Question 1

One of an investment centre's products is sold on an external market. Output is limited because the specialist machine that manufactures the product is operating at full capacity.

Current data for the product are as follows.

Options :

A : $21,400

B : $17,800

C : $23,900

D : $26,160

Answer: A

Question 2

In order to remain competitive an organization wishes to achieve cost savings for one of its existing products.
Which of the following correctly describes methods which the organization can use to achieve these cost savings?
Select ALL that apply.

Options :

A : Functional analysis is carried out only on existing products and is concerned only with minimizing the cost of the originally defined functions of a product.

B : Value engineering is a fundamental rethinking and radical redesign of an organization-s existing processes.

C : Target costing is continuously setting new stretch targets while the product is in production.

D : Value analysis is examining a product-s costs in order to achieve its purpose at a reduced cost while maintaining its reliability and quality.

E : Kaizen costing is seeking to make cost savings by continuously making small incremental cost reductions while the product is in production.

Answer: A,D

Question 3

Which TWO of the following expressions are correct?

Options :

A : 1 + money rate = (1 + real rate) x (1 + inflation rate)

B : 1 + real rate = (1 + money rate) / (1 + inflation rate)

C : 1 + real rate = (1 + inflation rate) / (1 + money rate)

D : 1 + money rate = (1 + inflation rate) / (1 + real rate)

E : 1 + inflation rate = (1 + money rate) x (1 + real rate)

Answer: A,B

Question 4

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.
In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

Options :

A : $ 2.10

B : $ 0.50

C : $ 1.40

D : $ 2.60

Answer: B

Question 5

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

Options :

A : They are future costs.

B : They are committed costs.

C : They are incremental costs.

D : They are unavoidable costs.

E : They are cash flows.

Answer: A,C

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