Question 1

Which of the following statements is TRUE about the activity based costing system when compared to absorption costing method?

Options :

A : ABC is easier to administer than an absorption costing system

B : ABC will be less detailed than an absorption costing system

C : ABC will provide more accurate overhead allocation than absorption costing

D : ABC will cost less to administer than an absorption costing system

Answer: C

Question 2

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)

Answer: A,B

Question 3

The following summarised financial statements have been prepared by JNM's North subsidiary for the year just ended:

Calculate the North subsidiary's Residual Income, assuming that JNM's cost of capital is 10%.
Give your answer to the nearest $ million.

Options :

A : A

Answer: A

Question 4

Which of the following statements are correct with regard to responsibility centres?
Select ALL that apply.

Options :

A : Revenue centre managers have a lower level of decision-making authority than profit centre managers.

B : Revenue centre managers and profit centre managers are accountable for controllable costs only.

C : Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.

D : Investment centre managers have a higher level of managerial authority than profit centre managers.

E : Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.

Answer: A,C,D

Question 5

A company is classifying its quality costs to prepare a quality cost report. Which of the following are conformance costs?
Select ALL that apply.

Options :

A : Internal Failure Costs

B : External Failure Costs

C : Prevention Costs

D : Appraisal Costs

Answer: C,D

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