Question Bank Volume 2 Q

ACCA Management Accounting (F2)
Question Bank
(Volume 2)
Ibrahim Sameer
2015
ibrahimsameer@hotmail.com
Question Bank (Volume 2) 2015
Preference
The core intention of this Question Bank 2 is to provide the students the comprehensive practice
question for ACCA F2 students. The compilation of the Question bank encompass the past paper
questions of ACCA, CIMA and some other authorized tuition provider such as KAPLAN &
BPP.
Good Luck for your Exam
Ibrahim Sameer
1 Ibrahim Sameer ACCA (Management Accounting F2)

Question 1
Which of the following statements, relating to performance measurement, are true?
(1) External data are never required to assess the performance of an organisation
(2)
The degree of government regulation should be considered when comparing the performance
of public sector and private sector organisations
(3) Financial performance indicators are only relevant to private sector organisations
2 and 3
3 only
2 only
1 only
Question 2
Three activities associated with budgeting are as follows:
(1) Preparing the master budget

(2) Determining the principal budget factor
(3) Flexing the budget in line with the actual
What is the correct sequence for these activities?
2, then 3, then 1
1, then 2, then 3
2, then 1, then 3
1, then 3, then 2

Question 3
The following data for last month relate to a production process in which no work-in-progress is
held:
Input 12,800 litres

Normal loss 4% of input
Output 12,500 litres
What was the abnormal loss or abnormal gain for last month?
Abnormal gain of 200 litres
Abnormal loss of 212 litres
Abnormal gain of 212 litres
Abnormal loss of 300 litres
Question 4
The following statements refer to different types of planning in a large organisation:
(1) Strategic planning is concerned with both quantitative and qualitative matters
(2) Tactical planning is concerned with setting long term objectives
(3) Operational planning is concerned with a time horizon starting one year from now
Which of these statements is/are correct?
2 and 3
2 only
1 only
1 and 2

Question 5
A company used government produced data that showed the economy grew by 4.6% in the last
year.
Which of the following describes the data used by the company?
Secondary and continuous
Primary and continuous
Secondary and discrete
Primary and discrete

Question 6
A company manufactures two main products, J and K, and the by-product L. The by-product has
a net realisable value of $2 per litre. The following information relates to last month, when there
were no opening inventories.
Product J K L
Litres Litres Litres
Production 50,000 40,000 10,000
Sales 45,000 30,000 10,000
Joint costs last month were $290,000. Company policy is to apportion joint costs on a physical
measure basis and to treat the net realisable value of the by-product as a deduction from the cost
of the main products.
What was the cost value of last month's closing inventory of product J?
$13,500
$15,000
$16,200
$16,400

Question 7
Which of the following is NOT a dimension which is used to measure performance in

service organisations?
Quality inspection in advance
Resource utilisation
Innovation
Financial performance
Question 8
T Co usually has a quarterly labour cost of $2,500,000. Material costs (mainly copper) were
$3,000,000 in January to March. The worldwide cost of copper has increased in the second
quarter by 15%. Overheads were $45,000,000 in January to March.
Which TWO of the following variances for April to June are worth investigating as the
reasons for the variance are unknown?
Materials price variance of $450,000 adverse
Total direct labour variance of $400 adverse
Overhead expenditure variance of $4,000,000 adverse
Sales volume variance of $3,000,000 favourable
Question 9
Which of the following defines the prime cost of a product?
The total production cost of a product
The material cost of a product
The cost of making the first unit of a product
The total direct costs of a product

Question 10
Which TWO of the following statements relating to value analysis are true?
Value analysis attempts to enhance the esteem value of a product at the lowest cost
Value analysis is a planned, scientific approach to cost reduction
One of the problems with value analysis is that it discourages innovation

Cost value is the market value of the product or service
Question 11
Last month the opening inventory was 6,000 units and the closing inventory was 4,000 units.
Using absorption costing this closing inventory was valued at $33,000. Using marginal costing
last month's profit was $50,000 and using absorption costing it was $41,000.
What was the variable production cost per unit last month?
$8.25
$3.75
$4.50
$6.00
Question 12
One material is used in the manufacture of product X. The total cost of the material (purchased
and used) in a period was $4,000. In the period the direct material price and usage variances
were $200 adverse and $300 favourable respectively and 1,000 units were manufactured.
What is the standard direct material cost per unit for product X?
$3.80
$4.30
$3.90
$4.10

Question 13
Last month the total sales for XYZ Co were $960,000. A pie chart is used to show the
breakdown of sales by region for the month. South region is represented by 60 degrees on the pie
chart.
What are the sales for the month for the south region?
Question 14
Which of the following statements about payback is true?
Payback is useful as an initial screening device
Payback takes into account the time value of money
Payback is technically superior to NPV
A change in the cost of capital will affect the payback
Question 15
The following statements refer to documents used in the material procurement procedures
of XYZ Co. Is each of these statements true or false?
. TrueFalse
A goods received note is prepared by the supplier and sent with the material to XYZ
Co
A purchase requisition is prepared in the purchasing department of XYZ Co and then
sent to the supplier

Question 16
The performance of a publicly funded hospital is monitored using measures based upon the 'three
Es'. The most important performance measure is considered to be the achievement of hospital
targets for the successful treatment of patients.
Which of the three Es best describes the above measure?
Efficiency
Economy
Externality
Effectiveness

Question 17
A time series model of sales volume has the following trend and additive seasonal variation:
Trend:
Y = 5,000 + 4,000 X
where Y = quarterly sales volume in units,
X = the quarter number (where the first quarter of 20X1 = quarter 17, the second quarter of 20X1
= quarter 18, etc)
Quarter Seasonal variation

(units)
First +3,000
Second +1,000
Third -1,500
Fourth -2,500
What would be the time series forecast of sales units for the third quarter of 20X2?
95,500
97,000
79,500
98,500
Question 18
Which accounts should be debited and credited to form the correct journal entry to record
the direct labour costs charged to production?
Work-in-
Wages Production overhead
. progress
control control
control
Account to be debited
Account to be credited

Question 19
Which TWO of the following are true of imposed budgeting?
It is most effective in large organisations
Top management prepare a budget with little or no input from operating staff
It increases operational managers' commitment to organisational objectives
It reduces deliberate overestimation of costs and underestimation of revenues in a budget
Question 20
A company uses the Economic Order Quantity (EOQ) model and holds no buffer inventory. Its
annual cost of holding one unit in inventory has decreased.
What is the effect, if any, of this decrease in holding costs on the EOQ and on the total
annual cost of placing orders?
. Increase Decrease No effect

Total annual cost of placing orders
EOQ
Question 21
Which of the following are benefits of using activity based costing?
(1) It recognises that overhead costs are not always driven by the volume of production
(2) It does not result in under or over absorption of fixed overheads
(3) It avoids all arbitrary cost apportionments
(4) It is particularly useful in single product businesses
1 only
1 and 2
2 and 3
1 and 4

Question 22
Which of the following statements about standard costing are true?
(1) A standard cost is a predetermined estimated unit cost

(2) A standard cost can be used as a control device to help improve performance
(3) A standard cost card shows the unit cost details only of each product
1, 2 and 3
1 and 3 only
1 and 2 only
2 and 3 only
Question 23
Which of the following about mission statements are true?
(1) They are stated in a standard format

(2) They play an important role in the planning process
(3) They help ensure consistency in decision making
2 and 3 only
2 only
1 only
1, 2 and 3

Question 24
A company manufactures and sells a single product. Next year the budgeted total fixed
production costs are $480,000, budgeted sales are 24,000 units and budgeted production is
25,000 units. The budgeted profit for next year using absorption costing principles is $57,500.
What is the budgeted profit for next year using marginal costing principles?
$38,300
$76,700
$37,500
$77,500
Question 25
A company uses absorption costing with a predetermined hourly fixed overhead rate.
The following situations arose last year. Would each of these situations cause overheads to
be under absorbed or over absorbed?
Under Over
.
absorbedabsorbed
Actual overhead expenditure was less than the budgeted expenditure
Actual hours worked were less than the budgeted hours used to set the
predetermined overhead absorption rate
Question 26
In the last period an organisation budgeted to work 116,000 hours manufacturing 29,000 units.
Actual output last period was 26,000 units which took 108,000 hours to manufacture.
What was the labour efficiency ratio for the last period (expressed as a % correct to one
decimal place)?
89.7%
93.1%
96.3%
103.3%

Question 27
Which TWO of the following problems are associated with performance measurement in
public sector organisations?
The profit is difficult to measure
Regional benchmarking cannot be carried out
Performance measures are difficult to define
Unable to compare with the competition
Question 28
The following data relate to a process for last month:
Opening inventory 200 units (70% complete)

Completed output 2,450 units
Closing inventory 300 units (40% complete)
What were the equivalent units of production last month?

Question 29
A company uses standard marginal costing. Last month the standard contribution on actual sales
was $10,000 and the following variances arose:
$
Total variable costs variance 2,000 Adv
Sales price variance 500 Fav
Sales volume contribution variance 1,000 Adv
What was the actual contribution for last month?
$8,500
$7,000
$8,000
$7,500
Question 30
A company operates a job costing system. Job number 1207 requires $80 of direct materials and
$120 of direct labour. Direct labour is paid at a rate of $12 per hour. Direct expenses for the job
are $50. Production overheads are absorbed at a rate of $40 per direct labour hour and non-
production overheads are absorbed at a rate of 110% of prime cost.
What is the total cost of job number 1207?
Question 31
Is each of these statements about spreadsheets true or false?
. TrueFalse
A spreadsheet could be used for preparing flexible budgets for different activity levels
A spreadsheet is the most suitable software for the long term storage of large volumes
of data

Question 32
Last month an organisation's direct workers were paid $40,000 for normal working. In addition
they were paid a total of $12,000 for overtime working. Overtime hours which were required due
to a general shortage of labour were paid at time and a half.
What was the total direct labour cost for last month?
Question 33
A company manufactures and sells a single product. At the end of the manufacturing process all
units are inspected and 20% are rejected and scrapped. Next year the budgeted sales are 192,000
units and the inventory of finished units will increase by 2,000 units.
What is next year's budgeted production (in units) which will be subject to inspection?
Question 34
Which TWO of the following statements about fixed and flexible budgets are true?
Fixed budgets are useful for monitoring fixed costs

Comparison of a fixed budget with the actual results is useful for budgetary control
purposes
Flexible budgets are prepared using marginal costing techniques
Flexible budgeting assumes that most costs are semi-variable

Question 35
The budgeted costs for X Co for June are as follows:
Sales 20,000 units
$
Materials 120,000
Labour 200,000
Fixed overheads 350,000
Total cost 670,000
If the budget is flexed for 30,000 units what will be the budgeted total cost?
$1,005,000
$730,000
$770,000
$830,000
Question 36
The following information is available for two projects. Only one project can be undertaken.
Project A Project B
Internal rate of return (IRR) 16% 17%
Discounted payback period 3.6 years 4.1 years
Net present value (NPV) $18,300 $16,900
Which TWO of the following statements are true?
Ranking the projects based on discounted payback period would make project B seem
more favourable
Project A should be accepted because it has the higher NPV
Project B should be accepted because it has the higher IRR
At a cost of capital of 17% project B would have a zero NPV

Question 37
Is each of the following statements about scatter diagrams true or false?
. True False
Scatter diagrams are graphs which show equations
The x axis on a scatter diagram is used to represent the independent variable
Question 38
A company uses standard marginal costing. Last month when all sales were at the standard price,
the standard contribution from actual sales was $50,000 and the following variances arose:
$
Total variable costs variance 3,500 Adv
Total fixed costs variance 1,000 Fav
Sales volume contribution variance 2,000 Fav
What was the actual contribution for last month?

Question 39
The operating statement used by an organisation to measure the performance of its divisions is
structured as follows:
$ $ $
External sales X
Internal transfers X
Variable cost of sales (X)
Other variable divisional costs (X)
(X)
Contribution X
Depreciation on controllable non current assets (X)
Other controllable fixed costs (X)
(X)
Controllable operating profit X
Depreciation on other divisional non current assets (X)
Other traceable divisional costs (X)
(X)
Traceable divisional profit X
Apportioned head office cost (X)
Divisional net profit X
Which of the following would provide the best basis for measuring the performance of a
manager of an investment centre?
Controllable operating profit
Contribution
Traceable divisional profit
Divisional net profit

Question 40
A company uses standard costing. This year the standard labour cost of a product is $180.60 per
unit. The standard labour rate is $86.00 per hour. Last month 2,200 hours were worked and there
was an adverse labour efficiency variance of $8,600. This variance was caused entirely by new
working practices introduced by the company. The full effect of the new working practices is to
be incorporated into the new standard cost of the product for next year. In addition, a labour rate
increase of 10% is to be built into the new standard cost.
What is the standard cost per unit of the product for next year?
$198.66
$207.26
$189.20
$208.12
Question 41
Which TWO of the following statements about responsibility centres are true?
There are only two types of responsibility centre
Managers of cost centres should be accountable for controllable costs only
The performance of a profit centre is measured by its return on capital

A cost which is not controllable by a junior manager may be controllable by a senior
manager
Question 42
Which of the following methods of costing describes target costing?
A method that sets a target cost by subtracting a desired profit margin from a competitive
market price
A method that sets a target price by adding a desired profit margin to actual cost
A method that targets selected business departments and aims to minimise their costs
A method whose target is to reduce unit cost without impairing value to the customer

Question 43
A publishing company is researching the reading habits of the United Kingdom's population. It
randomly selects a number of locations from around the United Kingdom and then interviews
everyone who lives in these locations.
What is this approach to sampling known as?
Stratified sampling
Quota sampling
Systematic sampling
Cluster sampling
Question 44
A company manufactures and sells a single product. Next year the budgeted total fixed
production costs are $300,000, the budgeted sales are 100,000 units and the budgeted production
is 120,000 units. The budgeted profit for next year using absorption costing principles is
$80,000.
What is the budgeted profit for next year using marginal costing principles?
$30,000
$20,000
$140,000
$130,000

Question 45
Which of the following statements about non-financial measures are true?
(1) Non-financial measures can be useful for indicating future financial performance
(2) Non-financial measures may help to prevent short termism
Both statments are false
Statement 1 is true and statement 2 is false
Both statements are true
Statement 1 is false and statement 2 is true
Question 46
A company uses a standard absorption costing system. Last month the actual profit was
$500,000. The only variances recorded for the month were as follows.
$000
Sales volume profit variance 10 adverse
Fixed production overhead capacity variance 30 favourable
Fixed production overhead efficiency variance 40 adverse
Fixed production overhead volume variance 10 adverse
Fixed production overhead expenditure 50 favourable
Direct labour efficiency variance 15 adverse
What was the budget profit for last month?
$515,000
$485,000
$495,000
$505,000

Question 47
A company rents its factory for $90,000 per annum. This year 60,000 units have been
manufactured in the factory utilising 75% of its total capacity. Next year the plan is to
manufacture 100,000 units by using the existing factory at full capacity and by renting just
sufficient additional capacity. The additional capacity is available at the same rental cost per
square metre as the existing factory.
What is the budgeted total rental cost for next year?
Question 48
The following statements refer to qualities of good information:
(1) It should be clear and unambiguous to the recipient

(2) It should be relevant to the needs of the recipient
(3) It must be 100% accurate before the recipient uses it
Which of the above statements are correct?
1 and 3 only
2 and 3 only
1, 2 and 3
1 and 2 only

Question 49
A company uses absorption costing with a predetermined hourly fixed overhead absorption rate.
The following situations arose last month:
(1)
Actual hours worked were less than the budgeted hours used to set the
predetermined absorption rate
(2) Actual overhead expenditure exceeded budgeted expenditure
Which of the following statements is correct?
Both situations would cause the overheads to be under absorbed

Situation 1 would cause the overheads to be under absorbed and situation 2 would cause
the overheads to be over absorbed
Situation 1 would cause the overheads to be over absorbed and situation 2 would cause the
overheads to be under absorbed
Both situations would cause the overheads to be over absorbed
Question 50
The following statements are about the gradient of a straight line:
(1) The gradient of a straight line is the point at which the line crosses the y-axis
(2)
On a graph which shows a semi-variable cost the variable cost per unit can be determined
using the gradient of the line
Are the statements true or false?
Both statements are false
Statement 1 is false and statement 2 is true
Both statements are true
Statement 1 is true and statement 2 is false

Question 51
Flexed budgets for the cost of cleaning in a hotel depend on the number of beds occupied. The
following information is available for different levels of occupancy:
Proportion of beds occupied (%) 73 85

Cleaning costs ($) 28,241 28,445
In June 76% of beds were occupied.
What should the cleaning costs be for June?
$28,343
$28,292
$25,433
$29,402
Question 52
A factory consists of two production cost centres (T and V) and one service cost centre (W). The
total allocated and apportioned overhead for each centre is as follows:
T ($) V ($) W ($)

22,000 54,000 80,000
The service cost centre overhead is reapportioned to the production cost centres based on the
number of employees. The number of employees in each cost centre is as follows:
T V W
50 30 20
After the reapportionment of service cost centre overhead what is the total overhead for
production cost centre T?

Question 53
Which of the following statements about motivation are correct?
(1) All employees are motivated by money

(2)
All employees should be motivated by the employer to work towards
the mission of the organisation
Statement 1 only
Statement 2 only
Both statements
Neither statement
Question 54
An organisation is using regression analysis to establish the relationship between two variables
(x and y). It is using six pairs of data for the analysis. The linear equation for the relationship is
of the form:
y = a + 0.69x
Preliminary calculations have established that x = 90 and y = 180.
What is the value of a in the equation?
15.000
9.825
19.650
40.350

Question 55
What are the purposes of having strategic, tactical and operational objectives?
(1) To comply with government legislation

(2) To ensure goal congruence
(3)
To ensure that the objectives arising from the mission statement are quantified and fed
down to the entire business
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
Question 56
Is each of the following statements about fixed and flexible budgets true or false?
. True False
Flexible budgets can be used at the planning stage of the budget period
The main purpose of a fixed budget is at the planning stage of the budget period
Question 57
A process operates with a normal loss of 20% of input. All losses have a net realisable value of
$5.60 per litre. Last month 150,000 litres were input into the process and the output of good
production was 130,000 litres. Costs arising last month were $924,000.
What was the valuation of the 130,000 litres of output in the process account?

Question 58
A firm has used linear regression analysis to establish the relationship between total cost and
activity in units.
What does the gradient of the regression line represent?
The fixed cost per unit
The variable cost per unit
The average cost per unit
Total variable costs

Question 59
A hotel has 120 identical bedrooms. It uses labour efficiency percentages to compare the
performance of four groups of workers (A, B, C and D) employed to clean the bedrooms. The
standard time to clean a bedroom is 40 minutes.
The following data for last week are available:
Group A B C D
Actual hours worked 128 140 124 108
Actual number of bedrooms cleaned 198 207 186 165
Which group of workers was the most efficient last week?
Group C
Group B
Group A
Group D

Question 60
Z Co has long-term loan liabilities of $324,000 and shareholders' funds of $402,000.
What is Z Co's capital gearing ratio?
124.1%
44.6%
19.4%
55.4%
Question 61
On 1 June there were 3,600 units of inventory component H valued at a price of $5 each. The
following receipts and issues were recorded during June:
5 June Receipts 5,000 units at $5.70 per unit

13 June Receipts 3,000 units at $6.10 per unit
25 June Issues 9,000 units
Using the first-in first-out (FIFO) method what is the total value of the units issued on 25
June?
$50,310
$51,800
$52,900
$48,940
Question 62
Is each of the following statements about aspects of budget administration true or false?
. TrueFalse
One of the responsibilities of the budget committee is to prepare the annual budgets
A budget manual is a set of instructions governing aspects of the preparation of
budgets

Question 63
The following details have been extracted from the accounts of B Co for the quarter ended 30
June.
1 April - 30 June
$'000
Net profit 35
Non-current assets 150
Inventory 12
Receivables 22
Payables 15
Cash at bank 14
What is the quick ratio for the quarter ended 30 June?
10
3.2
12.4
2.4
Question 64
Which TWO of the following are most likely to use batch costing?
A film making company
A footwear manufacturer
An oil refinery
A bakery

Question 65
A company uses an overhead absorption rate of $24 per machine hour which was calculated
using 80,000 budgeted machine hours for the period. During the same period actual total
overhead expenditure was $2,100,000 and 84,000 machine hours were recorded on actual
production.
By how much was the total overhead under or over absorbed in the period?
$80,000 over absorbed
$84,000 under absorbed

Question 66
Which TWO of the following statements about cost control and cost reduction are true?
Cost control starts with the assumption that current cost levels are too high
Cost control is concerned with regulating the costs of operating a business
Cost reduction is a planned approach to reducing expenditure
Cost reduction aims to reduce costs to budget level
Question 67
Last month a company which uses standard costing purchased a larger quantity of materials than
was budgeted. The supplier gave the company a discount on the company's standard purchase
price for materials. The company used highly skilled labour paid at a rate above the standard
wage rate to process all the materials purchased last month. The workforce took less time than
the standard time allowed but used more material than standard in the production.
Were the direct materials variances for last month adverse or favourable?
. Adverse Favourable
Usage variance
Price variance

Question 68
A company operates a process in which no losses are incurred. It uses the weighted average
valuation method. The process account for last month was as follows:
Process Account
$ $
Opening work-in-progress 55,000 Finished output 335,800
(7,000 units: 66% complete) (14,600 units)
Input 380,160 Closing work-in-progress 99,360

(8,000 units)
435,160 435,160
What was the degree of completion of the 8,000 units in the closing work-in-progress?
54%
40%
46%
60%

Question 69
An organisation operates a process that creates two joint products (T and V). Product T has a
selling price of $20 per litre and product V has a selling price of $60 per litre. Last month joint
costs of $600,000 were incurred and the completed production was as follows:
Product Litres
T 18,000
V 9,000
The organisation uses the sales value method of apportioning joint costs.
How much of the joint costs were apportioned to product V last month?
$200,000
$450,000
$360,000
$240,000
Question 70
Last month the opening inventory of a company was 2,000 units and the closing inventory was
4,500 units. Using absorption costing this closing inventory was valued at $29,250. Using
marginal costing last month's profit was $25,000 and using absorption costing it was $34,000.
What was the variable production cost per unit last month?
$4.50
$2.00
$2.90
$3.60

Question 71
Z Co is evaluating a project which will generate cash flows of $2,600 each year in years four to
eight. (The first amount will be received in four years from now.)
What is the present value of the project cash flows using a discount rate of 14%?
$4,485
$6,024
$6,822
$12,061
Question 72
The following bar chart shows the overhead expenses for a business for each quarter of 20X
What was the reduction in overhead expenses between quarter three and quarter four?

Question 73
Data relating to two processes (L and M) are as follows:
Process Normal loss as % of input Input (litres) Output (litres)

L 6 800,000 750,000
M 6 600,000 570,000
For each process, was there an abnormal gain or an abnormal loss?
. Abnormal gain Abnormal loss

Process L
Process M
Question 74
The manager of the southern region of a catering company has specified weekly sales targets for
each sales representative.
What type of objective are these targets?
Operational
Tactical
Strategic
Non-operational

Question 75
Product A uses 4 kg of material X and 7 kg of material Y at a standard price of $5 per kg and $6

per kg respectively. Product A needs two hours of skilled labour and one hour of semi-skilled
labour at $10 per hour and $8 per hour respectively.
Production overhead is absorbed at $5 per labour hour. Selling and distribution costs are $3 per
unit of product A.
What is the standard cost of production for product A?
$105
$47
$90
$108
Question 76
Is each of the following statements, which refer to documents used in the material
procurement procedures of a company, true or false?
. TrueFalse
All goods received notes are prepared in the goods inwards department
All purchase requisitions are prepared in the purchasing department and are then sent
to the appropriate suppliers

Question 77
The following information relates to a manufacturing company for next period:
Units $
Production 24,000 Fixed production costs 480,000
Sales 25,000 Fixed selling costs 50,000
Using absorption costing, the budgeted loss for next period is $30,000.
What would be the budgeted loss for next period using marginal costing?
$52,000
$10,000
$50,000
$8,000
Question 78
For which TWO of the following production overhead costs would 'floor area occupied' be
a suitable basis of apportionment?'
Equipment depreciation
Heating
Factory rent
Stationery

Question 79
The following statements refer to attributes of good information:
(1) The cost of producing information should be less than the benefit derived from it
(2) Information should be understandable to the managers who use it
(3) Information should always be 100% accurate before it is used
Which statements are correct?
1 and 2 only
1, 2 and 3
2 and 3 only
1 and 3 only
Question 80
Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour
hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.
What is the budgeted total labour cost for the next period?
$300,000
$192,000
$240,000
$288,000

Question 81
A company absorbs production overheads on a machine hour basis. The following data relates to
last year:
Budget Actual
Machine hours 2,500 2,400
Total production overheads ($) 50,000 47,000
What was the total over or under absorption of production overheads last year?

Question 82
Last month a manufacturing company's profit was $2,000, calculated using absorption costing
principles. If marginal costing principles had been used, a loss of $3,000 would have occured.
The company's fixed production cost is $2 per unit. Sales last month were 10,000 units.
What was last month's production (in units)?
7,500
9,500
10,500
12,500

Question 83
Which of the following variances would be shown in an operating statement prepared

under a standard absorption costing system?
(1) Variable overhead expenditure variance

(2) Fixed overhead expenditure variance
(3) Fixed overhead volume variance
1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3
Question 84
Three types of organisation are listed as follows:
(1) Airline
(2) Hotel
(3) Hospital
Which of these organisations are likely to use service costing?
2 and 3 only
1 and 2 only
1 and 3 only
1, 2 and 3

Question 85
An organisation has the following total costs at two activity levels:
Activity level (units) 16,000 36,000

Total costs ($) 68,000 144,000
Variable cost per unit is constant within this range of activity levels, and there is a step-up in the
total fixed costs of $6,000, when activity level exceeds 25,000 units.
What are the total costs at an activity level of 30,000 units?
Question 86
An organisation operates a process that creates two joint products (J and K). Last month, joint
costs of $6,000 were incurred and the organisation apportioned these to the joint products using
the sales value method. Data relating to last month were as follows:
Product Production (litres) Selling price per litre ($)

J 10,000 2
K 5,000 1
What was the apportionment of joint costs to product K for last month?
Question 87
Last period an organisation budgeted to work 45,000 hours manufacturing 11,250 units. Actual
output last period was 10,700 units which took 43,600 hours to manufacture.
What was the labour efficiency ratio for last period (to one decimal place)?
95.1%
98.2%
101.9%
96.4%

Question 88
An accountant has been asked to check the accuracy of the month's sales invoices. There are
several hundred so she decides to check a sample. She selects every tenth invoice after the third
one.
What type of sampling method has she used?
Stratified
Cluster
Multi-stage
Systematic
Question 89
A company uses a multiplicative time series model to forecast sales. The trend in sales is linear
and is described by the following equation:
Trend = 400 + 10 T
Where T = 1 denotes the first quarter of 20X0
T = 2 denotes the second quarter of 20X0 etc.
The average seasonal variations are as follows:
Quarter 1 2 3 4
% Variation -30 +40 +10 -20
What is the sales forecast for Quarter 3 of 20X1?
517 units
480 units
423 units
3,157 units

Question 90
The following statements refer to aspects of budget administration:
(1) A budget manual describes the budget setting process in terms of objectives and procedures
The budget committee should consist of representatives of all the major segments of a
(2)
business
(3)
Accounting department staff set all the budgets and are responsible for communicating their
content to budget holders
Which of the statements are correct?
1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3
Question 91
Two years ago the price index appropriate to the cost of material X had a value of 120. It now
has a value of 160.
If material X costs $2,000 per kg today, what would its cost per kg have been two years
ago?

Question 92
Which of the following best describes a flexible budget?
An annual budget which incorporates the actual results for the year end and the budgeted
figures for the remaining months
A budget which is updated periodically so that it always covers the next twelve month
period
A budget constructed for several production activity levels which incorporates the effect of
different cost behaviour patterns
An annual budget which can be updated each month to reflect changing market and
economic conditions
Question 93
An investment has the following net present values (NPV), depending on the cost of capital.
Cost of capital of 15%: NPV = $5,000
Cost of capital of 20%: NPV = ($3,000)
What is the internal rate of return (IRR)?
17.5%
16.9%
18.1%
27.5%
Question 94
Which TWO of the following statements about managerial incentive schemes are true?
Incentive schemes can be non-financial
Some incentive schemes may encourage bullying of under performers
The rewards must relate to the achievement of team goals
Incentive schemes will always boost performance

Question 95
The following information is available for direct material A for the month of June
$
Fixed budget 210,000
Actual cost 365,625
Flexed budget 262,500
What is the total direct materials variance for the month of June?
$103,125 adverse
$103,125 favourable
$52,500 adverse
$52,500 favourable
Question 96
A customer returns a faulty product to a firm for repair under a warranty scheme. The firm
operates a total quality management system.
Which of the following best describes the cost of the repair?
An appraisal cost
An external failure cost
An internal failure cost
A prevention cost

Question 97
A company which operates a process costing system had work in progress at the start of last
month of 400 units (valued at $3,000), which were 40% complete in respect of all costs. Last
month 1,500 units were completed and transferred to the finished goods warehouse. The cost per
equivalent unit for output produced last month was $20. The company uses the FIFO method of
cost allocation.
What is the total cost of the 1,500 units transferred to the finished goods warehouse last
month?
Question 98
A company uses the economic order quantity (EOQ) model and holds no buffer inventory. The
cost of placing an order has now increased.
What is the effect of the increase on the EOQ and the annual holding cost?
. Increase Decrease No change

Annual holding cost
EOQ

Question 99
A factory consists of two production cost centres (PC1 and PC2) and two service cost centres
(SC1 and SC2). The total allocated and apportioned overhead for each centre is as follows:
PC1 PC2 SC1 SC2

$300,000 $200,000 $100,000 $600,000
The work done by the service cost centres can be represented as follows:
PC1 PC2 SC1 SC2

% of SC1 costs to other cost centres: 60 40 - -
% of SC2 costs to other cost centres: 50 25 25 -
After the full reapportionment of service cost centre overheads, what is the total overhead
for production cost centre PC1?
$690,000
$660,000
$675,000
$750,000
Question 100
Which of the following statements about benchmarking is true?
Functional benchmarking is a method of comparing one unit or function with another

within the same industry
It is always possible to identify a valid benchmark
Benchmarking can discourage team working in an organisation
Benchmarking is an attempt to identify best practices

Question 101
Which of the following options best matches the definition 'Variables or conditions which
are essential for an organisation's success'?
Key performance indicators
Strategic objectives
Critical success factors
Mission statements
Question 102
The standard variable production overhead cost per unit of output is $32 (four direct labour hours
at $8 per hour). Last month actual expenditure on variable production overheads was $69,800
and 9,200 direct labour hours were worked. 2,250 units of output were produced last month.
What were the variable production overhead expenditure and efficiency variances last
month?
Efficiency: $1,600
Expenditure $2,200 Fav
Adv
Expenditure: $2,200 Fav Efficiency: $1,600 Fav
Efficiency: $1,600
Expenditure: $3,800 Fav
Adv
Expenditure: $3,800 Fav Efficiency: $1,600 Fav

Question 103
The following information is available for H Co for quarter two:
Budgeted hours 3,100 standard hours

Standard hours produced 3,125 standard hours
Actual hours worked 3,200
What is the efficiency ratio?
98%
101%
103%
102%
Question 104
Which TWO of the following statements about cost reduction are true?
Cost reduction improves employee motivation
Cost reduction measures include crash programmes and planned cost reduction campaigns
Cost reduction happens automatically
Cutting costs in the short term may increase costs in the longer term

Question 105
During a recession, performance measurement may be affected in several ways.
Which of the following actions are most likely to be taken by a publishing business during a
recession?
(1) Ensure customer service and client relationships are strong

(2) Ignore competitors' innovations
(3) Increase number of staff training courses in spreadsheets
(4) Use assets economically, effectively and efficiently
1 and 4 only
2 and 4 only
2 and 3 only
1 and 3 only
Question 106
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Question 108
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Question 112
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Question 116
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Question 144

Question 145
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Question 150
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Question 154
Question 155
Question 156
The following information relates to question 157 -161
Question 157

Question 158
Question 159
Question 160
Question 161
Question 162

Question 163
Question 164
Question 165

Question 166
Question 167

Question 168
Question 169

Question 170

Question 171
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Question 200
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Question 204
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Question 208
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Question 210
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Question 212

Question 213
Question 214
The following information relates to Question 215 216
Question 215
Question 216

The following information relates to Question 217 218
Question 217
Question 218
Question 219
Question 220

Question 221
Question 222
Question 223

Question 224
Question 225
Question 226

Question 227
Question 228
Question 229

The following information is relates to Question 230 231
Question 230
Question 231
Question 232

Question 233
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Question 235
Question 236

Question 237
Question 238

Question 239
Question 240

Question 241
Question 242
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Question 244
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Question 246
Question 247

Question 248
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Question 250

Question 251
Question 252
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Question 254
Question 255
Question 256

Question 257
Question 258

Question 259
Question 260
The following information is related to Question 261 & 262

Question 261
Question 262
Question 263

Question 264
Question 265
Question 266

Question 267
The following information relates to Question 268 & 269
Question 268

Question 269
Question 270
Question 271

Question 272
Question 273

Question 274
Question 275
Question 276
Question 277

Question 278
Question 279
Question 280
Question 281

Question 282
Question 283
The following question relates to Question 284 & 285

Question 284
Question 285
The following question relates to Question 286 & 287
Question 286
Question 287

Question 288
Question 289
Question 290
Question 291

Question 292
Question 293
Question 294
Question 295

Question 296
Question 297
Question 298
Question 299

Question 300
Question 301
Question 302
Question 303
Question 304

Question 305
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Question 310
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Question 315
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Question 318
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Question 327
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Question 333

Question 334
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Question 336

Question 337
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Question 340

Question 341
Question 342
Question 343

Question 344
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Question 347

Question 348
Question 349

Question 350

Question 351

Question 352
Question 353

Question 354
Question 355
Question 356
Question 357
Question 358

Question 359
Question 360
Question 361
Question 362

The following information relates to Question 363 - 366
Question 363
Question 364
Question 365
Question 366
Question 367

Question 368
Question 369
Question 370
Question 371
Question 372

Question 373
Question 374
Question 375
Question 376

Question 377
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Question 519


Question 520

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Question 559

Question 560
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Question 563
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Question 569
Question 570

Question 571
Question 572
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Question 579
Question 580

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Question 582
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Question 584
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Question 588
Question 589

Question 590
Question 591

Question 592
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Question 597
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Question 600

Question 601
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ACCA Management Accounting (F2)

Good Luck for your Exam

1 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the following statements, relating to performance measurement, are true?

Three activities associated with budgeting are as follows:

(1) Preparing the master budget

What is the correct sequence for these activities?

2 Ibrahim Sameer ACCA (Management Accounting F2)

Input 12,800 litres

Abnormal gain of 200 litres

Abnormal loss of 212 litres

Abnormal gain of 212 litres

Abnormal loss of 300 litres

The following statements refer to different types of planning in a large organisation:

Which of these statements is/are correct?

3 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the following describes the data used by the company?

Secondary and continuous

Primary and continuous

Secondary and discrete

Primary and discrete

4 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the following is NOT a dimension which is used to measure performance in

Quality inspection in advance

Materials price variance of $450,000 adverse

Total direct labour variance of $400 adverse

Overhead expenditure variance of $4,000,000 adverse

Sales volume variance of $3,000,000 favourable

Which of the following defines the prime cost of a product?

The total production cost of a product

The material cost of a product

The cost of making the first unit of a product

The total direct costs of a product

5 Ibrahim Sameer ACCA (Management Accounting F2)

Value analysis is a planned, scientific approach to cost reduction

One of the problems with value analysis is that it discourages innovation

6 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the following statements about payback is true?

Payback is useful as an initial screening device

Payback takes into account the time value of money

Payback is technically superior to NPV

A change in the cost of capital will affect the payback

7 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the three Es best describes the above measure?

8 Ibrahim Sameer ACCA (Management Accounting F2)

where Y = quarterly sales volume in units,

Quarter Seasonal variation

9 Ibrahim Sameer ACCA (Management Accounting F2)

Which TWO of the following are true of imposed budgeting?

It is most effective in large organisations

It increases operational managers' commitment to organisational objectives

It reduces deliberate overestimation of costs and underestimation of revenues in a budget

. Increase Decrease No effect

Which of the following are benefits of using activity based costing?

10 Ibrahim Sameer ACCA (Management Accounting F2)

Which of the following statements about standard costing are true?

(1) A standard cost is a predetermined estimated unit cost

Which of the following about mission statements are true?

(1) They are stated in a standard format

11 Ibrahim Sameer ACCA (Management Accounting F2)

12 Ibrahim Sameer ACCA (Management Accounting F2)

The profit is difficult to measure

Regional benchmarking cannot be carried out