F5PM-Revision-Question-Bank_Sample_D14-J15.pdf

PLE December 2014–June 2015 Edition REVISION QUESTION BANK SA M ACCA Paper F5 | PERFORMANCE MANAGEMENT ATC International became a part of Becker Professional Education in 2011. ATC International has 20 years of experience providing lectures and learning tools for ACCA Professional Qualifications. Together, Becker Professional Education and ATC International offer ACCA candidates high quality study materials to maximize their chances of success. In 2011 Becker Professional Education, a global leader in professional education, acquired ATC International. 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Becker Professional Education's ACCA Study Materials All of Becker’s materials are authored by experienced ACCA lecturers and are used in the delivery of classroom courses. M Study System: Gives complete coverage of the syllabus with a focus on learning outcomes. It is designed to be used both as a reference text and as part of integrated study. It also includes the ACCA Syllabus and Study Guide, exam advice and commentaries and a Study Question Bank containing practice questions relating to each topic covered. Revision Question Bank: Exam style and standard questions together with comprehensive answers to support and prepare students for their exams. The Revision Question Bank also includes past examination questions (updated where relevant), model answers and alternative solutions and tutorial notes. SA Revision Essentials*: A condensed, easy-to-use aid to revision containing essential technical content and exam guidance. *Revision Essentials are substantially derived from content reviewed by ACCA’s examining team. ® E PL ACCA PAPER F5 SA M PERFORMANCE MANAGEMENT REVISION QUESTION BANK For Examinations to June 2015 ® ©2014 DeVry/Becker Educational Development Corp.  All rights reserved. (i) No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, editor or publisher. This training material has been prepared and published by Becker Professional Development International Limited: 16 Elmtree Road Teddington TW11 8ST United Kingdom E Copyright ©2014 DeVry/Becker Educational Development Corp. All rights reserved. The trademarks used herein are owned by DeVry/Becker Educational Development Corp. or their respective owners and may not be used without permission from the owner. SA M PL No part of this training material may be translated, reprinted or reproduced or utilised in any form either in whole or in part or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system without express written permission. Request for permission or further information should be addressed to the Permissions Department, DeVry/Becker Educational Development Corp. Acknowledgement Past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants and have been reproduced by kind permission. (ii) ©2014 DeVry/Becker Educational Development Corp.  All rights reserved. REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) CONTENTS Question Page Answer Marks Date worked FORMULAE Formulae Sheet (vii) MULTIPLE CHOICE QUESTIONS 1001 1002 1004 1006 1008 1010 1011 1013 1014 1015 1016 1017 1019 1020 1021 1021 1023 18 24 20 20 18 18 14 14 20 6 26 18 14 14 14 20 18 1024 14 E 1 3 7 10 13 17 20 22 24 27 28 31 34 37 38 40 43 PL Cost Accounting Developments in Management Accounting Relevant Cost Analysis Cost Volume Profit Analysis Limiting Factor Decisions Pricing Risk and Uncertainty Budgeting Quantitative Analysis in Budgeting Budgeting and Standard Costing Basic Variance Analysis Advanced Variance Analysis Behavioural Aspects of Standard Costing Performance Measurement Further Aspects of Performance Measurement Divisional Performance Evaluation Transfer Pricing Performance Measurement and Information Systems SA M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 45 Section B of the Examination will include 10 and 15 mark questions (see Specimen Exam). Questions with different mark allocations, as indicated below, are provided for further revision question practice. More theoretical and non-past exam questions are provided for preparing to attempt exam standard questions. ACTIVITY BASED COSTING 1 2 Abkaber Co (ACCA D02) Gadget Co (ACCA D10) 48 49 1025 1026 15 15 49 50 50 51 52 52 54 1028 1029 1031 1033 1033 1034 1036 20 10 15 10 10 15 10 DEVELOPMENTS IN MANAGEMENT ACCOUNTING 3 4 5 6 7 8 9 Environmental management accounting Edward Co – I (ACCA D07) Wargrin – I (ACCA D08) Yam Co – I (ACCA J09) Yam Co – II (ACCA J09) Thin Co (ACCA J11) Fit Co (ACCA D11) ©2014 DeVry/Becker Educational Development Corp.  All rights reserved. (iii) PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Question Page Answer Marks Date worked RELEVANT COST ANALYSIS 10 11 12 13 Sniff Co (ACCA D07) Bits and Pieces (ACCA J09) Stay Clean (ACCA D09) T Co (ACCA D11) 54 55 56 57 1036 1038 1039 1041 15 15 15 15 59 59 1042 1045 10 18 1046 1048 1049 1050 15 15 10 15 14 15 A to C Co Nerville (ACCA DIP FM D08) LIMITING FACTOR DECISIONS Kobrin Engineers Co Albion Co (ACCA J03) Cut and Stitch (ACCA J10) Cosmetic Co (ACCA D10) 60 61 62 63 Kadok Co BIL Motor Components Co (ACCA) Heat Co – I (ACCA J11) Heat Co – II (ACCA J11) 64 65 66 66 1052 1055 1056 1057 15 10 10 10 67 67 68 69 70 71 71 1058 1060 1061 1062 1063 1064 1066 10 15 15 10 15 15 15 71 72 73 73 1069 1070 1071 1072 10 10 15 20 74 1073 10 74 1074 10 PRICING 20 21 22 23 SA M RISK AND UNCERTAINTY PL 16 17 18 19 24 25 26 27 28 29 30 E COST VOLUME PROFIT ANALYSIS Decision tree Stow Health Care (ACCA PP) Shifters Haulage (ACCA D08) Cement Co (ACCA J11 adapted) Northland (ACCA J09) Zero-based budgeting (ACCA D10) PC Co (ACCA D11) QUANTITATIVE TECHNIQUES FOR BUDGETING 31 32 33 34 Alex Co Edward Co – II (ACCA D07) Henry Co (ACCA D08) Big Cheese Chairs (ACCA D09) BUDGETING AND STANDARD COSTING 35 Wargrin II (ACCA D08) BASIC VARIANCE ANALYSIS 36 (iv) Chaff Co – I (ACCA J08) ©2014 DeVry/Becker Educational Development Corp.  All rights reserved. . REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Question Page Answer Marks Date worked 37 38 39 40 41 AVX Co Simply Soup – I (ACCA Pilot Paper 2007) Simply Soup – II (ACCA Pilot Paper 2007) Crumbly Cakes (ACCA J09) Choc Co (ACCA D11) 75 76 77 77 78 1076 1077 1079 1080 1080 79 80 80 81 E ADVANCED VARIANCE ANALYSIS 10 15 10 10 10 PLANNING AND OPERATIONAL VARIANCES 42 43 44 45 Spike Co – I (ACCA D07) Spike Co – II (ACCA D07) Chaff Co – II (ACCA J08) Carad Co (ACCA D10) 46 Oliver (ACCA J09) 10 10 10 15 PL PERFORMANCE MEASUREMENT 1082 1084 1085 1086 82 1087 15 83 84 84 85 86 1089 1090 1092 1093 1094 15 15 10 10 20 87 88 89 1096 1098 1099 10 10 10 89 90 91 1099 1101 1102 10 15 15 1103 1106 1107 15 15 15 FURTHER ASPECTS OF PERFORMANCE MANAGEMENT 47 48 49 50 51 Education Ministry Eatwell Restaurant (ACCA J02) Jump – I (ACCA J10) Jump – II (ACCA J10) Accountancy Teaching Co (ACCA D10) SA M DIVISIONAL PERFORMANCE EVALUATION 52 53 54 Osborne Co Pace Co – I (ACCA D08) Pace Co – II (ACCA D08) TRANSFER PRICING 55 56 57 Business Solutions (ACCA J02) Hammer (ACCA J10) Bath Co (ACCA D11) PERFORMANCE MANAGEMENT INFORMATION SYSTEMS 58 59 60 St Peregrine’s Motor Components (ACCA D02) Moffat (ACCA D05) ©2014 DeVry/Becker Educational Development Corp.  All rights reserved. 92 93 93 (v) . PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK RECENT EXAMINATIONS1 Robber Co Universal Health System Not reproduced Lock Co Biscuits and Cakes 94 95 1109 1110 15 10 96 97 1112 1113 10 15 98 1115 15 DECEMBER 2012 1 Hair Co 2 Truffle Co (see Specimen Examination) 3 Web Co 4 Designit 5 Wash Co 99 100 101 JUNE 2013 1 2 3 4 5 102 102 103 105 106 1116 1118 1119 15 15 15 1122 1123 1125 1126 1127 10 15 10 15 10 108 109 110 111 112 1129 1130 1131 1133 1135 15 15 15 20 10 2 15 40 7 8 9 10 11 16 17 17 18 19 21 10 10 10 15 15 PL Gym Bunnies Squarize Cam Co Block Co Newtown School E JUNE 2012 1 2 3 4 5 SA M DECEMBER 2013 1 Process Co 2 Solar Systems Co 3 Mic Co 4 Protect Against Fire Co 5 Bedco SPECIMEN EXAM (applicable from December 2014) Section A Section B 1 2 3 4 5 1 20 Multiple Choice Questions Brace Co Cement Brick by Brick Thatcher International Park Truffle Co Marking scheme All questions in these exams have been adapted to take account of the style of questions in the Specimen Exam. .  All rights reserved. (vi) ©2014 DeVry/Becker Educational Development Corp. (vii) .  All rights reserved.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Formulae Sheet Learning curve Y = axb Y = cumulative average time per unit to produce x units a = the time taken for the first unit of output x = the cumulative number of units produced b = the index of learning (log LR/log 2) LR = the learning rate as a decimal Demand curve P = a – bQ change in price change in quantity PL b= E Where a = price when Q = 0 SA M MR = a – 2bQ ©2014 DeVry/Becker Educational Development Corp. .  All rights reserved.SA M PL E PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK (viii) ©2014 DeVry/Becker Educational Development Corp. PL 1. 1 .  All rights reserved. He estimates that his printing machine will need to be set-up 200 times per month.152·52 The budgeted annual costs for two activities are as follows: Machine set-up Processing $ 180.500 issues will be made. at a monthly total cost of $80. Curtis expects the total demand for item 2145 to be 5. What amount should be charged to each copy of item 2145 for set-up costs? Meadaw Co operates an activity based costing system. where each batch requires the machine to be set-up twice.3 $337·44 $815·08 $1. it is expected that 3.80 $30 $150 The following statements have been made about activity based costing: (1) ABC recognises that some overhead costs do not depend directly on the volume of output.000 60.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 1 COST ACCOUNTING 1. Item 2145 has to be printed in batches of 50 copies.014. details of which are given below: Product R Product S Budgeted production per annum (units) 80.414 is in respect of handling receipts of materials.000 Batch size (units) 100 50 Machine set-ups per batch 3 3 Processing time per unit (minutes) 3 5 SA M 1. RS manufactures two products. The balance is for the issue of goods to production.000 What is the budgeted machine set-up cost per unit of Product S? A B C D 1.1 Curtis runs a printing business.2 $0·08 $1·92 $8·00 $16·00 E A B C D What is the warehousing cost to be included in the total cost of the order? A B C D RS has recently introduced an activity based costing system. (2) The cost of implementing activity based costing may exceed the benefits for some businesses.000 108. of which $215.4 $1. ©2014 DeVry/Becker Educational Development Corp.000 copies per annum. In the same period. The budgeted costs for warehousing for the next six months are $356.000.50 $1. The company has received an order which will generate 14 receipts and 6 issues.700 orders will be received and 2.148·43 $1. Each batch requires a separate production run. 6. Judgement may be required in selecting the drivers for a particular activity.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Which of the above statements is/are true? A B C D (1) (2) It is not particularly relevant for service industry businesses.6 Which of the following statements about activity-based costing is/are true? E 1. Which statements are true/false? A B C D 2 Statement 1 True False True False Statement 2 True False False True ©2014 DeVry/Becker Educational Development Corp. SA M One of the company’s products is produced in batches of 500.  All rights reserved.000 purchase orders will be processed and there will be 450 production runs.5 1 only 2 only Neither 1 nor 2 Both 1 and 2 $000 450 180 640 Purchase order processing costs Production run set up costs Machine running costs In the next year. A B C D 1 only 2 only Neither 1 nor 2 Both 1 and 2 The budgeted overheads of Nambro for the next year have been analysed as follows: PL 1. 30 purchase orders and 750 machine hours. it is anticipated that machines will run for 32. It is based on marginal costing principles. .000 hours. Using Activity Based Costing. what is the overhead cost per unit of the product? A B C D 1.7 $0·99 $1·59 $35·30 $495·00 The following statements have been made about activity-based costing (ABC) in a manufacturing environment: (1) (2) ABC eliminates the use of volume as a means of measuring costs. 200 Order processing 1. (2) If the cost of a product or service using both ABC and absorption costing is the same.495.  All rights reserved.25 $6.75 $6.342 (18 marks) 2 DEVELOPMENTS IN MANAGEMENT ACCOUNTING 2.8 minutes What is the throughput contribution per hour for Product C? A B C D $50.631.85 $121.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 1.15 $148. what is the distribution cost for this customer? A B C D $1.1 A company operates a throughput accounting system.00 7.000 km.08 ©2014 DeVry/Becker Educational Development Corp. 3 . A customer has indicated that 138 orders. The details per unit of Product C are: Selling price Material cost Labour cost Overhead costs Time on bottleneck resource $28.000 –––––––– Total distribution costs 4. The budgeted distribution costs for the next year are: $ Transport costs 2.200 –––––––– PL 1.9 1 only 2 only Neither 1 nor 2 Both 1 and 2 E A B C D It is estimated that in the next year.50 $9. SA M To the nearest $.00 $122.299 $38. Which of the statements is/are correct? Themens Co uses activity based costing.785 $30.891 $47. there will be no benefit to be gained from adopting ABC.573.000 orders will be processed and that the delivery vehicles will travel 1. each of which will require a journey of 122 km will be placed in the next year.8 The following statements have been made about Activity Based Costing (ABC): (1) Introducing ABC will always reduce costs in the short term.204. 325. E SA M A B C D 2. Distribution and customer service costs. F E. D.4 Which of the following costs would be included in the life cycle costs of a product? (1) (2) (3) (4) Planning and concept design costs. E and F. 3 and 4 only 1. E.2 Each of the products is produced using Process A which has a maximum capacity of 2. The statement below shows the selling price and product costs per unit for each product. what will be the ranking of products. 2 and 4 only 1. E D. for the profit maximising product mix? D.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK A company produces three products D.000 20 PL Demand per period (units) Time in Process A (minutes) E 2. Proto-type testing costs. If a throughput accounting approach is used. . in order of priority.000 25 5. F. A B C D All four costs 2. F F.000 15 Additional information: 3. 3 and 4 only Which costing approach identifies ways of making an acceptable profit margin on the market price of a product or service? A B C D 4 Activity-based costing Benchmarking Life-cycle costing Target costing ©2014 DeVry/Becker Educational Development Corp.  All rights reserved.500 hours per period. D. Product manufacturing costs. based on a traditional absorption costing system: Selling price Variable costs Direct material Direct labour Variable overhead Fixed overhead cost Total product cost Profit Product D $ 32 Product E $ 28 Product F $ 22 10 6 4 9 –––– 29 –––– 3 –––– 8 4 2 6 –––– 20 –––– 8 –––– 6 4 2 6 –––– 18 –––– 4 –––– 4.3 2. 000. The direct cost of the new product is $124·50 per unit and the overhead cost is $91·20 per unit.  All rights reserved. SA M What reduction in cost must be made to achieve the target cost? A B C D 2. It focuses on the production of monthly profit statements throughout a product’s entire life. It takes into account a product’s total costs over its entire life. However. The initial assumption was that a sales volume of 200. A B C D 2. Which of the statements are true? A B C D 1 and 2 only 1 and 3 only 2 and 3 only All three statements ©2014 DeVry/Becker Educational Development Corp. The following data has been estimated for the product: $10·45 per unit 20 units $64 per hour $82 per hour (absorbed on a direct labour hour basis) E Direct material Hourly production volume Direct labour cost Variable overheads Fixed costs to produce 200.7 $4·62 $16·95 $22·60 $88·95 The following statements have been made about life-cycle costing: (1) (2) (3) It helps forecast a product’s profitability over its entire life. You have been asked to carry out a target cost pricing exercise.000 units. Market research indicates that the likely selling price should be $265·00.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 2. the selling price should be $23·50.6 $0·38 $1·15 $1·88 $2·35 PL What reduction in the cost per unit is required in order to achieve the target cost per unit? Caward Co is planning to introduce a new product.000 units are estimated to be $680. The company seeks to obtain a 25% margin on all products. Hera wishes to obtain an average profit margin of 20% on sales.000 units could be achieved at a selling price of $25 per unit.5 Hera Co is developing a new product using a target costing approach. 5 . market research indicates that to achieve the sales volume of 200. 000 Machining 4 220.000 Polishing 3 120.11 A product is manufactured in three consecutive processes. 3 and 4 only 1.9 1 only 2 only Neither 1 nor 2 Both 1 and 2 Which of the above techniques might be used in environmental management accounting? A B C D 2. of the processes is the bottleneck? A B C D 6 Preparation Machining Polishing None of the above ©2014 DeVry/Becker Educational Development Corp. 2 and 3 only 1.10 1.  All rights reserved. if any.000 units per week. The time taken per unit and the total hours available per week are as follows: Process Hours per unit Total hours available Preparation 2 100.000 Demand for the product is 50. machining and polishing. preparation.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 2. Which.8 The following statements have been made about environmental management accounting: (1) (2) It provides information mainly for external parties. It may include physical information about quantities of scarce resources used. 2 and 4 only All of the above Which of the following statements about the theory of constraints is NOT true? It focuses on removing bottlenecks in production to improve throughput Non-bottleneck resources should not be operated at full capacity It can only be used in manufacturing organisations It aims to reduce delays in meeting customer orders SA M A B C D 2. Which of the above statements is/are true? A B C D (1) (2) (3) (4) E The following are all types of management accounting techniques: Activity based costing Life-cycle costing Throughput accounting Input output analysis PL 2. . Information about the three products is as follows: Product Selling price per metre Material cost per metre Other variable costs Time taken in dyeing per metre Ax 10 3. It could use material X in place of material Y – however. then Ax By.” Which term is best described by the definition above? A B C D Incremental cost Opportunity cost Relevant cost Variable cost ©2014 DeVry/Becker Educational Development Corp. However. 7 .  All rights reserved.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 2. then Ax.000 units left in inventory that had been purchased at $4·00 per unit. The current purchase price is $4·75 per unit. This special version will use 2.0 2. What is the relevant cost per unit of material X for the manufacture of the special version? A B C D 3.1 Albrecht has received a request to make a special version of one of its basic products.0 3.5 4. Ax. What will be the ranking of the textiles in order of priority for the throughput maximising production plan? Ax.5 10 minutes Cz 12. then By. SA M Material X is no longer used by Albrecht but there are 2. By and Cz.0 15 minutes E The manufacturer wishes to maximise throughout contribution.2 $3·00 $3·75 $4·00 $4·75 “The value of a benefit sacrificed in favour of an alternative course of action. it would cost $2·75 per unit to modify material X so that it could be used in place of material Y. material X is similar to material Y that is currently in use by Albrecht and can be purchased for $6·50 per unit. then Cz By.000 units of material X.12 A textiles manufacturer makes three textiles at its Bigtown factory. then By. then Cz.0 10 minutes By 11 3.0 2. then Cz Cz. Albrecht believes it could sell material X for $3·00 per unit. The dyeing process has been identified as a bottleneck resource. then Ax PL A B C D (24 marks) 3 RELEVANT COST ANALYSIS 3. Another alternative is for three regular staff to cover the work of the staff involved in the project and to hire new additional staff to cover for these three regular staff at a cost of $18. What is the sunk cost of the project? A B C D 3. PL 3.100.5 Park Co is developing a number of new products.6 8 $200. The cost of hiring agency staff to cover the work they would normally undertake would be $21. Product QZ takes three labour hours per unit to manufacture and makes a contribution of $12 per unit. What is the cost of staff that should be included in the calculation of the profitability of the project? A contract is under consideration which requires 600 labour hours to complete.400.700. but the company needs to calculate whether the project will be profitable.250 $3.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 3.000 $4.000 $2. ©2014 DeVry/Becker Educational Development Corp. The full employment costs for the three staff involved in the project.000.000.000 $2.400 E A B C D What is the total relevant cost of labour for the contract? $1. The variable running costs of the machine during the period of the contract would be $400. It is estimated that before the change in legislation. Its only other use is on a short-term contract which is under consideration.4 $5.000 which is the estimate of the contribution which will be lost through the delay to another project due to the transfer of resources.600 $18. The normal rate of pay for labour is $9 per hour. would be $15. To date $4·7 million has been spent on the project. There are 350 hours of spare labour capacity.800 $15. On completion of the contract the machine would have no realisable value and would cost $150 to dismantle and remove. is undertaken. $2·1 million was required to bring the product to the launch stage. for the life of the project.250 $4. If the contract is undertaken and labour is diverted. This amount excludes $200. 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 the manufacture of product QZ.000 $21.000 A machine is no longer used by a company. .600.500 SA M A B C D 3. It could be sold now for net proceeds of $300. estimated at $450. then sales of product QZ will be lost. New legislation means that one of these products will not be viable unless additional expenditure.3 Nottingham Co is planning to use three staff members for a special project.  All rights reserved.000 $450. REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) What is the total relevant cost of using the machine on the contract? A B C D A company is evaluating a new contract which requires 400 kg of raw material M. 9 .7 $450 $550 $700 $850 The benefit which would have been obtained from the best alternative foregone The difference in future operating cash flows resulting from a decision A future cash flow which cannot be avoided All cash flows.  All rights reserved. Raw material M is used regularly by the company in normal production. the machine could be sold now for a net amount of $1. After use on the contract.600 $20. What is the relevant cost of material M for the contract? 3. Since then the purchase price of material M has risen by 4% to $52 per kg.632 PL A B C D E 3. arising from a project A company is evaluating a project that requires two types of material (T and V).000 $20. the machine would have no saleable value and the cost of disposing of it in one year’s time would be $800. The net book value of the machine is $1.400 $40.400 $43. SA M Data relating to the material requirements for the project are as follows: Material type Quantity needed kg 500 400 T V Quantity Original cost of currently quantity in inventory in inventory kg $/kg 100 40 200 55 Current purchase price $/kg 45 52 Current resale price $/kg 44 40 Material T is regularly used by the company in normal production.8 Which of the following best describes the term “relevant cash flow”? A B C D 3.800 $21. It has 100 kg of material M in inventory which were purchased recently.000.200.10 $40.900 $43. ©2014 DeVry/Becker Educational Development Corp.900 A machine owned by a company has been idle for some months but could now be used on a one year contract which is under consideration. including financing cash flows. What is the total relevant cost of materials for the project? A B C D 3. If not used on this contract.9 $20. Material V is no longer in use by the company and has no alternative use within the business. including delivery. SA M 4.385 units 4. the budgeted production volume is 10.  All rights reserved.824 units 10. .2 3.1 Mario operates a small business that makes pizzas and delivers them within a two-mile radius.000 units.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK What is the total relevant cost of the machine to the contract? A B C D $400 $800 $1. The budgeted sales volume for the next year is 256.605 PL What is the breakeven number of pizzas per year for Mario’s business? What is the budgeted breakeven sales volume (to the nearest unit)? A B C D 4. The average price charged is $6·50 per pizza.000 (20 marks) COST VOLUME PROFIT ANALYSIS 4.000. E 4 Mario estimates the annual fixed costs of his business are $40. including salaries of $24.000.154 9.688 units 8. A B C D A division manufacturing a single product which sells for $325 has the following unit cost structure: $ Direct materials 95 Direct labour 78 Variable overheads 56 Share of fixed costs 45 –––– Total cost 274 –––– In the coming period.000 units. The variable cost incurred to make and deliver one pizza is $2·15. What is the margin of safety ratio? A B C D 10 31·79% 34·77% 53·29% 65·23% ©2014 DeVry/Becker Educational Development Corp.000 units per annum.195 18.678 6.000 units Graytun Co has a production capacity of 280.000 units and the break even volume is 167.200 $2.3 1. 100 5. The product has a contribution to sales ratio of 40%.000.000 10.000. The cost of the new employee will be $18.000 PL If Morava wishes to generate a profit of $11. Budgeted fixed costs are $121.000 12.350 7.000 11. 11 .000 per month. Jim will also reduce his C/S ratio) to 30%.250 33.750 ©2014 DeVry/Becker Educational Development Corp.000 expressed in terms of sales value. The budgeted sales volume is 25. What is the planned activity level (in units) for next month? A B C D 3.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 4. E 4. He also wishes to increase the monthly profit by 10%. His total fixed expenses were $25. He is considering employing an extra member of staff as he anticipates an increase in business.800. To stimulate sales.250 43.5 19.000 units per month and the budgeted fixed costs are $250.7 21·66% 25·00% 35·00% 60·00% A company manufactures one product which it sells for $40 per unit.4 Benown Co manufactures a single product which has a variable cost of $17 and currently sells for $30. SA M What percentage increase in sales is needed for Jim to earn the same net profit in the next six months as he earned in the first six months? A B C D 4.000 per annum. the company has a margin of safety of $64.559 32. Budgeted sales and production volumes for the next month are 18. The divisional manager is considering reducing the price to $27 to stimulate sales.250 A B C D 4.000 per month.  All rights reserved. on sales of $120.000 units. His average contribution sales(C/S) ratio for that period was 33%. At the planned level of activity for next month. What volume of sales is required at the new selling price to increase profit by 10%? A B C D Morava Co produces a product which has a variable cost of $28 and a selling price of $39.100 4.6 1. Monthly total fixed costs are $60. how many units must be sold? Jim Bowen has been trading for the last six months as a fast food retailer.000. 9 Four lines representing expected costs and revenue have been drawn on a break-even chart: $ A B C D Output 0 Which line represents total variable cost? A B C D 12 Line A Line B Line C Line D ©2014 DeVry/Becker Educational Development Corp.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 4.000 units and there is an increase in the total fixed costs at 4.000 units. C Variable cost per unit is constant but the selling price per unit increases for sales over 4.000 PL 0 Which one of the following statements is consistent with the above chart? Both selling price per unit and variable cost per unit are constant.000 units. SA M A 4.000 units. D Selling price per unit increases for sales over 4.8 A break-even chart for a company is depicted as follows: $ Sales revenue E Total costs Units 4. .  All rights reserved. B Selling price per unit is constant but variable cost per unit increases for sales over 4. Extracts from the weekly profit S $ 15. E D. based on a traditional absorption costing system: SA M Selling price per unit Variable costs per unit Direct material Direct labour Variable overhead Fixed cost per unit Total product cost Additional information: Time in process A (minutes) D 32 E 28 F 22 10 6 4 9 ––– 29 ––– 8 4 2 6 ––– 20 ––– 6 4 2 6 ––– 18 ––– 20 25 15 Process A time is limited to 2.000 23. E ©2014 DeVry/Becker Educational Development Corp.000 Variable cost of sales 4.000 Fixed costs* 3.000 9.1 A company produces three products.000 ––––– 13. The statement below shows the selling price and product costs per unit for each product.000 9.000 ––––– R. 13 . D. S and T. F F. E and F. in order of priority. what will be the ranking of products.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 4.000 3.000 ––––– 7. S 50%.000 ––––– T $ 20.000 ––––– E * general fixed costs absorbed using a unit absorption rate If the mix of products produced and sold is changed to: R 20%. D.000 ––––– 3. If a traditional contribution approach is used.000 ––––– Profit 3. E.000 3. T 30% what impact would this have on the weighted average contribution to sales ratio? It would be increase It would be decrease It would remain unchanged It cannot be determined without more information PL A B C D (20 marks) 5 LIMITING FACTOR DECISIONS 5. D.500 hours per period.10 A company makes and sells three products.000 ––––– Total $ 45.000 10. F. F E. in order to maximise profit? A B C D D.  All rights reserved. statements are as follows: R $ Sales 10. 3 Economy Standard Premium Deluxe PL A B C D E In order to maximise short term profit which product should NOT be produced? The following statements have been made about outsourcing: (1) (2) Outsourcing an activity always leads to short-term cost savings. insufficient material will be available to manufacture all four products and therefore one product must be discontinued. .4 Statement 2 False True True False Cornaur Products uses a scarce material in the manufacture of four products.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 5. Data in respect of each product is shown below: Per unit Selling price Variable cost Direct labour hours Economy $28 $13 0·17 Standard $32 $16 Premium $37 $20 0·22 Deluxe $40 $22 0·28 0·31 In the coming period. a shortage of direct labour means that Ardvec can only manufacture three products. which product should be discontinued? A B C D 14 Y W S E ©2014 DeVry/Becker Educational Development Corp. Data per unit of each product is shown below: Selling price Variable cost Material input (kgs) Y $38·72 $30·58 W $29·86 $25·56 S $41·17 $34·19 E $31·25 $20·53 1·7 1·5 1·9 1·6 In the next period. Outsourcing an activity normally reduces the risk of under-utilising the resources used in undertaking the activity internally. In order to maximise short-term profit.  All rights reserved. Which of the above statements is true/false? Statement 1 True False True False SA M A B C D 5.2 Ardvec makes four products which sell in roughly equal volume. 5. Material H 125 150 Product X (units) 15 . SA M 5.  All rights reserved.6 Constraints (1) and (2) Constraints (2) and (3) Constraints (1) and (3) Constraint (1) and the x-axis The management accountant has drawn the following graph accurately showing the constraints for materials G and H: Product Y (units) Material G 100 90 0 ©2014 DeVry/Becker Educational Development Corp. At which intersection is contribution maximised? A B C D A company manufactures and sells two products (X and Y) which have contributions per unit of $8 and $20 respectively.800 kg of H are available next period. The company holds no inventory and it can sell all the units produced.000 kg of G and 1.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 5.5 The following graph relates to a linear programming problem: y (1) (2) 0 x E (3) PL The objective is to maximise contribution and the dotted line on the graph depicts this function. Both materials are in short supply. The company aims to maximise profit. There are three constraints which are all of the “less than or equal to” type which are depicted on the graph by the three solid lines labelled (1). (2) and (3). only 1. Two materials (G and H) are used in the manufacture of each product. 000 PL Product L $ per unit Material ($4 per litre) 13 Labour ($7 per hour) 35 Units Maximum monthly demand 6. SA M 5. Product X makes a contribution per unit of $4 and product Y makes a contribution per unit of $1.7 Product Y 90 60 50 0 Each month 50.000 E 5.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK What is the optimal mix of production (in units) for the next period? Product X 0 50 60 125 A B C D A company manufactures two products (L and M) using the same material and labour. . (2) and (3) on the following graph: Product Y 000 units 11 10 9 (3) (2) 8 7 H 6 J 5 4 3 2 1 1 16 (1) K 2 3 4 5 L 6 7 8 9 10 11 12 13 14 Produkt X 000 units ©2014 DeVry/Becker Educational Development Corp. It holds no inventory.000 labour hours are available.  All rights reserved. It holds no inventory. Which one of the following statements is correct? A B C D A company which manufactures and sells two products (X and Y) aims to maximise its profits.8 Material is a limiting factor but labour is not a limiting factor Material is not a limiting factor but labour is a limiting factor Neither material nor labour is a limiting factor Both material and labour are limiting factors Next period the company faces three “less than” production constraints and these are shown as the lines labelled (1).000 litres of material and 60. Information about the variable costs and maximum demands are as follows: Product M $ per unit 19 28 Units 8. 000 units. Total contribution Decrease Increase Increase Decrease PL Revenue Increase Decrease Increase Decrease A B C D E What will be the effect on revenue and total contribution of the change in pricing policy? (18 marks) 6 PRICING 6.  All rights reserved. 150 units of the product per month.9 Point H Point J Point K Point L A manufacturing company prices its product to give a mark-up of 100% on variable cost. Production capacity is 18.27 0. The following per unit information is available: $ $ Selling price 160 Variable cost 80 Fixed overheads 33 –––– Total cost 113 –––– Profit 47 –––– A potential overseas customer has requested a price for an initial order of 3.1 A shopkeeper finds that if he sets the price of a particular product at $9.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Which point represents the optimal solution for the next period? A B C D 5. he sells an average of 110 units per month.42 2.00 per unit he sells.11 SA M A B C D 6. what is the minimum price per unit that should be quoted? A B C D $80 $113 $146 $160 ©2014 DeVry/Becker Educational Development Corp.000 units over the next three months. Assuming that Posquade Co wishes to ensure that short-term profit is not reduced if the enquiry becomes an order. on average.2 Posquade Co produces a single product.40 0.00 per unit. However. Budgeted sales volume for the next three month periods is 50. What is the price elasticity of demand for the product? 0. If the selling price is increased by 50%. 17 . quantity sold is expected to be reduced by 40% but the variable cost per unit is expected to remain unchanged.000 units per month. at a price of $10. If Arbor seeks a 40% margin on sales. what is its price elasticity of demand? A B C D 18 1 only 2 only Neither 1 nor 2 Both 1 and 2 More than one Positive but less than one Zero Between zero and minus one ©2014 DeVry/Becker Educational Development Corp.3 The following statements have been made about pricing policies: (1) A pricing policy which is appropriate when the price sensitivity of demand is unknown. (3) A pricing policy which is likely to encourage competitors to enter the market. (2) A pricing policy which is likely to discourage competitors from entering the market.6 If a 6% fall in price causes a 9% increase in demand for a particular item. what is the selling price of the product? $50·40 $60·00 $67·20 $80·00 SA M A B C D 6.5 The following statements have been made about sales pricing policies: (1) Market skimming will lead to a constant price throughout the product’s life (2) Cost plus pricing will lead to profit being maximised Which of the above statements is/are true? A B C D 6.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 6.  All rights reserved.4 1 and 2 1 and 3 2 and 3 only All three statements E Which of the above statements can apply to market skimming? Arbor uses marginal cost plus pricing. A B C D The cost per unit of a product manufactured by Arbor Co is: Direct material Direct labour Direct overheads Share of fixed costs Total cost $ 12 17 7 12 ––– 48 ––– PL 6. . at which price monthly demand is 4. Selling price ($P) is related to quantity sold (Q) by the following equation: P = 30 – 0.8Q 24 – 800Q ©2014 DeVry/Becker Educational Development Corp.000 4.0002Q If there are no opening or closing inventories.000 units.  All rights reserved. If P denotes selling price in $ and Q monthly demand in thousands of units.000 Total cost $000 500 550 625 725 850 1.00125Q 30 – 1.000 2. (18 marks) 19 .7 A firm sells its product at $20 per unit in order to achieve its objective of maximising profits.000 4.25Q 24 – 0.9 Abel Co currently sells its major product line for $25.000 6.000 3.8 Zero $10 $15 $20 E A B C D At what level of demand is profit maximised? 2.000 Selling price $ per unit 350 300 250 200 150 100 PL 6. which of the following correctly describes the demand curve? A B C D P P P P = = = = 30 – 0. Total cost at various levels of output and the selling price that will achieve these levels of demand are as follows: Production/sales (units) 1. what is the marginal cost of production at the optimum level of output? Edmonds Co has established its cost and demand functions.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 6.000 SA M A B C D 6.000 3.000 5. Market research has suggested that a cut in price of $1 would increase monthly sales by 800 units and that the demand curve is linear.000 5. (2) Using expected value in decision-making can lead to the worst possible outcome being ignored. (3) The reliability of expected value calculations is heavily influenced by the accuracy of the probabilities assigned to outcomes.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 7 RISK AND UNCERTAINTY 7.2 $600 $800 $900 $1. There is uncertainty about the mix of staff that would be available to provide each of the services.  All rights reserved. what fee would be set by the committee? Which of the statements are correct? A B C D 7.3 All three statements 1 and 2 only 1 and 3 only 2 and 3 only The following statements have been made about the use of expected values in decision making: (1) (2) Expected values ignore the risk associated with decisions. High.000 PL Applying the minimax regret criterion.4 20 1 only 2 only Neither 1 nor 2 Both 1 and 2 PT provides expert quality assurance services on a consultancy basis. ©2014 DeVry/Becker Educational Development Corp. The forecast annual cash inflows from membership fees are shown below: $600 Economic conditions: Low Average High 400 440 480 360 405 495 $1. Which of the above statements is/are true? A B C D 7. . As the staff are on different pay scales the mix of staff would affect the variable costs of each service.1 The committee of a new golf club is setting the annual membership fee. Standard or Low fee level. SA M 7. The management of the company is unsure whether to price the services it offers at the Deluxe. The number of members depends on the membership fee charged and economic conditions. Expected values are most useful for recurring rather than one-off events.000 320 380 420 E 360 480 540 Membership Fee $800 $900 A B C D The following statements have been made about expected values: (1) Expected value is of limited use for decisions regarding outcomes which will be repeated often. 000 $810.000 If PT applies the minimax regret criterion.000 $200. 21 .30 400 300 500 Average 0.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) The table below details the annual contribution earned from each of the possible outcomes. Demand for the event may be low.000 $165.000 $150. Staffing mix X Y Z Deluxe $135.000 $0 $480.000 $150. what fee level it will it choose? NG is deciding which of four potential venues should be used to stage an entertainment event.500 Low $120.000 Fee level High Standard $140.000 $300.000 $590.000 $137.500 $160. The management accountant has estimated the contribution that would be earned for each of the possible outcomes and has produced the following regret matrix: Venue Demand Low Medium High PL 7. All of the projects will last for only one year. The forecast net cash flows and their associated probabilities are given below: Market demand Probability Project A Project B Project C Weak 0. What is the maximum amount that FP should pay for the forecast? A B C D $530 $505 $25 $0 ©2014 DeVry/Becker Educational Development Corp.000 $165.50 500 350 450 Good 0.000 $160.000 Deefield $450.6 FP can choose from three mutually exclusive projects.20 600 400 650 FP can commission a forecast that would tell it with certainty what demand conditions will be before the decision is made about which project to invest in.5 Deluxe High Standard Low E A B C D Ayefield $0 $330.  All rights reserved. The net cash flows from the projects will depend on market demand.000 Regret Matrix Beefield Ceefield $200.000 $110.000 $0 If the company applies the minimax regret criterion. which venue would be chosen? Ayefield Beefield Ceefield Deefield SA M A B C D 7.000 $192.000 $180. medium or high depending on weather conditions on the day. costs or revenues B One that is continuously updated by adding a further accounting period when the earliest accounting period has expired C One that is changed in response to changes in the level of activity D One that is changed in response to changes in costs SA M A 8.000.2 The finance function of Bagnall Co has been asked to oversee the production of the company’s budgets for the forthcoming year.7 A company is considering whether to develop and market a new product. If the development is successful the product will be marketed. There is a 30% chance that the marketing will be reasonably successful and the product will make a profit of $150.800 $62.000 PL (14 marks) 8 BUDGETING 8.000 $107.1 Which of the following describes a flexed budget? One that is set prior to the control period and not subsequently changed in response to changes in activity.  All rights reserved.800 $4. In their initial instructions to the company’s various divisions the finance function has stressed that once budgets for next year have been formally agreed steps will be taken to maintain their ongoing relevance by undertaking a monthly review of budgets for forthcoming months in the light of performance in earlier months. A B C D E What is the expected value of the decision to develop and market the product? $154.000 development cost.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 7. These profit and loss amounts take account of the $150.000 and a 20% chance that the marketing will be unsuccessful and the product will make a loss of $80. There is a 50% chance that the marketing will be very successful and the product will make a profit of $250. . Which of the following best describes this approach to budgeting? A B C D 22 Flexible budgeting Incremental budgeting Zero-based budgeting Rolling budgeting ©2014 DeVry/Becker Educational Development Corp. There is a 70% probability that the development will succeed and a 30% probability that the development will be unsuccessful. The cost of developing the product is estimated to be $150.000.000. 072 $4. 23 . 2 and 4 only 2. 2 and 3 only 1.000 Production line set up 42. E 8. C A method of budgeting which recognises the difference between the behaviour of fixed and variable costs with respect to changes in output and is designed to change appropriately with such fluctuations.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) A A method of budgeting where an attempt is made to make each cost heading as close to zero as possible. The company has received an enquiry for an order which requires three set ups and will take 56 machine hours. How much (to the nearest $1) should be included in the cost of the order in respect of maintenance costs? A B C D $804 $1.000 ––––––– Total 193.106 ©2014 DeVry/Becker Educational Development Corp. B A method of budgeting whereby all activities are re-evaluated each time a budget is formulated.  All rights reserved. The budgeted costs of the maintenance section for the current twelve month period have been analysed as follows: $ Routine maintenance 151. 3 and 4 only The budget was prepared on the basis that there will be 720 set ups and that 10. 3 and 4 only 1.000 SA M 8.014 $1.5 1.4 Which of the following definitions best describes Zero-Based Budgeting? The following statements have been made about a flexed budget: (1) (2) (3) (4) It allows managers to plan for alternative contingencies It makes no differentiation between fixed and variable costs It assists in identifying limiting factors It provides useful control information PL 8.3 Which of the above statements are correct? A B C D Amelpa Manufacturing Co manufactures a range of industrial products. D A method of budgeting where the sum of revenues and expenditures in each cost centre must equal zero.080 machine hours will be worked. Fixed costs will increase by $30.000 $352.000 $392.6 Statement 1 Statement 2 PL An annual budget that can be broken down into monthly budgets. What are the budgeted total costs for an output level of 45.000 units.000 ©2014 DeVry/Becker Educational Development Corp.000 $472.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK 8. is called a flexible budget. which differ depending on the number of working days in each month.000? A B C D 24 $454.000 $504. .000 units 30.000 The variable cost per unit will reduce by 5% for output levels above 40.000 for output levels above 38.000 units 35.000 $484.  All rights reserved. The reduced cost per unit will apply to all units.7 Which of the following statements about programme planning and budgeting is correct? A The objective of programme planning and budgeting is to minimise the input resources B Programme planning and budgeting seeks to allocate resources to programmes on the basis of anticipated profitability C Programme planning and budgeting may measure outputs using non-financial measures D Programme planning and budgeting is usually carried out over a short time frame The following statements have been made about different types of budgets: E 8.000 units. Which of the above statements is/are true? Statement 1 True False False True Statement 2 False True False True SA M A B C D (14 marks) 9 QUANTITATIVE ANALYSIS IN BUDGETING 9.000 units Total costs $304. An annual budget set before the start of a year based on estimated sales and production volumes is called a fixed budget.1 The budgeted costs for a company at different levels of output are as follows: Output 24. The variable production cost per unit remains constant in the range 10.615.000 $2. Inflation is ignored.060 Machine hours 7. which occurs when production reaches 15.000 units? A B C D 9.000 2.2 Hightech is a computer hardware repair company.060 The budgeted total cost figures reflect that there is a step-up in the total fixed cost of 15%.000 $2.463 $423.560 2.775.083 $427.000 Using the high-low method to separate total costs into their fixed and variable elements the company has now established that there is a stepped increase in fixed costs of $30.000 190.150 PL 9. Data extracted from the budget for three months is shown below: Month 1 Month 2 Month 3 Total overheads $442.000 to 20. What estimate of total costs should be made for an output of 175.420 7.000 units.500 7.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 9.000 $81.900 Level 2 20.000 The flexed budgets for two levels of activity are as follows: Production (units) Budgeted total cost Level 1 10.5 $2.350 What is the variable overhead cost per labour hour? Demdisc manufactures computer equipment.630.275.000 units.4 $421.000 units.000 185.000 $126.000 $2.  All rights reserved.645. ©2014 DeVry/Becker Educational Development Corp.500 $439. The total overhead costs and labour hours booked to jobs for the last two months have been: April May Total overhead costs $107.3 $33·00 $42·18 $42·57 $43·00 E A B C D What will be the budgeted total overheads for Month 3? A B C D 9.420.980 $101. 25 .450 A company is estimating its costs based on past information.050 Total labour hours 2.000 Total costs $ 2.000 2. SA M The total costs incurred by the company at different levels of output were as follows: Output (units) 160.850 $422.840.000 when output reaches 180. PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK What is the total cost associated with a flexed budget for 16.057 When the budget for the three months to 30 April was prepared.  All rights reserved. If the task needs to be performed 500 times.000 units of production? A B C D 9.720·40 $186.7 Which of the following is an assumption of learning curve theory? A B C D The reduction in unit time will follow a predictable pattern Unit time will decrease at an increasing rate The time required to do a task will vary randomly each time the task is repeated Learning will not be transferred from one worker to the next You have just timed a person doing a job a few times. SA M 9.000 of fixed costs.4150375. A B C D 9.060 $114.220 units.8 minutes ©2014 DeVry/Becker Educational Development Corp.55 minutes.000 units and the budgeted production overhead was $178. (For a learning rate of 75% the value of the index of learning b is -0.9 10% 20% 80% 90% You have determined that a 75 percent learning curve is appropriate for a task.282·40 $231.) The initial timing of the person performing that job was 50 minutes.184 minutes 1.396 $111. how many minutes of work will be required? A B C D 26 3. the second time it took 20 minutes and the third time it took 17.6 $104.379 minutes 636. E Actual production in the three months to 30 April was 21.282·40 PL What is the flexed production overhead budget for the three months to 30 April? Which learning rate should you use? A B C D 9. The first time it took the person 25 minutes.400.720·40 $189.400 $108. with the remainder estimated to vary with the level of production. This included $42. .896 minutes 1.8 $144. the expected level of production was 20. PL A Which of the following best describes “management by exception”? A Using management reports to highlight exceptionally good performance. SA M 10.2 E 10 10. D A standard which is based on current price levels. B A standard which assumes an efficient level of operation. What learning rate should be used if the person took 35 minutes on the second haircut? A B C D 15% 30% 70% 85% (20 marks) BUDGETING AND STANDARD COSTING 10. (2) The difference between the flexed budget profit and the actual profit shows the effect on profit of operating at a level of activity that differs from the expected level. It took 50 minutes.3 Which of the following statements about flexed budgets is/are correct? (1) The flexed budget is prepared at the same level of activity as actual output. B Sending management reports only to those managers who are able to act on the information contained within the reports. D Appointing and promoting only exceptional managers to areas of responsibility within the organisation.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) 9. C A standard which is kept unchanged over a period of time. A B C D 1 only 2 only Neither 1 nor 2 Both 1 and 2 ©2014 DeVry/Becker Educational Development Corp. waste and machine downtime.  All rights reserved.1 What is a basic standard? A standard set at an ideal level. C Focusing management reports on areas which require attention and ignoring those which appear to be performing within acceptable limits. which makes no allowance for normal losses. but which includes allowances for factors such as normal loss. (6 marks) 27 .10 You have just timed a person doing a haircut for the first time. so that favourable results can be built upon to improve future outcomes. waste and machine downtime. 500 + 8.056 –––––– 84.447 24.550 66.400 48.  All rights reserved.270 –––––– ©2014 DeVry/Becker Educational Development Corp.000 18.000 $ 3·88 $ 4·35 $ 4·72 A $ 2·4 1·48 3·88 ––––– 7·76 ––––– B $ 3·6 2·22 4·35 ––––– 10·17 ––––– C $ 4·8 2·96 4·72 ––––– 12·48 ––––– SA M Machine set up costs Machine running costs Procurement costs Delivery costs A $ 11.510 21.850 17.163 –––––– C $ 5.514 12.320 –––––– 195.298 11.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Answer 2 GADGET CO (a) Activity based costing Cost drivers Cost driver 36 production runs (16 + 12 + 8) 32.000/94 = $510·6383 $54.000 54.320/140 = $388 PL Cost pools Machine set up costs Machine running costs Procurement costs Delivery costs Allocation of overheads to each product: B $ 8.640 –––––– 52.550/36 = $737·50 $66.400 48.000 54.900 33.400 + 16.193 –––––– Number of units produced Overhead cost per unit Total cost per unit Materials Labour Overheads 1026 Total $ 26.550 66.000 12.255 18.270 ––––––– $26.400/32.375 14.100 machine hours (7.913 –––––– 15.200) 94 purchase orders (24 + 28 + 42) 140 deliveries (48 + 30 + 62) E Cost per machine set up Cost per machine hour Cost per order Cost per delivery $ 26. .320 ––––––– 195.100 = $2·0685 $48.800 15.624 –––––– 58. if possible. This is particularly significant given that the selling price for product A is $7·50 per unit. Under ABC. being only $0·10. while C looks like it is making a loss under traditional costing. the following observations can be made: Product A PL Product B E The unit cost for product A is 16% higher under ABC as opposed to traditional absorption costing. ABC is therefore very useful in identifying that C is actually more profitable than A. Product C SA M The unit cost for C is 7% lower under ABC when compared to traditional costing. due to the larger number of production runs. ABC does not really identify any areas for concern here. The company needs to look at the efficiency that seems to be achieved with C (low number of production runs less testing) and see whether any changes can be made to A. the number of product tests carried out on C is low relative to its volume. ABS tells a different story. product A is actually making a loss. Of course. under ABC. This leads to a lower apportionment of the machine set up costs to C than would be given under traditional absorption costing. Also. because of the reasons identified above. More importantly. in which case the company may consider whether it wishes to continue to produce A and whether it could sell higher volumes of C. it is apparent that the number of production runs required to produce C is relatively low compared to the volumes produced. it costs $12·48 per unit. it is $7·76 per unit compared to $6·71 under traditional costing. product B is clearly profitable whichever method of overhead allocation is used. machine set up costs are higher for product A than for any of the other products.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) (b) How ABC may improve profitability When comparing the full unit costs for each of the products under absorption costing as compared to ABC. 1027 . to bring it more in line with C. this may not be possible. If the company wants to improve profitability it should look to either increase the selling price of product A or somehow reduce the costs. Since the selling price for B is $12. with 48 deliveries a year being made for product A. the number of production runs needs to be reduced. C is making a loss of $0·42 per unit. The selling price for C is $13 per unit and. This means that when the activities that give rise to the overhead costs for product A are taken into account. The reason for this needs to be identified and. Similarly.  All rights reserved. Maybe the company could seek further efficiencies here. Identifying the reason for the differences in C. Delivery costs are also high. Under traditional absorption costing. The difference between the activity based cost for B as opposed to the traditional cost is quite small. ©2014 DeVry/Becker Educational Development Corp. (3) Increasing regulation by governments means that costs of non-compliance (e. such costs can be significant. As such they need to be managed. Since managers are not aware of them. Many environmental related costs are simply included in general overheads.  Costs incurred to protect the environment such as investing in production processes to reduce pollution.  Costs of cleaning up pollution or contamination caused by activities. they have no information with which to manage them and no incentive to reduce them. as discussed above. 1028 ©2014 DeVry/Becker Educational Development Corp. The following are perhaps the most significant of these: Costs of waste. Weakness of traditional management accounting Traditional management accounting systems do not provide management with enough information about the impact of the organisations environmental costs.g. (2) Environmental costs account for a huge portion of costs for many industrial companies.  Costs of compliance with environmental regulations or voluntary codes. fines) are becoming ever larger. Some such costs may not become payable until operations cease (e.  All rights reserved. However. (a) Meaning of environmental costs Various organisations have come up with different definitions of environmental cost so there is no definitive answer to the question “what is meant by environmental costs. SA M PL E  (b) Why the management of environmental costs is becoming increasingly important There are three main reasons why the management of environmental costs is becoming increasingly important.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Answer 3 ENVIRONMENTAL MANAGEMENT ACCOUNTING Tutorial note: It is highly unlikely that a question in Section B would be devoted entirely to this topic. the term “environmental costs” is taken to mean any costs that have relevance to the environment. such as energy and water. . decontamination of the site on which a nuclear power station stands). This may include employment of compliance officers. Many organisations that have committed environmental crimes have suffered as a result of product boycotts.” In most cases. Many organisations spend huge amounts to publicise their environmental credentials.  Image and relationship costs. (c) (1) Increasing awareness of environmental issues means that organisations are expected to behave in an environmentally friendly way. which have affected their bottom line. Here poor environmental behaviour costs more than good environmental behaviour. The environment is an important political issue.g. and monitoring equipment. particularly wasting scarce resources. so management are not aware of them. This question is provided for revision of this topic and is not representative of an exam question.  Monetary information on environment related costs. flows and destinies of energy. spend too much on energy due to inefficient practices and waste. which can be used to manage environmental costs more effectively. management make decisions that are bad for the environment and bad for the organisation’s profits. Managers can then take steps to reduce the use of the drivers. for example. Environmental management accounting makes managers more aware of the costs of their environmental activities. Answer 4 EDWARD CO – I (a) Target costing process Target costing begins by specifying a product an organisation wishes to sell. whereby information is provided to management to help them to manage the environmental costs and activities. many of which contain much jargon and are not very clear. considering which features customers value and which they do not. This will involve extensive customer analysis. and make decisions. so that the environmental costs are reduced without reducing the output of the organisation. E Management accounting aims to provide detailed information to managers of an organisation. The United Nations Division for Sustainable Development distinguishes between:  Physical information such as the use. they can manage them more effectively. (d) Environmental management accounting As with environmental costs. and reducing the costs of energy. The price at which the product can be sold at is then considered. including waste. SA M Environmental management accounting makes use of management accounting techniques such as activity-based costing (ABC). This will take in to account the competitor products and the market conditions expected at the time that the product would be launched. without becoming too involved in the jargon of the various definitions that have been provided. If they are more aware. thus conserving a scarce resource.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Since traditional management accounts do not provide management with an accurate view of environmental costs. Good energy management would reduce the waste. PL Environmental management accounting does not provide only financial information. ©2014 DeVry/Becker Educational Development Corp. Tutorial note: This solution is not the definitive solution to such a question. Ideally only those features valued by customers will be included in the product design. In ABC. Environmental management accounting is simply an extension of this. Many organisations have provided definitions. and life cycle costing. there is an absence of a clear definition of environmental management accounting. 1029 . the drivers that cause environmental costs to be incurred can be identified. The examiner also stated that she would not set numerical questions on this area. Hence a heavy emphasis is placed on external analysis before any consideration is made of the internal cost of the product. It has been provided to give a “general” view of the issues. for example. The examiner stated that she would not set a whole question on environmental management accounting. Many organisations. As such it is probably longer than the marking scheme would warrant. water and materials. to help them plan and control its activities. Any questions on this area would appear for up to eight marks as part of a 20-mark question. earning and savings.  All rights reserved. This enhances profitability. This gap would have to be closed. Traditionally.  Cost control will begin much earlier in the process. which is often far too late to make a significant impact on a product that is too expensive to make. Traditional approaches (by calculating the cost and then adding a margin to get a selling price) are often far too internally driven. Costs for the product are then calculated and compared to the cost target mentioned above. If it is clear at the design stage that a cost gap exists then more can be done to close it by the design team.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK From the above price a desired margin is deducted. This leaves the cost target. This can be a gross or a net margin. cost control takes place at the “cost incurring” stage. PL E  SA M (b)  (c) It is often argued that target costing reduces the time taken to get a product to market. This is often insufficiently considered in cost plus methodologies. In traditional cost plus systems an organisation may not be fully aware of the constraints in the external environment until after the production has started.  All rights reserved. Target costing has been shown to reduce product cost by between 20% and 40% depending on product and market conditions. tends to help get things right first time and this reduces the time to market. Steps to reduce a cost gap Review radio features Remove features from the radio that add to cost but do not significantly add value to the product when viewed by the customer. Features that are unlikely to be valued by the customer will be excluded. design. Target costing. because it has an early external focus. Businesses have to compete with others (competitors) and an early consideration of this will tend to make them more successful. by some form of cost reduction. Cost reduction at this point is much more difficult as many of the costs are “designed in” to the product. If it appears that this cost cannot be achieved then the difference (shortfall) is called a cost gap. This can be referred to as value engineering or value analysis. assembly and distribution teams to allow discussion of methods to reduce costs.  Only those features that are of value to customers will be included in the product design. An organisation will need to meet this target if their desired margin is to be met. Edward should bring together members of the marketing. Under traditional methodologies there are often lengthy delays whilst a team goes “back to the drawing board”. This should reduce cost but not the achievable selling price. Target costing at an early stage considers carefully the product that is intended. .  Costs per unit are often lower under a target-costing environment. Benefits of adopting target costing The organisation will have an early external focus to its product development. if the desired margin is to be achieved. Open discussion and brainstorming are useful approaches here. 1030 ©2014 DeVry/Becker Educational Development Corp. Team approach Cost reduction works best when a team approach is adopted. ©2014 DeVry/Becker Educational Development Corp. Avoid. Focusing on continuous improvement in production processes may help. smoother workflow and staff incentives could all help here. Components E Edward should look at the significant costs involved in components. 1031 . The profitability of a product can then be assessed taking all costs into consideration. For example. Care would be needed not to damage the perceived value of the product. the questionnaire might ask. to identify areas of likely cost savings. Equally Edward should consider an ABC approach to its overhead allocation. The team can then focus on areas that are identified by staff as being likely cost saving areas. The learning curve may ultimately help to close the cost gap by reducing labour costs per unit. Answer 5 WARGRIN – I (a) Lifecycle costing principles Lifecycle costing is a concept that traces all costs to a product over its complete lifecycle. Better management. The early development costs would have to be seen in the context of the expected trading results. Clearly reducing the percentage of idle time will reduce product costs.  All rights reserved. This is probably very true for Wargrin. It recognises that for many products there are significant costs to be incurred in the early stages of its lifecycle. Automation is increasingly common in assembly and manufacturing and Edward should investigate what is possible here to reduce the costs. from design through to cessation. Efficiency improvements should also be possible by reducing waste or idle time that might exist. Assembly workers PL Productivity gains may be possible by changing working practices or by de-skilling the process. where possible. this may reveal more favourable cost allocations for the digital radio or ideas for reducing costs in the business. possibly with the aid of staff questionnaires.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Review the whole supplier chain Each step in the supply chain should be reviewed. “Are there more than five potential suppliers for this component?” Clearly a “yes” response to this question will mean that there is the potential for tendering or price competition. therefore preventing a serious over spend at this stage or under-pricing at the launch point. New suppliers could be sought or different materials could be used. It is also likely that adopting lifecycle costing would improve decision-making and cost control. Overheads SA M Productivity increases would also help here by spreading fixed overheads over a greater number of units. The design and development of software is a long and complicated process and it is likely that the costs involved would be very significant. non-standard parts in the design.   All rights reserved.000 130. 1032 ©2014 DeVry/Becker Educational Development Corp.000 140. Total cost = fixed cost + variable cost $150. as the game players are likely to become bored of the game and move on to something new.000 of profit over its three-year life measured on a traditional basis.000 40.000 ––––––– Year 3 $ 120.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK (b) Budgeted results for game Sales Variable cost (W1) Fixed cost (W1) Marketing cost Profit Year 1 $ 240.000 80.000 × $5) $150.g.000 ––––––– E On the face of it the game will generate profits in each of its three years of life.000 60.000 profit.000 Fixed cost = $80.000 80. Indeed it shows a positive net profit in each of its years on existence.000 80.000 units in a year). This represents 40% of turnover – ahead of its target. The contribution level is steady at around 83% indicating reasonable control and reliability of the production processes.000 40.000 unit = $5 per unit.000 ––––––– 240. Taking these into consideration. This figure is better than the stated target.4% of sales). Games only have a short lifecycle. .000 –––––– Total $ 840. Wargrin is likely to be relatively happy with the game’s performance.000 280.000 units 4. the game only just broke even.000/4.000 and are ignored in the annual profit calculations. the initial design and development costs were incurred and were significant at $300.000 = fixed cost +$70. Whether this is enough is debatable (e. PL The pattern of sales follows a classic product lifecycle with poor levels of sales towards the end of the life of the game.000 20. making a small $20.000 100.000 –––––– Year 2 $ 480. SA M However.000 units 10. it represents only 2. The Stealth product has generated $320. In order to properly assess the performance of a product the whole lifecycle needs to be considered.000 ––––––– 320.000 –––––– 60.000 20. WORKINGS (1) Split of variable and fixed cost for Stealth High Low Difference Volume 14.000 Variable cost per unit = $20.000 –––––– 20.000 if volume exceeds 15.000 (and $120.000 = fixed cost + (14.000 120. Considering traditional performance management concepts.000 units Cost $ 150. Total fixed cost is therefore $18.000 metres.0 0. By increasing the speed of the bottleneck process the rate of throughput will also increase. Given this. Increase the selling prices.0 Throughput 67.7 25. Answer 7 YAM CO – II (a) Ways in which Yam could improve the TPAR of product F Speed up the bottleneck process.0 1.250. a cost of $2.250.250.500 Pressing Stretching Rolling The bottleneck is clearly the pressing process. Automation might be used or a change in the detailed processes.000 plus the labour cost.000 900.000.0 1. It can be difficult to increase selling prices in what is said to be a competitive market.49 Working* 67÷ 0.4 = 63 Fixed costs per bottleneck hour Total fixed costs are $18.500 900.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Answer 6 YAM CO – I (a) Bottleneck process The total processing hours of the factory is given but can be proven as follows: 18 hours × 5 days × 50 weeks × 50 production lines = 225.8 25.000 hours/0.28 57.000.000 E Product A 450. PL Clearly an alternative approach is simply to look at the original table for processing speed and pick out the slowest process.2 63.0 2. a price increase may be possible given that the business appears to be selling all it can produce.5 57. On the other hand.000/225.0 Throughput per bottleneck hour* 134. ©2014 DeVry/Becker Educational Development Corp.000 processing hours. Using this method the production capacity for all processes is as follows: Product B 450. This is pressing.5 = 134 (1) Product B 60.000 = $90 per hour.  All rights reserved.0 90.2 ÷ 0.5 115. Tutorial note: Full marks would be available for explaining this observation – not merely stating it as the answer. the production capacity for pressing must be 225.000 562.5 ÷ 0.000 Fixed cost per bottleneck hours is $20.0 TPAR 1. Volume of sales could be lost leaving Yam with unsold stock or idle equipment.000.000 hours. generating a greater rate of income for Yam if the extra production can be sold.5 = 115 Product C 27.5 hours per metre = 450.0 Fixed costs per hour (W1) 90.250.500 900. which has a lower capacity for each product. The other processes will probably be slowed to ensure smooth processing.000 Product C 562.000 = $20. Investment in new machinery can also help here but the cost of that would need to be taken into account.0 90.000 + $2. 1033 .000 562. (b) TPAR for each product SA M Product A Selling price 70.000 900. Labour costs $10 per hour for each of the 225.0 Raw materials 3. 000/1. (b) Suggestion to cease the production of product F E Reduce the level of fixed costs.  Lost related sales: if product C is lost will Yam lose customers that bought it along with another product?  The use that could be made of the excess capacity that is created. for stationery) are all possible cost reduction methods.880 = $291·49. total hospital costs will be all the salaries plus the general overheads: $45. producing a product that incurs fixed cost faster than it generates throughput does not seem to make commercial sense. Clearly the TPAR could be improved (using the methods above) before cessation is considered any further. this will be: return per hospital hour/cost per hospital hour.g.  Throughput assumes that all costs except raw materials are fixed. ABC techniques can help to identify the cost drivers and with management these could be used to reduce activity levels and hence cost. However.880 hours. Outsourcing. SA M  Answer 8 THIN CO (a) Throughput accounting ratio (TPAR) TPAR is traditionally defined as: return per factory hour/cost per factory hour.000 + $250. . Yam will have to be careful to protect its quality levels. this may not necessarily be the case and only avoidable fixed costs need to be taken into account for a cessation decision.000 = $548. The fixed costs should be listed and targets for cost reduction be selected.000. all costs except material costs are treated as fixed costs. Since. Metal is available from many sources being far from a unique product. Total hours of bottleneck resource (surgeon’s time) = 40 hours × 47 weeks = 1.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Reduce the material prices.  Customer perception could be negative in that they will see a reduction in choice.000 + $38. PL A TPAR of less than one indicates that the rate at which product F generates throughput (sales revenue less material cost) is less than the rate at which Yam incurs fixed cost.  All rights reserved. 1034 ©2014 DeVry/Becker Educational Development Corp. Given the industry is mature the suppliers of the raw material could be willing to negotiate on price. deskilling or using alternative suppliers (e.000 + $90.000 + $50.000 + $75. cessation decisions involve consideration of many wider issues (only three required). in throughput accounting. Long-term expected net cash flows from the product allowing for the timing of those cash flows (NPV) are an important factor in cessation decisions. Bulk buying increases stock levels and the cost of that would need to be considered. this could have volume or quality based conditions attached. If few fixed costs can be avoided then product C is making a contribution that will be lost if the product ceased. In the context of a hospital. So on a simple level. Reducing material prices will increase the net throughput rate. Therefore cost per hospital hour = $548. Total profit will be: Throughput Less total costs Profit ©2014 DeVry/Becker Educational Development Corp.559·52/$291·49 = 8·78 Throughput per unit (b) E Time on BNR in hours Return per hour ($) TPAR Return per hospital hour Optimum production plan TAR Ranking Number 800 600 504 Hours each 1 0·75 1·25 Total hours 800 450 630 –––––– 1.638·5 1.123.656·1 (548.612·53 2. A $ 8·96 2 B $ 9·11 1 Throughput per hour 2.363.880 –––––– SA M Name B A C PL Limiting factor analysis can be used to determine the optimum production plan.656·1 –––––––––– C $ 8·78 3 The optimum production plan is therefore to perform the maximum number of procedures A and B (600 and 800 respectively) and perform only 504 of procedure C.559·52 Total throughput 2.000) –––––––––– 4.911.654·40 2.520 1.559·52 $2.911.175. then as many of each procedure should be performed as possible. $ 4.000) (45) (5·6) –––––––– 3.  All rights reserved. starting with the most profitable procedure first.199·40 –––––––– 1·25 2.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) Return per hospital hour $ 4.656·1 –––––––––– 1035 .497·6 –––––––––– 4.612.250 Selling price per unit Materials cost: – injection – anaesthetic – dressings (1. Each procedure first needs to be ranked according to its TAR. developing and designing those products are also taken into account.000/300.000 19. Answer 10 SNIFF CO – I Further processing decision Production costs for 1. Note: Other valid benefits would also be awarded marks.600.  All rights reserved.000 × $42) Variable distribution costs (100. rather than just costs relating to one period.000 = $82·30 Benefits of life cycle costing  The visibility of ALL costs is increased.000 × $4 + 200.000 –––––––––– 24.300.  Individual profitability for products is more accurate because of this.000 –––––––––– PL Total costs E R & D costs Product design costs Marketing costs Fixed production costs Fixed distribution costs Fixed selling costs Administration costs Variable manufacturing costs (100. This facilitates performance appraisal and decision-making.950.690.000 × $3 + 200.800 30. and means that prices can be determined with better knowledge of the true costs.000 1.000 1.000 × $3·20) Therefore cost per unit = $24.000 360.000 240. SA M (b)  More accurate feedback can take place when assessing whether new products are a success or a failure.940.000 3.000 12.PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK Answer 9 FIT CO (a) Life cycle cost per unit $ 160.000 hours × $15 Total Cost per litre Sales price per litre Lost contribution per hour of labour used on new products 1036 180.000 ––––––– 229.800 ––––––– 229·80 399·80 ©2014 DeVry/Becker Educational Development Corp.000 940.000 800. This facilitates better decision-making. since the costs of researching.000 litres of the standard perfume Aromatic oils Diluted alcohol $ 10 litres × $18.690. .400.800 ––––––– 199.000 2.000 × $40 + 200.000/litre 990 litres × $20/litre Material cost Labour 2.000 × $4·50) Variable selling costs (100. 040 –––––– $ 319.540 –––––– Net benefit/(cost) 6. Future production decisions are a different matter. If Sniff could exploit this and resolve its current shortage of labour then more contribution could be created.000 Sunk cost 0 Sunk cost 0 –––––– 65. ©2014 DeVry/Becker Educational Development Corp. the prices charged for a one off experimental promotion might be different to the prices that can be secured in the long run.80 Hormone added 202 litre × $750/litre 151. The Female version of the product is not worth further processing in that the extra cost exceeds the extra revenue by $5.500 –––––– Incremental revenues 8 litre × $12.7m (after allowing for labour costs).760 ––––––– 160. In both cases the numbers appear small. It is worth noting that resolving its labour shortage would substantially reduce the labour cost allocated to the hormone added project.040. To put this figure into context: the normal output generates a contribution of $170 per litre and on normal output of about 10. If the product proves popular. 1037 .840 480.  All rights reserved.500 Sunk cost 0 500 hours × $100/hour 50.080.000 ––––––– Female version $ Standard 200 litre × $399.000 hours = $100 per hour.750/litre 15. Incremental costs Hormone Supervisor Labour Fixed cost Market research Total $ 2 litre × $7. Indeed.80/litre 79.960 800 litre × $399.000 litres this represents a monthly contribution of around $1.800) ÷ 2.000 0 0 ––––––– 166.000/litre Sunk cost 700 hours × $100/hour Sunk cost Sunk cost $ 96. however. Equally.000 0 70.REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5) ($399. the benefit of $6.080) ––––––– PL Male version Female version E Male version SA M The Male version of the product is worth further processing in that the extra revenue exceeds the extra cost by $6.800 – $199. Sniff might expect a significant increase in overall volumes.920 ––––––– (5.500 808 litre × $595/litre –––––– Incremental revenue 71.040 may not be enough to persuade management to take the risk of damaging the brand and the reputation of the business. During reading and planning time only the question paper may be annotated.M Specimen Exam applicable from December 2014 Time allowed Reading and planning: Writing: Paper F5 Performance Management PL E Fundamentals Level – Skills Module 15 minutes 3 hours SA This paper is divided into two sections: Section A – ALL TWENTY questions are compulsory and MUST be attempted Section B – ALL FIVE questions are compulsory and MUST be attempted Formulae Sheet is on page 12. Do NOT open this paper until instructed by the supervisor. This question paper must not be removed from the examination hall. The Association of Chartered Certified Accountants . You must NOT write in your answer booklet until instructed by the supervisor. Each question is worth 2 marks.Section A – ALL TWENTY questions are compulsory and MUST be attempted Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question. (2) Ideal standards are short-term targets and useful for day-to-day control purposes. A B C D 2 1 only 2 only Neither 1 nor 2 Both 1 and 2 PL E Which of the above statements is/are true? The following statements have been made about management information systems: (1) They are designed to report on existing operations (2) They have an external focus Which of the above statements is/are true? 3 1 only 2 only Neither 1 nor 2 Both 1 and 2 M A B C D The following statements have been made about zero based budgeting: (1) Employees will focus on eliminating wasteful expenditure (2) Short-term benefits could be emphasised over long-term benefits Which of the above statements is/are true? 1 only 2 only Neither 1 nor 2 Both 1 and 2 SA A B C D 4 The following statements have been made about changing budgetary systems: (1) The costs of implementation may outweigh the benefits (2) Employees will always welcome any new system which improves planning and control within the organisation Which of the above statements is/are true? A B C D 1 only 2 only Neither 1 nor 2 Both 1 and 2 2 . 1 The following statements have been made about different types of standards in standard costing systems: (1) Basic standards provide the best basis for budgeting because they represent an achievable level of productivity. M 7 (i) only (i) and (ii) only (i). Tech World has realised that whenever a new design engineer is employed. A new design engineer has just completed his first job in five hours.250 SA A B C D 8 The following statements have been made about the balanced scorecard: (1) It focuses solely on non-financial performance measures (2) It looks at both internal and external matters concerning the organisation Which of the above statements is/are true? A B C D 1 only 2 only Neither 1 nor 2 Both 1 and 2 3 [P. the learning factor (b) is equal to –0·415.000 16. Sales revenue is $62. there is a learning curve with a 75% learning rate which exists for the first 15 jobs.250 30. . From its past experiences.000 per month. How long would it take the design engineer to complete the sixth job? 6 2·377 hours 1·442 hours 2·564 hours 5 hours PL E A B C D The following are types of management accounting techniques: (i) (ii) (iii) (iv) Flow cost accounting Input/output analysis Life-cycle costing Activity based costing Which of the above techniques could be used by a company to account for its environmental costs? A B C D A company makes a single product which it sells for $2 per unit.000 31. The contribution/sales ratio is 40%. Note: At the learning rate of 75%. (ii) and (iii) only All of the above Fixed costs are $13.5 Tech World is a company which manufactures mobile phone handsets.500.T. What is the margin of safety (in units)? 15.O. SA PL E M Answers . 000/$2 =15.500 Break even sales = $13.500 Margin of safety (sales revenue) = $30. time required to perform the 6th job = 14·262 hours – 12·820 hours = 1·442 hours 6 D 7 A 8 B 9 A M Sales = $62. Y uses 1 kg (5/5)) Labour = 4x + 0·5y ≤ 3. Paper F5 Performance Management Specimen Exam Answers 1 C 2 A 3 D 4 A 5 B PL E Section A Y = axb Average time for six jobs: 5 x 6–0·415 = 2·377 hours Total time required for six jobs = 6 x 2·377 hours = 14·262 hours Average time for five jobs: 5 x 5–0·415 = 2·564 hours Total time required for five jobs = 5 x 2·564 hours = 12·820 hours Time required to perform the 6th job = Total time required for six jobs – total time required for five jobs. Therefore.Fundamentals Level – Skills Module.000/0·4 = $32. Y uses 0·5 hrs (3/6)) 15 .200 (as X uses 3 kgs of material (15/5).000 units.000 Margin of safety (units) $30. SA Return per factory hour = ($130 – $50)/4 hours = $20 Factory costs per hour = $20 + $40/4 = $15 TAR = $20/$15 = 1·33 10 B 11 C 12 A 13 C Contribution for X = $15 ($60 – $45) Contribution for Y = $12 ($25 – $13) Objective function = 15x + 12y Constraints: Material = 3x + y ≤ 4.000 (as X uses 4 labour hrs (24/6). ® .E PL ABOUT BECKER PROFESSIONAL EDUCATION Together with ATC International. visit www.com.becker. Becker Professional Education provides a single destination for candidates and professionals looking to advance their careers and achieve success in: Accounting • International Financial Reporting • Project Management • Continuing Professional Education • Healthcare SA M • For more information on how Becker Professional Education can support you in your career. com ©2014 DeVry/Becker Educational Development Corp. updated where relevant t
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