Challenge Game 4

The following data is available on the production and sales for the first three years of a company’s new product.

Refer to the table.

Variable costs per unit, selling price and total fixed costs per year were constant over the three-year period. The company is considering the use of either marginal or absorption costing.

Which TWO of the following statements are true?

1. 
   

• 1. Absorption costing will show a lower profit than marginal costing in Year 1

• 1. Marginal costing will show a lower closing inventory valuation than absorption costing in Year 2

• 1. Total profit over the three-year period will be the same under both methods

• Both methods will show the same profits in Year 3.

Which TWO of the following could explain an adverse material usage variance?

• Purchase of cheaper raw materials

• Overtime worked by existing employees

• Recruitment of temporary workers

• Purchase of better-quality materials

BP Ltd produces one single product, the BP01. During the month of September, it took 30,060 hours, at a total cost of $480,960 to produce 5,200 units of BP01.

The direct labour efficiency variance for the period was $15,960 favourable and the standard direct labour rate is $14 per hour.

What is the standard labour time to make one unit of BP01?

A company had total revenue of $169,000 in a period from the sale of 6,500 units of its single product. There was no finished goods inventory at the beginning of the period and 200 units were in inventory at the end of the period.

Production costs in the period were:

Variable costs $93,130

Fixed costs $41,540

Fixed costs are absorbed on an actual basis using units produced.

What was the gross profit in the period?

• $30,055

• $34,330

• $35,570

• $38,350

The internal rate of return is one of the techniques used in long-term decision making.

Which one of the following statements about the internal rate of return (IRR) is true?

• If the result of the calculation of IRR is higher than the cost of capital invested, then the project should be accepted

• The IRR technique using accounting profits over the life of the project in the calculation

• The result of the calculation provides a measure of absolute return, so it is easier for investors to compare against

• The IRR does not take into account the time value of money in the calculation of the return

Which of the following is correct?

• Qualitative data is numerical information

•  Information can only be extracted from external sources

• Operational information gives details of long-term plans only

• Data can either be discrete or continuous

The process of cost apportionment is carried out so that ______________

• Cost may be controlled

• Cost unit gather overheads as they pass through cost centers

• Whole items of cost can be charged to cost centers

• Common costs are shared among cost centers

The following information is available for the W hotel for the latest 30-day period.
Number of rooms available per night 40
Percentage occupancy achieved 65%
Room servicing cost incurred $3900

Calculate the room servicing cost per occupied room-night last period, to the nearest $.

Calculate the prime cost for the production from the following information:

Direct material purchased: $100,000
Direct material consumed: $90,000
Direct labour: $60,000
Direct expenses: $20,000
Manufacturing overheads: $30,000

• $180,000

• $200,000

• $170,000

• $210,000

TG Ltd is looking at investing in a project and is unsure as to which long-term decision-making technique to use and what the results mean.

Which one of the following results should TG Ltd focus on if it wishes to concentrate on liquidity and minimising risk?

• 1. Shortest payback period

• The highest accounting rate of return

• Highest net present value

• An internal rate of return lower than cost of capital