MULTIPLE CHOICE QUESTION PRACTICE:

5. P Co makes two products - P1 and P2 - budgeted details of which are as follows:

P1 P2

Selling Price 10.00 8.00

Cost per unit:

Direct Material 3.50 4.00 Direct Variable 1.50 1.00 Variable Overhead 0.60 0.40 Fixed Overhead 1.20 1.00 Profit per unit 3.20 1.80 Budgeted production and sales for the year ended 30 November 20X5 are:

P1 10,000 units

P2 12,500 units

The fixed overhead costs included in P1 relate to apportionment of general overhead costs only. However P2 also includes specific fixed overheads totalling 2,500.

If only P1 were to be made, how many units (to the nearest unit) would need to be sold in order to achieve a profit of 60,000 each year?

6. A company makes a single product with the following data:

Selling Price 25

Material 5

Labour 7

Variable Overhead 3

Fixed Overhead 4

(19)

06.0

Budgeted output is 30,000 units

In relation to this data, which of the following statements is true?

A. The margin of safety is 40%.

B. The distribution to sales ratio is 24%.

C. The volume of sales needed to make a profit of 270,000 is 45,000.

D. If budgeted sales increase to 40,000 units, budgeted profit will increase be 110,000.

7. The management accountant of Caroline plc has calculated the firm's breakeven point from the following data:

Selling Price per unit 20

Variable cost 8

Fixed Overhead for next year 79,104

It is now expected that the product's selling price and variable cost will increase by 8% and 5.20% respectively.

By how much will Caroline's breakeven point for next year change by as a result of these changes?

A. Rise by 9%

B. Rise by 2.8%

C. Fall by 2.8%

D. Fall by 9%

8. Ace Limited is considering whether or not to cease production of leatherbound diaries.

Which TWO of the following items are valid factors to consider in this decision?

A. The diaries made a loss in the year just passed.

B. The diaries made a positive contribution in the year just passed.

C. The market outlook in the long term looks very poor.

D. The budget for the next year shows a loss.

E. The business also sells pens and many diary buyers will often also buy a pen.

F. The business was founded to produce and sell diaries