FFA Mock Exam 3 - FFA Mock Exam 3 PDF

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FFA Mock Exam 3...

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The following statements refer to attributes of good information: (1)

The cost of producing information should be less than the benefit derived from it

(2)

Information should be understandable to the managers who use it

(3)

Information should always be 100% accurate before it is used

Which of the statements regarding the attributes of good information are TRUE? 1 and 3 only 1, 2 and 3 1 and 2 only 2 and 3 only Correct Answer 1 and 2 only Good information does not cost more to produce than the benefit derived from it and must be understandable to the recipient. Although accuracy is important, it should not be more accurate than required. Efforts to chase 100% accuracy or completeness may be pointless.

Identify whether each of the following statements about the advantages of big data analytics are true or false. . True False Fraud can be detected through using data analytics techniques to identify improper transactions Data analytics can allow organisations to monitor product usage by customers in real-time, in order to prompt maintenance activities Correct Answer Fraud can be detected through using data analytics techniques to identify improper transactions - TRUE Data analytics can allow organisations to monitor product usage by customers in real-time, in order to prompt maintenance activities - TRUE The analysis of big data can allow organisations to identify fraud and other unusual transactions. The analysis of big data can allow organisations to monitor customer activities in realtime, allowing them to take required action as soon as possible.

Martin is the manager of production department M in a factory which has 8 other production departments. He receives monthly information that compares planned and actual expenditure for department M. All production from department M is transferred to other factory departments to be completed prior to being despatched to customers. Decisions involving capital expenditure in department M are not taken by Martin. Which of the following describes Martin's role in department M? A revenue centre manager A profit centre manager An investment centre manager A cost centre manager Correct Answer Martin is a cost centre manager. A cost centre manager is only responsible for costs. A revenue centre manager would be responsible for revenues only while a profit centre manager would be responsible for both costs and revenues. An investment centre manager would be responsible for profits and capital investments.

The following bar chart shows the overhead expenses for a business for each quarter of 20X1.

What was the reduction in overhead expenses between quarter three and quarter four? 400000

$ Correct Answer $400,000 In quarter three, overhead expenses were $1,200,000. In quarter four they were $800,000. The reduction was therefore $1,200,000 - $800,000 = $400,000.

An accountant has been asked to check the accuracy of the month's sales invoices. There are several hundred so she decides to check a sample. She selects every tenth invoice after the third one. What type of sampling method has she used? Stratified Multi-stage Systematic Cluster Correct Answer Systematic Systematic sampling is a sampling method which works by selecting every nth item after a random start. The accountant has not divided the invoices into categories so it is not a stratified sample. The accountant has not divided the invoices into a number of sub-populations so it is not multi-stage sampling. Cluster sampling involves selecting one definable subsection of the population as the sample, so it is not cluster sampling.

An organisation has the following total costs at two activity levels: Activity level (units)

16,000

36,000

Total costs ($)

68,000

144,000

Variable cost per unit is constant within this range of activity levels, and there is a stepup in the total fixed costs of $6,000, when activity level exceeds 25,000 units. What are the total costs at an activity level of 30,000 units? 123000

$ Correct Answer $123,000 Variable cost using high-low method: (Total cost at high activity - step-up in fixed cost - total cost at low activity) / (total units at high activity - total units at low activity) = $3.50 ((144,000 - 6,000 - 68,000) / (36,000 - 16,000)) Total fixed cost = $18,000 (144,000 - (36,000 x 3.5)) Total cost at 30,000 units of activity: Fixed cost = $18,000 plus variable cost = $105,000 (30,000 x $3.50) Total cost at 30,000 units of activity = $123,000 (18,000 + 105,000)

A company uses a multiplicative time series model to forecast sales. The trend in sales is linear and is described by the following equation: Trend = 400 + 10 T Where T = 1 denotes the first quarter of 20X0 T = 2 denotes the second quarter of 20X0 etc. The average seasonal variations are as follows: Quarter % Variation

1

2

3

4

-30

+40

+10

-20

What is the sales forecast for Quarter 3 of 20X1? 423 units 3,157 units 480 units 517 units Correct Answer 517 units T = 7 (4 quarters in 20X0 plus 3 quarters in 20X1) Variation for quarter 3 = + 10% Sales forecast = 517 units ((400 + (10 x 7)) x 1.1)

The height of boys in a class follows a standard normal distribution with a mean height of 175cm and standard deviation of 10cm. What is the probability of the boys being taller than 195cm? 2.28

% Correct Answer The percentage probability that a boy will be more than 195cm tall is 2.28%. Calculate the Z score: Z-score = (x - µ)/σ Z = (195 - 175)/10 = 2 Look up this number on the standard normal distribution table: 0.4772 This gives us the area under the normal curve between the mean and 195. The area under the curve above 195 will therefore be 0.5 - 0.4772 = 0.0228, or 2.28%.

The number of quarterly complaints to a local school has a mean of 50 and the coefficient of variation is 20%. What is the variance for the number of quarterly complaints? 100

Correct Answer The variance for the number of quarterly complaints is 100. Coefficient of variation = standard deviation /mean 0.20 = standard deviation/50 Standard deviation = 10 Variance = standard deviation2 = 102 = 100.

The following statements refer to aspects of budget administration: (1) A budget manual describes the budget setting process in terms of objectives and procedures (2) The budget committee should consist of representatives of all the major segments of a business (3) Accounting department staff set all the budgets and are responsible for communicating their content to budget holders Which of the statements are correct? 2 and 3 only 1 and 3 only 1, 2 and 3 1 and 2 only Correct Answer 1 and 2 only Budget manuals are instructions relating to objectives, procedures and preparation of the budgets. These are co-ordinated by a budget committee which consists of representatives from major functions of the business. The managers from these functions are responsible for preparing the budget, e.g. purchasing manager should set material purchases budget.

Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time. What is the budgeted total labour cost for the next period? $300,000 $288,000 $240,000 $192,000 Correct Answer $300,000 Total labour time = 5 hours plus 20% idle time Total labour time = 6.25 hours (5 / 0.8) Total budgeted labour cost = $300,000 (4,800 x 6.25 x 10)

Q36

Background

Blitzen Co manufactures and sells a single product. It is preparing its budgets for the three month period ending 31 December 20X5. The budget is virtually complete and the remaining task is to prepare the budgeted statement of financial position as at 31 December 20X5. Sales of the product and purchases of materials are all made on credit terms. There were no purchases or disposals of non-current assets in the period to 31 December 20X5. Entries marked 'n/a' are yet to be calculated. The following information is available: Statement of financial position at 30 September 20X5 $

Budgeted statement of financial position at 31 December 20X5 $

Assets

$

$

Assets

Non-current assets (net)

10,000

Current assets

Non-current assets (net)

n/a

Current assets

Raw material inventory

4,000

Raw material inventory

Trade receivables

3,000

Trade receivables

n/a

Cash

1,000

Cash

n/a

4,500

8,000 18,000 Equity and liabilities Ordinary shareholders funds

Equity and liabilities 16,000

Current liabilities Trade payables

Ordinary shareholders funds

19,500

Current liabilities 2,000 18,000

Trade payables

n/a

Budgeted statement of profit or loss for the quarter ending 31 December 20X5

Cash budget for the quarter ending 31 December 20X5

$

$

Sales

25,000

Receipts from customers

Direct materials

14,000

Payments

23,000

Direct wages

6,000

Materials

Depreciation

1,500

Wages

6,000

Net profit/(loss)

3,500

Net cash inflow

5,000

Task 1

12,000

4.5 of 7 marks

What figure should be included in the budgeted statement of financial position as at 31 December 20X5 for each of the following items? Non-current assets $ 8500 Receivables

$

5000

Cash

$

6000

Payables

$

4000

Correct Answer Budgeted statement of financial position at 31 December 20X5: $

$ Note

Assets: Non-current assets

8,500

(1)

Current assets: Raw material inventory

4,500

Trade receivables

5,000

(2)

Cash

6,000

(3) 15,500 24,000

Equity and liabilities: Ordinary shareholders funds

19,500

Current liabilities: Trade payables

4,500

(4)

24,000 As there are no purchases or disposals of non-current assets in the period the non-current assets at 31 December will be: Non-current assets at 30 September

$10,000

Less depreciation in the 3 months to 31 December

$1,500

Non-current assets at 31 December

$8,500

Trade receivables at 30 September

$3,000

Plus credit sales in the 3 months to 31 December

$25,000

Less receipts from customers in the 3 months to 31December

$23,000

Trade receivables at 31 December

$5,000

Cash balance at 30 September

$1,000

Plus net cash inflow in the 3 months to 31 December

$5,000

Cash balance at 31 December

$6,000

Trade payables at 30 September Plus raw materials used in the 3 months to 31 December Plus increase in raw material inventory in the 3 months to 31 December Less payments for raw materials in the 3 months to 31 December Trade payables at 31 December

Task 2

$2,000 $14,000 $500 (4,500 – 4,000) $12,000 $4,500

0 of 2 marks

Blitzen Co is about to start work on the budgets for 20X6. One kg of direct material A is required to make four units of its product. Each unit of product also requires three kg of material B and two hours of direct labour. Demand for the product and the supply of material A is unlimited, but only 50,000 kg of material B and 40,000 labour hours are available in the coming period. What is the principal budget factor for 20X6? Direct material A Direct material B Direct labour Sales demand Correct Answer Direct material B Neither sales demand nor supply of material A will limit what can be produced and sold in 20X6. Maximum production in 20X6: From the availability of material B = 50,000 kg / 3 kg/unit = 16,666 units From the availability of direct labour = 40,000 hours / 2 hours/unit = 20,000 units Therefore, material B is the principal budget factor for 20X6. Task 3

1 of 1 mark

What would be the order of the budget preparation for a manufacturing company where the principal budget factor was sales demand? Sales budget, production budget, purchases budget Purchases budget, production budget, sales budget Sales budget, purchases budget, production budget Correct Answer Sales budget, production budget, purchases budget The principal budget factor should be the first budget to be prepared as this determines the level of activity that can be achieved and thus all other budgets. As sales demand is the principal budget factor the sales budget should be prepared first, followed by the production budget which will influence what is purchased.

Which of the following best describes a flexible budget? An annual budget which can be updated each month to reflect changing market and economic conditions An annual budget which incorporates the actual results for the year end and the budgeted figures for the remaining months A budget which is updated periodically so that it always covers the next twelve month period A budget constructed for several production activity levels which incorporates the effect of different cost behaviour patterns Correct Answer A budget constructed for several production activity levels which incorporates the effect of different cost behaviour patterns A flexible budget reflects different cost behaviour patterns and is designed to change as volumes of output change.

Z Co is evaluating a project which will generate cash flows of $2,600 each year in years four to eight. (The first amount will be received in four years from now.) What is the present value of the project cash flows using a discount rate of 14%? $6,822 $12,061 $4,485 $6,024 Correct Answer $6,024 We need the cumulative discount factor for years four to eight.

Cumulative discount factor for years 1 - 8 at 14%

4.639

Less: cumulative discount factor for years 1 - 3 at 14% 2.322 Cumulative discount factor for years 4 - 8 at 14% The present value = 2,600 x 2.317 = $6,024.20

2.317

Organisations can forecast the differences between actual and planned outcomes and implement measures to close the gap. What type of control action is being described above? Variance analysis Budgeting Feedback control Feedforward control Correct Answer Feedforward control is being described. Feedback control occurs after the event when a variance between budgeted and actual results has been found. Feedforward control occurs before the event when a variance is foreseen and action is taken to try to mitigate it.

Which TWO of the following statements about managerial incentive schemes are true? Incentive schemes can be non-financial Incentive schemes will always boost performance Some incentive schemes may encourage bullying of under performers The rewards must relate to the achievement of team goals Correct Answer Incentive schemes can be non-financial Some incentive schemes may encourage bullying of under performers Incentive schemes can be non-financial, for example, extra holidays. One of the criticisms of group schemes is that they can encourage bullying of under-performers. Incentive schemes will not always boost performance. They can demoralise employees if the goals are not achievable. Rewards can relate to individual personal goals, as well as team goals. Individual goals help to link extra pay with extra output.

Q36 Background

Rudolph Co uses a standard marginal costing system to control the costs and revenues of its only product. The following spreadsheet shows a standard costbased operating statement for the month of July. Entries for some cells have been deliberately omitted.

Task 1

2 of 2 marks

Complete the following cells with the correct text label. Cell A4

Sales volume contribution variance Actual contribution

Cell A15 Correct Answer

The difference between the ‘budgeted contribution’ and the ‘standard contribution on actual sales’ is the variance in the amount sold multiplied by the standard contribution per unit. The term for this (cell A4) is the ‘sales volume contribution variance’. Cell D7 is the sum of the standard contribution on actual sales and the favourable selling price variance. The adverse total variable cost variance of $9,000 (net) is then deducted to determine the ‘actual contribution’ (cell A15). Task 2

2 of 2 marks

Which of the following formulae will calculate correctly the value in cell D18? =D7-D14-D16+D17 =D7-D14+D17 =D15+D16+D17 = sum(D3:D17) Correct Answer =D7-D14-D16+D17 The actual profit (cell D18) is calculated by deducting, from cell D7, the variable cost variance (cell D14), because it is adverse, and the budgeted fixed overheads

(cell D16) and then adding the fixed overhead expenditure variance (cell D17), because it is favourable. Task 3

2 of 2 marks

Which of the following is a possible explanation of the variable cost variances? A new expensive material was easier to work with A new cheap material was more difficult to work with A new expensive material resulted in less wastage A new cheap material was easier to work with Correct Answer A new cheap material was more difficult to work with It is most likely that a cheaper material has been bought (favourable material price variance) and that this has resulted in increased wastage (adverse material usage variance) and more time to process it (adverse labour efficiency variance). Task 4

0 of 4 marks

Rudolph Co is now considering changing the costing system from standard marginal costing to standard absorption costing system. You are given further details that were used to prepare the July operating statement as follows: (1) Budgeted sales and production were 5,000 units (2) Actual sales and production were 4,900 units If Rudolph Co had used standard absorption costing in the month of July, what would have been the value of the following: 120 Fixed overhead volume variance adverse Sales volume variance

1880

adverse

Correct Answer The fixed overhead volume variance is the difference between the budgeted and actual volume multiplied by the budgeted fixed overhead cost per unit. (5,000 – 4,900 = 100 units) × ($10,000 / 5,000 units = $2/unit) = $200 The sales volume profit variance is the difference between the budgeted and actual sales units multiplied by the budgeted profit per unit. (5,000 units – 4,900 units = 100 units) × [(budgeted contribution $100,000 – budgeted fixed overhead $10,000 = budgeted profit $90,000) / budgeted sales 5,000 units = $18 per unit] = $1,800

Product A uses 4 kg of material X and 7 kg of material Y at a standard price of $5 per kg and $6 per kg respectively. Product A needs two hours of skilled labour and one hour of semi-skilled labour at $10 per hour and $8 per hour respectively. Production overhead is absorbed at $5 per labour hour. Selling and distribution costs are $3 per unit of product A. What is the standard cost of production for product A? $47 $105 $90 $108 Correct Answer $105 Standard cost of production for product A:

$ per unit Material X 4 kg @ $5

20