2

1. Which of the following are part of the prime cost for a

manufacturing entity?

A Cost of lubricating a machine used in production B Salary cost of supervisors overseeing direct employees

C Cost of a canteen used by production employees D Hire of specialist equipment for a particular job

( ) (2)

2. Direct costs are:-

A costs which can neither be identified with a cost centre nor identified with a single cost unit

B costs which can be identified with a single cost unit

C costs incurred regardless of production level D. all of the above

( ) (2)

3. Edgarese Co has recorded the following distribution costs during the last three months.

Month Volume Total cost

in units $ Apr 32,000 100,000

May 40,000 120,000 Jun 50,000 145,000

What will be the distribution cost (to the nearest $) in July when the expected activity level is 42,500 units?

$............... (2)

3

Use the following information for questions 4 and 5

Cost and selling price details for product Mottel are as follows. $ per unit

Direct material 4.20 Direct labour 3.00

Variable overhead 1.00 Fixed overhead 2.80

------- 11.00

Profit 4.00 -------

Selling price 15.00

Budgeted production for month 10,000 units Actual production for month 12,000 units

Actual sales for month 11,200 units

Actual fixed overhead cost incurred during month $31,000

4. Based on the above data, the variable costing profit for the

month is:-

A $44,800 B $45,160

C $50,600 D $76,160

( )(2)

5. Based on the above data, the absorption costing profit for the

month is:-

A $42,200

B $44,800 C $45,160

D $47,400 ( ) (2)

4

6. Kay Hien Pte Ltd absorbs overheads on the basis of machine

hours. Details of budgeted and actual figures for the latest period are as follows.

Budget Actual

Overheads $350,000 $400,000 Output 70,000 units 60,000 units

Machine hours 35,000 hours 30,000 hours

Which ONE of the following statements is correct?

A. Overheads were $50,000 over absorbed. B. Overheads were $50,000 under absorbed.

C. Overheads were $100,000 over absorbed. D. Overheads were $100,000 under absorbed.

( ) (2)

7. A factory consists of two production cost centres (PP and QQ)

and two service cost centres (XX and YY). The total allocated and apportioned overhead for each is as follows:

PP QQ XX YY

$95,000 $82,000 $46,000 $30,000

It has been estimated that each service cost centre does work for the other cost centres in the following proportions:-

PP QQ XX YY

Percentage of service cost centre X to 40 40 – 20

Percentage of service cost centre Y to 30 60 10 –

After the reapportionment of service cost centre costs has been carried out using a method that fully recognizes the

reciprocal service arrangements in the factory, what is the total overhead for production cost centre P?

A $122,400

B $124,716 C $126,000

D $127,000 ( ) (2)

5

8. Mun Wai uses a spreadsheet package to produce budgets for its long established product. An extract from the

spreadsheet is shown below. It is Mun Wai’s policy to always maintain finished goods inventory at a level equal to 30%

of next month’s forecast sales.

A B C D

1

2

3 January February March

4 Production budget

5 Sales (units) 5,000 6,000 8,000

6 Production (units)

Which of the following is a correct formula for cell C6?

A =5000-6000*0.3+5000*0.3 B =1.3*C5-D5*0.3

C =C5+C5*0.3-0.7*D5 D =C5+(D5-C5)*0.3

( )

9. A sales budget is:-

J. derived from the production budget.

K. management's best estimate of sales revenue for the year.

A. not the starting point for the master budget. B. prepared only for credit sales.

( )

6

10. Jon Tey Food Manufacturing has the following budget for the

next month:-

Finished Product Sales 7,000 units

Production units 7,200 units

Materials Usage per unit 3 kg

Opening stock 400 kg Closing stock 500 kg

What is the material purchases budget for the month?

A 20,900 kg

B 21,100 kg

C 21,500 kg D 21,700 kg

( ) (2)

11. Which of the following are purposes of having a budget?

(i) establishing strategic options (ii) motivating management

(iii) establishing long term objectives (iv) planning operations

A (i) and (iii) only

B (i) and (iv) only

C (ii) and (iv) only D (ii), (iii) and (iv) only

( ) (2)

7

The following information relates to questions 12 and 13:-

In the following price, cost and revenue functions, which have been

established by a company for one of its products, Q represents the number of units produced and sold per week:

Price ($ per unit) = 40 – 0.03Q

Marginal revenue ($ per unit) = 40 – 0.06Q Total cost per week ($) = 3,500 + 10Q

12. What price should be set in order to maximise weekly profits?

A $10 B $15

C $25

D $30 ( ) (2)

13. What would be the profit per week if the selling price of the

product was set at $31 per unit?

A $2,800 B $3,150

C $5,490 D $5,800

( ) (2)

14. Ayer Hitam Travels incurs the following costs at various activity levels:

Total cost Activity level

$ Units 250,000 5,000

312,500 7,500 400,000 10,000

Using the high-low method what is the variable cost per unit?

A $25

B $30 C $35

D $40

( ) (2)

8

15. Edgar has been reviewing its total costs over the last few

periods and has established the following:

Period Sales Total cost (units) $

1 225 2,300 2 150 1,500

3 350 2,800

The company is aware that fixed costs increase by $500 when sales exceed 200 units.

What would be the total cost at a sales level of 180 units?

P $2,120 Q $1,800

R $1,695 S $1,620

( ) (2)

16. A cost is described as staying the same over a certain activity

range and then increasing but remaining stable 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 D A stepped fixed cost

( ) (2)

17. For which of the following is Edger, profit centre manager,

normally responsible?

A Costs only B Revenues only

C Costs and revenues D Costs, revenues and investment.

( ) (2)

9

18. A company operates a job costing system. Job number #007

requires $45 of direct materials and $30 of direct labour. Direct labour is paid at the rate of $7.50 per hour. Production

overheads are absorbed at a rate of $12.50 per direct labour hour and non-production overheads are absorbed at a rate of

60% of prime cost.

What is the total cost of job number #007?

A $170 B $195

C $200 D $240

( ) (2)

19. The following information relates to a management consultancy organisation:-

Salary cost per hour for senior consultants $40

Salary cost per hour for junior consultants £25 Overhead absorption rate per hour applied to all hours $20

The organisation adds 40% to total cost to arrive at the final

fee to be charged to a client.

Assignment “Project Runway” took 54 hours of a senior consultant’s time and 110 hours of junior consultants’ time.

What is the final fee to be charged for “Project Runway”?

R $6,874 S $10,696

T $11,466 U $12,642

( ) (2)

10

20. A company has a budget for two products Aple and Bola as

follows:-

Product Aple Product Bola Sales (units) 2,000 4,500

Production (units) 1,750 5,000

Labour:- Skilled at $10/hour 2 hours/unit 2 hours/unit

Unskilled at $7/hour 3 hours/unit 4 hours/unit

What is the budgeted cost for unskilled labour for the period?

Answer - ………………….. (2)

21. The following statements relate to labour costs:-

There would be an increase in the total cost for labour as a

result of:- (i) additional labour being employed on a temporary basis.

(ii) a department with spare capacity being made to work more hours.

(iii) a department which is at full capacity switching from the production of one product to another.

Which of the above is/are correct?

B (i) only

C (ii) only

D (iii) only E (i) and (iii) only

( ) (2)

11

22. A company produces three products which have the following

details:-

Product AA BB CC

Per unit Per unit Per unit Direct materials (at $5/kg) 8 kg 5 kg 6 kg

Contribution per unit $35 $25 $48 Contribution per kg

of material $4.375 $5 $8 Demand (units)

(excluding special contract) 3,000 5,000 2,000

The company must produce 1,000 units of Product AA for a special contract before meeting normal demand.

Unfortunately there are only 35,000 kg of material available.

What is the optimal production plan?

Product AA BB CC

A 1,000 4,600 2,000 B 1,000 3,000 2,000

C 2,875 – 2,000 D 3,000 2,200 –

( ) (2)

23. Which of the following is correct?

A When considering limiting factors the products should always be ranked according to contribution per unit sold

B If there is only one scarce resource linear programming should be used

C In linear programming the point furthest from the origin will always be the point of profit maximisation

D The slope of the objective function depends on the contributions of the products

( ) (2)

12

24. The following relate to procedures for materials:-

1. Check the goods received note

2. Raise a stores requisition note 3. Update the stores ledger account for the purchase

4. Raise a purchase order

What would be the correct order of the above when in the process of purchasing and using materials?

A 4, 2, 1, 3

B 2, 1, 3, 4 C 4, 1, 3, 2

D 1, 4, 3, 2 ( ) (2)

25. When considering the economic batch quantity model what

does (1–D/R) represent?

A The rate at which production decreases. B The rate at which production increases.

C The rate at which stock decreases. D The rate at which stock increases.

( ) (2)

26. Edgarise Co uses process costing to value output. During the

last month the following information was recorded:

Output: 2,800 kg valued at $7.50/kg

Normal loss: 300 kg which has a scrap value of $3/kg Actual loss: 200 kg

What was the value of the input?

A $22,650

B $21,900 C $21,600

D $21,150 ( ) (2)

13

27. Which of the following best describes the term ‘equivalent units’ when using the FIFO method?

A The number of units worked on during a period

including the opening and closing stock units.

B The number of whole units worked on during a period ignoring the levels on completion of opening and closing

stock units.

C The number of effective whole units worked on during a period allowing for the levels of completion of opening

and closing stock units.

D The total number of whole units started during a period

ignoring the opening stock units as these were started in the previous period.

( ) (2)

28. Regression analysis is being used to find the line of best fit (y

= a + bx) from eleven pairs of data. The calculations have produced the following information:-

Σx = 440, Σy = 330, Σx2 = 17,986, Σy2 = 10,366 and

Σxy = 13,467

What is the value of ‘a’ in the equation for the line of best fit

(to 2 decimal places)?

A 0.63 B 0.69

C 2.33 D 5.33

( ) (2)

14

29. The following statements relate to the calculation of the

regression line y = a + bx using the information on the formulae sheet at the end of this examination paper:-

(i) n represents the number of pairs of data items used

(ii) (Σx)2 is calculated by multiplying Σx by Σx (iii) Σxy is calculated by multiplying Σx by Σy

Which statements are correct?

A (i) and (ii) only

B (i) and (iii) only C (ii) and (iii) only

D (i), (ii) and (iii) ( ) (2)

30. Optic Pointer has just purchased a new machine, costing

$150,000, for a contract. It has an installation cost of $25,000 and is expected to have a scrap value of $10,000 in five

years’ time. The machine will be depreciated on a straight line basis over five years.

What is the relevant cost of the machine for the contract?

A $140,000

B $150,000 C $165,000

D $175,000 ( ) (2)

15

31. Ah Long Tau Co has just secured a new contract which

requires 500 hours of labour.

There are 400 hours of spare labour capacity. The remaining hours could be worked as overtime at time and a half or

labour could be diverted from the production of product X. Product X currently earns a contribution of $4 in two labour

hours and direct labour is currently paid at a rate of $12 per normal hour.

What is the relevant cost of labour for the contract?

A $200

B $1,200 C $1,400

D $1,800

( ) (2)

32. The following statements relate to long-term contracts:-

(i) Levels of completion of the contract can be estimated

using either costs to date or work certified to date. (ii) Any anticipated losses should be taken as soon as they

are expected. (iii) If the contract is half complete it is expected that half

the expected profit will always be taken.

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) ( ) (2)

16

33. The following statements relate to business objectives:-

(i) The short-term objectives of an organisation are

described in very general terms. (ii) Corporate objectives relate to the organisation as a

whole. (iii) 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)

( ) (2)

34. Joint Winnner Co is reviewing actual performance to budget to see where there are differences. The following standard

information is relevant:- $ per unit

Selling price 50 Direct materials 4

Direct labour 16 Fixed production overheads 5

Variable production overheads 10 Fixed selling costs 1

Variable selling cost 1 ---

Total costs 37

Budgeted sales units 3,000

Actual sales units 3,500

What was the favourable sales volume variance using marginal costing?

Answer - ……………………. (2)

17

35. Jewel Institute uses variance analysis to control costs and

revenues.

Information concerning sales is as follows: Budgeted selling price $15 per unit

Budgeted sales units 10,000 units Budgeted profit per unit $5 per unit

Actual sales revenue $151,500 Actual units sold 9,800 units

What is the sales volume profit variance?

A $500 favourable

B $1,000 favourable C $1,000 adverse

D $3,000 adverse

( ) (2)

36. Boh Leow Ltd produces and sells a single product, which has a

profit/volume ratio of 30%. Fixed costs amount to $120,000 each year.

The sales revenue required each year to break even

A is $156,000

B is $171,428 C is $400,000

D cannot be calculated from the data supplied. ( ) (2)

37. Which of the following would be included in the master budget?

A Sales budget

B Budgeted cash flow C Material usage budget

( )(1)

18

38. Which of the following is/are characteristics of contract costing?

(i) Work is often undertaken on the customer's premises (ii) Work is often constructional in nature

A (i)

B (ii) C (i) and (ii)

( ) (1)

39. In which of the following situation(s) will job costing normally

be used?

(i) Production is continuous (ii) Production of the product can be completed in a single

accounting period

(iii) Production relates to a single special order

A (i) and (ii) B (ii) and (iii)

C (i) and (iii) ( ) (1)

40. Which of the following are characteristics of service costing?

(i) High levels of indirect costs as a proportion of total cost (ii) Cost units are often intangible

(iii) Use of equivalent units

A (i) and (ii)

B (i) and (iii) C (ii) and (iii)

( ) (1)

41. Which of the following is/are cost objects?

(i) A pint of milk produced by a dairy

(ii) A call taken at a call centre (iii) One of a bank's business customers

A (i) and (ii)

B (ii) and (iii) C All of them

( ) (1)

19

42. Which one of the following statements about a fixed budget

is/are correct? A fixed budget is:-

(i) A budget which is most generally used for planning purposes

(ii) A budget for a single level of activity (iii) A budget for fixed costs

A (i) only

B (i) and (ii) C (i), (ii) and (iii)

( ) (1)

43. A joint product is:-

(i) the incidental product produced as a result of a process. (ii) not saleable at the point of separation and must always

be processed further. (iii) one of two or more products separated during

processing, each having a significant sales value.

Which of the above is/are correct?

A (iii) only B (i) and (iii) only

C (ii) and (iii) only ( ) (1)

44. Which of these is not an essential quality of good information?

A. predictive value

B. completeness in accuracy C. timely

D. relevance ( ) (2)

45. Management accounting is guided by GAAP in presentation.

A. True B. False ( ) (1)

20

46. Controllable costs are costs within the authority of all levels of

management.

A. False B. True

( ) (1)

47. Over- or under-absorption of overheads is the difference

between:-

A. Actual overhead incurred and overhead absorbed B. Budgeted overhead and overhead absorbed

( ) (1)

48. Belachan operates a continuous process into which 3,000

units of material costing $10,000 were input during the period. Conversion costs for the period were $10,970 and losses are

expected at a rate of 10% of input.

These losses can be sold for $1.50 per unit. There were no opening or closing inventories, and output for the period was

2,900 units.

What was the valuation of the output for the period?

Answer - …………………………. (2)

21

49. Draw & Napier LLP has 40 reams of headed notepaper in

inventory and 100 reams on order with suppliers.

If the free inventory is 70 reams, the number of reams of headed notepaper that have been requisitioned but not yet

issued is:-

Answer - ………………….. (2)

50. A product is manufactured in two consecutive processes, details of which for the latest period are as follows.

Process 1 Process 2 $ $

Opening work in progress 3,290 2,140 Materials added 10,000 17,000

Conversion costs 8,350 19,700

Closing work in progress 9,080 2,620

What is the output of Process 1 going into Process 2?

Answer - ………………………. (2)