Professional Documents
Culture Documents
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13. Letter L is?
a. Overhead cost b. Total cost c. Prime cost d. Factory cost
14. A worker who worked for 6 hours at an hourly rate of #3 per hour is expected to earn:
a. #18 b. #9 c. #2 d. #3
15. If the total cost of producing 4000 units is #20,000 and the total cost of producing 20,000
units is #40,000. What is the variable cost per unit?
a. #1.80 b. #0.80 c. #2.00 d. #1.25
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31. Materials, labor and overhead costs are traced to processing departments rather than
individual products or jobs. This statement is true for… a. a job order costing system
b. an activity based costing system c. a process costing system d. a variable costing system
32. Which of the following is not relevant to a process costing system? a. Heterogeneous
products b. Repetitive production c. High production volume d. Low production flexibility
33. Which of the following is not correct about process costing and job order costing? a. Both the
systems classify materials as direct materials and/or indirect materials b. Both the systems
classify labor as direct labor and/or indirect labor c. Direct materials under job order costing
might be indirect under process costing and vice versa d. Both the systems assign costs by
process
34. If the total cost of 1000 units is Rs.60000 and that of 1001 units is Rs.60400, then the increase
of Rs.400 in the total cost is… a. Prime cost b. All variable overheads c. Marginal cost d.
None of the above
35. While computing profit in marginal costing… a. The fixed cost gets added to the contribution
b. The total marginal cost gets deducted from total sales revenue c. The total marginal cost
gets added to total sales revenue d. None of the above
36. The term ‘Contribution’ refers to the… a. Excess of selling price over variable cost per unit b.
Difference between the selling price and total cost c. Subscription towards raising capital d.
None of the above
37. Fixed cost is also referred to as ________ in the marginal costing technique… a. Total cost b.
Product cost c. Period cost d. None of the above
38. Under absorption costing, profit is ascertained… a. On the basis of difference between sales
and total cost. b. By computation as per desired rate of profit on sales or cost c. Both a and b
d. None of the above.
39. Which of the following is correct about break-even point of a company… a. Revenue >
Variable expenses + fixed expenses b. Revenue < Variable expenses + fixed expenses c.
Revenue=variable cost + fixed expenses d. None of the above
40. Which of the following industries is Standard Costing most suited for? a. It is suitable for
industries that produce standard products b. It is suitable for enterprises that are engaged in
service activities c. It is suitable for industries that produce non-standard products d. None of
the above
41. Which of the following is not a demerit of the Standard Costing System…a. The traditional
cost variances are not tied to any specific product lines b. Standard Costing System is much
more expensive than other systems c. It is usually less expensive than normal or actual
costing d. All of the above
42 A company maintains a _____ to avoid stopping production due to the shortage of material.
a. Minimum stock level b. Reorder level c. Maximum stock level d. None of the above
43. Which one is NOT an assumption of Break-even analysis… a. Fixed costs remain constant b.
Variable costs vary proportionally with volume c. costs can be resolved into their fixed and
variable components d. Selling price does not changes volume changes
44. For the purpose of proof, material cost variance is equal to… a. Material
usage=variance+material mix variance b. Material price variance+material usage variance c.
Material price variance+material yield variance d. Material mix variance+material yield
variance
45. Which of the following is not the main component of standard cost… a. Standard rate
b. standard output c. Actual yield d. All of the above
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46. The principles of marginal costing are based on the following equations… a. variable cost +
fixed cost +profit = sales b. contribution - fixed cost= profit c. total cost + profit =sales d. all of
the above
47. What is marginal cost… a. Cost incurred when increasing profit margin b. Total cost of
manufacture c. Cost of producing an additional unit d. Cost of manufacturing a new product
48. What is the economic order quantity…units a. 10,000 b. 4,000 c. 1,500 d. 1,000 units
49. The number of times the order will be placed in a year is A. 500 B. 400 C. 90 D. 50
50. The amount by which an item contributes towards covering fixed cost and providing for
profit is known as…a. gross profit b. gross margin c. Contribution Margin d. Net margin
3 A gang of workers normally consists of 30 men, 15 women and 10 boys. They are paid at
standard hourly rates as under: In a normal working week of 40 hours, the gang is expected
to produce 2,000 units of output. During the week ending 31st December, 2002, the gang
consisted of 40 men, 10 women and 5 boys. The actual wages paid were @ £0.70, £0.65 and
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£0.30 respectively. 4 hours were lost due to abnormal idle time and 1,600 units were
produced.
Calculate:
{9marks}
4. Zulfiqar Limited makes and sells a single product and has the total production capacity of
30,000 units per month. The company budgeted the following information for the month of
January 20X4:
Normal capacity (units) 27,000
Variable costs per unit:
Production (¥) 110
Selling and administration (¥) 25
Fixed overheads: Production (¥) 756,000
Selling and administration (¥) 504,000
The actual operating data for January 20X4 is as follows:
Production 24,000 units
Sales @ ¥250 per unit 22,000 units
Opening stock of finished goods 2,000 units
During the month of January 20X4, the variable factory overheads exceeded the budget by
¥120,000.
Required:
(a) Prepare an income statement for period 3 based on marginal costing principles.
(b) Prepare an income statement for period 3 based on absorption costing principles.
{9marks}
5. Erora Macopy Nigeria Ltd. deals with one product called “Feyikogbon”. The current sales of
the product average 2,000 units at $200 each.
The costs are:
$
Direct materials 114,000
Direct labour 36,000
Variable overhead 40,000
Fixed overhead 99,750
Required:
i. How many units must the company sell in order to break even?
ii. Calculate the additional sales in units required to maintain the current profit level if
the selling price is reduced by 5%.
iii. Calculate the net profit if the sales volume (in units) is increased by 10%
iv. If the fixed cost increases by $20,000, how many units should be sold in order to earn
a profit of $60,000?
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v. It has been suggested that an advertisement of $40,000 on AIT can increase the
product by 300 units. Should the advertisement be embarked upon? {9marks}