FINALTERM EXAMINATION
Fall 2009
MGT402- Cost & Management Accounting (Session - 3)
Time: 120 min
Marks: 84
| Student Info | |
| ExamDate: | 2/22/2010 12:00:00 AM |
Question No: 1 ( Marks: 1 ) - Please choose one
All of the following are a part of Planning Process EXCEPT:
► Identifying the objectives
► Search for alternative actions
► Data gathering for alternatives
► Selection of a fixed action
Question No: 2 ( Marks: 1 ) - Please choose one
All of the following indicate the problems in traditional budget EXCEPT:
► Programmes and activities involving wasteful expenditure are identified, resulting in unavoidable financial and other costs
► Inefficiencies of a prior year are carried forward in determining subsequent years’ levels of performance
► Managers are not encouraged to identify and evaluate alternate means of accomplishing the same objective
► Decision-making is irrational in the absence of rigorous analysis of all proposed costs and benefits
Question No: 3 ( Marks: 1 ) - Please choose one
The chief financial officer is also known as the:
► Controller
► Staff accountant
► Auditor
► Finance director
Question No: 4 ( Marks: 1 ) - Please choose one
When purchases are added to raw material opening Inventory, we get the value of:
► Material consumed.
► Material available for use.
► Material needed.
► Raw material ending inventory.
Question No: 5 ( Marks: 1 ) - Please choose one
For manufacturing entities inventories are classified into ---------- categories?
► One
► Two
► Three
► Four
Question No: 6 ( Marks: 1 ) - Please choose one
When prices are rising over time, which of the following inventory costing methods will result in the lowest gross margin?
► FIFO
► LIFO
► Weighted Average
► Cannot be determined
Question No: 7 ( Marks: 1 ) - Please choose one
All of the following are unavoidable causes of labor turnover EXCEPT:
► Retirement and death leading to labor turnover
► Domestic responsibilities—to look after old parents
► Accident or illness rendering workers permanently incapable to work
► Unfair methods of promotion and lack of promotions avenues
Question No: 8 ( Marks: 1 ) - Please choose one
The term cost allocation is described as:
► The costs that can be identified with specific cost centers.
► The costs that can not be identified with specific cost centers.
► The total cost of factory overhead needs to be distributed among specific cost centers.
► None of the given options
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following statement is true ragarding Repeated distribution method?
► The re-allocation continues until the numbers being dealt with become very small
► The re-allocation continues until the numbers being dealt with become very Large
► The re-allocation continues until the numbers being dealt with become small
► None of the given options
Question No: 10 ( Marks: 1 ) - Please choose one
Which of the following is TRUE regarding the use of blanket rate?
► The use of a single blanket rate makes the apportionment of overhead costs unnecessary
► The use of a single blanket rate makes the apportionment of overhead costs necessary
► The use of a single blanket rate makes the apportionment of overhead costs uniform
► None of the given options
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following is/are reported in production cost report?
► The costs charged to the department
► How the costs were assigned to the output?
► The equivalent units of production by the department
► All of the given options
Question No: 12 ( Marks: 1 ) - Please choose one
In the process costing when labor is charged to production department no 1. What would be the journal entry Passed?
► Payroll a/c
To W.I.P (Dept-I)
► Payroll a/c
To W.I.P (Dept-II)
► W.I.P (Dept-I)
To Payroll a/c
► W.I.P (Dept-II)
To Payroll a/c
Question No: 13 ( Marks: 1 ) - Please choose one
Materials Costs (Rs.) Conversion Costs (Rs.)
Work-in-process, May 1 46,000 78,000
Current costs (May) 92,000 124,000
Total cost 138,000 202,000
If the equivalent units of production under weighted average costing were 40,000 and 50,000 for materials and conversion costs, respectively, what are the costs per equivalent unit?
► Rs. 1.15, Rs.1.56
► Rs.1.76, Rs.1.94
► Rs. 2.30, Rs. 2.48
► Rs. 3.45, Rs. 4.04
Question No: 14 ( Marks: 1 ) - Please choose one
In comparing common cost and joint cost:
► The terms can be correctly used interchangeably
► Both have the same objective of assigning production cost to cost center
► They differ since common cost products or services have been obtained separately
► Common cost is sometime used as Joint cost
Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following concept is used in absorption costing?
► Matching concept
► Cost concept
► Cash concept
► None of the given options
Question No: 16 ( Marks: 1 ) - Please choose one
Good Job Plc makes one product which sells for Rs. 80 per unit. Fixed costs are Rs. 28,000 per month and marginal costs are Rs. 42 per unit. What sales level in units will provide a profit of Rs. 10,000?
► 350 units
► 667 units
► 1,000 units
► 1,350 units
Question No: 17 ( Marks: 1 ) - Please choose one
Which of the following costs are treated as period costs under direct costing?
► Only direct cost
► Fixed selling and administrative expenses
► Fixed manufacturing overhead
► Both fixed manufacturing overhead and fixed selling and administrative expenses
Question No: 18 ( Marks: 1 ) - Please choose one
Variable costing is also known as:
► Direct Costing
► Marginal Costing
► Both Direct Costing & Marginal Costing
► Indirect Costing
Question No: 19 ( Marks: 1 ) - Please choose one
Cost volume Profit analysis (CVP) is a behavior of how many variables?
► 2
► 3
► 4
► 5
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following costs do NOT change when the activity base fluctuates?
► Variable costs
► Discretionary costs
► Fixed costs
► Mixed costs
Question No: 21 ( Marks: 1 ) - Please choose one
The break-even point is the point where:
► Total sales revenue equals total expenses (variable and fixed)
► Total contribution margin equals total fixed expenses
► Fixed cost plus Profit is equal to contribution margin
► All of the given options
Question No: 22 ( Marks: 1 ) - Please choose one
In process costing, a joint product is
► A product which is later divided in to many parts
► A product which is produced simultaneously with other products and is of similar value to at least one of the other products
► A product which is produced simultaneously with other products but which is of a greater value than any of the other products
► A product produced jointly with another organization
Question No: 23 ( Marks: 1 ) - Please choose one
Eclair Ltd manufactured three products,JP,1,JP2,JP,3 with the following cost of raw material 10,000 kg,cost Rs,24,000 and conversion cost is Rs,28,000.
| Out-Put | Production,Kg | sales price, per Kg |
| JP,1 | 4,000 | 11 |
| JP,2 | 3,000 | 10 |
| JP,3 | 1,000 | 26 |
Process costs are apportioned on a sales value basis.
Required: What was the apportioned cost for JP3.
► Rs. 52,000
► Rs. 13,520
► Rs. 15,600
► Rs. 22,880
Question No: 24 ( Marks: 1 ) - Please choose one
The little Rock Company shows fixed expenses of Rs. 12,150 and Margin of safety ratio is 25% and Break even sales is Rs. 40, 500. If contribution margin ratio is 30% what would be the actual sales?
► Rs. 40,500
► Rs. 54,000
► Rs. 12,150
► Rs. 4,050
Question No: 25 ( Marks: 1 ) - Please choose one
All of the following are assumptions in constructing a Break even chart EXCEPT:
► There is no change of time value of money
► Price of cost factors remains constant
► Long term period will be considered
► Cost is affected by volume
Question No: 26 ( Marks: 1 ) - Please choose one
If a firm is using activity-based budgeting, the firm would use this in place of which of the following budgets?
► Direct labor budget
► Direct materials budget
► Revenue budget
► Manufacturing overhead budget
Question No: 27 ( Marks: 1 ) - Please choose one
Hogan Company plans to produce 5,000 wooden tables. Each table requires 10 bd. Ft. of lumber at a price of Rs. 2.50 per bd. Ft. The desired beginning and ending inventories of lumber are 10,000 and 20,000 board feet, respectively. The total direct materials purchase cost for lumber is:
► Rs. 100,000
► Rs. 12,500
► Rs. 175,000
► Rs. 150,000
Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following budgets provide information for preparation of the owner's equity section of a budgeted balance sheet?
► Sales budget
► Cash budget
► Capital expenditures budget
► Budgeted income statement
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following is NOT example of a cash outflow?
► Cash drawings
► Purchase of new equipment
► Commission paid
► Depreciation
Question No: 30 ( Marks: 1 ) - Please choose one
When using a flexible budget, what will occur to variable costs (on a per unit basis) as production increases?
► Variable costs are not considered in flexible budgeting
► Variable costs per unit will decrease
► Variable costs per unit will remain unchanged
► Variable costs per unit will increase
Question No: 31 ( Marks: 1 ) - Please choose one
A relevant cost or benefit is one that will be affected by the decision. Which of the following should be regarded as relevant in the decision-making process?
► Fixed overheads
► Notional costs
► Sunk costs
► Opportunity costs
Question No: 32 ( Marks: 1 ) - Please choose one
Decision making should be based on all of the following relevant costs features EXCEPT:
► Relevant Costs are future costs
► Relevant Costs are cash flows
► Relevant Costs are incremental costs
► Relevant Costs are sunk costs
Question No: 33 ( Marks: 1 ) - Please choose one
In a make or buy situation with no limiting factors, which of the following would be the relevant costs for the decision?
► Opportunity costs
► Differential costs between the two options
► Sunk costs
► Implied costs
Question No: 34 ( Marks: 1 ) - Please choose one
In one off contracts, a contract will probably be accepted if:
► It increases contribution margin and decreases profit
► It increases both contribution margin and profit
► It reduces contribution margin and increases profit
► It reduces both contribution margin and profits
Question No: 35 ( Marks: 1 ) - Please choose one
The following monthly data are available for the Boarder, Inc. and its only product: Unit sales price = Rs. 36 Unit variable expenses = Rs. 28 Total fixed expenses = Rs. 50,000 Actual sales for the month of May = 7,000 units. The margin of safety for the company for May was:
► Rs. 6,000
► Rs. 27,000
► Rs. 56,000
► Rs. 106,000
Question No: 36 ( Marks: 1 ) - Please choose one
Under perpetual Inventory system at the end of the year:
► No closing entry passed
► Closing entry passed
► Closing value find through closing entry only
► None of the above.
Question No: 37 ( Marks: 1 ) - Please choose one
Details of the process for the last period are as follows:
| Materials | 5,000 Kgs at 0.50 per Kg |
| Labor | Rs.700 |
| Production overheads | 200% of labor |
Normal losses are 10% of input in the process. The out put for the period was 4,200Kg from the process. There was no opening and closing Work- in- process. What were the units of abnormal loss?
► 500 units
► 300 units
► 200 units
► 100 units
Question No: 38 ( Marks: 1 ) - Please choose one
A cost that has been incurred but cannot be changed by present or future decisions is called:
► Sunk cost
► Differential cost
► Opportunity cost
► Marginal cost
Question No: 39 ( Marks: 1 ) - Please choose one
If an item of overhead expenditure is charged specifically to a single department this would be an example of:
► Apportionment
► Allocation
► Re-apportionment
► Absorption
Question No: 40 ( Marks: 1 ) - Please choose one
When By-product is to be recycled, which one of the following will be used for costing?
► Costing approach
► Sale approach
► Expense approach
► Asset approach
Question No: 41 ( Marks: 1 ) - Please choose one
What would be the margin of safety ratio based on the following information?
· Sales price = Rs. 100 per unit
· Variable cost = Rs. 25 per unit
· Fixed cost = Rs. 50 per unit
► 25%
► 33.333%
► 66.666%
► 75%
Question No: 42 ( Marks: 1 ) - Please choose one
What is the starting point of variable cost line on a break even chart at zero production level?
► It must start from origin
► It might start from origin
► It does not start from origin
► Non of the given options
Question No: 43 ( Marks: 1 ) - Please choose one
All of the following describe forecasting EXCEPT:
► It allows you to create budget amounts, and then track how well you are staying within those amounts
► It is a projected cash flow for the future, based on scheduled transactions and estimated amounts
► A prediction of customer demand used to calculate future inventory levels
► Predicting current and future market trends using existing data and facts
Question No: 44 ( Marks: 1 ) - Please choose one
Which of the following is NOT considered as external factor while preparing the sales budget?
► Availability of materials or supplies
► Governmental rules
► Market fluctuations
► Competitor’s success
Question No: 45 ( Marks: 1 ) - Please choose one
If estimated direct labour cost is Rs. 50,000 for producing 2,400 units then what is the amount of FOH cost if FOH cost is assumed as 50% of direct labor cost?
► Rs. 25,000
► Rs. 1,200
► Rs. 26,200
► Cannot be calculated
Question No: 46 ( Marks: 1 ) - Please choose one
Which of the following item is NOT included in FOH cost budget?
► Indirect material cost
► Indirect labor cost
► Power and fuel
► Direct material cost
Question No: 47 ( Marks: 1 ) - Please choose one
Which of the following is the best example of a fixed administrative expense?
► Rent of building used for office
► Commission paid
► Repair and maintenance
► Stationery expense
Question No: 48 ( Marks: 1 ) - Please choose one
Which of the following statement is TRUE about historical cost?
► It is always relevant to decision making
► It is always irrelevant to decision making
► It is always an opportunity cost
► It is always realizable value
Question No: 49 ( Marks: 3 )
Break even chart is the useful technique for showing relationship between costs, volume and profits. Identify the components of break even chart.
Question No: 50 ( Marks: 3 )
Briefly describes the importance of material budget.
Question No: 51 ( Marks: 5 )
Garrett Company sells hand-crafted furniture. One item it sells is a small table that sells for Rs. 30 per unit. The variable costs related to the table, including product and shipping costs, are Rs. 18 per unit. Total fixed costs for the company are Rs. 60,000. Assume the tables are the only product the company sells this year and draw a CVP graph to represent the company’s sales and expenses. From this graph, compute the approximate breakeven point in rupees and units.
Question No: 52 ( Marks: 5 )
A textile company anticipates the following unit sales during the four months of 2008.
| Months | April | May | June | July |
| Sales units | 20,000 | 30,000 | 25,000 | 40,000 |
The company maintains its ending finished goods inventory at 60% of the following month’s sale. The April1st, finished goods inventory will be 12,000 units.
Required: Prepare a production budget for second quarter of year.
Question No: 53 ( Marks: 10 )
The Midnight Corporation budget department gathered the following data for the third quarter:
| | July | August | September |
| Projected Sales (units) | 1,000 | 1,500 | 1,450 |
| Selling price per unit (Rs.) | 40 | 40 | 40 |
| Direct material purchase requirement (units) | 1,300 | 2,000 | 1,800 |
| Purchase cost per unit materilal (Rs.) | 20 | 20 | 20 |
| Production units required to calculate labor cost | 800 | 1,300 | 1100 |
Additional information
| Direct labor hours | 2 per complete unit |
| Direct Labor rate | Rs. 2 per direct labor hour |
| Fixed factory overhead | Rs. 500 per month including Rs. 200 depreciation |
| Variable factory overhead | Rs. 1.50 per direct labor hour |
| Selling and Admin expense | 5% of sales |
Net Income before tax is as follows:
| Months | Rs. |
| July | 6,000 |
| August | 10,000 |
| September | 8,000 |
All sales and purchases are for cash and all expenses are paid in the month incurred. Assuming that the opening cash balance on July 1st is Rs. 25,000 and tax rate is 40%,
Required:
Prepare cash budget for third quarter.
Question No: 54 ( Marks: 10 )
ABC company is currently deciding whether to undertake a new contract of 20 hours of labor will be required for the contract. The company currently producing product S the standard cost details of which are given below:
Standard Cost Card
Product S
Rs/unit
Direct Material 200
Direct Labor 300
500
Selling Price 700
Contribution margin 200
Requirement:
1. What is the relevant cost of labor if the labor must be hired from outside the organization?
2. What is the relevant cost of labor if the company expects to have 5 hours spare capacity?
3. What is the relevant cost of labor if the labor is in a short supply
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