A company’s annual sales budget is for 120,000 units, spread equally through the year. It needs to have one and three quarter’s month stock at the end of each month. If opening stock is 12,000 units, the number of units to be produced in the first month of the budget year is: (Points : 3)

1. Q16-1: Zero based budgeting is a technique where a department: (Points : 3)

A. is required to make a case for its budget as if its activities were new

B. a budget after taking into account current expenditure and an allowance for the next period’s expenditure

C. prepares budgets on the basis of no increase in unit costs from the previous period.

D. difference between budget and actual results will be zero

Question 2. 2. Q16-2: A company’s annual sales budget is for 120,000 units, spread equally through the year. It needs to have one and three quarter’s month stock at the end of each month. If opening stock is 12,000 units, the number of units to be produced in the first month of the budget year is: (Points : 3)

A. 10,500

B. 12,000

C. 13,000

D. 15,500

Question 3. 3. Q16-3: The standard costs for a manufacturing business are £12 per unit for direct materials, £8 per unit for direct labour and £5 per unit for manufacturing overhead. The sales projection is for 5,000 units, 3,500 units need to be in stock at the end of the period and 1,500 units are in stock at the beginning of the period. The production budget will show costs for that period of: (Points : 4)

A. £175,000

B. £150,000

C. £140,000

D. £125,000

Question 4. 4. Q16-4: Receivable increase by £15,000 and payables increase by £11,000. The effect on cash flow of the Statement of Cash Flow is a (an): (Points : 4)

A. increase of £26,000

B. increase of £4,000

C. decrease of £4,000

D. decrease of £26,000

Question 5. 5. Q16-5: Randy Airplanes Ltd is a privately owned business. It has budgeted for profits (after deducting depreciation of £41,000) of £150,000. Debtors are expected to increase by £20,000, inventory is planned to increase by £5,000 and creditors should increase by £8,000. Capital expenditure is planned of £50,000, income tax of £35,000 has to be paid and loan repayments are due totaling £25,000. What is the forecast cash position of Randy’s at the end of the budget year, assuming a current bank overdraft of £15,000? (Points : 4)

A. 18,000

B. 52,000

C. 66,000

D. 49,000

E. None of the above

Question 6. 6. Q 17-1: The method of adjusting the budget to reflect the actual volume of sales is called (Points : 4)

A. activity-based budgeting

B. flexible budgeting

C. programme budgeting

D. incremental budgeting

Question 7. 7. Q17-2: A company has budgeted for materials of £170,000 but the actual costs are £164,000. The company has also budgeted for labor of £130,000 with actual costs being £133,000. The expense variance is:
@

	Budget for the year to date	Actual for the year to date	Variance
Materials	170,000	164,000	6,000 Fav
Labor	130,000	133,000	3,000 Adv
Total	300,000	297,000	3,000 Fav

A. £3,000 adverse

B. £3,000 favorable

C. £6,000 adverse

D. £6,000 favorable

Question 8. 8. Q17-3a: Higher prices from material suppliers will be reflected in the: (Points : 3)

A. material price variance

B. material usage variance

C. labor rate variance

D. labor efficiency variance

Question 9. 9. Q17-3b: Poor quality materials that require greater skill to work will be reflected in the (Points : 3)

A. material price variance

B. material usage variance

C. labor rate variance

D. labor efficiency variance

Question 10. 10. Q18-1: A concern with recognizing all the costs of a product or service from the design stage through to its abandonment can be described as a process of: (Points : 4)

A. Kaizen costing

B. target costing

C. throughput costing

D. life cycle costing

Question 11. 11. Q18-2: Trans PLC estimates that a new product will sell in sufficient quantities to justify its manufacture at a selling price of £175. The company needs to invest £5 million to produce a quantity of 10,000 of these new products per year and requires a return on that investment of 12% per annum. The current prediction is that the product will cost £140 to manufacture. To achieve the target selling price and target rate of return, the product needs to be re-engineered to reduce its cost of manufacture by: (Points : 4)

A. £35

B. £25

C. £60

D. £40

Question 12. 12. Q18-3: SkinTan’s top five customers generate sales revenue of £950,000 per annum. Each generates a different gross margin as a consequence of price negotiations that have been carried out over several years. Because of their location, each customer incurs different distribution expenses. Sales commissions are paid at the rate of 6% on all sales. Fixed costs are customer specific, covering salaries of sales and office staff who service each customer. The following table shows the information for each of the top customers for the previous year.

Sales	250,000	250,000	200,000	150,000	100,000
Gross margin %	30%	25%	21%	37%	39%
Distribution expenses	30,000	14,000	25,000	12,000	6,000
Fixed costs	30,000	25,000	16,000	15,000	10,000

Carry out a customer profitability analysis in relation to SkinTan’s top customers. Then match the customer with the profitability.

(Points : 10)

Potential Matches:

1 : 19,500

2 : -11,000

3 : 17,000

4 : 8,500

5 : 0

Answer

___: Customer A

___: Customer B

___: Customer C

___: Customer D

___: Customer E

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A company’s annual sales budget is for 120,000 units, spread equally through the year. It needs to have one and three quarter’s month stock at the end of each month. If opening stock is 12,000 units, the number of units to be produced in the first month of the budget year is: (Points : 3)

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