LM operates a parcel delivery service. Last year its employees delivered 15,120 parcels and travelled 120,960 kilometers. Total costs were $194,400.

LM has estimated that 70% of its total costs are variable with activity and that 60% of these costs vary with the number of parcels and the remainder vary with the distance travelled.

LM is preparing its budget for the forthcoming year using an incremental budgeting approach and has produced the following estimates:

• All costs will be 3% higher than the previous year due to inflation

• Efficiency will remain unchanged

• A total of 18,360 parcels will be delivered and 128,800 kilometers will be travelled.

Calculate the following costs to be included in the forthcoming year’s budget: 

(i) the total variable costs related to the number of parcels delivered. 

(ii) the total variable costs related to the distance travelled.

Which costing method, used in just-in-time (JIT) production systems, attaches cost directly to output rather than following the flow of product through the production process?

A project has an expected value of $165,250.

The estimates of cash inflows and their probabilities are:

What is the missing cash inflow?

Give your answer as a whole number.

For a company that does not have any production resource limitations, what would be the correct sequence for budget preparation?

A company manufactures three products X, Y and Z.

The company is currently operating at full capacity and is unable to meet the full sales demand for Product Z.

According to the latest management accounts, Product Y is loss making, whilst X and Z both make strong positive contributions.

Which of the following is relevant when making a decision on whether or not to discontinue the manufacture of Product Y?

Assume that you have made profit calculations based on standard profit calculation methods and activity based costing methods.

In which ways will this information be beneficial to the management team?

Select all the true statements.

Calculate the sensitivity of the investment decision to a change in the annual fixed costs.

By how much should the present value of the fixed cost increase, before this project is not viable?

For the forthcoming period, the number of units of product L produced must be no more than four times the number of units of product M produced.

The equation to represent this constraint in a linear programming exercise is:

Which of the following managers is most likely to be responsible for an favourable labour efficiency variance?

QR uses an activity based budgeting (ABB) system to budget product costs. It manufactures two products, product Q and product R. The budget details for these two products for the forthcoming period are as follows:

The total budgeted cost of setting up the machines is $74,400.

What was the budgeted machine set up cost per unit of product Q?