F2 Mock1 Quest

ACCA Management Accounting

2 F r e p a P

Mock Exam 1

Questions (Duration: 3 hours)

LSAM

Mock Exam - 1 (Questions)

FORMULAE SHEET Linear regression

r=

n  xy -  x  y [n  x 2 - (  x) 2 ] [n  y 2 - (  y) 2 ]

If y = a + bx,

b=

n  xy -  x  y n  x 2 - (  x) 2

and a =

y x -b n n

Economic order quantity

Economic order quantity

=

Economic batch quantity

=

LondonSAM

2C O D CH

2C O D  D  C H 1 -   R 

1

F2 - Management Accounting


ALL 50 questions are compulsory and MUST be attempted QUESTION 1 A fixed budget recognises different cost behaviour patterns and is designed to change as the volume of activity changes. A B

True False

(1 mark)

QUESTION 2 Which of the following statements are true? (i) (ii) (iii)

Fixed budgets are the only type of budget used at the planning stage. Flexed budgets provide meaningful meaningful comparison to actual results. Budgeting procedures are only useful in maintaining control over the expenditure of a business.

A

All of them (i) and (ii) only (i) and (iii) only (ii) only

B C D

(2 marks)

QUESTION 3 A manufacturing company uses 28,000 components at an even rate during the year. Each order placed with the supplier of the components is for 1,500 components, which is the economic order quantity. The company holds a buffer inventory of 700 components. The annual cost of holding one component in inventory is €3. What is the total annual cost of holding inventory of the component? A B C D

€2,250 €3,300 €4,350 €4,500

(2 marks)

QUESTION 4 Which of the following is NOT an attribute of good information? A B C D

LondonSAM

Accurate Confidential Timely Cost effective

(2 marks)

2



QUESTION 5 A part of an organisation which generates revenues and for which costs are also collected is called: A B C D

A cost centre A revenue centre A profit centre A loss centre

(2 marks)

QUESTION 6 The total costs incurred at various output levels in a factory have been measured as follows: Output in units

Total cost

23 30 35 40 45 48

£ 5,200 £ 5,450 £ 5,550 £ 6,000 £ 6,500 £ 7,100

The variable cost per unit and the total fixed costs are: A B C D

LondonSAM

Variable costs £37 per unit; Total fixed costs £5,966 Variable costs £40 per unit; Total fixed costs £4,280 Variable costs £76 per unit; Total fixed costs £3,452 Variable costs £148 per unit; Total fixed costs £1,796

3

(2 marks)



QUESTION 7 The following diagram represents a cost behaviour pattern:

Total cost

Volume of activity Which of the following statements is consistent with the above diagram? A

B C D

Annual factory costs when the electricity supplier sets a tariff based on a fixed charge, plus a constant unit cost for consumption but subject to a maximum annual charge Total direct material cost for the period if the supplier has agreed to a maximum charge for that period Total direct material cost for a period if the supplier charges a lower unit cost on all units once a certain quantity has been purchased in that period Weekly total labour cost when workers are paid an hourly wage during normal working hours, and a higher hourly rate if they are required to work outside those hours (2 marks)

QUESTION 8 Regression analysis has produced the following results from the batch production costs for each of the past 6 months: x y 2

x

xy

600 950 53,000 88,560

Which of the following is the appropriate value for b in the regression line to 2 decimal places? A B C D

LondonSAM

-1.65 0.92 1.38 66.33

(2 marks)

4



QUESTION 9 A company has estimated that sales next year may be €57,000 (probability 0.45), €66,000 (probability 0.4) or €75,000. What is the expected value of sales to be used in next year’s forecast? A B C D

€21,100 €36,600 €63,300 €66,000

(2 marks)

QUESTION 10 When faced with a known scarce resource, such as material, the best way to allocate the resource in line with a profit maximisation objective is to follow a particular procedure. The various elements which make up this procedure are shown below. Which option shows the most logical order? (1) (2) (3) (4)

Calculate the contribution per unit of the scarce resource. Rank the products. Allocate the scarce resource. Calculate the contribution per unit of the products.

A

(1), (4), (2), (3) (4), (1), (2), (3) (4), (1), (3), (2) (3), (2), (4), (1)

B C D

(2 marks)

QUESTION 11 A Goods Received Note (GRN) provides: (i) (ii) (iii) (iv)

Information used to update inventory records. Information to check that the correct price has been recorded on the supplier’s invoice. Information to check that the correct quantity of goods has been recorded on the supplier’s invoice. Information to record any unused materials which are returned to stores.

Which of the above statements is/are true? A B C D

LondonSAM

(i) only (ii) and (iii) only (i) and (iii) only All of the above

(2 marks)

5



QUESTION 12 Caz currently pays its direct production workers on a time basis, at a rate of £8.20 an hour. In an effort to improve productivity, Caz is introducing a bonus based on (time taken ÷ time allowed)  time saved  rate per hour. The standard time allowed for a worker in the assembly department to perform this particular operation once has been agreed at 45 minutes. In the first week of operation, one (very experienced) employee worked for a total of 45 hours and performed 99 operations. The gross wages for this employee for that week, to 2 decimal places, is: A B C D

£145.36 £369.10 £514.36 £540.08

(2 marks)

QUESTION 13 Which one of the following group of workers would be classified as indirect labour? (i) (ii) (iii)

Machinists in a company manufacturing manufacturing clothes. Plasterers in a building company. Maintenance Maintenance workers in a hat factory.

A

(i) only (ii) only (i) and (ii) (iii) only

B C D

(1 mark)

QUESTION 14 A company uses an overhead absorption rate of €4.50 per labour hour, based on 3,600 budgeted labour hours for the period. During the same period, the actual total overhead expenditure amounted to €18,225 and 3,850 labour hours were worked. By how much was the total overhead under or over absorbed for the period? A B C D

Under-absorbed by €900 Under absorbed by €1,035 Over-absorbed Over-absorbed by €900 Over-absorbed Over-absorbed by €1,035

(2 marks)

QUESTION 15 For which of the following is a profit centre manager responsible? A B C

LondonSAM

Costs only Revenue only Costs and revenues

(1 mark)

6



QUESTION 16 In an organisation manufacturing a number of different products in one factory, the cost of power & fuel is an example of a direct expense when costing a product. True False

A B

(1 mark)

QUESTION 17 A stepped cost is one which is only fixed within certain levels of activity. Once the upper activity level is reached, a new level of fixed cost becomes relevant. relevant. True False

A B

(1 mark)

QUESTION 18 Up to a given level of activity in each period, the purchase price per unit of 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?

Cost

Cost

B

A

Volume

Volume Cost

Cost

C

D

Volume

Volume (2 marks)

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7



QUESTION 19 Relevant Information for decision making: A B C D

usually includes depreciation. may reflect the incremental cost. should ignore opportunity costs. should consider accounting profit

(1 mark)

QUESTION 20 What does the total materials variance show? A B C D

The difference between the flexed budget and the actual The difference between the original budget and the actual The difference between the flexed budget and the original budget None of the above

(2 marks)

QUESTION 21 Q Ltd order in supplies of stock from a local supplier. The following information is available for their stocks: Demand Holding cost Deliver cost per order Maximum room available for stock

= 5,000 units per quarter = $0.192 per unit per year = $30 = 6,000 units

Calculate the most cost efficient order size: A B C D

250 1,250 2,500 6,000

(2 marks)

QUESTION 22 M Ltd makes a single product which it sells for $40 per unit. Z Ltd’s fixed costs amount to $120,000. Its contribution to sales ratio is 40%. What is the breakeven point? A B C D

LondonSAM

$120,000 $300,000 7,500 units 15,000 units

(2 marks)

8



QUESTION 23 The following breakeven breakeven chart has been drawn showing lines for total cost (TC), total variable cost (TVC), total fixed cost (TFC) and total sales revenue (TSR):

What is the margin of safety at the 1,850 units level of activity? A B C D

LondonSAM

275 units 350 units 350 units 500 units

(2 marks)

9



The following information relates to questions 24 and 25.

Cost and selling price details for product Alpha are as follows: $ per unit 8.00 8.50 3.50 4.00 _____ 24.00 _____

Direct materials Direct labour Variable overhead Fixed overhead absorption rate

Profit

11.00 _____

Selling price

35.00

_____

You are also given the following information at month-end: Budgeted production for the month Actual production for the month Actual sales for the month Fixed overhead costs

6,000 units 6,500 units 6,100 units $30,000

QUESTION 24 The marginal costing profit for the month is: A B C D

$61,500 $91,500 $97,600 $122,000

(2 marks)

QUESTION 25 The absorption costing profit for the month is: A B C D

LondonSAM

$61,500 $63,100 $67,100 $72,000

(2 marks)

10



QUESTION 26 Beta Ltd wishes to use a machine for one month on a new contract. The machine cost $120,000 six years ago. When purchased, it had an estimated life of ten years and it is being fully depreciated using the straight line method. It is currently valued at $39,000 and it estimated value at the end of the year is $15,000. The machine is underused and stands idle for 30% of its time, but it must be retained for use on similar contracts. The relevant cost of using the machine on the new contract is: A B C D

$0 $14,000 $20,000 $26,000

(2 marks)

QUESTION 27 A firm is currently considering a job that requires 800 units of raw material. There are currently 1,200 units of the material in stock, bought just over a year ago for £3.80 per Kg, but no longer used for any of the firm’s products. The current market price for the material is £4.20, but the company could sell it for £2.00 per unit. What is the relevant cost per unit? A B C D

£0 £2.00 £3.80 £4.20

(2 marks)

QUESTION 28 A contract is under consideration which requires 150 hours to complete. There are 350 hours of spare labour capacity for which the workers are still being paid the normal rate of pay. The remaining hours for the contract can be found either by weekend overtime working paid at double the normal rate of pay, or by diverting labour from other production. This other production makes makes a contribution, net of labour cost, of £7.00 per hour. The normal rate of pay is £7.50 per hour. What is the total relevant cost of labour for the contract? A B C D

LondonSAM

£0 £520 £870 £900

(1 mark)

11



The following information relates to questions 29 and 30.

A company manufactures and sells two products, A and B, which have contributions of £11 and £15 respectively. The company aims to maximise profit. Two materials, M1 and M2, are used in the manufacture of each product. Each material is in short supply – 2,500 kgs of M1 and 1,350 kgs of M2 are available next period. The company holds no inventories, and it can sell all the units produced. The management accountant has drawn the following graph accurately, showing the constraints for materials M1 and M2.

QUESTION 29 What is the amount, in kgs, of Materials M1 and M2 used in each product of Product B?

A B C D

Material M1 10 9 10 9

Material M2 9 9 10 10

(2 marks)

QUESTION 30 What is the optimal mix of production (in units) for the next period?

A B C D

LondonSAM

Product A 0 70 40 120

Product B 50 40 70 0

(2 marks)

12



QUESTION 31 A company operates a process costing system. During a period there was no opening stock, and 350 units were received from the previous process. At the end of the period there was closing stock of 50 units, which were 60% complete. There were no process losses. What was the number of equivalent units produced? A B C D

50 units 60 units 300 units 330 units

(2 marks)

The following is relevant to questions 32 and 33.

A company operates a process costing system. The following information is relevant for the last period for process 1: Inputs:

12,000 kgs of raw material at $4 per kg. Direct wages: 6,000 hours at $5 per hour. Production Producti on overhead absorbed at $7 per labour hour.

Outputs:

Normal loss 10% of input Transfer to process 2: 11,050 kgs

All losses have a scrap value of $1 per kg. There was no opening or closing stock.

QUESTION 32 The abnormal gain or loss for the period was: A B C D

108 kgs loss 250 kgs gain 950 kgs gain 1,000 kgs gain

(2 marks)

QUESTION 33 The average cost per kg of output is: A B C D

LondonSAM

$10 $11 $12 $13

(2 marks)

13



QUESTION 34 Planning for the activities of a business in the short term is best described as: A B

Operational planning Strategic planning planning

(1 mark)

The following information relates to questions 35 to 39.

A product is manufactured in two processes. Details for the second process in period 4 were as follows: Opening work-in-progress work-in-progress Materials transferred from the first process Output transferred to finished goods Closing work-in-progress

Nil 4,000 litres 2,900 litres 800 litres

Normal loss is 5% of input. Losses have no scrap value. Closing work-in-progress is 100% complete for material and 60% complete for labour and overheads. The cost per unit equivalent has been calculated at $3.32 per litre for materials and $2.20 per litre for labour and overheads.

QUESTION 35 The abnormal loss for the period was: A B C D

Nil 100 litres 200 litres 300 litres

(2 marks)

QUESTION 36 The equivalent units of output for labour and overheads for the period were : A B C D

2,900 litres 3,440 litres 3,480 litres 3,800 litres

(2 marks)

QUESTION 37 What is the value of the abnormal loss? A B C D

LondonSAM

$0 $220 $332 $552

(2 marks)

14



QUESTION 38 What is the value of the closing work-in-progress? A B C D

$2,649.60 $3,353.60 $3,712 $4,416

(2 marks)

QUESTION 39 What is the value of output? A B C D

$16,008 $16,560 $20,976 $22,080

(2 marks)

QUESTION 40 The following information relates to Job J1, which is carried out by a company to meet a customer’s order.

Direct materials consumed Direct labour hours Direct labour rate per hour Production Productio n overhead per direct lab.hour Administration and other overheads Profit margin

Department A

Department B

£10,000 800 hours £4 £4 20% of full production cost 25% of sales price

£6,000 400 hours £5 £4

What is the selling price to the customer for Job J1? A B C D

£32,500 £34,666 £39,000 £41,600

(2 marks)

QUESTION 41 The most appropriate costing method to use by a company that makes individual products to order for customers is: A B C D

LondonSAM

Standard costing Job costing Process costing Service costing

(2 marks)

15



QUESTION 42 Which of the following would NOT be considered as service industries? (i) (ii) (iii) (iv)

An airline company. A coal mining company. A manufacturer manufacturer of soups. A firm of solicitors.

A

(i) and (ii) only (i) and (iii) only (ii) and (iii) (iii) and (iv)

B C D

(2 marks)

QUESTION 43 A company uses a predetermined overhead absorption rate based on machine hours. The budgeted factory overhead for one year was £68,000, but the actual overhead incurred was £72,000. In the period 17,500 machine hours were worked, and overheads were overabsorbed by £2,375. The budgeted level of machine hours was A B C D

12,000 hours 16,000 hours 17,000 hours 18,000 hours

(2 marks)

QUESTION 44 A company makes a product called the Widget. Budgeted Widget sales for next period are 48,000 units. Each unit uses 2 kgs of material, costing $5 per kg. Opening and closing inventory for the quarter are forecast to be

Opening inventory Closing inventory

Raw materials 2,250 kgs 4,000

Widget (units) 6,000 7,500

What is the purchases budget for raw materials (in kgs)? A B C D

LondonSAM

96,000 97,750 99,000 100,750

(2 marks)

16



The following relates to questions 45 and 46.

Product Gamma has a standard labour time of two hours per unit. The standard labour rate is $6 per hour. During one particular month 5,000 units were produced. The actual labour cost was $52,525 for 9,550 hours worked.

QUESTION 45 The labour rate variance is: A B C D

$4,775 Adverse $4,775 Favourable $7,475 Favourable $7,475 Adverse

(2 marks)

QUESTION 46 The labour efficiency variance is: A B C D

$4,775 Adverse $4,775 Favourable $2,700 Favourable $2,700 Adverse

(2 marks)

QUESTION 47 Performance standards that are based upon perfect operating conditions are known as: A B C D

Basic standards Ideal standards Current standards Attainable standards

(1 mark)

QUESTION 48 A firm uses standard costing and absorbs overheads on labour hours. Budgeted overheads were £650,000 and labour hours were budgeted to be 125,000. Actual results showed overheads incurred as £665,000 and labour hours worked as 122,500. The total fixed overhead variance is: A B C D

LondonSAM

£28,000 £28,000 £15,000 £15,000

favourable adverse favourable adverse

(2 marks)

17



QUESTION 49 The margin of safety is the difference between the Breakeven Sales and the Budgeted Sales. Is this statement true or false? A B

True False

(1 mark)

QUESTION 50 The management of a company is making a decision which could lead to just three possible outcomes – ‘high’, ‘medium’ and ‘low’ levels of demand. Profit and expected value information are as follows: Outcome High Medium Low

Profit $28,500 $18,000 $12,000

Profit x Probability of outcome $11,400 $8,100 $1,800

What is the most likely level of profit from making the decision? A B C D

LondonSAM

$18,000 $19,500 $21,300 $28,500

(2 marks)

18


F2 Mock1 Quest

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