Financial Accounting and Costing Assignment - Questions and Answers

This document presents a comprehensive finance quiz covering key concepts in financial accounting and costing. The quiz includes questions on topics such as profitability analysis, relevant costs, variance analysis, break-even point, and financial ratios like the acid test ratio and contribution margin ratio. Detailed solutions are provided for each question, including calculations and explanations. The quiz assesses understanding of cost accounting principles, including full costing, and the impact of inventory valuation methods like LIFO. It also covers budgeting, including flexing budgets, and the application of activity-based costing (ABC). Furthermore, the quiz assesses understanding of financial statement analysis, including the impact of errors on financial ratios and the interpretation of variances. The assignment includes questions on make-or-buy decisions, and calculating prices based on cost plus mark-up. Overall, this is a valuable resource for students seeking to reinforce their knowledge of financial accounting and costing principles and prepare for examinations or assignments.

Q U E S T I O N 1
1. Coca plc is a profitable business that produces a single product. The following
information is available concerning the product.
Per unit (£)
Selling price 31
Variable costs (13)
Fixed costs (16)
Profit 2
An overseas business has recently offered to buy 4,900 units of the product for
£16 per unit over the next year.
If the order is accepted, the business will have to pay workers overtime rates to
complete the order, which will increase variable costs by £1 per unit. It will also
mean that separate factory, which is currently not being used, will have to be
used to complete the order. The lease of the factory costs £5,500 per year.
What would be the net benefit (or loss) to the business if the order is accepted?
£ -142700 Net benefit/(Loss)
2 points
Q U E S T I O N 2
1. The following information is available about two companies, A Ltd and B Ltd.
Company A Ltd
(£)
Company B Ltd (£)
Sales 2,000 2,000
Cost of Sales 1,000 500
Trade receivables
(constant)
250 150
Which of the following statements is correct in making a comparison of company
A with company B?

A. Company A has the higher gross profit margin percentage and the shorter trade
receivables collection period
B. Company A has the lower gross profit margin percentage and the shorter trade
receivables collection period
C. Company A has the lower gross profit margin percentage and the longer trade
receivables collection period
D. Company A has the higher gross profit margin percentage and the longer trade
receivables collection period
A
B
C
D
2 points
Q U E S T I O N 3
1. The aspect of the business that prevents the business from achieving its
objectives to the maximum extent is known as the ___________________ factor.
A. key
B. constraining
C. main
D. limiting
A
B
C
D
1 points
Q U E S T I O N 4
1. Consider the following statements:
1. A cost that does not result in an outlay of cash is an irrelevant cost
2. A relevant cost must relate to the objectives of the business
Which of these statements is/are correct?
A. 2 only
B. 1 and 2
C. Neither 1 nor 2
D. 1 only

A
B
C
D
1 points
Q U E S T I O N 5
1. The following information from the statement of financial position of North Port
plc at the end of last year is available:
£m
Trade receivables 285
Accrued expenses 24
Inventories 222
Trade payables 208
Long term loan 157
Prepaid expenses 27
Bank balance 30
What is the acid test ratio (expressed as number of times and to one decimal
point)? [___________1.3__] times
2 points
Q U E S T I O N 6
1. For which ONE of the following uses is full costing usually considered most
appropriate?
A. Income measurement
B. Make or buy decisions
C. Profitability analysis where there is a scarce resource
D. Spare capacity usage decisions over the short term
A
B

C
D
1 points
Q U E S T I O N 7
1. The managers of Regan plc discovered that the repayment of a short term loan
during the year had been treated in error as interest charges. This discovery was
made after the draft annual financial statements had been prepared and after
the managers had calculated the following ratios based on these statements:
1. Operating profit margin
2. 2. Acid test ratio
3. 3. Sales revenue per employee
4. 4. Price/earnings ratio
Which TWO of the above ratios will change after the error has been corrected in
the financial statements?
E. 1 and 3
F. 2 and 4
G. 1 and 2
H. 3 and 4
A
B
C
D
2 points
Q U E S T I O N 8
1. Trade payables at the start of January are £12,500. They are all paid during
January. During the month, goods costing £18,000 are purchased, and at the end
of January there is an amount of £13,600 owing to trade payables.
What is the amount of cash paid to trade payables during January?
The amount of cash paid to trade payables during January is £[__16900___]
2 points
Q U E S T I O N 9
1. Consider the following statements:
1. When budgets are flexed, fixed costs are unaffected.
2. An adverse variance results in a profit shortfall.

Which of the statements is/are correct?
A. Neither 1 nor 2
B. 1 only
C. 2 only
D. 1 and 2
A
B
C
D
2 points
Q U E S T I O N 1 0
1. ABC is criticised in exactly the same way as the traditional approach because it
does not provide ___________________ information for decision makers.
A. Comparable
B. Understandable
C. Reliable
D. Relevant
A
B
C
D
1 points
Q U E S T I O N 1 1
1. Cosmos Ltd sells one product for which the data is given below:
£
Selling price per unit 10
Variable cost per unit 6

Fixed cost per unit 2
The fixed costs are based on a budgeted level of activity of 5,000 units for the
period.
What is the contribution per unit? £20000
What is the breakeven point in units? 0.5 units
How many units must be sold if Cosmos Ltd to earn a profit of £6,000 for the
period? 4600 units
6 points
Q U E S T I O N 1 2
1. Return on shareholders’ funds is within which one of the following groups of
ratios?
A. Profitability
B. Investment
C. Liquidity
D. Efficiency
A
B
C
D
1 points
Q U E S T I O N 1 3
1. The cost of indirect materials in any month is 40% variable (varying with direct
labour hours) and 60% fixed. The total cost of indirect materials during the
month of March was budgeted at £500. During the month of April it is expected
that the direct labour hours will be 20% higher than during March.
What should be budgeted for the cost of indirect materials in April?
The budgeted cost of indirect materials in April is £[__560___]

2 points
Q U E S T I O N 1 4
1. Instead of using the FIFO method, the effect of using LIFO for inventory
valuation during an inflationary period will?
1.
1.
A. Results in lower value of closing stock along with a lower profit
B. Results in higher value of closing stock along with a higher profit
C. Results in higher value of closing stock along with a lower profit
D. Results in lower value of closing stock along with a higher profit
A
B
C
D
1 points
Q U E S T I O N 1 5
1. A semi variable cost will:
A. Be zero when output is zero and will increase in direct proportion to output
B. Be more than zero when output is zero and will increase directly, but not
proportionately, with output
C. Be zero when output is zero and will increase directly, but not proportionately, with
output
D. Be more than zero when output is zero and will increase in direct proportion to output
A
B
C
D
1 points
Q U E S T I O N 1 6

1. A company gives a quotation for a job which requires 100kg of materials @ £10
per kg, 25 direct labour hours @ £40 per hour and overheads recovered on the
basis of kg used at £8 per kg. A profit mark-up of 60% is added. What is the
price chargeable to the customer?
A. £2,800
B. £5,600
C. £4,480
D. £3,248
A
B
C
D
2 points
Q U E S T I O N 1 7
1. Consider the following statements:
 1.A cost unit is the full cost of producing a single unit of a particular product or
service
2. 2.To deduce the cost of producing a unit of output for a business
producing a single, identical distinguish between direct and
indirect costs.
Which of these statements is/are correct?A
C. Neither 1 nor 2
D. 2 only
E. 1 only
F. 1 and 2
A
B
C
D
1 points
Q U E S T I O N 1 8
1. Shirley Ltd produced the following information for the month of August.
£
Sales price variance 57,000 (adverse)

Sales volume variance 36,000 (favourable)
Actual profit 179,000
Direct materials 65,000 (favourable)
Direct labour 83,000 (adverse)
Fixed overheads 18,000 (favourable)
2.
3. What is the original budget profit for the period? £[__272000__]
4.
5.
6.
2 points
Q U E S T I O N 1 9
1. DMF Ltd manufactures smoke detectors and the following information is
available for Model DMF/04:
Per unit
Direct cost £5
Selling price £15
Machine hours: Production 0.5
Direct labour hours: Inspection & Packing 0.1
2.
3. The following absorption rates are in use by the company:
4. Production: £4 per machine hour
5. Inspection & Packing: £10 per direct labour hour
6.
7. What will be the cost per unit of Model DMF/04 for inventory valuation
purposes in the company’s published financial statements?
8.
A. £10
B. £11
C. £7
D. £8
A
B
C
D
2 points
Q U E S T I O N 2 0
1. Kay Ltd makes a product with the following financial characteristics:

£
Selling price 40
Materials (16)
Labour (8)
Fixed overheads (12)
Profit 4
2.
3. Employees are paid a constant monthly income and are employed on a five year
contract.
4. What is the contribution margin ratio of the product?
A. 40%
B. 60%
C. 30%
D. 10%
A
B
C
D