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Question Bank - Business Studies

Accounting and Finance: Test 4

Q1. In following the procedure known as 'zero budgeting'

(Select one answer)

(a) * managers are not allowed to spend any money on capital items for the period of the budget.
(b) * managers have to justify any expenditure in order to ensure that allocations to departments are not excessive.
(c) * managers may apply for their budgets to be changed within the budgeting period.
(d) * managers are not allowed to use money saved against one periods to budget in the next period.

Source: bized

Q2. All the following are fixed costs, except

(Select one answer)

(a) * a salary.
(b) * a wage.
(c) * a commission payment.
(d) * a weekly retainer.

Source: bized

Q3. A firm, which makes yachts, has fixed costs of £260,000 per month. The product sells for £35,000 per boat, and the variable costs of production are £15,000 per boat. The boatyard can manufacture 20 boats each month. What is the firms margin of safety at the moment?

(Select one answer)

(a) * 54%
(b) * £245,000
(c) * 7 boats
(d) * 7 boats per month

Source: bized

Q4. A boatyard expected to sell 20 boats in a month at a price of £20,000 each, It actually sold 21 craft at an average price of £21,250 each. The accountants have determined a sales revenue variance of

(Select one answer)

(a) * - £46,250 Favourable
(b) * + £46,250 Unfavourable
(c) * £446,250
(d) * + £46,250 Favourable

Source: bized

Q5. A firm, which makes yachts, has fixed costs of £260,000 per month. The product sells for £35,000 per boat, and the variable costs of production are £15,000 per boat. The boatyard can manufacture 20 boats each month. What is the firms break-even output?

(Select one answer)

(a) * Cannot work it out from the data given.
(b) * 13 boats
(c) * £455,000
(d) * 20 boats

Source: bized

Q6. All the following are examples of fixed costs, except

(Select one answer)

(a) * insurance fees.
(b) * rent payments.
(c) * directors fees.
(d) * licence fee on a product sold.

Source: bized

Q7. A company sold 20 items at a price of £50 each. It bought them for £20 each, but had to buy them in packs of 50. These transactions were for cash. It incurred 'other costs' amounting to £50, and also received a payment of £150, being the sales made on credit last week. At the start of the day the company had £1,000 in the bank and as cash. What effect did these transactions have on the firms cash position?

(Select one answer)

(a) * - £100
(b) * £1,100
(c) * + £100
(d) * £900

Source: bized

Q8. The value of break-even analysis to a firm is limited by all of the following factors except

(Select one answer)

(a) * the assumption that all items made are sold.
(b) * the assumption that all fixed costs do not change with output.
(c) * all costs vary with time.
(d) * that all costs and price can change independently of each other.

Source: bized

Q9. All of the following are examples of profit centres within an airline, except

(Select one answer)

(a) * in-flight magazine.
(b) * merchandising.
(c) * aircraft maintenance.
(d) * ticketing.

Source: bized

Q10. A company sold 20 items at a price of £50 each. It bought them for £20 each, but had to buy them in packs of 50. These transactions were for cash. It incurred 'other costs' amounting to £50, and also received a payment of £150, being the sales made on credit last week. At the start of the day the company had £1,000 in the bank and as cash. What effect did these transactions have on the firms gross profit (or loss)?

(Select one answer)

(a) * - £600
(b) * Zero
(c) * £600
(d) * £1,000

Source: bized

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