Q1. A company makes three products, to which the following budgeted information relates.

B A T
Selling Price 100 120 145
Labour at $20 per hour 40 40 60
Materials at $10 per kg 10 20 30
Fixed overheads 30 40 20
Profit 20 20 35

The marketing department says that maximum annual sales are: 1.000 units of Product B, 1,200 units
of Product A an; 1,500 units of Product T.

Budgeted production levels for the year are the same as maximum annual sales.

It has just been discovered that next year materials will be limited to 5,000 kg and labour will be limited to
10,000 hours.

The company does not hold any finished inventory.

Calculate the maximum profit for next year.

Q2. MF manufactures three products, the selling price and cost details of which are as follows.

Product M Product F Product S

$ per unit $ per unit $ per unit
Selling price 129 137 141
Direct material ($8/kg) 32 16 40
Direct labour ($6/hour) 30 36 24
Variable overhead 10 12 8
Fixed overhead 15 20 14

In a period when direct materials are restricted in supply, the most and least profitable use of direct
materials are:

Most profitable

Least profitable

Q3. Extracts from V Co's records for June are as follows.;

Budget Actual
Production 520 units 560 units
Variable production overhead cost $3,120 $4,032
Labour hours worked 1,560 2,240

The favourable variable production overhead expenditure variance for June is: $_______.

Q4. A company manufactures a single product for which cost and selling price data are as follows.

Selling price per unit $21

Variable cost per unit $14
Fixed costs per month $168,000
Budgeted monthly sales 26,400 units

The margin of safety, expressed as a percentage of budgeted monthly sales (to the nearest whole
number) is: ________%.

Q5. A firm has to pay a 20c per unit royalty to the inventor of a device which it manufactures and sells.

The royalty charge would be classified in the firm's accounts as:

A. An administrative overhead.
B. A direct expense.
C. A production overhead.
Q6. Barunda manufactures a single product which has a selling price of $14 and a variable cost of $6 per unit. The
company incurs annual fixed costs of $24,400. Annuals sales demand is 8,000 units.

New production methods are under consideration, which would cause a 30% increase in fixed costs and a
reduction in variable cost to $5 per unit. The new production methods would result in a superior product and would
enable sales to be increased to 8,500 units per annum at a price of $15 each.

If the change in production methods were to take place, the breakeven output level would be:

A. 915 units higher.

B. 610 units lower.
C. 122 units higher.
D. 372 units higher.

Q7. Abs has been using an overhead absorption rate of $6.25 per labour hour in its packing department throughout
the year.

During the year the overhead expenditure amounted to $257,500 and 44,848 labour hours were used.

Which of the following statements is correct?

A. Overheads were over absorbed by $27,600.

B. Overheads were under absorbed by $27,600.
C. Overhead were under absorbed by $22,800.
D. Overheads were over absorbed by $22,800.

Q8. GC has a standard ingredients cost of $18 for a single unit of production. The standard ingredient price
is $9 per litre.

During May, 976 units were produced. The ingredient cost was $19,190 for a total of 2,020 litres.

Calculate the ingredients price variance for May.

A. $1,010 (A).
B. $1,622 (A).
C. $612 (A).
D. $1,010 (F).

Q9. If fixed costs relating to Product W are $1,000,000, variable costs are $10 per unit, the selling price is $30 per
unit and budgeted sales are 80,000 units.

What is the margin of safety?

A. 50,000 units.
B. 20,000 units.
C. 30,000 units.
D. 66,667 units.

Q10. Which of the following is the best definition of a by-product?

A. A product which is produced at the same time as other products but which has no value.
B. A product which is produced at the same time as other products but which has a relatively low sales value
compare to that of the other products.
C. A product which is produced at the same time as other products but which has a relatively low production
volume compared with other products.

Q11. An organisation has found that there is a linear relationship between production volume and production costs.
It has found that a production volume of 400 units corresponds to production costs of $10,000 and that a
production volume of 800 units corresponds to production costs of $12,000. What would be the production costs
for a production volume of 1,000 units?

A. $13,000.
B. $25,000.
C. $8,500.
D. $5,000.
Q12. In a period, opening inventories were 12,600 units and closing inventories were 14,100 units. The profit based on
marginal costing was $50,400 and profit based on absorption costing was $60,150.

Calculate the fixed overhead absorption rate per unit (to the nearest cent).

A. $4.77.
B. $6.50.
C. $4.00.
D. $4.27.

Q13. A company which produced high-class perfumes, has a production schedule for April showing that 5,000 kg of
materials were input to the process.

These materials cost an average of 50 cents per kg. Other costs for the month amounted to $1,500.

It is generally expected that 20% of materials input will be lost due to spillage and that the waste can be sold for
20 cents per kg.
Out from this process was 3,800 kg in April.

There was no opening or closing work in progress.

What is the cost of good output?

Q14. Which of the following would help to explain an adverse direct labour variance?

A. Employees were of a higher grade than standard.

B. Labour worked at a slower rate than allowed for in the standard.
C. The standard rate of pay did not take account of a pay award negotiated with the trade unions.

Q15. Which one of the following would be included in the financial accounts, but may be excluded from the cost
accounts?

A. Factory manager's salary.

B. Bank interest and charges.
C. Direct material costs.

Q16. Which of the following variances would not be shown in an operating statement prepared under a standard
marginal costing system?

i. Fixed production overhead efficiency variance.

ii. Fixed production overhead capacity variance.
iii. Fixed production overhead expenditure variance.

A. (ii) and (iii) only.

B. (i) and (iii) only.
C. (i) and (ii) only.
D. (i), (ii) and (iii).

Q17. Actual overheads $225,900

Actual machine hours 7,530
Budgeted overheads $216,000

Based on the data above and assuming that the budgeted overhead absorption rate was $32 per machine hours,
calculate the amount of over absorbed overhead.

Q18. Which of the following are contained in a typical job cost?

A. Actual labour cost.

B. Actual material cost.
C. Actual manufacturing overheads.
D. Absorbed manufacturing overheads.
Q19. A company absorbs overheads on the basis of machine hours. Machine hours were budgeted to be 13,500 and
overheads were budgeted to be $268,300. Actual results were 12,000 machine hours and overheads were
$258,000.

Which of the following statement is correct?

A. Overheads were over absorbed by $19,560.

B. Overheads were under absorbed by $19,560.
C. Overheads were under absorbed by $10,300.
D. Overheads were over absorbed by $10,300.

Q20. If fixed costs relating to Product Z are $100,00 and the profit/volume ratio is 30%, what is the sales revenue at
breakeven point?

A. $30,000.
B. $200,000.
C. $333,333.
D. $133,333.

Q21. Which of the following organisations should not be advised to use service costing.

A. Distribution service.
B. Maintenance division of a manufacturing company.
C. Hospital.
D. A light engineering company.

Q22. Which of the following are unavoidable reasons for labour turnover?

A. Paying a lower wage rate than other companies in the same industry.
B. Illness or accidents.
C. Retirement or death.

Q23. Which one of the following is true with regard to management information?

A. It is the same as operating information.

B. It must be produced by a computer.
C. It should be complete accurate, regardless of cost.
D. It should be produced if its cost is less than the increased revenue it leads to.

Q24. A firm has some material which originally cost $45,000. It has a scrap value of $12,500 but it reworked at a cost
of $7,500, it could be sold for $17,500.

What would be the incremental effect of reworking and selling the materials?

A. A loss of $27,500.
B. A profit of $5,000.
C. A profit of $10,000.
D. A loss of $2,500.

Q25. Which of the following statements relating to marginal costing and absorption costing profits is/are current?

A. If inventory levels are constant, absorption costing and marginal costing profits will be the same.
B. If inventory levels are increasing, marginal costing will report a higher profit than absorption costing.
C. Absorption costing and marginal costing profits will never be the same.
D. If inventory levels are decreasing, marginal costing will report a higher profit than absorption costing.
E. Absorption costing will always show a higher profit than marginal costing.

Q26. The direct materials involved in the manufacuring of a Whoopie cost $2 per unit and the direct labour cost is
$2.50 per unit. There are also direct expenses of $0.50 per Whoopie.

Fixed costs allocated to one Whoopie amount to $3.15.

Calculate the prime cost of a Whoopie.

Q27. Job No. 352 requires 270 hours of active labour. It is expected that there will be 10% idle time. The wage rate is
$8 per hour.

What is the labour cost for the job?

Q28. Bell Co makes one product and uses process costing to accounts for costs. During January, 10,000 units of
material were input to the process at a cost of $20,000 and conversion costs of $10,000 were incurred.

At the end of the period 8,500 units were transferred to finished goods, with the remaining units being only 60%
complete. There was no opening work in progress for January and no losses were expected or experienced.

What was the value of closing work in progress show in the process account (to the nearest $)?

Q29. A straight line graph can be expressed by the formula.

A. y = a + bx.
B. y = ax + √b.
C. y = ax + bx.

Q30. Management accountants often need to predict future costs, revenues and other factors. The variable to be
predicted (e.g.. Costs) is known as the:

A. Independent variable.
B. High-low variable.
C. Dependent variable.
D. Statistical variable.

Q31. Mugs Co is a small company with a team of 6 employees making mugs. They are all paid $6.50 and hour and work
a 35-hour week. During week 8 the team made 300 mugs.

Calculate the labour cost of one mug for 8week (to 2 decimal places).

Q32. P Co is considering accepting a contract. The materials required for the contract are currently held in inventory at
a book value of $3,000. The materials are not regularly used by the organisation and currently have a scrap value
of $500. Current replacement cost for the materials is $4,500.

The relevant cost to P Co of using the materials on this contract is:

Q33. Depreciation on plant machinery is:

A. Part of prime cost.

B. Not a cash cost so is ignored in the cost accounts.
C. Part of manufacturing overheads.

Q34. The following information relates to the machining department of a manufacturing organisation.

Period 1 Machine Hours Overheads ($)

Budgeted 20,000 400,000
Actual 19,000 350,000

Overheads are absorbed on the basis of machine hours.

By how much are overheads over absorbed in period 1?

Q35. JC operates a job costing system. The company's standard net profit margin is 25% of sales value.

The estimated costs for Job 912 are as follows.

Direct materials 3 units @ $4 per unit

Direct labour 4 hours @ $7 per hour

Production overheads are budgeted to be $250,000 for the period and are to be recovered on the basis of a total
of 50,000 labour hours.

Other overheads, related to selling, distribution and administration, are budgeted to be $150,000 for the period.
They are to be recovered on the basis of the total budgeted production cost of $750,000 for the period.

Calculate the price to be quoted for Job 912.

Q36. A company does not hold any opening and closing inventories.

Which of the following statement is true?

A. Profits will be higher if absorption costing is used.

B. Profits would be the same if either absorption costing or marginal costing were used.
C. Profits will be higher if marginal costing is used.
D. It is impossible to determine whether absorption costing or marginal costing would produce the higher profit
without being provided with figures.

Q37. In a period, 11,280 kilograms of material were used at a total standard cost of $46,248. The material usage variance
was $492 adverse.

What was the standard allowed weight of material for the period?

Q38. A company has established a budget sales revenue of $500,000 for Period 1, with an associated contribution of
$275,000. Fixed production costs are $137,500 and fixed selling costs are $27,500.

What is the sales revenue at the breakeven point?

Q39. For which of the following would a production line manager of a manufacturing company be responsible?

A. Labour rates and raw material usage.

B. Labour hours worked and raw material prices.
C. Labour hours worked and raw material usage.
D. Labour rates and raw materials prices.

Q40. Which three of the following could be considered as properties of good information?

A. Adaptable.
B. Complicated.
C. Accurate.
D. Time consuming.
E. Cost effective.

Q41. A regression line of y = -32 +0.7x has been computed.

What value of 'y' would be predicted for a value of 'x' of 48.5?

A. 65.95
B. 115
C. 23.57
D. 1.95

Q42. XYZ uses standard costing. It makes an assembly for which the following standard date is available.
Standard labour hours per assembly 24
Standard labour cost per hour $8
During a period 850 assemblies were made, there was a nil rate variance and an adverse efficiency variance
of $4,400.

Calculate the actual labour hours worked in the period.

Q43. XY purchased 6,850 kg of material at a total cost of $21,920. The material price variance was $1,370 favourable.

The standard price per kg was. (to the nearest cent).

Q44. In the context of reporting the profit for a given period, which of the following statements are true?

A. If opening and closing inventory volumes are the same, marginal costing and absorption costing will report the
same profit figure.
B. If inventory levels reduce, marginal costing will report a higher profit than absorption costing.
C. If inventory levels reduce, absorption costing will report a higher profit than marginal costing.

Q45. 3,000 units of material are input to a process. Output is 2,000 units. Normal loss is 20% of input. There is no
opening or closing work in progress.

Calculate the abnormal loss. (units)

Q46. The Getwellquick Hospital has total cost of $1m for 20X1. During 20X1, 200,000 patients were treated and doctors
were paid $500,000.

What is the most appropriate cost per unit for the hospital to use. (to 2 decimal places).

Q47. Which of the following is not a cost of labour turnover?

A. The cost of increased wastage due to lack of expertise among new staff.
B. The contribution foregone on the output lost due to slower working.
C. The cost of recruiting new employees to replace those leaving.
D. The salary paid to the personnel manager.

Q48. In the market research survey of a drink, respondents were asked to rank eight drinks in order of preference
regarding taste, and then again rank them for looks, with a rank of 1 indicating nicest taste and best looks. The
rank correlation coefficient was calculated and was 0.95.

This means that:

A. There appeared to be no correlation between taste and looks.

B. The best-looking drinks did not taste very nice.
C. The nicest drinks looked the best.

Q49. In a period 6,500 units were made and there was an adverse labour efficiency variance of $26,000. Workers were
paid $8 per hour, total wages were $182,000 and there was a nil rate variance.

The number of standard labour hours per unit were.

Q50. Which of the following would considered to be an investment centre?

A. Managers have control over marketing.

B. Management have a sales team and are given a credit control function.
C. Managers can purchase capital assets and are given a credit control function.