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NEW QUESTION 79
A company's management accountant wishes to calculate the present value of the cost of renting a delivery vehicle. There will be five annual rental payments of $5,000, the first of which is due immediately. The company's discount rate is 12%.
Which TWO of the following are valid ways to calculate the present value of the rental payments?
- A. $5,000/1.12 + $5,000/(1.12)2+ $5,000/(1.12)3+ $5,000/(1.12)*+ $5,000/(1.12)5
- B. $5,000x3.605
- C. $5,000+ ($5,000x3.037)
- D. $5,000 + (35,000x3.605)
- E. $5,000 + $5,000/1.12 + $5,000/(1.12)2+ $5,000/(1.12)3+ $5,000/(1.12)4
Answer: B,E
NEW QUESTION 80
Which type of budget would be the most suitable for a cash budget?
- A. Flexible budget
- B. Incremental budget
- C. Fixed budget
- D. Rolling budget
Answer: D
Explanation:
Reference:
https://www.acowtancy.com/textbook/acca-pm/budgetary-systems/types-of-budgetary-systems/notes
NEW QUESTION 81
Refer to the exhibit.
A machine costing $47,000 will generate the following accounting profits:
The annual charge for depreciation is $9,000.
The cost of capital is 12%.
The net present value of the investment in the machine is:
Answer:
Explanation:
$55839
NEW QUESTION 82
The following data are available for a company that produces and sells a single product.
The company's opening finished goods inventory was 2,500 units.
The fixed overhead absorption rate is $8.00 per unit.
The profit calculated using marginal costing is $16,000.
The profit calculated using absorption costing and valuing its inventory at standard cost is $22,400.
The company's closing finished goods inventory is:
- A. 3,300 units
- B. 3,900 units
- C. 8,900 units
- D. 1,700 units
Answer: A
NEW QUESTION 83
A product has a break-even point of 40,000 units and a margin of safety of 20%. The contribution per unit is
£3.
What is the budgeted profit?
- A. £8,000
- B. £30,000
- C. £24,000
- D. £40,000
Answer: B
NEW QUESTION 84
Which of the following statements relating to risk and uncertainty is correct?
- A. Uncertainty exists when we know all of the possible outcomes but not their probabilities.
- B. Risk exists when we know all of the possible outcomes but not their probabilities.
- C. Uncertainty exists when we know all of the possible outcomes and their probabilities.
- D. Risk exists when we do not know all of the possible outcomes.
Answer: D
NEW QUESTION 85
Which of the following is NOT a characteristic of useful operational level information?
- A. Focused on the decision to be made.
- B. Governed by financial reporting standards.
- C. Sufficiently accurate.
- D. Available immediately.
Answer: D
NEW QUESTION 86
In investment appraisal, the calculation of the payback period
- A. places greater value on cash flows received in earlier years during the payback period.
- B. places greater value on cash flows received in later years during the payback period.
- C. places the same value on all cash flows received during the payback period.
- D. places the same value on all cash flows received over the whole life of a project.
Answer: C
NEW QUESTION 87
Refer to the exhibit.
A proposal to purchase a new packing machine contains the following estimates.
In addition it is estimated that a supervisor who is currently paid a salary of $30,000 will spend 5% of their time overseeing the operation of this machine.
The cost of capital is 16%.
The net present value (NPV) for the investment in the machine is closest to
- A. $53,550
- B. $50,181
- C. $51,627
- D. $10,876
Answer: A
NEW QUESTION 88
Refer to the exhibit.
The following data relates to Department A within a business unit.
The overhead absorption rate per direct labour hour for Department A is:
Give your answer to 2 decimal places.
Answer:
Explanation:
£7.93
NEW QUESTION 89
Refer to the exhibit.
A company issued its production budget based on an anticipated output of 2000 units. The actual output for the period was 1500 units. The details of the costs are shown below:
What was the budget expenditure variance?
- A. £17,000 favourable
- B. £18,000 adverse
- C. £4,500 favourable
- D. £4,500 adverse
Answer: C
NEW QUESTION 90
Which of the following are not examples of intangible and nonfinancial factors in decision making? (Select ALL that apply.)
- A. Profitability ratios
- B. Government regulations
- C. Return on investment
- D. Employee morale
- E. Competitor reaction
- F. Market share
Answer: A,C,F
NEW QUESTION 91
Refer to the exhibit.
ZAP publishes a monthly magazine aimed at the teenage market. It has drawn up a budget for next year as follows:
The magazine is currently sold at $2.00 per copy.
The margin of safety is?
Answer:
Explanation:
8747 units
NEW QUESTION 92
A project is about to be launched. Two of the three possible outcomes and their associated probabilities are as follows:
The remaining possible outcome is a $70,000 gain.
What is the correct calculation of the expected value of the project?
- A. ($30,000 x 0.7) + ($70,000 x (1.0 - (0.2 + 0.7))) - ($25,000 x 0.2)
- B. ($30,000 + $70;000 - $25,000) / 3
- C. ($30,000 x 0.7) + ($70,000 x (1.0 - (0.2 + 0.7))) + ($25,000 x 0.2)
- D. ($30,000 + $70,000 - $25,000} x (0.7 + (1.0 - (0.2 + 0.7)) + 0.2)
Answer: C
NEW QUESTION 93
Refer to the exhibit.
The management accountant has completed the appraisal of a project which is forecast to generate the following cash flows.
It has now been discovered that the cash inflow in year 3 has been overestimated.
What will be the effect on the calculated net present value (NPV) and the payback period?
- A. NPV decrease; payback period decrease
- B. NPV decrease; payback period increase
- C. NPV decrease; payback period stay the same
- D. NPV increase; payback period increase
Answer: C
NEW QUESTION 94
A company is considering investing $57,000 in a machine that will last for five years, after which time it will have no value. The machine will generate additional revenue of $190,000 each year. Annual running costs, including depreciation of $11,400 will amount to $168,400.
Assuming that all cash flows occur evenly, the payback period of the investment in the machine is closest to:
- A. 1 year 9 months
- B. 1 year 7 months
- C. 2 years 6 months
- D. 2 years 8 months
Answer: B
NEW QUESTION 95
A company has spent $5,000 on a report into the viability of using a subcontractor. The report highlighted the following:
A machine purchased six years ago for $30,000 would become surplus to requirements. It has a written-down value of $10,000 but would be resold for $12,000.
A machine operator would be made redundant and would receive a redundancy payment of $40,000.
The administration of the subcontractor arrangement would cost the company $25,000 each year.
Which THREE of the following are relevant for the decision? (Choose three.)
- A. A relevant revenue of $12,000 for the machine.
- B. A relevant cost of $25,000 each year for administration.
- C. A relevant cost of $10,000 for the machine.
- D. A relevant cost of $40,000 for the redundancy payment.
- E. A relevant cost of $5,000 for the viability report.
- F. A relevant cost of $30,000 for the machine.
Answer: B,C,E
NEW QUESTION 96
Which TWO of the following are characteristics of Management Accounts?
- A. Governed by rules and regulations
- B. Provide information to managers
- C. Provide information needed by shareholders
- D. Statutory requirement2
- E. Internally focused
Answer: A,E
NEW QUESTION 97
Which of the following statements about batch costing is true?
- A. The cost of a unit is found by dividing the cost of a batch by the number of units in the batch.
- B. Batch costing must use absorption costing.
- C. Batch costing must use marginal costing.
- D. The cost of a batch is found by multiplying the cost of one unit by the number of units in the batch.
Answer: A
NEW QUESTION 98
A company uses an integrated accounting system and absorbs production overhead using a predetermined rate of $6 per machine hour.
Last period a total of 25,500 machine hours were worked and the actual production overhead incurred was
$158,000.
The accounting entries for the production overhead under- or over-absorbed for the period would be:
- A. Debit: income statement $5,000
Credit: production overhead control account $5,000 - B. Debit: work in progress control account $5,000
Credit: production overhead control account $5,000 - C. Debit: work in progress control account $5,000
Credit: income statement $5,000 - D. Debit: production overhead control account $5,000
Credit: income statement $5,000
Answer: A
NEW QUESTION 99
Refer to the exhibit.
X Enterprises runs a private nursing home for the elderly. The company are concerned that bed occupancy rates have been falling over the past 2 years with a consequential effect on profit. They have drawn up a budget for next year as follows:
The nursing home currently charges $90 per patient day.
The nursing home operates at 7,500 patient days per year. In an effort to increase occupancy rates the company are proposing to reduce the current price by 10% and increase spending on advertising by $10,000 each year. What effect will this have on the margin of safety?
- A. Increase the margin of safety by 1,178 days
- B. Reduce the margin of safety by 622 days
- C. Increase the margin of safety by 622 days
- D. Reduce the margin of safety by 1,178 days
Answer: D
NEW QUESTION 100
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