Question 16

Which of the following statements relating to the participation of junior management in setting budgets, are true?

1. It speeds up the setting of budgets

2. It increases the motivation of junior managers

3. It reduces the level of budget padding

A 1 only

B 2 only

C 2 and

3 only

D 1, 2 and 3

Question 17

A company purchased 8,000 kg of material at a total cost of $25,880. The material price variance was $1,880 adverse. The standard price per kg was:

A $0.20

B $3.00 C

$3.20

D $3.40

Question 18 Which of the following statements is incorrect?

A) When deciding to accept a special order at below the normal selling price a firm would not consider the historical cost

B) It is often very expensive to collect data used for activity based costing

C) Allocating indirect overheads to the direct cost of production is known as absorption costing

D) Activity based costing is not suitable for service industries

Question 19

UWX Company can make either of 2 products, XX and YY, but not both. The profitability of each product depends on the state of the market, as follows:

MARKET STATE	PROFIT FROM THE PRODUCTS	PROFIT FROM THE PRODUCTS	PROBABILITY OF MARKET STATE
	XX ()	YY ()
GOOD	20000	17000	0.25
FAIR	15000	16000	0.5
POOR	6000	7000	0.25

What is the expected value of perfect information as to the state of the market?

A) 0

B) 750

C) 800

D) 1,000

Question 20

ABKO Ltd produce three products, all of which require specialist machine that has limited capacity.

	ABKO	ABKO PLUS	ABKO ULTRA
CONTRIBUTION PER UNIT	5.00	6.00	12.00
MACHINE HOURS PER UNIT	2	3	6

What order should they be made in?

A) ABKO Ultra, ABKO then ABKO Plus

B) ABKO, ABKO Plus then ABKO Ultra

C) ABKO Plus, ABKO then ABKO Ultra

D) ABKO Plus, ABKO Ultra then ABKO