Management Accounting v6.0 (MA)

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Total 80 questions

Which of the following statements about transfer pricing is/are correct? i) Using transfer pricing allows divisional managers to act with total autonomy in setting prices. ii) Market based transfer prices are always the most appropriate basis for setting transfer prices.

  • A. neither (i) nor (ii)
  • B. both (i) and (ii)
  • C. (i) only
  • D. (ii) only

Answer : A

The directors of Carifer Co wish to use the maximin decision rule to select one of four mutually exclusive projects to accept.
The following payoff table has been calculated in $000:

DemandLowMediumHigh -

Project A129155182 -

Project B143181188 -

Project C115139166 -

Project D138164191 -
Using themaximumdecision rule, which project should be selected?

  • A. Project A
  • B. Project B
  • C. Project C
  • D. Project D

Answer : B

Which of the following statements is NOT correct about the Kaizen philosophy?

  • A. Theorganizationshould always seek perfection. Since perfection is never achieved, there must always be scope for improving on the current methods.
  • B. Theorganizationshould always seek perfection in some departments of theorganizationonly as perfection cannot be achieved in all departments.
  • C. The search for perfection should be ingrained into the culture and mindset of all employees.
  • D. Individual improvements identified by the work force will be small rather than far- reaching.

Answer : B

A company absorbs overheads on a machine hour basis. Actual machine hours were
20,000, actual overheads were $480,000 and there was over absorption of overheads of
What is the overhead absorption rate?

  • A. $19.25 per unit
  • B. $19.25 per hour
  • C. $28.75 per unit
  • D. $28.75 per hour

Answer : D

On 1 December 2009 Reon Co acquired a non-current asset at a cost of $318,000. The purchase was financed through a six year finance lease. Under the lease, an initial payment of $71,000 was made on 1 December 2009. Five further payments of $71,000 are required on 1 December each year, commencing 1 December 2010. Reon uses the sum of digits method to allocate interest to accounting periods.
How should the total lease liability be reported in the statement of financial position at 30
November 2010?

  • A. Current liability = $71,000, Non-current liability = $212,000
  • B. Current liability = $36,000, Non-current liability = $247,000
  • C. Current liability = $42,200, Non-current liability = $240,800
  • D. Current liability = $35,000, Non-current liability = $248,000

Answer : A

In the last production period, Runnos Co budgeted to produce 18,000 units with a standard material cost of $72,000.
Each unit has a standard material input of 2 kg. Actual production volume was 18,600 units, and 39,060 kg of material was used at a cost of $76,167.
What is the material price variance?

  • A. $4,167 Adverse
  • B. $1,767 Adverse
  • C. $1,860 Favourable
  • D. $1,953 Favourable

Answer : D

In an attempt to improve product quality, the management team of Valcq Co replaced some material with more expensive items and introduced a bonus scheme. The bonus scheme was based on reducing both the number of defective units produced and material wastage.
No changes were made to the standard costs.
What material variances are likely to be reported as a direct result of these decisions?

  • A. Materialprice:Adverse, Materialusage:Adverse
  • B. Materialprice:Adverse, Materialusage:Favorable
  • C. Materialprice:Favorable, Materialusage:Adverse
  • D. Materialprice:Favorable, Materialusage:Favorable

Answer : B

At 1 November 2009 Boho Cos statement of financial position reported a deferred tax liability of $36,560. At 31 October 2010 the net book value of non-current assets was
$135,400 greater than the tax written down value.
The current rate of tax is 22%. It has recently been announced that this will be reduced to
20% during the next financial year.
What should be reported in the statement of comprehensive income for the year to 31
October 2010 in respect of deferred tax?

  • A. A charge of $6,772
  • B. A credit of $6,772
  • C. A charge of $9,480
  • D. A credit of $9,480

Answer : D

A division manufacturing a single product which sells for $325 has the following unit cost structure:

Direct materials95 -

Directlabor78 -

Variable overheads56 -

Share of fixed costs45 -

Total cost274 -
In the coming period, the budgeted production volume is 10,000 units.
What is the budgeted breakeven sales volume (to the nearest unit)?

  • A. 1,385 units
  • B. 4,688 units
  • C. 8,824 units
  • D. 10,000 units

Answer : B

Consider the following statements:
(i)Users must be able to compare an entity's results to its results in previous years and to the results of other entities. To ascertain this objective, accounting policies must be applied consistently both within the financial statements and from one period to the next. Users must be informed of any changes of accounting policy or accounting estimate and must be able to see the effects of such changes.
(ii)Financial statements must seek to represent faithfully the transactions which have taken place during the year.
What accounting concepts are reflected by the above two statements?

  • A. (i) Accruals; (ii) Going concern
  • B. (i) Materiality; (ii) Comparability
  • C. (i) Comparability; (ii) Reliability
  • D. (i) Neutrality; (ii) Comparability

Answer : C

At 31 May 2010 the non-current assets of Solace Co were reported on the statement of financial position at a value of $1,643,800. The assets had cost $2,200,000. Taxation allowances of $1,200,000 had been claimed.
The tax rate is currently 22%, and is expected to reduce to 20% in the near future.
The deferred tax liability at 31 May 2009 was $200,000.
What value should be reported on the income statement for the year to 31 May 2010 for deferred taxation?

  • A. $58,364
  • B. $71,240
  • C. $102,364
  • D. $111,240

Answer : B

Revue plc uses a standard costing system. The budget for one of its products for
September includeslaborcost (based on 4 hours per unit) of $117,600. During September,
3,350 units were made which was 150 units less than budgeted. Thelaborcost incurred was
$111,850 and the number oflaborhours worked was 13,450.
Thelaborefficiency variance for the month was:

  • A. $415.80 (A)
  • B. $420.00 (A)
  • C. $420.00 (F)
  • D. $710.00 (F)

Answer : B

Which of the following items can berecognizedas intangible assets in an entitys financial statements? i) Internally generated goodwill ii) Purchased goodwill iii) Reputation

  • A. (i) only
  • B. (ii) only
  • C. (iii) only
  • D. (i), (ii) and (iii)

Answer : B

Coolbreeze Co manufactures refrigerators. The company isorganizedon a divisionalised basis and has two divisions (compressor and cabinet).
The compressor division transfers 65% of its output to the cabinet division for $85 per unit, and sells the rest of its output to external companies for $92 per unit.
The cabinet division sells the final product at an average selling price of $495 per unit. In the next month, it expected that the compressor division will produce 27,000 units. The variable cost of manufacturing compressors is $62 per unit.
Assuming that the divisions operate with total autonomy, which of the following options is the most likely reason for making internal transfers at a value which is less than the external selling price of the compressor division?

  • A. Head office has imposed the transfer price.
  • B. The management of the compressor division are seeking to restrict the quantity produced.
  • C. Some additional costs are incurred on external sales.
  • D. The transfer price has been set to allow the cabinet division to compete through lower prices.

Answer : C

Okram Co produces four products. Data for these are:

ProductABCD -

Selling price ($)21015632298 -
Variable cost per unit ($)13610818751
Fixed costs per unit ($)47367519
Machine hours per unit63.5122.75
Due to a breakdown, machine hours will be limited in the next few weeks, and Okram will only be able to meet market demand for three products.
Based on the decision solely on financial factors, which products should be manufactured?

  • A. A, B and C
  • B. A, B and D
  • C. A, C and D
  • D. B, C and D

Answer : B

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Total 80 questions