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Cutting department data — Budget: Overheads $40,000; Machine hours 2,800; Labour hours 2,600. Actual: Overheads $44,000; Machine hours 2,700; Labour hours 2,900. What OAR would have been used?
Option C ($15.38 per labour hour) is correct.
OAR uses budgeted figures: $40,000 ÷ 2,600 budgeted labour hours = $15.38 per labour hour.
Labour hours are the more appropriate basis as actual labour hours (2,900) exceed actual machine hours (2,700), indicating a labour-intensive department.
Financial data: Profit from operations $59,800; Finance costs $12,000; Profit for year $47,800; Ordinary share capital $700,000; Retained earnings $72,500; 10% Debentures $120,000. What was the ROCE?
Option C (6.70%) is correct.
Capital Employed = ($700,000 + $72,500) + $120,000 = $892,500
ROCE = $59,800 ÷ $892,500 × 100 = 6.70%
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