ACCA F2

Management Accounting
Mock test
Dec 2008
Prepared by: Ben Lee
Question 1

Taree Limited uses linear programming to establish the optimal production plan for the
production of its two products, A and U, given that it has the objective of minimising costs. The
following graph has been established bearing in mind the various constraints of the
business. The dotted area indicates the feasible region.

Which points are the most likely to give the optimal solution?
a) A and B only
b) B, D and E only
c) D and E only
d) A, B and C only ( )
2 marks

Question 2

On the first day of a particular period, a company has 300 units of its products in stock, valued at
$3,080. During the period, the following purchases and sales of this product took place:

Day Purchases Sales Cost Selling price

Units Units $/units $/units
8 400 10.50
14 800 11.00
16 500 17.50
22 600 18.00

What is the gross profit for the month using the weighted average method of pricing stock issue?
Ans :___$ ___
2 marks
Question 3

Which of the following is NOT correct?

a) Management accounting provides appropriate information for decision-making, planning,

control and performance evaluation
b) Routine information can be used for both short-term and long run decisions
c) Financial accounting information can be used for internal reporting purposes
d) Cost accounting can be used for stock valuation to meet the requirements of internal
reporting only
( )
2 marks

Question 4

Which of the following statements is correct?

a) A stores ledger account will be updated from a goods received note only
b) The term 'lead time' is best used to describe the time between receiving an order and paying
for it
c) Authorisation is required to make an issue from stores
( )
1 marks

Question 5

Balcombe has recorded the following costs over the last six months:

Total cost Units produced

Month
$'000 '000
1 74 3
2 72.75 1.75
3 73.25 2
4 75 2.5
5 69.5 1.5
6 72.75 2

a) Total cost = 65,000 + 3 x Quantity

b) Total cost = 71,000 + 1 x Quantity
c) Total cost = 61,250 + 5.5 x Quantity
d) Total cost = 70,250 + 1.25 x Quantity
( )
2 marks
Question 6

A production department absorbs overhead using a machine hour basis. Overhead allocated to the
department in a period are $39,630 with a further $51,570 re-apportioned from the service
departments in the factory. 480,000units of product are manufactured at 60 units per machine hour.

What is the overhead absorption rate in the production department?

Ans :$ _ per machine hour
2 marks

Question 7

Hill Limited sells a single product. In the coming month, it is planned that this product will
generate a total revenue of $300,000 with a total contribution of $125,000. Fixed costs are
$100,000 per month.

What is the margin of safety?

a) 20%
b) 30%
c) 40% ( )
1 marks

Question 8

If a salesman is paid a basic salary plus commission for each sale made, what is the best description
of this labour cost?

a) A semi-variable (mixed) cost

b) A variable cost
c) A fixed cost
d) A production cost
( )
2 marks

Question 9

The order quantity of a raw material is 450 kg. A safety stock of 120 kg is planned to be held, the
annual stock holding cost of the material is $4 per kg and total purchases in a year are 3,000 kg.

What is the total annual stock-holding cost of the raw material?

Ans :__$ _
2 marks
Question 10

Bumblebee Limited absorbs fixed overhead costs on a unit basis. For the year just ended,
Bumblebee's fixed overhead expenditure was budgeted at $150,000 but was actually $148,000.

The budgeted production level was 30,000 units and 29,000 units were actually manufactured.

a) Fixed overheads were over-absorbed by $3,000, being partly the difference between
budgeted and actual expenditure and partly the production shortfall of 1,000 units

b) Fixed overheads were under-absorbed by $5,000, being the difference between budgeted
expenditure and 29,000 units at $5 per unit

c) Fixed overheads were under-absorbed by $5,000, being the difference between budgeted and
actual production at $5 per unit

d) Fixed overheads were under-absorbed by $3,000, being partly the difference between
budgeted and actual expenditure and partly the production shortfall of 1,000 units
( )
2 marks

Question 11

What is the main purpose of an overhead absorption rate?

a) To control overheads
b) To charge overheads to products
c) To share out common costs to cost centres that benefit from them

( )
1 marks

Question 12

A company operates a piecework system of remuneration but also guarantees its employees 85% of
a time based rate of pay, based on $8.00 per hour for an eight hour working day. The standard time
allowed to produce one unit of output is four minutes. Piecework is paid at the rate of $0.12 per
standard minute.

If an employee produces 120 units, on a particular day when eight hours were worked. What is the
employee’s gross pay for that day ( to one decimal place)?
Ans :___$ __
2 marks
Question 13

Which of the following best describes joint products?

a) Two or more products output from the same process which have significant sales value but
which are indistinguishable up to the point of separation
b) Two or more products output from a process which require further processing before being
completed and available for sale
c) Two or more products output from a process recognised by a relatively low sales value
compared to the main output produced
( )
1 marks

Question 14

A company carry out work to customer order. A job costing system is used to collect production
cost on each customer order. Non production overhead are applied to each job at 15% of total
production cost.

The following information relates to job ABC which has been completed by the company.
Department X Y
Direct material used ( $ ) 6,700 1,260
Direct labour hour worked 246 98
Direct labour rate $ per hour 8.00 10.00
Production overhead $ per direct labour hour 12.00 12.00

What is the total production cost of job ABC?

Ans :___$ _
2 marks

Question 15

Which department would normally be responsible for completing a standard purchase requisition
for goods in a service organisation?

a) The buying (purchasing) department

b) The department that requires the goods
c) The goods inwards department
d) The accounting department staff. ( )
2 marks
Question 16

Which one of the following groups of workers would be classified as indirect labour?
a) Machinists in an organisation manufacturing clothes
b) Bricklayers in a house building company
c) Maintenance workers in a shoe factory
d) Assembly workers in a vehicle manufacturing business
( )
2 marks

Question 17

Profit for a period using marginal costing is $25,100, finished goods stock are:

Opening 3020 units

Closing 2630 units

What is the profit using absorption costing where the fixed production overheads are applied at $8
per unit?
Ans :___$ _
2 marks

Question 18

Total production cost of $149,700 were incurred in the manufactures of 68,000units in a period.
These costs reduce by $14,400 when output is reduced to 58,000 units.

What are the total fixed production costs per period?

Ans :___$ __
2 marks

Question 19

A company 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 Total annual holding cost
a) Higher Lower
b) Higher Higher
c) Lower Higher
d) Lower Lower ( )
2 marks
Question 20

Which of the following is correct?

a) When considering limiting factors the products should always be ranked according to
contribution per unit sold
b) If there is only one scarce resource linear programming should be used
c) In linear programming the point furthest from the origin will always be the point of profit
maximization
d) The slope of the objective function depends on the contributions of the products
( )
2 marks

Question 21

Which of the following would be likely be a cost driver for the amount of direct materials used?
a) The number of units sold.
b) The number of direct labor hours worked
c) The number of machine hours worked
d) The number of units produced
( )
2 marks

Question 22

Quality Appliance produces washers and dryers in an assembly-line process. Labor costs incurred
during a recent period were: corporate executives, $100,000; assembly-line workers, $60,000;
security guards, $11,000;and plant supervisor, $18,000. The total of Quality’s direct labor cost was:
a) $60,000
b) $71,000
c) $78,000
d) $89,000
( )
2 marks

Question 23

“Pumpkin enterprises began operations on January 1,19x7, with all its activities conducted from a
single facility. The company’s accountant concluded that the year’s building depreciation should be
allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing
activities, 45%. If pumpkin sold 60% of 19x7 production during that year, what percentage of the
depreciation would appear (either directly or indirectly) on the 19x7 income statement?
a) 27%
b) 45%
c) 55%
d) 82%
( )
2 marks
Question 24

If a company sells goods that cost $70,000 for $82,000, the firm will:
a) reduce Finished-Goods Inventory by $70,000.
b) reduce Finished-Goods Inventory by $82,000
c) reduce Cost of Goods sold by $70,000
( )
1 marks

Question 25

Treetops worked on four jobs during its first year of operation: nos 401, 402, 403 and 404. Nos. 401
and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of
job no 403’s cost sheet revealed direct material charges of $20,000 and total manufacturing costs of
$25,000. If Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no.
403 must have been:
a) $0
b) $2,000
c) $3,000
d) $3,333
( )
2 marks

Question 26

Which of the following statement(s) is/are correct regarding overhead application?

I Actual overhead rates result in more accurate but less timely information
II Predetermined overhead rates result in less accurate but more timely information
III Predetermined overhead rates tend to smooth product costs over time.

a) I, II and III
b) I and II only
c) I and III only
d) II and III only
( )
2 marks

Question 27

Which of the following would be considered to be an investment centre?

a) Management have a sales team.
b) Management have a sales team and are given a credit control function.
c) Managers can purchase capital assets and are given a credit control
function.
( )
1 marks
Question 28

Flagston company uses a weighted-average process-costing system. Company records disclosed that
the firm completed 100,000 units during the month and had 20,000 units in process at month-end,
25% complete. Conversion costs related to the beginning work-in-process inventory amounted to
$105,000, and amounts incurred during the current month totaled $840,000. If conversion is
incurred uniformly throughout manufacturing, Flagston’s equivalent-unit cost is

a) $7.00
b) $7.88
c) $8.40
d) $9.00
( )
2 marks

Question 29

Which of the following is the proper sequence of events in an activity-based costing system?

a) Identification of cost drivers, identification of cost pools, calculation of cost application

rates, assignment of cost to products.
b) Identification of cost pools, identification of cost drivers, calculation of cost application
rates, assignment of cost to products.
c) Assignment of cost to products, identification of cost pools, identification of cost drivers,
calculation of cost application rates.
d) Calculation of cost application rates, identification of cost drivers, identification of cost
pools, assignment of cost to products.
( )
2 marks

Question 30

Which of the following is not used to analyze cost behavior?

a) Least-squares regression
b) High-low method
c) Linear programming
d) Visual fit method
( )
2 marks
Question 31

Yang manufacturing, which uses the high-low method, makes a product called Yin. The company
incurs three different cost types (A, B and C) and has a relevant range of operation between 2,500
units and 10,000 units per month. Per-unit costs at two different activity levels foe each cost type
are presented below.

Type A Type B Type C Type D

5,000 units $4 $9 $4 $17
7,500 units $4 $6 $3 $13

Each of the cost types shown above is identified by behavior as:

Type A Type B Type C

a) Fixed Variable Semi-variable
b) Fixed Semi-variable Variable
c) Variable Semi-variable Fixed
d) Variable Fixed Semi-variable
( )
2 marks

Question 32

Atlanta Inc, which uses the high-low method to analyze cost behavior, has determined that machine
hours best explain the company’s utilities cost. The company’s relevant range of activity varies
from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being
available for the first six months of the year:

Month Utilities Machine Hours

January $8,700 800
February 8,360 720
March 8,950 810
April 9,360 920
May 9,625 950
June 9,150 900

Using the high-low method, the utilities cost associated with 980 machine hours would be:

a) $9,510
b) $9,660
c) $9,700
d) $9,790
( )
2 marks
Question 33

Which of the following would depict the logical order for preparing (1)a production budget, (2)a
cash budget, (3)a sales budget, and (4)a direct-labor budget?

a) 1-3-4-2
b) 2-3-1-4
c) 3-1-4-2
d) 3-1-2-4 ( )
2 marks

Question 34

What will be the effect of increasing the re-order level?

a) There will be a decrease in stock-out costs

b) There will be a decrease in holding costs
( )
1 marks

Question 35

In which cost classification would the amount of overtime premium contained in direct wages
normally appear?

a) Direct labour cost

b) Production overhead
c) Prime cost
( )
1 marks

Question 36

Thomas recently completed 24,000 units of a product that was expected to consume five pounds of
direct material per finished unit. The standard price of the direct material was $6 per pound. If the
firm purchased and consumed 110,000 pounds in manufacturing (cost=$605,000), the direct-
materials quantity variance would be figured as:

a) $55,000 Favourable
b) $60,000 Favourable
c) $115,000 Favourable
d) $60,000 Unfayourable
( )
2 marks
Question 37

Consider the following information

Actual direct labor hours 34,500

Standard direct labor hours 35,500
Total-actual direct labor cost $241,500
Direct-labor efficiency variance, favorable $3,200

The direct labor rate variance is:

a) $17,250U
b) $20,700U
c) $20,700F
d) $21,000F
( )
2 marks

Question 38

A direct labor efficiency variance cannot be caused by:

a) inexperienced employees
b) poor quality raw materials
c). producing fewer finished units than originally planned.
d) an out-of-date labor time standard
( )
2 marks

Question 39

Callison’s income under absorption costing was $15,000 higher than under variable costing. During
the year, the company met anticipated manufacturing figures, producing 20,000 units. If total
variable production costs were $80,000 and fixed manufacturing overhead was $40,000, how many
units were sold?

a) 5,000
b) 7,500
c) 10,000
d) 12,500
( )
2 marks
Use the following information to solve questions 40 - 41

Nelson has a standard variable overhead rate of $4 per machine hour, and each unit produced has a
standard time allowed of three hours. The company’s static budget was based on 50,000 units.
Actual results for the year follow.

Actual units produced : 45,000

Actual machine hours worked : 120,000
Actual variable overhead incurred : $500,000

Question 40

Nelson’s variable-overhead spending variance:

a) $40,000 favorable
b) $60,000 favorable
c) $20,000 favorable
d) $50,000 favorable ( )
2 marks

Question 41

Nelson’s variable-overhead efficiency variance is:

a) $40,000 favorable
b) $60,000 favorable
c) $20,000 favorable
d) $50,000 favorable
( )
2 marks

Question 42

Stone Limited uses an absorption costing system, and manufactures a single product, the
Henge. Each unit of this product requires 12 labour hours to complete.

For a particular accounting period, the normal level of activity was 30,000 units, although 34,500
units were produced. Fixed overheads are absorbed on a direct labour hour rate basis at a rate of $9
per direct labour hour.

What was the under or over absorption of fixed overheads in the period?

a) $40,500 under absorbed

b) $40,500 over absorbed
c) $486,000 over absorbed
d) $54,000 over absorbed
( )
2 marks
Question 43

The following information relates to a process for last period.

Material cost per equivalent unit $35
Conversion cost per equivalent unit $22
Closing work in progress (Units ) 5,000

There was no opening work in progress, and the closing work in progress was 50% complete. All
material are introduced at the start of the process and conversion takes place evenly throughout the
process. There were no losses.

What was the value of the closing work in progress for last period?
Ans :___$ ___
2 marks

Question 44

The following information relates to a process for last period.

Opening work-in-progress:
Units 10,000
Conversion cost was 60% completed
Units completed 28,000
Closing work in progress ( Units ) 8,000
Conversion cost added $465,760
The closing work in progress was 80% complete as regards conversion costs, conversion takes place
evenly throughout the process, and there were no losses.

What was the conversion cost per unit for the period using FIFO method of valuation?
Ans :___$ ___
2 marks

Question 45

The economic order quantity of a raw material is 450 kg. A safety stock of 120 kg is planned to be
held, the annual stock holding cost of the material is $4 per kg and total purchases in a year are
3,000 kg.

What is the total annual ordering cost of the raw material?

Ans :___$ __
2 marks
Question 46

If an assembly line supervisor is paid a salary of $100 each week, and an extra 10 cents for every
unit of production made in the week, this wage cost could be described as:

a) a fixed cost
b) a variable cost
c) a semi variable cost
( )
1 marks

Question 47

Adams Sporting Goods sells bicycles throughout the southeastern United States. The following data
were taken from the most recent quarterly sales forecast:

Expected End-of-month
Sales Target inventory
April 1,400 units 315 units
May 1,575 units 412 units
June 1,650 units 425 units

On the basis of the information presented, how many bicycles should the company purchase in
May?

a) 1,478
b) 1,562
c) 1,575
d) 1,672
( )
2 marks

Question 48

Iowa makes all sales on account, subject to the following collection pattern: 20% are collected in
the month of sale; 70% are collected in the first month after sale; and 10% are collected in the
second month after sale. If sales for October, November, and December were $70,000, $60,000, and
$50,000, respectively, what were the firm’s budgeted collections for December?

a) $10,000
b) $46,000
c) $52,000
d) $59,000
( )
2 marks
Question 49

Which of the following correlation coefficients indicates the weakest relationship between two
variables?

a) +1
b) 0.2
c) -0.7
( )
1 marks

Question 50

Clayton Corporation, which adds materials at the beginning of production , uses a weighted-average
process-costing system. Consider the data that follow.

Number of Units Cost of Materials

Beginning work in process 30,000 $22,200
Started in May 80,000 72,400
Production completed 85,000
Ending work in process 25,000

The company’s cost per equivalent unit for materials is:

a) $0.86
b) $0.90
c) $1.10
d) $1.18
( )
2 marks