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Question and
Answer Book
Write here your full examination number
Centre Code:
Hall Code:
Desk Number:
2 FMAF
22 May 2002
Day 3 afternoon
INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions
You are allowed three hours to answer this question paper. All questions are compulsory.
Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-12)
Answer the THREE questions in section B (these are on pages 14-18)
You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 85 minutes in total answering the ONE question in section A, which has
25 sub-questions.
You should spend no more than 85 minutes in total answering the THREE questions in section B.
Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.
Do NOT write your name or your student registration number anywhere on this booklet.
TURN OVER
Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct
answer.
REQUIRED:
Place a circle O around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.
Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space
has been provided for you to do your workings where these sub-questions require them.
Question One
A factor which limits the activities of the organisation and is often the starting point in budget preparation.
D overestimation of revenue budgets and underestimation of cost budgets, which operates as a safety
factor against risk.
A 400 per unit. B 450 per unit. C 500 per unit. D 550 per unit.
1.4 X Ltd operates an integrated cost accounting system. The Work-in-Progress Account at the end of the
period showed the following information:
Work-in-Progress Account
Stores ledger a/c 100,000 ? 200,000
Wage control a/c 75,000
Factory overhead a/c 50,000 Balance c/d 25,000
225,000 225,000
The 200,000 credit entry represents the value of the transfer to the
C Sales account.
TURN OVER
Budget Actual
Overheads 1,250,000 1,005,000
1.6 Using the FIFO method, what was the value of the closing stock on 30 April?
1.7 If P Ltd had used LIFO, instead of FIFO, the value of the material issued would have been
1.8 In an integrated bookkeeping system, when the actual production overheads exceed the absorbed
production overheads, the accounting entries to close off the production overhead account at the end
of the period would be
A debit the production overhead account and credit the work-in-progress account.
B debit the work-in-progress account and credit the production overhead account.
C debit the production overhead account and credit the profit and loss account.
D debit the profit and loss account and credit the production overhead account.
TURN OVER
If absorption costing principles had been used and the fixed overhead absorption rate was 30 per
unit, the absorption costing profit for the period compared to the marginal costing profit would have
been
Employee A
Actual output achieved 800 units
Actual hours worked 45
There is a guaranteed minimum wage of 5 per hour for a 40-hour week paid to all employees.
A the additional amount paid for hours worked in excess of the basic working week.
B the additional amount paid over and above the normal hourly rate for hours worked in excess of the
basic working week.
C the additional amount paid over and above the overtime rate for hours worked in excess of the basic
working week.
TURN OVER
Stores provide the following service to the production departments: 60% to Assembly and 40% to Finishing.
1.15 The budgeted fixed production overhead absorption rate for the Assembly Department will be
A 100 per unit. B 130 per unit. C 250 per unit. D 300 per unit.
1.16 At the end of the year, the total of all of the fixed production overheads debited to the Finishing
Department Fixed Production Overhead Control Account was 130,000, and the actual output
achieved was 100,000 units.
A 20,000 under-absorbed.
B 20,000 over-absorbed.
C 40,000 under-absorbed.
D 40,000 over-absorbed.
Fixed production overheads for the company are budgeted to be 250,000 and are recovered on the
basis of labour hours. There are 12,500 budgeted labour hours and this job is expected to take 3
labour hours.
Other costs in relation to selling and distribution, and administration are recovered at the rate of 15
per job.
(i) Depreciation
C (iii) only
D (i) only
TURN OVER
The estimated sales for the first four months of the forthcoming year are as follows:
40% of each months sales units are to be produced in the month of sale and the balance is to be produced
in the previous month.
50% of the direct materials required for each months production will be purchased in the previous month
and the balance in the month of production.
1.22 The following extract is taken from the overhead budget of X Ltd:
1.23 Which of the following would be included in the cash budget, but would not be included in the
budgeted profit and loss account?
TURN OVER
For office use only Total 1.21 1.22 1.23
Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question
May 2002 11 FMAF
1.24
Sales
Total cost
Fixed cost
Level of activity
1.25 The following details have been extracted from the creditors records of X Limited:
(Total = 50 Marks)
End of Section A
TURN OVER
May 2002 13 FMAF
SECTION B 50 MARKS
ANSWER ALL THREE QUESTIONS
IMPORTANT
MARKS ARE AWARDED FOR CORRECTLY COMPLETING THE SHADED BOXES WITH THE
CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN.
THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS
INDICATED, BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS.
DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.
Question Two
TP Ltd is a small company that specialises in servicing computers. The company operates a standard
costing system and details of the standard cost of servicing a computer are shown below.
The figures were based on servicing 20,000 computers during the year.
The majority of work that TP Ltd undertakes is based on three-year service contracts. However, PP Ltd, a
new local company, has asked TP Ltd to quote for an urgent stand-alone job of servicing 150 computers.
TP Ltd wants to win this order because it has some spare capacity, but knows that the standard price per
service is more than PP Ltd is willing to pay.
Material X is regularly used. There is sufficient stock of Material X held, with a book value of 10 per
unit. The replacement cost of Material X is 11 per unit.
Material Y is regularly used. There are 100 units held in stock, with a book value of 5 per unit. The
replacement cost of Material Y is 550 per unit.
No additional engineers would be required to do this job. The service engineers are paid for a 35-hour
week. 70% of the time required to complete this job can be undertaken within normal working hours;
however, the remainder would have to be completed during overtime. Overtime is paid at time plus a
half.
(b) The total relevant cost of Material Y for this job would be 2
(c) The total relevant cost of the labour for this job would be 2
(d) The total relevant cost of the variable overheads for this 2
job would be
Explain in no more than 20 words (in the shaded area below) how you
(e) would calculate the relevant cost of the fixed overheads for this job
2
Sub-total:
10
TP Ltd is now planning for 2002/2003. The budgeted demand is expected to be 20,000 services. Because of
changes in technology, Material X and Material Y will be replaced by a new component that will cover both of
their functions. Labour costs, variable overhead costs and fixed overhead costs are expected to remain at
the same level as the previous year. The new component will cost 1440 per service. TP Ltd will keep the
standard service charge at 135 for each computer.
Question Three
A cleansing detergent is manufactured by passing raw material through two processes. The details of the
process costs for Process 1 for April 2002 were as follows:
Normal loss is 3% of the input during the period and has a scrap value of 020 per litre. It is company policy
to deduct the income from the sale of normal loss from that periods materials cost.
A template that could be used to calculate the cost of the output from Process 1 is shown below. The
template has been partially completed.
(e) In no more than 15 words, state one possible reason for the
abnormal loss occurring
2
Sub-total
= 14
In another process, the abnormal loss account showed the following values:
2
Sub-
total: 6
TURN OVER
May 2002 17 FMAF
Question Four
BB Ltd, a fast food restaurant, prepares and sells a meal called Yum Yum. The meal consists of a burger,
fries and a cold drink. BB Ltd uses a standard marginal costing system.
The budgeted meal sales for the quarter ended 31 March 2002 were 100,000 meals with a selling price of 5
per meal. The standard labour cost for preparing each meal was 060. The standard labour time per meal
was 6 minutes. The standard food and drink cost for each meal was 150. The budgeted fixed overheads
for the year were estimated to be 500,000 and these are expected to be incurred evenly throughout the
year.
For the quarter under review, the actual results were as follows:
Sales of Yum Yum 90,000 meals
Required:
Complete the shaded boxes labelled (a) to (f) on the reconciliation
statement below. For all calculated variances, you must state whether they
are favourable (F) or adverse (A). There are no marks for filling in the two
shaded boxes labelled X, but completing these will help you obtain the Do not write in these
correct answers. columns below
3
Sub-
total: 3
End of Question Paper - ADDITIONAL SPACE FOR WORKINGS AND NOTES IS PROVIDED
ON PAGES 19 TO 22
FMAF 18 May 2002
You may use this sheet for workings
(no marks are awarded for workings)
FMAF
Day 3 afternoon