The standard output from a joint process is 4,000 litres of Product K, 6,000 litres of Product L and 3,000 litres of Product M.
The total cost of the joint process is $147,000.
The company is now deciding if it should further process Product L.
In the further processing decision the best way to apportion the joint costs to the products is:

• A.in the ratio of the sales value at the split-off point.
• B.it is not necessary to allocate joint costs in a further processing decision.
• C.in the ratio of 4:6:3.
• D.in the ratio of the sales value after further processing.

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A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning. The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.
What are the benefits for the company that could occur following the introduction of an activity based budgeting system?
Select ALL the correct answers.

• A.The approach under an Activity based Budgeting System is to make arbitrary cuts in order to meet overall financial targets.
• B.Under an activity based budgeting system, resource allocation is linked to the strategic plan and is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.
• C.Activity Based Budgeting Systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness if this approach is that it gives little indication of the link between the level of activity and the cost incurred.
• D.Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
• E.Under a traditional incremental budgeting system the focus is on existing resources and operations.
  Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under an activity based budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.

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A company operates a customer complaints department.
How will the cost of the customer complaints department be classified in a system focussed on quality related costs?

• A.Appraisal cost
• B.Internal failure cost
• C.External failure cost
• D.Prevention cost

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A company manufactures three products X, Y and Z.
The company is currently operating at full capacity and is unable to meet the full sales demand for Product Z.
According to the latest management accounts, Product Y is loss making, whilst X and Z both make strong positive contributions.
Which of the following is relevant when making a decision on whether or not to discontinue the manufacture of Product Y?

• A.The salary of the sales manager who deals with all three products.
• B.The rent and rates of the factory used to make the three products.
• C.The contribution from additional sales of Product Z.
• D.The cost of market research carried out last month to establish if sales of Product Y are likely to improve.

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A company sells three products A, B and C in a ratio of 2:2:3.
Each unit of A,B and C earns a contribution of $4.00, $2.00 and $4.00 respectively. Production fixed costs are $69,000 each month and selling fixed costs are $13,000 each month.
The company holds no inventory. The management accountant wants to know the total number of units needed to break-even. However, he is unsure about how to calculate the weighted average contribution per unit or what category of fixed cost to use.
Place the amounts given to complete the table in order to calculate the total number of units to break even.

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