Welcome to your Practice Questions - ML 301 Question 1Determine the total value of ‘facility level’ activities from the following information for acompany: Factory rent - Rs.1,500,000Direct labour - Rs.2,400,000Plant depreciation - Rs. 1,800,000Admin staff salaries - Rs. 500,000Production set –up costs - Rs. 170,000Materials handling costs - Rs. 300,000 Question 2 NC Question 3The loss of reputation in the market caused by selling poor quality goods is which type of cost ?1. Appraisal cost2. Prevention cost3. Internal cost4. External cost Question 4The following are the quality costs for H Manufacturing Company : Rework of finished goods - Rs.400Inspections of work –in- progress - Rs.600Maintenance of machinery - Rs.1,350Staff training - Rs.200 How much did the company spend on prevention costs ? Question 5Which of the following are not usually features of a Quality Circle arrangement ? 1. Compulsory participation 2. Employee involvement 3. Annual meetings 4. Problem analysis Question 6A new product is being developed by CIM Co. The following cost estimates have been obtained: Direct materials : 100 kg required at Rs.3.50 per kg.Labour production times is uncertain. There is a 50% chance that the new product will take hours to make , otherwise it will take 3 hours per unit. Labour is paid at the rate of Rs.20 per hour.Variable overheads are incurred at the rate of Rs. 6 per labout hour.The market selling price for this product is Rs.350 per unit , and CIM Co required a 25% profit margin. What is the amount of the target cost gap ? Question 7The market selling price of a product is Rs.400 per unit .The current estimated production cost is Rs.360 per unit.There is a requirement to make a mark – up of 30%. Which of the following is the correct target cost gap ?1. Rs 52.312. Rs 40.003. Rs 307.694. Rs 84.00 Question 8Identify which of the following statements are true ? ( select all the apply ) 1. The total lifecycle cost can be reduced through effective target costing 2. Markup is a percentage profit based on the selling price 3. Value analysis , value engineering and functional analysis can all be used along with target costing to reduce costs without negatively impacting the customer’s requirements or perception of value. 4. Margin is a percentage profit based on the selling price 5. Standard costing is a push method of determining selling price , compared to target costing which is pull method 6. Kaizen costing should gradually reduce design costs 7. Target costing does not work in conjunction with lifecycle costing 8. Value engineering relates to products that are already in production Question 9Identify which of the following statements are correct (select all that apply) 1. The decline stage of a product does not include cost of withdrawal from market 2. The heavy cost of research and design has the potential to make the product loss making overall 3. A reduction in time spent on the development stage is likely to cause an increase in profit overall 4. Demand increases most rapidly in the maturity stage 5. Potential options for pricing at the introductory stage may be price penetration or price skimming depending on the demand for the product and the company strategy 6. Traditional accounting does not directly associate the cost of research and development to the product cost Question 10XYZ co has a target rate of return 0f 20% and divisional managers will receive a bonus each timetheir ROI exceed this figure.X division has profits of Rs.600,000 and currently capital employed of Rs.2,400,000.A new commercially desirable project will increase profits by Rs.44,000 add to the asset value Rs.120,000. The divisional manager is likely to _________ the project.Please select your answerAcceptReject Question 11Zavvi company grants autonomy to its divisional managers in all key areas. The required rate of return for the company is set at 18%.The North West division of Zavvi is considering an investment that will increase their assets value to Rs.650,000. The divisional profit is expected to be Rs.200,000. Which of the following is the correct Residual income for this region.1. Rs 117,0002. Rs 200,0003. Rs 164,0004. Rs 83,000 Question 12Which of the following best explains why we use controllable profits to measure divisional performance ? (select all that apply) 1. Inclusion of uncontrollable profit will demotivate managers 2. Managers are there , ultimately to control profits 3. Costs and revenues that are outside managements’ influence can not be attributed to divisional performance. 4. Inclusion of uncontrollable costs will demotivate managers Question 13Which of the following statements are TRUE in relation to the residual income method of appraising managers ? (select all that apply) 1. Residual Income can be adjusted to account for different levels of risk 2. It is widely used and popular in industry 3. It is a profit based measure – so may be subject to accounting manipulation. 4. It is useful for comparison of different divisions regardless of size 5. It favors divisions which have older asset bases 6. It encourages divisional managers to be focused on long term results Question 14Which of the following are useful measures of liquidity ? (select all that apply) 1. Current ratio 2. Gross profit margin 3. Return on Capital Employed 4. Quick ratio 5. Accounts receivable days Question 15Z company has sales revenue of $650,000 and a PBIT of Rs. 37,500. Its ROCE is 15% Which of the following is the correct asset turnover figure for this company ?1. 2.58 times2. 2.58 %3. 5.8 times4. 5.8 % Question 16Which of the following is NOT a benefit of benchmarking ?1. It identifies processes to improve2. Comparative data may be hard to obtain3. It can give an insight into competitive advantage4. It fits well with the principles of TQM5. It can provide an insight into doing things differently Question 17Which of the following are useful measures of liquidity ? (select all that apply) 1. Current ratio 2. Gross profit margin 3. Return on Capital Employed 4. Quick ratio 5. Accounts receivable days Question 18Select with FOUR perspectives are covered by the Balanced Scorecard model 1. Stakeholder perspective 2. Financial perspective 3. Investor perspective 4. Learning and Growth perspective 5. Innovation and Training perspective 6. Employee perspective 7. Customer perspective 8. Environmental perspective 9. Internal business perspective Question 19Which of the following is NOT a disadvantage of non – financial performance measures ?1. They can lack comparability due to a diverse range of measures2. The can be hard to measures3. The causation between non – financials factors and company performance may be incorrectly interpreted4. They can not be quantified Question 20The measurement of performance at I raders Co. involves a number of non – financial indicators.Performance is evaluated on a monthly ( four weekly )basis. The raw data relating to last month is below. 200 customers per week. 56 new customers. 25 complaints logged. 1 staff member left the company every week. The performance target are :Target 1) 5% of customers should be now.Target 2) Fewer than 2 staff leavers per month.Target 3) No more than 3% of customers to log complaints. Which of the non – financial targets did Traders Co. meet last month:1. Target 3 only2. None of the targets were met3. Targets 1 and 34. Target 1 only5. Targets 2 and 36. Target 1 and 2 Question 21A new piece of special machinery is being considered as a potential investment project for C.Co.The machine will initially cost Rs.150,000 and it will have cash inflows of Rs.30,000 every year for five years. It is expected that there will be scrap value of Rs.15,000 receivable during the last year of the project. Which is the correct Accounting Rate of Return (ARR) for this investments? 1. 1.8%2. 18%3. 2%4. 3.63% Question 22A new piece of special machinery is being considered as a potential investment project for C.Co. The machine will initially cost Rs.150,000 and it will have cash inflows of Rs.30,000 every year for five years. It is expected that there will be a scrap value of Rs.15,000 receivable during the last year of the project. Which is the correct payback period for this investment? 1. 5 years2. 5 years 4 months3. years4. 6 years Question 23Which of the following are typical features of capital investment decisions ?(select all that apply ) 1. The initial outlay value is not known with certainty 2. The initial outlay is usually known and payable immediately 3. Project go – ahead usually requires board level approval 4. Projects are usually short term in nature 5. The long term benefits of projects are expected to outweigh the costs in the long run Question 24Decide whether the following weaknesses relate to payback period , ARR or both : Uses profits rather than cash flows Ignores that total profitability of the project Does not account for the time value of money Question 25A new investment costing Rs.180,000 is being assessed in terms of its financial viability based on the company cost of capital of 9%.The project will run for three years after which there will be no scrap value remaining. The net cash flows relating to the project are given below :Y1 Rs. 125,000Y2 Rs. 80,000Y3 Rs. 50,000 Ignoring tax inflation – enter the NPV of this project to the nearest Rs. 100 Question 26An annual investment project has a net present value of Rs.19,936 when discounted at cost of capital 10%.Its is expected to generate net cash inflows of Rs.84,000 in year 2 and Rs.42,000 in year 3. Which of the following are correct ? (select all that apply ) 1. The project must have an initial cost of Rs.140,000 ( to the nearest Rs.1,000) 2. The project must have an initial cost of Rs.300,000 ( to the nearest Rs.1,000) 3. At the current cost of capital the project should be accepted 4. At the current cost of capital the project should be rejected Question 27An annual investment project has a net present value of Rs.19,936 when discounted at cost of capital 10%.Its is expected to generate net cash inflows of Rs.84,000 in year 1, Rs.63,000 in year 2 and Rs.42,000 in year 3. Enter the IRR of this project ( to the nearest %) Question 28A company’s selling price is Rs.10 per unit and operating variable cost is Rs. 4 / per unit. If it’s operating Fixed cost is Rs.20000/- and the current volume is 10000 units . What is it’s operating leverage. ? Question 29The real cost of capital is 6% and inflation rate is 3%. Which from the following is the correct cost of capital in nominal terms ?1. 2.%2. 9%3. 9.18%4. 18% Question 30Identify whether or not the following are relevant costs for investments appraisal 1. Cash spent on research prior to project acceptance2. Incremental fixed cost increases expected during the life of the project3. Disposal proceeds at the end of the asset life4. Monthly salary of a warehouse manager who will be diverted to work at the project’swarehouse Time is Up!Time's up
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