Section A

1.Z Co is evaluating a project which will generate cash flows of $2,600 each year in years four
to eight. (The first amount will be received in four years from now.)

What is the present value of the project cash flows using a discount rate of 14%?
$6,024
$4,485
$6,822
$12,061

2.The following bar chart shows the overhead expenses for a business for each quarter of
20X1.

What was the reduction in overhead expenses between quarter three and quarter four?
$

3.Data relating to two processes (L and M) are as follows:

Process Normal loss as % of input Input Output

(litres) (litres)
L 6 800,000 750,000
M 6 600,000 570,000

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For each process, was there an abnormal gain or an abnormal loss?
. Abnormal gain Abnormal loss
Process L
Process M

4.The manager of the southern region of a catering company has specified weekly sales targets
for each sales representative.

What type of objective are these targets?

Operational
Strategic
Tactical
Non-operational

5.Product A uses 4 kg of material X and 7 kg of material Y at a standard price of $5 per kg and

$6 per kg respectively. Product A needs two hours of skilled labour and one hour of semi-skilled
labour at $10 per hour and $8 per hour respectively.

Production overhead is absorbed at $5 per labour hour. Selling and distribution costs are $3 per
unit of product A.
What is the standard cost of production for product A?
$90
$47
$105
$108

6.Is each of the following statements, which refer to documents used in the material
procurement procedures of a company, true or false?
. True False
All goods received notes are prepared in the goods inwards department
All purchase requisitions are prepared in the purchasing department and are then
sent to the appropriate suppliers

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7.The following information relates to a manufacturing company for next period:

Units $
Production 24,000 Fixed production costs 480,000
Sales 25,000 Fixed selling costs 50,000

Using absorption costing, the budgeted loss for next period is $30,000.
What would be the budgeted loss for next period using marginal costing?
$50,000
$8,000
$52,000
$10,000

8.For which TWO of the following production overhead costs would 'floor area occupied'
be a suitable basis of apportionment?'
Factory rent
Equipment depreciation
Heating
Stationery

9.The following statements refer to attributes of good information:

(1) The cost of producing information should be less than the benefit derived from it
(2) Information should be understandable to the managers who use it
(3) Information should always be 100% accurate before it is used

Which statements are correct?

1 and 2 only
2 and 3 only
1, 2 and 3
1 and 3 only

10.Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour
hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.

What is the budgeted total labour cost for the next period?

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 $300,000
$240,000
$192,000
$288,000

11.A company absorbs production overheads on a machine hour basis. The following data relates
to last year:
Budget Actual
Machine hours 2,500 2,400
Total production overheads ($) 50,000 47,000
What was the total over or under absorption of production overheads last year?
$1,000 over absorbed
$2,000 under absorbed
$3,000 under absorbed
$3,000 over absorbed

12.Last month a manufacturing company's profit was $2,000, calculated using

absorption costing principles. If marginal costing principles had been used, a loss of
$3,000 would have occured. The company's fixed production cost is $2 per unit. Sales
last month were 10,000 units.

What was last month's production (in units)?

10,500
7,500
9,500
12,500

13.Which of the following variances would be shown in an operating statement

prepared under a standard absorption costing system?

(1) Variable overhead expenditure variance

(2) Fixed overhead expenditure variance
(3) Fixed overhead volume variance

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 1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3

14. Three types of organisation are listed as follows:

(1) Airline
(2) Hotel
(3) Hospital

Which of these organisations are likely to use service costing?

1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3

15.An organisation has the following total costs at two activity levels:

Activity level (units) 16,000 36,000

Total costs ($) 68,000 144,000

Variable cost per unit is constant within this range of activity levels, and there is a step-
up in the total fixed costs of $6,000, when activity level exceeds 25,000 units.
What are the total costs at an activity level of 30,000 units?
$

16.An organisation operates a process that creates two joint products (J and K). Last
month, joint costs of $6,000 were incurred and the organisation apportioned these to the
joint products using the sales value method. Data relating to last month were as follows:
Product Production (litres) Selling price per litre
($)
J 10,000 2
K 5,000 1

What was the apportionment of joint costs to product K for last month?
$

5
17.Last period an organisation budgeted to work 45,000 hours manufacturing 11,250
units. Actual output last period was 10,700 units which took 43,600 hours to
manufacture.
What was the labour efficiency ratio for last period (to one decimal place)?
101.9%
98.2%
95.1%
96.4%

18.An accountant has been asked to check the accuracy of the month's sales invoices.
There are several hundred so she decides to check a sample. She selects every tenth
invoice after the third one.
What type of sampling method has she used?
Multi-stage
Systematic
Stratified
Cluster

19.A company uses a multiplicative time series model to forecast sales. The trend in
sales is linear and is described by the following equation:

Trend = 400 + 10 T

Where T = 1 denotes the first quarter of 20X0

T = 2 denotes the second quarter of 20X0 etc.

The average seasonal variations are as follows:

Quarter 1 2 3 4
% Variation -30 +40 +10 -20

What is the sales forecast for Quarter 3 of 20X1?

423 units
517 units
480 units
3,157 units

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20.The following statements refer to aspects of budget administration:
(1) A budget manual describes the budget setting process in terms of objectives and
procedures
(2) The budget committee should consist of representatives of all the major segments of a
business
(3) Accounting department staff set all the budgets and are responsible for communicating
their content to budget holders
Which of the statements are correct?
1, 2 and 3
1 and 3 only
1 and 2 only
2 and 3 only

21.Two years ago the price index appropriate to the cost of material X had a value of
120. It now has a value of 160.
If material X costs $2,000 per kg today, what would its cost per kg have been two
years ago?
$

22.Which of the following best describes a flexible budget?

An annual budget which can be updated each month to reflect changing market and
economic conditions
A budget which is updated periodically so that it always covers the next twelve month
period
A budget constructed for several production activity levels which incorporates the effect of
different cost behaviour patterns
An annual budget which incorporates the actual results for the year end and the budgeted
figures for the remaining months

23.An investment has the following net present values (NPV), depending on the cost of capital.

Cost of capital of 15%: NPV = $5,000

Cost of capital of 20%: NPV = ($3,000)
What is the internal rate of return (IRR)?
16.9%
17.5%
18.1%
27.5%

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24.Which TWO of the following statements about managerial incentive schemes are true?
Incentive schemes will always boost performance
Incentive schemes can be non-financial
The rewards must relate to the achievement of team goals
Some incentive schemes may encourage bullying of under performers

25.The following information is available for direct material A for the month of June
$
Fixed budget 210,000
Actual cost 365,625
Flexed budget 262,500
What is the total direct materials variance for the month of June?
$52,500 favourable
$103,125 favourable
$52,500 adverse
$103,125 adverse

26.A customer returns a faulty product to a firm for repair under a warranty scheme. The
firm operates a total quality management system.
Which of the following best describes the cost of the repair?
An external failure cost

An internal failure cost

A prevention cost

An appraisal cost

27.A company which operates a process costing system had work in progress at the
start of last month of 400 units (valued at $3,000), which were 40% complete in respect
of all costs. Last month 1,500 units were completed and transferred to the finished
goods warehouse. The cost per equivalent unit for output produced last month was $20.
The company uses the FIFO method of cost allocation.
What is the total cost of the 1,500 units transferred to the finished goods
warehouse last month?
$

8
28.A company uses the economic order quantity (EOQ) model and holds no buffer
inventory. The cost of placing an order has now increased.
What is the effect of the increase on the EOQ and the annual holding cost?
. Increase Decrease No change
Annual holding cost
EOQ

29.A factory consists of two production cost centres (PC1 and PC2) and two service
cost centres (SC1 and SC2). The total allocated and apportioned overhead for each
centre is as follows:

PC1 PC2 SC1 SC2

$300,000 $200,000 $100,000 $600,000

The work done by the service cost centres can be represented as follows:
PC1 PC2 SC1 SC2
% of SC1 costs to other cost centres: 60 40 - -
% of SC2 costs to other cost centres: 50 25 25 -
After the full reapportionment of service cost centre overheads, what is the total
overhead for production cost centre PC1?
$660,000
$675,000
$690,000
$750,000

30.Which of the following statements about benchmarking is true?

It is always possible to identify a valid benchmark
Benchmarking can discourage team working in an organisation
Functional benchmarking is a method of comparing one unit or function with another
within the same industry
Benchmarking is an attempt to identify best practices

31.Which of the following options best matches the definition 'Variables or

conditions which are essential for an organisation's success'?
Critical success factors
Strategic objectives

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 Key performance indicators
Mission statements

32.The standard variable production overhead cost per unit of output is $32 (four direct
labour hours at $8 per hour). Last month actual expenditure on variable production
overheads was $69,800 and 9,200 direct labour hours were worked. 2,250 units of
output were produced last month.
What were the variable production overhead expenditure and efficiency variances
last month?
Expenditure: $2,200 Fav Efficiency: $1,600 Fav

Expenditure: $3,800 Fav Efficiency: $1,600 Fav

Expenditure $2,200 Fav Efficiency: $1,600 Adv

Expenditure: $3,800 Fav Efficiency: $1,600 Adv

33. The following information is available for H Co for quarter two:

Budgeted hours 3,100 standard hours

Standard hours produced 3,125 standard hours
Actual hours worked 3,200
What is the efficiency ratio?
98%
101%
103%
102%

34. During a recession, performance measurement may be affected in several ways.

Which of the following actions are most likely to be taken by a publishing business
during a recession?

(1) Ensure customer service and client relationships are strong

(2) Ignore competitors' innovations
(3) Increase number of staff training courses in spreadsheets
(4) Use assets economically, effectively and efficiently
1 and 4 only
1 and 3 only

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 2 and 4 only
2 and 3 only

35. The height of boys in a class follows a standard normal distribution with a mean height of 175cm and
standard deviation of 10cm
What is the probability of the boys being taller than 195cm?

Section B
36. Background
Blitzen Co manufactures and sells a single product. It is preparing budgets for the three month period
ending 31 December 20X5. The budget is virtually complete and the remaining task is to prepare the
budgeted statement of financial position as at 31 December 20X5. Sales of the product and purchases of
materials are all made on credit terms. There were no purchases or disposals of non-current assets in the
period to 31 December 20X5. Entries marked 'n/a' are yet to be calculated. The following data is
available:

Statement of financial position at 30 Budgeted statement of financial position at 31

September 20X5 December 20X5
$ $ $ $
Assets Assets
Non-current assets (net) 10,000 Non-current assets (net) n/a
Current assets Current assets
Raw material inventory 4,000 Raw material inventory 4,500
Trade receivables 3,000 Trade receivables n/a
Cash 1,000 Cash n/a
8,000
18,000
Equity and liabilities Equity and liabilities
Ordinary shareholders 16,000 Ordinary shareholders funds 19,500
funds

Current liabilities Current liabilities

Trade payables 2,000 Trade payables n/a
18,000

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Budgeted statement of profit or loss for the quarter Cash budget for the quarter ending 31
ending 31 December 20X5 December 20X5
$ $
Sales 25,000 Receipts from customers 23,000
Direct materials 14,000 Payments
Direct wages 6,000 Materials 12,000
Depreciation 1,500 Wages 6,000
Net profit/(loss) 3,500 Net cash inflow 5,000

7 marks
Task 1
What figure should be included in the budgeted statement of financial position as at 31 December
20X5 for each of the following items?
Non-current assets $

Receivables $

Cash $

Payables $

Task 2 2 marks
Blitzen Co is about to start work on budgets for 20X6. One kg of direct material A is required to make
four units of its product. Each unit of product also requires three kg of material B and two hours of direct
labour. Demand for the product and the supply of material A is unlimited, but only 50,000 kg of material
B and 40,000 labour hours are available in the coming period.
What is the principal budget factor for 20X6?
Direct material A

Sales demand

Direct labour

Direct material B

Task 3 1 mark
What would be the order of budget preparation for a manufacturing company who's principal
budget factor was sales demand?
Purchases budget, production budget, sales budget

Sales budget, production budget, purchases budget

Sales budget, purchases budget, production budget

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37. Background
Rudolph Co uses a standard marginal costing system to control the costs and revenues of its
only product. The following spreadsheet shows a standard cost-based operating statement for
the month of July. Entries for some cells have been deliberately omitted.

2 marks
Task 1
Complete the following cells with the correct text label.

Cell A4 (Sale volume variance / Selling price variance / Budget Fixed cost)

Cell A15 (Sale volume variance / Selling price variance / Budget Fixed cost/Actual
contribution)

2 marks
Task 2
Which of the following will calculate correctly the value in cell D18?
=D7-D14+D17
= sum(D3:D17)
=D7-D14-D16+D17
=D15+D16+D17

2 marks

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Task 3
Which of the following is a possible explanation of the variable cost variances?
A new cheap material was easier to work with
A new cheap material was more difficult to work with
A new expensive material was easier to work with
A new expensive material resulted in less wastage
Task 4 4 marks

Rudolph Co is now considering changing the costing system from standard marginal costing to
standard absorption costing system. You are given further details that were used to prepare the
July operating statement as follows:
(1) Budgeted sales and production were 5,000 units
(2) Actual sales and production were 4,900 units

If Rudolph Co had used standard absorption costing in the month of July, what would
have been the value of the following:

Fixed overhead volume variance adverse

Sales volume variance adverse
38. Background
Vixen Co is an internet based retailer of books and music. It believes that the factors critical to the
success of its business are the:

(1) Number of people visiting its website

(2) Conversion of website visits into orders
(3) Amount of time it takes to deliver an order to a customer
(4) Level of customer satisfaction with the way in which it deals with customer returns

Results for the most recent year are given below:

Website visits 5,000,000

Value of customer orders placed $30,000,000
Average value per order placed $20
Average value of undelivered orders at the end of each day $411,000
Number of orders returned 150,000
Number of complaints about returns process 1,000

Customers place a maximum of one order per visit to the website. The company operates for
365 days per year.

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Task 1 6 marks

Calculate the following for Vixen Co for the most recent year.
The average number of website visits per day (to the nearest whole visits
number)
The conversion rate of website visits into orders (to the nearest whole %
number)
The average delivery time per order (to the nearest day) days
The percentage of customer returns made without complaint (to the %
nearest whole number)
Task 2 2 marks
The performance indicators calculated above are part of Vixen Co's balanced scorecard performance
monitoring system. They measure process efficiency and customer satisfaction.

Which TWO of the following are also balanced scorecard perspectives?

Effectiveness
Financial success
Economy
Growth

Task 3 2 marks
Which of the following statements about balanced scorecard approach to performance
measurement is TRUE?
It includes financial and non-financial indicators
It is part of the benchmarking process
It must have an equal number of performance measures in each perspective
It ignores cause and effect relationships between performance measures

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