Question 1

Which TWO of the following statements are true for obtaining a reliable forecast from a time series?

Options :

A : There must be an increasing trend.

B : The past trend must continue in the future.

C : The past pattern of seasonal variations must continue in the future.

D : Extrapolation of the trend must be avoided.

E : There must be a decreasing trend.

Answer: B,C

Question 2

Christian the management accountant at a car manufacturer has been given a list of costs that have been incurred due to accidents and errors either occurring or being prevented.
Which of the following are examples of non-conformance costs? Select ALL that apply.

Options :

A : Cost of scrap

B : Loss of goodwill

C : Cost of repairs to products

D : Inspection costs

E : Cost of repairs to equipment

Answer: A,B,C

Question 3

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning. The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.

What are the benefits for the company that could occur following the introduction of an activity based budgeting system?

Select ALL the correct answers.

Options :

A : Under an activity based budgeting system, resource allocation is linked to the strategic plan and is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company-s strategic objectives are included in the budget.

B : Under a traditional incremental budgeting system the focus is on existing resources and operations. Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under an activity based budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.

C : Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.

D : Activity Based Budgeting Systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness if this approach is that it gives little indication of the link between the level of activity and the cost incurred.

E : The approach under an Activity based Budgeting System is to make arbitrary cuts in order to meet overall financial targets.

Answer: A,B,C

Question 4

The standard production cost of making a product is as follows:

What is the fixed production overhead capacity variance?

Options :

A : $9,000F

B : $6,000F

C : $3,000F

D : $6,000A

Answer: B

Question 5

Which THREE of the following statements about different costing systems are correct?

Options :

A : Contribution per unit is the selling price per unit minus the variable costs per unit.

B : In a period during which finished goods inventory levels fall, profit using marginal costing will be higher than if absorption costing is used.

C : When valuing inventory using throughput costing, the direct labour cost is excluded.

D : Over-absorption of fixed production overhead is caused by actual sales exceeding budgeted sales.

E : Finished goods inventory will be assigned a higher value using throughput costing than absorption costing.

Answer: A,B,C