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Specimen Exam applicable for Chartered Accounting Students Fundamentals Level – Knowledge Module- ACCA International Business management Exam International Business and Finance International Accounting Marginal costing
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Management Accounting
This paper is divided into two sections: Section A – Contains 35 questions Section B – Contains THREE Formulae Sheet, Present Value and Annuity Tables are on pages 16, 17 and 18. NOTE: NO STUDENT IS ALOW TO TAKE THIS BOOKLET TO EXAM HALL; FOR SUCH ACTION SHALL BE REGAREDE AS EXAM MISCONDUCT, BE WARNED
Section A – ALL 35 questions (ANWSERS are written below) make attempt Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question. Each question is worth 2 marks. 1 A manufacturing 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 2 Which of the following BEST describes target costing? A Setting a cost by subtracting a desired profit margin from a competitive market price B Setting a price by adding a desired profit margin to a production cost C Setting a cost for the use in the calculation of variances D Setting a selling price for the company to aim for in the long run 3 Information relating to two processes (F and G) was as follows: Process Normal loss as Input Output % of input (litres) (litres) F 8 65,000 58, G 5 37,500 35, 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 4 The following budgeted information relates to a manufacturing company for next period: Units $ Production 14,000 Fixed production costs 63, Sales 12,000 Fixed selling costs 12, 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 be the profit for next period using marginal costing? A $25, B $27, C $45, D $47, 2
8 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 $ 0 0 $ C $ B D 0 0 A Graph A B Graph B C Graph C D Graph D 9 Which of the following are benefits of budgeting? 1 It helps coordinate the activities of different departments 2 It fulfils legal reporting obligations 3 It establishes a system of control 4 It is a starting point for strategic planning A 1 and 4 only B 1 and 3 only C 2 and 3 only D 2 and 4 only 10 The following statements relate to the participation of junior management in setting budgets:
11 A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000. What is the company’s return on investment? A 30% B 12% C 18% D 22% 12 A company has calculated a $10,000 adverse direct material variance by subtracting its flexed budget direct material cost from its actual direct material cost for the period. Which of the following could have caused the variance? (1) An increase in direct material prices (2) An increase in raw material usage per unit (3) Units produced being greater than budgeted (4) Units sold being greater than budgeted A 2 and 3 only B 3 and 4 only C 1 and 2 only D 1 and 4 only 13 A company has recorded the following variances for a period: Sales volume variance $10,000 adverse Sales price variance $5,000 favourable Total cost variance $12,000 adverse Standard profit on actual sales for the period was $120,000. What was the fixed budget profit for the period? A $137, B $103, C $110, D $130, 14 Which of the following are suitable measures of performance at the strategic level? (1) Return on investment (2) Market share (3) Number of customer complaints A 1 and 2 B 2 only C 2 and 3 D 1 and 3 5 [P.T.O.
19 A factory consists of two production cost centres (P and Q) and two service cost centres (X and Y). The total allocated and apportioned overhead for each is as follows: P Q X Y $95,000 $82,000 $46,0 00 $30, It has been estimated that each service cost centre does work for other cost centres in the following proportions: P Q X (^) Y Percentage of service cost centre X to 50 50 – – Percentage of service cost centre Y to 30 60 10 – The reapportionment of service cost centre costs to other cost centres fully reflects the above proportions. After the reapportionment of service cost centre costs has been carried out, what is the total overhead for production cost centre P? A $124, B $126, C $127,00 0 D $128, 20 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? EOQ Annual holding cost A Higher Lower B Higher Higher C Lower Higher D Lower Lower 21 A company which operates a process costing system had work-in-progress at the start of last month of 300 units (valued at $1,710) which were 60% complete in respect of all costs. Last month a total of 2,000 units were completed and transferred to the finished goods warehouse. The cost per equivalent unit for costs arising last month was $10. The company uses the FIFO method of cost allocation. What was the total value of the 2,000 units transferred to the finished goods warehouse last month? A $19,910 B $20,000 C $20,510 D $21, 22 A manufacturing company operates a standard absorption costing system. Last month 25,000 production hours were budgeted and the budgeted fixed production cost was $125,000. Last month the actual hours worked were 24,000 and standard hours for actual production were 27,000. What was the fixed production overhead capacity variance for last month? A $5,000 Adverse B $5,000 Favourable C $10,000 Adverse D $10,000 Favourable 7 [P.T.O.
23 The following statements have been made about value analysis. (1) It seeks the lowest cost method of achieving a desired function (2) It always results in inferior products (3) It ignores esteem value Which is/are true? A 1 only B 2 only C 3 only D 1 and 3 only 24 Under which of the following labour remuneration methods will direct labour cost always be a variable cost? A Day rate B Piece rate C Differential piece rate D Group bonus scheme 25 A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occurred: Month 1 Month 2 Sales 3,800 4, Production 3,900 4, The opening inventory for Month 1 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? Absorption costing profit/(loss) Marginal costing profit/(loss) Month 1 Month 2 Month 1 Month 2 $ $ $ $ A 200 4,400 (400) 3, B (400) 4,400 200 3, C 200 3,200 (400) 4, D (400) 3,200 200 4, 26 The following statements relate to the advantages that linear regression analysis has over the high low method in the analysis of cost behaviour:
31 Which of the following statements relating to management information are true?
35 Two products G and H are created from a joint process. G can be sold immediately after split-off. H requires further processing into product HH before it is in a saleable condition. There are no opening inventories and no work in progress of products G, H or HH. The following data are available for last period: $ Total joint production costs 350, Further processing costs of product H 66, Product Production Closing units inventory G 420,000 20, HH 330,000 30, Using the physical unit method for apportioning joint production costs, what was the cost value of the closing inventory of product HH for last period? A $16, B $18, C $20, D $21, (70 marks) 11 [P.T.O.
(c) Cab Co wishes to maximise the wealth of its shareholders. It has correctly calculated the following measures for the proposed computerised tracking system project:
2 Castilda Co manufactures toy robots. The company operates a standard marginal costing system and values inventory at standard cost. The following is an extract of a partly completed spreadsheet for calculating variances in month 1. Required: (a) Which formula will correctly calculate the direct labour efficiency variance in cell B18? A = (C9C4)- B B =B13-(C9C4) C = (C9C4)- (150,0008) D =(150,000-(C96))8 (2 marks) (b) Calculate the following for month 1: (i) Sales volume variance and state whether it is favourable or adverse; (ii) Sales price variance and state whether it is favourable or adverse. Note: The total marks will be split equally between each part. (5 marks) (c) Castilda’s management accountant thinks that the direct labour rate and efficiency variances for Month 1 could be interrelated. Required: Briefly explain how the two direct labour variances could be interrelated. (3 marks) (10 marks) 14
Formulae Sheet Regression analysis y = a + bx Economic order quantity 2C 0 D Ch Economic batch quantity
0
C (1– D) h (^) R 16
Present value of 1 i.e. (1 + r )– n Where r = discount rate n = number of periods until payment Discount rate (r) Periods
Fundamentals Level – Knowledge Module, Paper F2 Management Accounting Section A 1 C 2 A 3 C (litres) Normal loss Actual loss Abnormal loss Process F 5,200 6,100 900 Process G 1,875 1,800 – 4 B Marginal costing profit: (36,000 – (2,000(63,000/14,000)) $27, 5 C 6 B 7 B Budgeted production (19,000 + 3,000 – 4,000) = 18,000 units RM required for production (18,0008) = 144,000 kg RM purchases (144,000 + 53,000 – 50,000) = 147,000 kg 8 D 9 B 10 B 11 A (36,000 + (200,000 x 12%))/200,000 = 30% 12 C 13 D Sales volume variance: (Budgeted sales units – actual sales units) * Standard profit per unit = 10, adverse Standard profit on actual sales: (actual sales units * std profit per unit) = $120,000 Fixed budget profit: (120,000 +10,000) = $130, 14 A 15 B 16 C Specimen Exam Answers Abnormal gain
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