ACCA f2 pilot up to june 2007

Management Accounting Time allowed: hours ALL FIFTY questions are compulsory and MUST be attempted Paper F2 Fundamentals Pilot Paper – Knowledge module Do NOT open this paper until instructed by the supervisor This question paper must not be removed from the examination hall The Association of Chartered Certified Accountants FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com ALL 50 questions are compulsory and MUST be attempted The following break-even chart has been drawn showing lines for total cost (TC), total variable cost (TVC), total fixed cost (TFC) and total sales revenue (TSR): £ TSR TC TVC TFC 675 1,200 What is the margin of safety at the 1,700 units level of activity? A B 300 units C 1,500 1,700 Units 200 units 500 units D 1,025 units (2 marks) The following assertions relate to financial accounting and to cost accounting: (i) The main users of financial accounting information are external to an organisation (ii) Cost accounting is that part of financial accounting which records the cash received and payments made by an organisation Which of the following statements are true? A Assertions (i) and (ii) are both correct B Only assertion (i) is correct C Only assertion (ii) is correct (1 mark) Regression analysis is being used to find the line of best fit (y = a + bx) from eleven pairs of data The calculations have produced the following information: Σx = 440, Σy = 330, Σx2 = 17,986, Σy2 = 10,366, Σxy = 13,467 and b = 0.69171 What is the value of ‘a’ in the equation for the line of best fit (to decimal places)? A 0.63 B 0.69 C 2.33 D 5.33 (2 marks)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com The purchase price of a stock item is $25 per unit In each three month period the usage of the item is 20,000 units The annual holding costs associated with one unit equate to 6% of its purchase price The cost of placing an order for the item is $20 What is the Economic Order Quantity (EOQ) for the stock item to the nearest whole unit? A 730 B 894 C 1,461 D 1,633 (2 marks) A company uses an overhead absorption rate of $3.50 per machine hour, based on 32,000 budgeted machine hours for the period During the same period the actual total overhead expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual production By how much was the total overhead under or over absorbed for the period? A Under absorbed by $3,875 B Under absorbed by $7,000 C Over absorbed by $3,875 D Over absorbed by $7,000 (2 marks) For which of the following is a profit centre manager responsible? A Costs only B Revenues only C Costs and revenues (1 mark) An organisation has the following total costs at two activity levels: Activity level (units) Total costs ($) Variable cost per unit is constant within this range of activity but there is a step up of $5,000 in the total fixed costs when the activity exceeds 17,500 units What is the total cost at an activity of 20,000 units? A $155,000 B $158,000 C $160,000 16,000 135,000 22,000 170,000 D $163,000 (2 marks)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com A company manufactures and sells a single product In two consecutive months the following levels of production and sales (in units) occurred: Sales Production Month Month 3,800 ,400 3,900 ,200 The opening inventory for Month was 400 units Profits or losses have been calculated for each month using both absorption and marginal costing principles Which of the following combination of profits and losses for the two months is consistent with the above data? A 200 4,400 B (400) 4,400 C 200 3,200 D (400) 3,200 Absorption costing profit/(loss) Month Month $ $ Marginal costing profit/(loss) Month Month $ $ (400) 3,200 200 3,200 (400) 4,400 200 4,400 (2 marks) 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 (2 marks) 10 Information relating to two processes (F and G) was as follows: Process F G Normal loss as % of input Input litres 65,000 37,500 Output litres 58,900 35,700 For each process, was there an abnormal loss or an abnormal gain? Process F Process G A Abnormal gain Abnormal gain B Abnormal gain Abnormal loss C Abnormal loss Abnormal gain D Abnormal loss Abnormal loss (2 marks)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 11 An organisation manufactures a single product which is sold for $80 per unit The organisation’s total monthly fixed costs are $99,000 and it has a contribution to sales ratio of 45% This month it plans to manufacture and sell 4,000 units What is the organisation’s margin of safety this month (in units)? A 1,250 B 1,750 C 2,250 D 2,750 (2 marks) 12 Which one of the following should be classified as indirect labour? A Assembly workers on a car production line B Bricklayers in a house building company C Machinists in a factory producing clothes D Forklift truck drivers in the stores of an engineering company (2 marks) 13 A company is evaluating a project that requires 400kg of raw material X The company has 150kg of X in stock that were 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? A $17,950 B $19,250 C $21,200 D $21,500 (2 marks) 14 Which of the following is NOT a feasible value for the correlation coefficient? A +1.4 B +0.7 C D −0.7 (2 marks) 15 The following statements relate to aspects of budget administration: Statement (1): An important task of a budget committee is to ensure that budgets are properly coordinated Statement (2): A budget manual is the document produced at the end of the budget setting process Which of the following is true? A Only statement (1) is correct B Only statement (2) is correct C Both statements are correct (1 mark)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 16 Up to a given level of activity in each period the purchase price per unit of a raw material is constant After that point a lower price per unit applies both to further units purchased and also retrospectively to all units already purchased Which of the following graphs depicts the total cost of the raw materials for a period? £ A £ £ B C £ D (2 marks) 17 A manufacturing organisation incurs costs relating to the following: (1) Commission payable to salespersons (2) Inspecting all products (3) Packing the products at the end of the manufacturing process prior to moving them to the warehouse Which of these costs are classified as production costs? A (1) and (2) only B (1) and (3) only C (2) and (3) only D (1), (2) and (3) (2 marks) 18 Which of the following is correct with regard to expected values? A Expected values provide a weighted average of anticipated outcomes B The expected value will always equal one of the possible outcomes C Expected values will show the decision maker’s attitude to risk D The expected value will never equal one of the possible outcomes  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com (2 marks) 19 There is a 60% chance that a company will make a profit of $300,000 next year and a 40% chance of making a loss of $400,000 What is the expected profit or loss for next year? A $120,000 Loss B $20,000 Loss C $20,000 Profit D $120,000 Profit (2 marks) 20 A company’s budgeted sales for last month were 10,000 units with a standard selling price of $20 per unit and a standard contribution of $8 per unit Last month actual sales of 10,500 units at an average selling price of $19.50 per unit were achieved What were the sales price and sales volume contribution variances for last month? Sales price variance ($) A 5,250 Adverse Sales volume contribution variance ($) 4,000 Favourable B 5,250 Adverse C 5,000 Adverse 4,000 Favourable D 5,000 Adverse 4,000 Adverse 4,000 Adverse (2 marks) 21 A company manufactures and sells one product which requires 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 (2 marks) 22 The following statements refer to spreadsheets: (i) A spreadsheet is the most suitable software for the storage of large volumes of data (ii) A spreadsheet could be used to produce a flexible budget (iii) Most spreadsheets contain a facility to display the data in them within them in a graphical form Which of these statements are correct? A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (i), (ii) and (iii) (2 marks)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 23 A company always determines its order quantity for a raw material by using the Economic Order Quantity (EOQ) model What would be the effects on the EOQ and the total annual holding cost of a decrease in the cost of ordering a batch of raw material? E O Q A Higher Annual holding cost Lower B C Lower Higher Higher Higher D Lower Lower (2 marks) 24 Which one of the following is most likely to operate a system of service costing? A A printing company B A hospital C A firm of solicitors (1 mark) 25 The following budgeted information relates to a manufacturing company for next period: Production Sales Units 14,000 12,000 Fixed production costs Fixed selling costs $ 63,000 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? A $25,000 B $27,000 C $45,000 D $47,000 (2 marks) 26 A company manufactures a single product which it sells for $20 per unit The product has a contribution to sales ratio of 40% The company’s weekly break- even point is sales revenue of $18,000 What would be the profit in a week when 1,200 units are sold? A $1,200 B $2,400 C $3,600 D $6,000 (2 marks)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 27 The following graph relates to a linear programming problem: Y (1) (2) (3) X The objective is to maximise contribution and the dotted line on the graph depicts this function There are three constraints which are all of the “less than or equal to” type which are depicted on the graph by the three solid lines labelled (1), (2) and (3) At which of the following intersections is contribution maximised? A Constraints (1) and (2) B Constraints (2) and (3) C Constraints (1) and (3) D Constraint (1) and the x-axis (2 marks) 28 In an organisation manufacturing a number of different products in one large factory, the rent of that factory is an example of a direct expense when costing a product Is this statement true or false? A True B False (1 mark)  FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 29 A company operates a process in which no losses are incurred The process account for last month, when there was no opening work-in-progress, was as follows: Process Account Costs arising $ 624,000 Finished output (10,000 units) Closing work-in progress (4,000 units) 624,000 The closing work-in-progress was complete to the same degree for all elements of cost What was the percentage degree of completion of the closing work-in-progress? A 12% B 30% C 40% $ 480,000 144,000 624,000 D 75% (2 marks) 30 A company manufactures and sells two products (X and Y) both of which utilise the same skilled labour For the coming period, the supply of skilled labour is limited to 2,000 hours Data relating to each product are as follows: Product X Y Selling price per unit $20 $40 Variable cost per unit $12 $30 Skilled labour hours per unit Maximum demand (units) per period 800 400 In order to maximise profit in the coming period, how many units of each product should the company manufacture and sell? A 200 units of X and 400 units of Y B 400 units of X and 300 units of Y C 600 units of X and 200 units of Y D 800 units of X and 100 units of Y (2 marks) 31 The following statements refer to organisations using job costing: (i) Work is done to customer specification (ii) Work is usually completed within a relatively short period of time (iii) Products manufactured tend to be all identical Which two of these statements are CORRECT? A (i) and (ii) B (i) and (iii) C (ii) and (iii) (1 mark) 10 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com Section B (a) Raw material Direct labour Direct expenses Production overheads (W1) Abnormal gain (W4) Litres 60,000 Process £ 381,000 180,000 54,000 G Output (W3): P1 (W4) P2 (W4) Normal loss (W2) Litres £ 36,250 21,750 3,000 507,500 304,500 15,000 ––––––– 61,000 ––––––– –––––––– 827,000 –––––––– 198,000 1,000 ––––––– 61,000 ––––––– 14,000 –––––––– 827,000 –––––––– Workings: W1 Production overheads = 110% x 180,000 = £198,000 W2 Normal loss = 5% x 60,000 = 3,000 litres at = £15,000 W3 Total output = 61,000 – 3,000 = 58,000 W3 Split P1 : P2 in ratio : W3 P1 = (5 ÷ 8) x 58,000 = 36,250 litres W3 P2 = (3 ÷ 8) x 58,000 = 21,750 litres W4 Cost per litre: W3 Net total cost = 381,000 + 180,000 + 54,000 + 198,000 – 15,000 W3 Net total cost = £798,000 W3 Expected output = 60,000 x 95% = 57,000 litres W3 Cost per litre = 798,000 ÷ 57,000 = £14 W3 Valuations: W3 Abnormal gain = 1,000 x 14 = £14,000 W3 Joint products: W3 Joint prodP1 36,250 x 14 = £507,500 W3 Joint prodP2 21,750 x 14 = £304,500 (b) Assuming 100 litres of product P1 Revenue if sold at point of split-off without further processing (100 x 20) Revenue (from PP1) if sold after further processing (100 x 90%) x 26 Additional revenue Additional cost (in process H) £ 2,000 2,340 ––––– 1,340 ––––– 1,400 ––––– The additional cost exceeds the additional revenue by £60 for every 100 litres of product P1 further processed For example, if the output of 36,250 litres of product P1 last month were further processed to make product PP1 then the additional costs would exceed the additional revenue by (36,250 ÷ 100 x 60) = £21,750 Therefore product P1 should not be further processed into product PP1 (c) (a) (i) Direct expenses are costs, other than material and labour, which are specifically traceable to the process (G) An example of such a cost would be the cost of hiring special equipment required for that process only (ii) Production overheads are general factory wide costs which need to be apportioned to the various processes that benefit from them An example of production overhead would be factory rates Monthly machining hours required to meet maximum demand: Product Units Hours/unit R 9,000 (40 ÷ 60) = 0·667 S 6,000 (54 ÷ 60) = 0·900 T 3,000 (75 ÷ 60) = 1·250 Available hours Shortfall in machining hours Total hours 16,000 15,400 13,750 –––––– 15,150 10,500 –––––– 14,650 –––––– 19 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com (b) Calculation of the contribution per machining hour for each product: R S Selling price per unit £60 £75 Contribution to sales ratio 20% 24% Contribution per unit £12 £18 Machining hours per unit 0·667 0·900 Contribution per machine hour £18 £20 Ranking 2nd 1st T £84 25% £21 1·250 £16·80 3rd Optimal production plan and resultant contribution: Product Units Machine hours used Contribution (£) S 6,000 15,400 108,000 R 7,650 15,100 (balance) 191,800 ––––––– –––––––– Total 10,500 199,800 ––––––– –––––––– (a) Direct material variances: Actual quantity purchased at actual price £ 294,000    300,000  Actual quantity purchased at standard price (40,000 kg at 7·50 ) Actual quantity used at standard price (36,500 kg at 7·50 ) Standard quantity for actual production at standard price [(7,200 units x 4·8) at 7·50] (b) 273,750    259,200  Reconciliation: Actual cost of purchases Less: Adverse/Plus: Favourable variances: Less: Price variance [as in (a)] Less: Usage variance [as in (a)] £ Variance (£) 6,000 F Price 14,550 A Usage £ 294,000 6,000 F 14,550 A ––––––– (8,550) A Less: Increase in stock at standard cost Less: [(40,000 – 36,500) x 7·50] (26,250) –––––––– 259,200 –––––––– Standard material cost of actual production [per (a)] (c) (a) (i) Price variance (£6,000 F) Cheaper materials, but with a lower quality than standard, may have been purchased because the normal supplier was unable to deliver Usage variance (£14,550 A) The lower quality materials purchased may have required higher than standard usage per unit in production (ii) The purchase price variance should be reported to the purchasing (procurement) manager as this is the person within the organisation who is responsible for buying the materials This manager would be able to take any appropriate action In the linear regression equation y = a + bx: y = maintenance cost in £’000 (dependent variable), and x = production units in ’000 (independent variable) Σ y = (265 + 302 + 222 + 240 + 362 + 295 + 404 + 400) = 2,490 Σ x = (20 + 24 + 16 + 18 + 26 + 22 + 32 + 30) = 188 n=8 Using formulae provided in the examination: b = [(8 x 61,250) – (188 x 2,490)] ÷ [ (8 x 4,640) – (188 x 188)] b = 12·32 a = (2,490 ÷ 8) – (12·32 x 188 ÷ 8) = 21·73 Linear equation is: y = 21·73 + 12·32x where x and y are in ’000 The interpretation is that the fixed maintenance cost per quarter is £21,730 and the variable cost per unit of production is £12·32 20 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com (b) Predicted maintenance cost for next quarter (44,000 units) is: 21·730 + (12·320 x 44) = 563·81 or £563,810 The major reservation about this prediction is that 44,000 units of production is well outside the range of data used to establish the linear regression equation The data related to a range 16,000 to 32,000 units per quarter The behaviour of costs outside this range may be quite different For example there may be a step in the fixed costs (a) Budgeted profit statement (absorption costing): £’000 Sales (24,000 units) Less: Production cost of sales: Less: Opening stock (3,000 x 28) [W1] Less: Production (22,000 x 28) Less: Closing stock (1,000 x 28) 84 616 (28) –––– Less: Under absorption of fixed Less: production overhead cost [W2] Less: (3,000 x 5) £’000 864 (672) –––– 192 (15) –––– 177 Gross profit Less: Non-production costs: Less: Variable selling cost Less: Fixed selling and admin costs 60 40 ––– Net profit Workings: W1 Variable production cost per unit W1 [For example, from opening stock under W1 marginal costing: (69,000 ÷ 3,000)] W1 Fixed production cost per unit W1 [125,000 ÷ 25,000] W1 (100) –––– 77 –––– £ 23 ––– 28 ––– W2 Under absorption (25,000 – 22,000) = 3,000 units (b) Reconciliation: £’000 77 Net profit per absorption costing (a) Add: Decrease in stocks x fixed production overhead Add: cost per unit [2,000 x 5] 10 ––– 87 ––– Net profit per marginal costing (per question) (c) Marginal costing is more relevant for short-term decision-making as it separates fixed and variable costs In the short-term fixed costs are more likely to remain unchanged and therefore would not be relevant 21 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com Part Examination – Paper 1.2 Financial Information for Management June 2006 Marking Scheme Marks Section A Each of the 25 questions in this section is worth marks 50 ––– Section B (a) Inputs Abnormal gain Normal loss Joint products 11/2 11/2 ––– (b) Additional revenue Additional cost Conclusion 11/2 1/ ––– (c) Direct expenses Production overheads 1 ––– ––– 12 ––– (a) Required hours Shortfall 11/2 1/ ––– (b) Contribution per unit Contribution per machining hour Ranking Optimal plan Resultant contribution 11/2 11/2 1/ 11/2 ––– ––– ––– (a) Price variance Usage variance 11/2 11/2 ––– (b) Variances Change in stock Layout/presentation of statement 1 ––– (c) (i) (ii) 1 ––– 3 Causes (1 mark for each) Purchasing manager Responsibility for buying ––– 10 ––– 23 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com Marks (a) Σy Σx Calculation of ‘b’ Calculation of ‘a’ Fixed/variable costs 1 21/2 11/2 ––– (b) Total cost for 44,000 units Reservation 11/2 11/2 ––– ––– 10 ––– (a) 1/ Sales Cost of sales Under absorption of overhead Variable selling cost Fixed selling and admin costs 11/2 1/ 1/ ––– (b) Layout/presentation of statement Change in stock and its evaluation 1 ––– (c) Marginal costing Separation of fixed and variable costs Fixed costs not relevant to short term decisions 1/ 1/ ––– 2 ––– 10 ––– 24 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com PART FRIDAY DECEMBER 2006 QUESTION PAPER Time allowed hours This paper is divided into two sections Section A ALL 25 questions are compulsory and MUST be answered Section B ALL FIVE questions are compulsory and MUST be answered Paper 1.2 Financial Information for Management Formulae Sheet is on page 12 Do not open this paper until instructed by the supervisor This question paper must not be removed from the examination hall The Association of Chartered Certified Accountants FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com Section A – ALL 25 questions are compulsory and MUST be attempted Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question Each question within this section is worth marks The following diagram represents a profit/volume chart for an organisation: £ H Output G At the specific levels indicated what the lines ‘G’ and ‘H’ represent? A B C D Line ‘G’ Loss Loss Contribution Contribution Line ‘H’ Profit Contribution Profit Contribution 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 a 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 a lower 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 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com An organisation has the following total costs at three activity levels: Activity level (units) Total cost 8,000 £204,000 12,000 £250,000 15,000 £274,000 Variable cost per unit is constant within this activity range and there is a step up of 10% in the total fixed costs when the activity level exceeds 11,000 units What is the total cost at an activity level of 10,000 units? A B C D £220,000 £224,000 £227,000 £234,000 An organisation manufactures and sells a single product which has a variable cost of £24 per unit and a contribution to sales ratio of 40% Total monthly fixed costs are £720,000 What is the monthly breakeven point (in units)? A B C D 18,000 20,000 30,000 45,000 The following statements refer to qualities of good information: (i) It should be communicated to the right person (ii) It should always be completely accurate before it is used (iii) It should be understandable by the recipient Which of the above statements are correct? A B C D (i) and (ii) only (i) and (iii) only (ii) and (iii) only (i), (ii) and (iii) A company is considering the launch of a new product at a high initial selling price Which of the following statements is correct? A B C D This This This This is is is is an an an an example example example example of of of of strategic planning involving the application of penetration pricing operational planning involving the application of penetration pricing strategic planning involving the application of price skimming operational planning involving the application of price skimming FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com [P.T.O The following statements relate to an organisation’s management information system: (i) It is used only by top and middle management to aid in strategic and tactical decision-making (ii) It generates both financial and non-financial information (iii) It often uses a database system Which of the above statements are correct? A B C D (i) and (ii) only (i) and (iii) only (ii) and (iii) only (i), (ii) and (iii) Regression analysis is being used to find the line of best fit (y = a + bx) from five pairs of data The calculations have produced the following information: Σx = 129 Σy = 890 Σxy = 23,091 Σx2 = 3,433 Σy2 = 29,929 What is the value of ‘a’ in the equation for the line of best fit (to the nearest whole number)? A B C D 146 152 210 245 Which of the following is a feasible value for a correlation coefficient? A B C D +1·2 –1·2 –2·0 10 The following data relate to material J for last month: Opening stock Purchases: 4th 18th Issues: 13th 25th 300 kg valued at £ 3,300 400 kg for 500 kg for 4,800 6,500 600 kg 300 kg Using the LIFO valuation method, what was the value of the closing stock for last month? A B C D £3,300 £3,500 £3,700 £3,900 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 11 A jobbing company operates a premium bonus scheme for its employees of 75% of the time saved compared with the standard time allowance for a job, at the normal hourly rate The data relating to Job 1206 completed by an employee is as follows: Allowed time for Job 1206 Time taken to complete Job 1206 Normal hourly rate of pay hours hours £8 What is the total pay of the employee for Job 1206? A B C D £24 £30 £32 £38 12 A paint manufacturer has a number of departments Each department is located in a separate building on the same factory site In the mixing department the basic raw materials are mixed together in very large vessels These are then moved on to the colour adding department where paints of different colours are created in these vessels In the next department – the pouring department – the paint is poured from these vessels into litre sized tins The tins then go on to the labelling department prior to going on to the finished goods department The following statements relate to the paint manufacturer: (i) The mixing department is a cost centre (ii) A suitable cost unit for the colour adding department is a litre tin of paint (iii) The pouring department is a profit centre Which statement or statements is/are correct? A B C D (i) only (i) and (ii) only (i) and (iii) only (ii) and (iii) only 13 The following statements relate to spreadsheets: (i) (ii) (iii) (iv) A spreadsheet consists of records and files Most spreadsheets have a facility to allow data within them to be displayed graphically A spreadsheet could be used to prepare a budgeted profit and loss account A spreadsheet is the most suitable software for storing large volumes of data Which of the above statements are correct? A B C D (i) and (ii) only (i), (iii) and (iv) only (ii) and (iii) only (iii) and (iv) only FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com [P.T.O 14 A company uses absorption costing with a predetermined hourly overhead absorption rate The following situations have both occurred: (i) Actual overhead expenditure exceeded planned expenditure; and (ii) Actual hours worked were less than the planned hours Which of the following statements is correct? A B C D Situation (i) would cause overheads to be over absorbed and situation (ii) would cause overheads to be under absorbed Situation (i) would cause overheads to be under absorbed and situation (ii) would cause overheads to be over absorbed Both situations would cause overheads to be over absorbed Both situations would cause overheads to be under absorbed 15 A company operates a job costing system Job 812 requires £60 of direct materials, £40 of direct labour and £20 of direct expenses Direct labour is paid £8 per hour Production overheads are absorbed at a rate of £16 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 812? A B C D £240 £260 £272 £320 16 At the end of manufacturing in Process I, product K can be sold for £10 per litre Alternatively product K could be further processed into product KK in Process II at an additional cost of £1 per litre input into this process Process II is an existing process with spare capacity in which a loss of 10% of the input volume occurs At the end of the further processing, product KK could be sold for £12 per litre Which of the following statements is correct in respect of 9,000 litres of product K? A B C D Further Further Further Further processing processing processing processing into into into into product product product product KK KK KK KK would would would would increase profits by £9,000 increase profits by £8,100 decrease profits by £900 decrease profits by £1,800 The following information relates to questions 17 and 18: The standard direct material cost for a product is £50 per unit (12·5 kg at £4 per kg) Last month the actual amount paid for 45,600 kg of material purchased and used was £173,280 and the direct material usage variance was £15,200 adverse 17 What was the direct material price variance last month? A B C D £8,800 £8,800 £9,120 £9,120 Adverse Favourable Adverse Favourable FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com 18 What was the actual production last month? A B C D 3,344 3,520 3,952 4,160 units units units units 19 Equipment owned by a company has a net book value of £1,800 and has been idle for some months It could now be used on a six months contract which is being considered If not used on this contract, the equipment would be sold now 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 B C D £1,200 £1,800 £2,000 £2,800 20 A contract is under consideration which requires 800 labour hours to complete There are 450 hours of spare labour capacity for which the workers are still being paid the normal rate of pay The remaining hours required for the contract can be found either by overtime working paid at 50% above the normal rate of pay or by diverting labour from the manufacture of product OT If the contract is undertaken and labour is diverted, then sales of product OT will be lost Product OT takes seven labour hours per unit to manufacture and makes a contribution of £14 per unit The normal rate of pay for labour is £8 per hour What is the total relevant labour cost to the contract? A B C D £3,500 £4,200 £4,500 £4,900 The following information relates to questions 21 and 22: In the following price, revenue and cost functions, which have been established by an organisation for one of its products, Q represents the number of units produced and sold per week: Price (£ per unit) = 50 – 0·025Q Marginal revenue (£ per unit) = 50 – 0·05Q Total weekly cost = 1,000 + 15Q 21 What price per unit should be set in order to maximise weekly profit? A B C D £15·00 £17·50 £25·00 £32·50 22 What would the weekly total contribution be if the price of the product was set at £20 per unit? A B C D £2,000 £3,000 £5,000 £6,000 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com [P.T.O 23 A company has three shops (R, S and T) to which the following budgeted information relates: Shop R £000 400 –––– 100 (60) –––– 40 –––– Sales Contribution Less: Fixed costs Profit/(Loss) Shop S £000 500 –––– 60 (70) –––– (10) –––– Shop T £000 600 –––– 120 (70) –––– 50 –––– Total £000 1,500 –––––– 280 (200) –––––– 80 –––––– 60% of the total fixed costs are general company overheads These are apportioned to the shops on the basis of sales value The other fixed costs are specific to each shop and are avoidable if the shop closes down If shop S is closed down and the sales of the other two shops remained unchanged, what would be the revised budgeted profit for the company? A B C D £50,000 £60,000 £70,000 £90,000 24 Which of the following statements correctly describes the shadow price of a resource in linear programming? A B C D The The The The minimum sum payable for one more unit of the scarce resource maximum sum payable for one more unit of the scarce resource increase in total contribution if one more unit of a non-binding constraint is made available increase in total contribution if one more unit of a binding constraint is made available 25 The following graph relates to a linear programming problem: y (3) (2) (1) x The objective is to maximise total contribution and the dotted line on the graph depicts this function There are three constraints which are all of the ‘less than or equal’ type which are depicted on the graph as the three solid lines labelled (1), (2) and (3) At which of the following intersections is total contribution maximised? A B C D Constraint Constraint Constraint Constraint (3) (2) (1) (1) and and and and the x-axis constraint (3) constraint (2) constraint (3) (50 marks) FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com Section B – ALL FIVE questions are compulsory and MUST be attempted Fairfax Ltd manufactures a single product which has a standard selling price of £22 per unit It operates a standard marginal costing system The standard variable production cost is £9 per unit Budgeted annual production is 360,000 units and budgeted non-production costs of £1,152,000 per annum are all fixed The following data relate to last month: Budget units 30,000 32,000 Production Sales Actual units 33,000 34,000 Last month the budgeted profit was £200,000 and the actual total sales revenue was £731,000 Required: (a) Calculate the sales price and sales volume contribution variances for last month showing clearly whether each variance is favourable or adverse (4 marks) (b) Explain how the two variances calculated in (a) could be interrelated (3 marks) (c) Calculate the BUDGETED profit for last month assuming that the company was using absorption costing (4 marks) (11 marks) Point Ltd uses the 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 Purchase price Ordering costs Annual holding costs 48,000 units £80 per unit £120 per order 10% of the purchase price Required: (a) Calculate: (i) the EOQ for raw material Y, and (ii) the total annual cost of purchasing, ordering and holding stocks of raw material Y (4 marks) The supplier has offered Point Ltd a discount of 1% on the purchase price if each order placed is for 2,000 units (b) Calculate the total annual saving to Point Ltd of accepting this offer (3 marks) (c) List FOUR examples of holding costs (2 marks) (9 marks) FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com [P.T.O Merryl Ltd manufactures four components (E, F, G and H) which are incorporated into different products made by the company All the components are manufactured using the same general purpose machinery The following production cost and machine hour data are available: Variable production cost (£ per unit) Fixed production cost (£ per unit) General purpose machine hours per unit E 32 F 27 14 G 34 H 35 16 The fixed production costs represent a share of factory-wide costs that have been related to the individual components by using a direct labour hour rate There are no fixed costs which can be specifically related to individual components From next month the company’s monthly manufacturing requirements are for 2,000 units of each component The maximum number of machine hours available for component manufacture is 35,000 per month The company can purchase any quantity of each component from Sergeant Ltd at the following unit prices next month: E £48 F £51 G £55 H £63 Merryl Ltd aims to minimise its monthly costs Required: (a) Calculate the shortfall in general purpose machine hours next month (2 marks) (b) Determine how many units of which components should be purchased from Sergeant Ltd next month (4 marks) (c) Briefly explain THREE other factors that the management of Merryl Ltd should consider before making a final decision to buy in components from Sergeant Ltd for next month (3 marks) (9 marks) Yeomen Ltd uses process costing and the FIFO method of valuation The following information for last month relates to Process G, where all the material is added at the beginning of the process: Opening work-in-progress: 2,000 litres (30% complete in respect of conversion costs) valued in total at £24,600 (£16,500 for direct materials; £8,100 for conversion) Costs incurred: Normal loss: Actual output: Closing work-in-progress: Direct materials £99,600 for 12,500 litres of input Conversion £155,250 8% of input in the period All losses, which are incurred evenly throughout the process, can be sold for £3 per litre 10,000 litres were transferred from Process G to the finished goods warehouse 3,000 litres (45% complete in respect of conversion costs) Required: (a) Prepare the Process G Account for last month in £ and litres (10 marks) (b) Identify TWO types of organisation where it would be appropriate to use service (operation) costing For each one suggest a suitable unit cost measure (2 marks) (12 marks) 10 FOR FREE ACCA RESOURCES VISIT: http://kaka-pakistani.blogspot.com ... A stores ledger account will be updated from a goods received note only A stores requisition will only detail the type of product required by a customer The term ‘lead time’ is best used to describe... birthday She wishes to make payments until his 18th birthday and intends to pay £50 per month into an account yielding an APR of 12·68% She plans to start making payments into the account the... relating to the following: (1) Commission payable to salespersons (2) Inspecting all products (3) Packing the products at the end of the manufacturing process prior to moving them to the warehouse