UNIVERSITY OF PORTSMOUTH FACULTY OF BUSINESS AND LAW SUBJECT GROUP: ACCOUNTING AND FINANCE

UNIVERSITY OF PORTSMOUTH FACULTY OF BUSINESS AND LAW
SUBJECT GROUP: ACCOUNTING AND FINANCIAL MANAGEMENT
Management Accounting – P30260
Module Co-ordinator: Xinxiang Li
REFERRAL/DEFERRAL EXAMINATION PAPER
July 2020
Time Allowed: 2 Hours and 45 minutes
Paper rubric
Answer ALL TEN questions in Section A (30 marks)
Answer the ONE compulsory question in Section B (50 marks)
Answer ONE out of THREE questions in Section C (20 marks)
Total marks available 100 marks
SECTION A 30% of total examination marks
[Section instruction: Answer all 10 questions in this section, each question carries equal marks.]
1. A business makes a product with the following results:
Sales 25,000 units at £15 each
Variable costs £150,000
Profit £45,000
What is the breakeven point in number of units?
A) 12,000
B) 3,000
C) 20,000
D) 5,000
2. Which of the following statements concerning by-products is true?
A) they are also known as scrap
B) net revenues should be deducted from the cost of the joint production process prior to allocating costs to individual products
C) a small portion of the joint production costs are allocated to them
D) they are the primary reason that management undertook the production process
3. In one budget period, the following information applied to one of a company’s products:
Budgeted output: 10,000 units
Actual output: 9,000 units
Budgeted direct labour cost per unit: £30
Actual direct labour cost for period: £310,000
What was the flexible budget variance for direct labour in the period?
A) £40,000 adverse
B) £40,000 favourable
C) £10,000 adverse
D) £10 favourable
4. A favourable materials yield variance together with an adverse materials mix variance could suggest that?
A) We paid more for the materials than we should have
B) We may have altered the materials mix which has increased material productivity
C) All materials were of a lower quality than normally used
D) We are using materials less efficiently
5. The main disadvantage of cost-plus pricing is:
A) it encourages price instability
B) prices are difficult to calculate
C) it encourages increases in prices
D) it ignores customer demand
6. A salesman calculates his expected profit next week to be £120. A survey company offers to sell him for £20 information that he could use to increase his profits to £200 next week. The value of the information is:
A) £60
B) £80
C) £180
D) £200
7. Which of the following is incorrect
A) Incremental budgeting is the traditional budgeting method whereby the budget is prepared by taking the current period's budget or actual performance as a base, with incremental amounts then being added for the new budget period.
B) Zero based budgeting are easier to prepare than traditional incremental budgets and are therefore more cost effective
C) Incremental budgets are easy to prepare
D) Zero based budgeting challenges the status quo and encourages a questioning attitude among managers.
8. A company has recently completed the production of the first unit of a new product. The time taken for this was 12 minutes. The company expects that there will be a 75% learning rate for this product.
Calculate the total time expected to produce the first four units.
A) 18 minutes
B) 22 minutes
C) 27 minutes
D) 36 minutes
9. RS Ltd manufactures a product which requires two materials. The standard material cost per unit is as follows:
Material Q 20 kg at £5 per kg £100
Material R 13 kg at £7 per kg £63
The results for the month indicate that the actual mix used was 1,500 kg of Q and 1,800 kg of R. The actual output was 112 units. The total material yield variance was nearest to:
A) £1,000 adverse
B) £1,956 favourable
C) £1,956 adverse
D) £1,000 favourable
10. Which of the following statements is false:
A) Control is the process of ensuring that an organisations activities conform to its plan and that its objectives are achieved
B) A budget could be described as a results control
C) Organisations employ controls and control systems to give managers the tools & information to correct situations that they identify as out of control
D) A modern organisation in a service industry should not use budgetary control systems
[Total 20 marks]
[End of Section A]
SECTION B 50% of total examination marks
[Section instructions: Answer the ONE compulsory question in this section.]
Question 1
To improve profitability the Smooth Coffee Shop employed Martin Jones to run the Knightsbridge outlet. Before joining the chain Martin was the regional manager for a national chain of high quality bistros. The feeling was that Martin could use his experience to improve performance and was therefore allowed a free hand to make a number of changes, which included:
 Employing a chef and selling an extensive range of cooked meals
 Investing in a new kitchen
 Introducing a new pricing policy which was loosely based on material cost plus 300% to cover labour, fixed costs and profit
 Cutting opening hours from 9.00 to 19.00 in 2011 to 10.00 to 18.00 in 2012.
The general feeling amongst the management at the Smooth Coffee Shop is that Martin has been a breath of fresh air, sales are up, the customers give rave reviews and during lunch time during the week, it is near on impossible to find a table. Despite this, you are slightly concerned with the bottom line result and have decided to compare 2011 and 2012.
Knightsbridge 2011
Knightsbridge 2012
£'000
£'000
Sales Revenue
£572
£813
Variable Costs
£149
£299
Staff Costs
£125
£208
Leasehold Costs
£158
£160
Depreciation
£41
£52
Cost of Sales