Foundations In Accountancy

MA2
Managing Costs and Finance

Final Mock Examination

For exams to 31 August 2024

Questions

Time allowed 2 hours

This exam consists of one section

FIFTY compulsory questions MUST be attempted

DO NOT OPEN THIS EXAM UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS

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 Formula sheet
2C 0D
Economic order quantity =
Ch

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 Tackling Multiple Choice Questions
MCQs are part of all Foundations in Accountancy exams.
The MCQs in your exam contain four possible answers. You have to choose the option that best answers
the question. The three incorrect options are called distracters. There is a skill in answering MCQs quickly
and correctly. By practising MCQs you can develop this skill, giving you a better chance of passing the
exam.
You may wish to follow the approach outlined below, or you may prefer to adapt it.

Step 1 Skim read all the MCQs and identify what appear to be the easier questions.

Step 2 Attempt each question – starting with the easier questions identified in Step 1. Read
the question thoroughly. You may prefer to work out the answer before looking at
the options, or you may prefer to look at the options at the beginning. Adopt the
method that works best for you.

Step 3 Read the four options and see if one matches your own answer. Be careful with
numerical questions as the distracters are designed to match answers that
incorporate common errors. Check that your calculation is correct. Have you followed
the requirement exactly? Have you included every stage of the calculation?

Step 4 You may find that none of the options matches your answer.

 Re-read the question to ensure that you understand it and are answering the
requirement.
 Eliminate any obviously wrong answers.
 Consider which of the remaining answers is the most likely to be correct and select the
option.

Step 5 If you are still unsure make a note and continue to the next question.

Step 6 Revisit unanswered questions. When you come back to a question after a break you
often find you are able to answer it correctly straight away. If you are still unsure have a
guess. You are not penalised for incorrect answers, so never leave a question
unanswered!

After extensive practice and revision of MCQs, you may find that you recognise a question when you sit the
exam. Be aware that the detail and/or requirement may be different. If the question seems familiar read
the requirement and options carefully – do not assume that it is identical.

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ALL 50 questions are compulsory and MUST be attempted
Each question is worth 2 marks.
1 TFjl Co has been using an overhead absorption rate of $5.60 per machine hour in its
machining department throughout the year. During the year the overhead expenditure
amounted to $275,000 and 48,000 machine hours were used.
Which of the following statements is correct?
 Overhead was under absorbed by $6,200
 Overhead was under absorbed by $7,600
 Overhead was over absorbed by $6,200
 Overhead was over absorbed by $7,600 (2 marks)
2 Are the following statements about time series true or false?
True False
Moving averages can be used to establish the trend.  
Using the multiplicative model, the seasonal variation equals the
actual figure divided by the trend.  
(2 marks)
3 A company's breakeven point has been calculated from the following data:
$
Selling price per unit 6.00
Variable production cost per unit 1.20
Variable selling cost per unit 0.40
Fixed production costs per unit, based on annual budget of 10,000 units 4.00
Fixed selling costs per unit, based on annual budget of 10,000 units 0.62
What is the company's breakeven point?
units
(2 marks)
4 Which TWO of the following relate to a joint product?

Has high sales value relative to by-products

Accounted for by deducting the net realisable value from the main product cost of
production
Is an insignificant, incidental product from a process
Charged with a share of joint production costs
(2 marks)

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 5 The following cost behaviour pattern has been observed for maintenance costs at various
levels of production.
Activity Maintenance cost
hours $
14,000 26,800
9,800 21,760
10,560 22,672
15,400 28,480
What will be the likely maintenance cost for an activity of 12,000 hours?
 $22,192
 $22,971
 $24,400
 $26,645 (2 marks)
6 Which of the following is the correct formula for the maximum inventory level?
 Maximum usage × maximum lead time
 Reorder level + reorder quantity - (minimum usage × minimum lead time)
 Reorder level - (average usage × average lead time)
 Safety inventory + ½ reorder quantity (2 marks)
7 The overheads and operating hours for two production cost centres are:
Production cost centre 1: $528,000 24,000 machine hours 1,600 labour hours
Production cost centre 2: $504,000 2,000 machine hours 5,600 labour hours
From the information given, which basis should be used as the overhead absorption rate
(OAR) for the cost centres?
Machine hrs Labour hrs
Basis basis
OAR for production cost centre 1:  
OAR for production cost centre 2:  
(2 marks)
8 An asset is purchased for $16,000 and depreciated at a rate of 25% per year on the reducing
balance method.
What is the value of the asset after four years (to the nearest whole number)?
$
(2 marks)

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9 A specialist components manufacturer is working below full capacity. Its chief executive
would like to fill up capacity by taking on extra work at low prices. A potential customer has
offered to buy 1,000 units of component FGH. Each unit of FGH requires 2 units of Material
M111 and 5 units of Material M222.
The inventory position of the company is as follows:
Original Current
purchase replacement Disposal
Units in price per price per value per
Material inventory unit unit unit
$ $ $
M222 4,000 2.00 2.50 1.80
M111 2,500 3.00 3.50 2.00
Notes
1 Material M111 is in continuous use by the company.
2 Material M222 is no longer used by the company, and existing inventories are now
surplus to requirements.
To calculate a minimum price for the customer’s order, what is the relevant cost of the
materials?
 $15,050
 $16,700
 $16,750
 $19,500 (2 marks)
10 Which of the following is true of management accounts?
 They are required by law
 They focus on an historic picture of past operations
 Strict rules govern the way they are presented
 They are produced for internal use (2 marks)
11 A company is evaluating a project that requires 400 kg of raw material X. The company has
150 kg of X in inventory that was purchased six months ago for $55 per kg. The company no
longer has any use for X. The inventory of X could be sold for $40 per kg. The current purchase
price for X is $53 per kg.
What is the total relevant cost of raw material X for the project?
 $21,200
 $21,500
 $19,250
 $13,250 (2 marks)
12 Which of the following costs are part of the prime cost for a manufacturing company?
 The cost of raw materials that go in to the product
 Wages of factory workers engaged in machine maintenance
 Depreciation of lorries used for deliveries to customers
  Cost of indirect production materials (2 marks)

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 13 A farmer is to lease a field for six years at an annual rent of $500, the rentals being paid at the
beginning of each year.
What is the present value of the lease payments at a discount rate of 7% per year?
 $1,998
 $2,383
 $2,550
 $2,883 (2 marks)
14 The following information is available for Hotel Chock for the latest 30 day period:

Number of rooms available per night 60

Percentage occupancy achieved 75%
Room servicing cost incurred $4,995
What is the room servicing cost per occupied room-night (to two decimal places)?
 $3.70
 $62.44
 $111.00
 $1,350.00 (2 marks)
15 Which of the following mutually exclusive projects would you advise your client to undertake
if only one could be undertaken, given only the following information.
IRR NPV
Project 1 18.5% $1,000
Project 2 17.6% $1,200
Project 3 16.7% $1,400
Project 4 15.6% $1,600
 Project 1
 Project 2
 Project 3
 Project 4 (2 marks)
16 A business had budgeted to spend $12.60 per unit on materials in the coming month.
Budgeted production was 2,500 units.
Actual production was 2,750 units and total materials costs for the month were $34,100.
What was the total direct materials variance comparing actual with the fixed budget?
 $550 (F)
 $2,600 (A)
 $2,600 (F)
 $550 (A) (2 marks)
17 What is the present value at 8% per year, of ten annual payments of $700, the first payment
being made immediately (to the nearest dollar)?
 $4,697
 $1,050
 $4,435
 $5,073 (2 marks)

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18 Which of the following would be the most appropriate basis for apportioning machinery
insurance cost centres within a factory?
 The operating hours of the machinery in each cost centre
 The number of machines in each cost centre
 The floor area occupied by the machinery in each cost centre
 The value of the machinery in each cost centre (2 marks)
19 The NPV of an investment is $230 when the discount rate is 5% and $160 when it is 12%.
What is the internal rate of return of the investment to two decimal places?
 It is not possible to estimate the IRR unless one of the NPVs is negative
 28.00%
 9.13%
 8.50% (2 marks)
20 The following pie chart has been drawn depicting sales values for December:
Sales of components for December ($m)

70 (B9)

220 (C12)

160 (A2)

50 (D5)

Based on the pie chart above, what percentage of sales in December related to component
D5 (to the nearest whole number)?
%
(2 marks)
21 Budgeted and actual results for a sales department are as follows:
Budget Actual
Sales units 4,300 4,550
Sales revenue $107,500 $104,650
What is the selling price variance comparing actual results to the flexed budget?
 $9,100
 $2,850
 $6,250
 $5,750 (2 marks)
22 A company manufactures a single product with a selling price of $100.00 per unit. The
following other information is available:
$/Unit
Variable production 31.50
Fixed production 26.00
Variable selling 5.20
Fixed selling 6.00
During the period, 15,300 units were sold.

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 Using marginal costing, what was the total contribution made in the period?
 $478.890
 $650,250
 $968,490
 $1,048,050 (2 marks)
23 Data for department Y for the latest period was as follows.
Budgeted direct labour hours 12,300
Actual direct labour hours 11,970
Production overhead absorption rate $2.60 per direct labour hour
Production overhead under absorbed $5,670
What was the actual production overhead incurred during the period?
 $36,792
 $46,792
 $56,792
 $66,792 (2 marks)
24 The selling price of Product MNK is $20 per unit and the contribution to sales (C/S) ratio is
20%.
How many units of Product MNK need to be sold to make a contribution of $70,000?
units
(2 marks)
25 Which of these statements is correct?
 Over-trading can occur when a business has too much working capital and over-
capitalisation can occur when a business has insufficient working capital
 Signs of over-trading include rapidly increasing sales volumes, increasing profit margins,
shorter receivables collection periods, longer payables payment periods
 Over-trading can occur when a business has insufficient working capital and over-
capitalisation can occur when a business has too much working capital
 Signs of over-trading include slowly increasing sales volumes, increasing profit margins,
longer receivables collection periods, longer payables payment periods (2 marks)

26 The following data is available for the last two periods:

Period 1 Period 2
Total production costs ($) 36,995 49,423
Output (units) 3,600 4,900
What is the variable production cost per unit of output (to two decimal places)?
$ (2 marks)
27 The following table details the total cost Y, a step cost, for different production levels of
Product X.
Units of Product X Cost Y ($'000)
0 100
10 100
20 100
30 150
40 150

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 What could have been the cause for the increase in the cost?
 Increased storage requirements
 Pay increase for direct labour
 Loss of material discounts
 Temporarily employing extra delivery drivers on hourly pay rates (2 marks)
28 A business has higher closing inventory at the end of June than at the end of May.
If absorption costing rather than marginal costing is used, what is the effect on profit and
inventory valuation?
 Profit higher Inventory valuation higher
 Profit higher Inventory valuation lower
 Profit lower Inventory valuation higher
 Profit lower Inventory valuation lower (2 marks)
29 A company budgets that its fixed costs for next year will be $1,800,000. These include annual
rental costs, for which there are six-monthly payments of $120,000 in March and September,
and depreciation charges of 300,000. All other fixed costs occur at an even monthly rate
throughout the year, and are paid for in the month that they occur.
What are the budgeted cash payments for fixed cost expenses in March?
 $215,000
 $225,000
 $245,000
 $270,000 (2 marks)
30 FB Co makes a single product with the following cost details
Per Unit
Direct materials ($3 per kg) $12
Direct labour ($8 per hour) $72
Production overheads $18
Demand for next period will be 20,000 units. No inventories are held and only 85,000 kg of
material and 175,000 hours of labour will be available.
What will be the limiting factor for the next period?
 Material only
 Labour only
 Material and labour
 Neither material nor labour (2 marks)
31 The direct labour capacity utilisation ratio for a period was 106%.
What could have caused this?
 Actual hours worked being greater than budgeted hours
 Actual hours worked being less than budgeted hours
 Standard time for actual output being greater than budgeted hours
 Standard time for actual output being less than budgeted hours (2 marks)
32 Are the following statements about cost-volume-profit analysis true or false?
True False
Profits are maximised at the breakeven point.  
The margin of safety in units is the difference between the expected
sales volume and breakeven sales volume.  
(2 marks)

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 33 Which TWO of the following are examples of asset expenditure?

Purchase of a building
Extension to a building
Fixing broken windows
Replacing missing roof tiles
(2 marks)
34 The following data relates to a raw material:
Units Unit price Value
Date $ $
1 Feb Balance b/f 100 5.00 500.00
4 Jul Receipt 50 5.50 275.00
6 Jul Receipt 50 6.00 300.00
9 Oct Issue 120
If the FIFO method of pricing is used, what is the value of the issue on 9 October?
 $600
 $610
 $645
 $675 (2 marks)
35 What is the Economic Order Quantity (EOQ) where monthly demand is 2,000 units, order
costs are $45 per order, inventory costs $2,160 per unit and the company's cost of capital is
10%.
 70
 80
 90
 100 (2 marks)
36 Rose is paid using a differential piecework payment scheme with a guaranteed minimum
wage of $130 per day. The differential rates for output each day are:

up to 100 units $1.50 per unit

excess over 100 units $2.00 per unit
Rose produced the following over a three-day period:
Wednesday 85 units
Thursday 115 units
Friday 120 units
What is Rose’s total wage for the three days?
 $482.50
 $497.50
 $500.00
 $600.00 (2 marks)

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37 A differential piecework scheme has a basic rate of $0.50 per unit. Output in addition to 500
units is paid at higher rates. The premiums over and above the basic rate, which apply only to
additional units over the previous threshold, are:
Output (units) Premium (per unit)
501–600 $0.05
above 600 $0.10
What is the total amount paid if output is 620 units?
 $317
 $318
 $322
 $372 (2 marks)

38 Which of the following statements about a sunk cost is correct?

 It is a future, incremental cash flow
 It is irrelevant for decision making
 It is the value of the benefit sacrificed when one course of action is chosen in
preference to another
 It is affected by future fluctuations in the level of activity (2 marks)

39 A business had opening inventory of 33,480 units and closing inventory of 25,920 units. Profits
using marginal costing were $228,123 and using absorption costing were $203,931.
What was the fixed overhead absorption rate per unit (to the nearest cent)?
$
(2 marks)
40 An employee did not receive payment for overtime last month and is raising this with the
payroll department.
Which of the following is the most appropriate method of communication?
 Letter
 Formal report
 Table
 Telephone call (2 marks)
41 A company absorbs production overheads using a machine hour basis.
In order to calculate any over or under absorbed overheads which of the following would be
needed, in addition to the pre-determined machine hour rate?
 Budgeted overheads and actual overheads incurred
 Budgeted overheads and actual hours worked
 Actual overheads incurred and budgeted hours
 Actual overheads incurred and actual hours worked (2 marks)
42 In a typical cost ledger, what is the correct double entry for indirect labour cost incurred?
Debit Credit
 Wages control Overhead account
 WIP account Wages control
 Overhead account Wages control
 Wages control WIP account
(2 marks)

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 43 Which of the following would be appropriate cost units for a transport business?
(i) Cost per tonne-kilometre
(ii) Fixed cost per kilometre
(iii) Maintenance cost of each vehicle per kilometre
 (i) only
 (ii) only
 (i) and (iii) only
 All of them (2 marks)
44 A component has a buffer inventory of 280, a reorder quantity of 1,200 and a rate of demand
which varies between 100 and 400 per day.
What is the average inventory of the component?
units
(2 marks)
45 HMF Co apportions its joint costs using the physical measurement method. Joint costs for the
period were $20,000. The following information is given for its three joint products:
Product Selling price
output per kg
(kg) $
X 500 10
Y 2,000 8
Z 1,500 4
What is the joint cost apportioned to product Y for the period?
$ (2 marks)
46 Which of the following is NOT relevant to the calculation of the economic order quantity of a
raw material?
 Ordering cost
 Purchase price
 Inventory holding cost
  Usage
(2 marks)
47 Are the following statements about data visualisation true or false?
True False
Its purpose is to make data easier to understand.  
It avoids data bias being introduced into the data.  
(2 marks)
48 Are the following statements about further processing joint products true or false?
True False
It should only occur if the sales value at split-off point is less than the final sales value minus
further processing costs.  
The apportionment of common costs is irrelevant to the decision about whether to further
process.  
(2 marks)

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49 A company budgets to purchase $500,000 in materials in April, $800,000 in May and $700,000
in June. 10% of purchases are paid for in the month of purchase, in order to benefit from a
discount of 2% for immediate payment. One half of the remaining purchases are paid for in
the following month and the rest are paid for after two months.
What are budgeted payments to materials suppliers in June?
 $653,600
 $655,000
 $656,400
 $718,600 (2 marks)
50 What are government bonds otherwise known as?
 Certificates of deposit
 Bills
 Gilts
 Commercial paper
(2 marks)

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 Student self-assessment
Having completed this paper take a few minutes to consider what you did well and what you found
difficult. Use this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning

Did you finish too early?
Did you overrun?
Did you waffle?
Layout
Was your answer difficult to follow?
Did you fail to explain each point?
Were some of your workings unclear? Y/N
Content
Did you struggle with:
Interpreting the questions?
Understanding the subject?
Remembering the notes/text?
Y/N Focus your planning time on generating more ideas.
Use models to help develop width to your thinking.
Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind leave space and move on.
Y/N Focus your planning time on developing a logical
structure to your answer.
Y/N Use headings and subheadings.
Use numbering sequences when identifying points.
Leave space between each point.
Y/N Show why the point identified answers the question
set.
Give yourself time and space to make the marker's job
easy.
Y/N Learn the meaning of question words (inside front
cover).
Learn subject jargon (Interactive text glossary).
Read questions carefully noting all the parts.
Practise as many questions as possible.
Y/N Review your notes/Interactive text.
Work through easier examples first.
Contact a tutor for help.
Y/N Quiz yourself constantly as you study. You need to
develop your memory as well as your understanding
of a subject.

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