F2-FMA Practical Exercises and Questions from Chapter 1 to Chapter 17 PDF

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F2/FMA Practical Exercises and Questions From Chapter 1 to Chapter 17

Chapter 1: Accounting for management Test your understanding 1 Data is information that has been processed in such a way as to make it meaningful for use by management in making decisions. Is this statement TRUE or FALSE? A

True

B

False

Test your understanding 2 Which of the following is not a fundamental attribute of good information? A

Complete

B

Concise

C

Cost effective

Test your understanding 3 Good information should be: (i)

Relevant

(ii)

Timely

(iii)

Accurate

(iv) Motivating A

(i) only

B

(i) and (iii)

C

(iii) and (iv)

D

(i) (ii) and (iii)

Test your understanding 4 Which of the following steps does not form part of the planning process? A

Set objectives for achievement

B

Identify ways in which objectives can be achieved

C

Take corrective action to improve chances of achieving objectives

Test your understanding 5 Which of the following is the appropriate name for planning which considers how the functional heads within a business unit will coordinate employees on a day-to-day basis? A

Strategic planning

B

Tactical planning

C

Operational planning

Test your understanding 6 The manager of a division is responsible for costs and revenues as well as capital invested? Which is the appropriate classification for the division? A

Revenue centre

B

Investment centre

C

Profit centre

D

Cost centre

Test your understanding 7 The following assertions relate to financial accounting: (i)

The main purpose of financial information is to provide a true and fair view of the financial position of an organisation at the end of an accounting period.

(ii)

Financial information may be presented in any format deemed suitable by management.

Which of the following statements are true? A

Assertions (i) and (ii) are both correct.

B

Only assertion (i) is correct.

C

Only assertion (ii) is correct.

Chapter 2: Sources of data and analysing data Test your understanding 8 If you choose the 10th or the 100th unit after the first has been chosen. This type of sampling is known as: A

Simple random

B

Stratified

C

Cluster

D

Systematic

Test your understanding 9 Which of the following is an example of external information? A

Payroll system

B

Government statistics

C

Accounting system

D

Strategic planning system

Test your understanding 10 If you select a sample for a national opinion poll prior to a general election. The process would start by dividing the country into areas and a random sample of areas is taken. Next divide the country into town and cities and a sample is taken again. Then perhaps a sample of streets and a random sample of houses are then chosen. This is an example of which type of sampling: A

Simple

B

Random

C

Multi-stage

D

Cluster

Test your understanding 11 Here are possible reasons why sampling is used over other methods of gathering data? (i)

The whole population may not be know

(ii)

Testing all items in a population may not be possible

(iii)

Items may be destroyed in the testing process

Which of the statements are correct? A

(i), (ii) and (iii)

B

(ii) and (iii)

C

(i) and (ii)

D

(iii) only

Test your understanding 12 When sampling a population if there are several well defined groups which method would be used? A

Random sampling

B

Systematic sampling

C

Stratified sampling

D

Multi-stage sampling

Test your understanding 13 A project may result in profits of $20,000 or $12,000, or in a loss of $5,000, with probabilities 0.3, 0.5 and 0.2, respectively. What is the expected profit of the project? A

$11,000

B

$27,000

C

$9,000

D

$12,000

Test your understanding 14 FGH stocks a weekly magazine which advertises local second-hand goods. The owner can buy the magazines for 15c each and sell them at the retail price of 25c. At the end of each week unsold magazines are obsolete and have no value. The owner has estimated a probability distribution for weekly demand as follows: Weekly demand in units

Probability

10

0.20

15

0.55

20

0.25

Required: Calculate the expected value of demand. Test your understanding 15 A company has a normally distributed sales pattern for one of its products, with a mean of $110. The probability of a sale worth more than $120 is 0.0119. Using normal tables, the standard deviation, to two decimal places, associated with sales is: A

$4.41

B

$4.42

C

$4.43

D

$4.44

Test your understanding 16 The weights of a certain mass-produced item are known, over a long period of time, to be normally distributed with a mean of 8 kg and a standard deviation of 0.02 kg. Required: (a)

If items whose weight lies outside the range 7.985 – 8.035 kg are deemed to be faulty, what percentage of products will be faulty?

(b)

If it is required to reduce the percentage of items that are too heavy (with weight over 8.035 kg) to 2%, to what value must the mean weight be decreased, leaving all other factors unchanged?

(c)

If it is required to reduce the percentage of items that are too light (with weight below 7.985 kg) to 2%, to what value must the standard deviation be decreased, leaving other factors unchanged?

Test your understanding 17 A company’s assistant management accountant is analysing the number of orders placed by its 10 main customers. He has found the following workings which had been compiled by his manager. He can see from the followings workings that the median was calculated as 29. 13, 42, x, 7, 51, 69, 28, 33, 14, 8 What is the value of x? A

25

B

29

C

30

D

32

Test your understanding 18 A company is analysing the number of complaints received each day over a period. Complete the missing entries in the following table and calculate the arithmetic mean (to two decimal places). Complaints (x) Frequency (f) fx 0

10

?

1

15

?

2

25

?

3

5

?

–––

–––

?

?

Totals

Test your understanding 19 Which TWO of the following statements about the mode are true? Select all that apply. A

It is the most widely used average.

B

It is a measure of dispersion.

C

It gives the most common value.

D

It is the middle point of a set of values.

Test your understanding 20 Match the following terms to the correct definition. Mean

the value which occurs most often in a data set

Median

the answer derived by dividing the sum of a set of values by the number of values

Mode

the middle of a set of values

Test your understanding 21 Which concept is not part of the 3Vs of Big Data? A

Volume

B

Variety

C

Valorisation

D

Velocity

Chapter 3: Presenting information Test your understanding 22 What type of graph is this?

A

line graph

B

compound bar chart

C

percentage compound bar chart

D

percentage component bar chart

Test your understanding 23 Below is a pie chart showing the colours of shirts ordered by one shop.

What is the angle of the wedge showing black shirts ordered? A

44°

B

54°

C

65°

D

72°

Chapter 4: Cost classification Test your understanding 24 Which of the following costs should not be included in the inventory valuation of a manufacturing business? A

Depreciation on the plant and machinery

B

Salary of salesman

C

Factory supervisor’s salary

D

Electricity for factory

Test your understanding 25 A shop carries out repairs on customers’ electrical items, e.g. televisions, DVD players, etc. Which of the following is an example of an indirect variable cost? A

Business rates for repair shop

B

Salary of repair shop supervisor

C

Repair person paid per hour worked

D

Electricity for recharging repair tools

Test your understanding 26 The following diagram represents a cost behaviour pattern.

Which of the following statements is consistent with the above diagram? A

Annual factory costs when the electricity supplier sets a tariff based on a fixed charge plus a constant unit cost for consumption but subject to a maximum annual charge

B

Weekly total labour cost when workers are paid an hourly wage during normal working hours and a higher hourly rate if they are required to work outside those hours

C

Total direct material cost for a period if the supplier charges a lower unit cost on all units once a certain quantity has been purchased in that period

D

Total direct material cost for a period if the supplier has agreed to a maximum charge for that period

Test your understanding 27 The following diagram represents a cost behaviour pattern.

Which of the following statements is consistent with the above diagram? A

Annual factory costs when the electricity supplier sets a tariff based on a fixed charge plus a constant unit cost for consumption but subject to a maximum annual charge

B

Weekly total labour cost when workers are paid an hourly wage during normal working hours and a higher hourly rate if they are required to work outside those hours

C

Total direct material cost for a period if the supplier charges a lower unit cost on all units once a certain quantity has been purchased in that period

D

Total direct material cost for a period if the supplier has agreed to a maximum charge for that period

Test your understanding 28 The telephone costs of a business are likely to be classified as a stepped fixed cost. Is this statement TRUE or FALSE? A

True

B

False

Test your understanding 29 A company has a performance related pay scheme in operation. What is the most appropriate cost classification for the salaries of the managers? A

Fixed cost

B

Stepped fixed cost

C

Semi-variable cost

Test your understanding 30 Which of the following statements is correct? A

Only direct production costs should be included in inventory valuation

B

All indirect costs should be treated as non-production costs.

C

The sum of direct costs is known as prime cost.

D

Indirect costs per unit are always larger than direct costs per unit

Test your understanding 31 The costs and output of a business for the last quarter of the year were as follows: Output (units)

Cost ($)

Oct

1,800

8,850

Nov

2,000

8,750

Dec

800

3,950

Using the high low method which of the following represents the estimated cost in January of producing 1,500 units if the monthly fixed costs are expected to increase by $100 at the start of next year? A

$6,750

B

$6,850

C

$7,380

D

$7,480

Test your understanding 32 A business has experienced the following labour costs: Output (units)

Cost ($)

7,000

86,000

12,000

141,000

9,000

102,000

Fixed costs increase by $15,000 for output in excess of 10,000 units. Using the high low method what is the estimated cost of producing 14,000 units? A

$142,000

B

$157,000

C

$163,000

D

$178,000

Chapter 5: Accounting for materials Test your understanding 33 Which of the following could be used to document the transfer of materials from one production department to another? A

Materials requisition note

B

Materials returned note

C

Materials transfer note

Test your understanding 34 The following represent the materials transactions for a company for a year: $000 Materials purchases 240 Issued to production 215 Materials written off 12 Returned to stores 6 Returned to suppliers 2 The material inventory at 31 December 20X1 was $42,000. Test your understanding 35 Continuous stocktaking is the process of checking the balance of every item of inventory on the same date, usually at the end of an accounting period. Is this statement TRUE or FALSE? A

True

B

False

This information is relevant for TYUs 36–41. A business has inventory of material A of 400 units valued at $2.20 per unit at 1 September. During the month of September the movements of material A were as follows: 5 September

Issue

250 units

10 September

Receipt

500 units @ $2.50 per unit

15 September

Issue

340 units

18 September

Receipt

400 units @ $2.70 per unit

27 September

Issue

600 units

Test your understanding 36 What is the cost of issues using the FIFO method? A

$2,913

B

$2,980

C

$2,975

D

$2,990

Test your understanding 37 What is the value of the closing inventory using the FIFO method? A

$242

B

$251

C

$286

D

$297

Test your understanding 38 What is the value of issues using the LIFO method? A

$2,913

B

$2,924

C

$2,980

D

$2,968

Test your understanding 39 What is the value of closing inventory using the LIFO method? A

$242

B

$251

C

$286

D

$297

Test your understanding 40 What is the cost of issues using the weighted average cost method? A

$2,913

B

$2,924

C

$2,980

D

$2,968

Test your understanding 41 What is the value of closing inventory using the weighted average cost method? A

$242

B

$251

C

$286

D

$297

Test your understanding 42 The objective of holding buffer inventory is to take advantage of quantity discounts. Is this statement TRUE or FALSE? A

True

B

False

Test your understanding 43 Which of the following is not a stockholding cost: A

The opportunity cost of capital tied up

B

The cost of insurance

C

Shipping and handling costs

D

Inventory obsolescence

Test your understanding 44 A manufacturer uses 100,000 components costing $1 each at a constant rate throughout the year. The cost of making a single order for more components is $10 and the holding costs for each component are 0.5% of the average inventory value. What is the EOQ? A

1,411

B

14,142

C

20,000

Test your understanding 45 A retailer has a steady demand for rugby balls at 50 a month. Each ball costs $6 from the supplier. The costs involved in placing an order are $10 and the stockholding costs are 20% of the stockholding value per annum. How many orders will be placed per annum? A

1.73

B

6

C

8.48

D

100

Test your understanding 46 Annual demand for raw material is 1,000,000 units. Each unit costs 15 cents. Procurement costs for each order are $20 and lead time has been estimated as 2 days. There are 250 working days per annum, the carrying cost of inventory is 10 cents per unit and the cost of a stock out is 20 cents per unit. What is the optimal reorder level? A

125

B

8,000

C

20,000

Chapter 6: Accounting for labour Test your understanding 47 Which of the following should be classified as direct labour? A

The site foreman of a building company

B

Workers assembling components on a production line

C

The store man handling parts requisitions in a factory

Test your understanding 48 A company employs 100 direct workers in the factory, who are paid a basic rate of $5 per hour for a 35 hour week. In addition to working their normal hours last month, each worker was asked to work an additional 5 hours overtime per week to meet general production requirements. All overtime hours are paid at time and a half. As a result of some faulty material, 150 hours of direct labour time were registered as idle. What is the indirect labour cost for last month, assuming a 4 week period? A

$750

B

$2,000

C

$5,750

D

$15,750

Test your understanding 49 An employee receives a bonus. The employee’s basic rate of pay is $6 per hour. The allowed time for the job was 1 hour and the employee completed it in 40 minutes. The Rowan scheme is calculated as Bonus =

Time taken × Time rate × Time saved Time allowed

What is the total payment for the job (to the nearest cent)? A

$1.33

B

$4.00

C

$5.00

D

$5.33

Test your understanding 50 At 31 March 20X1 an organisation had 5,400 employees. During the previous year 750 had left the organisation, although the management had decided that only 600 needed replacing and had recruited accordingly. What was the labour turnover rate for the year to 31 March 20X1 (to 2 dec...