Page 278 - BA2 Integrated Workbook STUDENT 2018

Fundamentals of Management Accounting

2.4 A soup producer has a number of departments. Each department is located in a
separate building on the same factory site. In the preparation department the
basic raw materials are prepared. These are then moved on to the mixing
department where the various varieties of soups are created in separate large
mixing vessels. In the next department (the tinning department) the soup is
poured from these vessels into standard 400g tins. The tins then go on to the
labelling department prior to going on to the finished goods department.

The following statements relate to the soup producer:

(i) The preparation department is a cost centre.

(ii) A suitable cost unit for the mixing department is a 400g tin of soup.

(iii) The tinning department is a profit centre.

Which statement or statements is/are correct?

A (i) only

B (i) and (ii) only

C (i) and (iii) only

D (ii) and (iii) only

CHAPTER 3 – ANALYSING AND PREDICTING COSTS

3.1 The information below shows the number of calls made and the monthly
telephone bill for the first quarter of last year for ABC:

Month No. of calls Cost

January 400 $2,000
February 600 $2,800

March 900 $4,000

Using the high-low method, what was the fixed cost of the line rental each
month?

A $200

B $300

C $400

D $500

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