1.1.2 Which of the following statements are correct?

(1) Strategic information is mainly used by senior management in an organization

(2) Productivity measurements are examples of tactical information
(3) Operational information is required frequently by its main users
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
Answer D

2.1.4 Which of the following is an initial requirement of a management control system?

A Establishing the standard to be achieved
B Measuring the actual performance
C Setting organizational objectives
D Taking appropriate corrective action
Answer a

3.7.16 A company’s total overhead varies with output level. It has recorded the following
observations of output and total overhead cost:
Output level Total overhead cost
100,000 units $800,000
400,000 units $2,500,000
It is known that there is an increase in fixed costs of $200,000 when output exceeds 300,000
units.
Using the high low method, what is the variable overhead cost per unit?
A $5·00 per unit
B $5·67 per unit
C $6·25 per unit
D $6·60 per unit
Answer a

4.7.11 Reginald is the manager of production department M in a factory which has 10 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 center manager
Answer a

5.7.12 The following observations have been made of total overhead cost:
Output level (units) 5,000 10,000
Total overhead cost ($) 14,000 27,000
The variable element of total overhead cost is known to increase by $1 per unit at output
levels above 7,000 units.
What is the variable element of total overhead cost at an output level of 5,000 units?
A $2.00 per unit
B $2.60 per unit
C $3.20 per unit
D $3.60 per unit
Answer a

6.7.14 A product has the following costs per unit:

$
Direct material 4·00
Direct labour 3·00
Direct expenses 1·50
Variable overhead 5·00
Fixed overhead 6·00
What is the prime cost per unit of the product?
A $4·00
B $7·00
C $8·50
D $13·50
Answer c

7.7.15 A company has a single product with a selling price of $12 per unit, which is calculated as
variable cost per unit, plus 20%. At an output level of 5,000 units it makes a loss of $8,000.
What is the company’s total fixed cost?
A $2,000
B $4,000
C $18,000
D $20,000
Answer c

8.14.2 A company determines its order quantity for a raw material by using the Economic Order
Quantity (EOQ) model.
What would be the effects on the EOQ and the total annual holding cost of a decrease in
the cost of ordering a batch of raw material?
EOQ Total annual holding cost
A Higher Lower
B Higher Higher
C Lower Higher
D Lower Lower
Answer d

9.14.6 The purchase price of an item of inventory is $25 per unit. In each three-month period the
usage of the item is 20,000 units. The annual holding costs associated with one unit equate to
6% of its purchase price. The cost of placing an order for the item is $20.
What is the Economic Order Quantity (EOQ) for the inventory item to the nearest
whole unit?
A 730
B 894
C 1,461
D 1,633
Answer c
10.19.6 A company operates a differential piece-rate system and the following weekly rates have been
set:
1 – 500 units $0·20 per unit in this band
501 – 600 units $0·25 per unit in this band
601 units and above $0·55 per unit in this band
Employee A has produced 800 units in 45 hours worked
There is a guaranteed minimum wage of $11 per hour for a 40-hour week paid to all
employees.
What is the amount payable to employee A?
A $200
B $235
C $435
D $440
Answer d

11

Answer 15000,15,000,$15000,$15,000

12 What does an activity (production volume) ratio of 105%

signify?
That the actual hours worked exceeded the flexed budget.
That the budgeted hours were greater than the actual hours.
That the actual hours worked were less than the standard hours of actual output.
That the standard hours of actual output exceeded the fixed budget hours.
Answer a

13 A company budgeted on producing 20,000 units and taking 8,000

labour hours. They actually took 11,000 hours to produce 25,000 units.

What was the labour efficiency ratio?

137.5%
72.7%
110.0%
90.9%
Ans d
14 A company employs 100 direct workers in the factory, who are paid
a basic rate of $5 per hour for a 35-hour week. In addition to working
their normal hours last month,each worker was asked to work an
additional 5 hours overtime per week to meet general production
requirements.
All overtime hours are paid at a time and a half. As a result of some
faulty material, 150 hours of direct labour time were registered as
idle.

What is the indirect labour cost for last month, assuming a 4-week
period?
750
2000
5750
15750
Answer c

15 Staff working to assemble products are paid $10 per hour, and any
hours over 35 per week are paid at a rate of $15 per hour. Last week,
an employee was paid for 42 hours, including three hours during which
he was idle to machine breakdown.

How much of the employee's wages for last week would be treated
as an indirect cost?
35
65
105
30
Answer b
16 Which of the following is TRUE about the effect of different
methods of pricing raw materials from inventory in a period of
consistently rising prices?

(1) Production costs will be higher using FIFO rather than LIFO

(2) Closing inventory values will be lower using periodic weighted

average rather than cumulative weighted average

Both 1 and 2
1 only
Neither 1 nor 2
2 only
Answer d

17 In an inventory control system, what is normally meant by

free inventory?
Inventory which is in transit from warehouse to customer
Inventory which is in transit from supplier to warehouse
Inventory which is available for promotional offers
Inventory which is available for new orders from customers
Answer d

18 Which TWO of the following statements relating to management

accounting information are TRUE?
No strict rules govern the way in which the information is presented
It may be presented in monetary or non-monetary terms
There is usually a legal requirement for the information to be produced
It is produced for parties external to the organisation
Answer A and B

19 Demand for the product is 2,000 units per year and is even
throughout the year. The cost of holding one unit of inventory is $12
per year and the cost of placing an order is $30.

The EOQ Model is used to determine the order size of the products.
What is the length of time between the receipts of consecutive
order from the supplier from this product (to nearest day assuming
365 days a year)?

Answer 18 days, 18

20. what is the correct entry to record the direct wages charged
to production

1 dr wages control account cr production overhead control account

2 dr production overhead control account cr wages control account

3 dr wages control account cr work in progress

4 dr work in progress cr wages control account

Correct answer d

21. a company had a staff of 3000 at the beginning of year.

During year 340 new staff were recruited to replace employees
who had left. At the end of the year the total number of staff
was 2200.

What was the labour turnover rate for the year (to nearest
1%)Answer 13%

22. a business uses 65000 units of an inventory every year, and works
52 weeks per year. There is a delay of three weeks between placing an
order for the item and receiving it.

What should be set as a reorder level to ensure that the inventory

arrives just it is needed?
Answer 3750

23 which managerial process is used at the end of financial period,

when actual results are compared with the budget and action taken ?

1. planning

2. decision making

3. control

a. 1 and 2. B. 2 only. C. 2 and 3 d. 3 only

Correct answer d

24 which of the following are feature of a group bonus scheme ?

1. Individual effort is recognized and rewarded

2. Increased co operation between worker

3. Lower administration cost compared to an individual bonus

scheme

4. Bonuses reflects length of employment and position.

a. 2 and 3 b. 3 and 4 c. 2 and 4 d 1 and 2

Correct answer a

25 relevant detail on an item of inventory are as follows:

Annual demand 1000 units

Purchase cost $150 per unit

Holding cost $ 10 per unit

Ordering cost $ 200 per order

EOQ 200 units

What is the change in total annual holding cost if the inventory

increases its order quantity to 250 units to take advantage of
the discount?

a. Increase of $ 237.50

b.Increase of $ 187.50

c. Increase of $ 500

d. Increase of $ 250

Answer d