Paper F2 Questions

ACCA

Management

Accounting

Mock Exam 1

Questions

(Duration: 3 hours) LSAM

FORMULAE SHEET

Linear regression

r =

[n x - ( x) ] [n y - ( y) ]

n xy - x y

􀂦 2 􀂦 2 􀂦 2 􀂦 2

􀂦 􀂦 􀂦

If y = a + bx,

b = n x2 - ( x)2

n xy - x y

􀂦 􀂦

􀂦 􀂦 􀂦

and a =

n

􀂦 y

- b

n

􀂦 x

Economic order quantity

Economic order quantity =

H

O

C

2C D

Economic batch quantity =

􀂸 􀂹

􀂷

􀂨 􀂩

􀂧

R

C 1- D

2C D

H

O

Mock Exam - 1 (Questions)

LondonSAM 1 F2 - Management Accounting

ALL 50 questions are compulsory and MUST be attempted

QUESTION 1

A fixed budget recognises different cost behaviour patterns and is designed to change as the

volume of activity changes.

A True

B False (1 mark)

QUESTION 2

Which of the following statements are true?

(i) Fixed budgets are the only type of budget used at the planning stage.

(ii) Flexed budgets provide meaningful comparison to actual results.

(iii) Budgeting procedures are only useful in maintaining control over the expenditure of a

business.

A All of them

B (i) and (ii) only

C (i) and (iii) only

D (ii) only (2 marks)

QUESTION 3

A manufacturing company uses 28,000 components at an even rate during the year. Each

order placed with the supplier of the components is for 1,500 components, which is the

economic order quantity. The company holds a buffer inventory of 700 components. The

annual cost of holding one component in inventory is €3.

What is the total annual cost of holding inventory of the component?

A €2,250

B €3,300

C €4,350

D €4,500 (2 marks)

QUESTION 4

Which of the following is NOT an attribute of good information?

A Accurate

B Confidential

C Timely

D Cost effective (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 2 F2 - Management Accounting

QUESTION 5

A part of an organisation which generates revenues and for which costs are also collected is

called:

A A cost centre

B A revenue centre

C A profit centre

D A loss centre (2 marks)

QUESTION 6

The total costs incurred at various output levels in a factory have been measured as follows:

Output in units Total cost

23 Ј 5,200

30 Ј 5,450

35 Ј 5,550

40 Ј 6,000

45 Ј 6,500

48 Ј 7,100

The variable cost per unit and the total fixed costs are:

A Variable costs Ј37 per unit; Total fixed costs Ј5,966

B Variable costs Ј40 per unit; Total fixed costs Ј4,280

C Variable costs Ј76 per unit; Total fixed costs Ј3,452

D Variable costs Ј148 per unit; Total fixed costs Ј1,796 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 3 F2 - Management Accounting

QUESTION 7

The following diagram represents a cost behaviour pattern:

Volume of activity

Total

cost

Which of the following statements is consistent with the above diagram?

A Annual factory costs when the electricity supplier sets a tariff based on a fixed

charge, plus a constant unit cost for consumption but subject to a maximum annual

charge

B Total direct material cost for the period if the supplier has agreed to a maximum

charge for that period

C Total direct material cost for a period if the supplier charges a lower unit cost on all

units once a certain quantity has been purchased in that period

D Weekly total labour cost when workers are paid an hourly wage during normal

working hours, and a higher hourly rate if they are required to work outside those

hours (2 marks)

QUESTION 8

Regression analysis has produced the following results from the batch production costs for

each of the past 6 months:

􀂙x 600

􀂙y 950

􀂙x2 53,000

􀂙xy 88,560

Which of the following is the appropriate value for b in the regression line to 2 decimal

places?

A -1.65

B 0.92

C 1.38

D 66.33 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 4 F2 - Management Accounting

QUESTION 9

A company has estimated that sales next year may be €57,000 (probability 0.45), €66,000

(probability 0.4) or €75,000.

What is the expected value of sales to be used in next year’s forecast?

A €21,100

B €36,600

C €63,300

D €66,000 (2 marks)

QUESTION 10

When faced with a known scarce resource, such as material, the best way to allocate the

resource in line with a profit maximisation objective is to follow a particular procedure. The

various elements which make up this procedure are shown below.

Which option shows the most logical order?

(1) Calculate the contribution per unit of the scarce resource.

(2) Rank the products.

(3) Allocate the scarce resource.

(4) Calculate the contribution per unit of the products.

A (1), (4), (2), (3)

B (4), (1), (2), (3)

C (4), (1), (3), (2)

D (3), (2), (4), (1) (2 marks)

QUESTION 11

A Goods Received Note (GRN) provides:

(i) Information used to update inventory records.

(ii) Information to check that the correct price has been recorded on the supplier’s

invoice.

(iii) Information to check that the correct quantity of goods has been recorded on the

supplier’s invoice.

(iv) Information to record any unused materials which are returned to stores.

Which of the above statements is/are true?

A (i) only

B (ii) and (iii) only

C (i) and (iii) only

D All of the above (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 5 F2 - Management Accounting

QUESTION 12

Caz currently pays its direct production workers on a time basis, at a rate of Ј8.20 an hour. In

an effort to improve productivity, Caz is introducing a bonus based on (time taken ч time

allowed) 􀁵 time saved 􀁵 rate per hour.

The standard time allowed for a worker in the assembly department to perform this particular

operation once has been agreed at 45 minutes. In the first week of operation, one (very

experienced) employee worked for a total of 45 hours and performed 99 operations.

The gross wages for this employee for that week, to 2 decimal places, is:

A Ј145.36

B Ј369.10

C Ј514.36

D Ј540.08 (2 marks)

QUESTION 13

Which one of the following group of workers would be classified as indirect labour?

(i) Machinists in a company manufacturing clothes.

(ii) Plasterers in a building company.

(iii) Maintenance workers in a hat factory.

A (i) only

B (ii) only

C (i) and (ii)

D (iii) only (1 mark)

QUESTION 14

A company uses an overhead absorption rate of €4.50 per labour hour, based on 3,600

budgeted labour hours for the period. During the same period, the actual total overhead

expenditure amounted to €18,225 and 3,850 labour hours were worked.

By how much was the total overhead under or over absorbed for the period?

A Under-absorbed by €900

B Under absorbed by €1,035

C Over-absorbed by €900

D Over-absorbed by €1,035 (2 marks)

QUESTION 15

For which of the following is a profit centre manager responsible?

A Costs only

B Revenue only

C Costs and revenues (1 mark)

Mock Exam - 1 (Questions)

LondonSAM 6 F2 - Management Accounting

QUESTION 16

In an organisation manufacturing a number of different products in one factory, the cost of

power & fuel is an example of a direct expense when costing a product.

A True

B False (1 mark)

QUESTION 17

A stepped cost is one which is only fixed within certain levels of activity. Once the upper

activity level is reached, a new level of fixed cost becomes relevant.

A True

B False (1 mark)

QUESTION 18

Up to a given level of activity in each period, the purchase price per unit of 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?

(2 marks)

Volume

Cost Cost

A B

Cost

C

Cost

D

Volume

Volume Volume

Mock Exam - 1 (Questions)

LondonSAM 7 F2 - Management Accounting

QUESTION 19

Relevant Information for decision making:

A usually includes depreciation.

B may reflect the incremental cost.

C should ignore opportunity costs.

D should consider accounting profit (1 mark)

QUESTION 20

What does the total materials variance show?

A The difference between the flexed budget and the actual

B The difference between the original budget and the actual

C The difference between the flexed budget and the original budget

D None of the above (2 marks)

QUESTION 21

Q Ltd order in supplies of stock from a local supplier. The following information is available for

their stocks:

Demand = 5,000 units per quarter

Holding cost = $0.192 per unit per year

Deliver cost per order = $30

Maximum room available for stock = 6,000 units

Calculate the most cost efficient order size:

A 250

B 1,250

C 2,500

D 6,000 (2 marks)

QUESTION 22

M Ltd makes a single product which it sells for $40 per unit. Z Ltd’s fixed costs amount to

$120,000. Its contribution to sales ratio is 40%. What is the breakeven point?

A $120,000

B $300,000

C 7,500 units

D 15,000 units (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 8 F2 - Management Accounting

QUESTION 23

The following breakeven chart has been drawn showing lines for total cost (TC), total variable

cost (TVC), total fixed cost (TFC) and total sales revenue (TSR):

What is the margin of safety at the 1,850 units level of activity?

A 275 units

B 350 units

C 350 units

D 500 units (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 9 F2 - Management Accounting

The following information relates to questions 24 and 25.

Cost and selling price details for product Alpha are as follows:

$ per unit

Direct materials 8.00

Direct labour 8.50

Variable overhead 3.50

Fixed overhead absorption rate _4_._0_0_

_2_4_.0_0_

Profit _1_1_.0_0_

Selling price _3_5_.0_0_

You are also given the following information at month-end:

Budgeted production for the month 6,000 units

Actual production for the month 6,500 units

Actual sales for the month 6,100 units

Fixed overhead costs $30,000

QUESTION 24

The marginal costing profit for the month is:

A $61,500

B $91,500

C $97,600

D $122,000 (2 marks)

QUESTION 25

The absorption costing profit for the month is:

A $61,500

B $63,100

C $67,100

D $72,000 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 10 F2 - Management Accounting

QUESTION 26

Beta Ltd wishes to use a machine for one month on a new contract. The machine cost

$120,000 six years ago. When purchased, it had an estimated life of ten years and it is being

fully depreciated using the straight line method. It is currently valued at $39,000 and it

estimated value at the end of the year is $15,000. The machine is underused and stands idle

for 30% of its time, but it must be retained for use on similar contracts.

The relevant cost of using the machine on the new contract is:

A $0

B $14,000

C $20,000

D $26,000 (2 marks)

QUESTION 27

A firm is currently considering a job that requires 800 units of raw material. There are

currently 1,200 units of the material in stock, bought just over a year ago for Ј3.80 per Kg, but

no longer used for any of the firm’s products. The current market price for the material is

Ј4.20, but the company could sell it for Ј2.00 per unit.

What is the relevant cost per unit?

A Ј0

B Ј2.00

C Ј3.80

D Ј4.20 (2 marks)

QUESTION 28

A contract is under consideration which requires 150 hours to complete. There are 350 hours

of spare labour capacity for which the workers are still being paid the normal rate of pay. The

remaining hours for the contract can be found either by weekend overtime working paid at

double the normal rate of pay, or by diverting labour from other production. This other

production makes a contribution, net of labour cost, of Ј7.00 per hour. The normal rate of pay

is Ј7.50 per hour.

What is the total relevant cost of labour for the contract?

A Ј0

B Ј520

C Ј870

D Ј900 (1 mark)

Mock Exam - 1 (Questions)

LondonSAM 11 F2 - Management Accounting

The following information relates to questions 29 and 30.

A company manufactures and sells two products, A and B, which have contributions of Ј11

and Ј15 respectively. The company aims to maximise profit. Two materials, M1 and M2, are

used in the manufacture of each product. Each material is in short supply – 2,500 kgs of M1

and 1,350 kgs of M2 are available next period. The company holds no inventories, and it can

sell all the units produced.

The management accountant has drawn the following graph accurately, showing the

constraints for materials M1 and M2.

QUESTION 29

What is the amount, in kgs, of Materials M1 and M2 used in each product of Product B?

Material M1 Material M2

A 10 9

B 9 9

C 10 10

D 9 10 (2 marks)

QUESTION 30

What is the optimal mix of production (in units) for the next period?

Product A Product B

A 0 50

B 70 40

C 40 70

D 120 0 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 12 F2 - Management Accounting

QUESTION 31

A company operates a process costing system. During a period there was no opening stock,

and 350 units were received from the previous process. At the end of the period there was

closing stock of 50 units, which were 60% complete. There were no process losses.

What was the number of equivalent units produced?

A 50 units

B 60 units

C 300 units

D 330 units (2 marks)

The following is relevant to questions 32 and 33.

A company operates a process costing system. The following information is relevant for the

last period for process 1:

Inputs: 12,000 kgs of raw material at $4 per kg.

Direct wages: 6,000 hours at $5 per hour.

Production overhead absorbed at $7 per labour hour.

Outputs: Normal loss 10% of input

Transfer to process 2: 11,050 kgs

All losses have a scrap value of $1 per kg. There was no opening or closing stock.

QUESTION 32

The abnormal gain or loss for the period was:

A 108 kgs loss

B 250 kgs gain

C 950 kgs gain

D 1,000 kgs gain (2 marks)

QUESTION 33

The average cost per kg of output is:

A $10

B $11

C $12

D $13 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 13 F2 - Management Accounting

QUESTION 34

Planning for the activities of a business in the short term is best described as:

A Operational planning

B Strategic planning (1 mark)

The following information relates to questions 35 to 39.

A product is manufactured in two processes. Details for the second process in period 4 were

as follows:

Opening work-in-progress Nil

Materials transferred from the first process 4,000 litres

Output transferred to finished goods 2,900 litres

Closing work-in-progress 800 litres

Normal loss is 5% of input. Losses have no scrap value.

Closing work-in-progress is 100% complete for material and 60% complete for labour and

overheads.

The cost per unit equivalent has been calculated at $3.32 per litre for materials and $2.20 per

litre for labour and overheads.

QUESTION 35

The abnormal loss for the period was:

A Nil

B 100 litres

C 200 litres

D 300 litres (2 marks)

QUESTION 36

The equivalent units of output for labour and overheads for the period were :

A 2,900 litres

B 3,440 litres

C 3,480 litres

D 3,800 litres (2 marks)

QUESTION 37

What is the value of the abnormal loss?

A $0

B $220

C $332

D $552 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 14 F2 - Management Accounting

QUESTION 38

What is the value of the closing work-in-progress?

A $2,649.60

B $3,353.60

C $3,712

D $4,416 (2 marks)

QUESTION 39

What is the value of output?

A $16,008

B $16,560

C $20,976

D $22,080 (2 marks)

QUESTION 40

The following information relates to Job J1, which is carried out by a company to meet a

customer’s order.

Department A Department B

Direct materials consumed Ј10,000 Ј6,000

Direct labour hours 800 hours 400 hours

Direct labour rate per hour Ј4 Ј5

Production overhead per direct lab.hour Ј4 Ј4

Administration and other overheads 20% of full production cost

Profit margin 25% of sales price

What is the selling price to the customer for Job J1?

A Ј32,500

B Ј34,666

C Ј39,000

D Ј41,600 (2 marks)

QUESTION 41

The most appropriate costing method to use by a company that makes individual products to

order for customers is:

A Standard costing

B Job costing

C Process costing

D Service costing (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 15 F2 - Management Accounting

QUESTION 42

Which of the following would NOT be considered as service industries?

(i) An airline company.

(ii) A coal mining company.

(iii) A manufacturer of soups.

(iv) A firm of solicitors.

A (i) and (ii) only

B (i) and (iii) only

C (ii) and (iii)

D (iii) and (iv) (2 marks)

QUESTION 43

A company uses a predetermined overhead absorption rate based on machine hours. The

budgeted factory overhead for one year was Ј68,000, but the actual overhead incurred was

Ј72,000. In the period 17,500 machine hours were worked, and overheads were overabsorbed

by Ј2,375.

The budgeted level of machine hours was

A 12,000 hours

B 16,000 hours

C 17,000 hours

D 18,000 hours (2 marks)

QUESTION 44

A company makes a product called the Widget. Budgeted Widget sales for next period are

48,000 units. Each unit uses 2 kgs of material, costing $5 per kg.

Opening and closing inventory for the quarter are forecast to be

Raw materials Widget (units)

Opening inventory 2,250 kgs 6,000

Closing inventory 4,000 7,500

What is the purchases budget for raw materials (in kgs)?

A 96,000

B 97,750

C 99,000

D 100,750 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 16 F2 - Management Accounting

The following relates to questions 45 and 46.

Product Gamma has a standard labour time of two hours per unit. The standard labour rate is

$6 per hour. During one particular month 5,000 units were produced. The actual labour cost

was $52,525 for 9,550 hours worked.

QUESTION 45

The labour rate variance is:

A $4,775 Adverse

B $4,775 Favourable

C $7,475 Favourable

D $7,475 Adverse (2 marks)

QUESTION 46

The labour efficiency variance is:

A $4,775 Adverse

B $4,775 Favourable

C $2,700 Favourable

D $2,700 Adverse (2 marks)

QUESTION 47

Performance standards that are based upon perfect operating conditions are known as:

A Basic standards

B Ideal standards

C Current standards

D Attainable standards (1 mark)

QUESTION 48

A firm uses standard costing and absorbs overheads on labour hours. Budgeted overheads

were Ј650,000 and labour hours were budgeted to be 125,000. Actual results showed

overheads incurred as Ј665,000 and labour hours worked as 122,500.

The total fixed overhead variance is:

A Ј28,000 favourable

B Ј28,000 adverse

C Ј15,000 favourable

D Ј15,000 adverse (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 17 F2 - Management Accounting

QUESTION 49

The margin of safety is the difference between the Breakeven Sales and the Budgeted Sales.

Is this statement true or false?

A True

B False (1 mark)

QUESTION 50

The management of a company is making a decision which could lead to just three possible

outcomes – ‘high’, ‘medium’ and ‘low’ levels of demand. Profit and expected value information

are as follows:

Outcome Profit Profit x Probability of outcome

High $28,500 $11,400

Medium $18,000 $8,100

Low $12,000 $1,800

What is the most likely level of profit from making the decision?

A $18,000

B $19,500

C $21,300

D $28,500 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 18 F2 - Management Accounting

ACCA

Management

Accounting

Mock Exam 1

Questions

(Duration: 3 hours) LSAM

FORMULAE SHEET

Linear regression

r =

[n x - ( x) ] [n y - ( y) ]

n xy - x y

􀂦 2 􀂦 2 􀂦 2 􀂦 2

􀂦 􀂦 􀂦

If y = a + bx,

b = n x2 - ( x)2

n xy - x y

􀂦 􀂦

􀂦 􀂦 􀂦

and a =

n

􀂦 y

- b

n

􀂦 x

Economic order quantity

Economic order quantity =

H

O

C

2C D

Economic batch quantity =

􀂸 􀂹

􀂷

􀂨 􀂩

􀂧

R

C 1- D

2C D

H

O

Mock Exam - 1 (Questions)

LondonSAM 1 F2 - Management Accounting

ALL 50 questions are compulsory and MUST be attempted

QUESTION 1

A fixed budget recognises different cost behaviour patterns and is designed to change as the

volume of activity changes.

A True

B False (1 mark)

QUESTION 2

Which of the following statements are true?

(i) Fixed budgets are the only type of budget used at the planning stage.

(ii) Flexed budgets provide meaningful comparison to actual results.

(iii) Budgeting procedures are only useful in maintaining control over the expenditure of a

business.

A All of them

B (i) and (ii) only

C (i) and (iii) only

D (ii) only (2 marks)

QUESTION 3

A manufacturing company uses 28,000 components at an even rate during the year. Each

order placed with the supplier of the components is for 1,500 components, which is the

economic order quantity. The company holds a buffer inventory of 700 components. The

annual cost of holding one component in inventory is €3.

What is the total annual cost of holding inventory of the component?

A €2,250

B €3,300

C €4,350

D €4,500 (2 marks)

QUESTION 4

Which of the following is NOT an attribute of good information?

A Accurate

B Confidential

C Timely

D Cost effective (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 2 F2 - Management Accounting

QUESTION 5

A part of an organisation which generates revenues and for which costs are also collected is

called:

A A cost centre

B A revenue centre

C A profit centre

D A loss centre (2 marks)

QUESTION 6

The total costs incurred at various output levels in a factory have been measured as follows:

Output in units Total cost

23 Ј 5,200

30 Ј 5,450

35 Ј 5,550

40 Ј 6,000

45 Ј 6,500

48 Ј 7,100

The variable cost per unit and the total fixed costs are:

A Variable costs Ј37 per unit; Total fixed costs Ј5,966

B Variable costs Ј40 per unit; Total fixed costs Ј4,280

C Variable costs Ј76 per unit; Total fixed costs Ј3,452

D Variable costs Ј148 per unit; Total fixed costs Ј1,796 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 3 F2 - Management Accounting

QUESTION 7

The following diagram represents a cost behaviour pattern:

Volume of activity

Total

cost

Which of the following statements is consistent with the above diagram?

A Annual factory costs when the electricity supplier sets a tariff based on a fixed

charge, plus a constant unit cost for consumption but subject to a maximum annual

charge

B Total direct material cost for the period if the supplier has agreed to a maximum

charge for that period

C Total direct material cost for a period if the supplier charges a lower unit cost on all

units once a certain quantity has been purchased in that period

D Weekly total labour cost when workers are paid an hourly wage during normal

working hours, and a higher hourly rate if they are required to work outside those

hours (2 marks)

QUESTION 8

Regression analysis has produced the following results from the batch production costs for

each of the past 6 months:

􀂙x 600

􀂙y 950

􀂙x2 53,000

􀂙xy 88,560

Which of the following is the appropriate value for b in the regression line to 2 decimal

places?

A -1.65

B 0.92

C 1.38

D 66.33 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 4 F2 - Management Accounting

QUESTION 9

A company has estimated that sales next year may be €57,000 (probability 0.45), €66,000

(probability 0.4) or €75,000.

What is the expected value of sales to be used in next year’s forecast?

A €21,100

B €36,600

C €63,300

D €66,000 (2 marks)

QUESTION 10

When faced with a known scarce resource, such as material, the best way to allocate the

resource in line with a profit maximisation objective is to follow a particular procedure. The

various elements which make up this procedure are shown below.

Which option shows the most logical order?

(1) Calculate the contribution per unit of the scarce resource.

(2) Rank the products.

(3) Allocate the scarce resource.

(4) Calculate the contribution per unit of the products.

A (1), (4), (2), (3)

B (4), (1), (2), (3)

C (4), (1), (3), (2)

D (3), (2), (4), (1) (2 marks)

QUESTION 11

A Goods Received Note (GRN) provides:

(i) Information used to update inventory records.

(ii) Information to check that the correct price has been recorded on the supplier’s

invoice.

(iii) Information to check that the correct quantity of goods has been recorded on the

supplier’s invoice.

(iv) Information to record any unused materials which are returned to stores.

Which of the above statements is/are true?

A (i) only

B (ii) and (iii) only

C (i) and (iii) only

D All of the above (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 5 F2 - Management Accounting

QUESTION 12

Caz currently pays its direct production workers on a time basis, at a rate of Ј8.20 an hour. In

an effort to improve productivity, Caz is introducing a bonus based on (time taken ч time

allowed) 􀁵 time saved 􀁵 rate per hour.

The standard time allowed for a worker in the assembly department to perform this particular

operation once has been agreed at 45 minutes. In the first week of operation, one (very

experienced) employee worked for a total of 45 hours and performed 99 operations.

The gross wages for this employee for that week, to 2 decimal places, is:

A Ј145.36

B Ј369.10

C Ј514.36

D Ј540.08 (2 marks)

QUESTION 13

Which one of the following group of workers would be classified as indirect labour?

(i) Machinists in a company manufacturing clothes.

(ii) Plasterers in a building company.

(iii) Maintenance workers in a hat factory.

A (i) only

B (ii) only

C (i) and (ii)

D (iii) only (1 mark)

QUESTION 14

A company uses an overhead absorption rate of €4.50 per labour hour, based on 3,600

budgeted labour hours for the period. During the same period, the actual total overhead

expenditure amounted to €18,225 and 3,850 labour hours were worked.

By how much was the total overhead under or over absorbed for the period?

A Under-absorbed by €900

B Under absorbed by €1,035

C Over-absorbed by €900

D Over-absorbed by €1,035 (2 marks)

QUESTION 15

For which of the following is a profit centre manager responsible?

A Costs only

B Revenue only

C Costs and revenues (1 mark)

Mock Exam - 1 (Questions)

LondonSAM 6 F2 - Management Accounting

QUESTION 16

In an organisation manufacturing a number of different products in one factory, the cost of

power & fuel is an example of a direct expense when costing a product.

A True

B False (1 mark)

QUESTION 17

A stepped cost is one which is only fixed within certain levels of activity. Once the upper

activity level is reached, a new level of fixed cost becomes relevant.

A True

B False (1 mark)

QUESTION 18

Up to a given level of activity in each period, the purchase price per unit of 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?

(2 marks)

Volume

Cost Cost

A B

Cost

C

Cost

D

Volume

Volume Volume

Mock Exam - 1 (Questions)

LondonSAM 7 F2 - Management Accounting

QUESTION 19

Relevant Information for decision making:

A usually includes depreciation.

B may reflect the incremental cost.

C should ignore opportunity costs.

D should consider accounting profit (1 mark)

QUESTION 20

What does the total materials variance show?

A The difference between the flexed budget and the actual

B The difference between the original budget and the actual

C The difference between the flexed budget and the original budget

D None of the above (2 marks)

QUESTION 21

Q Ltd order in supplies of stock from a local supplier. The following information is available for

their stocks:

Demand = 5,000 units per quarter

Holding cost = $0.192 per unit per year

Deliver cost per order = $30

Maximum room available for stock = 6,000 units

Calculate the most cost efficient order size:

A 250

B 1,250

C 2,500

D 6,000 (2 marks)

QUESTION 22

M Ltd makes a single product which it sells for $40 per unit. Z Ltd’s fixed costs amount to

$120,000. Its contribution to sales ratio is 40%. What is the breakeven point?

A $120,000

B $300,000

C 7,500 units

D 15,000 units (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 8 F2 - Management Accounting

QUESTION 23

The following breakeven chart has been drawn showing lines for total cost (TC), total variable

cost (TVC), total fixed cost (TFC) and total sales revenue (TSR):

What is the margin of safety at the 1,850 units level of activity?

A 275 units

B 350 units

C 350 units

D 500 units (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 9 F2 - Management Accounting

The following information relates to questions 24 and 25.

Cost and selling price details for product Alpha are as follows:

$ per unit

Direct materials 8.00

Direct labour 8.50

Variable overhead 3.50

Fixed overhead absorption rate _4_._0_0_

_2_4_.0_0_

Profit _1_1_.0_0_

Selling price _3_5_.0_0_

You are also given the following information at month-end:

Budgeted production for the month 6,000 units

Actual production for the month 6,500 units

Actual sales for the month 6,100 units

Fixed overhead costs $30,000

QUESTION 24

The marginal costing profit for the month is:

A $61,500

B $91,500

C $97,600

D $122,000 (2 marks)

QUESTION 25

The absorption costing profit for the month is:

A $61,500

B $63,100

C $67,100

D $72,000 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 10 F2 - Management Accounting

QUESTION 26

Beta Ltd wishes to use a machine for one month on a new contract. The machine cost

$120,000 six years ago. When purchased, it had an estimated life of ten years and it is being

fully depreciated using the straight line method. It is currently valued at $39,000 and it

estimated value at the end of the year is $15,000. The machine is underused and stands idle

for 30% of its time, but it must be retained for use on similar contracts.

The relevant cost of using the machine on the new contract is:

A $0

B $14,000

C $20,000

D $26,000 (2 marks)

QUESTION 27

A firm is currently considering a job that requires 800 units of raw material. There are

currently 1,200 units of the material in stock, bought just over a year ago for Ј3.80 per Kg, but

no longer used for any of the firm’s products. The current market price for the material is

Ј4.20, but the company could sell it for Ј2.00 per unit.

What is the relevant cost per unit?

A Ј0

B Ј2.00

C Ј3.80

D Ј4.20 (2 marks)

QUESTION 28

A contract is under consideration which requires 150 hours to complete. There are 350 hours

of spare labour capacity for which the workers are still being paid the normal rate of pay. The

remaining hours for the contract can be found either by weekend overtime working paid at

double the normal rate of pay, or by diverting labour from other production. This other

production makes a contribution, net of labour cost, of Ј7.00 per hour. The normal rate of pay

is Ј7.50 per hour.

What is the total relevant cost of labour for the contract?

A Ј0

B Ј520

C Ј870

D Ј900 (1 mark)

Mock Exam - 1 (Questions)

LondonSAM 11 F2 - Management Accounting

The following information relates to questions 29 and 30.

A company manufactures and sells two products, A and B, which have contributions of Ј11

and Ј15 respectively. The company aims to maximise profit. Two materials, M1 and M2, are

used in the manufacture of each product. Each material is in short supply – 2,500 kgs of M1

and 1,350 kgs of M2 are available next period. The company holds no inventories, and it can

sell all the units produced.

The management accountant has drawn the following graph accurately, showing the

constraints for materials M1 and M2.

QUESTION 29

What is the amount, in kgs, of Materials M1 and M2 used in each product of Product B?

Material M1 Material M2

A 10 9

B 9 9

C 10 10

D 9 10 (2 marks)

QUESTION 30

What is the optimal mix of production (in units) for the next period?

Product A Product B

A 0 50

B 70 40

C 40 70

D 120 0 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 12 F2 - Management Accounting

QUESTION 31

A company operates a process costing system. During a period there was no opening stock,

and 350 units were received from the previous process. At the end of the period there was

closing stock of 50 units, which were 60% complete. There were no process losses.

What was the number of equivalent units produced?

A 50 units

B 60 units

C 300 units

D 330 units (2 marks)

The following is relevant to questions 32 and 33.

A company operates a process costing system. The following information is relevant for the

last period for process 1:

Inputs: 12,000 kgs of raw material at $4 per kg.

Direct wages: 6,000 hours at $5 per hour.

Production overhead absorbed at $7 per labour hour.

Outputs: Normal loss 10% of input

Transfer to process 2: 11,050 kgs

All losses have a scrap value of $1 per kg. There was no opening or closing stock.

QUESTION 32

The abnormal gain or loss for the period was:

A 108 kgs loss

B 250 kgs gain

C 950 kgs gain

D 1,000 kgs gain (2 marks)

QUESTION 33

The average cost per kg of output is:

A $10

B $11

C $12

D $13 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 13 F2 - Management Accounting

QUESTION 34

Planning for the activities of a business in the short term is best described as:

A Operational planning

B Strategic planning (1 mark)

The following information relates to questions 35 to 39.

A product is manufactured in two processes. Details for the second process in period 4 were

as follows:

Opening work-in-progress Nil

Materials transferred from the first process 4,000 litres

Output transferred to finished goods 2,900 litres

Closing work-in-progress 800 litres

Normal loss is 5% of input. Losses have no scrap value.

Closing work-in-progress is 100% complete for material and 60% complete for labour and

overheads.

The cost per unit equivalent has been calculated at $3.32 per litre for materials and $2.20 per

litre for labour and overheads.

QUESTION 35

The abnormal loss for the period was:

A Nil

B 100 litres

C 200 litres

D 300 litres (2 marks)

QUESTION 36

The equivalent units of output for labour and overheads for the period were :

A 2,900 litres

B 3,440 litres

C 3,480 litres

D 3,800 litres (2 marks)

QUESTION 37

What is the value of the abnormal loss?

A $0

B $220

C $332

D $552 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 14 F2 - Management Accounting

QUESTION 38

What is the value of the closing work-in-progress?

A $2,649.60

B $3,353.60

C $3,712

D $4,416 (2 marks)

QUESTION 39

What is the value of output?

A $16,008

B $16,560

C $20,976

D $22,080 (2 marks)

QUESTION 40

The following information relates to Job J1, which is carried out by a company to meet a

customer’s order.

Department A Department B

Direct materials consumed Ј10,000 Ј6,000

Direct labour hours 800 hours 400 hours

Direct labour rate per hour Ј4 Ј5

Production overhead per direct lab.hour Ј4 Ј4

Administration and other overheads 20% of full production cost

Profit margin 25% of sales price

What is the selling price to the customer for Job J1?

A Ј32,500

B Ј34,666

C Ј39,000

D Ј41,600 (2 marks)

QUESTION 41

The most appropriate costing method to use by a company that makes individual products to

order for customers is:

A Standard costing

B Job costing

C Process costing

D Service costing (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 15 F2 - Management Accounting

QUESTION 42

Which of the following would NOT be considered as service industries?

(i) An airline company.

(ii) A coal mining company.

(iii) A manufacturer of soups.

(iv) A firm of solicitors.

A (i) and (ii) only

B (i) and (iii) only

C (ii) and (iii)

D (iii) and (iv) (2 marks)

QUESTION 43

A company uses a predetermined overhead absorption rate based on machine hours. The

budgeted factory overhead for one year was Ј68,000, but the actual overhead incurred was

Ј72,000. In the period 17,500 machine hours were worked, and overheads were overabsorbed

by Ј2,375.

The budgeted level of machine hours was

A 12,000 hours

B 16,000 hours

C 17,000 hours

D 18,000 hours (2 marks)

QUESTION 44

A company makes a product called the Widget. Budgeted Widget sales for next period are

48,000 units. Each unit uses 2 kgs of material, costing $5 per kg.

Opening and closing inventory for the quarter are forecast to be

Raw materials Widget (units)

Opening inventory 2,250 kgs 6,000

Closing inventory 4,000 7,500

What is the purchases budget for raw materials (in kgs)?

A 96,000

B 97,750

C 99,000

D 100,750 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 16 F2 - Management Accounting

The following relates to questions 45 and 46.

Product Gamma has a standard labour time of two hours per unit. The standard labour rate is

$6 per hour. During one particular month 5,000 units were produced. The actual labour cost

was $52,525 for 9,550 hours worked.

QUESTION 45

The labour rate variance is:

A $4,775 Adverse

B $4,775 Favourable

C $7,475 Favourable

D $7,475 Adverse (2 marks)

QUESTION 46

The labour efficiency variance is:

A $4,775 Adverse

B $4,775 Favourable

C $2,700 Favourable

D $2,700 Adverse (2 marks)

QUESTION 47

Performance standards that are based upon perfect operating conditions are known as:

A Basic standards

B Ideal standards

C Current standards

D Attainable standards (1 mark)

QUESTION 48

A firm uses standard costing and absorbs overheads on labour hours. Budgeted overheads

were Ј650,000 and labour hours were budgeted to be 125,000. Actual results showed

overheads incurred as Ј665,000 and labour hours worked as 122,500.

The total fixed overhead variance is:

A Ј28,000 favourable

B Ј28,000 adverse

C Ј15,000 favourable

D Ј15,000 adverse (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 17 F2 - Management Accounting

QUESTION 49

The margin of safety is the difference between the Breakeven Sales and the Budgeted Sales.

Is this statement true or false?

A True

B False (1 mark)

QUESTION 50

The management of a company is making a decision which could lead to just three possible

outcomes – ‘high’, ‘medium’ and ‘low’ levels of demand. Profit and expected value information

are as follows:

Outcome Profit Profit x Probability of outcome

High $28,500 $11,400

Medium $18,000 $8,100

Low $12,000 $1,800

What is the most likely level of profit from making the decision?

A $18,000

B $19,500

C $21,300

D $28,500 (2 marks)

Mock Exam - 1 (Questions)

LondonSAM 18 F2 - Management Accounting