The following scenario relates to questions 1 – 5

Scenario

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400 units have been produced. Batches after this level will each take the same amount of time as the 64th batch. The batch size will always be 100 units.

Note. The learning index for an 85% learning curve is –0.2345

Ignore the time value of money.

REQUIREMENT

What is the cumulative average time per batch for the first 64 batches?

The following scenario relates to questions 1 – 5

Scenario

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400 units have been produced. Batches after this level will each take the same amount of time as the 64th batch. The batch size will always be 100 units.

Note. The learning index for an 85% learning curve is –0.2345

Ignore the time value of money.

REQUIREMENT

The total time for the first 16 batches of 100 units was 9,000 hours.

What was the actual learning rate closest to (to the nearest %)?

Note. Don't put % sign. Write only numbers (whole numbers).

The following scenario relates to questions 1 – 5

Scenario

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400 units have been produced. Batches after this level will each take the same amount of time as the 64th batch. The batch size will always be 100 units.

Note. The learning index for an 85% learning curve is –0.2345

Ignore the time value of money.

REQUIREMENT

Which of the following conditions, if present in Crush Co, would allow the learning curve to flourish?

The following scenario relates to questions 1 – 5

Scenario

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400 units have been produced. Batches after this level will each take the same amount of time as the 64th batch. The batch size will always be 100 units.

Note. The learning index for an 85% learning curve is –0.2345

Ignore the time value of money.

REQUIREMENT

Are the following statements about the learning curve true or false?

1. The learning curve must assume a certain degree of motivation among employees of Crush Co.
2. The learning curve phenomenon is not always present.

The following scenario relates to questions 1 – 5

Scenario

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400 units have been produced. Batches after this level will each take the same amount of time as the 64th batch. The batch size will always be 100 units.

Note. The learning index for an 85% learning curve is –0.2345

Ignore the time value of money.

REQUIREMENT

The following statements have been made about Crush Co and the learning curve:

1. Decisions about allocating resources and costing the new product should be based on the time taken to produce the 64th batch.
2. The learning process does not start until the second batch comes off the production line.

Which of the above statements is/are true?

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).

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?

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:

1. The learning effect comes to an end in BBB Co after the 71st unit; however, some learning effects can continue indefinitely.
2. The learning curve is restricted to the manufacturing industry.

Which of the above statements is/are true?

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?

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?

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:

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?

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:

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?

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:

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 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:

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 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:

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?

1. It compounds budgetary slack.
2. It discourages efforts to improve performance.
3. It involves more time and effort than other methods.

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:

The actual results for the period were as follows.

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?

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:

The actual results for the period were as follows.

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?

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:

The actual results for the period were as follows.

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?

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:

The actual results for the period were as follows.

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 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:

The actual results for the period were as follows.

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 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:

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:

REQUIREMENT

What is the material yield variance?

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:

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:

REQUIREMENT

Which of the following statements would result in a material mix variance in Organic Bread Company?

1. The production manager in Organic Bread Co deviates from the standard mix.
2. The selling price of the Mixed Bloomer changes.
3. An inferior quality of flour or yeast is used unknowingly.

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:

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:

REQUIREMENT

What is the material mix variance?

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:

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:

REQUIREMENT

What is the favourable materials usage variance (to two decimal places)?

Note. You are not required to put $ sign.

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:

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:

REQUIREMENT

Which of the following statements would result in an adverse material yield variance in Organic Bread Company?

1. Not fully removing the mix out of the machine, leaving some behind.
2. Errors in the mix causing sub-standard loaves and rejections by the quality inspector.
3. An unexpected increase in the cost of flour introduced by the supplier.

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?

1. The sales manager of Elm Co should be held responsible if an unfavourable planning sales price variance is found.
2. It is possible for the revised price to be manipulated and revised to a level whereby a favourable operational sales price could be found.

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?

1. The operational manager of Elm Co should examine each variance in isolation only.
2. A change in economic conditions in Sealand will result in operational variances.

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)

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)

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)

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?

1. Any operational variances arising should be a realistic measure of what the causes of the variances have cost Maple Co.
2. The causes of the planning variances should not be investigated immediately by the operational manager in Maple Co.

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?

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

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?

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?

1. 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.
2. There was a disruption to the supply of Material X to the market.

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?

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?

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?

1. Production management's motivation is likely to increase if they know they will not be held responsible for poor planning and faulty standard setting.
2. Planning variances will provide a more realistic and fair reflection of actual performance.

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?

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?

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)

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?

1. Because of the learning effect, the labour efficiency planning variance of Lyco will always be favourable.
2. A standard labour cost should only be established when a 'steady state' is reached.

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?

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?

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)

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:

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?

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:

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?

1. Allocation of resources
2. Identification of decision packages – base level
3. Evaluation and ranking of each activity
4. Identification of decision packages – incremental packages

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:

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?

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:

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 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:

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?

1. ZBB is particularly useful for cost reduction exercises.
2. ZBB is particularly useful for cost structures such as Hollie Hotels Co's.