Question 1

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

Options :

A : They are future costs.

B : They are committed costs.

C : They are incremental costs.

D : They are unavoidable costs.

E : They are cash flows.

Answer: A,C

Question 2

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?

Options :

A : $ 2.10

B : $ 0.50

C : $ 1.40

D : $ 2.60

Answer: B

Question 3

A large company that sells a single product has many customers. The contribution per unit of the product is $40. Data for the company as a whole are given below.Using customer profitability analysis, what is the total annual profit for this customer?

Options :

A : $1,660,000

B : $1,780,000

C : $1,460,000

D : $2,340,000

Answer: A

Question 4

Division A is an investment centre with assets of $7.3 million. The following is an extract from the annual budget for division A:The cost of capital is 14%.Calculate the residual income for division A.

Options :

A : $808,000

B : $1,727,800

C : $358,000

D : $2,008,000

Answer: A

Question 5

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.

Answer: A,D

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