QUESTION: 29

An organization wishes to make its investment decisions on the basis of more than simply a financial appraisal. Which of the following will assist it to take into account both qualitative and quantitative factors?

Cost Benefit Analysis
Profitability Index
Discounted Payback
Modified Internal Rate of Return

Answer(s): A

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QUESTION: 30

One of an investment centre's products is sold on an external market. Output is limited because the specialist machine that manufactures the product is operating at full capacity.

Current data for the product are as follows.

Investigations have identified that more rigorous maintenance of the machine at an annual cost of $5,000 would reduce the number of breakdowns and increase its capacity to 1,300 units per year.

There would be no change in the selling price if more units were sold. Any additional labor hours would be paid a premium of 25%. A discount of 2% of the cost of all materials purchased is available if the company increases its purchases to 3,700 kg or more per year.
What would be the increase in the investment centre's annual controllable profit if more rigorous maintenance is undertaken?

$21,400
$17,800
$23,900
$26,160

Answer(s): A

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QUESTION: 31

Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom- up' (participative) style of budgeting?

The budget will be based on information from employees who are familiar with the day to day activities.
Motivation will improve due to a feeling of ownership of the budget.
There will be increased commitment to organizational objectives.
Budget setters will be forced to justify every item on the budget.
There will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.
It will be less time-consuming for operational managers.

Answer(s): A,B,C

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QUESTION: 32

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.

In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

$ 2.10
$ 0.50
$ 1.40
$ 2.60

Answer(s): B

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QUESTION: 29

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QUESTION: 31

QUESTION: 32

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