F2 – (MA) – MCQ’s Quiz – #1 | ACCA

1. A company uses the Economic Order Quantity (EOQ) model to establish reorder quantities.

The following information relates to the forthcoming period:

Order costs = $25 per order
Holding costs = 10% of purchase price = $4/unit
Annual demand = 20,000 units
Purchase price = $40 per unit
EOQ = 500 units

No safety inventory are held.

What are the total annual costs of inventory (ie the total purchase cost plus total order cost plus total holding costs)?

2. Which of the following criticisms of standard costing apply in all circumstances?

(i) Standard costing can only be used where all operations are repetitive and output is homogeneous.
(ii) Standard costing systems cannot be used in environments which are prone to change. They assume stable conditions.
(iii) Standard costing systems assume that performance to standard is acceptable. They do not encourage continuous improvement.

3. Which of the following would be best described as a short term tactical plan?

4. What is a by-product?

5. A company has decided to lease a machine. Six annual payments of $8,000 will be made with the first payment on receipt of the machine. Below is an extract from an annuity table:

What is the present value of the lease payments at an interest rate of 10%?

6. An investment project has net present values as follows:

At a discount rate of 10% --> $2,700 positive
At a discount rate of 15% --> $3,740 negative

Using the above figures, what is the BEST approximation of the internal rate of return of the investment project?

8. A company with a single product sells more units than it manufactures in a period.

Which of the following correctly describes the use of marginal costing in comparison with absorption costing in the above situation?

9. A company uses the Economic Order Quantity (EOQ) model to establish reorder quantities.

The following information relates to the forthcoming period:

Order costs = $25 per order
Holding costs = 10% of purchase price = $4/unit
Annual demand = 20,000 units
Purchase price = $40 per unit
EOQ = 500 units

No safety inventory are held.

What are the total annual costs of inventory (ie the total purchase cost plus total order cost plus total holding costs)?

10. The following data relate to Product D.

Material cost per unit --> $20.00
Labour cost per unit --> $69.40
Production overhead cost per machine hour --> $12.58
Machine hours per unit --> 14
General overhead absorption rate --> 8% of total production cost

What is the total cost per unit of Product D, to the nearest $0.01?

13. A company sold 56,000 units of its single product in a period for a total revenue of $700,000. Finished inventory increased by 4,000 units in the period. Costs in the period were:

Variable production --> $3.60 per unit
Fixed production --> $258,000 (absorbed on the actual number of units produced)
Fixed non-production --> $144,000

Using absorption costing, what was the profit for the period?

15. A company made 17,500 units at a total cost of $16 each. Three quarters of the costs were variable and one quarter fixed. 15,000 units were sold at $25 each. There were no opening inventories.

By how much will the profit calculated using absorption costing principles differ from the profit if marginal costing principles had been used?

16. Which of the following relates to capital expenditure?

17. A company is considering accepting a one-year contract which will require four skilled employees. The four skilled employees could be recruited on a one-year contract at a cost of $40,000 per employee. The employees would be supervised by an existing manager who earns $60,000 per year. It is expected that supervision of the contract would take 10% of the manager's time.

Instead of recruiting new employees the company could retrain some existing employees who currently earn $30,000 per year. The training would cost $15,000 in total. If these employees were used they would need to be replaced at a total cost of $100,000.

What is the relevant labour cost of the contract?

19. A company wants to calculate the total cost of a job. The estimated cost for the job is as follows.

Direct materials --> 10 kg @ $10 per kg
Direct labour     --> 20 hours @ $5 per hour

Variable production overheads are recovered at the rate of $2 per labour hour.

Fixed production overheads for the company are budgeted to be $100,000 each year and are recovered on the basis of labour hours. There are 10,000 budgeted labour hours each year.

Other costs in relation to selling, distribution and administration are recovered at the rate of $50 per job.

What is the total production cost of the job?

20. Variable costs are conventionally deemed to: