1 Which of the following would normally be carried out by higher level management?

1 Day to day planning and control

2 Defining the objectives of the business
3 Making strategic decisions
A 2 and 3
B 1, 2 and 3
C 1 and 3
D 1 and 2 ( )

2 The total cost of production for two levels of activity is as follows:

Level 1 Level 2
Production (units) 3,000 5,000
Total cost ($) 6,750 9,250

The variable production cost per unit and the total fixed production cost both remain
constant in the range of activity shown.

What is the variable production cost per unit?

A $0.80
B $1.25
C $1.85
D $2.25 ( )

3 A manufacturing company has four types of cost (identification as T1, T2, T3 and
T4). The total cost of each type at two different production levels is:

Total cost for Total cost for

Cost Type 125 units 180 units
$ $
T1 1,000 1,260
T2 1,750 2,520
T3 2,475 2,826
T4 3,225 4,644

Which two cost types would be classified as being semi-variable?

A T1 and T3
B T1 and T4
C T2 and T3
D T2 and T4 ( )
4 A company has recorded its total cost for different levels of activity over the last five
months as follows:
Month Activity level (units) Total coast ($)
7 300 17,500
8 360 19,500
9 400 20,500
10 320 18,500
11 280 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.

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 ( )

5 Which of the following correlation coefficients indicates the weakest relationship

between two variables?

A + 1.0
B + 0.4
C - 0.6
D -1.0 ( )

6 Connie Furwood estimates the following probabilities of returns on an investment

she has made depending on the behaviour of the economy,

Estimated return
Probability %
Boom 0.10 13
Normal 0.65 8
Recession 0.25 5

What is the expected return on Connie’s investment?

A 9.00%
B 8.67%
C 7.75%
D 8.00% ( )
7 There are 27,500 units of part number X35 on order with the suppliers and 16,250
units outstanding on existing customers’ orders.
If the free inventory is 13,000 units, what is the physical inventory?
A 1,750
B 3,250
C 24,250
D 29,250 ( )

8 Data relating to a particular stores item as follows:

Average daily usage 400 units
Maximum daily usage 520 units
Minimum daily usage 180 units
Lead time for replenishment of inventory 10 to 15 days
Reorder quantity 8,000 units
What is the reorder level (in units) which avoids stockouts (running out of inventory)?

A 5,000
B 6,000
C 7,800
D 8,000 ( )

9 An organization’s stock records for last month show the following transactions in respect
of one item:
Date receipts issues stock
(units) (units) (units)
1st 300
5th 100 200
13th 600 800
th
20 300 500
28th 200 300

The opening stock was valued at a total cost of $9,300 and all receipts on the 13th were
purchased at a cost of $33 per unit.
The organization uses the weighted average method of valuation and calculates a new
weighted average after each stores receipt.

What was the total value of the closing stock?

A $9,500
B $9,700
C $9,750
D $9,900 ( )
10 An employee is paid on a piecework basis. The basis of the piecework scheme is
as follows:
1 to 100 units - $0.20 per unit
101 to 200 units - $0.30 per unit
201 to 299 units - $0.40 per unit

With only the additional units qualifying for the higher rates. Rejected units do not
qualify for payment.
During a particular day the employee produced 210 units of which 17 were
rejected as faulty.
What did the employee earn for their day’s work?

A $47.90
B $54.00
C $57.90
D $63.00 ( )

11 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?
A $2,000
B $2,400
C $2,840
D $4,400 ( )
12 A factory consists of two production cost centres (P and Q) and two service cost
centres (X and Y). The total allocated and apportioned overhead for each is as
follows:
P Q X Y
$95,000 $82,000 $46,000 $30,000

It has been estimated that each service cost centre does work for the other cost centres
in the following proportions:
P Q X Y
Percentage of service cost centre X to 40 40 - 20
Percentage of service cost centre Y to 30 60 10 -

After the reapportionment of service cost centre costs has been carried out using a
method that fully recognises the reciprocal service arrangments in the factory, what is the
total overhead for production cost centre P?

A $122,400
B $124,716
C $126,000
D $127,000 ( )

13 A company manufactures two products, X and Y, in a factory divided into two

production cost centres, Primary and Finishing. The following budgeted data are
available:

Cost Centre Primary Finishing

Allocated and apportioned fixed
Overhead costs $96,000 $82,500
Direct labour minutes per unit:
- product X 36 25
- product Y 48 35

Budgeted production is 6,000 units of product X and 7,500 units of product Y. Fixed
overhead costs are to be absorbed on a direct labour hour basis.

What is the budgeted fixed overhead cost per unit for product Y?

A $11
B $12
C $14
D $15 ( )
14 A company produces and sells a single product whose variable cost is $6 per unit.
Fixed costs have been absorbed over the normal level of activity of 200,000 units and
have been calculated as $2 per unit.
The current selling price is $10 per unit.
How much profit is made under marginal costing if the company sells 250,000 units?

A $500,000
B $600,000
C $900,000
D $1,000,000 ( )

15 The overhead absorption rate for product T is $4 per machine hour. Each unit of T
requires 3 machine hours. Inventories of product T last period were:
Units
Opening inventory 2,400
Closing inventory 2,700

Compared with the marginal costing profit for the period, the absorption costing profit
for product T will be:

A $1,200 higher
B $3,600 higher
C $1,200 lower
D $3,600 lower ( )

16 A company has the following budgeted information for the coming month:
Budgeted sales revenue $500,000
Budgeted contribution $200,000
Budgeted profit $50,000
What is the budgeted break-even sales revenue?

A $125,000
B $350,000
C $375,000
D $450,000 ( )

17 An organisation manufactures a single product which is sold for $60 per unit. The
organization’s total monthly fixed costs are $54,000 and it has a contribution to sales
ratio of 40%. This month it plans to manufacture and sell 4,000 units.
What is the organisation’s margin of safety this month (in units)?

A 1,500
B 1,750
C 2,250
D 2,500 ( )
18 Adverse material price variance cannot be caused by:

A market changes in demand and supply of material

B poor quality raw materials
C Unskilled workers.
( )

Use the following information to solve questions 19 - 20

Jackstar has a standard variable overhead rate of $4 per machine hour, and each unit produced
has a standard time allowed of three hours. The company’s budget was based on 50,000 units.
Actual results for the year follow.
Actual units produced : 45,000
Actual machine hours worked : 120,000
Actual variable overhead incurred : $500,000

19 Jackstar’s variable-overhead spending variance:

A $40,000 adverse
B $60,000 favorable
C $20,000 adverse
D $50,000 favorable ( )

20 Jackstar’s variable-overhead efficiency variance is:

A $40,000 adverse
B $60,000 favorable
C $20,000 adverse
D $50,000 favorable
( )

21 Which of the following statements is correct?

A A stores ledger account will be updated from a goods received note only
B The term 'lead time' is best used to describe the time between receiving an order
and paying for it
C Authorisation is required to make an issue from stores
( )
22 A company manufactures and sells a single product. The following data relate to a
weekly output of 2,880 units:
$ per unit $ per unit
Selling price 80
Less costs:
Variable production 30
Other variable 10
Fixed 25
(65)
Profit 15

What is the weekly break-even point (in units)?

A 900
B 1,440
C 1,800
D 4,800 ( )

23. The order quantity of a raw material is 450 kg. A safety stock of 120 kg is planned to be
held, the annual stock holding cost of the material is $4 per kg and total purchases in a
year are 3,000 kg.

What is the total annual stock-holding cost of the raw material?

Ans :___

24 The following process account has been drawn up for the last month:

Process account
Units $ Units $
Opening WIP 250 3,000 Normal loss 225 450
Input: Output 4,100
Materials 4,500 22,500 Abnormal Loss 275
Labour 37,500 Closing WIP 150
______ _______
4,750 4,750
====== =======

Work in progress has the following level of completion:

Material Labour
Opening WIP 100% 40%
Closing WIP 100% 30%
 The company uses the FIFO method for valuing the output from the process and all
losses occurred at the end of the process.

What were the equivalent units for labour?

A 4,380 units
B 4,270 units
C 4,320 units
D 4,420 units ( )

25 Perth operates a process costing system. The process is expected to lose 25% of input
and this can be sold for $8 per kg.
Inputs for the month were:
Direct materials 3,500 kg at a total cost of $52,500
Direct labour $9,625 for the period

There is no opening or closing work in progress in the period. Actual output was 2,800
kg.
What is the valuation of the output?

A $44,100
B $49,700
C $58,800
D $56,525 ( )
26 A company uses process costing to value its output. The following was recorded for the
period:
Input materials 2,000 units at $4.50 per unit
Conversion costs $13,340
Normal loss 5% of input valued at $3 per unit
Actual loss 150 units
There were no opening or closing stocks.
What was the valuation of one unit of output to one decimal place?

A $11.8
B $11.6
C $11.2
D $11.0 ( )

27 A company is considering its option with regard to a machine which cost $60,000 four
years ago. If sold the machine would generate scrap proceeds of $75,000. If kept, this
machine would generate net income of $90,000.
The current replacement cost for this machine is $105,000.
What is the relevant cost of the machine?

A $105,000
B $90,000
C $75,000
D $60,000 ( )

28 A company is evaluating a project that requires 4,000 kg of a material that is used

regularly in normal production. 2,500 kg of the material, purchased last month at a total
cost of $20,000, are in inventory. Since last month the price of the material has increased
by 2.5 per cent.
What is the total relevant cost of the material for the project?

A $12,300
B $20,500
C $32,300
D $32,800 ( )
29 A contract is under consideration that requires 800 labour hours to complete. There are
450 hours of spare labour capacity for which the workers are still being paid the normal
rate of pay. The remaining hours required for the contract can be found either by
overtime working paid at 50% above the normal rate of pay or by diverting labour from
the manufacture of product OT. If the contract is undertaken and labour is diverted, then
sales of product OT will be lost. Product OT takes seven labour hours per unit to
manufacture and makes a contribution of $14 per unit. The normal rate of pay for labour
is $8 per hour.
What is the total relevant labour cost to the contract?

A $3,500
B $4,200
C $4,500
D $4,900 ( )

30 A company requires 600 kg of raw material Z for a contract it is evaluating. It has 400 kg
of material Z in inventory that was purchased last month. Since then the purchase price of
material Z has risen by 8% to $27 per kg. Raw material Z is used regularly by the
company in normal production.
What is the total relevant cost of raw material Z to the contract?

A $15,336
B $15,400
C $16,200
D $17,496 ( )

31 In a short-term decision-making context, which ONE of the following would be a

relevant cost?

A Specific development costs already incurred.

B The cost of special material which will be purchased.
C Depreciation on existing foxed assets.
D The original cost of raw materials currently in stock which will be used on
the project.
( )
32 GR is currently experiencing a shortage of skilled labour. In the coming quarter only
3,600 hours will be available for the production of the firm’s three products of which
details are shown below:

Product X Y Z
Selling price per unit $66 $100 $120
Variable cost per unit $42 $75 $90
Fixed cost per unit $30 $34 $40
Skilled labour per unit 0.40 hours 0.50 hours 0.75 hours
Maximum quarterly demand 5,000 5,000 2,000

The optimum production plan that will maximise profit for the quarter is:

Xs Ys Zs
A 0 2,200 2,000
B 5,000 200 2,000
C 5,000 3,200 0
D 9,000 0 0 ( )

33 A process has a normal loss of 10% and budgeted output is 4,500 litres for the period.
Opening inventory of raw material is 600 litres and is expected to increase by 20% by the
end of the period.
The material usage budget is:

A 4,500 litres
B 5, 000 litres
C 5,133 litres
D 5,120 litres ( )

34 A company makes three products X, Y and Z. The following information is

available:
X Y Z
Budgeted production (units) 200 400 300
Machine hours per unit 5 6 2
Variable overheads $2.30 per machine hour
Fixed overheads $0.75 per machine hour
The overhead budget is:

A $10,980
B $12,200
C $12,000
D $11,590 ( )
35 Which of the following would be considered to be an investment centre?
A Managers have control over marketing.
B Management has a sales team.
C Management has a sales team and is given a credit control function.
D Managers can purchase capital assets and are given a credit control function.
( )

36 ABC Limited uses an absorption costing system, and manufactures a single

product. Each unit of this product requires 12 labour hours to complete.

For a particular accounting period, the normal level of activity was 30,000 units, although
34,500 units were produced. Fixed overheads are absorbed at a rate of $9 per direct
labour hour.
What was the under or over absorption of fixed overheads in the period?

A $40,500 under-absorbed
B $40,500 over-absorbed
C $486,000 over-absorbed
D $54,000 over-absorbed
( )

37 A company determines its order quantity for a raw material by using the Economic Order
Quantity
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 ( )
 38 BAK Limited uses linear programming to establish the optimal production plan for
the production of its two products, A and U, given that it has the objective of minimising
costs. The following graph has been established bearing in mind the various constraints of the
business. The dotted area indicates the feasible region.

Which points are the most likely to give the optimal solution?
A A and B only
B B, D and E only
C D and E only
D A, B and C only ( )

39 Which department would normally be responsible for completing a standard purchase

requisition for goods in a service organisation?
A The buying (purchasing) department
B The department that requires the goods
C The goods inwards department
( )
40 A cost is described as staying the same over a certain activity range and then increasing
but remaining stable over a revised activity range in the short term.
What type of cost is this?
A A fixed cost
B A variable cost
C A semi-variable cost
D A stepped fixed cost ( )

41 The following statements relate to business objectives:

(i) The short-term objectives of an organisation are described in very general terms.
(ii) Corporate objectives relate to the organisation as a whole.
(iii) It is possible for a division of an organisation to have its own specific objectives.
Which of the above are correct?
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
( )

42 Which one of the following groups of workers would be classified as indirect labour?
A Machinists in an organisation manufacturing clothes
B Bricklayers in a house building company
C Maintenance workers in a shoe factory
( )

43 Which of the following is NOT correct?

A Management accounting provides appropriate information for decision-making,
planning, control and performance evaluation
B Routine information can be used for both short-term and long run decisions
C Cost accounting can be used for stock valuation to meet the requirements of
internal reporting only
( )
44 Atlanta Inc, which uses the high-low method to analyze cost behavior, has determined
that machine hours best explain the company’s utilities cost. The company’s relevant
range of activity varies from a low of 600 machine hours to a high of 1,100 machine
hours, with the following data being available for the first six months of the year:
Month Utilities Machine Hours
January $8,700 800
February 8,360 720
March 8,950 810
April 9,360 920
May 9,625 950
June 9,150 900
Using the high-low method, the utilities cost associated with 980 machine hours would be:
A $9,510
B $9,660
C $9,700
D $9,790
( )

45 Hill Limited sells a single product. In the coming month, it is planned that this product
will generate a total revenue of $300,000 with a total contribution of $125,000. Fixed
costs are $100,000 per month.
What is the margin of safety?

A 20%
B 30%
C 40% ( )

46 Which of the following best describes joint products?

A Two or more products output from the same process which have significant sales
value but which are indistinguishable up to the point of separation
B Two or more products output from a process which require further processing
before being completed and available for sale
C Two or more products output from a process recognised by a relatively low sales
value compared to the main output produced
( )
47 A company carry out work to customer order. A job costing system is used to collect
production cost on each customer order. Non production overhead are applied to each job
at 15% of total production cost.
The following information relates to job ABC which has been completed by the
company.
Department X Y
Direct material used ( $ ) 6,700 1,260
Direct labour hour worked 246 98
Direct labour rate $ per hour 8.00 10.00
Production overhead $ per direct labour hour 12.00 12.00

What is the total production cost of job ABC?

Ans :____ ______

48 What will be the effect of increasing the re-order level?

A There will be a decrease in stock-out costs
B There will be a decrease in holding costs
( )

49 In which cost classification would the amount of overtime premium contained in

direct wages normally appear?
A Direct labour cost
B Production overhead
C Prime cost ( )

50 Completed output from a process was 6,690 units. At the beginning of the period, 410
units were in work in progress, 50% completed as to conversion cost. At the end of the
period, 630 units were in work in progress, 70% completed as to conversion costs.

What are the equivalent unit of production in the period relating to conversion cost?
Ans :_ ______ equivalent units