These are ACCA F2 (MA/FMA) Management Accounting MCQs for Part-D of the Syllabus “Budgeting”.

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INFORMATION ABOUT THESE MCQs Test

Course: ACCA – Associations of Chartered Certified Accountants
Fundamental Level: Knowledge, FIA – Foundation in Accounting
Subject: Management Accounting
Paper: F2 – MA/FMA
Chapter: Budgeting, and The budgetary process
Chapter Number: 10 of the Practice and Exam Kit
Syllabus Area: D – Budgeting
Questions Type: CBE MCQs
Exam Section Type: Section A

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Number of the Questions

There are 14 Questions in this F2 MCQ Test that cover Chapter 10a; Budgeting of ACCA F2 (MA/FMA) Management Accounting Module.

Time

This MCQs test is not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate.

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Students will get their F2 CBE MCQ result after they finish the entire test. They will also be able to see the score in percentage, correct and incorrect answers, as well as explanations for the incorrect questions.

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F2 - Chapter 10 - Part A - MCQs

Course: ACCA - FIA
Subject: F2 (MA/FMA) Management Accounting
Chapter: 10 - Budgeting, and The budgetary process
Syllabus Area: D - Budgeting
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 39

Which of these statements is untrue?

Spreadsheets are useful for plotting graphs

Spreadsheets make the calculation and manipulation of data easier and quicker

Spreadsheets are very useful for word-processing

Budgeting can be done very easily using spreadsheets

2 / 39

Extracts from a company's budget are as follows:

	August	September
Production units	12,600	5,500
Fixed production overhead cost incurred	$9,440	$7,000

The standard variable production overhead cost per unit is $5. Variable production overhead is paid 70 per cent in the month incurred and 30 per cent in the following month.

Fixed production overhead cost is paid in the month following that in which it is incurred and includes depreciation of $2,280 per month.

What is the payment for total production overhead cost shown in the cash budget for September?

$42,870

$45,310

$32,220

$47,590

3 / 39

Which of the following may be considered to be objectives of budgeting?

Co-ordination
Communication
Expansion
Resource allocation

(ii), (iii) and (iv)

All of them

(ii) and (iv)

(i), (ii) and (iv)

4 / 39

Misty Co's budgetary control report for last month is as follows:

	Fixed budget	Flexed budget	Actual results
	$	$	$
Direct costs	61,100	64,155	67,130
Production overhead	55,000	56,700	54,950
Other overhead	10,000	10,000	11,500
	126,100	130,855	133,580

What was the volume variance for last month?

$2,725 (F)

$4,755 (A)

$2,725 (A)

$4,755 (F)

5 / 39

Each unit of product Echo takes five direct labour hours to make. Quality standards are high, and 8% of units are rejected after completion as sub-standard. Next month's budgets are as follows.

Opening inventories of finished goods	3,000 units
Planned closing inventories of finished goods	7,600 units
Budgeted sales of Echo	36,800 units

All inventories of finished goods must have successfully passed the quality control check.

What is the direct labour hours budget for the month?

223,560 hours

225,000 hours

207,000 hours

190,440 hours

6 / 39

Each unit of product Zeta requires 3 kg of raw material and 4 direct labour hours. Material costs $2 per kg and the direct labour rate is $7 per hour.

The production budget for Zeta for April to June is as follows.

	April	May	June
Production units	7,800	8,400	8,200

Raw material opening inventories are budgeted as follows.

	April	May	June
	3,800 kg	4,200 kg	4,100 kg

The closing inventory budgeted for June is 3,900 kg.
Material purchases are paid for in the month following purchase.

What is the figure to be included in the cash budget for June in respect of payments for purchases?

$48,800

$50,200

$50,600

$25,100

7 / 39

The following extract is taken from the production cost budget of S Co.

Production (units)	2,000	3,000
Production cost ($)	11,100	12,900

What is the budget cost allowance for an activity level of 4,000 units?

$7,500

$13,460

$14,700

$7,200

8 / 39

X department is a division of W Plc. X department usually has a quarterly wages cost of $4,500,000. Quarterly material costs are usually around $2,000,000. W Plc made a central decision to award all employees a wages increase of 2%.

Which of the following variances for the latest quarter are worth investigating?

Direct material price variance $400 (A)
Labour rate variance $90,000 (A)
Sales volume variance $4,000,000 (F)

(i) and (ii) only

(i) and (iii) only

(i), (ii) and (iii)

(iii) only

9 / 39

A company manufactures a single product. In a computer spreadsheet the cells F1 to F12 contain the budgeted monthly sales units for the twelve months of next year in sequence, with January sales in cell F1 and finishing with December sales in F12. The company policy is for the closing inventory of finished goods each month to be 10% of the budgeted sales units for the following month.

Which of the following formulae will generate the budgeted production (in units) for March next year?

=[(1.1*F3) – (0.1*F4)]

=[(0.9*F3) + (0.1*F4)]

=[F3 – (0.1*F4)]

=[F3 + (0.1*F4)]

10 / 39

Budgeted sales of X for December are 18,000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for December are budgeted to be 15,000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check.

What is the production budget for X for December?

_______ units

11 / 39

In a situation where there are no production resource limitations, which TWO of the following items of information must be available for the production budget to be completed?

Budgeted change in finished goods inventory

Sales volume from the sales budget

Material purchases from the purchases budget

Standard direct labour cost per unit

12 / 39

A company manufactures a single product, M. Budgeted production output of product M during August is 200 units. Each unit of product M requires 6 labour hours for completion and PR Co anticipates 20 per cent idle time. Labour is paid at a rate of $7 per hour.

What is the direct labour cost budget for August?

$6,720

$8,400

$10,500

$10,080

13 / 39

Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.

What is the budgeted total labour cost for the next period?

$240,000

$288,000

$192,000

$300,000

14 / 39

An extract from a company's sales budget is as follows:

	$
October	224,000
November	390,000
December	402,000

Ten per cent of sales are paid for immediately in cash. Of the credit customers, 30 per cent pay in the month following the sale and are entitled to a one per cent discount. The remaining customers pay two months after the sale is made.

What is the value of sales receipts shown in the company's cash budget for December?

$312,830

$286,620

$285,567

$290,430

15 / 39

Misty Co's budgetary control report for last month is as follows:

	Fixed budget	Flexed budget	Actual results
	$	$	$
Direct costs	61,100	64,155	67,130
Production overhead	55,000	56,700	54,950
Other overhead	10,000	10,000	11,500
	126,100	130,855	133,580

What was the expenditure variance for last month?

$7,480 (A)

$7,480 (F)

$2,725 (A)

$2,725 (F)

16 / 39

The standard cost card for a company’s only product is given below:

	$ per unit
Selling price	118
Direct labour 4 hours at $20 per hour	80
Direct material 3 kg at $7 per hour	21
Fixed production overhead	5
Profit	12

For a period, budgeted production and sales were 8,000 units, whilst actual production and sales were 6,000 units.

What is the flexed budget profit?

$72,000

$102,000

$62,000

$96,000

17 / 39

Which of the following statements are true?

A flexed budget allows businesses to evaluate a manager's performance more fairly
A fixed budget is useful for defining the broad objectives of the organisation
Relying on fixed budgets alone would usually give rise to massive variances

(i) and (iii) only

(i) and (ii) only

(ii) and (iii) only

(i), (ii) and (iii)

18 / 39

If a company has no production resource limitations, in which order would the following budgets be prepared?

Material usage budget
Sales budget
Material purchase budget
Finished goods inventory budget
Production budget
Material inventory budget

(ii), (v), (iv), (i), (vi), (iii)

(ii), (iv), (v), (i), (vi), (iii)

(v), (iv), (i), (vi), (iii), (ii)

(ii), (iv), (v), (i), (iii), (vi)

19 / 39

The quantity of material in the material purchases budget is greater than the inferred from quantity of material in the material usage budget.

Which of the following statements can be this situation?

Raw materials inventories are budgeted to increase

Wastage of material occurs in the production process

Raw materials inventories are budgeted to decrease

Finished goods inventories are budgeted to increase

20 / 39

Each unit of product Alpha requires 3 kg of raw material. Next month's production budget for product Alpha is as follows.

Opening inventories:
Raw materials	15,000 kg
Finished units of Alpha	2,000 units
Budgeted sales of Alpha	60,000 units
Planned closing inventories:
Raw materials	7,000 kg
Finished units of Alpha	3,000 units

How many kilograms of raw materials should be purchased next month?

______ kgs

21 / 39

The following spreadsheet shows a profit centre's variances against budget for a period. Some figures have been omitted (omitted figures are labelled ????).

	A	B	C	D	E
1		Fixed budget	Flexed budget	Actual	Variance
2	Sales/production units	1,200	1,500	1,500	300
3		$	$	$	$
4	Sales revenue	60,000	75,000	74,000	-1,000
5	Direct material	21,600	???	24,000	???
6	Direct labour	14,400	18,000	22,000	-4,000
7	Contribution	24,000	???	28,000	???
8	Fixed costs	17,000	17,000	16,500	500
9	Profit	7,000	13,000	11,500	na

What figure should appear in cell E5?

3,000

-3,000

2,400

-2,400

22 / 39

Which of the following BEST describes the purpose of a flexible budget?

To ensure managers are motivated

To facilitate control by preventing discretionary expenditure

To facilitate control by establishing a budget relevant to actual activity levels

To enable accurate reforecasting when actual costs are known

23 / 39

	A	B	C	D	F	G
1		Jan	Feb	Mar	Apr	May
2	Sales	15,000	13,400	16,100	17,200	15,300
3	Cost of sales	11,090	10,060	12,040	13,000	11,100
4	Gross profit	3,910	3,340	4,060	4,200	4,200
5	Expenses	1,500	1,500	1,500	1,500	1,500
6	Net profit	2,410	1,840	2,560	2,700	2,700
7
8	Net profit %

What would be the formula for March net profit?

=G6/G2*100

=G2/G6*100

=G6/G4*100

=G4/100*G6

24 / 39

Each unit of product Zeta requires 3 kg of raw material and 4 direct labour hours. Material costs $2 per kg and the direct labour rate is $7 per hour.

The production budget for Zeta for April to June is as follows.

	April	May	June
Production units	7,800	8,400	8,200

Wages are paid 75% in the month of production and 25% in the following month.

What is the figure to be included in the cash budget for May in respect of wages?

$_______

25 / 39

Budgeted costs and revenues for an output level of 4,000 units are given below. It is known that after an output level of 5,000 units there is a step up in fixed costs of $1,000:

	$ per unit
Selling price	30
Variable cost	18
Fixed cost	4
Profit	8

What is the flexed budget profit at an output level of 6,000 units?

$48,000

$47,000

$56,000

$55,000

26 / 39

When preparing a production budget, what does the quantity to be produced equal?

Sales quantity + opening inventory of finished goods + closing inventory of finished goods

Sales quantity + opening inventory of finished goods – closing inventory of finished goods

Sales quantity – opening inventory of finished goods – closing inventory of finished goods

Sales quantity – opening inventory of finished goods + closing inventory of finished goods

27 / 39

The following details have been extracted from the receivables collection records of C Co.

Invoices paid in the month after sale	60%
Invoices paid in the second month after sale	25%
Invoices paid in the third month after sale	12%
Bad debts	3%

Invoices are issued on the last day of each month.
Customers paying in the month after sale are entitled to deduct a 2% settlement discount. Credit sales values for June to September are budgeted as follows.

June	July	August	September
$35,000	$40,000	$60,000	$45,000

What is the amount budgeted to be received from credit sales in September?

$49,480

$46,260

$50,530

$50,200

28 / 39

The following statements relate to fixed budgets and flexible budgets.

If production levels far exceed those anticipated, relying on a fixed budget is likely to result in massive variances
Flexible budgets assist management control by providing dynamic, comparable information
Flexible budgets are always superior to fixed budgets

Which statements are true?

(i) and (ii) only

(i) only

(i), (ii) and (iii)

(ii) and (iii) only

29 / 39

Which of the following control actions could be taken to help eliminate an adverse direct labour efficiency variance?

Employ more highly skilled labour
Ensure stricter supervision of labour workers
Ask employees to work paid overtime

(i), (ii) and (iii)

(i) and (iii) only

(i) and (ii) only

(ii) and (iii) only

30 / 39

A company plans to sell 24,000 units of product R next year. Opening inventory of R is expected to be 2,000 units and PQ Co plans to increase inventory by 25 per cent by the end of the year.

How many units of product R should be produced next year?

______ units

31 / 39

What does the statement 'sales is the principal budget factor' mean?

The company's activities are limited by the level of sales it can achieve

The level of sales will determine the level of cash at the end of the period

Sales is the largest item in the budget

The level of sales will determine the level of profit at the end of the period

32 / 39

BDL plc is currently preparing its cash budget for the year to 31 March 20X8. An extract from its sales budget for the same year shows the following sales values.

	$
March	60,000
April	70,000
May	55,000
June	65,000

40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in the month after sale and take a 2% discount; 27% are expected to pay in the second month after the sale, and the remaining 3% are expected to be bad debts.

What is the value of sales receipts to be shown in the cash budget for May 20X7?

$61,120

$66,532

$60,532

$86,620

33 / 39

The following details have been extracted from the payables' records of X Co:

Invoices paid in the month of purchase	25%
Invoices paid in the first month after purchase	70%
Invoices paid in the second month after purchase	5%

Purchases for July to September are budgeted as follows:

July	$250,000
August	$300,000
September	$280,000

For suppliers paid in the month of purchase, a settlement discount of 5% is received.

What is the amount budgeted to be paid to suppliers in September?

$292,500

$278,500

$280,000

$289,000

34 / 39

An accountant wishes to use the following spreadsheet to calculate budgeted production units.

	A	B	C	D
1		Jul	Aug	Sep
2		units	units	units
3	Sales	1,000	2,000	3,000
4	Opening inventory finished goods	100	200	300
5	Production

Which formula should be entered in cell B5?

=B3-C4+B4

=B3+C4-B4

=B3+C4

=B3-B4

35 / 39

What does a master budget comprise?

The budgeted cash flow

The budgeted cash flow, budgeted statement of profit or loss and budgeted statement of financial position

The budgeted statement of profit or loss

The entire set of budgets prepared

36 / 39

QT Co manufactures a single product and an extract from their flexed budget for production costs is as follows.

Activity level

Customer	80%	90%
	$	$
Direct material	2,400	2,700
Labour	2,120	2,160
Production overhead	4,060	4,080
	8,580	8,940

What would the total production cost allowance be in a budget flexed at the 83% level of activity? (to the nearest $)

37 / 39

	A	B	C	D	F	G
1		Jan	Feb	Mar	Apr	May
2	Sales	15,000	13,400	16,100	17,200	15,300
3	Cost of sales	11,090	10,060	12,040	13,000	11,100
4	Gross profit	3,910	3,340	4,060	4,200	4,200
5	Expenses	1,500	1,500	1,500	1,500	1,500
6	Net profit	2,410	1,840	2,560	2,700	2,700
7
8	Net profit %

The formula =C2-C3 will give the contents of which cell in the drop down list?

38 / 39

	A	B	C	D	F	G
1		Jan	Feb	Mar	Apr	May
2	Sales	15,000	13,400	16,100	17,200	15,300
3	Cost of sales	11,090	10,060	12,040	13,000	11,100
4	Gross profit	3,910	3,340	4,060	4,200	4,200
5	Expenses	1,500	1,500	1,500	1,500	1,500
6	Net profit	2,410	1,840	2,560	2,700	2,700
7
8	Net profit %

What would be the formula for March net profit?

=D2–D3

=D4–D5

=D3*D8

=B6+C6

39 / 39

The following spreadsheet shows the calculation of a company’s profit.

	A	B
1		$
2	Sales revenue	20,000
3	Variable production costs	5,000
4	Fixed production costs	3,000
5	Gross profit	12,000
6	Variable selling costs	1,000
7	Fixed selling costs	500
8	Profit	10,000