f2 past paper_question12-2005

8/7/2019 F2 Past Paper_Question12-2005

1/13

FinancialInformation forManagement

PART 1

FRIDAY 9 DECEMBER 2005

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A ALL 25 questions are compulsory and MUST be

answered

Section B ALL FIVE questions are compulsory and MUST be

answered

Formulae Sheet is on page 13

Do not open this paper until instructed by the supervisor

This question paper must not be removed from the examinationhall

The Association of Chartered Certified Accountants

Pap

er

1.2


2/13

Section A ALL 25 questions are compulsory and MUST be attempted.

Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question.

Each question within this section is worth 2 marks.

1 Up to a given level of activity in each period the purchase price per unit of a raw material is constant. After that point

a lower price per unit applies both to further units purchased and also retrospectively to all units already purchased.

Which of the following graphs depicts the total cost of the raw materials for a period?

2 The following breakeven chart has been drawn showing lines for total cost (TC), total variable cost (TVC), total fixed

cost (TFC) and total sales revenue (TSR):

What is the margin of safety at the 1,700 units level of activity?

A 200 units

B 300 units

C 500 units

D 1,025 units

2

0 Units

0 Units

0 Units

0 Units

A B

C D

TSR

TC

TVC

TFC

Units

1,7001,5001,2006750


3/13

3 A company manufactures a single product with a variable cost per unit of 22. The contribution to sales ratio is 45%.

Monthly fixed costs are 198,000.

What is the breakeven point (in units)?

A 4,950

B 9,000

C 11,000

D 20,000

4 An organisation has the following total costs at two activity levels:

Activity level (units) 17,000 22,000

Total costs () 140,000 170,000

Variable cost per unit is constant in this range of activity and there is a step up of 5,000 in the total fixed costs when

activity exceeds 18,000 units.

What is the total cost at an activity level of 20,000 units?

A 155,000

B 158,000

C 160,000

D 163,000

5 The following statements relate to financial accounting or to cost and management accounting:

(i) The main users of financial accounting information are external to an organisation.

(ii) Cost accounting is part of financial accounting and establishes costs incurred by an organisation.

(iii) Management accounting is used to aid planning, control and decision making.

Which of the statements are correct?

A (i) and (ii) only

B (i) and (iii) only

C (ii) and (iii) only

D (i), (ii) and (iii)

6 The following terms relate to computers:

(i) Application package

(ii) Operating system

(iii) Spreadsheet

Which of the above terms are examples of computer software?

A (i) and (ii) only




3 [P.T.O.


4/13

7 An organisations stock records for last month show the following transactions in respect of one item:

Date Receipts Issues Stock

(units) (units) (units)

1st 300

5th 100 200

13th 600 800

20th 300 50028th 200 300

The opening stock was valued at a total cost of 9,300 and all receipts on the 13th were purchased at a cost of 33

per unit.

The organisation uses the weighted average method of valuation and calculates a new weighted average after each

stores receipt.

What was the total value of the closing stock?

A 9,500

B 9,700

C 9,750

D 9,900

8 A company uses 9,000 units of a component per annum. The component has a purchase price of 40 per unit and

the cost of placing an order is 160. The annual holding cost of one component is equal to 8% of its purchase price.

What is the Economic Order Quantity (to the nearest unit) of the component?

A 530

B 671

C 949

D 1,342

9 A company determines its order quantity for a component using the Economic Order Quantity (EOQ) model.

What would be the effects on the EOQ and the total annual ordering cost of an increase in the annual cost of

holding one unit of the component in stock?

EOQ Total annual ordering cost

A Lower Higher

B Higher Lower

C Lower No effect

D Higher No effect

4


5/13

10 Consider the following statements:

(i) Job costing is only applicable to service organisations.

(ii) Batch costing can be used when a number of identical products are manufactured together to go into finished

stock.

Is each statement TRUE or FALSE?

Statement (i) Statement (ii)

A False False

B False True

C True True

D True False

11 An organisation absorbs overheads on a machine hour basis. The planned level of activity for last month was 30,000

machine hours with a total overhead cost of 247,500. Actual results showed that 28,000 machine hours were

recorded with a total overhead cost of 238,000.

What was the total under absorption of overheads last month?

A 7,000

B 7,500

C 9,500

D 16,500

12 The following information relates to a manufacturing company for next period:

Units Production 14,000 Fixed production costs 63,000

Sales 12,000 Fixed selling costs 12,000

Using absorption costing the profit for next period has been calculated as 36,000.

What would the profit for next period be using marginal costing?

A 25,000

B 27,000

C 45,000

D 47,000

5 [P.T.O.


6/13

13 Information relating to two processes (F and G) was as follows:

Process Normal loss as Input Output

% of input litres litres

F 8 65,000 58,900

G 5 37,500 35,700

For each process, was there an abnormal loss or an abnormal gain?

Process F Process G

A Abnormal gain Abnormal gain

B Abnormal gain Abnormal loss

C Abnormal loss Abnormal gain

D Abnormal loss Abnormal loss

14 Last month 27,000 direct labour hours were worked at an actual cost of 236,385 and the standard direct labour

hours of production were 29,880. The standard direct labour cost per hour was 850.

What was the labour efficiency variance?

A 17,595 Adverse

B 17,595 Favourable

C 24,480 Adverse

D 24,480 Favourable

15 Last month a companys budgeted sales were 5,000 units. The standard selling price was 6 per unit with a standard

contribution to sales ratio of 60%. Actual sales were 4,650 units with a total revenue of 30,225

What were the favourable sales price and adverse sales volume contribution variances?

Sales price Sales volume contribution

A 2,325 1,260

B 2,500 1,260

C 2,325 2,100

D 2,500 2,100

16 Which of the following is an initial requirement of a management control system?

A Establishing the standard to be achieved

B Measuring the actual performance

C Setting organisational objectives

D Taking appropriate corrective action

6


7/13

17 Which one of the following would be classified as indirect labour?

A Assembly workers on a car production line

B Bricklayers in a house building company

C Machinists in a factory producing clothes

D Forklift truck drivers in the stores of an engineering company

18 The following statements relate to the calculation of the regression line y = a + bx using the information on the

formulae sheet at the end of this examination paper:

(i) n represents the number of pairs of data items used

(ii) ( x)2 is calculated by multiplying x by x

(iii) xy is calculated by multiplying x by y

Which statements are correct?

A (i) and (ii) only




19 The correlation coefficient (r) for measuring the connection between two variables (x and y) has been calculated as

06.

How much of the variation in the dependent variable (y) is explained by the variation in the independent variable

(x)?

A 36%

B 40%

C 60%

D 64%

20 The following statements relate to relevant cost concepts in decision making:

(i) Materials can never have an opportunity cost whereas labour can.

(ii) The annual depreciation charge is not a relevant cost.

(iii) Fixed costs would have a relevant cost element if a decision causes a change in their total expenditure

Which statements are correct?

A (i) and (ii) only




7 [P.T.O.


8/13

21 A company is evaluating a project that requires 4,000 kg of a material that is used regularly in normal production.

2,500 kg of the material, purchased last month at a total cost of 20,000, are in stock. Since last month the price

of the material has increased by 21/2%.

What is the total relevant cost of the material for the project?

A 12,300

B 20,500

C 32,300

D 32,800

22 In a process where there are no work-in-progress stocks, two joint products (J and K) are created. Information (in

units) relating to last month is as follows:

Product Sales Opening stock of Closing stock of

finished goods finished goods

J 6,000 100 300

K 4,000 400 200

Joint production costs last month were 110,000 and these were apportioned to joint products based on the number

of units produced.

What were the joint production costs apportioned to product J for last month?

A 63,800

B 64,000

C 66,000

D 68,200

23 A company manufactures two products (L and M) using the same material and labour. It holds no stocks. Information

about the variable costs and maximum demands are as follows:

Product L Product M

/unit /unit

Material (4 per litre) 13 19

Labour (7 per hour) 35 28

Units Units

Maximum monthly demand 6,000 8,000

Each month 50,000 litres of material and 60,000 labour hours are available.

Which one 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.

8


9/13

The following information relates to questions 24 and 25:

A company has established the following selling price, costs and revenue equations for one of its products:

Selling price ( per unit) = 50 0025Q

Marginal revenue ( per unit) = 50 005Q

Total costs per month () = 2,000 + 15Q

Q represents the number of units produced and sold per month.

24 At what selling price will monthly profits be maximised?

A 1500

B 1750

C 2500

D 3250

25 What would be the monthly profit if the selling price per unit was set at 20?

A 1,000

B 4,000

C 6,000

D 12,000

(50 marks)

9 [P.T.O.


10/13

Section B ALL FIVE questions are compulsory and MUST be attempted.

1 Pointdextre Ltd, which manufactures and sells a single product, is currently producing and selling 102,000 units per

month, which represents 85% of its full capacity. Total monthly costs are 619,000 but at full capacity these would

be 700,000. Total fixed costs would remain unchanged at all activity levels up to full capacity. The normal selling

price of the product results in a contribution to sales ratio of 40%.

A new customer has offered to take a monthly delivery of 15,000 units at a price per unit 20% below the normalselling price. If this new business is accepted, existing sales are expected to fall by one unit for every six units sold

to this new customer.

Required:

(a) For the current production and sales level, calculate:

(i) the variable cost per unit;

(ii) the total monthly fixed costs;

(iii) the selling price per unit;

(iv) the contribution per unit. (6 marks)

(b) Calculate the net increase or decrease in monthly profit which would result from acceptance of the new

business. (4 marks)

(c) In the context of decision making, explain the term opportunity cost and illustrate your answer by reference

to Pointdextre Ltd. (2 marks)

(12 marks)

2 Partlet Ltd makes a product that passes through two manufacturing processes. A normal loss equal to 8% of the raw

material input occurs in Process I but no loss occurs in Process II. Losses have no realisable value.

All the raw material required to make the product is input at the start of Process I. The output from Process I each

month is input into Process II in the same month. Work in progress occurs in Process II only.

Information for last month for each process is as follows:

Process I

Raw material input 50,000 litres at a cost of 365,000

Conversion costs 256,000

Output to Process II 47,000 litres

Process II

Opening work in progress 5,000 litres (40% complete for conversion costs) valued at 80,000

Conversion costs 392,000

Closing work in progress 2,000 litres (50% complete for conversion costs)

Required:

(a) Prepare the Process I account for last month. (5 marks)

(b) Calculate in respect of Process II for last month:

(i) the value of the completed output; and

(ii) the value of closing work in progress. (5 marks)

(c) If the losses in Process I were toxic and the company incurred costs in safely disposing of them, state how

the disposal costs associated with the normal loss would have been recorded in the Process I account. No

calculations are required. (2 marks)

(12 marks)

10


11/13

3 JWW Ltd manufactures two products, X and Y, and any quantities produced can be sold for 60 per unit and 25

per unit respectively. Variable costs of the two products are:

X Y

per unit per unit

Materials (at 5 per kg) 15 5

Labour (at 6 per hour) 24 3

Other variable costs 6 5 Total 45 13

Next month only 4,200 kg of material and 3,000 labour hours will be available.

The company holds no stocks and aims to maximise its profits each month.

Required:

(a) State the objective function and constraints in a form suitable for solving by linear programming.

(5 marks)

(b) Determine the optimal production plan for next month (in units). (4 marks)

(9 marks)

4 Ploverleigh Ltd, which manufactures a single product, uses standard absorption costing. The standard product cost

per unit is as follows:

Direct materials 11

Direct labour 24

Fixed production overhead 18

Budgeted and actual production for last month were 12,000 units and 12,500 units respectively. The actual costs

incurred last month were:

Direct materials 142,700

Direct labour 291,300

Fixed production overhead 230,800

Required:

(a) Prepare a statement that reconciles the standard cost of actual production with its actual cost for last month

and highlights the total variance for each of the three cost elements. (4 marks)

(b) Provide a breakdown of the total fixed production overhead variance in your statement in (a) by calculating

two sub variances. (2 marks)

(c) If Ploverleigh Ltd uses standard marginal costing instead of standard absorption costing, explain how AND

why any of the three total variances calculated in (a) would be different and state clearly which, if any, of

the variances would remain unchanged. No calculations are required. (3 marks)

(9 marks)

11 [P.T.O.


12/13

5 Sangazure Ltd manufactures many different products in a factory that has two production cost centres (T and W) and

several service cost centres.

The total budgeted overhead costs (after the allocation, apportionment and reapportionment of service cost centre

costs), and other information for production cost centres T and W are as follows:

Cost centre Budgeted Basis of overhead Budgeted activity

overheads absorption

T 780,000 Machine hours 16,250 machine hours

W 173,400 Direct labour hours 14,450 direct labour hours

Required:

(a) Calculate the overhead absorption rates for cost centres T and W. (2 marks)

The prime cost of product PP, one of the products made by Sangazure Ltd, is as follows:

per unit

Direct material 10

Direct labour:

Cost centre T 14Cost centre W 21

One unit of product PP takes 35 minutes of machine time in cost centre T. The direct labour in cost centre T is paid

7 per hour and 6 per hour in cost centre W.

(b) Calculate the total production cost for one unit of PP. (3 marks)

(c) Briefly explain why service cost centre costs need to be reapportioned to production cost centres. Which

method of reapportionment fully recognises the work that service cost centres do for each other?

(3 marks)

(8 marks)

12


13/13

13

Formulae Sheet

End of Question Paper

f2 past paper_question12-2005

Documents