MOCK EXAM: 3

Question#1:
Z Co is evaluating a project which will generate cash flows of $2,600 each year in years four to eight.
(The first amount will be received in four years from now.)
What is the present value of the project cash flows using a discount rate of 14%?
A. $12,061
B. $6,822
C. $6,024
D. $4,485
Question#2:
The following bar chart shows the overhead expenses for a business for each quarter of 20X1.

What was the reduction in overhead expenses between quarter three and quarter four $ ?
Question#3:
Data relating to two processes (L and M) are as follows:
Process Normal loss as % of input Input (litres) Output (litres)
L 6 800,000 750,000
M 6 600,000 570,000
For each process, was there an abnormal gain or an abnormal loss?
Abnormal gain Abnormal loss
Process M
Process L
Question#4:
The manager of the southern region of a catering company has specified weekly sales targets for each
sales representative.
What type of objective are these targets?
A. Non-operational
B. Tactical
C. Strategic
D. Operational
Question#5:
Product A uses 4 kg of material X and 7 kg of material Y at a standard price of $5 per kg and $6 per kg
respectively. Product A needs two hours of skilled labour and one hour of semi-skilled labour at $10 per
hour and $8 per hour respectively.
Production overhead is absorbed at $5 per labour hour. Selling and distribution costs are $3 per unit of
product A.
What is the standard cost of production for product A?
A. $47
B. $90
C. $105
D. $108

Question#6:
Is each of the following statements, which refer to documents used in the material procurement
procedures of a company, true or false?
True False
All purchase requisitions are prepared in the purchasing department and
are then sent to the appropriatesuppliers
All goods received notes are prepared in the goods inwards department
Question#7:
The following information relates to a manufacturing company for next period:
Units $
Production 24,000 Fixed production costs 480,000
Sales 25,000 Fixed selling costs 50,000
Using absorption costing, the budgeted loss for the next period is $30,000.
What would be the budgeted loss for next period using marginal costing?
A. $10,000
B. $52,000
C. $50,000
D. $8,000
Question#8:
For which TWO of the following production overhead costs would 'floor area occupied' be a suitable
basis of apportionment?'
A. Heating
B. Equipment depreciation
C. Factory rent
D. Stationery
Question#9:
The following statements refer to attributes of good information:
(1) The cost of producing information should be less than the benefit derived from it
(2)Information should be understandable to the managers who use it
(3)Information should always be 100% accurate before it is used
Which of the statements regarding the attributes of good information are TRUE?
A. 1, 2 and 3
B. 1 and 2 only
C. 1 and 3 only
D. 2 and 3 only

Question#10:
Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours to
make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time. What is the budgeted
total labour cost for the next period?
A. $300,000
B. $288,000
C. $240,000
D. $192,000
Question#11:
A company absorbs production overheads on a machine hour basis. The following data relates to last year:
Budget Actual
Machine hours 2,500 2,400
Total production overheads ($) 50,000 47,000
What was the total over or under absorption of production overheads last year?
A. $1,000 over absorbed
B. $2,000 under absorbed
C. $3,000 under absorbed
D. $3,000 over absorbed
Question#12:
Last month a manufacturing company's profit was $2,000, calculated using absorption costing principles.
If marginal costing principles had been used, a loss of $3,000 would have occured. The company's fixed
production cost is $2 per unit. Sales last month were 10,000 units.
What was last month's production (in units)?
A. 7,500
B. 9,500
C. 10,500
D. 12,500
Question#13:
Which of the following variances would be shown in an operating statement prepared under a standard
absorption costing system?
(1) Variable overhead expenditure variance
(2) Fixed overhead expenditure variance
(3) Fixed overhead volume variance
A. 1 and 3 only
B. 2 and 3 only
C. 1, 2 and 3
D. 1 and 2 only
Question#14:
Three types of organization are listed as follows:
(1) Airline
(2) Hotel
(3) Hospital
Which of these organizations are likely to use service costing?
A. 1 and 2 only
B. 1, 2 and 3
C. 1 and 3 only
D. 2 and 3 only
Question#15:
An organization has the following total costs at two activity levels:
Activity level (units) 16,000 36,000
Total costs ($) 68,000 144,000
Variable cost per unit is constant within this range of activity levels, and there is a step-up in the total fixed
costs of $6,000, when activity level exceeds 25,000 units.
What are the total costs at an activity level of 30,000 units ?
Question#16:
A worker assembles components on a production line. Over a two-day period, the
worker completes the assembly of the following number of items:
10, 7, 6, 7, 6, 7, 6, 7, 6, 10, 9, 6, 9,10, 11, 10, 11
What is the mean of the worker’s output (to the nearest unit)?
A. 6
B. 7
C. 8
D. 9

Question#17:
Last period an organization budgeted to work 45,000 hours manufacturing 11,250 units. Actual output
last period was 10,700 units which took 43,600 hours to manufacture. What was the labour efficiency
ratio for last period (to one decimal place)?
A. 95.1%
B. 96.4%
C. 98.2%
D. 101.9%
Question#18:
An accountant has been asked to check the accuracy of the month's sales invoices. There are several
hundred so she decides to check a sample. She selects every tenth invoice after the third one
. What typeof sampling method has she used?
A. Systematic
B. Cluster
C. Stratified
D. Multi-stage
Question#19:
A company uses a multiplicative time series model to forecast sales. The trend in sales is linear and is
described by the following equation:
 Trend = 400 + 10 T
Where T = 1 denotes the first quarter of 20X0
T = 2 denotes the second quarter of 20X0 etc.
The average seasonal variations are as follows:
Quarter 1 2 3 4
% Variation -30 +40 +10 -20
What is the sales forecast for Quarter 3 of 20X1?
A. 423 units
B. 480 units
C. 3,157 units
D. 517 unit

Question#20:
The following statements refer to aspects of budget administration:
(1)A budget manual describes the budget setting process in terms of objectives and procedures
(2)The budget committee should consist of representatives of all the major segments of a business
(3)Accounting department staff set all the budgets and are responsible for communicating their content
to budget holders
Which of the statements are correct?
A. 1, 2 and 3
B. 2 and 3 only
C. C. 1 and 3 only
D. 1 and 2 only

Question#21:
Organizations can forecast the differences between actual and planned outcomes and implement
measures to close the gap.
What type of control action is being described above?
A. Budgeting
B. Feedforward control
C. Variance analysis
D. Feedback control

Question#22:
Which of the following best describes a flexible budget?
A. An annual budget which incorporates the actual results for the year end and the budgeted figures for
the remaining months
B. A budget which is updated periodically so that it always covers the next twelve month period
C. An annual budget which can be updated each month to reflect changing market and economic
conditions
D. A budget constructed for several production activity levels which incorporates the effect of different
cost behavior patterns
 Question#23:
Martin is the manager of production department M in a factory which has 8 other production
departments. He receives monthly information that compares planned and actual expenditure for
department M. All production from department M is transferred to other factory departments to be
completed prior to being dispatched to customers. Decisions involving capital expenditure in department
M are not taken by Martin.
Which of the following describes Martin's role in department M?
A. A cost centre manager
B. A revenue centre manager
C. An investment centre manager
D. A profit centre manager
Question#24:
Which TWO of the following statements about managerial incentive schemes are true?
A. Incentive schemes will always boost performance
B. Incentive schemes can be non-financial
C. Some incentive schemes may encourage bullying of under performers
D. The rewards must relate tothe achievement of team goals

Question#25:
The following information is available for direct material A for the month of June
$
Fixed budget 210,000
Actual cost 365,625
Flexed budget 262,500
What is the total direct materials variance for the month of June?
A. $52,500 adverse
B. $52,500 favorable
C. $103,125 favorable
D. $103,125 adverse
Question#26:
A customer returns a faulty product to a firm for repair under a warranty scheme. The firm operates a
total quality management system.
Which of the following best describes the cost of the repair?
A. An appraisal cost
B. An external failure cost
C. An internal failure cost
D. A prevention cost
Question#27:
The height of boys in a class follows a standard normal distribution with a mean height of 175cm and
standard deviation of 10cm.
What is the probability of the boys being taller than 195cm %?
Question#28:
A company uses the economic order quantity (EOQ) model and holds no buffer inventory. The cost of
placing an order has now increased.
What is the effect of the increase on the EOQ and the annual holding cost?
Increase Decrease No change
EOQ
Annual holding cost
Question#29:
A factory consists of two production cost centers (PC1 and PC2) and two service cost centers (SC1 and
SC2). The total allocated and apportioned overhead for each centre is as follows:
PC1 PC2 SC1 SC2
$300,000 $200,000 $100,000 $600,000
The work done by the service cost centers can be represented as follows:
PC1 PC2 SC1 SC2
% of SC1 costs to other cost centers: 60 40 - -%
of SC2 costs to other cost centers: 50 25 25 -
After the full reapportionment of service cost centre overheads, what is the total overhead for
production cost centre PC1?
A. $750,000
B. $690,000
C. $675,000
D. $660,000

Question#30:
Which of the following statements about benchmarking is TRUE?
A. It is always possible to identify a valid benchmark
B. Benchmarking can discourage team working in an organization
C. Functional benchmarking is a method of comparing one unit or function with another within the same
industry
D. Benchmarking is an attempt to identify best practices
Question#31:
Which of the following options best matches the definition 'variables or conditions which are essential
for an organization’s success'?
A. Key performance indicators
B. Strategic objectives
C. Critical success factors
D. Mission statements
Question#32:
The number of quarterly complaints to a local school has a mean of 50 and the coefficient of variation is
20%.
What is the variance for the number of quarterly complaints ?
Question#33:
The following information is available for H Co for quarter 2:
Budgeted hours 3,100
Standard hours produced 3,125
Actualhours worked 3,200
What is the efficiency ratio?
A. 103%
B. 98%
C. 101%
D. 102%

Question#34:
Identify whether each of the following statements about the advantages of big data analytics are true
or false.
True False
Data analytics can allow organizations to monitor product usage by customers
in real-time, in order toprompt maintenance activities
Fraud can be detected through using data analytics techniques to identify
improper transactions
Question#35:
During a recession, performance measurement may be affected in several ways.
Which of the following actions are most likely to be taken by a publishing business during a recession?
(1) Ensure customer service and client relationships are strong
(2) Ignore competitors' innovations
(3) Increase number of staff training courses in spreadsheets
(4) Use assets economically, effectively and efficiently
A. 1 and 3
B. 1 and 4
C. 2 and 4
D. 2 and 3

Section “B”
Question#36:
Blitzen Co manufactures and sells a single product. It is preparing its budgets for the three month period
ending 31 December 20X5. The budget is virtually complete and the remaining task is to prepare the
budgeted statement of financial position as at 31 December 20X5. Sales of the product and purchases of
materials are all made on credit terms. There were no purchases or disposals of non-current assets in the
period to 31 December 20X5. Entries marked 'n/a' are yet to be calculated. The following information is
available:
Statement of financial position at 30 Budgeted statement of financial position at 31
September 20X5 December 20X5

$ $ $ $

Assets Assets

Non-current assets (net) 10,000 Non-current assets (net) n/a

Current assets Current assets

Raw material inventory 4,000 Raw material inventory 4,500

Trade receivables 3,000 Trade receivables n/a

Cash 1,000
Cash n/a

8,000

Equity and liabilities Equity and liabilities

Ordinary shareholders funds 16,000

Ordinary shareholders funds 19,500
Current liabilities Current liabilities

Trade payables 2,000 Trade payables n/a

18,000

Budgeted statement of profit or loss for the Cash budget for the quarter ending
quarter ending 31 December 20X5 31 December 20X5

$ $
 Mirchawala’s Hub of Accountancy

Receipts from 23,000

Sales 25,000 customers

Payments
Direct materials 14,000
Direct wages 6,000
Depreciation 1,500 Materials 12,000

Wages 6,000

Net profit/(loss) 3,500 Net cash inflow 5,000

Task 1: 7 Marks
What figure should be included in the budgeted statement of financial position as at 31 December 20X5
for each of the following items?
Non-current assets $
Receivables $
Cash $
Payables $
Task 2: 2 Marks
Blitzen Co is about to start work on the budgets for 20X6. One kg of direct material A is required to make
four units of its product. Each unit of product also requires three kg of material B and two hours of direct
labour. Demand for the product and the supply of material A is unlimited, but only 50,000 kg of material
B and 40,000 labour hours are available in the coming period.
What is the principal budget factor for 20X6?
A. Sales demand
B. Direct labour
C. Direct material A
D. Direct material B
Task 3: 1 Marks
What would be the order of the budget preparation for a manufacturing company where the principal
budget factor was sales demand?
A. Sales budget, production budget, purchases budget
B. Sales budget, purchases budget, production budget
C. Purchases budget, production budget, sales budget

Question#37:
Rudolph Co uses a standard marginal costing system to control the costs and revenues of its only product.
The following spreadsheet shows a standard cost-based operating statement for the month of July. Entries
for some cells have been deliberately omitted.

From the desk of Sir Ahmed Shafi 10

 Mirchawala’s Hub of Accountancy

Task 1: 2 Marks
Complete the following cells with the correct text label.
Cell A4
Cell A15
Task 2: 2 Marks
Which of the following formulae will calculate correctly the value in cell D18?
A. = sum(D3:D17) C. =D15+D16+D17
B. =D7-D14-D16+D17 D. =D7-D14+D17
Task 3: 2 Marks
Which of the following is a possible explanation of the variable cost variances?
A. A new expensive material was easier to work with
B. A new cheap material was easier to work with
C. A new cheap material was more difficult to work with
D. A new expensive material resulted in less wastage
Task 4: 4 Marks
Rudolph Co is now considering changing the costing system from standard marginal costing to standard
absorption costing system. You are given further details that were used to prepare the July operating
statement as follows:
(1) Budgeted sales and production were 5,000 units
(2) Actual sales and production were 4,900 units

If Rudolph Co had used standard absorption costing in the month of July, what would have been the value
of the following:
Fixed overhead volume variance adverse
Sales volume variance adverse

From the desk of Sir Ahmed Shafi 11

 Mirchawala’s Hub of Accountancy

Question#38:
Vixen Co is an internet based retailer of books and music. It believes that the factors
critical to the success of its business are the:

(1) Number of people visiting its website

(2) Conversion of website visits into orders

(3) Amount of time it takes to deliver an order to a customer
(4) Level of customer satisfaction with the way in which it deals with customer returns

Results for the most recent year are given below:

Website visits 5,000,000

Value of customer orders placed $30,000,000
Average value per order placed $20
Average value of undelivered orders at the end of each day $411,000
Number of orders returned 150,000
Number of complaints about returns process 1,000
Customers place a maximum of one order per visit to the website. The company operates for 365
days per year.
Task 1: 6 Marks
Calculate the following for Vixen Co for the most recent year.
The average number of website visits per day (to the nearest whole No.) visits
The conversion rate of website visits into orders (to the nearest whole No.) %
The average delivery time per order (to the nearest day) days
The percentage of customer returns made without complaint (to the nearest whole No. %
Task 2: 2 Marks
The performance indicators calculated above are part of Vixen Co's balanced scorecard performance
monitoring system. They measure process efficiency and customer satisfaction.
Which TWO of the following are also balanced scorecard perspectives?
A. Effectiveness C. Growth
B. Economy D. Financial success

From the desk of Sir Ahmed Shafi 12

 Mirchawala’s Hub of Accountancy

Task 3: 2 Marks
Which of the following statements about balanced scorecard approach toperformance
measurement is TRUE?
A. It ignores cause and effect relationships between performance measures
B. It is part of the benchmarking process
C. It must have an equal number of performance measures in each perspective
D. D. It includes financialand non-financial indicators

End Paper
(!)Best of Luck (!)

From the desk of Sir Ahmed Shafi 13