MTQ Question Bank - Ibrahim Sameer

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ACCA – Management Accounting (F2)MTQQuestionBankIbrahim Sameeribrahimsameer@hotmail.com

MTQ Question Bank 2015PreferenceAlhamdulillah!In the name of Allah, most benevolent, ever merciful. All praise to be Allah, Lord of all theworlds, giving me the forte, new ideas and forbearance from the commencement until thecompletion of this book.Management accounting combines accounting, finance and management with the leading edgetechniques needed to drive successful businesses. Management accountants normally advisemanagers about the financial implications of projects, explain the financial consequences ofbusiness decisions, formulate business strategy, monitor spending and financial control, conductinternal business audits, explain the impact of the competitive landscape, and bring a high levelof professionalism and integrity to business.This book “MTQ Question Bank” is prepared for the syllabus requirements of ACCA – F2. Thecore intention of this book is to provide the students the comprehensive theory & practicequestion for students.Complete care has been taken to make the book error free. However, mistakes might have creptin advertently. Readers finding any errors with regards to accounting treatment or calculationsare requested to bring to my notice, for enabling me to rectify them in my future edition.Like most text book, this book has also drawn from the works of a large number of researchersand authors in the field of finance. My compilation of this book has also been influenced by anumber of standard and popular text books in the field. A number of problems, Illustrations andexercised in the book have been drawn from or are based on the examinations of universities andmanagement institute around the globe as well as the public examinations of the professionalbodies such as ACCA (UK), CIMA (UK), CPA (Irelands), CA (India) & ICWA (India).Good Luck for your ExamIbrahim Sameer1Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 12Ibrahim SameerACCA (Management Accounting – F2)

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MTQ Question Bank 20154Ibrahim SameerACCA (Management Accounting – F2)

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MTQ Question Bank 2015Question 16The single product manufactured by Allegrop Co requires 2.5 kg of a single raw material per unitof product. The material costs 9.00 per kg.Budgets are being prepared and the following additional information is available:(1) Budgeted sales for the next three periods are:Period 138,600unitsPeriod 226,500unitsPeriod 332,100units(2) Opening inventory of finished goods in each period is budgeted to be 25% of the budgetedsales demand in that period.(3) Opening inventory of raw material in each period is budgeted to be one third of thebudgeted material usage in that period.1 markTask 1Calculate the budgeted inventory of finished goods at the beginning of Period 1.units2 marksTask 2Calculate the budgeted production volume of the product in Period 2.units3 marksTask 3If the budgeted production in Period 3 is 31,600 units and in Period 4 is 28,900 units:What are the budgeted purchases of the rawmaterial in Period 3?What is the budgeted cost of the rawmaterial usage requirement in Period 4?15Ibrahim Sameerkg ACCA (Management Accounting – F2)

MTQ Question Bank 20154 marksTasks 4 and 5It is possible that raw material availability will be restricted to 75,000 kg per period. If thissituation arises, 75,000 kg of the material will be purchased and used in each period. Any salesdemand not satisfied in a period would be lost.2 marksTask 4Assume that the restriction on raw material supply occurs throughout the budget periodand that there would be no inventory of raw material or finished goods at the beginning ofPeriod 1. In this circumstance:What would be the finished goods inventory at the end of Period 2?units2 marksTask 5Which of the following may enable Allegrop Co to increase output?(1)(2)(3)(4)Introduce a perpetual inventory systemIntroduce continuous stocktakingUse raw material more efficientlyTake advantage of settlement discount1 and 31, 2 and 43 only2, 3 and 416Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 17BackgroundKidling Co uses a standard marginal costing system for cost control of its single product. Thestandard cost card for the product is: perunitDirect material 2.5 kg at 12.60 per kg31.50Direct labour22.402 hours at 11.20 per hourVariable production overhead8.8062.70Fixed production overheads are budgeted at 160,200 per month.Actual results for the month just ended included:Production6,200 unitsDirect materials15,240 kg purchased and used at a total cost of 195,920Direct labour12,590 hours workedVariable productionoverhead 52,820Fixed productionoverhead 158,6708 marksTask 1Calculate the following variances:Direct material price Direct material usage ( A/F)Direct labour efficiency ( A/F)Total variable production overhead ( A/F)Fixed production overheadexpenditure ( A/F)17Ibrahim Sameer( A/F)ACCA (Management Accounting – F2)

MTQ Question Bank 20152 marksTask 2The direct labour rate variance in the month just ended was 1,908 favourable.What was the total direct labour cost in the month? 283,924 139,100 142,916 280,10818Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 18BackgroundThe following information, for the year to 31 December 20X9, is available for Fun Co whichoperates in the toys and games industry. '000Sales7,660Gross profit1,200Operating profitCapital employed5903,330Current assets400The cost of capital of Fun Co is 12% per annum.Fun Co sold 350,000 units in the year ended 31 December 20X9. Total sales for the toys andgames industry for the year were 61,280,000.6 marksTask 1Calculate the following performance measures for Fun Co for the year ended 31 December20X9:Operating profit margin (to one decimal place)%Asset turnover (to one decimal place)timesReturn on investment (to one decimal place)%Residual income (to nearest '000)Market share (to one decimal place) '000%2 marksTask 2Return on investment (ROI) and residual income (RI) are both measures of investmentperformance.Does each of the following statements describe a feature of ROI only, RI only, both ROIand RI or neither of the two measures?19Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015ROI RIBothNeitheronlyonly.Based on profit rather than cash flowProvide(s) a relative measure of investment performanceFacilitates the comparison of performance of business units of differentsizeEnsure(s) that managers will select investment projects with positive NPV2 marksTask 3An analyst has calculated the following ratios for Fun Co for comparison with the toys andgames industry average.Toys and gamesFun Coindustry averageCurrent ratio1.4:11.2:1Gearing55%30%650.8:10.8:1Interest coverAcid testComplete the following commentary on Fun Co's performance relative to the industryaverage.Fun Co's liquidity is . (Worse/Better) than the industry average.Its capital gearing is . (riskier/safer) than the industry average.Its ability to service its loans is . (Worse/Better) than the industry average, which couldmean that Fun Co is . (lower/higher) having a level of profitability than the industryaverage.20Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 19Dancer Co wishes to buy a new packaging machine. Two alternatives are available; Machine Aand Machine B. Both have an expected life of three years. Dancer Co's management accountanthas begun to prepare the following spreadsheet to evaluate the two machines but he has not yetcompleted it. The data entered to date is correct.Machine B has a purchase cost of 10,000 and an expected scrap value in three years time of 4,000. It will generate a contribution of 7,000 per annum before incurring productionoverheads (including straight line depreciation) of 3,000 per year. In addition maintenance costsof 1,200 per year will be payable each year in advance. All costs and revenues, apart from thepurchase cost and maintenance costs may be assumed to occur at the end of the year.Dancer Co's cost of capital is 10% per year. In the spreadsheet, t0 represents the date of theinitial investment, t1 represents the first anniversary of this date etc.6 marksTask 1What is the net present value (NPV) ofMachine A (to the nearest )? What is the non-discounted payback periodof Machine A (to the nearest one decimalplace)?YearsWhat value should be entered in cell C10? What value should be entered in cell B11? Task 24 marksDoes each of the following advantages apply to the NPV method, the non-discountedpayback method, both of these methods or neither of these methods?21Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015NonBoth NeitherNPV discountedmethods methodpayback.It is cash flow basedIt takes into account the time value of moneyIt considers the effect on reported profitsIt selects projects that quickly recoup their initial investmentQuestion 20Product A is one of the products that are manufactured by a company. The following direct coststandards were set, for each batch of 50 units of Product A, for the period just ended:Materials: 10 kg of Material X at 17.50 per kg5 litres of Material Y at 9.20 per litreLabour:20 hours at 12.50 per hourVariable production overheads were absorbed at a standard rate of 3.70 per direct labour hour.Fixed production overheads were absorbed at a standard rate per machine hour using thefollowing budgeted data for the factory:Budgeted fixed production overheads 51,000Budgeted machine hours1,700Each batch of Product A requires 8 machine hours.40 batches of Product A were manufactured in the period just ended and the following directresources were used:Material X416 kgMaterial Y195 litresLabour838 hours6 marksTask 1What was the standard total variable production cost perunit of Product A (to two decimal places)?22Ibrahim Sameer ACCA (Management Accounting – F2)

MTQ Question Bank 2015What was the standard fixed production overhead cost per unit of Product A (to two decimal places)?What was the labour efficiency variance?(F/A) 2 marksTask 2Do each of the following fixed production overhead variances occur in a standard marginalcosting system?.ExpenditureEfficiencyCapacityVolumeTask 3YesNo2 marksWhich of the following variances is/are required in order to reconcile the budgeted profitfor a period with the standard profit on actual sales for the same period?(1) Sales volume revenue variance(2) Selling price variance(3) Sales volume profit variance(4) Total cost variance2, 3 and 43 only1, 2 and 41 only23Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 21Donner Co operates for 365 days per year and makes all of its sales on credit. A summary of itscurrent financial information is given below.Summarised statement of profit or lossRevenue '000150,000Cost of sales60,000Operating expenses50,000Operating profit40,000Finance charges12,000Profit before tax28,000Summarised statement of financial position '000Non current assets60,000Current assets (all receivables)35,00095,000Ordinary share capital15,000Reserves30,00045,000Long term liabilities (5% bank loan)30,000Current liabilities20,00095,000Task 16 marksCalculate the following based upon Donner Co's summarised financial information. Allfigures should be to one decimal place.Return on capital employed (ROCE)%Asset turnover ratio (based upon capitalemployed)timesReceivables daysdaysCapital gearing (debt to equity)%24Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Interest cover ratiotimes4 marksTask 2The performance of Donner Co's closest rival, Competitor A, together with the industry averagein their sector is given below.Competitor AIndustry Average35.040.0Asset turnover ratio based upon capital employed2.03.0Receivables (days)706575.050.0Interest cover ratio2.05.0Current ratio1.52.0ROCE (%)Capital gearing (debt to equity) (%)Based on the figures above, are the statements about Competitor A true or false?.Its liquidity position is worse than the industry averageTrue FalseIt has a smaller operating profit margin than the industry averageIf its operating profit were 30% lower it would make a net lossIts capital gearing is riskier than the industry average25Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 22BackgroundBlitzen Co manufactures and sells a single product. It is preparing budgets for the three monthperiod ending 31 December 20X5. The budget is virtually complete and the remaining task is toprepare the budgeted statement of financial position as at 31 December 20X5. Sales of theproduct and purchases of materials are all made on credit terms. There were no purchases ordisposals of non-current assets in the period to 31 December 20X5. Entries marked 'n/a' are yetto be calculated. The following data is available:Statement of financial position at 30September 20X5 Budgeted statement of financial position at 31December 20X5 Assets AssetsNon-current assets (net)10,000Current assetsNon-current assets (net)n/aCurrent assetsRaw materialinventory4,000Raw materialinventoryTrade receivables3,000Trade ty and liabilitiesOrdinary shareholdersfundsEquity and liabilities16,000Current liabilitiesTrade payablesOrdinary shareholdersfunds19,500Current liabilities2,000Trade payablesn/a18,000Budgeted statement of profit or loss for thequarter ending 31 December 20X526Ibrahim SameerCash budget for the quarter ending 31December 20X5ACCA (Management Accounting – F2)

MTQ Question Bank 2015 Sales25,000Receipts fromcustomersDirect materials14,000PaymentsDirect wages6,000MaterialsDepreciation1,500Wages6,000Net profit/(loss)3,500Net cash inflow5,00023,00012,0007 marksTask 1What figure should be included in the budgeted statement of financial position as at 31December 20X5 for each of the following items?Non-current assets Receivables Cash Payables Task 22 marksBlitzen Co is about to start work on budgets for 20X6. One kg of direct material A is required tomake four units of its product. Each unit of product also requires three kg of material B and twohours of direct labour. Demand for the product and the supply of material A is unlimited, butonly 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?Direct material ASales demandDirect material BDirect labourTask 327Ibrahim Sameer1 markACCA (Management Accounting – F2)

MTQ Question Bank 2015What would be the order of budget preparation for a manufacturing company who'sprincipal budget factor was sales demand?Purchases budget, production budget, sales budgetSales budget, purchases budget, production budgetSales budget, production budget, purchases budget28Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 23BackgroundRudolph Co uses a standard marginal costing system to control the costs and revenues of itsonly product. The following spreadsheet shows a standard cost-based operating statement forthe month of July. Entries for some cells have been deliberately omitted.2 marksTask 1Complete the following cells with the correct text label.Cell A4 . (sales volume contribution variance/ sales price variance/ sales turnovervariance)Cell A15 . (Standard profit/ Actual contribution/ Actual variable cost)2 marksTask 2Which of the following will calculate correctly the value in cell D18?29Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015 D15 D16 D17 D7-D14-D16 D17 D7-D14 D17 sum(D3:D17)2 marksTask 3Which of the following is a possible explanation of the variable cost variances?A new expensive material was easier to work withA new cheap material was more difficult to work withA new expensive material resulted in less wastageA new cheap material was easier to work with4 marksTask 4Rudolph Co is now considering changing the costing system from standard marginal costing tostandard absorption costing system. You are given further details that were used to prepare theJuly operating statement as follows:(1) Budgeted sales and production were 5,000 units(2) Actual sales and production were 4,900 unitsIf Rudolph Co had used standard absorption costing in the month of July, what wouldhave been the value of the following:Fixed overhead volume varianceadverseSales volume varianceadverse30Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Question 24BackgroundVixen Co is an internet based retailer of books and music. It believes that the factors critical tothe 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 returnsResults for the most recent year are given below:Website visits5,000,000Value of customer orders placed 30,000,000Average value per order placed 20Average value of undelivered orders at the end of each day 411,000Number of orders returned150,000Number of complaints about returns process1,000Customers place a maximum of one order per visit to the website. The company operates for365 days per year.6 marksTask 1Calculate the following for Vixen Co for the most recent year.The average number of website visits per day(to the nearest whole number)visitsThe conversion rate of website visits into orders(to the nearest whole number)%The average delivery time per order (to thenearest day)daysThe percentage of customer returns madewithout complaint (to the nearest wholenumber)%31Ibrahim SameerACCA (Management Accounting – F2)

MTQ Question Bank 2015Task 22 marksThe performance indicators calculated above are part of Vixen Co's balanced scorecardperformance monitoring system. They measure process efficiency and customer satisfaction.Which TWO of the following are also balanced scorecard perspectives?EffectivenessGrowthFinancial successEconomy2 marksTask 3Which of the following statements about balanced scorecard approach to performancemeasurement is TRUE?It is part of the benchmarking processIt ignores cause and effect relationships between performance measuresIt includes financial and non-financial indicatorsIt must have an equal number of performance measures in each perspective32Ibrahim SameerACCA (Management Accounting – F2)

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MTQ Question Bank 2015 1 Ibrahim Sameer ACCA ( Management Accounting – F2) Preference Alhamdulillah! In the name of Allah, most benevolent, ever merciful. All praise to be Allah, Lord of all the worlds, giving me the forte,

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