Financial Accounting Quiz 5 Solutions - Detailed Explanations

This document presents the solutions to a Finance Quiz 5, covering a range of financial accounting topics. The quiz includes questions on budgeting, cost volume profit (CVP) analysis, management remuneration, debt financing, and relevant costs for decision-making. Other topics include capital investment, cost assignment, target costing, break-even analysis, mixed costs, and product life cycles. The solutions provide detailed explanations and answers to each question, including calculations for break-even units and analysis of qualitative factors in outsourcing decisions. The quiz also covers operating leverage and the differences between target costing and standard costing, offering a comprehensive review of key financial concepts. This resource is designed to aid students in understanding and preparing for similar assessments, providing valuable insights into financial management principles and practical applications.

Quiz 5
Question 1
From the following, select a statement that is true with regard to budgeting:
a. budgeting is a specialist skill that requires a certified practicing accountant to achieve
Question 2
A firm can:
d. none of the options are true
Question 3
Cost volume profit (CVP) analysis:
b. can be referred to as break-even analysis
Question 4
Choose the best statement regarding management remuneration:
a. management remuneration is a real-life example of the principal-agent dilemma
Question 5
Select the statement that is false about debt financing:
c. all debt is convertible
Question 6
Select the best statement regarding costs for decision-making:
a. incremental costs are relevant in making a decision
Question 7
From the following pick the best statement regarding capital investment:
d. none of the options is ideal
Question 8
Pick the best statement regarding cost assignment:
c. job costing is designed to ensure any possible job is costed to be the same
Question 9
Target costing:
d. is not different from product lifecycle costing

Question 10
A key assumption of CVP and break even analysis includes:
a. costs can be neatly classified as fixed or variable
Question 11
Which is not an example of a mixed cost:
d. Rent
Question 12
Ryan’s Music provides individual music lessons in the homes of clients. The following data is provided with respect
to the last 12 months of activity ending 30 June:
Calculate break even units:
c. 1,500
Question 13
The Cone Head House sells ice cream cones in a variety of flavours. Financial data for a recent week is shown
below:
Revenue (1000 cones @ $2.00) $2,000
Cost of ingredients $600
Rent $350
Store attendant $700
Income $70
The Cone Head’s manager received a call from a club requesting an order on 100 cones to be picked up in three
days (in addition to the above). The cones could be produced by the store attendant during slack periods, and
then stored in the freezer. Each cone requires a special plastic cover that costs $0.05.
What quantitative information is relevant for this decision?
a. cost of ingredients
Question 14
Which is not a step in the target costing process:
d. break even analysis
Question 15
Which is not a stage of a product’s life cycle:
d. product support

Question 16
When deciding to outsource a business activity, an example of a qualitative factors to be considered includes:
c. reliability of supply
Question 17
How is target cost and different from standard cost?
b. The purpose of standard cost is to ascertain the cost of a product in future, the purpose of target costing is to
help a firm to remain and to compete in the market in the long run.
Question 18
The formula for break-even analysis is:
a. Fixed costs / contribution margin
Question 19
Choose the best statement regarding operating leverage:
b. he mix between fixed and variable costs
Question 20
Of the following, identify the statement that is false:
d. All of the above are true
Q