QUESTION: 13

CORRECT TEXT
A manufacturing company is preparing the production budget for the forthcoming year.

The following budgeted information has already been obtained:

How many units will need to be produced for the forthcoming year?

Give your answer to the nearest whole number.

22639
24039

Answer(s): A

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QUESTION: 14

A major company sells a range of electrical, clothing and homeware products through a chain of department stores. The main administration functions are provided from the company's head office. Each department store has its own warehouse which receives goods that are delivered from a central distribution center.

The company currently measures profitability by product group for each store using an absorption costing system. All overhead costs are charged to product groups based on sales revenue. Overhead costs account for approximately one-third of total costs and the directors are concerned about the arbitrary nature of the current method used to charge these costs to product groups.

A consultant has been appointed to analyses the activities that are undertaken in the department stores and to establish an activity based costing system.

The consultant has identified the following data for the latest period for each of the product groups for the X Town store:

Calculate the total profit for each of the product groups:

.... using the current absorption costing system;

The profit or loss in $ was.... Clothing 122; Electrical 56; Homeware (178)
The profit or loss in $ was.... Clothing (175); Electrical 86; Homeware 22
The profit or loss in $ was.... Clothing 85; Electrical 36; Homeware (28)
The profit or loss in $ was.... Clothing 192; Electrical (56); Homeware 148

Answer(s): D

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QUESTION: 15

A company operates a customer complaints department.

How will the cost of the customer complaints department be classified in a system focussed on quality related costs?

External failure cost
Internal failure cost
Prevention cost
Appraisal cost

Answer(s): A

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QUESTION: 16

Company X is deciding which of Projects A, B or C to undertake. The profit earned from each of the projects is dependent on economic conditions.

The table below details the profit for each of the possible outcomes and the expected value of each of the projects.

What is the maximum amount that should be paid for perfect information about the economic conditions?

$442.50
$497
$54.50
$57.50

Answer(s): C

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