Which THREE of the following statements about different costing systems are correct?

• A.In a period during which finished goods inventory levels fall, profit using marginal costing will be higher than if absorption costing is used.
• B.Over-absorption of fixed production overhead is caused by actual sales exceeding budgeted sales.
• C.When valuing inventory using throughput costing, the direct labour cost is excluded.
• D.Contribution per unit is the selling price per unit minus the variable costs per unit.
• E.Finished goods inventory will be assigned a higher value using throughput costing than absorption costing.

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Company Y absorbs fixed production overheads using a rate per machine hour. Budgeted and actual data for month 8 are as follows:

What is the fixed production overhead efficiency variance?

• A.$1,000,000 favourable
• B.$1,000,000 adverse
• C.$400,000 adverse
• D.$400,000 favourable

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A manager in your organisation says, "I have spare capacity and I need a unit cost as a basis for pricing a special one-off contract. You have provided me with a relevant cost of $6.50 per unit and a full production cost of $8.00 per unit. Please explain which unit cost I should use." Which cost should be used in this decision and why?

• A.The relevant cost because it is the lower unit cost.
• B.The full production cost because it will be used in the financial accounting reporting system.
• C.The full production cost because it is important to ensure that all costs are covered by the selling price.
• D.The relevant cost because it represents the cash flows that will be affected if the contract is accepted.

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TP makes wedding cakes that are sold to specialist retail outlets which decorate the cakes according to the customers' specific requirements. The standard cost per unit of its most popular cake is as follows:

The general market prices at the time of purchase for Ingredient A and Ingredient B were $23 per kg and
$20 per kg respectively. TP operates a JIT purchasing system for ingredients and a JIT production system; therefore, there was no inventory during the period.
What was the material price planning variance for ingredient B?

• A.The material price planning variance - Ingredient B was $54 000 F
• B.The material price planning variance - Ingredient B was $57 000 F
• C.The material price planning variance - Ingredient B was $59 000 F
• D.The material price planning variance - Ingredient B was $64 000 F

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A company accountant is trying to determine the optimum production plan for the period using linear programming.
The accountant has correctly formulated the linear programming problem as follows:
Variables (products): x and y
Objective function: Maximise contribution, C = 10x + 15y
Material constraint: 4x + 6y ≤ 500 (kg)
Labour constraint: x + 2y ≤ 350 (hours)
Machine constraint: 10x + 4y ≤ 1,500 (hours)
x constraint: 50 ≤ x ≤ 200
y constraint: y ≥ 0
Which of the following statements is true?

• A.Product x requires twice as much labour time as Product y.
• B.The maximum demand for product x is 50 units.
• C.The selling price of y is $15.
• D.Product y requires 4 machine hours to manufacture.

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