Question 1

Palesworth Productions Limited budgeted a figure of £25 000 in net profit for the month of May 20X5, based on a target sales figure of 600 units.The actual outturn was that 700 units were sold.The flexed budget net profit figure was £26 700 and the actual net profit for the month was £27 200. What was the sales profit volume variance for May 20X5?
A)£500
B)£1200
C)£2200
D)£1700

Accepted Answer

D

Question 2

Britney Walsh Limited budgeted a total spend of £12 600 on raw materials for June 20X1: 6 kg @ £3.50 x 600 units. The budget outturn was that 620 units were sold.These were each produced using 6.5kg of raw materials at a price of £3.30 per kg.
What was the flexed budget figure for raw materials for June 20X1?
A)£12 870
B)£11 880
C)£13 020
D)£14 105

Accepted Answer

The original budget was calculated as follows: 
- 6 kg of raw materials at £3.50 per kg for each unit = £21 per unit 
- £21 per unit x 600 units = £12,600 total budgeted spend on raw materials

However, the actual production used 6.5kg of raw materials at a lower price of £3.30 per kg. This means the flexed budget for raw materials should be calculated as follows: 
- 6.5 kg of raw materials at £3.30 per kg for each unit = £21.45 per unit 
- £21.45 per unit x 620 units = £13,281 total flexed budget for raw materials

Therefore, the closest answer choice is C) £13,020.

Question 3

Snelling and Penwortham Limited's sales budget for November 20X6 was 3000 units at a standard selling price of £26.50.Actual sales volumes exceeded expectations at 3150 units.The actual sales price was £26.20. What was the sales price variance for November 20X6?
A)£3030 (F)
B)£945 (F)
C)£3030 (A)
D)£945 (A)

Accepted Answer

The sales price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, it is (£26.20 - £26.50) x 3150 = -£0.30 x 3150 = -£945, which is adverse (A).

Question 4

Styles Warnleigh Limited's materials budget for February 20X2 comprised 4.5 kg.of raw material at a standard cost of £3.50 per kg.for each unit produced and sold.Actual sales and production for the month was 286 units.£3.62 was actually paid for each kg of raw material used in the month, and the actual input to each product unit was 4.3 kg. What was the materials price variance for February 20X2?
A)£147.58 (F)
B)£147.58 (A)
C)£52.62 (F)
D)£52.62 (A)

Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. The actual quantity purchased is not directly given, but we can infer it from the actual input per unit and the actual production, which is 4.3 kg/unit * 286 units = 1230.8 kg. The variance is then (3.62 - 3.50) * 1230.8 = £147.58. Since the actual price is higher than the standard, this is an adverse variance.

Question 5

Hoode and Lowe Limited's materials budget for August 20X3 comprised 6 metres of raw material at a standard cost of £2.30 per metre for each unit produced and sold.Actual sales and production for the month was 680 units.The outturn was that 6.20 metres of raw material were used for each unit at a cost of £2.40 per metre. What was the materials price variance for August 20X3?
A)£734.40 (A)
B)£421.60 (F)
C)£734.40 (F)
D)£421.60 (A)

Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The actual quantity used is 6.20 metres per unit for 680 units, which equals 4216 metres. The variance is (2.40 - 2.30) x 4216 = £421.60. Since the actual price is higher than the standard, it's an adverse variance.

Question 6

Brandenburg and Fontaine Limited produced and sold 1350 units of their BF322 product in October 20X4.Each unit was budgeted to use 1.5 hours of labour at a standard cost of £11.60 per hour.When the company's management accountant reviewed the records for the month he found that 1.6 labour hours had been used in actual production, at an actual cost of £11.55 per hour. What was the labour rate variance for October 20X4?
A)£108 (F)
B)£108 (A)
C)£1458 (F)
D)£1458 (A)

Accepted Answer

The labour rate variance is calculated as (Standard Rate - Actual Rate) x Actual Hours. Here, it is (£11.60 - £11.55) x (1350 units x 1.6 hours) = £0.05 x 2160 = £108 Favorable (F).

Question 7

Petty Simpson Limited budgeted a figure of £32 460 in net profit for the month of June 20X2, based on a target sales figure of 1000 units.The actual outturn was that 990 units were sold.The flexed budget net profit figure was £32 320, and the actual net profit for the month was £33 060. What was the sales profit volume variance for June 20X2?
A)£460
B)£140
C)£740
D)£600

Accepted Answer

The sales profit volume variance is calculated as the difference between the flexed budget net profit and the actual net profit. In this case, £32,320 (flexed budget net profit) - £33,060 (actual net profit) = -£740. However, since the question asks for the variance specifically related to sales volume, and the variance is positive for the company (indicating better performance than expected), the correct interpretation is a positive variance of £740, indicating an error in the provided options. The correct approach to find the sales volume variance specifically would compare the flexed budget to the original budget based on actual sales volume, but with the given options and calculations, there seems to be a misunderstanding in the calculation explanation. The correct calculation for sales volume variance should be based on the difference in volume, but given the options and the context, the closest answer reflecting a variance involving the flexed budget and actual results is not accurately represented in the options provided.

Question 8

Precinct and Weston Limited's sales budget for June 20X6 was 500 units at a standard selling price of £75.The actual price at which units were sold in the month was £78, and in total 510 units were actually sold. What was the sales price variance for June 20X6?
A)£780 (F)
B)£780 (A)
C)£1530 (F)
D)£1530 (A)

Accepted Answer

Sales price variance = (actual selling price - standard selling price) x actual units sold
= (£78 - £75) x 510
= £1530 (F)

Therefore, the correct choice is C.

Question 9

Sloop Pennyfeather Limited budgeted a total spend of £12 600 on raw materials for December 20X6: 6 kg at a standard price of £3.50 x 600 units. The budget outturn was that 610 units were sold.These were each produced using 6.5kg of raw materials at a price of £3.30 per kg.
What was the materials quantity variance for December 20X6?
A)£274.50 (A)
B)£484.50 (A)
C)£1067.50 (A)
D)£1277.50 (A)

Accepted Answer

The materials quantity variance is calculated as (Actual Quantity - Standard Quantity) x Standard Price. The standard quantity for 610 units is 610 x 6 kg = 3660 kg. The actual quantity used is 610 x 6.5 kg = 3965 kg. The variance is (3965 kg - 3660 kg) x £3.50 = £1067.50 (A).

Question 10

Which one of the following statements is correct? Standard costing is a system that can be usefully applied in business environments where:
A)products are custom-built to comply with customer requirements
B)costs are expected to fluctuate within wide parameters
C)the relevant accounting standard on product costing is followed
D)a repetitive and predictable series of standardized operations are carried out

Accepted Answer

Standard costing is most useful when a repetitive and predictable series of standardized operations are carried out, allowing for accurate and consistent measurement of costs. In environments where products are custom-built, costs may vary widely based on customer requirements, making standard costing less useful for cost control and decision-making. Similarly, if costs are expected to fluctuate within wide parameters, standard costing may not provide the necessary level of accuracy in cost measurement. While following relevant accounting standards on product costing is important, it is not the primary factor that determines the usefulness of standard costing.

Question 11

Billingsgate Western Limited has the following budget for December 20X2:  The direct expense is a royalty payable to the product's patent holder for each unit produced.The company does not absorb production overhead using an overhead absorption rate and it may be assumed that all of its overheads are fixed in nature.If the company flexes its budget for 260 units, what will be the revised net profit figure?
A)£14 036
B)£14 876
C)£13 702
D)£14 896

Accepted Answer

To calculate the revised net profit figure, we need to calculate the total variable cost and total fixed cost for producing 260 units.

Total variable cost for 260 units:
Direct materials = 260 x £4.20 = £1,092
Direct labor = 260 x £2.80 = £728
Direct expense (royalty payable) = 260 x £0.50 = £130
Total variable cost = £1,950

Total fixed cost:
Rent and rates = £6,000
Salaries and wages = £11,000
Depreciation = £1,000
Total fixed cost = £18,000

Total cost:
Total variable cost + Total fixed cost = £19,950

Revenue:
Selling price per unit = £15.00
Number of units sold = 260
Total revenue = £3,900

Net profit:
Total revenue - Total cost = £3,900 - £19,950 = -£16,050 (loss)

Therefore, the revised net profit figure is a loss of £16,050.

However, the question asks for the revised net profit figure after the company flexes its budget. Flexing the budget means adjusting the budget for a different level of activity. In this case, the original budget was for 200 units and the company plans to produce 260 units. By producing more units, the company should be able to spread its fixed costs over a larger number of units, which will reduce the total cost per unit and increase the net profit.

To calculate the revised net profit figure, we need to adjust the fixed costs for the additional units produced:

Rent and rates = £6,000
Salaries and wages = £11,000 x (260/200) = £14,300 (adjusted for 260 units)
Depreciation = £1,000
Total fixed cost = £21,300

Total cost:
Total variable cost + Total fixed cost = £23,250

Total revenue: 
Selling price per unit = £15.00
Number of units sold = 260
Total revenue = £3,900

Net profit: 
Total revenue - Total cost = £3,900 - £23,250 = -£19,350 (loss)

Therefore, the revised net profit figure is a loss of £19,350.

The closest option to the revised net profit figure is option B (a loss of £14,876), but this is still not correct. Therefore, none of the options provided is correct.

Question 12

Mulhouse and Snell Limited budgeted a figure of £53 220 in net profit for the month of August 20X5, based on a target sales figure of 2000 units.The actual outturn was that 2020 units were sold.The flexed budget net profit figure was £54 470 and the actual net profit for the month was £54 400. What was the sales profit volume variance for August 20X5?
A)£1250 (A)
B)£1180 (F)
C)£1250 (F)
D)£1180 (A)

Accepted Answer

Sales profit volume variance = Actual net profit - Flexible budget net profit
Sales profit volume variance = £54 400 - £54 470
Sales profit volume variance = -£70 (F)

Note that the variance is negative, indicating that the actual net profit was lower than the flexed budget net profit.

Question 13

Snodgrass and Payne Limited's materials budget for April 20X4 comprised 6 metres of raw material at a standard cost of £2.30 per metre for each unit produced and sold.Actual sales and production for the month was 680 units.The outturn was that 6.20 metres of raw material were used for each unit at a cost of £2.40 per metre. What was the materials quantity variance for April 20X4?
A)£734.40 (F)
B)£312.80 (A)
C)£312.80 (F)
D)£734.40 (A)

Accepted Answer

The materials quantity variance is calculated as (Standard Quantity - Actual Quantity) x Standard Price. The standard quantity for 680 units is 680 x 6 = 4080 metres. The actual quantity used is 680 x 6.20 = 4216 metres. The variance is (4080 - 4216) x £2.30 = -£312.80, which is adverse (A).

Question 14

Britton Aarhus Limited's sales budget for November 20X3 was 550 units at a standard selling price of £68.50.The flexed sales figure was £37 264.The actual selling price achieved in the month was £68.95. What was the sales price variance for November 20X3?
A)£244.80 (F)
B)£244.80 (A)
C)£413.70 (A)
D)£413.70 (F)

Accepted Answer

The answer of Britton Aarhus Limited's sales budget for November...

Question 15

Hatton and Hussein Limited's sales budget for July 20X6 was 680 units at a standard selling price of £32.50.At the end of the month the management accountant flexed the budget; the flexed sales figure was £22 620.The actual selling price achieved in the month was £33.75. What was the sales price variance for July 20X6?
A)£870.00 (A)
B)£333.20 (F)
C)£870.00 (F)
D)£333.20 (A)

Accepted Answer

First, we need to calculate the flexible budget sales figure based on the actual selling price:
Flexed sales figure = Actual selling price x Flexed sales volume
Flexed sales volume = Actual sales in units = Flexed sales figure / Actual selling price
Flexed sales volume = £22,620 / £33.75 = 670.22 (rounded to 670 units)

Then, we can calculate the sales price variance:
Sales price variance = (Actual selling price - Standard selling price) x Actual sales volume
Sales price variance = (£33.75 - £32.50) x 680
Sales price variance = £870.00 (Favorable)

Therefore, the correct answer is C.

Question 16

Picken Warbury Limited has the following budget for January 20X5:  The company does not absorb production overhead using an overhead absorption rate and it may be assumed that all of its overheads are fixed in nature.If the company flexes its budget for 560 units, what will be the revised net profit figure?
A)£6737.50
B)£7237.50
C)£3750.00
D)£9260.00

Accepted Answer

The answer of Picken Warbury Limited has the following budget...

Question 17

Which one of the following statements is correct? The variance between the original budgeted profit and the flexed budget profit is known as:
A)the profit variance
B)the sales volume variance
C)the sales profit volume variance
D)the profit price variance

Accepted Answer

The sales profit volume variance is the variance between the original budgeted profit and the flexed budget profit.

Question 18

Wengeli and Hudson Limited's materials budget for February 20X3 comprised 2.5 kg of raw material at a standard cost of £10.50 per kg for each unit produced and sold.The sales and production budget was for 880 units.Actual sales and production for the month was 890 units.The actual price paid for raw materials was £10.40 and 2.4 kg were used in the manufacture of each unit. What was the materials price variance for February 20X3?
A)£885.60 (F)
B)£213.60 (F)
C)£1148.10 (F)
D)£222.50 (F)

Accepted Answer

First, let's calculate the actual quantity of raw materials used:
Actual Quantity = 890 units × 2.4 kg per unit = 2,136 kg

Then, let's calculate the actual cost of the raw materials used:
Actual Cost = £10.40 per kg × 2,136 kg = £22,214.40

Now, let's calculate the standard cost of the raw materials that should have been used:
Standard Quantity = 880 units × 2.5 kg per unit = 2,200 kg
Standard Cost = £10.50 per kg × 2,200 kg = £23,100.00

The materials price variance is the difference between the actual cost and the standard cost:
Materials Price Variance = Actual Cost - Standard Cost
Materials Price Variance = £22,214.40 - £23,100.00
Materials Price Variance = £885.60 (F)

Therefore, the answer is B) £213.60 (F).

Question 19

Which one of the following statements is correct? Responsibility accounting ensures that:
A)there is strict control over responsibility for resource allocation
B)management accountants accept responsibility for their monthly management reports
C)problems identified by analysing variances are tracked to their source
D)standard costing systems are implemented in accordance with accounting standards

Accepted Answer

Responsibility accounting is a system of accounting that focuses on evaluating the performance of individuals and departments in an organization based on their responsibilities. It involves tracking and analyzing variances between actual and budgeted results and tracing these variances to the individuals or departments responsible for them. Therefore, option C is the correct statement because responsibility accounting helps to identify the source of problems and assign responsibility for corrective actions. Option A is incorrect because responsibility accounting does not necessarily involve strict control over resource allocation. Option B is incorrect because responsibility accounting is not about holding management accountants accountable for their reports. Option D is incorrect because implementing standard costing systems is a separate accounting process and not directly related to responsibility accounting.

Question 20

Sloop Warrenby Limited has the following budget for March 20X3:  The company does not absorb production overhead using an overhead absorption rate and it may be assumed that all of its overheads are fixed in nature.If the company flexes its budget for 1200 units, what will be the revised net profit figure?
A)£2580.00
B)£2688.00
C)£2400.00
D)£3216.67

Accepted Answer

The answer of Sloop Warrenby Limited has the following budget...

Quiz 17: Accounting for Control

Snelling and Penwortham Limited's sales budget for November 20X6 was 3000 units at a standard selling price of £26.50.Actual sales volumes exceeded expectations at 3150 units.The actual sales price was £26.20. What was the sales price variance for November 20X6?

Precinct and Weston Limited's sales budget for June 20X6 was 500 units at a standard selling price of £75.The actual price at which units were sold in the month was £78, and in total 510 units were actually sold. What was the sales price variance for June 20X6?

Which one of the following statements is correct? Standard costing is a system that can be usefully applied in business environments where:

Britton Aarhus Limited's sales budget for November 20X3 was 550 units at a standard selling price of £68.50.The flexed sales figure was £37 264.The actual selling price achieved in the month was £68.95. What was the sales price variance for November 20X3?

Which one of the following statements is correct? The variance between the original budgeted profit and the flexed budget profit is known as:

Which one of the following statements is correct? Responsibility accounting ensures that: