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During a Board meeting at a manufacturing company, concerns regarding the analysing of the current inventory management systems and processes are brought up.
Attendees of the meeting have made several claims and suggestions but the managing director admits that he does not know who to believe and so has asked you to let him know which statements of the following
statements are TRUE?
Select ALL that apply.
We have 2 divisions with the following information: Profit before depreciation: B1=$800,000, B2=S1,000,000; Assets: B1 =$2,000,000, B2=S3,000,000; Capital employed: B1 = $1,700,000 and B2 = $2,550,000. 20%
straight-line depreciation is used.
Calculate ROI for each division.
The following forecast data relate to the first three years of a five year project.
The project will require an initial investment of $30,000 in non-current assets.
All revenue will be received in the year it is earned and all operating costs will be paid in the year they are incurred. Tax will be paid in the following year.
Tax depreciation will be 25% per annum of the reducing balance.
The taxation rate will be 30% of taxable profits.
What is the forecast after tax cash flow for year 3 (to the nearest $10)?
A project with a 6 year life generates a positive net present value of $1,100. The discount rate is 8%.
To the nearest $, the equivalent annual benefit is:
Which of the following is the ideal basis to use for a transfer price when there is a perfect external market?
Kaizen costing is being used by an organization to gradually reduce the unit cost of one of its products in order to achieve a 20% mark up on the product's cost.
The selling price of the product must be $72 per unit and this selling price has been maintained for two years.
Two years ago the product's cost was $3 per unit more than its selling price. Kaizen costing has achieved an 8% reduction from the previous period's unit cost in each of the past two years. The organization expects to continue to achieve the same rate of cost reduction next year.
Which of the following statements provides an accurate analysis of the extent to which Kaizen costing has been successful in achieving the required unit cost for the product?
For a complex and repetitive task, which of the following correctly describes a steep learning curve?
The following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values.
What cost of capital has been used to calculate the EVA?
Give your answer to the nearest percentage.
A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume.
The present value of which of the following would be used in the calculation?
SQ has the opportunity to invest in project X. The net present value for project X is $12,600. Cash inflows occur in years 1, 2 and 3. The company's cost of capital is 14%.
Calculate the annualized equivalent annuity of project X.
Give your answer to the nearest whole $.
.
In accordance with a just-in-time (JIT) philosophy, which of the following is regarded as a value added activity?
A small company currently uses an information system that was implemented several years ago and is based entirely on internal data. The company is considering replacing it with a more up to date system. It has been suggested that the new system should include the use of big data.
Which TWO of the following statements are correct?
$30.328 million is to be invested in a project that will yield annual net cash inflows of $8 million for 5 years.
What is the project's internal rate of return (IRR)?
Give your answer to the nearest whole percentage.
In order to support decision making, management accounting information categorizes costs in a variety of ways.
Responsibility accounting primarily distinguishes between costs on the basis that they are either:
An organization has carried out a risk assessment for a project.
Which of the following possible outcomes are examples of upside risk?
Select ALL that apply.
Company TTM has the opportunity to invest $60,000 in a project. The project is anticipated to produce annual returns of $12,500 each year for 8 years. The cost of capital is 12%.
What is the net present value of the project? Give your answer to the nearest whole number.
SDF makes cars. Demand for one of SDF's most popular models has declined because of a long-running television program. SDF's car is driven by a villainous character in the program and that has created such a negative association that sales have declined so significantly that SDF is planning to discontinue production.
Which of the following statements is correct? Select ALL that apply.
Place the correct category of Value Chain activity against each of the activities described below.
Place each method of analysing risk and uncertainty against the statement that describes it correctly.
S is considering launching a new product.
The variable costs of manufacturing the product will be $6 per unit.
The product must be manufactured in batches of 2,000 units. The machine set up cost for each batch will be $4,000.
Maximum capacity will be 8,000 units each year.
Market research has shown that the unit selling price will affect the demand for the product as follows.
Which unit selling price will maximise annual profit?
One aspect of life cycle costing is the recognition of the fact that during the design or development stage a large proportion of many products' life cycle costs are:
How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.
A group consists of two divisions, Alpha and Beta, both of which are profit centers. Alpha sells a product to the external market and also sells it as an intermediate product to Beta.
Beta then processes further before selling the final product to the external market. The current group transfer pricing policy requires Alpha to charge Beta with the variable cost of production.
Which of the following statements is valid?
Which of the following statements about modified internal rate of return (MIRR) and internal rate of return (IRR) is correct?
Using the Value Chain model for a manufacturing company, place the correct primary activity classification against each of the activities described.
Residual income is an appropriate performance measure for which type of responsibility centre?
An organization's transfer pricing system involves:
• The transferring division receiving $20 per unit; an amount equal to its variable costs.
• The receiving division paying an additional $30,000 every month to the transferring division.
Which transfer pricing system is the organization using?
Using Porter's value chain, place the tokens to correctly categories the following activities of a manufacturing company.
Under the absorption costing system, which simply allocates our entire amount of production overheads based on machine hours, we have found that out of our 4 products, 2 are profitable, 1 breaks even and 1 is
making a loss.
Model D the most recent addition to the range is making a large loss after the price of a major component rose dramatically. Model A is only just breaking now too as costs have risen. The only two products making profit
are Models B and C. These two require the least about of machine hours so this makes sense.
However, the management have a few reservations. They cannot understand how B is so profitable. It requires several more stages of production than the other models and a whole day longer to be customised by an
expert.
Select the correct answer from the list below that can help to explain this situation.
A company is considering investing $150,000 in a project which will generate the following contributions during the first three years.
Tax depreciation allowance is 25% each year of the reducing balance.
The taxation rate is 30% of taxable profits and tax is payable in the year after that in which it arises.
To the nearest $10, what is the forecast total project cash flow in year 3?
LL produces an item, the Z, for which the demand curve is estimated to be:
P = 10 - 0.0001Q
where, P is the unit price in $ and Q is the annual sales volume in units;
Marginal revenue (MR) = 10 - 0.0002Q
The variable cost of producing the Z is $2 per unit. The annual fixed costs of production are $110,000.
What is the profit maximizing output level?
A company is considering two mutually exclusive projects, an analysis of which is given below:
The company's cost of capital is 12%.
Assuming an objective of maximising shareholders' wealth, which project would be recommmended?
Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance.
Which is the most appropriate pricing strategy for company D's new product, and for what reason?
TTR Ltd plans to purchase a new plant for $1,000m on the 1st of January 20X6. The annual sales expected from the production of this plant is S400m per year. The plant has an expected life of five years. The financial
accountant has computed the NPV of the project at $61.42m considering a discount rate of 10%.
The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing
director?
Which of the following statements regarding multinational transfer pricing is INCORRECT?
A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.
The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.
In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?
The discount rate at which the net present value (NPV) is zero is known as the
The Chief Executive of a large manufacturing company has made the following comment.
"All of our competitors are using both just-in-time(JIT) and Total Quality Management (TQM) whereas we have never used either. Consequently we are lagging behind our competitors because their levels of inventory and quality costs are significantly below ours. I want to see JIT fully implemented, both for purchasing and for production, in 4 weeks' time and TQM fully implemented 4 weeks after that."
Which of the following provide appropriate advice to the Chief Executive?
Select ALL that apply.
When making an investment decision, which THREE of the following are reasons why receiving $1 today is preferable to receiving $1 in the future?
A not-for-profit organization measures performance using the three Es. If the organization has made optimum utilization of available resources then it should be described as:
A company expects to sell 3,600 units of Product A at a selling price of $750 per unit during the forthcoming year. The currently expected variable cost per unit is $860 per unit. The company requires a return of 15% during the forthcoming year on its investment of $2.4 million in Product A. Absorbed general overheads are expected to amount to $40 per unit.
What is the target cost for each unit of product A in the forthcoming year?
The following cost of quality report has been prepared for the latest period.
What is the difference between the cost of conformance and the cost of non-conformance?
An organization employs a dual pricing basis for the transfer of components between its divisions. This means that:
A company makes three products, E, F and G. Total overheads for the year are expected to be $1.2 million, with the following split between cost pools:
Cost driver information has been estimated as follows:
The company plans to make 10,000 units of product E in the year, with an expected direct cost of $0.60 per unit. This annual production of product E is expected to require 20 quality inspections, 28 purchase requisitions, and 400 kilogrammes of materials.
What is the overhead cost per unit of product E?
Which THREE of the following conditions are required for a sustained learning curve to apply?
An investment appraisal has identified that a project has a positive net present value when discounted at the company's cost of capital. If the cost of capital is now increased, indicate whether each of the following appraisal measures will increase, decrease or stay the same.
A firm of accountants uses an activity-based costing system. The firm's costing system permits staff to indicate specific tasks undertaken for clients, such as requesting missing information. The amount charged for a request for missing information is based on the following analysis.
Each request takes an average of 15 minutes of professional staff time. Professional staff are charged out at $100 per hour.
Administrators then process the information request and prepare a standard letter. The average time administration staff spend on each information request is 20 minutes. The cost of administration staff at the firm is $75,600 per year. Administration staff work for a total of 6,000 hours per year. The cost of printing and posting a letter is $1.
Calculate the cost of an information request.
Give your answer to 2 decimal places.
Which of the following factors would prevent a learning curve being observed for a task?
An organization produces only two products. Each month it produces 1,000 units of product A and 10,000 units of product B.
Using traditional absorption costing the products have very similar unit costs. However when costs are calculated using activity-based costing (ABC), product A's unit cost is significantly higher than that of product B.
Which of the following factors has the potential to cause this difference?
Select ALL that apply.
TESTED 09 Oct 2024
