Question 1:
Ace Marketing Private Limited is a marketing research firm that organises focus groups for consumer product companies. Each focus group has eight individuals who are paid HKD $90 per session to provide comments on new products. These focus groups meet in hotels and are led by a trained independent marketing specialist hired by Ace Marketing Private Limited. Each specialist is paid a fixed retainer to conduct a minimum number of sessions and a pre-session fee of HKD $360. Ace Marketing Private Limited will send a staff member to attend each session so as to ensure that all the logistical aspects run smoothly.
Classify each of the following cost items as:
(a) Direct or indirect costs with respects to each individual focus group.
(b) Variable or fixed costs with respect to how the total costs of Ace Marketing Private Limited change as the number of focus groups changes.
Indicate your answer by stating direct or indirect and variable or fixed in the answer space provided respectively.
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Cost item
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Direct
or Indirect
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Variable or Fixed
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a) Payment to individual in each focus group to provide comments on new products
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b) Annual subscription of Ace Marketing Private Limited to Consumer Reports magazine.
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c) Lease payment by Ace Marketing Private Limited for corporate office
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d) Cost of CDs used to record visuals and comments made by individuals in a focus group sessions. (These CDs are sent to the company whose products are being tested.)
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e) Petrol costs of Ace Marketing Private Limited staff for company-owned vehicles. (Staff members submit monthly bills with no mileage breakdowns.)
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Question 2:
A company manufactures and retails electrical appliances. You are required to group the costs, which are listed below (a) to (j) into the following classification (each cost is intended to belong to only one classification). Indicate your answer by stating i, ii, iii, iv, v or vi in the answer space provided.
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i. Direct materials
ii. Direct labour
iii. Direct expenses
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iv. Indirect production overhead
v. Selling and distribution costs
vi. Administration costs
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a) Wages of security guards for manufacturing plant
b) Carriage inwards expenses for the purchase of basic raw materials
c) Royalty fee payable on number of units of product produced
d) Manufacturing plant production manager's salaries
e) Transportation fee to send electrical appliances to customers
f) Cost of advertising products on internet
g) Audit fees charges for the year
h) Wages of workers in the maintenance department
i) Chief Executive Officer's salary
j) Lubricant for machines
Question 3
State whether the following statements are True or False in the answer space provided:
a) Cost accounting can be used only in manufacturing industries. ___
b) Fixed cost per unit remains fixed. ___
c) Fixed cost per unit increases with increase in output. ___
d) Variable costs vary with variation in output but do not vary in the same proportion in which output changes. ___
e) Variable cost per unit does not remain fixed. ___
f) Variable cost per unit increases with increase in output. ___
g) Prime cost is the aggregate of direct material costs, direct labour costs, direct expenses and variable production overheads. ___
h) Factory supervisor's salary is a direct labour cost. ___
Question 4:
Classify each of the cost items in part (a) to (h) into component of the value chain shown, namely Research and Development, Process Design, Production, Marketing, Distribution, and Customer Service. Boots the Chemist incurs the following costs.
Question 5:
Able Travel markets vocation packages to Singapore from Hong Kong. The package includes a round-trip flight on Bravo Airlines. Able Travel pays Bravo Airlines HK$600,000 for each round-trip flight. The maximum load on a flight is 300 passengers. (Marks awarded for workings.)
What is the unit cost to Able Travel of each passenger on a round-trip flight if there are:
a) 200 passengers b) 250 passengers c) 350 passengers
Question 6:
Discuss 4 main distinctions/ differences between Financial Accounting and Management Accounting