Rana Abubakar Khan

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FINAT TERM

Spring 2010
MGT402- Cost & Management Accounting (Session)

Time: 90 min
Marks: 69

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

All of the
following are the features of fixed costs EXCEPT:
► Although fixed within a relevant range of activity level but are relevant to a
decision making when it is avoidable.

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 ► Although fixed within a relevant range of activity level but are relevant to a
decision making when it is incremental.
► Generally it is irrelevant
► It is relevant to decision making under any circumstances

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

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 68,00 210,800
0
Units completed and transferred 66,00
out 0
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

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 ► Rs. 3.10
► Rs. 3.09
► Rs. 3.05

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

A typical factory
overhead cost is:
► Distribution
► Internal audit
► Compensation of plant manager
► Design

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

An average cost
is also known as:
► Variable cost
► Unit cost
► Total cost

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 ► Fixed cost

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

Period costs are:
► Expensed when the product is sold
► Included in the cost of goods sold
► Related to specific period
► Not expensed

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

While
calculating the EOQ, number of orders is calculated by:
► Dividing required unit by ordered quantitypage 57
► Multiplying the required units with ordered quantity
► Multiplying the ordered quantity with cost per order
► Multiplying the required units with cost per order

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

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 Which of the
following best describe piece rate system?
► The increased volume of production results in decreased cost of
productionpage90
► The increased volume of production in minimum time
► Establishment of fair standard rates
► Higher output is a result of efficient management

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

The term Cost
apportionment is referred to:

► The costs that can not be identified with specific cost centers.page100
► The total cost of factory overhead needs to be distributed among specific cost
centers but must be divided among the concerned department/cost centers.
► The total cost of factory overhead needs to be distributed among specific cost
centers.
► None of the given options

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Question No: 9 ( Marks: 1 ) - Please choose one
Examples of
industries that would use process costing include all of the following EXCEPT:
► Beverages
► Food
► Hospitality
► Petroleum

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

Which of the
following loss is not included as part of the cost of transferred or finished goods, but
rather treated as a period cost?
► Operating loss
► Abnormal loss
► Normal loss
► Non-operating loss

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

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 Hyde Park
Company produces sprockets that are used in wheels. Each sprocket sells for Rs. 50 and
the company sells approximately 400,000 sprockets each year. Unit cost data for the
year follows:

Direct material Rs. 15

Direct labor Rs. 10

Other cost: Fixed Variabl

e
Manufacturing Rs. 5
Rs. 7
Distribution Rs. 4
Rs. 3

Required: Identify the unit cost of sprockets under direct costing

► Rs. 44
► Rs. 37
► Rs. 32
► Rs. 35

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Question No: 12 ( Marks: 1 ) - Please choose one
When production
is equal to sales, which of the following is TRUE?

► 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
► 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

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

Selling price per
unit is Rs. 15, total variable cost per unit is Rs. 9, and total fixed costs are Rs. 15,000 of
“XIT”. What is the breakeven point in units for “XIT”?
► 3,000 units
► 1,000 units

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 ► 1,667 units
► 2,500 units15-6=9 ,,15000/6=2500

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

Éclair Ltd
manufactured three products,JP,1,JP2,JP,3 with the following cost of raw material
10,000 kg ,cost Rs. 24,000 and conversion cost is Rs. 28,000.

sales price, per

Out-Put Production,Kg Kg

JP,1 4,000 11

JP,2 3,000 10

JP,3 1,000 26

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Process costs are apportioned on a sales value basis.
Required: What was the apportioned cost for JP1.

► Rs. 22,880
► Rs. 15,600
► Rs. 13,520
► Rs. 52,000

Question No: 15 ( Marks: 1 ) - Please choose one

While
constructing a Break even chart, the gap between sales line and variable cost line shows
which of the following?
► Fixed cost
► Break even pointpage
► Contribution marginpage193

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 ► Variable cost

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

All of the
following compose cost of goods sold EXCEPT:
► Raw material
► Labor
► Capital
► Factory overhead

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

If a firm is using
activity-based budgeting, the firm would use this in place of which of the following
budgets?
► Direct labor budgetnot sure
► Direct materials budget
► Revenue budget
► Manufacturing overhead budget

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Question No: 18 ( Marks: 1 ) - Please choose one
Amount of
Depreciation on fixed assets will be fixed in nature if calculated under which of the
following method?
► Straight line method100%sure
► Reducing balance method
► Some of year's digits method
► Double declining method

Question No: 19 ( Marks: 1 ) - Please choose one

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

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

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 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 requirespage220
► 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

Question No: 21 ( Marks: 1 ) - Please choose one

Which of the
following is NOT a relevant cost to decision making?

► Opportunity costs
► Relevant benefits
► Avoidable costs
► Sunk costspage7

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Question No: 22 ( Marks: 1 ) - Please choose one
Which of the
following statement is NOT true about overhead applied rates?
► 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
► None of the given options

Question No: 23 ( Marks: 1 ) - Please choose one

Equivelant units
of production:
► Is a measure of productive activity.
► Represent work done on units still in process as well as units completed during
the period
► Are used as basis for computing per unit cost in most process cost accounting
systems
► All of the given optionspage134

Question No: 24 ( Marks: 1 ) - Please choose one

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 If, Total fixed
cost Rs. 2,000, Variable manufacturing cost Rs. 4,000, Variable selling cost Rs. 3,000
and Sales Rs. 10,000 then what is the amount of margin available to recover fixed
cost?
► Rs.6,000
► Rs.3,000i think
► Rs.7,000
► Rs.8,000

Question No: 25 ( Marks: 1 ) - Please choose one

Which one of the
following is the Traditional approach for costing?

► Contribution approach
► Absorption costing approachpage203
► Decision making approach
► Marginal costing approach

Question No: 26 ( Marks: 1 ) - Please choose one

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 Under which of
the following, all cost of production is considered as product cost, regardless of
whether they are variable or fixed in nature?
► Absorption costingpage175
► Direct costing
► Marginal costing
► Variable costing

Question No: 27 ( Marks: 1 ) - Please choose one

Which of the
following is TRUE in case of positive contribution margin?

► Profit will occur

► Both profit and loss are possiblepage196
► Profit will occur if the fixed expenses are greater than the contribution margin
► A loss will occur if the contribution margin are greater than the fixed expenses

Question No: 28 ( Marks: 1 ) - Please choose one

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 Which of the
following is NOT considered as external factor while preparing the sales budget?

► Availability of materials or suppliespage203

► Governmental rules
► Market fluctuations
► Competitor’s success

Question No: 29 ( Marks: 1 ) - Please choose one

What would be
the attitude of the management in treating Sunk costs in decision making?
► A periodic investment of cash resources that has been made and should be
relevant for decision making
► It is a past cost which is not directly relevant in decision makingpage7
► Management will treat it as variable cost each time in decision making
► None of the given options

Question No: 30 ( Marks: 1 ) - Please choose one

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 Which of the
following item is NOT included in FOH cost budget?
► Indirect material cost
► Indirect labor cost
► Power and fuel
► Direct material cost

Question No: 31 ( Marks: 1 ) - Please choose one

Which of the
following budget includes an item of indirect labor cost?
► FOH cost budgeti think
► Direct labor cost budget
► Direct material cost budget
► None of the given options

Question No: 32 ( Marks: 1 ) - Please choose one

Which of the
following budget includes the item of depreciation of plant

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 ► Direct labor cost budget
► Variable FOH cost budget
► Fixed FOH cost budget
► Direct material cost budget

Question No: 33 ( Marks: 1 ) - Please choose one

Mr. Aslam is
running his own personal Financial services business. He has been offered a job for a
salary of Rs. 45,000 per month which he does not availed. Rs. 45,000 will be
considered as:
► Sunk Cost
► Opportunity costpage12
► Avoidable cost
► Historical cost

Question No: 34 ( Marks: 1 ) - Please choose one

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 After the
development of master budget, which of the following ratio (‘s) can be used to
compare actual performance with budgeted performance?
► Activity ratio
► Capacity ratio
► Efficiency ratio
► All of the given optionspage218

Question No: 35 ( Marks: 1 ) - Please choose one

Which of the
following statement is TRUE about historical cost?
► It is always relevant to decision making
► It is always irrelevant to decision makingpage7
► It is always an opportunity cost
► It is always realizable value

Question No: 36 ( Marks: 1 ) - Please choose one

Which of the
given cost does not become the part of cost unit?

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 ► Advertising expenses
► Direct labor cost
► Factory overhead cost
► Cost of raw material

Question No: 37 ( Marks: 1 ) - Please choose one

The main
difference between the profit center and investment center is:
► Decision making
► Revenue generation
► Cost incurrence
► Investment

Question No: 38 ( Marks: 1 ) - Please choose one

Budgeted
Factory overhead at two activity levels is as follows for the period.

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 Activity Budgeted factory
level overhead

Low 10,000 Rs. 40,000

Hours

High 50,000 Rs. 80,000

Hours

Required: Identify variable rate with the help of above mentioned data.
► Rs. 4.00 per hour
► Rs. 1.60 per hour
► Rs. 1.00 per hour variable rate=change in bugeted foh/change in activity level
50,000-10000=40,000, 80,000-40000=40000 ,40000/40000=1
► Rs. 2.00 per hour

Question No: 39 ( Marks: 1 ) - Please choose one

Which of the
given cost is NOT required to prepare Cost of Production Report?

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 ► Period costpage133
► Material cost
► Labour cost
► Factory overhead cost

Question No: 40 ( Marks: 1 ) - Please choose one

Identify the FOH
rate on the basis of machine hour?

Budgeted production overheads Rs.280,000

actual machine hours 70,000

hours

Actual production overheads Rs.295,000

► Rs. 4.00
► Rs. 4.08
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 ► Rs. 4.210
► Rs. 4.35

Question No: 41 ( Marks: 1 ) - Please choose one

Which of the
given will NOT be included for the calculation of equivalent units of material under
weighted average costing method?

► Opening work in process units

► Closing work in process unitsnot sure
► Unit completed and transferred out
► None of the given options

Question No: 42 ( Marks: 1 ) - Please choose one

The basic
assumption made in direct costing with respect to fixed costs is that:
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 ► Fixed cost is a controllable cost
► Fixed cost is a product cost
► Fixed cost is an irrelevant costpage12
► Fixed cost is a period cost

Question No: 43 ( Marks: 1 ) - Please choose one

ABC Company
makes a single product which it sells for Rs. 20 per unit. Fixed costs are Rs. 75,000 per
month and product has a profit/volume ratio of 40%. In that period actual sales were
Rs. 225,000.
Required: Calculate ABC Company Break Even point in Rs.

► Rs.187, 500
► Rs.562, 500
► Rs. 1,500,000
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 ► None of the given options

Question No: 44 ( Marks: 1 ) - Please choose one

The little Rock
Company shows Break even sales is Rs. 40, 500 and Budgeted Sales is Rs. 50,000.
Identify the Margin of safety ratio?

► 19%
► 81%mos/budgeted sales*100
► 1.81%
► Required more data to calculate

Question No: 45 ( Marks: 1 ) - Please choose one

Income
Statement Budget include(s) all of the following EXCEPT:
► Selling & distribution expenses budget
► General & administrative expenses budget
► Financial charges budget
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 ► Cash budget

Question No: 46 ( Marks: 1 ) - Please choose one

Deficit budget
can be compensated through:

► Expenses
► Borrowings
► Revenues
► Investments

Question No: 47 ( Marks: 1 ) - Please choose one

ABC Company is
preparing Cash Budget for its refuse disposal department. Which of the following would
NOT included in Cash Budget?

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 ► Capital cost of a new collection vehicle
► Depreciation of the incinerator
► Sales salaries paid
► Material purchased

Question No: 48 ( Marks: 1 ) - Please choose one

A machine cost
Rs. 60,000 five years ago. It is expected that the machine will generate future revenue
of 40,000. Alternatively, the machine could be scrapped for Rs. 35,000. An equivalent
machine in the same condition cost 38,000 to buy now.
Required: Identify the realizable value with the help of given data.
► Rs. 60,000
► Rs. 40,000
► Rs. 35, 000
► Rs. 38,000

Question No: 49 ( Marks: 3 )

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 Product "A" has a
contribution of Rs. 8 per unit; a contribution margin ratio is 50% and requires 4 machine
hours to produce. Product "B" has a contribution of Rs. 12 per unit; a contribution
margin ratio is 40% and requires 5 machine hours to produce. If the constraint is
machine hours to produce, then which one of the both product a company should
produce and sell? Support your answer with suitable workings.

Question No: 50 ( Marks: 3 )

Define the term
capacity and volume in budgeting?

Question No: 51 ( Marks: 5 )

An automobile
manufacturing company anticipates the following unit sales during the first four months
of 2008.

January 20000

February 30000

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 March 25000

April 40000

The company maintains its ending finished goods inventory at 70% of the following
month’s sale. The january1 finished goods inventory will be 14000 units.

Required: Prepare a production budget for January through March

Question No: 52 ( Marks: 5 )

Golden
Company sells its product for Rs. 42 per unit. The company’s unit product cost based
on the full capacity of 400,000 units is as follows:

Direct materials Rs. 8

Direct labor 10

Manufacturing 12
overhead

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 Unit product cost Rs. 30

A special order offering to buy 40,000 units has been received from a foreign distributor.
The only selling costs that would be incurred on this order would be Rs. 6 per unit for
shipping. The company has sufficient idle capacity to manufacture the additional units.
Two-thirds of the manufacturing overhead is fixed and would not be affected by this
order. Assume that direct labor is an avoidable cost in this decision. In negotiating a
price for the special order, calculate the minimum acceptable selling price per unit?

Question No: 53 ( Marks: 5 )

Data concerning
P Co’s single product is as follows:

Rs./unit

Selling price 7.00

Variable cost 3.00

Fixed production 4.00

cost

Fixed selling cost 1.00

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Budgeted production and sales for the year are 12,000 units.
Required: What will be the company’s new Break Even point, to the nearest whole unit
if it is expected that the variable production cost per unit will each increase by 10% and
fixed cost will rise by 25% and other things remains same.
Note: it is necessary to show complete working

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