Questions and Answers of Accounting For Non-Accounting Students

List six cost-based pricing methods.
List five characteristics associated with capital expenditure?
What is the future for Conoco if it continues to sell less oil but it still protects its dividend?
What is meant by ‘net cash flow’?
What does the Chief Executive mean when he states that the company has the flexibility ‘to ramp up spending should prices improve’?
What is the payback method of capital investment appraisal?
Lender Limited is considering investing in a new project. It is estimated that it will cost £100,000 to implement, and that the expected net profit after tax will be as follows: No residual
What information is needed to adopt it?
The following net cash flows relate to Lockhart Limited in connection with a certain project that has an initial cost of £2,500,000:The company’s required rate of return is 15 per
List four disadvantages of the payback method.
What is the discounted payback method of capital investment appraisal?
What does a discount factor depend on?
Hewie Limited has some capital available for investment and is considering two projects, only one of which can be financed. The details are as follows:Required:Advise management on which project to
Marsh Limited has investigated the possibility of investing in a new machine. The following data have been extracted from the report relating to the project: Cost of machine on 1 January Year 6:
List four advantages and four disadvantages of the discounted payback method.
What is the accounting rate of return method of capital investment appraisal?
What formula should be used in adopting it?
And how should (a) the numerator and (b) the denominator be determined?
List three advantages and three disadvantages of the accounting rate of return method.
What is the NPV method of capital investment appraisal?
Outline seven steps needed to adopt it.
What is the internal rate of return method of capital investment appraisal?
What is its basic objective?
What formula is used to determine the required rate of return?
List three advantages and three disadvantages of the method.
How may (a) inflation and (b) taxation be allowed for in capital investment appraisal?
Robert Jordan recently joined Larkhill Products Limited as a product manager. The company manufactures, distributes and sells a range of popular card games. At the end of his first month in post,
List three main external sources of (a) short-term finance, (b) medium-term finance and (c) long-term finance.
Amber Textiles Limited is a small textile processing company based in Burnley in Lancashire. It is one of the few remaining such companies in the United Kingdom but it too is struggling to survive as
Pennine Heating Systems Limited is a small heating and ventilation system company located in the West Yorkshire town of Dewsbury. It provides customer-designed systems for small businesses. The
What is (a) a production cost centre, (b) a service cost centre?
Why do you think that it has taken so many profit warning before any serious attempts were made to revive its financial fortunes?
What do the terms ‘allocate’, ‘apportion’ and ‘absorb’ mean?
Is it likely that a reorganisation of the company’s managerial structure and divisional structure will make a significant difference to reducing its costs?
Suggest three ways that service cost centre costs may be charged to other cost centres.
What would you identify as the major cause of the company’s possible financial struggles?
Scar Limited has two production departments and one service department. The following information relates to January 2016: The allocated expenses shown above are all indirect expenses as far as
What is meant by ‘reciprocal service costs’?
Indicate three ways to deal with them.
What is the basic formula for absorbing production overheads into product costs?
Bank Limited has several production departments. In the assembly department it has been estimated that £250,000 of overhead should be charged to that particular department. It now wants to charge a
List six methods of how this may be done.
The following information relates to the activities of the production department of Clough Limited for the month of March 2017:The company adds a margin of 50 percent to the total production cost of
What is non-production overhead?
Burns Limited has three production departments (processing, assembly and finishing) and two service departments (administration and work study). The following information relates to April
How should it be absorbed into product costs?
Outlane Limited’s overhead budget for 2019 is as follows:The company has four production departments: L, M, N and O. The following information relates to each department. Previously, the
What is a predetermined absorption rate?
What is meant by under- and over-recovery of overhead?
What do the initials ‘ABC’ mean?
What is a cost pool and a cost driver?
How does ABC differ from traditional absorption costing?
What is the difference between a plan and a budget?
What type of costs would an organisation like the FRC incur?
What is meant by ‘budgetary control’?
The following information has been prepared for Tom Limited for the six months to 30 September 2016: Product X uses two units of component A6 and three units of component B9. On 1 April 2016
How do you think that the various levies mentioned in the news story have been determined?
Don Limited has one major product that requires two types of direct labour to produce it. The following data refer to certain budget proposals for the three months to 31 August 2017: Direct
How long is a normal budgeting period?
What is a sub-budget period?
What administration procedures does a budgeting system require?
In a commercial organisation, which budget is normally the first to be prepared?
Chimes Limited has prepared a flexible budget for one of its factories for the year to 30 June 2017. The details are as follows: Additional information:1 The company only expects to operate at a
What initial criterion is given to production managers before they begin to prepare their budgets?
What is meant by a functional budget?
List six common functional budgets.
What is meant by a fixed budget?
What is meant by a flexible budget?
Why is it desirable to prepare one?
List five desirable behavioural elements necessary to ensure a budgeting system is effective.
Explain what is meant by the following terms:(a) A standard,(b) A standard cost,(c) A variance,(d) Variance analysis.
What is a ‘business strategy’?
List four uses of standard costing.
Can selling prices be based solely on what they cost to make?
What type of entities might benefit from a standard costing system?
Does this news story provide a reasonable summary of standard costing?
How long should a standard costing period be?
You are presented with the following information for X Limited: Standard price per unit: £10.Standard quantity for actual production: 5 units.Actual price per unit: £12.Actual quantity: 6
What is (a) a basic standard, (b) an attainable standard, (c) an ideal standard?
Name four types of information required for a standard costing system.
The following information relates to Bruce Limited: Actual hours: 1000.Actual wage rate per hour: £6.50.Standard hours for actual production: 900.Standard wage rate per hour:
What is meant by ‘a standard hour’?
Name three standard cost performance measures.
The following overhead budget has been prepared for Anthea Limited:Actual fixed overhead: £150,000.Budgeted fixed overhead: £135,000.Fixed overhead absorption rate per hour: £15.Actual hours
What are their respective formulae?
Using the data contained in the previous question, calculate the following performance measures:(a) Efficiency ratio(b) Capacity ratio(c) Production volume ratio.
Complete the following equations: (a) Direct materials total = _________ + _________(b) Direct labour total = _________ + _________(c) Variable production overhead total = _________ +
What is (a) an adverse variance, (b) a favourable variance?
Using the data from the previous question, calculate the following performance measures: (a) Efficiency ratio(b) Capacity ratio(c) Production volume ratio.
Complete this equation: total sales variance = _________ + _________
Complete this statement: a standard cost operating statement links the budgeted profit to the _________ _________ for the period.
Mean Limited manufactures a single product, and the following information relates to the actual selling price and actual cost of the product for the four weeks to 31 March 2016: The budgeted
What system of costing is normally used for the costing of products and for stock valuation purposes?
What is meant by the announcement that the company is ‘targeting breakeven in 2017’?
Why is this system not suitable for specific decision making?
Can you suggest some reasons why the company only thinks that it has made an operating loss of £6m in the year to the end of September 2015?
What is meant by ‘decision making’?
If the company is likely to break even in 2017, what will its costs be for that year?
The following information relates to Pole Limited for the year to 31 January 2016.Required:Using the above information, compile a contribution analysis statement for Pole Limited for the year to 31
What term is given to the extra cost of an event?

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