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ACC1115 Management Accounting Mock Test 2 2015 - 16

ACC1115 Mock Exam 2


Instructions:
Time Allowed -

ONE HOUR 45 MINUTES

Write your Name and student Number on every sheet


Clearly write the name of your Seminar Tutor on the first
page
Number of Questions 3
Number of Pages including this one 7
60 marks in total this will be converted to a percentage for
recording marks pass is above 40 %
Answer All Questions
if you cannot do one question attempt the next
You are not allowed to talk or refer to any notes etc. This
Mock Exam is to be conducted under University
Regulations.

Prepared by Alison Broughton


Date 8th February 2016

ACC1115 Management Accounting Mock Test 2 2015 - 16

Question One
A Ltd manufactures a single product. Information taken from their records for November is
as follows:
Sales
Production

42,000 Units
45,000 Units

There were no opening stocks of finished goods.


The unit selling price and relevant Marginal and Absorption costs are as follows :
Selling Price

Direct Materials
Direct Labour
Variable manufacturing
overhead
Variable Manufacturing Cost
Fixed Manufacturing Overhead
Unit Cost of Production

75

75

Marginal
Costing

Absorption
Costing

10
12
4

10
12
4

26
26

26
3
29

The normal monthly output is 43,000 units.


The fixed factory production overheads are 129,000 per month.
The fixed administration overheads are 86,000 per month.
The variable selling and distribution costs are 2 per unit.
Required :
(a)

Explain how the fixed manufacturing is calculated to be 3 per unit, which is


used in the absorption costing unit cost of production.
(1 mark)

(b)

Prepare profit statements for November using:


i.
ii.

Marginal cost basis at 26 per unit


Absorption cost basis at 29 per unit.
(13 marks)

(c)

Explain the difference between the profits obtained using each method.
(2 marks)

(d)

Explain how any under or over absorption is calculated using your results for
November above to illustrate your answer.
(2 marks)

Total 18 marks
Workings Question 1
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ACC1115 Management Accounting Mock Test 2 2015 - 16

Question Two
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ACC1115 Management Accounting Mock Test 2 2015 - 16

Rose Ltd produces two products details relating to next years production and sales are as
follows:

Demand in units
Direct labour
Direct materials kg.
Selling Price per Unit

Hours
Kg

P1

P2

4,000

2,000

3
8

4
5

75

60

Direct labour is paid 6 per hour but is limited to 20,000 hours.


The company can only acquire 40,000 Kg. of direct materials costing 4 per kg.
Variable factory overheads are recovered at the rate of 2 per direct labour hour worked.
Variable selling overheads are estimated to be 3 per unit.
Fixed administration costs are 30,000 per annum.

Required :
(a)

Identify whether direct labour or direct materials is the limiting factor.


(2 marks)

(b)

Calculate the contribution per product and hence prioritize the production plan
to maximise profits for next year.
(6 marks)

(c)

Calculate the projected profit for next year.

(d)

If the company must produce at least 2,000 units of each product show how will
this change the results you have calculated in (c) above.
(6 marks)

(3 marks)

Total 17 marks

Workings Question 2
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ACC1115 Management Accounting Mock Test 2 2015 - 16

Question Three
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ACC1115 Management Accounting Mock Test 2 2015 - 16

Baltic Bros is considering the following two machines. The relevant cash flows are as follows
:
Machine A

Machine B

Initial Cost

45,000

50,000

Net Inflows
Year 1
Year 2
Year 3

20,000
30,000
10,000

30,000
20,000
15,000

At the end of the three years machine B can be sold for 4,000 but machine A has no scrap
value.
The companys cost of capital is 14%.
Net Present Value Table
Rate

8%

9%

10%

11%

12%

13%

14%

15%

16%

Year
0
1
2
3
4
5

1.000
0.926
0.857
0.794
0.735
0.681

1.000
0.917
0.842
0.772
0.708
0.650

1.000
0.909
0.826
0.751
0.683
0.621

1.000
0.901
0.812
0.731
0.659
0.593

1.000
0.893
0.797
0.712
0.636
0.567

1.000
0.885
0.783
0.693
0.613
0.543

1.000
0.877
0.769
0.675
0.592
0.519

1.000
0.870
0.756
0.658
0.572
0.497

1.000
0.862
0.743
0.641
0.552
0.476

Required :
a)

Calculate the payback for each machine and decide which machine would be
chosen using this method.
(5 marks)

b)

Calculate the Accounting Rate of Return for each machine and again decide
which project would be selected using this method.
(7 marks)

c)

Using a discount rate of 14% calculate the NPV of each machine and hence
decide using the NPV decision rule which should be accepted.
(8 marks)

d)

Discuss which of the above methods you would recommend to decide between
the two machines.
(5 marks)
Total 25 marks

Workings Question 3
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ACC1115 Management Accounting Mock Test 2 2015 - 16