REVISION QUESTIONS LESSONS ONE, TWO AND THREE

1. Which of the following is not correct? A. Cost accounting can be used for stock valuation to meet the requirements of internal reporting only. B. Management accounting provides appropriate information for decision-making, planning, control and performance evaluation. C. Routine information can be used for both short term and long run decisions. D. Financial accounting information can be used for internal reporting purposes. 2. The following statements relate to business objectives; (i) (ii) (iii) The short term objectives of an organisation are described in very general terms. Corporate objectives relate to the organisation as a whole. It is possible for a division of an organisation to have its own specific objectives.

Which of the above are correct? A. (i) and (ii) only B. (i) and (iii) only C. (ii) and (iii) only D. (i), (ii) and (iii) 3. Which of the following is correct? A. Qualitative data is numerical information only. B. Information can only be extracted from external sources. C. Operational information gives details of long term plans only. D. Data can be either discrete or continuous. 4. Which of the following could be true with regard to a Management Information System (MIS)? An MIS is (i) A database system (ii) used for planning, directing and controlling activities (iii) a hierarchy of information within the organisation A. (i) and (ii) only B. (i) and (iii) only C. (ii) and (iii) only D. (i), (ii) and (iii)

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5. The following assertions relate to financial accounting and to cost accounting: (i) (ii) The main users of financial accounting information are external to an organisation. Cost accounting is that part of financial accounting which records the cash received and payments made by an organisation. Which of the following statements are true? A. Assertions (i) and (ii) are both correct. B. Only assertion (i) is correct. C. Only assertion (ii) is correct.

6. For which of the following is a profit centre manager normally responsible?

A. Costs only B. Revenues only C. Costs and Revenues D. Costs, Revenues and Investment 7. Data is information that has been processed in such a way so as to be meaningful to its recipients. A. True B. False 8. The following statement refers to a quality of good information: The cost of producing information should be greater than the value of the benefits of that information to management. Is this statement true or false? A. True B. False

9. An organisation has the following total costs at two activity levels: Activity level (units) Total costs ($) 16,000 135,000 22,000 170,000

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Variable cost per unit is constant within this range of activity but there is a step up in the total fixed costs when the activity level exceeds 17,500 units. What is the total cost at an activity level of 20,000 units? A. $155,000 B. $158,000 C. $160,000 D. $163,000 10. Which one of the following should be classified as indirect labour? A. Assembly workers on a car production line B. Bricklayers in a house building company C. Machinists in a factory producing clothes D. Forklift truck drivers in the stores of an engineering company 11. A manufacturing organisation incurs costs relating to the following: (i) (ii) (iii) Commission payable to salespersons Inspecting all products

of $ 5,000

Packing the product at the end of the manufacturing process prior to moving them to the warehouse

Which of these costs are classified as production costs? A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)

12. What would be the most appropriate cost unit for a cake manufacturer? Cost per: A. Cake

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B. Batch C. Kg D. Production run 13. Up to a given level of activity in each period the purchase price per unit of a raw material is constant. After that point a lower price per unit applies to both to further units purchased and also retrospectively to all units already purchased. Which of the following graph depicts the total cost of the raw material for a period?

14. In an organisation manufacturing a number of different products in one large factory, the rent of that factory is an example of a direct expense when costing a product. Is this statement true or false? A. True B. False 15. An organisation operates a piecework system of remuneration, but also guarantees its employees 80% of a time-based rate of pay which is based on $20 per hour for an 8 hours working day. Three minutes is the standard time allowed per unit of output. Piecework is paid at the rate of $18 per standard hour. If an employee produces 200 units in eight hours on a particular day, what is the employee gross pay for that day? A. $ 128

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B. $ 144 C. $ 160 D. $ 180 16. A semi-variable cost is one that, in the short term, remains the same over a given range of activity but beyond that increases and then remains constant at the higher level of activity. Is this statement true or false? A. True B. False 17. Which of the following are indirect costs? (i) (ii) (iii) The depreciation of maintenance equipment The overtime premium incurred at the specific request of a customer The hire of a tool for a specific job

A. Item (i) only B. Item (i) and (ii) C. Item (ii) and (iii) D. All of them 18. The following is a graph of cost against level of activity.

To which one of the following costs does the graph correspond? A. Electricity bills made up of a standing charge and a variable charge B. Bonus payment to employees

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C. Salesmans commission payable per unit up to a maximum amount of commission D. Bulk discounts on purchases, the discount being on all units purchased 19. Which of the following cost is part of the prime cost for a manufacturing company? A. Cost of transporting raw materials from the suppliers premises B. Wages of factory workers engaged in factory maintenance C. Depreciation of lorries used for deliveries to customers D. Cost of indirect production materials 20. A factory consists of two production cost centres (A and B) and two service centres (X and Y). The total allocated and apportioned overhead for each of them is as follows: A $95,000 B $82,000 X $46,000 Y $30,000

It has been estimated that each service cost centre does work for other cost centres in the following proportions: A Percentage of Service Cost Centre X to Percentage of Service Cost Centre Y to 50 60 B 50 30 X 10 Y -

The reapportionment of service cost centres cost to other cost centres fully reflects the above proportions. After the reapportionment of service cost centres cost has been carried out, what is the total overhead for production cost centre A? A. $124,500 B. $126,100 C. $127,000 D. $128,500 21. The process of cost apportionment is carried out so that A. Costs may be controlled B. Costs unit gather overheads as they pass through cost centres C. Whole items of cost can be charged to cost centres

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D. Common costs are shared among cost centres 22. A cost centre is A. A unit of product or service in relation to which costs are ascertained B. An amount of expenditure attributable to an activity C. A production or service location, function, activity or item of equipment for which costs are accumulated D. A centre for which an individual budget is drawn 23. A company manufactures two products L and M in a factory divided into two cost centres, X and Y. The following budgeted data are available: Cost centre X Allocated and apportioned fixed overhead costs Direct labour hours per unit: Product L Product M 3.0 2.5 1.0 2.0 $88,000 Y $96,000

Budgeted output is 8,000 units of each product. Fixed overhead costs are absorbed on a direct labour hour basis. What is the budgeted fixed overhead cost per unit for Product M? A. $10 B. $11 C. $12 D. $13 24. A company operates a job costing system. Job number 1203 requires $300 of direct materials and $400 of direct labour. Direct labour is paid at a rate of $8 per hour. Production overheads are absorbed at a rate of $26 per direct labour hour and non-production overheads are absorbed at a rate of 120% of prime cost. What is the total cost of Job number 1203? A. $2,000 B. $2,400

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C. $2,840 D. $4,400 25. The management accountant of Warsaw Limited has already allocated and apportioned the fixed overheads for the period although she has yet to apportion the service centre costs. Information for the period is as follows: Production departments 1 Allocated and apportioned Work done by: Stores Maintenance 60% 75% 30% 20% 5% 10% $17,500 2 $32,750 Service departments Stores $6,300 Maintenance $8,450 $65,000 Total

What are the total overheads included in production department 1 if the reciprocal method is used to reapportion service centre costs? A. $27,618 B. $28,171 C. $28,398 D. $28,453 26. Which of the following is not a feasible value for the correlation coefficient? A. +1.4 B. +0.7 C. 0 D. -0.7 27. X Ltd has recorded the following data for two recent periods. Transport Costs $ 9,680 Deliveries Made Number 840

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9,860

930

The transport costs for a particular period could be represented by: A. $10.60 X number of deliveries B. $ 11.52 X number of deliveries C. $ 8,000 ($2 X number of deliveries) D. $ 8,000 + ($2 X number of deliveries) 28. Berry has recorded the following costs over the last six months: Month Total cost 000 1 2 3 4 5 6 74 72.75 73.25 75 69.5 72.25 Units produced 000 3 1.75 2 2.5 1.5 2

Using the high-low method, what would be the total cost equation? A. Total cost = $61,250 + 5.5 X Quantity B. Total cost = $65,000 + 3 X Quantity C. Total cost = $70,250 + 1.25 X Quantity D. Total cost = $71,000 + 1 X Quantity

29.

A cost is described as staying the same over a certain activity range and then increasing

but remaining over a revised activity range in the short term. What type of cost is this? A. A fixed cost B. A variable cost C. A semi-variable cost

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D. A stepped fixed cost 30. The following could relate to optical mark readers. (i) (ii) Specialist pens are always required for use. Data entry is quick. Computers carry out most of the work.

(iii)

Which of the above would be considered to be advantages of using optical mark readers? A. (i) and (ii) only B. (i) and (iii) only C. (ii) and (iii) only D. (i), (ii) and (iii) 31. Which of the following would be best described as a short term tactical plan? A. Reviewing cost variances and investigate as appropriate B. Comparing actual market share to budget C. Lowering the selling price by 15% D. Monitoring actual sales to budget 32. An organisation manufactures a single product. The total cost of making 4,000 units is $20,000 and the cost of making 20,000 units is $40,000. Within this range of activity, the total fixed costs remain unchanged. What is the variable cost per unit of the product? A. $0.80 B. $1.20 C. $1.25 D. $2.00 33. Monthly variance reports are an example of which one of the following types of management information? A. Tactical B. Strategic C. Planning

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D. Operational 34. The total costs of production for two levels of activity are as follows: Level 1 Production (units) Total costs ($) 3,000 6,750 Level 2 5,000 9,250

The variable production cost per unit and the total fixed production cost both remain constant in the activity range shown. What is the variable production cost per unit? A. $0.80 B. $1.25 C. $1.85 D. $2.25 35. Which item is a fixed cost? A. Factory rent B. Maintenance of machinery C. Postage and stationery D. Sales commission

36. The table shows costs of three activity levels. Activity Levels 65 units $ Fixed cost Variable cost Total cost What is the fixed cost? A. $1,600 ? ? 15,600 90 units $ ? ? 19,600 100 units $ ? ? 21,200

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B. $4,000 C. $5,200 D. $5,600 37. What does the diagram show?

A. Fixed costs per unit are less as production increases. B. Total fixed costs are less as production increases. C. Total variable costs are less as production increases. D. Variable costs per unit are less as production increases.

38.

The graph shows the way in which a cost increases according to the level of activity of

the business.

Which cost follows this pattern? A. Administrative salaries B. Commission on sales C. Depreciation on factory D. Sales commission 39. A business uses job costing to calculate the cost of vehicle repair jobs. Overheads are allocated on an absorption costing basis. What is the effect of this method of allocation? A. Overheads will include both fixed and variable overhead costs B. Overheads will include direct costs only

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C. Overheads will include fixed overhead costs only D. Overheads will include variable overhead costs only 40. What will result in under-absorption of fixed production overhead? A. Absorption based on actual expenditure and actual activity B. Actual expenditure based on budgeted activity C. Actual activity above budget activity D. Actual activity below budget and expenditure as budgeted 41. The following data is relevant to a business. Budgeted labour hours 10,000 Actual labour hours 9,500 Budgeted overheads $ 150,000 Actual overheads $ 160,000

What is the amount of overhead under-absorbed? A. $7,500 B. $8,000 C. $10,000 D. $17,500

42. Production overhead expenditure in a period totalled $102,660 compared with a budget of $105,270. Direct labour hours are used to absorb production overheads. 8,700 direct labour hours were worked in the period and production overhead was over-absorbed by $1,740.What was the production overhead absorption rate per direct labour hour? A. $11.60 B. $11.80 C. $12.00 D. $12.10

43.

A business provides the following data for the year:

Budgeted output 10,000 units Actual output 8,000 units

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Budgeted fixed production costs 1,200,000 Budgeted variable production costs 800,000 Budgeted fixed selling overhead 600,000 What is the absorption cost per unit used for stocktaking? A. $200 B. $250 C. $260 D. $325 44. A business has the following budgeted and actual results for a period. Budgeted fixed overheads $354,000 Actual fixed overheads $360,000 Budgeted number of units 118,000 Under absorption of overheads $3,000 The fixed overheads are absorbed per unit. What is the actual level of activity n units? A. 118,000 B. 119,000 C. 120,000 D. 121,000 45. Which of the following is correct when considering the allocation, apportionment and reapportionment of overheads in an absorption costing situation? A. Only production related costs should be considered. B. Allocation is the situation where part of an overhead is assigned to a cost centre. C. Costs may only be reapportioned from production centres to service centres. D. Any overheads assigned to a single department should be ignored.

46.

A company has over absorbed fixed production overheads for the period by production

overhead absorption rate was $8 per unit and is based on the normal level of production units. Actual production was 4,500 units. What was the actual fixed production overheads incurred for the period? A. $30,000

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B. $36,000 C. $40,000 D. $42,000

47.

A company manufactures 2 products, X and Y, in a factory divided into 2 production cost

centres, Primary and Finishing. The following budgeted data are available: Cost centre Allocated and apportioned fixed overhead costs Direct labour minutes per hour: Product X Product Y 36 48 25 35 Primary $96,000 Finishing $82,500

Budgeted production is 6,000 units of product X and 7,500 units of product Y. Fixed overhead costs are to be absorbed on a direct labour hour basis. What is the budgeted fixed overhead cost per unit for Product Y? A. $11 B. $12 C. $14 D. $15

48.

A company uses an overhead absorption rate of $3.50 per machine hour, based on

32,000 budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual production. By how much was the total overhead under or over absorbed for the period? A. Under absorbed by $3,875 B. Under absorbed by $7,000 C. Over absorbed by $3,875 D. Over absorbed by $7,000

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