MA1 - Chapter 4

Which of the following describes cost centres?

• units of product or service for which costs are ascertained

• amounts of expenditure attributable to various activities

• functions or locations for which costs are ascertained

• a section of an organisation for which budgets are prepared and control exercised

Which statement or statements is/are correct?

• (i) only

• (i) and (ii) only

• (i) and (iii) only

• (ii) and (iii) only

The following statements relate to responsibility centres:

• Return on capital employed is a suitable measure of performance in both profit and investment centres.

• Cost centres are found in manufacturing organisations but not in service organisations.

• The manager of a revenue centre is responsible for both sales and costs in a part of an organisation.

The manager of a profit centre is responsible for which of the following?

• Revenues of the centre

• Costs of the centre

• Assets employed in the centre

Reginald is the manager of production department M in a factory which has ten other production departments.

He receives monthly information that compares planned and actual expenditure for department M. After department M, all production goes into other factory departments to be completed prior to being despatched to customers. Decisions involving purchasing asset items in department M are not taken by Reginald.

Which of the following describes Reginald’s role in department M?

• A cost centre manager

• An investment centre manager

• A revenue centre manager

• A profit centre manager

Which of the following measures would not be appropriate for a cost centre?

• Cost per unit

• Contribution per unit

• Comparison of actual labour cost to budget labour cost

• Under or over absorption of overheads

A division has a residual income of $240,000 and a net profit before imputed interest of $640,000.

If it uses a rate of 10% for computing imputed interest on its invested capital, what is its return on investment (ROI) to the nearest whole number?

• 4%

• 10%

• 16%

• 27%

JKLInc budgeted to make 1,000 units in May using 2,000 hours of direct labour. Actual output was 1,100 units which took 2,300 hours.

What is the production/volume ratio?

• 91%

• 105%

• 110%

• 115%

RLInc budgeted to make 200 units in June with a standard labour usage of 0.6 hours per unit.

Actual output was 180 units which took 126 hours.

What is the efficiency ratio?

• 86%

• 90%

• 105%

• 116%

CAP Inc budgeted to make 50 units in July with a standard labour usage of 1.2 hours per unit.

Actual output was 49 units which took 61 hours.

What is the capacity ratio?

• 96%

• 98%

• 100%

• 102%