1.

Idle time ratio = idle hours / total hours x 100%

2. What is the definition of the Internal Rate of Return (IRR)?
The IRR is the rate of interest at which the Net Present Value of the project is zero.
3. In process costing, how are abnormal losses or gains valued?
Abnormal gains and losses are valued at full cost per unit.
4. How is the Residual Income (RI) calculated?
RI = profit less notional interest on the capital invested
5. What does the sales volume variance measure?
The sales volume variance measures the effect on the budgeted profit of the difference between the actual sales volume and the
budgeted sales volume.
6. What is top-down budgeting?
Top-down budgeting is where the budgets are prepared by high-level management and then communicated to lower levels.
Lower level management do not participate in the budget process.

7.A Paasche price index number uses base year or current year quantities. Which?
A Paasche index number uses current year quantities.
8. In process costing, what is meant by an abnormal gain?
An abnormal gain is the amount by which the actual loss is less than the normal (or expected) loss
9. Define the labour production volume ratio (activity ratio)

The labour production volume ratio = expected hours to produce actual output / total hours available (budgeted) x 100%
10. If the linear equation y = a + bx, were to be drawn on a graph, what would be the gradient of the line?
The gradient of the line would be b.
11. In the linear equation y = a + bx, where y is the total cost and x is the total production, what is the variable

cost per unit?

The variable cost per unit is b in the equation
12. In the linear equation y = a + bx, which is the dependent variable?
The dependent variable is y
13. If we have an equation relating the total sales revenue to the total advertising spend, which would be the

dependent variable?

The dependent variable would be the sales revenue (it depends on the amount of advertising expenditure.)
14. When sampling, what is meant by a sampling frame?
A sampling frame is a numbered list of all items in a population
15. What is a semi-variable cost?
A semi-variable cost is a combination of variable and fixed costs.
16. Describe a pie chart?
A pie chart is a circle that is divided into segments representing each type of observation. The size of each segment is proportional
to the proportion of the total that are within each type of observation.
17. In the linear equation y = a + bx, where y is the total cost and x is the total production, what is the fixed

cost?
The fixed cost is a in the equation
18. What is meant by indirect costs (or overheads)?
Indirect costs are those costs which cannot be specifically identified with a specific cost unit or cost centre.
19. What is meant by a line of best fit?
The line that most nearly goes through all the points when the data is plotted on a graph.
20. What is meant by quota sampling?
The population is stratified and a sample of each strata is restricted to a fixed number.
21. What are the purposes of costing (i.e. calculating the cost of producing a product or service)?
To enable a selling price to be set
To calculate a profit per unit
To value inventory
22. What is the purpose of management accounting?
To help management run the business in a way that achieves the objectives of the business.
Set2
1. Give possible reasons for an adverse material expenditure variance.
Possible reasons for an adverse material expenditure variance include:
paying more than the budgeted price per unit of materials due to errors in purchasing
a price increase in materials
purchasing better quality materials
incorrect budgeting of the standard cost of materials
2. What is meant by the payback period?

The payback period is the number of years it takes to get back the original investment, in cash terms.

3.What is a sunk cost?

A sunk cost is a cost already incurred (and is not relevant for investment decisions)
4. What are the purposes of budgeting?
Planning
Control
Co-ordination
Authorisation
Communication
Motivation
Evaluation
5. How is the coefficient of determination calculated?
The coefficient of determination is the square of the coefficient of correlation.
6. What is a variable cost?
A variable cost is one which varies in total with the level of activity.
7. What is a delivery note?
A delivery note is included by the supplier with the goods, and lists the quantity of goods that are being delivered.
8. In the formula on the formula sheet for the Economic Order Quantity, what does the symbol D represent?
D represents the total demand per year.
9. What is meant by a piecework system of remuneration?
Employees are paid a fixed amount for each unit produced.
10. Define the labour capacity ratio
Labour capacity ratio = Number of hours spent working / total hours available x 100%
11. What is the symbol for the coefficient of correlation on the formulae sheet?
r is the coefficient of correlation
12. What is meant by the cost gap in the context of target costing?
The cost gap is the excess of the estimated actual cost over the target cost.
13. What are the four main differences between the output of service and manufacturing businesses?
* Intangibility the output of a service industry is performance rather than tangible goods.
* Perishability a service cannot be stored
* Simultaneity a service is received by the customer at the same time as it is delivered it cannot be checked first.
* Heterogeneity every service is likely to be different.

14. What is meant by the term by-product?

A by-product is output from a process which has a low value relative to the main product(s) being produced in the process.
15. What is the difference between a profit mark-up and a profit margin?
A mark-up is when the profit is calculated as a percentage of cost; a margin is when the profit is calculated as a percentage of
selling price.
16. Under what circumstances will the profit using marginal costing and the profit using absorption costing be

the same?
The profits will be the same if there is no change in the level of inventory over the period (i.e. when the closing inventory is the same
level as the opening inventory).
17. What is the reason for a difference between the profit calculated under marginal costing principles and the

profit calculated under absorption costing principles?

The difference is because of the difference in the way opening and closing inventories are valued. Under marginal costing they are
valued at the marginal (variable) cost of production; under absorption costing they are valued at the full cost of production (variable
plus fixed).
18. What is meant by the word contribution?
The contribution is the profit before fixed costs (or the revenue less all variable costs).
19. What is the difference between the allocation of overheads and the apportionment of overheads?
Allocation whole cost items are charged to the relevant cost centre
Apportionment cost items are shared/divided between several cost centres

20. What is meant by an incremental cost?

An incremental cost is an extra cost (and is relevant for investment decisions).
21. What is the Current Ratio?
The current ratio = current assets / current liabilities
22. What are the four main elements that one would expect to appear in a Mission Statement?
The four main elements are:

Purpose

Strategy

Culture

Values