Which statement regarding management accounting is true?
Detailed Answer
Correct answer: (D)
Management Accounts are used by managers within the organization.
2
If actual units produced are lower than the budgeted level of production which of the following actual costs would you expect to be lower than the budget?
Detailed Answer
Correct answer: (C)
Total variable costs
Variable costs per unit do not change
Total fixed costs do not change
Budget lower – fixed costs spread over less units then fixed cost per unit higher
Budget lower – less units so total variable costs lower
3
The following data relates to Lizard Ltd for last year :-
Highest Lowest
Monthly production cost £45,000 £31,000
Monthly machine hours 14,000 9,000
Using the high/ low method, the estimated variable cost per machine hour is:-
The following relates to two levels of output :-
10,000 units 15,000 units
Total cost £22,000 £27,000
The actual value of fixed costs assuming linearity is?
Detailed Answer
Correct answer: (A)
£12,000
10,000-15,000=5,000
22,000-27,000=5,000
Variable cost per unit 5,000/5,000=£1 per hr
Variable cost at £10,000 units = £10,000
Fixed costs = £22,000 - £10,000 = £12,000
5
Which of the following best describes a fixed cost?
Detailed Answer
Correct answer: (B)
Remains at the same level up to a particular level of output
6
An example of a production overhead would be:-
Detailed Answer
Correct answer: (D)
Costs of templates and moulds used in production
7
A semi variable cost would :-
Detailed Answer
Correct answer: (B)
Be more than zero if no products were made and would then increase in direct proportion to output.
8
A company uses 9,000 units of a component per annum. The component has a purchase price of £40 per unit and the cost of placing an order is £160. The annual holding cost of one component is equal to 8% of its purchase price.
What is the Economic Order Quantity (to the nearest unit) of the component?
Detailed Answer
Correct answer: (C)
949
EOQ = √(2 x order cost x demand/holding cost)
= √[2 x 160 x 9,000/(8% x £40)]
= √(288,000/3.20)
= √900,000
= 948.68
9
The purchase price of a stock item is £25 per unit. In each three month period the usage of the item is 20,000 units.
The annual holding costs associated with one unit equate to 6% of its purchase price. The cost of placing an order for the item is £20.
What is the Economic Order Quantity (EOQ) for the stock item to the nearest whole unit?
Detailed Answer
Correct answer: (C)
1,461
EOQ = √(2 x order cost x demand/holding cost)
= √[2 x 20 x 80,000/(6% x £25)]
= √(3,200,000/1.50)
= √2,133,333
= 1,461
10
A company determines its order quantity for a component using the Economic Order Quantity (EOQ) model.
What would be the effects on the EOQ and the total annual ordering cost of an increase in the annual cost of holding one unit of the component in stock?
EOQ Total annual ordering cost
Detailed Answer
Correct answer: (A)
EOQ lower and Total annual ordering costs higher
EOQ = √(2 x order cost x demand/holding cost)
Increase in holding costs = decrease in EOQ (A or C)
And therefore more orders as order less each time
Therefore higher ordering costs (A)
