Mock t7

Section A – ALL TEN questions are compulsory and MUST be attempted
1 ‘xxx’ describes the relationship between utilisation of resources (inputs) and the output produced
by
those resources.
Improving ‘xxx’ means getting more output from each unit of input, or getting the same amount of
output with fewer resources.
In this definition what does ‘xxx’ refer to?

A Economy
B Efficiency
C Effectiveness
D Value-for-money
The following information relates to questions 2 and 3.

Derby Limited budgets for 2,000 units of Z12 per month. Fixed overheads are allocated using
standard labour hours.
Z12 requires three hours of direct labour, and the fixed overhead absorption rate is £6 per standard
labour hour.
2,200 units were produced in November 2002, and the actual fixed overhead costs incurred were
£37,200.
2 What is the correct fixed overhead spending (expenditure) variance for November?
A £1,200 adverse
B £1,200 favourable
C £2,400 favourable
D £3,600 favourable
3 What is the correct fixed overhead volume variance for November?

A £1,200 adverse
B £2,400 adverse
C £2,400 favourable
D £3,600 favourable
4 In the Balanced Scorecard for Ashby plc, one of the goals has been stated as ‘continuing to
introduce successful new products to the market’.
Which of the following measures is most appropriate for that goal?

A Percentage of sales from new customers
B Percentage of sales from new products
C Number of new patents registered by Ashby per year
D Lead time for new products
5 Melton plc has many divisions which it evaluates using Return on Investment (ROI) and Residual
Income (RI) measures. The Mowbray division has net assets of £24m at 30 September 2002. In the
year to 30 September 2002 it earned profit before interest and tax of £3·6m. The appropriate cost of
capital for the Mowbray division is 12%.
During the year to 30 September 2002 it paid interest of £0·6m.

What is the correct combination of ROI and RI for the year to 30 September 2002?
ROI RI
A 121/2% £0·12m
B 121/2% £0·72m
C 15% £0·72m
D 15% £3·0m
ATC – Adding Value to Your Future 1

6 Division A supplies other divisions within the company with component parts. There are other
suppliers in the market supplying virtually identical products with known prices, and Division A also
supplies third-party companies.
From the viewpoint of the company as a whole, what is the optimal basis for the transfer
price for components sold by Division A to other divisions within the company?
A Full cost plus a profit margin
B Marginal cost
C Market price
D Market price less marketing costs
7 Consider the following statements relating to activity-based costing (ABC) in a manufacturing
environment:
(i) ABC eliminates the use of volume as a means of measuring costs
(ii) more accurate cost estimates will always be produced using ABC than absorption costing
Which of the following combinations is correct?
Statement (i) Statement (ii)
A true true
B false false
C true false
D false true
8 When the budget for the three months to 30 April 2008 was prepared, the expected level of
production was 20,000 units, and the budgeted production overhead was $178,400. This included
$42,000 of fixed costs, with the remainder estimated to vary with the level of production.
Actual production in the three months to 30 April 2008 was 21,220 units.
What is the flexed production overhead budget for the three months to 30 April 2008?
A $144,720·40
B $186,720·40
C $189,282·40
D $231,282·40
9 Capac Co uses activity based costing (ABC). Overhead costs for the next year are:
Expense Total expenditure Volume of activity

$
Set up costs 1,139,200 3,200 set ups
Raw material handling 488,900 5,000 materials orders
One of the company’s products is manufactured in batches of 500 units, with each batch requiring
one set up and 50 materials orders.
Using ABC, what is the overhead cost of 220 units?

A $10·49
B $453·78
C $2,307·80
D $5,245·00
10 Which of the following statements about Residual Income (RI) is correct?

A RI allows the performance of different investment centres to be compared
B The level of investment is considered when assessing performance using RI
C Projects with a return above the cost of capital will be accepted by using RI
D Risk cannot be included in the assessment of a project if RI is used

Section B – ALL FOUR questions are compulsory and MUST be attempted3 D Fixed Overhead
Variances

Mock t7

Uploaded by

Copyright:

Available Formats

Mock t7

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mock t7

Uploaded by

Copyright:

Available Formats

Section A – ALL TEN questions are compulsory and MUST be attempted

In this definition what does ‘xxx’ refer to?

The following information relates to questions 2 and 3.

3 What is the correct fixed overhead volume variance for November?

Which of the following measures is most appropriate for that goal?

During the year to 30 September 2002 it paid interest of £0·6m.

ATC – Adding Value to Your Future 1

Expense Total expenditure Volume of activity

Using ABC, what is the overhead cost of 220 units?

10 Which of the following statements about Residual Income (RI) is correct?

ATC – Adding Value to Your Future 2

ATC – Adding Value to Your Future 3

You might also like