FIN2142M Budgeting for Business Exam (TCA)
Lincoln International Business School
Time Constrained Practice Test 3
|Department||Accountancy, Finance and Economics|
|Student Name and
|Module Title||Budgeting for business|
|Module Coordinator||Tim Chai|
|Duration of Assessment||90 minutes|
|Release Time||British Summer Time|
|Submission Time||British Summer Time|
|Wordlimit for each answer||Wordlimit (+/- 10%)|
|General Instructions to Candidates.
1. You must submit your answers as a MS Word Document to Turnitin on Blackboard before the submission time: failure to do so will be classified as misconduct in examinations. We strongly recommend you submit 15 minutes prior to the deadline.
2. You must send a copy of your work to the Mailbox at the same time if you could not upload your work on Turnitin. You must place the Module Code and your Student Id in the Subject Field of the Mail.
3. Hand-written notes, expressions, symbols, Excel workings, or diagrams, must be inserted into the Word Document.
4. This assessment is an open resource format: you may use online resources, lecture and seminar notes, text books and journals.
5. All work will be subject to plagiarism and academic integrity checks. In submitting your assessment you are claiming that it is your own original work; if standard checks suggest otherwise, Academic Misconduct Regulations will be applied.
6. The duration of the Time Constrained Assessment will vary for those students with LSPs. Extensions do not apply, but Extenuating Circumstances can be applied for in the normal way.
7. A reference list is not required.
8. Total 40 marks
|Module Specific Instructions to Candidates ECO/BUS/FIN
1. All students are required to uphold the highest ethical and professional standards in line with University rules. Any identified cases of unethical behaviour or plagiarism during the assessment may be reported to the University and may impact on your ability to claim exemptions. Students are also welcome to report any detected cases of integrity breach (anonymous reporting of a breach holds no weight).
2. To ensure academic integrity of our assessments, students can randomly be called to a viva, which is an academic interview where you will be asked questions to check your understanding of the subject to help confirm the originality of your work.
3. Remember that due to the extended time limit, students may be tempted to write overly long answers. Please note, lengthy answers will not necessarily get you extra marks for discursive questions. The time extension is to help you meet the demands of IT imposed by digital submission. You should be guided by the marks available for each question and focus on the content and requirements.
Read the following statements. Discuss which of them are true or false. Explain or provide the correct statement if it is false.
- i) The direct material cost is £100, direct labour cost is £80, and factory overhead is £120, so the conversion cost is £200.
- ii) Operating profit under absorption costing is contribution less fixed costs.
iii) At the end of the accounting period Susan Corporation reports operating income of $30,000 and the fixed overhead cost rate is $20 per unit. Under absorption costing, if this company now produces an additional 100 units of inventory, then operating income will not be affected.
- iv) A limitation of zero-based budget is that the budget may carry forward existing inefficiencies
- v) A contract would require 2,000 kg of material A. There are 1,500 kg of material A in inventory, but because of a decision taken several weeks ago, material A is no longer in regular use by the company. The 1,500 kg originally cost £14,400, and have a scrap value of £3,400. New purchases of material Y would cost £13 per kg. So, the relevant cost of material A for the contract is £6,500.
- vi) Under marginal costing, given total fixed overhead spending, under-absorption may occur when the production volume variance is adverse.
vii) The higher proportion of variable cost, the higher the operating risk
viii) The variable cost is expected be $45 per unit. During the month, 800 units were actually sold. There is an adverse flexible budget variance related to variable cost of $4,000. The actual variable cost is $4,000.
AB Company manufactures and sells a single product. The selling price per unit is £60. The information of product cost is as follows.
|Year||Production units||Total Product costs £’s|
The forecast production of this product is 25,000 units and the forecast sales units of the product are 23,000. Fixed selling cost £72,000 per year and Fixed Administration cost £350,000 per year. There was no opening inventory at the start of the year.
- a) Use the High-Low technique to estimate the unit variable product cost and the total fixed product cost.
- b) Calculate the unit product cost and profit using both absorption costing and marginal costing and explain the difference
Total 15 marks
Raines Company manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below:
|Selling price per unit||150||250||500|
|Variable product cost per unit||(60)||(120)||(200)|
|Variable period cost per unit||(30)||(30)||(30)|
|Fixed cost per unit||(40)||(50)||(120)|
|Profit per unit||20||50||150|
|Demand in units||100||120||100|
|Machine-hours per unit||20||40||100|
The maximum machine-hours available are 6,000 per week.
- a) Calculate the product mixed that could maximise the profit.
- b) Discuss whether the product mix is ‘optimum’ in the long-run and discuss the potential solutions to the problem of the scarce resource with examples.