Questions and Answers of Management Accounting

Which of the following statements are TRUE regarding BPR? Select all that apply.- BPR is often used as the pretext for staff reductions.- BPR is a long term approach to gaining a competitive
The following data relates to three products manufactured by BJS Ltd:The firm has 80,000 bottleneck hours available each period, and total factory costs amount to $\$ 100,000$ in the period.Task:
$\mathrm{X}$ Ltd manufactures and distributes three types of car (the $\mathrm{C} 1$, $\mathrm{C} 2$ and $\mathrm{C} 3$ ). Each type of car has its own production line.The company is worried by
A company requires a return of $12 \%$ in the coming year on its investment of $\$ 1,000,000$ in product $\mathrm{J}$. The selling price of product $\mathrm{J}$ is set at $\$ 52.00$ for each unit,
The predicted selling price for a product has been set at $\$ 56$ per unit. The desired mark-up on cost is $25 \%$ and the material cost for the product is estimated to be $\$ 16$ before allowing for
Which of the following would be a legitimate strategy to reduce a cost gap for a product that existed in a competitive industry with demanding shareholders who expect a consistent return?A.
Which of the following is not considered a primary activity in the value chain developed by Michael Porter? Select ALL that apply:- Sales- Operations- Outbound logistics- Procurement- Inbound
Which of the following statements about the benefits of lifecycle costing are TRUE? Select ALL that apply:- Its use may assist management in allocating resources to nonproduction activities.- A
Company $\mathrm{B}$ is about to begin developing a new product for launch in its existing market. They have forecast sales of 20,000 units and the marketing department suggest a selling price of $\$
The selling price of product $Z$ is set at $\$ 250$ for each unit and sales for the coming year are expected to be 500 units. If the company requires a return of $15 \%$ in the coming year on its
Casabee was established in 2010 and manufactures a range of kitchen utensils, which it makes from material purchased from a number of suppliers. The recently appointed Managing Director has expressed
A company has carried out extensive product research and, as a result, has just launched a new innovative product unlike anything else that is currently available on the market. The company has
Company $\mathrm{S}$ is a specialist car manufacturer and intends to produce a new, limited edition 'Compact Executive' car in 2016. The car will be called the $\mathrm{S} 2016$. The production will
Formed in 1966, Jord Homes (Jord) quickly gained a reputation for the construction of high-quality, prefabricated timber-framed houses in its home country of Corvola. Under the leadership of the
As part of a new product development, Butte Ltd has employed a building consultant to perform an initial survey. This initial survey has cost $\$ 40,000$. But there will be an ongoing need for her
Identify which of the following costs are relevant to the decisions specified:(a) The salary to be paid to a market researcher who will oversee the development of a new product. This is a new post to
Activity 1A mining operation uses skilled labour costing $\$ 4$ per hour, which generates a contribution, after deducting these labour costs, of $\$ 3$ per hour. A new project is now being considered
What are the limitations of using externally generated information?
Data integrity and security is a particular issue in a database. For data to have integrity, it must be accurate, consistent and free from accidental corruption.Required:What controls are required in
Calculate the fund value after 12 years.$\$ 450$ is invested in an account earning $6.25 \%$ interest p.a.
Calculate the present value of $\$ 25,000$ receivable in six years' time, if the interest rate is $10 \%$ p.a. Use both the discounting formula and discount tables to calculate your answer.
Wilson Ltd is considering a capital investment in new equipment. The estimated cash flows are as follows.The company's cost of capital is $9 \%$.Calculate the NPV of the project to assess whether it
Mickey Ltd is considering two mutually-exclusive projects with the following details:Assume that the initial investment is at the start of the project and the annual cash flows are at the end of each
A potential project's predicted cash flows give a NPV of $\$ 50,000$ at a discount rate of $10 \%$ and $(\$ 10,000)$ at a rate of $15 \%$. Calculate the internal rate of return (IRR).
Following on from the information provided in example 4:(a) Calculate the internal rate of return of Project A. Use the project NPV of $\$ 73,620$ at $10 \%$ from example 4 , and calculate a second
A business undertakes high-risk investments and requires a minimum expected rate of return of $17 \%$ pa on its investments. A proposed capital investment has the following expected cash flows:State,
A project with the following cash flows is under consideration in a company called Alpine Ltd:Cost of capital 8%Calculate the MIRR. $000 T1 T2 T3 T4 (20,000) 8,000 12,000 4,000 2,000
Calculate the present value of the following cash flows:1. A fifteen year annuity of $\$ 300$ starting at once. Interest rates are $6 \%$.2. A perpetuity of $\$ 33,000$ commencing immediately.
A company may undertake any of the following investment projects.In the next budget period there is only $\$ 9$ million available for capital expenditure projects. Each project is
Calculate how much should be invested now in order to have $\$ 250$ in eight years' time? The account pays $12 \%$ interest per annum.
Allen Ltd is considering a project with a three-year life producing the following costs and revenues:Identify which of the following is closest to the net present value of the machine:A. $(\$
Identify the correct explanation of the internal rate of return - it is the interest rate that equates the present value of expected future net cash flows to:A. the initial cost of the investment
The financial director of A Co has prepared the following schedule to enable her to appraise a new project. Interest rates are $10 \%$. She wants to calculate the PV of the cash flows using two
You are a Financial Manager employed by Pepper Studios ('Pepper'), a company that makes feature films. Pepper produces and distributes films globally, in partnership with external investors.You
A project requires an initial investment of $\$ 1,000,000$ and then earns net cash inflows of $\$ 150,000$ per year for 7 years.What is the project's payback period?
A business is considering a project which would last 5 years and have an initial investment of $\$ 40,000$ in machinery. At the end of the project the machinery would have a scrap value of $\$
Mickey Ltd is considering two mutually-exclusive projects with the following details:Required:Calculate the ARR based on the average investment for each project, and indicate which project should be
$\$ 50,000$ is to be spent on a machine having a life of five years and a residual value of $\$ 5,000$. Operating cash inflows will be the same each year, except for year 1 when the figure will be
An asset is bought by Placer Ltd for a project at a cost of $\$ 25,000$. The asset will be used for four years before being disposed of for $\$ 5,000$. Tax-allowable depreciation is available at $25
Amigo Ltd is considering investing in a new machine which has a capital cost of $\$ 25,000$. It has an estimated life of four years and a residual value of $\$ 5,000$ at the end of four years. The
Camp plc has produced and marketed sleeping bags for several years. The sleeping bags are much heavier than some of the modern sleeping bags being introduced to the market. The company is concerned
Smith Ltd has decided to increase its productive capacity to meet an anticipated increase in demand for its products. The extent of this increase in capacity has still to be determined, and a
A company has a money cost of capital of $21 \%$ per annum. The inflation rate is currently estimated at $9 \%$ per annum.Identify the real cost of capital:A. $9 \%$B. $11 \%$C. $12 \%$D. $14 \%$
Storm Ltd is evaluating project $X$ which requires an initial investment of $\$ 50,000$. Expected net cash flows are $\$ 20,000$ per annum for 4 years at today's prices. However these are expected to
A company is considering a cost-saving project. This involves purchasing a machine costing $\$ 7,000$, which will result in annual savings (in real terms) on wage costs of $\$ 1,000$ and on material
Thunder plc has just developed a new product to be called the Lightening and is now considering whether to put it into production. The following information is available:(i) Costs incurred to date in
Leo is contemplating spending $\$ 400,000$ on new machinery. This will be used to produce a revolutionary type of lock, for which demand is expected to last three years. Equipment will be bought on
Ackbono $\mathrm{Co}$ is considering a potential project with the following forecasts:The initial investment will be made on the first day of the new accounting period.The selling price per unit is
November 20X7In early November 20X7, R Ltd considered manufacturing a new product called Sparkle. Up to that time $\$ 750,000$ had been spent on researching the product. The company estimated that it
Donald Ltd is considering replacing an asset with one of two possible machines:The machines will be required into the foreseeable future. The company's cost of capital is $10 \%$.Required:Calculate
A supermarket is trying to determine the optimal replacement policy for its fleet of delivery vehicles. The total purchase price of the fleet is $\$ 220,000$.The running costs and scrap values of the
Mickey Ltd is considering two mutually-exclusive projects with the following details:Assume that the initial investment is at the start of the project and the annual cash flows are at the end of each
The management of Spring Ltd are making a decision on whether or not to purchase a new piece of plant and machinery which costs $\$ 100,000$. The new machine will generate a net cash flow of $\$
Spotty Ltd plans to purchase a machine costing $\$ 18,000$ to save labour costs. Labour savings would be $\$ 9,000$ in the first year and labour rates in the second year will increase by $10 \%$. The
Apollonia Ltd operates 30 dental practices in London. You are a financial manager in Apollonia's head office. Your primary responsibilities are associated with management accounting. You report to
Assume that the sales of a retailer fall from 20 per day to 12 per day when the price of a chocolate bar goes up from $40 \mathrm{c}$ to $60 \mathrm{c}$. What is the price elasticity of demand?
At a price of $\$ 200$, a company will be able to sell 1,000 units of its product in a month. If the selling price is increased to $\$ 220$, the demand will fall to 950 units. It is also known that
The total fixed costs per annum for a company that makes one product are $\$ 100,000$, and a variable cost of $\$ 64$ is incurred for each additional unit produced and sold over a very large range of
Product $\mathrm{K}$ incurs a total cost of $\$ 10$ per unit sold, as follows.The marginal revenue (MR) and demand functions for product $\mathrm{K}$ are:$M R=200-0.4 x$$p=200-0.2 x$Where $p-$ price,
XYZ Ltd is introducing a new product. The company intends to hire machinery to manufacture the product at a cost of $\$ 200,000$ per annum. However, this will only enable 60,000 units per annum to be
Place each of the following statements in a grey cell, against the pricing strategy to which it is most likely to relate: Price differentiation on age Price differentiation on gender Skimming Volume
$A B C$ plc is about to launch a new product. Facilities will allow the company to produce up to 20 units per week. The marketing department has estimated that at a price of $\$ 8,000$ no units will
Market research by Delnorte Ltd has revealed that the maximum demand for product $R$ is 50,000 units each year, and that demand will reduce by 50 units for every $\$ 1$ that the selling price is
Another product manufactured by Delnorte Ltd is product M. At a price of $\$ 700$ for product $M$ there would be zero demand, and for every $\$ 40$ reduction in the selling price the demand would
Fresno Ltd is considering the pricing of one of its products. It has already carried out some market research with the following results:The quantity demanded at a price of $\$ 100$ will be 1,000
Glenn Ltd is launching a new product which it expects to incur a variable cost of $\$ 14$ per unit. The company has completed some market research to try to determine the optimum selling price with
During the current year AB Ltd planned to produce 150,000 units of its main product, a cordless hand drill. Nearing the end of the current year, activity so far has corresponded to budget and it is
CamLife Ltd manufactures webcams, devices which can provide live video and audio streams via personal computers. You report to the senior financial manager, but you also regularly advise the
Bryn Ltd sells and repairs photocopiers. The organisation has operated for many years with two departments, the sales department and the service department, but the departments have no autonomy. The
The materials purchasing manager is assessed on:- total material expenditure for the organisation- the cost of introducing safety measures, regarding the standard and the quality of materials, in
An investment centre has reported a profit of $\$ 28,000$. It has the following assets and liabilities:The $\mathrm{ROI}$ for the division is $\$$ __________________ $\%$. $ Non-current assets (at
Nielsen Ltd has two divisions with the following information:Division A has been offered a project costing $\$ 100,000$ and giving annual returns of $\$ 20,000$. Division $B$ has been offered a
Division A has been offered a project costing $\$ 100,000$ and giving annual returns of $\$ 20,000$. Division $B$ has been offered a project costing $\$ 100,000$ and giving annual returns of $\$
The manager of the 'D' Division is considering investing in a replacement machine at the beginning of next year, 2020.If the investment does not go ahead, then the divisional results for '
An investment centre has net assets of $\$ 800,000$, and made profits before interest of $\$ 160,000$. The notional cost of capital is $12 \%$. This is the company's target return.An opportunity
Comment on the problems that may be involved in comparing divisional performance.
A company with several divisions has a cost of capital of $6 \%$. An excerpt from Division B's accounting summary for the period is shown below:The value of closing Capital Employed is $\$ 525,000$.*
Bitluns is a holiday company, that operates more than 100 all-inclusive resorts. The performance of the manager of each resort is evaluated using financial measures.Many of the resort managers are
The manager of a trading division has complete autonomy regarding the purchase and use of non-current assets. The division operates its own credit control policy in respect of customers but the group
A division has a reported annual profit of $\$ 27 \mathrm{~m}$. This was after charging $\$ 6 \mathrm{~m}$ for the development and launch costs of a new product which is expected to have a life of 3
Tweedle Ltd has two divisions, Division Dee and Division Dum. Tweedle founded Dee on 1 January 2013. Dum was an independent business that had been formed some years before. Tweedle purchased Dum as a
GS Ltd has recently decided to enter into a joint venture with Garvs Ltd, with the newly formed company being named ABG Ltd and manufacturing and selling high-end sports clothes in Nordland.ABG Ltd
Division A of the Wye Group manufactures one product and when operating at $100 \%$ capacity can produce 5,000 units per period, but for the last few periods has been operating below capacity.Below
Bug Ltd manufactures one uniform product. Activity levels in the assembly department are an average level of activity of 20,000 units production per four-week period. The actual results for four
A government is looking at assessing state schools by reference to a range of both financial and non-financial factors, one of which is average class sizes.Which of the three E's best describes the
Suggest performance indicators to include in the Balanced Scorecard of a credit card company. Financial indicators of performance: 'Customers' indicators of performance:
Faster Pasta is an Italian fast food restaurant that specialises in high quality, moderately priced authentic Italian pasta dishes and pizzas. The restaurant has recently decided to implement a
You work as Financial Controller for E5E. E5E is a charity concerned with heart disease. Its mission statement is as follows:'To fund world class research into the biology and the causes of heart
Alameda Ltd has two divisions, Division Alpha and Division Beta. Division Alpha makes widgets, which it can sell externally for $\$ 45$ as well as internally to Division Beta. The marginal cost of
Pool Group has two divisions that operate as profit centres. Each centre sells similar products, but to different segments of the market:- Division P makes product P29 which it sells to external
Alameda Ltd has two divisions, Division Alpha and Division Beta.Division Alpha makes widgets, which it can sell externally for $\$ 45$ as well as internally to Division Beta. The marginal cost of
Seacross Group has two subsidiaries, UKD in the UK and GD in Germany.UKD makes and sells Product S99. The variable cost of manufacture in the UK is $£ 200$ per unit and annual fixed costs are $£
A professional firm has two divisions, a computer consultancy division (CSD) and a management advisory division (MAD). Each division provides consultancy and advisory services to clients and in the
Hock Group has two divisions, Division $\mathrm{P}$ and Division Q. Division $\mathrm{P}$ manufactures an item that is transferred to Division $Q$. The item has no external market, and 60,000 units
An international group operates in four countries, the US, France, the UK and Malaysia. Its divisions in each country trade with each other. There are large differences between the countries in rates
All That Jazz Ltd (ATJ) has two divisions - the 'Gin' division and the 'Piano' division. Division 'Gin' manufactures a product called the aye and Division 'Piano' manufactures a product called the
Division A transfers 100,000 units of a component to Division B each year. The market price of the component is $\$ 25$. Division A's variable cost is $\$ 15$ per unit, and A's divisional's fixed
STK Solutions (STK) is an IT service provider.You have received the following email from the Finance Director: From: Sarah Dentch Today Date: Subject: Restructuring and transfer pricing As you are
Amador Ltd is considering investing $\$ 120,000$ in equipment that has a life of 15 years. Its final scrap value is $\$ 25,000$.The equipment will be used to produce 15,000 deluxe pairs of rugby
Ventura Ltd is considering launching a new product. It will do so if the expected value of the total revenue is in excess of $\$ 1,000$. It is decided to set the selling price at $\$ 10$. After some

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