Question # 1 A manufacturing company produces and sells a single product.
It is preparing its budget for the next period and expects to breakeven.
Budgeted fixed costs are the same as budgeted variable costs and the budgeted contribution to sales ratio is 50%.
If all budgeted costs decreased by 10%, which of the following statements is true? A. Total contribution would increase by less than the increase in total profit.B. Total profit would increase by the same amount as the increase in total contribution.C. The contribution to sales margin would increase by more than five percentage points.D. The contribution to sales margin would increase by less than five percentage points.
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A. Total contribution would increase by less than the increase in total profit.
Question # 2 Place the components of the time series next to the example about the impact on sales that they best represent.
Answer Description
Question # 3 How would the cost of recycling scrap be classified in an environmental costing system? A. Environmental internal failure cost
B. Environmental appraisal cost
C. Environmental prevention cost
D. Environmental external failure cost
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A. Environmental internal failure cost
Question # 4 A company’s management is considering investing in a project with an expected life of 4 years. It has a positive net present value of $180,000 when cash flows are discounted at 8% per annum. The project’s cash flows include a cash outflow of $100,000 for each of the four years. No tax is payable on projects of this type.
The percentage increase in the annual cash outflow that would cause the company’s management to reject the project from a financial perspective is, to the nearest 0.1%: A. 54.3%
B. 45.0%
C. 55,6%
D. 184.0%
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A. 54.3%
Question # 5 JDM is considering whether to go ahead with the launch of a new product. Profit from the new product is dependent on the level of demand.
The following table shows the estimated profits and their respective probabilities at different levels of demand.
The company could still cancel the launch of the product but would incur a cost of $7,000.
What is the maximum amount that the company should pay for perfect information about demand for the product? A. $13,350B. $41,000C. $16,500D. $37,850
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A. $13,350
Question # 6 A university is trying to decide whether or not to advertise a new post-graduate degree programme. The number of students starting the programme is dependent on economic conditions. If conditions are poor, it is expected that the programme will attract 40 students without advertising. There is a 60% chance that economic conditions will be poor. If economic conditions are good it is expected that the programme will attract only 20 students without advertising. There is a 40% chance that economic conditions will be good.
If the programme is advertised and economic conditions are poor, there is a 65% chance that the advertising will stimulate further demand and student numbers will increase to 50. If economic conditions are good, there is a 25% chance the advertising will stimulate further demand and numbers will increase to 25 students.
The profit expected, before deducting the cost of advertising, at different levels of student numbers are as follows:
The cost of advertising the programme will be $15,000. Required:
Demonstrate, using a decision tree, whether the programme should be advertised. A. Yes, the programme should be advertised as the profit will be $82 000
B. Yes, the programme should be advertised as the profit will be $92 000
C. No, the programme should not be advertised as there will be a loss $82 000
D. No, the programme should not be advertised as there will be a loss $92 000
Click for Answer
A. Yes, the programme should be advertised as the profit will be $82 000
Question # 7 Rank the budgets listed below to show the order in which they should normally be prepared:
Answer Description
Question # 8 The standard production cost of making a product is as follows:
What is the fixed production overhead efficiency variance? Give your answer as a whole number.
Answer Description Answer: $3000 F
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