1. Q16-1: Zero based budgeting is a technique where a department: (Points : 3)
A. is required to make a case for its budget as if its activities were new
B. a budget after taking into account current expenditure and an allowance for the next
period’s expenditure
C. prepares budgets on the basis of no increase in unit costs from the previous period.
D. difference between budget and actual results will be zero Question 2. 2. Q16-2: A company’s annual sales budget is for 120,000 units, spread equally
through the year. It needs to have one and three quarter’s month stock at the end of each month.
If opening stock is 12,000 units, the number of units to be produced in the first month of the
budget year is: (Points : 3)
A. 10,500
B. 12,000
C. 13,000
D. 15,500 Question 3. 3. Q16-3: The standard costs for a manufacturing business are £12 per unit for
direct materials, £8 per unit for direct labour and £5 per unit for manufacturing overhead. The
sales projection is for 5,000 units, 3,500 units need to be in stock at the end of the period and
1,500 units are in stock at the beginning of the period. The production budget will show costs
for that period of: (Points : 4)
A. £175,000
B. £150,000
C. £140,000
D. £125,000 Question 4. 4. Q16-4: Receivable increase by £15,000 and payables increase by £11,000. The
effect on cash flow of the Statement of Cash Flow is a (an): (Points : 4)
A. increase of £26,000
B. increase of £4,000
C. decrease of £4,000
D. decrease of £26,000 Question 5. 5. Q16-5: Randy Airplanes Ltd is a privately owned business. It has budgeted for
profits (after deducting depreciation of £41,000) of £150,000. Debtors are expected to increase
by £20,000, inventory is planned to increase by £5,000 and creditors should increase by £8,000.
Capital expenditure is planned of £50,000, income tax of £35,000 has to be paid and loan
repayments are due totaling £25,000. What is the forecast cash position of Randy’s at the end of
the budget year, assuming a current bank overdraft of £15,000? (Points : 4)
A. 18,000
B. 52,000 C. 66,000
D. 49,000
E. None of the above Question 6. 6. Q 17-1: The method of adjusting the budget to reflect the actual volume of sales
is called (Points : 4)
A. activity-based budgeting
B. flexible budgeting
C. programme budgeting
D. incremental budgeting Question 7. 7. Q17-2: A company has budgeted for materials of £170,000 but the actual costs
are £164,000. The company has also budgeted for labor of £130,000 with actual costs being
£133,000. The expense variance is:
@
Budget for the
year to date Actual for the
year to date Variance Materials 170,000 164,000 6,000 Fav Labor 130,000 133,000 3,000 Adv Total 300,000 297,000 3,000 Fav A.
B.
C.
D. £3,000 adverse
£3,000 favorable
£6,000 adverse
£6,000 favorable Question 8. 8. Q17-3a: Higher prices from material suppliers will be reflected in the: (Points :
3)
A. material price variance
B. material usage variance
C. labor rate variance
D. labor efficiency variance Question 9. 9. Q17-3b: Poor quality materials that require greater skill to work will be reflected in the (Points : 3)
A. material price variance
B. material usage variance
C. labor rate variance
D. labor efficiency variance Question 10. 10. Q18-1: A concern with recognizing all the costs of a product or service from
the design stage through to its abandonment can be described as a process of: (Points : 4)
A. Kaizen costing
B. target costing
C. throughput costing
D. life cycle costing Question 11. 11. Q18-2: Trans PLC estimates that a new product will sell in sufficient quantities
to justify its manufacture at a selling price of £175. The company needs to invest £5 million to
produce a quantity of 10,000 of these new products per year and requires a return on that
investment of 12% per annum. The current prediction is that the product will cost £140 to
manufacture. To achieve the target selling price and target rate of return, the product needs to be
re-engineered to reduce its cost of manufacture by: (Points : 4)
A. £35
B. £25
C. £60
D. £40 Question 12. 12. Q18-3: SkinTan’s top five customers generate sales revenue of £950,000 per
annum. Each generates a different gross margin as a consequence of price negotiations that
have been carried out over several years. Because of their location, each customer incurs
different distribution expenses. Sales commissions are paid at the rate of 6% on all sales. Fixed
costs are customer specific, covering salaries of sales and office staff who service each
customer. The following table shows the information for each of the top customers for the
previous year.
250,000 250,000 200,000 150,000 Sales
Gross margin % 30% 25% 21% 37% Distribution expenses 30,000 14,000 25,000 12,000 Fixed costs 30,000 25,000 16,000 15,000 Carry out a customer profitability analysis in relation to SkinTan’s top customers. Then match
the customer with the profitability.
(Points : 10)
Potential Matches:
1 : 19,500
2 : -11,000
3 : 17,000
4 : 8,500
5:0
Answer
___: Customer A
___: Customer B
___: Customer C
___: Customer D
___: Customer E
