25
Tactical
Strategic
Planning
Operational
A company uses a standard absorption costing system. Last month budgeted production was
8,000 units and the standard fixed production overhead cost was $15 per unit. Actual production
last month was 8,500 units and the actual fixed production overhead cost was $17 per unit.
What was the total adverse fixed production overhead variance for last month?
A
B
C
D
$ 7,500
$16,000
$17,000
$24,500
The following information relates to questions 33 and 34:
A company operating a standard costing system has the following direct labour standards per unit for one
of its products:
4 hours at $12·50 per hour
Last month when 2,195 units of the product were manufactured, the actual direct labour cost for the 9,200
hours worked was $110,750.
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A
ACCA F2 / FMA Q&A
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PV TABLE
ANNUITY TABLE
Management Accounting
$4,250 favourable
$4,250 adverse
$5,250 favourable
$5,250 adverse
A
QUESTION DATA
A
What was the direct labour efficiency variance for last month?
A
B
C
D
35
FORMULAE
What was the direct labour rate variance for last month?
A
B
C
D
34
MAIN PAGE
$4,250 favourable
$4,250 adverse
$5,250 favourable
$5,250 adverse
QUESTION DATA
A cost centre has an overhead absorption rate of $4·25 per machine hour, based on a budgeted
activity level of 12,400 machine hours.
A
In the period covered by the budget, actual machine hours worked were 2% more than the
budgeted hours and the actual overhead expenditure incurred in the cost centre was $56,389.
What was the total over or under absorption of overheads in the cost centre for the period?
A
B
C
D
36
$1,054 over absorbed
$2,635 under absorbed
$3,689 over absorbed
$3,689 under absorbed
A company which operates a process costing system had work in progress at the start of last
month of 300 units (valued at $1,710) which were 60% complete in respect of all costs.
A
Last month a total of 2,000 units were completed and transferred to the finished goods warehouse.
The cost per equivalent unit for costs arising last month was $10. The company uses the FIFO
method of cost allocation.
What was the total value of the 2,000 units transferred to the finished goods warehouse last
month?
A
B
C
D
$19,910
$20,000
$20,510
$21,710
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ACCA F2 / FMA Q&A
37
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Management Accounting
A company has recorded its total cost for different levels of activity over the last five months as
follows:
Month
7
8
9
10
11
Activity level (units)
300
360
400
320
280
A
Total cost ($)
17,500
19,500
20,500
18,500
17,000
The equation for total cost is being calculated using regression analysis on the above data. The
equation for total cost is of the general form ‘y = a + bx’ and the value of ‘b’ has been calculated
correctly as 29·53.
What is the value of ‘a’ (to the nearest $) in the total cost equation?
A
B
C
D
38
7,338
8,796
10,430
10,995
A
A company operates a job costing system. Job number 1012 requires $45 of direct materials
and $30 of direct labour.
Direct labour is paid at the rate of $7·50 per hour. Production overheads are absorbed at a rate of
$12·50 per direct labour hour and non-production overheads are absorbed at a rate of 60% of `
prime cost.
What is the total cost of job number 1012?
A
B
C
D
39
$170
$195
$200
$240
A
Data relating to a particular stores item are as follows:
Average daily usage
Maximum daily usage
Minimum daily usage
Lead time for replenishment of inventory
Reorder quantity
400 units
520 units
180 units
10 to 15 days
8,000 units
What is the reorder level (in units) which avoids stock outs?
A
B
C
D
5,000
6,000
7,800
8,000
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ACCA F2 / FMA Q&A
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Management Accounting
The internal rate of return (IRR) can be calculated
(i)
(ii)
(iii)
A
by the use of an annuity factor but only when the annual cash flow of the project is
constant for all years.
by the linear interpolation of two NPVs, using a trial and error method
by the linear extrapolation of two NPVs, using a trial and error method
Which of the above statements are correct?
A
B
C
D
41
(i) and (ii) only
(i) and (iii) only
(i) and (iii) only
(i), (ii) and (iii)
Last month, when a company had an opening inventory of 16,500 units and a closing inventory
of 18,000 units, the profit using absorption costing was $40,000. The fixed production overhead
rate was $10 per unit.
A
What would the profit for last month have been using marginal costing?
A
B
C
D
42
$15,000
$25,000
$55,000
$65,000
The following terms relate to computers:
(i)
(ii)
(iii)
A
application packages
operating systems
point-of-sale devices
Which of these terms are categorised as software?
A
B
C
D
43
(i) and (ii) only
(i) and (iii) only
(ii) and (iii) only
(i), (ii) and (iii)
A component bar chart showed the number of each employees at each grade in a company
on 31 December each year. The data were as follows:
Grade
1
2
3
4
5
A
Number of employees
2011
2012
100
75
285
325
900
1,100
6,000
7,250
3,315
3,350
10,600
12,100
The bar for 2011 was 21.2 cm high. Assuming that the bar scale per employee remains consistent
between 2011 and 2012, how high was the component for grade 3 employees in the bar chart for
2012?
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ACCA F2 / FMA Q&A
A
B
C
D
44
MAIN PAGE
FORMULAE
PV TABLE
ANNUITY TABLE
Management Accounting
1.8 cm
2.0 cm
2.2 cm
2.4 cm
A
Which of the following statements is, or are, correct?
A
A company’s critical success factors are:
45
(i)
Those product and service features that a company is particularly competent at providing.
(ii)
Those product and service features that are particularly valued by a group of customers and,
therefore, where an organisation must excel to outperform competition.
(iii)
Those factors which are critical to the success of the organisation's main competitors.
A
B
C
D
(i) only
(ii) only
(i) and (ii) only
(i), (ii) and (iii)
Critical success factors in the public sector usually relate to:
(Select one answer only)
A
B
C
D
46
More than one stakeholder.
Government imposed standards.
The expectations of the providers of funds.
The expectations of service users.
Which of the following best describes a flexible budget?
A
B
C
D
47
A
A
A budget which shows variable production costs only.
A monthly budget which is changed to reflect the number of days in the month.
A budget which shows sales revenue and costs at different levels of activity.
A budget that is updated halfway through the year to incorporate the actual results for the
first half of the year.
A
Information relating to two processes (F and G) was as follows:
Process
F
G
Normal loss as
% of input
4
2.5
Input
litres
32,500
19,000
Output
litres
29,450
18,600
For each process, was there an abnormal loss or an abnormal gain?
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ACCA F2 / FMA Q&A
A
B
C
D
48
PV TABLE
ANNUITY TABLE
Management Accounting
Process G
Abnormal gain
Abnormal loss
Abnormal gain
Abnormal loss
A
A
Performance measurement
Balanced scorecard
Target setting
Benchmarking
Which one of the following groups of workers would be classified as indirect labour?
A
B
C
D
50
Process F
Abnormal gain
Abnormal gain
Abnormal loss
Abnormal loss
FORMULAE
What term best describes the use of both financial and non-financial measures in
assessing whether an entity has achieved its objectives?
A
B
C
D
49
MAIN PAGE
A
Machinists in an organisation manufacturing clothes
Bricklayers in a house building company
Maintenance workers in a shoe factory
Assembly workers in a vehicle manufacturing business
A factory consists of two production cost centres (P and Q) and two service cost centres (X and
Y). The total allocated and apportioned overhead for each is as follows:
P
$95,000
Q
$82,000
X
$46,000
A
Y
$30,000
It has been estimated that each service cost centre does work for the other cost centres in the
following proportions:
Percentage of service cost centre X to
Percentage of service cost centre Y to
P
40
30
Q
40
60
X
–
10
Y
20
–
After the reapportionment of service cost centre costs has been carried out using a method
that fully recognises the reciprocal service arrangements in the factory, what is the total
overhead for production cost centre P?
A
B
C
D
$122,400
$124,716
$126,000
$127,000
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ACCA F2 / FMA Q&A
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Management Accounting
THE END OF
DIAGNOSTIC TEST 1
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ACCA F2 / FMA Q&A
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Management Accounting
Management
Accounting
DIAGNOSTIC TEST - 1
ANSWER GUIDES
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Paper F2
+AddVance
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ACCA F2 / FMA Q&A
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FORMULAE
ANNUITY TABLE
PV TABLE
Management Accounting
Summary of correct answers:
1
2
3
4
5
6
7
8
9
10
1
D
2.
C
D
C
D
C
B
D
B
C
A
B
11
12
13
14
15
16
17
18
19
20
A
B
C
D
A
C
D
A
A
D
21
22
23
24
25
26
27
28
29
30
C
D
C
C
A
C
A
A
C
B
31
32
33
34
35
36
37
38
39
40
A
C
A
D
B
A
B
A
C
D
41
42
43
44
45
46
47
48
49
50
B
A
B
B
A
C
C
A
C
D
Q
The new total cost line for ‘D’ is less steep and has an angle that passes through the
origin (‘0’).
Q
The total cost of sales is equal to $(83,250 + 64,750 + 37,000) = $185,000.
The total number of degrees in the circle is 360, and we need to know the number of
degrees per $1 of cost:
360°/185,000 = 0.0019459 per $1 of cost.
Therefore,
3
x°, representing direct materials
y°, representing direct labour
z°, representing direct materials
= 83,250 x 0.0019459 =
= 64,750 x 0.0019459 =
= 37,000 x 0.0019459 =
162°
126°
72°
360°
D
Q
Cost accounting can be used for inventory valuation to meet the requirements of both external
financial reporting and internal reporting.
4
C
Workings:
High
Low
Q
Units
22,000
17,000
5,000
Therefore:
$
165,000
140,000
25,000
($170,000 - 5,000)
Variable cost per unit
$25,000
=
$5 per unit
5,000
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MAIN PAGE
ACCA F2 / FMA Q&A
Hence:
FORMULAE
ANNUITY TABLE
PV TABLE
At 17,000 units :
Total cost :
Less : Variable cost :
17,000 x $5
Fixed cost :
$
140,000
Cost at 20,000 units :
Variable cost :
20,000 x $5
$
100,000
Fixed cost
Additional fixed cost
Total cost :
55,000
5,000
160,000
Management Accounting
Q
(85,000)
55,000
volume exceeds 18,000 units
5
B
Q
6
D
Q
7
B
Q
8
C
Workings:
Q =
Q
2 COD
ch
=
2 x 160 x 9,000
40 x 0.08
=
9
A
948.7
Workings:
Q
=
Q
2 COD
ch
When the numerator (ch) increases, Q reduces.
Total annual ordering cost =
D
x Co
Q
So when Q reduces, the ordering cost increases.
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MAIN PAGE
ACCA F2 / FMA Q&A
10
B
11
A
FORMULAE
PV TABLE
ANNUITY TABLE
Management Accounting
Q
Workings:
OAR
Q
$247,500
=
=
$8.25 per hour
30,000 hrs
$
238,000
231,000
7,000
Actual overhead
Absorbed : 28,000 units x $8.25
Under absorbed overheads
(Note : OAR is ‘Overhead absorption rate’.)
12
B
Q
Workings:
$
36,000
Profit in absorption costing
Fixed overhead in closing inventory:
14,000 - 12,000 = 2,000 x
$63,000
=
(9,000)
14,000
Profit in marginal costing
13
C
27,000
Workings:
Q
PROCESS F
Input
Litres
65,000
_____
65,000
Output
Normal loss
(65,000 x 0.08)
Abnormal loss
Litres
58,900
5,200
900 (balancing)
65,000
PROCESS G
Input
Abnormal gain
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Litres
37,500
75
_____
37,575
Output
Normal loss
(37,500 x 0.05)
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Litres
35,700
1,875
37,575
29
ACCA F2 / FMA Q&A
14
D
MAIN PAGE
FORMULAE
Management Accounting
Q
$
29,880
27,000
2,880 hrs (F)
$8.50
$24,480 (F)
Standard labour cost per hour
A
ANNUITY TABLE
Workings:
Standard hours of production
Actual hours
15
PV TABLE
Q
Workings:
Contribution per unit = $6 x 0.6 = $3.60
So :
Sales volume contribution variance :
Budgeted sales
Actual sales
5,000 units
4,650 units
350 units (A)
$3.60
$1,260 (A)
Contribution per unit
And : Sales price variance :
$
4,650 units should earn ( x $6) 27,900
Actual revenue
30,225
2,325 (F)
Q
16
C
This is the initial (or first) requirement.
17
D
Q
18
A
Q
19
A
Workings:
Coefficient of determination =
So :
r2
20
Q
r2
= 0.62
= 0.36
= 36%
D
Q
Statement (i) provides a definition of a cost driver. Cost drivers for long-term variable overhead
costs will be the volume of a particular activity to which the cost driver relates, so Statement (ii) is
correct. Statement (iii) is also correct. In traditional absorption costing, standard high-volume
products receive a higher amount of overhead costs than with ABC. ABC allows for the unusually
high costs of support activities for low-volume products (such as relatively higher set-up costs,
order processing costs and so on).
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