203 An education authority is considering the implementation of a CCTV (closed circuit in) security system in one of its schools. Details of the proposed project are as Life of project Syears Initial cost $75,000 Annual savings: Labour costs $20,000 Other costs $5,000 NPV at15% $8,800 Calculate the internal rate of return for this project to the nearest 1% 16% 8 18% c 20% D 22%204 205 The following measures have been calculated to appraise a proposed project The internal rate of return is 12% The return on capital employed Is 16% The payback period Is 4 years Which of the following statements is correct? ‘A the payback is less than 5 years so the project should go ahead B the IRRis lower than the return on capital employed so the project should not go ahead C the IRRis greater than the cost of capital so the project should go ahead D The IRR is positive so the project should go ahead CC Company is considering an investment of $300,000 which will earn a contribution of $40,000 each year for 10 years at today’s prices. The company’s cost of capital is 11% per annum. Calculate the net present value of the project. A ($64,440) B $23,556 c $64,440 D $235,560207 JAM Company is about to invest $400.00 in machinery and other capital equipment for a new product venture, Cath flows forthe fie three year are estimated ae follows Year 000 2 20 JH Company requres.a17% return for projet ofthis type. Wht isthe NPV ofthis venture? a $154,670 8 sasc10 $2080 D $154670 208 A company has determined thatthe net present value of an Investment projec is $17,708 ‘when esinga 40% discount rate and $3,347) when using gscount rate of 15%. Caleuiat the intemal ate ofreton ofthe project the nearest 2% A 2% 2 us cas > 16% 209 & company Is considering an investment of $400,000 in new machinery. The machinery is ‘expected to yield incremental profits over the next ve Years as follows: ear Proft(S) 175,000 225,000 123,000 ‘Thereater, no Incremental profits are expected and the machinery willbe sod It company pokey to depredate machinery on a straight ine basis oer thelif ofthe asset. The machinery Is expected to have a value of $50,000 a the end of year. Cale the payback period of the Investment inthis machinery tothe nearest 0.3 your A og years 13years 15 years 1syears 230 Aninterestrate that includes the effect of compounding ie known 2s: simple merest Compound interest ani A Nomina interest © Effective interest211 Which of the following statements are true about IRRs? ()) IRR considers the time value of money (ii) if the IRR exceeds the companies cost of capital the NPV at the company’s cost of capital should be positive (ill) its possible for one investment to have 2 IRRS (only 8 (i) and{(ii) only Ci) and (ii) only D (i, (ian Git)212 A flexible budget is 213 214 A 8 a budget for semi-variable overhead costs only; ‘a budget which, by recognising different cost behaviour patterns, is designed to change as volume of activity changes; ‘a budget for a twelve month period which includes planned revenues, expenses, assets and liabilities; a budget which Is prepared for a rolling period which Is reviewed monthly, and updated accordingly. A purpose of a flexible budget is: A 8 to cap discretionary expenditure to produce a revised forecast by changing the original budget when actual costs are known to control resource efficiency to communicate target activity levels within an organisation by setting a budget in advance of the period to which it relates. A fixed budget is: A B é D a budget for a single level of activity used when the mix of products is fixed in advance of the budget period ‘a budget which ignores inflation an overhead cost budget,a6 Which of the following statements are corteet? (0) fied budget Is a budget that considers ll ofan ongansations costs and revenues for 2 lng love of acti. (i) A flee budget i a budget tat I produced during the budget period to recognise the effects of any changes in ries and methedsof operation that have occurred (i) Organizations can use budgets to communieste objectives to ther manngers. A (hand {ijl 8 G)and(i only © Giyandi only 3 Allotthem ‘The volume variance is the diflerence between the flexible budget and the actual results ‘This statement 8 Fake ‘The following information should be used for questions 217 and 228 Corwald Prose producer and sell textbooks for échoole and colleges. The Following budgeted Information i avaiable forthe yer ending 31 December 20%6, ne Budget Actual Soles (units) 120,000 100,000 000 $000 Ses revenve 1200 995, Variable printing costs 360 280 Variable production overheads 0 56 Fixed production cost 200 290 Fed administration cost 360 364 Pron 0 5 The texed budget shows: Ae prot of $10,000 8 alossof$10,000, © aprott of $100,000 © alossor$100.000 ‘The total expenditure and volume varlances are: Expenditure variance Volumevariance A S15.00favourable $130,000 adverse 8B $95,000 adverse $115,000 favourable © S118,000adverse $95,000 favourable 1D S130}000 adverse $15,000 favourable‘na responsiblity accounting system which ofthe following cots is lens likely to appear on ‘the performance reprt forthe foreman of» production department? Cost of eect labour Rent of machinery Repair to machinery cos of materalsuces In orespensbilty accountng system for which ofthe following should the production line manager beheld responsible? ‘A Raw materi prices and labour wage rates 1B Raw material usage and labour wage rates Raw matral prices and abou hours worked 1D Raw materia usage and labour hours worked STANDARD COSTING m ‘Which of the following techniques weuld be useful for controling costs? (0) Actua versus Rexed budget (W)Varance analysis (uw) Trend of costs anaiss A (hand i) ony 8 Ganda only © yanaqi ony DG.(ipand qa ‘When considering setting standards for costing which of the folowing would NOT be appropriate? A Thenormal level of actity shuld always be used for absorbing overhead B Average prices for materials should be used, encompassing any discounts that are regularly valble _Thelabour rate used ill be the rate at whic labour pa ‘average material usage should be established based on generaivaccepted working practices ‘A company uses standard marginal costing Last month the standard contribution on actual ‘sales was $10,000 an the following variances arose: Total variable costs variance $2,000 a6verse Sales Price variance $500 favourable Sales volume contubution variance $1000 adverse ‘what was the actual contribution for last month? A $7.00 $7,500 ® $8,000 $8,500228 ns ‘A company uses standard marginal costing. Last month, when all sales were at the standard selling price, the standard contribution from actual sales was $50,000 and the following Total variable cost variance $3,500 Adverse Total xed costs variance $1,000 favourable Sales volume contribution variance $2,000 favourable ‘What was the actual contribution for fast month? A $46,500 8 $47,500 © $48,500 D $49,500 ‘The following information relates to labour cost for the past mont udget Labour rate $10 per hour Production time 435,000 hours Time per unit Shours Production units 5,000 units Aetual Wages paid $176,000 Production 5,500 units Total hours worked 24,000 hours There was node time \What were the labour rate and efficiency variances? fate variance ——_efiency variance A $26,000 adverse $25,000 favourable 8 $26,000 adverse $10,000 favourable $3600 adverse $2,500 favourable © $36,000 adverse $25,000 favourable227A company operates a standard marginal costing system. Last month its actual fixed ‘overhead expenditure was 10% above budget resuking In a fied overhead expenditure variance of $36.00, ‘what wasthe actual expendtre on fied verhends nt month? A $324,900 8 $360,000 © $395,000 $40,000 220, Fotthas the following budgeted and actual data: Budgeted ned overhead cast $120,000 Budgeted production (units) 20000 Act fined overhand cost, 3115000 ‘Atul production (unis) 21.000 ‘The ued overhead volume variance A S4soDadvese 8 1s$5,500 favourable © 65500 favouable 1D §$10,500 favourable 229 A.company budgeted to make 30000 units ofa pradutP, Each unit was expected t take ¢ thous to make and budgeted fixed overhead expenditure was $840,00. actual production ‘of produc inthe period wa 32,000 units, which took 123,000 hours to make, ketal hed ‘overhead expenditure was $885,600, ‘what wasthe ned overhead capacity variance forthe period? A $2,000 favourable 5 s2100adverse © $3500 adverse $5600 favounabie 230. QR uses a standard absorption costing system, The folowing detalls have been extracted {tom ts budget or Apel 2047 Production uns) 4800 In Aor 2007 the fixed production overhead cost was under absorbed by $8000 and the xed production averhoadenpendture vance war $2,000 saver,a as Performance standards that have remained unchanged over along period of time are tow ae A estado © baskestandade 1D stanale stands, ‘Standard costing may be inappropriate the modern busines environment becaute quality ismow asimportant, not mere, han pie ‘A company has a higher than expected staff turnover and as a result staff are less ‘Sperencd than expeted [Asan net rest of ths, ae the nbor rate varance and material urge vatace ey to A Favourable Fevoursble Bo Adverse Favourable Adee averse ‘Acompany is oblged to buy sub-standard materials a lower than standard price because nothing eles aval. [As an indirect est of ths purchase, ae the materials usage varace and abou effleney ‘ate ely tobe sere er fv? Motes usage Lobowrefesency Adverse Fvourbis Adverse Aeverse Fowly' tet labour cost det relating t last month were a follows: Stondardlabeurcostofacualhoureweried $116.00, Standard hours worked 30900 Standard ate pe hour st Labourste variance $5300 favourable Laouretoency vance 58/00 frourabeaa 22 23 234 Performance standards that have remained unchanged over a long period of time are known 2 A Ideal standards 8 current standards C_basie standards 1D stainable standards, Standard costing may be inappropriate inthe modern business environment because quality Isnow as important, if not more, than price. “hie statement is A The 8 Fake [A company has a higher than expected staff turnover and as a result staf are less experienced than expected. ‘san indirect result of this, are the labour rate variance and material usage variance likly to be adverse of favourable? Labour rate Material usage A Favourable Favourable 8 Adverse Favourable © Favourable Adverse D Adverse Adverse ‘A company is obliged to buy sub-standard materials at lower than standard price because nothing else is availabe. [As an indirect result ofthis purchase, are the materiale vrage variance and labour efficiency Vatance likely tobe adverse or favourable? Moteriols wsoge Labour effiency A Favourable Favourable 8 Adverse Favourable Favourable Aeverse D Adverse Adverse236 237 el has the following results. 10,080 hours actually worked and paid costing $8,770 If the rate variance is $706 adverse, the efficiency variance $256 favourable, and 5,000 units were produced, what is the standard production time per unit? A 1.95hours, B 1.96hours © 2.07 hours D — .2.08hours ‘An extract from the standard cost card for product Cl is as follows: Direct labour (0.5 hours x $12) $6 710 units of C) were produced in the period and staff worked 378 hours at a total cost of $4,725. Of these hours 20 were lost due to a material shortage. The labour efficiency variance is: A $516 favourable B_ $36 favourable $36 adverse D $516 adverse38 ‘A company makes a single product. The following details are from the cost card for the product: Direct labour 410 hours at $5 per hour Variable overhead 10 hours at $2.50 per hour The actual results for the last period are: 500 units produced Labour 4,800 hours Variable overheads $7,700 The variable overhead expenditure and efficiency variances are: Expenditure Efficiency A $3000 $500 F B $300F $500.8 c $500 $300 F D $500 F $3008239 A company uses standard absorption costing. The following data relate to last month: Budget Actual Sales and production (units) 1,000 900 Stondard Actual $ 8 Selling price per unit 50 52 Total production cost perunit «39. 40 What was the adverse sales volume profit variance last month? A $1,000 8 $1,100 c $1,200 D $1,300 240 A company operates a standard marginal costing system. Last month actual fixed overhead expenditure was 2% below budget and the fixed overhead expenditure variance was $1,250. What was the actual fixed overhead expenditure for last month? A $61,250 8 $62,475 c $62,500240A company operates a standard marginal costing system. Last month actual fixed overhead expenditure was 2% below budget and the fied overhead expenditure variance was $1,250. What was the actual fixed overhead expenditure for last month? A $61,250 8 $62.75 © $62,500 > $63,750 241 Under absorption costing principles a favourable sales volume variance is calculated as the dlference in sales volumes multiplied by A standard contribution er unit 8 Standard cost per unit © Standard proft per unit D Standard selling price per unit 242 Thesales volume variance will be the same whether marginal or absorption costing is used ‘This statement is A Tue 8 False ‘The following information relates to questions 283 and 248 ‘The standard dract material cost for a product $50 per unit (12.5 ke at $4 per ke). Last month the actual amount pald for 45,600 ks of material purchased and used was $173,280 and the direct material usage variance was $25,200 adverse 243 What was the direct material price variance last month? A $8,800 adverse 8 $8,800avourable Cc $9,120a¢verse D $9,120 favourable14 What was the actual production lat month? 5 3,520units © 3,852 units 4,260 units 1245 Anew machine is purchased whichis more expensive, but requires less labour to operate per unit. ‘The impact on the ied overhead variances wil A Adverse Adverse Favourable Favourable Favourable Favourable 246 aR has budgeted to produce 4,000 units in January. Actual production was 3,700 unit with fixed production overheads of $10,300, The standard fined overhead cost per unt wae 3.S hours at $2.40 per hour. 5,800 actual production hours were worked, ‘What was the fixed overhead volume variance? $1,000 favourable $480 favourable $480 adverse $1,000 adverse 1247 Which ofthe folowing could be the cause of an adverse sales volume variance for garden furniture 1) The company offers discounts on sales prices in order to maintain busines. (i) Poor weather leads toa reduction in sales (il) A strike nthe factory causes a shortage of finshed eoods A Gand (only 5 and ij only © Wand ai ontyae 250 asi ‘The following information latest Apri production of product Ck Input materia (ig) 1566 1500 Cont ofmterapurhased andingut $7717 $76.00 ‘hat the mater sae aie? A $2348 fevourble 5 s3366 adverse © $5,782 20,8 2 $5.16 adverse For product DR, the meteral prce variance for the month of August was $1,000 (Favourable) an the material wage variance was $00 (Adverse). ‘The standard material usage ger units 3. an the standard materi price $2 peg. 500 nts wore proguced Inthe poi. Opening inventories of rau materie wore 10D 20 ‘os iventries 40016 Matra purchases inthe period were A Los0kg 8 1380 © 650k > 1350Ke ‘The folloming information lates toa month's production of product CN Budget Actual np of materi a) 1500 4.556 Cos omataralP pureatod sndinput $2500 $25,839 hati the rice sarianes formate #2 A s78Staveurble 8B s320advere © S4so averse D$19720d0ese ‘company wis a starred absorption costing stem Last month budgeted prosction vas '3000 uns and the standard ied production overhead cost was $15 per nit. Actal prodiion ast menth wae 8500 uns andthe actual fed production overhead cst wae $17 eran, a 97500 5 $1000 © 47000 D $2500 (mars)255 Direct labour cost data relating to last month is as follows: Actual hours worked 28,000 Total direct labour cost $117,600 Direct labour rate variance $8,400 adverse Direct labour efficiency variance $3,900 favourable To the nearest thousand hours, what were the standard labour hours for actual production last month? A 31,000 hrs B 29,000 hrs © 27,000 hrs D 25,000 hrs252A company is reviewing atual performance to budget to see where there are diferences The following standard information is relevant Sperunit sling rice 0 Direct materials: 4 Direct labour 16 Fixed production overheads 5 Variable production overheads 20 Fixed sling costs a Variable saling cost 1 Budgeted sates units 3,000 ‘Actual sles units 3,500 \ nat was the favourable sles volume variance using mareinal costing? A $8500 8 $7500 © $7900 $5500 253 A.company uses variance analysis to contro costs and revenues. Information concering sles 35 follows: budgeted cling price $15 per unit Budgeted sales units 30,000 Budgeted proft per unit 35 Actua sles revere $151,500 Actual units sold 9300 What isthe sales volume profit variance? $500 favourable 8 $1,000faveurae © $1000 adverse 1D $3,000 adverse259A government is looking at assessing hospitals by reference to a range ofboth financial and ‘non-financial factors, one of which s survival rates for heart by-pass operation. ‘hich ofthe tree E'sbestdeserbesthe above measure? A eeonomy Esfectveness Etikeney externality 260 Which ofthe following measures would not be appropriate fora cost centre? ost per unt Contibution per nit Comparison of atuallabour cost to budget labour cost Under or over absorption of overheads 261 Agovernments looking at assessing state schools by reference to a range of both Financial and non franca factors, one of whichis average clas sae. [Which ofthe tree E'sbestdesenbesthe above measure? A Geonomy 8 fectwoness © efciency externality 262. Copenhagen isan insurance company. Recently there has been concern that too many ‘quotations have been sent to cents either Ite or containing errs. ‘The department concerned has responded that Its understated, and a high proportion of current staff has recently joined the fr. The performance of this department Is to be carefully monitored ‘Which ONE of the following non-financlal performance indicators would NOT be an appropriate measure to monitor and improve the departments performance? 1A. Percentage of quotations found to contain erors when checked 5 Percentage of quotations not issued within company policy of tree working days © Percentage of department's quota of staff actualy employed Percentage of budgeted number af quotations actually sued