Câu 3. A company's master budget contains the following budgeted income statement.

£ £
Sales revenue (5,000 units) 130,000
Variable material cost 25,000
Variable labour cost 35,000
Variable overhead 15,000
Fixed overhead 40,000
115,000
Budgeted net profit 15,000
The company's management are planning to change the materials specification. This would reduce the
materials cost per unit by 10%. The reduced product quality would result in a 2% reduction in the selling
price and a 5% fall in the sales volume.
The revised budgeted net profit for the period would be
A. £8,530 B. £12,155 C. £14,155 D. £14,625
Sales price: (130000/5000)*98%*5000*95%= 121030
Variable material cost: (25000/5000)*90%*5000*95%= 21375
Variable labour cost: (35000/5000)*5000*95%= 33250
Variable overhead: (15000/5000)*5000*95%= 14250
Fixed overhead: 40000
Budgeted net profit: 12155 => B
Câu 4. The correlation coefficient between two variables, x and y, is +0.85.
The proportion of variation in y that is explained by variation in x is (to two decimal places)
A. 0.72 B. 0.85 C. 0.92 D. 1.57
The proportion of variation in y that is explained by variation in x is through coefficient of determination (r^2)
 R^2= 0,85^2= 0,72 => A
Câu 5. 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 method?
A. £1.67 per unit B. £1.83 per unit
C. £2.75 per unit
Y= a+bx
4000= a+ b*1000
10000= a + b*3000
 a= 1000, b= 3
 When output level >= 3500 units
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  y= 1500 + bx
At 4000 units
 9500= 1500+ 4000*b => b= 2
Câu 7. A company manufactures a single product L, for which the standard material cost is as follows.
Material: 14 kg * $3 = $42 per unit
During July, 800 units of L were manufactured, 12,000 kg of material were purchased for $33,600, of which
11,500 kg were issued to production.
This company values all inventory at standard cost.
What are the material price and usage variances for July?
A. Price: $2,300 (F); Usage: $900 (A) B. Price: $2,300 (F); Usage: $300 (A)
C. Price: $2,400 (F); Usage: $900 (A) D. Price: $2,400 (F); Usage: $840 (A)
Material price variance= (Standard price – Actual price)*Actual quantity of materials
= ( 3 – 33600/12000)*12000= 2400
 2400 favourable
Material usage variance= (Standard quantity of materials for actual output – Actual quantity)* Standard
price
= (800*14 -11500)*3= -900
 900 adverse
 C
Câu 8. A company expected to produce 200 units of its product, the Bone, in 20X3. In fact, 260 units were
produced.
The standard labour cost per unit was $70 (10 hours at a rate of $7 per hour). The actual labour cost was
$18,600 and the labour force worked 2,200 hours although they were paid for 2,300 hours.
What is the direct labour rate variance for the company in 20X3?
A. $400 (A) B. $2,500 (F)
C. $2,500 (A) D. $3,200 (A)
Direct labour rate variance= (Standard rate – Actual rate)*Actual labour hours
= (7 – 18600/2300)*2300= -2500
 2500 Adverse
 C
Câu 9. Extracts from a company's records from last period are as follows.
Budget Actual
Production 1,925 units 2,070 units
Variable production overhead cost $11,550 $14,904
Labour hours worked 5,775 8,280

What is the variable production overhead efficiency variance?

A. $2,070 (A) B. $3,726 (A)
C. $4,104 (A) D. $4,140 (A)
Variable production overhead efficiency variance= (Standard hours for actual output – Actual
hours)*Standard variable overhead rate
= (5775*2070/1925 – 8280)* 11550/5775= -4140
 4140 Adverse
 D
Câu 11. The following information relates to labour costs for the past month:
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 Budge Labour rate $10 per hour
t
Production time 15,000 hours
Time per unit 3 hours
Production units 5,000 units

Actual Wages paid $176,000

Production 5,500 units
Total hours worked 14,000 hours

There was no idle time.

What were the labour rate and efficiency variances?
A. Rate: $26,000 Adverse; Efficiency: $25,000 Favourable
B. Rate: $26,000 Adverse; Efficiency: $10,000 Favourable
C. Rate: $36,000 Adverse; Efficiency: $2,500 Favourable
D. Rate: $36,000 Adverse; Efficiency: $25,000 Favourable
Labour rate variance= (Standard rate – Actual rate)*Actual labour hours
= ( 10 – 176000/14000)* 14000 = -36000
 36000 Adverse
Labour efficiency variance= (Standard labour hours for actual output – Actual labour hours)* Standard rate
= (3*5500 – 14000)* 10= 25000
 25000 Favourable
 D
Câu 12. A company uses variance analysis to control costs and revenues.
Information concerning sales is as follows:
Budgeted selling price $15 per unit
Budgeted sales units 10,000 units
Budgeted contribution per unit $5 per unit
Actual sales revenue $151,500
Actual units sold 9,800 units
What is the sales volume variance?
A. $500 Favourable B. $1,000 Favourable
C. $1,000 Adverse D. $3,000 Adverse
Sales volume variance= (Actual sales quantity – Budgeted sales quantity)* Standard contribution per unit
= ( 9800 – 10000)*5 = -1000
 1000 Adverse
 C
Câu 13. The contribution ratio of product A is 40%. The manufacturer of product A wishes to make a
contribution of $100,000 towards fixed costs.
If the selling price is $5 per unit, the number of units of A that must be sold is:
A. 50,000 units B. 40,000 units
C. 20,000 units D. 8,000 units
Contribution per unit= selling price* contribution ratio= 5*40%= 2/unit
Number of units of A must be sold: x unit

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The manufacturer of product A wishes to make a contribution of $100,000 towards fixed costs.
 2*x = 100000
 x= 50000 units
 A
Câu 14. A company manufactures a single product for which cost and selling price data are as follows:
Selling price per unit: £20
Variable cost per unit: £10
Fixed costs per month: £50,000
Budgeted monthly sales (units): 8,000
The margin of safety, expressed as a percentage of budgeted monthly sales, is:
A. 68.75% B. 60.00% C. 37.50% D. 31.25%
Contribution per unit= selling price per unit – variable cost per unit= 20 – 10= 10/unit
Number of units of A must be sold to reach breakeven point: x unit
Breakeven point when: Contribution= Fixed costs
 10*x= 50000
 x= 5000 units
 Margin of safety= 8000 – 5000= 3000 units
 The margin of safety, expressed as a percentage of budgeted monthly sales= 3000/8000 *100%= 37,5%
 C
Câu 15. Rachel’s bakery makes a single product, the Bread. This product sells for £3, variable costs are £1 per
unit. Total fixed costs per annum are £15,250.
If Rachel wishes to make an annual profit of £14,000 how many Bread does she need to sell?
A. 7,625 units B. 9,750 units
C. 14,000 units D. 14,625 units
Contribution per unit= selling price per unit – variable cost per unit= 3 – 1= 2/unit
Number of units of A must be sold: x unit
Having: Contribution – Fixed cost= Profit
 2*x – 15250= 14000
 x= 14625 units
 D
Câu 16. A company has fixed costs of $1.3 million. Variable costs are 55% of sales up to a sales level of $1.5
million, but at higher volumes of production and sales, the variable cost for incremental production units falls to
52% of sales.
What is the breakeven point in sales revenue, to the nearest $1,000?
A. $1,977,000 B. $2,027,000
C. $2,708,000 D. $2,802,000
At a sales level of 1500000
Contribution= Sales revenue – Variable costs= 1500000 – 55%*1500000= 675000
 Profit= Contribution – Fixed costs= 675000 – 1300000= -625000
 At a sales level of 1500000, it witnesses a loss
 Breakeven point in sales revenue must exceed sales level of 1500000
At a sales level excess of 1500000
Sales revenue in brekeven point: x
Contribution= Sales revenue – Variable costs= x – 52%*x= 48%x
Having: Contribution = Fixed cost

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  48%*x= 1300000
 x= 2708000
 C

Câu 17. A company makes three products to which the following budget information relates:
Contribution per unit Labour hour(s) per unit
($)
Product X 10 2
Product Y 9 1.5
Product Z 12 2.5

Due to industrial action only 5,000 labour hours are available next period, when expected demand is 1,000 units
of each product. Fixed costs are $12,000 for the period. This company has no plan for outsourcing or hiring
extra labour from the outside.
What is the maximum profit that can be achieved next period?
A. $26,200 B. $14,200 C. $24,997 D. $32,000
Contribution per labour hour
Product X= Contribution per unit of X/ Labour hours per unit of X= 10/2= 5/hour
Product Y= Contribution per unit of Y/ Labour hours per unit of Y= 9/1,5= 6/hour
Product Z= Contribution per unit of Z/ Labour hours per unit of Z= 12/2,5= 4,8/hour
 Ranking:
- Product X: 2
- Product Y: 1
- Product Z: 3
Allocation
Product Y: Total hours need to produce 1000 units of Y= 1000*1,5= 1500 hours
 Remain labour hours= 5000 – 1500= 3500 hours
Product X: Total hours need to produce 1000 units of X= 1000*2= 2000 hours
 Remain labour hours= 3500 – 2000= 1500 hours
Product Z: It can be produced maximum of: 1500/2,5= 600 units of Z
 Maximum profit= Contribution per unit of each product*Production of each product
= 9*1000+ 10*1000+ 12*600= 26200
 A
Câu 18. Taylor manufactures three components, X, Y and Z using the same machines for each and assembles
them into a single product. The budget for the next period calls for the production and assembly of 1,000 of
each component. The variable production cost per unit of the final product is as follows.
Variable cost per unit ($) Machine hour(s) per unit
X 10 2.0
Y 9 1.0
Z 12 2.5

Only 5,000 hours of machine time will be available during the period, and a subcontractor has quoted the
following unit prices for supplying components: X $14; Y $12; Z $18.
What should production mix be to maximize profit?

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 A. 1000 units of X, 1000 units of Y, 800 units of Z
B. 750 units of X, 1000 units of Y, 1000 units of Z
C. 1000 units of X, 500 units of Y, 1000 units of Z
D. None of the answers are correct
Extra variable cost of buying of product X= Variable cost of buying of product X- Variable cost of internal
manufacture of product X= 14 – 10= 4/unit
Extra variable cost of buying of product Y= Variable cost of buying of product Y- Variable cost of internal
manufacture of product Y= 12 – 9= 3/unit
Extra variable cost of buying of product X= Variable cost of buying of product Z- Variable cost of internal
manufacture of product Z= 18 – 12= 6/unit
 Extra cost of buying per machine hours saved of product X= 4/2= 2/hour
 Extra cost of buying per machine hours saved of product Y= 3/1= 3/hour
 Extra cost of buying per machine hours saved of product Z= 6/2,5= 2,4/hour
 Ranking:
- Product X: 3
- Product Y: 1
- Product Z: 2
Allocation
Product Y: Total hours need to produce 1000 units of Y= 1000*1= 1000 hours
 Remain labour hours= 5000 – 1000= 4000 hours
Product Z: Total hours need to produce 1000 units of Z= 1000*2,5= 2500 hours
 Remain labour hours= 4000 – 2500= 1500 hours
Product X: It can be produced maximum of: 1500/2= 750 units of X
 B

Câu 21. A company has recorded the following data in the two most recent periods.
Total costs of production Volume of 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
Y= a+ bx
13500= a+ b*700
18300= a+ b*1100
 a= 5100, b= 12
 C
Câu 24. A company has a budgeted material cost of $125,000 for the production of 25,000 units per month.
Each unit is budgeted to use 2 kg of material. The standard cost of material is $2.50 per kg.
Actual materials in the month cost $136,000 for 27,000 units and 53,000 kg were purchased and used.
What was the adverse material price variance?
A. $1,000 B. $3,500 C. $7,500 D. $11,000
Material price variance= (Standard price – Actual price)*Actual quantity of materials
= (2,5 – 136000/53000)*53000= -3500
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  3500 adverse
 B
Câu 25. Information from company A:
Number of units produced 2,200 2,000
Budget Actual
$ $
Direct materials 110,00 110,000
0
Direct labour 286,00 280,000
0
Variable overhead 132,00 120,000
0

The actual number of units produced was 2,000.

What was the total direct materials variance?
A. Nil B. $10,000 Adverse
C. $10,000 Favourable D. $11,000 Adverse
Total direct material variances= Standard total direct materials variance – Actual total direct materials
variance = 110000*2000/2200 – 110000= -10000
 10000 adverse
 B

IN TOP-DOWN BUDGET, top management prepare a budget with little or no input from
operating personnel, which is then imposed upon the employees who have to work to the
budgeted figures.

An adverse direct material cost variance can be occurred when

- A combination of an adverse material price variance and an adverse material usage variance
- A combination of an adverse material price variance and an favourable material usage variance
- A combination of an favourable material price variance and an adverse material usage variance

Because there are 9 objectives of budgeting, include:

- Compel planning
- Coordinate activities
- Authorisation
- A control system
- Motivations
- Ideas and plans communication
- Resources allocation
- Responsibility accounting framework
- Performance evaluation
 So Expansion is not an objective of budgeting => C
Câu 22. Which of the following are disadvantages of a ‘bottom-up’ style of budgeting?
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(i) Consume more time.
(ii) May cause managers to introduce budget slack.
(iii) Morale and motivation is improved.
(iv) Changes implemented by senior managers may cause dissatisfaction.
A. (i) and (ii) only B. (ii) and (iii) only
C. (i), (ii) and (iv) only D. (i), (ii), (iii) and (iv)
Because:
(I), (II) are two of disadvantages of a “bottom-up” style of budgeting
(III) is an advantages of a “bottom-up” style of budgeting
(IV) is a disadvantages of a “top-down” style of budgeting
 A

Câu 23. Which of the following would help to explain a favourable direct labour efficiency variance?
(i) Employees were of a lower skill level than specified in the standard
(ii) Better quality material was easier to process
(iii) Suggestions for improved working methods were implemented during the period
A. (i), (ii) and (iii) B. (i) and (ii) only
C. (ii) and (iii) only
Because:
Labour efficiency variance= (Standard labour hours for actual output – Actual labour hours)* Standard rate
If employees were of a lower skill level than specified in the standard, it needs take it more hours of actual
labour hours than standard labour hours for actual output. From that, it causes the adverse direct labour
efficiency variance
If better quality material was easier to process, it needs take it less hours of actual labour hours than standard
labour hours for actual output. From that, it causes the favourable direct labour efficiency variance
If suggestions for improved working methods were implemented during the period, it will improve the
efficiency through need less hours of actual labour hours than standard labour hours for actual output. From
that, it causes the favourable direct labour efficiency variance
 C
Câu 19. Which of the following is not an example of a limiting factor?
A. Sales demand B. Materials
C. Profit D. Machine capacity
Because:
Sales demand is a liming factor because it depends on the consumption of customers
Material is a liming factor because it depends on the financial position or material supply to purchase available
material for production
Machine capacity is a liming factor because it depends on the hours to be produced a unit of product
Profit is not a limiting factor because it is not limit the activity of an entity
 C
Câu 20. Which of the following statements relating to budgets is correct?
A. A budget covers periods longer than one year and is used for strategic planning.
B. A budget manual will contain instructions governing the preparation of budgets.
C. A budget is usually prepared by the shareholders of a company.
D. The budget committee is responsible for the preparation of functional budgets.
A,C,D are false, because:

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A budget is set within the framework of the long term or strategic plan but is not itself used for strategic
planning. It acts as one step towards the achievement of the long term or strategic plan.
The budget committee is responsible for coordinating the preparation and administration of budgets but not for
actually preparing the individual functional budgets.
Shareholders (unless also managers) would not usually be involved in budget preparation.
 B