You must choose an answer for each MCQ. There is only ONE correctanswer to each question. If you choose more than one answer to aquestion, you will receive no marks for your choice.You must choose an answer for each MCQ and provide a short writtenjustification, including calculations, as needed, for your answer.The recommended word limit for Section A is approximately 700words.All questions carry equal marks – two marks per question: one markfor the answer and one mark for the justification

Answer ALL 20 questions in this section.
You must choose an answer for each MCQ. There is only ONE correct
answer to each question. If you choose more than one answer to a
question, you will receive no marks for your choice.
You must choose an answer for each MCQ and provide a short written
justification, including calculations, as needed, for your answer.
The recommended word limit for Section A is approximately 700
words.
All questions carry equal marks – two marks per question: one mark
for the answer and one mark for the justification (40 marks in
total).

1. The following statements have been made about life cycle costing.
2. Life cycle costing can be applied to products with a short
   life cycle.
3. Product life cycle costing is not well-suited for use within
   budgetary control systems.
   Which of the following statements is/are true?
   a. 1 only
   b. 2 only
   c. Neither 1 nor 2
   d. Both 1 and 2
   Examination
   © Pearson College London 2022 6
4. Product Alpha is made in a process where machine time is a
   bottleneck resource. Each unit requires 0.1 machine hours. The
   costs and selling price of product Alpha are as follows:
   Materials £6
   Labour £3
   Other factory costs £5
   Selling Price £15
   Using throughput accounting, what is the return per factory
   hour?
   a. £60
   b. £90
   c. £10
   d. £4
5. Given the following data has been established for product Beta, a
   new product in its design phase.

Product Beta target selling price £10 per unit
Target Profit 25% on cost
Current cost £8.40 per unit
What is the target cost gap for product Beta?
a. £0.40
b. £0.60
c. £0.90
d. £1.60

4. Paddington plc manufactures advanced cordless saws in a single
   factory. Each saw sells for £200 and the material costs £80 per unit.
   There is no limit to sales demand. Other production costs are
   £1,100,000 per year.
   Each saw requires the use of multiple machines of which, one
   machine is old and often breaks down. This means only 15,000
   saws can be produced per year.
   The factory is open for 50 weeks of the year and operates 40 hours
   a week.
   What is the throughput accounting ratio for Paddington plc’s
   factory?
   a. 1.32
   b. 1.53
   c. 1.64
   d. 2.19
5. Which of the following reasons would the choice of
   penetration pricing be suitable when establishing the price
   of a new product?
   a. To discourage new entrants to the market
   b. To increase the length of the initial stage of life cycle
   c. To ensure the product is as profitable as possible
   d. To set a price for the product to ensure it has a low elasticity
   of demand
6. A company is budgeting to sell 230,000 units of its product
   next year at a price of £15 per unit. Fixed costs will be
   £1,400,000 with variable costs of £8. What is the breakeven revenue and margin of safety in the budget?
   a. Break even £2,700,000, margin of safety 13%
   b. Break even £2,700,000, margin of safety 15%
   c. Break even £3,000,000, margin of safety 13%
   d. Break even £3,000,000, margin of safety 15%
7. The following budget data has been prepared for a company that
   manufactures four products
   Alpha Beta Gamma Delta
   Sales price per unit £9.00 £6.00 £4.00 £8.00
   Variable cost per unit £5.50 £4.00 £2.20 £4.00
   Budget sales units 20,000 25,000 50,000 12,500
   Direct labour hours
   per unit
   0.5 hr 0.25 hr 0.30 hr 0.8 hr
   The total number of direct labour hours available is 24,000 hours.
   Which products should it make and sell in the period?
   a. Alpha, Beta and Gamma
   b. Alpha, Beta and Delta
   c. Alpha and Beta only
   d. Alpha and Delta only
8. The main purpose of sensitivity analysis is to:
   a. predict the outcome of future events in an uncertain situation
   b. determine the worst possible outcome in a set situation
   c. understand how different assumptions and variables impact
   each other
   d. gain insight into how critical certain assumptions or variables
   are
9. Dig Ltd has been requested by a customer to help with some garden
   landscaping. The material which needs to be used and available
   information is as follows:
   Amount
   required
   Amount
   in stock
   Historic
   price per
   kg
   Current
   Price per
   kg
   Scrap
   Value per
   kg
   Cotswold stone 500 300 £12 £15 £5
   Green slate 200 200 £24 £20 £8
   The Cotswold stone is regularly used in projects by the company
   but the green slate is no longer used and has no alternative use.
   What is the relevant cost of material for this job?
   a. £5,200
   b. £8,400
   c. £9,100
   d. £10,800
   
10. A company is deciding which project to go ahead with from the
    following four mutually exclusive projects. The profit output
    depends on the strength of the economy.
    Strong
    economy
    Moderate
    economy
    Weak
    economy
    Project A £70,000 £10,000 (£7,000)
    Project B £40,000 £21,000 £5,000
    Project C £50,000 £20,000 (£6,000)
    Project D £25,000 £12,000 £5,000
    Probability of outlook 10% 40% 50%
    Which project offers the highest expected value?
    a. Project A
    b. Project B
    c. Project C
    d. Project D
11. Extracts from the flexible budgets of a manufacturing company are
    as follows.
    Quantity to produce 5,000 units 9,000 units
    Materials costs £50,000 £90,000
    Labour costs £55,000 £79,000
    Production costs £80,000 £80,000
    What would be the total expenditure incurred when 6,000
    units are produced?
    a. £259,000
    b. £248,000
    c. £230,000
    d. £233,000
12. The following statements have been made about zero based
    budgeting.
    (1) The zero-based budgeting process seeks to identify long term
    benefits and improvements, even if they are sometimes made
    at the expense of short-term profitability.
    (2) A restriction on the use of zero-based budgeting is that
    management do not always have the skills to apply it.
    Which of the above statements is/are true?
    a. 1 only
    b. 2 only
    c. Neither 1 nor 2
    d. Both 1 and 2
13. The following statements have been made about planning and
    operational variances.
    (1) No one may accept responsibility for planning variances.
    (2) It is usually easy to identify in retrospect what prices and
    quantities were, but not nearly so easy to identify what they
    should have been.
    Which of the above statements is/are true?
    a. 1 only
    b. 2 only
    c. Neither 1 nor 2
    d. Both 1 and 2
14. ‘Beyond Budgeting’ is considered an alternative to
    traditional budgeting as a result of criticisms of traditional
    budgeting. Which of the following is NOT a criticism of
    traditional budgeting?
    a. Budgets protect rather than reduce costs
    b. Budgets focus on sales targets rather than customer
    satisfaction
    c. Managers do not give budgeting enough of their time
    d. Budgets discourage innovation and initiative
15. Budget set up costs in a manufacturing department are £120,000.
    The following budgeted information is also available.
    Number of batches produced 40 batches
    Number of orders handled 200 orders
    Number of machine hours 8,000 machine hours
    Quantities of products produced 30,000 units
    In an activity-based costing system, what is likely to be the
    overhead recovery rate for set-up costs?
    a. £3,000 per batch
    b. £600 per order
    c. £15 per machine hour
    d. £4 per unit produced
16. Product quality or service quality is generally associated
    with which perspective of performance in a balanced
    scorecard?
    a. Customer perspective
    b. Financial perspective
    c. Innovation and learning perspective
    d. Operation perspective
17. In terms of performance measurement, ‘divisionalisation’
    refers to:
    a. The delegation of profit-making responsibility
    b. Incentives for improvement performance
    c. Return on investment
    d. Transfer pricing
    
18. Which ONE of the following measures of performance for
    public sector services is a measure of efficiency?
    a. Number of patients treated for £1 spent on hospital services
    b. Reduction in spending budget on government department
    compared with previous year
    c. Number of reported crimes that are solved by the police
    service
    d. Proportion of students in college achieving good pass grades
19. A divisionalised company has one division with the following
    performance details.
    per unit
    Selling price of products £154
    Variable Production costs £119
    Fixed Costs £160,000
    Sales 7,000 units
    Investment in the division £500,000
    The company uses 16% as its cost of capital.
    What is the residual income of the division?
    a. £85,000
    b. £5,000
    c. 17%
    d. 1%
20. The following are some areas which require control within a
    division.
    i. Creation of revenue
    ii. Purchase of Non-Current Assets
    iii. Apportioned head office costs
    iv. Spend on inventory and other working capital
    Which of the above would a manager within an investment
    centre have control over?
    a. i, ii, and iii only
    b. ii, iii and iv only
    c. i, ii and iv only
    d. All of the above