Quiz 3_Chapter 3: Calculating unit costs (Part

2)
1. Which of the following statements relating to costing is not correct?
a.Life cycle costing tracks costs that are incurred once production has ceased, even
though there are no revenues against which to match the costs.
b. Under a JIT system, inventory storage costs are reduced as materials are made
available just as they are needed in production. (Explanation: Cost apportionment is
the sharing of commonly incurred expenses proportionately where two or more cost
centres are involved) Cilla plc
c. Activity-based costing makes use of volume-related cost drivers.
d.Under target costing, the selling price of a product is established by adding a
mark up to its budgeted cost.
2. Products Alpha and Beta are made in a factory that has two production
cost centres: production and finishing. Budgeted production is 8,000 units
of alpha and 10,000 units of beta. Fixed overheads are absorbed on a
labor hour basis
The following budgeted information is available:
Producti Finishi
on ng
Allocated and apportioned fixed
£55,000 £63,000
costs
Direct labor hours per unit
Product Alpha 1.5 hours 2 hours
0.5
Product Beta 1 hour
hours
What is the budgeted fixed cost per unit for product Beta?
a. £9.75
b. £3.47
c. £3.46
d. £4.00
3. The process of cost apportionment is carried out so that:
a. Cost units gather overheads as they pass through cost centres
b. Whole items of cost can be charged to cost centres
c. Common costs are shared among cost centres
d. Costs may be controlled
4. Which of the following bases of apportionment would be most
appropriate for apportioning property rental costs to production cost
centres?
a. Labour hours worked
b.Number of employees
c. Floor space occupied in square metres
d. Volume of space occupied in cubic metres
5. The business absorbs its production overheads on the basis of labor
hours. There were 250,000 budgeted labor hours for the next period and
the overhead absorption rate was £3 per labor hour.
During the period the actual result were:
 Actual labor hours: 240,000 hours
 Actual production overhead: £710,000
Which of the following statement is correct?
a. Overhead was over-absorbed by £40,000
b. Overhead was under-absorbed by £40,000
c. Overhead was over-absorbed by £10,000
d. Overhead was under-absorbed by £10,000
6. Feedman Ltd makes only one product, the budgeted cost incurred per
unit:
 Direct materials: £3
 Direct labour: £6
 Variable production overhead: £2
 Fixed production overhead: £4
 Variable selling cost: £5
Budgeted fixed overheads are based on budgeted production of 5,000
units.
For the period, opening inventory was 1,000 units and closing inventory
was 4,000 units. Sales during the period were 3,000 units and actual fixed
production overheads incurred were £25,000.
The amount of under/over absorption in an absorption costing system
was:
a. Under absorbed by £5,000
b. Over absorbed by £2,000
c. Under absorbed by £1,000
d. Under absorbed by £13,000

7.

a.
£16.67
b. £2.00
c. £12.00
d. £16.00
8. Over-absorbed overheads occur when:
a. actual overheads exceed budgeted overheads
b. absorbed overheads exceed actual overheads
c. absorbed overheads exceed budgeted overheads
d. budgeted overheads exceed actual overheads
9. Over-absorbed overheads occur when:
a. actual overheads exceed budgeted overheads
b. absorbed overheads exceed actual overheads
c. absorbed overheads exceed budgeted overheads
d. budgeted overheads exceed actual overheads
10. Which of the following would normally result from the adoption of a JIT
purchasing system?
a. Lower levels of receivables
b. Higher levels of receivables
c. Higher levels of inventory
d. Lower levels of inventory
11.A company's packing department has budgeted labour hours of 3,250
and budgeted overhead costs of £35,880.
The actual labour hours were 3,175 and actual overheads were £35,544.
The overheads for the period were:
a. under-absorbed by £336
b. over-absorbed by £492
c. under-absorbed by £492
d. over-absorbed by £336
12.A new product has a variable material cost of £5.50 per unit, a variable
labour cost of £2 per unit
and a fixed overhead absorption rate of £3.50 per unit.
Production during the first month was 23,000 units and sales were 21,000
units.
The nearest £ the inventory valuation under absorption costing is:
a. £22,000 22000*(5,5+2+3.5)X21000*(5.5+2+3.5)
b. £7,000
c. £11,000
d. £15,000
13.In an organisation which applies contract costing, which of the
following statements is correct?
a.Work is usually of a relatively short duration.
b. Work is undertaken to customers' special requirements.
c. Work is planned using a Just In Time (JIT) system.
d. Work is usually undertaken on the contractor's premises.
14.

a. £7.20 per direct labour hour

b. 50% of direct material cost
c. £60 per machine hour
d. 18% of direct labour cost
15.______ is the process by which whole cost items are charged direct to a
cost centre.
a. All of these answers
b. Allocation
c. Apportionment
d. Absorption
16. The following statements refer to overhead absorption:
(1) Factory rent and rates are typically allocated to departments rather
than apportioned
(2) A single product firm does not need to apportion overhead to find a
cost per unit
(3) If departmental overhead recovery rates are similar, it makes little
difference if overheads are applied on a departmental or business wide
basis.
Which of these statements are correct?
a. (1) & (3) only
b. (1), (2) & (3)
c. (2) & (3) only
d. (1) & (2) only
17.A business absorbs its fixed production overhead on the basis of direct
labor hours. The budgeted direct labor hours for week 1 were 4,200 hours.
During that week 4,050 direct labor hours were actually worked and the
production overhead incurred was £16,700. The overhead was under-
absorbed by £1,310
What was the budgeted fixed overhead for the week?
a. £15,700
b. £17,700
c. £18,860

X
d. £15,960 × 4050=16700−1310
4200

18. Here are three statements relating to the determination of overhead

absorption rates:
(1) Cost can be allocated where it is possible to identify the department
that caused them
(2) Costs need to be apportioned where they are shared by more than one
department
(3) Service centre costs should not be included in unit overhead costs
Which of these statements are correct?
a. (1) and (2) only
b. (2) and (3) only
c. (1) and (3) only
d. (1) and (2) and (3)
19.
 20160
a. £51,984 × 12+ 43 920
14+12+ 4
b. £7,680
c. £51,600
d. £50,371
20. Cilla plc had budgeted overheads for January 20X7 of £544,000. At the
end of the period the actual labour hours worked were 2,105 hours and
the actual overheads were £550,120.
If overheads were over-absorbed by £22,440, how many labour hours were
budgeted to be worked by Cilla (to the nearest hour)?
a. 2,023
b. 2,105
c. 2,170

544000
d. 2,000 ×2105=550 120+22 440
X
21. Which of the following is typically an aspect of a just-in-time (JIT)
system for operating raw material inventory?
(1) The use of small frequent deliveries of raw materials
(2) Large production batches run on an infrequent basis
(3) Low levels of raw material inventory
(4) High levels of raw material inventory
a. (1), (2) and (4) only
b. (1) only
c. (2) and (4) only
d. (1) and (3) only
22. A product requires 4 hours of direct labour at £12.60 per hour, and
includes direct expenses of £128.40. In its production, it requires 24
minutes of finishing.
Possible overhead absorption rates have been calculated to be £17.04 per
direct labour hour or £99.60 per finishing machine hour.
Using the direct labour hour basis of overhead absorption, calculate to the
nearest penny the total product cost.
a.£218.64
b. £196.56
c. £286.80
d. £246.96
23. In a period where opening inventory was 5,000 units and closing
inventory was 3,000 units, a firm had a profit of £92,000 using absorption
costing. If the fixed overhead absorption rate was £9 per unit, the profit
using marginal costing would be:
a. £110,000
b. £65,000
c. £74,000
d. Impossible to calculate without more information
24.

a. £25,500
b. £24,400
c. £4,400
d.£24,000
25. Jade Limited is a pest control company which responds to customer
call outs 24 hours a day. Call out number 35 on 25 July turned out to be a
major infestation and required 190 hours of active labour. However, in
carrying out the job the supervisor has reported that 5% of the labour
hours were spent on idle time.
Assuming Jade Limited pays its call out staff a rate of £12 per hour,
calculate the labour cost for the job.
a. £2,394
b. £2,280
c. £200
d. £2,400
26. Which of the following statements concerning costing is correct?
a.The procedures used to calculate unit costs in manufacturing industries are not
applicable to service industries.
b.Within process costing, the cost per unit of output is found indirectly by dividing
total costs by the number of units produced.
c. Costing is irrelevant because the same level of detailed information can be
extracted from the financial accounts.
d. In process and job costing, the cost per unit of output is found directly by
accumulating costs for each unit.
27. _______is appropriate where each separately identifiable cost unit is of
relatively long duration.
a. Batch costing
b. Job costing
c. Contract costing
d. Process costing
28. In an organisation which applies contract costing, which of the following
statements is correct?
a.
Work is usually of a relatively short duration.
b. Work is planned using a Just In Time (JIT) system.
c. Work is usually undertaken on the contractor's premises.
d. Work is undertaken to customers' special requirements.

Quiz 4_Review of Chapter 1,2,3

 1. A company's packing department has budgeted labour hours of
3,250 and budgeted overhead costs of £35,880.
The actual labour hours were 3,175 and actual overheads were £35,544.
The overheads for the period were:
a. over-absorbed by £492
b. over-absorbed by £336
c. under-absorbed by £492
d. under-absorbed by £336
2. Which of the following would be classified as indirect costs for a food product
manufacturer?
(1) Food label on a tin of beans;
(2) Maintenance materials used to repair production machinery;
(3) Cleaner’s wages in the factory.
a. All of them
b. None of them
c. 2 and 3 only
d. 1 only
Which two of the following are cost objects?
a. A gas bill
b. Indirect materials used for production
c. A salesperson
d. The salary of the production director
e. A factory warehouse

Primary packing materials like carton and boxes are_____.

a. Direct materials
b. Indirect expenses
c. Direct expenses
d. Indirect materials
The process of cost apportionment is carried out so that:
a. Common costs are shared among cost centres
b. Whole items of cost can be charged to cost centres
c. Cost units gather overheads as they pass through cost centres
d. Costs may be controlled
Which of the following would normally be classified as a direct labour cost?
a. The basic pay of production line staff
b. Overtime premiums paid – if the overtime is not worked at the specific request of
a customer
c. The basic pay of production line supervisors
d. Idle time payments to production line staff
With all average price systems where it is required to keep prices up to date, in
which of the following situations is it not necessary to recalculate the average price?
a. Each time an issue is made
b. Each time a purchase is made
c. Each time excess material is returned from the factory floor to the stores
d. Each time an item is transferred into inventory from work in progress
Which of the following bases of apportionment would be most appropriate for
apportioning property rental costs to production cost centres?
a. Labour hours worked
b. Volume of space occupied in cubic metres
c. Floor space occupied in square metres
d.
Number of employees
Direct wages costs are charged to the cost unit as part of the_____.
a. Direct expenses
b. Indirect labour cost
c. Prime cost
d. Direct materials
Financial accounting___________
a. focuses on the parts of the organization rather than the whole.
b. is specifically directed at management decision-making needs.
c. is primarily concerned with internal reporting.
d. is more concerned with verifiable, historical information than is cost accounting.
When cost relationships are linear, total variable prime costs will vary in proportion
to changes in
a. total overhead cost.
b. direct labor hours.
c. total material cost.
d. production volume.
A shop carries out repairs on customers’ electrical items, eg, televisions, DVD
players. From the point of view of costing individual repair jobs, identify the most
appropriate description for each cost.
a. Replacement electrical components: Direct and fixed
b. Replacement electrical components: Direct and variable
c. Repair person paid a fixed wage per week: Indirect and fixed
d. Replacement electrical components: Indirect and fixed
e. Rent of the repair shop: Direct and variable
f. Repair person paid a fixed wage per week: Direct and fixed
g. Rent of the repair shop: Direct and fixed
h. Repair person paid a fixed wage per week: Direct and variable
i. Rent of the repair shop: Indirect and fixed
Bushind plc makes the following purchases and sales:

a. £18,000
b. £15,600
c. £19,200
d. £16,800
a. £12.00
b. £16.00
c.
£16.67
d. £2.00
Buildit Ltd has ascertained that its total costs (T) can be estimated for any level of
output (O) and sales (S) according to the following equation:
T = (£50 × O + £10,000) + (£20 × S + £5,000)
If the production level was 500 units and sales were 400 units, what would Buildit's
fixed costs be?
a. £15,000
b. £48,000
c. £35,000
d. £33,000
Which two of the following would be regarded as cost objects?
a. An operating theatre in a hospital
b. A branch of a high street bank
c. Wood used in making a chair
d. labor used in cleaning offices
e. Business rates paid on a factory
Management accounting information typically includes ________.
a. All of these answers are correct.
b. the percentage of units produced that are defective
c. the cost of producing a product
d. tabulated results of customer satisfaction surveys
Here are three statements relating to the determination of overhead absorption
rates:
(1) Cost can be allocated where it is possible to identify the department that caused
them
(2) Costs need to be apportioned where they are shared by more than one
department
(3) Service centre costs should not be included in unit overhead costs
Which of these statements are correct?
a. (1) and (2) and (3)
b. (1) and (2) only
c. (1) and (3) only
d. (2) and (3) only
Which of the following statements is true?
a. A particular cost can be a direct cost of one cost object and an indirect cost of a
different cost object.
b. An indirect cost will always be a fixed cost.
c. Fixed costs per unit are not affected by the level of activity.
d. Total indirect costs are always greater than total direct costs.
_______involves apportioning general overheads to cost centres.
a. All of these answers
b. Overhead allocation
c. Overhead absorption
d. Overhead apportionment