| Multiple choice & accounting formulas | 1. Q9-1: Information systems that include both financial and non-financial information which can be presented graphically with highlighting of performance relative to target are: (Points:3) |
Transaction processing systems Management information systems Enterprise resource planning systems Expert systems
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| Question 2. 2. Q9-2: Information systems that integrate financial and non-financial information and provide holistic information across multiple business activities are: (Points : 3) |
Transaction processing systems Management information systems Enterprise resource planning systems Expert systems
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| Question 3. 3. Q9-3: Reporting on a horizontal perspective provides information about: (Points : 3) |
an organization’s structure of departments or business units business activities or processes that cut across departments or business units an organization’s processes reflected in its organization chart an organization’s structure of processes
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| Question 4. 4. Q9-4: Information systems design and control is important: (Points : 3) |
Only for new information systems Only for accounting systems For all systems except those by established suppliers such as SAP and Oracle For all new and existing systems
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| Question 5. 5. Q13-1: Williams, a professional services firm has overhead of £625,000. It operates three divisions and an accountant’s estimate of the overhead allocation per division is 38% for Division 1, 22% for Division 2 and 40% for Division 3. The divisions respectively bill 4,100, 1,950 and 3,300 hours.
The business-wide overhead recovery rate and the cost-centre overhead recovery rate for Division 2 are, respectively: (Points : 5) |
£55.55 and £62.50 £62.50 and £55.55 £66.84 and £70.51 £57.93 and £72.51
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| Question 6. 6. Q13-2: Randy’s Components uses an activity based costing system for its product costing. For the last quarter, the following data relates to costs, output volume and cost drivers: | Overhead Costs | £ | | Machinery | 172,000 | | Set-ups | 75,000 | | Materials Handling | 25,000 | | Total | 272,000 |
| Product information | A | B | C | | Production and sales units | 5,000 | 3,500 | 2,800 | | Number of production runs | 11 | | | | Number of stores orders | 15 | 10 | |
(Points : 9)
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| Potential Matches: | | 1 : £8.65 | | 2 : £8.24 | | 3 : £9.27 |
| Answer | | _____: Product A | | _____: Product B | | _____: Product C |
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| Question 7. 7. Q13-3: The method of determining overhead allocation using absorption costing and that under activity-based costing differs because: (Points : 3) |
Activity-based costing can never accurately allocate overheads to products because the method of allocation is arbitrary whereas absorption costing is always more reliable because it uses predictable causes of overhead costs to trace those costs to products
Absorption costing allocates costs to cost pools and traces costs to products based on cost drivers whereas activity-based costing allocates costs to cost centres and then to products based on a measure of activity such as direct labour hours
Activity-based costing allocates costs to cost pools and traces costs to products based on cost drivers whereas absorption costing allocates costs to cost centres and then to products based on a measure of activity such as direct labour hours
Absorption costing is based on a business-wide allocation of overheads whereas activity-based costing is based on a departmental (or cost centre) allocation of overheads
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| Question 8. 8. Q13-4: The main proposal made by Cooper & Kaplan in their article “How cost accounting distorts product costs” is that (Points : 3) |
cost accounting has not reflected the shift from manufacturing to service industries
nearly all product costs are variable and cost systems need to reflect the variability of these costs in terms of the number of transactions
product costs that are calculated for inventory valuation purposes are not reliable for decision-making
product cost information can lead to inappropriate decisions about product discontinuance
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| Question 9. 9. Q14-1a: The projected net cash flows for an investment are (in £’000): Y0: ?
Y1: 130
Y2: 200
Y3: 330
Y4: 270
Y5: 180
Match the net present value of the investment assuming a 7% cost of capital and a 950 initial investment; a 8% cost of capital and a 850 initial investment; a 9% cost of capital and a 825 initial investment; and a 6% cost of capital and a 900 initial investment?
(Points : 8)
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| Potential Matches: | | 1 : -50.1 | | 2 : 25.7 | | 3 : 24.8 | | 4 : 26.1 |
| Answer | | _____: 7%/950 | | _____: 8%/850 | | _____: 9%/825 | | _____: 6%/900 |
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| Question 10. 10. Q14-1b: Given the cash flow in the prior question (14a) and for the $900 initial investment, what is the IRR of the cash flows? (Points : 3) |
6%
7%
8%
9%
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| Question 11. 11. Q14-2: General Sales is considering three alternative investment proposals but can only accept one of these. The investments and cash flows are shown below: | | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | | Project A | | | | | | | Cost of Capital | 12% | | | | | | Cash inflows | -150,000 | 50,000 | 75,000 | 75,000 | 50,000 | | Project B | | | | | | | Cost of Capital | 11% | | | | | | Cash inflows | -200,000 | 75,000 | 75,000 | 75,000 | 75,000 | | Project C | | | | | | | Cost of Capital | 10% | | | | | | Cash inflows | -265,000 | 50,000 | 100,000 | 150,000 | 100,000 |
General uses discounted cash flow techniques to evaluate its investments, using a cost of capital as specified above. Compare for each alternative investment the Net present value, Profitability index, and the Internal rate of return. Which of the three investment proposals is the best for General Sales? (Points : 7) |
Project A
Project B
Project C
None of them have positive NPVs and are not acceptable.
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