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# Finance and accounting multiple choice questions

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16 Which of the following may be used to smooth distributable profits from one year to another?
A asset revaluation reserve
B capital redemption reserve
C general reserve
D provisions for depreciation

17 A company makes three products for which the following details are given.
Product P Product Q Product R
\$ \$ \$
Selling price per unit 20 24 36
Direct Material per unit 9 12 15
dirrect labour per unit 5 3 9

The same material is used by all three products and it costs \$3.00 per kilo. There is a shortage of material. In which order of priority should the products be made in order to achieve maximum profit from the available material?
First Next Last
A P Q R
B Q R P
C R P Q
D R Q P

18 For what purpose might management undertake sensitivity analysis?
A to calculate employees' bonuses
B to determine levels of depreciation
C to determine the effect of dividends on profit
D to determine the selling price of a product

19 A company manufactures one product. It has variable costs of \$600 000 and fixed costs of If it bought all its production from another supplier, it could use its existing machinery to make a total contribution of \$400 000. Fixed costs would not change. What is the maximum price it should pay to obtain all its production from another supplier?
A \$600 000 B \$700 000 C \$900 000 D \$1 000 000

20 A company makes a product for which the following information is given.

_________________ Per unit
selling price 100
direct materials 40
direct labour 30
Total fixed costs are \$40 000.
Planned production is 1000 units.
Which action should the company take to break-even?
Decrease Cost Of increase Cost OF
A direct labour 30%
B direct material 25%
C direct labour 30%
D direct materials 25%

21 At the beginning of a given period the value of work-in-progress was \$1 1 000. The unit costs of production for the period were:

5
8.5
At the end of the period work-in-progress consisted of 700 units which were complete as to 80% of materials and 50% labour.
What was the change in the value of the work-in-progress during the period?

decrease Increase
\$ \$

A 1550
B 1550
C 5225
D 5225

22 Which of the following should be considered by a manufacturer before deciding to buy-in its products instead of manufacturing them?
B alternative use of resources formerly used for production
C contribution to sales ratio
D marketing expenditure

23 Which of the following is an advantage of using a budgetary control system?
A calculation of bad debt provisions
B calculation of depreciation
C making 'make or buy' decisions
D monitoring management performance

24 A company's debtors total \$27 000. There is a collection period of 30 days. The budget for the coming year provides for an increased turnover of 50 % with the relevant collection period being increased to 60 days. What will the year-end debtors be?
A \$81 000 B \$54000 C \$40500 D \$36000

25 A company has a standard selling price of \$12 per unit and budgeted sales of 80 000 units It has actual sales of 82 000 units with a total sales value of \$955 300. What is the sales price variance?
C \$24 000 favourable

26 The table shows details of direct labour costs.
Budget Actual
48250 hours at \$6.50 per hours 50000Hours at \$7.00 per hours
What is the direct labour rate variance?
B \$24 125 favourable
D \$25 000 favourable

27 The following material costs relate to the manufacture of 100 units of a product.
. Kilos Cost per unit Total cost

standard 1500 5.5
actual 1650 9570

What is the raw material price variance?
B \$495 favourable
D \$1320 favourable

28 What is the net present value of an investment equal to when the internal rate of return is calculated?
A the aggregate anticipated future cash income at compound interest
B the initial expenditure on the investment
C the value of the investment's depreciation
D zero

29 What i an advantage of using pay back method of capital investment appraisal?
A calculates higher purchase instalments
B calculates profitability
C determines the efficiency of a process
D evaluates risk

30 A company converts \$2 000 000 debenture stock into \$0.50 ordinary shares. The conversion rate is 40 ordinary shares per \$100 debenture stock. What amount is credited to the Share Premium account?
A \$800 000 B \$1 000 000 C \$1 200 000 D \$1 600 000

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Answers to Finance and accounting multiple choice questions

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16 Which of the following may be used to smooth distributable profits from one year to another?
A asset revaluation reserve
B capital redemption reserve
C general reserve
D provisions for depreciation

17 A company makes three products for which the following details are given.
Product P Product Q Product R
\$ \$ \$
Selling price per unit 20 24 36
Direct Material per unit 9 12 15
dirrect labour per unit 5 3 9
Contribution 6 9 12

Contribution per kilo of material= 2 2.25 2.4
lowest highest

The same material is used by all three products and it costs \$3.00 per kilo. There is a shortage of material.
In which order of priority should the products be made in order to achieve maximum profit from the available material?
First Next Last
A P Q R
B Q R P
C R P Q

18 For what purpose might management undertake sensitivity analysis?
A to calculate employees' bonuses
B to determine levels of depreciation
C to determine the effect of dividends on profit
D to determine the selling price of a product

19 A company manufactures one product. It has variable costs of \$600 000 and fixed costs of

If it bought all its production from another supplier, it could use its existing machinery to make a
total contribution of \$400 000. Fixed costs would not change.
What is the maximum price it should pay to obtain all its production from another supplier?
A \$600 000 B \$700 000 C \$900 000 D \$1 000 ...

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