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Advanced Management Accounting

Last Update 5 days ago
Total Questions : 202

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Question # 1

Performance measures that monitor the extent to which a not-for-profit organization's objectives have been achieved are measures of:

Options:

A.  

economy

B.  

efficiency

C.  

effectiveness

D.  

enterprise

Discussion 0
Question # 2

SDF is a newly-established production company that is experiencing high staff turnover in its factory. The production department is studying the manufacturing process and its associated learning curve.

Which of the following statements is correct?

Options:

A.  

SDF's staff turnover will disrupt the observation and measurement of the learning curve.

B.  

SDF's staff turnover will affect the learning curve.

C.  

SDF's rapid staff turnover means that knowledge of the learning curve has little value.

D.  

SDF can use the learning curve to determine labor budgets for the remainder of the first year of operation.

Discussion 0
Question # 3

In an organization's transfer pricing system the selling division and the purchasing division each record a different price for the same transaction.

This is known as a:

Options:

A.  

Dual pricing system.

B.  

Two part tariff system.

C.  

Full cost pricing system.

D.  

Marginal cost plus pricing system.

Discussion 0
Question # 4

The Chief Executive of a large manufacturing company has made the following comment.

"All of our competitors are using both just-in-time(JIT) and Total Quality Management (TQM) whereas we have never used either. Consequently we are lagging behind our competitors because their levels of inventory and quality costs are significantly below ours. I want to see JIT fully implemented, both for purchasing and for production, in 4 weeks' time and TQM fully implemented 4 weeks after that."

Which of the following provide appropriate advice to the Chief Executive?

Select ALL that apply.

Options:

A.  

Full implementation of JIT is unlikely to be successful unless a TQM environment has first been established.

B.  

Implementing TQM from scratch within 8 weeks should be feasible for a large manufacturing company, but implementing JIT within 4 weeks is unlikely to be feasible.

C.  

Total quality costs are likely to begin declining immediately once the process of implementing TQM has commenced.

D.  

JIT offers the long run prospect of significantly reducing inventory.

E.  

It would be possible to implement TQM without implementing JIT.

F.  

It is not possible to implement JIT for production without first implementing JIT for purchasing.

Discussion 0
Question # 5

The cash flows from a project are detailed in the table below.

Question # 5

To the nearest 1%, what is the project's internal rate of return?

Options:

A.  

15%

B.  

8%

C.  

46%

D.  

115%

Discussion 0
Question # 6

The following cost of quality report has been prepared for the latest period.

Question # 6

What is the difference between the cost of conformance and the cost of non-conformance?

Options:

Discussion 0
Question # 7

A public sector service organization is considering whether to use a balanced scorecard or a value for money approach based on the three Es to assess its performance.

Which of the following are correct comparisons of the balanced scorecard and value for money based on the three Es as performance measurement frameworks?

Select ALL that apply.

Options:

A.  

Efficiency is measured as one of the three Es but the balanced scorecard does not measure efficiency.

B.  

If the organization wishes to consider both financial and non-financial performance then the balanced scorecard should be used rather than the three Es.

C.  

The public's satisfaction with the organization's services can be measured by both the three Es and the balanced scorecard.

D.  

The balanced scorecard is concerned with meeting the organization's objectives whereas the three Es approach is concerned only with reducing costs.

E.  

The three Es approach was designed for public sector service organizations, but the balanced scorecard approach can also be used in the public sector.

Discussion 0
Question # 8

Which TWO of the following actions taken during the budgetary planning process will result in the creation of budgetary slack?

Options:

A.  

Overestimating costs

B.  

Underestimating costs

C.  

Underestimating revenues

D.  

Overestimating revenues

E.  

Overestimating profit

Discussion 0
Question # 9

Which TWO of the following expressions are correct?

Options:

A.  

1 + money rate = (1 + real rate) x (1 + inflation rate)

B.  

1 + real rate = (1 + money rate) / (1 + inflation rate)

C.  

1 + real rate = (1 + inflation rate) / (1 + money rate)

D.  

1 + money rate = (1 + inflation rate) / (1 + real rate)

E.  

1 + inflation rate = (1 + money rate) x (1 + real rate)

Discussion 0
Question # 10

A company has a maximum of $2 million to invest and has identified four viable projects, E, F, G and H.

The initial investment for each of the projects is the maximum amount that can be invested in the project, but any amount up to the maximum can be invested. The projects are divisible.

The projects have been evaluated using net present value, as below. All figures are $ millions.

Question # 10

In which project should the company invest $2 million?

Options:

A.  

Project E

B.  

Project F

C.  

Project G

D.  

Project H

Discussion 0
Question # 11

An investment appraisal has identified that a project has a positive net present value when discounted at the company's cost of capital. If the cost of capital is now increased, indicate whether each of the following appraisal measures will increase, decrease or stay the same.

Question # 11

Options:

Discussion 0
Question # 12

Which THREE of the following conditions are required for a sustained learning curve to apply?

Options:

A.  

Labor intensive production

B.  

Continuous production

C.  

A complex production process

D.  

Frequent machine maintenance

E.  

Continuous product development

F.  

Frequent staff rotation

Discussion 0
Question # 13

K Supermarket spends $80,000 per year on checking and processing receipts of inventory. Annual warehouse costs are a further $70,000 per year. These costs are currently treated as fixed overheads in the company's costing system.

As an experiment, the company is preparing a direct profitability analysis of a small range of products, including fresh grapes.

K Supermarket receives a total of 3,600 deliveries every year. 20% of these deliveries are of perishable goods such as grapes. It takes twice as long to process a delivery of perishable goods compared to a normal delivery because perishable goods have to be checked more carefully.

Half of the warehouse costs are for the chilled store that is used to store perishable goods. At any time, the chilled store has 800 kilos of perishable goods in stock.

K Supermarket receives 150 deliveries of grapes every year. Each delivery is for 100 kilos of grapes. The grapes spend an average of two days in the chilled store before they are sold.

Calculate the total cost per kilo of checking, processing and storing grapes that should be taken into account in determining the profitability of grapes.

Give your answer to the nearest whole cent.

Options:

Discussion 0
Question # 14

An organization has the right to mine for gold on its land. The price of gold and the cost of extraction are such that mining is not currently financially viable. However, the organization has the right to commence mining at any time in the future if the price of gold increases and makes mining financially viable.

This right to commence mining in the future is an option to:

Options:

A.  

abandon

B.  

redeploy

C.  

expand

D.  

delay

Discussion 0
Question # 15

A company is determining the selling price for its new product.

At a selling price of $16 per unit there will be zero demand but for every $1 reduction in the price, demand will increase by 100 units per period.

Production must be in batches of 100 units. The variable cost per unit will be $8 if 400 units are produced in a period. For each additional batch produced in a period the variable cost per unit will increase by $1 per unit for the additional batch only.

No inventories will be held.

Which of the following sales and production volumes will generate the highest contribution per period?

Options:

A.  

400 units

B.  

500 units

C.  

600 units

D.  

700 units

Discussion 0
Question # 16

Which of the following statements about learning curves is correct?

Options:

A.  

The learning index for an 80% learning curve is calculated as log 2 divided by log 0.8.

B.  

The learning index for an 80% learning curve is calculated as log 0.8 divided by log 2.

C.  

A 90% learning curve indicates a faster rate of learning than an 80% learning curve.

D.  

The learning index will always have a positive value.

Discussion 0
Question # 17

Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance.

Which is the most appropriate pricing strategy for company D's new product, and for what reason?

Options:

A.  

Market skimming because it exploits areas of the market which are sensitive to price.

B.  

Penetration pricing because it can be used to rapidly build sales volume in mature markets.

C.  

Market skimming because it enables high prices to be charged to buyers who want the product as soon as possible.

D.  

Penetration pricing because it can be used to rapidly build sales volume in high growth markets.

Discussion 0
Question # 18

Which of the following statements is true?

Options:

A.  

Risk transfer means the management of a portfolio of different risks.

B.  

Insuring risks means that businesses will not need to take any measures to reduce those risks.

C.  

High frequency, high severity risks are always strategic risks.

D.  

Risk hedging is taking action to offset one risk by incurring a new risk in the opposite direction.

Discussion 0
Question # 19

SDF makes cars. Demand for one of SDF's most popular models has declined because of a long-running television program. SDF's car is driven by a villainous character in the program and that has created such a negative association that sales have declined so significantly that SDF is planning to discontinue production.

Which of the following statements is correct? Select ALL that apply.

Options:

A.  

Business risks can arise from unexpected events.

B.  

The use of a product in a television program can create upside risks.

C.  

SDF should have considered the possibility that sales of this car could be affected by public perception, even though the car's practical attributes are unchanged.

D.  

SDF's board should accept full responsibility for permitting this to happen.

E.  

SDF's sales department should have prevented the television production company from buying the car.

Discussion 0
Question # 20

A supermarket group has experienced operational problems during recent years, including a shortage of warehousing space due to increasing turnover and poor inventory management. The product portfolio has expanded considerably. Although this has led to increased sales volume, marketing and logistics costs have increased disproportionately. Non product-specific costs have also increased significantly.

Management is now considering using Direct Product Profitability (DPP).

Which of the following statements are valid in respect of the possible implementation of DPP within the supermarket group?

Select ALL that apply.

Options:

A.  

DPP should result in improved management of storage space.

B.  

DPP should result in improved supplier relationships.

C.  

DPP should result in improved pricing decisions.

D.  

DPP requires non product-specific costs to be apportioned rather than allocated.

E.  

DPP provides summary information on the profitability of each customer group.

Discussion 0
Question # 21

A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume.

The present value of which of the following would be used in the calculation?

Options:

A.  

Contribution

B.  

Operating profit

C.  

Fixed overheads

D.  

Net profit

Discussion 0
Question # 22

An 80% learning curve will apply to the production of a new product. The first unit will require 120 labor hours. The labor rate is $11 per hour.

To the nearest $1, the expected total labor cost for the first 4 units is:

Options:

A.  

$3,379

B.  

$845

C.  

$5,280

D.  

$4,224

Discussion 0
Question # 23

Which TWO of the following are reasons why cost-based approaches to transfer pricing are often used in practice?

Options:

A.  

The buying division will want to maximize its profits.

B.  

The transferring division will want to maximize its profits.

C.  

Because the external market is imperfect.

D.  

Because there is often no external market for the product that is being transferred.

E.  

The approach allows the organization to cover all the costs.

Discussion 0
Question # 24

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:

Question # 24

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?

Options:

A.  

$0.10

B.  

$0.70

C.  

$3.57

D.  

$4.17

Discussion 0
Question # 25

A manufacturing company is in the process of introducing just in time (JIT) and total quality management (TQM) into every aspect of its value chain.

Which TWO of the following are appropriate changes to make to the support activities in the organization's value chain?

Options:

A.  

Inbound logistics would need to ensure that materials of appropriate quality are delivered on a just in time basis.

B.  

Operations would need to be carried out on a right first time basis as any failure could delay production.

C.  

After sales service would need to ensure that appraisal costs are kept to a minimum.

D.  

Procurement would need to arrange to purchase goods so that they are delivered as required.

E.  

Firm infrastructure would need to arrange appropriate training courses for staff.

F.  

Technology development would need to ensure that processes are continually improving.

Discussion 0
Question # 26

A group consists of two divisions, Alpha and Beta, both of which are profit centers. Alpha sells a product to the external market and also sells it as an intermediate product to Beta.

Beta then processes further before selling the final product to the external market. The current group transfer pricing policy requires Alpha to charge Beta with the variable cost of production.

Which of the following statements is valid?

Options:

A.  

A two-part tariff would provide a more effective basis for assessing divisional performance.

B.  

A dual pricing approach to transfer pricing would increase Beta's total profit and reduce Alpha's.

C.  

If Alpha has unfulfilled external demand then the transfer price should always be set at variable cost.

D.  

Transfer prices only affect the assessment of performance of investment centres, not of profit centres.

Discussion 0
Question # 27

Company X is considering the launch of a new product. In order to compete in the market the selling price must be $100 per unit. Company X aims to achieve a sales margin of 25 per cent.

Direct materials cost is $75 for each unit. It takes 15 minutes for workers to assemble each unit. Workers are paid $16 per hour. 5 per cent of paid time is idle. Overheads are absorbed at $6.50 per unit.

What is the value of any cost gap between the forecast total cost and the target cost?

Options:

A.  

$10.71

B.  

$5.50

C.  

$10.50

D.  

$9.10

Discussion 0
Question # 28

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

Options:

A.  

The budget will be based on information from employees who are familiar with the day to day activities.

B.  

Motivation will improve due to a feeling of ownership of the budget.

C.  

There will be increased commitment to organizational objectives.

D.  

Budget setters will be forced to justify every item on the budget.

E.  

There will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.

F.  

It will be less time-consuming for operational managers.

Discussion 0
Question # 29

Place each performance measure against the correct perspective of the Balanced Scorecard for a company that operates a chain of hotels.

Question # 29

Options:

Discussion 0
Question # 30

Which of the following criticisms relate to traditional budgeting methods and which relate to the 'beyond budgeting' approach?

Question # 30

Options:

Discussion 0
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