• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

ACCA December 2022 Exam results:
* Pass rates * Comments * Instant Poll * Competition *

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Examiner report 2018 J

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Examiner report 2018 J

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • September 3, 2021 at 5:24 pm #634187
    uusha
    Member
    • Topics: 3
    • Replies: 2
    • ☆

    Dear John
    Below is a question and answer from June 2018 paper.
    Could you pls help me understand how a manager can manipulate the return for his division using the method described in statement 2.

    The explanation give in the report is “Statement 2: when a manufacturing division uses absorption costing, building high inventory levels will result in a large proportion of production overheads being carried from one period to the next in inventory. This increases the return figure benefiting the divisional managers if these are linked to bonuses but would only benefit the company if those units of inventory can be sold in the following period.”

    Example 2
    Which of the following could lead to an increase in management bonus, without benefitting
    the organisation?

    (1) A manager holds on to heavily depreciated assets in order to avoid heavy investment in the period
    (2) A manager in a manufacturing division uses absorption costing and builds up high levels of inventory
    (3) A sales manager changes their fixed target to a relative target based on market share

    A 1 and 2 only
    B 1, 2 and 3
    C 1 only
    D 2 and 3 only

    What does this test?
    ? The behavioural aspects of performance management.
    What is the correct answer?
    ? The correct answer is A

    September 4, 2021 at 10:31 am #634245
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    With absorption costing the fixed costs are absorbed into the unit cost and so the more units that are produced then the lower the fixed cost will be per unit. If the fixed cost per unit is lower then the full cost per unit will be lower, and therefore the profit per unit will be higher.

    So, by producing a lot more units than they actually need to produce (and therefore having high inventory at the end of the period), the profit on those units sold during the period will be higher. That is OK provided that they can sell the inventory in the next period, but the risk is that they will end up with lots of inventory that becomes out of date and is never sold.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • tmatanga2008@gmail.com on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • palbu on Basic group structures – Impairment – ACCA (SBR) lectures
  • AkilaShaikh on Capital asset pricing model (part b) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy