Paper F2

ACCA

Management
Accounting

Mock Exam 2

Questions
(Duration: 3 hours)
LSAM
 Mock Exam - 2 (Questions)

FORMULAE SHEET

Linear regression

n ¦ xy - ¦ x ¦ y
r=
[n ¦ x 2 - (¦ x)2 ] [n ¦ y 2 - (¦ y)2 ]

If y = a + bx,

n ¦ xy - ¦ x ¦ y and a = ¦ y ¦x
b= -b
n ¦ x 2 - (¦ x)2 n n

Economic order quantity

2COD
Economic order quantity =
CH

2COD
Economic batch quantity =
§ D·
C H ¨1- ¸
© R¹

LondonSAM 1 F2 - Management Accounting

 Mock Exam - 2 (Questions)

ALL 50 questions are compulsory and MUST be attempted

QUESTION 1
The following details are available for a company:

Budgeted Actual
Expenditure £176,400 £250,400
Machine hours 4,000 5,000
Labour hours 3,600 5,400

If the company absorbs overheads using labour hours, then, during the period, overheads
were:

A Under-absorbed by £29,900
B Under-absorbed by £14,200
C Over-absorbed by £14,200
D Over-absorbed by £64,990 (2 marks)

QUESTION 2
A company uses process costing in calculating output cost. The following details are available
for a particular department in December 20X8. All materials are added at the start of the
process:

Opening Work in Progress Nil Units

Units started 10,000 units
Closing Work-in-Progress 1,000 units
100% complete for materials
75% complete for conversion
Normal loss 200 units
Units completed 8,000 units

If all losses occur at the start of the process, how many equivalent units should be included
for materials?

A 7,750
B 8,750
C 8,800
D 9,800 (2 marks)

QUESTION 3
A principal budget factor is a factor common to all functions in budget preparation.

A True
B False
(1 mark)

LondonSAM 2 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 4
The management of a company is making a decision which could lead to just three possible
outcomes – ‘high’, ‘medium’ and ‘low’ levels of demand. Profit and expected value information
are as follows:

Outcome Profit Profit x Probability

High $29,000.00 $7,250.00
Medium $20,000.00 $8,000.00
Low $12,000.00 $4,200.00

What is the most likely level of profit from making the decision?

A $19,450
B $20,000
C $20,333
D $29,000 (2 marks)

QUESTION 5
A sunk cost is a relevant cost.

Is this statement true or false?

A True
B False (1 mark)

QUESTION 6
The following data is available for a company in period 2.

Actual overheads $225,900

Actual machine hours 7,530
Budgeted overheads $216,000

Based on the data above and assuming that the budgeted overhead absorption rate was $32
per hour, the number of machine hours (to the nearest hour) that were budgeted to be worked
were:

A 7,059
B 6,750
C 6,900
D 7,000 (2 marks)

QUESTION 7
Overhead absorption is a means of attributing total costs to a cost unit.

A True
B False (1 mark)

LondonSAM 3 F2 - Management Accounting

 Mock Exam - 2 (Questions)

The following information relates to questions 8 and 9.

Sales revenue

Total costs
Cost
and
revenue
in $

Output

Budgeted sales

QUESTION 8
This graph is known as:

A conventional breakeven chart

B contribution breakeven chart
C semi-variable cost chart
D profit volume chart (2 marks)

QUESTION 9
What does X represent?

A The margin of safety

B The profit margin (1 mark)

LondonSAM 4 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 10
A manufacturing company uses 28,000 components at an even rate during the year. Each
order placed with the supplier of the components is for 1,600 components, which is the
Economic Order Quantity. The company holds a buffer inventory of 800 components. The
annual cost of holding one component in inventory is €3.50.

What is the Annual Cost of holding inventory of the component?

A €2,800
B €4,200
C €5,600
D €5,700 (2 marks)

The following information relates to Questions 11 and 12.

The following data relates to work at a manufacturing company:

Normal working week 36 hours

Basic rate of pay (direct) $6.20 per hour
Overtime pay $7.50 per hour

Last week, the total hours worked by all these workers was 936. The overtime hours worked
was 108. All employees worked at least their basic 36 hours.

QUESTION 11
The number of workers who worked last week:

A was 23
B was 26
C was 29
D cannot be determined from the above data (2 marks)

QUESTION 12
The total direct labour charge for the above was:

A $810.00
B $5,133.60
C $5,803.20
D $6,210.00 (2 marks)

LondonSAM 5 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 13
A manufacturer of children’s toys wishes to increase his C/S (contribution/sales) ratio. Which
of the following is likely to achieve this aim?

(i) taking advantage of quantity discounts for bulk purchases of inputs

(ii) introducing training programmes designed to improve labour efficiency
(iii) following the actions of a competitor who has cut prices substantially
(iv) reducing exports to countries where there is intense price competition
(v) offering retailers a lower price if they promote the product more heavily

A (ii), (iii) and (v)

B (i), (ii) and (iv)
C (i), (iii) and (iv)
D (ii), (iv) and (v) (2 marks)

QUESTION 14
Service costing is characterised by high levels of indirect costs as a proportion of total costs
and the use of composite cost units.

A True
B False (1 mark)

QUESTION 15
A Company has four departments – Assembly, Finishing, Maintenance and Administration.

Budgeted data for each department is shown below:

Assembly Finishing Maintenance

Allocated overheads $90,000 $100,000 $10,000
Direct labour hours 5,000 6,000 Nil
Machine hours 10,000 3,000 2,000
Percentage of time spent 60 40 Nil
maintaining machinery
Number of staff 60 120 10

The most appropriate production overhead absorption rate to use in the Assembly department
would be:

A ǧ9.60 per machine hour

B ǧ9.90 per machine hour
C ǧ17.33 per labour hour
D ǧ18.33 per labour hour (2 marks)

LondonSAM 6 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 16
Products A and B are manufactured in a joint process. The following data is available for a
period:

Joint process costs $30,000

Output: Product A 2,000 kg
Product B 4,000 kg
Selling price: Product A $12 per kg
Product B $18 per kg

What is Product B’s share of the joint process costs if the sales value method of cost
apportionment is used?

A 7,500
B 18,000
C 20,000
D 22,500 (2 marks)

The following data relates to Questions 17 and 18.

Budgeted production details for November are as follows:

Product X Product Y Product Z

Units produced 2,000 1,600 2,200
Units sold 1,800 1,500 2,000
Variable cost/unit 100 80 120
Fixed overhead absorbed/unit 30 30 50
No. of labour hours 6 4.5 5

There was no opening stock at the beginning of November

QUESTION 17
Budgeted fixed overheads for November were:

A $810,000
B $739,000
C $218,000
D $199,000 (2 marks)

QUESTION 18
Which of the following statements is true?

A Absorption costing profit will be $19,000 lower than marginal costing profit
B Absorption costing profit will be $71,000 lower than marginal costing profit
C Absorption costing profit will be $19,000 higher than marginal costing profit
D Absorption costing profit will be $71,000 higher than marginal costing profit (2 marks)

LondonSAM 7 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 19
The total costs incurred at various output levels in a factory have been measured as follows:

Output in units Total cost

25 £5,500
30 £5,450
33 £5,550
44 £6,000
48 £6,500
52 £7,000

The variable cost per unit and the Total Fixed Costs are (rounded figures):

A Variable Cost £50 per unit, Fixed costs £4,000

B Variable Cost £53 per unit, Fixed costs £4,000
C Variable Cost £56 per unit, Fixed costs £4,111
D Variable Cost £59 per unit, Fixed costs £4,111 (2 marks)

QUESTION 20
A company makes a product that uses two materials. Standard cost information is given
below:

Material A: 2 kg u $7
Material B: 3 litres u $11

In a period 1,300 units were made, and the following actual results were recorded:

Material A: 2,600 kg were bought at a cost of $18,400 and 2,400 kg were used
Material B: 3,900 litres were bought at a cost of $38,800 and 4,000 litres were used.

The company maintains its stocks at standard cost.

What was the total price variance reported in the period?

A 4,300 (F)
B 3,600 (F)
C 3,900 (F)
D 3,600 (A) (2 marks)

LondonSAM 8 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 21
Regression analysis is being used to find the line of best fit (y=a + bx) from eleven pairs of
data. The calculations have produced the following information:

™x 440
™y 330
™x2 17,986
™y2 10,366
™xy 13,467

And b = 0.69171

What the value of ‘a’ in the equation for the line of best fit?

A 0.63
B 0.69
C 2.33
D 5.33 (1 mark)

QUESTION 22
Which of the following statements IS true when applied to fixed costs:

A overhead costs are always fixed costs

B as production levels increase, fixed cost per unit decreases
C fixed costs are always irrelevant in a decision making situation
D as the level of activity changes, fixed costs will also change (2 marks)

QUESTION 23
A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total
labour cost budgeted for the job is $36,300, what is the labour cost per hour (to the nearest
penny)?

A $8.25
B $8.80
C $11.00
D $13.75 (2 marks)

QUESTION 24
Which of the following statement about variable costs is correct?

Variable costs are conventionally deemed to:

A be constant per unit of output

B vary per unit of output as production volume changes
C vary in total when production volume is constant
D vary, in total, from period to period when production is constant (2 marks)

LondonSAM 9 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 25
The cost card of an electronic component made by DEL Ltd is:

$
Direct labour 2.00
Direct materials 22.50
Variable overheads 2.50
Fixed overheads 3.00

The price is set to give a profit margin of 25%.

The price should be:

A $33.75
B $36
C $37.50
D $40 (2 marks)

LondonSAM 10 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 26
Four vertical lines have been labelled A, B, C, D at different levels of activity on the following
profit-volume chart:

Which line represents the total contribution at that level of activity?

A Line A
B Line B
C Line C
D Line D (2 marks)

QUESTION 27
D Ltd operates a total absorption costing system. Budgeted fixed overheads for 2007 were
$175,000 and budgeted production was 5,000 units.

During 2007, the actual fixed overheads amounted to $186,000 and actual production was
6,000 units. Overheads have been:

A under-absorbed by $24,000
B under-absorbed by $11,000
C over-absorbed by $11,000
D over-absorbed by $24,000 (2 marks)

LondonSAM 11 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 28
A continuous budget is prepared retrospectively.

Is this statement true or false?

A True
B False (1 mark)

QUESTION 29
Below is the standard cost card for one unit of product K.
$/unit
Selling price 35
Direct materials 20
Direct labour 4
Variable overhead 1
Fixed overhead 6

Production was 50,000 units and sales 60,000 units. Opening stock was 25,000 units. The
profit calculated using marginal costing was $180,000. The profit using absorption costing is:

A $30,000
B $120,000
C $210,000
D $240,000 (2 marks)

QUESTION 30
Direct costs are costs that:

A can be directly identified with a product or service

B are directly under the control of a manager
C are incurred directly the factory is opened
D are directly charged to a department (1 mark)

QUESTION 31
A firm has some material which originally cost $49,000. It has a scrap value of $12,500, but, if
re-worked at a cost of $7,500, it could be sold for $17,500. There is no other foreseen use for
the material.

The relevant cost of using the material for a special job is :

A Nil
B $12,500
C $17,500
D $20,000 (2 marks)

LondonSAM 12 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 32
Caz is considering its options with regard to a piece of machinery which cost $150,000 six
years ago. The current replacement cost of that particular machine is $250,000.

Selling the piece of machinery would generate scrap sales of $160,000. Keeping the machine
in-house would generate a net income of $175,000.

The relevant cost of the machine is:

A $150,000
B $160,000
C $175,000
D $250,000 (2 marks)

QUESTION 33
A centre which is responsible for managing both costs and revenues is best described as:

A Revenue centre
B Investment centre
C Profit centre (1 mark)

QUESTION 34
An industrial bakery manufactures two products, the Brioche and the Croissant, in batches. It
uses the same material and labour for both products, and holds no stock. You are given the
following information:

Brioche Croissant
€ per batch € per batch
Material €4 per litre 13 19
Labour €7 per hour 35 28
Maximum monthly demand 6,000 8,000

Each month, 55,000 litres of material and 58,000 labour hours are available.

Which of the following statements is correct?

A Material is a limiting factor, but labour is not a limiting factor

B Material is not a limiting factor, but labour is a limiting factor
C Neither material nor labour is a limiting factor
D Both material and labour are limiting factors (2 marks)

LondonSAM 13 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 35
Luke Ltd makes a single product which it sells for $100.00 per unit, on a contribution to sales
ratio of 25%. It has fixed costs of $30,000 per month.

What is its breakeven sales revenue?

A $120,000
B $125,000
C $130,000
D $135,000 (2 marks)

QUESTION 36
The use of composite cost units is a characteristic of service costing.

A True
B False (1 mark)

QUESTION 37
Which of these statements regarding expected values is correct?

A Expected values can be used to calculate the correlation coefficient

B An expected value is a long run average
C The project with the largest negative expected value will give you the best return
D The project with the lowest expected value should be chosen (2 marks)

QUESTION 38
Using data from 40 counties in England and Wales, it has been calculated that the correlation
between the level of trampoline ownership and the number of neck injuries is 0.75. Which of
the statements shown follow this?

(i) High levels of trampoline ownership in a given county cause high levels of neck
injuries.

(ii) There is a strong relationship between the level of trampoline ownership and the
number of neck injuries.

(iii) 56% of the variation in the level of neck injuries from one county to the next can be
explained by the corresponding variation in the level of trampoline ownership.

(iv) 75% of the variation in the level of neck injuries from one county to the next can be
explained by the corresponding variation in the level of trampoline ownership.

A (i) and (ii) only

B (i) and (iii) only
C (ii) and (iii) only
D (ii) and (iv) only (2 marks)

LondonSAM 14 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 39
K Ltd has published the following profit-volume chart:

The contribution at level of activity L can be identified as:

A A
B B
C C
D D (2 marks)

QUESTION 40
The Widget has a standard labour time of two hours per unit. The standard labour rate is $6
per hour. During one particular month 5,000 units were produced. The actual labour cost was
$52,525 for 9,550 hours worked.

The labour rate variance is:

A $4,775 A
B $4,775 F
C $7,475 F
D $7,475 A (2 marks)

LondonSAM 15 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 41
A company produces two types of Garden sheds, the Traditional and the Modern, which
require 10 and 16 labour hours respectively. The budgeted data for the next period is as
follows:

Traditional Modern
Sales 7,500 12,000
Opening inventory of finished goods 1,800 2,400

Closing inventory of finished goods are expected to be reduced by 50%.

What are the total budgeted labour hours for the next period?

A 295,200
B 267,000
C 238,800
D 210,600 (2 marks)

QUESTION 42
The following statements refer to spreadsheets:

(1) Spreadsheets can used for budgeting.

(2) Spreadsheets are very useful for word-processing.
(3) Spreadsheets make the manipulation of data easier and quicker.

Which of these statements are correct?

A (1) and (2)

B (1) and (3)
C (2) and (3)
D (1), (2) and (3) (2 marks)

QUESTION 43
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
variances arose:

Total variable costs variance $3,500 adverse

Total fixed costs variance $1,000 favourable
Sales volume contribution variance $2,000 favourable

What was the actual contribution for last month?

A $46,500
B $47,500
C $48,500
D $49,500 (2 marks)

LondonSAM 16 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 44
A production worker is paid a salary of $650 per month, plus an extra 5 cents for each unit
produced during the month. This labour cost is best described as:

A A variable cost
B A fixed cost
C A step cost
D A semi-variable cost (2 marks)

QUESTION 45
A supplier of telephone services charges a fixed line rental per period. The first 10 hours of
telephone calls by the customer are free, after that all calls are charged at a constant rate per
minute up to a maximum, thereafter all calls in the period are again free.

Which of the following graphs depicts the total cost to the customer of the telephone services
in a period?

(2 marks)

LondonSAM 17 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 46
Rogers plc wishes to use a machine for one month on a new contract. The machine cost
$120,000 six years ago. When purchased it had an estimated life of ten years and it is being
fully depreciated using the straight-line method. It is currently valued at $39,000 and its
estimated value at the end of the year is $15,000. The machine is under-used and stands idle
for perhaps 30% of its time, but it must be retained for use on similar contracts.

The relevant cost of using the machine on the new contract is:

A Nil
B $250
C $812.50
D $1,000 (2 marks)

QUESTION 47
A company produces wardrobes which it sells for $300 per unit and has the following
breakdown of costs per unit:

Direct materials 120

Direct labour 62
Direct expenses 28
Variable overheads 24
Total variable cost 234

Total fixed costs for the year were $3,000,000 and the building wishes to make a profit of
$500,000. How many units will the organisation need to produce and sell to achieve this (to
the nearest whole unit)?

A 53,000
B 53,030
C 53,045
D 53,060 (2 marks)

The following information relates to questions 48 and 49.

During the month of December, a manufacturing process incurs material costs of £8,000 and
conversion costs of £4,500. 2,000 kgs of material was input. There is a normal loss of 10%
and all losses have a scrap value of £1.75 per kg. During the period, 1700 kgs were output to
finished goods. Opening and Closing stocks in the process were nil.

QUESTION 48
The cost per kg output was:

A £6.25
B £6.75
C £6.94
D £7.35 (2 marks)

LondonSAM 18 F2 - Management Accounting

 Mock Exam - 2 (Questions)

QUESTION 49
The value of the abnormal loss written off in the profit and loss account will be

A £675
B £175
C £2025
D £500 (2 marks)

QUESTION 50
Jojo is an assembly worker earning $12 per hour for a basic 35 hour week. Any overtime is
paid at a premium of 50%.

In the last four-week period, Jojo was paid for 150 hours. During this time 15 hours were
classed as idle due to a machine breaking down. Also included in the number of hours are
four hours’ overtime spent working for an urgent job at the request of the customer.

How much should be charged to the production overhead account for the four-week period?

A $216
B $240
C $288
D $360 (2 marks)

LondonSAM 19 F2 - Management Accounting