AC5052 Performance Management Accounting L5 Resit CW1 Brief Term 2 | UEL

AC5052 Section A

Scenario-based questions: use the below information to answer questions 1 to 15.

Tracey Douglas is the owner and managing director of Heritage Garden Furniture Ltd. The company that makes museum-quality reproductions of antique outdoor furniture. Ms Douglas would like advice concerning the advisability of eliminating the model C3 lawnchair. These lawnchairs have been among the company's best-selling products, but they seem to be unprofitable. A condensed statement of operating income for the company and for the model C3 lawnchair for the quarter ended 30 June follows:

The following additional data have been supplied by the company:

(a) Direct labour is a variable cost at Heritage Garden Furniture.
(b) All of the company's products are manufactured in the same facility and use the same equipment. Building rent and maintenance and depreciation are allocated to products using various bases. The equipment does not wear out through use; it eventually becomes obsolete.
(c) There is ample capacity to fill all orders.
(d) Dropping the model C3 lawnchair would have no effect on sales of other product lines.
(e) Stocks of work in progress or finished goods are insignificant.
(f) Shipping costs are traced directly to products.
(g) General administrative expenses are allocated to products on the basis of sales. There would be no effect on the total general administrative expenses if the model C3 lawnchair were dropped.
(h) If the model C3 lawnchair were dropped, the product manager would be laid off.
Ms Douglas the owner and managing director of Heritage Garden Furniture Ltd., has consulted you for an advice on whether the company should drop the model C3 lawnchair.

Coursework Task:

Use the above Scenario information to answer questions 1 to 15. Select one correct option from each of the following questions:

1. Total avoidable variable costs if the model C3 lawnchair were dropped is:
A. £12,000
B. £240,000
C. £252,000
D. £184,000

2. Total avoidable fixed costs if the model C3 lawnchair were dropped is:
A. £12,000
B. £240,000
C. £252,000
D. £184,000

3. Total avoidable fixed and variable costs if the model C3 lawnchair were dropped is:
A. £12,000
B. £240,000
C. £252,000
D. £184,000

4. The opportunity cost of dropping the Model C3 lawnchair is:
A. £252,000.
B. £48,000
C. £122,000
D. £72,000

5. Which of the following costs would be avoided if the Model C3 lawnchair is dropped:
A. Depreciation
B. Building, rent, and maintenance
C. General administrative expenses
D. Product manager's salary for ModelC3 lawnchair.

6. The Model C3 lawnchair should be dropped if the company can find more profitable uses for the resources consumed by the Model C3 lawnchair.
A. True
B. False

7. The Fixed amount of avoidable Fringe benefits is:
A. £2,000
B. £10,000
C. £5,000
D. £15,000

8. The Variable amount of avoidable Fringe benefits is:
A. £3,000
B. £10,000
C. £5,000
D. £15,000

9. Total relevant contribution margin for Model C3 lawnchair is:
A. £300,000
B. £240,000
C. £12,000
D. £60,000

10. Relevant contribution margin ratio for Model C3 lawnchair is:
A. 0.20
B. 0.25
C. 0.30
D. 0.40

11. What should be the minimum acceptable level of sales for Model C3 lawnchair to be retained?
A. £60,000.
B. £252,000
C. £300,000
D. £235,100

12. If Model C3 lawnchair is dropped, overall company net operating profit would reduce by:
A. £252,000.
B. £48,000
C. £122,000
D. £72,000

13. Total irrelevant costs in the decision on whether or not to drop model C3 lawnchair is:
A. £71,100
B. £88,000
C. £48,000
D. £235,100

14. Which of the following is acceptable reason for including depreciation as unavoidable cost in a decision on model C3 lawnchair:
A. All products use the same equipment.
B. The equipment does not wear out through use.
C. The equipment can become obsolete.
D. All of the above.

15. As long as Contribution Margin from Model C3 lawnchair exceeds its own avoidable fixed costs it should not be dropped.
A. True
B. False

Section B: Multiple Choice Questions

16. International competition has:
A. made many management accounting systems obsolete over time.
B. made little impact on the work of management accountants.
C. made it difficult for companies to expand.
D. created few opportunities for management accountants to work in other countries.

17. Global competition:
A. is mainly a problem for companies in Europe and the US.
B. can come from unexpected sources.
C. is not having an impact on the quality of goods.
D. is always beneficial for companies.

18. The quality of a company's management accounting system is irrelevant to a company's success.
A. True
B. False

19. One of the following is not a recent development in management accounting:
A. PQR
B. TOC
C. TQM
D. JIT

20. With regards to environmental sustainability issues, managers concentrating on shareholder value should not be concerned by one of the following.
A. Eco-efficiency
B. Executive compensation
C. Cost of compliance
D. Efficient use of resources

21. Ethical standards have nothing to contribute to profitable business practices.
A. True
B. False

22. ERP represents a process-oriented information system based on value chain thinking.
A. True
B. False

23. Service industries provide different challenges for management accounting than do manufacturing industries.
A. True
B. False

24. Financial accounting suffered in the latter part of the 20th Century due to the emphasis on management accounting.
A. True
B. False

25. The key to control is:
A. feedback.
B. feeders.
C. actual figures.
D. budgeted figures.

26. Which of the following attribute is not required by the management in directing and motivating process?
A. Setting targets for different areas of business
B. Setting targets for different individuals
C. Planning for the future
D. Solve on-the-spot problems

27. Which of the following step is the least likely followed by the management in the process of planning?
A. Identifying alternatives.
B. Learning from the past.
C. Expressing things formally in budgets.
D. Keeping the organization functioning smoothly.

28. The process of overseeing day-to-day activities and keeping the organization functioning smoothly is called:
A. directing.
B. controlling.
C. planning.
D. decision making.

29. In decision making, managers use:
A. financial accounting information exclusively since it is more objective and precise due to well-established principles and conventions.
B. information regarding the organization as a whole rather than segments of the organization in order to capture a broader perspective of the company's operations.
C. information that is as precise as humanly possible.
D. whatever information is relevant to the decision even though the information may not conform to generally accepted accounting principles.

30. The managerial accounting reports of a company would be of most interest and benefit to the company's:
A. bankers.
B. shareholders.
C. bondholders.
D. production manager.