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A company produces a product that requires two materials, Material A and Material B. Details of the material quantities and costs for August are given in the table below.

Budgeted and actual output of the product for August was 12,000 units.
The material yield variance for August is:

• A. $1,340 F
• B. $1,590 A
• C. $1,740 A
• D. $1,340 A
• E. $1,840 A

RT produces two products from different quantities of the same resources using a just-in-time (JIT) production system. The selling price and resource requirements of each of the products are shown below:

Market research shows that the maximum demand for products R and T during June 2010 is 500 units and 800 units respectively. This does not include an order that RT has agreed with a commercial customer for the supply of 250 units of R and 350 units of T at selling prices of $100 and $135 per unit respectively. Although the customer will accept part of the order, failure by RT to deliver the order in full by the end of June will cause RT to incur a $10,000 financial penalty. At a recent meeting of the purchasing and production managers to discuss the production plans of RT for June, the following resource restrictions for June were identified:
Direct labour hours 7,500 hours
Material A 8,500 kgs
Material B 3,000 litres
Machine hours 7,500 hours
Assuming that RT completes the order with the commercial customer, prepare calculations to show, from a financial perspective, the optimum production plan for June 2010 and the contribution that would result from adopting this plan.
The optimum production plan will be:

• A. Contract: R = 250, T = 360 and Market: R = 650 T = 710
• B. Contract: R = 250, T = 360 and Market: R = 500 T = 700
• C. Contract: R = 250, T = 360 and Market: R = 600 T = 710
• D. Contract: R = 250, T = 360 and Market: R = 500 T = 710
• E. Contract: R = 250, T = 360 and Market: R = 660 T = 720

A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.


Calculate, for the original budget, the budgeted fixed overhead costs, the budgeted variable overhead cost per tray and the budgeted total overheads costs.

• A. The variable cost per tray = $0.65; The fixed cost = $ 550 000
• B. The variable cost per tray = $0.75; The fixed cost = $ 490 000
• C. The variable cost per tray = $0.45; The fixed cost = $ 320 000
• D. The variable cost per tray = $0.85; The fixed cost = $ 530 000

A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.
The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:

Calculate the annual profit per machine for each of the three sizes of machine, using the current basis for charging the costs of support activities to machines.

• A. The profit per machine for the medium machine was: $1250
• B. The profit per machine for the medium machine was: $1350
• C. The profit per machine for the medium machine was: $1376
• D. The profit per machine for the medium machine was: $1276

Select the benefits to a company of using sensitivity analysis in investment appraisal.
(Select all the true statements.)

• A. Sensitivity analysis enables risk management strategies to be put in place to focus on those variables of special significance.
• B. Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome.
• C. Sensitivity analysis enables identification of fixed costs that are of special significance.
• D. Sensitivity analysis enables a company to assess the risk associated with a project.