AAT L4 Applied Management Accounting 2

Question 1

A company uses activity-based costing. The cost driver for 'machine setups' is number of setups. Total setup costs are £48,000 and there are 160 setups in the period. Product A requires 40 setups. What is the setup cost allocated to Product A?

Accepted Answer

£12,000

Answer

The cost per setup is £48,000 ÷ 160 = £300. Product A uses 40 setups, so its allocation is 40 × £300 = £12,000.

Question 2

A business has fixed costs of £120,000 and a contribution to sales ratio (C/S ratio) of 40%. What is the breakeven sales revenue?

Accepted Answer

£300,000

Answer

Breakeven sales revenue = Fixed costs ÷ C/S ratio = £120,000 ÷ 0.40 = £300,000.

Question 3

Using a standard costing system, actual material used was 5,200 kg at £4.80 per kg. The standard was 5,000 kg at £5.00 per kg for actual production. What is the material usage variance?

Accepted Answer

£1,000 Adverse

Answer

Material usage variance = (Standard quantity − Actual quantity) × Standard price = (5,000 − 5,200) × £5.00 = −£1,000, i.e. £1,000 Adverse.

Question 4

A limiting factor analysis shows that Product X contributes £18 per unit and requires 3 machine hours, while Product Y contributes £20 per unit and requires 5 machine hours. Machine hours are the binding constraint. Which product should be prioritised?

Accepted Answer

Product X, as it has higher contribution per machine hour

Answer

Product X: £18 ÷ 3 hours = £6/hour. Product Y: £20 ÷ 5 hours = £4/hour. Product X generates more contribution per scarce resource hour, so it should be prioritised.

Question 5

A company operates a JIT (Just-in-Time) production system. Which of the following is a key characteristic of JIT?

Accepted Answer

Producing goods only when required by the customer

Answer

JIT systems produce goods only in response to actual demand, eliminating the need to hold inventories and reducing waste across the production process.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Applied Management Accounting 2