The total cost of production for two levels of activity is as follows:
Level 1 Level 2
Production (units) 3,000 5,000
Total cost ($) 6,750 9,250
The variable production cost per unit and the total fixed production cost both remain constant in the range of activity shown.
What is the level of fixed costs?
Which of the following should be accounted for in the consolidated financial statements of Company A using equity
accounting?
1 An investment in 51% of the ordinary shares of W Co
2 An investment in 20% of the preference (non-voting) shares of X Co
3 An investment in 33% of the ordinary shares of Y Co 4 An investment in 20% of the ordinary shares of Z Co, and an
agreement with other shareholders to appoint the majority of the directors to the board of Z Co
The first unit of an entirely new product took 160 labour hours to make and the labour cost was $3,200. Four units have now been produced and it is thought that a 75% learning curve applies to the work.
What will be the expected labour cost of the fifth unit to be produced?
Breakspear Co purchased 600,000 of the voting equity shares of Fleet Co when the value of the noncontrolling interest in
Fleet Co is $150,000 The following information relates to Fleet at the acquisition date
At acquisition $!000
Share capital, $0.5 500
ordinary shares 150
Retained earnings 50
Revaluation surplus 700
The goodwill arising on acquisition is $70,000. What was the consideration paid by Breakspear Co for the investment in Fleet Co?
Which of the following is generally regarded as a benefit of using spreadsheets for budgeting?
Date Co owns 100% of the ordinary share capital of Prune Co. The following balances relate to Prune Co.
At acquisition At 31.12.X8
Tangible non-current assets $’000 $’000
Freehold land 500 500
Plant and equipment 350 450
850 950
At acquisition, the fair value of Prune Co’s land was $50,000 more than shown in the financial statements of Prune Co. At 31 December 20X8, Date Co’s financial statements show a total tangible non-current asset balance of $1,250,000.
What amount should be included in the consolidated financial statements of the Date group at 31 December 20X8 for
tangible non-current assets?
This question appeared in the June 2015 exam.
A company predicted that the learning rate for production of a new product would be 80%. The actual learning rate was 75%. The following possible reasons were stated for this:
(1) The number of new employees recruited was lower than expected
(2) Unexpected problems were encountered with production
(3) Unexpected changes to Health and Safety laws meant that the company had to increase the number of breaks during production for employees.
Which of the above reasons could have caused the difference between the expected rate of learning and the actual rate of learning?
Six Co owns 80% of the equity share capital of Seven Co. At 31 December 20X4, the trade receivables and trade payables of the two companies were as follows:
Six Co Seven Co
Trade receivables $64,000 $39,000
Trade payables $37,000 $48,000
These figures include $30,000 that is owed by Seven Co to Six Co for the purchase of goods, for which Six Co has not yet
paid. These goods were sold by Six Co for a profit of $15,000 and 50% of them were still held as inventory by Seven Co at
31 December 20X4.
What should be the amounts for trade receivables and trade payables in the consolidated statement of financial position as at 31 December 20X4?
This objective test question contains a question type which will only appear in a computer-based exam, but this question provides valuable practice for all students whichever version of the exam they are taking.
The budgeted electricity cost for a business is $30,000 based upon production of 1,000 units. However if 1,400 units were to be produced the budgeted cost rises to $31,600.
Using the high/low approach what would be the budgeted electricity cost if 2,100 units were to be produced?
Donna Co acquired 80% of the equity share capital of Blitsen Co on 1 January 20X4 when the retained earnings of Blitsen Co were $40,000. The fair value of the non-controlling interest at this date was $25,000. At 31 December 20X4, the equity capital of Blitsen Co was as follows:
Share capital $’000
40
Share premium 10
Retained earnings 60
110
During the year Blitsen Co sold goods to Donna Co for $20,000. This price included a mark-up of $12,000 for profit. At 31
December 20X4, 50% of these goods remained unsold in the inventory of Donna Co.
What is the value of the non-controlling interest in the Donna Group at 31 December 20X4, for the purpose of preparing the
consolidated statement of financial position?