1 A firm has to pay a 20c per unit royalty to the inventor of a device which it manufactures and sells.

The royalty charge would be classified in the firm's accounts as a:

A Selling expense
B Direct expense
C Production overhead
D Administrative overhead (2 marks)

2 Which of the following would be classed as indirect labour?

A Assembly workers in a company manufacturing televisions
B A stores assistant in a factory store
C Plasterers in a construction company (1 mark)

3 A manufacturing firm is very busy and overtime is being worked.

The amount of overtime premium contained in direct wages would normally be classed as:
A Part of prime cost
B Factory overheads
C Direct labour costs
D Administrative overheads (2 marks)

4 Which of the following items would be treated as an indirect cost?

A Wood used to make a chair
B Metal used for the legs of a chair
C Fabric to cover the seat of a chair
D Staples to fix the fabric to the seat of a chair (2 marks)

5 Prime cost is:

A All costs incurred in manufacturing a product
B The total of direct costs
C The material cost of a product (1 mark)

6 Over which of the following is the manager of a profit centre likely to have control?
(i) Selling prices
(ii) Controllable costs
(iii) Apportioned head office costs
(iv) Capital investment in the centre
A All of the above
B (i), (ii) and (iii)
C (i), (ii) and (iv)
D (i) and (ii) (2 marks)
7 Which of the following best describes a controllable cost?
A A cost which arises from a decision already taken, which cannot, in the short run, be changed.
B A cost for which the behaviour pattern can be easily analysed to facilitate valid budgetary control
comparisons.
C A cost which can be influenced by its budget holder.
D A specific cost of an activity or business which would be avoided if the activity or business did not
exist. (2 marks)

8 Which of the following items might be a suitable cost unit within the credit control department of a
company?
(i) Stationery cost
(ii) Customer account
(iii) Cheque received and processed
A Item (i) only
B Item (ii) only
C Item (iii) only
D Items (ii) and (iii) only (2 marks)

9 Which of the following best describes a period cost?

A A cost that relates to a time period which is deducted as expenses for the period and is not included
in the inventory valuation.
B A cost that can be easily allocated to a particular period, without the need for arbitrary apportionment
between periods.
C A cost that is identified with a unit produced during the period, and is included in the value of
inventory. The cost is treated as an expense for the period when the inventory is actually sold.
D A cost that is incurred regularly every period, eg every month or quarter. (2 marks)

10 A company employs four supervisors to oversee the factory production of all its products. The salaries paid
to these supervisors are:
A A direct labour cost
B A direct production expense
C A production overhead
D An administration overhead (2 marks)

11 The following question is taken from the June 2009 exam.

A company manufactures and sells toys and incurs the following three costs:
(i) Rental of the finished goods warehouse
(ii) Depreciation of its own fleet of delivery vehicles
(iii) Commission paid to sales staff
Which of these are classified as distribution costs?
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii) (2 marks)
3.1 A firm has to pay a 20c per unit royalty to the inventor of a device which it manufactures and sells.
How would the royalty charge be classified in the firm's accounts?
A Selling expense
B Direct expense
C Production overhead
D Administrative overhead (2 marks)

3.2 Which of the following would be classed as indirect labour?

A Assembly workers in a company manufacturing televisions
B A stores assistant in a factory store
C Plasterers in a construction company
D A consultant in a firm of management consultants (2 marks)

3.3 A manufacturing firm is very busy and overtime is being worked.

How would the amount of overtime premium contained in direct wages normally be classed?
A Part of prime cost
B Factory overheads
C Direct labour costs
D Administrative overheads (2 marks)

3.4 A company makes chairs and tables. Which of the following items would be treated as an indirect cost?
A Wood used to make a chair
B Metal used for the legs of a chair
C Fabric to cover the seat of a chair
D The salary of the sales director of the company (2 marks)

3.5 Over which of the following is the manager of a profit centre likely to have control?
(i) Selling prices
(ii) Controllable costs
(iii) Apportioned head office costs
(iv) Capital investment in the centre
A All of the above
B (i), (ii) and (iii)
C (i), (ii) and (iv)
D (i) and (ii) (2 marks)

3.6 Which of the following best describes a controllable cost?

A A cost which arises from a decision already taken, which cannot, in the short run, be changed.
B A cost for which the behaviour pattern can be easily analysed to facilitate valid budgetary control
comparisons.
C A cost which can be influenced by its budget holder.
D A specific cost of an activity or business which would be avoided if the activity or business did
not exist. (2 marks)
 3.9 A company employs four supervisors to oversee the factory production of all its products. How would the
salaries paid to these supervisors be classified?
A As a direct labour cost
B As a direct production expense
C As a production overhead
D As an administration overhead (2 marks)

3.10 A company manufactures and sells toys and incurs the following three costs:
(i) Rental of the finished goods warehouse
(ii) Depreciation of its own fleet of delivery vehicles
(iii) Commission paid to sales staff
Which of these are classified as distribution costs?
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii) (2 marks)

3.11 Which of the following describes a cost centre?

A A unit of output or service for which costs are ascertained
B A function or location for which costs are ascertained
C A segment of the organisation for which budgets are prepared
D An amount of expenditure attributable to a particular activity (2 marks)
1.1 For which of the following is a profit centre manager normally responsible?
A Costs only
B Revenues only
C Costs and revenues
D Costs, revenues and investment (2 marks)

1.2 Monthly variance reports are an example of which one of the following types of management
information?
A Tactical
B Strategic
C Planning
D Operational (2 marks)

1.3 Which of the following statements are correct?

(i) Strategic information is mainly used by senior management in an organisation.
(ii) Productivity measurements are examples of tactical information.
(iii) Operational information is required frequently by its main users.

A (i) and (ii) only

B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii) (2 marks)

1.4 Reginald is the manager of production department M in a factory which has ten other
production departments. He receives monthly information that compares planned and actual
expenditure for department M. After department M, all production goes into other factory
departments to be completed prior to being despatched to customers. Decisions involving
capital expenditure in department M are not taken by Reginald.
Which of the following describes Reginald's role in department M?
A A cost centre manager
B An investment centre manager
C A profit centre manager
D A revenue centre manager (2 marks)

1.5 The following statements relate to financial accounting or to cost and management
accounting:
(i) The main users of financial accounting information are external to an organisation.
(ii) Cost accounting is part of financial accounting and establishes costs incurred by an
organisation.
(iii) Management accounting is used to aid planning, control and decision making.

Which of the statements are correct?

A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only (2 marks)
D (i), (ii) and (iii)