QUESTION: 101

A decision tree is being evaluated back to a decision point.

There are two alternatives at this point:

1. To abandon the project and generate a return of $435,000;

2. To continue with the project and generate the following possible returns:

What value should be included at the decision point?

$435,000
$451,000
$443,000
$720,000

Answer(s): B

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QUESTION: 102

DRAG DROP (Drag & Drop is not supported)

Demand for two products, A and B is 1,000 units and 2,000 units respectively. Each unit of Product A requires 8 kg of material and each unit of Product B requires 5 kg of material. The maximum availability of material is 17,200 kg. Contribution per unit of A is $10 and per unit of B is $9.

Place the production volumes of Product A and Product B, that will maximize contribution, in the table.

See Explanation section for answer.

Answer(s): A

Explanation:

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QUESTION: 103

A musical instrument manufacturing company is considering a new project that will require 1000 kg of wood. They have 700 kgs of wood in stock which was purchased last year for £4 per kg. The wood in stock can be

sold back to the supplier for £5 per kg. The wood in stock will have to be replaced if it is

used. The current purchase price of wood is £8 per kg.

Using this information, what is the relevant cost of wood for the manufacturers decision on this project?

£8,000
£5,000
£11,500
£5,600

Answer(s): A

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QUESTION: 104

Which of the following, regarding costing methods, is true?

A company produces two products which undergo similar processes. The company has very low overhead costs. This company should consider activity based costing rather than traditional absorption costing to ensure that its pricing decisions are more accurate.
A company which has introduced technology to reduce labour costs now incurs a greater proportion of non volume-related support activities. Activity based costing would be more appropriate than traditional absorption costing in this environment.
A company is making short term decisions based on the contribution per unit of its different products. These decisions are based upon full absorption costing data.
In traditional absorption costing, overheads are charged to a product by absorbing them at the cost driver rate for an activity based on their usage of the activity.

Answer(s): B

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Free P1 Management Accounting Exam Braindumps (page: 26)

QUESTION: 101

QUESTION: 102

Explanation:

QUESTION: 103

QUESTION: 104