These are ACCA F5 (PM) Performance Management MCQs for Part-D of the Syllabus “Budgeting and control “ .
These multiple-choice questions (MCQs) are designed to help ACCA F5 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams . By doing so, students can reduce exam stress and prepare more effectively.
Please note:
Students should not attempt these MCQs until they have finished the entire chapter.
All questions are compulsory, so please do not skip any.
We hope that these MCQs will be a valuable resource for students preparing for the ACCA F5 (PM) exam .
Course: ACCA – Association of Chartered Certified Accountants Fundamental Level: Applied Skills Subject: Performance Management Paper: F5 – PM Chapters and Topics Covered: Budgetary systems and types of budget, Analytical techniques in budgeting and forecasting, Standard costing, Material mix and yield variances, Sales mix and quantity variances, Planning and operational variances Performance analysis Questions: 01 – Crush Co 02 – BBB Co 03 – Mistletoe Co 04 – Birch Co 05 – Organic Bread Co 06 – Elm Co 07 – Maple Co 08 – Pine Co 09 – Kiss Co 10 – Hollie Hotels Co Syllabus Area: D – “Budgeting and control” Questions Type: CBE MCQs Exam Section: Section B
Syllabus Area
These Multiple Choice Questions (MCQs) cover the Syllabus Area Part D of the Syllabus; “Budgeting and control “ of ACCA F5 (PM) Performance Management Module.
Time
These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate
Result
Students will get their F5 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.
Types of Questions
MCQs: Choose one from the given options. Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect) “. Drop-down: Select from the list provided. Type numbers: Type your answer in numbers as per the requirement of the question.
Question – u003cstrongu003eCrush Cou003c/strongu003e u003cstrongu003e- (01/10)u003c/strongu003e
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Question – u003cstrongu003eBBB Cou003c/strongu003e u003cstrongu003e- (02/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - BBB Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: BBB Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to produce. There will be an 90% learning curve that will continue until 3,550 units have been produced. Batches after this level will each take the same amount of time as the 71st batch. The batch size will always be 50 units.
Note . The learning index for a 90% learning curve is –0.152
Ignore the time value of money.
REQUIREMENT
The total time for the first 16 batches of units was 8,500 hours.
What was the actual learning rate closest to (to the nearest %)?
Note . Don't put % sign. Write only numbers (whole numbers).
Batches
Total time
Average time/unit
1
750
750
2
750 × r
4
750 × r²
8
750 × r³
16
8,500
750 × r⁴
8,500 = 16 × 750 r⁴
8,500/(16 × 750) = r⁴
r = 0.92 or 92%
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to produce. There will be an 90% learning curve that will continue until 3,550 units have been produced. Batches after this level will each take the same amount of time as the 71st batch. The batch size will always be 50 units.
Note . The learning index for a 90% learning curve is –0.152
Ignore the time value of money.
REQUIREMENT
What is the time taken for the 71st batch?
Cumulative average time per batch for the first 71 batches
Y = axᵇ
Where
Y = the cumulative average time per unit to produce x units
x = the cumulative number of units
a = the time taken for the first unit of output
b = the index of learning (logLR/log2)
The cumulative average time per batch, with a learning curve of 90%, is therefore
Y = aX⁻⁰ꞏ¹⁵²
where a = the time for the first batch (750 hours) and X is the number of the batch. For the
71st batch, X = 71.
Y = 750 × 71⁻⁰ꞏ¹⁵²
= 750 × 0.5231 = 392.35
The cumulative average time per batch for the first 71 batches is 392.35 hours.
Time taken for the 71st batch
The cumulative average time per batch for the first 70 batches is Y
= 750 × 70⁻⁰ꞏ¹⁵²
= 750 × 0.5243 = 393.23
Hours
Total time for 1st 71 batches (71 × 392.35)
27,856.85
Total time for 1st 70 batches (70 × 393.23)
27,526.10
Time for the 71st batch
330.75
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to produce. There will be an 90% learning curve that will continue until 3,550 units have been produced. Batches after this level will each take the same amount of time as the 71st batch. The batch size will always be 50 units.
Note . The learning index for a 90% learning curve is –0.152
Ignore the time value of money.
REQUIREMENT
The learning curve effect in BBB Co could be extended by which of the following?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to produce. There will be an 90% learning curve that will continue until 3,550 units have been produced. Batches after this level will each take the same amount of time as the 71st batch. The batch size will always be 50 units.
Note . The learning index for a 90% learning curve is –0.152
Ignore the time value of money.
REQUIREMENT
The costs of producing more units in BBB Co has been reduced due to the following factors.
Which factor from those below is due to the learning curve effect?
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to produce. There will be an 90% learning curve that will continue until 3,550 units have been produced. Batches after this level will each take the same amount of time as the 71st batch. The batch size will always be 50 units.
Note . The learning index for a 90% learning curve is –0.152
Ignore the time value of money.
REQUIREMENT
The following statements have been made about BBB Co and the learning curve:
The learning effect comes to an end in BBB Co after the 71st unit; however, some learning effects can continue indefinitely.
The learning curve is restricted to the manufacturing industry.
Which of the above statements is/are true?
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Question – Mistletoe Co u003cstrongu003e- (03/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Mistletoe Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Mistletoe Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Mistletoe Co currently prepares an annual fixed budget using incremental budgeting but is considering changing to a quarterly rolling budget. The accounts department consists of one part-qualified accountant who is always very busy. However, management want to improve the budget forecasts and improve performance over the year. There is some degree of uncertainty in Mistletoe Co's industry but the level of uncertainty is quantifiable.
The sales and cost of sales budgets for the year to 30 June 20X9 were as follows:
Q1
Q2
Q3
Q4
$
$
$
$
Sales
80,000
81,600
83,232
84,897
Cost of sales
56,000
57,120
58,262
59,428
However, at the end of Quarter 1, actual sales were $110,000 because a competitor went out of business. Senior management suggested that the revised assumption for sales growth should be 3% per quarter.
REQUIREMENT
Which THREE of the following are advantages for Mistletoe Co of implementing rolling budgets?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Mistletoe Co currently prepares an annual fixed budget using incremental budgeting but is considering changing to a quarterly rolling budget. The accounts department consists of one part-qualified accountant who is always very busy. However, management want to improve the budget forecasts and improve performance over the year. There is some degree of uncertainty in Mistletoe Co's industry but the level of uncertainty is quantifiable.
The sales and cost of sales budgets for the year to 30 June 20X9 were as follows:
Q1
Q2
Q3
Q4
$
$
$
$
Sales
80,000
81,600
83,232
84,897
Cost of sales
56,000
57,120
58,262
59,428
However, at the end of Quarter 1, actual sales were $110,000 because a competitor went out of business. Senior management suggested that the revised assumption for sales growth should be 3% per quarter.
REQUIREMENT
Using a rolling budget, what should the budget for Quarter 3 sales be?
The revised budget should incorporate a 3% growth rate per quarter starting with Quarter 1's actual sales.
Q1: $110,000
Q2: $110,000 × 1.03 = $113,300
Q3: $113,300 × 1.03 = $116,699 .
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Mistletoe Co currently prepares an annual fixed budget using incremental budgeting but is considering changing to a quarterly rolling budget. The accounts department consists of one part-qualified accountant who is always very busy. However, management want to improve the budget forecasts and improve performance over the year. There is some degree of uncertainty in Mistletoe Co's industry but the level of uncertainty is quantifiable.
The sales and cost of sales budgets for the year to 30 June 20X9 were as follows:
Q1
Q2
Q3
Q4
$
$
$
$
Sales
80,000
81,600
83,232
84,897
Cost of sales
56,000
57,120
58,262
59,428
However, at the end of Quarter 1, actual sales were $110,000 because a competitor went out of business. Senior management suggested that the revised assumption for sales growth should be 3% per quarter.
REQUIREMENT
Which TWO of the following methods could Mistletoe Co use to reduce the element of uncertainty in its budgets?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Mistletoe Co currently prepares an annual fixed budget using incremental budgeting but is considering changing to a quarterly rolling budget. The accounts department consists of one part-qualified accountant who is always very busy. However, management want to improve the budget forecasts and improve performance over the year. There is some degree of uncertainty in Mistletoe Co's industry but the level of uncertainty is quantifiable.
The sales and cost of sales budgets for the year to 30 June 20X9 were as follows:
Q1
Q2
Q3
Q4
$
$
$
$
Sales
80,000
81,600
83,232
84,897
Cost of sales
56,000
57,120
58,262
59,428
However, at the end of Quarter 1, actual sales were $110,000 because a competitor went out of business. Senior management suggested that the revised assumption for sales growth should be 3% per quarter.
REQUIREMENT
Based on the actual sales for Quarter 1, what should the budget for Quarter 1 cost of sales be?
$ _______
Note . Don't put $ sign. Write only numbers.
The cost of sales in the original budget was 70% of sales.
$56,000/$80,000 × 100% = 70%
$57,120/$81,600 × 100% = 70%
$58,262/$83,232 × 100% = 70%
Therefore the revised cost of sales budget for Quarter 1 = $110,000 × 70% = $77,000
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Mistletoe Co currently prepares an annual fixed budget using incremental budgeting but is considering changing to a quarterly rolling budget. The accounts department consists of one part-qualified accountant who is always very busy. However, management want to improve the budget forecasts and improve performance over the year. There is some degree of uncertainty in Mistletoe Co's industry but the level of uncertainty is quantifiable.
The sales and cost of sales budgets for the year to 30 June 20X9 were as follows:
Q1
Q2
Q3
Q4
$
$
$
$
Sales
80,000
81,600
83,232
84,897
Cost of sales
56,000
57,120
58,262
59,428
However, at the end of Quarter 1, actual sales were $110,000 because a competitor went out of business. Senior management suggested that the revised assumption for sales growth should be 3% per quarter.
REQUIREMENT
Are the following statements about incremental budgeting for Mistletoe Co true or false?
It compounds budgetary slack.
It discourages efforts to improve performance.
It involves more time and effort than other methods.
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Question – u003cstrongu003eBirch Cou003c/strongu003e u003cstrongu003e- (04/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Birch Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Birch Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Birch Co budgeted to make and sell 20,000 units of Product X in a four-week period, as follows:
$
Budgeted sales ($4 per unit per week)
80,000
Variable costs ($2.50 per unit)
50,000
Contribution
30,000
Fixed costs
3,000
Profit
27,000
The actual results for the period were as follows.
$
Budgeted sales ($4 per unit)
64,000
Variable costs ($2.50 per unit)
40,000
Contribution
24,000
Fixed costs
3,000
Profit
21,000
In retrospect, it is decided that the optimum budget would have been to sell only 17,500 units in the period.
REQUIREMENT
What is the sales volume operational variance?
The operational variance is calculated in a similar way to the planning variance, except that actual results are compared with the revised standard or budget.
Actual sales volume
16,000 units
Revised sales volume
17,500 units
Operational sales volume variance in units
1,500 units (A)
× standard contribution per unit
$1.5
Operational sales volume variance in $ contribution
2,250 (A)
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Birch Co budgeted to make and sell 20,000 units of Product X in a four-week period, as follows:
$
Budgeted sales ($4 per unit per week)
80,000
Variable costs ($2.50 per unit)
50,000
Contribution
30,000
Fixed costs
3,000
Profit
27,000
The actual results for the period were as follows.
$
Budgeted sales ($4 per unit)
64,000
Variable costs ($2.50 per unit)
40,000
Contribution
24,000
Fixed costs
3,000
Profit
21,000
In retrospect, it is decided that the optimum budget would have been to sell only 17,500 units in the period.
REQUIREMENT
A manager in Birch Co asked for the market share variance. Which of the following variances was she looking for?
Select an answer The sales price planning variance The sales price operational variance The sales volume planning variance The sales volume operational variance
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Birch Co budgeted to make and sell 20,000 units of Product X in a four-week period, as follows:
$
Budgeted sales ($4 per unit per week)
80,000
Variable costs ($2.50 per unit)
50,000
Contribution
30,000
Fixed costs
3,000
Profit
27,000
The actual results for the period were as follows.
$
Budgeted sales ($4 per unit)
64,000
Variable costs ($2.50 per unit)
40,000
Contribution
24,000
Fixed costs
3,000
Profit
21,000
In retrospect, it is decided that the optimum budget would have been to sell only 17,500 units in the period.
REQUIREMENT
What is the sales volume planning variance?
The sales volume planning variance compares the revised budget with the original budget.
It may be called a market size variance.
Revised sales volume
17,500 units
Original budgeted sales volume
20,000 units
Sales volume planning variance in units of sales
2,500 units (A)
× standard contribution per unit
$1.5
Sales volume planning variance in $
3,750 (A)
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Birch Co budgeted to make and sell 20,000 units of Product X in a four-week period, as follows:
$
Budgeted sales ($4 per unit per week)
80,000
Variable costs ($2.50 per unit)
50,000
Contribution
30,000
Fixed costs
3,000
Profit
27,000
The actual results for the period were as follows.
$
Budgeted sales ($4 per unit)
64,000
Variable costs ($2.50 per unit)
40,000
Contribution
24,000
Fixed costs
3,000
Profit
21,000
In retrospect, it is decided that the optimum budget would have been to sell only 17,500 units in the period.
REQUIREMENT
Which of the following factors would contribute to a planning variance in Birch Co?
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Birch Co budgeted to make and sell 20,000 units of Product X in a four-week period, as follows:
$
Budgeted sales ($4 per unit per week)
80,000
Variable costs ($2.50 per unit)
50,000
Contribution
30,000
Fixed costs
3,000
Profit
27,000
The actual results for the period were as follows.
$
Budgeted sales ($4 per unit)
64,000
Variable costs ($2.50 per unit)
40,000
Contribution
24,000
Fixed costs
3,000
Profit
21,000
In retrospect, it is decided that the optimum budget would have been to sell only 17,500 units in the period.
REQUIREMENT
In a subsequent 4-week period, Birch Co decided to adopt absorption costing and actual fixed costs were $3,500. There were 18,000 units produced. The budgeted fixed costs were $3,000 based on budgeted production of 17,500 units.
What is the fixed production overhead total variance?
Fixed production overhead total variance:
Units produced × standard fixed costs per unit – actual cost
[18,000 × ($3,000/17,500 units)] – $3,500
[18,000 × ($3,000/17,500 units)] – $3,500
[18,000 × 0.17] – $3,500
$3,060 – $3,500 = $440 (A)
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Question – u003cstrongu003eOrganic Bread Cou003c/strongu003e u003cstrongu003e- (05/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Organic Bread Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Organic Bread Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
The Organic Bread Company (OBC) makes a range of breads for sale direct to the public. The production process begins with workers weighing out ingredients on electronic scales and then placing them in a machine for mixing. A worker then manually removes the mix from the machine and shapes it into loaves by hand, after which the bread is placed into the oven for baking.
All baked loaves are then inspected by OBC's quality inspector before they are packaged up and made ready for sale. Any loaves which fail the inspection are donated to a local food bank.
The standard cost card for OBC's 'Mixed Bloomer', one of its most popular loaves, is as follows:
$
White flour
450 grams
at $1.80 per kg
0.81
Wholegrain flour
150 grams
at $2.20 per kg
0.33
Yeast
10 grams
at $20 per kg
0.20
Total
610 grams
1.34
Budgeted production of Mixed Bloomers was 1,000 units for the quarter, although actual production was only 950 units. The total actual quantities used and their actual costs were:
Kg
$ per kg
White flour
408.50
1.90
Wholegrain flour
152.0
2.10
Yeast
10.0
20.00
Total
570.5
REQUIREMENT
Which of the following statements would result in a material mix variance in Organic Bread Company?
The production manager in Organic Bread Co deviates from the standard mix.
The selling price of the Mixed Bloomer changes.
An inferior quality of flour or yeast is used unknowingly.
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
The Organic Bread Company (OBC) makes a range of breads for sale direct to the public. The production process begins with workers weighing out ingredients on electronic scales and then placing them in a machine for mixing. A worker then manually removes the mix from the machine and shapes it into loaves by hand, after which the bread is placed into the oven for baking.
All baked loaves are then inspected by OBC's quality inspector before they are packaged up and made ready for sale. Any loaves which fail the inspection are donated to a local food bank.
The standard cost card for OBC's 'Mixed Bloomer', one of its most popular loaves, is as follows:
$
White flour
450 grams
at $1.80 per kg
0.81
Wholegrain flour
150 grams
at $2.20 per kg
0.33
Yeast
10 grams
at $20 per kg
0.20
Total
610 grams
1.34
Budgeted production of Mixed Bloomers was 1,000 units for the quarter, although actual production was only 950 units. The total actual quantities used and their actual costs were:
Kg
$ per kg
White flour
408.50
1.90
Wholegrain flour
152.0
2.10
Yeast
10.0
20.00
Total
570.5
REQUIREMENT
What is the favourable materials usage variance (to two decimal places)?
Note . You are not required to put $ sign.
Std usage for actual output 950 units
'Should have used'
Actual usage
'Did use'
Variance
Standard cost
per kg
Variance
kg
kg
kg
$
$
White flour
427.50
408.50
19.00 (F)
1.80
34.20 (F)
Wholegrain flour
142.50
152.00
9.50 (A)
2.20
20.90 (A)
Yeast
9.50
10.00
0.50 (A)
20.00
10.00 (A)
579.50
570.50
3.30 (F)
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
The Organic Bread Company (OBC) makes a range of breads for sale direct to the public. The production process begins with workers weighing out ingredients on electronic scales and then placing them in a machine for mixing. A worker then manually removes the mix from the machine and shapes it into loaves by hand, after which the bread is placed into the oven for baking.
All baked loaves are then inspected by OBC's quality inspector before they are packaged up and made ready for sale. Any loaves which fail the inspection are donated to a local food bank.
The standard cost card for OBC's 'Mixed Bloomer', one of its most popular loaves, is as follows:
$
White flour
450 grams
at $1.80 per kg
0.81
Wholegrain flour
150 grams
at $2.20 per kg
0.33
Yeast
10 grams
at $20 per kg
0.20
Total
610 grams
1.34
Budgeted production of Mixed Bloomers was 1,000 units for the quarter, although actual production was only 950 units. The total actual quantities used and their actual costs were:
Kg
$ per kg
White flour
408.50
1.90
Wholegrain flour
152.0
2.10
Yeast
10.0
20.00
Total
570.5
REQUIREMENT
Which of the following statements would result in an adverse material yield variance in Organic Bread Company?
Not fully removing the mix out of the machine, leaving some behind.
Errors in the mix causing sub-standard loaves and rejections by the quality inspector.
An unexpected increase in the cost of flour introduced by the supplier.
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
The Organic Bread Company (OBC) makes a range of breads for sale direct to the public. The production process begins with workers weighing out ingredients on electronic scales and then placing them in a machine for mixing. A worker then manually removes the mix from the machine and shapes it into loaves by hand, after which the bread is placed into the oven for baking.
All baked loaves are then inspected by OBC's quality inspector before they are packaged up and made ready for sale. Any loaves which fail the inspection are donated to a local food bank.
The standard cost card for OBC's 'Mixed Bloomer', one of its most popular loaves, is as follows:
$
White flour
450 grams
at $1.80 per kg
0.81
Wholegrain flour
150 grams
at $2.20 per kg
0.33
Yeast
10 grams
at $20 per kg
0.20
Total
610 grams
1.34
Budgeted production of Mixed Bloomers was 1,000 units for the quarter, although actual production was only 950 units. The total actual quantities used and their actual costs were:
Kg
$ per kg
White flour
408.50
1.90
Wholegrain flour
152.0
2.10
Yeast
10.0
20.00
Total
570.5
REQUIREMENT
What is the material mix variance?
Actual usage
Actual usage
in std mix
(w1)
Mix Variance
Standard cost
per kg
Mix Variance
kg
kg
kg
$
$
White flour
408.50
420.86
12.36 (F)
1.80
22.25 (F)
Wholegrain flour
152.00
140.29
11.71 (A)
2.20
25.76 (A)
Yeast
10.00
9.35
0.65 (A)
20.00
13.00 (A)
570.50
570.50
16.51 (A)
Workings
(450 ÷ 610) × 570.50 = 420.86
(150 ÷ 610) × 570.50 = 140.29
(10 ÷ 610) × 570.50 = 9.35
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
The Organic Bread Company (OBC) makes a range of breads for sale direct to the public. The production process begins with workers weighing out ingredients on electronic scales and then placing them in a machine for mixing. A worker then manually removes the mix from the machine and shapes it into loaves by hand, after which the bread is placed into the oven for baking.
All baked loaves are then inspected by OBC's quality inspector before they are packaged up and made ready for sale. Any loaves which fail the inspection are donated to a local food bank.
The standard cost card for OBC's 'Mixed Bloomer', one of its most popular loaves, is as follows:
$
White flour
450 grams
at $1.80 per kg
0.81
Wholegrain flour
150 grams
at $2.20 per kg
0.33
Yeast
10 grams
at $20 per kg
0.20
Total
610 grams
1.34
Budgeted production of Mixed Bloomers was 1,000 units for the quarter, although actual production was only 950 units. The total actual quantities used and their actual costs were:
Kg
$ per kg
White flour
408.50
1.90
Wholegrain flour
152.0
2.10
Yeast
10.0
20.00
Total
570.5
REQUIREMENT
What is the material yield variance?
Units
570.50 kg should produce (x 0.610)
935.25
They did produce
950.00
Yield variance in units of output
14.75 (F)
Standard material cost per unit
$1.34
Yield variance in $
$19.77 (F)
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Question – u003cstrongu003eu003cstrongu003eElm Cou003c/strongu003eu003c/strongu003e u003cstrongu003e- (06/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Elm Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Elm Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Elm Co is a company which operates in Sealand. Elm Co budgeted to sell 25,000 units of a new product during the year. The budgeted sales price was $8 per unit, and the variable cost $4 per unit.
Actual sales during the year were 22,000 units and variable costs of sales were $88,000. Sales revenue was only $9 per unit. With the benefit of hindsight, it is realised that the budgeted sales price of $8 was too low, and a price of $10 per unit would have been much more realistic.
REQUIREMENT
Are the following statements about Elm Co true or false?
The operational manager of Elm Co should examine each variance in isolation only.
A change in economic conditions in Sealand will result in operational variances.
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Elm Co is a company which operates in Sealand. Elm Co budgeted to sell 25,000 units of a new product during the year. The budgeted sales price was $8 per unit, and the variable cost $4 per unit.
Actual sales during the year were 22,000 units and variable costs of sales were $88,000. Sales revenue was only $9 per unit. With the benefit of hindsight, it is realised that the budgeted sales price of $8 was too low, and a price of $10 per unit would have been much more realistic.
REQUIREMENT
What is the favourable sales price planning variance?
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
$ per unit
Original budgeted sales price
8
Revised budgeted sales price
10
Sales price planning variance
2 (F)
× actual units sold
22,000
Planning variance for sales price
44,000 (F)
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Elm Co is a company which operates in Sealand. Elm Co budgeted to sell 25,000 units of a new product during the year. The budgeted sales price was $8 per unit, and the variable cost $4 per unit.
Actual sales during the year were 22,000 units and variable costs of sales were $88,000. Sales revenue was only $9 per unit. With the benefit of hindsight, it is realised that the budgeted sales price of $8 was too low, and a price of $10 per unit would have been much more realistic.
REQUIREMENT
Are the following statements about Elm Co true or false?
The sales manager of Elm Co should be held responsible if an unfavourable planning sales price variance is found.
It is possible for the revised price to be manipulated and revised to a level whereby a favourable operational sales price could be found.
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Elm Co is a company which operates in Sealand. Elm Co budgeted to sell 25,000 units of a new product during the year. The budgeted sales price was $8 per unit, and the variable cost $4 per unit.
Actual sales during the year were 22,000 units and variable costs of sales were $88,000. Sales revenue was only $9 per unit. With the benefit of hindsight, it is realised that the budgeted sales price of $8 was too low, and a price of $10 per unit would have been much more realistic.
REQUIREMENT
What is the adverse sales price operational variance?
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
$
Actual sales revenue
198,000
Should have sold for (× $10)
220,000
Operational (selling price) variance
22,000 (A)
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Elm Co is a company which operates in Sealand. Elm Co budgeted to sell 25,000 units of a new product during the year. The budgeted sales price was $8 per unit, and the variable cost $4 per unit.
Actual sales during the year were 22,000 units and variable costs of sales were $88,000. Sales revenue was only $9 per unit. With the benefit of hindsight, it is realised that the budgeted sales price of $8 was too low, and a price of $10 per unit would have been much more realistic.
REQUIREMENT
In a subsequent year, the cost of labour was $73,000. 4,000 hours were worked. The budgeted cost of labour was $15 per labour hour.
What is the adverse labour rate variance for this subsequent year?
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
$
4,000 hours should have cost (× $15)
60,000
But did cost
73,000
Labour rate variance
13,000 (A)
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Question – u003cstrongu003eMaple Cou003c/strongu003e u003cstrongu003e- (07/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Maple Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Maple Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
A company made a product called Bark. Bark had a standard direct material cost in the budget of:
2.5 kg of Material X at $4 per kg = $10 per unit.
The average market price for Material X during the period was $5 per kg, and it was decided to revise the material standard cost to allow for this.
During the period, 8,000 units of Bark were manufactured. They required 22,000 kg of Material X, which cost $123,000.
REQUIREMENT
What is the adverse material price operational variance?
This compares the actual price per kg of material with the revised standard price. It is calculated using the actual quantity of materials used.
$
22,000 kg of Material X should cost (revised standard $5)
110,000
They did cost
123,000
Material price operational variance
13,000 (A)
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
A company made a product called Bark. Bark had a standard direct material cost in the budget of:
2.5 kg of Material X at $4 per kg = $10 per unit.
The average market price for Material X during the period was $5 per kg, and it was decided to revise the material standard cost to allow for this.
During the period, 8,000 units of Bark were manufactured. They required 22,000 kg of Material X, which cost $123,000.
REQUIREMENT
What is the adverse material price planning variance?
This is the difference between the original standard price for Material X and the revised standard price.
$ per unit
Original standard price
4
Revised standard price
5
Material price planning variance
1 (A)
× Actual quantity of material used (22,000 kg)
22,000 (A)
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
A company made a product called Bark. Bark had a standard direct material cost in the budget of:
2.5 kg of Material X at $4 per kg = $10 per unit.
The average market price for Material X during the period was $5 per kg, and it was decided to revise the material standard cost to allow for this.
During the period, 8,000 units of Bark were manufactured. They required 22,000 kg of Material X, which cost $123,000.
REQUIREMENT
This variance is calculated by comparing the actual material usage with the standard usage in the revised standard, but is then converted into a monetary value by applying the original standard price for the materials, not the revised standard price.
kg of X
8,000 units of Bark should use (× 2.5kg)
20,000
They did use
22,000
Material usage (operational) variance in kg of X
2,000 (A)
Original standard price per kg of Material X
$4
Material usage (operational) variance in $
$8,000 (A)
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
A company made a product called Bark. Bark had a standard direct material cost in the budget of:
2.5 kg of Material X at $4 per kg = $10 per unit.
The average market price for Material X during the period was $5 per kg, and it was decided to revise the material standard cost to allow for this.
During the period, 8,000 units of Bark were manufactured. They required 22,000 kg of Material X, which cost $123,000.
REQUIREMENT
Are the following possible reasons for a material price planning variance valid or invalid?
Maple Co failed to order a sufficient amount of Material X for production from the main supplier. They sourced the rest of the material from another supplier at a higher price to make up for this.
There was a disruption to the supply of Material X to the market.
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
A company made a product called Bark. Bark had a standard direct material cost in the budget of:
2.5 kg of Material X at $4 per kg = $10 per unit.
The average market price for Material X during the period was $5 per kg, and it was decided to revise the material standard cost to allow for this.
During the period, 8,000 units of Bark were manufactured. They required 22,000 kg of Material X, which cost $123,000.
REQUIREMENT
Are the following statements about variances in Maple Co true or false?
Any operational variances arising should be a realistic measure of what the causes of the variances have cost Maple Co.
The causes of the planning variances should not be investigated immediately by the operational manager in Maple Co.
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Question – u003cstrongu003ePine Cou003c/strongu003e u003cstrongu003e- (08/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Pine Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Pine Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Pine Co makes a single product. At the beginning of the budget year, the standard labour cost was established as $45 per unit, and each unit should take three hours to make.
However, during the year, the standard labour cost was revised. The labour rate was reduced to $14 per hour, and the revised labour time was 4.5 hours per unit.
In the first month after revision of the standard cost, budgeted production was 10,000 units but only 8,000 units were actually produced. These took 24,300 hours of labour time, which cost $352,350.
REQUIREMENT
What is the favourable labour rate planning variance?
This is the difference between the original standard rate per hour and the revised standard rate per hour.
$ per hour
Original standard price
15
Revised standard price
14
Labour rate planning variance
2 (F)
× actual no of hours worked
24,300
24,300 (F)
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Pine Co makes a single product. At the beginning of the budget year, the standard labour cost was established as $45 per unit, and each unit should take three hours to make.
However, during the year, the standard labour cost was revised. The labour rate was reduced to $14 per hour, and the revised labour time was 4.5 hours per unit.
In the first month after revision of the standard cost, budgeted production was 10,000 units but only 8,000 units were actually produced. These took 24,300 hours of labour time, which cost $352,350.
REQUIREMENT
Are the following statements about labour variances in Pine Co true or false?
Production management's motivation is likely to increase if they know they will not be held responsible for poor planning and faulty standard setting.
Planning variances will provide a more realistic and fair reflection of actual performance.
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Pine Co makes a single product. At the beginning of the budget year, the standard labour cost was established as $45 per unit, and each unit should take three hours to make.
However, during the year, the standard labour cost was revised. The labour rate was reduced to $14 per hour, and the revised labour time was 4.5 hours per unit.
In the first month after revision of the standard cost, budgeted production was 10,000 units but only 8,000 units were actually produced. These took 24,300 hours of labour time, which cost $352,350.
REQUIREMENT
What is the favourable labour efficiency operational variance?
This is the difference between the original standard time per unit and the revised standard time for the quantity of units produced.
Hours
8,000 units of product should take (× 4.5 hours)
36,000
They did take
24,300
Labour efficiency (operational variance in hours)
11,700 (F)
Original standard rate per hour
$15
Labour efficiency (operational variance in $)
$175,500 (F)
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Pine Co makes a single product. At the beginning of the budget year, the standard labour cost was established as $45 per unit, and each unit should take three hours to make.
However, during the year, the standard labour cost was revised. The labour rate was reduced to $14 per hour, and the revised labour time was 4.5 hours per unit.
In the first month after revision of the standard cost, budgeted production was 10,000 units but only 8,000 units were actually produced. These took 24,300 hours of labour time, which cost $352,350.
REQUIREMENT
What is the adverse labour efficiency planning variance?
This is the difference between the original standard time per unit and the revised standard time for the quantity of units produced.
Hours
8,000 units of product should take: original standard (× 3)
24,000
8,000 units of product should take: revised standard (× 4.5)
36,000
Labour efficiency planning variance in hours
12,000 (A)
Original standard rate per hour
$15
Labour efficiency planning variance in $
$180,000 (A)
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Pine Co makes a single product. At the beginning of the budget year, the standard labour cost was established as $45 per unit, and each unit should take three hours to make.
However, during the year, the standard labour cost was revised. The labour rate was reduced to $14 per hour, and the revised labour time was 4.5 hours per unit.
In the first month after revision of the standard cost, budgeted production was 10,000 units but only 8,000 units were actually produced. These took 24,300 hours of labour time, which cost $352,350.
REQUIREMENT
What is the adverse labour rate operational variance?
This is calculated using the actual number of hours worked and paid for.
$
24,300 hours should cost (revised standard $14)
340,000
They did cost
352,350
Labour rate operational variance
12,150 (A)
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Question – u003cstrongu003eKiss Cou003c/strongu003e u003cstrongu003e- (09/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Kiss Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Kiss Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 241 – 245.
Scenario
Kiss Co has developed a new product. The first batch of 200 units will take 3,500 labour hours to produce. There will be a 75% learning curve that will continue until 4,800 units have been produced. Batches after this level will each take the same amount of time as the 24th batch. The batch size will always be 200 units.
Note . The learning index for a 75% learning curve is –0.415
Ignore the time value of money.
REQUIREMENT
Kiss Co makes another product, the Lyco. The learning effect stopped after the 16th batch of product, and a 'steady state' was reached. Workers in Kiss Co received $15 per hour.
The first batch of Lyco took 0.75 hours to produce. The 16th batch of Lyco took 0.5 hours, and the standard cost was revised to this figure once the 'steady state' was reached. Kiss Co produced 10,000 batches of Lyco during the year.
What is the favourable labour efficiency planning variance?
Hours
10,000 batches of product should take: original standard (× 0.75)
7,500
10,000 batches of product should take: revised standard (× 0.5)
5,000
Labour efficiency planning variance in hours
2,500 (F)
Original standard rate per hour
$15
Labour efficiency planning variance in $
$37,500 (F)
2 / 5
The following scenario relates to questions 241 – 245.
Scenario
Kiss Co has developed a new product. The first batch of 200 units will take 3,500 labour hours to produce. There will be a 75% learning curve that will continue until 4,800 units have been produced. Batches after this level will each take the same amount of time as the 24th batch. The batch size will always be 200 units.
Note . The learning index for a 75% learning curve is –0.415
Ignore the time value of money.
REQUIREMENT
In which of the following ways might an operational manager in Kiss Co try to improve labour efficiency and achieve favourable labour efficiency variances?
3 / 5
The following scenario relates to questions 241 – 245.
Scenario
Kiss Co has developed a new product. The first batch of 200 units will take 3,500 labour hours to produce. There will be a 75% learning curve that will continue until 4,800 units have been produced. Batches after this level will each take the same amount of time as the 24th batch. The batch size will always be 200 units.
Note . The learning index for a 75% learning curve is –0.415
Ignore the time value of money.
REQUIREMENT
Are the following statements about Kiss Co true or false?
Because of the learning effect, the labour efficiency planning variance of Lyco will always be favourable.
A standard labour cost should only be established when a 'steady state' is reached.
4 / 5
The following scenario relates to questions 241 – 245.
Scenario
Kiss Co has developed a new product. The first batch of 200 units will take 3,500 labour hours to produce. There will be a 75% learning curve that will continue until 4,800 units have been produced. Batches after this level will each take the same amount of time as the 24th batch. The batch size will always be 200 units.
Note . The learning index for a 75% learning curve is –0.415
Ignore the time value of money.
REQUIREMENT
What is the time taken for the 24th batch (to the nearest hour)?
______ hours (e.g. 1000)
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
Time taken for the 24th batch
Cumulative average time per batch for the first 24 batches
Y = axᵇ
Where
Y = the cumulative average time per unit to produce × units
x = the cumulative number of units
a = the time taken for the first unit of output
b = the index of learning (logLR/log2)
The cumulative average time per batch, with a learning curve of 75%, is therefore
Y = aX⁻⁰ꞏ⁴¹⁵
where a = the time for the first batch (3,500 hours) and X is the number of the batch. For the 24th batch,
X = 24.
Y = 3,500 × 24⁻⁰ꞏ⁴¹⁵
= 3,500 × 0.2674 = 936
The cumulative average time per batch for the first 24 batches is 936 hours.
The cumulative average time per batch for the first 23 batches is Y = 3,500 × 23–0.415 = 3,500 × 0.2722 = 952.7
Hours
Total time for 1st 24 batches (24 × 936)
22,464.0
Total time for 1st 23 batches (23 × 952.7)
21,912.1
Time for the 24th batch
551.9
5 / 5
The following scenario relates to questions 241 – 245.
Scenario
Kiss Co has developed a new product. The first batch of 200 units will take 3,500 labour hours to produce. There will be a 75% learning curve that will continue until 4,800 units have been produced. Batches after this level will each take the same amount of time as the 24th batch. The batch size will always be 200 units.
Note . The learning index for a 75% learning curve is –0.415
Ignore the time value of money.
REQUIREMENT
The total time for the first 16 batches of units was 22,000 hours.
What was the actual learning rate, to the nearest %?
______ % (e.g. 1000)
Note . You are not required to put % sign nor any coma. (e.g. 1000)
Batches
Hours
1
3,500
2
Doubled once
4
Doubled twice
8
Doubled three times
16
Doubled four times
22,000
Cumulative average time per batch = 22,000 / 16 = 1,375
1,375 = 3,500 r⁴
r = 0.79 or 79%
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Question – u003cstrongu003eHollie Hotels Cou003c/strongu003e u003cstrongu003e- (10/10)u003c/strongu003e
F5 (PM) - Part D - MCQs - Hollie Hotels Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: D - Budgeting and control
Question Name: Hollie Hotels Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Hollie Hotels Co operates a chain of upmarket hotels across the country of Westland. Each hotel manager is responsible for producing an annual budget, based on targets set by head office.
Online budget training is available for all managers. Hollie Hotels Co has recently updated its information system and it is capable of providing extensive cost information for managers.
Managers find the new system easy to use.
20X0 and 20X1
In 20X1, Hollie Hotels Co used incremental budgeting based on the previous year's actual results. Estimated cost inflation was 5% and occupancy was estimated to be two percentage points higher than 20X0. Hollie Hotel – Northwest is a typical hotel in the chain and opens for 360 days a year. The budgeted and actual results for Hollie Hotel – Northwest in 20X0 were as follows:
Budget
(Y/e Nov 20X0)
Actual
(Y/e Nov 20X0)
Number of rooms available
20
Occupancy
80%
75%
Revenue per room per night (average)
$120
$110
Variable cost per room per night (average)
$30
$40
Fixed costs
$125,000
$130,000
20X2
According to targets set by head office for 20X2, the company hoped to raise total revenue by 7% and total profit by 14%. By the end of the year, total profits had only increased by 9% because of a lack of cost control.
20X3
Hollie Hotels Co is considering whether zero-based budgeting (ZBB) would be beneficial, given the 20X2 results.
REQUIREMENT
Which TWO of the following problems relating to ZBB would apply to Hollie Hotels Co?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Hollie Hotels Co operates a chain of upmarket hotels across the country of Westland. Each hotel manager is responsible for producing an annual budget, based on targets set by head office.
Online budget training is available for all managers. Hollie Hotels Co has recently updated its information system and it is capable of providing extensive cost information for managers.
Managers find the new system easy to use.
20X0 and 20X1
In 20X1, Hollie Hotels Co used incremental budgeting based on the previous year's actual results. Estimated cost inflation was 5% and occupancy was estimated to be two percentage points higher than 20X0. Hollie Hotel – Northwest is a typical hotel in the chain and opens for 360 days a year. The budgeted and actual results for Hollie Hotel – Northwest in 20X0 were as follows:
Budget
(Y/e Nov 20X0)
Actual
(Y/e Nov 20X0)
Number of rooms available
20
Occupancy
80%
75%
Revenue per room per night (average)
$120
$110
Variable cost per room per night (average)
$30
$40
Fixed costs
$125,000
$130,000
20X2
According to targets set by head office for 20X2, the company hoped to raise total revenue by 7% and total profit by 14%. By the end of the year, total profits had only increased by 9% because of a lack of cost control.
20X3
Hollie Hotels Co is considering whether zero-based budgeting (ZBB) would be beneficial, given the 20X2 results.
REQUIREMENT
What is the total budgeted profit for Hollie Hotel – Northwest for 20X1 (to the nearest whole dollar)? (e.g. 1000)
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
The incremental budget is based on the previous year's actual results.
Budgeted contribution per room per night for 20X1 = $110 – ($40 × 105%) = $68
20X1 budget
$
Contribution (360 days × 20 rooms × 77% occupancy × $68)
376,992
Fixed costs ($130,000 × 105%)
(136,500)
Profit
240,492
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Hollie Hotels Co operates a chain of upmarket hotels across the country of Westland. Each hotel manager is responsible for producing an annual budget, based on targets set by head office.
Online budget training is available for all managers. Hollie Hotels Co has recently updated its information system and it is capable of providing extensive cost information for managers.
Managers find the new system easy to use.
20X0 and 20X1
In 20X1, Hollie Hotels Co used incremental budgeting based on the previous year's actual results. Estimated cost inflation was 5% and occupancy was estimated to be two percentage points higher than 20X0. Hollie Hotel – Northwest is a typical hotel in the chain and opens for 360 days a year. The budgeted and actual results for Hollie Hotel – Northwest in 20X0 were as follows:
Budget
(Y/e Nov 20X0)
Actual
(Y/e Nov 20X0)
Number of rooms available
20
Occupancy
80%
75%
Revenue per room per night (average)
$120
$110
Variable cost per room per night (average)
$30
$40
Fixed costs
$125,000
$130,000
20X2
According to targets set by head office for 20X2, the company hoped to raise total revenue by 7% and total profit by 14%. By the end of the year, total profits had only increased by 9% because of a lack of cost control.
20X3
Hollie Hotels Co is considering whether zero-based budgeting (ZBB) would be beneficial, given the 20X2 results.
REQUIREMENT
Three months into 20X3, Hollie Hotels Co looks at the results and forecasts of its hotels.
Which of the following situations describes feedforward control?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Hollie Hotels Co operates a chain of upmarket hotels across the country of Westland. Each hotel manager is responsible for producing an annual budget, based on targets set by head office.
Online budget training is available for all managers. Hollie Hotels Co has recently updated its information system and it is capable of providing extensive cost information for managers.
Managers find the new system easy to use.
20X0 and 20X1
In 20X1, Hollie Hotels Co used incremental budgeting based on the previous year's actual results. Estimated cost inflation was 5% and occupancy was estimated to be two percentage points higher than 20X0. Hollie Hotel – Northwest is a typical hotel in the chain and opens for 360 days a year. The budgeted and actual results for Hollie Hotel – Northwest in 20X0 were as follows:
Budget
(Y/e Nov 20X0)
Actual
(Y/e Nov 20X0)
Number of rooms available
20
Occupancy
80%
75%
Revenue per room per night (average)
$120
$110
Variable cost per room per night (average)
$30
$40
Fixed costs
$125,000
$130,000
20X2
According to targets set by head office for 20X2, the company hoped to raise total revenue by 7% and total profit by 14%. By the end of the year, total profits had only increased by 9% because of a lack of cost control.
20X3
Hollie Hotels Co is considering whether zero-based budgeting (ZBB) would be beneficial, given the 20X2 results.
REQUIREMENT
Are the following statements about zero-based budgeting for Hollie Hotels Co true or false?
ZBB is particularly useful for cost reduction exercises.
ZBB is particularly useful for cost structures such as Hollie Hotels Co's.
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Hollie Hotels Co operates a chain of upmarket hotels across the country of Westland. Each hotel manager is responsible for producing an annual budget, based on targets set by head office.
Online budget training is available for all managers. Hollie Hotels Co has recently updated its information system and it is capable of providing extensive cost information for managers.
Managers find the new system easy to use.
20X0 and 20X1
In 20X1, Hollie Hotels Co used incremental budgeting based on the previous year's actual results. Estimated cost inflation was 5% and occupancy was estimated to be two percentage points higher than 20X0. Hollie Hotel – Northwest is a typical hotel in the chain and opens for 360 days a year. The budgeted and actual results for Hollie Hotel – Northwest in 20X0 were as follows:
Budget
(Y/e Nov 20X0)
Actual
(Y/e Nov 20X0)
Number of rooms available
20
Occupancy
80%
75%
Revenue per room per night (average)
$120
$110
Variable cost per room per night (average)
$30
$40
Fixed costs
$125,000
$130,000
20X2
According to targets set by head office for 20X2, the company hoped to raise total revenue by 7% and total profit by 14%. By the end of the year, total profits had only increased by 9% because of a lack of cost control.
20X3
Hollie Hotels Co is considering whether zero-based budgeting (ZBB) would be beneficial, given the 20X2 results.
REQUIREMENT
If Hollie Hotels Co changed to zero-based budgeting, In which order the following steps should be carried out?
Allocation of resources
Identification of decision packages – base level
Evaluation and ranking of each activity
Identification of decision packages – incremental packages
2, 4, 3, 1
4, 1, 3, 2
3, 4, 1, 2
2, 1, 4, 3
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