A company is considering the use of Material V in a special order.

The material is used regularly and a sufficient quantity of the material is in inventory.

It could also be sold, at just below the current market price, to a local competitor.

What is the relevant cost of Material V to be used in the special contract?

A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

A healthcare company specializes in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures the company offers pre operation and post operation in-patient care, in a fully equipped hospital, for those patients who will be undergoing the surgical procedures.

Surgeons are paid a fixed fee for each surgical procedure they perform and an additional amount for any follow-up consultations. Post procedure follow-up consultations are only undertaken if there are any complications in relation to the surgical procedure. There is no additional fee charged to patients for any follow up consultations. All other staff are paid annual salaries.

The company’s existing costing system uses a single overhead rate, based on revenue, to charge the costs of support activities to the procedures. Concern has been raised about the inaccuracy of procedure costs and the company’s accountant has initiated a project to implement an activity-based costing (ABC) system.

The project team has collected the following data on each of the procedures. 

Calculate the profit per procedure for each of the three procedures, using the current basis for charging the costs of support activities to procedures.

What was the profit for the knee procedure?

For the past year a manufacturing company has recorded the number of units produced (x) each week and the total production cost (y) for that week. The company intends to use this data to predict future costs.

For the circumstance described above, linear regression is more useful and accurate than the high-low method because:

1. It uses all the sets of data observed to calculate the line of best fit.

2. The coefficient of variation can estimate what percentage of x is due to a change in y.

3. Forecasts remain valid for values for x outside of the observed range.

Which of the above statements are true?

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company’s planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company’s normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.

The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.

Select ALL the benefits for the company that could occur following the introduction of an activity based budgeting system.

FG Enterprises manufactures and sells three products. There are 4,400 kg of Material X available in the next period. Material X is used in the manufacture of all three products. The following data is available for the next period.

What is the optimal production plan for the next period in order to maximise profit?

A flexible budget is a budget that is:

Sales volumes reported for the latest period are used by managers as the basis to forecast sales for the forthcoming period. The forecasts are compared with the budgeted sales and plans are adjusted to ensure that the budgeted sales are achieved.

This is an example of:

Place the components of the time series next to the example about the impact on sales that they best represent.

A manufacturing company has fixed production overhead costs, direct material costs and direct labour costs. The number of units of closing finished goods inventory is lower than the opening inventory.

Which of the following statements is true?