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© The Chartered Institute of Management Accountants 2001
Foundation Level
Management AccountingFundamentals
2FMAF 
21 November 2001Day 3 – afternoonINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsYou are allowed three hours to answer this question paper.Answer the ONE question in section A (this has 25 sub-questions, and is on pages 2 – 8).Answer the ONE question in section B (this is on page 9)Answer ONE question ONLY from section C (these questions are on pages 10 and 11).Write your examination number in the boxes provided on the front of the answer book.Write FMAF on the line marked "Subject" on the front of the answer book.Write your examination number on the special answer sheet for section A. Detach the sheetfrom the booklet and insert it into your answer book before you hand this in.Do NOT write your name or your student registration number anywhere on your answer book.Tick the appropriate boxes on the front of the answer book to indicate which questions you haveanswered.
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FMAFNovember 20012 
SECTION A — 50 MARKSANSWER
ALL
TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH
Question One1.1
A standard cost is
A
the planned unit cost of a product, component or service in a period.
B
the budgeted cost ascribed to the level of activity achieved in a budget centre in acontrol period.
C
the budgeted production cost ascribed to the level of activity in a budget period.
D
the budgeted non-production cost for a product, component or service in a period.
1.2
The term “budget slack” refers to the
A
extended lead time between the preparation of the functional budgets and the master budget.
B
difference between the budgeted output and the breakeven output.
C
additional capacity available which can be budgeted for.
D
deliberate over-estimation of costs and under-estimation of revenues in a budget.
The following information is required for sub-questions 
1.3 
and 
1.4 
RS Ltd is currently preparing the production budget for Product A and the materialpurchase budget for material X for the forthcoming year. Each unit of Product Arequires 5 kgs of material X.The anticipated opening stock for Product A is 5,000 units and the company wishes toincrease the closing stock by 30% by the end of the year.The anticipated opening stock for material X is 50,000 kgs and in order to avoid stock-outs the required closing stock has been increased to 60,000 kgs.The Sales Director has confirmed a sales requirement of 70,000 units of Product A.
1.3
How many units of Product A will need to be produced?
A
68,500 units.
B
71,500 units.
C
76,500 units.
D
80,000 units.
1.4
What will be the purchases budget for material X?
A
347,500 kgs.
B
350,000 kgs.
C
357,500 kgs.
D
367,500 kgs.Each of the sub-questions numbered from
1.1
to
1.25
inclusive, given below, has only ONEcorrect answer.
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November 2001FMAF 3 
1.5
S Ltd absorbs overheads on the basis of direct labour hours. Details of budgeted andactual figures for the latest period are as follows:
BudgetActual 
Overheads£350,000£400,000Output 70,000 units 60,000 unitsLabour hours 35,000 hours 30,000 hoursWhich ONE of the following statements is correct?
A
Overheads were £50,000 over-absorbed.
B
Overheads were £50,000 under-absorbed.
C
Overheads were £100,000 over-absorbed.
D
Overheads were £100,000 under-absorbed.
1.6
PP Ltd has recorded the following distribution costs during the last three months:
MonthVolumeTotal cost units £ 
132,000100,000240,000120,000350,000145,000What will be the distribution costs (to the nearest £) in month 4 when the expected activity levelis 42,500 units?
A
£126,250.
B
£127,500.
C
£129,861.
D
£132,813.
The following information is required for sub-questions 
1.7 
and 
1.8 
ZK Ltd has been asked to quote a price for a special job that must be completed withinone week.The job requires a total of 100 skilled labour hours and 50 unskilled labour hours. Thecurrent employees are paid a guaranteed minimum wage of £525 for skilled workersand £280 for unskilled workers for a 35-hour week. Currently, skilled labour has sparecapacity amounting to 75 labour hours each week and unskilled labour has sparecapacity amounting to 100 labour hours each week. Additional skilled workers andunskilled workers can be employed and paid by the hour at rates based on the wagespaid to the current workers.The materials required for the job are currently held in stock at a book value of £5,000.The materials are regularly used by ZK Ltd and the current replacement cost for thematerials is £4,500. The total scrap value of the materials is £1,000.
1.7
What is the total relevant cost to ZK Ltd of using skilled and unskilled labour on this job?
A
Nil.
B
£375.
C
£775.
D
£1,540.
1.8
What is the relevant cost to ZK Ltd of using the materials in stock on this job?
A
£1,000.
B
£3,500.
C
£4,500.
D
£5,000.
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