Mock oc Examination a at o

: C CAT Paper ape TT7

Planning, Control & Performance Management

Session Set by : June 2011 : Mdm Gan Bee Eng

Your Lecturer Mdm Gan Bee Eng Ms Yeo Ai Ling Your Mailing Address : ______________________________________ ______________________________________ Y Your C Contact N Number b : ______________________________________

I wish to have my script marked by my lecturer and collect the marked script at the SAA-GE Reception Counter have the marked script returned to me by mail

(Please submit your script latest by 6th May 2011 for marking)
SAA GLOBAL EDUCATION CENTRE PTE LTD
Company Registration No. 201001206N 20 Aljunied Road, #01-04, CPA House, Singapore 389805 Tel: (65) 6744 9700 Fax: (65) 6744 9796 Website: www.saa.org.sg Email: acca@saa.org.sg

TT7 Management Accounting

Mock Test June 2011

TT7 Management Accounting

Mock Test

Which of the following is correct when considering the allocation, apportionment and reapportionment of overheads in an absorption costing situation? A B C D Only production related costs should be considered. Allocation is the situation where part of an overhead is assigned to a cost centre Costs may only be reapportioned from production centres to service centres Any overheads assigned to a single department should be ignored

A company wishes to make a profit of $300,000. It has fixed costs of $60,000 with a C/S ratio of 0.60 and a selling price of $30 per unit. How many units must the company sells? Answer

A company produces and sells a single product whose variable cost is $8 per unit. Fixed costs have been absorbed over the normal level of activity of 200,000 units and have been calculated as $3 per unit. The current selling price is $15 per unit. How much profit is made under marginal costing if the company sells 150,000 units? Answer

A company incurs the following costs at various activity levels: Total cost $ 250,000 312,500 400,000 Using the high-low method, what is the variable cost per unit? A $25 B $30 C $35 D $40 Activity level Units 5,000 7,500 10,000

A company has over-absorbed fixed production overheads for the period by $6,000. The fixed production overhead absorption rate was $8 per unit and is based on the normal level of activity of 5,000 units. Actual production was 4,500 units. What was the actual fixed production overheads incurred for the period? A $30,000 B $36,000 C $40,000 D $42,000

A company input 500 kilos of material into a process at a cost of $7,000.As expected it had to scrap 10% of the input and it sold this for $10 per kilo. What was the net material cost (to the nearest penny) per kilo of good production? A $13.00 B $14.00 C $14.44 D $15.56

The activity (volume) ratio for a given month was 110% and the efficiency ratio was 99%. What was the capacity ratio (to the nearest whole number) for the same month? A 90% B 109% C 111% D 200%

Failure to record stock returned to stores will result in which of the following if a physical stocktake was not undertaken? Stock quantity Production costs A B C D Higher than shown on record card Lower than shown on record card Lower than shown on record card Higher than shown on record card Higher than it should be Higher than it should be Lower than it should be Lower than it should be

A company achieves bulk buying discounts on quantities over a certain level. These discounts are only available for the units above the specified level and not on all the units purchased. Which of the following graphs of total purchase cost against units best illustrates the above situations?

A $

B $

units

units

C $

D $

units

units

10

Which of the following is correct with regard to stocks? (i) (ii) (iii) Stock-outs arise when too little stock is held. Safety stocks are the level of units maintained in case there is unexpected demand. A reorder level can be established by looking at the maximum usage and the maximum leadtime. (i) and (ii) only (ii) and (iii) only B D (i) and (iii) only (i), (ii) and (iii)

A C

11

A company has the following budgeted information for the coming month:: Budgeted sales revenue Budgeted contribution Budgeted profit $500,000 $200,000 $50,000

What is the budgeted break-even sales revenue? Answer

12

Which of the following statements are correct with regard to marginal costing? (i) (ii) (iii) A C Period costs are costs treated as expenses in the period incurred Production costs can be identified with goods produced. Unavoidable costs are relevant for decision making (i),(ii) and (iii) (i) and (iii) only B D (i) and (ii) only (ii) and (iii) only

13

Camden has three divisions. Information for the year ended 30 September is as follows: Division A $000 Sales Variable Costs Contribution Fixed Costs Net Profit 350 280 70 Division B $000 420 210 210 Division C Total $000 $000 150 120 30 920 610 310 262.5 47.5

General fixed overheads are allocated to each division on the basis of sales revenue; 60% of the total fixed costs incurred by the company are specific to each division being split equally between them. Using relevant costing techniques, which divisions should remain open if Camden wishes to maximise profits? A C A, B and C B only B D A and B only B and C only

14

A company uses process costing to value its output. The following was recorded for the period: Input materials Conversion costs Normal loss Actual loss 2,000 units at $4.50 per unit $13,340 5% of input valued at $3 per unit 150 units

There were no opening or closing inventories What was the valuation of one unit of output to one decimal place? A $11.8 B $11.6 C $11.2 D $11.0

15

Machine hours are used to absorb overheads in a production cost centre. Overheads allocated and apportioned to the cost centre are: $ 13,122 7,920 2,988

Allocated Apportioned Reapportioned from service cost centres

216,000 units of product are manufactured at a rate of 120 units per machine hour. What is the overhead absorption rate per machine hour? A $7.29 B $11.13 C $11.69 D $13.35

16

In a cost accounting system what would be the entry to record the completion of production? A B C D Debit Cost of Sales Account Finished Goods Account Finished Goods Account Work-in-Progress Account Credit Finished Goods Account Cost of Sales Account Work-in-Progress Account Finished Goods Account

17

A company employs 20 direct production operatives and 10 indirect staff in its manufacturing department. The normal operating hours for all employees is 38 hours per week and all staff are paid $5 per hour. Overtime hours are paid at the basic rate plus 50%. During a particular week all employees worked for 44 hours. What amount would be charged to production overhead? A $2,650 B $2,350 C $450 D $30

18

The use of marginal costing as opposed to absorption costing may result in a difference in the reported profit for an accounting period. In which of the following circumstances would the use of marginal costing, rather than absorption costing, result in higher reported profits? A B C D Opening inventory 200 units 0 units 200 units 0 units Closing inventory 200 units 100 units 100 units 0 units

19

A company is evaluating a project that requires 4,000 kg of a material that is used regularly in normal production. 2,500 kg of the material, purchased last month at a total cost of $20,000 are in stock.. Since last month the price of the material has increased by 2%. What is the total relevant cost of the material for the project? A $12,300 B $20,500 C $32,300 D $32,800

20

In a cost bookkeeping system what would be the entry for the absorption of production overhead? A B C D Debit Cost Ledger Control Account Production Overhead Account Work-in-Progress Account Work-in-Progress Account Credit Production Overhead Account Work-in-Progress Account Cost Ledger Control Account Production Overhead Account

The following data relates to questions 21, 22, 23 and 24 Pointdextre Ltd, which manufactures and sells a single product, is currently producing and selling 102,000 units per month, which represents 85% of its full capacity. Total monthly costs are $619,000 but at full capacity these would be $700,000. Total fixed costs would remain unchanged at all activity levels up to full capacity. The normal selling price of the results in a contribution to sales ratio of 40% 21 What is the variable cost per unit? Answer

22

What is the monthly fixed costs? Answer

23

What is the selling price per unit? Answer

24

What is the contribution per unit? Answer

25

The following extract of information is available concerning the 4 cost centres of Api Ltd. Production cost centres Machinery Finishing Packing 7 6 2 3 2 1 $28,500 $18,300 $8,960 Service cost centre Canteen 4 $8,400

No. of direct employees No. of indirect employees Overhead allocated and apportioned

The overhead cost of the canteen is to be re-apportioned to the production cost centres on the basis of the number of employees in each production cost centre. What is the total overhead cost of the packing department (to the nearest $) after the reapportionment? A $1,200 B $9,968 C $10,080 D $10,160

26

You are currently employed as an account assistant in a trading company. You are contemplating to further your study full time in the university. In considering whether or not to take up the study, you current salary level would be: A A sunk cost B An incremental cost C An opportunity cost D An irrelevant cost

The following information relates to questions 27, 28 and 29 Point Ltd uses economic order quantity (EOQ) model to establish the reorder quantity for raw material Y. The company holds no buffer stock. Information relating to raw material Y is as follows: Annual usage 48,000 units Purchase price $80 per unit Ordering costs $120 per order Annual holding costs 10% of the purchase price 27

Calculate the EOQ for raw material Y Answer

28

With reference to your answer in Question 27, calculate the total annual cost of purchasing, ordering and holding stocks of raw material Y. Answer

29

The supplier has offered Point Led a discount of 1% on the purchase price if each order placed is for 2,000 units. Calculate the total annual savings to Point Ltd of accepting this offer. Answer

30

Equipment owned by a company has a net book value of $1,800 and has been idle for some months. It could be used on a six months contract which is being considered. If not used on this contract, the equipment would be sold for a net amount of $2,000. After use on the contract, the equipment would have no saleable value and would be dismantled. The cost of dismantling and disposing of it would be $800. What is the total relevant cost of the equipment to the contract? A $1,200 B $1,800 C $2,000 D $2,800

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31

The following classifications may be applied to costs: (i) direct (ii) fixed (iii) period (iv) production Which of the above classifications could be applied to the cost of raw materials used by a company in the manufacture of its range of products? A C (i) only (ii) and (iii) only B D (i) and (iv) only (ii), (iii) and (iv) only

32

An organisation absorbs overheads on a machine hour basis. The planned level of activity for last month was 30,000 machine hours with a total overhead cost of $247,500. Actual results was 28,000 machine hours were recorded with a total overhead cost of $238,000. What was the total under absorption of overheads last month? A $7,000 B $7,500 C $9,500 D $16,500

33

A company currently produces 6,000 units of its single product each period, incurring total variable costs of $60,000 and fixed costs of $42,000. Production will increase to 8,000 units per period if the company expands capacity resulting in changes both to the variable costs per unit and to the total fixed costs. For production of 8,000 units per period total variable costs would be $76,000 and fixed costs $50,000. What is the reduction in total cost per unit comparing the costs for 8,000 units per period with the unit costs currently being incurred? A $0.50 B $0.75 C $1.25 D $2.08

34

Which of the following are true with regard to expected values? Expected values (i) represents the single most likely estimate of an outcome (ii) take no account of decision-makers risk (iii) are reliant on the accuracy of the probability distribution A C (i), (ii) and (iii) (i) and (iii) only B D (i) and (ii) only (ii) and (iii) only

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The following information relates to questions 35 and 36 John has established the following with regard to fixed overheads for the past month: Actual costs incurred Actual units produced Actual labour hours worked Budgeted costs Budgeted units of production Budgeted labour hours $132,400 5,000 units 9,750 hours $135,000 4,500 units 9,000 hourd

Overheads are absorbed on a labour hour basis. 35 What was the fixed overhead expenditure variance? Answer

36

What was the overhead capacity variance? Answer

37

A company has a budget for two products A and B Product A Sales (units) Production (units) Labour: Skilled at $10 /hour Unskilled at $7/hour 2,000 1,750 2 hours/unit 3 hours/unit Product B 4,500 5,000 2 hours/unit 4 hours/unit

What is the nudgeted cost for unskilled labour for the period? A B C D $105,000 $135,000 $176,750 $252,500

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38 The following diagram represents the behaviour of one element of cost

$ Total Cost

Volume of Activity
Which one of the following descriptions is consistent with the above diagram? A B C D Annual total cost of factory power where the supplier sets a tariff based on a fixed charge plus a constant unit cost for consumption which is subject to a maximum annual charge. Total annual direct material cost where the supplier charges a constant amount per unit which then reduces to a lower amount per unit after certain level of purchases. Total annual direct material cost where the supplier charges a constant amount per unit but when purchases exceed a certain level amount per unit applies to all purchases in the year. Annual total cost of telephone services where the supplier makes a fixed charge and then a constant unit rate for calls up to a certain level. This rate then reduces for all calls above this level.

39 A company uses absorption costing with a predetermined overhead absorption rate. The following situations arose last month: (i) (ii) Actual hours worked exceeded planned hours Actual overhead expenditure exceeded planned expenditure

Which of the following statements is correct? A Situation (i) would cause overheads to be over absorbed and situation (ii) would cause overheads to be under absorbed B Situation (i) would cause overheads to be under absorbed and situation (ii) would cause overheads to be over absorbed C Both situations would cause overheads to be over absorbed D Both situations would cause overheads to be under absorbed

40 A company operates a job costing system. Job number 2010 requires $45 of direct materials and $30 of direct labour. Direct labour is paid at the rate of $7.50 per hour. Production overheads are absorbed at a rate of $12.50 per direct labour hour and non-production overheads are absorbed at a rate of 60% of prime cost. What is the total cost of Job number 2010? A $170 B $195 C $200 D $240

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The following information relates to questions 41 and 42 A company which manufactures and sells two products (X and Y) aims to maximize its profits. It holds no stocks. Product X makes a contribution per unit of $4 and product Y makes a contribution per unit of $1. Next period the company faces three less than production constraints and these are shown as the lines labeled (1), (2) and (3) on the following graph:

Product Y units 000

11 10 9 8 7 6 5 4 3 2 1
J H (2)

(3)

K L

(1)

10 11 12 13 14 15

Product X units 000

41 Which of the following points shown on the graph is optimal for next period? A. B. C. D. Point H Point J Point K Point L

42 Which of the following constraint formulations is represented by the line labeled (2) on the graph? A. B. C. D. 10X + 7Y 70, 000 7X + 10Y 70, 000 7X + 13Y 91, 000 13X + 7Y 91, 000

43 Which of the following is NOT a feasible value for the correlation coefficient? A B C D + 1.2 + 0.6 0 - 0.6

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The following information relates to questions 44 and 45 A company operates a process costing system using the first in first out (FIFO) method of valuation. No losses occurs in the process. The following data relate to last month: Opening work in progress Completed during the month Closing work in progress Units 100 900 Degree of completion 60% Value $680

The cost per equivalent unit of production for last month was $12 44 What was the value of the closing work in progress? A B C D $816 $864 $936 $1,800

45 What was the value of the units completed last month? A B C D $10,080 $10,320 $10,760 $11,000

46 A company has established the following information for the costs and revenues at an activity level of 500 units: $ Direct materials 2,500 Direct labour 5,000 Production overheads 1,000 Selling costs 1,250 Total cost 9,750 Sales revenue 17,500 Profit 7,750 20% of the selling costs and 50% of the production overheads are fixed over all levels of activity. What would be the profit at an activity level of 1,000 units? A $15,500 B $16,250 C $16,500 D $17,750

47 When considering the economic batch quantity model what does (1 D/R) represent A B C D The rate at which production decreases The rate at which production increases The rate at which stock decreases The rate at which stock increases

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48 Which of the following best describe the term equivalent units when using the FIFO method? A B The number of units worked on during a period including the opening and closing stock units? The number of whole units worked on during a period ignoring the levels on completion of opening and closing stock units The number of effective whole units worked on during a period allowing for the levels of completion of opening and closing stock units The total number of whole units started during a period ignoring the opening stock units as these were started in the previous period.

49 A company manufactures a single product. Production and sales quantities for a period were: ` Production Sales Budget 100,000 units 102,000 units Actual 97,000 units 96,000 units The fixed production overhead absorption rate is $1.40 per unit If marginal costing had been used instead of absorption costing how would the profit for the period have differed? A B C D $1,400 less using marginal costing $1,400 more using marginal costing $4,200 less using marginal costing $4,200 more using marginal costing

50 A companys budgeted sales for last month were 10,000 units with a standard selling price of $20 per unit and a contribution to sales ratio of 40%. Last month actual sales of 10,500 units with total revenue of $204,750 were achieved. What were the sales price and sales volume contribution variances? Sales price variance ($) A B C D 5,250 adverse 5,250 adverse 5,000 adverse 5,000 adverse Sales volume contribution variance ($) 4,000 favourable 4,000 adverse 4,000 favourable 4,00 adverse