Paper MA

Fundamentals Level – Knowledge Module

Management
Accounting

Mock Exam 5

Friday 11th June 2021

Time allowed: 2 hours

This paper is divided into two sections:

Section A – ALL 35 questions are compulsory and
MUST be attempted
Section B – ALL THREE questions are compulsory and
MUST be attempted

Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

SHOBA 0704622229 1
Formula Sheet

SHOBA 0704622229 2
 Present Value Table
−n
Present value of 1, i.e. (1 + r)
Where r = discount rate
n = number of periods until payment
Discount rate (r)
Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826
3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751
4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683
5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621

6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564
7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513
8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467
9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424
10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386

11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350
12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319
13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290
14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263
15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239

Discount rate (r)

Periods
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402

6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162

11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065

SHOBA 0704622229 3
 Annuity table
-n
1 – (1 + r)
Present value of an annuity of 1 i.e
r
Where r = discount rate
n =number of periods
Discount rate (r)
Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170
5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791

6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868
8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335
9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759
10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145

11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 8.495
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814
13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103
14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367
15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606

Discount rate (r)

Periods
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106
4 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589
5 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991

6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326
7 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
9 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192

11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 6.492 6.194 5.918 5.660 5.421 5.197 4.968 4.793 4.611 4.439
13 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
14 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
15 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675

SHOBA 0704622229 4
To find the area under the normal curve between the mean and a point Z standard deviations
above the mean, use the table below. The corresponding area for a point Z standard deviations
below the mean can be found through using symmetry.

STANDARD NORMAL DISTRIBUTION TABLE

0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879

0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389

1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319

1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767

2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857
2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936

2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
2.7 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974
2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986

3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990

SHOBA 0704622229 5
SECTION A
1. In which of the following industries is process costing used
(1) Road construction
(2) Oil Refining
A 1 only B 2 only C Both 1 and 2 D None

2. An analysis of costs has found that fixed costs are $40,000 per month and variable costs are
$4.5 per unit. If y = total cost per month in $’000, and x = output in ‘000 units, then which of
the following equations is correct?
A y = 40 + 0.0045x B y = 40 + 4.5x C y = 4.5 + 40x D y = 40x + 4.5x

3. Which TWO of the following statements about spreadsheets are correct?

A A ‘cell/ is the intersection of a row and a column
B A ‘window’ is a view of a whole spreadsheet
C A ‘spreadsheet’ is a package that is used to analyse and manipulate data
D A ‘worksheet’ is a collection of workbooks

4. Which of the following statements about budgets are correct?

(1) Using flexible budgets to calculate variances eliminates the effects of activity changes
(2) Fixed budgets can only be used in organisations that use absorption costing
(3) Flexible budgets facilitate the isolation of variances in price, cost and efficiency
A 1 only B 2 and 3 only C 1, 2 and 3 D 1 and 3 only

5. One unit of a product requires three kg of material and the expected cost of materials is $4
per kg. Labour will be paid at $12 per hour and each employee will make four units per hour.
Budgeted fixed overheads are $800,000 per period and are absorbed using budgeted labour
hours, which are 40,000. What is the standard total absorption cost per unit?

6. Company Z budgeted to sell and produce 6,400 units last month. Budgeted sales price per unit
was $18 and budgeted costs per unit was $12. During the month, the company sold and
produced the same number of units as budgeted. However, costs were $1 lower than budget and
sales price was $0.5 lower than budget.
What was the overall favourable variance between budgeted and actual profit? $..................

7. A company uses standard marginal costing to monitor its performance in a period actual profit
was $142,000. Budgeted fixed overheads were $50,000 and the fixed overhead expenditure
variance was $3,000 adverse. What was the actual contribution in the period? $.......................

SHOBA 0704622229 6
8. Which of the following statements about life cycle costing true?
(1) It accumulates costs that are attributable to a product over its whole life
(2) It involves determining the cost of a new product by subtracting a desired profit margin
from a competitive price
A 1 only B 2 only C Both 1 and 2 D None

9. A firm uses Job costing and charges overheads to Jobs using departmental overhead
absorption rates. The following is the record of the time taken on a Job in each of the two
departments:
Department Direct labour Machine time
Assembly 40 hours 8 hours
Machining 30 hours 24 hours
An absorption rate of $20 per direct labour hour is charged to Jobs for work carried out in the
assembly department, and $50 per machine hour is charged to jobs for work carried out in the
machining department.
What is the total overhead cost charged to the job? $..................................

10. Which of the following statements referring to the measurement of the performance of
responsibility centre managers is / are true?
(1) Variance analysis is a suitable measure for cost and revenue centre managers
(2) Return on capital employed is a suitable measure for profit centre managers
A 1 only B 2 only C Both 1 and 2 D None

11. Budgeted overheads have been analysed as follows:

$
Indirect labour department A 40,000
Indirect labour department B 32,000
Rent and rates (total) 88,000
Administration costs (total) 60,000
220,000
Adminstration costs are to be shared equally by departments A and B. Other information is as
follows:
Department A Department B
Floor area (m2) 12,000 8,000
Number of employees 160 40
What is the total overhead cost of department A?
A $100,800 B $122,800 C $140,800 D $82,800

SHOBA 0704622229 7
12. Which of the following are key elements of a mission statement?
(1) Purpose
(2) Values and Culture
(3) Organisation structure
(4) Strategy
A 2, 3 and 4 B 1, 3 and 4 C 1, 3 and 3 D 1, 2 and 4

13. The data below shows the frequency distribution for the number of products returned in the
last month:
Frequency (f) 10 20
Products returned (x) 4 7
Which TWO of the following equations are correct?
A Ʃfx²/Ʃf = 38.00 C (Ʃfx/Ʃf)² = 23.55
B (Ʃfx/Ʃf)² = 36.00 D Ʃfx²/Ʃf = 1,080.00

14. What is the correct sequence for the following stages in the budgeting process?
(1) Identify principle budget factor
(2) Prepare cost and revenue budgets
(3) Form budget committee
(4) Produce master budget
A 1, 2, 3, 4 B 1, 3, 2, 4 C 3, 1, 2, 4 D 3, 1, 4, 2

15. Consider the following incomplete statements:

(1) Assesses the profitability of products and services
(2) Provides a financial information system for management
(3) Follows all accounting standards and company law
Which statement(s) is/are describing aspects of cost and management accounting?
A 1 and 2 only B 1 only C 1, 2 and 3 D 2 and 3 only

16. Which TWO of the following are most likely to be classified as measures of process
efficiency within a balanced scorecard approach to performance measurement of a
manufacturing company?
A Quality rejects as a percentage of total production
B Training days per employee
C Standard hours of output compared with actual hours worked
D Percentage of turnover attributable to new products

SHOBA 0704622229 8
17. An investment will yield a cash inflow of $500 per year forever, starting in one year’s time,
and a cash outflow of $200 each year for ten years, starting in one year’s time
At an interest rate of 10% per annum, what is the present value of the investment’s net cash
flows (to the nearest $100)?
A $5,000 B $3,800 C $3,600 D $1,800

18. What is the BEST description of an organisation’s mission statement?

A An outline of the reason for the organisation’s existence
B An evaluation of alternative courses of corporate action
C A qualification of the organisation’s corporate objectives
D A statement of profit targets for the coming year

19. The following statements relate to value analysis:

(1) Value analysis aims to eliminate unnecessary costs
(2) Value analysis should not result in the reduction of a product’s functionality
Which statements are correct?
A Neither 1 nor 2 B 2 only C 1 only D Both 1 and 2

20. HM Co operates a process costing system. 1,000 units of a product remained incomplete in a
process at the end of a period. The closing work–in–progress (WIP) was 70% complete in respect
of conversion costs which were $3 per equivalent unit in the period.
What was the amount of conversion costs included in the valuation of the closing WIP? $.......

21. Which TWO of the following statements are correct regarding a raw materials purchases
budget?
A Budgeted purchases would be reduced by a planned increase in raw materials inventory
B Budgeted purchases would be increases by a planned increase in raw materials inventory
C Budgeted purchases would be reduced by a planned reduced in raw materials inventory
D Budgeted purchases would be reduced by a planned increase in raw materials inventory

22. In relation to charts and graphs, which of the following statements are correct?
(1) On a scatter diagram the independent variable should be represented on the y-axis
(2) Line graphs can be used to show the relationship between two variables
(3) On a pie chart the total of all the sectors should be 360 degrees
(4) Multiple bar charts illustrate the comparative sizes of the variables more clearly than
component bar charts
A 2, 3 and 4 only B 1, 3 and 4 only C 1, 2 and 3 only D 1, 2, 3, and 4

SHOBA 0704622229 9
23. The following information is available concerning three production departments (X, Y and Z),
which use both labour and machines:
X Y Z Total
Budgeted overheads $34,000 $46,600 $22,000 $102,600
Budgeted direct labour hours 850 30 20 900
Budgeted machine hours 50 920 840 1,810
What is the MOST appropriate absorption rate for department X?
A $114 per labour hour C $680 per machine hour
B $57 per machine hour D $40 per labour hour

24. A firm uses standard costing. Labour cost variances for the period are as follows:
Efficiency Adverse
Rate Favourable
Which TWO of the following explanations are consistent with these variances?
A The labour used was more skilled than standard
B The quality of materials used was worse than standard
C The quality of the maintenance of production machinery was better than expected
D Wage rates were lower than expected

25. The table shows the annual salary range for the 15 employees of knots Co:
Annual Salary Range Number of staff
$0 to $20,000 9
$20,000 to $40,000 4
$40,000 to $80,000 2
What is the mean annual salary for an employee of knots Co (to the nearest $’000)? $...........

26. Which TWO of the following statements are true of the top down approach to
budgeting?
A Lower level managers may lack ownership of the budget
B The method is also known as participative budgeting
C Budgets are set by high level managers only
D Employees are likely to be motivated by the budget

SHOBA 0704622229 10
27. A firm monitors labour activity. The following information relates to last period:
Production volume ratio 96%
Budgeted standard hours 20,000
Actual hours 24,000
What is the labour efficiency ratio for last period?
A 83.33% B 80.00% C 120.00% D 125.00%

28. The profitability measure return on capital employed is calculated by using the following
formula:
Operating profit X 100
Capital employed
For a company that has some long term borrowings, what does the ‘Capital employed’
element of the formula consist of?
A Shareholder’s funds + non–current liabilities
B Ordinary share capital
C Shareholder’s funds + non–current assets
D Total equity less reserves

29. A firm monitors labour turnover. At the beginning of the year staff numbers were 1,600.
During the year 860 staff left and 260 of these were replaced.
What is the labour turnover rate for the year?
A 26.00% B 20.00% C 16.25% D 10.00%

30. An accountant wishes to monitor daily movements in the share price of a direct competitor.
Which of the following sources of information should the accountant use?
A The financial press C Trade associates
B Competitor’s financial accounts D Government agencies

31. Which TWO of the following documents are used to record the receipt or issue of
material inventories into and out of stores?
A Materials requisition C Materials transfer note
B Goods received note D Purchase order

SHOBA 0704622229 11
32. The following statement set out to explain why the profit for a period calculated under
marginal costing may be greater than the profit calculated under absorption costing. Are
they true or false?
(1) Fixed production overhead is over – absorbed
(2) Sales volume is less than productive volume
A 1 only B 2 only C Both 1 and 2 D None

33. Regression analysis can be used to determine total costs at different activity levels.
The following equation is used to calculate these costs.
y = a + bx
Which TWO of the following are correct definitions for the letters included in the equation?
A a = total fixed cost C y = activity level
B b = variable cost per unit of activity D x = gradient of the line

34. A firm monitors labour activity. Information for last period is as follows:
Production budget (in standard units) 5,000
Actual production (in standard units) 6,000
Actual hours worked 75,000
Standard labour hours per unit 12
What was the labour capacity ratio in the last period?
A 96.0% B 125.0% C 120.0% D 80.0%

35. In a given period the net profit of a company was the same under both marginal and
absorption costing. Which of the following could explain this?
A Production and sales volumes were equal
B There was no under or over absorption of fixed production overheads
C Fixed production overhead expenditure was in line with budget
D Both the opening inventory and all the production were sold

SHOBA 0704622229 12
SECTION B
36. A company is undertaking an investment appraisal exercise on a proposed new project. It
uses both the discounted payback period as well as net present value of for project appraisal, and
applies a cost of capital of 8%. The following information has been collected for the new project:
(1) The project is expected to generate sales of 380,000 in year 1, increasing at 6% per

annum cumulatively for a further 3 years.

(2) The project will require machinery which will be purchased at the start of the project for
$620,000, and will be sold at the end of the fourth year for $80,000. The machinery will be
depreciated at a straight line rate of 20% per year.

(3) The project will be financed by borrowing $620,000 at an interest rate of 8% per annum.
The balance outstanding on the loan at the start of the second year will be $460,000.

Assume all cash flows take place at year ends, unless informed otherwise.
Task 1 (4 marks)
a) What is the cash flow from sales in year 3? $..........................................
b) What is the cash flow associated with machinery at the end of the fourth year?

$..............

c) What financing interest cost should be included in project cash flows at the end of
the second year?

A $0 B $36,800 C $49,600
Task 2 (4.5 marks)
The following net cash flows have been calculated for the project:
Year Cash flow ($)
0 (620,000)
1 160,000
2 280,000
3 380,000
4 240,000
All cash flows, apart from the initial investment which occurs at the beginning of the project’s life,
should be assumed to take place at year ends.
What is the net present value? $.......................................
What is the discounted paypack …………………… years ……………………..months
Task 3 (1.5 marks)
Which of the following is TRUE for the calculation of a discounted payback period?
(i) Decision is based on operational cash flows only
(ii) It ignores all post payback cash flows
(iii) It is consistent with long term profit maximization
A 1, 2 and 3 B 2 only C 3 only D 1 only

SHOBA 0704622229 13
37. Oak Co uses standard absorption costing to monitor its performance. A standard cost
operating statement for period 8 for one of its products, Ash, is given below together with a
standard cost card. Some figures have been deliberately omitted and are marked with ???.
Standard cost operating statement
Period 8 $ Fav / Adv
Budgeted profit ???
Sales volume profit variance 5,200 Adv
Standard profit on actual sales 234,000
Direct labour rate variance ??? ???
Direct labour efficiency variance ???? ???
Direct materials price variance 2,000 Fav
Direct materials usage variance 3,000 Adv
Fixed overhead expenditure variance 2,000 Fav
Fixed overhead volume variance 4,500 Adv
Standard cost card
Standard cost per unit ($)
Sales price 100
Direct labour : 3 hours @ $8 per hour 24
Direct material : 5kg @ $7 per kg 35
Fixed overhead : 3 hours @ $5 per hour 15
Standard profit 26
9,000 units of Ash were produced and sold in period 8. 26,000 labour hours were used at a cost
of $8.50 per hour.
(a) What is the direct labour rate variance for period 8?
A $13,500 adverse B $13,500 favourable C $13,000 favourable D $13,500 adverse

(b) What is the direct labour efficiency variance for period? $ ……………… Fav/Adv

(c) What was the budgeted sales volume units for period 8?
A 9,200 B 8,800 C 9,568 D 9,152

(d) What was the budgeted production volume units for period 8? …………….. units

(e) Which of the following would explain the direct material variances for period 8?
A Production volume was higher than expected
B Production volume was lower than expected
C A lower quality material was used
D A higher quality material was used

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38.
Measures used to assess the performance of the divisions of Parson Co. a manufacturer, include:
(1) Return on Investment (ROI)
(2) Residual Income (RI)
(3) Asset turnover (based on vapital employed)
(4) Operating profit margin
Data for division A of Parson Co for the year just ended include:
$m
Non-current assets 64.5
Net current assets 15.4
Sales 218.9
Operating profit 16.2
Loan interest 5.2
The cost of capital for divion A is 12% per annum. Parson Co uses operating profit to calculate
ROI and RI.

Task 1 (8 marks)
Return on investment (to one decimal place) ………………………..%
Residual income (to one decimal place) $ ……………………. Million
Asset turnover (to two decimal place) ………………………… times
Operating profit margin (to one decimal place) ………………………..%

Task 2 (2 marks)
Is each of the following disadvantages of ROI only, RI only or both ROI and RI as a measure
of divional performance?
ROI only RI only Both ROI and RI
A Based on accounting measures of profit and capital
employed which may be subject to manipulation
B Does not facilitate easy comparision between divisions of
different sizes

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