ACCA F2

Management Accounting
Mock test
Jun 2010
Prepared by: Ben Lee
Question 1

Which of the following is NOT correct?

a) Management accounting provides appropriate information for decision-making, planning,
control and performance evaluation
b) Financial accounting information can be used for internal reporting purposes
c) Cost accounting can be used for stock valuation to meet the requirements of internal reporting
only ( )
1 marks

Question 2

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 3

Which of the following would normally be carried out by higher level management?
1 Day to day planning and control
2 Defining the objectives of the business
3 Making strategic decisions
a) 2 and 3
b) 1, 2 and 3
c) 1 and 3
d) 1 and 2 ( )
2 marks
Question 4

A company has recorded its total cost for different levels of activity over the last five months as
follows:
Month Activity level (units) Total coast ($)
Question 6

Connie estimates the following probabilities of returns on an investment she has made depending on
the behaviour of the economy,
Estimated return
Probability %
Boom 0.10 13
Normal 0.65 8
Recession 0.25 5

What is the expected return on Connie’s investment?

a) 9.00%
b) 8.67%
c) 7.75%
d) 8.00% ( )
2 marks

Question 7

There are 27,500 units of part number X35 on order with the suppliers and 16,250 units outstanding on
existing customers’ orders.
If the free inventory is 13,000 units, what is the physical inventory?
a) 29,750
b) 3,250
c) 24,250
d) 1,750 ( )
2 marks

Question 8

Data relating to a particular stores item as follows:

Average daily usage 400 units
Maximum daily usage 520 units
Minimum daily usage 180 units
Lead time for replenishment of inventory 10 to 15 days
Reorder quantity 8,000 units
What is the reorder level (in units) which avoids stockouts (running out of inventory)?
a) 5,000
b) 6,000
c) 7,800
d) 8,000 ( )
2 marks
Question 9

An organization’s stock records for last month show the following transactions in respect of one item:
Date receipts issues stock
(units) (units) (units)
st
1 300
5th 100 200
13th 600 800
th
20 300 500
28th 200 300
The opening stock was valued at a total cost of $9,300 and all receipts on the 13th were purchased at
a cost of $33 per unit. The organization uses the weighted average method of valuation and calculates a
new weighted average after each stores receipt. What was the total value of the closing stock?
a) $9,500
b) $9,700
c) $9,990
d) $9,750 ( )
2 marks

Question 10

An employee is paid on a piecework basis. The basis of the piecework scheme is as follows:
1 to 100 units - $0.20 per unit
101 to 200 units - $0.30 per unit
201 to 299 units - $0.40 per unit
With only the additional units qualifying for the higher rates. Rejected units do not qualify for
payment. During a particular day the employee produced 210 units of which 17 were rejected as faulty.
What did the employee earn for their day’s work?
a) $47.90
b) $54.00
c) $57.90
d) $63.00 ( )
2 marks

Question 11

A company operates a job costing system. Job number 605 requires $300 of direct materials and $400
of direct labour. Direct labour is paid at the rate of $8 per hour.Production overheads are absorbed at a
rate of $26 per direct labour hour and non-production overheads are absorbed at a rate of 120% of
prime cost.
What is the total cost of job number 605?
a) $2,000
b) $2,400
c) $2,840
d) $4,400 ( )
2 marks
Question 12

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 13

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 14

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
( )
1 marks
Question 15

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 16

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 17

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 18

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 19

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 20

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 21

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 22

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 23

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 24

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

a) Management has a sales team.
b) Management has 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 25

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 26

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.
( )
1 marks

Question 27

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 28

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 29

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 30

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 31

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

It has been estimated that each service cost centre does work for the other cost centres in the following
proportions:
P Q X Y
Percentage of service cost centre X to 40 40 - 20
Percentage of service cost centre Y to 30 60 10 -

After the reapportionment of service cost centre costs has been carried out using a method that fully
recognises the reciprocal service arrangments in the factory, what is the total overhead for production
cost centre P?
a) $122,400
b) $124,716
c) $126,000
d) $127,000 ( )
2 marks

Question 32

A company manufactures two products, X and Y, in a factory divided into two production cost
centres, Primary and Finishing. The following budgeted data are available:
Cost Centre Primary Finishing
Allocated and apportioned fixed
Overhead costs $96,000 $82,500
Direct labour minutes per unit:
- product X 36 25
- product Y 48 35
Budgeted production is 6,000 units of product X and 7,500 units of product Y. Fixed overhead costs
are to be absorbed on a direct labour hour basis.
What is the budgeted fixed overhead cost per unit for product Y?
a) $11
b) $12
c) $14
d) $15 ( )
2 marks
Question 33

A company produces and sells a single product whose variable cost is $6 per unit.
Fixed costs have been absorbed over the normal level of activity of 200,000 units and have been
calculated as $2 per unit. The current selling price is $10 per unit.
How much profit is made under marginal costing if the company sells 250,000 units?
a) $500,000
b) $600,000
c) $900,000
d) $1,000,000 ( )
2 marks

Question 34

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

Question 35

An organisation manufactures a single product which is sold for $60 per unit. The organization’s total
monthly fixed costs are $54,000 and it has a contribution to sales ratio of 40%. This month it plans to
manufacture and sell 4,000 units.
What is the organisation’s margin of safety this month (in units)?
a) 1,500
b) 1,750
c) 2,250
d) 2,500 ( )
2 marks
Question 36

A company manufactures and sells a single product. The following data relate to a weekly output of
2,880 units:
$ per unit $ per unit
Selling price 80
Less costs:
Variable production 30
Other variable 10
Fixed 25
(65)
Profit 15
What is the weekly break-even point (in units)?
a) 900
b) 1,440
c) 1,800
d) 4,800 ( )
2 marks
Question 37

A company is considering its option with regard to a machine which cost $60,000 four years ago. If
sold the machine would generate scrap proceeds of $75,000. If kept, this machine would generate net
income of $90,000. The current replacement cost for this machine is $105,000.
What is the relevant cost of the machine?
a) $105,000
b) $90,000
c) $75,000
d) $60,000 ( )
2 marks

Question 38

A company is evaluating a project that requires 4,000 kg of a material that is used regularly in normal
production. 2,500 kg of the material, purchased last month at a total cost of $20,000, are in inventory.
Since last month the price of the material has increased by 2.5 per cent.
What is the total relevant cost of the material for the project?
a) $12,300
b) $20,500
c) $32,300
d) $32,800 ( )
2 marks
Question 39

A contract is under consideration that requires 800 labour hours to complete. There are 450 hours of
spare labour capacity for which the workers are still being paid the normal rate of pay. The remaining
hours required for the contract can be found either by overtime working paid at 50% above the normal
rate of pay or by diverting labour from the manufacture of product OT. If the contract is undertaken
and labour is diverted, then sales of product OT will be lost. Product OT takes seven labour hours per
unit to manufacture and makes a contribution of $14 per unit. The normal rate of pay for labour is $8
per hour.
What is the total relevant labour cost to the contract?
a) $3,500
b) $4,200
c) $4,500
d) $4,900 ( )
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

Adverse material price variance cannot be caused by:

a) market changes in demand and supply of material
b) poor quality raw materials
c) Unskilled workers.
( )
1 marks

Question 43

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 44

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 45

A company requires 600 kg of raw material Z for a contract it is evaluating. It has 400 kg of material Z
in inventory that was purchased last month. Since then the purchase price of material Z has risen by
8% to $27 per kg. Raw material Z is used regularly by the company in normal production.
What is the total relevant cost of raw material Z to the contract?
a) $15,336
b) $15,400
c) $16,200
d) $17,496 ( )
2 marks

Question 46

In a short-term decision-making context, which ONE of the following would be a relevant cost?
a) Specific development costs already incurred.
b) The cost of special material which will be purchased.
c) Depreciation on existing foxed assets.
( )
1 marks

Question 47

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 48

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 49

The following process account has been drawn up for the last month:

Process account
Units $ Units $
Opening WIP 250 3,000 Normal loss 225 450
Input: Output 4,100
Materials 4,500 22,500 Abnormal Loss 275
Labour 37,500 Closing WIP 150
______ _______
4,750 4,750
====== =======

Work in progress has the following level of completion:

Material Labour
Opening WIP 100% 40%
Closing WIP 100% 30%
The company uses the FIFO method for valuing the output from the process and all losses occurred at
the end of the process. What were the equivalent units for labour?
a) 4,380 units
b) 4,270 units
c) 4,320 units
d) 4,420 units ( )
2 marks
Question 50

Perth operates a process costing system. The process is expected to lose 25% of input and this can be
sold for $8 per kg.
Inputs for the month were:
Direct materials 3,500 kg at a total cost of $52,500
Direct labour $9,625 for the period
There is no opening or closing work in progress in the period. Actual output was 2,800 kg.
What is the valuation of the output?
a) $44,100
b) $49,700
c) $58,800
d) $56,525 ( )
2 marks