FOUNDATIONS IN ACCOUNTANCY

Management Accounting
Pilot Paper

Time allowed: 2 hours This paper is divided into two sections: Section A ALL 35 questions are compulsory and MUST be attempted Section B ALL THREE questions are compulsory and MUST be attempted Formulae Sheet, Present Value and Annuity Tables are on pages 17, 18 and 19 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

Paper FMA

Section A ALL 35 questions are compulsory and MUST be attempted 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 B C D Internal benchmarking Competitive benchmarking Functional benchmarking Strategic benchmarking

Which of the following BEST describes target costing? A B C D Setting Setting Setting Setting a a a a cost by subtracting a desired profit margin from a competitive market price price by adding a desired profit margin to a production cost cost for the use in the calculation of variances selling price for the company to aim for in the long run

Information relating to two processes (F and G) was as follows: Process F G Normal loss as % of input 8 5 Input (litres) 65,000 37,500 Output (litres) 58,900 35,700

For each process, was there an abnormal loss or an abnormal gain? A B C D Process F Abnormal gain Abnormal gain Abnormal loss Abnormal loss Process G Abnormal gain Abnormal loss Abnormal gain Abnormal loss

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 be the profit for next period using marginal costing? A B C D $25,000 $27,000 $45,000 $47,000

The Eastland Postal Service is government owned. The government requires it to provide a parcel delivery service to every home and business in Eastland at a low price which is set by the government. Express Couriers Co is a privately owned parcel delivery company that also operates in Eastland. It is not subject to government regulation and most of its deliveries are to large businesses located in Eastlands capital city. You have been asked to assess the relative efficiency of the management of the two organisations. Which of the following factors should NOT be allowed for when comparing the ROCE of the two organisations to assess the efficiency of their management? A B C D Differences Differences Differences Differences in in in in prices charged objectives pursued workforce motivation geographic areas served

Under which sampling method does every member of the target population has an equal chance of being in the sample? A B C D Stratified sampling Random sampling Systematic sampling Cluster sampling

A Company manufactures and sells one product which requires 8 kg of raw material in its manufacture. The budgeted data relating to the next period are as follows: Sales Opening inventory of finished goods Closing inventory of finished goods Opening inventory of raw materials Closing inventory of raw materials Units 19,000 4,000 3,000 Kg 50,000 53,000

What is the budgeted raw material purchases for next period (in kg)? A B C D 141,000 147,000 157,000 163,000

[P.T.O.

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

0 $ C

0 $ D

0 A B C D Graph Graph Graph Graph A B C D

Which of the following are benefits of budgeting? 1 2 3 4 A B C D It It It It 1 1 2 2 helps coordinate the activities of different departments fulfils legal reporting obligations establishes a system of control is a starting point for strategic planning and and and and 4 3 3 4 only only only only

10 The following statements relate to the participation of junior management in setting budgets: 1. 2. 3. It speeds up the setting of budgets It increases the motivation of junior managers It reduces the level of budget padding

Which statements are true? A B C D 1 only 2 only 2 and 3 only 1, 2 and 3

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 companys return on investment? A B C D 30% 12% 18% 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) (2) (3) (4) A B C D An increase in direct material prices An increase in raw material usage per unit Units produced being greater than budgeted Units sold being greater than budgeted 2 3 1 1 and and and and 3 4 2 4 only only only only

13 A company has recorded the following variances for a period: Sales volume variance Sales price variance Total cost variance $10,000 adverse $5,000 favourable $12,000 adverse

Standard profit on actual sales for the period was $120,000. What was the fixed budget profit for the period? A B C D $137,000 $103,000 $110,000 $130,000

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 B C D 1 2 2 1 and 2 only and 3 and 3

[P.T.O.

15 Which of the following are feasible values for the correlation coefficient? 1 2 3 4 A B C D +140 +104 0 094 1 and 2 only 3 and 4 only 1, 2 and 4 only 1, 2, 3 and 4

16 A companys operating costs are 60% variable and 40% fixed. Which of the following variances values would change if the company switched from standard marginal costing to standard absorption costing? A B C D Direct material efficiency variance Variable overhead efficiency variance Sales volume variance Fixed overhead expenditure variance

17 ABC Co has a manufacturing capacity of 10,000 units. The flexed production cost budget of the company is as follows: Capacity Total production costs 60% $11,280 100% $15,120

What is the budgeted total production cost if it operates at 85% capacity? A B C D $13,680 $12,852 $14,025 $12,340

18 Using an interest rate of 10% per year the net present value (NPV) of a project has been correctly calculated as $50. If the interest rate is increased by 1% the NPV of the project falls by $20. What is the internal rate of return (IRR) of the project? A B C D 75% 117% 125% 200%

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 $95,000 Q $82,000 X $46,000 Y $30,000

It has been estimated that each service cost centre does work for other cost centres in the following proportions: Percentage of service cost centre X to Percentage of service cost centre Y to P 50 30 Q 50 60 X 10 Y

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 B C D $124,500 $126,100 $127,000 $128,500

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? A B C D EOQ Higher Higher Lower Lower Annual holding cost Lower Higher Higher 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 B C D $19,910 $20,000 $20,510 $21,710

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 B C D $5,000 Adverse $5,000 Favourable $10,000 Adverse $10,000 Favourable

[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 B C D 1 2 3 1 only only only and 3 only

24 Under which of the following labour remuneration methods will direct labour cost always be a variable cost? A B C D Day rate Piece rate Differential piece rate 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: Sales Production Month 1 3,800 3,900 Month 2 4,400 4,200

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) Month 1 Month 2 $ $ 200 4,400 (400) 4,400 200 3,200 (400) 3,200 Marginal costing profit/(loss) Month 1 Month 2 $ $ (400) 3,200 200 3,200 (400) 4,400 200 4,400

A B C D

26 The following statements relate to the advantages that linear regression analysis has over the high low method in the analysis of cost behaviour: 1. 2. 3. the reliability of the analysis can be statistically tested it takes into account all of the data it assumes linear cost behaviour

Which statements are true? A B C D 1 only 1 and 2 only 2 and 3 only 1, 2 and 3

27 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 $ 624,000 624,000 Finished output (10,000 units) Closing work-in-progress (4,000 units) $ 480,000 144,000 624,000

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 B C D 12% 30% 40% 75%

28 Which of the following would not be expected to appear in an organisations mission statement? A B C D The organisations values and beliefs The products or services offered by the organisation Quantified short term targets the organisation seeks to achieve The organisations major stakeholders

29 An organisation operates a piecework system of remuneration, but also guarantees its employees 80% of a time-based rate of pay which is based on $20 per hour for an eight hour working day. Three minutes is the standard time allowed per unit of output. Piecework is paid at the rate of $18 per standard hour. If an employee produces 200 units in eight hours on a particular day, what is the employees gross pay for that day? A B C D $128 $144 $160 $180

30 A company uses an overhead absorption rate of $350 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 B C D Under absorbed by $3,875 Under absorbed by $7,000 Over absorbed by $3,875 Over absorbed by $7,000

[P.T.O.

31 Which of the following statements relating to management information are true? 1. 2. 3. 4. A B C D It is produced for parties external to the organisation There is usually a legal requirement for the information to be produced No strict rules govern the way in which the information is presented It may be presented in monetary or non monetary terms 1 3 1 2 and and and and 2 4 3 4

32 A companys sales in the last year in its three different markets were as follows Market 1 Market 2 Market 3 Total $ 100,000 150,000 50,000 300,000

In a pie chart representing the proportion of sales made by each region what would be the angle of the section representing Market 3 (to the nearest whole degree)? A B C D 17 degrees 50 degrees 61 degrees 120 degrees

33 Which of the following BEST describes a flexible budget? A B C D A A A A budget which shows variable production costs only monthly budget which is changed to reflect the number of days in the month budget which shows sales revenue and costs at different levels of activity budget that is updated halfway through the year to incorporate the actual results for the first half of the year

34 The purchase price of an item of inventory 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 inventory item to the nearest whole unit? A B C D 730 894 1,461 1,633.

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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 Further processing costs of product H Product G HH Production units 420,000 330,000 $ 350,000 66,000 Closing inventory 20,000 30,000

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 B C D $16,640 $18,625 $20,000 $21,600 (70 marks)

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[P.T.O.

Section B ALL THREE questions are compulsory and MUST be attempted Please write your answer within the answer booklet in accordance with the detailed instructions provided within each of the questions in this section of the exam paper. You are NOT required to show your workings. 1 Cab Co owns and runs 350 taxis and had sales of $10 million in the last year. Cab Co is considering introducing a new computerised taxi tracking system. The expected costs and benefits of the new computerised tracking system are as follows: (i) (ii) (iii) (iv) The system would cost $2,100,000 to implement. Depreciation would be provided at $420,000 per annum. $75,000 has already been spent on staff training in order to evaluate the potential of the new system. Further training costs of $425,000 would be required in the first year if the new system is implemented. Sales are expected to rise to $11 million in Year 1 if the new system is implemented, thereafter increasing by 5% per annum. If the new system is not implemented, sales would be expected to increase by $200,000 per annum. Despite increased sales, savings in vehicle running costs are expected as a result of the new system. These are estimated at 1% of total sales. Six new members of staff would be recruited to manage the new system at a total cost of $120,000 per annum.

(v) (vi)

(vii) Cab Co would have to take out a maintenance contract for the new system at a cost of $75,000 per annum for five years. (viii) Interest on money borrowed to finance the project would cost $150,000 per annum. (ix) Cab Cos cost of capital is 10% per annum.

Required: (a) Indicate whether each of the following items are relevant or irrelevant cashflows for a net present value (NPV) evaluation of whether to introduce the computerised tracking system. In your answer booklet, list (i) to (v) to represent each of the items and write relevant if an term is a relevant cash flow and irrelevant if it is not. (i) Computerised tracking system investment of $2,100,000 (05 marks) (1 mark) (1 mark) (05 marks) (1 mark)

(ii) Depreciation of $420,000 in each of the five years (iii) Staff training costs of $425,000 (iv) Maintenance costs of $75,000 per annum for five years (v) Staff training costs of $75,000 (b) Calculate the following values if the computerised tracking system is implemented. (i) Incremental sales in Year 1

(1 mark) (1 mark) (05 marks) (15 marks)

(ii) Total sales in Year 2 (iii) Savings in vehicle running costs in Year 1 (iv) Present value of the maintenance costs over the life of the contract

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(c) Cab Co wishes to maximise the wealth of its shareholders. It has correctly calculated the following measures for the proposed project: The internal rate of return (IRR) is 14%, The return on average capital employed (ROCE) is 20% and The payback period is four years.

Required: Which of the following is true? A B C D The The The The project project project project is is is is worthwhile because the worthwhile because the not worthwhile because not worthwhile because IRR is a positive value IRR is greater than the cost of capital the IRR is less than the ROCE the payback is less than five years

(2 marks) (10 marks)

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[P.T.O.

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 figure in B18? A B C D = (C9*C4)- B13 =B13-(C9*C4) = (C9*C4)- (150,000*8) =(150,000-(C9*6))*8

(2 marks)

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(b) Castilda Co uses a standard costing operating statement to reconcile budgeted contribution with actual contribution. A standard cost operating statement for Month 1 is given below with some information missing. Standard costing operating statement Month 1 $ Budgeted contribution Gap 1 Standard contribution on actual sales Sales price variance $ 700,000 Gap 2 Gap 3 711,680 12,800 adv 21,000 adv 48,000 fav 10,000 fav 24,200 fav 735,880

Cost variances Total direct materials variance Direct labour rate variance Direct labour efficiency variance Total variable production overhead variance

Actual contribution

Required: (i) Which is the correct title for Gap 1? A B C Sales volume variance Total sales variance Fixed overhead volume variance

(1 mark) (25 marks) (25 marks)

(ii) Calculate the variance for Gap 2 and state whether it is favourable or adverse. (iii) What is the sales price variance in Gap 3 and state whether it is favourable or adverse.

(c) Castildas management accountant thinks that the direct labour rate and efficiency variances for Month 1 could be interrelated. Required: Which TWO of the following could explain their interrelationship? A B C D Higher grade labour performed tasks more efficiently Lower grade labour performed tasks less efficiently A productivity bonus was paid to direct labour Actual production was less than budgeted

(2 marks) (10 marks)

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[P.T.O.

Nicholson Co sells mobile telephones. It supplies its customers with telephones and wireless telephone connections. Customers pay an annual fee plus a monthly charge based on calls made. The company has recently employed a consultant to install a balanced scorecard system of performance measurement and to benchmark the results against those of Nicholson Cos competitors. Unfortunately the consultant was called away before the work was finished. You have been asked to complete the work. The following data is available. Nicholson Co Operating data for the year ended 30 November 20X0 Sales revenue Sales attributable to new products Average capital employed Profit before interest and tax Average numbers of customers Average number of telephones returned for repair each day Number of bill queries Number of customer complaints Number of customers lost Average number of telephones unrepaired at the end of each day Required: (a) Calculate the following ratios and other statistics for Nicholson Co for the year ended 30 November 20X0. (i) Return on capital employed; (15 marks) (15 marks) (15 marks) (15 marks) $480 million $8 million $192 million $48 million 1,960,000 10,000 12,000 21,600 117,600 804

(ii) Return on sales (net profit percentage); (iii) Asset turnover; (iv) Average wait for telephone repair (in days). (b) Calculate the following statistics for Nicholson Co. (Give your answers to 2 decimal places.) (i) Percentage of customers lost per annum;

(1 mark) (1 mark)

(ii) Percentage of sales attributable to new products. (c) The following explanation of a balanced score card is incomplete:

A balanced scorecard measures performance from four perspectives: customer satisfaction, growth, financial success and (Gap 1). The scorecard is balanced in that it requires managers to (Gap 2). Required: Select the correct phrases to complete each sentence. Gap 1 A B C process flexibility process efficiency non financial success

(1 mark)

Gap 2 A B C achieve on an equal number of KPIs in each perspective offset bad performance in one area with good performance in another deliver performance in all four areas

(1 mark) (10 marks)

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Formulae Sheet Regression analysis y = a + bx

Economic order quantity 2C0D Ch

Economic batch quantity

2C0D D Ch (1 ) R

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[P.T.O.

Present Value Table Present value of 1 i.e. (1 + r)n Where r = discount rate n = number of periods until payment Discount rate (r) Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1% 0990 0980 0971 0961 0951 0942 0933 0923 0941 0905 0896 0887 0879 0870 0861 2% 0980 0961 0942 0924 0906 0888 0871 0853 0837 0820 0804 0788 0773 0758 0743 3% 0971 0943 0915 0888 0863 0837 0813 0789 0766 0744 0722 0701 0681 0661 0642 4% 0962 0925 0889 0855 0822 0790 0760 0731 0703 0676 0650 0625 0601 0577 0555 5% 0952 0907 0864 0823 0784 0746 0711 0677 0645 0614 0585 0557 0530 0505 0481 6% 0943 0890 0840 0792 0747 0705 0665 0627 0592 0558 0527 0497 0469 0442 0417 7% 0935 0873 0816 0763 0713 0666 0623 0582 0544 0508 0475 0444 0415 0388 0362 8% 0926 0857 0794 0735 0681 0630 0583 0540 0500 0463 0429 0397 0368 0340 0315 9% 0917 0842 0772 0708 0650 0596 0547 0502 0460 0422 0388 0356 0326 0299 0275 10% 0909 0826 0751 0683 0621 0564 0513 0467 0424 0386 0305 0319 0290 0263 0239 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

(n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

11% 0901 0812 0731 0659 0593 0535 0482 0434 0391 0352 0317 0286 0258 0232 0209

12% 0893 0797 0712 0636 0567 0507 0452 0404 0361 0322 0287 0257 0229 0205 0183

13% 0885 0783 0693 0613 0543 0480 0425 0376 0333 0295 0261 0231 0204 0181 0160

14% 0877 0769 0675 0592 0519 0456 0400 0351 0308 0270 0237 0208 0182 0160 0140

15% 0870 0756 0658 0572 0497 0432 0376 0327 0284 0247 0215 0187 0163 0141 0123

16% 0862 0743 0641 0552 0476 0410 0354 0305 0263 0227 0195 0168 0145 0125 0108

17% 0855 0731 0624 0534 0456 0390 0333 0285 0243 0208 0178 0152 0130 0111 0095

18% 0847 0718 0609 0516 0437 0370 0314 0266 0225 0191 0162 0137 0116 0099 0084

19% 0840 0706 0593 0499 0419 0352 0296 0249 0209 0176 0148 0124 0104 0088 0074

20% 0833 0694 0579 0482 0402 0335 0279 0233 0194 0162 0135 0112 0093 0078 0065 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Annuity Table
n Present value of an annuity of 1 i.e. 1 (1 + r) r

Where

r = discount rate n = number of periods Discount rate (r)

Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1% 0990 1970 2941 3902 4853 5795 6728 7652 8566 9471 1037 1126 1213 1300 1387 11% 0901 1713 2444 3102 3696 4231 4712 5146 5537 5889 6207 6492 6750 6982 7191

2% 0980 1942 2884 3808 4713 5601 6472 7325 8162 8983 9787 1058 1135 1211 1285 12% 0893 1690 2402 3037 3605 4111 4564 4968 5328 5650 5938 6194 6424 6628 6811

3% 0971 1913 2829 3717 4580 5417 6230 7020 7786 8530 9253 9954 1063 1130 1194 13% 0885 1668 2361 2974 3517 3998 4423 4799 5132 5426 5687 5918 6122 6302 6462

4% 0962 1886 2775 3630 4452 5242 6002 6733 7435 8111 8760 9385 9986 1056 1112 14% 0877 1647 2322 2914 3433 3889 4288 4639 4946 5216 5453 5660 5842 6002 6142

5% 0952 1859 2723 3546 4329 5076 5786 6463 7108 7722 8306 8863 9394 9899 1038 15% 0870 1626 2283 2855 3352 3784 4160 4487 4772 5019 5234 5421 5583 5724 5847

6% 0943 1833 2673 3465 4212 4917 5582 6210 6802 7360 7887 8384 8853 9295 9712 16% 0862 1605 2246 2798 3274 3685 4039 4344 4607 4833 5029 5197 5342 5468 5575

7% 0935 1808 2624 3387 4100 4767 5389 5971 6515 7024 7499 7943 8358 8745 9108 17% 0855 1585 2210 2743 3199 3589 3922 4207 4451 4659 4836 4988 5118 5229 5324

8% 0926 1783 2577 3312 3993 4623 5206 5747 6247 6710 7139 7536 7904 8244 8559 18% 0847 1566 2174 2690 3127 3498 3812 4078 4303 4494 4656 4793 4910 5008 5092

9% 0917 1759 2531 3240 3890 4486 5033 5535 5995 6418 6805 7161 7487 7786 8061 19% 0840 1547 2140 2639 3058 3410 3706 3954 4163 4339 4486 4611 4715 4802 4876

10% 0909 1736 2487 3170 3791 4355 4868 5335 5759 6145 6495 6814 7103 7367 7606 20% 0833 1528 2106 2589 2991 3326 3605 3837 4031 4192 4327 4439 4533 4611 4675 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

End of Question Paper

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Answers

FOUNDATIONS IN ACCOUNTANCY Paper FMA Management Accounting Section A 1 C

Pilot Paper Answers

C (litres) Process F Process G Normal loss 5,200 1,875 Actual loss 6,100 1,800 Abnormal loss 900 Abnormal gain 75

B Marginal costing profit: (36,000 (2,000*(63,000/14,000)) $27,000

B Budgeted production (19,000 + 3,000 4,000) = 18,000 units RM required for production (18,000*8) = 144,000 kg RM purchases (144,000 + 53,000 50,000) = 147,000 kg

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 = 10,000 adverse Standard profit on actual sales: (actual sales units * std profit per unit) = $120,000 Fixed budget profit: (120,000 +10,000) = $130,000

14 A

15 B

16 C

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17 A Variable production cost per unit = (15,120 11,280)/(10,000 6,000) = 3,840/4,000 = $096 Fixed cost = 11,280 (6,000 x 096) = $5,520 85% capacity = 8,500 units. Flexible budget allowance for 8,500 units = $5,520 + (8,500 x 096) = $13,680

18 C At 13% NPV should be 10 Using interpolation: 10% + (50/60)(10% 13%) = 125%

19 D Direct cost Proportion of cost centre X (46,000 + (010*30,000))*050 Proportion of cost centre Y (30,000*03) Total overhead cost for P

$95,000 $24,500 $9,000 $128,500

20 D

21 A 1,700 units*10 300 units*04*10 Opening work in progress value Total value

$17,000 $1,200 $1,710 $19,910

22 A (Actual hours Budgeted hours) * standard rate (24,000 25,000)*5 = $5,000 adverse

23 A

24 B

25 C Month 1: production >sales Absorption costing > marginal costing Month 2: sales> production marginal costing profit> absorption costing profit A and C satisfy month 1, C and D satisfy month 2; therefore C satisfies both

26 B

27 D Cost per equivalent unit (480,000/10,000) = $48 Degree of completion= ((144,000/48)/4,000) = 75%

28 C

29 D 200 units*(3/60)*18 = $180

30 A Actual cost Absorbed cost Under absorbed

$108,875 $105,000 $3,875

24

31 B

32 C Total number of degrees = 360 Proportion of market 3 sales: (50,000/300,000) = 01666 = 017 017*360 = 61

33 C

34 C {(2*20*(4*20,000))/(006*25)}05 1,461 units

35 C Joint costs apportioned to H: ((330,000/(420,000 + 330,000))*350,000 = $154,000 Closing inventory valuation(HH): (30,000/330,000)*(154,000 + 66,000) = $20,000 Section B 1 (a) (i) (ii) relevant irrelevant

(iii) relevant (iv) relevant (v) (b) (i) irrelevant Increase in sales = ($11m $10m) = $1m Increase due to the project = ($1m $02m) = $800,000 (ii) Sales in year 1 = $11m Sales in year 2 = ($11m*005) + $11m = $11,550,000 (iii) Total sales in year 1 = $11m Savings ($11m*001) = $110,000 (iv) Annuity factor for five years at 10%= 3791 Present value ($75,000*3791) = $284,325 (c) B

(a) (b)

C (i) (ii) A Sales volume variance: Budgeted to sale 25,000 units but sold 25,600 units (25,600 25,000)*$28 $16,800 favourable (iii) Sales price variance: Budgeted to sale at $120 per unit (25,600*$120) = $3,072,000 Actual sales were $3,066,880 Variance ($3,066,880 $3,072,000) = $5,120 adverse

(c)

A and C

(a)

(i)

Profit before interest and tax/Capital employed: $48m $192m = 25%

25

(ii)

Profit before interest and tax/Sales revenue: $48m $480m = 10%

(iii) Sales revenue/capital employed = $480m 192m = 25 (iv) Average number of telephones unrepaired at the end of each day/Number of telephones returned for repair: (804 10,000)*365 days = 293 days (b) (i) (ii) Percentage of customers lost per annum = number of customers lost total number of customers x 100% = 117,600 1,960,000 = 6% Percentage of sales attributable to new products = Sales attributable to new products/total sales x 100% = $8m $480m = 167% B C

(c)

Gap 1 Gap 2

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