MA2:Managing Costs and Finance
Mock Exam 1:
Question#1:
Budgeted sales of a company’s single product in a period are 20,000 units producing a total contribution
of $180,000 at a selling price of $24 per unit. Fixed costs are $6 per unit based on the budgeted sales
quantity.
What is the budgeted variable cost per unit ?
Question#2:
Holding costs are included in the Economic Order Quantity formula.
Which of the following are examples of holding costs?
(1) Warehouse rent
(2) Interest on inventory investment
(3) Carriage inwards
(4) Inventory theft
A. 1 and 2 only
B. 1 and 3 only
C. 3 and 4
D. 1,2 and 4
Question#3:
Cost for Job 123 are as follows:
Direct materials $460
Direct labour $600
Overheads 120% of direct labour cost
A profit margin of 20% of selling price is required.
What is the selling price of Job 123?
A. $2,975
B. $2,136
C. $2,225
D. $2,856
Question#4:
A single-product business has the following results for a period:
$
Sales revenue 268,000 (at $25 per unit)
Less: Variable costs (139,360)
Contribution 128,640
Less:Fixed costs 87,480
Net profit 41,160
What is the break-even point in units?
A. 8,645
B. 9,074
C. 3,499
D. 7,290
Question#5:
A company uses time series analysis and the additive model when preparing its cash budgets.
(1) The latest trend figure for sales calculated for January 20X1 was $2,135,000
(2) On average the trend is increasing by $17,000 each month.
Page 1
,(3) Season variations are estimated to be:
(4) February -$162,000, March +135,000 and April +$181,000
What should the company’s budgeted sales figure be for April?
A. $2,340,000
B. $2,289,000
C. $2,367,000
D. $2,186,000
Question#6:
Which of the following would MOST likely be a responsibility of a trainee accountant?
A. Approving employee recruitment
B. Authorising a contract for a new computerized accounting system
C. Deciding on procedures for the authorization of invoices
D. Producing a schedule of budgeted and actual costs to calculate variances.
Question#7:
Which form of communication would be MOST appropriate to send to a customer who regularly fails
to meet agreed payment dates?
A. Memo
B. Note
C. Report
D. Letter
Question#8:
Which of the following could be the cause of a favourable material cost variance?
A. Inefficient use of materials
B. Purchase of higher priced materials of standard quality
C. Use of a higher grade of labour
D. Use of untrained labour
Question#9:
In which of the following industries would process costing be appropriate?
A. Manufacturing components
B. Fitting bathrooms
C. Building offices
D. Manufacturing chemicals
Question#10:
Which of the following are likely characteristics of the working capital cycle of a large retailing
business such as a supermarket chain?
(1) Receipts of cash are likely to precede payments
(2) Most cash income is received at the time of sales
(3) The majority of sales will be on credit
A. 1 and 2 only
B. 1 and 3 only
C. 2 only
D. 1,2 and 3
Question#11:
Cash budgets and forecasts can provide an early warning of liquidity problems by estimating which of
the following?
(1) How much cash is required
(2) The cost of borrowing any funds
(3) When cash is likely to be required
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, (4) How long cash is likely to be required for
A. 1,2,3 and 4
B. 1 and 2 only
C. 1,3 and 4 only
D. 3 and 4 only
Question#12:
Which TWO of the following are relevant in capital investment decision-making using discounted cash
flow methods of appraisal?
A. Timing of future cash flows
B. Cost of capital
C. Annual depreciation
D. Sunk costs
Question#13:
The gross wages of the direct operatives in a production cost centre for a period are analysed as follows:
Direct operatives
$
Productive hours at basic rate 37,640
Overtime premium 2,440
Idle time 590
Group bonuses 3,130
How much of the gross wages would normally be accounted for as direct labour ?
Question#14:
Machine parts are assembled in a factory. One of the components used in assembling machine part MP7
is component C6.
Which one of the following is an example of a cost unit in the factory?
A. The cost per unit of machine part MP7
B. The cost per unit of component C6
C. A unit of machine part MP7
D. A unit of component C6
Question#15:
The standard time for the production of unit of product X is 15 minutes. 2,600 units of the product were
manufactured. This was 200 units more than budget.630 hours were worked.
What was the efficiency ratio?
A. 105.0
B. 103.2%
C. 96.9%
D. 108.3%
Question#16:
Which of the following is an advantage of absorption costing?
A. Helps managers understand the impact of volume on costs and profits.
B. Appropriate for short-term decision-making.
C. Inventory valuation considers all necessary production costs.
D. Ignores fixed costs.
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Mock Exam 1:
Question#1:
Budgeted sales of a company’s single product in a period are 20,000 units producing a total contribution
of $180,000 at a selling price of $24 per unit. Fixed costs are $6 per unit based on the budgeted sales
quantity.
What is the budgeted variable cost per unit ?
Question#2:
Holding costs are included in the Economic Order Quantity formula.
Which of the following are examples of holding costs?
(1) Warehouse rent
(2) Interest on inventory investment
(3) Carriage inwards
(4) Inventory theft
A. 1 and 2 only
B. 1 and 3 only
C. 3 and 4
D. 1,2 and 4
Question#3:
Cost for Job 123 are as follows:
Direct materials $460
Direct labour $600
Overheads 120% of direct labour cost
A profit margin of 20% of selling price is required.
What is the selling price of Job 123?
A. $2,975
B. $2,136
C. $2,225
D. $2,856
Question#4:
A single-product business has the following results for a period:
$
Sales revenue 268,000 (at $25 per unit)
Less: Variable costs (139,360)
Contribution 128,640
Less:Fixed costs 87,480
Net profit 41,160
What is the break-even point in units?
A. 8,645
B. 9,074
C. 3,499
D. 7,290
Question#5:
A company uses time series analysis and the additive model when preparing its cash budgets.
(1) The latest trend figure for sales calculated for January 20X1 was $2,135,000
(2) On average the trend is increasing by $17,000 each month.
Page 1
,(3) Season variations are estimated to be:
(4) February -$162,000, March +135,000 and April +$181,000
What should the company’s budgeted sales figure be for April?
A. $2,340,000
B. $2,289,000
C. $2,367,000
D. $2,186,000
Question#6:
Which of the following would MOST likely be a responsibility of a trainee accountant?
A. Approving employee recruitment
B. Authorising a contract for a new computerized accounting system
C. Deciding on procedures for the authorization of invoices
D. Producing a schedule of budgeted and actual costs to calculate variances.
Question#7:
Which form of communication would be MOST appropriate to send to a customer who regularly fails
to meet agreed payment dates?
A. Memo
B. Note
C. Report
D. Letter
Question#8:
Which of the following could be the cause of a favourable material cost variance?
A. Inefficient use of materials
B. Purchase of higher priced materials of standard quality
C. Use of a higher grade of labour
D. Use of untrained labour
Question#9:
In which of the following industries would process costing be appropriate?
A. Manufacturing components
B. Fitting bathrooms
C. Building offices
D. Manufacturing chemicals
Question#10:
Which of the following are likely characteristics of the working capital cycle of a large retailing
business such as a supermarket chain?
(1) Receipts of cash are likely to precede payments
(2) Most cash income is received at the time of sales
(3) The majority of sales will be on credit
A. 1 and 2 only
B. 1 and 3 only
C. 2 only
D. 1,2 and 3
Question#11:
Cash budgets and forecasts can provide an early warning of liquidity problems by estimating which of
the following?
(1) How much cash is required
(2) The cost of borrowing any funds
(3) When cash is likely to be required
Page 2
, (4) How long cash is likely to be required for
A. 1,2,3 and 4
B. 1 and 2 only
C. 1,3 and 4 only
D. 3 and 4 only
Question#12:
Which TWO of the following are relevant in capital investment decision-making using discounted cash
flow methods of appraisal?
A. Timing of future cash flows
B. Cost of capital
C. Annual depreciation
D. Sunk costs
Question#13:
The gross wages of the direct operatives in a production cost centre for a period are analysed as follows:
Direct operatives
$
Productive hours at basic rate 37,640
Overtime premium 2,440
Idle time 590
Group bonuses 3,130
How much of the gross wages would normally be accounted for as direct labour ?
Question#14:
Machine parts are assembled in a factory. One of the components used in assembling machine part MP7
is component C6.
Which one of the following is an example of a cost unit in the factory?
A. The cost per unit of machine part MP7
B. The cost per unit of component C6
C. A unit of machine part MP7
D. A unit of component C6
Question#15:
The standard time for the production of unit of product X is 15 minutes. 2,600 units of the product were
manufactured. This was 200 units more than budget.630 hours were worked.
What was the efficiency ratio?
A. 105.0
B. 103.2%
C. 96.9%
D. 108.3%
Question#16:
Which of the following is an advantage of absorption costing?
A. Helps managers understand the impact of volume on costs and profits.
B. Appropriate for short-term decision-making.
C. Inventory valuation considers all necessary production costs.
D. Ignores fixed costs.
Page 3
