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ACCA

Management

Accounting

Mock Exam 2

Answers

(Duration: 3 hours) LSAM

ANSWER 1

C

OAR = $176,400/3,600 = $49

$

Amount absorbed = $49 􀁵 5,400 = 264,600

Actual overhead (_2_5_0_,_4_0_0 )

Over absorbed __1_4_,_2_0_0

ANSWER 2

D

Process account

Units Units

Materials (100% complete) 10,000 CWIP 1,000

Normal loss 200

Output 8,000

______ Abnormal loss ___8__00_

_1_0_,0__0_0 _1_0_,0__0_0

ANSWER 3

B – False

A principal budget factor is a factor which limits the activities of the organisation.

ANSWER 4

B

The question stated that there were just three possible outcomes for profit in a decision

situation. The requirement asked for the most likely level of profits, that is the one of the three

possibilities with the highest probability of occurring. The probability of a $29,000 profit

was.0.25 and that of a $20,000 profit was 0.4.

ANSWER 5

B

ANSWER 6

B

Budgeted hours =

$32

$216,000 = 6,750 hours

Mock Exam - 2 (Answers)

LondonSAM 1 F2 - Management Accounting

ANSWER 7

B – False

It is a method of attributing total production cost centre overheads to a cost unit, not total

costs.

ANSWER 8

A

ANSWER 9

A

ANSWER 10

C

{[Buffer inventory + (EOQ ÷ 2)] 􀁵 Annual holding cost per component}

= [800 units + (1,600 units ÷ 2)] 􀁵 €3.50 = €5,600

ANSWER 11

A

Normal time = 936 – 108 = 828 hours

Number of employees = 23

ANSWER 12

C

Direct labour charge is all hours (including overtime) at normal rate: 936 􀁵 $6.20 = $5,803.20

ANSWER 13

B

ANSWER 14

A

ANSWER 15

A

Assembly Finishing Maintenance

Allocated o/hs 90,000 100,000 10,000

Maintenance __6_,0__0_0 ___4_,_0_0_0 (_1_0_,_0_0_0 )

_9_6_,0__0_0 _1_0_4_,_0_0_0 ______–

OAR for Assembly department = £96,000/10,000 machine hours = £9.60

Mock Exam - 2 (Answers)

LondonSAM 2 F2 - Management Accounting

ANSWER 16

D

Output(kg) Sales value ($) Apportionment of

joint costs ($)

Product A 2,000 24,000 (24/96) 7,500

Product B 4,000 _7_2_,0_0_0_ (72/96) _2_2_,5_0_0_

_9_6_,0_0_0_ _3_0_,0_0_0_

ANSWER 17

C

($30 􀁵 2,000) + ($30 􀁵 1,600) + ($50 􀁵 2,200) = $218,000

ANSWER 18

C

All stocks are increasing, so absorption costing profits will be higher by:

($30 􀁵 2,00) + ($30 􀁵 100) + ($50 􀁵 200) = $19,000

ANSWER 19

C

Units Total costs

High 52 £7,000

Low 25 £5,500

Difference 27 £1,500

Therefore, Variable costs =

27units

£1,500 = £55.56 per unit

By substitution, we find FC = £4,111.

ANSWER 20

C

ANSWER 21

C

Y = a + bx

330/11 = a + (0.69171 􀁵 440)/11

30 = a +27.66 so a = 2.33

Mock Exam - 2 (Answers)

LondonSAM 3 F2 - Management Accounting

ANSWER 22

B

ANSWER 23

A

Total hours worked, and paid = 3,300/0.75 = 4,400 hours

Hourly rate = $36,300/4,400 = $8.25

ANSWER 24

A

ANSWER 25

D

Total costs = $30

Profit margin = 25%, therefore cost = 75%

Price = $30 ÷ 0.75 = $40

ANSWER 26

C

ANSWER 27

D

Overheads incurred 186,000

Actual absorption

5,000

175,000 􀁵 6,000 210,000

_______

Over-absorbed 24,000

ANSWER 28

B

ANSWER 29

B

Marginal costing profit 180,000

Plus

( 15,000 – 25,000) 􀁵 $6 _(_6_0_,_0_00_)

Equals absorption costing profit _1_2_0_,_0_0_0

ANSWER 30

A

Mock Exam - 2 (Answers)

LondonSAM 4 F2 - Management Accounting

ANSWER 31

B

The original cost of $49,000 is a past cost, or sunk cost, and is therefore irrelevant. The

material would not be re-worked, since its value would only increase by $5,000 ($17,500 -

$12,500) for a cost of $7,500.

The relvant cost of using the material on the job is, therefore, the opportunity cost of the scrap

sale foregone, i.e. £12,500.

ANSWER 32

C

ANSWER 33

C

ANSWER 34

D

Material required to meet maximum demand:

6000 􀁵 (13÷4) + 8,000 􀁵 (19÷4) = 57,500 litres

Material available = 55,000 litres. Therefore, material is a limiting factor.

Labour required to meet maximum demand:

6000 􀁵 (35÷7) + 8,000 􀁵 (28÷7) = 62,000 hours

Labour available = 58,000 hours. Therefore, labour is a limiting factor.

ANSWER 35

A

Breakeven sales revenue = Fixed costs 􀂹􀀃􀀦ontribution to sales ratio

= $30,000 􀂹􀀃0.25 = $120,000

ANSWER 36

A

Mock Exam - 2 (Answers)

LondonSAM 5 F2 - Management Accounting

ANSWER 37

B

ANSWER 38

C

ANSWER 39

C

Contribution = Profit + Fixed costs

ANSWER 40

B

AH 􀁵 AR = 9,550 􀁵 $5.5 = 52,525

Rate variance 4,775 F

AH 􀁵 SR = 9,550 􀁵 $6.0 = 57,300

ANSWER 41

C

Budgeted production

Traditional = 7,500 + 900 – 1,800 = 6,600

Modern = 12,000 + 1,200 – 2,400 = 10,800

Labour hours = (6,600 􀂙􀀃10) + (10,800 􀂙􀀃16) = 238,800

ANSWER 42

B

ANSWER 43

A

Sales contribution on actual sales $50,000

Less: Adverse total variable costs variance ($3,500)

Actual contribution $46,500

No adjustment is required for the favourable sales volume contribution variance, as it will

have already been added to the budgeted contribution to arrive at the standard contribution

from actual sales ($50,000) given in the question.

ANSWER 44

D

Mock Exam - 2 (Answers)

LondonSAM 6 F2 - Management Accounting

ANSWER 45

A

For the first 10 hours of calls only the fixed line rental is charged therefore the answer cannot

be B or D, which show no costs until a number of hours have passed. Graph C shows a

variable cost is charged from nil to a maximum number of hours which is incorrect.

ANSWER 46

A

As the machine stands idle but must be retained, there is no future cash flow related to

keeping it for the contract. The relevant cost is zero.

ANSWER 47

B

Contribution per unit = $(300 – 234) = $66

Volume required =

66

3,000,000 􀀎 500,000

= 53,030

ANSWER 48

B

Process account

Units $ Units $

Materials 2,000 8,000 Normal loss 200 350

Conversion 4,500 Output 1,700 11,475

_____ ______ Abnormal loss __1_0_0_ ___6__7_5

_2_,0_0_0_ _1_2_,5__0_0 _2_,0_0__0 _1_2_,5__0_0

Average cost = ($12,500 􀀐 $350)/(2,000 􀀐 200) = $6.75

ANSWER 49

D

Abnormal loss account

Units $ Units $

Abnormal loss 100 675 Scrap 100 175

___ 6_7_5_ P&L ___ 5_0_0_

1_0_0_ 6_7_5_ 1_0_0_ 6_7_5_

ANSWER 50

A

Idle time + General overtime = (15 hours 􀁵 $12) + ((10 hours – 4 hours) 􀁵 $6) = $216

Mock Exam - 2 (Answers)

LondonSAM 7 F2 - Management Accounting

ACCA

Management

Accounting

Mock Exam 2

Answers

(Duration: 3 hours) LSAM

ANSWER 1

C

OAR = $176,400/3,600 = $49

$

Amount absorbed = $49 􀁵 5,400 = 264,600

Actual overhead (_2_5_0_,_4_0_0 )

Over absorbed __1_4_,_2_0_0

ANSWER 2

D

Process account

Units Units

Materials (100% complete) 10,000 CWIP 1,000

Normal loss 200

Output 8,000

______ Abnormal loss ___8__00_

_1_0_,0__0_0 _1_0_,0__0_0

ANSWER 3

B – False

A principal budget factor is a factor which limits the activities of the organisation.

ANSWER 4

B

The question stated that there were just three possible outcomes for profit in a decision

situation. The requirement asked for the most likely level of profits, that is the one of the three

possibilities with the highest probability of occurring. The probability of a $29,000 profit

was.0.25 and that of a $20,000 profit was 0.4.

ANSWER 5

B

ANSWER 6

B

Budgeted hours =

$32

$216,000 = 6,750 hours

Mock Exam - 2 (Answers)

LondonSAM 1 F2 - Management Accounting

ANSWER 7

B – False

It is a method of attributing total production cost centre overheads to a cost unit, not total

costs.

ANSWER 8

A

ANSWER 9

A

ANSWER 10

C

{[Buffer inventory + (EOQ ÷ 2)] 􀁵 Annual holding cost per component}

= [800 units + (1,600 units ÷ 2)] 􀁵 €3.50 = €5,600

ANSWER 11

A

Normal time = 936 – 108 = 828 hours

Number of employees = 23

ANSWER 12

C

Direct labour charge is all hours (including overtime) at normal rate: 936 􀁵 $6.20 = $5,803.20

ANSWER 13

B

ANSWER 14

A

ANSWER 15

A

Assembly Finishing Maintenance

Allocated o/hs 90,000 100,000 10,000

Maintenance __6_,0__0_0 ___4_,_0_0_0 (_1_0_,_0_0_0 )

_9_6_,0__0_0 _1_0_4_,_0_0_0 ______–

OAR for Assembly department = £96,000/10,000 machine hours = £9.60

Mock Exam - 2 (Answers)

LondonSAM 2 F2 - Management Accounting

ANSWER 16

D

Output(kg) Sales value ($) Apportionment of

joint costs ($)

Product A 2,000 24,000 (24/96) 7,500

Product B 4,000 _7_2_,0_0_0_ (72/96) _2_2_,5_0_0_

_9_6_,0_0_0_ _3_0_,0_0_0_

ANSWER 17

C

($30 􀁵 2,000) + ($30 􀁵 1,600) + ($50 􀁵 2,200) = $218,000

ANSWER 18

C

All stocks are increasing, so absorption costing profits will be higher by:

($30 􀁵 2,00) + ($30 􀁵 100) + ($50 􀁵 200) = $19,000

ANSWER 19

C

Units Total costs

High 52 £7,000

Low 25 £5,500

Difference 27 £1,500

Therefore, Variable costs =

27units

£1,500 = £55.56 per unit

By substitution, we find FC = £4,111.

ANSWER 20

C

ANSWER 21

C

Y = a + bx

330/11 = a + (0.69171 􀁵 440)/11

30 = a +27.66 so a = 2.33

Mock Exam - 2 (Answers)

LondonSAM 3 F2 - Management Accounting

ANSWER 22

B

ANSWER 23

A

Total hours worked, and paid = 3,300/0.75 = 4,400 hours

Hourly rate = $36,300/4,400 = $8.25

ANSWER 24

A

ANSWER 25

D

Total costs = $30

Profit margin = 25%, therefore cost = 75%

Price = $30 ÷ 0.75 = $40

ANSWER 26

C

ANSWER 27

D

Overheads incurred 186,000

Actual absorption

5,000

175,000 􀁵 6,000 210,000

_______

Over-absorbed 24,000

ANSWER 28

B

ANSWER 29

B

Marginal costing profit 180,000

Plus

( 15,000 – 25,000) 􀁵 $6 _(_6_0_,_0_00_)

Equals absorption costing profit _1_2_0_,_0_0_0

ANSWER 30

A

Mock Exam - 2 (Answers)

LondonSAM 4 F2 - Management Accounting

ANSWER 31

B

The original cost of $49,000 is a past cost, or sunk cost, and is therefore irrelevant. The

material would not be re-worked, since its value would only increase by $5,000 ($17,500 -

$12,500) for a cost of $7,500.

The relvant cost of using the material on the job is, therefore, the opportunity cost of the scrap

sale foregone, i.e. £12,500.

ANSWER 32

C

ANSWER 33

C

ANSWER 34

D

Material required to meet maximum demand:

6000 􀁵 (13÷4) + 8,000 􀁵 (19÷4) = 57,500 litres

Material available = 55,000 litres. Therefore, material is a limiting factor.

Labour required to meet maximum demand:

6000 􀁵 (35÷7) + 8,000 􀁵 (28÷7) = 62,000 hours

Labour available = 58,000 hours. Therefore, labour is a limiting factor.

ANSWER 35

A

Breakeven sales revenue = Fixed costs 􀂹􀀃􀀦ontribution to sales ratio

= $30,000 􀂹􀀃0.25 = $120,000

ANSWER 36

A

Mock Exam - 2 (Answers)

LondonSAM 5 F2 - Management Accounting

ANSWER 37

B

ANSWER 38

C

ANSWER 39

C

Contribution = Profit + Fixed costs

ANSWER 40

B

AH 􀁵 AR = 9,550 􀁵 $5.5 = 52,525

Rate variance 4,775 F

AH 􀁵 SR = 9,550 􀁵 $6.0 = 57,300

ANSWER 41

C

Budgeted production

Traditional = 7,500 + 900 – 1,800 = 6,600

Modern = 12,000 + 1,200 – 2,400 = 10,800

Labour hours = (6,600 􀂙􀀃10) + (10,800 􀂙􀀃16) = 238,800

ANSWER 42

B

ANSWER 43

A

Sales contribution on actual sales $50,000

Less: Adverse total variable costs variance ($3,500)

Actual contribution $46,500

No adjustment is required for the favourable sales volume contribution variance, as it will

have already been added to the budgeted contribution to arrive at the standard contribution

from actual sales ($50,000) given in the question.

ANSWER 44

D

Mock Exam - 2 (Answers)

LondonSAM 6 F2 - Management Accounting

ANSWER 45

A

For the first 10 hours of calls only the fixed line rental is charged therefore the answer cannot

be B or D, which show no costs until a number of hours have passed. Graph C shows a

variable cost is charged from nil to a maximum number of hours which is incorrect.

ANSWER 46

A

As the machine stands idle but must be retained, there is no future cash flow related to

keeping it for the contract. The relevant cost is zero.

ANSWER 47

B

Contribution per unit = $(300 – 234) = $66

Volume required =

66

3,000,000 􀀎 500,000

= 53,030

ANSWER 48

B

Process account

Units $ Units $

Materials 2,000 8,000 Normal loss 200 350

Conversion 4,500 Output 1,700 11,475

_____ ______ Abnormal loss __1_0_0_ ___6__7_5

_2_,0_0_0_ _1_2_,5__0_0 _2_,0_0__0 _1_2_,5__0_0

Average cost = ($12,500 􀀐 $350)/(2,000 􀀐 200) = $6.75

ANSWER 49

D

Abnormal loss account

Units $ Units $

Abnormal loss 100 675 Scrap 100 175

___ 6_7_5_ P&L ___ 5_0_0_

1_0_0_ 6_7_5_ 1_0_0_ 6_7_5_

ANSWER 50

A

Idle time + General overtime = (15 hours 􀁵 $12) + ((10 hours – 4 hours) 􀁵 $6) = $216

Mock Exam - 2 (Answers)

LondonSAM 7 F2 - Management Accounting