Mock Examination

Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

Note
Read instructions carefully
Attempt all questions
Do not ask any clearance regarding question from invigilator, because
interpretation of question is the part of your examination.
Any unfair mean or practice will lead to the cancellation of test.
MULTIPLE CHOICE QUESTIONS
1. A semi variable cost is one that, in short term, remains the same for a given range of
activity but beyond that increases and then remains constant at the higher level of activity
A. True
B. False
2. As a company's management accountant you would:
A. Be involved in the yearly reporting of financial performance.
B. Prepare plans and forecasts for the future activities of the business.
C. Be primarily concerned with the reporting of past data.
D. Be primarily concerned with providing information to shareholders on how management
are doing.
3. Which of the following functions would not be classed as cost accounting?
A. Providing information to managers on the best type of machine to buy.
B. Providing details to management of the cost of running a department.
C. Providing accurate valuations for units of stock.
D. Ascertaining the price to charge for output based on the resources used to make it.
4. The Valuation Department of a large firm of surveyors wishes to develop a method of
predicting its total costs in a period. The following past costs have been recorded at two
activity levels.
Number of
Valuation
V

Total Cost

Period 1

420

TC
82,200

Period 2

515

90,275

The total cost model for a period could be represented as follows.

A. TC = $46,500 + 85V
B. TC = $42,000 + 95V
C. TC = $46,500 85V
D. TC = $51,500 95V
5. Cost apportionment involves:
A. The sharing out of costs to products.
B. The sharing out of common costs to departments.
C. The allocation of direct costs to departments.

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

D. The sharing out of overheads to service departments only.

6. Which of the following would generally be the least appropriate method of apportioning
service department costs?
A. Apportioning on the basis of number of employees.
B. Sharing costs out equally between departments.
C. Apportioning on the basis of floor area.
D. Apportioning on the basis of service department activity.
7. Absorption costing refers to the process of:
A. Absorbing service department costs into production department costs.
B. Absorbing the direct costs of production and service departments into products.
C. Absorbing the overhead costs of departments into products.
D. Absorbing direct costs of production into products
8. Which of the following is the sequence of events in costing overheads to products?
(i) Re-apportion service department costs to production departments
(ii) Charge costs directly to departments where appropriate.
(iii) Apportion common fixed costs over departments.
(iv) Absorb overheads into products
A. (ii), (iii), (i), then (iv)
B. (i), (iii), (iv), then (ii)
C. (i), (ii), (iii), then (iv)
D. (ii), (i), (iv), then (iii)
9. Which of the following would not cause a discrepancy between the actual stock held and
the stock recorded on bin cards in the warehouse?
A. Theft from the warehouse
B. Differences between the goods received and the amount recorded on the GRN
C. Differences between the amounts of stocks recorded on the job card and the amount of
stocks recorded on the customer invoice
D. Delivery of the correct units, but the wrong items of stock
10. A company uses components at the rate of 18,000 units per year, which are bought in at a cost
of $1.20 each from the supplier. The company orders 1,500 units each time it places an order
and the buffer stock held is 500 units. It costs $20 each time to place an order, regardless of
the quantity ordered. The total holding cost is 20% per annum of the average inventory held.
Annual holding and ordering cost of the company would be $
11. Which of the following industries are most likely to use job costing?
A. A manufacturer of frozen food
B. A manufacturer of saloon cars
C. A firm of accountants
D. A chemical manufacturer
12. Which of the following is NOT a characteristic of process costing?
A. There will be a wide range of products.
B. Products can go through several processes.
C. There will be a large number of units produced.
D. Total costs will be divided by output to ascertain cost per unit.

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

13. In process costing an abnormal gain would arise if:

A. Closing stock at the end of a period was higher than opening stock.
B. The actual units lost during the process were more than the normal loss.
C. The actual units lost during the process were less than the normal loss.
D. The estimate of cost per unit was below the actual cost per unit of output.
14. A company makes one product, which passes through a single process. Details of the process
for last period are as follows:
Materials
Labour
Production overheads

5,000 kg at 50c per kg

$800
200% of labour

Normal losses are 20% of input in the process, and without further processing any losses can
be sold as scrap for 30p per kg.
The output for the period was 3,800 kg from the process. There was no work in progress at
the beginning or end of the period.
The value of the abnormal loss is $
15. WP Co makes a product in a single process. The following data is available for the latest
period.
Opening work in progress: 300 units
Valued as follows: $
Material
3,600
Labour
1,600
Overhead
400

Closing work in progress: 150 units

Degree of completion: %
Material
Labour
Overhead

100
50
30

Units added and costs incurred during the period:

Material: 750 units
$11,625
Labour
$6,200
Overhead
$4,325
Losses
nil
WP Co uses the weighted average method of inventory valuation
The value of the units transferred to finished goods was $
16. The following information relates to job RT110, which is being carried out by AB Co to meet
a customer's order.
Department A
Department B
Direct materials consumed
$5,000
$3,000
Direct labour hours
400 hours
200 hours
Direct labour rate per hour
$4
$5
Production overhead per direct labour hour
$4
$4
Administration and other overhead 20% of full production cost
Profit margin 25% of sales price

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

What is the selling price to the customer for job RT110?

A. $16,250
B. $17,333
C. $19,500
D. $20,800
17. Job 198 requires 380 active labour hours to complete. It is expected that there will be five
per cent idle time. The wage rate is $6 per hour. The labour cost of Job 198 is:
A. $2,166
B. $2,280
C. $2,394
D. $2,400
18. Calculate the most appropriate unit cost for a distribution division of a multinational company
using the following information.
Miles travelled
Tonnes carried
Number of drivers
Hours worked by drivers
Tonne-miles carried
Costs incurred

636,500
2,479
20
35,520
375,200
$562,800

Unit cost would be:

A. $0.88
B. $1.50
C. $15.84
D. $28,140
19.

In the above breakeven chart, the contribution at level of activity x can be read as:
A.
B.
C.
D.

distance A
distance B
distance C
distance D

20. Which of the following statements about profit/volume graphs are correct?
(i) The profit-volume line starts at the origin
(ii) The profit-volume line crosses the x axis at the breakeven point

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

(iii) Any point on the profit-volume line above the x axis indicates the profit (as measured on

the vertical axis) at that level of activity

A.
B.
C.
D.

(i) and (ii) only

(ii) and (iii) only
(i) and (iii) only
All of them

21.

The above breakeven chart has been drawn for R Co's single product. Which of the
following statements about the product are correct?
(i) The product's selling price is $10 per unit
(ii) The product's variable cost is $8 per unit
(iii) The product incurs fixed costs of $30,000 per period
(iv) The product earns a profit of $70,000 at a level of activity of 10,000 units
A.
B.
C.
D.

(i), (ii) and (iii) only

(i) and (iii) only
(i), (iii) and (iv) only
(iii) and (iv) only

22. A company's single product has a contribution to sales ratio of 20%. The unit selling price
is $12. In a period when fixed costs were $48,000 the profit earned was $5,520. Direct
wages were 30% of total variable costs, and so the direct wages cost for the period was:
$
23. A company manufactures three products, details of which are as follows.
Product J
Product K
Product L
$ per unit
$ per unit
$ per unit
Selling Price
140
122
134
Direct material $2/kg
22
14
26
Other variable cost
84
72
51
Fixed Cost
20
26
40
In a period when direct material is restricted in supply, the ranking of the products in terms
of the most profitable use of the material is:
First

: Product

Second : Product

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Third

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

: Product

24. H Company sells product V, for which data is as follows.

$ per unit
108
73

Selling price
Variable cost

Period fixed costs amount to $196,000, and the budgeted profit is $476,000 per period. If the
selling price and variable cost per unit increase by 10% and 7% respectively, the sales volume
will need to
by
units in order to achieve the
original budgeted profit for the period.
A.
B.
C.
D.

Decrease / 16,515
Increase / 16,515
Decrease / 2,685
Increase / 2,685

25. A product has the following costs.

$
8
5
7

Direct materials
Direct labour
Variable overheads

Fixed overheads are $10,000 per month. Budgeted sales per month are 400 units.
The markup which needs to be added to marginal cost to allow the product to break even
is:
%
26. JC Co operates a bottling plant. The liquid content of a filled bottle of product T is 2 litres.
During the filling process there is a 30% loss of liquid input due to spillage and evaporation.
The standard price of the liquid is $1.20 per litre.
The standard cost of the liquid per bottle of product T, to the nearest cent, is
A.
B.
C.
D.

$2.40
$2.86
$3.12
$3.43

27. What is a standard hour?

A. An operating hour in which there are no exceptional events, eg machine breakdowns
B. An hour during which only standard units are made
C. The amount of work achievable in an hour, working at standard efficiency levels
D. An hour during which only standard hourly rates are paid to labour
28. Extracts from P Co's records for last month are as follows.
Budget
Actual
Production
7,000
7,200
Direct material cost
$42,000
$42,912
What is the total direct material cost variance?

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011
A.
B.
C.
D.

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

$288 (F)
$288 (A)
$912 (A)
$1,200 (F)

29. ABC Co uses standard costing. It purchases a small component for which the following data
are available.
Actual purchase quantity
6,800 units
Standard allowance for actual production
5,440 units
Standard price
85 cent/unit
Purchase price variance (adverse)
($544)
What was the actual purchase price per unit?
A.
B.
C.
D.

75c
77c
93c
95c

30. Z Co uses a standard costing system and has the following labour cost standard in relation to
one of its products.
4 hours skilled labour @ $6.00 per hour $24.00
During October, 3,350 of these products were made which was 150 units less than budgeted.
The labour cost incurred was $79,893 and the number of direct labour hours worked was
13,450.
The direct labour variances for the month were
Rate
A. $807 (F)
B. $807 (F)
C. $807 (F)
D. $807 (A)

Efficiency
$297 (A)
$300 (A)
$3,300 (A)
$300 (F)

31. Extracts from Drizzle Co's records from last period are as follows.
Budget
Actual
Production
1,925 units
2,070 units
Variable production overhead cost
$13,475
$13,455
Labour hours worked
3,850
2,990
The variable production overhead expenditure variance for last period is:
Favorable

Adverse

$
32. Which of the following would help to explain a favourable direct labour rate variance?
(i) Employees were of a lower grade than standard
(ii) The standard hourly rate of pay was set unrealistically high
(iii) A pay increase which had been anticipated in the budget was not awarded

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011
A.
B.
C.
D.

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

All of them
(i) and (ii) only
(ii) and (iii) only
(i) and (iii) only

33. Each unit of product Alpha requires 3 kg of raw material. Information about next month's
production budget for product Alpha is as follows.
Budgeted sales of Alpha
Opening inventories:
Raw materials
Finished units of Alpha

60,000 units
15,000 kg
2,000 units

Planned closing inventories:

Raw materials
7,000 kg
Finished units of Alpha
3,000 units
The number of kilograms of raw materials that should be purchased next month is:
A.
B.
C.
D.

172,000
175,000
183,000
191,000

34. Each unit of product Echo takes five direct labour hours to make. Quality standards are high,
and 8% of units are rejected after completion as sub-standard. Next month's budgets are as
follows.
Opening inventories of finished goods
3,000 units
Planned closing inventories of finished goods
7,600 units
Budgeted sales of Echo
36,800 units
All inventories of finished goods must have successfully passed the quality control check.
What is the direct labour hours budget for the month?
A.
B.
C.
D.

190,440 hours
207,000 hours
223,560 hours
225,000 hours

35. The following data have been extracted from the budget working papers of BL Co.
Production volume

1,000
$/unit
Direct materials
4.00
Direct labour
3.50
Production overhead department 1
6.00
Production overhead department 2
4.00
The total fixed cost and variable cost per unit is
Total fixed cost
$

2,000
$/unit
4.00
3.50
4.20
2.00

Variable cost per unit

$

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011
A.
B.
C.
D.

3,600
4,000
7,600
7,600

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours
9.90
11.70
7.50
9.90

36. A company sold 10,000 units of its single product in a period during which finished
goods inventory increased by 2,000 units.
Based on absorption costing, how would the profit in the period and the inventory
value at the end of the period compare with those calculated using marginal costing?
Profit
A. Higher
B. Higher
C. Lower
D. Lower

Inventory
Higher
Lower
Higher
Lower

37. Sunk costs are costs that have proven to be unproductive.

A. True
B. False
38. Costs which can be eliminated in whole or in part if a particular business segment is
discontinued are called:
A.
B.
C.
D.

Sunk Costs
Opportunity Costs
Avoidable Costs
Irrelevant Costs

39. The following standard costs pertain to a component part manufactured by Bor Company:
$
Direct materials
4
Direct labor
10
Manufacturing overhead
40
Standard cost per unit
54
An outside supplier has offered to supply all of the parts needed by Bor Company for $50
each. The 60% of the manufacturing overhead cost that is fixed would be unaffected by this
decision. In the decision to make or buy, what is the relevant unit cost to make the part
internally?
A.
B.
C.
D.

$54
$30
$16
$24

40. Kinsi Corporation manufactures five different products. All five of these products must pass
through a stamping machine in its fabrication department. This machine is Kinsi's constrained
resource.
Kinsi would make the most profit if it produces the product that:
A. uses the lowest number of stamping machine hours.
B. generates the highest contribution margin per unit.
C. generates the highest contribution margin ratio.

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

D. generates the highest contribution margin per stamping machine hour.

41. Gandy Company has 5,000 obsolete desk lamps that are carried in inventory at a
manufacturing cost of $50,000. If the lamps are reworked for $20,000, they could be sold for
$35,000. Alternatively, the lamps could be sold for $8,000 for scrap. In a decision model
analyzing these alternatives, the sunk cost would be:
A. $8,000
B. $15,000
C. $20,000
D. $50,000
42. Which of the following is a feasible value for the correlation coefficient?
A. +1.6
B. 1.6
C. 0
D. +2.0
43. The management of a company is making a decision which could lead to just three possible
outcomes high, medium and low levels of demand. Profit and expected value
information are as follows:
Outcome
Profit
Probability
High
10,000
0.3
Medium
7,000
0.5
Low
(5,000)
0.2
What is the most likely level of profit from making the decision?
A. $12,000
B. $5,500
C. $7,000
D. $2,000
44. A company is using linear programming to decide how many units of each of its two products
to make each week. Weekly production will be x units of product X and y units of product Y.
At least 50 units of X must be produced each week, and at least twice as many units of Y as of
X must be produced each week. Each unit of X requires 30 minutes of labour, and each unit
of Y requires 2 hours of labour. There are 5,000 hours of labour available each week.
Which of the following is the correct set of constraints?
A. 0.5x + 2y 5,000
x 50
y 2x
B. x + 4y 5,000
x 50
y 2x
C. 0.5x + 2y 5,000
x 50
y 100
D. 0.5x + 2y 10,000
x 0.5y
y 100

45. The following statement refers to a qualifty of good information

The cost of producing information should be ___________ than the value of the benefits of
the information to management
Is the correct missing word in the statement less or greater?

10

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

A. Lesser
B. Greater
46. Secondary data could be described as
A.
B.
C.
D.

Data collected specifically for the purpose of the survey being conducted
Data collected within the organization only
Data collected through the use of postal questionnaires
Data which has already been collected elsewhere for some other purpose

47. A differential piecework scheme has a basic rate of 050 per unit. Output in addition to 500
units is paid at higher rates. The premiums over and above the basic rate, which apply only
to additional units over the previous threshold, are:
Output (units)
Premium (per unit)
501600
005
above 600
010
What is the total amount paid if output is 620 units?
A.
B.
C.
D.

317
318
322
372

48. Following graph depicts two lines one for production cost and other for selling costs the upper
line shows production cost and the lower shows selling costs

Production Costs
Selling Costs

Which of the following is true about the above graph

A. The production cost consists of fixed and variable cost where as selling cost only

includes variable cost

B. The production cost consists of fixed and variable cost where as selling cost only
includes variable cost
C. Both the production cost and selling cost has same fixed cost
D. Both the production cost and selling cost have same variable cost per unit
11

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

49. One of the advantages of piece work scheme is that it ensures good quality

production
A. True
B. False
50. Overheads in a
Budget
Absorbed
Actual

production cost centre for a period are:

74,600
71,890
73,220

What is the overhead over/under absorption?

A.
B.
C.
D.

12

1,330
1,330
2,710
2,710

over absorbed
under absorbed
over absorbed
under absorbed

Exam Questions

Mock Examination
Level: F-2
Dated: 11th June 2011

Maximum Marks: 100

Passing Marks; 50
Time allowed 2 Hours

Answers to Mock Exam

Q#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

13

Answer
B
B
A
A
B
B
C
A
C
$540
C
A
C
230
$24,750
D
D
B
C
B
B
$64,224
K, L & J
C
125%

Q#
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

Answer
D
C
A
C
B
$2,990 Adverse
C
B
D
D
A
B
C
B
D
D
C
B
A
A
D
A
D
B
B

Exam Questions