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CIMAPRO15-P01-X1-ENG – P1 Management Accounting

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Showing 4–6 of 10 questions

Question 4

TP makes wedding cakes that are sold to specialist retail outlets which decorate the cakes according to the customers’ specific requirements. The standard cost per unit of its most popular cake is as follows:

The general market prices at the time of purchase for Ingredient A and Ingredient B were $23 per kg and $20 per kg respectively. TP operates a JIT purchasing system for ingredients and a JIT production system; therefore, there was no inventory during the period.

Discuss the usefulness of the planning and operational variances calculated for TP’s management. Select ALL the TRUE statements.

Select all that apply, then click Submit answer.

  • ○

    The use of planning and operational variances will enable TP’s management to draw a distinction between variances caused by factors extraneous to the business and planning errors (planning variances) and variances caused by factors that are within the control of management (operational variances).
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    The purchasing manager’s performance can’t be compared with the adjusted standards that reflect the conditions the manager actually operated under during the reporting period.
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    If planning and operational variances are not distinguished, there is potential for dysfunctional behavior especially where the manager has been operating efficiently and performance is being judged by factors outside the manager’s control. In the case of TP it became evident during the period that the prevailing market prices for materials were significantly less than those set during the budget process.
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    Where a revision of standards is required due to environmental changes that were not foreseeable at the time the budget was prepared, the planning variances are controllable.
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    Standards that failed to anticipate known market trends when they were set will reflect faulty standard setting.
Question 5

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.

Select all that apply, then click Submit answer.

  • ○

    Under an activity based costing system the various support activities that are involved in the process of making products or providing services are identified.
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    The cost drivers that cause a change to the cost of activities are also identified and used as the basis to attach activity costs to a particular product or service.
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    Through the tracing of costs to product in this way ABC establishes less accurate costs for the product or service.
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    The identification of cost drivers provides information to management to enable them to take actions to improve the overall profitability of the company.
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    Operational analysis will provide information to management on how costs can be incurred and managed.
Question 6

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 mix variance for August is:

Select an option, then click Submit answer.

  • ○

    $ 1, 540 Favourable
  • ○

    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 mix variance for August is:
    $ 1, 540 Adverse
  • ○

    $ 1, 288 Favourable
  • ○

    $ 1, 540 Adverse