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Questions and Answers of Accounting and Finance

14.7 Fullbright Bognor Limited, a manufacturing business, has the following cost structure:Selling price per unit: £85 Variable costs per unit: £41 The company’s directors expect to incur fixed
14.6 Porton Fitzgerald Limited manufactures wardrobes. The selling price of a wardrobe is£210. Each wardrobe costs £52 in direct materials (all variable) and £34 in direct labour(all variable). In
14.5 For each of the following types of business, list at least two fixed and two variable costs that might typically be incurred:n self-employed taxi driver n solicitor n shirt manufacturer n beauty
14.2 Wetwang Limited owns a piece of machinery that is now surplus to requirements following changes in its production systems. The machinery was bought for £24 000 and since purchase a total of
14.15 The directors of Darlene Fabrik are considering whether or not to start up a new production process. The process would use a machine that is no longer required for the purpose for which it was
n Understand the role of budgeting in planning and controlling business organizations.
17.9 Ferguson Farrar Limited is a manufacturing company. For the month of April 2013 it budgeted for 4000 units of production, each to use 1.5 hours of machine time. Production overhead absorption
17.6 What is the direct materials quantity variance for the month?a) £1749 (F)b) £1749 (A)c) £1590 (F)d) £1590 (A).
17.5 What is the direct materials price variance for the month?a) £2226 (F)b) £2226 (A)c) £2385 (F)d) £2385 (A).
17.2 Darblay Harriett Limited produces a single product – a wooden cabinet. The company’s budget for November 2013 is as follows:£Sales: 2000 units £19.50 39 000 Direct materials: 2000 (2
17.1a Denholm Pargeter Limited is an engineering company producing a wide range of component parts for the aerospace industry. Its component XP04/H has the following budget sales and prime costs for
n Understand the pros and cons of standard costing systems.
n Be able to compare actual results against flexed budgets.
n Know about some of the problems of control in firms.
n Know about a classification of control mechanisms within organizations.
16.16 Working with the information from 16.15, put the cash flow information into a spreadsheet.Use the spreadsheet to perform ‘what if’ calculations to answer Silas’s questions as follows:i)
16.15 Silas is starting out in business on his own, running a shop selling scuba diving gear. He has gained a lot of free publicity for his new venture by writing articles in specialist trade and
16.14 Roxanne’s budgeted year-end accounts at 31 December 2012 include a figure for receivables of £23 600. This represents:£20% of November sales of £28 000 5 600 60% of December sales of £30
16.12 Corby Thirlwell Limited manufactures ornamental birdbaths made out of reconstituted stone. The company works on a rolling budget system, and its senior management is currently examining
16.11 Colney Brighouse Limited makes office furniture. The company’s directors are preparing sales and production forecasts for January, February and March 2013 Sales forecasts in units for its two
16.10 Hildebrandt St. Martins Limited manufactures a single product. Its budget sales (in units)for December 2012 are 9350. Opening inventory of finished goods for the month is budgeted at 12 360
17.10 Grindleton Gears Limited is a manufacturing business which uses a standard costing system. If a variance exceeds 5% of the flexed budget total for that item, the management team investigates
17.12 Dorchester Slugg Limited manufactures plastic refuse bins. Its monthly budget for August 2013 is as follows:£Sales: 4000 units £18 72 000 Direct materials: 4000 (7 kg £1) (28
18.6 Tripp and Hopp Limited is a booking agency that specializes in selling London theatre tickets. Until this year the business ran four central London booking offices and a website.But at the end
18.3 The managers of division Alpha of Burntwood and Down Holdings determine selling prices for the division, and control almost all costs. Decisions on non-current assets purchases are made at head
17.20 Feltham Finch Limited is a manufacturing company. For the month of August 2013 it budgeted for 780 units of production, each to use 4 hours of machine time. Production overhead absorption rates
17.19 What is the direct labour efficiency variance for the month (to the nearest £)?a) £523 (A)b) £523 (F)c) £340 (F)d) £340 (A).
17.18 What is the direct labour rate variance for the month (to the nearest £)?a) £360 (A)b) £360 (F)c) £1021 (F)d) £1021 (A).
17.13 Dillinger Thompson Limited produces a line of leather bags. Although they vary slightly in design the cost structure is the same for each bag. The company’s budget for January 2013 is as
16.8 Lamar Bristol plc is a large trading organization with retail premises in most major towns and cities in the UK. The key budget factor is sales; the company’s main board sets the sales budget
16.7 Referring to the information given in exercise 16.6, at the beginning of April 2013 Skippy reviews the past 3 months. Bookings on the first coach trip to Austria were not as good as planned: he
16.6 Skippy is about to set up in business as a tour operator, after several years of working in the travel industry. He is starting out on a small scale, working from a room in a friend’s office.
15.3 The compounding factor for an investment over 4 years at 3% per year is (to three decimal places):a) 0.888b) 1.093c) 0.915d) 1.126.
15.1 A business is considering whether or not to invest in a new building. The managers have incurred expenditure of £15 000 on an initial land survey. For capital investment appraisal purposes this
n Understand the time value of money.
14.23 Gospodin Grimshaw Limited manufactures hiking boots for sale which it sells principally in Russia and other parts of eastern Europe. Each pair of boots sells for £15. Variable costs are £5.50
14.21 Gulf Gadgets Limited manufactures chess sets. Each chess set sells for £185. Variable costs of manufacture are £78. The company’s directors are currently setting the budget for 2013. Fixed
14.20 Fallon Frodsham Limited manufactures and installs small prefabricated building structures that are sold to people who want to establish a home office using part of their gardens.Each
14.19 Finch Fletcher Limited manufactures trumpets. Each trumpet sells for £350, and has variable costs of manufacture of £120. The company can produce no more than 1200 in a year. In the year
14.18 Vernon Limited is a xylophone manufacturer. The direct materials cost of a xylophone is£300; the direct labour process is intensive and costs £450 per xylophone. Both direct materials and
15.4 At the end of year 4, £312 invested now at an annual rate of 6% interest over 4 years will be worth (to the nearest £):a) £394b) £387c) £372d) £418.
15.5 The discounting factor for an investment over 3 years at 10% is (to 3 decimal places):a) 0.700b) 0.751c) 0.100d) 1.093.
15.6 Assuming a constant discount rate of 12%, the present value of £1300 receivable at the end of year 5 is (to the nearest £):a) £563b) £520c) £2 293d) £737.
16.5 Reinhart has his own wholesale business selling goods to retailers. His sales are made entirely on credit. In respect of the sales in any given month he expects 75% to be paid for in the next
16.4 Barfield Primrose is the manufacturer of the renowned ‘Primrose’ ice cream maker, which retails at £199. Barfield Primrose sells to wholesalers at £145 per unit. The prime cost structure
16.3 Luminant Productions produces light fittings from a small factory unit. The company’s directors have just met to discuss the sales budget and related matters for the next quarter, and have
16.2 Pirozhki Products Limited uses a rolling budget system. The company’s directors are currently preparing a sales and production budget for the month of March 2013, which is just over 1 year
n Be able to prepare straightforward budget statements.
n Know about the stages involved in setting a budget.
15.14 Assuming a constant discount rate of 14%, the present value of £85 000 receivable at the end of year 4 is (to the nearest £):a) £50 320b) £47 600c) £49 045d) £73 100.
15.13 The discounting factor for an investment over 5 years at 19% is:a) 0.419b) 0.190c) 0.950d) 0.810.
15.12 At the end of year 6, £1900 invested now at an annual rate of 17% interest over 6 years will be worth (to the nearest £):a) £3 838b) £741c) £4 874d) £2 223.
15.11 The compounding factor for an investment over 6 years at 8% per year is (to three decimal places):a) 1.587b) 0.627c) 1.595d) 0.630.
15.10 Montfort Spelling plc operates a chain of health clubs. Each year the company opens a club in a new location. For 2013, the company is examining two possible locations:Broughton Town and Carey
13.10 Earlier in the chapter the case successfully brought by the OFT against various sports related businesses was explained. The companies found guilty were required to pay a substantial fine for
13.9 Discuss the key factors which would arise in determining selling prices for:a plumber (sole trader)a biscuit manufacturer.
13.8 Burke and Harpur are solicitors who have recently set up in partnership together and are working hard to establish themselves in a town which already has several solicitors. Both have a
13.6 Discuss the key factors which would arise in determining selling prices for:a garden centre a small grocery store which is open for 24 hours.
13.5 Belvedere, Bharat & Burgess are in partnership together as accountants. They have recently enlarged their practice and have taken on extra staff. The partners meet to discuss chargeout rates,
13.4 Auger Ambit Limited is a manufacturing company which sets prices based on total costs plus a mark-up.For the year ending 31 December 2013 the company is forecasting total fixed costs of £788
n Be able to apply knowledge of pricing issues across a range of industries and commercial activities.
n Understand the interface between pricing and costing, with especial reference to cost-plus pricing.
n Understand the various additional factors which play a part in pricing decisions.
n Understand the interaction between supply and demand and the interdependence of price and quantity.
12.14 Queen’s Move plc is a listed business that specializes in household removals and storage services. The business runs its own fleet of removal vehicles and also has freehold premises used for
12.13 Combe Cullen Systems manufactures two products in its Oldfield division.Traditionally the company has used an overhead absorption system based on machine hours. However, following a management
12.12 Bushey Travel is an online travel agent. Clients can book online or by telephoning the company’s headquarters which are located in a business park. Bushey Travel operates as an agency only
12.11 Facts as in 12.10 The prime cost and timing details for one unit of production are:£Materials 14.20 Direct labour 18.00 Prime cost 32.20 Each unit uses 2 hours of machine time in the machining
12.9 Curtis Bedford is MD of the family business, Bedford Bowler. The company manufactures children’s wooden trainsets. Recently Curtis has been on a course about costing and he is keen to apply
12.8 Hallett Penumbra Systems produces a range of building products at several factories.The company’s directors have decided to pilot an ABC system at one of its factories.The factory produces
12.7 Arbend is an Internet-based bookseller which uses an ABC system. The chief management accountant and his team have produced the following information about expected annual overhead cost pools,
12.6 ABC is a costing system that was developed in the 1980s as a result of an increasing awareness in businesses of the deficiencies of traditional approaches to production overhead
12.5 David has recently been elected as a local councillor for an area in England served by two primary schools (note: English primary school education lasts for 6 years). The council has threatened
12.3 WGB produces two types of metal shelving in their factory – one for domestic use, and one, which is produced to a higher quality standard, for commercial use (in factories and hotel kitchens,
12.2 Barley Brindle produces a single product, Product B. One unit of Product B has a prime cost of £6.20, which included one hour of direct labour @ £6.20, and each unit uses 0.5 hours of machine
12.1 Jersey Brookfield & Co is a manufacturer of soap powders and detergents.Each of the products moves through two stages: bulk production and then packaging.In the year ended 31 December 2012
n Be able to contrast ABC with traditional costing methods, and to understand the benefits and problems associated with ABC.
n Understand the nature of activity-based costing (ABC) and be able to apply its principles to straightforward costing examples.
n Understand some important issues in relation to the costing of services.
n Be able to calculate and apply suitable overhead absorption rates.
11.8 Ravenna & Michele produces components to order for specialist motor manufacturers. An order for 100 components code 1187AB6 was received from one of the business’s principal customers. A job
11.7 Wensleydale Woollen Waistcoats Limited (WWW Ltd) buys in wool to manufacture into waistcoats on its weaving machines. The inventory card for wool code 78X4A shows the following movements in June
11.6 Brisbane Pinker Limited manufactures a range of containers for cosmetics in metal and plastic. In the year ending 31 December 2012 the company incurred the following costs:£Selling department
11.4 Each of the following scenarios describes an approach to costing.a) Greenaway Slipknot Limited produces high quality prints of contemporary art. Typically, a production run will involve the
11.3 Porter Farrington Limited imports components for input into its production process. In November 2012 the following deliveries into inventory and transfers to production took place in respect of
11.2 ArtKit Supplies manufactures metal paint tins for the artist’s supplies industry. The company operates from a small rented factory unit. In the year ending 31 August 2012 it incurred the
11.1 Paige Peverell produces plastic casings for telephones. The following is a list of some of the costs which the company incurs:Plastic moulding machine depreciation Sales office fixtures and
n Understand the build-up of materials, labour and production overheads into full production cost.
n Be able to classify costs into direct and indirect costs.
n Recognize and understand a range of basic costing terminology.
10.6 Denver runs a restaurant business, operating from rented premises in the centre of a large town. His business has been relatively successful; he has succeeded in making a small profit each year,
10.5 Preedy Price Limited is a small fashion company run by two sisters, Anne Preedy and Amelia Price. They have been very successful in marketing a range of very exclusive and expensive knitwear
10.4 Cyclostyle Limited makes metal parts for bicycles. The metal press machine, which has been used in the business for several years, is now reaching the end of its useful life. The directors are
10.3 Bulstrode, Barker and Bennett is a successful firm of solicitors operating in a small town.Bulstrode died some years ago, Barker has retired, but Dexter Bennett still works in the business as
10.2 Putt plc owns several shops selling golfing and other sporting equipment. It operates principally in the area around London. The company’s directors will be meeting next month to discuss a
n Appreciate the usefulness of management and cost accounting in helping management to make decisions, and to plan, control and monitor business activity.
n Know about some of the principal features of management and cost accounting.
n Understand in principle the nature and purpose of management and cost accounting.
7.5 The directors of Solar Bubble plc, a trading company, have asked the company’s chief accountant to prepare a draft income statement for the year ending 31 January 2013 in time for them to
5.18 Xavier depreciates his machinery over 10 years using the straight-line method. On 31 December 2012 he sold a machine which he had owned for exactly 7 years. Its original cost was £73 730. The

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