MOCK EXAM

1. The main functions that management are involved with are planning, decision making
and control.
Which two of the following describe the control process?

(1) Gathering information about actual results achieved

(2) Choosing between alternative ways for achieving the objectives
(3) Comparing actual and expected results for evaluating the outcome
(4) Making a decision based on information provided

A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 2 and 4 only

2 marks

2. Which of the following statements relating to management information are

true?

1. It is produced for parties external to the organization

2. There is usually a legal requirement for the information to be produced
3. No strict rules govern the way in which the information is presented
4. It may be presented in monetary or non-monetary terms

A. 1 and 2
B. 3 and 4
C. 1 and 3
D. 2 and 4
2 marks

3. Which of the following costs is part of the prime cost for a manufacturing
company?

A. Cost of transporting wood from the supplier’s premises for a furniture manufacturer
B. Wages of factory workers engaged in machine maintenance
C. Depreciation of lorries used for deliveries to customers
D. Cost of indirect production materials

2 marks

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4. An organization has the following total costs at three activity levels:

Activity level (units) 14,000 18,000 25,000

Total costs ($) 125,000 145,000 172,000

Variable cost per unit is constant within this range of activity but there is a step up of
10% in the total fixed costs when the activity exceeds 18,500 units.

What is the total cost at an activity of 22,000 units?

A. $159,180
B. $164,450
C. $166,500
D. $170,500
6 marks

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5. Match the cost types with their graphs by putting letters of scenarios in the boxes of
the graphs:
A. For the production of up to 100 computers only one supervisor is required, but if
the production is between 100 and 200, two supervisors are required.
B. In addition to a per minute fee, the company is required to pay a fixed fee for the
telephone services
C. The company produces chairs and it takes 0.5 m 2 of wood to make one chair and
each square meter costs 50$. IF the factory makes 10 chairs, the total material
cost is 250$, if the company makes 20 chairs the total material cost is 500$.
D. The company’s production premises rent is 5,000 $ irrespective of the fact
whether the company makes 100 or 200 telephones.

8 marks

1. 2.

3. 4.

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6. Inventory movement for product X during last quarter was:

2 June Purchases 20 items at 20$

15 July Sales 22 items at 30$

5 March Purchases 25 items at 22$

24 March Sales 25 items at 30$

Opening inventory on 1 June was 15 items valued at 18$ each.

Required:
a. Calculate the gross profit for the quarter using FIFO method
4 marks

b. Calculate the gross profit for the quarter using the continuous weighted
average cost method (WACO). Explain the difference in profits according to
WACO costing and FIFO?
6 marks

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7. The demand for a product G100 is 12,500 units for a three month period. Each unit of
the product has a purchase price of $15 and ordering costs are $20 per order placed.
The annual holding cost of one unit of product is 10% of its purchase price.

What will be total annual costs of inventory purchasing, ordering and holding?
Please round EOQ and cost figures to the nearest dollar

A. $600,000
B. $750,000
C. $750,866
D. $751,732
6 marks

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8. XYZ’s annual demand for raw material is 750,000 units. The company is working 250
days per annum. The estimated lead time is 5 days. The cost of each unit is $2, the unit
holding cost is 30 cents per annum, and the cost of placing one order is $20.

What will be an optimal reorder level for XYZ assuming no buffer inventory is
kept?
A. 10,000
B. 15,000
C. 3,000
D. 75
4 marks

9. A company had 80 direct production workers at the beginning of last year and 60
direct production workers at the end of last year. During the year a total of 45
employees had left the company and all positions needing replacement were already
filled by the yearend.

The labour turnover rate (rounded to one decimal place) for last year was:

A. 75.0%
B. 64.3%
C. 35.7%
D. 21.4%
4 marks

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10. A company has the following information for a given week:

Budgeted Production 2,000 units

Actual Production 2,200 units

Each unit is expected to take 3 labour hours.

Actual labour hours worked for the week were 6,800.

What were the labour capacity and efficiency ratios (rounded to a full
percentage)?

4 marks

11. A company has the following budgeted and actual information

Budget Actual
Production overhead $50,000 $60,000
Labour hours 12,500 13,600

What is the amount of under/over absorption?

A. $10,000 over-absorption
B. $10,000 under-absorption
C. $5,600 over-absorption
D. $5,600 under-absorption
6 marks

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12. A direct labor employee works a standard 40 hour week and is paid a basic rate of
$20 per hour. Overtime is paid at time and a half. Overtime is worked to meet
production general requirements. In a week when 60 hours were worked and a bonus
of $100 was paid, what was the direct labor cost?

A. $800
B. $900
C. $1,200
D. $1,300
4 marks

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

Units $
Production 15,000 Fixed production costs 65,000
Sales 13,000 Fixed selling costs 12,000

The normal level of activity is 14,000 units per period.

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? Please round to
the nearest dollar.

A. $26,714
B. $14,714
C. $25,000
D. $14,000
4 marks

14. Which of the following statements is not correct?

A. In a marginal costing system, the cost per unit is equal to the variable cost per
unit
B. In an absorption costing system, the non-production costs are deducted from
gross profit to calculate net profit
C. In a marginal costing system, the fixed costs are not included in the cost per unit
D. In a marginal costing system contribution is calculated by deducting total costs
from sales revenue

4 marks

9
 15. The management accountant of Progress LLC has already allocated and
apportioned the fixed overheads for the period although she has yet to reapportion the
service centre costs. Information for the period is as follows:

Total 1 2 Stores Maintenance

Overheads $65,000 $17,500 $32,750 $6,300 $8,450
Work done by
60% 30% - 10%
Stores
Work done by
75% 20% 5% -
maintenance

What are the total overheads included in production department 1 if the

reciprocal method is used to reapportion service centre costs?
(Use either equation or repeated distribution method for reciprocal reapportionment,
ignore rounding error, and hence, from the choices below select a figure that is most
close to the solution).

A. $27,618
B. $28,171
C. $28,398
D. $28,453
6 marks

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16. Z is a transportation service company. The trucks deliver loads to the destinations
and come back to the headquarters. The trucks drive in total 150,400 kilometers (loaded
and unloaded) per annum. Fuel and other variable running costs per kilometer travelled
(loaded and unloaded) are budgeted to be $0.80. Other fixed running costs amount to
$145,200 per year. Total estimated tone-kilometers (composite cost unit) for the
company are 331,900.

What is the standard running cost per tone-kilometer?

A. $0.36
B. $0.60
C. $0.80
D. $1.25
4 marks

17. The company is involved in mass production and producing tins of paint. All the
products in a process are identical and indistinguishable from each other. Most
appropriate costing method for the company will be:

A. Job costing
B. Batch costing
C. Process costing
D. All, except process costing
2 marks

11
The following information available for a process for the month of October relates to
questions 18, 19 and 20.
A company operates a process costing system using the first-in-first-out (FIFO) method
of valuation. No losses occur in the process. All materials are input at the
commencement of the process. Conversion costs are incurred evenly through the
process.

The following data relate to October:

Units Degree of completion

Opening work in progress 2,000 60%
Total number of units completed 14,000
Closing work in progress 3,000 30%

$
Costs arising in October:
Materials 51,000
Conversion 193,170

18. What was the total number of units input during October?

A. 12,000
B. 13,000
C. 15,000
D. 17,000
4 marks

19. Calculate the total cost per equivalent unit

A. $ 3.4
B. $14.1
C. $15.0
D. $17.5

Show your workings on the next page

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 6 marks

20. What was the value of the closing work-in-progress for last period?

A. $21,330
B. $21,690
C. $22,530
D. $22,890
4 marks

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21. The selling price of product H is set at $700 for each unit. If the company requires a
return of 15% in the coming year on product H, the target cost for each unit for the
coming year will be:
4 marks

22. At what stage of the product life cycle the Company enjoys the highest profits.
Please explain.
4 marks

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1. A Company manufactures and sells one product which requires 8 kg of raw material
in its manufacture. The budgeted data relating to the next period are as follows:

Units
Sales 19,000
Opening inventory of finished goods 4,000
Closing inventory of finished goods 3,000

Kg
Opening inventory of raw materials 50,000
Closing inventory of raw materials 53,000

What is the budgeted raw material purchases for next period (in kg)?

A. 141,000
B. 147,000
C. 157,000
D. 163,000

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2.The forecast sales for an organization are as follows:

September October November December

$ $ $ $
Sales 5,000 8,000 6,000 9,000

All sales are on credit and receivables tend to pay in the following pattern:
%
In month of sale 40
In month after sale 45
Two months after sale 10

The organization expects the rate of irrecoverable debts to be 5%.

Calculate the forecast cash receipts from receivables in December ($):

A. 3,600
B. 9,000
C. 7,100
D. 8,550

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3. A company is preparing budgets for the coming year. The following is information
regarding the labour budgets:
Products
F G
Output units 1,000 1,300
Labour usage (hrs/ unit) 3 hrs 4 hrs

It is expected that 10% of labour paid for will be idle time.

What are the budgeted hours paid (rounded to a full hour)?

A. 8,200 hours
B. 9,020 hours
C. 9,111 hours
D. 9,300 hours

4. What does the statement 'sales is the principal budget factor' mean?

A. The level of sales will determine the level of cash at the end of the period
B. The level of sales will determine the level of profit at the end of the period
C. The company's activities are limited by the level of sales it can achieve
D. The sales manager is the head of the budget committee

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5. ABC Co has a manufacturing capacity of 10,000 units. The flexed production cost
budget of the company is as follows:
Capacity 60% 100%
Total production costs $11,280 $15,120

What is the budgeted total production cost if it operates at 85% capacity?

A. $13,680
B. $12,852
C. $14,025
D. $12,340

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6.An organization is preparing its quarterly budget. It has consistently maintained
inventory levels at 10% of the following month’s sales. Budgeted sales for October are
2,500 units and sales are expected to increase by 350 units per month for the following
three months.

What is the budgeted production in units for November?

A. 2,815
B. 3,235
C. 2,535
D. 2,885

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

A. A budget which shows variable production costs only

B. A monthly budget which is changed to reflect the number of days in the month
C. A budget which shows sales revenue and costs at different levels of activity
D. A budget that is updated halfway through the year to incorporate the actual
results for the first half of the year

8. A bank offers depositors a nominal 4% p.a. with interest payable quarterly.

What is effective annual rate of interest?

A. 1%
B. 4%
C. 1.025%
D. 4.06%

9. A machine has an investment cost of $70,000 at time 0. The present values (at time
0) of the expected net cash inflows from the machine over its useful life are:

Discount rate Present value of cash flows

10% $77,700
15% $68,800
20% $62,200

What is the internal rate of return (IRR) of the machine investment? Please
explain your answer.

A. Below 10%
B. Between 10% and 15%
C. Between 15% and 20%
D. Over 20%

20
10.An education authority is considering the implementation of a CCTV (closed circuit
television) security system in one of its schools. Details of the proposed project are as
follows:

Life of project 5 years

Initial cost $75,000

Annual savings:
Labor costs $20,000
Other costs $5,000
NPV at 15% $8,800

Calculate the internal rate of return for this project to the nearest 1%.

A. 16%
B. 18%
C. 20%
D. 22%

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11. A company is considering investing in a new machine that will cost $270,000 and
will last for 4 years with a scrap value at the end of 4 years of $20,000.

It is expected to generate operating cash inflows each year as follows:

Year 1: $50,000
Year 2: $180,000
Year 3: $100,000
Year 4: $50,000

The cost of capital is 12% per annum.

What is the discounted payback period for the machine?

A. Within the first year

B. Within the second year
C. Within the third year
D. Within the fourth year

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12. A company’s operating costs are 60% variable and 40% fixed.

Which of the following variances’ values would change if the company switched
from standard marginal costing to standard absorption costing?

A. Direct material efficiency variance

B. Variable overhead efficiency variance
C. Sales volume variance
D. Fixed overhead expenditure variance

13.The following statements relate to an investment project that has been discounted at
rates of 15% and 20%:

1. The discounted payback period at 15% will be longer than the discounted payback at
20%.
2. The discounted payback period at 20% will be longer than the discounted payback at
15%.
3. The non-discounted payback period will be longer than the discounted payback
period.
4. The non-discounted payback period will be shorter than the discounted payback
period.

Which of the statements are true?

A. 1 and 3
B. 1 and 4
C. 2 and 3
D. 2 and 4

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14. The following information relates to labour costs for the past month:

Budget Labour rate $10 per hour

Production time 15,000 hours
Time per unit 3 hours
Production units 5,000 units

Actual Wages paid $176,000

Production 5,500 units
Total hours worked 14,000 hours

There was no idle time.

What were the labour rate and efficiency variances?

Rate variance Efficiency variance

A. $26,000 adverse $25,000 favourable
B. $26,000 adverse $10,000 favourable
C. $36,000 adverse $10,000 favourable
D. $36,000 adverse $25,000 favourable

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15. The standard cost information for Prospect's single product shows the standard
direct material content to be 4 liters at $3 per liter.

Actual results for December were:

Production: 1,270 units

Material used: 5,000 liters at a cost of $16,000

All of the materials were purchased and used during the period.

The direct material price and usage variances for December:

Material price Material usage

A. $1,000 (F) $240 (F)
B. $1,000 (A) $240 (F)
C. $1,000 (F) $240 (A)
D. $1,000 (A) $256 (F)

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16. A company has the following information available for a particular month:

Budget:
Sales 8,000units
Selling price $20/unit
Variable cost $8/unit
Fixed cost $4/unit

Actual sales revenue was $148,200 for 7,800units.

What is the adverse sales volume variance using marginal and absorption
costing systems?

Marginal Costing Absorption Costing

A. $2,400 $1,600
B. $1,600 $2,400
C. $2,200 $1,400
D. $1,400 $2,200

4 4454u

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The following information refers to the questions 17, 18, 19

The following information is provided regarding fixed overhead costs:

Budget Actual
Units: 1,300 units 1,260 units
Hours: 3,900 hours 4,020 hours
Cost: $17,550 $18,140

17. What is the fixed overhead expenditure variance?

A. $1,080 Favorable
B. $540 Favorable
C. $590 Adverse
D. $1,080 Adverse

18. What is the fixed overhead efficiency variance?

A. $1,080 Favorable
B. $540 Favorable
C. $590 Adverse
D. $1,080 Adverse

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19. What is the fixed overhead capacity variance?

A. $1,080 Favorable
B. $540 Favorable
C. $590 Adverse
D. $1,080 Adverse

The following information relates to questions 20 and 21

The variable overhead cost is $21/unit. Variable overheads are absorbed based on
machine hours. Each unit requires 6 hours and 3,000 units are budgeted. The actual
output is 3,450 units; we incurred $74,000 during the period and worked 23,426
machine hours.

20. What is the variable production overhead expenditure variance?

A. $9,450 favorable
B. $7,991 favorable
C. $9,541 adverse
D. $11,000 adverse

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21.What is the variable production overhead efficiency variance?

A. $9,450 favorable
B. $7,991 favorable
C. $9,541 adverse
D. $11,000 adverse

22. As one of its key performance indicators, a restaurant measures the amount of food
that is wasted.

Under which perspective would this appear on a balanced scorecard?

A. Financial Success
B. Customer Satisfaction
C. Process Efficiency
D. Growth

23. A construction company benchmarks the performance of its accounts receivable

department with that of a leading credit card company.

What type of benchmarking is the company using?

A. Internal benchmarking
B. Competitive benchmarking
C. Functional benchmarking
D. Strategic benchmarking

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24. ABC LLC budgeted to produce 10,000 units of its product (the Luka) in the budgeted
time of 50,000 hours. During the period the company produced 12,500 units in a total
time of 68,750 hours.

The production volume ratio for the period was _______ % (please show your
workings below)

25. ABC LLC is keen to increase the use they make of non-financial performance
measures in their overall performance measurement activities. In particular, they are
keen to improve customer retention and so want to focus on the quality of service they
provide to their customers.

Which of the following measures would be directly appropriate as a measure of

service quality?

1. Number of customer complaints

2. Number of repeat orders as a proportion of total orders
3. Sales volume growth

A. 1 and 2
B. 1, 2 and 3
C. 1 and 3
D. 2 and 3

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Present value table

31
Annuity table

32