ARBAMINC UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
FINAL EXAMINATION

Course: Cost & Management Accounting I Weight: 50%

Course Code: ACFN 2091 Exam Time:@ 8:00-11:00 A.M
Instructor: Genanew A. Time Allowed: 3:00 hours
Target Group: Regular G2 Management Students
Exam date: June 21/06/2019

Name: ______________________________________ID.NO.____________Sec.__________

Admission: Regular Add

General instructions
 Check that the exam booklet has two parts and eight pages including cover page.
 Check that your exam paper contains both front and back pages.
 Ticks above you either are regular or add.
 Attempting to cheat is strictly forbidden and it makes your result null.
 Answer all parts on the ruled answer sheet attached with your exam.
 Neatly handwriting is encouraging for workout questions
 Switch off your cell phone
 Sharing calculator is not allowed

Do not turn this page until you are told to do so!!

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 PARTE ONE: MULTIBLE CHOICES (30%)
Choose the correct answer from the following alternatives and write your answer on the
ruled paper provided (1 Pont’s each)
1. One of the following statements is true about cost accounting and management accounting
comparison.
A. Scope of cost accounting is not limited to providing cost information for managerial
uses.
B. Scope of cost accounting is narrower than that of management accounting.
C. Evolution of cost accounting is mainly due to the limitation of financial accounting.
D. The main emphasis of management accounting is not on planning and controlling.
E. A & B
2. Which one of the following is correct about Cost accounting?
A. provides information on the efficiency of factory labor
B. provides information on the cost of servicing commercial customers
C. provides information on the performance of an operating division
D. All of these answers are correct.
E. None of the above
3. Which one of the following is odd?

A. variable cost per unit varies with increase or decrease in the volume of output
B. conversion cost is equal to direct wages plus factory overhead
C. fixed cost per unit varies with increase or decrease in the volume of output
D. An item of cost that is direct for one business may be indirect for another
4. If DM represents direct materials; DL represents direct labor; PC represents prime cost FOH
stands for factory overhead; IM represents indirect materials; IL represents indirect labors;
CC represents conversation cost and MC represents manufacturing costs; which one is wrong
about the relationship of these operating costs?
A. PC + FOH = MC C. IM + IL = CC- DL
B. DM + DL = MC- FOH D. MC = IL+ IM + CC
5. In a job order cost accounting system, the entry to record the flow of direct materials into
production is:
A. Debit Materials, credit Work in Process
B. Debit Factory Overhead, credit material

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 C. Debit Work in Process, credit Supplies
D. Debit Work in Process, credit material
6. Transferred in costs in a cost of production report are most similar to:
A. Conversion costs added during the process
B. Materials added at the beginning of the process
C. Costs transferred to the next process
D. Costs included in beginning inventory
E. All of the above
F. None of the above
7. In a process cost accounting, the costs of direct materials and direct labor are charged to:
A. Service departments D. Job orders
B. Customer accounts receivable E. All of the above
C. Processing departments F. None of the above
8. In a process costing system, the journal entry used to record the transfer of units from
Department A, a processing department, to Department B, the next processing department,
includes a debit to:
A. Work in Process Department A and a credit to Work in Process Department B
B. Work in Process Department B and a credit to Materials
C. Finished Goods and a credit to Work in Process Department B
D. Work in Process Department B and a credit to Work in Process Department A
E. All of the above
F. None of the above
9. Which one of the flowing schedules exists in the Cost of Production Report under Process
Costing?
A. Physical Quantity Schedule D. Equivalent Unit Costs Schedule
B. Equivalent Units Schedule E. All of the above
C. Cost flow Schedule F. None of the above
10. Which one of the following characterizes Process costing?
A. High production volume and homogeneous products
B. High production volume and heterogeneous products
C. Low production volume and heterogeneous products

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 D. Low production volume and homogeneous products
E. All of the above
F. None of the above
11. Which of the following statements is true?
A. Costs are traced to departments and then allocated to units of product when job-order
costing is used
B. Companies that produce many different products or services are more likely to use job
order costing systems than process costing systems.
C. Job-order costing systems are used by service firms only and process costing systems are
used by manufacturing concern only
D. Companies that produce many different products or services are more likely to use
process-costing systems than Job order costing systems.
E. All of the above
F. None of the above
12. Under which of the following conditions will FIFO method of process costing yield the
same equivalent unit costs as the Weighted-Average Method?
A. When units produced are homogenous in nature.
B. When there is no ending inventory
C. When beginning and ending inventories are each 50% complete
D. When there is no beginning inventory
E. All of the above
F. None of the above
13. The difference between actual costing and normal costing is:
A. normal costing uses actual quantities of direct-costs
B. actual costing uses actual quantities of direct-costs
C. normal costing uses budgeted indirect-costs
D. actual costing uses actual quantities of cost-allocation bases

14. All costs incurred beyond the split off point that are assignable to one or more individual
products are called:
A. byproduct costs C. main costs
B. joint costs D. separable costs
15. In joint costing:
A. costs are assigned to individual products as assembly of the product occurs

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 B. costs are assigned to individual products as disassembly of the product occurs
C. a single production process yields two or more products
D. Both B and C are correct

16. The support department allocation method that is the most widely used because of its
simplicity is the
A. Step-down method C. Direct allocation method
B. Reciprocal allocation method D. Sequential allocation method
17. Managers often cite reductions in the costs of spoilage as an
A. A major justification for implementing a just -in -time production system
B. Measurement of improved output quality
C. Immaterial item that is not to be tracked
D. Indication of improvement in the accounting system
E. None of the above
18. Unacceptable units of production that are discarded or are sold for reduced prices are referred
to as
A. Reworked units D. Defective units
B. Spoilage E. None of the above
C. Scrap
19. Material left over when making a product is referred to as
A. Reworked unit’s D. Defective units
B. Spoilage E. None of the above
C. Scrap
20. Under which of the following conditions will FIFO method of process costing yield the
same equivalent unit costs as the Weighted -Average Method?
A. Units produced are homogenous in nature.
B. When there is no ending inventory
C. When there is no beginning inventory.
D. When beginning & ending inventories are each 50% complete
E. All of the above
F. None of the above
21. If ABC Company detects, reprocess and sells a certain product, which was defective before
then what do, we call that product.
A. Quality product D. Scarp
B. Rework E. All of the above
C. Spoilage F. None of the above
22. In job –costing system, the net cost of spoilage that is normal and common to all jobs should
be charged to:
A. Materials Control D. Finished goods Inventory
B. Work In Process Control E. All of the above
C. Factory Overhead Control F. None of the above

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23. Under which allocation method are one -way reciprocal support services recognized?
A. The direct method D. The step-down method
B. The artificial cost method E. All of the above
C. The reciprocal method
24. Which one of the following is true about direct allocation method?
A. Partially recognizes the services provided among support departments.
B. Is also referred to as the sequential method
C. Is conceptually the most precise method
D. Results in allocating only the support costs used by operating departments
E. None of the above
25. The step-down allocation method
A. Typically begins with the support department that provides the highest percentage of its
total services to other support departments
B. Recognizes the total amount of services that support departments provide to each other
C. Allocates complete reciprocated costs
D. Offers key input for outsourcing decisions
E. All of the above
26. . When a single manufacturing process yields two products, one of which has a relatively
high sales value compared to the other, the two products are respectively known as:
A. Joint products and byproducts D. Main products and joint products
B. Joint products and scrap E. All of the above
C. Main products and byproducts F. None of the above
27. Which of the following costs of a joint process would be allocated to the joint products?
A. Labor and overhead only E. Conversion costs less by-product
B. Materials, labor, and overhead values
C. Materials and labor only F. None of the above
D. Prime costs less by-product values
28. Which of the following is not a primary reason for allocating joint costs?
A. Cost justification and insurance settlement cost information requirements
B. Cost justification and asset measurement
C. Income measurement and rate regulation requirements
D. To calculate the bonus of the chief executive officer
E. All of the above
F. None of the above
29. The joint cost allocation method that assigns joint production costs based on the
proportionate share of eventual revenues less further processing costs is the:
A. Sales-to-production-ratio method E. Constant gross margin percentage
B. Net realizable value method method
C. Physical units’ method F. None of the above
D. Sales-value-at-split-off method

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30. The physical-measure method:
A. Allocates joint costs to joint products in a way that each product has an identical gross
margin percentage
B. Allocates joint costs to joint products on the basis of a comparable physical measure at
the split off point
C. Allocates joint costs to joint products on the basis of the relative sales value at the split
off point
D. Allocates joint costs to joint products based on relative NRV
E. All of the above
F. None of the above

PARTE-II: WORKOUT QUESTIONS (20%)

Show the necessary steps for the following questions and your handwriting should be neat

Q1. The Minch Shop manufactures pottery products. All direct materials are included at the
inception of the production process. For April, there was no beginning inventory in the
processing plant. Direct materials totaled Br.310, 000 for the month. Work-in process records
revealed that 5,000 tons were started in April and that 3,000 tons were finished; 1,000 tons were
spoiled as expected. Ending work-in-process units are complete in respect to direct materials
costs and spoilage is not detected until the process is complete.
Required:
A. What is the cost per equivalent unit if spoiled units are recognized?(2 points)
B. What are the costs assigned to completed units when spoilage units are recognized?(2
points)
C. What are the costs transferred out if spoilage units are recognized?( points)
Q2. For May, the production control department of GA chemical company reported the
following production data for department three.
 Transferred in from department two………………………….…..55,000 liters
 Transferred out to department four………………………………..39,500 liters
 In process at the end of May (2/3 of labor and factory overhead)……10,500 liters
The cost department collected these figures for department three:
 Unit cost for units transferred in from preceding department………..Br 1.8
 Labor cost in department three…………………………………………Br 27,520
 Factory overhead cost in department three……………………………Br 15,480

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Required: prepare cost of production report for department three for the month-ended may (5
points)
Q3. Mom Company has a small factory with two service departments and two operating
departments. The service departments, A and B provide support to the operating departments and
use some of their own service. Budget estimates provided in the following table.
Support departments Operating departments
A B Machining Assembly Total
Budgeted factory overhead $13,752,150
cost before any cost $6,300,000 $1,452,150 $4,000,000 $2,000,000
allocations
Service provided by A
Budgeted labor-hours 4,000 6,000 10,000 20,000
Percentage 20% 30% 50% 100%
Service provided by B
Budgeted computer hours 500 4,000 500 5,000
Percentage 10% 80% 10% 100%

Required: Allocate service department costs by using

a. Direct cost allocation method(2 points)
b. Step down/sequential method(2 points)
c. Reciprocal method( 2 points)
Q4. The GAAM Corporation manufactures widgets, gizmos, and turbots from a joint process.
June production is 4,000 widgets; 7,000 gizmos; and 8,000 turbots. Respective per unit selling
prices at split off are Br.15, Br.10, and Br.5. Joint costs up to the split off point are Br.75, 000. In
addition to these, GAAM incurred the following cost for further processing and there is an active
market for these intermediaries products and sold with Br 20, Br 15, and Br 8 respectively.

Required: what amounts of joint costs will allocate to the widgets when GAAM used.
A. Physical measures method(2 points)
B. Sales value at split off point method(2 points)
C. NRV less constant gross margin method(2 points)

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