F5 P1.1

Q20: The following costs have arisen in relation to the production of a product: (i) Planning and design costs (ii) Testing costs (iii) Production costs (iv) Customer service costs In calculating the life-cycle cost of a product, which of the above items would be included?

• (iii) only
• (i) and (iii) only
• (i), (ii) and (iii) only
• All of the above

Q21: Which of the following statements about life-cycle costing is TRUE?

• A product is usually most profitable during the growth of its life-cycle
• Life-cycle costing is useful for deciding the selling price for a product
• An important use of life-cycle costing is to decide whether to go ahead with the development of a new product
• Life-cycle costing is most useful for products with an even weighting of cost over their life

Q22: Different management accounting techniques can be used to account for environmental costs. One of these techniques involves analyzing costs under three distinct categories: material, system and delivery and disposal. What is this technique known as?

• Activity based costing
• Life-cycle costing
• Input-output analysis
• Flow cost accounting

Q23: Which of the following statements is/are true regarding the issue faced by business in the management of their environmental costs?(i) The costs involved are difficult to define(ii) Environmental costs can be categorized as quality related cost(iii) Cost control can be an issue, in particular if costs have been identified incorrect….. the first place.

• (i) only
• (ii) and (iii) only
• None of them
• All of them

Q24: Flow cost accounting is a technique which can be used to account for environmental costs. Inputs and outputs are measured through each individual process of production. Which of the following is NOT a category within flow cost accounting?

• Material flows
• Water flows
• System flows
• Delivery and disposal flows

Q25: Accountants usually find it difficult to deal with environmental costs. Which of the following is NOT a reason for this?

• Costs are often hidden
• Costs are mostly minor
• Costs are often very long term
• Accounting systems rarely split off these costs automatically

Q26: The contribution ratio of product A is 40%. The manufacturer of product A wishes to make a contribution of $100,000 towards fixed costs. If the selling price is $ per unit, the number of units of A that must be sold is:

• 50,000 units
• 40,000 units
• 20,000 units
• 8,000 units

Q27: A company makes a single product and incurs fixed costs of $100,000 per month. Variable cost per unit is $10 and each unit sells for $20. It’s budgeted to sell 10,000 unit monthly. How much is contribution earned from each $1 of sales revenue?

• $2
• $1
• $0.5
• $0.25

Q28: Taylor. Co makes a single product, which it sells for $25 per unit. Fixed costs are $87,500 per month and the product has a contribution ratio of 25%. In a month when actual sales were $425,000, Taylor’s margin of safety, in units, was:

• 17,000 units
• 14,000 units
• 3,500 units
• 3,000 units

Q29: The following information is available for a manufacturing company which procedures multiple products: (i) The production mix ratio (ii) Contribution to sales ratio for each product (iii) General fixed cost (iv) Method of apportioning general fixed costs. Which of the above are required in order to calculate breakeven sales revenue for the company?

• (i), (ii) and (iii) only
• (i), (ii) and (iv) only
• (ii) and (iii) only
• All of the above