QUESTION: 101

CORRECT TEXT
IOP's product is manufactured using a production process that is known to have a defect rate of 10%.

IOP's quality control department has developed a test that has a 98% probability of classifying a non-defective item correctly and a 2% probability of classifying a non-defective item as defective.

The same test has a 95% probability of classifying a defective item correctly and a 5% probability of classifying a defective item as non-defective.

Calculate the proportion of IOP's output that will be classified as non-defective by the quality control department's test.
Give your answer to one decimal place.

99.4 %

Answer(s): A

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QUESTION: 102

A company makes three products, E, F and G. Total overheads for the year are expected to be $1.2 million, with the following split between cost pools:

Cost driver information has been estimated as follows:

The company plans to make 10,000 units of product E in the year, with an expected direct cost of $0.60 per unit. This annual production of product E is expected to require 20 quality inspections, 28 purchase requisitions, and 400 kilogrammes of materials.

What is the overhead cost per unit of product E?

$0.10
$0.70
$3.57
$4.17

Answer(s): A

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QUESTION: 103

A not-for-profit organization measures performance using the three Es.

If the organization has been acquiring the resources it needs as cheaply as possible it should be described as having been:

Efficient
Effective
Economic
Enterprising

Answer(s): C

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QUESTION: 104

A company has a 31 December year end and pays corporation tax at a rate of 30%. Corporation tax is payable 12 months after the end of the year to which the cash flows relate. The company can claim tax allowable depreciation at a rate of 25% reducing balance. It pays $1 million for a machine on 31 December 20X4. The company's cost of capital is 10%.

What is the present value of the benefit of the first portion of tax allowable depreciation?

$250,000
$227,500
$75,000
$68,175

Answer(s): D

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QUESTION: 104