F5 - IPRO - Mock 1 - Questions
F5 - IPRO - Mock 1 - Questions
F5 - IPRO - Mock 1 - Questions
ACCA MOCK
PERFORMANCE MANAGEMENT
Time allowed
3 hours and 15 minutes
This paper is divided into three sections:
Section A ‐ All 15 questions are compulsory and MUST be attempted
Section B ‐ All 15 questions are compulsory and MUST be attempted
Section C ‐ BOTH questions are compulsory and MUST be attempted
Formulae sheet, present value and annuity tables are on pages 3, 4
and 5
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SECTION A
ALL 15 questions are compulsory and MUST be attempted. Each question is
worth two marks.
Q1. The following information has been extracted from the budget of Alpha Co:
Per unit
Selling price $750
Direct material $220
Direct labour $105
Variable production overheads $29
Variable selling overheads $76.
The fixed production cost of the business is $20,000 per month and the fixed selling
cost is $10,000 per quarter.
How many units should Alpha Co produce and sell in order to generate annual profit
of $400,000? (To the nearest whole number)
A 1,217 Units
B 2,222 Units
C 130 Units
D 2,125 Units
Q 2. Dalton Co produces and sells a product for $90. The production for the
upcoming year is budgeted to be 30,000 units and Dalton Co expects all the
produced units to be sold.
The cost accountant has determined the break-even point (in revenue) to be
$600,000, whereas contribution to sales ratio is 40%.
What is the expected profit for the year?
A $840,000
B $960,000
C $720,000
D $980,000
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Q 3. ABC Co has received four different job orders from the customers. However,
given the limited capacity, it can only undertake one order at a time. All the
customers have agreed to pay a price of $325,000.
The costs incurred on the order will vary depending upon three different scenarios.
The details of costs and probability of different scenarios are as under:
Costs Probability $000 $000 $000 $000
Job Order W X Y Z
Scenario 1 (0.6) 220 105 285 230
Scenario 2 (0.3) 300 135 290 310
Scenario 3 (0.1) 360 400 295 390
Assuming that the objective of ABC Co is to maximise profits and the decision-
maker is risk neutral, which of these job orders should be accepted?
A Job Order ‘W’
B Job Order ‘X’
C Job Order ‘Y’
D Job Order ‘Z’
Q4. Which of the following statements regarding Fitzgerald and Moon’s Building
Blocks model are correct?
(1) Standards, i.e. performance targets, should always be achievable, clear and
(2) controllable.
(2) Rewards should always be fair, sufficient and motivating.
(3) The framework is highly suitable for service organisations.
(4) The model ignores the external measures.
(5) The model includes both financial and non-financial measures.
A (1), (3) and (5)
B (3) and (5)
C (2), (4) and (5)
D (1) and (2)
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Q5. Paris Inc produces and sells expensive perfumes. It uses full-cost pricing system
and keeps a mark up of 25%. The business has received an order of 8,000 perfume
bottles from one of its major customers. Each perfume bottle will require 300 ml of
liquid and will take around 45 seconds of labour time. The business will contract a
courier company for the delivery of these perfumes. The business estimates the
weight of entire consignment, including packaging, to be around 3,200 kg.
The information about various costs associated with each perfume is as follows:
Cost of bottle = $10 per unit
Cost of liquid = $1,500 per litre
Labour rate = $20 per hour
Charges of courier company = $0.008 per gram
Calculate the price Paris Inc should quote to the customer.
A $4,536,500
B $4,634,500
C $4,632,500
D $4,532,500
Q6. Which of the following statements about pricing decisions are incorrect?
(1) Penetration pricing is useful when the demand for a product is highly inelastic.
(2) Price skimming is useful when a business wishes to achieve economies of scale.
(3) Cost based pricing strategies tend to ignore the external factors.
(4) Full cost pricing requires the budgeted level of output to be determined at the
outset.
A (1) and (2)
B (1) and (3)
C (2) and (4)
D (3) and (4)
Q7. A business has formulated a linear programming function for two products, A
and B. The objective was to maximise the contribution and this was reflected by C =
3A + 2B. Both units are produced with the help of Chemical X, which is available in
the market at a price of $5 per kg. The shadow price of Chemical X is determined to
be $9 per kg.
In the context of this scenario, which of the following statements is correct?
A The maximum price to be paid for an additional unit of Chemical X is $4 per kg.
B The maximum price to be paid for an additional unit of Chemical X is $5 per kg.
C The maximum price to be paid for an additional unit of Chemical X is $9 per kg.
D The maximum price to be paid for an additional unit of Chemical X is $14 per kg.
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Q8. The following ratios have been calculated for Cola Co:
Gross profit margin 29%
Operating profit margin 16%
Gearing (debt/equity) 37%
Asset turnover 72%
Current ratio 1.5:1
Quick ratio 0.8:1
What is the return on capital employed?
A 11.52%
B 20.88%
C 15.33%
D 22.22%
Q9. Which of the following statements about life cycle costing are correct?
(1) It focuses on short-term by trying to identify all costs at the beginning of
product’s life cycle.
(2) It can be applied to customers along with the products.
(3) It ignores the cost incurred in the development phase and only considers the
costs incurred during actual life cycle of the product.
(4) It includes the dismantling and environment related cost associated with a
product.
A (1) and (2)
B (1) and (3)
C (2) and (4)
D (3) and (4)
Q10. Technology Co produces and sells mobile phones. The current price for one of
its mobile phones is $600, the variable cost is $420 and the expected demand is
90,000 units. The business wishes to increase the price of this model by $50.
However, the marketing department has warned about the fall in demand by 2,500
units for every $50 increase in the price.
Assuming that profits are maximised when marginal revenue equals marginal
cost, calculate the profit- maximising selling price.
A $1,700
B $1,410
C $1,230
D $1,100
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Q11. The key steps in limiting factor analysis include:
(1) Ranking the products.
(2) Estimating the total demand of all products.
(3) Calculating contribution per unit.
(4) Calculating contribution per unit of limiting factor.
(5) Identifying the limiting factor.
What is the correct order of these steps?
A (1), (4), (3), (5), (2)
B (2), (1), (4), (5), (3)
C (2), (5), (3), (4), (1)
D (3), (4), (2), (5), (1)
Q12. The selling price of Product X is $300 per unit. Sales for the coming month
are expected to be 1,200 units. The company has a policy of keeping 25% profit
margin.
The cost accountant has prepared the following cost estimates for Product X:
Cost $
Direct Material 90.10
Direct Labour 75.30
Ordering Costs 60.80
Quality Control 18.90
Despatch Costs 25.20
Marketing Costs 11.20
Calculate the cost gap for Product X.
A $12.40
B $20.10
C $45.30
D $56.50
Q13. Beta Co produces and sells two different products. The details about
budgeted sales and profits of these products are as follows;
Products Budgeted sales Profit per unit ($)
Product A 1,200 16.40
Product B 1,800 30.20
Beta Co actually sold 1,500 units of Product A and 1,000 units of Product B.
What is the sales mix variance?
A $6,900 (F)
B $8,200 (F)
C $8,200 (A)
D $6,900 (A)
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Q14. Which of the following statements about standard costing and variance
analysis are correct?
A An adverse sales volume variance can arise due to unexpected increase in product
demand.
B Idle time variance can be favourable if the actual labour rate turns out to be less
than the standard labour rate.
C A favourable material price variance can arise if a business avails unforeseen
discounts.
D Labour efficiency variance compares the actual cost of labour with what it should
have cost.
Q15. The following information has been extracted from the labour budget of
Alpha Co:
Budgeted hours Rate Total cost 40,000 hours $15 $600,000
The labour actually worked for 35,000 hours and the labour rate variance for the
period was found to be $300,000 adverse.
Calculate the actual hourly rate paid to the labour.
A $22.57
B $26.33
C $20.12
D $23.57
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The following scenario relates to question 16 - 20
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Q17. What is relevant cost of labour?
Skilled Semi-skilled
A $2,800 $12,600
B $2,800 $14,400
C Nil $12,600
D Nil $14,400
Q18. What is the total relevant cost of printing?
A $15,000
B $25,000
C $35,000
D $45,000
Q19. What is the relevant cost of overheads?
A $3,400
B $3,000
C $3,200
D $3,600
Q20. Which of the following statements about relevant costing is correct?
A The overheads are considered relevant as the business needs to recover all costs.
B An opportunity cost is always relevant even if it is a sunk cost.
C Notional costs are always relevant.
D An opportunity cost represents the cost of the best alternative forgone.
Delicious Food is a newly established fast food restaurant situated in busy part of the
city. The lunch menu is prepared each morning and the business has to decide the
number of meals to make each day. If the demand turns out higher than the number
of meals prepared, the business has to refuse the customers, thereby resulting in
loss of goodwill and lesser profitability. Conversely, if the demand turns out lower
than the number of meals prepared, unsold meals reduce the overall profitability.
Based on the sales made during its first month of operation, Delicious Food has
established four possible demand levels and the associated probabilities. The daily
profits at different combinations of demand and supply are presented in the payoff
table below:
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Supply level
Demand level Probability 300 400 500 600
$ $ $ $
300 0.2 1,200 1,050 900 750
400 0.3 1,200 1,450 1,350 1,250
500 0.4 1,200 1,450 1,700 1,600
600 0.1 1,200 1,450 1,700 1,950
Q21. Assuming that Delicious Food follows maximax approach, how many meals
should it prepare?
A 300 meals
B 400 meals
C 500 meals
D 600 meals
Q22. Assuming that Delicious Food follows maximin approach, how many meals
should it prepare?
A 300 meals
B 400 meals
C 500 meals
D 600 meals
Q23. Assuming that Delicious Food follows minimax regret approach, how many
meals should it prepare?
A 300 meals
B 400 meals
C 500 meals
D 600 meals
Q24. An experienced restaurant has offered to provide advice to Delicious Food.
Based on the extensive
experience, this restaurant can inform Delicious Food about the exact level of
demand in a particular day.
What is the maximum price which Delicious Food should pay for this information?
A $115
B $235
C $460
D $1,550
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Q25. Which of the following statements about decision making are incorrect?
(1) A risk-averse decision-maker uses expected values to choose the right option.
(2) A risk taking decision-maker uses maximin approach to choose the right option.
(3) Expected values take account of the likelihood of different outcomes.
(4) Maximax is an aggressive and risk taking approach to decision making.
A (1) and (2)
B (1) and (3)
C (2) and (3)
D (2) and (4)
The steel was actually procured at $6 per kg. A total of 55,000 kilograms were
actually used to manufacture waterproof lockers and 260,000 kilograms were used
to manufacture high-security lockers.
The world commodity prices for steel increased by 30% during the previous
month. A complaint made by local health club forced Security Inc. to revise the
design of waterproof lockers. The revised design required 10% more steel than the
standard.
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Q29. Which of the following statements about planning and operational variances is
/ are correct?
(1) Planning variances are always inevitable and there is no way to control or reduce
them.
(2) Operational variances compare the original standard with revised standard based
on the availability of new information.
A 1 Only
B 2 Only
C Both 1 and 2
D Neither 1 nor 2
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Q30 Which of the following statements about variances is correct?
A If sales price planning variance is adverse, the sales price operational variance is
always favourable.
B If sales price planning variance is adverse, the sales price operational variance is
always adverse too.
C Materials price planning variance and materials price operational variance are the
two components of materials price variance.
D Materials planning variance is a useful variance to assess the performance of a
production supervisor.
Required
(a) Assuming that all units from Division A are transferred to Division B for further
processing, calculate the monthly profit for the company in a given month.
(4 marks)
(b) Calculate and conclude, for each product, whether they should be further
processed in Division B in order to maximise the profitability of Silicon Co.
(10 marks)
Division A and Division B are separate investment centres. The board has identified
a potentially growing market for Amplifiers, whereas Transistors are already in the
declining stage of their respective life cycles. Consequently, board has ordered
Division A to transfer all Transistors at marginal cost to Division B.
(c) Discuss the implications of this decision for the future prospects and
performance measurement of Division A. (6 marks)
(20 marks)
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Q 32. Clean Co produces and sells three different types of detergents, X, Y and Z.
Each detergent is made from a combination of two different materials, A and B. The
company uses traditional absorption costing to allocate overheads on the basis of
direct labour hours. The selling prices currently charged by the business cannot be
increased due to intensive competition. Information from the annual budget about
the three products is as follows:
X Y Z
Production and sales (units) 14,000 16,000 18,000
Selling price per unit $36 $28 $53
Direct material cost (A) $4 $6 $2
Direct material cost (B) $4 $2 $18
Direct labour cost ($15 per hour) $1.5 $3 $7.5
Number of purchase orders per annum 30 40 10
Number of production runs per annum 6 12 2
Number of deliveries to retailers per annum 20 30 10
Megawatts of electricity consumed 3 6 1
(c) Calculate the budgeted production cost per unit of each detergent using
activity based costing. (9 marks)
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(d)Using the cost per unit calculated in part (c), Calculate the total profit / loss
of each detergent. (3 marks)
(e)Based on your calculations from (a) to (d), discuss whether Clean Co should
continue to produce all three detergents. (2 marks)
(20 marks)
END
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