5/26/24, 2:02 PM PM Test 2

PM Test 2
Standard Costing and Performance Measurement

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1. Email *

2. Student Name *

3. 1. 2 points

Check all that apply.

A
B
C
D

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4. 2. Division Sell is operating at full capacity producing component XBD2 which 2 points

it sells externally for $8.00 per unit. The variable cost of production is $5 per
unit. Another internal division, Division Buy is negotiating a transfer price for
purchasing component XBD2 from Division Sell. Because of saved transport
costs, the variable cost of producing component XBD2 for Division Buy would
be $4.50 per unit.

What is the minimum transfer price that Division Sell should accept for
transferring component XBD2 to Division Buy?

Mark only one oval.

$4.50 per unit

$5.00 per unit

$7.50 per unit

$8.00 per unit

5. 3. A company has budgeted to produce 30,000 units of a product in one of its 2 points
divisions. Total costs for the division are expected to be:

Direct materials $52,000

Direct labor $77,000
Overheads (40% variable) $28,000

What transfer price per unit will generate a desired divisional profit of 10% on
sales (to two decimal places)?

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6. 4. Which THREE of the following events would most likely contribute towards 2 points
an adverse labor operational efficiency variance?

Check all that apply.

The union introduced a “go slow” agreement in the factory.

A number of factory workers retired and were replaced by new recruits.
The standard time per unit was revised downwards at the end of the month
Higher quality material was used
The original standard time per unit was too difficult
Workers received a pay rise that was not reflected in the standard rate per hour

7. 5. The Safe Soap Co makes environmentally-friendly soap using three basic 2 points
ingredients. The standard cost of one batch of soap was $6.4, as follows.

According to the given information, what was the yield variance for September?
(to the nearest $?)

Mark only one oval.

$291,277 adverse

$102,400 favourable

$9,899 favourable

$45,512 adverse

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8. 6. Magic Drinks makes a popular soft drink by mixing two ingredients − soda 2 points

water and a special syrup. Soda water is inexpensive; the special syrup is
expensive. The standard mix for the drink is 80% soda water and 20% special
syrup.

During the recent financial period, the company recorded a favorable mix
variance.

Identify, by selecting the relevant boxes in the table below, whether the
following statements regarding the favorable mix variance are true or false.

Mark only one oval per row.

True False

Less
syrup
was
used
than the
standard
mix

The
quality
of the
product
may be
below
standard

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9. 7. The Northern division of Gemas Co currently earns a return on investment 2 points

of 15.5%, based on capital employed of $2,680,000. The divisional

management team has decided to implement a project which will require an
investment of $320,000. The project is expected to generate a profit of
$53,000 per year. The Northern division’s cost of capital is 13%.

What will be the residual income of the division after the project is
implemented?

Mark only one oval.

$67,000

$78,400

$120,000

$468,400

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10. 8. JC Ltd. mixes three materials to produce a chemical SGR. The following 2 points
extract from a standard cost card shows the materials to be used in producing
100 kg of chemical SGR.

According to the given information, what is the total material mix variance?

Mark only one oval.

$1984 A

$7216 A

$9200 A

$16416 A

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11. 9. The following are types of Key Performance Indicators. 2 points

(i) Return on Capital Employed
(ii) Gross profit percentage
(iii) Acid test ratio
(iv) Gearing ratio

Which of the above KPIs would be used to assess the liquidity of a

company?

Mark only one oval.

(i) and (ii) only

(iii) only

(iv) only

(iii) and (iv) only

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12. 10. 2 points

Mark only one oval per row.

Would Would
choose choose
to not to
invest invest
in the in the
project project

Division
A

Division
B

13. 11. 2 points

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14. 12. 2 points

15. 13. A government is trying to assess schools by using a range of financial 2 points

and non-financial factors. One of the chosen methods is the percentage of

students passing five exams or more.

Which of the three Es in the value for money framework is being measured
here?

Mark only one oval.

Economy

Efficiency

Effectiveness

Expertise

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16. 14. 2 points

Mark only one oval.

1 only

2 only

Neither 1 nor 2

Both 1 and 2

17. 15. Which TWO of the following statements are correct? 2 points

(1) A reduction in the tax rate will improve the interest cover ratio
(2) If the level of long term debt is reduced, the interest cover and dividend
cover ratios will improve.
(3) If the level of long term debt is reduced, the asset turnover ratio will
improve.
(4) Financial gearing is a measure of risk, but interest cover is a measure of
profitability.

Mark only one oval.

(1) and (2)

(2) and (3)

(3) and (4)

(1) and (4)

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18. 16. Pro is a division of Mo and is an investment center. The head office cont 2 points
rols finance, HR
and IT expenditure but all other decisions are devolved to the local centers.
The statement of financial position for Pro shows net value of all assets and l
iabilities to be
$4,500m. It carries no debt itself although the group has debt liabilities.

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19. 17. 2 points

Mark only one oval.

Increase of $65,000

Decrease of $78,000

Decrease of $88,000

Increase of $55,000

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5/26/24, 2:02 PM PM Test 2

20. 18. Two divisions within an organization have autonomy to decide whether to 2 points

trade with each other or not, and to negotiate transfer prices. The selling
division sells its output externally at the external market price, and there is
sufficient external demand to ensure that the selling division could sell all
that it can produce to external customers. A transfer price has been agreed
between the two divisions that is below the external market price.

Which of the following is the MOST LIKELY reason for making internal
transfers at less than the external selling price of the selling division?

Mark only one oval.

Head office has imposed the transfer price

The management of the selling division is seeking to restrict the quantity produced

Some additional costs incurred on external sales are not incurred on internal
transfers.

The transfer price has been set to allow the buying division to compete through
lower prices

21. 19. 2 points

Mark only one oval.

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22. 20. 2 points

Mark only one oval.

$2000 favorable

$1600 favorable

$400 adverse

$320 adverse

23. 21. According to the given information, what is the sales quantity variance? 2 points

Mark only one oval.

$150 adverse

$50 favorable

$1208 adverse

$1695 favorable

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24. 22. 2 points

Mark only one oval.

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5/26/24, 2:02 PM PM Test 2

25. 23. Mobe Co manufactures electronic mobility scooters. The company is split into
two divisions: the scooter division (Division S) and the motor division (Division M).
Division M supplies electronic motors to both Division S and to external customers.
The two divisions run as autonomous profit centers; Division M has the freedom to
decide how many motors to sell to Division S and how many to sell to external
customers, and Division S may buy motors externally or from Division M. Details of
the two divisions are given below:

Division S

Division S’s budget for the coming year shows that 35,000 electronic motors will be
needed. An external supplier could supply these to Division S for $800 each.

Division M

Division M has the capacity to produce a total of 60,000 electronic motors per year.
Details of Division M’s budget, which has just been prepared for the forthcoming
year, are as follows:

Budgeted sales volume (units) 60,000

Selling price per unit for external sales of motors $850
Variable costs per unit for external sales of motors $770

The variable cost per unit for motors sold to Division S is $30 per unit lower due to
cost savings on distribution and packaging.

Maximum external demand for the motors is 35,000 units per year.

26. Task 1: If the transfer price for the motors is set at $760 per motor, how 2 points
many motors per year will Division M be willing to sell to Division S?

27. Task 2: How many motors should Division M supply to Division S in order to 2 points
maximize group profits?

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28. Task 3. Assume Division M has spare capacity to produce 28,000 motors. 2 points
Head office has now introduced a new policy stating that Division M must
sell 35,000 motors per year to Division S. It wants Division M to set a total
price for all 35,000 motors.

What is the minimum TOTAL transfer price at which Division M would be

willing to sell 35,000 motors to Division S?

29. Task 4. Which TWO of the following statements about the use of the “full 2 points
cost plus” method of setting transfer prices are correct?

Check all that apply.

It always ensures that the supplying division is compensated for the opportunity cost
of lost contribution on external sales
It motivates the supplying division to keep costs under control
The transfer price covers the costs of production of the supplying division if actual
output exceeds budgeted output
It may lead to dysfunctional decisions if the supplying division has spare capacity

30. 24. Joyrider Co. makes and sells three models of family car: The basic model (the
Drastic), an upgraded model (the Bomber) and a deluxe model (the Cracker). All of
the cars are priced to achieve a 6% mark-up on standard cost. For the month of
June, Joyrider Co. budgeted to sell 30,000 units of the Drastic and so have 10%
market share of the budgeted sales at a price of $10,600 each. Joyrider Co.
actually achieved a 15% share of the market, though the market had actually
contracted by 5%.
The following information is available for July.
Drastic Bomber Cracker
Sales units
- Budgeted 27000 15000 18000
- Actual 26000 16000 14000

Budgeted sales price $10,600 $13,250 $16,960

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31. Task 1. Which option correctly fills the gaps in the paragraph? 2 points

The difference between the sales quantity and __________ variances is that
the standard __________ is considered in the former. The difference
between standard and actual is __________ .

Mark only one oval.

volume, mix, ignored

price, mix, calculated

volume, quantity, ignored

price, quantity, calculated

32. Task 2. The market share variance for the Drastic is $ __________ 1 point
Favorable.

33. Task 3. The market size variance for the Drastic is $ __________ Adverse. 1 point

34. Task 4. The sales mix variance is $ __________ Adverse. 1 point

35. Task 5. The sales quantity variance is __________ Adverse. 1 point

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36. Task 6. Which TWO of the following statements are true? 2 points
(1) The sales mix variance would not give useful information to the
management of Joyrider Co. if the Cracker was a van.
(2) The sales mix variance will not be affected if the labor efficiency on the
Drastic production line increases, all other factors remaining the same.
(3) The market share variance is a planning variance, not an operational
variance.
(4) If the mix variance was calculated as a physical quantity, the answer
would always be zero.

Mark only one oval.

(1) and (2)

(2) and (3)

(3) and (4)

(1) and (4)

37. Constructed Response Questions

ALL TWO questions are compulsory.

20 marks are available for each question.

38. 25. HAMMER *

(Please check your telegram group for the question.)

Files submitted:

39. 26. LENS Co *

Please check your telegram group for the question.

Files submitted:

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