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ACCA
Paper F5
Performance Management
Revision Mock Examination
December 2014
Question Paper
Time Allowed
15 minutes
3 hours
Writing
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2. The budgeted overheads of Coleman Ltd for the next year have been analysed as
follows:
Machine running costs
Purchase order processing costs
Production run setup costs
$000
640
450
180
In the next year, it is anticipated that machine will run for 32,000 hours, 6,000
purchase orders will be processed and there will be 450 production runs.
One of the companys products is produced in batches of 500. Each batch
requires a separate production run, 30 purchase orders and 750 machine hours.
Using activity-based costing, what is the overhead cost per unit of the
product?
A. $0.99
B. $1.59
C. $35.30
D. $495.00
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3. Your company regularly uses material X and currently has in inventory 500 kg for
which it paid $1,500 two weeks ago. If this were to be sold as raw material, it
could be sold today for $2.00 per kg. You are aware that the material can be
bought on the open market for $3.25 per kg, but it must be purchased in
quantities of 1,000 kg.
You have been asked to determine the relevant cost of 600 kg of material X to
be used in a job for a customer. The relevant cost of the 600 kg is:
A. $1,325
B. $1,825
C. $1,950
D. $3,250
4. A company manufactures and sells two products (X and Y) both of which utilise
the same skilled labour. For the coming period, the supply of skilled labour is
limited to 2,000 hours. Data relating to each product are as follows:
Products
X $20
Y $40
Variable cost per unit
X $12
Y $30
Skilled labour hours per unit
X 2
Y 4
Maximum demand (units) per period
X 800
Y 400
In order to maximise profit in the coming period, how many units of each
product should the company manufacture and sell?
A. 200 units of X and 400 units of Y
B. 400 units of X and 300 units of Y
C. 600 units of X and 200 units of Y
D. 800 units of X and 100 units of Y
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5. A company makes a single product which it sells for $16 per unit. Fixed costs are
$76,800 per month and the product has a profit/volume ratio of 40%.
In a period when actual sales were $224,000, the companys safety
margin, in units, was:
A. 2,000
B. 12,000
C. 14,000
D. 32,000
Activity level
Units
5,000
7,500
10,000
Using the highlow method what is the variable cost per unit?
A. $25
B. $30
C. $35
D. $40
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A. (i) only
B. (ii) only
C. Both (iii) and (iv)
D. Both (i) and (ii)
A. (i) only
B. (ii) only
C. (iii) only
D. (iv) only
10.Calculate the average labour cost of a toy when 15 toys are produced.
A. $16.25
B. $17.25
C. $18.25
D. $19.25
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Sales and research departments have established a price of $150 per unit in the local
market with a margin of 20% of the selling price.
13.What is the target cost per antenna? Identify the cost gap if any.
14.Which of the following may be used to close the target cost gap for the
antenna?
A. Use overtime to complete work ahead of schedule.
B. Substitute current raw materials with cheaper versions.
C. Raise the selling price of the antenna.
D. Negotiate cheaper rent for the companys premises.
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15.An office manager of Harris Plc wishes to minimise the cost of telephone calls
made. 40% of calls in peak hours cost 1 each and the remainder of such calls
cost 1.50 each. 30% of calls at other times cost 80p each, 50% of them cost
90p each and 20% of them cost 1 each. This proportion cannot be varied, though
the total number of calls made in peak hours and of calls made at other times can
be.
If X = the numbers of calls made each day in peak hours, and Y = the
number of calls made each day at other times, the official managers
objective is to:
A. Minimise 120X + 89Y
B. Minimise 120X + 90Y
C. Minimise 130X + 89Y
D. Minimise 130X + 90Y
17.Hold-on has a 40% chance to make a profit of $300,000 next year and a 60%
chance of making a loss of $400,000.
What is the expected profit or loss for next year?
A. $120,000 Loss
B. $20,000 Loss
C. $20,000 Profit
D. $120,000 Profit
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19.Beauty Co makes two products, nail polish and lipsticks. Nail polish sales make
up 30% of total sales and their variable costs are 45% as a percentage of sales
value.
Lipsticks sales are 70% of the total sales and their variable costs are 40% as a
percentage of sales value.
Total fixed costs are $400,000 for the company.
Calculate the breakeven revenue for Beauty Co.
20.Wong Ltd is trying to decide the selling price for a product. Three prices are under
consideration and expected sales volume and costs are as follows:
Price per unit
Expected sale volume
(unit):
Best possible
Most likely
Worst possible
$4
$4.30
$4.40
16,000
14,000
10,000
14,000
12,500
8,000
12,500
12,000
6,000
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(a) Using only the data provided in Table 1, discuss the performance of
the office manager for 2010. Calculate relevant ratios to support your
answer.
(9 marks)
Table 2 shows a selection of statistics that have been extracted from Goodison's
other management control systems regarding the same office as that of Table 1:
Table 2: Non-financial information
Number of clients
Share of local consulting market
Client assignment error rate
Average time taken per client assignment (weeks)
Average days training received per consultant
Staff turnover rate
Year
2009 2010
190
140
40%
25%
2%
4%
4
5
8
6
8%
12%
(2 marks)
(2 marks)
(2 marks)
(15 marks)
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Patients number
48,000
64,000
72,000
52,000
60,000
Expenditure ($)
80,000
72,000
82,000
58,000
100,000
The manager of OPD is now in the process of budget preparation for the year
2007. Over the past few years the manager has been using the incremental style
of budgeting. Being a new management accountant for the hospital, you have
been asked to provide help in budgeting.
Required:
(a) You are thinking about suggesting the use of zero-based budgeting
(ZBB) to the manager. Describe the principles of ZBB, with its
advantages and limitations in a memo addressed to the manager.
(8 marks)
(b)Forecast the total expenditure for 2007 if the manager expects 65,000
patients in the next year, using highlow method.
(2 marks)
(10 marks)
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Profit
$
(20,000)
(5,000)
35,000
55,000
70,000
90,000
115,000
130,000
150,000
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4. Barons plc has been in the business of manufacturing state-of-the-art stereos for
many years, and is now considering developing a new model and the board
members are considering the reliability of the existing management accounting
system.
At present products are produced by workers assembling a variety of components.
Production overheads are currently absorbed into product costs on a labour hour
basis.
Barons plc is considering introducing a target costing system for costing and
pricing their new stereos.
A selling price of $50 has been as per market research considering prices being
charged by the competitors with similar features. A target profit of 10% has been
approved by the board.
The following is the cost information of the new stereo:
Part 1 The suppliers have agreed a price of $10.00 per unit.
Part 2 5 units of part 2 are assembled in a stereo, and cost $3.00 per unit along
with delivery charge of 10% of the purchase price which is to be added to the
invoice.
Other materials $5.00 per stereo.
Factory labour it takes 2 hours to produce one stereo, excluding idle time of
20% which has to be considered reflecting existing efficiencies of the workforce.
All workers are paid a constant rate of $8 per hour.
Production overheads The following information has been recorded over the past
two months, fixed overheads being charged on the basis of labour hours. Normal
production hours per month are estimated to be 2,400.
Month 1
Month 2
Labour hours
1,900
2,300
Required:
Calculate the current expected cost per stereo, and identify any cost gap
that may exist.
(10 marks)
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$/unit
0.32
0.15
1.73
2.20
Recently one particular kiosk has been causing concern for Mr Khan. Although the
profitability of the kiosk has been rising for months, several customer complaints
have reached Mr Khan's office about the potatoes sold from the kiosk. Mr Khan
cannot understand this, as the kiosk operator has been paid increasing levels of
bonus for the past few months. Table 1 shows the output from the standard costing
system for the kiosk in question for the three months to August 2010:
Table 1: Variance
Food material mix
Food material yield
Food material price
June
$188.45 F
$40.65 F
$37.50 A
July
$213.80 F
$90.20 F
$5.50 A
August
$246.50 F
$117.80 F
$15.50 F
The actual number of potatoes sold at the kiosk was almost constant for the three
months.
Required:
(a) Comment upon the performance of the kiosk operator for the three
months to August 2010, suggesting possible performance reasons for
the variances reported, in the areas of:
(i) managing food material cost
(4 marks)
(3 marks)
Table 2 below shows actual results for the kiosk for September 2010:
Table 2: Potatoes made and sold: 1,420
Material purchased and used:
Potato
Butter
Cheese
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(b) For the month of September 2010, and working to two decimal
places, calculate:
(i) Total food material mix variance
(4 marks)
(4 marks)
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Formulae Sheet
Learning curve
Y axb
Where:
Demand curve
P a bQ
b
changein price
changein quantity
a price when Q 0
MR = a 2bQ
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