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1. A business manufactures a single product.

Budgeted
production for the period is 80,000units. Which are
expected to take 120,000 hours to produce? The fixed
overhead expenditure budget is $720,000. The standard
fixed overhead cost per unit is therefore $9(1.5
hours per unit at $6 per hours). Actual output for
the period was 81,500 units. These took 130,000 hours
to produce and fixed overhead expenditure was
$767,000. What was the fixed overhead volume variance
for the period?
a. $13,500(a)
b. $50,000(f)
c. $13,500(f)
d. $33,500(A)
e. $45,300(A)
Answer:
(Budgeted production actual production)x
standard OH rate per unit
(80,000 81,500)x 9
1,500 x 9 = 13,500(F)
81,500 x 9 = 733,500
(actual output x standard rate) x budgeted fixed
OH
81,500 x 9
720,000
733,500 720,000 = 13,500 (F)
2. A company budgets to produce 25,000 units of product
H90 monthly, each unit requiring 15 minutes of labour
time. The standard direct labour rate is $16 per hour
and the standard variable production overhead rate is
$2 per hour. During October 23,000 units of H90 were
produced. The labour time required for production was
5,500 hours. Direct labour hours costs were $90,750
and variable production overhead costs were $9,900.
What was the direct labour efficiency variance in
October?
a. 4,125(f)
b. 4,125(a)
c. 4,000(a)
d. 8,000(a)
e. 4,000(f)
Answer:

(Actual standard time for actual output actual


time) x standard rate
23,000 x 15 / 60 = 5,750
(5,750 5,500)x 16
250 x 16 = 4000(F)

3. The intentional over estimation of costs and/or


estimation of sales revenue in the budgeting
process?
a. Managerial fraud
b. Incremental budgeting
c. Budget bargaining
d. Asprational levels.
e. Budgetary slack.
4. the following incomplete WIP account is for process 2
during May:
Process account
units
$
Opening WIP b/fwd
2,000
10,210
Direct materials
18,000
74,250
Conversion costs
90,150
Normal loss
900
Abnormal loss
300
By products
1,800
Finished goods
14,000
Closing WIP c/fwd
3,000
the opening WIP, whose value consists of direct
materials $7,270 and conversion costs $2,850 has
complete for materials and 25% complete for conversion
costs, loss has no scrap value, but by product has a
sale value of $3 per unit. Closing WIP is 100% complete
for materials and 40% complete for conversion cost
using the FIFO method, the cost of finished output in
the method?
a. $115,700
b. $146,255
c. $74,250
d. $142,545
e. $155,255

5. Using the same above information; but using the


average method the value of WIP is ?
a. $24,000
b. $20,400
c. $20,000
d. $18,600
e. $24,000
6. A company sets up a new division investing $800,000
in non-current assets with an anticipated successful
life of ten years and no scrap value. Annual profit
before depreciation is expected to be $200,000 each
year. The straight line method of depreciation will
be applied. The calculated ROI for the division for
the first three years, by expressing annual profits
as a percentage of the average net book value of
assets for the year, will be?
a. Year 1=15.0%,year 2=17.0% &year 3 =21.0%
b. Year 1=15.8%,year 2=17.6% &year 3 =20.0%
c. Year 1=5.0%, year 2=10.0% &year 3 =15.0%
d. Year 1=20.0%, year 2=17.6% &year3 =15.8%
e. Year 1=16.2%, year 2=17.8% &year 3=19.3%
ANSWER;
Average net book value = Original cost of asset
at start of investment +Cost of asset at the end
of the first year 2
= 800,000 + 720,000 =
1,520,000 = 760,000
2
2
ROI= net profit/cost of investment x 100%
Net profit= profit before tax depreceation
= 200,000 80,000 = 120,000
Depreceation of straight line = value of asset/no of yrs of
asset
= 800,000/10,000
=80,000
Profit year 1 ROI = 800,000 + 720,000 /2 =1,520,000/2 =
=120,000/760,000
= 15.78%
Year 2 = 720,000+640,000/2 = 1,360,000/2 =
=120,000/680,000
=17.6%
Year 3 = 640,000 +560,000/2 = 1,200,000/2
= 120,000/600,000
=20%

Average of book value = max level +min level /2


7. In items produced by a division in a bamaby group is
both sold in an intermediate external market and
transferred to another division within the group
where it is enhanced and sold to an external endmarket. If the external markets for both the
transferred item and the end product are perfect,
with no variable selling costs, the ideal transfer
price is..?
a. The market price in the intermediate market.
b. Full cost
c. The market price in the end market
d. A dual price arrangement.
i. The market price in the end market
ii. Full cost
iii. The market price in the intermediate
market.
iv. The lesser of (a) the market price in the
intermediate market, and (c) the market
price in the end market.
v. A dual price arrangement
8. A transport business makes a particular journey
regularly, and has established that the standard fuel
cost for each journey is 20 liters of fuel at $2 per
liters. Due to a change in the vehicle used for the
journey and an unexpected rise in fuel costs. It is
decided retrospectively that the standard cost per
journey should have been 18 liters at $2.50 per
liters. If the fuel consumption for the 120 journey
was 2,090 liters, the operational variance for fuel
consumption in the period was..?
a. $175(A)
b. $95(F)
c. $175(F)
d. $600(A)
e. $600(F)
Answer:
Operational variance=
Actual standard (revised)
=120 x 18 x 2.50 = 5400 (standard or revised)
Actual =
2090 x 2.50 = 5225

5400 5225 = 175 (F)


Favorable, because it is a cost, so whenever the
cost decrease it is a favourable one and vise
verse
9. Bamaby group has two divisions, division A and
Division B. division A makes a product A77 and is
able to sell 20,000 units in an external market at
$15 each. The variable cost of product A77 is $8 per
unit. Division B has offered to buy 3,000 additional
units of A77 from Division A to utilize its compare
capacity. The units transferred would be altered and
sold to division B customers for $15 each, after
incurring variable cost of alteration of $3 per unit.
The manager of division B will not pay more than $10
per unit for units of A77 transferred. The manager of
division A will not accept less than the external
market price of $15. head office decides on a dual
transfer price arrangements, with sales of A77 priced
at $15 for division A and purchased priced at $10 for
division B. therefore under this dual pricing
arrangement what loss would be charged to head office
for the transfer.?
a. $12,000
b. 0
c. $30,000
d. $15,000
e. $24,000
10. the following data relates to production in a
manufacturing business that uses absorption costing:
Absorption rate
150% of direct cost labour
Direct labour cost
$30,000
Actual production
Overhead expenditure
$42,600
Which of the following entries would be recorded in the
cost ledger?
a. Debit production overhead $7,400, credit
costing profit /loss $7,400
b. Debit production overhead $2,400, credit
costing profit/loss $2,400
c. Debit costing profit/loss $2,400, credit
production overhead $2,400
d. Debit WIP $2,400 , credit production overhead
$2,400

e. Debit production overhead $2,400, credit WIP


$2,400.
11. for which of the following purposes might a budget
be used;
a. Continuous improvement.
b. Recording costs.
c. Rewording good performance.
i. (A) Continuous improvement.
ii. (c) Rewording good performance.
iii. (b) Recoding cost and arise (a)
continuous improvement.
iv. (b)Recording costs only.
v. All of these
12. which one or more of the following statement is
true, spreadsheet model can be used to:
a. Prepare fixed budgets.
b. Prepare flexible budgets.
c. Calculate variance & present variance reports.
d. Prepare fixed-forward control reports.
i. A,B,C AND D
ii. A AND B ONLY
iii. A,B,AND C ONLY
iv. B AND C ONLY
13. During a particular week 1,200 liters were input
to process 1, normal loss is 10% of input. Losses can
be sold for $1.80 per liter costs of the process
totaled $12,096. Actual output was 1,120 liters.
There was no opening or closing work-in-process. The
net value of the abnormal gain in the week was?
a. There was no abnormal gain. It was an abnormal
loss $368.
b. $368
c. $376
d. $446
e. $448
Answer:
Units of abnormal gain =
Actual output expected output
Expected output = input normal loss
To calculate the cost of abnormal gain =

Total cost incurred scrap value of normal loss


Input normal loss
Units of abnormal gain= 1,120 (1200-120=1080)= 40
cost of abnormal gain =12,096 0 = 12,096/108 = $11.2/unit
1080
Cost of per unit = 11.2 x 40 = 448
Sale price of abnormal gain = 40 x 1.8 = 72
448 72 = 376

14. Brett uses marginal costing. For the month of


April, it reported a profit of $56,500, opening
inventory was valued at $3,300 and closing inventory
at $1,900. If the business had used absorption
costing its opening inventory would have been $6,800
and closing inventory $4,100. What would have been
the reported profit using absorption costing?
a. $57,800
b. $56,300
c. $55,200
d. $53,800
e. $52,400
Answer:
Increase in inventory , marginal costing
3,300 1,900 = 1,400
Increase in inventory, absorption costing=
6,800 4,100 = 2,700
Difference (profit higher with absorption
costing)
1,400 2,700 = 1,300
Profit with marginal costing=
56,500 + 1,300 = 57,800
15. bamaby international has a subsidiary in country A
and another subsidiary in country B. the country A
subsidiary manufacture an item that has a variable
cost of $180 per unit and it transfers, 000 units
each year to the subsidiary in country B. the rate of
tax on company profit is 60% in country A and 25% in
country B. what would be the effect on the groups

annual after tax profit if the transfer price were to


be reduce in $240 per unit to $200?
a. Group profit would rise by $240,000
b. Group profit would rise by $140,000
c. Group profit would fall by $140,000
d. Group profit would fall by $210,000
e. Group profit would rise by $210,000
16. a level of performance or target for achievement
that an individual wishes to reach. Motivated
individual might seek to raise these in their
budget. The above description best describe?
a. Budgetary slack
b. Incentive scheme
c. Bonus system
d. Budget bargaining
e. Aspiration levels
17. Two profit centres trade with each other division
2 sells all its output to division 6, which comes to
an external market, the cost of each division are as
follows:
Division2
division6
Variable cost/unit
$5
$4
Fixed cost/month
$50,000
$45,000
Head office has decided that the transfer price
should be based on a two part tariff. Therefore, what
will be the transferred price?
a. A fixed price of $95,000 per month plus $0 per
unit transferred
b. A fixed price of $50,000 per month plus $4 per
unit transferred.
c. Fixed price of $45,000 per month plus $4 per
unit transferred.
d. Fixed price of $50,000 per month plus $5 per
unit transferred.
e. Fixed price of $45,000 per month plus $5 per
unit transferred.
18. Bambay division has net assets of $600,000 at
lobalance sheet value. The replacement cost of these
assets is estimated of the division 800,000 was

$160,000, before depreciation charges of $24,000. If


the assets were valued at replacement cost $32,000.
The company has a risk adjusted cost of capital of
12% but it has a large loan from a bank on which it
currently. What is the economic value added (EVA)
for bambay division (ignoring taxation).
a. $32,000
b. $96,000
c. $17,000
d. $24,000
e. $42,000
19. A business manufactures a single product. Budget
production for the period is 80,000 units. Which are
expected fixed overhead expenditure budget is
720,000. The standard fixed overhead cost per unit is
therefore $9 (1.5 hoursX6). Actual output for the
period was 81,500 units. These took 130,000 hours to
produce and fixed overhead expenditure what was the
fixed overhead volume variance for the period?
a. $33,500(A)
b. $13,500(A)
c. $13,500(F)
d. $60,000(F)
e. $46,000(A)
Answers;
81,500 80,000 = 1,500
1,500 x 9 = 13,500
20. Which of the following statement is correct?
a. Backflush accounting to particular appropriate
for job costing
b. Backflush accounting is based on a system of
continuous stock taking.
c. Backflush accounting make use of budget costs or
standard costs.
i. Statement A is correct.
ii. Statement C is correct.
iii. Both statement A and C is correct
iv. None of the statement is correct.(there is
no need for detailed tracking of material
movement through stores and production.)
v. Statement B is correct.

21. A negotiation process between a budget holder and


a senior manager, in which the budget holder argues
for more funds and the senior manager tries to reduce
description best describe?
a. Aspiration levels
b. Incremental budgeting
c. Budget baragaining
d. Staff dismissed
e. Budgetary slack.
22. The standard direct materials cost for a period is
$10 per unit, costing of 2.5 litres of material D at
$9 per litres. Actual output 1400 unit and materials
usage variance was $600(F). the actual usage of
material D in july was?
a. 3350 litres
b. 5350 liters
c. 3530 liters
d. 5530 liters
e. 600 liters
Answer;
Muv= (sqXsp)-(aqXsp)
600= 10x 14000
14000+600 = 10x
14600 = 10x
X= 1460
1460 -1400 = 60
60 x 2.5 = 150
1460 x 2.5 = 3,650
1400 x 2.5 = 3500
3500 150 = 3350
23. A variance report shows that in the pervious month
there was an adverse material price variance of $600.
It will $300 is investigate the variance to establish
whether the cause of the variance is controllable
from past experience. It 3has been estimated that is
a 0.25 probability that a price variance of this size
would reveal the need for control action. What must
be the minimum expected benefits from control action
to justify an investigation of this particular
variance in ?
a. $15,000
b. $1,200
c. $900

d. $600
e. $300
Answer
X x 0.25 300
0.25x 300 = 0
0.25x/0.25 = 300/0.25
X = 75
600 x 75% = 450 order control
600 x 25% = 150 0ut of order
= 600 300 = $300
24. The monthly production planning cost of Marget are
forecast using the trend:
Y= $50,000+$40x
Where y is the monthly production planning cost and x
is the number of batches processed each each month
may be estimated using a time series model
B= 200+6m
Where b is the de-seasonalized monthly activity level
and m represents the month number.
In month 25, the seasonal index value is 94. The
calculated production planning cosat for marget for
month 25, to nearest $1000 is/
a. $67,000
b. $60,000
c. $50,000
d. $53,000
e. $27,000
25. The Areadia division of butten group currently has
an investment base of $2.4m and annual profit of
$0.48m. it is considering the following. Three
mutually exclusive investment funds for which will be
supplied by the company:
Project
A
B
C
Initial outlay($000) 1400
600
400
Annual earning after
Depreciation($000)
350
200
88
Which investment would the investment manager prefer
if her aim to maximize the average ROI over the
period of new investment?
a. Investment C at average ROI = 66.7%
b. Investment B at average ROI = 25.8%
c. Investment A at average ROI = 25.8%

d. Investment B at average ROI = 50.0%


e. Investment C at average ROI = 25.8%
Answer
ROI= net profit/cost of investment x 100%
Net profit = profit before tax depreciation
26. An investment centre expected to make a profit of
$100,000 next year and to have capital employed of
$630,000. An opportunity to invest in new equipment
costing $140,000. The equipment would have a three
year life and would have a residual value of $20,000
at the end of year 3. The investment would increase
the annual cash profits of investment centers
performance in interested by residual income with
national interest charged at 10% on the midyear value
of net assets. If the investment is undertaken the
residual income in the first year will be?
a. $67,000
b. $43,000
c. $80,000
d. $41,000
e. $82,000
27. The following data relates to process 123 during
January;
Input quantity
5000 kilos
Process costs
$16,500
Actual output
4,600 kilos
There was no opening or closing WIP, loses are sold
for a net income of $2.35 per kilo. The net cost of
abnormal loss in January , to be charged as a cost in
the income statement?
a. $150
b. $15
c. $225
d. $325
e. $1500

28. A company produces two products S & T information


below. What is the budgeted overhead cost per unit of
product S?
Product S
product T

Budgeted production(units) 2400


Machine hours/ unit
3
Production runs required
2
Inspection during production 9
Production setup cost $126,000
Quality control cost
$72,000

600
3
5
7

There were no other overhead costs. Therefore the


overhead cost per unit of production S is?
a. $3,000
b. $54,875
c. $3,250
d. $31,875
e. $31,755
29. A company budgets to produce 25000 units of
product H90 monthly, each unit requiring 15 minutes
of labour times. The standard direct labour hour rate
is $16 per hour and standard variable production
overhead rate is $2 per hour. During October 23000
unit of H90 were produced, the labour time required
for production was 5,500 hours. Direct labour cost
were $90,750 and variable production overhead costs
were $9,900. What was the direct labour efficiency
variance in October?
a. $4000(F)
b. $8000(A)
c. $4125(F)
d. $4000(A)
e. $4125(A)

Answer:
(Actual standard time for actual output actual
time) X standard rate
23,000 X 15
= 5,750
60
5750 5500 X 16
250 X 16 = 4000 F

30. Which of the following statement is correct?


Statement 1: a sales budget and sales forecasts
should always be consistant with each other
Statement 2: responsibility accounting means
identifying the costs that budget center managers can
control
a. None is correct
b. Statement 1 only is correct but in context of
activity base costing
c. Statement 1 only is correct
d. Statement 2 only is correct
e. Both statement are correct.
31. A branch makes and sells two product P & Q the
following budget has been prepared
Product P
product Q
Sales price/unit
$3
$6
Kilos/unit
$2
$3
Budgeted fixed cost are $140,000
Budgeted sales are 20,000 units of product P and
product Q.
Calculate by how much the profit would be reducted or
increased it the total sales revenue is the same as
in the original budget revenue is one-third product P
and two-third product Q. therefore the profit would
fall or increase by?
a. $21,000 increase
b. $10,000 fall
c. $30,000 fall
d. $30,000 increase
e. $10,000 increase
ANSWER:
Contribution per unit
Q= sale price variable cost
= 6 -3 = 3 per unit
P= 3 -2 = 1 per unit
Then total contribution is =
Q = 3 x 50,000 = 150,000
P = 1 x 20,000 = 20,000
Total contribu = 170,000
Less fixed cost= 140,000
Budgeted profit = 30,000

20,000 X 1/3 = 6,667


50,000 X 2/3 = 33,333

40,000

When there is sales mix we must take the total mix unit.
For Q = 3 X 40,000 = 120,000
P = 1 X 40,000 = 40,000
Total contribution = 160,000
Less fixed cost
= 140,000
Mix profit
= 20,000
Then from all this information our profit are falling by
$10,000
32. The standard cost of a particular task is budgeted
as 0.75 hours of grade A labour at $10 per labour.
Due to a short was decided that the task should be
performed by grade B labour. An expert standard
labour cost for carring out 0.60 hours of grade B
labour at $14 per hour, during March. The task was
performed 250 times. The variance for this work in
march will be reported as planning and operational
variance. What is the planning variance?
a. $250 (F)
b. $225 (F)
c. $225(A)
d. $98(F)
e. $98(A)
Answer
(0.75x10)-(0.60x14)
7.5
8.4
0.9 x 250 = 225(A)
33. The intentional over-estimation of cost and for
under-estimation of sales revenue in the budgeting
process. The above description best describes:
a. Budget baragaining
b. Aspirational levels
c. Budgetary slack
d. Managerial fraud
e. Incremental budgeting
34. Which of the following is the most suitable
definition of a performance metric?
a. A record of performance

b. A measure used to monitor performance


c. A performance target
d. A measure of actual performance
i. (C)a performance target
ii. (A) a record of performance
iii. (A)a record of performance and also (c) a
performance target.
iv. (B)a measure used to monitor performance
v. (D) a measure of actual performance
35. A company makes & sells two products X & Y
budgeted data for the next period are as follows:
Product X
product Y
Production unit
3,500
5,200
Sells unit
4,000
5,000
X
Y
Production cost of units in the period
53
26
Production costs of opening inventory
53
26
Sales price
70
35
The budgeted gross profit for the period is?
a. $111,000
b. $113,000
c. $311,000
d. $131,000
e. $133,000

36. the standard direct material cost for one unit of


product A44 is as follows:
Material A 4 liters
@ $5 per liter
$20
Material B 1 liters
@ $10 per liter
$10
Material C 3 liters
@ $2 per liter
$6
Total
$36
During February 1,000 units of A44 were produced and the
usage of material included 4,800 liters of material A and
900 liters of material B. the material yield variance was
$900 adverse. The quantity of material C used was?
a. 3,600 liters
b. 2,500 liters
c. 2,000 liters
d. 500 liters

e. 2,550 liters
Type of
Material
A
B
C

SQ for
AQ
4000
1000
3000

SQ

SQxSP

5
10
2

20000
10000
6000
36000

AQ

AP

AQxAP

AQxAP

AQxSP

4800
5
900
10
x
2
5700+x

24000
900
2x

24000
9000
2x

24000
9000
2x

RQ
RQXSP
2850+0.5X
14,250+2.5X
712.5+0.125X 7125+1.25X
2137.5+0.375X 4275+0.75X
25650+ 4.5X
4000/8000 X 5700+x = 5X0.5 X 5700+x= 2850+0.5x
1000/8000 X 5700+x = 10 X 0,125 X 5700+x = 712.5+0.125x

3000/8000 X 5700+x = 2 X 0.375 X 5700+x = 2137.5 +0.375x


MMV=RQXSP - AQXSP
900=(25,650+4.5x) - (33000+2x)
900= 7350 2.5x
7350 900=2.5x
6450/2.5 = 2.5x/2.5x
=2580
MYV= (SQXSP) - (RQXSP)
-900= 36,000 25,650 + 4.5x
-900= 10,350 + 4.5x
-10,350-900=4.5x
-11,250 = 4.5
X= -2500