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Audit and Assurance Study Videos – 50% OFF – Promo Code : 50FIFTY – Quick Purchase

PPM 2-1

Question 01 (1 to 10)
Question 02 (11 to 20)
Question 03 (21 to 30)
Question 04 (31 to 40)
Question 05 (41 to 50)
Question 06 (51 to 60)
Question 07 (61 to 65)
Question 01 (1 to 10)

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  • Please read all instructions. When you are finished click ‘Next’ to move to the next screen.

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1 / 11

1. Are the following statements about environmental management accounting true or false?

A. Environmental management accounting systems typically make use of life cycle costing.

2 / 11

2. Which TWO of the following are not usually a characteristic of a modern manufacturing environment?

3 / 11

3. Which of the following statements are true regarding activity-based costing (ABC) and cost drivers?

(1) A cost driver is any factor that causes a change in the cost of an activity.

(2) For long-term variable overhead costs, the cost driver will be the volume of activity.

(3) Traditional absorption costing tends to under-allocate overhead costs to low-volume products.

4 / 11

4. A company produces a range of products and uses an absorption costing system.

Which TWO of the following are unlikely to be a consequence of the company switching to an activity based costing (ABC) system?

5 / 11

5. The following costs have arisen in relation to the production of a product:

  • Production costs
  • Planning and concept design costs
  • Distribution and customer service costs
  • Testing costs

In calculating the life cycle costs of a product, which of the above items would be included?

6 / 11

6. Are the following statements about material flow cost accounting (MFCA) true or false?

A. Material flow cost accounting should encourage management to focus on ways of achieving the same amount of finished output with less material input.

7 / 11

B. In material flow cost accounting, waste is treated as a negative product and given a cost.

8 / 11

7. In environmental costing, the future cost of cleaning up operations for a product or activity may be classified as which of the following?

9 / 11

8. Which of the following statements about target costing is NOT true?

10 / 11

9. ABC is felt to give a more useful product cost than classic absorption costing (with overheads absorbed on labour hours) if which of the following TWO apply?

11 / 11

10. Flow cost accounting is a technique which can be used to account for environmental costs. Inputs and outputs are measured through each individual process of production.

Which of the following is NOT a category used within flow cost accounting?

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Question 02 (11 to 20)

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Navigating between questions

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1 / 13

11. Different management accounting techniques can be used to account for environmental costs. One of these techniques involves analysing costs under three distinct categories: material, system, and delivery and disposal.

What is this technique known as?

2 / 13

12. Which of the following is a definition of the throughput accounting ratio?

3 / 13

13. When demand exceeds supply, which one of the following situations would increase the throughput accounting ratio?

4 / 13

14. A company which makes two products, Lilly and Lez, uses activity-based costing to absorb its overheads. It has recently identified a new overhead cost pool for inspection costs and has decided that the cost driver is the number of inspections.

The following information has been provided:

Total inspection costs $250,000

Lilly                                    Lez

Production volume (units)                                                                    2,500                                8,000

Machine hours per unit                                                                             1                                       1.5

Units per batch                                                                                          500                                  1,000

Inspections per batch                                                                                 4                                         1

What is the inspection cost per unit of product Lilly?

5 / 13

15. Which of the following statement(s) is/are true regarding activity-based costing?

(1) A cost pool is an activity which consumes resources and for which overhead costs are identified and allocated.

(2) An activity-based costing overhead absorption rate (OAR) is calculated in the same way as an absorption costing OAR, and will result in the same OAR being calculated for each cost pool.

6 / 13

16. One of the products manufactured by a company is Product Q, which sells for $40 per unit and has a material cost of $10 per unit and a direct labour cost of $7 per unit. The total direct labour budget for the year is 50,000 hours of labour time at a cost of $12 per hour. Factory overheads are $2,920,000 per year.

The company is considering the introduction of a system of throughput accounting. It has identified that machine time is the bottleneck in production. Product Q needs 0.01 hours of machine time per unit produced. The maximum capacity for machine time is 4,000 hours per year.

What is the throughput accounting ratio for Product Q (to two decimal places)?

7 / 13

17. A company makes products X and Y. It is experimenting with activity-based costing. Production set-up costs are $12,000; total production will be 20,000 units of each of products X and Y. Each run is 1,000 units of X or 5,000 units of Y.

Using activity-based costing, what is the set-up cost per unit of X? (Give your answer to the nearest cent.)

$  

8 / 13

18. Which TWO of the following statements about throughput accounting and the theory of constraints are true?

9 / 13

19. The Company Z manufactures two products, product Tina and Product Tuna. Both are produced in a very labour-intensive environment and use similar processes. Tina and Tuna differ by volume. Tuna is a high-volume product, while Tina is a low-volume product.

Details of product inputs, outputs and the costs of activities are as follows:

Direct labour           Annual output          Number of                    Number of

hours/unit                    (units)             purchase orders                 set-ups

Tina                                               5                             1,200                           75                                  40

Tuna                                             5                             12,000                          85                                  60

160                                100

Fixed overhead costs amount to a total of $420,000 and have been analysed as follows:

$

Volume-related                                                                   100,000

Purchasing related                                                              145,000

Set-up related                                                                      175,000

Using a traditional method of overhead absorption based on labour hours, what is the overhead              cost per unit for each unit of product Tina (to two decimal places)?

$  

10 / 13

20. Are the following statements about target costing true or false?

A. An effective way of reducing the projected cost of a new product is to simplify the design.

11 / 13

B. A risk with target costing is that cost reductions may affect the perceived value of the product.

12 / 13

C. The value of target costing depends on having reliable estimates of sales demand.

13 / 13

D. Target costing may be applied to services that are provided free of charge to customers, such as costs of call centre handling.

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Question 03 (21 to 30)

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1 / 10

21. The selling price of Product P is set at $550 for each unit and sales for the coming year are expected to be 800 units.

A return of 30% on the investment of $500,000 in Product P will be required in the coming year. What is the target cost for each unit of Product P (to two decimal places)?

$  

2 / 10

22. The following estimates have been produced for a new product with an expected life of four years.

Year 1               Year 2          Year 3          Year 4

Units made and sold                                                   5,000                10,000         25,000         10,000

$                          $                   $                  $

R&D costs                                                                0.9 million         0.3 million           –                   –

Marketing costs                                                     0.3 million         0.3 million    0.1 million   0.1 million

Production cost per unit                                             80                       40                  30                 30

Customer service cost per unit                                  20                       15                  10                  5

Disposal costs                                                                 –                        –                     –             0.2 million

What is the expected life cycle cost per unit (to two decimal places)?

$  

3 / 10

23. Which TWO of the following costs are likely to rise when just-in-time (JIT) manufacturing is introduced?

4 / 10

24. A company makes two products using the same type of materials and skilled workers. The following information is available:

 

Product A                  Product B

Budgeted volume (units)                                                                               1,000                          2,000

Material per unit ($)                                                                                         10                                20

Labour per unit ($)                                                                                             5                                 20

Fixed costs relating to material handling amount to $100,000. The cost driver for these costs is the volume of material purchased.

General fixed costs, absorbed based on labour hours, amount to $180,000.

Using activity-based costing, what is the total fixed overhead amount to be absorbed into each unit of product B (to the nearest whole $)?

5 / 10

25. Which of the following strategies would be an immediately acceptable method to reduce an identified cost gap?

6 / 10

26. A manufacturing company which produces a range of products has developed a budget for the life-cycle of a new product, M. The information in the following table relates exclusively to product M:

Lifetime total                  Per unit

Design costs                                                                                        $800,000

Direct manufacturing costs                                                                                                         $20

Depreciation costs                                                                             $500,000

Decommissioning costs                                                                     $20,000

Machine hours                                                                                                                                 4

Production and sales units                                                                 300,000

The company’s total fixed production overheads are budgeted to be $72 million each year and total machine hours are budgeted to be 96 million hours. The company absorbs overheads on a machine hour basis.

What is the budgeted life-cycle cost per unit for product M?

7 / 10

27. Which of the following techniques is NOT relevant to target costing?

8 / 10

28. The predicted selling price for a product has been set at $56 per unit. The desired mark-up on cost is 25% and the material cost for the product is estimated to be $16 before allowing for additional materials to allow for shrinkage of 20% (for every 10 kg of material going in only 8 kg comes out).

If labour is the only other cost and 2 hours are needed, what is the most the business can pay per hour if a cost gap is to be avoided?

The maximum rate per hour is (2 d.p)

$  

9 / 10

29. Which FOUR of the following are said to be benefits of life-cycle costing?

10 / 10

30. Which TWO of the following statements about the advantages of using Activity-based costing for Environmental Management Accounting are correct?

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Question 04 (31 to 40)

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Navigating between questions

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1 / 10

31. Accountants usually find it difficult to deal with environmental costs.

Which of the following is NOT a reason for this?

2 / 10

32. A company manufactures Product K, which sells for $50 per unit and has a material cost of $14 per unit and a direct labour cost of $10 per unit. The total direct labour budget for the year is 18,000 hours of labour time at a cost of $10 per hour. Factory overheads are $1,620,000 per year. The company has identified machine time as the bottleneck in production. Product K needs 0.05 hours of machine time per unit produced. The maximum capacity for machine time is 6,000 hours per year.

What is the throughput accounting ratio for Product K (to one decimal place)?

 

3 / 10

33. Which TWO of the following statements about activity based costing (ABC) are true?

4 / 10

34. Which TWO of the following statements about life cycle costing are true?

5 / 10

35. Which of the following defines the throughput accounting ratio?

6 / 10

36. Jimmy Ltd has recently introduced an activity-based costing (ABC) system. It manufactures three products, details of which are set out below:

Product:                                                                                       J                              K                              L

Budgeted annual production (units)                                100,000                  100,000                  50,000

Batch size (units)                                                                     100                           50                           25

Machine set-ups per batch                                                      3                              4                             6

Purchase orders per batch                                                       2                              1                             1

Processing time per unit (minutes)                                        2                               3                             3

Three cost pools have been identified. Their budgeted costs for the year ending 30 June 2003 are as follows:

Machine set-up costs – $150,000

Purchasing of materials – $70,000

Processing – $80,000

What is the budgeted machine set-up cost per unit of product K?

7 / 10

37. Optic Co is a firm of opticians. It provides a range of services to the public, such as eye tests and contact lens consultations, and has a separate dispensary selling glasses and contact lenses. Patients book appointments with an optician in advance.

A standard appointment is 30 minutes long, during which an optician will assess the patient’s specific requirements and provide them with the eye care services they need. After the appointment, patients are offered the chance to buy contact lenses or glasses from the dispensary.

Which of the following describes a characteristic of the services provided by an optician at Optic Co during a standard appointment?

8 / 10

38. Which of the following statements are true regarding the justification of the use of life cycle costing?

  1. The high costs of (for example) research, design and marketing in the early stages in a product’s life cycle necessitate a high initial selling price.
  2. Product costs are increasingly weighted to the start of a product’s life cycle, and to properly understand the profitability of a product these costs must be matched to the ultimate revenues.
  3. Product life cycles are becoming increasingly short. This means that the initial costs are an increasingly important component in the product’s overall costs.
  4. Traditional capital budgeting techniques do not attempt to minimise the costs or maximise the revenues over the product life cycle.

9 / 10

39. The following are all steps in the implementation of target costing:

  1. Calculate the target cost
  2. Calculate the estimated current cost of production
  3. Determine the required profit
  4. Decide on a selling price
  5. Calculate the target cost gap

Which of the following represent the correct order of steps if target costing is being used?

10 / 10

40. Which TWO of the following statements about activity based costing (ABC) are true?

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Question 05 (41 to 50)

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Navigating between questions

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1 / 11

41. Are the following statements about environmental cost accounting true or false?

A. Input/output analysis divides material flows within an organisation into three categories: material flows; system flows; and delivery and disposal flows.

2 / 11

B. The majority of environmental costs are already captured within a typical organisation’s accounting system. The difficulty lies in identifying them.

3 / 11

42. The following data refers to an energy drinks manufacturing company that passes its product through four processes and is currently operating at optimal capacity.

Process                                                       Washing                Filling               Capping                 Labelling

Time per dozen units                                 6 mins                 3 mins              1.5 mins                   2 mins

Machine hours available                           1,200                      700                     250                          450

 

Product data                                                      $ per unit

Selling price                                                             0.60

Direct material                                                        0.18

Direct labour                                                           0.02

Factory fixed cost                                                 $4,120

Which process is the bottleneck?

4 / 11

43. A company has a target mark up of 25% and sells into a competitive market where the market price is $120 per unit. The company’s current costs per unit are $46 for variable costs and $60 for fixed costs, and it has a budgeted output of 10,000 units.

What is the minimum production required to close the target cost gap?

5 / 11

44. Company G is about to start developing a new product for launch in its existing market. They have forecast sales of 20,000 units and the marketing department suggest a selling price of $43/unit. The company seeks to make a mark-up of 40% product cost. It is estimated that the lifetime costs of the product will be as follows:

  • Design and development costs $43,000.
  • Manufacturing costs $15/unit.
  • Plant decommissioning costs $30,000.

The company estimates that if it were to spend an additional $15,000 on design, manufacturing costs/unit could be reduced.

What is the life cycle cost per unit of the new product?

6 / 11

45. Which of the following statement(s) is/are true regarding life-cycle costing?

(1) Life cycle costing takes into account all costs incurred in a product life cycle with exception of sunk costs incurred on research and development.

(2) Life cycle costing ensures a profit is generated over the life of the product.

(3) Life cycle costing is most useful for products with an even weighting of costs over their life.

7 / 11

46. Emran Limited operates through an environment where products go through two processes and details of their capacity are below:

Process P

There are 8 machines operating at 90% capacity. Each machine produces 6 units per hour.

Process Q

There are 6 machines operating at 85% capacity. Each machine produces 9 units per hour.

Emran Limited produces the ‘Cloud’ which is not a popular product. The marketing manager has therefore decided to apply a price discount of 15% on the selling price of $20 per unit. The material cost per unit is $5 and the direct labour cost per unit is twice that of the material costs for the ‘Cloud’. It currently takes 0.2 hours and 0.3 hours to make a unit of the ‘Cloud’ on the machines in process P and process Q respectively.

 

What is the Cloud’s throughput per hour of the bottleneck resource (to two decimal places)?

$  

8 / 11

47. Which ONE of the above statements is NOT true of throughput accounting?

9 / 11

48. In which of the following ways might financial returns be improved over the life cycle of a product?

(1) Maximising the breakeven time

(2) Minimising the time to market

(3) Minimising the length of the life cycle

10 / 11

49. Which of the following statements is/are true regarding the issues faced by businesses in the management of their environmental costs?

1) The costs involved are difficult to define.

(2) Environmental costs can be categorised as quality related costs.

(3) Cost control can be an issue, in particular if costs have been identified incorrectly in the first place.

11 / 11

50. The following statements have been made about throughput accounting.

(1) Direct labour should always be treated as a factory cost when measuring throughput.

(2) If machine time is the bottleneck resource, there is no value in taking measures to improve direct labour efficiency.

Which of the above statements is/are true?

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Question 06 (51 to 60)

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No other characters, including commas, are accepted.

Navigating between questions

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    part(s) in Section B
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1 / 10

51. Product BC2 is made in a production process where machine time is a bottleneck resource. Production of one unit of Product BC2 takes 0.25 machine hours. The costs and selling price of Product BC2 are as follows:

$

Materials                                                                     10

Labour (0.5 hours)                                                     7

Other factory costs                                                     7

24

Sales price                                                                   30

Profit                                                                              6

 

In a system of throughput accounting, what is the return per factory hour (to two decimal places)?

$  

2 / 10

52. Which of the following should be categorised as environmental failure costs by an airline company?

(1) Compensation payments to residents living close to airports for noise pollution caused by their aircraft

(2) Air pollution due to the airline’s carbon emissions from their aircraft engines

(3) Penalties paid by the airline to the government for breaching environmental regulations

3 / 10

53. Budget information relating to a company that manufactures four products is as follows.

Product         Maximum                Machine               Maximum           Sales price             Material cost

sales demand         hours per unit           machine              per unit                    per unit

(Units)                                               hours required               $                                $

A                       1,000                           0.1                         100                         15                               6

B                        500                              0.2                        100                          21                             10

C                      2,000                            0.3                         600                          18                              9

D                      1,000                            0.2                         200                          25                             16

1,000

Only 750 machine hours are available during the period. Applying the principles of throughput accounting, how many units of Product B should be made if the company produces output to maximise throughput and profit?

                               Units

4 / 10

54. The following statements have been made about traditional absorption costing and activity based costing (ABC).

(1) Traditional absorption costing may be used to set prices for products, but activity based costing cannot.

(2) Traditional absorption costing tends to allocate too many overhead costs to lowvolume products and not enough overheads to high-volume products.

(3) Implementing ABC is expensive and time consuming

Which of the above statements is/are true?

5 / 10

55. The following statements have been made about throughput accounting.

(1) Inventory has no value and should be valued at $0.

(2) Efficiency is maximised by utilising direct labour time and machine time to full capacity.

Which of the above statements is/are true?

6 / 10

56. In the theory of constraints and throughput accounting, which of the following methods may be used to elevate the performance of a binding constraint?

Method 1: Acquire more of the resource that is the binding constraint

Method 2: Improve the efficiency of usage of the resource that is the binding constraint

7 / 10

57. The following information is available for a single product:

Units produced                                                              500

Time taken                                                                200 hours

Maximum time available                                        200 hours

Materials purchased    1,000 kg costing                 $3,000

Materials used                                                             800 kg

Labour costs                                                                $2,000

Overheads                                                                    $1,500

Sales                                                                              $9,000

Which of the following is the throughput accounting ratio for this product?

8 / 10

58. Phone Ltd produces two products: G and S.

The monthly production is 20,000 units of G and 50,000 units of S.

Product G is produced in batches of 1,000 units each time. Product S is produced in batches of 5,000 each time.

The total set-up cost is $30,000 each month, and Phone Ltd uses activity based costing with the number of production runs as the cost driver.

Which is the set-up cost for each unit of product G?

9 / 10

59. A manufacturing company uses three processes to make its two products, U and C. The time available on the three processes is reduced because of the need for preventative maintenance and rest breaks.

The table below details the process times per product and daily time available:

Process                            Hours available                  Hours required to                      Hours required to

per day                          make one unit of                        make one unit of

product U                                     product C

1                                                  22                                        1.00                                                0.75

2                                                  22                                        0.75                                                1.00

3                                                  18                                        1.00                                                0.50

Daily demand for product U and product C is 10 units and 16 units respectively.

Which of the following will improve throughput?

10 / 10

60. The selling price of a product has been set at $450 per unit, and at that price the company expects to sell 1,000 units per month.

The required profit margin is 20% of sales, and the expected production cost is $400 per unit.

What is the target cost gap?

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Question 07 (61 to 65)

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1 / 5

61. The monthly budget for process F shows the following input/output analysis:

INPUTS

Description                        Comment                                                            Weight (kg)                     $

Materials                                                                                                              1,000                     (50,000)

System costs           Labour, utilities and other overheads                               –                         (30,000)

Total                                                                                                                      1,000                     (80,000)

OUTPUTS

Description                       Comment                                                             Weight (kg)                     $

Good output          Expected good output is 70% of input                            700                        84,000

and can be sold for $120 per kg

Waste                     Expected waste is 10% of input and must                      100                        (1,000)

be scrapped at a cost of $10 per kg

Scrap                       Expected scrap is 20% of input and can                         200                          3,000

be sold for $15 per kg

Total                                                                                                                     1,000                       86,000

Monthly profit is thus expected to be $6,000.

The company is looking at introducing new quality systems that will increase system costs by $5,000 per month but will reduce waste from 10% to 4% of input. Scrap is expected to stay at 20% of input.

What would be the impact on monthly profit of implementing the proposal?

2 / 5

62. The monthly budget for process F shows the following input/output analysis:

INPUTS

Description                        Comment                                                            Weight (kg)                     $

Materials                                                                                                              1,000                      (50,000)

System costs           Labour, utilities and other overheads                               –                         (30,000)

Total                                                                                                                      1,000                     (80,000)

OUTPUTS

Description                         Comment                                                             Weight (kg)                     $

Good output            Expected good output is 70% of input                             700                       84,000

and can be sold for $120 per kg

Waste                        Expected waste is 10% of input and must                      100                       (1,000)

be scrapped at a cost of $10 per kg

 

Scrap                          Expected scrap is 20% of input and can                          200                       3,000

be sold for $15 per kg

Total                                                                                                                        1,000                     86,000

The company is looking at adopting environmental flow cost accounting, in which all material and system costs will be apportioned on the basis of weight.

Calculate the total net cost of waste and scrap using flow cost accounting. Give you answer to the nearest $.

$  

3 / 5

63. The following costs have been identified in relation to the production of a product:

  • Production costs
  • End of life disposal costs
  • Design costs
  • Distribution costs

Which of the above items should be included in calculating the lifecycle cost of a product?

4 / 5

64. A company is developing a new product and expects to sell 4,000 units per year over a period of 5 years.

The lifetime costs of the product are:

Design and development                   $50,000

Manufacturing                                     $5 per unit

End of life costs                                   $10,000

What is the lifecycle cost per unit?

5 / 5

65. A company makes two products – W and Z – The following details are available:

W                                             Z

Selling price                                                                      $50                                          $32

Material                                                                            $10                                           $6

Direct labour                                                                    $20                                          $15

Assembly time                                                             20 mins                                   15 mins

Maximum demand                                                  1,500 units                              1,000 units

The total assembly time is limited to 600 hours.

Using throughput accounting, how many units of Z should be produced?

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