Question No. 1

“In
medium and large organisations there is usually a significant separation
between ownership and
management.
Owners often face problems in encouraging goal congruence of managers”.

Required:
In the
context of this statement discuss fully the following;

Goal
congruence. Illustrate your answer with at least two specific examples of
situations or circumstances that would foster goal congruence and at least two
specific examples of situations or circumstances that would lead to goal incongruence.

Question No. 2

Define the
following terms and provide an example of each to illustrate your definition.

i. Normal
activity
ii.
Practical activity
iii.
Theoretical activity

Question No. 3
a. Explain
the positive and negative outcomes of participative budgeting.
(4 MARKS –
Suggested time 12 minutes)

b. Discuss
the following comment by the manager of a small manufacturing
company:
‘Budgeting
is a waste of time. I’ve been running this business for forty years. I don’t
need to
plan.’ (3 MARKS – Suggested time 9 minutes)

c. Discuss
the following comment by the manager of a marketing research
company
made the following comment:
‘I don’t
understand why I should be concerned with motivation when setting my
budget.
It is my job to set targets and it is my employees’ job to meet them.’

Question No. 4

Activity-based
costing systems can identify costs for all activities, not just manufacturing
overhead activities. For each of the following businesses, speculate on and
list three key activities that are likely to be important in the provision of
the firm’s service. (Remember, these activities do not have to be overhead
activities.)

For each
activity, suggest an appropriate cost driver to use in assigning costs from the
activity cost pool to the services provided.

i.Legal
firm.
ii.Automobile
repair shop.
iii.
Laundry

Question No. 5

Explain
the meaning of the variable overhead efficiency variance. Support your answer
by distinguishing between the direct labour efficiency variance and the variable
overhead efficiency variance (assuming direct labour hours is the relevant
activity).
(3 MARKS –
Suggested time 9 minutes)
(Do not
waste time and marks explaining the calculation of the variance.)

b.
Describe a common but faulty interpretation of the fixed overhead volume
variance.
Why is this interpretation incorrect? In addition to and in support of
your
answer draw a graph showing budgeted and applied fixed overhead, and
indicate
clearly a favourable volume variance.
(3 MARKS –
Suggested time 9 minutes)
(Do not
waste time and marks explaining the calculation of the
variance.)

Question No. 6

Describe
how the activity-based management model combines the process and costing views.
What are the steps involved in each? What are the objectives of the
activity-based management system?

Question No. 7

a. Distinguish
between static and flexible budgets and explain the advantages of using a
flexible budget for control, compared with using a static budget.
(3 MARKS –
Suggested time 8 minutes)

b. Explain
how you would interpret a variable overhead spending variance.(Do not waste time and marks explaining the calculation of the
variance.)

(3 MARKS –
Suggested time 8 minutes)
c. Explain
the meaning of the variable overhead efficiency variance.(Do not waste time and marks explaining the calculation of the
variance.)

(2 MARKS –
Suggested time 6 minutes)
d. What is
the correct interpretation of the fixed overhead volume variance?(Do not waste time and marks explaining the calculation of the
variance.)

(2
MARKS – Suggested time 6 minutes)

Question No. 8

A cost driver is
an activity or factor that causes costs to be incurred.
(i) What is a volume based cost driver?
(ii) What is a non-volume based cost driver?
(iii) Give two
examples of non-volume driven costs in a university and suggest a possible
driver for each of those costs

Question No. 9

a. Explain the
differences between a cost centre, a revenue centre, a profit centre and an
investment centre, and explain what type of financial performance measure(s) is
suitable for the evaluation of each unit.
(2 marks –
suggested time approx. 6 minutes)

b.Discuss the advantages and disadvantages of decentralization in the
context of a responsibility accounting system. (2 marks – suggested time
approx. 6 minutes)

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