ACCA F2 Kit

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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 behaviour 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 or business did not exist.

3.6 C Controllable costs are items of expenditure which can be directly influenced by a given manager within a given time span.

3.7 Which of the following items might 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 (iii) only D Items (ii) and (iii) only

3.7 D It would be appropriate to use the cost per customer account and the cost per cheque received and processed for control purposes. Therefore items (ii) and (iii) are suitable cost units. Stationery costs, item (i), is an expense of the department, therefore it is not a suitable cost unit.

4.8 A company has recorded the following data in the two most recent periods. Total costs Volume of of production production $ Units 13,500 700 18,300 1,100 What is the best estimate of the company's fixed costs per period? A $13,500 B $13,200 C $5,100 D $4,800

4.8 C Units $ High output 1,100 18,300 Low output 700 13,500 Variable cost of 400 4,800 Variable cost per unit $4,800/400 = $12 per unit Fixed costs = $18,300 - ($12 × 1,100) = $5,100 Therefore the correct answer is C.

4.9 A production worker is paid a salary of $650 per month, plus an extra 5 cents 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

4.9 D The salary is part fixed ($650 per month) and part variable (5 cents per unit). Therefore it is a semi-variable cost and answer D is correct.

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 degrees would material Y represent? A 90 degrees B 120 degrees C 144 degrees D 204 degrees

5.1 C Material Cost $ Percentage % Degrees W 2,250 25 90 X 3,000 33.3 120 Y 3,600 40 144 Z 150 1.7 6 9,000 100 360 3,600/9,000 × 360o = 144o

6.1 Which of the following functions are fulfilled by a goods received 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

6.1 A Among other things, the GRN is used to update the inventory records and to check that the quantity invoiced by the supplier was actually received. The GRN does not usually contain price information. Therefore the correct answer is A.

6.10 Data relating to a particular stores item are as follows: Average daily usage 400 units Maximum daily usage 520 units Minimum daily usage 180 units Lead time for replenishment of inventory 10 to 15 days Reorder quantity 8,000 units What is the reorder level (in units) which avoids stockouts (running out of inventory)? A 5,000 B 6,000 C 7,800 D 8,000

6.10 C Reorder level = maximum usage × maximum lead time = 520 × 15 = 7,800 units

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 quantity 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

6.3 C Reorder level = maximum usage × maximum lead time = 95 × 18 = 1,710 units

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

6.4 C Maximum level = reorder level + reorder quantity - (minimum usage × minimum lead time) = 1,710 + 1,750 - (50 × 12) = 2,860 units

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 economic order quantity, to the nearest unit? A 31 units B 115 units C 163 units D 26,667 units

6.5 C EOQ = h 2CoD C = 2 $80 2,500 $15 = 163

6.6 Which of the following is correct with regard to inventories? (i) Stock-outs arise 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 leadtime A (i) and (ii) only B (i) and (iii) only C (ii) and (iii) only D (i), (ii) and (iii)

6.6 D Stock-outs arise when too little inventory is held (i); safety inventories are the level of units maintained in case there is unexpected demand (ii); and a reorder level can be established by looking at the maximum usage and the maximum lead-time (iii). Therefore, they are all correct statements with regards to inventories.

6.7 What is the economic batch quantity used to establish? Optimal A reorder quantity B recorder level C order quantity D inventory level for production

6.7 C The economic batch quantity is used to establish the optimal order quantity.

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

6.8 D EOQ = H 2CoD C Where Co = 20 D = 12,500 × 4 = 50,000 CH = 10% × $15 = 1.50 EOQ = 2 20 50,000 1.50 = 1,333,333 = 1,155 units

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 effectiveness of the bank's customer services A (i) and (ii) B (i) and (iii) C (i) only D (iii) only

2.1 D Data collected by survey for a particular project are a primary data source. Historical records of transport costs were not collected specifically for the preparation of forecasts, therefore these are secondary data. The Annual Abstract of Statistics is a source of secondary external data.

2.4 Government statistics can be a useful source of data and information. Which one of the following types of data is most likely to be obtained from government statistics? A Foreign exchange rates B Population data C Details of industry costs D Interest rates

2.4 B Population data. Foreign exchange rates and interest rates are likely to be obtained from financial newspapers. Details of industry costs are more likely to be found in trade journals.

2.5 Which of the following explains the essence of quota 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

2.5 D In quota sampling, investigators are told to interview all of the people they meet up to a certain quota.

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 Administrative overhead

3.1 B The royalty cost can be traced in full to the product, ie it has been incurred as a direct consequence of making the product. It is therefore a direct expense. Options A, C and D are all overheads or indirect costs which cannot be traced directly and in full to the product.

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

3.10 A Remember you are only looking for costs that are directly related to getting the finished goods from the production line to your customers. Before they can be distributed, finished goods may have to be temporarily stored in a warehouse therefore the rental of the warehouse will be regarded as a distribution cost. In addition, you will need delivery vehicles for distribution purposes - any costs related to these vehicles will be classed as distribution costs. Hence both (i) and (ii) are distribution costs (option A). Commission paid to sales staff is a selling cost.

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

3.11 B A function or location for which costs are ascertained. A cost centre acts as a 'collecting place' for costs before they are analysed further.

3.12 The overhead expenses of a company are coded using a five digit coding system, an extract from which is as follows: Cost centre Code no Types of expense Code no Machining 10 Indirect materials 410 Finishing 11 Depreciation of production machinery 420 Packing 12 Indirect wages 430 Stores 13 Maintenance materials 440 Maintenance 14 Machine hire costs 450 Depreciation of non-production equipment 460 Which is the coding for the issue of indirect materials issued from stores to the machining department? A 10410 B 10440 C 13410 D 13440

3.12 A For (10) machining department use of (410) indirect materials the code is 10410. Option B has an incorrect expense type. Options C and D have the incorrect cost centre code. The code indicates the cost centre incurring the cost, ie receiving the materials.

3.13 Which one of the following statements does NOT explain why coding systems are used? A A code is more precise than a description so reduces ambiguity B A code is briefer than a description so saves time C A code is more suited to communicating wider issues than a description D The use of codes facilitates data processing

3.13 C Wider issues are more suited to communication through a 'free text' description rather than the use of codes.

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

3.2 B The wages paid to the stores assistant cannot be traced in full to a product or service, therefore this is an indirect labour cost.

3.3 A manufacturing firm is very busy and overtime is being worked. How would the amount of overtime premium contained in direct wages normally be classed? A Part of prime cost B Factory overheads C Direct labour costs D Administrative overheads

3.3 B Overtime premium is always classed as factory overheads unless it is: Worked at the specific request of a customer to get the order completed. Worked regularly by a production department in the normal course of operations, in which case it is usually incorporated into the direct labour hourly rate.

3.4 A company makes chairs and tables. 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 The salary of the sales director of the company

3.4 D The salary of the sales director is a selling overhead.

3.5 Over which of the following is the manager of a profit centre likely to have control? (i) Selling prices (ii) Controllable costs (iii) Apportioned head office 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)

3.5 D The manager of a profit centre usually has control over how revenue is raised, ie selling prices (item (i)) and over the controllable costs incurred in the centre (item (ii)). Apportioned head office costs (item (iii)) are uncontrollable from the point of view of the profit centre manager. A responsibility centre manager does not have control over the capital investment in the centre (item (iv)) unless the centre is designated an investment centre.

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 treated 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.

3.8 A A period cost is charged against the sales for the period. It is not carried forward in inventory to a future period.

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

3.9 C The supervisors are engaged in the production activity, therefore option D can be eliminated. They supervise the production of all products, therefore their salaries are indirect costs because they cannot be specifically identified with a cost unit. This eliminates options A and B. The salaries are indirect production overhead costs, therefore option C is correct.

4.1 Fixed costs are conventionally deemed to be which of the following? A Constant per unit of output B Constant in total when production volume changes C Outside the control of management D Easily controlled

4.1 B Within the relevant range, fixed costs are not affected by the level of activity, therefore option B is correct.

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

4.10 D The cost described will increase in steps, remaining fixed at each step until another supervisor is required. Such a cost is known as a step cost.

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 correct 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)

4.11 A Independent variable x = advertising expenditure Dependent variable y = sales revenue Highest x = month 6 = $6,500 Highest y = month 6 = $225,000 Lowest x = month 2 = $2,500 Lowest y = month 2 = $125,000 Using the high-low method: Advertising expenditure Sales revenue $ $ Highest 6,500 225,000 Lowest 2,500 125,000 4,000 100,000 Sales revenue generated for every $1 spent on advertising = $100,000 $4,000 = $25 per $1 spent. If $6,500 is spent on advertising, expected sales revenue = $6,500 × $25 = $162,500 Sales revenue expected without any expenditure on advertising = $225,000 - $162,500 = $62,500 Sales revenue = 62,500 = (25 × advertising expenditure)

4.12 A total 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 variable cost C A semi-variable cost D A stepped fixed cost

4.12 D The cost described is a stepped fixed cost. A stepped fixed cost is fixed in nature but only within certain levels of activity.

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

4.13 B Activity level Cost Units $ Highest 10,000 400,000 Lowest 5,000 250,000 5,000 150,000 Variable cost per unit = $150,000 5,000units = $30

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 remain unchanged. What is the variable cost per unit of the product? A $0.80 B $1.20 C $1.25 D $2.00

4.15 C Using the high-low method: Units Cost $ 20,000 40,000 4,000 20,000 16,000 20,000 Variable cost per unit = $20,000 16,000units = $1.25

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 Total cost ($) 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 B $2,500 C $3,000 D $3,500

4.17 C Production Total cost Units $ Level 2 5,000 9,250 Level 1 3,000 6,750 2,000 2,500 Variable cost per unit = $2,500 2,000units = $1.25 per unit

4.18 The following question is taken from the December 2011 exam paper. The following shows the total overhead costs for given levels of a company's total output. Cost Output $ Units 4,000 1,000 7,000 2,000 10,000 3,000 9,500 4,000 A step up in fixed costs of $500 occurs at an output level of 3,500 units. What would be the variable overhead cost per unit (to the nearest $0.01) using the high-low technique? A $1.67 per unit B $1.83 per unit C $2.75 per unit D $3.00 per unit

4.18 AACCA examining team comments This question relates to study guide reference A3(h). The high-low technique estimates variable cost per unit by looking at the change in costs between the highest and lowest levels of output. The correct answer is A. This can be calculated by finding the change in cost between the highest and lowest output levels not explained by the step in fixed costs ($9,500 - $4,000 - $500 = $5,000) , and dividing by the change in output between the highest and lowest output levels. ($5,000 / (4,000 units - 1,000 units) = $1.67 per unit. Many candidates incorrectly based their calculations on the change in costs between the highest and lowest levels of cost, and hence selected option D (($10,000 - $4,000)/ (3,000 units - 1,000 units) or C (($10,000 - $4,000 - $500)/ (3,000 units - 1,000 units). This mistake suggests

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

4.2 B Variable overhead = 97,850 - 84,865 12,985 = 15,950 - 13,500 2,450 = $5.30 per square metre Fixed overhead = $84, 865 - ($5.30 × 13,500) = $84,865 - $71,550 = $13,315 Overheads on 18,300 square metres = $13,315 + ($5.30 18,300) = $13,315 + $96,990 = $110, 305

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 c/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 $40,000 (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

6.11 C Statement (i) is not correct. A debit to stores with a corresponding credit to work in progress (WIP) indicates that direct materials returned from production were $18,000. Statement (ii) is correct. Direct costs of production are 'collected' in the WIP account. Statement (iii) is correct. Indirect costs of production or overhead are 'collected' in the overhead control account. Statement (iv) is correct. The purchases of materials on credit are credited to the creditors account and debited to the material stores control account. Therefore the correct answer is 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 economic 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

6.12 C Annual holding cost = [buffer (safety) inventory + reorder level/2)] × holding cost per unit = [500 + (2,000/2)] × $2 = $3,000

6.13 A company wishes to minimise 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. What is the economic order quantity? A 949 units B 90,000 units C 1,039 units D 300 units

6.13 D The economic order quantity is 300 units. The formula for the economic order quantity (EOQ) is EOQ = 2C D o C h With CO = $10 D = 5,400 12 = 450 per month Ch = $0.10 EOQ = 2 $10 450 $0.10 = 90,000 = 300 units

6.14 For a particular component, the re-order quantity is 6,000 units and the average inventory holding is 3,400 units. What is the level of safety inventory (in whole units)? A 400 B 3,400 C 3,000 D 6,400

6.14 A The level of safety inventory is 400 units (to the nearest whole unit). Let x = safety inventory Average inventory = safety inventory (x) + reorder quantity 2 3,400 = x + 6,000 2 3,400 = x + 3,000 x = 3,400 - 3,000 x = 400 units

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 What is the economic order quantity (to the nearest whole unit)? A 175 units B 62 units C 44 units D 124 units

6.15 A The economic order quantity is 175 units (to the nearest whole unit). EOQ = 2C Do Ch = 2 $100 1,225 $8 = 30,625 = 175 units

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 What is the maximum inventory level? A 3,380 units B 6,180 units C 7,380 units D 8,580 units

6.16 B The maximum inventory level was 6,180 units Reorder level = maximum usage maximum lead time = 130 26 = 3,380 units Maximum level = reorder level + reorder quantity - (minimum usage minimum lead time) = 3,380 + 4,000 - (60 20) = 6,180 units

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

6.17 C EBQ = 0 h 2C D C (1 D / R) Q 0.0025(1 5,000 / 10,000) 2 125 5,000 = 1,250,000 0.00125 = 31,623 units

6.19 A company uses an item of inventory as follows. Purchase price $25 per unit Annual demand 1,800 units Ordering cost $32 Annual holding cost $4.50 per unit EOQ 160 units What is the minimum total cost assuming a discount of 2% applies to the purchase price and to holding costs on orders of 300 and over? A $45,720.00 B $44,953.50 C $45,000.00 D $44,967.00

6.19 B The company could order the EOQ amount of 160 or it could order 300 units and take a discount of 2%. We need to work out which is the cheapest option. $ Purchases (no discount) 1,800 × $25 45,000 Holding costs (W1) 360 Ordering costs (W2) 360 Total annual costs 45,720

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

6.2 A Free inventory balance = units in inventory + units on order from suppliers - units outstanding on customers' orders 13,000 = units in inventory + 27,500 - 16,250 Units in inventory = 13,000 - 27,500 + 16,250 = 1,750

The following information relates to questions 6.20 and 6.21. G Co makes the following purchases and sales. 1 January Purchases 4,000 units for $10,000 31 January Purchases 1,000 units for $2,000 15 February Sales 3,000 units for $13,000 28 February Purchases 1,500 units for $3,750 14 March Sales 500 units for $1,200 6.20 At 31 March which of the following closing inventory valuations using FIFO is correct? A $8,000 B $7,500 C $7,000 D $6,500

6.20 C See workings above. If you selected the wrong option then check your workings carefully against the above table.

6.21 At 31 March which of the following closing inventory valuations using LIFO is correct? A $6,500 B $7,000 C $7,500 D $8,000

6.21 C See workings above. If you selected the wrong option then check your workings carefully against the above table.

6.22 A wholesaler had opening inventory of 300 units of product Emm valued at $25 per unit at the beginning of January. The following receipts and sales were recorded during January. Date 2 Jan 12 Jan 21 Jan 29 Jan 400 Issues 250 200 75 The purchase cost of receipts was $25.75 per unit. Using a weighted average method of valuation, calculate the value of closing inventory at the end of January. A $11,550 B $4,492 C $4,192 D $9,550

6.22 B $4,492 Units $ Opening inventory 300 $25 300 7,500 Issue on 2 Jan 256 $25 (250) (6,250) 50 1,250 Receipt on 12 Jan 400 10,300 450 11,550 Issues on 21 Jan and 29 Jan (11,550/450) (200 + 75) (275) (7,058) 175 4,492

6.9 A company determines its order quantity for a raw material by using the Economic Order Quantity (EOQ) model. What would be the effects on the EOQ and the total 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

6.9 D If there is a decrease in the cost of ordering a batch of raw material, then the EOQ will also be lower (as the numerator in the EOQ equation will be lower). If the EOQ is lower, than average inventory held (EOQ/2) with also be lower and therefore the total annual holding costs will also be lower.

1.6 Monthly variance reports are an example of which one of the following types of management information? A Tactical B Strategic C Non-financial D Operational

A Monthly variance reports are an example of tactical management information.

1.9 Which of the following statements is correct? A Management accounting systems provide information for use in fulfilling legal requirements B Management accounting systems provide information for the use of decision-makers within an organisation C Management accounting systems provide information for use by shareholders D Management accounting systems provide information for use by tax authorities

B Financial accounting systems provide information for legal requirements, shareholders and tax authorities. Management accounting systems provide information specifically for the use of decision-makers (managers) within the organisation.

1.5 Good information should have certain qualities. Which of the following are qualities of good information? (i) Complete (ii) Extensive (iii) Relevant (iv) Accurate A (i), (ii) and (iii) B (i), (iii) and (iv) C (ii) and (iv) D All of them

B Good information is not necessarily extensive. Too much information may tend to obscure the important points.

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

B Tactical planning is used by middle management to decide how the resources of the business should be employed to achieve specific objectives in the most efficient and effective way.

1.10 Which of the following would be data rather than information? A Sales increase/decrease per product in last quarter B Total sales value per product C Sales made per salesman as a percentage of total sales D Sales staff commission as a percentage of total sales

B The other three items have been processed in some way to provide meaningful information whereas total sales value per product is the basic data for further processing.

2.3 Which of the following statements are false? (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

C A sampling frame is a numbered list of all items in a population (not a sample). Cluster sampling involves selecting one definable subsection of the population which therefore makes the potential for bias considerable.

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

C Complete accuracy is not necessarily an essential quality of good information. It needs to be sufficiently accurate for its purpose, and often there is no need to go into unnecessary detail for pointless accuracy

1.7 Which of the following statements is/are correct? (i) Information for decision-making should incorporate uncertainty in some way (ii) The data used to prepare financial accounts and management accounts are the same A (i) is true and (ii) is false B (ii) is true and (i) is false C Both are true D Both are false

C Statement (i) is true and this is why cost accounting is, in general, unsuitable for decisionmaking. Statement (ii) is true. However, the way the data is analysed is different.

1.8 Which of the following processes occurs at the business planning stage? A Obtaining data about actual results B Taking corrective action C Comparing actual performance with budget D Establishing objectives

D Establishing objectives. The planning stage involves establishing objectives and selecting appropriate strategies to achieve those objectives

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

D It is primary data that is collected for a specific purpose so (i) is false. Continuous data can take on any value so (ii) is false. Both (iii) and (iv) are true.

1.3 Which of the following statements about management accounting information is/are true? (i) They must be stated in purely monetary terms. (ii) Limited companies must, by law, prepare management accounts. (iii) They serve as a future planning tool and are not used as an historical record. A (i), (ii) and (iii) B (i) and (ii) C (ii) only D None of the statements is true

D Management accounts often incorporate non-monetary measures. Therefore statement (i) is incorrect. There is no legal requirement to prepare management accounts. Therefore statement (ii) is incorrect. Management accounts do serve as a future planning tool, but they are also useful as an historical record of performance. Therefore statement (iii) is incorrect.

1.4 Which of the following statements is/are correct? (i) 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. (ii) An objective is a course of action that an organisation might pursue in order to achieve its strategy. (iii) Information is data that has been processed into a form meaningful to the recipient. A (i), (ii) and (iii) B (i) and (iii) C (ii) and (iii) D (iii) only

D Statement (i) is a description of a management information system, not a management control system Statement (ii) is the 'wrong way round'. The strategy is the course of action that a business might pursue in order to achieve its objectives. Statement (iii) is correct. Data is the 'raw material' which is processed into useful information


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