1.

Here are three statements on the determination of overhead absorption rates:

(1) Costs can be allocated where it is possible to identify the department that caused
them.
(2) Costs need to be apportioned where they are shared by more than one
department.
(3) Service centre costs should not be included in unit overhead costs.
Which of these statements are correct?
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
2. In a typical cost ledger, what is the double entry for indirect labour cost
incurred?
A. DR Wages control CR Factory Overhead control
B. DR Admin overhead control CR Wages control
C. DR Factory Overhead control CR Wages control
D. DR Wages control CR Admin overhead control
3. A firm has the following transactions with its product R.
1 January 20X1 Opening inventory: nil

1 February 20X1 Buys 10 units at $300 per unit

11 February 20X1 Buys 12 units at $250 per unit

1 April 20X1 Sells 8 units at $400 per unit

1 August 20X1 Buys 6 units at $200 per unit

1 December 20X1 Sells 12 units at $400 per unit

The firm uses periodic weighted average cost (AVCO) to value its inventory.
What is the inventory value at the end of the year (amount to the nearest dollar)?
A. $nil
B. $2,057
C. $2,400
D. $2,007
4. The direct materials involved in the manufacture of a Whoopie cost $2 per unit
and the direct labour cost is $2.50 per unit. There are also direct expenses of $0.50
per Whoopie. Fixed costs apportioned to a Whoopie amount to $3.15.
What is the prime cost of a Whoopie? = 2+2,5+0,5 =
A. $3.65
B. $4.50
C. $5.00
D. $8.15
5. Which of the following is NOT CORRECT?

A. Contract costing is appropriate if each unit of production is unique and takes a

considerable length of time to complete.

B. Batch costing refers to a system where either job or process costing techniques are
used to manufacture a product.

C. Rectification costs should be charged to production overheads if the costs can not be
specifically traced to a job.

D. Job costing is required when each unit of production is unique and production is of
long duration.

6. A company has established a marginal costing profit of £72,300. Opening stock

was 300 units and closing stock is 750 units. The fixed production overhead
absorption rate has been calculated as £5/unit.

What was the profit under absorption costing? =72,300 + 450*5 = 74,550

A. £67,050
B. £70,050
C. £74,550
D. £77,550

7. A company which uses marginal costing has a profit of £37,500 for a period.
Opening stock was 100 units and closing stock was 350 units.

The fixed production overhead absorption rate is £4 per unit.

What is the profit under absorption costing?

A. £35,700
 B. £36,500
C. £38,500
D. £39,300

8. Which of the following statements concerning marginal costing is NOT true?

A. Contribution is calculated as sales revenue minus all variable costs.

B. Closing inventories are valued at full production cost. => should be variable
production cost

C. Fixed costs are treated as a period cost and are charged in full to the income statement
of the accounting period in which they are incurred.

D. Marginal cost is the cost of a unit which would not be incurred if that unit were not
produced.

9. A company manufactures two products P1 and P2 in a factory divided into two

cost centres, X and Y. The following budgeted data are available:

Cost centre
X Y
Allocated and apportioned fixed OH costs $88,000 $96,000
Direct labour hour(s) per unit
Product P1 3.0 1.0
Product P2 2.5 2.0
Budgeted output is 8,000 units of each product. Fixed overhead costs are absorbed on a
direct labour hour basis.

What is the budgeted fixed overhead cost per unit for Product P2?

A. $10
B. $11
C. $13
D. $14
Total labor hours of P1 and P2 (Y) = 8000+8000*2= 24000
Fixed overhead per unit = 96000/24000 = 4
Fixed overhead per unit P2 = 4*2 = 8
Tương tự vs Cost center X – Fixed overhead per unit P2 = 5
Total budgeted fixed overhead cost per unit for Product P2 = 5+8 = 13
10. A company operates a job costing system. Job number 605 requires £300 of direct
materials and £400 of direct labour. Direct labour is paid at the rate of £8 per hour.
Production overheads are absorbed at a rate of £26 per direct labour hour and non-
production overheads are absorbed at a rate of 120% of prime cost.

What is the total cost of job number 605? =300 + 400 + 50h*26 = 2000

A. £2,000
B. £2,400
C. £2,840
D. £4,400

11. The following information relates to a management consultancy organisation:

Salary cost per hour for senior consultants: £40

Salary cost per hour for junior consultants: £25

Overhead absorption rate per hour applied to all hours: £20

The organisation adds 40% to total cost to arrive at the final fee to be charged to a
client.

Assignment number 789 took 54 hours of a senior consultant’s time and 110 hours
of junior consultants’ time.

What is the final fee to be charged for Assignment 789?

A. £6,874
B. £10,696
C. £11,466
D. £12,642
Final fee = [40*54 + 25*110 + 20*(40+25)]*140% = 11,466

12. An organisation’s records for last month show the following in respect of one
particular stores item:

Date Receipts (units) Issues (units) Stock units

1st 200 200
4th 150 50
12th 500 550
19th 200 350
27th 300 50
The opening stock for last month was valued at a total of £4,000 and all receipts during
the month were purchased at a cost of £26.60 per unit. The organisation uses the
weighted average method of valuation and calculates a new weighted average price after
each stores receipt.

What was the total value of the issues during last month?????

A. £16,000
B. £16,900
C. £17,000
D. £17,290

13. A company has recorded its total cost for different levels of activity over the last
five months as follows:

Month Activity level (units) Total cost ($)

1 300 17,500
2 360 19,500
3 400 20,500
4 320 18,500
5 280 17,000
The equation for total cost is being calculated using regression analysis on the above
data. The equation for total cost is of the general form ‘y = a + bx’ and the value of ‘b’
has been calculated correctly as 29·53.

(Y – Total cost/ X – Variable cost/ X – 29.53/ N – 5)

a = (Total y)/ n - b * (total x)/n

What is the value of ‘a’ (to the nearest £) in the total cost equation?

A. 7,338
B. 8,796
C. 10,430
D. 10,995

14. A company uses standard absorption costing to value inventory. Its fixed
overhead absorption rate is $10 per labour hour and each unit of production should take
four hours. In a recent period where there was no opening inventory of finished goods,
20,000 units were produced using 100,000 labour hours. 18,000 units were sold. The
actual profit was $500,000.
What profit would have been earned under a standard marginal costing system?
A. $580,000
B. $520,000
C. $480,000
D. $420,000
15. Canberra has established the following information regarding fixed overheads
for the coming month:
Budgeted information:
- Fixed overheads: $180,000
- Labour hours: 3,000 hours
- Machine hours: 10,000 hours
- Units of production: 5,000 units
Actual fixed costs for the last month were $160,000. Canberra produces many different
products using highly automated manufacturing processes (=> Machine hours) and
absorbs overheads on the most appropriate basis.
What will be the pre-determined overhead absorption rate = 180,000/10,000 = 18
A. $16
B. $18
C. $36
D. $60
16. A company has two divisions, X and Y. Division X transfers one third of its output
to Y and sells the remainders to the external market for £21 per unit. The transfers to
division Y are made at the transfer price of cost plus 30%.

Division Y incurs costs of £6 per unit in converting the transferred units before selling
them to external customers for £30 per unit.

Division X costs amount to £15 per unit and the budgeted total output for the period is
300 units. There is no budgeted change in inventories for either division.

The reported profits for the period will be:

A. Division X: £1,650 profit; Division Y: £2,400 profit

B. Division X: £1,650 profit; Division Y: £1,050 profit
C. Division X: £1,650 profit; Division Y: £450 profit
D. Division X: £2,325 profit; Division Y: £225 loss
17. The following statement about inventory valuation method – LIFO is true or
false?
“With LIFO, inventories are issued at a price which is close to the current market
value.”
A. True
B. False
18. “The inventory valuation based on FIFO method can be near to a valuation
based on replacement cost.”

Is this true or false?

A. True
B. False

19. Product X has $10 of its cost per unit. The company charges $17 per unit. Is it
true or false if the margin earned by each unit is 70%?

A. True

B. False

20. “Period costs are costs that can be written off as expense – not included in stock
value.”

Is this true or false?

A. True
B. False

21. The total cost of production for three levels of production volume is as follows:
Production volume (units) Total cost ($)

200 7,000

300 8,000

400 9,000

What should total production cost expected to be at the activity level of 450 units ?

A. $9,500
B. $9,000
 C. $5,500
D. $5,000

22. “Idle time payment for direct operatives is treated as factory overheads”

Is this true or false?

A. True
B. False

23. Give the correct order for steps of applying ABC:

(i) Collect the costs associated with each activity into cost pools - 3
(ii) Identify major activities - 1
(iii) Charge costs of activities to products on the basis of their usage of the
activities - 4
(iv) Identify cost drivers which cause the costs of the activities - 2
A. (i), (ii), (iii), (iv)
B. (ii), (iv), (i), (iii)
C. (i), (ii), (iv), (iii)
D. (ii), (iv), (iii), (i)
24. The following statement is correct or incorrect?
“If inventory levels increase between the beginning and end of a period, absorption
costing will report the higher profit than marginal costing”
A. Correct
B. Incorrect
25. What kind of information is illustrated on the graph below?

A. It can be about total variable cost

B. It can be about total sale value
C. Both are correct
D. Both are incorrect