Progress test - I

Management accounting
F2

NUMBER OF QUESTION : 25

TIME ALLOWED : 90 MINUTES

THERE WOULD BE A PRIZE FOR THE HIGHEST MARK

Question 1
ABC ltd. has actual overhead cost for 20x9 of $100,000 with 5,500 products made. Overheads are
absorbed on the basis of $2/unit at standard of 6,000 products.

What would be accounting entries for over/under absorption?

a) Dr Overhead control account 10,000

Cr Work in progress 10,000

b) Dr Work in progress 10,000

Cr Overhead control account 10,000

c) Dr Income statement 10,000

Cr Overhead control account 10,000

d) Dr Over head control account 10,000

Cr Income statement 10,000

Question 2
What is the impact of the decrease of monthly holding cost to total annual cost of ordering if the company
uses EOQ to determine its optimal reorder quantity?

a) Increase
b) No change
c) Decrease
d) It depends

Question 3
A factory had a budget of $400,000 for over head based on the normal capacity of 80,000 products. At the
end of the year, accounting figure showed that total overhead expenditure for the year was actually over
budget of $20,000 while the production department’s report showed that 90,000 products have been
produced.
What is over/under absorption for the year?
a) Over absorption of $30,000
b) Over absorption of $50,000
c) Over absorption of $20,000
d) Under absorption of $50,000
Question 4
Following scheme is currently applied to worker in Workshop 1.
Normal working day 8 hours
Basic rate $10/h
OT premium 50%
Standard time allowed per unit 10 minutes
Premium bonus at basic rate 50% of time saved
In particular day a worker made 66 products in 9 hours. What is his gross pay?

a) $95
b) $105
c) $110
d) $85

Question 5
What line in following profit – volume chart represents profit (not loss) at corresponding level of out put

a) A&C
b) C&D
c) D only
d) A&D

C
A
B
Question 6
What is direct wages cost for following production department
Ordinary time 24,000
Over time: Basic pay 3,150
Premium 2,750
Meal shift allowance 500
Sick pay 300

a) 24,000
b) 27,150
c) 30,400
d) 27,650

Question 7
Following information is available for a component:
Lead time for replenish 3-7 days
Reorder quantity 10,000 units
Min usage per day 600 units
Average usage per day 800 units
Max usage per day 1,200 units

What is max level of inventory?

a) 8,200
b) 16,600
c) 6,000
d) 6,600

Question 8
A company made 17,500 units at a total cost of $16 each. Three quarters of the cost were variable and
remaining is fixed. 15,000 units were sold at $24. There were no opening inventories.
By how much will profit calculated by absorption cost differ from that calculated by marginal costing?

a) Absorption costing profit would be $10,000 greater

b) Absorption costing profit would be $20,000 greater
c) Absorption costing profit would be $30,000 greater
d) Absorption costing profit would be $40,000 greater
Question 9
Which of the following would be considered as direct material?

a) Cleaning material used to clean factory floor

b) Component part ordered for a specific project
c) Paint used for car in Ford’s factory
d) Button in Viet Tien’s garment factory

Question 10
Following data is obtained from XYZ Industries ltd which uses absorption costing and absorption basis is
unit of product.
Production 1 Production 2 Maintenance Canteen
Total allocated overhead cost 90,000 60,000 37,800 20,000
Number of employee 40 50 10 10
Maintenance hour 450 500 - 50
Units produced 10,000 20,000

What is OAR of production 2 using reciprocal apportionment (rounding to 2 digits)?

a) $4.55/unit
b) $4.58/unit
c) $4.57/unit
d) None of above

Question 11
High-low method is preferred method used by company MNO to analyze cost structure of its plant.
Following data are collected in several recent months.
Units of products made Total production cost
6,400 $132,000
6,900 $134,500
6,650 $132,675
6,700 $133,650
What is total production cost if 6,800 units are made?

a) $134,075
b) $134,200
c) $134,000
d) $133,800
Following information relates to question 12 and question 13
Cost and selling price for product X
Per unit
Direct material $5.0
Direct labour $2.5
Variable overhead $1.5
Fixed overhead absorption rate $3.0
Total cost $12.0
Profit $8.0
Selling price $20.0
The company did sell 9,000 product during the month. Closing inventories is 500 unit which is 1,000 lower
than opening balance. The production during the month was 1,000 unit higher than budget, fixed cost
incurred was $1,000 higher than budget.

Question 12
Marginal costing profit for the month is

a) $77,000
b) $99,000
c) $72,000
d) $74,000

Question 13
Absorption costing profit for the month is

a) $74,000
b) $80,000
c) $77,000
d) $96,000
Following information is related to question 14 and question 15:
Company STU manufactures and sells a single product with following cost structure in the planned output
of 5,000 units
$ per unit
Selling price 40
Variable labour cost 12
Variable material cost 12
Variable overheads 50% material cost
Fixed overheads 4

Question 14
What is margin of safety in term of percentage?

a) 60%
b) 150%
c) 75%
d) 300%

Question 15
In order to cut the margin of safety to one third of the current level, what price should the company charge
customers?

a) $45.0/unit
b) $33.3/unit
c) $32.0/unit
d) $35.0/unit

Question 16
Following are pairs of data showing the relation between level of output and corresponding factory cost of
XYZ Hightech Ltd. which manufactures only one type of specialized part for computer.
Factory cost Output
$700,000 15,000
$750,000 17,000
$800,000 19,000
$900,000 21,000
Using least square method to calculate expected factory cost if 18,000 units are to be produced?

a) $775,000
b) $787,500
c) $727,500
d) $800,000
Question 17
A company use EOQ to establish optimal reorder quantities, following data is available:
Order cost = $25 per order
Quarterly holding cost = 25% purchase price
Quarterly demand = $1,250 units
Purchase price = $4/unit
No safety inventory is held.

What is total annual cost of inventory (purchase cost+ holding cost + ordering cost)?

a) $21,000
b) $1,000
c) $6,000
d) $250

Question 18
Unit Cost Unit Cost
Type 1 620 7,700 930 11,550
Type 2 40 4,500 80 4,500
Type 3 316 3,160 430 4,000
Type 4 700 21,000 1,100 35,000

Which type of above cost can most likely be step cost?

a) Type 1
b) Type 3
c) Type 2
d) Type 4

Question 19
Fill in the blank in following statement:
If total production in a period is less than sale volume profit using absorption costing would be ……………
in comparison with that using marginal costing

a) Lower
b) Higher
c) The same
Question 20
The high speed internet of a company is leased with a fixed monthly charge of $5,000 provided total usage
(download plus upload) does not exceed 200 Gb. Any Gb of usage over 200 Gb will be charged at the rate
$20 per Gb. However in any circumstance the supplier guarantee that total internet charge will not be
higher than $7,000
Which of following chart best describe internet cost of the company?

Chart 1 Chart 2
Cost Cost

Usage Usage

Chart 3 Chart 4
Cost Cost

Usage Usage

a) Chart 1
b) Chart 3
c) Chart 2
d) Chart 4

Question 21
Which of following is a characteristic of an investment centre?

a) Managers have control over marketing

b) Manager is responsible for a sales team’s performance
c) Management have a sales team and are given a credit control
d) Managers can purchase capital assets
Question 22
Which of below statement is true?

a) Absorption costing is proper for both reporting and decision making purpose because it provides
full picture of product unit cost.
b) When there is excess capacity marginal absorption costing is more proper than marginal costing in
decision making purpose.
c) International reporting frame work encourages use of marginal costing in valuation of inventory
because it includes only proper cost elements.
d) Marginal costing is less useful in determining the profitability of several groups of product.

Question 23
A company manufactures a single product with variable cost per unit of 15. The contribution to sales ratio is
40%. The company estimates that if 37,000 products are made and sole, no profit or loss would be
incurred.
What is the margin of safety (in percentage) in percentage if the company is planned to manufacture and
sell 50,000 products?

a) 40%
b) 13,000 products
c) 35%
d) 26%

Question 24
i) The main users of financial accounting information are external to the organization
ii) Cost accounting is part of financial accounting and establishes costs incurred by an
organization.
iii) Management accounting issued to aid planning, control and decision making.
Which of following statement is not quite correct?

a) (i) and (ii)

b) (ii) only
c) (iii) only
d) none of above

Question 25
Which of the following is NOT an advantage of group bonus schemes?

a) They are easier to administer because they reduce the clerical effort to measure output and
calculate individual bonuses.
b) They are really good to promote productivity since it help to recognize individual contribution
c) They increase the co-operation between fellow workers