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Topic: MGT402- Cost & Management Accounting FINALTERM EXAMINATION Fall 2008  (Read 6401 times)
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Sadia0786
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« Reply #6 on: December 30, 2010, 09:43:16 PM »

FFINALTERM  EXAMINATION
Fall 2009
MGT402- Cost & Management Accounting (Session - 4)
Time: 120 min
Marks: 84
     
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.
       ? 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
 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 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
       ? Rs. 570,000
       ? Rs. 540,000
       ? Rs. 510,000
    50000 *4 = 200000
50000*7.40 =370000
200000* 370000 =750000
Question No: 3    ( Marks: 1 )    - Please choose one
 Cost of incoming freight on merchandise to be sold to customers by a retail chain would be considered by that merchandiser to be:
       ? Prime costs
       ? Inventoriable costs
       ? Period costs
       ? None of the given options
   
Question No: 4    ( Marks: 1 )    - Please choose one
 Which of the following is a cost that changes in proportion to changes in volume?
 
       ? Fixed cost
       ? Sunk cost
       ? Opportunity cost
       ? None of the given options                                       
   
Question No: 5    ( Marks: 1 )    - Please choose one
 The second name of explicit cost is?
       ? Opportunity cost
       ? Out of pocket cost
       ? Implicit cost
       ? None of the given options
   
Question No: 6    ( Marks: 1 )    - Please choose one
 The net profit or loss for a particular period of time is reported on which of the following?
       ? Statement of cash flows
       ? Statement of changes in owner's equity
       ? Income statement
       ? Balance sheet
   
Question No: 7    ( Marks: 1 )    - Please choose one
 Which of the following is deducted from purchases in order to get the value of Net purchases?
       ? Purchases returns
       ? Carriage inward
       ? Custom duty
       ? All of the given options
   
Question No: 8    ( Marks: 1 )    - Please choose one
 When prices are rising over time, which of the following inventory costing methods will result in the lowest gross margin?
       ? FIFO
       ? LIFO (PAGE 47)
       ? Weighted Average
       ? Cannot be determined
   
Question No: 9    ( Marks: 1 )    - Please choose one
 A store sells five cases of soda each day. Ordering costs are Rs. 8 per order, and soda costs Rs. 3 per case. Orders arrive four days from the time they are placed. Daily holding costs are equal to 5% of the cost of the soda. What is the EOQ for soda?
       ? 4 cases
       ? 8 cases
       ? 10 cases
       ? 23 cases
    2*5*8 /3*5% UNDERROOT  = 23
Question No: 10    ( Marks: 1 )    - Please choose one
 If, Basic Salary                        Rs.10,000
Per Piece commission   Rs. 5
Unit sold                                   700 pieces
Amount of commission received will be:
 
       ? Rs. 3,500
       ? Rs. 13,500
       ? Rs. 10,000
       ? Rs. 6,500
    700 *5 = 3500
Question No: 11    ( Marks: 1 )    - Please choose one
 Increased cost of production due to high labor turnover is a result of which of the following factor?
       ? Interruption of production
       ? Coordination between new and old employee to produce more
       ? Increased production due to newly motivated employees (PAGE 96)
       ? Decrease losses as new employees will be more concerned towards output
   
Question No: 12    ( Marks: 1 )    - Please choose one
 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   (repeat)
   
Question No: 13    ( Marks: 1 )    - Please choose one
 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 (PAGE 116)
       ? 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
       ? None of the given options
   
Question No: 14    ( Marks: 1 )    - Please choose one
 Nelson Company has following FOH detail.
                                                        Budgeted (Rs.)              Actual (Rs.)
Production Fixed overheads           36,000                            39,000
Production Variable overheads        9,000                            12,000
Direct labor hours                             18,000                            20,000
 
What would be the applied rate.
 
       ? Rs.2.00  per labor hour
       ? Rs.2.50 per labor hour
       ? Rs.2.55 per labor hour
       ? Rs.0.50 per labor hour

Budgeted FIXED OVERHEAD + budgeted VARIABLE OVERHEAD / DIRECT LABOR HOUR
36000 +9000 /18000 =2.50
Question No: 15    ( Marks: 1 )    - Please choose one
 Which of the following is the best define a by-product?
 
       ? A by-product is a product arising from a process where the wastage rate is higher than a defined level
       ? A by-product is a product arising from a process where the sales value is insignificant by comparison with that of the main product or products
       ? A by-product is a product arising from a process where the wastage rate is unpredictable
       ? A by-product is a product arising from a process where the sales value is significant by comparison with that of the main product or products
   
Question No: 16    ( Marks: 1 )    - Please choose one
 Which of the following method of accounting for joint product cost will produce the same gross profit rate for all products?
       ? Actual costing method
       ? Services received method
       ? Market value method (PAGE 154)
       ? Physical quantity method
   
Question No: 17    ( Marks: 1 )    - Please choose one
 Profit under absorption costing will be higher than under marginal costing if:
       ? Produced units > Units sold (PAGE 171)
       ? Produced units < Units sold
       ? Produced units =Units sold
       ? Profit cannot be determined with given statement
   
Question No: 18    ( Marks: 1 )    - Please choose one
 Which of the following costs do NOT change when the activity base fluctuates?
       ? Variable costs
       ? Discretionary costs
       ? Fixed costs
       ? Mixed costs
   
Question No: 19    ( Marks: 1 )    - Please choose one
 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
       ? Total variable costs 
       ? Total fixed costs
   
Question No: 20    ( Marks: 1 )    - Please choose one
 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
   CM = SALE PER UNIT – VARIABLE COSR PER UNIT
     =   40 – 22
  = 18
BREAK EVEN SALE PER UNIT  = FIXED COST / CONTRIBUTION PER UNIT
                                                        =  82800  / 18
                                                  =   4600
SALE = (4600* 40)                                     184000
VARIABLE COST  =( 4600 *22)            ( 101200)
                                                                  __________
CONTRIBUTION MARGIN                       82800
LESS FIXED COST                                   82800
                                                               ___________
PROFIT / LOSS                                               0             
Question No: 21    ( Marks: 1 )    - Please choose one
 The following detail is related to Bloch Company:
 
Opening work-in-process   2,000 litres,100% completed to material, 40% as to conversion cost
Material put in process   24,000 liters
Closing work-in-process   3,000 litres,100% completed to material and 45% as to conversion cost
 
Required: The numbers of equivalent units as to material, using FIFO method would be:   
 
 
       ? 24,000 units
       ? 26,000 units
       ? 28,000 units
       ? 20,000 units
   
Question No: 22    ( Marks: 1 )    - Please choose one
 The following detail is related to Bloch Company:
 
Opening work-in process   2,000 litres,100% completed to material, 40% as to conversion cost
Material put in process   24,000 liters
Closing work-in-process   3,000 litres,100% completed to material and 45% as to conversion cost
 
Required: The numbers of equivalent units as to Conversion cost, using FIFO method would be:
       ? 26,000 units
       ? 25,550 units
       ? 24,200 units
       ? 24,350 units

OPENING WIP             2000
ADD STARTED        24000
LESS CLOSING        3000
                                  ________
COMPLETED           23000

EQUIVALENT UNIT CONVERSION COST
OPENING WIP   (2000*60%)                          1200
ADD COMPLETED                                        23000
CLOSING WIP  (3000*45%)                             1350
                                                                      __________
TOTAL UNITS                                                  25 250
Question No: 23    ( Marks: 1 )    - Please choose one
 The by-product of flour is:
 
       ? Fats
       ? Bran (PAGE 157)
       ? Glycerin
       ? Meat Hides
   
Question No: 24    ( Marks: 1 )    - Please choose one
 The point at which the cost line intersects the sales line will be called:
       ? Budgeted sales
       ? Break Even sales (PAGE 193)
       ? Margin of safety
       ? Contribution margin
   
Question No: 25    ( Marks: 1 )    - Please choose one
 All of the following are assumptions in constructing a Break even chart EXCEPT:
       ? There is no change of time value of money
       ? Price of cost factors remains constant
       ? Long term period will be considered
       ? Cost is affected by volume
   
Question No: 26    ( Marks: 1 )    - Please choose one
 When using conventional cost-volume-profit analysis, some assumptions about costs and sales prices are made. Which one of the following is NOT one of those assumptions?
       ? The sales price will remain unchanged per unit
       ? The actual variable cost per unit must vary over the production range
       ? The costs can be expressed as straight lines in a break-even graph
       ? The variable cost will remain unchanged per unit
   
Question No: 27    ( Marks: 1 )    - Please choose one
 Which one of the following is NOT a tool of financial forecasting?
       ? Cash budget
       ? Capital budget
       ? Pro forma balance sheet
       ? Pro forma income statement
   
Question No: 28    ( Marks: 1 )    - Please choose one
 Which of the following factor/s should be considered while constructing an administrative selling expense budget?
       ? Fixed expenses
       ? Past experience
       ? Variable expenses
       ? All of the given options
   
Question No: 29    ( Marks: 1 )    - Please choose one
 The master budget usually begins with a:
 
       ? Production budget
       ? Direct materials budget
       ? Direct labor budget
       ? Sales budget
   
Question No: 30    ( Marks: 1 )    - Please choose one
 Financial managers use which of the following to plan for monthly financing needs?
       ? Capital budget
       ? Cash budget
       ? Income Statement budget
       ? Selling & administrative expenses budget
   
Question No: 31    ( Marks: 1 )    - Please choose one
 When using a flexible budget, a decrease in production levels within a relevant range:
       ? Decreases variable cost per unit
       ? Decreases total costs
       ? Increases total fixed costs
       ? Increases variable cost per unit
   
Question No: 32    ( Marks: 1 )    - Please choose one
 The decision to drop a product line should be based on:
       ? The fact that the product line shows a net loss over several periods (PAGE 246)
       ? 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
   
Question No: 33    ( Marks: 1 )    - Please choose one
 A cost that has been incurred but cannot be changed by present or future decisions is called:
       ? Sunk cost (PAGE 227)
       ? Differential cost
       ? Opportunity cost
       ? Marginal cost
   
Question No: 34    ( Marks: 1 )    - Please choose one
 If sales is greater than cost, it means:
 
       ? Profit
       ? Loss
       ? Neither profit nor Loss
       ? Can not be determined
   
Question No: 35    ( Marks: 1 )    - Please choose one
 If, Total fixed cost Rs. 2,000, Variable manufacturing cost Rs. 3,000, Variable selling cost Rs. 1,000 and Sales Rs. 10,000 then what will be the profit under absorption costing?
       ? Rs.7,000
       ? Rs.5,000
       ? Rs.4,000
       ? Rs.8,000
   
Question No: 36    ( Marks: 1 )    - Please choose one
 Which of the following cannot becomes a part of product cost under absorption costing?
       ? Fixed manufacturing overhead
       ? Selling cost
       ? Direct materials
       ? Variable manufacturing overhead
   
Question No: 37    ( Marks: 1 )    - Please choose one
 A company ABC has contribution to sales ratio of 35%, variable cost to sales ratio of 65% and a profit to sales ratio of 17%. What will be the margin of safety ratio?
       ? 48.6%
       ? 53.8%
       ? 26.2%
       ? It can not be calculated from the given data
   PROFIT SALES RATIO /CONTRIBUTION TO SALES RATIO *100
         17%/35%*100
48.6%
Question No: 38    ( Marks: 1 )    - Please choose one
 Which of the following is TRUE at Break even point?
 
 
       ? Profit is zero
       ? Fixed cost + variable cost = sales
       ? Fixed cost = contribution margin
       ? All of the given options
   
Question No: 39    ( Marks: 1 )    - Please choose one
 Which one of the following factors would caused a budgeted revenue to be less than the expected demand?
       ? Excess capacity exists
       ? Abundant resources are available 
       ? Demand exceeds capacity
       ? Excess supply of labor exists
   
Question No: 40    ( Marks: 1 )    - Please choose one
 If:
Cost of goods available for sales Rs. 7,000
Cost of opening finished goods inventory is Rs. 1,000
Commercial expenses Rs. 2,000.
 
Which of the following is the cost of goods to be produced?
       ? Rs. 6,000
       ? Rs. 4,000
       ? Rs. 8,000
       ? Rs. 10,000
    CSOT  OF GOODS AVAILABLE FOR SALE – OPENING FINISHED GOOD
Question No: 41    ( Marks: 1 )    - Please choose one
 If:
Cost of opening finished goods Rs. 2,000
Cost of goods to be produced Rs. 6,000
Operating expenses Rs. 1,000.
 
Which of the following is the cost of goods available for sale?
       ? Rs. 8,000
       ? Rs. 4,000
       ? Rs. 7,000
       ? Rs. 9,000
   
Question No: 42    ( Marks: 1 )    - Please choose one
 All of the following are features of a relevant cost EXCEPT:
       ? They affect the future cost
       ? They cause an increment in cost
       ? Relevant cost is a sunk cost
       ? They affect the future cash flows
   
Question No: 43    ( Marks: 1 )    - Please choose one
 Which of the following statement is TRUE about the relevant cost?
       ? It is a sunk cost
       ? It is an opportunity cost
       ? It do not affect the decision making process
       ? All costs are relevant
   
Question No: 44    ( Marks: 1 )    - Please choose one
 A company produced a desired level of product ‘A’ in 5,500 Hours. The standard hours required to produce the same product are 5,000 Hours. What is the amount & nature of variance?
       ? 500 hours (Favorable)
       ? 500 hours (Unfavorable)
       ? 5,000 hours (Favorable)
       ? 5,000 hours (Unfavorable)
   
Question No: 45    ( Marks: 1 )    - Please choose one
 Which of the following cost would be increases with an increase in activity level?
       ? Incremental cost
       ? Avoidable cost
       ? Sunk cost
       ? Opportunity cost
   
Question No: 46    ( Marks: 1 )    - Please choose one
 An ice factory has a contribution margin of Rs. 450,000 and fixed cost for the year amounts to Rs. 495,000. The fixed cost of Rs. 215,000 can be eliminated if the operations are to be closed during winter season. An extra sale of Rs. 25,000 is also expected during winter season. What would be the decision?
       ? Operations would be closed during winter season
       ? Operations would be continued as we are having extra sales in winter season
       ? Operations would be partially closed
       ? None of the given options
   
Question No: 47    ( Marks: 1 )    - Please choose one
 A contract will be accepted in which of the following condition?
       ? If it reduces the contribution margin
       ? If it increases the contribution margin
       ? If it increases the fixed cost
       ? If it decreases sales revenue
   
Question No: 48    ( Marks: 1 )    - Please choose one
 Which of the following statement is TRUE about opportunity cost?
       ? It is irrelevant to decision making
       ? It is always a sunk cost
       ? It is always a historical cost
       ? It is relevant to decision making
   
Question No: 49    ( Marks: 3 )
 Define contribution margin?
Contribution margin per unit means selling price per unit less variable cost per unit
Total contribution margin means volume * (selling price per unit less variable cost per unit
Target contribution margin 
                Fixed cost + target profit

Question No: 50    ( Marks: 3 )
 What is a principle budget factor?
 
Some factor like labor or material which are short in supply. This may be due to shortage of material, labor hours, machine capacity and shortage of funds. That factor which ultimately decides the planned activity level.
For example a company wants to produce 100,000 pieces of computer but available skilled labor can produce only 80,000 units.
Hence, labor is principle budget factor in this case.
 
   
Question No: 51    ( Marks: 5 )
 Ali Company produces and sells Amrat Cola to retailers. The Cola is bottled in 2-litter plastic bottles. The estimated budgeted sales for the year 2009 would be Rs. 360,000 and the estimated Profit for the year 2009 would be Rs 10,000.
The Margin of safety Ratio is calculated as 20%.
 
Required: Breakeven Sales for the year 2009

PROFIT / MOS RATIO = CONTRIBUTION MARGIN
      10000 /  .2                  =                     50,000
C/S RATIO = CM /SALES *100
                    = 50000 / 360000*100
                   = 13.88%
(IN CASE OF BREAK EVEN SALES = CONTRIBUTION MARGIN EQUAL TO FIXED COST)
BE SALES = FIXED COST /C/S RATIO
                   = 40000 / 13.8889
                   287,999
         
                 OR
 MOS RATIO = MOS / BUDGETED SALES
MOS = BUDGETED SALES * MOS RATIO
MOS = 360,000 * 20% = 72,000
 
MOS = budgeted sales – break even sales
Break even sales = Budgeted sales – MOS
= 360,000 – 72,000 = 288,000
Question No: 52    ( Marks: 5 )
 The management of Franco Corporation is concerned about department B, which showed a loss of Rs. 1,300 last quarter. You have been asked to prepare an analysis that will help management to decide whether to discontinue the department. Below is the Franco’s Income Statement for last quarter:
 
    Department A   Department B   Total
Sales (Rs)   260,000   130000   390,000
Variable Cost (Rs)   156,000   117000   273,000
Contribution margin   104,000   13,000   117,000
Less: Fixed Costs:           
Separable (Rs)   11,300   5700   17,000
Joint (Rs)   17,400   8600   26,000
Total   28,700   14300   43,000
Profit (Loss) (Rs)   75,300   (1,300)   74,000
 
Showing all calculations, determine the effect of closing department B on Franco Corporation and make a recommendation.
ANALYSIS
If we discontinue the department “b” than the loss will be as follows
13,000 +1,300 = 14,300
Department “b” must be continued because fixed cost equal to Rs.13, 000 is being covered and loss is only rs.1300 other wise if we discontinue the loss will be equal to Rs.14, 300     
Question No: 53    ( Marks: 10 )
 Classify following organization with respect to cost accumulation procedure generally used either Job order costing or Process costing by filling the appropriate boxes given below.
                                                                                          ANSWER
Industries   Costing Procedure to be applied
Paint   Process Costing
Leather   Process Costing
Printing press   Job Order
Wood furniture   Job Order
Steel   Process Costing
Jewelry items   Job Order
Accounting firms   Job Order
Mobile phones   Process costing
Tires and tubes   Process Costing
Sugar   Process Costing
 
   
Question No: 54    ( Marks: 10 )
 Ali and Co. has sales of Rs. 50,000 in March and Rs. 60,000 in April. Forecasted sales for May, June and July are Rs. 70,000, Rs. 80,000 and 100,000 respectively. The firm has a cash balance of Rs. 5,000 on May 01 and wishes to maintain a minimum cash balance of Rs. 5,000. Given the following data, prepare a cash budget for the month of May, June and July.
1.      The firm makes 20% of sales for cash, 60% are collected in the next month and the remaining 20% are collected in the second month following the sale.
2.      The firm receives other income of Rs. 2,000 per month.
3.      The firm’s actual or expected purchases, all made for cash, are Rs. 50,000, Rs. 70,000 and Rs. 80,000 for the months of May through July, respectively.
4.      Rent is Rs. 3,000 per month.
5.      Wages and salaries are 10% of the previous month’s sales.
6.      Cash dividends of Rs. 3,000 will be paid in June.
7.      Payment of principal and interest of Rs. 4,000 is due in June.
8.      A cash purchase of equipment costing Rs. 6,000 is scheduled in July.
9.      Taxes of Rs. 6,000 are due in June.
SALES BUDGET FOR THE QUARTER FROM MAY TO JULY
CASH RECEIPTS
PARTICULARS   MAY
(Rs.)   JUNE
(Rs.)   JULY
(Rs.)
OPENING BALANCE of cash               5000                5000             -16000
Receipts from sales
March 50,000
April  60,000
May  70,000
June  80,000
July 100,000
   
10,000
36,000
14,000
____
___   
___
12,000
42,000
16,000
___   
____
____
14,000
48,000
20,000
Other receipts   2000   2000   2000
TOTAL RECEIPTS              62,000   77,000   68,000
 CASH PAYMENTS
CASH PURCHASES    50000   70000   80000
RENT    3000   3000   3000
WAGES AND SALERIES    6000   7000   8000
CASH DIVIDEND    ----   3000   -----
PAYMENT OF INTEREST    ----   4000   -----
EQUIPMENT    -----   -----   6000
TAX   ----   6000   ----
TOTAL PAYMENTS
   59000   93000   97000

TR – TP
BANK LOAN    3000
2000   -16000   -29000
CLOSING BALANCE    5000   -16000   -29000

Cash budget for the month of May
Opening balance of cash                                      Rs. 5,000
Add: receipts                                                            62000
 
Total amount of cash                                               67000
Less: payments                                                        (59000)
Closing balance of cash                                            8000         
 
 
Receipts = cash sales+ Previous month sales + Previous last 2 months sales + receives other income
              = 14000+ 36000 + 10000 + 2000 = 62000
Rs.70000 *20% = 14000
Previous month sales = 60000*60/100=36000
Previous last 2 months sales = 50000 * 20/100 = 10000
 
1.      Payments = purchases + Rent + Wages and salaries 10% of the previous month’s sales
                 =50000 + 3,000 + 10% * 60000                 = 59000
 
 
Cash budget for the month of June
 
 
Cash budget for the month of May
Opening balance of cash                                      Rs. 5,000
Add: receipts                                                             76000
 
Total amount of cash                                               81000
Less: payments                                                       (90000)
Closing balance of cash                                           (9000)           
 
 
Receipts = cash sales+ Previous month sales + Previous last 2 months sales + receives other income
              = 14000 + 48000 + 12000 + 2000 = 76000
             =70000*20/100 = 14000
Previous month sales =80000* 60/100 = 48000
Previous last 2 months sales = 60000*20/100=12000
 
2.      Payments = purchases + Rent + Wages and salaries 10% of the previous month’s sales + Payment of principal and interest + Taxes                       
 70000 + 3000 + 7000 + 4000 + 6000 = 90000
 
 
Cash budget for the month of July
 
Opening balance of cash                                      Rs. 5,000
Add: receipts                                                            92000
 
Total amount of cash                                               97000
Less: payments                                                       (97000)
Closing balance of cash                                               0
Receipts = cash sales+ Previous month sales + Previous last 2 months sales + receives other income
              = 60000 + 14000 + 16000 +2000 = 92000
100000*60/100 = 60000
70000*20/100=14000
80000*20/100=16000
 
Payments = purchases + Rent + Wages and salaries 10% of the previous month’s sales + cash purchase of equipment
                = 80000 + 3000 + 8000 + 6000= 97000
Logged
Sadia0786
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« Reply #7 on: December 30, 2010, 09:45:02 PM »

FINALTERM  EXAMINATION
Fall 2009
MGT402- Cost & Management Accounting
Ref No:    
Time: 120 min
Marks: 84
Student Info
Student ID:   
Center:   
Exam Date:   


For Teacher's Use Only
Q No.   1   2   3   4   5   6   7   8   Total
Marks                                                                                          
Q No.   9   10   11   12   13   14   15   16   
Marks                                                                                          
Q No.   17   18   19   20   21   22   23   24   
Marks                                                                                          
Q No.   25   26   27   28   29   30   31   32   
Marks                                                                                          
Q No.   33   34   35   36   37   38   39   40   
Marks                                                                                          
Q No.   41   42   43   44   45   46   47   48   
Marks                                                                                          
Q No.   49   50   51   52   53   54           
Marks                                                                                          
 

 
 

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

In a situation where a company must subcontract work to make up a shortfall in its own production capability, its total costs are minimized if those components/products subcontracted are those:

       ? With the highest extra variable cost of buying per unit of limiting factor saved by buying

       ? With the lowest extra variable cost of buying per unit of limiting factor saved by buying

       ? With the lowest extra fixed cost of buying per unit of limiting factor saved by buying

       ? With the highest extra fixed cost of buying per unit of limiting factor saved by buying



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

Which of the following product cost is Included in prime cost and conversion cost?

       ? Direct labor

       ? Manufacturing overhead

       ? Direct material

       ? Work in Process



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

A firm had beginning finished goods inventory of Rs.15,000, ending finished goods inventory of Rs. 20,000 and cost of goods sold of Rs. 80,000. What was the cost of goods manufactured?

       ? Rs. 80,000

       ? Rs.85,000

       ? Rs.75,000

       ? Rs.65,000

Cost of goods sold                        80000
Add ending finished good           20000
                                                   _________
Cost of goods available for sale 100000
Less opening finished goods         15000
                                                  __________
Cost of goods manufactured        85000

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

“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



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

While transporting petrol, a little quantity will be evaporated; such kind of loss is termed as:

       ? Normal Loss.

       ? Abnormal Loss.

       ? Incremental Loss.

       ?  Incremental abnormal loss.



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

Machine lubricant used on processing equipment in a manufacturing plant would be classified as a:


       ? Period cost (manufacturing overhead)

       ? Period cost (Selling, General & Admin)

       ? Product cost (manufacturing overhead)

       ? Product cost (Selling, General & Admin)             



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

The net profit or loss for a particular period of time is reported on which of the following?

       ? Statement of cash flows

       ? Statement of changes in owner's equity

       ? Income statement

       ? Balance sheet



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

Which of the following is/are the basic object/s of job analysis?


       ? Determination of wage rates

       ? Ascertain the relative worth of each job

       ? Breaking up job into its basic elements

       ? All of the given options



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

Capacity Variance / Volume Variance arises due to


       ? Difference between Absorbed factory overhead and budgeted factory for capacity attained

       ? Difference between Absorbed factory overhead and absorption rate

       ? Difference between Budgeted factory overhead for capacity attained  and FOH actually incurred

       ? None of the given options



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

The difference over the period of time between actual and applied FOH will usually be minimal when the predetermined overhead rate is based on:

       ? Normal capacity

       ? Designed capacity

       ? Direct Labor hours

       ? Machine hours



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

Which of the following would be considered a major aim of a job order costing system?

       ? To determine the costs of producing each job

       ? To compute the cost per unit

       ? To include separate records for each job to track the costs

       ? All of the given options



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

Which of the following is characteristic of a job order cost accounting system?

       ? It records manufacturing activities using a perpetual inventory system

       ? It tracks cost by job

       ? It is best suited for customized products

       ? All of the given options



Question No: 13      ( 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: 14      ( Marks: 1 ) - Please choose one
 

If joint products are to be processed further beyond the point of separation, costs should be assigned to the products on the basis of:

       ? Adjusted sales value

       ? Ultimate sales value

       ? A physical unit of measure

       ? An engineering analysis



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

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



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

The break-even point is the point where:

       ? Total sales revenue equals total expenses (variable and fixed)

       ? Total contribution margin equals total fixed expenses

       ? Fixed cost plus Profit is equal to contribution margin

       ? All of the given options



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

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



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

Accelerate Ltd has fixed costs of Rs. 72,000 per annum. It makes one product which it sells for Rs. 32 per unit. Its contribution to sales ratio is 45%. Accelerates break even point in units is:

       ? 5,000 units

       ? 7,000 units

       ? 2,250 units

       ? 2,750 units

break even point in units  = fixed cost  / c/s ratio  / sales per unit
                                            =   72000 / 45% / 32
                                           = 5000

Question No: 19      ( 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

       ? 1,667 units

       ? 2,500 units


CM = SALES PER UNIT  - VARIABLE COST PER UNIT
       =   15 – 9
     =  6
BREAK EVEN POINT IN UNITS  = FIXED COST  / CM PER UNIT           
                                                            = 15000 / 6   
                                                             =2500






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

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

       ? 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



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

The by-product of oil and fuel is:


       ? Mobil oil and lubricating oils

       ? Kerosene oil and Asphalt and Tar

       ? Gasoline and Petroleum coke

       ? All of the given



Question No: 22      ( Marks: 1 ) - Please choose one
 

Which one of the following is NOT a tool of financial forecasting?

       ? Cash budget

       ? Capital budget

       ? Pro forma balance sheet

       ? Pro forma income statement



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

Atlas Productions expects to sell 85,000 gimlets its only product next year. The company has a beginning inventory of 14,000 units and wants to have an ending inventory of 12,000 at the end of the year. How many gimlets does Atlas have to produce to meet its goals?

       ? 79,000 units

       ? 83,000 units

       ? 85,000 units

       ? 97,000 units

SALES +ENDING – 0PENING

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

Extent Incorporated estimates its direct labor costs at 2 hours per unit at an average cost of Rs. 12 per hour. The budgeted direct labor cost to produce 27,000 units of product is:

       ? Rs. 324,000

       ? Rs. 470,000

       ? Rs. 540,000

       ? Rs. 648,000


TOTAL HOURS = 12
LABOR COST PER HOUR = 2 (12*2= 24)
DIRECT LABOR COST  = 27000* 24 = 684000
Question No: 25      ( Marks: 1 ) - Please choose one
 

Gleason Company has budgeted Rs. 15,000 in variable factory overhead costs and Rs. 10,000 in fixed factory overhead costs for the production of 2,000 units requiring 4,000 direct labor hours. The standard factory overhead rate per direct labor hour and the standard overhead cost per unit are:

       ? Rs. 12.50, Rs. 6.25

       ? Rs. 7.50; Rs. 15.00

       ? Rs. 15.00, Rs. 7.50

       ? Rs. 6.25, Rs. 12.50
SOLUTION
FIXED +VARIABLE FOH
15000+10000
25000

RATES 
25000 / 4000 = 6.25
25000 / 2000 = 12.5


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

The master budget usually begins with a:


       ? Production budget

       ? Direct materials budget

       ? Direct labor budget

       ? Sales budget



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

In the decision to replace an old equipment with a new equipment, which of the following would be considered as relevant cost?

       ? The book value of the old equipment

       ? Depreciation expense on the old equipment

       ? The loss on the disposal of the old equipment

       ? The current disposal price of the old equipment



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

Which of the following is a process by which managers analyze options available to set courses of action by the organization?

       ? Heuristics method

       ? Decision making

       ? The Delphi technique

       ? Systematic error



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

Opening WIP Jan 01   3,500 units.
Completed    19,000 units
Closing WIP 31st Jan   6,500 units.

How many units were started during January?


       ? 19,000 units

       ? 22,000 units

       ? 16,000 units

       ? 25,500 units

UNIT STARTED  = COMPLETE + CLOSING WIP – OPENING WIP

Opening  wip
Add started               
Total units
Less closing
completed
Question No: 30      ( Marks: 1 ) - Please choose one
 

Order level is a point at which,

       ? It is necessary to start production

       ? It is necessary to initiate purchase orders

       ? It is necessary to maintain minimum stock level

       ? It is necessary to maintain maximum stock level for orders



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

Which of the following is an element of cost?

       ? Direct Labour Cost

       ? Cost of goods sold

       ? Cost of goods manufactured

       ? Mark up



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

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


       ? Contribution approach

       ? Absorption costing approach

       ? Decision making approach

       ? Marginal costing approach



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

Which of the following cannot becomes a part of product cost under marginal costing?

       ? Direct materials

       ? Variable manufacturing overhead

       ? Fixed manufacturing overhead

       ? Direct labor



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

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 costing

       ? Direct costing

       ? Marginal costing

       ? Variable costing



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

A company ABC has budgeted sales of Rs. 8,000 and breakeven sales of Rs. 5,000 during a particular period whereas the actual sales amounted to Rs. 7,000. What will be the margin of safety ratio?

       ? None of the given options

       ? 37.5%

       ? 40%

       ? 60%

MOS = BUDGETED SALES – BE SALES
          =    8000 – 5000
          =     2000
MOS RATIO =  MOS / budgeted SALES * 100
                       = 2000 / 8000 *100
                       = 37.5
Question No: 36      ( Marks: 1 ) - Please choose one
 

A company ABC has contribution to sales ratio of 17% and a profit to sales ratio of 6%. What will be the margin of safety ratio?

       ? 283.3%

       ? 35.3%

       ? 11.5%

       ? It can not be calculated from the given data

MOS RATIO  = PROFIT TO SALES RATIO / C/S RATIO *100
                         =                 6% / 17% *100
                         =35.3%

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

Which of the following is a purpose of Break-even chart with respect to its usage?




       ? To show the effect of change in circumstances

       ? To show the financial performance of business

       ? To show the financial health of business

       ? To calculate the cost of production



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

Responsibility center where the manager is accountable for only the revenues and costs is a(n):

       ? Revenue center

       ? Cost center

       ? Profit center

       ? Investment center



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

If, units of goods to be sold are 800, closing finished goods units are 200 and opening finished goods units are 100. What is the required production?

       ? 900 units

       ? 1,000 units

       ? 700 units

       ? 600 units


PRODUCTION  = SALES +ENDING FINISHED GOODS – OPENING FINISHED GOODS
Question No: 40      ( Marks: 1 ) - Please choose one
 

If sale at 120% of cost is Rs. 96,000 then, what would be the cost?

       ? Rs. 80,000

       ? Rs. 115,200

       ? Rs. 19,200

       ? Cannot be determined

96000 * 100/120 =80000

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

If estimated direct labour cost is Rs. 50,000 for producing 2,400 units then what is the amount of FOH cost if FOH cost is assumed as 50% of direct labor cost?

       ? Rs. 25,000

       ? Rs. 1,200

       ? Rs. 26,200

       ? Cannot be calculated


50000 *50 % = 25000
Question No: 42      ( Marks: 1 ) - Please choose one
 

Which of the following is an example of financial expense?

       ? Salaries of employees

       ? Utility bills

       ? Interest paid

       ? Depreciation of office equipment



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

Which of the following statement is TRUE about the relevant cost?

       ? It is a sunk cost

       ? It is an opportunity cost

       ? It do not affect the decision making process

       ? All costs are relevant



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

All of the following costs are relevant to decision making EXCEPT:

       ? Incremental Cost

       ? Overtime wages

       ? Variable cost

       ? Research & development cost



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

All of the following costs are irrelevant to decision making EXCEPT:

       ? Incremental cost

       ? Sunk cost

       ? Fixed cost

       ? Supervisor’s routine salary



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

An ice factory has a contribution margin of Rs. 450,000 and fixed cost for the year amounts to Rs. 495,000. The fixed cost of Rs. 215,000 can be eliminated if the operations are to be closed during winter season. An extra sale of Rs. 25,000 is also expected during winter season. What would be the decision?

       ? Operations would be closed during winter season

       ? Operations would be continued as we are having extra sales in winter season (my ans )

       ? Operations would be partially closed

       ? None of the given options



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

A contract will be rejected in which of the following condition?

       ? If it reduces the contribution margin

       ? If it increases the contribution margin

       ? If it reduces the fixed cost

       ? None of the given options



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

A contract will be accepted in which of the following condition?

       ? If it reduces the contribution margin

       ? If it increases the contribution margin

       ? If it increases the fixed cost

       ? If it decreases sales revenue



Question No: 49      ( Marks: 3 )
 

Ahmed Trading Company has the following information about Soap, the only product it sells. The selling price for each unit is Rs 150. the variable cost per unit is Rs 45. and the total fixed cost for the firm is Rs. 90,000. The Company has budgeted sales of Rs. 370,000 for the next period. Calculate Margin of safety in Rs.
   Per Unit   Amount               
Sales        150.00      370,000.00                
Variable Cost        45.00    111,000.00               
Cont Margin       105.00    259,000.00                
Fixed Cost      90,000.00                
Profit      169,000.00                
                     
                     
Margin Of Safety = Budgeted Sales - Breakeven Sales            
                     
Break Even Sales = Fixed Cost/Contibution Margin Per Unit = No. Of units of Breakeven Sales
                     
Units to be sold for Breakeven =           857.14             
Selleing price = 150                  
                     
Breakeven Sales in Rs.       =128,571.43             
                     
Margin Of Safety in Rs       =370,000128,571.43         
Margin Of Safety in Rs.      =241,428.57             





KAMRAN HAIDER SOLUTION

CM = 150 – 45
       = 105

C/S RATIO = 105 / 150
      = 0.7
BREAK EVEN SALES   = 90000 / .7
                                          = 128571

MOS = BUDGETED SALES – BREAK EVEN SALES
          =  370000 – 128571
         =241,429


Question No: 50      ( Marks: 3 )
 

The gross profit for the company amounts to Rs. 150,000. The marketing and office expenses are Rs. 45,000 and Rs. 20,000 respectively. The financial charges for the period are Rs. 2,500. Calculate the Operating profit of a company?

Solution:
 Gross profit                                                           150,000
LESS OPERATING EXPENSES

 Marketing Expenses            45,000       
    Office Expenses                     20,000         
                                                           --------------     65,000
                                                                                __________
OPERATIN PROFIT                                               85,000         


Question No: 51      ( Marks: 5 )
 


ICI Ltd manufactured three joint products, W, X, Z in a common process. The cost and production data for March is as follows:
   Rs.
Opening stock   40,000
Direct material input   80,000
Conversion cost   100,000
Closing stock   20,000

                  Out put and sales were as follows:

Products   Production units   sales units   sales price per unit
W                     20,000    15,000   4
X                     20,000    15,000   6
Z   40,000   50,000   3

Required:
Costs are apportioned between joint products on market value basis, (Sales value of the units produced)?

            W      X      Z      Total
Final Price         4      6      3
Direct Meterial      16,000      24,000      40,000      80,000
Coversion Cost      20,000      30,000      50,000      100,000
Total Cost         36,000      54,000      90,000      180,000
-Closing Balance      9,000      13,500      ______
Net Cost         27,000      40,500      90,000
Sales Price          60,000      90,000      150,000   
Profit            33,000      49,500      60,000

Question No: 52      ( Marks: 5 )
 

Briefly describes the main features of relevant cost?

A relevant cost is a cost which is related to the future expected costs that is considerable for decision making for the management. Due to the difference among alternatives it will effect the decision of management like opportunity cost. The interest rate provided by the bank against investment is an opportunity cost which an investor can earn simply without making any business activity.

Question No: 53      ( Marks: 10 )
 

Particulars   Significant
Product   Incidental
Product
Opening Stock    -----   -----
Production during the year   10,000 units   800 units
Closing Stock   1,000 units   100 units
Cost incurred    Rs. 6,40,000   -----
Sales price per unit   Rs. 300   Rs. 200
Further Processing cost      Rs.  50
      

With the help of above mentioned information, classify the incidental product treated as deduction from the cost of goods sold in the income statement of main product.

Cost Of goods Sold   
   
Cost Incurred       640,000.00
Less Closing Stock         64,000.00
Cost Of goods Sold       576,000.00
Add Further Cost on By-Product         35,000.00
Less Sale Of By Product      (140,000.00)
Net Cost of Goods Sold       471,000.00
   
Sales 300*9000    2,700,000.00
COGS       471,000.00
Profit    2,229,000.00




Question No: 54      ( Marks: 10 )
 

Describe the various stages in a budgeting process?
   
Preparation of budgets
After finalizing the forecast the preparation process of budget starts. The budget activity starts with the preparation of the said budget. Then, production budget is prepared on the basis of sales budget and the production capacity available. Financial budget (i.e. cash or working capital budget) will be prepared on the basis of sale forecast and production budget. All these budgets are combined and coordinated into -a master budget- The budgets may be revised in the course of the financial period if it becomes necessary to do so in view of the unexpected developments, which have already taken place or are likely to take place.

Below are the stages of Preparation of Budget.

Functional Budget: Functional Budget is prepared to start the process of budgeting.
Sales budget:   Sales budget is the first step in process of budgeting process.
Production Budget: To meet the sales targets production budget if prepared.
Raw material, Labor, FOH Budget: In order to achieve the targets of production Raw material, Labor and FOH budgets are prepared.
Cost of goods sold: cost of goods sole budget is prepared after having above budgets.
Selling & Distribution Expenses, Administrative Expenses, Financial Expenses Budget: At last to determine the net income all these said budgets are prepared.
BUDGETED INCOME STATEMENT
All the above budgets are consolidated to finalize the Master budget.
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Sadia0786
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« Reply #8 on: December 31, 2010, 09:43:50 PM »

FINALTERM  EXAMINATION
Fall 2009
MGT402- Cost &amp; Management Accounting (Session - 3)
Time: 120 min
Marks: 84
     
Question No: 1    ( Marks: 1 )    - Please choose one
 the contribution margin ratio is 30% for the Spice Co. and the breakeven point in sales is Rs. 150,000. If the company desires a target net income of Rs. 60,000, what would have to be the amount of actual sales?
C/S RATIO  = CONTRIBUTION MARGIN  / SALES
CM = C/S RATIO * SALES
       =150000 * 30/100 = 45000
NET INCOME + CM / CM RATIO =  actual sale
45000 + 60000 / .3 = 350000
       ? Rs. 200,000
       ? Rs. 350,000
       ? Rs. 250,000
       ? Rs. 210,000
   

Question No: 2    ( Marks: 1 )    - Please choose one
 Cost of finished goods inventory is calculated by:
       ? Deducting total cost from finished goods inventory
       ? Multiplying units of finished goods inventory with the cost per unit
       ? Dividing units of finished goods inventory with the cost per unit
       ? Multiplying  total cost with finished goods inventory
   
Question No: 3    ( Marks: 1 )    - Please choose one
 All of the following are characteristics of Group Bonus Scheme EXCEPT:
       ? A standard time is set for the completion of a job
       ? If the time taken is greater than the time allowed, the workers in the group receive time wages
       ? If the time taken is less than the time allowed, the group receives a bonus on time saved
       ? If the time taken is greater than the time allowed, the workers in the group receive time deductions for extra hours (PAGE 93)
   
Question No: 4    ( Marks: 1 )    - Please choose one
 Superior started 80,000 gallons of paint. During the month the company completed 92,000 gallons and transferred them to the mixing department. Superior had 38,000 gallons in beginning inventory and 26,000 gallons in ending inventory.
Material is added at the beginning of the process and conversion costs are added evenly throughout the process.
Beginning WIP was 30% complete as to conversion costs and ending WIP was 20% complete as to conversion costs. The company uses a FIFO costing
 
The company uses a FIFO costing. The cost data for February follow:
 
Beginning inventory:
Direct materials Rs.22, 200
Conversion costs Rs. 44,000
Costs added this period:
Direct materials Rs. 150,000
Conversion costs Rs. 343,200
Required:
What was the cost of direct materials in ending inventory?
 
       ? Rs. 37,560
       ? Rs. 42,600
       ? Rs. 45,550
       ? Rs. 48,750 (CORRECT)
TRANSFERRED OUT                92000
ADD ENDING                              26000
                                                 _________
                                                     118000
LESS OPENING                             38000
                                                 __________
TOTAL                                         80000
                                                 __________
150000 / 80000
1.875

26000*1.875 =48750
   
Question No: 5    ( Marks: 1 )    - Please choose one
 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 weighted average, what are the equivalent units of production for direct material and conversion costs?
 
       ? Material 125,000 units Conversion cost 45,000 units
       ? Material 125,000 units Conversion cost 98,000 units
       ? Material 125,000 units Conversion cost 18,000 units
       ? Material 125,000 units Conversion cost 80,000 units


Units completed as per material are 100%            opening + closing
                                                                                  95,000 + 30,000               
                                                                                        1, 25,000
Units complete as per Conversion Cost are 40% as it is mentioned the Material is added at the end of process and the conversion costs are added uniformly throughout the process. The 20% as mentioned in question were held by the finishing department. And we are considering only current in process.  So
45, 000 x 40% = 18, 000
As per my knowledge the answer is 3rd option f

Question No: 6    ( Marks: 1 )    - Please choose one
 An average cost is also known as:
       ? Variable cost
       ? Unit cost
       ? Total cost
       ? Fixed cost
   
Question No: 7    ( 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: 8    ( Marks: 1 )    - Please choose one
 The net profit or loss for a particular period of time is reported on which of the following?
       ? Statement of cash flows
       ? Statement of changes in owner's equity
       ? Income statement
       ? Balance sheet
   
Question No: 9    ( Marks: 1 )    - Please choose one
 Which of the following is correct?
       ? Units sold= Opening finished goods units + Units produced – Closing finished goods units (PAGE 37)
       ? Units Sold = Units produced + Closing finished goods units - Opening finished goods units
       ? Units sold = Sales + Average units of finished goods inventory
       ? Units sold = Sales - Average units of finished goods inventory
   
Question No: 10    ( Marks: 1 )    - Please choose one
 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
       ? All of the given options

Effective material control requirements   
1. That no material is purchased without proper authority.
2. That the quantity of material purchased is in fact received.
3. That there are proper storage facilities.
4. That no material is issued without proper authorization and the purpose for which the
material is required is recorded.
5. That the accounts provide a running balance of the value of the materials on hand.

Question No: 11    ( Marks: 1 )    - Please choose one
 Material requisition is a document that supports the requirement of the material. This document is sent to store incharge and approved by:
       ? Store manager
       ? Production manager (PAGE 65)

       ? Supplier manager
       ? Purchase manager
   
Question No: 12    ( Marks: 1 )    - Please choose one
 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
   Apportionment
It refers to the costs that cannot be identified with specific cost centre but must be divided among the concerned department/cost centers.
Question No: 13    ( Marks: 1 )    - Please choose one
 Which of the following is characteristic of a job order cost accounting system?
       ? It records manufacturing activities using a perpetual inventory system
       ? It tracks cost by job
       ? It is best suited for customized products
       ? All of the given options
   
Question No: 14    ( Marks: 1 )    - Please choose one
 A by product:
       ? Is produced from material that would otherwise be of no value
       ? Has a lower selling price than the main product
       ? Is created along with the main product, but its sales value does not cover its production cost
       ? Always produces a large amount of revenue than the main product
   
Question No: 15    ( Marks: 1 )    - Please choose one
 According to marginal costing concept, all fixed costs are considered as:
       ? Period cost (page 164)
       ? Production cost
       ? Mixed cost
       ? Sunk cost
   
Question No: 16    ( Marks: 1 )    - Please choose one
 Variable costing is also known as:
       ? Direct Costing
       ? Marginal Costing
       ? Both Direct Costing & Marginal Costing
       ? Indirect Costing
   
Question No: 17    ( Marks: 1 )    - Please choose one
 Blackhat Chimney Builders constructed 80 units during 1901.  The total sales value for these 80 units was Rs. 460,000.  Variable costs associated with each unit were Rs. 4,000 and the company's fixed costs for 1901 amounted to Rs. 50,000.  How much was the per-unit contribution margin?
       ? Rs. 750
       ? Rs. 1,125
       ? Rs. 1,750
       ? Rs. 5,125
   sales per unit – variable cost per unit= contribution margin
(460,000/80)-4000 = 1750
 
Question No: 18    ( Marks: 1 )    - Please choose one
 Which of the following represents the calculation of contribution margin ratio?
       ? (Sales - Total Expenses) / Sales
       ? (Sales - Fixed Expenses) / Sales
       ? (Sales - Cost of Goods Sold) / Sales
       ? (Sales - Variable Expenses) / Sales
   
Question No: 19    ( Marks: 1 )    - Please choose one
 The by-product of oil and fuel is:
 
       ? Mobil oil and lubricating oils
       ? Kerosene oil and Asphalt and Tar
       ? Gasoline and Petroleum coke
       ? All of the given
   
Question No: 20    ( Marks: 1 )    - Please choose one
 Information concerning Label Corporation’s Product A is as follows:
 
    Rs.
Sales price   300,000
Variable cost   240,000
Fixed Cost   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
       ? Rs. 24,000
       ? Rs. 32,000
       ? Rs. 80,000 (correct)
 
Sale increased = 300000 *20/100= 60000
Total sale = 360,000
Sale – fixed cost –variable cost
 360000 – 40000-240000
= 80,000 
Question No: 21    ( 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 point
       ? Contribution margin
       ? Variable cost
   
Question No: 22    ( Marks: 1 )    - Please choose one
 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 (page 193)
       ? As a vertical line
       ? As a straight line sloping upward to the right
       ? As a straight line sloping downward to the right
   
Question No: 23    ( Marks: 1 )    - Please choose one
 All of the following are the objectives of budgeting EXCEPT:
       ? Maximization of sales
       ? Profit maximization
       ? Compete with competitors
       ? Increased cost
   
Question No: 24    ( Marks: 1 )    - Please choose one
 Production budget is an example of which of the following budget?
       ? Functional budget
       ? Master budget
       ? Cost of goods sold budge
        ? Sales budget

Then, production budget is prepared on the basis of sales budget and the production capacity available. Financial budget (i.e. cash or working capital budget) will be prepared on the basis of sale forecast and production budget   

Question No: 25    ( Marks: 1 )    - Please choose one
 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
sale – production + closing stock
330 – 280 +80 =    130
 

Question No: 26    ( Marks: 1 )    - Please choose one
 Which of the following is a reason of main difference between production budget and Production cost budget?
       ? Production budget is constructed in units
       ? Production budget is constructed in Rs.
       ? Production cost budget is constructed in units
       ? Both are same budgets
   
Question No: 27    ( Marks: 1 )    - Please choose one
 Which of the following factor would determine the importance of direct labor cost budget in human resource department?
       ? Provide guidance about the requirements of number of work force
       ? Provide feed back about the working of workforce
       ? How much payroll will have been paid?
       ? How the cost units will be produced?
   
Question No: 28    ( Marks: 1 )    - Please choose one
 Usually the first step in the production of the master budget is the:
       ? Sales forecast
       ? Sales budget
       ? Cash budget
       ? Production budget
   
Question No: 29    ( Marks: 1 )    - Please choose one
 The master budget usually begins with a:
 
       ? Production budget
       ? Direct materials budget
       ? Direct labor budget
       ? Sales budget
   http://www.accountingformanagement.com/the_master_budget.htm
 
Question No: 30    ( Marks: 1 )    - Please choose one
 Which of the following is NOT example of a cash outflow?
 
       ? Cash drawings
       ? Purchase of new equipment
       ? Commission paid
       ? Depreciation
   
Question No: 31    ( Marks: 1 )    - Please choose one
 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
Ref: 
 
The variable costs change in direct proportion to output if
flexible budgeting approach is adopted, the budget controller can analyze the variance between
actual costs and budgeted costs depending upon the actual level of activity attained during a period
of time.
   
Question No: 32    ( Marks: 1 )    - Please choose one
 Smith & Company estimate its overheads to produce 80,000 units are Rs. 1,000,000 (60 percent is variable). What would be the budgeted overhead at a capacity level of 100,000 units?
       ? Rs. 1,050,000
       ? Rs. 1,150,000
       ? Rs. 1,250,000
       ? Rs. 1,450,000
budgeted overhead / overhead produced
100000 / 80000
1.25*1000000 = 1250000
   
Question No: 33    ( Marks: 1 )    - Please choose one
 Which of the following is a process by which managers analyze options available to set courses of action by the organization?
       ? Heuristics method
       ? Decision making (page 219)
       ? The Delphi technique
       ? Systematic error
   
Question No: 34    ( Marks: 1 )    - Please choose one
 The following monthly data are available for the Boarder, Inc. and its only product: Unit sales price = Rs. 36 Unit variable expenses = Rs. 28 Total fixed expenses = Rs. 50,000 Actual sales for the month of May = 7,000 units. The margin of safety for the company for May was:
       ? Rs. 6,000
 
       ? Rs. 27,000
 
       ? Rs. 56,000
 
       ? Rs. 106,000
 
[Margin of Safety = Total budgeted or actual sales ? Break even sales]
Break even sales = fixed cost/ (contribution margin/sales or c/s)
Contribution margin = s-v.c = 36-28=8
Break even Sales = (50,000)/(8/36) 225000
Actual sales = 7000*36 = 252000
MOS = (252000-225000) = 27000
 
 
Question No: 35    ( Marks: 1 )    - Please choose one
 Perpetual inventory system is:
 
       ? A stock control system designed to ensure that the level of stock never falls to zero
       ? A system of counting and valuing selected stock items at different times on a perpetually rationing basis
       ? A system of recording receipts and issues of stock as they occur, showing the resulting balance of each stock item at all times
       ? A system of stock recording which remains unchanged over time,in rder to monitor trends
   
Question No: 36    ( Marks: 1 )    - Please choose one
 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
Equivalent units  WIP = 1500*.25 = 375
Total = 12500+375 = 12875
   
Question No: 37    ( Marks: 1 )    - Please choose one
 A cost that has been incurred but cannot be changed by present or future decisions is called:
       ? Sunk cost
       ? Differential cost
       ? Opportunity cost
       ? Marginal cost
   
Question No: 38    ( Marks: 1 )    - Please choose one
 All of the following are deducted from Gross Profit to calculate Operating income EXCEPT:
       ? Selling expenses
       ? Advertising expenses (correct)
       ? Administrative expenses
       ? Financial expenses
   
Question No: 39    ( Marks: 1 )    - Please choose one
 A company produces two chemicals in a joint process. Chemical A can be sold at split off while chemical B currently cost Rs. 12 per gallon for disposal. If chemical B is further processed, it would cost Rs. 17 per gallon. At what sale price would the company be in different between disposing of chemical B at split off and further processing the chemical?
       ? Rs. 5
       ? Rs. 17
       ? Rs. 29
       ? Rs. 7
   because if company decide 29 Rs. Currently cost profit  29 – 12 = 17  and after further processing  profit  29 – 17  = 12
Question No: 40    ( Marks: 1 )    - Please choose one
 Which of the following is(are) base(is) of cost allocation under joint products?
 
 
       ? Physical quantity ratio
       ? Selling price ratio
       ? Hypothetical market value ratio
       ? All of given options
   
Question No: 41    ( Marks: 1 )    - Please choose one
 What is the starting point of variable cost line on a break even chart at zero production level?
 
 
       ? It must start from origin
       ? It might start from origin
       ? It does not start from origin
       ? Non of the given options
   
Question No: 42    ( Marks: 1 )    - Please choose one
 Which of the following is NOT the type of a functional budget?
       ? Sales Budget
       ? Raw material budget
       ? Direct labour budget
       ? Cash budget  (page 202)
   a budget of income and/or expenditure applicable to a particular function. A function may refer to a department or a process. Functional budgets frequently include the following: production cost budget (based on a forecast of production and plant utilization); marketing cost budget; sales budget; personnel budget; purchasing budget; and research and development budget.
 
Question No: 43    ( Marks: 1 )    - Please choose one
 Which of the following must be required for the preparation of Production cost budget?
       ? Sales in rupees
       ? Cash budget
       ? Flexible budget
       ? Functional budget
production budget is prepared on the basis of sales budget. sales budget is the key factor in preparing production budget
Question No: 44    ( Marks: 1 )    - Please choose one
 Which of the following budget includes an item of indirect material cost?
       ? FOH cost budget
       ? Direct labor cost budget
       ? Direct material cost budget
       ? None of the given options
       FOH = Indirect material costs + power heat and light + depreciation + other manufacturing costs
 
Question No: 45    ( Marks: 1 )    - Please choose one
 The following information is available for Atlas Corporation to prepare a cash budget for the month of September:
•     Cash on hand beginning of September Rs. 16,000
•     Expected receipts in September Rs. 272,000
•     Sales salaries paid Rs. 62,000
•     Material purchases (all in cash) Rs. 190,000
•     Depreciation Rs. 44,000
What is the ending cash balance in September?
       ? Rs. (8,000)
       ? Rs. 22,000
       ? Rs. 36,000
       ? Rs. 45,000
 
SOLUTION
   
Opening balance                                                 16000
Add Receipts
         RECEIPTS IN SPE                                   272000
                                                                           _________
 TOTAL RECEIPTS                                          288000   
Less Payments
          SALARIES PAID                                        62000
          MATERIAL PURCHASE                        190000
                                                                           __________
TOTAL PAYMENTS                                           252000


TOTAL RECEIPTS     - TOTAL PAYMENTS
        288000             -        252000
     36000

Question No: 46    ( Marks: 1 )    - Please choose one
 Which of the following cost (‘s) will be considered as controllable cost (‘s)?
       ? Direct material
       ? Direct labor
       ? Variable overhead
       ? All of the given options (page 234)
   
Question No: 47    ( Marks: 1 )    - Please choose one
 All of the following costs are irrelevant to decision making EXCEPT:
       ? Incremental cost
       ? Sunk cost
       ? Fixed cost
       ? Supervisor’s routine salary
   
Question No: 48    ( Marks: 1 )    - Please choose one
 Which of the following statement is TRUE about opportunity cost?
       ? It is irrelevant to decision making
       ? It is always a sunk cost
       ? It is always a historical cost
       ? It is relevant to decision making
 Question No: 49    ( Marks: 3 )
 The Midnight Corporation budget department gathered the following data for the third quarter:
     July
Projected Sales (units)   1,000
Selling price per unit (Rs.)   30
Direct material purchase requirement (units)   1,500
Purchase cost per unit (Rs.)   15
Production requirements (units)   800
       
Direct labor hours Rs. 1.5 per unit
Direct Labor rate Rs. 2.5 per direct labor hour
Fixed FOH is Rs. 2600, included depreciation Rs. 300
Selling and Admin expense 4% of sales
 Net Income before tax is as follows
July    8,000
August    10,000
September   8,000
 All sales and purchase are for cash and all expenses are paid in the month incurred. Assuming that the opening cash balance on July 01 is Rs. 40,000 and tax rate is 35%,
 Requirement:
Prepare cash budget for the month of July.
CASH BUDGET FOR THE MONTH OF JULY
CASH RECEIPTS
PARTICULARS    JULY (Rs.)
OPENING BALANCE    40000
SALES    30000
NET INCOME AFTE TAX   2800
TOTAL RECEIPTS    72800
CASH PAYMENTS
PURCHASES    22500
DIRECT LABOR    3000
FIXED FOH   2300
SELLING AND ADMIN EXP   1200
TOTAL PAYMENTS    29000
TOTAL RECEIPTS – TOTAL PAYMENTS   43800

   
Question No: 50    ( Marks: 3 )
 Why is the selection of an appropriate cost allocation method in Joint Products important?
ANSWER
 The selection of an appropriate cost allocation method in joint products is important in order to know approximately exact cost of each product. Following are the factors which are more contributing to its importance
(1)   To know the profitability of each product
(2)   To arrive at decision weather to sell or process further
(3)   In order to know the realizable value of each product
                   
 
 
   
Question No: 51    ( Marks: 5 )
 The following information is available for the month of June from the Alpha department of the Greek Corporation:
 
    Units
Work in process June 01 (80% complete as to conversion)   40,000
Started in June   165,000
Work in process June 30 (60% complete as to conversion)   30,000
 
Materials are added at the beginning of the process in the Alpha department.
Required: Using the average cost method, what are the equivalent units of production for the month of June?
ANSWER     
WIP OPENING                         40000
ADD UNIT STARTED                165000
                                               _____________
TOTAL                                        205000
LESS CLOSING    WIP              30000
UNIT COMPLETED                   175000
EQUIVALENT UNITS USING AVERAGE COST METHOD
PARTICULARS    MATERIAL    LABOR    FOH
COMPLETED    175000   175000   175000
CLOSING WIP              30000   30000*60% = 18000   30000*60% = 18000
TOTAL    205000   193000   193000
       


Question No: 52    ( Marks: 5 )
 The Carter Manufacturing Company estimates its production requirements to be 30,000 units for October, 38,000 units for November and 41,000 units for December. It takes 3 direct labor hours at a rate of Rs. 3 per hour to complete one unit.
 Prepare direct Labor budget cost for the last quarter of the year.
DIRECT LABOR COST BUDGET FOR THE LAST QUARTER
From October to December
Particulars   October    November    December
Units produced    30000   38000   40000
Labor hour per unit    3   3   3
Total labor hours    90000   104000   120000
Labor rate per hour    Rs.3   Rs.3   Rs.3
Total labor cost    Rs. 270000   Rs.312000   Rs.360000
Question No: 53    ( Marks: 10 )
 Consider the following data:
Sales   Rs.100 Per unit
Material    Rs.10 Per unit
Labor    Rs.10 Per unit
FOH   Rs.5 Per unit
Fixed FOH   Rs. 50,00,000
Units produced & sold   1,00,000 units
Required:
•     Income statement under variable costing
•     Break Even point in rupees         
•     Margin of safety ratio at the given sales level
•     MOS
 Solution A)
Sales (100000*100)                                                       10,000,000
Less variable cost of goods sold
          Material (100000*10)              1,000,000
          Labor (100000*10)                  1,000,000
         Variable FOH(100000*5)           500,000   
                                                         ____________
total variable cost                                                              ( 2500000)
CM                                                                                     7500000
LESS FIXED OVERHEAD                                              (50,00,000)
PROFIT                                                                                2,500,000
         
                                                                                         
(B)
BE in Rs = fixed cost /(Contribution margin /Sales)
50,00,000/(75/100) = 6,666,667
 
C)
MOS RATIO  = PRIFIT / CM *100
                         = 2500000 / 7500000*100
                         =  33.34%
D)
MOS = Actual sales – BE sales
 =10,000,000  - 6,666,667  = 3,333,333
 
Question No: 54    ( Marks: 10 )
Ahmed manufacturing company’s projected sales of Rs. 850,000 for the next year. The budgeted data proposed by Cost Accountants are as follows:
 
Material:                       Rs. 115,000
Labor:                                   95,000
FOH:                                    65,000
 
The company’s opening finished goods inventory are Rs. 35,000 and ending finished goods inventory are Rs. 55,000. The fixed portion of administrative and selling expenses is estimated as 7% and 12% of sales respectively and variable portion of administrative and selling expenses is estimated as 6% and 14% of sales respectively.
The financial charges are estimated Rs. 5,500 and the tax rate is 30%.
 
Required: Prepare the projected income statement for the period?
SALES                                                                                                    850,000
LESS COST OF GOODS SOLD
             MATERIAL                                    115000
             LABOR                                             95000
             FOH                                                  65000
                                                                  __________
TOTLA FACTORY COST                          275000
ADD OPENING FINISHED GOODS           35000
                                                                 __________
COST OF GOODS TO BE SOLD             310000
LESS ENING FINISHED GOODS             55000
                                                                 __________
COST OF GOODS SOLD                                                                      255000
                                                                                                            ______________
GROSS PROFIT                                                                                     595000 
LESS ADMIN AND SELLING EXP FIXED
                        ADMIN                                                 59500
                        SELLING                                            102000
                                                                                 
LESS ADMIN AND SELLING EXP VARIABLE
                      ADMIN                                                   51000
                      SELLING                                              119000
                                                                                  ________                   331500
                                                                                                            _______________
EBIT                                                                                                             263500
LESS FINANCILA CHARGES                                                                      5500
                                                                                                             _______________
EBT                                                                                                               258000
LESS TAX 30%                                                                                             77400
                                                                                                            _________________
EAT                                                                                                               180600                                     
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