A manager has to decide between four mutually exclusive projects, A, B, C and D:

Using the above information, which Project would a risk seeking manager choose?

• A. Project B
• B. Project D
• C. Project A
• D. Project C

Which of the following would help to explain a favourable material price variance?

• A. An increase in the quantity of material purchased resulted in unexpected bulk discounts.
• B. A decision to reduce the raw materials inventory during the period led to a reduced level of material purchases.
• C. Improved processing methods meant that material purchases were lower than standard for the output achieved.
• D. The material purchased was of a higher quality than standard.

THS produces two products from different combinations of the same resources. Details of the products are shown below:

Identify, using graphical linear programming, the optimal production plan for products E and R to maximize THS's profit in the month.

• A. The solution (from the graph0 is to produce 495 units of E and 470 units of R.
• B. The solution (from the graph0 is to produce 375 units of E and 750 units of R.
• C. The solution (from the graph0 is to produce 475 units of E and 770 units of R.
• D. The solution (from the graph0 is to produce 675 units of E and 470 units of R.
• E. The solution (from the graph0 is to produce 495 units of E and 670 units of R.
• F. The solution (from the graph0 is to produce 375 units of E and 870 units of R.

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning. The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.
What are the benefits for the company that could occur following the introduction of an activity based budgeting system?
Select ALL the correct answers.

• A. Activity Based Budgeting Systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness if this approach is that it gives little indication of the link between the level of activity and the cost incurred.
• B. Under an activity based budgeting system, resource allocation is linked to the strategic plan and is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.
• C. The approach under an Activity based Budgeting System is to make arbitrary cuts in order to meet overall financial targets.
• D. Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
• E. Under a traditional incremental budgeting system the focus is on existing resources and operations.
  Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under an activity based budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.