ACCA F2 flashcards – set 3

See also ACCA F2 Flashcards: Set 1 | Set 2 | Set 4


In the context of asset impairments, what is the limit below which an asset should not be impaired?

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In the context of asset impairments, no asset should be impaired to an amount lower than its recoverable amount

In assessing ‘Value for Money’, what are the three ‘E’s’?

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The three ‘E’s’ are:

 

  • Economy
  • Efficiency
  • Effectiveness

 

How is the Return on Investment (ROI) calculated?

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ROI = profit / capital invested

How is the Interest Cover calculated?

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The interest cover = profit before interest and tax / interest

What is the purpose of an operating statement (as part of variance analysis)?

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The operating statement shows why the actual profit differs from the budgeted profit.

What is bottom-up budgeting?

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Bottom-up budgeting is where lower level managers are involved in the budget process – they prepare budgets for their departments which are then checked and co-ordinated by higher level management.

What is the difference between capital expenditure and revenue expenditure?

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Capital expenditure is the acquisition of non-current assets (which appear on the Statement of Financial Position)

Revenue expenditure is the payment of running expenses (which appear on the Income Statement)

 If there is perfect negative correlation between two variables, what will be the value of the coefficient of correlation?

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If there is perfect negative correlation, then r will equal -1.

What does a coefficient of determination of 0.75 mean?

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It means that 75% of the changes in y are explained by changes in x.

In process costing, what is meant by an abnormal loss?

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An abnormal loss is the excess of the actual loss over the normal (or expected) loss.

What are the attributes of good information?

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Good information should be:

  • Accurate
  • Complete
  • Cost-effective
  • Understandable
  • Relevant
  • Accessible
  • Timely
  • Easy to use

What is meant by ‘random sampling’?

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Each item in the population has an equal chance of being selected.

What is the ‘prime cost’ of a unit of production?

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The prime cost is the total of the direct costs of a unit.

What is a ‘stepped fixed cost’?

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A stepped fixed cost is one that is fixed in total within a certain level of activity, but where once an upper limit of activity is reached then a new higher level of fixed cost occurs.

What is a ‘purchase requisition form’?

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A purchase requisition form is prepared by the department that requires the material and is sent to the purchasing department.

In the formula on the formula sheet for the Economic Order Quantity, what does the symbol Co represent?

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Co represents the cost of placing one order.

What is the difference between direct and indirect labour costs?

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 Direct labour costs are directly involved in the making of products – the basic pay plus overtime premium on specific jobs

Indirect labour costs are all other labour costs – general overtime premiums, bonus payments, and the cost of indirect workers (e.g. canteen, maintenance)

In the formulae for regression analysis on the formulae sheet, what does the symbol n represent?

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n is the number of pairs of observations

What are the four types of cost relating to quality?

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Prevention costs (the costs of improving the quality of the production process)

Appraisal costs (the costs of quality control checks)

Internal failure costs (the costs of re-working; the costs of rejects)

External failure costs ( the costs of delivering poor quality to the customer – e.g. replacements, repair work)

What are the basic principles involved in Total Quality Management?

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‘Get it right first time’ – i.e. good quality production – no re-working, no rejects

Continuous improvement

Customer focus

What is meant by the term ‘target cost’?

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The target cost is the maximum cost we can allow in order to achieve the target level of profitability based on a pre-determined selling price.

In Activity Based Costing, what is meant by the term ‘cost driver’?

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A cost driver is whatever activity is causing the cost to occur.


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