1、 Accounting for management
1.1 Which of the following statements about qualities of good information is false ? A It should be relevant for its purposes
B It should be communicated to the right person C It should be completely accurate D It should be timely Answer：C
1.2 The sales manager has prepared a manpower plan to ensure that sales quotas for the
forthcoming year are achieved.This is an example of what type of planning?
A Strategic planning B Tactical planning C Operational planning D Corporate planning Answer：B
1.3 Which of the following stastements about management accounting information is/are true? 1 They must be stated in purely monetary terms
2 Limited companies must,by law,perpar management account
3 They serve as a future planning tool and not used as an historical record A 1,2 and3 B 1 and 2 C 2 only
D None of the statements is true Answer：D
1.4 Which of the following stastements is/are correct ?
1 A management control system is a term used to describe the hardware and software
used to drive a database system which produces information outputs that are easily assimilated by management.
2 An objectives is a course of action that an organisation might pursue in order to
achieve its strategy.
3 Informaton is data that has been processed into a form meaningful to the recipient. A 1,2 and 3 B 1 and 3 C 2 and 3 D 3 only Answer：D
1.5 Good information should have certain qualities. Which of the following are qualities of good Information ?
1 Complete 2 Extensive 3 Relevant 4 Accurate A 1,2 and 3 B 1,3 and 4 C 2 and 4 D All of them Answer：B
1.6 Monthly variance reports are an example of which one of the following types of management?
A Tactical B Strategic
C Non-financial D Operational Answer：A
1.7 Which of the following stastements is/are correct ?
1 Strategic planning is carried out by front-line managers
2 Non-financial information is relevant to management accounting A 1 is true and 2 is false B 2 is true and 1 is false C Both are true D Both are false Answer：B 2、Sources of data
2.1 Which of the following is/are primary sources of data ?
(i) Historical records of transport costs to be used to prepare forecasts for budgetary
planning
(ii) The Annual Abstract of Statistics, published by the Office for National Statistics in the
United Kingdom
(iii) Data collected by a bank in a telephone survey to monitor the effectivess of the bank?s
customer services
A (i) and (ii) B (i) and (iii) C (i) only D (iii) only Answer：D
2.2 The following statements relate to different types of data
(i) Secondary data are data collected especially for a specific purpose (ii) Discrete data can take on any value
(iii) Qualitative data are data that cannot be measured
(iv) Population data are data arising as a result of investigating a group of people or objects Which of the statements are true ? A (i) and (ii) only B (ii) and (iii) only C (ii) and (iv) only D (iii) and (iv) only Answer：D
2.3 Which of the following stastements are not true ?
I If a sample is selected using random sampling, it will be free from bias. II A sampling frame is a numbered list of all items in a sample. III In cluster sampling there is very little potential for bias.
IV In quota sampling, investigators are told to interview all the people they meet up to a
certain quota.
A I,II,III and IV B I,II and III C II and III D II only
Answer：C
2.4 Which of the following sampling methods require a sampling frame ? (i) Random (ii) Stratified (iii) Quota (iv) Systematic A (i) and (ii) only B (i),(ii) and (iii) only C (i),(ii) and (iv) only D (iii) only Answer：C
2.5 Which of the following explains the essence of quote sampling ?
A Each element of the population has an equal chance of being chosen B Every nth member of the population is selected
C Every element of one definable sub-section of the population is selected D None of the above Answer：D 3、 Cost classification
3.1 A firm has to pay a 20c per unit royalty to the inventor of a device which it manufactures and sells. How would the royalty charge be classified in the firm?s accounts ? A Selling expense B Direct expense
C Production overhead D Adminstrative overhead Answer：B
3.2 Which of the following would be classed as indirect labour ?
A Assembly workers in a company manufacturing televisions B A stores assistant in a factory store C Plasterers in a construction company
D A consultant in a firm of management consultants Answer：B
3.3 A manufacturing firm is very busy and overtime is being worked . A Part of prime cost B Factory overheads C Direct labour costs
D Administrative overheads Answer：B
3.4 Which of the following items would be treated as an indirect cost ? A Wood used to make a chair
B Metal used for the legs of a chair C Fabric to cover the seat of a chair
D Staples to fix the fabric to the seat of a chair Answer：D
3.5 Over which of the following is the manager of a profit center likely to have control ? (i) Selling prices (ii) Controllable costs
(iii) Apportioned head offices costs
(iv) Capital investment in the centre A All of the above B (i),(ii) and (iii) C (i),(ii) and (iv) D (i) and (ii) Answer：D
3.6 Which of the following best describes a controllable cost ?
A A cost which arises from a decision already taken, which cannot, in the short run, be
changed.
B A cost for which the bahaviour pattern can be easily analysed to facilitate valid
budgetary control comparisons.
C A cost which can be influenced by its budget holder.
D A specific cost of an activity or business which would be avoided if the activity of
business did not exist.
Answer：C
3.7 Which of the following items be a suitable cost unit within the credit control department of a
company ?
(i) Stationery cost (ii) Customer account
(iii) Cheque received and processed A Item (i) only B Item (ii) only C Item (ii) only
D Item (ii) and (ii) only Answer：D
3.8 Which of the following best describes a period cost ?
A A cost that relates to a time period which is deducted as expenses for the period and
is not included in the inventory valuation.
B A cost that can be easily allocated to a particular period, without the need for
arbitrary apportionment between periods.
C A cost that is identified with a unit produced during the period, and is included in the
value of inventory. The cost is treared as an expense for the period when the inventory is actually sold.
D A cost that is incurred regularly every period, eg every month or quarter. Answer：A
3.9 A company employs four supervisors to oversee the factory production of all its products.How would the salaries paid to these supervisors be classified ? A As a direct labour cost
B As a direct production expense C As a production overhead
D As an administration overhead Answer：C
3.10 A company manufactures and sells toys and incurs the following three costs: (i) Rental of the finished goods warehouse
(ii) Depreciation of its own fleet of delivery vehicles (iii) Commission paid to sales staff
Which of these are classified as distribution costs ?
A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (i),(ii) and (iii) Answer：A
3.11 Which of the following describes a cost centre ?
A A unit of output or service for which costs are ascertained B A function or location for which costs are ascertained
C A segment of the organisation for which budgets are prepared D An amount of expenditure attributable to a particular activity Answer：B 4、Cost behavior
4.1 Fixed costs are conventionally deemed to be: A Constant per unit of output
B Constant in total when production volume changes C Outside the control of management D Easily controlled Answer：B
4.2 The following data relate to the overhead expenditure of a contract cleaners at two activity
levels. Square metres cleaned 13,500 15,950 Overheads $84,865 $97,850
What is the estimate of the overheads if 18,300 square metres are to be cleaned ? A $96,990 B $110,305 C $112,267 D $115,039
Answer：B
The following information relates to questions 4.3 to 4.7 $ $ $
Level of activity Level of activity Level of activity Graph 1 Graph 2 Graph 3
$ $ $
Level of activity Level of activity Level of activity Graph 4 Graph 5 Graph 6
Which one of the above graphs illstrates the costs described in questions 4.3 to 4.7 ? 4.3 A linear variable cost—when the vertical axis represents cost incurred. A Graph 1 B Graph 2 C Graph 4 D Graph 5 Answer：B
4.4 A fixed cost—when the vertical axis represents cost incurred. A Graph 1 B Graph 2 C Graph 3 D Graph 6 Answer：A
4.5 A linear variable cost—when the vertical axis represents cost per unit. A Graph 1 B Graph 2 C Graph 3 D Graph 6 Answer：A
4.6 A semi—variable cost—when the vertical axis represents cost incurred. A Graph 1 B Graph 2 C Graph 4 D Graph 5 Answer：C
4.7 A step fixed cost—when the vertical axis represents cost incurred. A Graph 3 B Graph 4 C Graph 5 D Graph 6 Answer：A
4.8 A company has recorded the following data in the two most recent periods. Total costs of production Volume of production $ Units 13,500 700 18,300 1,100
What is the best estimate of the company?s fixed costs of period ? A $13,500 B $13,200 C $5,100 D $4,800 Answer：C
4.9 A production worker is paid a salary of $650 per month, plus an extra 5 pence for each unit
produced during the month. How is this type of labour cost best described ? A A variable cost B A fixed cost C A step cost
D A semi-variable cost Answer：D
4.10 What type of cost is supervisor salary costs, where one supervisor is needed for every ten
employees added to the staff ? A A fixed cost
B A variable cost C A mixed cost D A step cost Answer：D
4.11 The following information for advertising and sales has been established over the past six
months: Month Sales revenue Advertising expenditure $?000 $?000 1 155 3 2 125 2.5 3 200 6 4 175 5.5 5 150 4.5 6 225 6.5
Using the high-low method which of the following is the control equation for linking advertising and sales from the above data ?
A Sales revenue = 62,500 + (25 * advertising expenditure) B Advertising expenditure = -2,500 + (0.04* sales revenue) C Sales revenue = 95,000 + (20* advertising expenditure) D Advertising expenditure = -4,750 + (0.05 * sales revenue) Answer：A
4.12 A tatol cost is described as staying the same over a certain activity range and then increasing
but remaining stable over a revised activity range in the short term. What type of cost is this ? A A fixed cost B A varibale cost
C A semi-variable cost D A stepped fixed cost Answer：D
4.13 A company incurs the following costs at various activity levels: Total cost Activity level $ units 250,000 5,000 312,500 7,500 400,000 10,000
Using the high-low method what is the variable cost per unit ?
A $25 B $30 C $35 D $40 Answer：B
4.14 The following diagram repesents the behaviour of one element of cost: $ Total cost
0 Volume of activity Which ONE of the following statements is consistent with the above diagram ?
A Annual factory power cost where 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 there is a fixed wage for a standard 40 hour week but
overtime is paid at a premium rate.
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 where the supplier charges a constant amount
per unit for all units supplied up to a maximum charge for the period.
Answer：A
4.15 An organisation manufactures a single product. The total cost of making 4,000 units is
$20,000 and the total cost of making 20,000 units is $40,000. Within this range of activity the total fixed costs ramain unchanged.
What is the variable cost per unit of the product ? A $0.80 B $1.20 C $1.25 D $2.00 Answer：C
4.16 When total purchases of raw material exceed 30,000 units in any one period then all units
purchased, including the initial 30,000, are invoiced at a lower cost per unit.
Which of the following graphs is consistent with the behaviour of the total material cost in a
period ?
$ A $ B
UNITS UNITS 30,000 30,000 $ C $ D
UNITS UNITS 30,000 30,000 Answer：A
4.17 The total cost of production for two levels of activity is as follows: Level 1 Level 2 Production (units) 3,000 5,000 Tatal ($) 6,750 9,250
The variable production cost per unit and the total fixed production cost both remain constant in the range of activity shown.
What is the level of fixed costs ? A $2,000 C $3,000 B $2,500 D $3,500 Answer：C
4.18 The following data relate to two activity levels of an X-ray department in a hospital: Number of X-ray taken 4,500 4,750 Overheads $269,750 $273,625 Fixed overheads are $200,000 per period. What is the variable cost per X-ray ? A $0.06 C $250 B $15.50 D $3,875 Answer：B
4.19 An organisation has found that there is a linear relationship between sales volume and
delivery costs. It has found that a sales volume of 400 units corresponds to delivery cost of $10,000 and that a sales volume of 800 units corresponds to delivery costs of $12,000.
What are the delivery costs for a sales volume of 700 units ? A $5 C $8,000 B $3,500 D $11,500 Answer：D
5、Presenting information
5.1 The cost of materials for product A are as follows. Material W:$2,250 Material X:$3,000 Material Y:$3,600 Material Z:$150
If the material proportions were displayed on a pie chart, how many degree would material Y
represent ?
A 90 degrees C 144 degree B 120 degree D 204 degree Answer：C
The following information relates to questions 5.2 to 5.3 Number of ice-creams sold April May June Mint choc chip 600 760 725 Chocolate 300 335 360 Strawberry 175 260 310 Blueberry 75 90 100 July 900 525 475 90
5.2 The data may be illustrated by the following chart. What type if chart is it ?
1000
NO. 800of ice-creams April600 sold May 400June
July200
0 Mini-chocChocolateStrawberryBlueberry
A Simple bar chart B Multilpe bar chart C Component bar chart D Ogive Answer：B
5.3 Which one of the following statements is true ?
A Sales of mint choc chip rose steadily over the four months B Total sales fell in the month of July
C After May, sales of strawberry began to catch up with sales of chocolate D Sales of blueberry rose in May and July Answer：C 6、Material costs
6.1 Which of the following functions are fulfilled by a good rececived note (GRN) ? (i) Provides information to update the inventory records on receipt of goods (ii) Provides information to check the quantity on the supplier?s invoice (iii) Provides information to check the price on the supplier?s invoice A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (i) only Answer：A
6.2 There are 27,500 units of Part Number X35 on order with the suppliers and 16,250 units
outstanding on existing customers? orders.
If the free inventory is 13,000 units, what is the physical inventory ?
A 1,750 B 3,250 C 24,250 D 29,250 Answer：A
The following information relates to questions 6.3 and 6.4
A domestic appliance retailer with multiple outlets sells a popular toaster known as the Autocrisp
2000, for which the following information is available: Average sales 75 per day Maximum sales 95 per day Minimum sales 50 per day Lead time 12-18 days Reorder 1,750 6.3 Based on the data above, at what level of inventory would a replenishment order be issued ? A 600 units B 1,125 units C 1,710 units D 1,750 units Answer：C
6.4 Based on the data above, what is the maximum inventory level ? A 1,750 units B 2,275 units C 2,860 units D 2,900 units Answer：C
6.5 The annual demand for an item of inventory is 2,500 units. The cost of placing an order is $80
and the cost of holding an item in stock for one year is $15. What is the econmic order quantity
, to the nearest unit ? A 31 units B 115 units C 163 units D 26,667 units Answer：C
6.6 Which of the following is correct with regard to intentories ? (i) Stock-out aries when too little inventory is held
(ii) Safety inventories are the level of units maintained in case there is unexpected demand (iii) A re-order level can be established by looking at the maximum usage and the
maximum lead-time
A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (i),(ii) and (iii) Answer：D
6.7 What is the economic batch quantity used to setablish ? Optimal
A reorder quantity B recorder level
C cumulative production quantity D inventory level for production Answer：C
6.8 The demand for a product is 12,500 units for a three month period. Each unit of product has a
Purchase price of $15 and ordering costs are $20 per order placed.
The annual holding cost of one unit of product is 10% of its purchase price. What is the Economic Order Quantity (to the nearest unit)? A 577 B 816 C 866 D 1,155 Answer：D
6.9 A company determines its order quantity for a raw material by using Economic Order Quantity
(EOQ)model.
What would be the effects on the EOQ and the annual holding cost of a decrease in the cost of
ordering a batch of raw material ? EOQ Total annual holding cost A Higher Lower B Higher Higher C Lower Higher D Lower Lower Answer：D 6.10 Data ralating to a particular stores item are as follows: Average daliy usage 400 units Maximum daliy usage 520 units Minimum daliy usage 180 units Lead time for replenishment of inventory 10 to 15 days Record quantity 8,000 units What is the record level (in units) which avoids stockouts (running out of inventory) ? A 5,000 B 6,000 C 7,800 D 8,000 Answer：C
6.11 The material stores control account for a company for March looks like this: MATERIAL STORES CONTROL ACCOUNT $ $ Balance b/d 12,000 Work in progress 40,000 Suppliers 49,000 Overhead control 12,000 Work in progress 18,000 Balance b/d 27,000 79,000 79,000 Balance b/d 27,000 Which of the following statements are correct ? (i) Issues of direct materials during March were $18,000 (ii) Issues of direct materials during March were $48,000 (iii) Issues of indirect materials during March were $12,000
(iv) Purchases of materials during March were $49,000 A (i) and (iv) only B (ii) and (iv) only C (ii),(iii) and (iv) only D All of them Answer：C
6.12 A manufacturing company uses 25,000 components at an even rate during a year. Each order
placed with the supplier of the components is for 2,000 components, which is the econmic order quantity. The company holds a buffer inventory of 500 components.The annual cost of holding one component in inventory is $2.
What is the total annual cost of holding inventory of the component ? A $2,000 B $2,500 C $3,000 D $4,000 Answer：C
6.13 A company wishes to minmise its inventory costs.Order costs are $10 per order and holding
costs are $0.10 per unit per month. Fall Co estimates annual demand to be 5,400 units.
The economic order quantity is units. A 949 B 90,000 C 1,039 D 300 Answer：D
6.14 For a particular component, the re-order quantity is 6,000 units and the inventory holding is
3,400 units.
The level of safety inventory is (in whole units) A 400 B 3,400 C 3,000 D 6,400 Answer：A
6.15 The following data relates to component L512: Ordering costs $100 per order Inventory holding costs $8 per unit per annum Annual demand 1,225 units The economic order quantity is units (to the nearest whole unit) A 175 B 62 C 44 D 124 Answer：A
6.16 The following data relate to inventory item A452 Average usage 100 units per day Minimum usage 60 units per day Maximum usage 130 units per day Lead time 20-26 days EOQ 4,000 units The maximum inventory level was units A 3,380 B 6,180 C 7,380 D 8,580 Answer：B
6.17 ACB Co gradually receives its re-supply of inventory at a rate of 10,000 units a week.Other
information is available as follows. Weekly demand 5,000 units Set-up costs for each production run $125 Weekly cost of holding one unit $0.0025 What is the economic production run ? A 1,577 units B 7.071 units C 31,623 units D 894,427 units Answer：C 7、Labour
The following information ralates to questions 7.1 and 7.2
Budgeted and actual production data for the year that just ended are as follows. Product Budgeted production Actual production Units Standard machine hours Units W 15,000 3,000 12,000 X 20,000 8,000 25,000 Y 14,000 7,000 16,000 Z 6,000 9,000 5,000 Total machine hours wroked in the period amounted to 29,000 hours. 7.1 What was the capacity ratio in the year, as a percentage to one decimal place ? A 93.2% B 103.3% C 105.5% D 107.4% Answer：D
7.2 What was the efficiency ratio in the year, as a percentage to one decimai place ? A 96.2% B 103.3% C 103.5% D 107.4% Answer：A
7.3 The labour cost graph below depicts: $
0 Output
A A piece rate scheme with a minimum guaranteed wage B A straight piece rate scheme C A straight time rate scheme
D A differential piece rate scheme Answer：A
7.4 The following data relate to work in the finishing department of a certain factory. Normal working day 7 hours Basic rate of pay per hour $5 Standard time allowed to produce 1 unit 4 minutes Premium bonus payable at the basic rate 60% of time saved On a particular day one employee finishes 180 units.His gross pay for the day will be A $35 B $50 C $56 D $60 Answer：B
7.5 An employee is paid on a piecework basis. The basis of the piecework scheme is as follows: 1 to 100 units — $0.20 per units 101 to 200 units — $0.30 per units 201 to 299 units — $0.40 per units With only the additional units qualifying for the higher rates. Rejected units do not qualify for payment. During a particular day the employee produced 210 units of which 17 were rejected as faulty.
What did the employee earn for their day?s work ? A $47.90
B $54.00 C $57.90 D $63.00 Answer：A
7.6 Employee A is a carpenter and normally works 36 hours per week. The standard rate of pay is
$3.60 per hour. A premium of 50% of the basic hourly rate is paid for all overtime hours worked. During the last week of October, Employee A worked for 42 hours. The overtime hours worked were for the following reasons:
Maching breakdown: 4 hours To complete a special job at the request of a customer 2 hours
How much of Employee A?s earnings for the last week of October would have been treated as
direct wages ?
A $162.00 B $129.60 C $140.40 D $151.20 Answer：C
7.7 Which of the following statements is/are true about group bonus schemes ?
(i) Group bonus schemes are approprtate when increased output depends on a number of
people all making extra effort
(ii) With a group bonus scheme, it is easier to award each individual?s performance (iii) Non-production employees can be rewarded as part of a group incentive scheme A (i) only
B (i) and (ii) only C (i) and (iii) only D (ii) and (iii) only Answer：C
7.8 X Co has record the following wages costs for direct production workers for November. $ Basic pay 70,800 Overtime premium 2,000 Holiday pay 500 Gross wages incurred 73,300 The overtime was not worked for any specific job. The accounting entries for these wages costs would be:
Debit Credit $ $ A Work in progress account 72,800 Overhead control account 500
Wages control account 73,300 B Work in progress account 70,800 Overhead control account 2,500
Wages control account 73,300 C Wages control account 73,300
Work in progress account 70,800 Overhead control account 2,500
D Wages control account 73,300
Work in progress account 72,800 Overhead control account 500 Answer：B
7.9 A company had 30 direct production employees at the beginning of last year and 20 direct
production employees at the end of the year. During the year, a total of 15 direct production has left the company to work for a local competitor. The labour turnover rate for last year was:
A 16.7% B 20.0% C 25.0% D 60.0% Answer：B
7.10 Jane works as a menber of a three-person tearn in the assembly department of a factory. The
team is rewarded by a group bonus scheme whereby the team leader receives 40 per cent of any bonus earned by the team, and the ramaining bonus is shared evenly between Jane and the other team member.
Detail of output for one day are given below. Hours worked by team 8 hours Team production achieved 80 units Standard time allowed to produce one unti 9 minutes Group bonus payable at $6 per hour 70% of time saved The bonus element of Jane?s pay for this particular day will be A $5.04
B $7.20 C $10.08 D $16.80 Answer：A
7.11 In a typical cost ledger, the double entry for indircet labour cost incurred is: A DR Wages contorl CR Overhead control B DR Admin overhead control CR Wages contorl C DR Overhead control CR Wages contorl D DR Wages control CR Admin overhead control Answer：C 8、Accounting for overheads 8.1 The following extract of information is available concerning the four cost centres of EG
Limited. Service cost Production cost centres centre Machinery Finishing Packing Canteen Number of direct employees 7 6 2 — Number of indirect employees 3 2 1 4 Overhead allocated and apportioned $28,500 $18,300 $8,960 $8,400 The overhead cost of the canteen is to be re-apportioned to the production cost centres on the basis of the number of employees ini each production cost centre. After the re-apportioned, the total overhead cost of the packing department, to the nearest $, will be A $1,200
B $9,968 C $10,080 D $10,160 Answer：D
The following information relates to questions 8.2 and 8.3
Budgeted information relating to two departments in a company for the next period is as follows Production Direct Direct Direct Machine Department Overhead Material cost Labour cost Labour hours hours $ $ $ 1 27,000 67,500 13,500 2,700 45,000 1 18,000 36,000 100,000 25,000 300 Individual direct labour employees within each department earn differing rates of pay, according to their skills, grade and experience.
8.2 What is the most appropriate production overhead absorption rate for department 1 ? A 40% of direct material cost B 200% of direct labour cost C $10 per direct labour hour D $0.60 per machine hour Answer：D
8.3 What is the most appropriate production overhead absorption rate for department 2 ?
A 50% of direct material cost B 18% of direct labour cost C $0,72 per direct labour hour D $60 per machine hour Answer：C
8.4 Which of the following statements about predetermined overhead absorption rates are true ? (i) Using a predetermined absorption rate avoids fluctuations in unit costs caused by
abnormally high or low overhead expenditure or activity levels
(ii) Using a predetermined absorption rate offers the administrative convenience of being
able to record full production costs sooner
(iii) Using a predetermined absorption rate aviods problem of under/over absorption of
overheads because a constant overhead rate is available.
A (i) and (ii) only B (i) and (iii) only C ((ii) and (iii) only D All of them Answer：A
8.5 Over-absorbed overheads occur when
A Absorbed overheads exceed actual overheads B Absorbed overheads exceed budgeted overheads C Actual overheads exceed absorbed overheads D Actual overheads exceed budgeted overheads Answer：A
The following information relates to questions 8.6 and 8.7 A company has the following actual budgeted data for year 4.
Production Variable production overhead per unit Fixed production overheads Sales Budget 8,000 units $3 $360,000 6,000 units Actual 9,000 units $3 $432,000 8,000 units Overheads are absorbed using a rate per unit, based on budgeted output and expenditure. 8.6 The fixed production overhead absorded during year 4 was: A $384,000
B $405,000 C $432,000
D $459,000 Answer：B
8.7 Fixed production overhead was: A under basorbed by $27,000 B under basorbed by $72,000 C under basorbed by $75,000 D over basorbed by $27,000 Answer：A
8.8 Which of the following would be the most appropriate basis for apportioning machinery insurance costs to cost centers within a factory ? A The number of machine in each cost centre
B The floor area occupied be the machinery in each cost centre C The value of the machinery in each cost centre
D The operating hours of the machinery in each cost centre Answer：C
8.9 Factory overheads can be absorbed by which of the following methods ? (i) Direct labour hours (ii) Machine hours
(iii) As a percentage of prime cost (iv) $x per unit
A (i),(ii),(iii) and (iv) B (i) and (ii) only C (i),(ii) and (iii) only D (ii),(iii) and (iv) only Answer：A
8.10 The production overhead control account for R Limited at the end of the period looks like this PRODUCTION OVERHEAD CONTROL ACCOUNT $ $ Stores control 22,800 Work in progress 404,800 Wages control 180,400 Profit and loss 8,400 Expense creditors 210,000 413,200 413,200 Which of the following statements are correct ? (i) Indirect material issued from inventory was $22,800 (ii) Overhead absorbed during the period was $210,000 (iii) Overhead for the period was over absorbed by $8,400 (iv) Indirect wages costs incurred were $180,400 A (i),(ii) and (iii) B (i),(iii) and (iv) C (i) and (iv) D All of them Answer：C
8.11 Which of the following is correct when considering the allocation, approtionment and
reapportionment of overheads in an absorption costing situation ?
A Only production ralated costs should be considered
B Allocation is the situation where part of an overhead is assigned to a cost centre C Costs may only be reapportioned from production centres to service centers D Any overheads assigned to a single department should be ignored Answer：A
8.12 A company has over-absorbed fixed production overheads for the period by $6,000. The fixed
production overhead absorption rate was $8 per unit and is based on the normal level of activity of 5,000 units. Actual production was 4,500 units.
What was the actual fixed production overheads incurred for the period ?
A $30,000
B $36,000 C $40,000
D $42,000 Answer：A
8.13 A company manufacturers two products, X and Y, in a factory divided into two production
cost centres. Primary and Finishing. The following budgeted data are avaliable: Cost centre Primary Finishing Allocated and apportioned fixed overhead costs $96,000 $82,500 Direct labour minutes per unit: —product X 36 25 —product Y 48 35 Budgeted production is 6,000 units of product X and 7,500 units of product Y. Fixed overhead costs are to be absorbed on a direct labour hour basis.
What is the budgeted fixed overhead cost per unit for product Y ?
A $11
B $12 C $14
D $15 Answer：D
8.14 A company uses an overhead absorption rate of $3.50 per machine our, based on 32,000
budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual production.
By how much was the total overhead under or over absorbed for the period ? A Under absorbed by $3,875 B Under absorbed by $7,000 C Over absorbed by $3,875 D Over absorbed by $7,000 Answer：A
8.15 A factory consists of two production cost centres (P and Q) and two service cost centres (X
and Y). The total allocated and apportioned for each is as follows: P Q X Y $95,000 $82,000 $46,000 $30,000 It has been estimated that each service cost centre does work for the other cost centres in the following proportions: P Q X Y Percentage of service cost centre X to 40 40 — 20 Percentage of service cost centre Y to 30 60 10 — After the reapportionment of service cost centre costs has been carried out using a method that fully racognise the reciprocal service arrangements in the factory, what is the total overhead for production cost centre P ? A $122,400
B $124,716 C $126,000
D $127,000 Answer：D
8.16 The following data is available for a paint department for the latest period. Budgeted production overhead $150,000 Actual production overhead $150,000 Budgeted machine hours 60,000 Actual machine hours 55,000
Which of the following statements is correct ?
A There was no under or over absorption of overhead B Overhead was $13,636 over absorbed C Overhead was $12,500 over absorbed D Overhead was $12,500 under absorbed Answer：D
8.17 Actual overhead $496,980 Actual machine hours 16,566 Budgeted overhead $475,200
Based on the data above, and assuming that the budgeted overhead absorption rate was $32
per hour, the number of machine hours (to the nearest hour) budgeted to be worked were
hours.
A 14,850 B 15,531 C 16,566
D 33,132 Answer：A 8.18
Budgeted overheads $690,480 Budgeted machine hours 15,344 Actual machine hours 14,128 Actual overheads $679,550 Based on the data above, the machine hour absorption rate is (to the nearest $) $ per machine hour.
A 44 B 45 C 48
D 49 Answer：B
8.19 A company absorbs overheads on machine hours. In a period, actual machine hours were
22,435, actual overheads were $496,500 and there was over absorption of $64,375. The budgeted overhead absorption rate was $ per machine hour (to the nearest $).
A 19
B 22 C 25
D 27 Answer：C
8.20 A company absorbs fixed production overheads in one of its departments on the basis of
machine hours. There were 100,000 budgeted machine hours for the forthcoming perid. The fixed production overhead absorption rate was $2.50 per machine hour.
During the period, the following actual results were recorded: Standard machine hours 110,000 Fixed production overheads $300,000 Fixed production overhead was ahsorbed by $ A Over absorbed by $25,000 B Under absorbed by $50,000 C Over absorbed by $50,000
D Under absorbed by $25,000 Answer：D
9、Absorption costing and marginal costing 9.1 The following data is available for period 9.
Opening inventory 10,000 units Closing inventory 8,000 units Absorption costing profit $280,000
The profit for period 9 using marginal costing would be : A $278,000 B $280,000 C $282,000
D Impossible to calculate without more information Answer：D
9.2 The overhead absorption rate for product T is $4 per machine hour. Each unit of requires 3
machine hours. Inventories of product T last period were: Units Opening inventory 2,400 Closing inventory 2,700
Compared with the marginal costing profit for the period, the absorption costing profit for product T will be: A $1,200 higher B $3,600 higher C $1,200 lower D $3,600 lower Answer：B
9.3 In a period where opening inventories were 15,000 units and closing inventories were 20,000
units, a firm had a profit of $130,000 using absorption costing, If the fixed overhead absorption rate was $8 per unit, the profit using marginal costing would be :
A $90,000 B $130,000 C $170,000
D Impossible to calculate without more information Answer：A
The following information relates to questions 9.4 and 9.5 Cost and selling price details product Z are as follows.
$ per unit Direct materials 6.00 Direct labour 7.50 Variable overhead 2.50 Fixed overhead absorption rate 5.00 21.00 Profit 9.00 Selling price 30.00 Budgeted production for the month was 5,000 units although the company managed to produce 5,800 units, selling 5,200 of them and incurring fixed overhead costs of $27,400. 9.4 The marginal costing profit for the month is :
A $45,400
B $46,800 C $53,800
D $72,800 Answer：A
9.5 The absorption costing profit for the month is : A $45,200 C $46,800 B $45,400 D $48,400 Answer：D
9.6 In a period, a company had opening inventory of 31,000 units and closing inventory of 34,000 units. Profits based on marginal costing were $850,500 and on absorption costing were $955,500.
If the budgeted total fixed costs for the company was $1,837,500, what was the budgeted level of activity in units ?
A 32,500 C 65,000 B 52,500 D 105,000 Answer：B
9.7 A company had opening inventory of 48,500 units and closing inventory of 45,500 units. Profits based on marginal costing were $315,250 and on absorption costing were $288,250. What is the fixed overhead absorption rate per unit ? A $5.94 C $6.50 B $6.34 D $9.00 Answer：D
9.8 Which of the following are acceptable bases for absorbing production overheads ? (i) Direct labour hous (ii) Machine hous
(iii) As a percentage of the prime cost (iv) per unit
A Method (i) and (ii) only B Method (iii) and (iv) only C Method (i),(ii),(iii) and (iv) D Method (i),(ii) or (iii) only Answer：C
9.9 Absorption costing is concerned with of the following ? A Direct materials B Direct labour C Fixed costs
D Variable and fixed costs Answer：D
9.10 A company has established a marginal costing profit of $72,300. Opening inventory was 300
units and closing inventroy is 750 units. The fixed production overhead absorption rate has been calculated as $5/unit.
What was the profit under absorption costing ? A $67,050
B $70,050 C $74,550
D $77,550 Answer：C
9.11 A company produces and sells a single product whose variable cost is $6 per unit.
Fixed costs have been absorbed over the normal level of activity of 200,000 units and have
been calculated as $2 per unit.
The current selling price is $10 per unit.
How much profit is made under marginal costing if the company sells 250,000 units ?
A $500,000
B $600,000 C $900,000
D $1,000,000 Answer：B
9.12 A company wishes to profit of $150,000. It has fixed costs of $75,000 with a C/S ratio of 0.75
and a selling price of $10 per unit.
How many units would the company need to sell in order to achieve the required level profit ? A 10,000 units B 15,000.units C 22,500 units D 30,000 units Answer：D
9.13 A company which uses marginal costing has a profit of $37,500 for a period. Opening
inventory was 350 units.
The fixed production overhead absorption rate is $4 per unit. What is the profit under absorption costing ?
A $35,700
B $35,500 C $38,500
D $39,300 Answer：C
9.14 A company manufactures and sells a single product. For this month the budgeted fixed
production overheads are $48,000, budgeted production is 12,000 units and budgeted sales are 11,720 units.
The company currently uses absorption costing.
If the company used marginal costing principles instead of absorption costing for this month ,what would be the effect on the budgeted profit ? A $1.120 higher B $1,120 lower C $3,920 higher D $3,920 lower Answer：B
9.15 A company operates a standard marginal costing syetem. Last month its actual fixed overhead
expenditure was 10% above budget resulting in a fixed overhead expenditure variance of $36,000.
What was the actual expenditure on fixed overhead last month ?
A $324,000
B $360,000 C $396,000
D $400,000 Answer：C
9.16 Last month, when a company had an opening inventory of 16,500 units and a closing
inventory of 18,000 units, the profit using absorption costing was $40,000. The fixed production overhead rate was $10 per unit.
What would the profit for last month have been using marginal costing ?
A $15,000
B $25,000 C $55,000
D $65,000 Answer：B
9.17 Last month a manufacturing company?s profit was $2,000, calculated using absorption
costing principles. If marginal costing priciples has been used, a loss of $3,000 would have occurred. The company?s fixed production cost is $2 per unit. Sales last month were 10,000 units.
What was last month?s production (in units) ?
A 7,500 B 9,500 C 10,500 D 12,500 Answer：D
9.18 HMF Co produces a single product. The budgeted fixed production overheads for the period
are $500,000. The budgeted output for the period is 2,500 units. Opening inventory at the start of the period consisted of 900 units and closing inventory at the end of the period consisted of 300 units. If absorption costing principles were applied, the profit for the period compared to the marginal costing profit would be :
A $ 125,000 higher B $ 125,000 lower C $ 120,000 higher D $ 120,000 lower Answer：D
10、Job, batch and service costing
10.1 Which of the following costing methods is most likely to be used by a company involved in
the manufacture of liquid soap ?
A Batch costing B Service costing C Job costing D Process costing Answer：D
10.2 A company calculates the prices of jobs by adding overheads to the prime cost and adding
30% to total costs as a mark up. Job number Y256 was sold for $1,690 and incurred overheads of $694. What was the prime cost of the job ? A $489
B $606 C $996
D $1,300 Answer：B
10.3 A company operates a job costing system. The estimated costs for job 173 are as follows.
Direct materials 5 metres @ $20 per metre Direct labour 14 hours @ $8 per hour
Variable production overheads are recovered at the rate of $3 per direct labour hour.
Fixed production overheads for the year are budgeted to be $200,000 and are to be recovered
on the basis of the total of 40,000 direct labour hours for the years.
Other overheads, in ralation to selling, distribution and daministretion, are recovered at the rate
of $80 per job.
The total cost of job 173 is
A $404 B $300 C $254 D $324 Answer：A
The following information relates to questions 10.4 and 10.5
A firm makes special assemblies to customers? orders and uses job costing. The data for a period are: Job number Job number Job number AA10 BB15 CC20 $ $ $ Opening WIP 26,800 42,790 0 Material added in period 17,275 0 18,500 Labour for period 14,500 3,500 24,600 The budgeted overheads for the period were $126,000. 10.4 What overhead should be added to job number CC20 for the period ?
A $65,157
B $69,290 C $72,761
D $126,000 Answer：C
10.5 What was the approximate value of closing work-in-progerss at the end of the period ?
A $58,575
B $101,675 C $217,323
D $227,675 Answer：C
10.6 The following items may be used in costing batches. 1 Actual material cost
2 Actual manufacturing overheads 3 Absorbed manufacturing overheads 4 Actual labour cost
Which of the above are contained in a typacil batch cost ? A 1,2 and 4 only B 1 and 4 only C 1,3 and 4 only D 1,2,3 and 4 Answer：C
10.7 What would be the most appropriate cost unit for a cake manufacturer ? Cost per : A Cake B Batch C Kg
D Piece of cake Answer：B
10.8 Which of the following would be appropriate cost units for a passenger coach company ? (i) Vehicle cost per passenger-kilometre (ii) Fuel cost for each vehicle per kilometre (iii) Fixed cost per kilometre
A (i) only B (i) and (ii) only C (i) and (iii) only D (ii) and (iii)only Answer：B
10.9 The following information is available for a hotel company for the latest thirty day period. Number of rooms available per night 40 Percentage occupancy achieved 65% Room servicing cost incurred $3,900
The room servicing cost per occupied room-night last period, to the nearest penny, was: A $3.25 B $5.00 C $97.50 D $150.00 Answer：B
10.10 Annie is to set up a small hairdressing business at home. She anticipates working a 35-hour
week and taking four week?s holiday per day. Her expenses for materials and overheads are expected to be $3,000 per year, and she has set herself a target profit of $18,000 for the first year.
Assuming that only 90% of her working time will be chargeable to clients, what price should
she charge for a ?colour and cut? which would take 3 hours ? A $13.89
B $35.71 C $37.50
D $41.67 Answer：D
10.11 Which of the following is not a characteristic of service costing ? A High levels of direct costs as a proportion of total costs B Intangibility of output
C Use of composite cost units
D Can be used for internal services as well as external services Answer：A
10.12 Which of the following are likely to use service costing ? (i) A college (ii) A hotel (iii) A plumber A (i),(ii) and (iii) B (i) and (ii) C (ii) only
D (ii) and (iii) only Answer：B
10.13 Which of the following would be considered a service industry ? (i) An airline company (ii) An railway company (iii) A firm of accountants A (i) and (ii) only B (i) and (iii) only C (i),(ii) and (iii) D (ii) and (iii) only
Answer：C
10.14 The following information relates to a management consultancy organisation: Salary cost per hour for senior consultants $ Salary cost per hour for junior consultants 40 Overhead absorption rate per hour applied to all hours 20
The organisation adds 40% to total cost to arrive at the final fee to be changed to a client Assignment number 789 took 54 hours of a senior consultant?s time and 110 hours of junior
consultants? time
What is the final fee to be charged for Assignment 789 ? A $6,874 C $11,466 B $10,696 D $12,642 Answer：C
10.15 A company operates a job costing system. Job number 1012 requires $45 of direct material
and $30 of direct labour. Direct labour is paid at the rate of $7.50 per hour. Production
overheads are absorbed at a rate of $12.50 per labour hour and non-production overhead are absorbed at a rate of 60% of prime cost.
What is the total cost of job number 1012 ?
A $170
B $195 C $200
D $240 Answer：A 11 Process costing
11.1 A chemical process has a normal wastage of 10% of input. In a period, 2,500 kgs of material were input and there was an abnormal loss of 75 kgs. What quantity of good production was achieved?
A 2,175 kgs B 2,250 kgs C 2,325 kgs D 2,425 kgs Answer：A
The following information relates to questions 11.2 and 11.3
A company manufactures Chemical X, in a single process. At the start of the month there was no work-in-progress. During the month 300 litres of raw material were input into the process at a total cost of $6,000. Conversion costs during the month amounted to $4,500. At the end of the month 250 litres of Chemical X were transferred to finished goods inventory. The remaining work-in-progress was 100% complete with respect to materials and 50% complete with respect to conversion costs. There were no losses in the process.
11.2 The equivalent units for closing work-in-progress at the end of the month would have been: Material Conversion costs A 25 litres 25 litres B 25 litres 50 litres C 50 litres 25 litres D 50 litres 50 litres Answer：C
11.3 If there had been a normal process loss of 10% of input during the month the value of this loss would have been: A Nil B $450 C $600
D $1,050 Answer：A
11.4 In a particular process, the input for the period was 2,000 units. There were no inventories at
the beginning or end of the process. Normal loss is 5 per cent of input. In which the following circumstances is there an abnormal gain?
(i) Actual output =1,800 units (ii) Actual output=1,950 units
(iii) Actual output=2,000 units A (i) only B (ii) only
C (i) and (ii) only D (ii) and (iii) onlr Answer：D
11.5 In a process account, abnormal losses are valued: A At their scrap value
B The same as good production C At the cost of raw materials D The same as normal losses Answer：B
11.6 A company needs to produce 340 litres of Chemical X. There is a normal loss of 10% of the
material input into the process. During a given month the company did produce 340 litres of good production, although there was an abnormal loss 5% of the material input into the process.
How many litres of material were input into the process during the month? A 357 litres B 374 litres C 391 litres D 400 litres Answer：D
The following information relares to questions 11.7 and 11.8
A company produces a certain food item in a manufacturing process. On 1 November, there was no opening inventory of work in process. During November, 500 units of material were input to the process, with a cost of $9,000. Direct labour costs in November were $3,840. Production overhead is absorbed at the rate of 200% of direct labour costs. Closing inventory on 30 November considered of 100 units which wre 100% complete as to materials and 80% complete as to olabour and overhead. There was no loss in process.
11.7 The full production cost of completed units during November was
A $10,400 B $16,416 C $16,800 D $20,520 Answer：C
11.8 The value of the closing work in progress on 30 November is
A $2,440 B $3,720 C $4,104 D $20,520 Answer：B
The following information relates to questions 11.9 and 11.10
A company makes a product in two processes. The following data is available for the latest period,
for process 1.
Opening work in progress of 200 units was valued as follows. Material $2,400 Labour $1,200 Overhead $400 No losses occur in the process. Units added and costs incurred during the period: Material $6,000(500 units) Labour $3,350 Overhead $1,490 Closing work in progress of 100 units had reached the following degrees of completion: Material 100% Labour 50% Overhead 30% The company used the weighted average method of inventory valuation. 11.9 How many equivalent units are used when calculating the cost per unit in relation to overhead?
A 500 B 600 C 630 D 700 Answer：C
11.10 The value of the units transferred to process 2 was
A $7,200 B $13,200 C $14,840 D $15,400 Answer：B
11.11 A company uses process costing to estabilsh the cost per unit its output. The following information was available for the last month: Input units 10,000 Output units 9,850 Opening inventory 300 units, 100% complete for materials and 70% complete for conversion costs Closing inventory 450 units, 100% complete for materials and 30% complete for conversion costs The company uses the weighted average method of valuing inventory. What were the equivalent units for conversion costs? A 9,505 units B 9,715 units C 9,775 units D 9,985 units Answer：D
11.12 A company uses process costing to value its output. The following was recorded for the period Input material 2,000 units at $4.50 per unit Conversion costs 13,340 Normal loss 5% of input valued at $3 per unit Actual loss 150 units There were no opening or closing inventories. What was the valuation of one unit of output to one decimal place? A $11.8 B $11.6 C $11.2 D $11.0 Answer：B
11.13 A company operates a continuous process into which 3,000 units of material costing $9,000
was input in a period. Conversion costs for this period were $11,970 and losses, which have a scarp value of $1.50, are expected at a rate of 10$ of input. There were no opening or closing inventories and output for the period was 2,900 units.
What was the output valuation? A $20,271 B $20,520 C $20,970 D $22,040 Answer：D
11.14 The following information relates to a company?s polishing process for the previous period. Output to finished goods 5,408 units valued at $29,744 Normal loss 276 units Actual loss 112 units All losses have a scrap value of $2.50 per unit and there was no opening or losing work in process.
The value of the input during the period was: A $28,842 B $29,532 C $29,744 D $30,434 Answer：B
11.15 Which of the following statements about process losses are ture? (i) Units of normal loss should be valued at full cost per unitr. (ii) Units of abnormal loss should be valued at their scrap value. A (i) only B (ii) only
C Both of them D Neither of them Answer：D
12 Process costing, joint and by-products
The following data relates to questions 12.1 and 12.2
A company manufactures two joint products, P and R, in a common process. Data for June are as follows. $ Opening inventory 1,000 Direct materials added 10.000 Conversion costs 12,000 Closing inventory 3,000
Production Sales Sales price Units Units $ per unit P 4,000 5,000 5 R 6,000 5,000 10 12.1 If costs are apportioned between joint products on a sales value basis, what was the cost per unit of product R in June?
A $1.25
B $2.22 C $2.50 D $2.75 Answer：C
12.2 If costs are apportioned between joint products on a physical unit basis, what was the total cost of product P production in June? A $8,000 B $8,800 C $10,000 D $12,000 Answer：A
12.3 Which of the following statements is/are correct?
(i) A by-product is a product produced at the same time as other products which has a
relatively low volume compared with the other products.
(ii) Since a by-product is a saleable item it should be separately costed in the process
account, and should absorb some of the process costs.
(iii) Costs incurred prior to the point of separation are known as common or joint costs. A (i) and (ii) B (i) and (iii) C (ii) and (iii) D (iii) only Answer：D
12.4 A company manufactures two joint products and one by-product in a single process. Data for November are as follows. $ Raw material input 216,000 Conversion costs 72,000 There were no inventories at the beginning or end of the period. Output Sales price Units $ per unit Joint product E 21,000 15 Joint product Q 18,000 10 By-product X 2,000 2 By-product sales revenue is credited to the process account. Joint costs are apportioned on a
sales value basis. What were the full production costs of product Q in November (to the nearest $)?
A $102,445 B $103,273 C $104,727 D $180,727
Answer：B
12.5 A company manufactures three joint products and one by-product from a single process. Data for May are as follows. Opening and closing inventories Nil Raw materials input $180,000 Conversion costs $50,000 Output Sales price Units $ per unit Joint product L 3,000 32 M 2,000 42 N 4,000 38 By-product R 1,000 2 By-product sales revenue is credited to the sales account. Joint costs are apportioned on a sales value basis.
What were the full production costs of product M in May (to the nearest $)?
A $57,687
B $57,844 C $58,193 D $66,506 Answer：C
12.6 Two products G and H are created from a joint proces. G can be sold immediately after
plit-off. H requires further processing before it is in a saleable condition. There are on opening inventories and no work in progress. The following data are available for last period; $ Total joint production costs 384,000 Further processing costs(product H) 159,600
Product Selling price Sales Production per unit Units Units G $0.84 400,000 412,000 H $1.82 200,000 228,000 Using the physical unit method for apportioning joint production costs, what was the cost value of the closing inventory of product H for last period?
A $36,400 B $37,520 C $40,264 D $45,181 Answer：A
12.7 Two products (W and X) are created from a joint process. Both products can be sold
immediately after split-off. There are no opening inventories or work in progress. The following information is available for last period:
Total joint production costs $776,160 Product Production Sales units Selling price per units unit W 12,000 10,000 $10 X 10,000 8,000 $12 Using the sales value method of apportioning joint production costs, what was the value of the closing inventory of product X for last period?
A $310,464 B $388,080 C $155,232 D $77,616 Answer：D 13 Alternative costing principles
13.1 Which of the following statements is not correct?
A Activity based costing is an alternative to traditional volume-based costing methods B Activity based costs provide an approximation of long-run variable unit costs C Activity based costing cannot be used to cost services D Activity based costing is a form of absorption costing Answer：C
13.2 A products is in the stage of its life cycle which is typified by falling prices but good profit margins due to high sales volumes. What stage is it in? A Growth B Maturity C Introduction D Decline Answer：B
13.3 Which of the following statements describes life cycle costing? A The profiling of cost over a product?s production life
B The profiling of cost over a product?s development, production life and dismantling
period
C The profiling of cost and revenues over a product?s development, production life and
dismantling period
D The profiling of cost and revenues over a product?s production life Answer：B
13.4 In what stage of the product life cycle are initial costs of the investment in the product typically recovered? A Introduction B Decline C Growth D Maturity Answer：C
13.5 How is target cost calculated?
A Desired selling price-actual profit margin B Market price-desired profit margin
C Desired selling price- desired profit margin D Market price-standard profit margin Answer：B
13.6 Which stage of the product life cycle do the following characteristics refer to? New competitors
Customer feedback received
New distribution outlets being found Product quality improvements made A Growth B Decline C Maturity D Introduction
Answer：A 14 Frorecasting
14.1 The following four data pairs have been obtained：(1,5),(2,6),(4,9),(5,11).Without carrying out
any calculations,which of the following correlation coefficients best describes the relationship between x and y?
A -0.98 B -0.25 C 0.98 D 0.25 Answer：C
14.2 A company?s management accountant is anaylysing the reject rates achieved by 100 factory
operatives working in identical conditions. Reject rates, Y%, are found to be related to months of experience, X, by this regression equation: Y=20 - 0.25X. (The correlation coefficient was r =-0.9.)
Using the equation, what is the predicted reject rate for an operative with 12 months?
experience?
A 17% B 19% C 20% D 23% Answer：A
14.3 A regression equation Y = a + bX is used to forecast the value of Y for a given value of X.
Which of the following increase the reliability of the forecast?
(i) A correlation coefficienr numerically close to 1
(ii) Working to a higher number of decimal places of accuracy
(iii) Forecasting for values of X ouutside the range of those used in the sample (iv) A large smple is used to calculate the regression equation
A (i) only B (i) and (ii) only C (i) and (iii) only D (i) and (iv) only Answer：D 14.4 If
,
,
,
,
and n=4, what is the correlation coefficient ?
A 0.98 B -0.98 C 0.26 D 0.008 Answer：A
14.5 Using data from twelve European countries, it has been calculated that the correlation
between the level of car ownership and the number of road deaths is 0.73. Which of the statements shown follow from this?
(i) High level of car ownership cause high level of road deaths
(ii) There is a strong relationship between the level of car ownership and the number of
road deaths
(iii) 53% of the variation in the level of road deaths from one country to the next can be
explainted by the corresponding variation in the level of car ownership
(iv) 73% of the variation in the level of road deaths from one country to the next can be
explainted by the corresponding variation in the level of car ownership A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (ii) and (iv) only Answer：C
14.6 The regression equation Y=3+2X has been calculated from 6 pairs of values, with X ranging
from 1 to 10. The correlation coefficient is 0.8. It is estimated that Y=43 when X=20. Which of the following are true?
(i) The estimated is not reliable because X is outside the range of the data (ii) The estimated is not reliable because the correlation is low
(iii) The estimated is reliable
(iv) The estimated is not reliable because the sample is small
A (i) and (ii) only B (i) and (iii) only C (ii) and (iv) only D (i) and (iv) only Answer：D
14.7 In calculating the regression equation linking two variables, the standard formulae for the
regression coeffcients are given in terms of X and Y. Which of the following is true?
A X must be the variable which will be forecast B It does not matter which variable is which C Y must be the dependent variable
D Y must be the variable shown on the vertical axis of a scatter diagram Answer：C
14.8 A company used regression analysis to establish a total cost equation for budgeting purposes. Data for the past four months is as follow: Month Total cost Qauntity produced $?000 $?000 1 57.5 1.25 2 37.5 1.00 3 45.0 1.50 4 60.0 2.00 200.0 5.75 The gradient of the regression line is 17.14. What is the value of a? A 25.36
B 48.56 C 74.64 D 101.45 Answer：A
14.9 Regression analysis is being used to fine the line of the best fit (y=a+bx) from eleven pairs of
data. The calculations have produced the following information:
What is the value of ?a? in the equation for the line of best fit (to 2 decimal places)? A 0.63 B 0.69 C 2.33 D 5.33 Answer：C
14.10 Which of the following is a feasible value for the correlation cosfficient? A - 2.0 B - 1.2 C 0 D + 1.2 Answer：C
14.11 Over an 18-month period, sales have been found to have an underlying linear trend of y =
7.112+3.949x, where y is the number of its sold andx represents the month. Monthly deviations from trend have been calculated and month 19 is expected to be 1.12 times the trend value.
What is the forecast number of items to be sold in month 19? A 91 B 92 C 93 D 94 Answer：B
14.12 Based on the last 15 periods the underlying trend of sales is y=345.12-1.35x. If the 16th
period has a seasonal factor of -23.62, assuming an additive forecasting model, then the forecast for that period, in whole units, is
A 300 B 301 C 324 D 325 Answer：A
14.13 Unemployment numbers actually recorded in a town for the second quarter of the year 2000
were 4,700. The underlying trend at this point was 4,300 people and the seasonal factor is 0.92. Using the multiplicative model for seasonal adjustment, what is the seasonally-adjusted figure (in whole numbers) for the quarter?
A 3,932 B 3,956 C 5,068 D 5,109 Answer：D
14.14 Monthly sales have been found to follow a linear trend of y=9.82+4.372x, where y is the
number of items sold and x is the number of the month. Monthly deviations from the trend have been calculated and follow an additive model. In month 24, the seasonal variation is estimated to be plus 8.5.
What is the forecast number of items to be sold in month 24?(to the nearest whole number.) A 106 B 115 C 123 D 152 Answer：C
14.15 Which of the following are necessary if forecasts obtained from a time series analysis are to
be reliable?
1 There must be no unforeseen events 2 The model used must fit the past data 3 The trend must be increasing
4 There must be no seasonal variation
A 1 only B 1 and 2 only C 1,2 and 3 only D 1,2,3 and 4 Answer：B
14.16 What is the purpose of seasonally adjusting the values in a time series? A To obtain an instant estimate of the degree of seasonal variation B To obtain an instant estimate of the trend
C To ensure that seasonal components total zero
D To take the first step in a time series analysis of the data Answer：B
14.17 The following data represents a time series: X 36 Y 41 34 38 42
A series of three point moving averages produced from this data has given the first two
values as 38 39
What are the values of (X,Y) in the original time series? A (38,39) B (38,40) C (40,38) D (39,38) Answer：B
14.18 Using an additive time series model, the quarterly trend (Y) is given by Y=65+7t, where t is
the quarter (starting with t=1 in the first quarter of 20X5). If the seasonal component in the fourth quarter is-30, forecast the actual value for the fourth quarter of 20X6, to the nearest whole number.
A 63 B 546 C 85 D 91
Answer：D
14.19 The trend for monthly sales ($Y) is related to the month (t) by the equantion Y=1,500-3t
where t=1 in the first month of 20X8. The forecast sales (to the nearest pound ) for the first month of 20X9 if the seasonal component for that month is 0.92 using a multiplicative model is
A $1,377 B $17,904 C $1,344 D $1,462 Answer：C
14.20 Which of the following are necessary if forecasts obtained from a time series ananlysis are to
be reliable?
1 The trend must not be increasing or deceasing 2 The trend must continue as in the past 3 Extrapolation must not be used
4 The same pattern of seasonal variation must continue as in the past A I only B I and II only C I and III only D I and IV only Answer：C
14.21 Under which of the following circumstances would a multiplicative model be preferred to an
additive model in time series analysis?
A When a model easily understood by non-accountants is required B When the trend is increasing or decreasing C When the trend is steady
D When accurate forecasts are required Answer：B
14.22 In a time series analysis, the trend equantion for a particular product is given by TREND
=0.0002×YEAR2+0.4×YEAR+30.4
Due to the cyclical factor, the forecast for the year 2000 is estimated at 1.6 times trend. In whole units, the forecast for the year 2000 is? A 2,606 B 2,607 C 2,608 D 2,609 Answer：D
14.23 A company?s annual profits have a trend line given by Y=20t-10, where Y is the trend in
$?000 and t is the year with t=0 in 20X0.
What are the forecast profits for the year 20X9 using an additive model if the cyclical
component for that year is -30?
A $160,000 B $140,000 C $119,000 D $60,000 Answer：B
The following information is to be used for questions 14.24 ang 14,25
In a time series analysis, the multiplicative model is used to forecast sales and the following seasonal variations apply: Quarter 1 2 3 4 Seasonal variation 1.2 1.3 0.4 ? The actual sales values for the first two quarters of 2006 were: Quarter 1:$125,000 Quarter 2:$130,000
14.24 What is the seasonal variation for the fourth quarter? A -2.9 B 0.9 C 1.0 D 1.1
Answer：D
14.25 The trend line for sales:
A Decreased between quarter1 and quarter2 B Increased between quarter1 and quarter2
C Remained constant between quarter1 and quarter2 D Cannot be determined from the information given Answer：A
14.26 In January, the unemployment in Ruritania is 567,800. If the seasonal factor using an
additive time series model is +90,100, what is the seasonally-adjusted level of unemployment (to the nearest whole number)?
A 90,100 B 477,700 C 567,800 D 657,900 Answer：B
14.27 The following statements relate to Paasche and Laspeyre indices.
(i) Constructing a Paasche index is generally more costly than a Laspeyre index
(ii) With a Laspeyre index, comparisons can only be drawn directly between the current
year and the base year
Which statements are true? A Both statements are true B Both statements are false C (i) is true and (ii) is false D (ii) is true and (i) is false Answer：C
14.28 The following information is availabe for the price of materials used at P Co. Laspeyre index for price in 20X5 (with base year of 20X0): 150.0 Corresponding Paasche index 138.24 Calculate Fisher?s ideal index. A 12.00 B 16.98 C 144.00 D 288.24 Answer：C
14.29 A large bag of cement cost $0.80 in 20X3. The price indices are as follows. 20X3 91 20X4 95 20X5 103 20X6 106 How much does a bag of cement cost in 20X6? A $0.69 B $0.85 C $0.92 D $0.95 Answer：C
14.30 Four yeas ago material X cost $5 per kg and the price index most appropriate to the cost of
material X stood at 150.
The same index now stands at 430.
What is the best estimate of the current cost of material X per kg? A $1.74($5×150÷430)
B $9.33($5×(430－150)÷150) C $14.33($5×430÷150) D $21.50($5×430÷100) Answer：C
14.31 Six years ago material M cost $10 per kg and the price index most appropriate
to the cost of material M was 130. The same index now stands at 510.
What is the best estimate of the current cost of material M per kg? A $2.55 B $29.23 C $39.23 D $51.00 Answer：C 15 Budgeting
15.1 Which of the following may be considered to be objectives of budgeting?
(i) Co-ordination (ii) Communication (iii) Expansion
(iv) Resource allocation A All of them B (i),(ii)and(iv) C (ii),(iii)and(iv) D (ii)and(iv) Answer：B
15.2 What does the statement?sales is the principal budget factor?mean?
A The level of sales will determine the level of cash at the end of the period B The level of sales will determine the level of profit at the end of the period C The company?s activities are limited by the level of sales it can achieve D Sales is the largest item in the budget Answer：C
15.3 Which of the following tasks would usually be carried out first in the budgetary planning
process ?
A Identify the principal budget factor B Establish the level of salea demand
C Calculate the predetermined overhead absorption rate D Estsblish the organisation?s long term objectives Answer：D
15.4 QT Co manufactures a single product and an extract from their flexed budget for production
costs is as follows. Activity level 80% 90% $ $ Direct material 2,400 2,700 Labour 2,120 2,160 Production overhead 4,060 4,080 8,580 8,940 What would the total production cost allowance be in a budget flexed at the 83% level of activity? (to the nearest $)
A $6,266 B $6,888 C $8,586 D $8,688 Answer：D
15.5 Which of these statements is untrue?
A Spreadsheets make the calculation and manipulation of data easier and quicker B Spreadsheets are very useful for word-processing C Budgeting can be done very easily using spreadsheets D Spreadsheets are useful for plotting graphs Answer：B
The following data applies to questions 15.6 to 15.7: A B C D F G 1 Jan Feb Mar Apr May 2 Sales 15,000 13,400 16,100 17,200 15,300 3 Cost of sales 11,090 10,060 12,040 13,000 11,100 4 Gross profit 3,910 3,340 4,060 4,200 4,200 5 Expenses 1,500 1,500 1,500 1,500 1,500 6 Net profit 2,410 1,840 2,560 2,700 2,700 7 8 Net profit % 15.6 The formula =C2-C3 will give contents of which cell? A C6 B C4 C C5 D C1 Answer：B
15.7 What would be the formula for March net profit? A =D2-D3 B =B6+C6 C =D4-D5 D =D3*D8 Answer：C
15.8 What will be the formula to go in G8? A =G6/G2*100 B =G4/100*G6 C =G2/G6*100 D =G6/G4*100 Answer：A
15.9 A company manufactures a single product. In a computer spreadsheet the cells F1 to F12
contain the budgeted monthly sales units for the twelve months of next year in sequence, with January sales in cell F1 and finishing with December sales in F12. The company policy is for the closing inventory of finished goods each month to be 10% of the budgeted sales units for the following month.
Which of the following formulae will generate the budgeted production (in units) for March
next year?
A =[F3+(0.1*F4)]
B =[F3-(0.1*F4)]
C =[(1.1*F3)-(0.1*F4)] D =[(0.9*F3)+(0.1*F4)] Answer：D
15.10 Which of the following are disadvantages of flexible budgets? 1 They are not very useful for decision-making
2 They are more time consuming to prepare than fixed budgets
3 They fail to provide an appropriate yardstick for cost control purposes 4 They are based on a set of assumptions which may be over simplistic A 2 and 4 only B 2,3 and 4 only C 1,2 and 3 only D 1,3 and 4 only Answer：A
16 The budgetary process
16.1 A master budget comprises
A the budgeted income statement
B the budgeted cash flow, budgeted income statement and budgeted statement of
financial position
C the budgeted cash flow
D the entire set of budgets prepared Answer：B
16.2 Which of the following is not a functional budget?
A Production budget
B Distribution cost budget C Selling cost budget D Cash budget Answer：D
16.3 If a company has no production resource limitations, in which order would the following
budgets be prepared?
1 Material usage budget 4 Finished goods inventory budget 2 Sales budget 5 Production budget
3 Material purchase budget 6 Material inventory budget A 5,4,1,6,3,2 B 2,4,5,1,6,3 C 2,4,5,1,3,6 D 2,5,4,1,6,3 Answer：B
16.4 In a situation where are no production recource limitations, which of the following items of
information must be available for the production budget to be completed?
1 Sales volume from the sales budget
2 Material purchases from the purchases budget 3 Budgeted change in finished goods inventory 4 Standard direct labour cost per unit A 1,2 and 3 B 1,3 and 4 C 1 and 3
D All of them Answer：C
16.5 When preparing a production budget, the quantity to be producted equals
A sale quantity + opening inventory of finished goods + closing inventory of finished
goods
B sale quantity - opening inventory of finished goods + closing inventory of finished
goods
C sale quantity - opening inventory of finished goods - closing inventory of finished
goods
D sale quantity + opening inventory of finished goods - closing inventory of finished
goods
Answer：B
16.6 The quantity of material in the material purchases budget is greater than the inferred from
quantity of material in the material usage budget. Which of the following statements can be this situation?
A Wastage of material occurs in the production process B Finished goods inventories are bedgeted to increase C Raw materials inventories are budgeted to increase D Raw materials inventories are budgeted to decrease Answer：C
16.7 A company plans to sell 24,000 units of product R next year. Opening inventory of R is
expected to be 2,000 units and PQ Co plans to increase inventory by 25 per cent by the year. How many units of product R should be produced next year?
A 23,500 units B 24,000 units C 24,500 units D 30,000 units Answer：C
16.8 Each unit of product Alpha requires 3 kg of raw material. Next month?s production budget for
product Alpha is as follows.
Opening inventories:
Raw materials 15,000 kg Finished units of Alpha 2,000 units Budgeted sales of Alpha 60,000 units Planned closing inventories:
Raw materials 7,000 kg Finished units of Alpha 3,000 units
The number of kilograms of raw materials that should be purchases next month is: A 172,000 B 175,000 C 183,000 D 191,000 Answer：B
16.9 Budgeted sales of X for December are 18,000 units. At the end of the production process for
X, 10% of production units are scrapped as defective. Opening inventories of X for December are budget to be 15,000 units and closing inventories will be 11,400 units.All inventories of finished goods must have successfully passed the quality control check. The production
budget for X for December, in units is
A 12,960 B 14,400 C 15,840 D 16,000 Answer：D
16.10 A company manufactures a single product, M. Budgeted production output of product M
during August is 200 units. Each unit of product M requires 6 labour hours for completion and PR Co anticipates 20 per cent idle time. Labour is paid at a rate of $7 per hour. The direct labour cost budget for August is
A $6,720 B $10,080 C $8,400 D $10,500 Answer：D
16.11 Each unit of product Echo takes five direct labour hours to make. Quality standards are high,
and 8% of units are rejected after completion as sub-standard. Next month?s budget are as follows.
Opening inventories of finished goods 3,000 units Planned closing inventories of finished goods 7,600 units Budgeted sales of Echo 36,800 units
All inventories of finished goods must have successfully passed the quality control check. What is the direct labour hours budget for the month? A 190,440 hours B 207,000 hours C 223,560 hours D 225,000 hours Answer：D
16.12 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? A $192,000 C $288,000 B $240,000 D $300,000 Answer：D
16.13 Which of the following statements are true?
1 A flexible budget allows businesses to evaluate a manager?s performance more fairly 2 A fixed budget is useful for defining the broad objectives of the organisation 3 Relying on fixed budgets alone would usually give rise to massive variances A 1 and 3 only B 1 and 2 only C 2 and 3 only D 1,2 and 3 Answer：D
16.14 Which of the following statements are true?
1 Flexed budgets help managers to deal with uncertainty
2 Flexed budgets allow a more meaningful comparison to the made with actual results A 1 is ture and 2 is fales B 2 is ture and 1 is fales
C 1 and 2 are ture D 1 and 2 are fales Answer：C
17 Making budgets work
17.1 Participation by staff in the budgeting process is often seen as an aid to the creation of a
realistic budget and to the motivation of staff. There are, however, limitations to the effectiveness of such participation.
Which of the following illustrates one of these limitations A Participation allows staff to buy into the budget
B Staff suggestions may be ignored leading to de-motivation C Staff suggestions may be based on local knowledge
D Budgetary slack can be built in by senior manager as well as staff Answer：B
17.2 Which of the following statements about budgeting and motivation are true? 1 A target is more motivationing than no target at all
2 The problem with a target is setting an appropriate degree of difficulty 3 Employees who are challenged tend to withdraw their commitment A All of them B 2 and 3 only C 1 and 2 only D 3 only Answer：C
17.3 Which of the following best describes a top-down budget?
A A budget which has been set by scaling down individual expenditure items until the
total budgeted expenditure can be met from available resources
B A budget which is set by delegating authority from top management, allowing budget
holders to participate in setting their own budget
C A budget which is setting without permitting the ultimate budget holder to participate
in the budgeting process
D A budget which is set within the framework of strategic plans determined by top
management
Answer：C
17.4 In which of the following situations are imposed budgets effective? A In large businesses
B During periods of economic boom C In well established businesses
D When the organisation?s different units require precise organization Answer：D
17.5 In which of the following circumstances are participative budgets effective?
1 In decentralised organization
2 During periods of economic affluence
3 When an organisation?s different units act autonomously A All of them B 2 and 3 only C 1 and 2 only D 3 only Answer：A
17.6 Which of the following best describes a controllable cost?
A A cost which can be easilly forecast and is therefore readily controllable using
budgetary control techniques
B A cost which can be specifically identified with a particular cost object
C A.cost which is easily controlled because it is not affected by fluctuations in the level
of activity
D A cost which can be influenced by its budget holder Answer：D
18 Capital expenditure budgeting
18.1 You are currently employed as a Management Accountant in an insurance company. You are
contemplating starting your own business. In considering whether or not to start your own business, your current salary level would be:
A A sunk cost C An irrelevant cost B An incremental D An opportunity cost Answer：D
18.2 In decision making, costs which need to be considered are said to be relevant costs. Which of
the following are characteristics associated with relevant costs?
1 Future costs
2 Unavoidable costs
3 Incremental costs 4 Differential costs A 1 and 3 only B 1 and 2 only C 1,3 and 4 only D All of them Answer：C
18.3 A machine owned by a company has been idle for some months but could now be used on a
one year contract which is under consideration. The net book value of the machine is $1,000. If not used on this contract, the machine could be sold now for a net amount of $1,200. After used on the contract, the machine would have no saleable value and the cost of disposing of it in one year?s time would be $800.
What is the total relevant cost of the machine to the contract? A $400 C $1,200 B $800 D $2,000 Answer：D
18.4 Which of the following would be part of the capital espenditure budget? 1 Purchase of a new factory premises 2 Replacement of existing machinery
3 Refurbishment of existing factory premises 4 Purchases of raw materials
A 1 and 2 only B 3 and 4 only C 1,2 and 3 only D 2 and 4 only Answer：C
19 Methods of project appraisal
19.1 A building society adds interest monthly to investors? accounts even though interest rates are
expressed in annual terms. The current rate of interest is 6% per annum.
An investor deposits $1,000 on 1 January. How much interest will have been earned by 30
June?
A $30.00 B $30.38 C $60.00 D $300 Answer：B
19.2 A one-year investment yields a return og 15%. The cash returned from the investment,
including principal and interest, is $2,070. The interest is
A $250 B $270 C $300 D $310.50 Answer：B
19.3 If a single sum of $12,000 is invested at 8% per annum with interest compounded quarterly,
the amount to which the principal will have grown by the end of year three is approximately
A $15,117 B $9,528 C $15,219 D $30,924 Answer：C
19.4 Which is worth most, at present values, assuming an annual rate of interest of 8%? A $1,200 in exactly one year from now B $1,400 in exactly two year from now C $1,600 in exactly three year from now D $1,800 in exactly four year from now Answer：D
19.5 A bank offers depositors a nominal 4% pa, with interest payable quaterly. What is the effective
annual rate of interest?
A 1% B 4% C 1.025% D 4.06% Answer：D
19.6 A project requiring an investment of $1,200 is expected to generate returns of $400 in years 1
and 2 and $350 in years 3 and 4. If the NPV=$22 at 9% and the NPV=-$4 at 10%, what is the IRR for the project?
A 9.15% B 9.85% C 10.15% D 10.85% Answer：B
19.7 A sum of money was invested for 10 years at 7% per annum and is now worth $2,000. The
original amount invested (to the nearest $) was
A $1,026 B $1,016 C $3,937 D $14,048
Answer：B
19.8 Home prices rise at 2% per calendar month. The annual rate of increase correct to one decimal
place is A 24% B 26.8% C 12.7% D 12.2% Answer：B
19.9 Find the present value of ten annual payments of $700, the first paid immediately and
discounted at 8%, giving your answer to the nearest $. A $4,697 B $1,050 C $4,435 D $5,073 Answer：D
19.10 An investor is to receive an annuity of $19,260 for six years commencing at the end of year 1.
It has a present value of $86,400.
The rate of interest (to the nearest whole percent) is A 4% B 7% C 9% D 11% Answer：C
19.11 How much should be invested now (to the nearest $) to receive $24,000 per annum in
perpetuity if the annual rate of interest is 5%?
A $1,200 B $25,200 C $120,000 D $480,000 Answer：D
19.12 The net present value of an investment at 12% is $24,000, and at 20% is -$8,000. What is the
internal rate of return of this investment?
A 6% B 12% C 16% D 18% Answer：D
State your answer to the nearest whole percent.
The following data is relevant for questions 19.13 and 19.14
Diamond Ltd has a payback period limit of three years and is considering investing in one of the following projects. Both projects require an initial investment of $800,000. Cash inflows accrue evenly throughtout the year. Project Alpha Project Beta Year Cash inflow Year Cash inflow $ $ 1 250,000 1 250,000 2 250,000 2 350,000 3 400,000 3 400,000 4 300,000 4 200,000 5 200,000 5 150,000 6 50,000 6 150,000 The company?s cost of capital is 10%. 19.13 What is the non-discounted payback period of Project Beta? A 2 years and 2 months B 2 years and 4 months C 2 years and 5 months D 2 years and 6 months Answer：D
19.14 What is the discounted payback period of Project Alpha? A Between 1 and 2 years B Between 3 and 4 years C Between 4 and 5 years D Between 5 and 6 years Answer：B
19.15 A capital investment project has an initial investment followed by constant annual returns. How is the payback period calculated? A Initial investment÷annual profit B Initial investment÷annual net cash inflow C (Initial investment－residual value)÷annual profit D (Initial investment－residual value)÷annual net cash inflow Answer：B
19.16 A machine has an investment cost of $60,000 at time 0. The present values (at time 0) of the
expected net cash inflows from the machine over its useful life are: Discount rate Present value of cash inflows 10% $64,600 15% $58,200 20% $52,100 What is the internal rate of return (IRR) of the machine investment? A Below 10%
B Between 10% and 15% C Between 15% and 20% D Over 20% Answer：B
19.17 An investment project has a positive net present value (NPV) of $7,222 when its cash flows
are discounted at the cost of capital of 10% per annum. Net cash inflows from the project are expected to be $18,000 per annum for five years. The cumulative discount (annuity) factor for five years at 10% is 3.791.
What is the investment ta the start of the project? A $61,016 B $68,238 C $75,460 D $82,778 Answer：A
19.18 The following statements relate to an investment project that has been discounted at rates of
10% and 20%:
1. The discounted payback period at 10% will be longer than the discounted payback at 20%.
2. The discounted payback period at 20% will be longer than the discounted payback at 10%.
3. The non-discounted payback period will be longer than the discounted paycback period. 4. The non-discounted payback period will be shorter than the discounted payback period. Which of the statements are true? A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4 Answer：D
19.19 Which of the following accurately defines the internal rate of return (IRR)?
A The average annual profit from an investment expressed as a persentage of the
investment sum
B The discount rate (%) at which the net present value of the cash flows from an
investment is zero
C The net present value of the cash flows from an investment discounted at the required
rate of return
D The rate (%) at which discounted net profits from an investment are zero Answer：B
19.20 An investment project has the following discounted cash flows ($?000):
Year Discounted rate
0% 10% 20% 0 (90) (90) (90) 1 30 27.3 25.0 2 30 24.8 29.8 3 30 22.5 17.4 4 30 20.5 14.5 30 5.1 12.3
The required rate of return on investment is 10% per annum. What is the discounted payback period of the investment project? A Less than 3.0 years B 3.0 years
C Between 3.0 years and 4.0 years D More than 4.0 years Answer：C
19.21 What is the effective annual rate of interest of 2.1% compounded every three
months? A 6.43% B 8.40% C 8.67% D 10.87% Answer：C
19.22 If the interest rate is 8%, what would you pay for a perpetuity of $1,500 starting in one
year?s time?(to the nearest $)