FOUNDATIONS IN ACCOUNTANCY

Paper MA1
MANAGEMENT INFORMATION
Mock Exam 1 : 8 SEPTEMBER 2023

Name :

Student ID :

Group :

Time allowed: 2 hours

ALL 50 questions compulsory and MUST be attempted.

Answer all questions – Use the answer sheet at the end of this exam to
record your answer.

Please write your answer using a black ball-point pen.

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

ACCA
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Answer ALL questions. Each question carries 2 marks.

1. Which of the following words DOES NOT describe a main focus of management
accounting?

A Planning
B Control
C External
D Decision-making

2. Which of the following statements are true?

i. The main role of the management accountant is to produce financial accounts

ii. Management accountants always work within the finance function
iii. Management accountants always work in partnership with business manager

A i and ii only
B ii and iii only
C i and iii only
D None of the above

3. If actual units produced are lower than the budgeted level of production, which of the
following actual costs would you expect to be lower than the budget?

A Total fixed cost

B Total variable cost
C Fixed cost per unit
D None of the above

4. The audit fee paid by a manufacturing company would be classified by the company
as______.

A production overhead
B selling and distribution cost
C research and development cost
D administration cost

5. Which statement describes a cost centre?

A Units of output or service for which costs are ascertained

B Functions or locations for which costs are ascertained
C A segment of the organisation for which budgets are prepared
D Amounts of expenditure attributable to various activities

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6. Which of the following activities would not be considered an overhead support activity
in a clothing factory?

A Ordering material
B Maintaining the machines
C Training machine operators
D Cutting the material according to patterns

7. What is the accounting entry to record under-absorbed of production overhead?

Debit Credit
A Income statement Production overhead
B Work-in-progress Production overhead
C Production overhead Income statement
D Production overhead Work-in-progress

8. An engineering firm operates a job costing system. Production overhead is absorbed at the
rate of $8.50 per machine hour. In order to allow for non-production overhead costs and profit,
a mark-up of 60% of prime cost is added to the production cost when preparing price estimates.
The estimated requirements of job number 808 are as follows:

Direct materials $10,650

Direct labour $3,260
Machine hours 140

What will be the estimated price notified to the customer for job number 808?

A $22,256
B $22,851
C $23,446
D $24,160

9. Which of the following statements is true?

A The total variable cost varies with a measure of activity

B A variable cost is an unavoidable cost
C A variable cost is not relevant for decision-making
D A variable cost becomes fixed in the long run

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10. The following data have been collected for four cost types: W, X, Y, and Z at two activity levels.

Cost type Cost @ 100 units Cost @ 140 units

W 8,000 10,560
X 5,000 5,000
Y 6,500 9,100
Z 6,700 8,580

Where V = variable, SV = semi-variable and F = fixed, assuming linearity.

Which of the following classifications could describe the cost behaviour for W,X,Y, and
Z?

W X Y Z
A V F SV V
B SV F V SV
C V F V V
D SV F SV SV

11. Based on the data below, what is the amount of the overhead under-/over-absorbed?

Budgeted overheads $493,200

Budgeted machine hours 10,960
Actual machine hours 10,493
Actual overheads $514,157

A $20,957 under-absorbed
B $21,015 over-absorbed
C $21,015 under-absorbed
D $41,972 under-absorbed

12. RS is currently preparing the production budget for Product A and the material purchase budget
for material X for the forthcoming year. Each unit of Product A requires 5 kgs of material X.
The anticipated opening inventory for Product A is 5,000 units and the company wishes to
increase the closing inventory by 30% by the end of the year.

The anticipated opening inventory for material X is 50,000 kgs and in order to avoid stock outs
the required closing inventory has been increased to 60,000 kgs. The Sales Director has
confirmed a sales requirement of 70,000 units of Product A.

How many units of Product A will need to be produced?

A 68,500 units
B 71,500 units
C 76,500 units
D 80,000 units

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13. TOP is currently preparing the production budget for Product A and the material purchase
budget for material X for the forthcoming year. Each unit of Product A requires 5 kgs of material
X.

The anticipated opening inventory for Product A is 5,000 units and the company wishes to
increase the closing inventory by 30% by the end of the year.

The anticipated opening inventory for material X is 50,000 kgs and in order to avoid stock outs
the required closing inventory has been increased to 60,000 kgs.

The Sales Director has confirmed a sales requirement of 70,000 units of Product A.

What will be the purchases budget for material X?

A 347,500 kgs
B 350,000 kgs
C 357,500 kgs
D 367,500 kgs

14. What is meant by overtime premium?

A The additional amount paid for hours worked in excess of the basic working week
B The additional amount paid over and above the normal hourly rate for hours worked in
excess of the basic working week
C The additional amount paid over and above the overtime rate for hours worked in excess
of the basic working week
D The overtime rate

15 What does it mean if ###### appears in a cell?

A The cell is not wide enough to display the content

B The cell contains a formula which refers to an empty cell
C There is a circular reference
D There has been an attempt to divide by 0

16. Which of the following statements in connection with process costing are correct?

i. A loss expected during the normal course of operations, for unavoidable reasons, is
abnormal loss
ii. An unexpected loss is an abnormal loss
iii. An abnormal loss arises if the actual loss is greater than the expected loss
iv. A normal loss is never less than actual loss

A i and ii
B ii and iii
C i and iv
D ii and iv

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17. A company produces a single product that passes through two processes. The details for
process 1 are as follows:

Material inputs 20,000 kg at $2.50 per kg

Direct labour $15,000
Production overheads 150% of direct labour
Expected losses 15% of input

The output for the period was 18,500 kg from process 1. There was no work-in-progress at
the beginning or end of the period.

What is the amount of the expected loss?

A Nil
B 3,000 kg
C 2,775 kg
D 2,000 kg

18. A company has been asked to quote for a job. The company aims to make a net profit of 30%
on sales. The estimated cost for the job is as follows:

Direct materials 10 kg @ $10 per kg

Direct labour 20 hours @ $5 per hour

Variable production overheads are recovered at the rate of $2 per labour hour. Fixed
production overheads for the company are budgeted to be $100,000 each year and are
recovered on the basis of labour hours. There are 10,000 budgeted labour hours each year.
Other costs in relation to selling, distribution and administration are recovered at the rate of $50
per job.

The company quote for the job should be______.

A $572
B $637
C $700
D $833

19. Which of the following statements are correct about step down method?

i. The sequence of reapportionment is important

ii. The costs being reapportioned to production cost centre only
iii. It recognizes inter-service work
iv. It is used to assign the costs to specific cost centre

A i and ii
B i and iii
C ii and iv
D iii and iv

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20. XYZ operates an integrated accounting system. The material control account at 31 March
2023 shows the following information:

Material control account

$ $
Balance b/d 50,000 Production OH 10,000
Creditors 100,000 ? 125,000
Bank 25,000 Balance c/d 40,000
175,000 175,000

What is the suitable term for the $125,000 credit entry?

A Cost of sales account

B Finished goods account
C Profit and loss account
D Work-in-progress account

21. Which of the following are characteristics of service costing?

i. High levels of indirect costs as a proportion of total cost

ii. Use of composite cost units
iii. Use of equivalent units

A i only
B ii only
C i and ii only
D All of the above

22. A sport equipment company uses a pre-determined overhead absorption rate based on labour
hours. The budgeted overheads for September were $3,161,700 and the actual overheads
were $3,096,900. Budgeted labour hours were 175,650 and the overheads were over-absorbed
by $28,800.

What were the actual labour hours?

A 170,450 hours
B 173,650 hours
C 174,016 hours
D 177,283 hours

23. What source document is used to determine the actual amount of direct materials to
record on a job cost sheet?

A Bill of material
B Production order
C Material purchase order
D Material requisition order

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24. Which of the following statement/s, about filling a range of spreadsheet cells, is/are
TRUE?

i. Type Jan in cell A1. Select cell A1 and fill down to cell A3. The result is Feb in cell A2 and
Mar in cell A3
ii. Type the number 1 in cell A1. Select A1 and fill down to cell A4. The result is 2 in cell A2,
3 in cell A3 and 4 in cell A4
iii. Type the number 2 in cell A1 and 4 in cell A2. Select A1 and A2 and fill down to cell A4.
The result is 2 in cell A3 and 4 in cell A4
iv. Type Jan in cell A1. Select cell A1 and fill down to cell A3. The result is also Jan in cell A2
and cell A3

A i only
B i and ii only
C ii and iv only
D ii, iii and iv only

25. Which of the following is correct about the use of the high–low method of cost
estimation?

A Calculate the budget cost for the actual activity

B Calculate the highest and lowest costs in the budget period
C Measure the actual cost for the budget activity
D Predict the range of costs expected in the budget period

26. Which of the following statements about predetermined overhead absorption rates are
true?

i. Using a predetermined absorption rate avoids fluctuations in unit costs caused by

abnormally high or low overhead expenditure or activity levels
ii. Using a predetermined absorption rate offers the administrative convenience of being able
to record full production costs sooner
iii. Using a predetermined absorption rate avoids problems of under/over absorption of
overheads because a constant overhead rate is available.

A i and ii only
B i and iii only
C ii and iii only
D All of the above

27. Which of the following would be classified as data?

A Number of purchase requisition

B Analysis of wages into direct and indirect costs
C Table showing variances from budget
D Graph showing the number of labour hours worked

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28. Chin Co budgets during its first year, of operations to produce and sell 38,160 litres of product
per annum at a selling price of $10 per litre.

Chin Co's budgeted costs are as follows:

$ per unit
Variable production costs 3.54
Fixed production costs 1.04
Variable selling costs 2.50

In the first year the unit selling price was $10 per litre and the variable unit cost and expenditure
on fixed production costs were also as budgeted. Actual sales volume was 38,400 litres and
closing inventory was 960 litres.

What is the Chin Co’s profit using absorption costing?

A $113,376
B $112,378
C $112,128
D $110,880

29. Which of the following is correct for a period of continual price inflation for material
purchases?

A The LIFO method will produce lower profits than the FIFO method, and lower closing
inventory values
B The LIFO method will produce lower profits than the FIFO method, and higher closing
inventory values
C The FIFO method will produce lower profits than the LIFO method, and lower closing
inventory values
D The FIFO method will produce lower profits than the LIFO method, and higher closing
inventory values

30. The following statements are correct when referring to process costing except______.

A costs are accumulated by department

B unit produced are indistinguishable from each other
C a process costing system has the same basic purpose as a job costing system
D process costing would be appropriate for jeweller who makes custom jewellery to order

31. A company uses a First In First Out (FIFO) system for pricing inventory issues. During
a period, product costs were overstated and profits were understated. This meant that
during the period, prices were______.

A rising
B falling

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32. A job requires 2,400 actual labour hours for completion, and it is anticipated that there will be
20% idle time. The wage rate is $10 per hour.

What is the budgeted labour cost for the job?

A $19,200
B $24,000
C $28,800
D $30,000

33. A factory consists of two production cost centres (P and Q) and two service cost centres (X
and Y). The total allocated and apportioned overheads for each are:

P Q X Y
$95,000 $82,000 $50,000 $30,000

It has been estimated that each service cost centre does work for the other cost centres in
the following proportion:

P Q X Y
% of service cost centre X 40 40 - 20
% of service cost centre Y 20 60 10 -

What will be the total reapportioned overhead cost for production cost centre P using
direct method?

A $28,000
B $32,500
C $127,500
D $123,000

34. Which of the following is not a cause of idle time?

A Production disruption
B Stock-outs
C Strikes affecting vital supplies
D A wage increase

35. Which of the following graphs would be used to identify trends in data?

A A scatter graph
B A bar chart
C A pie chart
D A line graph

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36. John is an assembly worker. Details of his gross pay for the week are as follows:

Basic pay for normal hours worked (40 hours at $10 per hour) $400
Overtime (15 hours at time and half) $225
Gross pay $625

Although he is paid for normal hours in full, John has been idle for 10 hours during the week
because of the absence of any output from the machining department.

The indirect labour costs that are included in his total gross pay of $625 are______.

A $75
B $100
C $175
D $325

37. You are the accountant responsible for the input into the computer accounting system of data
about goods received from supplier. For each transaction, you require to see the purchase
order, delivery note, goods received note and invoice.

Which document is most likely to find the code number for an item of inventory to be
entered into the system?

A Purchase order
B Delivery note
C Goods received note
D Invoice

38. Which of the following types of business unit would residual income be a suitable
measure of performance?

A Cost centre
B Revenue centre
C Profit centre
D Investment centre

39. The following are information about Tech Co for quarter 1 of 2023:

Budgeted hours 1,100

Standard hours produced 1,125
Actual hours worked 1,200

What is company’s production volume ratio?

A 93.8%
B 91.7%
C 109.1%
D 102.3%

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40. Spice Co has a capital employed of $300,000. It has a cost of capital of 13% per year and its
residual income is $6,000.

What is the company’s return on investment?

A 2%
B 10%
C 13%
D 15%

41. Which of the following statements concerning marginal costing are true?

i. Closing inventories are valued at full production cost

ii. Contribution is calculated as sales revenue minus fixed cost of sales
iii. Marginal cost is the cost of a unit which would not be incurred if that unit were not produced
iv. Fixed costs are treated as a period cost and are charged in full the income statement of
the accounting period in which they are incurred

A i and ii only
B i and iii only
C ii and iv only
D iii and iv only

42. A factory worker is paid a basic wage of $2,100 per week based on 35 standard working hours
per week. Overtime is paid at the following rates:

Weekly total less than 40 hours 20% premium on all overtime hours
Weekly total more than 40 hours 40% premium on all overtime hours

Other payments are as follows:

PAYE $150
Employee’s benefit contribution 10% of gross pay
Employer’s benefit contribution 15% of gross pay

The factory worker worked 45 hours last week.

What was the net pay of the factory worker?

A $2,349
B $2,388
C $2,496
D $2,937

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43. The formula =$B$1*B$4 has been entered into cell B5.

What result would be visible in C5 if the formula in B5 was copied to C5?

A 0
B Nil
C 30,000
D 45,000

44. Which of the following statements is an advantage of a spreadsheet program?

A Can answer ‘what if?’ questions

B Can answer ‘when is?’ questions
C Checks for incorrect entries
D Automatically writes formulae

45. Which of the following statements is/are true?

i. Formula bar is displaying the information or formula in the selected cell

ii. Multiple worksheets combined will make up the workbook or the file

A i only
B ii only
C i and ii
D Neither i nor ii

46. The principal difference between process costing and job costing is that in job costing an
averaging process is used to compute the unit costs of products or services.

Is this statement true or false?

A True
B False

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47. Which of the following is NOT a valid spreadsheet cell input?

A Number
B Text
C Formula
D Graph

48. What does an error value of #VALUE! in an Excel spreadsheet indicate?

A A formula is attempting to divide a number by zero

B The formula contains text that is an invalid cell reference or function name
C The formula refers to a cell that contains text
D The formula has invalid numeric values supplied

49. The following statements relate to spreadsheet formulae:

The formula Explanation

i. =C4*B10 Multiplies the value in C4 by the value in B10
ii. =C4*117.5% Adds 17.5% to the value C4
iii. =C4+C5+C6/3 Adds C4, C5 and C6 together and divides the result by 3

Which statements are correct?

A i and ii only
B i and iii only
C ii and iii only
D All of the above

50. Which of the following is a disadvantage of a pie chart?

A They do not show differences in the elements of two different totals

B The do not show the relative sizes of elements in a total
C The trend line is difficult to estimate
D They do not show the absolute sizes of elements in a total

END OF QUESTION PAPER

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