Mgt402 Collection of Old Papers

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FINALTERM EXAMINATION
FALL 2007 Marks: 60
MGT402 - COST & MANAGEMENT ACCOUNTING Time: 150min
(Session - 6 )
StudentID/LoginID: ______________________________
Student Name: ______________________________
Center Name/Code: ______________________________
Exam Date: Thursday, March 06, 2008
Read the following instructions carefully before attempting any question:

All questions are compulsory.
This exam consists of 15 Multiple Choice Questions (MCQs) carrying 1 mark each, 5
True/False Statements carrying 1 mark each, 5 fill in the blanks carrying 1 mark each, 3
Short Questions carrying 5 marks each and 2 descriptive questions carrying 10 marks
each.
For each MCQ, read the available choices carefully and select the most appropriate
choice which you consider is the correct answer by clicking on the appropriate check
box.
To answer True False questions, click on the correct option.
For fill in the blank questions, provide the appropriate word(s) in the given blank.
Remember not to spend too much time on any one objective type question since all
objective type questions carry equal marks; it is important to manage your time
according to the marks allocated to each question.
If you believe that some essential piece of information is missing, make an appropriate
assumption and use it to solve the problem by providing foot note at the end of the
solution box.
Show proper working where necessary.
Use of calculator is allowed.
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For Teacher's use only

Question 1 2 3 4 5 6 7 8 9 10 Total
Marks
Question 11 12 13 14 15 16 17 18 19 20
Marks
Question 21 22 23 24 25 26 27 28 29 30
Marks
Question No: 1 ( Marks: 1 ) - Please choose one
The planned sales volume is 200 units per month. The planned stock at the start of
the month is 60 units and the planned stock at the end of the month is 50 units. The
cost per unit is Rs.4. What is the amount of the purchases budget for the month?
► Rs. 630
► Rs. 570
► Rs. 760
► None of the given options
Property tax paid for the sales offices would be classified as:
► Product cost
► Period cost
► Manufacturing overhead cost
► Cost of Goods Sold
If direct material used during the period equals Rs.14, 000 and direct labor equals
30% of prime cost, the direct labor cost for the period equals:
► Rs. 6,000
► Rs. 12,000
► Rs. 30,000
Internal Factor(s) which affects/affect sales budget
► Government policies
► Previous trend of sales
► Seasonal fluctuations
► Competition
Profit under absorption costing will be higher than under marginal costing if
► Produced units > Units sold
► Produced units < Units sold
► Produced units =Units sold
► Profit cannot be determined with given statement
_____________ = Reorder level – (Average consumption * Lead time)
► Minimum stock level
► Maximum stock level
► Re-order level
► Re- order quantity
__________entities purchase and then sell tangible products without changing

basic form of product.
► Trading entities
► Manufacturing entities
► Servicing entities
Actual hours worked ÷ Budgeted hours x 100 represents
► Activity Ratio
► Capacity Ratio
► Efficiency Ratio
Which of the following is an example of job order costing?
► Beverage manufactures
► Printing industry
► Ball point manufactures
► Software house
Which of the following is not function of cash budget?
► Determining the future cash needs of the firm
► Planning for financing
► Exercising control over cash and liquidity of the firm
Which one of the following organization follows the cost of production report
_________________?
► Textile unit
► Chartered accountant firm
► Software houses
► None of the given option
A summary of all operations budgets is the budgeted ________
► Income statement
► Master budget
► Cash budget
Fixed costs are Rs. 45,000. The unit sales price is Rs.12. The contribution margin
per unit is Rs. 40. What are the break-even sales units?
► 1,125 units
► 3,750 units
► 9,375 units
► Not determinable from the information provided
Which of the following statement(s) is (are) true?
► A manufacturer of ink cartridges would ordinarily use process costing rather

than job-order costing
► If a company uses a process costing system it accumulates costs by

processing department rather than by job
► The output of a processing department must be homogeneous in order to use

process costing
► All of the given options

The following data related to production of ABC Company:
Units produced 8,000 units

Direct materials Rs.6
Direct labor Rs.12
Fixed overhead Rs.24000
Variable overhead Rs.6
Fixed selling and administrative Rs.2000
Variable selling and administrative Rs.2
Using the data given above, what will be the unit product cost under marginal
costing?
► Rs. 22
► Rs. 24
► Rs. 28
The separable fixed costs are eliminated when a product /segment is discontinued.
► True
► False
Using direct costing, unit cost of product includes combination of costs direct materials,
direct labor, and variable overhead and fixed overhead.
► True
► False
Gross profit margin Rate= Gross profit ÷ Cost of Goods Sold *100
► True
► False
Relevant cost is an incremental cost.
► True
► False
If decision “X” costs Rs: 700 and decision “Y” costs Rs: 800 the differential cost is Rs: 100
incremental cost.
► True
► False
Question No: 21 ( Marks: 1 )
The level of activity at which the business makes neither a profit nor a loss is called
__________.
________ are deductions from pay that are made by law.
Research & development cost to launch a new product is called __________cost
A building purchased in last year, its cost is ____________cost to management

decisions.
The foregone benefit of the second best alternative is considered the _________ cost of
the favored options.
Particulars Significant Incidental

Product Product
Opening Stock ----- -----
Production during the year 10,000 units 800
Closing Stock 1,000 units 100
Cost incurred Rs. 6,40,000 -----
Sales price per unit Rs. 300 200
Further Processing cost 50
With the help of above mentioned information, and classify the incidental product as other
income in significant/main product income statement.
The Rizwan Equipment Company, estimates its carrying cost at 15% and its ordering cost
at Rs. 9.00 per order. The estimated annual requirement is 48, 000 units at a price of
Rs. 4 per unit. It is assumed that there are 360 days per year.
Required:
a. EOQ
b. Number of orders per year
c. Frequency of orders
The following is the Corporation's Income Statement for last month:
Particulars Rs.
Sales 4,000,000
Less: variable expenses 1,800,000
Contribution margin 2,200,000
Less: fixed expenses 720,000
Net income 1480,000
The company has no beginning or ending inventories. A total of 80,000 units were
produced and sold last month.
a. What is the company's contribution margin ratio?

b. What is the company's break-even in units
c. How many units would the company have to sell to attain a target profit of
Rs. 600,000?
In Department No. 412 normal production losses are discovered at the end of process.
During January 2007 following costs were charged to Department 412:
Particulars Rs.
Direct Materials 30,000
Direct Labor 20,000
Manufacturing overhead 10,000
Cost from preceding department 96,000
Data of production quantities is as follows:

Particulars Units
Received in 12,000
Transferred out 7,000
Normal Production Loss 1,000
Partly processed units in Department No. 412 were completed 50%.

Required:
Prepare a Cost of Production Report
The T & M Wild Corporation anticipates sales of Rs. 9, 00,000 for the current. The
percentage of gross profit from sales has been 40% in past years. Operating expenses
are expected to be Rs. 2, 00,000, of which 45% is administrative expenses and 55% is
selling expenses. Assuming 40% tax rate.
Prepare
A Budgeted income statement for the for the T & M Wild Corporation year 2009
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Spring 2009
MGT402- Cost & Management Accounting (Session - 4)
All of the following are a part of Planning Process EXCEPT:
► Identifying the objectives
► Search for alternative actions
► Data gathering for alternatives
► Selection of a fixed action
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Finished goods inventory costs represent the costs of goods that are:
► Currently being worked on
► Waiting to be worked on
► Waiting to be sold
► Already delivered to customers
M
According to IASB framework, Financial statements exhibit its users the:
► Financial position
► Financial performance
C O
► Cash inflow and outflow analysis
g .
i n
If, Sales = Rs. 1200,000
Markup = 20% of cost
t .n
What would be the value of Gross profit?
=[
n a
► Rs. 100,000
an
► Rs. 580,000
► Rs. 740,000
u j
. v
Order level is a point at which,
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► It is necessary to start production
► It is necessary to initiate purchase orders
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► It is necessary to maintain minimum stock level
► It is necessary to maintain maximum stock level for orders
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While calculating the EOQ, carrying cost is taken as the:
► %age of unit cost
► %age of ordering cost
► %age of annual required units
► Total unit cost
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discussions and many more.
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Which of the following is TRUE for Merrick Differential System?
► Merrick Differential system is a slight modification of the Taylor's system
► Merrick Differential system used two rates of wage determination instead
of three
► Normal piece rates are applicable at 75% of efficiency of worker
Raymond Corporation estimates factory overhead of Rs. 345,000 for next fiscal
year. It is estimated that 60,000 units will be produced at a material cost of Rs.
575,000. Conversion will require 34,500 direct labor hours at a cost of Rs. 10 per
hour, with 25,875 machine hours.
FOH rate on the bases of Prime cost would be?

► Rs. 37.5 per unit
► Rs. 56.6 per unit
► Rs. 60 per unit
M
► Rs.1 per unit
C O
g .
A company applied overheads on machine hours which were budgeted at
overheads of Rs.254, 692. Overhead were?

i n
11,250 with overhead of Rs.258, 750.Actual results were 10,980 hours with
► Over applied by Rs.4, 058

t .n
► Under applied by Rs.2, 152
► Under applied by Rs.4, 058
n a
► Over applied by Rs.2, 152
an
j
u
. v
If management predicts total direct labor costs of Rs. 100,000 and total
overhead costs of Rs. 200,000, what is its predetermined overhead rate based
on direct labor costs?
► 50%
► 100% W
► 200%
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► Cannot be determined
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Examples of industries that would use process costing include all of the following
EXCEPT:
► Beverages
► Food
► Hospitality

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► Petroleum

What would be the effect on the cost of a department in case of normal Loss?
► Decreased
► Increased
► No effect
► Increase to the %age of loss
If computational and record-keeping costs are about the same under both FIFO
and weighted average, which of the following method will generally be preferred?
► Weighted Average
► FIFO
► Hybrid process
► Cannot be determined with so little information
M
Materials are added at the start of the process in Gruden Company's forming
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department. The following information is available for the month of June:
C
g . Units
in
Work in process June 01 (40% complete to conversion) 30,000
Units started in process

.t n 220,000
Lost in process n a
Units completed and transferred out 160,000
35,000
an
u j
Work in process June 30 (60% complete to conversion) 55,000
. v
Under Gruden's cost accounting system, the costs incurred on the lost units are
absorbed by the remaining good units.
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Required: Using the average cost method, what are the equivalent units for the
materials?
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► 193,000 units
► 215,000 units
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► 211,000 units
► 250,000 units

The distinction between joint product and by product largely depends upon
which of the following factor?
► The split off point of each product
► The market value of each product

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► The differential cost of each product
► Management discretions

By using absorption costing method, which of the following is NOT shown in
Income Statement?
► Cost of goods manufactured

► Contribution margin
► Selling and administrative expenses
► Cost of goods sold


Direct labor Rs.12
M
Variable overhead
Fixed selling and administrative O
Rs.6
Rs.2000
C
Variable selling and administrative
g . Rs.2
costing?
► Rs. 22
i n
► Rs. 24
► Rs. 28
t .n
► Rs. 30
n a
n
a
u
compared to variable costing is: j
The difference between unit product costs under absorption costing as
. v
► Direct materials and direct labor
► Fixed and variable portions of manufacturing overhead
► Fixed manufacturing overhead only
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► Variable manufacturing overhead only
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When production is equal to sales, which of the following is TRUE?
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► No change occurs to inventories for either use absorption costing or
variable costing methods
► The use of absorption costing produces a higher net income than the use
of variable costing

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► The use of absorption costing produces a lower net income than the use
of variable costing
► The use of absorption costing causes inventory value to increase more
than they would though the use of variable costing

Once the fixed cost has been met, the remaining increase in contribution margin
will be shows as which of the following option?
► Profit
► Variable cost
► Operating profit
► Sales volume

A firm's fixed costs are Rs. 54,000, and it sold 350 units at Rs. 140 each. The
total variable costs were Rs. 35,000. What is the net income or loss of the firm?
► Rs.40,000 loss
► Rs. 40,000 income
► Rs.14,000 income
M
► Rs. 5,000 loss
C O
The following detail is related to Bloch Company:
g .
Opening work-in-
i n
2,000 litres,100% completed to material, 40% as to
process
Material put in process
conversion cost
24,000 liters
t .n
na
3,000 litres,100% completed to material and 45% as
Closing work-in-process to conversion cost
an
would be:
u j
Required: The numbers of equivalent units as to material, using FIFO method
► 24,000 units . v
► 26,000 units
► 28,000 units W
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► 20,000 units
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In process costing, a joint product is
► A product which is later divided in to many parts

► A product which is produced simultaneously with other products and is of
similar value to at least one of the other products

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► A product which is produced simultaneously with other products but which
is of a greater value than any of the other products
► A product produced jointly with another organization

The by-product of Soap is:
► Glycerin
► Meat Hides
► Fats
► Flour Bran

Bruce Inc. has the following information about Rut, the only product sold. The
selling price for each unit is Rs. 20, the variable cost per unit is Rs. 8, and the
total fixed cost for the firm is Rs. 60,000. Bruce has budgeted sales of Rs.
130,000 for the next period. What is the margin of safety in Rs. for Bruce?
► Rs. 30,000
M
► Rs. 70,000
► Rs. 100,000
C O
► Rs. 130,000
g .
i n
Bruce Inc. has the following information about Rut, the only product is sold. The
.n
t
total fixed cost for the firm is Rs. 60,000. The firm's current tax rate is 25%. If
sell?
n a
Bruce wants to earn Rs. 60,000 in profits after taxes, how many units must it
► 10,000 units
an
► 6,000 units
► 11,667 units
► 7,000 units u j
. v
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Information concerning Label Corporation’s Product A is as follows:
W Sales price
Rs.
300,000
W Variable cost
Fixed Cost
240,000
40,000
Assuming that Label increased sales of Product A by 20%, the profit of the
product A would be which of the following?
► Rs. 20,000

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► Rs. 24,000
► Rs. 32,000
► Rs. 80,000

The Rose Willaim Company budgeted sales of Rs. 200,000 and a profit of Rs.
60,000. The fixed cost is Rs. 40,000. Keeping in view the given data, what would
be the contribution margin ratio?
► 20%
► 25%
► 50%
► 75%

The point at which the cost line intersects the sales line will be called:
► Budgeted sales
► Break Even sales
► Margin of safety
M
C O
► There is no change of time value of money
g .
All of the following are assumptions in constructing a Break even chart EXCEPT:
► Price of cost factors remains constant

► Long term period will be considered
i n
► Cost is affected by volume
t . n
n a
On a Cost-Volume-Profit chart (break-even graph), where are the total fixed
costs shown?
an
u j
► At the point where the sales line intersects the cost line
► At the point where the sales line below the total cost line
. v
► At the point where the total cost line intersects the cost line
► At the point where the total cost line intersects the volume line
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Consider the following data for the month of January:
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Sales 600 units
Opening stock 80 units
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If the closing stock has to be 50% higher than the previous month then
production will have to be:
► 700 units
► 720 units
► 640 units
► 600 units

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If B Limited shows required production of 120 cases of product for the month,
direct labor per case is 3 hours at Rs. 12 per hour. Budgeted labor costs for the
month should be:
► Rs. 1,360
► Rs. 1,440
► Rs. 4,320
► Rs. 5,346
Which of the following is true about flexible budget?
► A budget that always based on actual capacity
► A budget that is prepared using spreadsheet model
► A budget in which total variable cost remains unchanged
► Variable costs per unit will remain unchanged

Which of the following best describe a flexible budget?
► A budget of variable production costs only
M
activity
C O
► A budget which shows the costs and revenues at different levels of
g .
► A budget which is prepared using a computer spreadsheet model
► A budget which is updated with actual costs and revenues as they occur
during the budget period
i n
.n
t
In the decision to replace an old equipment with a new equipment, which of the
n a
following would be considered as relevant cost?
► The book value of the old equipment
n
► Depreciation expense on the old equipment
a
u j
► The loss on the disposal of the old equipment
► The current disposal price of the old equipment
. v
In a make or buy situation with no limiting factors, which of the following would
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be the relevant costs for the decision?
► Opportunity costs
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► Differential costs between the two options
► Sunk costs
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► Implied costs

The effect on a company's operating income of discontinuing a department with
a contribution margin of Rs. 8,000 and allocated overhead of Rs. 16,000 (of
which Rs. 7,000 cannot be eliminated) would be to:
► Increase operating income by Rs. 1,000

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► Increase operating income by Rs. 8,000
► Decrease operating income by Rs. 1,000
► Decrease operating income by Rs. 9,000

Which of the following costs are always relevant in decision-making
► Avoidable costs
► Fixed costs
► Sunk costs

If the cost per equivalent unit is Rs. 1.60. The equivalent units of output are
50,000. The WIP closing stock is 10,000 units, 40% completed. What will be the
value of closing stock?
► Rs. 9,600
► Rs. 80,000
► Rs. 16,000
► Rs. 6,400 M
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..C
A manufacturing company manufactured 325 units and 300 units sold @ Rs.
know company earns no profit/no loss.

n g
100 each. Variable cost Rs. 16,500. After preparing income statement it came to
i
.t n
What will be the effects of following two plans on profit of company?
a.
n a
Treat both plans individually. Analyze both situations.
If sales price per unit increased by Rs. 25 and sales volume decreased by
100 units. Other things remain same
an
b.
j
Management decided to increase sales volume by 100 units and expected
to increase fixed costs by Rs. 1,000
u
. v
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A study has been conducted to determine if one of the departments of Sparrow
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Company should be discontinued. The contribution margin in the department is
Rs. 150,000 per year. Fixed expenses charged to the department are Rs.
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130,000 per year. It is estimated that Rs. 120,000 of these fixed expenses could
be eliminated if the department is discontinued.
v If the department is discontinued, what will be the impact on the company’s

overall net operating income?
v Which costs are irrelevant to this decision?

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Operating at normal capacity, ABC Company employs 20 production workers in
assembly department, working 8 hours per day, 20 days per month at a wage
rate of Rs. 9 per hour.
Normal capacity 3,800 units of production per month

Supplies average Rs. 0.23 per direct labor hour
Indirect labor cost 1/8 of direct labor cost and other charges are Rs. 0.18
Per direct labor hour
The flexible budget at normal capacity activity level is as follows:
Rs.
Direct material 4,760
Direct Labour 28,800
Fixed factory overhead 670
Supplies
Indirect Labor
736
3,600 M
Other charges 576
C O
Total
Cost per unit
g .
39,142
10.30
i n
Required:
t . n
You are required to prepare flexible budget at 60% and 75% capacity levels.

n a
n
The following is the Corporation's Income Statement for last month:
a
u j
Particulars Rs.
Sales
. v
Less: variable expenses
4,000,000
1,800,000
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Contribution margin
Less: fixed expenses
2,200,000
720,000
W Net income 1480,000
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The company has no beginning or ending inventories. A total of 80,000 units
were produced and sold last month.
Required:
v What is the company's contribution margin ratio?
v What is the company's break-even in units?
v How many units would the company have to sell to attain a target profit of
Rs. 820,000?

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Answer:
Contribution Margin:
Contribution margin in rupees= Rs 2,200,000
Sales in rupees = Rs 4,000,000
Contribution margin ratio = Contribution margin in rupees/ sales in rupees
= 2,200,000/4,000,000
= 0.55
Break Even in Units:
Break even in units = Target Contribution margin/contribution margin per unit
Target contribution margin = fixed costs = Rs 720,000
Contribution Margin per unit = Contribution Margin/ units produced
= 2,200,000/80,000
= 27.5
Break even units = 720,000 / 27.5
= 26182
Units need to sell to get profit of 820,000:

Target Contribution margin = fixed cost + target profit
= 720,000+ 820,000 M
= 1540000
C O
= 1540000/27.
g .
Sales in units to earn 820,000 profit = target CM/ CM per unit
= 56000
i n
t .n
The manufacturing Company estimates its factory overhead to be as follows:
n a Variable rate (Rs.)

per direct labor
Fixed expense per month
an Rs. hour
Indirect material
Indirect Labor
u j 2,000
900 0.2
maintenance
Heat and Light . v 1200
300
0.3
Power
Insurance W 200
270
0.55
W
Taxes 600
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Payroll Taxes
Depreciation 1,350
0 0.10
Assuming that the direct labor hours for January, February and March are 2,640,
4,740 and 2,370 hours respectively.
Required:
Prepare factory overhead budget for the first quarter.

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FOH Budget for the period January to March
Items Rupees
Indirect material 2000x3= 6000
Indirect labour 900x0.2x2640+900x0.2x4740+900x0.2x2370 =
1755000
Maintenance 1200x0.3x2640+1200x0.3x4740+1200x0.3x2370
= 35100000
Heat and light 300x3 =900
Power 200x0.55x2640+200x0.55x4740+200x0.55x2370
= 1072500
Insurance 270x3 = 810
Taxes 600x3 = 1800
Payroll taxes 0
Depreciation 1350x3 = 4050
Total 3794106
M
C O
g .
i n
t .n
n a
an
u j
. v
W
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Spring 2009
\
All of the following indicate the problems in traditional budget EXCEPT:
► Programmes and activities involving wasteful expenditure are identified, resulting
in unavoidable financial and other costs
► Inefficiencies of a prior year are carried forward in determining subsequent years’
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levels of performance
► Managers are not encouraged to identify and evaluate alternate means of
accomplishing the same objective
► Decision-making is irrational in the absence of rigorous analysis of all proposed
costs and benefits

A forecast set of final accounts is also known as:
► Cash budget
► Capital budget M
► Master budget
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..C
► Sales budget
n g
Brutus Company manufactures glass bottles. The company expects to sell 500,000
i
bottles next year. The budgeted ending inventory this year is 15,000 bottles and the
.t n
desired ending inventory for next year is 12,000 bottles. It takes 5 pounds of sand to
produce one bottle. The ending inventory of sand this year is expected to be 200,000
n a
pounds, and the desired ending inventory next year is 100,000 pounds. The amount of
direct material purchases is expected to be:
► 2,385,000 pounds
an
► 2,465,000 pounds
► 2,585,000 pounds
► 2,600,000 pounds u j
. v
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BDH produced 30,500 units of Kisty (a product). Each unit of Kisty takes two units of
component L. Component L is budgeted to cost Rs. 12 per unit. Current inventory of L is
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4,000 units. BDH wants 6,000 units of L on hand at the end of the next year. How much
will the direct materials budget show as the cost of materials to be purchased?
W
► Rs. 756,000
► Rs. 390,000
► Rs. 684,000
► Rs. 330,000

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Railway Product Ltd makes one product that sells for Rs. 72 per unit. Fixed costs are Rs.
81,000 per month & the product has a contribution to sales ratio of 37.5%. In a period
when actual sales were Rs. 684,000 the company's unit margin of safety was:
► 4,000 units
► 4,800 units
► 5,500 units
► 6,500 units
A company decreased the selling price for its product from Rs. 2.00 to Rs. 1.75 per
unit when total fixed costs decreased from Rs. 500,000 to Rs. 400,000 and variable cost
per unit of Rs. 1 remained unchanged. How would these changes affect the break-even
point?
► The break-even point in units would be increased
► The break-even point in units would be decreased
► The break-even point in units would remain unchanged
► The effect cannot be determined from the information given

M
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The total cost of the beginning inventory was Rs. 60,000. During the month, 50,000 units
were transferred out. The equivalent unit cost was computed to be Rs. 4.00 for materials
C
g .
and Rs. 7.40 for conversion costs under the weighted-average method.
With the help of given information, what was the total cost of the units completed and
transferred out during the month.
► Rs. 480,000
i n
► Rs. 570,000
► Rs. 540,000
t . n
► Rs. 510,000
n a
n
a
u j
The average cost method of process costing has an advantage when compared to the
FIFO method relative to simplicity because under the average method:
period cost
. v
► It provides that units started within the current period are valued at the current
► The costs in the beginning inventory in a processing department maintain their

separate identity
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► The identity of the beginning units in process is typically maintained when they
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are transferred to the next department
► All units completed during the period will be assigned the same unit cost
W
Assuming no returns outwards or carriage inwards, the cost of goods sold will be equal
to:
► Opening stock Less purchases plus closing stock
► Closing stock plus purchases plus opening stock
► Sales less gross profit

W
► Purchases plus closing stock plus opening stock plus direct labor

“Taking steps for the fresh purchase of those stocks which have been exhausted and for
which requisitions are to be honored in future” is an easy explanation of:
► Over stocking
► Under stocking
► Replenishment of stock
► Acquisition of stock
Which of the following would be the effect, if inventory is not properly measured?
► Expenses and revenues cannot be properly matched
► Unfair position in Financial Statements
► Inventory items show under or over stocking

While calculating the EOQ, carrying cost is taken as the:
M
► %age of unit cost
► %age of ordering cost
C O
► %age of annual required units
► Total unit cost
g .
i n
Payroll includes:
► Salaries & Wages of direct labor
t .n
► Salaries & Wages of Indirect labor
► Salaries & Wages of Administrative
n a
n
► Salaries & Wages of direct labor, Indirect labor, and Administrative
a
u j
following factor?
. v
Increased cost of production due to high labor turnover is a result of which of the
► Interruption of production
W
► Coordination between new and old employee to produce more
► Increased production due to newly motivated employees
W
► Decrease losses as new employees will be more concerned towards output
W
The Process of cost apportionment is carried out so that:
► Cost may be controlled

► Cost unit gather overheads as they pass through cost centers
► Whole items of cost can be charged to cost centers
► Common costs are shared among cost centers

W
When a manufacturing Company has highly automated manufacturing plant producing
many different products, the most appropriate basis for applying FOH cost to work in
process is:
► Direct labor hours
► Direct labor costs
► Machine hours
► Cost of material used
Which of the following industries would most likely use a Process cost Accounting
system?
► Construction
► Beer
► Hospitality
► Consulting
Question No: 18 ( Marks: 1 ) - Please choose one M

O
Which of the following loss is not included as part of the cost of transferred or finished
..C
goods, but rather treated as a period cost?
► Operating loss
► Abnormal loss
► Normal loss
n g
► Non-operating loss
i
Question No: 19 ( Marks: 1 ) - Please choose one .t n
n a
A company produces two chemicals in a joint process. Chemical A can be sold at split
off while chemical B currently cost Rs. 2 per gallon for disposal. If chemical B is further
n
processed, it would cost Rs. 5 per gallon. At what sales price would the company be in
a
chemical?
u j
different between disposing of chemical B at split off and further processing the
► Rs.3
► Rs.5
► Rs.4 . v
► Rs.7
W
W
Variable costing is also known as:
W
► Direct Costing
► Marginal Costing
► Both Direct Costing & Marginal Costing
► Indirect Costing


W
Direct labor Rs.12
Variable overhead Rs.6
Fixed selling and administrative Rs.2000
Variable selling and administrative Rs.2
Using the data given above, what will be the unit product cost under marginal costing?
► Rs. 22
► Rs. 24
► Rs. 28
► Rs. 30

Net income reported under direct costing will exceed net income reported under
absorption costing for a given period if:
► The fixed overhead exceeds the variable overhead
► Production equals sales for that period
M
► Production exceeds sales for that period
► Sales exceed production for that period
C O
g .
i n
Profit under absorption costing will be higher than under marginal costing if:

t . n
a
n
n
a
contribution margin per unit?
u j
A firm sells bags for Rs. 14 each. The variable cost for each unit is Rs. 8. What is the
► Rs. 6
► Rs. 12
► Rs. 14 . v
► Rs. 8
W
W
W
The break-even point in units is calculated using which of the following factors?
► Fixed expenses and the contribution margin ratio
► Variable expenses and the contribution margin ratio
► Fixed expenses and the unit contribution margin
► Variable expenses and the unit contribution margin

The point at which the cost line intersects the sales line will be called:

W
► Budgeted sales
► Break Even sales
► Margin of safety

If one would prepare a graph with a horizontal axis representing units of production and
a vertical axis representing per-unit production cost, how would a line representing fixed
production cost is drawn?
► As a horizontal line
► As a vertical line
► As a straight line sloping upward to the right
► As a straight line sloping downward to the right

Budget for an organization is prepared by which of the following person?
► Functional head
► Manager
► Auditor
M
► Administrator
C O
g .
Amount of Depreciation on fixed assets will be fixed in nature if calculated under which
of the following method?
► Straight line method
i n
► Reducing balance method
► Some of year's digits method
t . n
► Double declining method
n a
n
a
u j
Which of the following factor/s should be considered while constructing an
administrative selling expense budget?
► Fixed expenses
► Past experience
► Variable expenses . v
W
W
All are examples of cash disbursements EXCEPT:
W
► Payment for materials purchased
► Payment received as collection of accounts receivable
► Payment of dividends
► Payment of taxes

W
A budget that requires management to justify all expenditures, rather than just changes
from the previous year is referred to as:
► Self-imposed budget
► Participative budget
► Perpetual budget
► Zero-based budget

Which of the following sentences is the best description of zero-base budgeting?
► Zero-base budgeting is a technique applied in government budgeting in order to
have a neutral effect on policy issues
► Zero-base budgeting requires a completely clean sheet of paper every year, on
which each part of the organization must justify the budget it requires
► Zero-base budgeting starts with the figures of the previous period and assumes a
zero rate of change
► Zero based budgeting is an alternative name of flexible budget

Which of the following is the first step in the decision-making process?
M
► Clarify the decision problem
► Collect the data
C O
► Select an alternative
► Develop a decision model
g .
i n
. n
Which the following would be considered a Relevant Cost?
► The book value of the old equipment
t
► Depreciation expense on the old equipment
n a
► The current disposal price of the old equipment
► Historical cost of an equipment
an
u j
. v
The Auslander Company has 1,600 obsolete calculators that are carried in inventory at a
total cost of Rs. 106,800. If these calculators are upgraded at a total cost of Rs. 40,000,
they can be sold for a total of Rs. 120,000. As an alternative, the calculators can be sold
W
in their present condition for Rs. 44,800. What will be the sunk cost in this situation?
► Rs. 0
W
► Rs. 40,000
► Rs. 44,800
W
► Rs. 106,800

Costs that have been incurred include which of the following?
► Only opportunity costs
► Costs that have already been paid
► Costs that have been committed

W
► Both costs that have already been paid and committed

For a retail outlet chain with multiple stores, which of the following statements would be
correct?
► Stores which have a net loss should be discontinued
► Stores with a negative contribution margin should be discontinued
► Stores with a negative contribution margin should be discontinued provided such
discontinuation will not cause an increase in sales at other stores
► Stores with a negative contribution margin should not be discontinued if such
discontinuation will cause profitable stores to bear a portion of the unprofitable store's
overhead

In the process costing when material is issued for production to department no 1.what
would be the journal entry Passed?
► W.I.P (Dept-I)
To Material a/c
M
► W.I.P (Dept-ii)
C O
To Material a/c
g .
► Material a/c
To W.I.P (Dept-ii)
i n
► W.I.P (Dept-ii)
t . n
To FOH applied.
n a
an
u j
. v
FIFO is the abbreviation of:
W
► Final Interest-Free Option
► First in First out Method
W
► Fixed income Financial Operations
W
Bouch Company has the following data of year 02 given below
Year 02
Sales Rs. 120/unit
Direct Materials Rs. 8/unit

Direct labor Rs. 10/unit
Variable overhead Rs. 7/unit
Selling & Admin expenses Rs. 2/unit
Fixed overhead Rs. 7,500
Normal volume of production 250 units per year
Information regarding units as follows
Item 1st year 2nd year 3rd year 4th year
units units units units

Opening stock 200 300 300
Production 300 250 200 200
Sales 100 150 200 300
Required: Prepare income statement of year 2 under absorption costing.

M
C O
g .
A Company manufacturers two products A and B. Forecasts for first 7 months is as
under:
i n
Month Sales in Units
t . n
January
A
1,000
n aB
2,800
February
n
1,200
a
2,800
March
April
u j
1,610
2,000
2,400
2,000
May
June . v 2,400
2,400
1,600
1,600
July
W 2,000 1,800
W
No work in process inventory has been estimated in any moth however finished goods
W
inventory shall be on hand equal to half the sales to the next month, in each month. This
is constant practice.
Budgeted production and production costs for the year 1999 will be as follows:
Production units 22,500 24,000

Direct Materials (per unit) 12.5 19

W
Direct Labor (per unit) 4.5 7
F.O.H. (apportioned) Rs. 66,000 Rs 96,000
Prepare for the six months period ending June 1999, a production budget for ‘’Product
A”
The managing director of Parser Limited, a small business, is considering undertaking a
one-off contract. She has asked her inexperienced accountant to advise on what costs are
likely to be incurred so that she can price at a profit. The following schedule has been
prepared:
Costs for special order Notes Rs.

Direct wages 1 28,500
Supervisor costs 2 11,500
General overheads 3
M
4,000
Machine depreciation
Machine overheads
4
5
C O
2,300
18,000
Materials 6
g . 34,000
Total
i n 98,300
Notes
t .n
v Direct wages comprise the wages of two employees, particularly skilled in the labor
n a
process for this job. They could be transferred from another department to undertake
the work on the special order. They are fully occupied in their usual department and
an
sub-contracting staff would have to be brought in to undertake the work left behind.
v Sub-contracting costs would be Rs. 32,000 for the period of the work. Other sub-
u j
contractors who are skilled in the special order techniques are also available to work
on the special order. The costs associated with this would amount to Rs. 31,300.
.v
v A supervisor would have to work on the special order. The cost of Rs. 11,500 is made
up of Rs. 8,000 normal payments plus a Rs. 3,500 additional bonus for working on
W
the special order. Normal payments refer to the fixed salary of the supervisor. In
addition, the supervisor would lose incentive payments in his normal work amounting
W
to Rs. 2,500. It is not anticipated that any replacement costs relating to the
supervisors' work on other jobs would arise.
W
v General overheads comprise an apportionment of Rs. 3,000 plus an estimate of Rs.
1,000 incremental overheads.
Required
Produce a revised costing schedule for the special project based on relevant costing
principles. Fully explain and justify each of the costs included in the costing schedule.

Due to the declining popularity of digital watches, Swiss Company’s digital watch line
has not reported a profit for several years. An income statement for last year follows:
Segment Income Statement—Digital Watches
Rs. Rs.
Sales ...................................................................... 500,000
Less variable expenses:
Variable manufacturing costs ............................ 120,000
Variable shipping costs...................................... 5,000
Commissions ..................................................... 75,000 200,000
Contribution margin .............................................. 300,000
Less fixed expenses:
General factory overhead(1) .............................. 60,000
Salary of product line manager.......................... 90,000
Depreciation of equipment (2)........................... 50,000
Product line advertising .....................................
Rent—factory space (3) .....................................
100,000
70,000 M
General administrative expense (1) ................... 30,000
C O 400,000
Net operating loss..................................................
g . (100,000)
digital watches were dropped

i n
1) Allocated common costs that would be redistributed to other product lines if
2) This equipment has no resale value and does not wear out through use
3) The digital watches are manufactured in their own facility
t . n
n
Should the company retain or drop the digital watch line? a
an
u j
. v
Production component Rates
W Per unit Rate
Direct LaborW
Direct material 2.5 lbs @ Rs. 4.00
.5 hr @ Rs. 16.00
Rs. 10.00
Rs. 8.00
VOH
Fixed FOH
W .5 hr @ Rs. 4.00
Rs. 40,000
Rs. 2.00
Rs. 2.50
Actual Output 16,000 units
Variable S&A Rs. 6.00 per unit
Fixed S&A Rs. 60,000
Selling price Rs. 40

W
Assume sales of 12,000 units.
Required: What is the profit under marginal and absorption costing method?
M
C O
g .
i n
t . n
n a
an
u j
. v
W
W
W

W
Spring 2009
The Regal, Inc. makes 35,000 motors to be used in the production of its sewing
machines. The cost per motor at this level of activity would be: Direct materials
Rs. 4.50 Direct labor Rs. 4.60 Variable factory overhead Rs. 3.75 Fixed factory
overhead Rs. 3.45. An outside supplier recently began producing a comparable
motor for the sewing machine. The price to Regal for this motor is Rs. 15. If
Regal decided not to make the motors, there would be no other use for the
production facilities. If Regal decides to continue making the motor, how much
higher or lower would net income be than if the motors are purchased from the
outside supplier?
► 75,250 higher
► 45,500 lower
► 311,500 higher
► 120,750 higher

M
C O
g .
i n
t .n
All of the following are features of Zero based budgeting EXCEPT:
n a
► It provides the organization with a systematic way to evaluate different
operations and programmes undertaken. It enables management to allocate
n
resources according to the priority of the programmes
a
j
► It ensures that each and every programme undertaken by management is
really essential for the organization, and is being performed in the best possible
way u
. v
► It disables the management to approve departmental budgets on the
basis of cost-benefit analysis. No arbitrary cuts or increases in budget estimates
are made
W
► It links budgets with the corporate objectives. Nothing will be allowed
W
simply because it was being done in the past. An activity may be shelved it does
not help in achieving the goals of the enterprises
W
A forecast set of final accounts is also known as:
► Cash budget
► Capital budget
► Master budget
► Sales budget

W
Apex Corporation experienced the following during April:
Beginning WIP inventory 7,500 units, 40% of labor added in this period
Units started in this period 64,000 units
Ending WIP inventory 5,000 units, 60% of labor added in this period
Direct materials are added at the beginning of the process and direct labor is
added uniformly throughout the process.
Required: What should be the equivalent units for direct materials and direct
labor under a weighted average method?
► 66,500 units 66,500 units
► 66,500 units72,000 units
► 71,500 units 69,500 units
► 64,000 units 74,000 units

M
Opportunity cost is the best example of:
► Relevant Cost
C O
► Irrelevant Cost
► Standard Cost
g .
► Sunk Cost
i n
Financial statements are prepared:
t .n
n a
► Only for publicly owned business organizations
► For corporations, but not for sole proprietorships or partnerships
n
► Primarily for the benefit of persons outside of the business organization
a
u j
► Depending upon only the need of the decision maker
. v
Selected information for a company for the year 2005 follows:
W Particulars
Cost of goods sold
Rs.
30,000
W Inventory, January 1 9,000
W Inventory, December 31 7,800
What was the inventory turnover ratio?
► 3.57 times
► 3.67 times

W
► 3.85 times
► 5.36 times

Jones, Industries uses process costing system. In October, the finishing
department had 30,000 (20% as to conversion) units in beginning work-in-
process, 45,000 (40% as to conversion) units in ending inventory and had 95,000
units transferred in from the previous department. Material is added at the end of
the process and conversion costs are added uniformly throughout the process.
Required: If Jones uses FIFO method, what are the equivalent units of
production for conversion costs?
► 98,000 units
► 45,000 units
► 80,000 units
M
Costs that change in response to alternative courses of action are called:
► Relevant costs
► Differential costs
C O
► Target costs
► Sunk costs
g .
i n
.n
Which of the following is CORRECT to calculate cost of goods manufactured?
t
n a
► Direct labor costs plus total manufacturing costs
► The beginning work in process inventory plus total manufacturing costs
n
and subtract the ending work in process inventory
a
j
► Beginning raw materials inventory plus direct labor plus factory overhead
► Conversion costs and work in process inventory adjustments results in
cost of goods manufactured u
. v
W
In the basic EOQ model, if Units= 50 per month, Ordering cost =Rs. 10, and
carrying cost =Rs. 10 per unit per month, EOQ is:
► 10
► 12 W
► 25
► 30W
Counting items to ensure an order is correct, is an activity relates to:
► Ordering cost
► Carrying cost

W
► Stock out cost
► Holding cost

According to Taylor’s Differential plan, the worker is paid according to his:
► Degree of efficiency
► Degree of understanding
► Degree of flexibility
► Degree of loyalty
In which of the following center FOH cost incurred.
► Production Center
► Service Center
► General Cost Center

M
► The costs charged to the department
C O
Which of the following is/are reported in production cost report?
► How the costs were assigned to the output?
g
► The equivalent units of production by the department.
i n
.
t n
Which of the following is NOT reason of abnormal loss?
n a
► Defective material used
an
► Machine breakdown
► Poor workmanships
u j
► Natural disaster
. v
W
Net income reported under direct costing will exceed net income reported under
absorption costing for a given period if:
W
► The fixed overhead exceeds the variable overhead
► Production equals sales for that period
W
► Production exceeds sales for that period
► Sales exceed production for that period

Using variable costing, which costs are included in product cost?
► All variable product costs, including direct materials, direct labor, and
variable manufacturing overhead

W
► All variable and fixed allocations of product costs, including direct
materials, direct labor, and both variable and fixed manufacturing overhead
► All variable product costs except for variable manufacturing overhead
► All variable and fixed allocations of product costs, except for both variable
and fixed manufacturing overhead

of variable costing
of variable costing
Question No: 21 ( Marks: 1 ) - Please choose one M

O
Advantages of variable costing include which of the following?
C
contribution margin format income statement
g .
► Data that is required for CVP analysis can be taken directly from the
inventories
i n
► All things being equal, profit for the period is not affected by changing

t .n
► Profits tend to move in the same direction as sales
n a
n
Which of the following equation is CORRECT?
a
j
► Revenues + Variable costs - Fixed costs = Operating income
► Revenues - Variable costs - Fixed costs = Operating income
u
► Revenues + Variable costs + Fixed costs = Operating Income
. v
► Revenues - Variable costs + Fixed costs = Operating income
W
The break-even point in units is calculated using which of the following factors?
W
► Fixed expenses and the contribution margin ratio
► Variable expenses and the contribution margin ratio
W
► Fixed expenses and the unit contribution margin
► Variable expenses and the unit contribution margin

All of the following are true EXCEPT:
► Profit + Fixed cost + Variable cost = Sales
► Profit + Fixed cost = Sales – Variable cost

W
► Contribution margin – Fixed cost = Profit
► Profit + Fixed cost = Sales + Variable cost

Which of the following statements is CORRECT?
► A by-product is a product produced at the same time as other products
which has a relatively low volume
► Since a by-product is a saleable item it should be separately costed in the
process account and should absorb some of the process costs
► Cost incurred prior to the point of separation are known as common or
joint costs
► A by-product is a product produced at the same time as other products
which has a relatively high volume compared with the other products

The by-product of flour is:
M
► Fats
► Bran
C O
► Glycerin
► Meat Hides
g .
i n
The by-product of oil and fuel is:
t . n
► Mobil oil and lubricating oils
► Kerosene oil and Asphalt and Tar
n a
► Gasoline and Petroleum coke
an
► All of the given
u j
. v
On a Cost-Volume-Profit chart (break-even graph), where are the total fixed
costs shown?
W
► At the point where the sales line intersects the cost line
► At the point where the sales line below the total cost line
W
► At the point where the total cost line intersects the cost line
► At the point where the total cost line intersects the volume line
W
Budget for an organization is prepared by which of the following person?
► Functional head
► Manager
► Auditor
► Administrator

W
Production budget is an example of which of the following budget?
► Functional budget
► Master budget
► Cost of goods sold budget
► Sales budget
Consider the following data for the month of April:
Closing stock 80 units
Production 280 units
Sales 330 units
Based on the data, the opening stock for April will have to be:
► 50 units
► 410 units
► 70 units
► 130 units
M
All of the following compose cost of goods sold EXCEPT:
C O
► Raw material
► Labor
g .
► Capital
► Factory overhead
i n
t .n
The master budget usually begins with a:
n a
► Production budget
an
► Direct materials budget
► Direct labor budget
u j
► Sales budget
. v
W
Which of the following budgets provide information for preparation of the owner's
equity section of a budgeted balance sheet?
W
► Sales budget
► Cash budget
W
► Capital expenditures budget
► Budgeted income statement

Which of the following budget shows a summary of all operational budgets?
► Income statement budget

W
► Cash budget
► Flexible budget

Which of the following is NOT example of a cash outflow?
► Cash drawings
► Purchase of new equipment
► Commission paid
► Depreciation

A budget that requires management to justify all expenditures, rather than just
changes from the previous year is referred to as:
► Self-imposed budget
► Participative budget
► Perpetual budget
► Zero-based budget
M
O
Which of the following sentences is the best description of zero-base budgeting?
C
order to have a neutral effect on policy issues
g .
► Zero-base budgeting is a technique applied in government budgeting in
i n
► Zero-base budgeting requires a completely clean sheet of paper every
year, on which each part of the organization must justify the budget it requires
. n
► Zero-base budgeting starts with the figures of the previous period and
assumes a zero rate of change
t
a
► Zero based budgeting is an alternative name of flexible budget
n
n
a
u j
A relevant cost or benefit is one that will be affected by the decision. Which of
the following should be regarded as relevant in the decision-making process?
► Fixed overheads
► Notional costs
► Sunk costs . v
W
► Opportunity costs
W
Details of the process for the last period are as follows:
W
Materials 5,000 Kgs at 0.50 per Kg
Labor Rs.700
Production overheads 200% of labor
Visit vujannat.ningCom For Video Lectures ,previous assigmnets ,Papers,Chat, Study

W
Normal losses are 10% of input in the process. The out put for the period was
4,200Kg from the process. There was no opening and closing Work- in- process.
What were the units of abnormal loss?
► 500 units
► 300 units
► 200 units
► 100 units
WWW.vujannat.ningCOM
Ahmed Trading Company has the following information about Soap, the only
product it sells. The selling price for each unit is Rs 110, the variable cost per unit
is Rs 75 and the total fixed cost for the firm is Rs 70,000. The Company has
budgeted sales of Rs 270,000 for the next period.
Required:
1- Margin of safety in Rs.
2- Margin of safety Ratio
M
C O
2008.
g .
A textile company anticipates the following unit sales during the four months of
Months April May

i n
June July
Sales
units
20,000 30,000
t .n 25,000 40,000
n a
The company maintains its ending finished goods inventory at 60% of the
n
following month’s sale. The April1st, finished goods inventory will be 12,000
a
units.
u j
v
Required: Prepare a production budget for second quarter of year.
.
W
Operating at normal capacity, ABC Company employs 20 production workers in
W
assembly department, working 8 hours per day, 20 days per month at a wage
rate of Rs. 9 per hour.
W
Normal capacity 3,800 units of production per month
Indirect labor cost 1/8 of direct labor cost and other charges are Rs. 0.18
Per direct labor hour

W
The flexible budget at normal capacity activity level is as follows:
Rs.
Direct material 4,760
Direct Labour 28,800
Fixed factory overhead 670
Supplies 736
Indirect Labor 3,600
Other charges 576
Total 39,142
Cost per unit 10.30
Required:
You are required to prepare flexible budget at 60% and 75% capacity levels.

M
Swisher company produces and sells commercial printing press. According to
the records of the past four years reveals the following:
O
Sales in units:
g .C
Press Year 1 Year 2
i n
Year 3 Year 4
.t n
Model
222 100 110 120 130
na
333 100 120 160 240
444 100
an 95 85 70
estimates for year 5 are:

u j
The trends over past four years are expected to extend to year 5. Inventory
Press
Model . v Beginning
Inventory
Ending
Inventory
W 222
333
2
5
4
5
W 444 4 5
W
Required: Prepare sales and production estimates for year 5 in units and by
product wise.

The Briks manufacturing Company estimates its factory overhead to be as
follows:
Fixed expense per month Rs. Variable rate (Rs.)

W
per direct labor
hour
Indirect material 2,000 -
Indirect Labor 900 0.25
maintenance 200 0.30
Heat and Light 500 0.30
Power 350 0.50
Insurance 540 -
Taxes 700 0.10
depreciation 1,200 -
Assuming that the direct labor hours for January, February and March are 2,500,
4,000 and 3,500 hours respectively.
Requirement:
Prepare factory overhead budget for the first quarter.
M
O
g .C
i n
.t n
n a
an
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. v
W
W
W

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Spring 2009


BDH Corporation, which makes only one product, Kisty, has the following
information available for the coming year. BDH expects sales to be 30,000 units
at Rs. 50 per unit. The current inventory of Kisty is 3,000 units. BDH wants an
ending inventory of 3,500 units. BDH pays its sales staff commission of 5% of
sales. How much will be recorded on the marketing budget for sales
commissions for the next period?
M
► Rs. 75,000
► Rs. 30,000 O
► Rs. 150,000
► Rs. 1,500,000
g .C
i n
- Please choose one
.t n
Coins Company adds materials in the beginning of the process in Forming
Department, which is the first of two stages of its production cycle. Information
a
concerning the materials used in the Forming department in June is as follows:
n
an Units Material Cost (Rs.)
Work in process June 01

u j 15,000 21,000
. v
Units started during June
Units completed and transferred out

35,000
40,000
79,000
W
W
Using the weighted average method, what were the materials cost in work in
process at June 30?
W
► Rs. 30,000
► Rs. 10,000
► Rs. 20,000
► Rs. 40,000

W
Information concerning Department B of Baba Company for the month of April is
as follows:
Units Material Cost (Rs.)
Work in process opening 7,000 21,000
Units started in April 68,000 210,800
Units completed and transferred out 66,000
Work in process ending 9,000
All materials are added at the beginning of the process.

Required: Using the average cost method. How much be the cost (rounded to
two places) per equivalent unit for materials?
► Rs. 3.00
► Rs. 3.10
► Rs. 3.09 M
► Rs. 3.05
O
Net sales = Sales less: g .C
► Sales returns
i n
.t n
► Sales discounts
► Sales returns & allowances
a
► Sales returns & allowances and sales discounts
n
an
The salary of factory clerk is treated as:
► Direct labor cost
► Indirect labor cost
u j
► Conversion cost
► Prime cost . v
W
W
When purchases are added to raw material opening Inventory, we get the value
of:
W
► Material consumed.
► Material available for use.
► Material needed.
► Raw material ending inventory.

Which of the following is CORRECT to calculate cost of goods manufactured?

W
► Direct labor costs plus total manufacturing costs
► The beginning work in process inventory plus total manufacturing costs
and subtract the ending work in process inventory
► Beginning raw materials inventory plus direct labor plus factory overhead
► Conversion costs and work in process inventory adjustments results in
cost of goods manufactured
According to Rowan premium plan, which of the following formula is used to
calculate the bonus rate?
► (Time saved/time allowed) x 100
► (Time allowed/time saved) x 100
► (Actual time taken/time allowed) x 100
► (Time allowed/actual time taken) x 100

All of the following are avoidable causes of labor turnover EXCEPT:
► Personal betterment of worker
M
► Dissatisfaction with job
► Bad working conditions O
► Long and odd working hours
g .C
i n
A company has calculated that volume variance for a given month was
.t n
favourable.This could have been caused by which of the following factors?
n a
► The number of rejectes were lower than normal
► Machine breakdowns were lower than normal
n
► No delays were experienced in the issuing of material to production
a
► All of the given
u j
. v
Which of the following industries would most likely use a Process cost
Accounting system?
► Construction
► Beer W
W
► Hospitality
► Consulting
W
Which of the following constitutes the basis on which joint costs are more
frequently allocated?
► Physical volume of output
► Conversion costs
► Prime costs

W
► Market value

A company produces two chemicals in a joint process. Chemical A can be sold
at split off while chemical B currently cost Rs. 2 per gallon for disposal. If
chemical B is further processed, it would cost Rs. 5 per gallon. At what sales
price would the company be in different between disposing of chemical B at split
off and further processing the chemical?
► Rs.3
► Rs.5
► Rs.4
► Rs.7

By using absorption costing method, which of the following is NOT shown in
Income Statement?
► Cost of goods manufactured

M
► Selling and administrative expenses
► Cost of goods sold O
g .C
n
i
Units produced
Direct materials .t n 8,000 units
Rs.6
Direct labor
Fixed overhead
n a Rs.12
Rs.24000
Variable overhead
an Rs.6
u j
Fixed selling and administrative
Variable selling and administrative
Rs.2000
Rs.2
costing?
► Rs. 22 . v
► Rs. 24
► Rs. 28
W
W
► Rs. 30
W


W
of variable costing
of variable costing

Profit under absorption costing will be higher than under marginal costing if:

In CVP analysis, when the number of units sold changes, which one of the
following will remain the same?
► Total contribution margin
► Total sales revenues
M
► Total variable costs
► Total fixed costs O
g .C
determine which of the following?
i n
The difference between total revenues and total variable costs is used to
► Operating Income
► Gross margin .t n
► Fixed costs
n a
an
u j
Which of the following is NOT true? A small company's breakeven point:
. v
► Occurs where its revenue equals its expenses
► Shows entrepreneurs’ minimum level of activity required to keep the
company in operation
W
► Is the point at which a company neither earns a profit nor incurs a loss
► Total contribution margin equals total variable expenses
W
W
Terrell, Inc. sells a single product at a selling price of Rs. 40 per unit. Variable
costs are Rs. 22 per unit and fixed costs are Rs. 82,800. Terrell's break- even
point is:
► Rs. 184,000
► 3,764 units
► Rs. 150,540
► 2,070 units

W
The by-product of Soap is:
► Glycerin
► Meat Hides
► Fats
► Flour Bran
Bruce Inc. has the following information about Rut, the only product sold. The
total fixed cost for the firm is Rs. 60,000. Bruce has budgeted sales of Rs.
130,000 for the next period. What is the margin of safety in Rs. for Bruce?
► Rs. 30,000
► Rs. 70,000
► Rs. 100,000
► Rs. 130,000
M
O
The little Rock Company shows fixed expenses of Rs. 12,150 and Margin of
ratio is 30% what would be the actual sales?

g .C
safety ratio is 25% and Break even sales is Rs. 40, 500. If contribution margin
► Rs. 40,500
i n
► Rs. 54,000
► Rs. 12,150 .t n
► Rs. 4,050
n a
n
a
► Functional budget
u j
Production budget is an example of which of the following budget?
► Master budget
. v
► Sales budget
W
W
The master budget comprises:
► The budgeted profit and loss account
W
► The capital expenditure budget
► The budgeted profit and loss account, budgeted cash flow and budgeted
balance sheet
► The budgeted cash flows

Consider the following data for the month of January:

W
Sales 600 units
Opening stock 80 units
If the closing stock has to be 50% higher than the previous month then
production will have to be:
► 700 units
► 720 units
► 640 units
► 600 units
If a firm is using activity-based budgeting, the firm would use this in place of
which of the following budgets?
► Direct labor budget
► Direct materials budget
► Revenue budget
► Manufacturing overhead budget
M
Financial managers use which of the following to plan for monthly financing
needs?
► Capital budget O
► Cash budget
► Income Statement budget
g .C
► Selling & administrative expenses budget
i n
.t n
All are examples of cash disbursements EXCEPT:
► Payment for materials purchased
n a
► Payment received as collection of accounts receivable
► Payment of dividends
an
► Payment of taxes
u j
. v
The Auslander Company has 1,600 obsolete calculators that are carried in
inventory at a total cost of Rs. 106,800. If these calculators are upgraded at a
W
total cost of Rs. 40,000, they can be sold for a total of Rs. 120,000. As an
alternative, the calculators can be sold in their present condition for Rs. 44,800.
W
What will be the sunk cost in this situation?
► Rs. 0
W
► Rs. 40,000
► Rs. 44,800
► Rs. 106,800

Decision making should be based on all of the following relevant costs features
EXCEPT:

W
► Relevant Costs are future costs
► Relevant Costs are cash flows
► Relevant Costs are incremental costs
► Relevant Costs are sunk costs

The decision to drop a product line should be based on:
► The fact that the product line shows a net loss over several periods
► The ability of the firm to eliminate some fixed costs as a result of dropping
the product
► Whether the fixed costs that can be avoided by dropping the product line
are less than the contribution margin that will be lost
► Whether the fixed costs that can be avoided by dropping the product line
are greater than the contribution margin lost

If an organization has the freedom of choice about whether to make internally or
buy externally and has no scarce resources that put a restriction on what it can
do itself, the relevant costs for the decision will be the:
M
► Past costs
► Differential costs between the two options O
► Sunk costs
► Replacement costs
g .C
i n
.t n
For a retail outlet chain with multiple stores, which of the following statements
would be correct?
n a
► Stores which have a net loss should be discontinued
n
a
j
provided such discontinuation will not cause an increase in sales at other stores
► Stores with a negative contribution margin should not be discontinued if
u
such discontinuation will cause profitable stores to bear a portion of the
. v
unprofitable store's overhead
W
In the process costing when material is issued for production to department no
W
1.what would be the journal entry Passed?
W
► W.I.P (Dept-I)
To Material a/c
► W.I.P (Dept-ii)
To Material a/c
► Material a/c

W
To W.I.P (Dept-ii)
► W.I.P (Dept-ii)
To FOH applied.
Which of the following is NOT an element of factory overhead?
► Depreciation of the maintenance on equipment
► Salary of the plant supervisor
► Property taxes on the plant buildings
► Salary of a marketing manager

The following data is available for the Bricks Company:
M
Freight in
Particulars
ORs.
20,000
Purchases return and allowances
Marketing expenses
g .C 80,000
200,000
Finished goods Inventory, ending
Cost of goods sold
i n 90,000
700% of marketing expenses
.t n
Calculate the cost of goods available for sales if Gross Profit is 50% of cost of
goods sold.
► Rs. 1,390,000
n a
► Rs. 1,490,000
an
► Rs. 1,500,000
► Rs. 1,590,000
u j
. v
Under perpetual Inventory system at the end of the year:
W
► No closing entry passed
► Closing entry passed
W
► Closing value find through closing entry only
► None of the above.
W
Information regarding cost:
Cost from preceding Labor FOH

department (Rs.) (Rs.) (Rs.)
Work in process (opening) 5400 910 800

W
Cost during month 65,360 34,050 30,018
Production statistics:
Units in process opening inventory (1/3 labor & FOH) 3,000

Units in process ending inventory (1/2 labor & FOH) 4,000
Units transferred to next department 36,000
Units lost 1,000
Units received from preceding department 38,000
Required:
Calculate equivalent units of Labor and FOH under FIFO costing
Calculate unit cost of Labor, and FOH.

A Company manufacturers two products A and B. Forecasts for first 7 months is
as under:
Month Sales in Units M

O
January
A B
g .C
February
1,000
1,200
2,800
i
2,800 n
March
1,610 .t n
2,400
April
2,000
n a 2,000
May
an
j
2,400 1,600
vu
June
2,400 1,600
July
. 2,000 1,800
W
W
No work in process inventory has been estimated in any moth however finished
goods inventory shall be on hand equal to half the sales to the next month, in
W
each month. This is constant practice.
Budgeted production and production costs for the year 1999 will be as follows:
Production units 22,500 24,000

Direct Materials (per unit) 12.5 19
Direct Labor (per unit) 4.5 7

W
F.O.H. (apportioned) Rs. 66,000 Rs 96,000
Prepare for the six months period ending June 1999, a production budget for
‘’Product B”

Rashid and company employees 10 production workers, working 8 hours a day
20 days per month at a normal capacity of 2,400 units.
The direct labor wage rate Rs. 6.30 per hour
Direct materials are budgeted Rs. 2.00 per unit produced
Fixed factory overhead Rs. 960
Indirect labor is 1/6 of direct labor cost and other charges are Rs. 0.45 per direct labor
hour
Required:
M
Prepare a flexible budget at 60%, 80% and 100% of normal capacity. Showing
O
total manufacturing costs as well as per unit total manufacturing costs.
C
g .
i n
t . n
There are some common types of costs which you will meet when evaluating
different decisions are incremental, non-incremental, spare capacity, opportunity,
a
sunk costs. Are these likely to be relevant or non-relevant?
n
an
u j
Lavender Company produces 2,000 parts per year, which are used in the
. v
assembly of one of its products. The unit product cost of these parts is:
W
Variable manufacturing cost
Fixed manufacturing cost
Rs. 64
Rs. 36
W Unit product cost Rs. 100
W
The part can be purchased from an outside supplier at Rs. 80 per unit. If the part
is purchased from the outside supplier, two-thirds of the fixed manufacturing
costs can be eliminated.
v What costs are irrelevant to this decision?

v What would the annual impact on the company’s net operating income be
as a result of buying the part from the outside supplier?

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Connecting VU Students
MIDTERM EXAMINATION
FALL 2007 Marks: 40
(Session - 7 )
Student Name: ______________________________
Center Name/Code: ______________________________
Exam Date: Thursday, November 22, 2007
Please read the following instructions carefully before attempting any

question:
This exam consists of 10 Multiple Choice Questions (MCQs) carrying 1 mark each; 5
True False carrying 1 mark each; 3 Short Questions carrying 5 marks each and 1
descriptive question carrying 10 marks.
For each MCQ, read the available choices carefully and select the most appropriate
choice which you consider is the correct answer by clicking on the appropriate check
box.
To answer True False questions, click on the correct option.
Remember not to spend too much time on any one objective type question since all
objective type questions carry equal marks; it is important to manage your time
according to the marks allocated to each question.
If you believe that some essential piece of information is missing, make an appropriate
assumption and use it to solve the problem by providing foot note at the end of the
solution box.
Show proper working where necessary.
Save your answer before proceeding to the next question.
Do not click the “Finish” button while solving your paper. Once you clicked the “Finish”
button, you will not be able to access your paper again. Click it at the end of your paper.
That means you have submitted your complete paper.
A clock is given in the exam software. Software will automatically close at the end of
given time.
Use of mobile phone is strictly prohibited. Switch off your mobile phone during the
exam.
Failure to comply with the Supervisor’s directions will result in your test being
cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.

Question 1 2 3 4 5 6 7 8 9 10 Total
Marks
Question 11 12 13 14 15 16 17 18 19
Marks
Question
Marks
The prime objective of Cost Accounting is to:
► Collection, processing and evaluation of operating data
► Provide information for external users
► Information to management regarding actual results
Which of the following represents Conversion cost?
► Labor and Factory Overheads
► Labor and Work in Process
► Work in Process and Finished Goods
► Factory Overhead and Work in Progress
Which of the following is not a method of Inventory costing?
► First In First Out
► Last In First Out

______________= Maximum Consumption x Lead Time (maximum)
► Order Level
► Danger Level
► Minimum Level
► Re- order quantityl
Which of the following Financial Statement(s) is/are prepared for certain period of time?
► Income Statement
► Statement of Owner's equity
► Statement of cash flows
In order to evaluate performance ___________ percentage is calculated.
► Gross Profit
► Stocks turnover
► Operating Expense to Net Sales
____________ is the value of a benefit sacrificed in favor of an alternative.
► Differential cost
► Opportunity cost
► Marginal cost
► Sunk cost

Halsey Premium Plan offers __________ of the time saved as premium.
► 30%
► 50%
► The proportion ratio between hours saved and hours allowed
Carrying cost and Order cost behave in ________ to each other.
► Parallel direction
► Opposite direction
► Independent
Job G34 was unfinished at the end of the accounting period. The total cost assigned to the job is
Rs. 48,000 of which Rs. 12,000 is direct material. Factory overhead is allocated to goods in
process at 125% of direct labor cost. What was the amount of Prime cost Job G34?
► Rs. 12,000
► Rs. 16,000
► Rs. 28,000
► Can be determined
Under the LIFO method of Inventory valuation, the ending merchandise Inventory would be
valued at the purchase price of the most recent purchases.
► TRUE
► FALSE
Cost that has been incurred but cannot be changed by present or future decisions is called Sunk
Cost.
► TRUE
► FALSE
Finished Goods,Work in process and Material are Inventory types of a trading concern.
► TRUE
► FALSE
Bin card is an example of Time Keeping Card.
► TRUE
► FALSE
Any Inventory above the maximum limit is an indication of Overstocking.
► TRUE
► FALSE
Maximum Stock Level = 8200 units

Budgeted consumption:
Maximum 600 units daily
Minimum 400 units daily
Lead Time 4-8 days
You are required to calculate:

¾ Re-order level
¾ Re-order Quantity/ EOQ

Match column A with B and put your answer in column “C”
A B C
A single rate of absorption used
throughout
an organization facility & based
upon its total production costs
(1)Blanket Rate and activity
(2)Departmental Costs that can be identified
Rate with specific cost centers
Cost of the goods that have
been destroyed because of any
(3)Apportionment reason
A rate of absorption based

upon a particular
department’s overhead cost &
(4)Spoiled output activity level
Costs that cannot be identified

with specific cost centre but
must be divided among the
concerned departments /cost
(5)Cost Allocation centers.
Output of the workers for the week:

Worker Output
X 320units
Y 370 units
Z 420 units
Normal piece rate Rs. 50 per unit
Standard production 400 units per week
Calculate the total earnings of the three workers who are paid wages under the
Merrick Differential System used as follows:
upto 80% Normal Piece rate applicable
Upto 100% 10% above normal rate
Above 100% 20% above normal rate

The following data is taken from the records of Alpha manufacturing for the year
ended June 30, 2003.
Particular Rs.
Sales 300,000
Direct Material purchased 100,000
Direct Labor 80,000
FOH (75% direct labour)
Increase in material inventory 10,000
Increase in WIP inventory 5,000
Decrease in finish goods inventory 30,000
Selling & administrative expenses 20,000
Prepare cost goods sold statement and calculate the following ratios:
a. Gross profit markup ratio
b. Gross profit margin ratio
c. Net profit ratio
d. inventory turnover ratio
e. Inventory holding period in months
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MIDTERM EXAMINATION
SPRING 2007 Marks: 40
(Session - 3 )
Student Name: ______________________________
Center Name/Code: ______________________________
Exam Date: Monday, April 30, 2007
Please read the following instructions carefully before attempting any question:
This exam consists of 10 Multiple Choice Questions (MCQs) of 1 mark each, 5 fill in the blanks of
1 mark each, 5 Short questions of 3 marks each and one Descriptive question of 10 marks.
For each Multiple Choice Question, read the options available and select which you consider is the
correct one.
You are required to show all the working of short as well as practical question.
This examination is closed book, closed notes and closed neighbours.
Do not ask question about the contents of this examination from anyone.
You may wish to pace yourself with your own watch, but the Supervisor will be the official
timekeeper of the test.
Failure to comply with the Supervisor’s directions will result in your test being cancelled. Please
comply with supervisor’s directions to avoid any unpleasant event.

Question 1 2 3 4 5 6 7 8 9 10 Total
Marks
Question 11 12 13 14 15 16 17 18 19 20
Marks
Question 21
Marks
Opportunity cost is an example of which of the following?
► Sunk Cost
► Irrelevant Cost
► Relevant Cost
► Period Cost
Wage rate per hour = Rs.1.50

Time allowed for the job = 16 hours
Time taken = 12hours
Calculate the effective rate of earnings.
► 1.8
► 1.75
► 1.6
► 1.55
From the following data, calculate the Economic Order Quantity.
Annual usage = 8,000 units

Cost per unit = Rs.30
Ordering cost = Rs.7 per order
Storage and carrying cost as percentage of average inventory holding 15%.
► 157.76
► 61.10
► 864.09
► 60.95

______________ System applies when standardized goods are produced under a series of
inter-connected operations.
► Process costing
► Job order costing
► Standard costing
Find the value of Closing stock if:
Purchases Rs.33, 000

Purchases return Rs.2, 000
Opening stock Rs.14, 000
Material consumed Rs.40, 000
► Rs.4, 000
► Rs.5, 000
► Rs.7, 000
The value of finished goods inventory is calculated by which of the following formula?
► Cost of goods manufactured / no. of units manufactured
► Closing finished goods units X cost per unit
► Cost of goods available for sale X cost per unit
If Applied FOH is more than actual FOH, the difference will be _____________ in the Net
Income.
► Added
► Subtracted
► Both added and subtracted
The labor cost that is lost because of power and machinery break-down is called:
► Direct Labor Cost
► Indirect Labor Cost
► Abnormal Labor Cost
► Labor related cost
Which of the following is not the way by which Employees may be paid their wages?
► In cash
► By bank transfer
► Through the Banks Automated Clearing System (BACS)
► None of the given Options
____________is an amount paid to an employee based on that employee's performance.
► Bonus
► Commission
► Both bonus & Commission
Rent of workshop is an example of ______________.

Maximum stock level = ________________________________
Salary is a ________________ amount of remuneration paid to the employees after a

month or a year.
____________ are charged to work in process account and hence become a part of the cost
of specific job.
Number of orders is calculated by dividing annually required units by the

____________________.
Explain the main difference between implicit and explicit cost?
Find the value of Budgeted FOH if:

Volume variance (Favorable) = Rs. 12,000
Budgeted variance (Un-Favorable) = Rs. 5,000
Applied FOH = Rs, 20,000
What is the difference between piece rate and time base wage rate?
Write down two advantages of periodic and perpetual inventory system?
The Hedge Corporation manufactures only one product, planks. The single raw material
used in making planks is the dint. For each plank manufactured 12 dints are required.
Assume that company manufactured 150,000 planks per year, that demand for planks is
perfectly stead throughout the year that it cost Rs. 200 each time dints are ordered, and
that carrying cost is Rs. 8 per dint per year.
a) Determine the economic order quantity of dints.
b) What is the total inventory cost for Hedge (total carrying cost plus total ordering
cost)?
From the following information calculate the Maximum stock level, Minimum stock level,
Re-ordering level and Danger stock level;-
(a) Average consumption 300 units per day
(b) Maximum consumption 400 units per day
(c) Minimum consumption 200 units per day
(d) Re-order quantity 3,600 units
(e) Re-order period 10 to 15 days
(f) Emergency Re-order period 13 days
W
MIDTERM EXAMINATION
Spring 2009
Time: 60 min
Marks: 50

D Corporation uses process costing to calculate the cost of manufacturing
Crunchies. During the month 12,500 units were completed, 1,500 units remained
in work in process at 25 percent completed. How many equivalent units are
produced?
► 12,500 units
► 12,875 units
► 14,250 units
► 12,125 units

Details of the process for the last period are as follows:
M
Materials 5,000 Kgs at 0.50 per Kg O
Labor
Production overheads
Rs.700
200% of labor
g .C
i n
Normal losses are 10% of input in the process. The out put for the period was
.t n
4,200Kg from the process. There was no opening and closing Work- in- process.
What were the units of abnormal loss?
n a
an
► 500 units
► 300 units
u j
► 200 units
► 100 units
. v
W
The following data is available for the Bricks Company:
W
W
Freight in
Particulars
Purchases return and allowances

Rs.
20,000
80,000
Marketing expenses 200,000
Finished goods Inventory, ending 90,000
Cost of goods sold 700% of marketing expenses
Calculate the cost of goods available for sales if Gross Profit is 50% of cost of

W
goods sold.
► Rs. 1,390,000
► Rs. 1,490,000
► Rs. 1,500,000
► Rs. 1,590,000

Which of the following is NOT an element of factory overhead?
► Depreciation of the maintenance on equipment
► Salary of the plant supervisor
► Property taxes on the plant buildings
► Salary of a marketing manager

Which of the following is NOT reason of abnormal loss?
► Defective material used

► Machine breakdown
M
► Poor workmanships
► Natural disaster O
g .C
finished goods, but rather treated as a period cost?
i n
Which of the following loss is not included as part of the cost of transferred or
► Operating loss
► Abnormal loss .t n
► Normal loss
► Non-operating loss
n a
an
u j
Which cost accumulation procedure is best suited to a continuous mass
► Job order costing

► Process costing . v
production process of similar units?
W
► Standard costing
► Actual costing
W
debit to: W
In a job order cost system, the use of direct materials would be recorded as a
► Finished Goods inventory

► Manufacturing Overhead
► Raw Materials inventory
► Work in Process inventory

W
P Ltd applied overheads on the basis of direct labor hours. The overhead
applied rate for the period has been based on budgeted overhead of Rs.150, 000
and 50,000 direct labor hours. During the period overhead of Rs. 180,000 were
incurred and 60,000 direct labor hours were used.
Which of the following statement is correct?
► Overhead was Rs.30,000 over applied

► Overhead was Rs.30,000 under applied
► No under or over applied occurred
► None of the given

Under applied FOH costs are:
► Fixed costs not allocated to units produced
► Factory overhead costs not allocated to units costs
► Excess variable factory overhead costs
► Costs that can not be controlled
M
O
A spending variance for factory overhead is the difference between actual
for actual hours worked and results from:

g .C
factory overhead cost and factory overhead cost that should have been incurred
► Price difference of FOH costs

► Quantity differences of FOH costs
i n
.t n
► Price and quantity differences for FOH costs
► Difference caused by production volume variations
n a
n
Capacity Variance / Volume Variance arises due to
a
u j
► Difference between Absorbed factory overhead and budgeted factory for
capacity attained
. v
► Difference between Absorbed factory overhead and absorption rate
► Difference between Budgeted factory overhead for capacity attained
W
and FOH actually incurred
W
W
Budget/spending variance arises due to:
► Difference between absorbed factory overhead & capacity level attained

► Difference between budgeted factory overhead for capacity attained
and FOH actually incurred
► Difference between absorbed factory overhead and FOH actually incurred

W
Which of the following statement about overhead applied rates are NOT true?
► They are predetermined in advance for each period

► They are used to charge overheads to product
► They are based on actual data for each period
Which of the following is TRUE regarding the use of blanket rate?
► The use of a single blanket rate makes the apportionment of
overhead costs unnecessary
► The use of a single blanket rate makes the apportionment of overhead
costs necessary
► The use of a single blanket rate makes the apportionment of overhead
costs uniform
M
A Blanket Rate is: O
g .C
► A single rates which used throughout the organisation departments
► A double rates which used throughout the organisation departments
► None of the Given

i n
► A single rates which used in different departments of the organisation.
.t n
a
Which of the following is NOT included under the head of FOH cost?
n
► Indirect Material
an
► Indirect Labor
► Indirect Expense
u j
► Direct labor
. v
W
Which of the following is a point of differentiation between blanket rates and
department rates?
W
► Blanket rate is a single overhead rate established for the entire
factory
W
► Department rates are separate overhead rates for all departments of
factory through which the products pass
► Department rate is a single overhead rate established for the entire
factory
► Blanket rates are separate overhead rates for all departments of factory
through which the product passes

W
Which of the following is TRUE for Merrick Differential System?
► Merrick Differential system is a slight modification of the Taylor's system
► Merrick Differential system used two rates of wage determination
instead of three
A worker is paid Rs. 0.50 per unit and he produces 18 units in 7 hours. Keeping
in view the piece rate system, the total wages of the worker would be:
► 18 x 0.50 = Rs. 9
► 18 x 7 = Rs. 126
► 7 x 0.5 = Rs. 3.5
► 18 x 7 x 0.50 = Rs. 63

Which of the following is NOT time based incentive wage plan?
► Hasley Premium Plan
M
► Hasley Weir Premium Plan
► Rowan Premium Plan O
► Merrick Differential Piece Rates System
g .C
Payroll includes:
i n
► Salaries & Wages of direct labor
► Salaries & Wages of Indirect labor .t n
► Salaries & Wages of Administrative
n a
► Salaries & Wages of direct labor, Indirect labor, and Administrative
an
u j
Material requisition is a document that supports the requirement of the material.
► Store manager
► Production manager . v
This document is sent to store incharge and approved by:
W
► Supplier manager
► Purchase manager
W
W
In the basic EOQ model, if Units= 50 per month, Ordering cost =Rs. 10, and
carrying cost =Rs. 10 per unit per month, EOQ is:
► 10
► 12
► 25
► 30

W
Which of the following is important requirement of the effective material control?
► There are proper storage facilities
► There is a proper authority that will regulate the supply of material
► The accounts should provide a running balance of the value of the
materials on hand
Which of the following method of inventory valuation is not recommended under
IAS 02?
► LIFO
► FIFO
► Both LIFO & FIFO

Average consumption x Emergency time is a formula for the calculation of:
► Lead time
M
► Re-order level
► Maximum consumption O
► Danger level
g .C
Period costs are:
i n
► Expensed when the product is sold
► Included in the cost of goods sold .t n
► Related to specific period
► Not expensed
n a
an
u j
The components of the conversion cost are:
. v
► Direct Material + Direct Labor + Other Direct Cost
► Direct Labor + FOH
W
► Prime Cost + FOH+ Other Direct Cost
► Prime Cost + FOH
W
W
The cost of Telephone bill of the factory is treated as:
► Fixed cost
► Variable cost
► Step cost
► Semi variable cost

W
Which of the following is indirect cost?
► The overtime premium incurred at the specific request of a customer

► The hire of tools for a specific job
► The repair of machinery
Which of the following are basic inventories for a manufacturing concern?
► Indirect materials, goods in process, and raw materials
► Finished goods, raw materials, and direct materials
► Raw materials, goods in process, and finished goods
► Raw materials, factory overhead, and direct labor

Machine lubricant used on processing equipment in a manufacturing plant would
be classified as a:
M
► Period cost (manufacturing overhead)
► Period cost (Selling, General & Admin) O
► Product cost (manufacturing overhead)
► Product cost (Selling, General & Admin)
g .C
i n
.t n
Cost accounting concepts include all of the following EXCEPT:
► Planning
► Controlling
► Sharing
n a
► Costing
an
u j
. v
Under Halsey premium plan, if the employee completes his job in less than the
standard time fixed for the job, he is given:
► Only wages for the actual hours taken
W
► Wages for the actual hours taken plus bonus equal to one half of the
wage of the time saved
W
► Wages for the actual hours taken plus bonus equal to one third of the
wage of the time saved
W
► Only the bonus equal to one half of the time saved

Which of the following is NOT a reason for carrying inventory?
► To maintain independence of operations
► To take advantage of economic purchase-order size
► To make the system less productive

W
► To meet variation in product demand

“Taking steps for the fresh purchase of those stocks which have been exhausted
and for which requisitions are to be honored in future” is an easy explanation of:
► Over stocking
► Under stocking
► Replenishment of stock
► Acquisition of stock
Which of the following formula is used to calculate the Number of units
manufactured?
► Sold units - Units of closing finished goods inventory + Units of
opening finished goods inventory
► Sold units + Average units of finished goods inventory
► Sold units - Average units of finished goods inventory
► Sold units + Units of closing finished goods inventory - Units of opening
finished goods inventory
M
Question No: 39 ( Marks: 1 ) - Please choose one O
g .C
The total cost to produce one unit is Rs. 600. Direct materials are 20% of the
total cost and direct labor is 1/3 of the combined total of direct labor and direct
overhead?
i n
materials. What was the cost for direct materials, direct labor, and factory
► Rs. 420, Rs. 60 and Rs. 120, respectively

► Rs. 60, Rs. 120 and Rs. 420, respectively .t n
n a
► Rs. 120, Rs. 60 and Rs. 420, respectively
► Rs 60, Rs. 420 and Rs. 120, respectively
an
u j
Opportunity cost is the best example of:
► Relevant Cost
► Irrelevant Cost
► Standard Cost . v
► Sunk Cost
W
W
Differentiate between process costing and job order costing.
W
Process costing
It is a method of cost accounting applied to production carried out by a series of

operational, stages or processes. It is a continuous production process.
In process costing all units produce are similar. The whole process is divided into several
departments.

W
Job order costing.
The costing system that separately accumulates costs incurred to produce each job in a
situation where each job is distinguishable from the other throughout the production
process. The job may be a single unit or a multi unit batch, a contract or a project,
program or a service. Job costing is employed by organizations possessing following
characteristics.
1. Every order has its own manufacturing specifications. Therefore, every job is different
from the other and requires different amounts materials, labor and overhead.
2. Each job is clearly distinguishable from the other at all stages production process
which makes job wise accumulation of possible.
3. Each job is generally of high value.
4. Production is generally in response of customers' orders
5. Job wise accumulation of cost is desirable and/or necessary for and profit
determination.
Job costing is more expensive as compared with process costing.
M
O
g .C
i n
.t n
n a
an
u j
. v
W
W
W


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Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Thursday, March 06, 2008

Read the following instructions carefully before attempting any question:

For Teacher's use only

Question No: 1 ( Marks: 1 ) - Please choose one

► None of the given options

Question No: 2 ( Marks: 1 ) - Please choose one

► Manufacturing overhead cost

► Cost of Goods Sold

Question No: 3 ( Marks: 1 ) - Please choose one

► None of the given options

Question No: 4 ( Marks: 1 ) - Please choose one

Internal Factor(s) which affects/affect sales budget

► Previous trend of sales

Question No: 5 ( Marks: 1 ) - Please choose one

► Produced units > Units sold

► Produced units < Units sold

► Produced units =Units sold

► Profit cannot be determined with given statement

Question No: 6 ( Marks: 1 ) - Please choose one

_____________ = Reorder level – (Average consumption * Lead time)

► Minimum stock level

► Maximum stock level

► Re- order quantity

Question No: 7 ( Marks: 1 ) - Please choose one

__________entities purchase and then sell tangible products without changing

► None of the given options

Question No: 8 ( Marks: 1 ) - Please choose one

Actual hours worked ÷ Budgeted hours x 100 represents

► None of the given options

Question No: 9 ( Marks: 1 ) - Please choose one

Which of the following is an example of job order costing?

► Ball point manufactures

Question No: 10 ( Marks: 1 ) - Please choose one

Which of the following is not function of cash budget?

► Determining the future cash needs of the firm

► Planning for financing

► Exercising control over cash and liquidity of the firm

► None of the given options

Question No: 11 ( Marks: 1 ) - Please choose one

► Chartered accountant firm

► None of the given option

Question No: 12 ( Marks: 1 ) - Please choose one

A summary of all operations budgets is the budgeted ________

► None of the given options

Question No: 13 ( Marks: 1 ) - Please choose one

► Not determinable from the information provided

Question No: 14 ( Marks: 1 ) - Please choose one

Which of the following statement(s) is (are) true?

► A manufacturer of ink cartridges would ordinarily use process costing rather

► If a company uses a process costing system it accumulates costs by

► The output of a processing department must be homogeneous in order to use

► All of the given options

The following data related to production of ABC Company:

Units produced 8,000 units

► None of the given options

Question No: 16 ( Marks: 1 ) - Please choose one

Question No: 17 ( Marks: 1 ) - Please choose one

Question No: 18 ( Marks: 1 ) - Please choose one

Relevant cost is an incremental cost.

Question No: 20 ( Marks: 1 ) - Please choose one

Question No: 21 ( Marks: 1 )