AMA Summer 22 Exam Preparation Final

Just-in-time philosophy: Manufacturing and purchasing strategies that
seek to reduce throughput time.

Moving time: The time it takes to move the product from one production
department to the next and the time to move it to and from storage.
Nonvalue-added time: This time includes inspection time, moving time,
waiting time, and storage time. It is also referred to as waste time.
Processing time: The actual time that a product is being worked on
Quality control: A continuous system of feedback necessary for decision
making to ensure optimum product quality.
Standard costing: Costing that is concerned with cost per unit that
should be incurred; standard costing serves basically the same purpose as
a budget.
Standard costs: Costs that are expected to be achieved in a particular
production process under normal conditions.
Static budget: A form of planning that shows anticipated costs at one
level of activity.
Storage time: The time that raw material and work in process remain in
storage before they are used by production department and finished
products before they are shipped to customers.
Throughput time: The time between the beginning of the production
department and finished products before they are shipped to customers.
Value-added time: Same as processing time.
Waiting or queue time: The time that the product remains in a
production department before it is worked on.
Waste time: Same as nonvalue-added time.
Zero defects: A program designed to eliminate defects in production.
Budget (controllable) variance: Difference between actual factory
overhead and budgeted factory overhead based on standard direct labor
hours allowed.
Combined price-efficiency variance: Direct material price variance per
unit multiplied by the difference between the actual quantities purchased
and the standard quantity allowed.
Direct labor efficiency variance: Difference between the actual direct
labor hours worked and the standard direct labor hours allowed multiplied
by the standard direct labor hour wage rate.
Direct labor price variance: Difference between the actual wage and
the standard wage per direct labor hour multiplied by the actual direct
labor hours worked.
Direct materials efficiency variance: Difference between actual
quantity of direct materials used and standard quantity allowed multiplied
by the standard unit price.
Direct materials price variance: Difference between actual unit price
and standard unit price of direct materials purchased multiplied by the
actual quantity purchased.
Factory overhead efficiency variance: Difference between actual direct
labor hours worked and standard direct labor hours allowed multiplied by
the standard variable factory overhead application rate.
Factory overhead price (spending) variance: Difference between
actual factory overhead and budgeted factory overhead based on actual
direct labor hours worked.
Favorable variance: The result when actual costs are less than standard
costs.
Production volume (denominator or idle capacity) variance:
Difference between the activity level used in the denominator for
establishing the factory overhead standard application rate and standard
application rate and standard direct labor hours allowed multiplied by the
standard fixed factory overhead application rate.
Pure direct materials price variance: Difference between the direct
materials price variance per unit and the standard quantity allowed.
Unfavorable variance: The result when actual costs are greater than
standard costs.
Variance: Difference arising when actual results do not equal standards,
because of either external or internal factors.
Disposition of variances: The end-of-period treatment of variance that
results from a standard cost system.
Immaterial or insignificant variances: Variances which don not have
to be prorated and which may be treated as period costs.
Proration of variances: Allocation of variances to the specific accounts
affected.
Absorption costing: The costing method under which all direct and
indirect production costs, including fixed factory overhead, are charged to
product costs.
Contribution margin: Sales less variable manufacturing, selling, and
administrative costs.
Direct costing: The costing method under which only production costs
which tend to vary with the volume of production are treated as product
costs.
External reports: Formal financial statements, such as the income
statement, balance sheet, and statement of cash flows, filed with
government regulatory agencies as required, or issued to stockholders.
Fixed factory overhead: The fixed costs, such as rent, insurance, and
taxes, required to provide or maintain facilities for manufacturing.
Gross profit: Sales less cost of goods sold.
Internal reports: The various cost, operating, and financial reports that
are prepared daily, weekly, monthly, etc., for internal management in
planning and controlling operations.
Variable factory overhead: The variable costs, such as indirect materials
and indirect labor, which are indirect costs needed in production.
Accept a special order: A common decision-making problem wherein a
company must decide whether it is beneficial or not to sell on a one-time
basis its product to a specific customer at a price below the normal selling
price.
By-product: A product of limited sales value produced simultaneously
with a product of greater value, known as main product.
Common costs: Those costs incurred to produce products
simultaneously, but each of the products could have been produced
separately.
Joint costs: Costs incurred up to the point in a given process where
individual products can be identified.
Joint product costs: Common cost factors shared by joint products which
are incurred prior to separation into individual joint products.
Joint products: Individual products of significant sales value which are
produced simultaneously and which are results of a common raw material
and/or a common manufacturing process.
Split-off point: The point in the production process wherein separate
products, either joint products or by-products, emerge.
Cost of quality: The cost associated with nonconformance to quality
standards. It consists of prevention costs, appraisal costs, internal failure
costs, and external failure costs.
Direct labor efficiency standard: Predetermined performance standards
in terms of the direct labor hours that should go into the production of one
finished unit.
Direct labor price (rate) standards: Predetermined wage rate per hour
Direct material efficiency (usage) standards: Predetermined
specifications of the quality of direct materials that should go into the
production of one finished unit.
Direct materials price standards: Predetermined amount of factory
overhead, per hour, for example, that should go into the production of one
finished unit:
Flexible budget: A form of budgeting that shows anticipated costs at
different activity levels.
Inspection time: The time spent to inspect the product to make sure it
conforms to production standards as it moves from one production
department to the next and before it is shipped to customers. Inspection
time also includes the time it takes to rework products that are found not
to conform to specifications.
Avoidable cost: A term used interchangeably with relevant cost.

Cost of prediction error: The relevant revenue lost or relevant cost
incurred because the company chose a course of action on the basis of
incorrect information; a course of action that would not have been chosen
on the basis of correct information.
Cost-plus-fixed-fee contract: A cost-type defense contract whereby the
government will pay all costs permitted under the all costs permitted under
the contract plus a fixed fee above the costs.
Cost-plus-incentive-fee contract: A cost-type defense contract
whereby the government agrees to reimburse the contractor on the basis
of a formula.
Decremental costs and revenues: A decrease in total costs and
revenues when one alternative course of action is compared to another.
Differential cost format: A format in which relevant costs and revenues
are presented for each alternative course of action.
Differential costs and revenues: Changes in total costs and revenues
which are attributable to alternative courses of action.
Elimination of a product line: A common decision making problem
wherein a company must decide whether it is beneficial or not to
discontinue the manufacture of a product line that appears, on a superficial
inspection, to be sustaining losses.
Escapable cost: A term used interchangeably with relevant cost.
Federal Procurement Regulation (FPR): Document containing the
principal regulations governing the sale of products and furnishing of
services to civilian agencies of the U.S. government.
Firm-fixed-price contract: One type of negotiated defense contract in
which the supplying contractor is given a firm price and is subject to the
risk that the actual costs to deliver the product or service will exceed the
firm price.
Fixed-price incentive contract: A cost-type defense contract whereby
the government and the contractor negotiate the following: a target profit,
a maximum price, and a formula for determining the final price and profit.
Full-cost pricing: Approach to product pricing which is based on total
manufacturing costs, CG&A, and a markup.
Incremental costs and revenues: An increase in total costs and
revenues when one alternative course of action is compared to another
alternative.
Inescapable cost: A term used interchangeably with irrelevant costs.
Make or buy: A common decision-making problem wherein a company
must decide whether it is beneficial to make a needed component or buy it
from an outside supplier.
Opportunity cost format: A format in which relevant costs and revenues
plus opportunity costs are presented for a single course of action.
Product or service mix-single constraint: A common decision-making
problem wherein a company must decide which product(s) or service(s)
should be offered in light of a single scarce resource.
Relevant costs and revenues: Future costs and revenues that will differ
between or among alternative courses of action.
Relevant qualitative data: Those consequences of a decision that
cannot be measured but should still be taken into consideration, such as
the impact of an alternative course of action on employee morale.
Relevant quantitative data: Costs and revenues that should be
considered by decision makers in choosing between or among alternative
courses of action.
Sell or process further in joint costing: A common decision-making
problem wherein a company must decide which of its joint products should
be sold at the split-off point or sold after additional processing.
Sunk cost: A cost incurred as a result of a past decision that is irrelevant
in decision making.
Target-return pricing: Approach to product pricing in which the markup
is based on a target return on the assets invested to produce the product.
Total cost format: A format in which relevant and irrelevant costs and
revenues are presented for each alternative course of action.
Unavoidable cost: A term used interchangeably with irrelevant cost.
Break-even point: The point, in terms of units or dollars, at which total
costs equal total revenue, and profit equals zero.
Contribution margin: Total revenue less total variable costs.
Contribution margin per unit: Selling price per unit minus variable cost
per unit.
Contribution margin ratio: Contribution margin per unit as a percentage
of the selling price.
Fixed costs: Costs which are not directly associated with production and
which remain constant for a relevant range of productive activity.
Margin of safety: The maximum percentage by which expected sales can
decline and profit can still be realized.
Mixed cost: Costs that are fixed up to a certain level of output but will
vary within certain ranges of output.
Regression analysis: A statistical technique that can be used to estimate
the relationship between cost and output.
Relevant range: The range of output over which the amount of total
fixed costs and unit variable costs remains constant.
Variable costs: Costs which are directly associated with producing a
product and which vary with the level of output.
Annuity: When the same dollar amount is to be paid or received in the
future.
Annuity due: An annuity in which the first amount to be paid or received
begins immediately.
Capital budgeting decision: Decisions that involve the long-term
commitment of a firm’s resources.
Cash flow for a period: For a given period, the difference between
additional dollars received and additional dollars paid out if an investment
project is undertaken.
Cash flow from operations: As used in this chapter, a project’s cash
flow for all years except year 0. In some textbooks, cash flow from
operations may mean the cash flow for all years including year 0.
Compound interest: An investment situation in which interest is earned
not only on the principal invested but also on the previous interest earned.
Contingent projects: A project which can only be accepted if some other
project is accepted.
Dependent projects: Same as contingent projects.
Discount rate: The interest rate used to determine the present value.
Discounted value: Same as present value.
Discounting: The process of obtaining the present value of a future
value.
Independent projects: A project whose expected cash flow is
independent of another project.
Initial net cash outlay: A project’s cash flow in year 0.
Modified Accelerated Cost Recovery System (MACRS) deductions:
Tax depreciation deductions allowed under the Internal Revenue Code.
Mutually exclusive projects: Projects are said to be mutually exclusive
if the acceptance of one precludes the acceptance of any of the other
projects in the group.
Ordinary annuity: An annuity in which the first amount to be paid or
received begins one period from now.
Present value: The amount of money that must be set aside today
earning a specified rate of interest in order to have a specified dollar
amount in the future.
Tax credit: Subject to specified limitations, a dollar-for-dollar reduction of
the tax liability.
Calculus: A tool of mathematics that can be used to determine the
optimal value of a mathematical function.
Coefficient of variation: A statistical measure found by dividing the
standard deviation by the expected value.
Compound event: In probability theory, an event that can be
decomposed into simple events.
Conditional probability: In probability theory, an event that can be
decomposed into simple events.
Cumulative probability distribution: A distribution function that sets
out the probability that a random variable will attain a value less than or
equal to a specific value for the random variable.
Decision criterion: The yardstick of performance employed to measure
the outcome of a decision.
Derivative of a mathematical function: In calculus, an operation that
is performed on a mathematical function.
Descriptive models: Models that are useful in predicting the outcome of
a decision under various assumptions.
Deterministic models: Models in which there is only one outcome or
environment.
Distribution free models: Models in which more than one environment
exists but for which probabilities of occurrence cannot be assigned to the
outcomes or environments.
Expected value: The weighted average of the random variable of a
probability distribution.
Joint probability: In probability theory, the probability where more than
one event occurs simultaneously.
Management science: A specialty area in business administration that
applies quantitative techniques to analyze and solve managerial problems.
Mutually exclusive events: In probability theory, two events or
outcomes which have nothing in common.
Normal deviate: Standardization of a random variable that is normally
distributed in order to use a normal distribution table.
Normal probability distribution: A probability distribution in which the
probabilities can be determined once the expected value and standard
deviation are known. It is a commonly used probability distribution in
business.
Objective probability: The approach to probability theory in which the
probability of an event is defined in terms of its relative frequency.
Opportunity loss: The difference between the best profit that could be
realized if that environment occurred and the profit that would be realized
for a given decision if that environment occurred.
Optimization models: Models that prescribe the best course of action
that the decision maker should pursue so as to achieve an objective.
Outcome matrix or outcome table: A matrix in which each cell shows
the outcome of a decision for a given state of nature or environment.
Pay-off matrix: An outcome matrix in which the outcome for each
environment is measured as dollar profits.
Probabilistic models: Models in which alternative outcomes or
environments exist.
Probability distribution or probability function: A function in which
the possible values that a random variable can take on are assigned
probabilities.
Random variable: A variable for which a probability can be associated
with each possible value that the variable can take on.
Regrets criterion: A decision criterion based on the opportunity loss.
Simple event: In probability theory, an event that cannot be decomposed
into other events.
Standard deviation: A measure of dispersion around the expected value
of a probability distribution. It is equal to the square root of the variance.
Standardized value: A procedure used to standardize a random variable
that is normally distributed so that a normal distribution table can be used.
Statistical independence: In probability theory, two events are
statistically independent if the occurrence of one does not affect the
probability of the other.
Stochastic dominance rules: Rules that can be employed to determine
whether one capital investment project is more attractive than other. The
rules are based on the underlying probability distribution of the projects
being compared.
Stochastic models: Same as probabilistic models.
Subjective probability: The approach to probability theory that
measures probabilities on the basis of the decision maker’s degree of belief
in the likelihood of the outcome of an event.
Value of perfect information: The difference between the expected
value of a decision assuming perfect information and the expected value of
a decision associated with the best course of action in the absence of
perfect information.
Variance: A measure of dispersion around the expected value of
probability distribution. The variance is equal to the square of the standard
deviation.
Contribution margin: The excess of sales over all variable costs,
including variable cost of goods sold, variable selling costs, and variable
administrative costs.
Cost variance: A variance due to a difference between budgeted and
actual per unit costs.
Earnings ratio: The percentage of investment center controllable income
to investment center controllable revenue (controllable income ÷
controllable revenue).
Investment turnover: The “efficient” use of assets as measured by the
relationship between investment center controllable revenues and
investment center controllable assets (controllable revenues ÷ controllable
assets).
Performance evaluation: The review process conducted by upper-level
management of the performance of a cost, profit, or investment center
manager.
Residual income (RI): The investment center controllable income less
investment center controllable assets multiplied by a company’s required
rate of return.
Residual income formula: Controllable income – (Controllable assets ×
Company’s required rate of return) = Residual income.
Return on investment (ROI): The investment turnover times the
earnings ratio.
Return on investment formula:
Controllable revenues Controllable income Controllable assets Controllable
revenues
(Investment turnover × Earnings ratio)
Under variable costing, fixed manufacturing overhead is:
A. expensed immediately when incurred.
B, never expensed.
C. Applied directly to Finished-Goods inventory.
D. Applied directly to Work-in-Process Inventory.
E. Treated in the same manner as variable manufacturing overhead.
2. The underlying difference between absorption costing and variable costing lies in
the treatment of:
A. direct labor.
B. variable manufacturing overhead.
C. fixed manufacturing overhead.
D. variable selling and administrative expenses.
E. fixed selling and administrative expenses.
3. All of the following costs are inventoried under absorption costing except:
A. direct materials,
B. direct labor.
C. variable manufacturing overhead.
D. fixed manufacturing overhead.
E fixed administrative salaries.
4. All of the following are inventoried under absorption costing except:
A. direct labor.
B. raw materials used in production.
C. Utilities cost consumed ¡n manufacturing.
D, sales commissions.
E. machine lubricant used in production.
Use the following information in solving multiple-choice questions 5 - 6.
Klinger Company incurred the following costs during the past year when
planned production and actual production each totaled 20,000 units:
Direct materials used Rs.240,000
Direct labor 120,000
Variable manufacturing overhead 160,000
Fixed manufacturing overhead 100,000
Variable selling and administrative costs
60,000 Fixed selling and administrative costs
90,000
5. If Kiinger uses variable costing, the total inventor able costs for the year would
be: A. Rs. 360,000
B. Rs. 420,000
C. Rs. 520,000
D. Rs, 580,000
E. Rs. 620000
6. The per-unit inventor able cost under absorption costing is:
A. Rs. 9.50
B. Rs. 23.00
C. Rs. 26.00
D. Rs 31.00 ,
E. Rs. 38,50
7. Consider the following comments about absorption- and variable-costing income
statements:
(j) A variable-costing income statement discloses a firm’s contribution margin.
(ii) Cost of goods sold on an absorption-costing income statement includes fixed costs.
(iii) The amount of variable selling and administration cost is the same on
the absorption- and variable-costin income statements.
Which of the above statements is (are) true?
A. I.
B. Il.
C. I and Il.
D. II and Ill.
E. I, II, and Ill.
Webster Company began operations this year and anticipated producing
2,500 units. Actual production conformed to estimates, and the firm sold
2,000 of these units at Rs.60 each. Cost data follow.
Budgeted fixed manufacturing overhead Rs.25.000
Budgeted fixed selling and administrative expenses 5,000
Per-unit dired material standard 14
Per-unit direct labor standard 16
Per-unit variable overhead standard
8 Per-unit variable selling expense 2
There were no variances.
8. The standard product cost per unit under absorption costing is:
A. Rs. 38.00
B. Rs. 40.00
C. Rs. 48.00
D. Rs. 50.00
E. Rs. 50.50
9. The standard product cost per unit under variable costing is:
A. Rs. 38.00
B. Rs. 40.00
C. Rs. 48.00
D. Rs. 50.00
E. Rs. 50,50
10. The net income under absorption costing is:
A. Rs. 9,000
B. Rs.10,000
C. Rs.15,000
D. Rs.20,000
E. Rs.40,000
11. The net income under variable costing is:
A. Rs. 9,000
B. Rs. 10,000
C. Rs. 15,000
D. Rs. 20,000
E. Rs.40,000 .
Use the following inforrrtion in solving multiple-choice questions 12- 13.
Austin began business at the start of this year and had the following
costs: variable manufacturing cost per unit, Rs.8; fixed manufacturing
costs, Rs.60000, variable selling and administrative costs per unit, Rs.3;
and fixed selling and administrative costs, Rs.220,000. The company sells
its units for Rs.45 each. Additional data follow.
Planned production in units 10,000
Actual production in units 10,000
Number of units sold 9,ooo
There were no variances,
12. The net income under absorption costing is:

A. Rs. 23.000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32000
E. Some other amount.
13. The net income under variable costing is:
A. Rs. 23,000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32,000
14. Income reported under absorption costing and variable costing is:
A. Always the same.
B. sometimes different.
C. Always higher under absorption costing.
D. Always higher under variable cosng.
E. Always the same or higher under absorption costing.
15. Gomez’s inventory increased throughout the year. On the basis of
this information, income reported under absorption costing:
A. will be the same as that reported under variable costing.
B. will be higher than that reported under variable costing.
C. will be lower than that reported under variable costing.
D. will differ from that reported under variable costing, the direction of
which cannot be determined from the information given.
E. will be less than that reported in the previous period.
16. Which of the following conditions would cause absorption-costing net income
to be lower than variable-costing net income?
A. Units sold exceeded units produced.
5. Units sold equalled units produced.
C. Units sold were less than units produced.
D. Sales prices decreased.
E. Selling expenses increased.
Page I 190
17. Consider the following statements about absorption- and variable-costing income
(I) Yearly income reported under absorption costing will differ from income
reported under variable costing if production and sales volumes differ.
(Il) Long-run, total income reported under absorption costing will often be close
to that reported under variable costing.
(iii) Differences in income under absorption and variable costing can normally
be reconciled by multiplying the change In inventory (in units) by the
variable manufacturing overhead cost per
unit. Which of the above statements is (are)
true?
A. ‘I.
B. Il.
C. Ill.
D. I and Il.
E. Il and Ill.
18. Moriex reported Rs. 65,000 of net income for the year by using absorption
costing. The company had no beginning inventory, planned and actual
production of 20,000 units, and sales of 18,000 units. Standard variable
manufacturing costs were Rs.20 per unit, aod total budgeted fixed
manufacturing overhead was Rs. 100,000. If there were no variances, net income
under
variable costing would be:
A. Rs.15,000 ‘
B. Rs. 55,000
C. Rs.65,000
D. Rs. 75.000
E. Rs. 115,000
19. Classix reported Rs. 28,000 of net income for the year by using variable
costing. The company had no beginning inventory, planned and actual production
of
30.000 units, and sales of 25000 units, Standard variable manufacturing costs
were Rs.15 per unit, and total budgeted fixed manufacturing overhead was
Rs. 150,000. If there were no variances, net income under absorption costing
would be:
A. Rs. 3,000
B. Rs.28000
C. Rs. 30,000
D. Rs. 53,000
E. Rs. 58,000
Page I 191
20. Callisons income under absorption costing was Rs.15000 higher than under
variable costing. During the year, the company met anticipated manufacturing
figures, producing 20000 units. If total variable production costs were
Rs.80,000 and fixed manufacturing overhead was Rs.40,000, how many units
were sold? A. 5,000.
B. 7,500.
C. 10,000.
D. 12,500.
E. 27500.
21. For external-reporting purposes. generally accepted accounting principles require
that net income be based on:
A. absorption costing.
B. variable costing.
C. direct costing.
D. Semi-variable costing.
E Activity-based costing.
22. Consider the following statements about absorption costing and variable costing:
(i) Variable costing is consistent with’ contribution reporting and cost-volume-
profit analysis.
(ii) Absorption costing must be useJ for external financial reporting.
(iii) A number of companies use both absorption costing and variable costing.
A. I.
B. Il.
C. Ill.
D. I and Il.
E, I, il, and Ill.
23. Consider the following statements about absorption costing and variable costing:
(i) Variable costing is consistent with contribution reporting and cost-volume-
profit analysis.
(ii) Variable costing must be used for external financial reporting.
(iii) A number of companies use both absorption costing and variable costing.
A. I.
B. Il,
C. lii.
D. I and Il.
E. I and Ill.
Page I 192
24. The fixed-overhead volume variance under variable costing:

A. coincides with the fixed manufacturing overhead that was applied to production
B. Is deducted on the income statement.
C. does not exist.
D. will equal the fixed-overhead budget variance
E. must be unfavourable.
25. Which of the following differs between absorption costing and variable costing?
A. The number of units produced.
B. The fixed-overhead volume variance.
C. Saies revenues.
D. The treatment of variable manufacturing overhead.
E. income tax rates.
Multiple Choice Answers
1 The overhead rates of the functional-based product costing use

(a) no unit-based activity drivers.
(b) unit-based activity drivers
(c) process costing.
(d) job order costing.
2. A(n) method first traces costs to a department and then to products.
(a) direct costing
(b) absorption costing
(c) functional-based costing
(d) indirect costing
3. Unit-based product costing uses which of the following procedures?
(a) Overhead costs are traced to departments. then costs are traced to products.
(b) Overhead costs are traced to activities, then costs are traced to products
(c) Overhead costs are traced directly o products.
(d) All overhead costs are expensed as incurred.
4. If conventional manufacturing is used, which of the following would be considered
direct costs?
(a) set-up costs
(b) direct labor
(c) maintenance of machinery
(d) ïnspection costs
5. Products might consume ‘rhead in different proportions due to
(a) differences in product size.
(b) differences in set-up times
(C) differences in product complexity.
(d) all of the above.
6. The proportion of an overhead activity consumed by a product is the
(a) overhead ratio.
(b) consumption ratio.
(C) quick ratio.
(d) fixed ratio.
7. More accurate product costing information is produced by assigning costs using
(a) a volume-based, plant wide rate.
(b) volume-based, departmental rates.
(c) activity-based pool rates.
(d) alloftheabove.
8. A(n) system first traces costs to activities and then to products.
(a) direct costing
(b) absorption costing
(d) activity-based costing
9. An activity-based costing system uses which of the following procedures?
(a) Overhead costs are traced to departments, then costs are traced
to products.
(b) Overhead costs are traced to actl”ities, then costs are traced to products.
(c) Overhead costs are traced directly toroducts.
(d) All overhead costs are expensed as incurred.
10. If a firm has implemented activity-Ñsed procedures for home office expenses, it
will
(a) allocate all home office expenses on the basis of sales revenues.
(b) allocate all home office expenses to homogeneous cost pools.
(c) allocate the costs in a pool using a predetermined rate per unit of activity
(d) both a and b.
11. The use of unit-based activity drivers to assign costs tends to
(a) overcost low-volume products.
(b) overcost high-volume products.
(c) undercost all products.
(d) overcost all products ,
12. A(n) ¡s a collection of overhead costs for which cost variations can
be explained by a single activity driver.
(a) cost objective
(b) homogeneous cost pool
(C) allocation base
(d) heterogeneous cost pool
are causal factors.

(a) Activity drivers
(b) Cost pools
(c) Cost objectives
(d) Cost catchers
14. If activity-based costing is used, materials handling would be classified as a
(a) unit-level activity.
(b) batch-level activity.
(c) product-level activity.
(d) facility-level activity.
15. If activity-based costing is used, modifications made by engineering to the
product design of several products would be classified as a
16 Which of the following quantities is an ¿xample of an activity driver in activity-
based costing?
(a) number of direct labor hours
(b) number of labor transactions
(c) number of machine hours
(d) all of the above
17. If activity-based costing is used, security is an example of a
(C) product-level activity.
18. If activity-based costing is used, insurance on the plant would be classified as a
19. If activity-based costing is used, product inspections would be classified as a

20. If activity-based costing is used, set-ups would be classified as a
21. Maintenance of the production equipment would be classified as a
(b) product-level activity.
(c) cell-level activity.
22. are causal-factors that explain the consumption of overhead.
(a) Fixed costs
(b) Joint costs
(c) Proportional costs
(d) Activity drivers
23. Ail of the following are nonunit-based activity drivers EXCEPT
(a) number of setups.
(b) number of direct labor hours.
(c) number of inspections.
(d) number of material moves.
24. When selecting an activity driver, a company shovld consider
(a) the cost of measurement.
(b) the time of the year.
(c) the cause and effect between the activity driver and the cost pool.
(d) both a and c.
25. If activity-based costing is used, electricity usage would be an example of a
Process costing is a method that is used to account for:

A. large numbers of identical products that are produced in a continuous manufacturing environment.
B. small numbers of products that are produced in batches.
C. raw materials that are converted to finished goods.
D. finished goods that are refined and processed further.
E. large numbers of products that are produced in a non-repetitive process.
2. Process costing would be used ¡n all of the following industries except:
A. petroleum refining.
B. chemicals.
C. truck tire manufacturing.
D. wood pulp production.
E. automobile repair.
3. Which of the following manufacturers would most likely fl2 use a process-
cost accounting system?
A. A producer of computer monitors.
B. A producer of lawn fertilizer,
C. A producer of frozen orange juice.
D. A custom-home builder.
E. A lumber mill.
4. Which of the following statements regarding similarities between process
costing and job-order costing are true?
(i) Both systems assign production costs to units of output.
(ii) Both systems require extensive knowledge of financial accounting.
(iii) The flow of costs through the manufacturing accounts ¡s essentially the same.
A. I only.
B. I and Ill only.
C. Il and Ill only.
D. Ill only.
E. I, Il, and Ill.
5. Companies that use a process-cost accounting system would:
A. establish a separate Work-in-Process Inventory account for each manufacturing department.
B. establish a separate Pintshed-Goods Inventory account for each manufacturing department.
C. pass completed production directly to Cost of Goods Sold.
D. charge goods produced with actual overhead amounts rather than
applied overhead amounts.
E. eliminate the need for the Finished-Goods Inventory account.
6. Which of the following statements is j?
A. In job-order costing, costs are accumulated by job order.
B. In process costing, costs are accumulated by department.
C. In process costing, the cost per unit in a department is found by spreading the periods
manufacturing costs over the units produced.
D. In process costing, the total cost of each unit is found by dividing the
total factory costs by the number of units completed.
E. In job-order costing, the unit cost of a particular job is found by dividing
the jobs total cost by the number of units in the job.
7. Morrison, Inc., which uses a process-cost accounting system, passes
completed production from Department A to Department B for further
manufacturing. The journal entry to record completed production in Department
A requires
A. a debit to Work-in-Process Inventory and a cred o Finished-Goods Inventory.
B. a debit to Finished-Goods Inventory and a credit to Work-in-Proces Inventory.
C. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.
D. a debit to Work-in-Prc.,ess Inventory: Department A and a credit toWork-in-Prr’ess
Irentory: Departnient B.
E. a debit to Work-in-Process Inventory: Department B and a credit to Work-
in- Process Inventory: Department A.
8. Unit costs in a process-costing system are derived by using:

A. in-process units.
B. completed units.
C. physical units.
D. equivalent units.
E. a measure of activity other than those listed above.
9. Rex Co., had 4,000 units of work in process on April 1, 199x. During April,
11,000 units were compl&ed and as of April 30, 5,000 units remained in
production. How many units were started during April?
A. 5,000
B. 10,800
C. 11,000
D. 12,000
E. 16,000
10. ABC Co. had 3,000 units of work in process on Apil 1 that were Up To 60%
complete. During April, 10,000 units were completed and as of April 30, 4,000 units
that were
40% complete remained in production. How many units were started during April?
A. 9000
B. 9,800
C. 10,000
D. 11,000
E. 13,000
11. Ohio, lnc, which uses a process-cost accounting system, began operations on
January 1 of the current year. The company incurs conversion cost evenly
throughout manufacturing. If Ohio started work on 3,000 units during the period
and these units were 70% of the way through manufacturing it would be correct
to say that the company has:
A. 3,000 physical units in production.
B. 2,100 completed units.
C. 900 in-process units.
D. 900 equivalent units of production.
E. 3,000 equivalent units of production.
12. Which of the following data are needed to calculate total equivalent units under
the weighted-average method?
A. Work-to-date on ending work in process. units started during the period.
B. Units completed during the period, work-to-date on ending work in process.
C. Work to complete beginning work in process, work-to-date on ending work in process.
D. Work to complete beginning work in process, units completed, work done
on ending work in process.
E. Units completed, work to complete beginning work in process.
13. Kentucky Corporation uses a process-cost accounting system. The company
adds direct materials at the start of its production process: conversion cost, on the
other hand, is incurred evenly throughout manufacturing. The firm has no beginning
work-in-process inventory; its ending work in process is 40% complete. Which of
the following sets of percentages would be used to calculate the correct number of
equivalent units in the ending work-in-process inventory?
A. Materials. 100%; conversion cost, 100%.
B. Materials. 100%; conversion cost, %
C. Materials, 100%; conversion cost, 40%.
D. Materials, 40%; conversion cost, 40%.
E. Materials, 4O%; conversion cost, 100%.
Use The following information to solve multiple-choice questions 14 and 15.

Soft cloth Textile Co. manufactures a variety of fabrics. All materials are
introduced at the beginning of production; conversion cost s incurred evenly
through manufacturing. The Weaving Department had 1000 units of work in
process on April 1 that were 20% complete as to conversion costs. During April,
8,000 units were completed and on April 30, 4000 units remained in producton,
50% complete as to conversion costs.
14. The equivalent units of conversion for April total:

A. 8,800
B. 9,000
C, 9,800
D. 10,000
E. 12,000
15. The equivalent units of direct materials for April total:

8.800.
9,000.
C. 9,800.
D. 10,000.
E. 12,000.
16. Flagship Corporation adds all materiais at the beginning of production and incurs
conversion cost evenly throi’hout manufacturing. The company completed
40,000 units during the year and had 12,000 units In process at December 31,
30% complete with respect to conversion cost. Equivalent units for the year
total:
A. materials, 40,000; conversion, 40,000.
B. materials, 52,000; conversion, 52,000.
C. materials, 52,000; conversion, 43,600.
D. materials, 43,600; conversion, 43,600.
E. materials, 40,000; conversion, 3,600.
17. Corruption, Inc., overstated the percentage of work completed with respect to
conversion cost on the ending work-in-process inventory. What is the effect of this
overstatement on ronversion cost equivalent units and physical units
manufactured, respectively?
A. Overstated, overstated.
B. Overstated, understated.
C. Overstated, none.
D. None, overstated.
E. None, none.
18, Assuming no beginning work-in-process inventory and an ending work-in-process

inventory that Is 50% complete as to conversion costs, the number of equivalent
units with respect to conversion costs would be:
A. the same as the units completed.
B. the same as the units placed in process.
C. less than the units completed.
D. less than the units placed in process.
E. half of the units completed.
19. When calculating unit costs under the weighted-average process-costing method,
the unit cost is based on:
A. only the current period’s manufacturing costs.
B. only costs in the period’s beginning work-in-process inventory.
C. a summation of the costs in the beginning work-in-process inventory plus
costs incurred in the current period.
D. only costs incurred in previous accounting periods.
E. a summation of the costs in the beginning work-in-process inventory
plus costs to be incurred in the upcoming period.
Use the following information to solve multiple-choice questions 20 and 21.
Andrews Corporation uses a process-cost accounting system and began operation
on January 1 of the current year. All materials are added to production at the start
of manufacturing; conversion cost is incurred evenly throughout the process. The
company started work on 1,000 units and completed 75% of conversion activity,
incurring direct material costs of Rs. 5,000 and conversion cost of Rs. 1,500.
20. The equivalent-unit conversion cost
is: A. Rs.1.00
B. Rs.1.50
C. Rs. 2.00
D. Rs. 2.50
E. Rs. 10.50
21. The equivalent-unit material cost is:

A. Rs. 2.00
B. Rs. 5.00
C. Rs. 6.00
D. Rs. 6.67
E. Rs. 10.00
22. Clayton Corporation, which adds materials at the beginning of production, uses
a weighted-average process-costing system. Consider the data that follow.
Number of Units Cost of Materials
Beginning work in process 30,000 Rs. 22 200
Started In May 80,000 72,400

Production completed 85000
Ending work In process 25,000
The company’s cost per equivalent unit for materials is:
A. Rs. 0.86.
B. Rs. 0,90.
C. Rs. 1.10.
D. Rs.1,18.
C, Rs. 1.30.
23. Flagston Company uses a weighted-average process-costing system. Company
records disclosed that the firm completed 100,000 units during the month and
had 20000 units in process at month-end, 25% complete. Conversion costs related
to the beginning work-in-process inventory amounted to Rs. 105,000. and
amounts incurred during the current month totaled Rs. 840,000. If conversion is
incurred uniformly throughout manufacturing, Flagston’s equivalent-unit cost is:
A. Rs. 7.00.
B. Rs. 7.88.
C. Rs. 8.40.
D. Rs. 9.00.
E. an amount other than those shown above.
24. Equivalent-unit Calculations are necessary to allocate manufacturing
costs between:
A. cost of goods manufactured and ending work in process.
B. beginning work in process and units completed.
C. cost of goods sold and ‘ng work in process.
D. cost of goods manufactured and beginning work in process.
E. cost of goods manufactured and cost of goods sold.
25. Which of the following are needed to calculate the total cost of the ending
work-in-process inventory under the weighted-average process-costing
methoð
Unit Cost Equivalent Units Coil of Beginning Work In Process
A.
No No Yes
B.
Yes Yes No
C.
Yes Yes Yes
D.
Yes No Yes
Yea No No
Use the following Irilormabon to solve multipl,-chojø. question. 26. 31.
South River Chemical manufactures a product called Zbek. Direct materials are
added at the beginning of the process, and conversion activity occurs uniformly
throughout the process. The beginning work-in-process inventory is 60% complete
with respect to conversion, the ending work-in-process inventory is 20% complete.
The following data pertain to May:
Total Direct Conversion
Units Materials Costs
Work in process, May 1 15,000
Units started during 60,000
May
Units completed and transferred out 68,000 Costs:
Work in process, May31 7,000
Work
Totalsin process, Mayl Rs. 275,880Rs. 41,250 Rs. 16,500
Rs. 88,500 Rs. 187,380Rs. 24,750
26. Using
Costs the weighted-average
incurred during May method
234,630of process costing, 162,630
72.000 the equivalent units
of direct materials are calculated to be:
A. 68,000.
B. 69,400.
C. 74,000.
D. 75,000.
E. 75,400.
27. Using the weighted-average method of process costing, the equivalent units
of conversion activity are calculated to be:
A. 60,400.
B. 68,000.
C. 69,400
D. 74,000.
E. 75,000.
28. Using the weighted-average metno or process costing, the cost per unit of
direct materials i3 calculated to be:
A. Rs.117
8. Rs.
1.18 C. Rs.
1.20
D. Rs,128
E. Rs.1.30
29. Using the weighted-average method of process costing, the cost per unit
of conversion activity is calculated to be:
A. Rs. 2.50
B. Rs. 2.53
C. Rs. 2.70
D. Rs. 2.76
E. Rs. 3.10
30. Using the weighted-average method of process costing, the cost of
goods completed and transferred during May is calculated to be:
A. Rs. 249,560
B. Rs. 250,240
C. Rs. 258400
D. Rs. 263,840
E. Rs. 275,880
31. Using the weighted-average method of process costing, the total costs remaining
in work in process on May 31 are calculated to be:
A. Rs. 0.
B. Rs. 12,040
C. Rs. 17,480
D. Rs. 25,640 .
E. Rs. 26.320
32. Friendship Corporation, a new company, adds material at the beginning of its
production process; conversion cost, in contrast, is incurred evenly throughout
manufacturing. During May, the firm completed 10,000 units and had ending
work in process of 2,000 units, 40% complete. Equivalent-unit costs were:
materials,
Rs. 8; conversion, Rs, 15. On the basis of this information, the cost of the
company’s completed production amounted to:
A. Rs. 80,000
B. Rs. 92,000
C. Rs. 150,000
D. Rs. 230,000
E. Rs. 322,000
33. Friendship Corporation, a new company, adds material at the beginning of its
production process; conversion cost, in contrast, is incurred evenly throughout
manufacturing. During May, the firm completed 10,000 units and had ending
work in process of 2,000 units. 40% complete. Equivalent-unit costs were:
materials,
Rs. 8; conversion, Rs. 15. On the basis of this information, the cost of the
company’s ending work-in-process inventory was:
A. Rs. 18,400
B. Rs. 28000
C. Rs, 36400
D. Rs. 46000
E. An amount other than those listed above
34. Which of the following is a key document in e typical process-costing system?
A. Departmental production report.
B. Master schedule.
C. Production budget.
D. Sequential product report.
E. Materials requirement report.
35. Which of the following represents a corrnct seoucnce in preparing a departmental
production report?
A Analysis of physical flow of units, computation of unit costs, calculation of equivalent units, and
analysis of total costs.
B Analysis of physical flow of units, calculation of equivalent units,
computatIon of unit costs, and analysis of total costs.
C. Calculation of equivalent units analysis of physical flow of units, analysis of
total costs, and computation of unit costs.
O. Analyses of total costs, calculation of equivalent units, computation of unit
costs, and analysis of physical flow of units.
E. Analysis of total costs, analyšis of physical flow of units, computation of unit
costs, and calculation of equilents units
36. Which ol the following statements about operation costing are true?
(i) Conversion costs are accumulated by department.
(ti) Direct material costs are accumulated by batch.
(iii) Operation costing is a hybrid product-Costing system.
A. I, Il, and Ill.
B. il and Ill.
C. landill.
D. land Il.
E. lonly.
37. Operation costing:
A. tends to parallel job-order costing with respect to the treatment
of conversion cost.
B. tends to parallel process costing with respect to the treatment of conversion cost.
C. tends to parallel process costing with respect to the treatment of
direct materials.
D. would likely be used by a manufacturing plant that produces one model
of a single product.
E. is commonly known as a joint-costIng system.
38. Fulton Company recently opened a new state-of-the-art, high-tech
manufacturing plant, and management made the decision to Install a just-In-time
production system. How would labor costs, overhead costs, and work-in-process
inventory
levels at this plant respectively compare with those at other Fulton facilities?
A. Lower, lower, lower.
B. Lower, higher, higher.
C. Higher, lower, higher.
D. Lower, higher, lower.
E. Higher, higher, higher.
39. The first processing department in a sequence of sequential production
departments must account for which of the following costs?
A. Direct Material and transferred-in costa. .
B. Direct material costs only.
C. Conversion and transferred-In costs.
D. Direct material and conversion costs.
E. Direct material, conversion, and transférred-in costs.
40. The second processing department n a sequence of sequential
production departments would typically account for which of the following
costs?
A. Direct material and transferred-in costs.
C. Transferred-in costs only.
E. Direct material, conversion, and transferred-in costs.
41. spoilage is inherent in the production process and is in cost of goods sold.
A. Normal, included
B. Normal, not included
C. Abnormal, included
D. Abnormal, not included
42. In a process costing system, the journal entry used to record the transfer of
units from department A, a processing department, to department B, the next
processing department, includes a debit to:
A. Work in process-department- A, and a crt..t to work in process-department-B
B. Work in process-department- B, and a credit to wok ri process-department-A
C. Work In process-department- B, and a credit to materials
D. Finished goods, and a credit to work in process-department-B
43. Trans world Ltd. Has transferred out 8,800 completed units during April
2007. Opening stock was 400 units, 75% completed, and closing stock was 800
units, 50% completed. Assuming FIFO method, the equivalent production during
the period was:
A. 8900 units
S. 9,100 units
C. 9,300 units
D. 9500 units
44. In a process where there are no work-in-process stocks, two joint products
(J and K) are produced. Information (in units) relating to last month is as
follows:
Product Sales Opening Stock Closing Stock
J 6,000 100 300
K 4,000 400 200
Joint production costs for last month. were Rs. 110000 and these were
apportioned to joint products based on the number of units produced.
What were the joint production cost apportioned to product J for last
month? Æ Rs. 63,800
B. Rs. 64,000
C. Rs. 66,000
D. Rs. 68,200
45. ABC buys item X, which is processed until two products, Y and Z can be
separated. The coast of processing item X to the split-off point is Rs.
500.000, when the two products can be identified Following Information is
available:
Products Production Sales value at split-off point
Y 20,000 units Rs. 50 per unit
Z 25,000 units Rs. 60 per unit
If the company uses the sales value method ci joint cost allocation at split-off point,
how much of the joint processing cost should oe allocated to product Y?
A. Rs. 200,000
B. Rs. 250,000
C. Rs. 300,000
D. Rs. 500,000
46. Blacksmith processes a single t’pe of steel, Following information is available

for the current period:
Units Material Costs Conversion Costs
Beginning inventory 3,000 Rs. 45000 Rs 48,000
Current period 20,000 Rs. 480,000 Rs. 650.00,
Ending inventory 2,500
.
All materials are faded at the beginning of the production process. The beginning
inventory was 40%f complete as to conversion, while the ending inventory was
30% complete as to conversion.
If blacksmith uses the weightedaverage method, what was the number of units
completed and transferred out during the current oerlod?
A. 20,000 units
B. 20.500 units
C. 22,500 units
D. 23,000 units
1. manufacturing reduces inventory levels because production is geared to demand.
(a) Traditional
(b) Conventional
(c) JIT
(d) Both a and b
2. When JIT manufacturing is used, cell workers labor is a(n)
(a) variable cost.
(b) fixed cost.
(c) indirect cost.
(d) mixed cost.
3. The approach to quality control strives for zero defects.
(a) acceptable quality level
(b) total quality control
(c) traditional
(d) both a and c
4. JIT manufacturing differs from traditional manufacturing in all of the following ways
EXCEPT
(a) the treatment of direct materials and direct labor for product costing.
(b) the level of inventories.
(c) the approach to quality control.
(d) the physical layout of the manufacturing process.
5. Which of the following is NOT a trait of a JIT system?
(a) acceptable quality level
(b) long-term contracts
(c) multi skilled labor
(d) high employee involvement
6. Which of the following is a trait of a JIT system?

(a) push-through system
(b) significant inventory
(C) buyers’ market
(d) large supplier base
7. Which of the following is a trait of a traditional system?

(b) value-chain focus
(o) total quality control
(d) high employee involvement
8. Traditional manufacturing uses which of the following philosophies of quality control?
(a) zero defects
(b) total quality control
(c) acceptable quality level
(d) bothaancib
9. Which of the following is NOT a trait of a traditional system?
(b) short-term supplier contracts
(c) value-added focus
(d) total quality control
10. JIT manufacturing uses which of the following philosophies of quality control?
(a) just-in-case (JIC)
(b) acceptable quality level (AOL)
(C) total quality control (TOC)
(d) both a and c
11 , When JIT manufacturing is used, cell labor is
(a) specialized.
(b) interdisciplinary.
(c) compartmentalized.
(d) Insignificant.
12. In a JIT manufacturing environment, product costing information is used mainly for
all of the following EXCEPT
(a) product costing of ‘inventory for financial reporting purposes.
(b) pricing decisions.
(C) product profitability analysis.
(d) make-or-buy decisions.
13, Which of the following manufacturing costs is assigned to products in a traditional
and JIT environment using direct tracing7
(a) direct materials
(b) direct labor
(c) operating supplies
(d) both a and b
14. If JIT manufacturing is used and each manufacturing cell produces a single product, all of
the following are considered direct product costs EXCEPT
(a) overtime wages for cell workers.
(b) the salary of the plant supervisor.
(C) the salary of the cell supervisor,
(d) All of the above are considered direct costs.
15. If JIT manufacturing is used and each manufacturing cell produces a

single product, which of the following is considered a direct product cost?
(a) inspection costs
(b) materials
(c) setup costs
(d) All of the above are direct product costs.
16. Which of the following manufacturing costs is assigned to products ¡n a traditional
and JIT environment using allocation’
(a) insurance and taxes
(b) direct labor
(c) supervision (department)
(d) custodial services
17. Which of the following manufacturing costs is assigned to products in JIT
environment using direct tracing?
(a) material handling
(b) repairs and maintenance
(C) custodial services
(d) all of the above
18. Which of the following manufacturing costs is assigned to products in a
JIT environment using allocation?
(a) cafeteria services

(b) equipment depreciation
(c) . insurance and taxes
(d) operating supplies
19. Afim, that has implemented JIT had the following transactions:
1. Materials were purchased on account for Rs. 40,000.
2. Materials were placed into production.
3. Actual direct labor costs were Rs. 6,000
4. Actual overhead costs were Rs. 40,000.
5. Conversion costs applied were Rs. 42,000,
6. All work was completed for the month.
7. All completed work was sold.
8. The variance is recognized.
Which of the following would NOT be an entry under the backflush system.
assuming the second trigger point is the completion of goods?
(a) Materials and In Process
40,000 Accounts Payable 40,000
(b) Work in
Process 40,000 Materials
40,000
(c) Conversion Cost Control
46,000 Payroll 6,000
Accounts Payable 40,000
(d) Cost of Goods Sold
82,000 Finished Goods
82,000
20. The JIT approach to inventory management
(a) allows greater flexibility as to when product can be manufactured.
(b) results in higher inventory levels hut reduce ordering and setup costs.
(c) results in tower inventory carrying costs.
(d) does none of the above.
21. Strategic objectives of JIT include
(a) increasing profits.
(b) improving a firm’s competitive position.
(c) increasing inventory.
(d) both a and b.
22. With JIT manufacturing, the major variable cost remaining is

(a) direct materials.
(b) overhead.
(C) inventory.
(d) direct labor.
23. Under JIT, the number end magnitude of direct fixed costs
(a) decrease.
(b) increase.
(c) stay the same.
(d) are eliminated.
24. One of the traditiotial reasons for holding inventory is to avoid shutdowns due
to defective parts. The JIT solution is to
(a) reduce setup costs.
(b) reduce lead time.
(c) use total preventive maintenance.
(d) use total quality control.
25. One of the traditional reasons for holding Inventory Is to minimize total carrying
costs and setup costs. The JIT solution is to
(a) reduce setup costs.
(b) reduce lead time.
(c) use total preventive maintenance.
(d) use total quality control.
The labour rate variance is determine by multiplying the difference between me

actual labor rate and the standard labor rate by:
(a) The standard hours allowed.
(b) The actual hours worked.
(c) The budgeted hours allowed.
(d) None of the these.
2. If inferior-grade materials are purchased, the result may be:
(a) An unfavorable materials price variance.
(b) A favorable materials price variance.
(c) An unfavorable labor efficiency variance.
(d) A favorable labour efficiency variance.
(e)Responses (b) and (C) are both correct.
(f) Responses (a) and (d) are both,
3. During June, Kaka Company produced 4,000 units of product. The standard
card indicates the following for labour costs per unit of output: 3.5 hours Rs. 6
per hours = Rs. 21. During the month, the company worked 15,000 hours. The
standard hours allowed for the month were:
(a) 14,000 hours .
(b) 15,000 hours
(C) 24,999 hours
(d) 18,000 hours
4. Refer to the data in question 3 above. What is the labour efficiency variance
for June? (F indicates a Favorable variance and U indicates an Unfavorable
variance):
(a) Rs.1,000F
(b) Rs. 6,000 U
(c) Rs. 2,000 F
(d) Rs. 2,000 U
5. Refer to the data in questIon 3 above. The total labor cost during Juno was Rs.
88,000 for the 15,000 hours that were worked. What is the labor rate variance
for
June?
(a) Rs. 6,000 F
(b) Rs.6,000U
(c) Rs. 2,000 F
(d) Rs. 2,000 U
6. During July, Kaka Company produced 2,000 units of price. The standard cost
card indicates the following for materials costs per unit of output: 2 pounds Rs.
0.50
= Re. 1. During July, 8,000 pounds of materials were purchased at a cost of Rs.
3,900. The materials price variance for July is:
(a) Rs.100F
(b) Rs.100U
(c) Rs.4100F
(d) Rs. 4,100 iJ
7, Refer to the data ¡n question 6 above. 6,100 pounds of material were used In July
to produce the output of 3,000 units. The materials quantity variance for July Is:
(a) Rs. 1,550 F
(b) Rs. 1,550 U
(c) Rs. 50 F
(d)Rs,50U
8. During August, Kaka Company produced 3500 units of price using 12,750
labor hours. The standard cost card indicates the following variable
manufacturing overhead costs are unit of output: 3.5 labor hours © Rs. 2 per
labor hours Rs. 7. During the month, the actual variable manufacturing overhead
cost incurred was Rs. 25,000. The variable overhead spending variance was:
(a) Rs.500U
(b) Rs.500F
(c) Rs. 24,500 U
(d) Rs. 24,500 F
9. Refer to the data in question 8 above. The variable overhead efficiency variance was:
(a) Rs. 7.000 F
(b) Rs. 7,000 U
(C) Rs.1,000F
(d) Rs.1,000U
10. The ‘price” variance for variable overhead is called:
(a) Rate variance
(b) Spending variance
(c) Budget variance
(d) None of these
11. The delivery cycle time consists of:
(a) The time required to get a product to a customer atter production
is complete.
(b) The time required to get deliver of raw materials
(c) The velocity of production plus the throughput time
(d) The time required from receipt of an order from a customer to shipment of the completed
goods.
12. Given the following data:
Wait time to start product 15.0 days
Inspection time 0.6 days
Process time 3.0 days
Move time 1.4 days
Queue time 7.0 days
The throughput time would be:
(a) 12.0 days
(b) 7.0 days
(c) 5.0 days
(d) 20.0 days
13. Refer to the data in question 12 above. The MCE (manufacturing cycle
efficiency) would be:
(a) 75%
(b) 30%
(c) 25%
(d) 42%
14. Refer again to the data in question 12 above. What percentage of the
throughput time is spend in non-value added activities:
(a) 25%
(b) 70%
(c) 75%
(d) 58%
15 Prime Ltd is in the process of setting standard unit cost for next period. Product
J uses tow types of material, P and s. 7 kg of material P and 3 kg of material S are
needed, at a standard pride of Rs. 4 per kg and Rs. 9 per kg respectively.
Direct labour will cost Rs. 7 per hour and each unit of J requires 5 hours of labour.
Production overheads are to be recovered at the rate of Rs. 6 per direct labour
hours, and general overhead is to be absorbed at a rate of ten per cent of
production cost.
The standard prime cost for one unit of product J will be:
(a) Rs. 55
(b) Rs. 90 .
(c) Rs, 120
(d) Rs. 132
16. Information on standard rates of play would be provided by:
(a) A trade union
(b) A production manager
(c) A personnel manager
(d) A work study manager
17. What is an attainable standard?

(a) A standard that includes no allowance for losses, waste and inefficiencies.
It represents the level of performance, which is attainable under perfect
operating conditions.
(b) A standard, which includes some allowance for loses, waste and
inefficiencies. It represents the level of performance, which is attainable
under efficient operating conditions.
(C) A standard, which is bases on currently attainable operating conditions.
(d) A standard which is kept unchanged, to show the trend in costs.
18. Which of the following statements is correct?
(a) The operating Standards set for production should be the most ideai
if possible.
(b) The operating Standards set for production should be the minimal level.
(c) The operating Standards set for production should be the attainable level.
(d) The operating Standards set for production should be the maximum level.
19. Which of the following would not be directly relevant to the determination
of standard labour times per unit of output?
(a) The type of performance standard to be used
(b) The volume o output from the productioh budget
(c) Technical specifications of the proposed production methods
(d) The results of work study exercises
20. Contingency Limited manufactures a carbonated drink, which is sold in 1-litter
bottles, During the bottling process there is a 20% loss of liquid input due to
spillage and evaporation. The standard usage of liquid per bottle is:
(a) 0.80 litres
(b) 1.00 litres
(c) 1.20 litres
(d) 1.25 litres
21. Which of the following best describes management by exception?
(a) Using management reports to highlight exceptionally good performance,
so that favorable result scan be built upon to improve future outcomes.
(b) Sending management reports only to those managers who are able to
act on the information contained within the reports.
(C) Focusing management reports on areas that require attention and ignoring
those which appear to be performing within acceptable limits.
(d) Appointing and promoting only exceptional managers to areas of
responsibility within the organization.
22. Standard costing provides which of the following?
(j) Targets and measures of performance
(li) Information for budgeting

(iii) Simplification of stock control systems
(iv) Actual future costs
(a) (î), (il) and (iii) only
(b) (il), (Iii) and (iv) only
(c) (I), (üi) and (iv) only
(d) (i), (ii) and (iv) only
23. A unit of prnduct L requires 9 active labor hours for completion. The
performance standard for product L allows for ten per cent of total labour time to be
idle, due to machine downtime. The standard wage rate is Rs. 9 per hour. What is
the
standard labour cost per unit or product L?
(a) Rs. 72.90
(b) Rs. 81.00
(C) Rs. 89.10
(d) Rs. 90.00
24. Which of the following criticisms of standard costing apply in all circumstances?
(i) Standard Costing can only be use where all homogenous,
(ii) Standard costing systems cannot be used in environments that the prone
to change. They assume stable conditions.
(iii) Standard costing systems assume that performance upto the standard
is acceptable. They do not encourage continuous improvement.
(a) Criticism (j)
(b) Criticism (ii)
(c) Criticism (iii)
(d) None of them
25. Which one of the following is not a possible cause of an unfavourable direct labour
efficiency variance?
(a) Lack of motivation
(b) Low quality materials
(c) Poor supervision
(d) All of the above could be conivered as possible causes of unfavourable efficiency variance.
26. Standard output for the year 2006, was 2006, was 2,000 units. Actual
output during the year was 2,500 units. Standard variable overheads were Rs,
8,000 Actual variable overheads were Rs. 9,700. Variable overhead expenditure
variance is:
(a) Rs. 300 Favourable
(b) Rs. 700 Adverse
(c) Rs. 1,000 Favourable
(d) Rs. 300 Adverse
27, The labour rate variance is calculated by comparing the:

(a) actual hours at standard rate with the tual hours at standard rate
(b) actual hours at actual rate with the standard hours at standard rate
(c) standard hours at actual rate with the actu& hours at actual rate
(d) standard hours at standard rate with the actual hours at standard rate
28. Standards that do not allow for machine breakdowns or other work
interruptions and that require peak efficiency at all times, are known as:
(a) budgeted standards
(b) ideal standards
(C) normal standards
(d) practical standards
29. Chitral Company employs a standard costing system in which direct materials
inventory is carried at standard cost. The company has established the following
standard for the material costs of one unit of product:
Standard quantity Standard Price Standard cost
Direct materials 6.00 kgs. Rs. 700/kg. Rs. 42.00
During June, the company purchased 165,000 kilograms of direct material at a
total cost of Rs. 1,171,500. The company manufactured 25,000 units of product
during June using 151,000 kilograms 6f direct materials. The direct material
quantity variance for June is:
(a) Rs. 7000 favourable
(b) Rs. 7,000 unfavourable
(c) Rs, 7,100 favourable
(d) Rs. 7,100 unfavourable
30 M/s. foremost applies manufacturing overhead costs to products on the basis of
direct labour hours. The standard cost card shows that 12 dIrect labour-hours are
required for producing per unit of product. For October, the company budgeted to
work 360,000 direct labor-hours and to incur the following total manufacturing
overhead costs:
Total variable overhead cost. Rs. 396,000
Total fixed overhead costs Rs. 475,200
During October, the company completed 28,000 units of product, worked 344,000
direct labour-hours and incurred the following total manufacturing overhead costs:
Total variable overhead costs Rs. 395,600
Total fixed over head costs Rs. 461,200
The denominator activity In the predetermined overhead rate is 360,000

direct labour-hours. The fixed overhead budget variance for October is:
(a) Rs. 14000 Favourable
(b) Rs. 14,000 Unfavourable
(c) Rs. 12,800 Favourable
(d) Rs. 12,800 Unfavourable
31. To record overhead costs Incurred during a period. The control account will be
to show the actual cost incurred and will be to show costs
applied to production.
(a) Debited, debited
(b) Debited, credited
(c) Credited, debited
(d) Credited, credited
32. ABC Corporation recently con,pleted the manufacturing of 4,000 computer
tables. Standard direct labour cost for each table is Rs. 800 (2 hours at Rs. 400 per
hour).
If the actual payroll totalled Rs. 3,199,500 (8100 hours at Rs. 395), the company’s
labour efficiency variance is:
(a) Rs. 40,000 (Favourable)
(b) Rs. 40,000 (Unfavourable)
(c) Rs. 40,500 (Favourable)
(c) Rs. 40,500 (Unfavourable)
Generally speaking, which of the following is not one of the primary purposes of
a budget’
A Identifying a companys most profitable products.
B. Evaluating performance and providing incentives,
C. Planning•
D. Controlling profit and operations.
E. Facilitating communication and coordinating
activities 2 A formal budget program will almost always
result in:
A higher sales.
B. more cash inflows then cash outflows.
C. decreased expenses.
D. improved profits.
E a detailed plan against which actual results can be ornpared.
3 A budget serves as a benchmark with which:
A actual results can be compared.
B allocated results can be compared.
C. actual results become inconsequential
D. allocated results become inconseçuential.
E cash balances can be compared to expense totals.
4 A companls plan for the acquisition of long-lived assets, such as buildings and
equipment, is commonly called a:
A. pro-forma budget.
B Master budget.
C. financial budget.
D. profit plan.
E. Capital budget.
) The comprehensive set of budgets that serves as a companys overall financial
plan is commonly known as:
A. an integrated budget.
B. a pro-forma budget.
C. a master budget.
D. a financial budget.
E. a revolving budget.
6. Wilson Corporation is budgeting its equipment needs on an on-going basis, with
a new quarter being added to the budget as the current quarter is completed. This
type of budget is most commonly known as a:
A. Capital budget.
B. rolling budget.
C. revised budget.
D. pro-forma budget.
E. financial budget.
7. An organization budgets will often be prepared to cover:
A. one month.
B. one quarter.
C. one year
D. periods longer than one year.
E. all of the above.
8. A manufacturing firm would begin preparation of its master budget by
constructing a:
A. sales budget.
B. Production budget. . .
C. cash budget.
D. capital budget.
E. set of pro-forma financial statements.
9. A company’s sales forecast would likely consider all of the following factors
A. political and legal events.
B. advertising and pricing policies.
C. general economic and industry trends.
D. top management’s attitude toward decentralized operating structures.
E. competition.
10. Which of the following organizations would be least likely to use budets7
A. Manufacturing firms.
B. Merchandising firms.
C. Firms in service
industries. D Non-profit
organizations
E none of aboce as all are equally likely to use budgets.
11 Which of the following would depict the logical order for preparing (1) a production
budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?
‘A. 1-3-4-2,
B. 2-3-1-4.
C. 2.1-3-4.
D. 3-1-4-2.
E. 3-1-2-4. .
12. Santa Fe Corporation has a highly automated production facility. Which of the
following correctly shows the two factors that would have the most direct
influence on the company’s manufacturing overhead budget?
A. Sales volume arid labor hours.
B. Contribution margin and cash payments.
C. Production volume and management judgment.
D. Labor hours and management judgment.
E. Management judgment and indirect labor cost.
13. Which of the following would have no effect, either direct or indirect, on
an organization’s cash budget?
A. Sales revenues.
B. Outlays for professional labor.
C Advertising expenditures.
D. Raw material purchases. .
E. None of the above, as all of these items would have some influence.
14. The budgeted income statement, budgeted balance sheet, and
budgeted statement of cash flows comprise:
A. the final portion of the master budget.
B. the depiction of an organization’s overall actual financial results.
C. the first step of the master budget.
D. the portion of the master budget prepared after the sales forecast
and before the remainder of the operational budgets.
E. the second ‘step of the master budget.
15. Adams Sporting Goods sells bicycles throughout the south eastern United
States. The following data were taken from the most recent quarterly sales forecast:
Expected End-of-Month
Sales Target Inventory
April 1,400 units 315 units
May 1,575 units 412 units
June 1,650 units 425 units
on the basis of the infom,ation presented, how many bicycles should the company
purchase in May?
A. 1478,
B, 1.562.
C. 1,575.
D. 1672,
E. 1987.
16. Telcer & Company had 3,000 units in finished-goods inventory on December
31. The following data are available:
January February
• Units to be 9.400 10200
produced
Desired ending finished-goods inventory 2,500 2,100

The number of units the company expects to sell in January is:
A. 6,900.
B. 8,900.
C. 9,400.
D. 9,900.
E. 11,900.
17. Donovan plans to sell 75,000 units of product no. 675 in May, and each of
these units requires five units of raw material. Pertinent data follo
Product No. 675 Raw Material
Actual May 1 inventory 12,000 units 24,000 units
Desired May 31 inventory 15.000 units 20,000 units
On the basis of the information presented, how many units of raw material should
Donovan plan to purchase?
A. 356,000.
B. 364,000.
C. 386,000.
D. 394,000.
E. None of the above.
Vebco manufactures a product requiring 0.5 ounces of platinum per unit. The cost
orpiatinum is approximately Rs.360 per ounce; the company maintains an ending
platinum inventory equal to 10% of the following month’s production usage. The
following data were taken from the most recent quarterly production budget:
July August September
Planned production in units 1,000 1.100 980
18. The cost of platinum to be purchased in August is:

A. Rs 195,840
B. Rs.198,000
C Rs 200,160.
D. Rs.391.680.
E None of the above.
19. If it takes 2.5 direct labor hours to produce each unit and Vebco’s cost per
labor hour is Rs.15. September’s direct labor cost would be budgeted at:
A. Rs 5,880.
B Rs 14,700.
C. Rs.18,375,
D. Rs.36,750.
20. Iowa makes all sales on account. subject to the following collection pattern:
20% are collected in the month of sale; 70% are collected in the first moth after
sale; and 10% are collected in the second month after sale, If sales for October,
November, and December were Rs 70,000, Rs.60,000, and Rs.50,000,
respectively, what were the firm’s budgeted collections for December?
A Rs.10,000.
B. Rs.46,000.
C. Rs.52,000.
D Rs 59,000.
E. None of the above
21. Vern’s makes all sales on account, subject to the following collection pattern:
20% are collected in the month of sale; 70% are collected in the first month after
sale;
and 10% are collected in the second month after sale. If sales for October,
November, and December were Rs.70,000, Rs.60,000, and Rs.50,000,
respectively, what was the budgeted receivables balance on December 31?
A. Rs.40,000.
B. Rs.46.000.
C. Rs.49000.
D. Rs.59.000.
Use the following information n solving multiple-choice questions 22 - 25.
The Grainger Company’s budgeted income statement reflects the following
amounts
Sales Purchases Expenses
January Rs 120,000 Rs.78.000 Rs.24000
February 110.000 66000 24,200
March 125,000 81250 27,000
April 130000 84,500 28,600
Sales are collected 50% in the month of sale, 3O% in the month following sale, and
19% in the second month following sale. One percent of sales is un-collectible and
expensed at the end of trie year. .
Grainge pays for all purchases by the fifth of the month following purchase,
to take advantage of a 3% discount. The following balances are as of January
1’ Cash Rs 88.000
Accounts receivable* 58,000
Accounts payable 72.000
Of this balance, Rs 35.000 will be collected in January and the remaining amount
will be collected in February.
The monthly expense figures include Rs.5.000 in monthly depreciation. The
expenses are paid for in the month incurred.
22. Grainger’s expected cash balance at the end of January
is: A Rs 87.000 .
B. Rs.89.160
C. Rs 92 000
D. Rs.94,160.
E. Rs 113,160.
23. Grainger’s budgeted cash receipts in February are:
A Rs 91.000
S Rs.95 000.
C Rs 113,090
D Rs 113.640,
E Rs 114.000
24 Orangers budgeted cash payments in February are
A Rs.75 660
B Rs 94860.
C Rs 97200
D Rs 98860
E Rs 102200
25, Grainger. expected cash balance at th. end of February is:

A. Rs.9416O,
B. Rs.98800.
C. Rs.103800,
D. Rs.108,300.
E. Rs.113300,
26, Which of the following statements concerning the budget director is flQ true?
A. The budget direct is often the organizations controller.
B. The budget director has the responsibility of specifying the process by which
budget data will be gathered.
C. The budget director collects information and participates in preparing
the master budget.
D. The budget director communicates budget procedures and deadlines
to employees throughout the organization.
E. The budget director usually has the authority to give final approval to the master budget.
27. Consider the following statements about budget administration:
— Regardless of size, the budgeting process is a formal process in
all organizations.
— The budget manual is prepared to communicate budget procedures
and deadlines to employees throughout an organization.
Ill — Effective internal control procedures require that the budget director be an
individual other than the controller. ,
A. I.
B. Il.
C. Ill.
D. landll.
E. I and Ill.
28. Consider the following statements concerning zero-base budgeting:
— The budget for virtually every activity in an organization is initially set to
the level that existed during the previous year.
II — The budget forces management to rethink each phase of an organizations
operations before resources are allocated.
Ill — To receive funding for the upcoming period, individual activities must be
justified in terms of continued usefulness to the organization.
WhIch of the above statements Is (are) true?

A. Il.
B. III.
C. and li.
D. Il and Ill.
E. I, Il, and III.
29 Consider the following statements . about companies that are Involved with
nternational operations:
— Budgeting for these firms is often very involved because of
fluctuating values in foreign currencies.
II — Multinational firms may encounter hypeririflationary economies.
III — Companies with off-shore operations often face changing laws and political
climates that affect business activity.
A. I.
B. III.
C. lanill.
D. llandlll.
E. l.ll.andlll.
30. Consider the following statements about budgeting and a products life cycle;
— Budgtts should focus on costs that are incurred only after a product has
been introduced to the marketplace.
II — Life-cycle costs would inclue those related to product planning, preliminary
design, detailed design and testing, production. and distribution and
customer service.
III — When a life cycle is short, companies must make certain that before a
commitment is made to a product the product’s life-cycle costs are
covered. Which of the above statements is (are) true?
A. L
B. Il.
C. landif.
D. II and lll.
E. I, Il. and III.
31. The difference between the revenue or cost projection that a person provides,
an a realistic estimate of the revenue or cost, is called:
A. passing the buck.
B. budgetary slack,
C false budgeting
D. participative budgeting
E. resource allocation processing .
32. If a manager builds slack into a budget, how would that manager handle estimates
of revenues and costs?
Revenues Costs
A. Underestimate Underestimate
B. Underestimate Overestimate
C. Overestimate Underestimate
D. Overestimate Overestimate
E. Estimate correctly Estimate correctly
33 The following events took place when Managers A, B, and C were preparing
budgets for the upcoming period:
— Manager A increased property taxexperiditures by 2% when she was
informed of a recent rate hike by local authorities.
II — Manager B reduced sales revenues by 4% when informed of recent
aggressive actions by a new competitor
III — Manager C. who supervises employees with widely varying skill levels,
used the highest wage rate in the department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the
preceding cases is (are) an example of building slack in budgets2
A
I.
B II
C Ill.
D tandIl
E Il and
Ill
34 Consider the following statements about budgetary stack:
I — Managers build slack into a budget so that they stand a greater chance of
receiving favorable performance evaluations.
Il — Budgetary slack is used by managers to guard against uncertainty and
unforeseen events
Ill - Budgetary slack is used by manaòers to guard against cuts by top
management in the budget preparation process

A. I.
B. Il.
C. tandil.
D. li and Ill.
E. I, Il, and Ill.
35, When an organization involves its many employees ‘n the budgeting process in a
meaningful way, the organization is said to be using
A. budgetary stack
B participative budgeting
C. budget padding
D. imposed budgeting
E. employee-based budgeting
36. Which of the following outcor’ies ‘s typically assoctatec with participative
budgeting”
A. Employees make significant attempts in trying to achieve budgetary goals.
B Budget preparation time can be somewhat lengthy
C The problem of budget padding may surface
D. Ethical issues may arise, especially when the budget is used as a basis for
performance appraisal
E Employee morale may suffer.
37. Company A uses a heavily participative budgeting approach whereas at
Company B, top management develops all budgets and imposes them on lower-
level personnel. Which of the following statements is tie?
A. A’s employees will likely be more motivated to achieve budgetary goals than the employees of
Company B
B B’s employees may be somewhat disenchanted because although they will
be evaluated against a budget. they really had little say in budget development
C Budget padding will likely be a greater problem at Company B.
D. Budget preparation time will likely be longer at Company A.
E. Ethical issues may arise at Company A, especialiy when the budget is used
as a basis for performance appraisal.
38. When comparing ECO and JIT inventory systems. which of the
following statements is false?
A. The EOO approach takes the viewpoint that some iventory is necessary.
B. The ECO system ssumes a constanl order quantity.
C. JIT argues that inventory investments should be minimized.

D. The EOQ system focuses on acquisition and holding costs.
E. JIT argues that safety stocks are necessary to reduce the probability of a stock shortage.
Use the following information in solving multiple-choice questIons 39 - 40.
Cartwright Graphics uses a special purpose paper In 80% & Its jobs. The paper is
purchased in 100-sheet packages at a cost of Rs,100 per package. Management
estimates that the cost of placing and receiving a typical order is Rs.15, and the
annual cost of carrying a package ¡n inventory is Rs.1.50. Cartwrigtit uses 2600
packages each year. Production is constant, and the lead time to receive an order
is 1 week.
39. The economic order quantity is:
A. 203 packages.
B. 225 packages.
C. 228 packages.
D. 565 packages.
E. 631 packages.
40. The reorder point is:
A. 25 packages.
B. 50 packages.
C. 100 packages.
D. 203 packages.
E. 225 packages
41. Of littie or rio relevance in ealuating the performance of an activity wowd be:
A. Flexible budget
P Fixed budget
C. Difference between planned and actual results
D. Planning and control of future activities
42. The budget is:
& A substitute ti management
B. An aid to management
C. A post mortem analysis
D None of the above
43. Which of the following are functional budget?
I. Sales budget
Il. Cash budget
Ill. Purchase budget
IV. Selling expense budget
A. l and ll
B. I. Ill and IV
C. None of he above
D. All of the above
44. Which of the following items would be included in a cash payment budget’
I. Purchase of fixed asset
Il. Sales proceed of fixed asset
llI Loss on disposal of fixed
asset
IV. Depreciation of fixed asset
A. l only .
B. I and Il only
C. l,lI ,Illonly .
D. All of the above
45. Fried-n-Grill compares monthly operating results with a static budget preparéd
at the beginning of the year. When actual sales are less than budget. would the
restaurant usually report favourable variances on fixed supervisory salaries a
variable food costs?
A. Supervisory salaries: Yes food costs Yes
B. Supervisory salaries : Yes food costs: No
C Supervisory salaries: No : food costs : Yes
D. Supervisory salaries: No: food costs : No
46. Paramount Sports Company produces and sells volleyballs. To guard against
out of stock situation, the company requires that 20% of the next month’s sales be
on hand at the end of each month. Budgeted sales of volleyballs over the next
three months are:
October November December
Budgeted sales in units 80,000 1,20,000 100,000
Budgeted production units for November would be:

A. 140.000 units
B. 124,000 units
C. 116.000 units
D. 100.000 units
47. A wisely administered master budget should promote and among sub-units within
the company.
A. Discourse, competition
B Competition, communication
C. Judgement, competition
D. Cooperation, competition
48. Which one of the following statements is false?
A Budgets are used in both the planning and control of daily operations.
B. Budgets assist in coordinating the diverse goals of a companys different sub-units
C. Top-down budgeting is sometimes known as participative budgeting.
D. Budgets help to formalize a company’s planning process.
1. Global Company has developed the following sales projections for the calendar year:
May Rs.100, 000
June 120,000
July 140,000
August 160,000
September 150,000
October 130,000
Normal cash collection experience has been that 50% of sales are collected during the month of sale and
45% in the month following sale. The remaining 5% of sales is never collected. Global’s budgeted cash
collections for the third calendar quarter are:
a) Rs.427,500
b) Rs.422,500
c) Rs.414,000
d) Rs.450,000
2. Which of the following condition would cause absorption-costing net income to be

Lower than variable-costing net income?
a) Units sold equaled units produced.

b) Units sold were less than units produced.
c) Selling expenses increased.
d) Units sold exceeded units produced.
3. What would be the attitude of the management in treating Sunk costs in decision making?
a) A periodic investment of cash resources that has been made and should be relevant for
decision making
b) It is a past cost which is not directly relevant in decision making
c) Management will treat it as variable cost each time in decision making
d) None of the given options
4. A firm develops an annual cash budget in order to
a) Avoid the opportunity costs of non-invested excess cash and minimize the cost of interim financing.
b) Support the preparation of its cash flow statement for the annual report.
c) Ascertain which capital expenditure projects are feasible and which capital expenditure projects should
be deferred.
d) Determine the opportunity costs of alternative sales and production strategies.
5. After the development of master budget, which of the following ratio (‘s) can be used to
compare actual performance with budgeted performance?
a) Activity ratio
b) Capacity ratio
c) Efficiency ratio
d) All of the given options
6. Process costing is a method that is used to account for:

a) Large numbers of identical products that are produced in a
continuous manufacturing environment
b) Small numbers of products that are produced in batches
c) Finished goods that are refined and processed further
d) Large numbers of products that are produced in a non-repetitive process
7. A budget that requires management to justify all expenditures, rather than just changes from the
previous year is referred to as:
a) Self-imposed budget
b) Participative budget
c) Perpetual budget
d) Zero-based budget
8. The proportion of an overhead activity consumed by a product is the?
a) Overhead ratio.
b) Consumption ratio.
c) Quick ratio.
d) Fixed ratio.
9. More accurate product costing information is produced by assigning costs using?
a) a volume-based , plant wide rate.

b) Volume –based, departmental rates.
c) activity-based pool rates.
d) all of the above.
10. Which of the following concept is used in absorption costing?

a) Matching concept
b) Cost concept
c) Cash concept
11. A(n) Is a collection of overhead costs for which cost variation can be explained by
a Single activity driver?
a) cost objective
b) Homogeneous cost pool
c) Allocation base
d) Heterogeneous cost pool
12. Which of the following best describe a flexible budget?

a) A budget of variable production costs only
b) A budget which shows the costs and revenues at different levels of activity
c) A budget which is prepared using a computer spreadsheet model
d) A budget which is updated with actual costs and revenues as they occur during the budget period
13. If the selling price and the variable cost per unit both decrease at10% and fixed costs do not
change, what is the effect on the contribution margin per unit and the contribution margin ratio?
a) Contribution margin per unit and the contribution margin ratio both remains unchanged
b) Contribution margin per unit and the contribution margin ratio both increases
c) Contribution margin per unit decreases and the contribution margin ratio remains
unchanged
d) Contribution margin per unit increases and the contribution margin ratio remains
unchanged
14. Process costing would be used in all of the following industries except?
a) Petroleum refining.
b) Chemicals.
c) Truck tire manufacturing.
d) Automobile repair.
15. Which of the following statements is true for a firm that uses variable costing?
a) The cost of a unit of product changes because of changes in number of units manufactured
b) Profits fluctuate with sales
c) An idle facility variation is calculated
d) Product costs include variable administrative costs

department must account for which of the following costs?
a) Direct material costs only.

b) Conversion and transferred-in costs.
c) Direct material and conversion costs.
d) Direct material, conversion, and costs.
17. The profit and loss statement of Majid Mining Inc. includes the following information for the
current fiscal year
Sales $160,000
Gross profit 48,000
Year-end finished goods inventory 58,300
Opening finished goods inventory 60,190
The cost of goods manufactured by Majid for the current fiscal year is
a) $46,110
b) $49,890
c) $110,110
d) $113,890
18. Which of the following is NOT true? A small company's breakeven point:
a) Occurs where its revenue equals its expenses
b) Shows entrepreneurs’ minimum level of activity required to keep the company in operation
c) Is the point at which a company neither earns a profit nor incurs a loss
d) Total contribution margin equals total variable expenses
19. Which of the following cost is linked with the calculation of cost of inventories?
a) Product cost
b) Period cost
c) Both product and period cost
d) Historical cost
20. If conventional manufacturing is used, which of the following would be
considered Direct costs?
a) Set-up costs
b) Direct labor
c) Maintenance of machinery
d) Inspection costs

a) Establish a separate work-in-process inventory account for each
manufacturing department.
b) Establish a separate finished-goods inventory account for each manufacturing department
c) Pass completed production directly to cost of goods sold
d) Charge goods produced with actual overhead amounts rather than applied
overhead amounts
22. Which of the following statements is FALSE?

a) In process costing, costs are accumulated by department
b) In process costing, the cost per unit in a department is found by spreading
the period’s manufacturing costs over the units produced
c) In process costing, the total cost of each unit is found by dividing the total
factory costs by the number of units completed
d) In job order costing, the unit cost of a particular job is found by dividing the
job’s total cost by the number of units in the job
23. When a firm prepares financial reports by using absorption costing
a) Profits will always increase with increases in sales

b) Profits will always increase with increases in sales
c) Profits may decrease with increased sales even if there is no change in
selling prices and costs
d) Decreased output and constant sales result in increased profits
24. In a JIT manufacturing environment, product costing information is used mainly for all of
the following EXCEPT
a) Product costing of inventory for financial reporting purposes

b) Pricing decisions
c) Product profitability analysis
d) Make-or-buy decisions
25. The proposed transfer price is based upon the outlay cost. Outlay cost plus opportunity cost is
a) The retail price

b) The price representing the cash outflows of the supplying division plus the contribution
t the supplying division from an outside sale
c) The price usually set by an absorption-costing calculation
d) The price set by charging for variable costs plus a lump sum or an additional markup, but
less than full markup
26. Which one of the following is an advantage of using variable costing?
a) Variable costing complies with the U.S. Internal Revenue Code

b) Variable costing complies with generally accepted accounting principles
c) Variable costing makes cost-volume relationships more easily apparent
d) Variable costing is more relevant to long-run pricing strategies
27. Shezan Co.’s master budget was prepared based on the following projections:
Sales Rs.2, 400,000
Decrease in inventories 60,000
Decrease in accounts payable 100,000
Gross margin 40%
Shezan’s estimated cash disbursements for inventories are
a) Rs.920,000
b) Rs.1,000,000
c) Rs.1,400,000
d) Rs.1,480,000
28. A learning curve of 80% assumes that direct labor costs are reduced by 20% for each doubling of output.
What is the
incremental cost of the sixteenth unit produced as an approximate percentage of the first unit produced?
a) 64%
b) 64%
c) 31%
d) 41%
29. A limitation of transfer prices based on actual cost is that they

a) Charge inefficiencies to the department that is transferring the goods.
b) Can lead to suboptimal decisions for the company as a whole.
c) Must be adjusted by some markup.
d) Lack clarity and administrative convenience.
30. The series of activities in which customer usefulness is added to the product is the definition of:
a) A value chain
b) Process value analysis
c) Integrated manufacturing
d) Activity-based costing
31. In short term decision making which of the following is not concerned?
a) Cash flows
b) Time value of money
c) Pay back period
d) Capital investments
32. Which of the following is NOT suitable action taken by the firm to overcome the problem of
cash shortage during a period?
a) Overdraft arrangement
b) Selling off assets
c) Extension in credit period with suppliers
d) Issue of bonus shares
33. The Shan Foods Company’s budgeted sales of Rs.200,000 for July, Rs.280,000 for August,
Rs.198,000 for September and Rs.200,000 for October. Approximately 75% of sales are on credit;
the remainder are cash sales. Collection experience indicates that 60% of the budgeted credit sales
will be collected the month after the sale, 36% will be collected the second month, and 4% will be
uncollectible. The cash receipts budgeted for October equals to:
a) Rs.164,700
b) Rs.200,000
c) Rs.214,700
d) Rs.244,400
34. A carpet manufacturer maintains a retail division consisting of stores stocking its brand and
other brands, and a manufacturing division that makes carpets and pads. An outside market exists
for carpet padding material in which all padding produced can be sold. The proper transfer price
for padding transferred from the manufacturing division to the retail division is:
a) Variable manufacturing division production cost.

b) Variable manufacturing division production cost plus allocated fixed factory overhead.
c) Variable manufacturing division production cost plus variable selling and administrative cost.
d) The market price at which the retail division could purchase padding.
35. The term Cost apportionment is referred to:

a) The costs that can not be identified with specific cost centers.
b) The total cost of factory overhead needs to be distributed among specific
cost centers but must be divided among the concerned department/cost
centers.
c) The total cost of factory overhead needs to be distributed among specific cost centers.
36. When production is equal to sales, which of the following is TRUE?
a) No change occurs to inventories for either use absorption costing or variable costing
methods
b) The use of absorption costing produces a higher net income than the use of variable costing
c) The use of absorption costing produces a lower net income than the use of variable costing
d) The use of absorption costing causes inventory value to increase more than they would
though the use of variable costing
37. One department of an organization, Final Assembly, is purchasing subcomponents from

another department, Materials
Fabrication. The price that will be charged to Final Assembly by Materials Fabrication is to be determined.
Outside market prices for the subcomponents are available. Which of the following is the most correct
statement regarding a market-based transfer price?
a) Marginal production cost transfer prices provide incentives to use otherwise idle capacity.
b) Market transfer prices provide an incentive to use otherwise idle capacity.
c) Overall long term competitiveness is enhanced with a market-based transfer price.
d) Corporate politics is more of a factor in a market-based transfer price than with other methods
38. For external-reporting purposes, generally accepted accounting principles require that Net income
be based on?
a) Absorption costing.
b) Variable costing.
c) Direct costing.
d) Activity-based costing.
39. Which of the following sentences is the best description of zero-base budgeting?
a) Zero-base budgeting is a technique applied in government budgeting in order to have a neutral effect on
policy issues
b) Zero-base budgeting requires a completely clean sheet of paper every year, on which each part of
the organization must justify the budget it requires
c) Zero-base budgeting starts with the figures of the previous period and assumes a zero rate of change
d) Zero based budgeting is an alternative name of flexible budget
40. Which of the following budget includes the item of depreciation of plant?
a) Direct labor cost budget
b) Variable FOH cost budget
c) Fixed FOH cost budget
d) Direct material cost budget
41. The Eastern division sells goods internally to the Western division of the same company. The
quoted external price in industry publications from a supplier near Eastern is Rs.200 per ton plus
transportation. It costs Rs.20 per ton to transport the goods to Western. Eastern’ s actual market
cost per ton to buy the direct materials to make the transferred product is Rs.100. Actual per ton
direct labor is Rs.50. Other actual costs of storage and handling are Rs.40. The company president
selects a Rs.220 transfer price. This is an example of
a) Market-based transfer pricing.

b) Cost-based transfer pricing.
c) Negotiated transfer pricing.
d) Cost plus 20% transfer pricing
42. Which of the following is the best define a by-product?

a) A by-product is a product arising from a process where the wastage rate is higher than a defined
level
b) A by-product is a product arising from a process where the sales value is insignificant by
comparison with that of the main product or products
c) A by-product is a product arising from a process where the wastage rate is unpredictable
d) A by-product is a product arising from a process where the sales value is significant by
43. Which of the given will NOT be included for the calculation of equivalent units of material under
weighted average costing method?
a) Opening work in process units
b) Closing work in process units
c) Unit completed and transferred out
44. All of the following are essential requirements of a good wage system EXCEPT:
a) Reduced labor and overhead costs
b) Reduced per unit variable costs
c) Increased production
d) Increased operating costs
45. The main difference between the profit center and investment center is:
a) Decision making
b) Revenue generation
c) Cost incurrence
d) Investment
46. When selecting an activity driver, a company should consider?
a) The cost of measurement.

b) The time of the year.
c) the cause and effect between the activity driver and the cost pool.
d) Both a and c.
47. ABC Company makes a single product which it sells for Rs. 20 per unit. Fixed costs are Rs.
75,000 per month and product has a profit/volume ratio of 40%. In that period actual sales were Rs.
225,000.
Calculate ABC Company Break Even point in Rs.
a) Rs.187, 500
b) Rs.562, 500
c) Rs. 1,500,000
48. Which of the following is true for the manufacturing overhead budget?
a) Provides a schedule of all costs of production other than direct materials and direct labor
b) Includes both variable and fixed costs associated with overhead
c) Depreciation has to be deducted as a non-cash expense in order to determine the level of cash required for
overhead
49. A particular manufacturing job is subject to an estimated 80% learning curve. The first unit
required 50 labor hours to complete. What is the cumulative average time per unit after eight
units are completed?
a) 40.0 hours
b) 32.0 hours
c) 25.6 hours
d) 20.0 hours
50. The little Rock Company shows Break even sales is Rs. 40, 500 and Budgeted Sales is Rs. 50,000.
Identify the Margin of safety ratio?
a) 19%
b) 81%
c) 1.81%
d) Required more data to calculate
Q1: Will Klampps Ltd manufactures joint products S and T in a joint process. Data for February are as
follows.
Opening stock 1,000 units, 60% complete: cost 8,400
Added materials 5,000 units, cost 31,800
Conversion costs 20,000
Closing stock 2,000 units, 30% complete
Transfer to finished goods S 1,800 units:
T 1,200 units:
Sales price Product S 30 per unit: Product T 15 per unit.
Normal loss which is 10% of input in a period is not accounted for. Abnormal loss which is written off to
the P & L account is assumed to occur at the end of the process.
Process costs are apportioned between products on a sales revenue basis. Stock is valued on a FIFO basis.
What is the cost per unit in February for product T?
A. 8.75
B. 9.15
C. 9.25
D. 14.80
Q2: Pardell Steamers Ltd produces two joint products L and M and a by-product N in a joint process.
Product L is then further processed to manufacture product LA and a waste material Z.
The budget for the next period has been drafted, as follows.
Joint process costs Production and Sales
Variable 6,000 L 400 units: sales value at split-off point, per 12.5
Fixed 5,000 unit M 500 units: sales price per unit 30
Further process costs, excluding N 100 units: sales price per unit 2
disposal cost of Z LA 200 units: sales price per unit 160
Z 200 units: disposal cost per unit 10
Variable 12,000
Fixed 10,000
Rowan Bote, the company’s chief executive, believes that it would be possible to produce and sell an extra
50 units of product LA in the period at budgeted sales price of 160 without any increase in fixed costs.
The extra by-product N could be sold at its budgeted price although to sell any extra quantities of product
M, the sales price would need to be reduced to 25 for all units of M produced in the period. Any unsold
quantities of M must be disposed of at a cost of 4 per unit.
If all sales and distribution costs are fixed, by how much could the company’s profits be increased if the
extra 50 units of LA are made and sold during the period?
A. 3,175
B. 3,675
C. 4,175
D. 4,925
Q3: Harrop Lane Ltd manufactures two products by passing materials through two consecutive
processes. Results for June were as follows.
Process 1 Input materials at 1.5 per kilo: 9,000

Conversion costs: 5,850
Output to process 2: 5,500 kilos
Defective production (scrapped on completion): 500 kilos
Process 2 Conversion costs: 14,675
Output: Joint product X: 2,500 kilos, sales price 16 per kilo
Joint product Y: 2,500 kilos, sales price 8 per kilo
By product Z: 500 kilos, sales price 2 per kilo
There were no opening or closing stocks in either process. Normal loss is 10% in process 1 and nil
in process 2. Joint product costs are apportioned on a sales value basis. By-product income is credited to
the process account. All output of Z was sold in June.
Taking profits as a difference between sales and full production costs, what was the profit per kilo of joint
product X in June, to two decimal places?
A. 8.05
B. 8.32
C. 8.39
D. 8.72
Data for questions 4-6
Annette Cord Ltd has developed a new design of short-handled tennis racket. She has done this in her
spare time and must now decide whether or not to set in business to market this new product. The
potential sales volume is difficult to predict, but the following estimates have been made.
Sales price per Racket Sales volume per year

14$ 17,500 rackets
15$ 15,000 rackets
21$ 10,000 rackets
23$ 9,000 rackets
She plans to have the rackets manufactured for her by an external supplier and to organize selling and
distributing through her own company. Production and selling costs would be as follows.
Variable cost per racket Fixed costs

for up to 10,000 rackets per year 9$ 110,000
for over 10,000 rackets per year 6$ 120,000
The costs above exclude the following consideration.
 Annette has already spent 5,000 on market research and she intends to spend a further 2,000.
 Annette will pay herself a monthly salary of 1,000. If she decides to go ahead with the product
development, she will have to give up her job with a sports goods manufacturer, which pays her a
salary of 800 per month.
In deciding whether or not to set up the business, Annette Cord should consider the relevant costs and
benefits of each decision option.
Q4: In the assessment of the relevant costs of the decision to set up in business, development and
research costs are;
A. a sunk cost of 7,000
B. a sunk cost of 5,000 and an incremental cost of 2,000
C. a suck cost of 2,000 and an incremental cost of 5,000
D. an opportunity cost of 7,000
Q5: In the assessment of the relevant costs of the decision to set up in business, Annette Cord’s salary
cost should be treated as:
A. An incremental benefit of 200 per month net

B. An opportunity cost of 200 per month net
C. An opportunity cost of 800 per month
D. An opportunity cost of 1,000 per month
Q6: If Annette Cord does decide to set up in business, which of the four selling prices per racket should
she charge, on the basis of estimates provided, in order to maximize profits?
A. $14 per racket

B. $15 per racket
C. $21 per racket
D. $23 per racket
Data for question 7-9
Hetty kett Ltd plans to produce and sell 5000units of its product, the Manna, for which the selling price is
$25 per unit.
1unit of manna requires 3units of material X and 4 units of material Y .Opening stocks of raw material are
as follows.
Units Total Value
Material X 8,000 16,000
Material Y 10,000 5,000
The closing stock of raw material is to be a level which is sufficient to produce 3,000 units of Manna.
There are no opening stocks or planned closing stocks of Mannas.
Hugo first, the company’s cost accountant, has made the following estimates.
1) Purchase prices for all raw materials next year will be 10% higher than the prices reflected in the
opening stock values.
2) Sales and purchases are all on credit. The opening balances at the beginnings of the year will be.
Debtors $80,000
Trade creditors $29,000
3) Expected receipts from debtors in the year are $86,000 and expected payments to trade creditors
are $26,000
Q 7: what is the budgeted cost of the raw material purchases for the year?
A. $41,900
B. $43,000
C. $44,300
D. $47,300
Q 8: what is the budgeted closing balance for debtors, given no bad debts and no discounts allowable?
A. $119,000
B. $122,000
C. $125,000
D. $131,000
Q9: the budgeted amount for the trade creditors at the end of the budget period, given on discounts
receivables, is?
A. $40,000
B. $44,300
C. $46,000
d. $50,300
Data for questions 10 – 12
Actual sales for a retail company, Markup LTD, for November and December 19X1, together with
budgeted monthly sales for January –June 19X2 are shown below.
Sales
19X1 November 160,000 (actual)

December 210,000 (actual)
19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
The company sells food products with a very short shelf life, and so i* carries no stock goods beyond the
end of any day. All good purchased on any day are resold during the day
The purchase price of the good for markup Ltd is 75% of their retail price. Purchases are on one and a half
months’ credit. Sales are 50% on cash and 50% on credit. One half of credit customers pay after 1 month
and the other half pay after 2 months.
There are no bad debts. Sales and purchases occur at an even rate throughout each month.
Q10: What are the budgeted cash receipts in February 19X2?
A. $77,500
B. $102,500
C. $132,500
D. $175,000
Q11: What are the budgeted cash receipts in the six month period January-June 19X2?
A. $ 600,000
B. $615,000
C. $625,000
D. $650,000
Q12: what are the budgeted cash payments to suppliers in the six month period January-June 19X2?
A. $450,000
B. $495,000
C. $510,000
D. $680,000
Q13. A master budget compromises of;
A. The budgeted income statement

B. The budgeted cash flow, budgeted income statement and budgeted balance sheet
C. The budgeted cash flow
D. The capital expenditure budget
The following relates to Holden Tile Ltd.
At 1.1.X2
Debtors 60,000(2 months sale)
Stocks 24,000(1 month’s cost of goods sold)
Creditors for material purchases 24000(1 month’s purchases)
The cost of goods sold consists entirely of materials, and amounts to 80% of sales value. Sales in 19X1
occurred at an even rate of 30,000 per month, and this time sane rate is budgeted to continue throughout
19X2. No discounts are currently offered to customers.
There has been a proposal by the budget committee to improve working capital management, and from 1
January 19X2 the following changes will be made.
Debtors 25% of sales will be for cash, with a discount of 5% now offered for cash payment. Of the
75% credit sales, one half would be expected to pay after 1 month and one half after 2 months.
Stocks Stocks turnover will be reduced to ½ month.
Creditors Credit taken from suppliers will be extended to 2 months.
Q14: What are the budgeted payments to suppliers of raw material purchases in 19X2?
A. 252,000
B. 264,000
C. 276,000
D. 315,000
Q15: What are the budgeted cash receipts for cash and credit sales for 19X2?
A. 368,250
B. 370,350
C. 381,750
D. 386,250
Q16: Compare the budgeted cash flows in 19X2 with what the cash flows would have been if debtors
continued to pay after 2 months, stock turnover remained at 1 month and suppliers continued to
be paid after 1 month. In comparison, the changes in working capital management will improve
the net cash flows in 19X2 by:
A. 34,500
B. 45,750
C. 57,750
D. 62,250
On 1 January, the summary balance sheet of Curran Bunn Ltd. was as follows:
Share Capital
Share capital 60,000 Machinery: at cost 170,000
Reserves 64,250 Accumulated (70,000)
Depriciation
Creditors for loan 3,750 100,000
interest
10% loan 50,000 Stocks 35,000
Proposed dividend 20,000 Debtors 80,000
(payable 20 January)
Overdraft 17,000
215,000 215,000
5- % of the sales are on credit, with payment after 1 month. 50% of sales are on cash with a discount of 5%
given for cash settlement. Payments for purchases are made in the month of purchase, to benefit from a
10% prompt settlement discount. Stock levels are expected to remain constant throughout the period.
The following are expected during the next three months

January 90,000 60,000 20,000
February 150,000 120,000 25,000
March 240,000 200,000 25,000
Sales and purchases figures are before deduction of discounts. The expenses figure includes depreciation
of machinery of 2,000 per month: the remaining expenses are all cash items and paid for in the month in
which they are charged. Loan interest for the whole month is payable at the end of March. Overdraft
interest should be ignored.
Q17: What is the budgeted net cash flow in January?
A 28,750
B 30,750
C 33,000
D 50,750
Q18: What is the budgeted net cash flow in February?
A 1,000
B 11,000
C 12,750
D 14,750
Q19: What is the budgeted net cash flow in March?
A 15,250
B 19,000
C 20,000
D 21,000
Armela Sling Ltd manufactures and sells a single product. Shown below is a summary of the budget for
the previous year (19X1) and actual results.
Budget Actual
Sales 500,000 600,000
Direct materials 200,000 300,000
costs
Other costs (all 250,000 250,000
fixed)
450,000 550,000
Profit 50,000 50,000
Fanny Bone, the company’s owner, made two decisions on 1 January 19X1.
1. She reduced the sales price of the products by 25% for all units sold in the year.
2. She switched to a different supplier for direct materials, purchasing a lower quality material but
obtaining a 20% reduction on the budgeted price. There were no stock of direct materials, work in
process or finished goods on either 1 January 19X1 or 31st December 19X1.
It is to be assumed that the original budget shown above was an accurate estimate of the likely results
for 19X1 before these two decisions were made.
The original is to be taken as a basis for comparison with actual results, for budgetary control
purposes.
Q20: Contribution is the difference between the sales price and the variable cost. What were the sales
volume contribution variance and the sales price variance in 19X1, in 000’?
Sales volume variance Sales price variance
A 60(F) 150(A)
B 150(F) 200(A)
C 180(F) 150(A)
D 180(F) 200(A)
Q21: What was the direct materials price variance in 19X1 in 000’?
A 20(F)
B 50 (F)
C 60 (F)
D 75 (F)
Q22: The direct material usage variance in 19X1 is 000’ was
A 60(A)
B 55(A)
C 25(A)
D 20(F)
Mardigras Manufacturing Ltd’s budget for the next year, when it expects to be operating at 75%
capacity, is as follows:
Sales 18,000 units @ 40 864,000

Less Direct materials 216,000
Direct wages 162,000
Production overheads:
Fixed 126,000
Variable 54,000
(558,000)
Gross Profit 306,000
Other cost Fixed 108,000
Varying with 81,000 189,000
sales vol.
Net Profit 117,000
Q23: The company’s breakeven point in sales revenue is
A 414,700
B 448,000
C 576,000
D 630,000
Q24: It has been estimated that if the selling price were reduced to 42, sales demand would increase to
90% of the firm’s output capacity. The profit at this price and sales volume would be
A 16,000
B 32,000
C 36,000
D 57,600
Q25: It has also been estimated that in order for sales to reach 100% of the company’s output capacity,
the sales price must be reduced by 15% below budget and advertising campaign costing $25,000
would be needed.
If the company decided to take this option, its breakeven point in sales revenue terms, to the nearest $ 000,
would now be
A. 859,000
B. 843,000
C. 831,000
D. 816,000
Q26: Finnish Inline Ltd. Manufactures component Q and end product T. One unit of Q goes into
manufacture of one unit of T. Budgeted manufacturing cost are as follows:
Component Q Product T
Component Q - 10
Raw material 2 2
Direct labour 4 8
Variable overhead 1 2
Fixed overhead 3 6
10 28
Sale price 35
Profit 7
Direct labour is a variable cost. The company is working at full capacity, and can only just produce enough
components of Q to meet the demand for product T.
An outside customer asks Finnish Inline to sell it 3000units of component Q. if the company agrees, it will
incur additional inspection and testing cost of £3000.
What is the minimum price per unit of Q that Finnish Inline would have to charge if it agreed to supply
the customer, so as not to suffer any drop in profits?
A. £17
B. £21
C. £24
D. £31
Q27: Lufthansika ltd has been making a new product and the time taken to produce successive units
has been recorded:
Cumulative output (units) Total hours taken

2 500
3 635
4 750
6 951
8 1,125
Which one of the following Learning Curve rates is the company experiencing?
A. 50%
B. 60%
C. 70%
D. 75%
Q28: Which of the following inventory valuation method results in a cost of sales value which is closest to
the economic value?
A. FIFO
B. LIFO
C. HIFO
D. Weighted average
Data for Question 29 and 30

Roll and Maul Ltd. is having serious problems in obtaining supplies of raw material M, which is used in
the four products that it makes. The company has current stocks of M amounting to 15000kilos, which
costs £60000. Expected demand, selling prices and costs for each of the four products are as follows:
Product Kilos of material Labour and Sales price per Budgeted

M per unit of material unit sales demand
product overhead cost in the period
per unit
KG £ £ Units
W 0.7 15 22 8000
X 0.5 8 14 7200
Y 1.0 12 23 12000
Z 1.5 10 22 10000
Q29: If Roll and Maul Ltd. Cannot obtain any further supplies of material M in the period, what
quantities of the products should be produced in order to maximize the period profits.
Units of W Units of X Units of Y Units of Z

A 4000 6400 0 6000
B 8000 0 9400 0
C 0 0 12000 2000
D 0 7200 11400 0
Q30: If Roll and Maul can obtain supplies of material M, but at a price of £9.50 per kilo, how many
kilos the company should purchase in the period in order to maximize profits? (It can be assumed
that the price of the material will subsequently fall to £4 per kilo in future periods).
A. None
B. 600 kilos
C. 6200 kilos
D. 21200 kilos
Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted data is as
follows:
Product X (£) Product Y (£) Product Z (£)

Sale price per unit 8 18 22
Variable cost per unit 6.5 12 15
Fixed cost per unit 0.5 4.5 4
Total cost per unit 7 16.5 19
Profit per unit 1 1.5 3
Direct Labour hours per unit ½ hour 1 ½ hour 2 hours
Budgeted monthly sales 500 units 300 units 400 units
Q31: On the basis of the data provided, if no overtime hours are worked, what monthly production budget
should be planned, in order to maximize profits?
Unit of X Unit of Y Unit of Z
a) 500 100 400

b) 0 300 375
c) 0 300 400
d) 50 250 400
Q32: Suppose extra direct labour hours a month upto a maximum of 250 hours a month can be made
available in the overtime. What additional product should be planned to use up the extra hours
available (if required) in order to maximize profits and by how much would profits increase?
(Assume no charge in fixed cost)
Units of X Units of Y Units of Z Extra profit per month
a) None None None £0

b) 100 0 100 £350
c) 350 50 0 £325
d) 400 0 25 £275
Q33: The Shadow Price of a resource is an increase in value (usually extra contribution which would be
created by having available one additional unit of a limiting resource at its increased price
(TRUE)
(FALSE)
Q34: When you have to decide the “order/sequence of production” in case of a limiting resource, the
main criteria for deciding the order is, contribution per limiting factor
(TRUE)
(FALSE)
Q35: The unit product cost, in Activity Based Costing may include some “Non-manufacturing cost”
(TRUE)
(FALSE
Q36: Generally, the decisive criteria followed by the organizations in selecting a mutually exclusive
capital project is a higher Internal Rate of Return
(TRUE)
(FALSE)
Q37: An Internal Rate of Return is a better measure than the Net Present Value in discounted cash flow
approach
(TRUE)
(FALSE)
Q38: An Internal Rate of Return calculated using WACC (re-investment rate) is a Cross over rate
(TRUE
FALSE
Q39: The price charged when one division or segment provides goods or services to another division or
segment of an organization is called a Transfer Price
(TRUE
(FALSE)
Q40: As cumulative output doubles, the cumulative average time per unit falls to a fixed percentage of
the previous average time. This phenomenon is known as wrights law (generally called a
learning curve rate)
(TRUE)
FALSE)
1 A manufacturing company benchmarks the performance of its accounts receivable

department with that of a leading credit card company.
What type of benchmarking is the company using?
(a) Internal benchmarking

(b) Competitive benchmarking
(c) Functional benchmarking
(d) Strategic benchmarking
2 Which of the following BEST describes target costing?

(a) Annual Subscription for year 2013 Rs.01,500
(b) Setting a price by adding a desired profit margin to a production cost
(c) Setting a cost for the use in the calculation of variances
(d) Setting a selling price for the company to aim for in the long run
3 Information relating to two processes (F and G) was as follows:
Process Normal loss as % of Input Output

input (liters) (liters)
F 8 65,000 58,900
G 5 37,500 35,700
For each process, was there an abnormal loss or an abnormal gain?

Process F Process G
(a) Abnormal gain abnormal gain

(b) Abnormal gain abnormal loss
(c) Abnormal loss abnormal gain
(d) Abnormal Loss abnormal loss
4 The following budgeted information relates to a manufacturing company for next period:
Units $
Production 14,000 Fixed production costs 63,000
Sales 12,000 Fixed selling costs 12,000
The normal level of activity is 14,000 units per period.

Using absorption costing the profit for next period has been calculated as $36,000.
What would be the profit for next period using marginal costing?
(a) $25,000
(b) $27,000
(c) $45,000
(d) $47,000
5 The Eastland Postal Service is government owned. The government requires it to provide a
parcel delivery service to every home and business in Eastland at a low price which is set by the
government. Express Couriers Co is a privately owned parcel delivery company that also
operates in Eastland. It is not subject to government regulation and most of its deliveries are to
large businesses located in Eastland’s capital city. You have been asked to assess the relative
efficiency of the management of the two organizations.
Which of the following factors should NOT be allowed for when comparing the ROCE
of the two organisations to assess the efficiency of their management?
(a) Differences in prices charged
(b) Differences in objectives pursued
(c) Differences in workforce motivation
(d) Differences in geographic areas served
6 Under which sampling method does every member of the target population has an equal
chance of being in the sample?
(a) Stratified sampling
(b) Random sampling
(c) Systematic sampling
(d) Cluster sampling
7 A Company manufactures and sells one product which requires 8 kg of raw material in its
manufacture. The budgeted data relating to the next period are as follows:
Units
Sales 19,000
Opening inventory of finished 4,000
Closing inventory of finished 3,000
Kg
Opening inventory of raw 50,000
Closing inventory of raw 53,000
What is the budgeted raw material purchases for next period (in kg)?
(a) $141,000
(b) $147,000
(c) $157,000
(d) $163,000
8 Up to a given level of activity in each period the purchase price per unit of a raw material
is constant. After that point a lower price per unit applies both to further units purchased
and also retrospectively to all units already purchased.
Which of the following graphs depicts the total cost of the raw materials for a period?
$ $
0 0
$ $
0 0
(a) Graph A
(b) Graph B
(c) Graph C
(d) Graph D
9 Which of the following are benefits of budgeting?

1 It helps coordinate the activities of different departments
2 It fulfils legal reporting obligations
3 It establishes a system of control
4 It is a starting point for strategic planning
(a) 1 and 4 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 2 and 4 only
10 The following statements relate to the participation of junior management in setting budgets:
1. It speeds up the setting of budgets
2. It increases the motivation of junior managers
3. It reduces the level of budget padding
Which statements are true?
(a) 1 only
(b) 2only
(c) 2 and 3 only
(d) 1,2 and 3
11 A company has a capital employed of $200,000. It has a cost of capital of 12% per year.
Its residual income is
$36,000.
What is the company’s return on investment?
(a) 30%
(b) 12%
(c) 18%
(d) 22%
12 Acompanyhascalculateda$10,000 adversedirectmaterialvariancebysubtractingitsflexed
budgetdirectmaterial costfromitsactualdirectmaterialcostfortheperiod.
Which of the following could have caused the variance?

(1) An increaseindirectmaterial prices
(2) An increase in raw material usage perunit
(3) Units produced being greater than budgeted
(4) Units sold being greater thanbudgeted
(a) 2 and 3 only
(b) 3 and 4 only
(c) 1 and 2 only
(d) 1 and 4 only
13 Acompanyhasrecorded thefollowingvariancesfor
aperiod: Sales volume variance $10,000 adverse
Sales price variance $5,000
favourable
Totalcost variance $12,000 adverse
Standard profit on actual sales for the period
was
$120,000.
What was the fixed budget profit for the period?
(a) $137,000
(b) $103,000
(c) $110,000
(d) $130,000
14 Which of the following are suitable measures of performance at the strategic level?
(1) Return on investment
(2) Market share
(3) Number of customer complaints
(a) 1 and 2
(b) 2 only
(c) 2 and 3
(d) 1 and 3
15 Which of the following are feasible values for the correlation coefficient?
1 +1·40
2 +1·04
3 0
4 –0·94
(a) 1 and 2 only

(b) 3 and 4 only
(c) 1, 2 and 4 only
(d) 1, 2, 3 and 4
16 A company’soperating costs are 60% variable and 40% fixed.
Which of the following variances’ values would change if the company switched from
standard marginal costing to standard absorption costing?
(a) Direct material efficiency variance
(b) Variable overhead efficiency variance
(c) Sales volume variance
(d) Fixed overhead expenditure variance
17 ABC Co has a manufacturing capacity of 10,000 units. The flexed production cost budget of
the company is as follows:
Capacity 60% 100%

Total production costs $11,280 $15,120
What is the budgeted total production cost if it operates at 85% capacity?

(a) $13,680
(b) $12,852
(c) $14,025
(d) $12,340
18 Usinganinterest rate of 10% peryearthe net present value (NPV) of aproject has been correctly
calculated as$50. If the interest rate is increased by 1% the NPV of the project falls by
$20.What is the internal rate of return (IRR) of the project?
(a) 7·5%
(b) 11·7%
(c) 12·5%
(d) 20·0%
19 Afactoryconsistsoftwoproductioncostcentres(Pand Q) andtwoservicecostcentres (X and Y).

Thetotalallocated andapportionedoverheadforeachisasfollows:
P Q X Y
$9,500 $8,200 $4,600 $3,000
Ithasbeenestimatedthateachservicecostcentredoesworkforothercostcentresinthe
followingproportions:
P Q X Y
Percentage of service cost centre X 50 50 – –
Percentage of service cost centre Y 30 60 10 –
The reapportionment of service cost centre costs to other cost centres fully reflects the above
proportions.
After the reapportionment of service cost centre costs has been carried out, what is the total
overhead for production cost centre P?
(a) $12,450
(b) $12,610
(c) $12,700
(d) $12,850
20 A company always 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 Annual holding
(a) Higher Lower

(b) Higher Higher
(c) Lower Higher
(d) Lower Lower
21 A company which operates a process costing system had work-in-progress at the start of last
month of 300 units (valued at $1,710) which were 60% complete in respect of all costs. Last
month a total of 2,000 units were completed and transferred to the finished goodswarehouse.
The costperequivalentunitforcostsarisinglastmonth was $10. The company uses the FIFO
method of cost allocation.
What was the total value of the 2,000 units transferred to the finished goods warehouse last
month?
(a) $19,910
(b) $20,000
(c) $20,510
(d) $21,710
22 A company manufactures and sells a single product. In two consecutive months the
following levels of production and sales (in units) occurred:
Month Month 2
Sales 3,800 4,400
Production 3,900 4,200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for
each month using both absorption and marginal costing principles.
Which of the following combination of profits and losses for the two months is consistent with the
above data?
Absorptioncostingprofit/(loss) Marginal costing profit/(loss)
Month Month Month Month 2
$ $ $ $
A 200 4,400 (400) 3,200
B (400) 4,400 200 3,200
C 200 3,200 (400) 4,400
D (400) 3,200 200 4,400
23 The following statements relate to the advantages that linear regression analysis has over
the high low method in the analysis of cost behaviour:
1. the reliability of the analysis can be statistically tested
2. it takes into account all of the data
3. it assumes linear cost
behavior Which statements are
true?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
24 A companyoperates a process in which no losses are incurred. The process account forlast
month, when there was no opening work-in-progress, was as follows:
Process Account
$ $
Costs arising 624,000 Finished output (10,000 units) 480,000

Closing work-in-progress (4,000 units)144,000
–––––––– ––––––––
624,000 624,000
–––––––– ––––––––
The closing work in progress was complete to the same degree for all elements of cost.
What was the percentage degree of completion of the closing work-in-progress?
(a) 12%
(b) 30%
(c) 40%
(d) 75%
25 Which of the following would not be expected to appear in an
organization’s mission statement?
(a) The organization’s values and beliefs
(b) The products or services offered by the organization
(c) Quantified short term targets the organization seeks to achieve
(d) The organization’s major stakeholders
26 An organization operates a piecework system of remuneration, but also guarantees its employees 80%
of a time-based rate of pay which is based on $20 per hour for an eight hour working day.
Three minutes is the standard time allowed per unit of output. Piecework is paid at the rate of
$18 per standard hour.
If an employee produces 200 units in eight hours on a particular day, what is the employee’s
gross pay for that day?
(a) $128
(b) $144
(c) $160
(d) $180
27 A company uses an overhead absorption rate of $3·50 per machine hour, based on 32,000
budgeted machine hours for the period. During the same period the actual total overhead
expenditure amounted to $108,875 and 30,000 machinehours were recorded on
actualproduction.
By how much was the total overhead under or over absorbed

for the period?
(a) Under absorbed by$3,875

(b) Under absorbed by $7,000
(c) Over absorbedby $3,875
(d) Over absorbed by $7,000
28 Which of the following statements relating to management information are true?
1. Itisproducedforpartiesexternaltotheorganisation
2. Thereisusuallyalegalrequirementfortheinformation to beproduced
3. No strict rules govern the way in which theinformation ispresented
4. Itmaybepresentedinmonetaryornonmonetaryterms
(a) 1 and 2
(b) 3 and 4
(c) 1 and 3
(d) 2 and 4
29 A company’ssales in the last yearin its three different markets were as follows
$
Market 1 100,000
Market 2 149,000
Market 3 51,000
––––––––
Total 300,000
––––––––
In a pie chart representing the proportion of sales made by each region what would be the
angle of the section representing Market 3?
(a) 17 degrees
(b) 50 degrees
(c) 61 degrees
(d) 120 degrees
30 Which of the following BEST describes a

flexible budget?
(a) Abudgetwhichshowsvariableproductioncosts
(b) A monthly budget which is changed to reflect the number ofdays in the month
(c) Abudgetwhichshowssalesrevenueand costsatdifferentlevelsofactivity
(d) Abudgetthatisupdatedhalfwaythroughtheyearto incorporatetheactualresultsforthefirsthalfofthe
year
31 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) $4,461
(d) $1,633
10
32 Two products G and H are created from a joint process. G can be sold immediately
after split-off. H requires further processing into product HH before it is in a saleable
condition. There are no opening inventories and no work in progress of products G, H
or HH. The following data are available for last period:
$
Total jointproduction costs 350,000
Further processing costs of product
H66,000
Product Production units
Closing inventory
G 420,000 20,000
HH 330,000 30,000
Using the physical unit method for apportioning joint production costs, what
was the cost value of the closing inventory of product HH for last period?
A $16,640
B $18,625
C $20,000
D $21,600
36.A company manufactures two products, C and D, for which the following information
is available:
Product C Product D Total

Budgeted production (units) 1,000 4,000 5,000
Labour hours per unit/in total 8 10 48,000
Number of production runs required 13 15 28
Number of inspections during
production 5 3 8
Total production set up costs $140,000

Total inspection costs $80,000
Other overhead costs $96,000
Other overhead costs are absorbed on a labour hour basis.
Using activity-based costing, what is the budgeted overhead cost per unit of Product D?
(a) $43·84
(b) $46·25
(c) $131·00
(d) $140·64
37. The selling price of Product X is set at $550 for each unit and sales for the coming
year are expected to be 800 units. A return of 30% on the investment of $500,000 in
Product X will be required in the coming year.
What is the target cost for each unit of Product X?

(a) $385·00
(b) $165·00
(c) $187·50
(d) $362·50
38 P Co makes two products, P1 and P2. The budgeted details for each product are as
follows:
P1 P2
$ $
Selling price 10·00 8·00
Cost per unit:

Direct materials 3·50 4·00
Direct labour 1·50 1·00
Variable overhead 0·60 0·40
Fixed overhead 1·20 1·00
––––– –––––
Profit per unit 3·20 1·60
––––– –––––
Budgeted production and sales for the year ended 30 November 20X5
are: Product P1 10,000 units

Product P2 12,500 units
The fixed overhead costs included in P1 relate to apportionment of general overhead

costs only. However, P2 also included specific fixed overheads totaling $2,500.
If only product P1 were to be made, how many units (to the nearest whole unit) would
need to be sold in order to achieve a profit of $60,000 each year?
(a) 25,625 units
(b) 19,205 units
(c) 18,636 units
(d) 26,406 units
39. Which of the following statements regarding environmental cost accounting are true?
(1) The majority of environmental costs are already captured within a typical
organization’s accounting system. The difficulty lies in identifying them
(2) Input/output analysis divides material flows within an organization into
three categories: material flows; system flows; and delivery and disposal
flows
(3) One of the cost categories used in environmental activity-based costing is
environment-driven costs which is used for costs which can be directly traced
to a cost center
(4) Environmental life-cycle costing enables environmental costs from the design
stage of the product right through to decommissioning at the end of its life to
be considered
(a) (1), (2) and (4)
(b) (1) and (4)
only (c) (2), (3)
and (4)
(d) (2) and (3) only

40 Global Company has developed the following sales projections for the calendar year in Rs:
May .100, 000
June 120,000
July 140,000
August 160,000
September 150,000
October 130,000
Normal cash collection experience has been that 50% of sales are collected during the month
of sale and 45% in the month following sale. The remaining 5% of sales is never collected.
Global’s budgeted cash collections for the third calendar quarter are:
e) Rs.427,500
f) Rs.422,500
g) Rs.414,000
h) Rs.450,000
(a) Units sold equaled units produced.

(b) Units sold were less than units produced.
(c) Selling expenses increased.
(d) Units sold exceeded units produced.
(a) A periodic investment of cash resources that has been made and should be relevant for
decision making
(b) It is a past cost which is not directly relevant in decision making
(c) Management will treat it as variable cost each time in decision making
(d) None of the given options
(a) Avoid the opportunity costs of non-invested excess cash and minimize the cost of
interim financing.
(b) Support the preparation of its cash flow statement for the annual report.
(c) Ascertain which capital expenditure projects are feasible and which capital expenditure
projects Should be deferred.
(d) Determine the opportunity costs of alternative sales and production strategies.
44. After the development of master budget, which of the following ratio (‘s) can be used
to compare actual performance with budgeted performance?
e) Activity ratio
f) Capacity ratio
g) Efficiency ratio
h) All of the given options

e) Large numbers of identical products that are produced in a
f) Small numbers of products that are produced in batches
g) Finished goods that are refined and processed further
h) Large numbers of products that are produced in a non-repetitive process
46. A budget that requires management to justify all expenditures, rather than just changes
from
the previous year is referred to as:
(a) Self-imposed budget
(b) Participative budget
(c) Perpetual budget
(d) Zero-based budget
(a) Overhead ratio.

(b) Consumption ratio.
(c) Quick ratio.
(d) Fixed ratio.
(a) a volume-based , plant wide rate.

(b) Volume –based, departmental rates.
(a) Matching concept
(b) Cost concept
(c) Cash concept
(d) None of the given options
50.A(n) Is a collection of overhead costs for which cost variation can be

explained by a Single activity driver?
(a) cost objective

(b) Homogeneous cost pool
(c) Allocation base
(d) Heterogeneous cost pool
Question # 1:
Under Variable costing, fixed manufacturing overhead is:
a. Expressed immediately when incurred.
b. Never expensed.
c. Applied directly to Finished-Goods Inventory.
d. Applied directly to Work-in-Process Inventory.
e. Treated in the same manner as variable manufacturing overhead.
Question # 2:
The Underlying difference between absorption costing and variable costing lies in the treatment of
a. Direct labor
b. Variable manufacturing overhead
c. Fixed manufacturing overhead
d. Variable selling and administrative expenses
Question # 3:
All of the following costs are inventoried under absorption costing except;
a. Direct materials
b. Direct labor
c. Variable manufacturing overhead
d. Fixed manufacturing overhead
e. Fixed administrative salaries
Question # 4:
Income reported under absorption costing and variable costing is:
a. Always the same.
b. Sometimes different
c. Always higher under absorption costing
d. Always higher under variable costing
e. Always the same or higher under absorption costing.
Question # 5:
Gomez’s inventory increased throughout the year. On the basis of this information income reported
under absorption costing:
a. Will be the same as that reported under variable costing

b. Will be higher than that reported under variable costing
c. Will be lower than that reported under variable costing
d. Will differ from that reported under variable costing, the direction of which cannot
be determined from the information given.
e. Will be less than that reported in the previous period.
Question # 6:
Which of the following conditions would cause absorption-costing net income to be lower than
variable-costing net income?
a. Units sold exceeded units produced.
b. Units sold equaled units produced.
c. Units sold were less than units produced
d. Sales prices decreased
e. Selling expenses increased.
Question # 7:
The overhead rates of the functional-based product costing use
a. Unit based activity drivers
b. No unit-based activity drivers.
c. Process costing
d. Job order costing
Question # 8:
A(n) method first traces costs to a department and then to products.
a. Direct costing
b. Absorption costing
c. Functional-based costing
d. Indirect costing
Question # 9:
Unit-based product costing uses which of the following procedures?
a. Overhead costs are traced to departments, then costs are traced to products.
b. Overhead costs are traced to activities then costs are traded to products.
c. Overhead costs are traced directly to products
d. All overhead costs are expensed as incurred
Question # 10:
If conventional manufacturing is used, which of the following would be considered direct costs?
a. Set-up costs
b. Direct labor
c. Maintenance of machinery
d. Inspection costs
Question # 11:
Product might consume overhead in different proportions due to
a. Differences in product size
b. Differences in set-up times
c. Differences in product complexity
d. All of the above
Question # 12:
The proportion of an overhead activity consumed by a product is the
a. Overhead ratio
b. Consumption ratio
c. Quick ratio
d. Fixed ratio
Question # 13:
More accurate product costing information is produced by assigning costs using
a. A volume-based, plant wide rate
b. Volume-based, departmental rates
c. Activity based pool rates
d. All of the above
Question # 14:
A / (n) system first traces costs to activities and then to products
a. Direct costing
b. Absorption costing
c. Functional-based costing
d. Activity-based costing
Question # 15
An activity-based costing system uses which of the following procedures?
a. Overhead costs are traced to departments then costs are traced to products.
b. Overhead costs are traced to activities then costs are traced to products
c. Overhead costs are traced directly to products
d. All overhead costs are expensed as incurred.
Question #16:
If a firm has implanted activity-based procedures for home office expenses, it will
a. Allocate all home office expenses on the basis of sales revenues

b. Allocate all home office expenses to homogeneous cost pools
c. Allocate the costs in a pool using a predetermined rate per unit of activity
d. Both a and b
Question #17:
The use of unit-based activity drivers to assign costs tends to
a. Over cost low-volume products

b. Over cost high-volume products
c. Under cost all products
d. Over cost all products
Question #18:
A(n) is a collection of overhead costs for which cost variations can be explained by
a single activity driver.
a. Cost objective
b. Homogeneous cost pool
c. Allocation base
d. Heterogeneous cost pool
Question #19:
If activity-based costing is used, materials handling would be classified as a
a. Unit-level activity
b. Batch-level activity
c. Product-level activity
d. Facility-level activity
Question #20:
If activity-based costing is used, modifications made by engineering to the product design of several
products would be classified as a
Question #21:
If activity based costing is used, security is an example of a
Question # 22:
Maintenance of the production equipment would be classified as a
Question # 23:
Process costing is a method that is used to account for:
a. Large numbers of identical products that are produced in a continuous

manufacturing environment
b. Small numbers of products that are produced in batches
c. Raw materials that are converted to finished goods
d. Finished goods that are refined and processed further
e. Large numbers of products that are produced in a non-repetitive process
Question # 24:
Process costing would be used in all of the following industries EXCEPT;
a. Petroleum refining
b. Chemicals
c. Truck tire manufacturing
d. Wood pulp production
e. Automobile repair
Question # 25:
Which of the following manufacturers would most likely NOT use a process cost accounting system?
a. A producer of computer monitors

b. A producer of lawn fertilizer
c. A producer of frozen orange
juice d. A custom-home builder
e. A lumber mill
Question # 26:
Companies that use a process-cost accounting system would:
a. Establish a separate work-in-process inventory account for each manufacturing department.

b. Establish a separate finished-goods inventory account for each manufacturing department
c. Pass completed production directly to cost of goods sold
d. Charge goods produced with actual overhead amounts rather than applied overhead amounts
e. Eliminate the need for the finished goods inventory account
Question # 27:
Which of the following statements is FALSE?
a. In job-order costing, costs are accumulated by job order

b. In process costing, costs are accumulated by department
c. In process costing, the cost per unit in a department is found by spreading the
period’s manufacturing costs over the units produced.
d. In process costing, the total cost of each unit is found by dividing the total factory costs by
the number of units completed.
e. In job order costing, the unit cost of a particular job is found by dividing the job’s total cost
by the number of units in the job.
Question # 28:
Unit costs in a process-costing system are derived by using;
a. In-process units
b. Completed units
c. Physical units
d. Equivalent units
e. A measure of activity other than those listed above
Question # 29:
Manufacturing reduces inventory levels because production is geared to demand.
a. Traditional
b. Conventional
c. JIT
d. Both a and b
Question # 30:
When JIT manufacturing is used, cell workers’ labor is a(n)
a. Variable cost
b. Fixed cost
c. Indirect cost
d. Mixed cost
Question # 31:
The approach to quality control strives for zero defects.
a. Acceptable quality level

b. Total quality control
c. Traditional
d. Both a and c
Question # 32:
JIT manufacturing differs from traditional manufacturing in all of the following ways EXCEPT
a. The treatment of direct materials and direct labor for product costing
b. The level of inventories
c. The approach to quality control
d. The physical layout of the manufacturing process
Question # 33:
Which of the following is NOT a trait of a JIT system?
a. Acceptable quality level

b. Long term contracts
c. Multi skilled labor
d. High employee involvement
Question # 34:
Which of the following is a trait of a JIT system?
a. Push-through system
b. Significant inventory
c. Buyers’ market
d. Large supplier base
Question # 35:
Which of the following is a trait of a traditional system?
b. Value-chain focus
c. Total quality control
d. High employee involvement
Question # 36:
Traditional manufacturing uses which of the following philosophies of quality control?
a. Zero defects
b. Total quality control
c. Acceptable quality level
d. Both a and b
Question # 37:
Which of the following is NOT a trait of a traditional system?
b. Short-term supplier contracts
c. Value-added focus
d. Total quality
control
Question # 38:
JIT manufacturing uses which of the following philosophies of quality control?
a. Just-in-case (JIC)
b. Acceptable quality level (AOL)
c. Total quality control (TQC)
d. Both a and c
Question # 39:
When JIT manufacturing is used cell labor is
a. Specialized
b. Interdisciplinary
c. Compartmentalized
d. Insignificant
Question # 40:
In a JIT manufacturing environment, product costing information is used mainly for all of the
following EXCEPT
a. Product costing of inventory for financial reporting purposes
b. Pricing decisions
c. Product profitability analysis
d. Make-or-buy decisions
Question # 41:
Which of the following manufacturing costs is assigned to products in a traditional and JIT
environment using direct tracing?
a. Direct materials
b. Direct labor
c. Operating supplies
d. Both a and b
Question # 42:
IF JIT manufacturing is used and each manufacturing cell produces a single product, all of the
following are considered direct product costs EXCEPT
a. Overtime wages for cell workers

b. The salary of the plant
supervisor
c. The salary of the cell supervisor
d. All of the above are considered direct costs.
Question # 43:
If JIT manufacturing is used and each manufacturing cell produces a single product, which of the
following is considered a direct product cost?
a. Inspection costs
b. Materials
c. Setup costs
d. All of the above are direct product costs
Question # 44:
Which of the following manufacturing costs is assigned to products in a traditional and JIT
environment using allocation?
a. Insurance and taxes

b. Direct labor
c. Supervision (department)
d. Custodial services
Question # 45:
Which of the following manufacturing costs is assigned to products in JIT environment using direct
tracing?
a. Material handling
b. Repairs and maintenance
c. Custodial services
d. All of the above
Question # 46:
Which of the following manufacturing costs is assigned to products in a JIT environment using
allocation?
a. Cafeteria services
b. Equipment depreciation
c. Insurance and taxes
d. Operating supplies
Question # 47:
The JIT approach to inventory management
a. Allows greater flexibility as to when product can be manufactured.

b. Results in higher inventory levels but reduces ordering and setup
costs c. Results in lower inventory carrying costs
d. Does none of the above
Question # 48:
Strategic objectives of JIT include
a. Increasing profits
b. Improving a firm’s competitive position
c. Increasing inventory
d. Both a and b
Question # 49:
With JIT manufacturing the major variable cost remaining is
a. Direct materials
b. Overhead
c. Inventory
d. Direct labor
Question # 50:
Under JIT, the number and magnitude of direct fixed costs
a. Decrease
b. Increase
c. Stay the same
d. Are eliminated
Question # 51:
One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts. The
JIT solution is to
a. Reduce setup costs

b. Reduce lead time
c. Use total preventive maintenance
d. Use total quality control
Question # 52:
One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs.
The JIT solution is to
a. Reduce setup costs

b. Reduce lead time
c. Use total preventive maintenance
d. Use total quality control
Question # 53:
Which of the following statements regarding similarities between process costing and job-order
costing are true?
(I) Both systems assign production costs to units of output

(II) Both systems require extensive knowledge of financial accounting
(III) The flow of costs through the manufacturing accounts is essentially the same
a. I only
b. I and II only
c. II and III only
d. III only
e. I, II and III
Q 1:- Under variable costing, fixed manufacturing overhead is?
A. Expensed immediately when incurred.
B. Never expensed.
C. Applied directly to Finished-Goods Inventory.

Answer:
Q 2:- The Underlying difference between absorption costing and variable costing lies in the treatment
of?
A. Direct labor.
B. Variable manufacturing overhead.
C. Fixed manufacturing overhead.
D. Variable selling and administrative expenses.
E. Fixed selling and administrative expenses.
Answer:
C. Fixed manufacturing overhead.
Q 3:- All of the following costs are inventoried under absorption costing except?
A. Direct materials.
B. Direct labor.
C. Variable manufacturing overhead.
D. Fixed manufacturing overhead.
E. Fixed administrative salaries.
Answer:
Q 4:- All of the following are inventoried under absorption costing except?
A. Direct labor.
B. Raw materials used in production.
C. Utilities cost consumed in manufacturing.
D. Sales commissions.
E. Machines lubricant used in production.
Answer:
Q 5:- If Klinger uses variable costing, the total inventor able costs for the year would be?
A. Rs. 360,000
B. Rs. 420,000
C. Rs. 520,000
D. Rs. 580,000
E. Rs. 620,000
Answer:
C. Rs. 520,000
Q 6:- The per-unit inventor able cost under absorption costing is?
A. Rs. 9.50
B. Rs. 23.00
C. Rs. 26.00
D. Rs. 31.00
E. Rs. 38.50
Answer:
D. Rs. 31.00
Q 7:- The standard product cost per unit under absorption costing is?
A. Rs. 38.00
B. Rs. 40.00
C. Rs.48.00
E. Rs. 50.00
Answer:
C. Rs.48.00
Q 8:- The standard product cost per unit under variable costing is?
A. Rs. 38.00
B. Rs. 40.00
C. Rs. 48.00
D. Rs. 50.00
E. Rs. 50.50
Answer:
A. Rs. 38.00
Q 9:- The net income under absorption costing is?

A. Rs. 9,000
B. Rs. 10,000
C. Rs. 15,000
D. Rs. 20,000
E. Rs. 40,000
Answer:
C. Rs. 15,000

A. Rs. 23,000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32,000
Answer:
D. Rs. 32,000
Q 11:- The net income under variable costing is?

A. Rs. 23,000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32,000
Answer:
B. Rs. 26,000
Q 12:- Income reported under absorption costing and variable costing is?
A. Always the same.
D. Always higher under variable costing.
Answer:
Q 13:- Which of the following condition would cause absorption-costing net income to
be Lower than variable-costing net income?
B. Units sold equaled units produced.
Answer:
Q 14:- For external-reporting purposes, generally accepted accounting principles require that
Net income be based on?
A. Absorption costing.
B. Variable costing.
C. Direct costing.
E. Activity-based costing.
Answer:
Q 15:- The fixed-overhead volume variance under variable costing?

A. Coincides with the fixed manufacturing overhead that was applied to production.
C. Does not exist.
D. Will equal the fixed-overhead budget variance.
E. Must be unfavorable.
Answer:
C. Does not exist.
Q 16:- Which of the following differs between absorption costing and variable costing?
C. Sales revenues.
E. Income tax rates.
Answer:
Q 17:- The overhead rates of the functional-based product costing use?

(a) No unit-based activity drivers.
(b) unit-based activity drivers.
(c) Process costing.
(d) Job order costing.
Answer:
Q 18:- A(n) Method firs traces costs to a department and .then to

products? (a). Direct costing.
(b). Absorption costing.
(c). Functional-based costing.
(d). Indirect costing.
Answer:
Q 19:- If conventional manufacturing is used, which of the following would be considered

Direct costs?
(a) Set-up costs
(b) Direct labor
(c) Maintenance of machinery
(d) Inspection costs
Answer:
(b) Direct labor
Q 20:- Products might consume overhead in different proportions due to?

(a) Differences in product size.
(b) Differences in set-up times.
(c) Differences in product complexity.
Answer:
Q 21:- The proportion of an overhead activity consumed by a product is the?

(a) Overhead ratio.
(c) Quick ratio.
(d) Fixed ratio.
Answer:
Q 22:- More accurate product costing information is produced by assigning costs using?
Answer:
Q 23:- A(n) system first traces costs to activities and then to products?
(a) Direct costing
(b) Absorption costing.
Answer:
Q 24:- The use of unit-based activity drivers to assign costs tends to?
(a) overcast low-volume products.
(b) overcast high-volume products.
(c) undercoat all products.
(d) overcost all products.
Answer:
Q 25:- A(n) Is a collection of overhead costs for which cost variation can be explained by
(a) cost objective
(C) Allocation base
Answer:
Q 26:- are causal factors?
(b) Cost pools
(c) Cost objectives
(d) Cost catchers
Answer:
Q 27:- If activity- based costing is used, materials handling would be classified as a?

(a) Unit-level activity.
(b) Batch-level activity.
(c) Product-level activity.
(d) Facility-level activity.
Answer:
Q 28:- If activity-based costing is used, security is an example of a?

Answer:
Q 29:- If activity-based costing is used, insurance on the plant would be classified as a?

Answer:
Q 30:- All of the following are nonunit-based activity drivers EXCEPT?
(a) Number of setups.
(b) Number of direct labor hours.
Answer:
Q31:- Maintenance of the production equipment would be classified as a?

Answer:
Q 32:- When selecting an activity driver, a company should consider?

(a) The cost of measurement.
(b) The time of the year.
(d) Both a and c.
Answer:
(d) Both a and c.
Q 33:- are casual –factors that explain the consumption of overhead?

(a) Fixed costs
(b) Joint costs
Answer:
Q 34:- If activity-based costing is used, electricity usage would be an example of a?

Answer:
Q 35 Process costing would be used in all of the following industries except ?

B. chemicals.
D. automobile repair.
Answer:
Q 36:- Which of the following manufacturers would most likely not use a process- cost
Accounting system?
A. A producer of computer monitors.
B. A producer of lawn fertilizer.
C. A producer of frozen orange juice.
D. A custom-home builder.
E. A lumber mill.
Answer:
A. A custom-home builder.
Q 37:- Unit costs in a process-costing system are derived by using?

A. in-process unit.
B. completed units.
C. physical units.
Answer:
Q 38:- The equivalent units of conversion for April total?

A. 8,800
B. 9,000
C. 10,000
D. 12,000
Answer:
C. 10,000
Q 39:- The equivalent units of direct materials for April total?

A. 8,800.
B. 9,000.
C. 9,800.
D. 10,000.
E. 12,000.
Answer:
E. 12,000.
Q 40:- The equivalent-unit conversion cost is?

A. Rs. 1.00
B. Rs. 1.50
C. Rs. 2.00
D. Rs. 2.50
E. Rs. 10.50
Answer:
C. Rs. 2.00
Q 41:- The equivalent –unit material cost is?

A. Rs. 2.00
B. Rs. 5.00
C. Rs. 6.00
D. Rs. 6.67
E. Rs. 10.00
Answer:
B. Rs. 5.00
Q 42:- Using the weighted-average method of process costing, the equivalent units
of Direct materials are calculated to be?
A. 68,000.
B. 69,000.
C. 74,000.
D. 75,000.
E. 75,000.
Answer:
A. 75,000.
of Conversion activity are calculated to be?
A. 60,00.
B. 68,000.
C. 69,000.
D. 74,000.
E. 75,000.
Answer:
F. 69,000.
Q 43:- Using the weighted-average method of process costing, the cost per unit of
direct materials is calculated to be?
A. Rs. 1.17
B. Rs. 1.18
C. Rs. 1.20
D. Rs. 1.28
E. Rs. 1.30
Ans:
B. Rs. 1.18
conversion activity is calculated to be?
A. Rs. 2.50
B. Rs. 2.53
C. Rs. 2.70
D. Rs. 2.76
E. Rs. 3.10
Ans:
C. Rs. 2.70
Q 45:- Using the weighted-average method of process costing, the total costs remaining in work in
process on May 31 are calculated to be?
A. Rs. 0.
B. Rs. 12,040
C. Rs. 17,480
D. Rs. 25,640
E. Rs. 26,320
Ans:
B. Rs. 12,040
Q 46:- Which of the following is a key document in a typical process-costing system?

A. Department production report.
B. Master schedule.
D. Materials requirement report.
Ans:
Q 47:- The first processing department in a sequence of sequential production department
Must account for which of the following costs?
A. Direct material and transferred-in costs.
C. Conversion and transferred-in costs.
E. Direct material, conversion, and
costs. Ans:
Direct material and conversion costs
Q 48:- Spoilage is inherent in the production process and is _ in cost of goods sold?
A. Normal, included
Ans:
A. Normal, included
Q 49:- If materials are faded at the beginning of the production process. The
beginning Completed and transferred out during the current period?
A. 20,000 units
B. 20,500 units
C. 22,500 units
D. 23, 000
units Ans:
C.22,500 units
Q 50:- manufacturing reduces inventory levels because production is geared

is Geared to demand?
A. Traditional
B. Conventional
C. JIT
D. Both a and
b Ans:
C.JIT
Q 51:- When JIT manufacturing is used, cell workers labor is a(n)

A. variable cost.
B. fixed cost.
C. indirect cost.
D. mixed cost.
Ans:
B. fixed cost.
Q 52:- which of the following is NOT a trait of a JIT system?

A. acceptable quality level
B. long-term contracts
C. multiskilled labor
D. high employee involvement
Ans:
acceptable quality level
Q 53:- Which of the following is a trait of a JIT system?

A. Push-through system
B. significant inventory
C. buyers’ market
D. large supplier base
Ans:
C. buyers’ market
Q 54:- which of the following is a trait of a traditional system?
B. value- chain focus
C. total quality control
Ans:
Note: Here onwards answers are made bold due to time constraint.
Q 55:- Traditional manufacturing uses which of the following philosophies of quality control?
A. zero defects
B. total quality control
C. acceptable quality level
D. both and b
Q 56:- Which of the following is NOT a trait of a traditional system?

A. push-through system
B. short-term supplier contracts
C. value-added focus
D. total quality control
Q 57:- When JIT manufacturing is used, cell labor is?

A. specialized
B. interdisciplinary
C. compartmentalized
D. insignificant
Q 58:- Strategic objectives of JIT include
A. increasing profits
B. improving a firm’s competitive position
C. increasing inventory.
D. both a and b
Q 59:- With JIT manufacturing, the major variable cost remaining is
A. direct materials
B. overhead
C. inventory
E. direct labor
Q 60:- Under JIT, the number and magnitude of direct fixed costs
A. Decrease
B. Increase
C. stay the same
D. are eliminated
Q 61:- One of the traditional reasons for holding inventory is to avoid shutdown due
to Defective parts. The JIT solution is to?
A. Reduce setup
B. Reduce lead time
C. Use total preventive maintenance
D. Use total quality control
Q 62:- If inferior-grade materials are purchased, the result may be?
A. An unfavorable materials price variance
B. A favorable materials price variance
C. An unfavorable labor efficiency variance
D. Responses (b) and (c) are both correct
E. Responses (a) and (d) are both correct
Q 63:- The ‘‘price ’’ variance for variable overhead is called?
A. Rate variance
B. Spending variance
C. Budget variance
D. None of these
Q 64:- The throughput time would be?
A. 12.0 days
B. 7.0 days
C. 5.0days
D. 20.0 days
Q 65:- Information on standard rates of play would be provided by?
A. A trade union
B. A production manager
C. A personal manager
D. A work study manager
Q 66:- The labour rate variance is determine by multiplying the difference between the
Actual labour rate and the standard labor rate by?
A. The standard hours allowed
B. The actual hours worked
C. The budgeted hours allowed
D. None of the these
Q 67:- Which one of the following is not a possible cause of an unfavorable
direct Labour efficiency variance?
A. Lack of motivation
B. Low quality materials
C. Poor supervision
D. All of the above could be considered as possible causes of
unfavorable Efficiency variance.
Q 68:- Standards that do not allow for machine breakdowns or other work interruptions?
A. Budgeted standards
B. ideal standards
C. normal standards
D. practical standards
Q 69:- Refer to the data in question 8 above. The variable overhead efficiency variance was?
A. Rs. 7,000 F
B. Rs. 7,000 U
C. Rs. 1,000 F
D. Rs. 1,000 U
Q 70:- Which of the following would not be directly relevant to the determination of
standard Labour times per unit of output?
A. The type of performance standard to be used
B. The volume of output from the production to be used
C. Technical specifications of the proposed production methods
D. The results of work study exercises
Q 71:- A manufacturing division of a company would most likely be evaluated as a (n) ?

A. Cost center.
B. Investment center.
C. Revenue center.
D. asset center.
Which of the following departments is likely to be an investment center?

A. Machining department
B. Food products division
C. Personnel department
D. Accounting department
Q 72:- Both revenue center and profit center mangers are responsible for achieving?
A. budgeted revenues.
B. budgeted net income.
C. budgeted costs.
D. budgeted contribution margin.
Q 73:- Which of the following departments would NOT be classified as a profit center?
A. Hardware revenues.
B. men`s shoes department
C. accounting department
D. automotive department
Q 74:- Which of the following responsibility centers would have a manager responsible
for Revenues, costs, and investments?
A. Cost center
B. Investment center
C. Profit center
D. Expense center
Q 75:- are NOT controlled by a manager for a profit center?
A. Revenues
B. Costs
C. Investment
D. Profits
Q 76:- The manager of an investment center is responsible for?
A. decisions regarding costs.
B. decisions regarding revenues.
C. Decisions to invest in assets.
D. all of the above.
Q 77:- The manager of a cost center is responsible for?
C. decisions to invest in assets.
D. both a and b.
Q 78:- An example of an investment center is a?
A. production department.
B. company.
C. marketing department.
D. credit department.
Q 79:- Responsibility accounting is a system that does not combine?
A. responsibility.
B. accountability.
C. performance evaluation.
D. static budgeting.
Q 80:- What is the margin for Division Z?
A. 1.5%
B. 100.0%
C. 15.0%
D. 6.0%
Q 81:- What are the average operating assets for Division Y?

A. Rs. 75,000
B. Rs. 500,000
C. Rs. 125,000
D. Rs. 187,500
Q 82:- Parker Corporation had sales of Rs. 250,000, Income of Rs. 10,000, and an
asset Base of Rs. 100,000. The operating asset turnover is?
A. 0.40.
B. 2.50.
C. 4.00.
D. 0.25.
Q 83:- The return on investment is computed as?
A. Operating income divided by average operating assets.
B. operating income divided by sales.
C. sales divided by average operating assets.
D. operating asset turnover divided by the operating income margin.
Q 84:- Mubeen Company had sales of Rs. 200,000, net income of Rs. 10,000, and an
asset base of Rs. 300,000. Its margin is?
A. 66.7%
B. 150.0%
C. 3.3%.
D. 5.0%.
Q 85:- If a company has of Rs. 2,500,000, net income of Rs. 250,000, and asset base of Rs.
1,2500, its return on investment is?
A. 20%
B. 10%
C. 500%
D. 200%
Q 86:- Which of the following changes would increase return on investment (ROI)?
A. decrease sales and expenses by the same percentage
B. increase total assets
C. Increase sales and expenses by the same percentage
D. decrease sales and expenses by the same dollar
amount Q 87:- Which of the following is NOT an advantage of ROI?
A. It encourages managers of departments with high ROIs to invest in average
ROI projects.
B. It encourages managers to pay careful attention to the relationships among
Sales, expenses, and investment.
C. It encourages cost efficiency.
D. it discourages excessive investment in operating assets.
Q 88:- Unit-based product costing uses which of the following procedures?
A. Overhead costs are traced to departments, then costs are
traced to products.
B. Overhead costs are traced to activities, then costs are traced to products.
C. overhead costs are traced directly to products.
D. All overhead costs are expensed as incurred.
Q 89:- The optimal transfer price from the viewpoint of the corporation is?
A. variable cost.
B. absorption cost plus mark-up
C. variable cost plus opportunity cost.
D. absorption cost plus selling
expenses. Q 90:- Transfer
pricing is used when?
A. a company has cost centers.
B. a company has profit centers or investment centers.
C. the return on investment ratio cannot be computed.
D. residual income cannot be computed.
Q 91:- When there is an outside market for an intermediate product, which is

perfectly Competitive, the most equitable method of transfer pricing is?
A. market price.
B. production cost pricing.
C. variable cost pricing.
Q 92:- What is the transfer price based on variable product costs plus a
fix fee of Rs.210?
A. Rs. 210
B. Rs. 1,800
C. Rs. 2,100
D. Rs. 2,310
Q 93:- What is the transfer price based on variable product costs plus 20 percent?
A. Rs. 720
B. Rs. 2,160
C. Rs. 2,100
D. Rs. 2,520
Q 94:- What would be the transfer price if Division X uses full cost plus mark-up?
A. Rs. 167.70
B. Rs. 198.90
C. Rs. 136.50
D. Rs. 129.00
Q 95:- What is the best transfer price to avoid transfer price problems?
A. Rs. 2,730
B. Rs. 600
C. Rs. 41,800
D. Rs. 2,100
Q 96:- The Company uses the opportunity cost approach to transfer pricing.
What is the minimum, transfer price in case 2?
A. Rs. 75
B. Rs. &4
C. Rs. 68
D. Rs. 58
Q 97:- is (are) the transfer price that would leave the selling division
no Worse off if the good is sold to an internal division.
A. The negotiated transfer price
B. The minimum transfer price
C. The maximum transfer price
D. Both a and c
Q 98:- What is the transfer price for the chemicals per gallon based on full cost plus
a Mark-up of 30 percent?
A. Rs. 11.40
B. Rs. 9.00
C. Rs. 14.82
D. Rs. 11.70
Q 99:- Process costing is a method that is used to account for?
A. Large numbers of identical products that are produced in
a Continuous manufacturing environment.
E. large numbers of products that are produced in a non-repetitive
Process.
Q 100:- Contingency Limited manufactures a carbonated drink, which is sold in 1-litter
Bottles. During the bottling process there is a 20% loss of liquid input due to
Spillage and evaporation. The standard usage of liquid per bottle is?
A. 0.80 liters
B. 1.00 liters
C. 1.20 liters
D. 1.25 liters
Q 1:- Under variable costing, fixed manufacturing overhead is?
B. Never expensed.
C. Applied directly to Finished-Goods Inventory.
Answer:

Q 2:- The Underlying difference between absorption costing and variable costing lies in the treatment
of?
F. Direct labor.
G. Variable manufacturing overhead.
H. Fixed manufacturing overhead.
I. Variable selling and administrative expenses.
J. Fixed selling and administrative expenses.
Answer:
Q 3:- All of the following costs are inventoried under absorption costing except?
A. Direct materials.
B. Direct labor.
C. Variable manufacturing overhead.
Answer:
Q 4:- All of the following are inventoried under absorption costing except?
A. Direct labor.
B. Raw materials used in production.
C. Utilities cost consumed in manufacturing.
E. Machines lubricant used in production.
Answer:
Q 5:- If Klinger uses variable costing, the total inventor able costs for the year would be?
A. Rs. 360,000
B. Rs. 420,000
C. Rs. 520,000
D. Rs. 580,000
E. Rs. 620,000
Answer:
C. Rs. 520,000
Q 6:- The per-unit inventor able cost under absorption costing is?
A. Rs. 9.50
B. Rs. 23.00
C. Rs. 26.00
D. Rs. 31.00
E. Rs. 38.50
Answer:
D. Rs. 31.00
Q 7:- The standard product cost per unit under absorption costing is?
A. Rs. 38.00
B. Rs. 40.00
C. Rs.48.00
E. Rs. 50.00
Answer:
C. Rs.48.00
Q 8:- The standard product cost per unit under variable costing is?
A. Rs. 38.00
B. Rs. 40.00
C. Rs. 48.00
D. Rs. 50.00
E. Rs. 50.50
Answer:
A. Rs. 38.00

A. Rs. 9,000
B. Rs. 10,000
C. Rs. 15,000
D. Rs. 20,000
E. Rs. 40,000
Answer:
C. Rs. 15,000

A. Rs. 23,000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32,000
Answer:
D. Rs. 32,000
Q 11:- The net income under variable costing is?

A. Rs. 23,000
B. Rs. 26,000
C. Rs. 29,000
D. Rs. 32,000
Answer:
B. Rs. 26,000
Q 12:- Income reported under absorption costing and variable costing is?
A. Always the same.
D. Always higher under variable costing.
Answer:
Q 13:- Which of the following condition would cause absorption-costing net income to
be Lower than variable-costing net income?
B. Units sold equaled units produced.
Answer:
Q 14:- For external-reporting purposes, generally accepted accounting principles require that
Net income be based on?
B. Variable costing.
C. Direct costing.
E. Activity-based costing.
Answer:
Q 15:- The fixed-overhead volume variance under variable costing?

A. Coincides with the fixed manufacturing overhead that was applied to production.
C. Does not exist.
D. Will equal the fixed-overhead budget variance.
E. Must be unfavorable.
Answer:
C. Does not exist.
Q 16:- Which of the following differs between absorption costing and variable costing?
C. Sales revenues.
E. Income tax rates.
Answer:
Q 17:- The overhead rates of the functional-based product costing use?

(a) No unit-based activity drivers.
(c) Process costing.
(d) Job order costing.
Answer:
Q 18:- A(n) Method firs traces costs to a department and .then to

products? (a). Direct costing.
(c). Functional-based costing.
(d). Indirect costing.
Answer:
Q 19:- If conventional manufacturing is used, which of the following would be considered

Direct costs?
(a) Set-up costs
(b) Direct labor
(c) Maintenance of machinery
(d) Inspection costs
Answer:
(b) Direct labor
Q 20:- Products might consume overhead in different proportions due to?

(a) Differences in product size.
(b) Differences in set-up times.
(c) Differences in product complexity.
Answer:
Q 21:- The proportion of an overhead activity consumed by a product is the?

(a) Overhead ratio.
(c) Quick ratio.
(d) Fixed ratio.
Answer:
Q 22:- More accurate product costing information is produced by assigning costs using?
Answer:
Q 23:- A(n) system first traces costs to activities and then to products?
(a) Direct costing
(b) Absorption costing.
Answer:
Q 24:- The use of unit-based activity drivers to assign costs tends to?
(a) overcast low-volume products.
(c) undercoat all products.
(d) overcost all products.
Answer:
Q 25:- A(n) Is a collection of overhead costs for which cost variation can be explained by
(a) cost objective
(C) Allocation base
Answer:
Q 26:- are causal factors?

(b) Cost pools
(c) Cost objectives
(d) Cost catchers
Answer:
Q 27:- If activity- based costing is used, materials handling would be classified as a?

Answer:
Q 28:- If activity-based costing is used, security is an example of a?

Answer:
Q 29:- If activity-based costing is used, insurance on the plant would be classified as a?

Answer:
Q 30:- All of the following are nonunit-based activity drivers EXCEPT?
(a) Number of setups.
Answer:
Q31:- Maintenance of the production equipment would be classified as a?

Answer:
Q 32:- When selecting an activity driver, a company should consider?

(a) The cost of measurement.
(b) The time of the year.
(d) Both a and c.
Answer:
(d) Both a and c.
Q 33:- are casual –factors that explain the consumption of overhead?

(a) Fixed costs
(b) Joint costs
Answer:
Q 34:- If activity-based costing is used, electricity usage would be an example of a?
Answer:
Q 35 Process costing would be used in all of the following industries except ?

B. chemicals.
Answer:
Q 36:- Which of the following manufacturers would most likely not use a process- cost
Accounting system?
F. A producer of computer monitors.
G. A producer of lawn fertilizer.
H. A producer of frozen orange juice.
I. A custom-home builder.
J. A lumber mill.
Answer:
B. A custom-home builder.
Q 37:- Unit costs in a process-costing system are derived by using?

A. in-process unit.
B. completed units.
C. physical units.
Answer:
Q 38:- The equivalent units of conversion for April total?

A. 8,800
B. 9,000
C. 10,000
D. 12,000
Answer:
C. 10,000
Q 39:- The equivalent units of direct materials for April total?

A. 8,800.
B. 9,000.
C. 9,800.
D. 10,000.
E. 12,000.
Answer:
E. 12,000.
Q 40:- The equivalent-unit conversion cost is?
A. Rs. 1.00
B. Rs. 1.50
C. Rs. 2.00
D. Rs. 2.50
E. Rs. 10.50
Answer:
C. Rs. 2.00
Q 41:- The equivalent –unit material cost is?

A. Rs. 2.00
B. Rs. 5.00
C. Rs. 6.00
D. Rs. 6.67
E. Rs. 10.00
Answer:
B. Rs. 5.00
of Direct materials are calculated to be?
F. 68,000.
G. 69,000.
H. 74,000.
I. 75,000.
J. 75,000.
Answer:
C. 75,000.
of Conversion activity are calculated to be?
G. 60,00.
H. 68,000.
I. 69,000.
J. 74,000.
K. 75,000.
Answer:
L. 69,000.
direct materials is calculated to be?
F. Rs. 1.17
G. Rs. 1.18
H. Rs. 1.20
I. Rs. 1.28
J. Rs. 1.30
Ans:
D. Rs. 1.18
conversion activity is calculated to be?
A. Rs. 2.50
B. Rs. 2.53
C. Rs. 2.70
D. Rs. 2.76
E. Rs. 3.10
Ans:
C. Rs. 2.70
Q 45:- Using the weighted-average method of process costing, the total costs remaining in work in
process on May 31 are calculated to be?
A. Rs. 0.
B. Rs. 12,040
C. Rs. 17,480
D. Rs. 25,640
E. Rs. 26,320
Ans:
B. Rs. 12,040
Q 46:- Which of the following is a key document in a typical process-costing system?

B. Master schedule.
D. Materials requirement report.
Ans:
Q 47:- The first processing department in a sequence of sequential production department
Must account for which of the following costs?
F. Direct material and transferred-in costs.
G. Direct material costs only.
H. Conversion and transferred-in costs.
I. Direct material and conversion
costs.
J. Direct material, conversion, and
costs. Ans:
Direct material and conversion costs
Q 48:- Spoilage is inherent in the production process and is _ in cost of goods sold?
A. Normal, included
Ans:
A. Normal, included
Q 49:- If materials are faded at the beginning of the production process. The
beginning Completed and transferred out during the current period?
E. 20,000 units
F. 20,500 units
G. 22,500 units
H. 23, 000
units Ans:
C.22,500 units
Q 50:- manufacturing reduces inventory levels because production is geared
is Geared to demand?
E. Traditional
F. Conventional
G. JIT
H. Both a and
b Ans:
C.JIT
Q 51:- When JIT manufacturing is used, cell workers labor is a(n)

A. variable cost.
B. fixed cost.
C. indirect cost.
D. mixed cost.
Ans:
B. fixed cost.
Q 52:- which of the following is NOT a trait of a JIT system?

A. acceptable quality level
B. long-term contracts
C. multiskilled labor
Ans:
acceptable quality level
Q 53:- Which of the following is a trait of a JIT system?

B. significant inventory
C. buyers’ market
D. large supplier base
Ans:
C. buyers’ market
Q 54:- which of the following is a trait of a traditional system?

B. value- chain focus
C. total quality control
Ans:
Note: Here onwards answers are made bold due to time constraint.
Q 55:- Traditional manufacturing uses which of the following philosophies of quality control?
A. zero defects
B. total quality control
C. acceptable quality level
D. both and b
Q 56:- Which of the following is NOT a trait of a traditional system?
A. push-through system
B. short-term supplier contracts
C. value-added focus
D. total quality control
Q 57:- When JIT manufacturing is used, cell labor is?

A. specialized
B. interdisciplinary
C. compartmentalized
D. insignificant
Q 58:- Strategic objectives of JIT include
A. increasing profits
B. improving a firm’s competitive position
C. increasing inventory.
D. both a and b
Q 59:- With JIT manufacturing, the major variable cost remaining is
A. direct materials
B. overhead
C. inventory
E. direct labor
Q 60:- Under JIT, the number and magnitude of direct fixed costs
A. Decrease
B. Increase
C. stay the same
D. are eliminated
Q 61:- One of the traditional reasons for holding inventory is to avoid shutdown due
to Defective parts. The JIT solution is to?
E. Reduce setup
F. Reduce lead time
G. Use total preventive maintenance
H. Use total quality control
Q 62:- If inferior-grade materials are purchased, the result may be?
A. An unfavorable materials price variance
B. A favorable materials price variance
C. An unfavorable labor efficiency variance
D. Responses (b) and (c) are both
correct E. Responses (a) and (d) are
both correct
Q 63:- The ‘‘price ’’ variance for variable overhead is called?
A. Rate variance
B. Spending variance
C. Budget variance
D. None of these
Q 64:- The throughput time would be?
A. 12.0 days
B. 7.0 days
C. 5.0days
D. 20.0 days
Q 65:- Information on standard rates of play would be provided by?
A. A trade union
B. A production manager
C. A personal manager
D. A work study manager
Q 66:- The labour rate variance is determine by multiplying the difference between the
Actual labour rate and the standard labor rate by?
E. The standard hours allowed
F. The actual hours worked
G. The budgeted hours allowed
H. None of the these
Q 67:- Which one of the following is not a possible cause of an unfavorable
direct Labour efficiency variance?
E. Lack of motivation
F. Low quality materials
G. Poor supervision
H. All of the above could be considered as possible causes of
unfavorable Efficiency variance.
Q 68:- Standards that do not allow for machine breakdowns or other work interruptions?
A. Budgeted standards
B. ideal standards
C. normal standards
D. practical standards
Q 69:- Refer to the data in question 8 above. The variable overhead efficiency variance was?
A. Rs. 7,000 F
B. Rs. 7,000 U
C. Rs. 1,000 F
D. Rs. 1,000 U
Q 70:- Which of the following would not be directly relevant to the determination of
standard Labour times per unit of output?
E. The type of performance standard to be used
F. The volume of output from the production to be used
G. Technical specifications of the proposed production methods
H. The results of work study exercises
Q 71:- A manufacturing division of a company would most likely be evaluated as a (n) ?

A. Cost center.
B. Investment center.
C. Revenue center.
D. asset center.
Which of the following departments is likely to be an investment center?

E. Machining department
F. Food products division
G. Personnel department
H. Accounting department
Q 72:- Both revenue center and profit center mangers are responsible for achieving?
A. budgeted revenues.
B. budgeted net income.
C. budgeted costs.
D. budgeted contribution margin.
Q 73:- Which of the following departments would NOT be classified as a profit center?
A. Hardware revenues.
B. men`s shoes department
C. accounting department
D. automotive department
Q 74:- Which of the following responsibility centers would have a manager responsible for
Revenues, costs, and investments?
E. Cost center
F. Investment center
G. Profit center
H. Expense center
Q 75:- are NOT controlled by a manager for a profit center?
A. Revenues
B. Costs
C. Investment
D. Profits
Q 76:- The manager of an investment center is responsible for?
C. Decisions to invest in
assets. D. all of the above.
Q 77:- The manager of a cost center is responsible for?
C. decisions to invest in assets.
D. both a and b.
Q 78:- An example of an investment center is a?
A. production
department. B.
company.
C. marketing department.
D. credit department.
Q 79:- Responsibility accounting is a system that does not combine?
A. responsibility.
B. accountability.
C. performance evaluation.
D. static budgeting.
Q 80:- What is the margin for Division Z?
A. 1.5%
B. 100.0%
C. 15.0%
D. 6.0%
Q 81:- What are the average operating assets for Division Y?

A. Rs. 75,000
B. Rs. 500,000
C. Rs. 125,000
D. Rs. 187,500
Q 82:- Parker Corporation had sales of Rs. 250,000, Income of Rs. 10,000, and an
asset Base of Rs. 100,000. The operating asset turnover is?
E. 0.40.
F. 2.50.
G. 4.00.
H. 0.25.
Q 83:- The return on investment is computed as?
A. Operating income divided by average operating assets.
B. operating income divided by sales.
C. sales divided by average operating assets.
D. operating asset turnover divided by the operating income margin.
Q 84:- Mubeen Company had sales of Rs. 200,000, net income of Rs. 10,000, and an asset
base of Rs. 300,000. Its margin is?
A. 66.7%
B. 150.0%
C. 3.3%.
D. 5.0%.
Q 85:- If a company has of Rs. 2,500,000, net income of Rs. 250,000, and asset base of Rs.
1,2500, its return on investment is?
A. 20%
B. 10%
C. 500%
D. 200%
Q 86:- Which of the following changes would increase return on investment (ROI)?
A. decrease sales and expenses by the same percentage
B. increase total assets
C. Increase sales and expenses by the same percentage
D. decrease sales and expenses by the same dollar
amount Q 87:- Which of the following is NOT an advantage of ROI?
A. It encourages managers of departments with high ROIs to invest in average
ROI projects.
B. It encourages managers to pay careful attention to the relationships
among Sales, expenses, and investment.
C. It encourages cost efficiency.
D. it discourages excessive investment in operating assets.
Q 88:- Unit-based product costing uses which of the following procedures?
A. Overhead costs are traced to departments, then costs are
traced to products.
B. Overhead costs are traced to activities, then costs are traced to products.
C. overhead costs are traced directly to
products. D. All overhead costs are expensed
as incurred.
Q 89:- The optimal transfer price from the viewpoint of the corporation is?
A. variable cost.
B. absorption cost plus mark-up
C. variable cost plus opportunity cost.
D. absorption cost plus selling
expenses. Q 90:- Transfer
pricing is used when?
A. a company has cost centers.
B. a company has profit centers or investment centers.
C. the return on investment ratio cannot be computed.
D. residual income cannot be computed.
Q 91:- When there is an outside market for an intermediate product, which is
perfectly Competitive, the most equitable method of transfer pricing is?
A. market price.
B. production cost pricing.
C. variable cost pricing.
Q 92:- What is the transfer price based on variable product costs plus a
fix fee of Rs.210?
A. Rs. 210
B. Rs. 1,800
C. Rs. 2,100
D. Rs. 2,310
Q 93:- What is the transfer price based on variable product costs plus 20 percent?
A. Rs. 720
B. Rs. 2,160
C. Rs. 2,100
D. Rs. 2,520
Q 94:- What would be the transfer price if Division X uses full cost plus mark-up?
A. Rs. 167.70
B. Rs. 198.90
C. Rs. 136.50
D. Rs. 129.00
Q 95:- What is the best transfer price to avoid transfer price problems?
A. Rs. 2,730
B. Rs. 600
C. Rs. 41,800
D. Rs. 2,100
Q 96:- The Company uses the opportunity cost approach to transfer pricing.
What is the minimum, transfer price in case 2?
A. Rs. 75
B. Rs. 74
C. Rs. 68
D. Rs. 58
Q 97:- is (are) the transfer price that would leave the selling division
no Worse off if the good is sold to an internal division.
A. The negotiated transfer
price B. The minimum transfer
price
C. The maximum transfer price
D. Both a and c
Q 98:- What is the transfer price for the chemicals per gallon based on full cost plus
a Mark-up of 30 percent?
A. Rs. 11.40
B. Rs. 9.00
C. Rs. 14.82
D. Rs. 11.70
Q 99:- Process costing is a method that is used to account for?
A. Large numbers of identical products that are produced in a
Continuous manufacturing environment.
E. large numbers of products that are produced in a non-repetitive
Process.
Q 100:- Contingency Limited manufactures a carbonated drink, which is sold in 1-litter
Bottles. During the bottling process there is a 20% loss of liquid input due to
Spillage and evaporation. The standard usage of liquid per bottle is?
A. 0.80 liters
B. 1.00 liters
C. 1.20 liters
D. 1.25 liters
Q1: Will Klampps Ltd manufactures joint products S and T in a joint process. Data for February
are as follows.
T 1,200
units:
Normal loss which is 10% of input in a period is not accounted for. Abnormal loss which is
written off to the P & L account is assumed to occur at the end of the process.
Process costs are apportioned between products on a sales revenue basis. Stock is valued on a
FIFO basis.
A. 8.75
B. 9.15
C. 9.25
D. 14.80
Q2: Pardell Steamers Ltd produces two joint products L and M and a by-product N in a joint
process. Product L is then further processed to manufacture product LA and a waste material Z.
Variable 12,000
Fixed 10,000
Rowan Bote, the company’s chief executive, believes that it would be possible to produce and
sell an extra 50 units of product LA in the period at budgeted sales price of 160 without any
increase in fixed costs. The extra by-product N could be sold at its budgeted price although to
sell any extra quantities of product M, the sales price would need to be reduced to 25 for all
units of M produced in the period. Any unsold quantities of M must be disposed of at a cost of 4
per unit.
If all sales and distribution costs are fixed, by how much could the company’s profits be
increased if the extra 50 units of LA are made and sold during the period?
A. 3,175
B. 3,675
C. 4,175
D. 4,925


There were no opening or closing stocks in either process. Normal loss is 10% in process 1 and
nil in process 2. Joint product costs are apportioned on a sales value basis. By-product income
is credited to the process account. All output of Z was sold in June.
Taking profits as a difference between sales and full production costs, what was the profit per
kilo of joint product X in June, to two decimal places?
A. 8.05
B. 8.32
C. 8.39
D. 8.72
Annette Cord Ltd has developed a new design of short-handled tennis racket. She has done this
in her spare time and must now decide whether or not to set in business to market this new
product. The potential sales volume is difficult to predict, but the following estimates have
been made.

14$ 17,500 rackets
15$ 15,000 rackets
21$ 10,000 rackets
23$ 9,000 rackets
She plans to have the rackets manufactured for her by an external supplier and to organize
selling and distributing through her own company. Production and selling costs would be as
follows.

 Annette has already spent 5,000 on market research and she intends to spend a further
2,000.
 Annette will pay herself a monthly salary of 1,000. If she decides to go ahead with the
product development, she will have to give up her job with a sports goods
manufacturer, which pays her a salary of 800 per month.
In deciding whether or not to set up the business, Annette Cord should consider the relevant
costs and benefits of each decision option.
Q4: In the assessment of the relevant costs of the decision to set up in business, development
and research costs are;

Q5: In the assessment of the relevant costs of the decision to set up in business, Annette Cord’s
salary cost should be treated as:
E. An incremental benefit of 200 per month net

F. An opportunity cost of 200 per month net
G. An opportunity cost of 800 per month
H. An opportunity cost of 1,000 per month
Q6: If Annette Cord does decide to set up in business, which of the four selling prices per racket
should she charge, on the basis of estimates provided, in order to maximize profits?
E. $14 per racket

F. $15 per racket
G. $21 per racket
H. $23 per racket
Hetty kett Ltd plans to produce and sell 5000units of its product, the Manna, for which the
selling price is $25 per unit.
1unit of manna requires 3units of material X and 4 units of material Y .Opening stocks of raw
material are as follows.
Units Total Value
Material X 8,000 16,000
Material Y 10,000 5,000
The closing stock of raw material is to be a level which is sufficient to produce 3,000 units of
Manna.
4) Purchase prices for all raw materials next year will be 10% higher than the prices
reflected in the opening stock values.
5) Sales and purchases are all on credit. The opening balances at the beginnings of the year
will be.
Debtors $80,000
6) Expected receipts from debtors in the year are $86,000 and expected payments to trade
creditors are $26,000
E. $41,900
F. $43,000
G. $44,300
H. $47,300
Q 8: what is the budgeted closing balance for debtors, given no bad debts and no discounts
allowable?
E. $119,000
F. $122,000
G. $125,000
H. $131,000
Q9: the budgeted amount for the trade creditors at the end of the budget period, given on
discounts receivables, is?
D. $40,000
E. $44,300
F. $46,000
G. $50,300
Actual sales for a retail company, Markup LTD, for November and December 19X1, together
with budgeted monthly sales for January –June 19X2 are shown below.
Sales
19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
The company sells food products with a very short shelf life, and so i* carries no stock goods
beyond the end of any day. All good purchased on any day are resold during the day
The purchase price of the good for markup Ltd is 75% of their retail price. Purchases are on one
and a half months’ credit. Sales are 50% on cash and 50% on credit. One half of credit customers
pay after 1 month and the other half pay after 2 months.
E. $77,500
F. $102,500
G. $132,500
H. $175,000
B. $ 600,000
B. $615,000
C. $625,000
D. $650,000
Q12: what are the budgeted cash payments to suppliers in the six month period January-June
19X2?
E. $450,000
F. $495,000
G. $510,000
H. $680,000

The following relates to Holden Tile Ltd.
At 1.1.X2
The cost of goods sold consists entirely of materials, and amounts to 80% of sales value. Sales in
19X1 occurred at an even rate of 30,000 per month, and this time sane rate is budgeted to
continue throughout 19X2. No discounts are currently offered to customers.
There has been a proposal by the budget committee to improve working capital management,
and from 1 January 19X2 the following changes will be made.
Debtors 25% of sales will be for cash, with a discount of 5% now offered for cash
payment. Of the 75% credit sales, one half would be expected to pay after 1 month and one
half after 2 months.
A 252,000
B 264,000
C 276,000
D 315,000
Q15: What are the budgeted cash receipts for cash and credit sales for 19X2?
A 368,250
B 370,350
C 381,750
D 386,250
Q16: Compare the budgeted cash flows in 19X2 with what the cash flows would have been if
debtors continued to pay after 2 months, stock turnover remained at 1 month and suppliers
continued to be paid after 1 month. In comparison, the changes in working capital management
will improve the net cash flows in 19X2 by:
A 34,500
B 45,750
C 57,750
D 62,250
Share Capital

Depriciation
interest
10% loan 50,000 Stocks 35,000
Overdraft 17,000
215,000 215,000
5-% of the sales are on credit, with payment after 1 month. 50% of sales are on cash with a
discount of 5% given for cash settlement. Payments for purchases are made in the month of
purchase, to benefit from a 10% prompt settlement discount. Stock levels are expected to remain
constant throughout the period.

January 90,000 60,000 20,000
February 150,000 120,000 25,000
March 240,000 200,000 25,000
Sales and purchases figures are before deduction of discounts. The expenses figure includes
depreciation of machinery of 2,000 per month: the remaining expenses are all cash items and
paid for in the month in which they are charged. Loan interest for the whole month is payable
at the end of March. Overdraft interest should be ignored.
A 28,750
B 30,750
C 33,000
D 50,750
A 1,000
B 11,000
C 12,750
D 14,750
A 15,250
B 19,000
C 20,000
D 21,000
Armela Sling Ltd manufactures and sells a single product. Shown below is a summary of the
budget for the previous year (19X1) and actual results.
Budget Actual
Sales 500,000 600,000
costs
fixed)
450,000 550,000
Profit 50,000 50,000
4. She switched to a different supplier for direct materials, purchasing a lower quality
material but obtaining a 20% reduction on the budgeted price. There were no stock of
direct materials, work in process or finished goods on either 1 January 19X1 or 31 st
December 19X1.
It is to be assumed that the original budget shown above was an accurate estimate of the
likely results for 19X1 before these two decisions were made.
The original is to be taken as a basis for comparison with actual results, for budgetary
control purposes.
Q20: Contribution is the difference between the sales price and the variable cost. What were the
sales volume contribution variance and the sales price variance in 19X1, in 000’?
A 60(F) 150(A)
B 150(F) 200(A)
C 180(F) 150(A)
D 180(F) 200(A)
A 20(F)
B 50 (F)
C 60 (F)
D 75 (F)
A 60(A)
B 55(A)
C 25(A)
D 20(F)
Sales 18,000 units @ 40 864,000

Fixed 126,000
Variable 54,000
(558,000)
Varying with sales 81,000 189,000
vol.
Net Profit 117,000
A 414,700
B 448,000
C 576,000
D 630,000
Q24: It has been estimated that if the selling price were reduced to 42, sales demand would
increase to 90% of the firm’s output capacity. The profit at this price and sales volume would be
A 16,000
B 32,000
C 36,000
D 57,600
Q25: It has also been estimated that in order for sales to reach 100% of the company’s output
capacity, the sales price must be reduced by 15% below budget and advertising campaign
costing $25,000 would be needed.
If the company decided to take this option, its breakeven point in sales revenue terms, to the
nearest $ 000, would now be
E. 859,000
F. 843,000
G. 831,000
H. 816,000
Component Q - 10
Raw material 2 2
Direct labour 4 8
Fixed overhead 3 6
10 28
Sale price 35
Profit 7
Direct labour is a variable cost. The company is working at full capacity, and can only just
produce enough components of Q to meet the demand for product T.
An outside customer asks Finnish Inline to sell it 3000units of component Q. if the company
agrees, it will incur additional inspection and testing cost of £3000.
What is the minimum price per unit of Q that Finnish Inline would have to charge if it agreed to
supply the customer, so as not to suffer any drop in profits?
E. £17
F. £21
G. £24
H. £31
Q27: Lufthansika ltd has been making a new product and the time taken to produce
successive units has been recorded:

2 500
3 635
4 750
6 951
8 1,125
E. 50%
F. 60%
G. 70%
H. 75%
Q28: Which of the following inventory valuation method results in a cost of sales value which is
closest to the economic value?
E. FIFO
F. LIFO
G. HIFO
H. Weighted average
Roll and Maul Ltd. is having serious problems in obtaining supplies of raw material M, which is
used in the four products that it makes. The company has current stocks of M amounting to
15000kilos, which costs £60000. Expected demand, selling prices and costs for each of the four
products are as follows:

per unit
KG £ £ Units
W 0.7 15 22 8000
X 0.5 8 14 7200
Y 1.0 12 23 12000
Z 1.5 10 22 10000

A 4000 6400 0 6000
B 8000 0 9400 0
C 0 0 12000 2000
D 0 7200 11400 0
Q30: If Roll and Maul can obtain supplies of material M, but at a price of £9.50 per kilo, how
many kilos the company should purchase in the period in order to maximize profits? (It can be
assumed that the price of the material will subsequently fall to £4 per kilo in future periods).
E. None
F. 600 kilos
G. 6200 kilos
H. 21200 kilos
Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted data
is as follows:

Q31: On the basis of the data provided, if no overtime hours are worked, what monthly
production budget should be planned, in order to maximize profits?
e) 500 100 400

f) 0 300 375
g) 0 300 400
h) 50 250 400
Q32: Suppose extra direct labour hours a month upto a maximum of 250 hours a month can be
made available in the overtime. What additional product should be planned to use up the extra
hours available (if required) in order to maximize profits and by how much would profits
increase? (Assume no charge in fixed cost)
e) None None None £0

f) 100 0 100 £350
g) 350 50 0 £325
h) 400 0 25 £275
Q33: The Shadow Price of a resource is an increase in value (usually extra contribution
which would be created by having available one additional unit of a limiting resource at its
increased price
(TRUE or FALSE)
Q34: When you have to decide the “order/sequence of production” in case of a limiting
resource, the main criteria for deciding the order is, contribution per limiting factor
(TRUE or FALSE)
Q35: The unit product cost, in Activity Based Costing may include some “Non-manufacturing
cost”
(TRUE or FALSE)
Q36: Generally, the decisive criteria followed by the organizations in selecting a mutually
exclusive capital project is a higher Internal Rate of Return
(TRUE or FALSE)
Q37: An Internal Rate of Return is a better measure than the Net Present Value in discounted
cash flow approach
(TRUE or FALSE)
Q38: An Internal Rate of Return calculated using WACC (re-investment rate) is a Cross over
rate
(TRUE or FALSE)
Q39: The price charged when one division or segment provides goods or services to another
division or segment of an organization is called a Transfer Price
(TRUE or FALSE)
Q40: As cumulative output doubles, the cumulative average time per unit falls to a fixed
percentage of the previous average time. This phenomenon is known as wrights law (generally
called a learning curve rate)
(TRUE or FALSE)
Q1: If Activity Based Costing is used modifications made by engineering to the product design
of several products would be classified as a
A. Unit level Activity

B. Batch level Activity
C. Product level Activity
D. Facility level Activity
Q2: Companies that would use a process costing system would;
A. Establish a separate work in process inventory account for each manufacturing

department
B. Establish a separate finished goods inventory account for each manufacturing
department
C. Pass completed production directly to cost of goods sold
D. Charge goods produced with actual overhead amounts rather than applied overhead
amounts
Q3: Hardy butler Ltd manufactures two products by passing materials through two
consecutive processes. Results for June were as follows.


There were no opening or closing stocks in either process. Normal loss is 10% in process 1 and
nil in process 2. Joint product costs are apportioned on a sales value basis. By-product income
is credited to the process account. All output of Z was sold in June.
Taking profits as a difference between sales and full production costs, what was the profit per
kilo of joint product X in June, to two decimal places?
A. 8.05
B. 8.32
C. 8.39
D. 8.72

Voltar Company manufactures and sells a specialized cordless telephone for high
electromagnetic radiation environments. The company’s contribution format income
statement for the most recent year is given below:
Total Per Percent of

Sales (20,000 units).................$1,200,000 $60 100%
Variable expenses..................900,000 45 ?
Contribution margin..............300,000 $15 ?
Fixed expenses........................240,000
Net operating income . . . . . . $ 60,000
Management is anxious to increase the company’s profit and has asked for an analysis of a
number of items.
Q4: What is the company’s CM ratio and variable expense ratio.
A. 25% & 75%

B. 30% & 75%
C. 75% & 25%
D. 50% & 50%
Q5: Compute the company’s break-even point in both units and sales dollars.
A. 1,600 units and 960,000$

B. 16,000 units and 960,000$
C. 20,000 units and 800,000$
Q6: Assume that sales increase by $400,000 next year. If cost behavior patterns remain
unchanged, by how much will the company’s net operating income increase?
A. 100,000$
B. 150,000$
C. 120,000$
D. 155,000$
Halt Ltd plans to produce and sell 5000units of its product, the Manna, for which the selling
price is $25 per unit.
Units Total Value

$
Material X 8,000 16,000
Material Y 10,000 5,000
Manna.
will be.
Debtors $80,000
Q7: What is the budgeted cost of the raw material purchases for the year?
I. $41,900
J. $43,000
K. $44,300
L. $47,300
Q8: what is the budgeted closing balance for debtors, given no bad debts and no discounts
allowable?
I. $119,000
J. $122,000
K. $125,000
L. $131,000
H. $40,000
I. $44,300
J. $46,000
K. $50,300
Sales
19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
I. $77,500
J. $102,500
K. $132,500
L. $175,000
C. $ 600,000
B. $615,000
C. $625,000
D. $650,000
19X2?
I. $450,000
J. $495,000
K. $510,000
L. $680,000

Q14: One of the traditional reasons for holding inventory is to avoid shutdowns due to
defective parts, the JIT solution is to;
i. Reduce setup cost

ii. Reduce lead time
iii. Use total preventive maintenance
iv. Use total quality control
Q15: One of the traditional reasons for holding inventory is to minimize total carrying cost
and holding cost, the JIT solution is to;

Q16: A transfer price based on marginal cost will result in a loss in the division selling goods to
another division of the same organization. (TRUE OR FALSE)
Share Capital

Depriciation
interest
10% loan 50,000 Stocks 35,000
Overdraft 17,000
215,000 215,000
5-% of the sales are on credit, with payment after 1 month. 50% of sales are on cash with a
discount of 5% given for cash settlement. Payments for purchases are made in the month of
purchase, to benefit from a 10% prompt settlement discount. Stock levels are expected to remain
constant throughout the period.

January 90,000 60,000 20,000
February 150,000 120,000 25,000
March 240,000 200,000 25,000
Sales and purchases figures are before deduction of discounts. The expenses figure includes
depreciation of machinery of 2,000 per month: the remaining expenses are all cash items and
paid for in the month in which they are charged. Loan interest for the whole month is payable
at the end of March. Overdraft interest should be ignored.
A 28,750
B 30,750
C 33,000
D 50,750
A 1,000
B 11,000
C 12,750
D 14,750
A 15,250
B 19,000
C 20,000
D 21,000
Armela Sling Ltd manufactures and sells a single product. Shown below is a summary of the
budget for the previous year (19X1) and actual results.
Budget Actual
Sales 500,000 600,000
costs
fixed)
450,000 550,000
Profit 50,000 50,000
6. She switched to a different supplier for direct materials, purchasing a lower quality
material but obtaining a 20% reduction on the budgeted price. There were no stock of
direct materials, work in process or finished goods on either 1 January 19X1 or 31 st
December 19X1.
It is to be assumed that the original budget shown above was an accurate estimate of the
likely results for 19X1 before these two decisions were made.
The original is to be taken as a basis for comparison with actual results, for budgetary
control purposes.
A 60(F) 150(A)
B 150(F) 200(A)
C 180(F) 150(A)
D 180(F) 200(A)
A 20(F)
B 50 (F)
C 60 (F)
D 75 (F)
A 60(A)
B 55(A)
C 25(A)
D 20(F)
Sales 18,000 units @ 40 864,000

Fixed 126,000
Variable 54,000
(558,000)
vol.
Net Profit 117,000
A 414,700
B 448,000
C 576,000
D 630,000
A 16,000
B 32,000
C 36,000
D 57,600
I. 859,000
J. 843,000
K. 831,000
L. 816,000
Q26: If the inventory increased throughout the year, the income reported under absorption
costing would be;
i. Same as reported under marginal costing

ii. Higher than as reported under marginal costing
iii. Lower than as reported under marginal costing
iv. Different from the income as reported under marginal costing, the direction of
which can not be determined from the given information
v. Less than that would be reported in the previous period
Q27: The use of unit based activity drivers to assign costs tends to;
i. Overcast low volume products

ii. Overcast high volume products
iii. Undercast all products
iv. Overcast all products
Q28: Which of the following inventory valuation method results in a cost of sales value which
is closest to the economic value?
I. FIFO
J. LIFO
K. HIFO
L. Weighted average
Q29: A firm using an Activity Based Costing will adopt the following procedures
i. Overhead costs are traced to departments, then costs are traced to products
ii. Overhead costs are traced to activities, then costs are traced to products
iii. Overhead costs are traced directly to products
iv. All overhead costs are expensed as incurred
Q30: If JIT manufacturing is used and each manufacturing cell produces a single product,
which of the following is considered a direct product cost?
a) Inspection cost
b) Materials
c) Setup cost
d) All of the above are direct product costs
Charter Sports Equipment manufactures round, rectangular, and octagonal trampolines.

Sales and expense data for the past month follow:
Trampoline
Total Round Rectangular Octagonal
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 $140,000 $500,000 $360,000
Variable expenses . . . . . . . . . . . . . 410,000 60,000 200,000 150,000
Contribution margin . . . . . . . . . . .590,000 80,000 300,000 210,000
Fixed expenses:
Advertising—traceable216,000 41,000110,000 65,000

20,00040,000 35,000
Depreciation of special 95,000
equipment . . . .
Line supervisors’ salaries............. 19,0006,0007,0006,000
General factory overhead* . . . . . .200,00028,000100,00072,000
Total fixed expenses . . . . . . . . . . . 530,00095,000257,000178,000 Net operating income (loss) . . . . $60,000$ (15,0
A common fixed cost that is allocated on the basis of sales dollars.

*
Management is concerned about the continued losses shown by the round trampolines
and wants a recommendation as to whether or not the line should be discontinued. The special
equipment used to produce the trampolines has no resale value. If the round trampoline model
is dropped, the two line supervisors assigned to the model would be discharged.
31. What would be the decrease in net operating income for the company as a whole should
production and sale of the round trampolines be discontinued? (The company has no other
use for the capacity now being used to produce the round trampolines.)
A. 33,000
B. 23,000
C. 35,000
D. 30,000
Q32. The avoidable fixed costs would be;
A. Depreciation of equipment and line supervisors salary

B. Advertising and line supervisors salary
C. Depreciation of equipment and Advertising
Q33: The Shadow Price of a resource is an increase in value (usually extra contribution
which would be created by having available one additional unit of a limiting resource at its
increased price
(TRUE or FALSE)
(TRUE or FALSE)
Q35: The unit product cost, in Activity Based Costing may include some “Non-manufacturing
cost”
(TRUE or FALSE)
Q36: Generally, the decisive criteria followed by the organizations in selecting a mutually
exclusive capital project is a higher Internal Rate of Return
(TRUE or FALSE)
Q37: An Internal Rate of Return is a better measure than the Net Present Value in discounted
cash flow approach
(TRUE or FALSE)
Q38: An Internal Rate of Return calculated using WACC (re-investment rate) is a Cross over
rate
(TRUE or FALSE)
Q39: The price charged when one division or segment provides goods or services to another
division or segment of an organization is called a Transfer Price
(TRUE or FALSE)
Q40: Residual Income (RI) is generally considered a better measure of performance by
divisional managers than a Return on Investment (ROI)
(TRUE or FALSE)
1. A particular manufacturing job is subject to an estimated 80% learning curve. The

first unit required 50 labor hours to complete. What is the cumulative average time per
unit after eight units are completed?
e) 40.0 hours
f) 32.0 hours
g) 25.6 hours
h) 20.0 hours

e) Units sold exceeded units produced.

f) Units sold equaled units produced.
g) Units sold were less than units produced.
h) Selling expenses increased.

e) Zero-base budgeting is a technique applied in government budgeting in order to have a neutral
effect on policy issues
f) Zero-base budgeting requires a completely clean sheet of paper every year, on which each
part of the organization must justify the budget it requires
g) Zero-base budgeting starts with the figures of the previous period and assumes a zero rate of
change
h) Zero based budgeting is an alternative name of flexible budget
Support the preparation of its cash flow statement for the annual report.
Ascertain which capital expenditure projects are feasible and which capital expenditure
projects should be deferred.
Determine the opportunity costs of alternative sales and production strategies.
Avoid the opportunity costs of non-invested excess cash and minimize the cost of interim
financing.
5. The overhead rates of the functional-based product costing use?

a) No unit-based activity drivers.
b) unit-based activity drivers.
c) Process costing.
d) Job order costing.

e) Set-up costs
f) Direct labor
g) Maintenance of machinery
h) Inspection costs
7. Products might consume overhead in different proportions due to?
a) Differences in product size.

b) Differences in set-up times.
c) Differences in product complexity.
e) Overhead ratio.
f) Consumption ratio.
g) Quick ratio.
h) Fixed ratio.
e) a volume-based , plant wide rate.

f) Volume –based, departmental rates.
g) activity-based pool rates.
h) all of the above.
10. A learning curve of 80% assumes that direct labor costs are reduced by 20% for each
doubling of output. What is the
incremental cost of the sixteenth unit produced as an approximate percentage of the first unit
produced?
e) 64%
f) 64%
g) 31%
h) 41%
11. A(n) Is a collection of overhead costs for which cost variation can be
explained by a Single activity driver?
e) cost objective
f) Homogeneous cost pool
g) Allocation base
h) Heterogeneous cost pool
12. The series of activities in which customer usefulness is added to the product is the definition of
e) A value chain
f) Process value analysis
g) Integrated manufacturing
h) Activity-based costing
e) The cost of measurement.

f) The time of the year.
g) the cause and effect between the activity driver and the cost pool.
h) Both a and c.
14. Process costing would be used in all of the following industries except ?
e) Petroleum refining.
f) Chemicals.
g) Truck tire manufacturing.
h) Automobile repair.
e) The cost of a unit of product changes because of changes in number of

units manufactured
f) Profits fluctuate with sales
g) An idle facility variation is calculated
h) Product costs include variable administrative costs

e) Direct material costs only.
f) Conversion and transferred-in costs.
g) Direct material and conversion costs.
h) Direct material, conversion, and costs.
17. The profit and loss statement of Majid Mining Inc. includes the following information for
the current fiscal year
Sales $160,000
Gross profit 48,000
The cost of goods manufactured by Majid for the current fiscal year
is e) $46,110
f) $49,890
g) $110,110
h) $113,890
18. Which of the following is a trait of a JIT system?
a) Push-through system
b) significant inventory
c) buyers’ market
d) large supplier base
19. If a firm has implanted activity-based procedures for home office expenses, it will
a) Allocate all home office expenses on the basis of sales revenues
b) Allocate all home office expenses to homogeneous cost pools
c) Allocate the costs in a pool using a predetermined rate per unit of activity
d) Both a and b

i) Large numbers of identical products that are produced in a
j) Small numbers of products that are produced in batches
k) Finished goods that are refined and processed further
l) Large numbers of products that are produced in a non-repetitive process

e) Establish a separate work-in-process inventory account for
each manufacturing department.
f) Establish a separate finished-goods inventory account for each
manufacturing department
g) Pass completed production directly to cost of goods sold
h) Charge goods produced with actual overhead amounts rather than
applied overhead amounts
e) In process costing, costs are accumulated by department

f) In process costing, the cost per unit in a department is found by
spreading the period’s manufacturing costs over the units produced
g) In process costing, the total cost of each unit is found by dividing the
total factory costs by the number of units completed
h) In job order costing, the unit cost of a particular job is found by
dividing the job’s total cost by the number of units in the job
e) Profits will always increase with increases in sales

f) Profits will always increase with increases in sales
g) Profits may decrease with increased sales even if there is no change
in selling prices and costs
h) Decreased output and constant sales result in increased profits
24. In a JIT manufacturing environment, product costing information is used mainly for
all of the following EXCEPT
e) Product costing of inventory for financial reporting purposes

f) Pricing decisions
g) Product profitability analysis
h) Make-or-buy decisions
e) The retail price

f) The price representing the cash outflows of the supplying division plus
the contribution to the supplying division from an outside sale
g) The price usually set by an absorption-costing calculation
h) The price set by charging for variable costs plus a lump sum or an additional
markup, but less than full markup

e) Variable costing complies with the U.S. Internal Revenue Code
f) Variable costing complies with generally accepted accounting principles
g) Variable costing makes cost-volume relationships more
easily apparent
h) Variable costing is more relevant to long-run pricing strategies
e) Product cost
f) Period cost
g) Both product and period cost
h) Historical cost

e) Matching concept
f) Cost concept
g) Cash concept
h) None of the given options
A. Charge inefficiencies to the department that is transferring the goods.

B. Can lead to suboptimal decisions for the company as a whole.
C. Must be adjusted by some markup.
D. Lack clarity and administrative convenience.

e) A budget of variable production costs only
f) A budget which shows the costs and revenues at different levels of activity
g) A budget which is prepared using a computer spreadsheet model
h) A budget which is updated with actual costs and revenues as they occur during the budget
period
e) Cash flows
f) Time value of money
g) Pay back period
h) Capital investments
32. Which of the following is NOT suitable action taken by the firm to overcome the
problem of cash shortage during a period?
e) Overdraft arrangement
f) Selling off assets
g) Extension in credit period with suppliers
h) Issue of bonus shares
33. Which of the following statement is TRUE about historical cost?
a) It is always relevant to decision making
b) It is always irrelevant to decision making
c) It is always an opportunity cost
d) It is always realizable value
34. Which of the given budget tells the financial effects?

a) Production budget
b) Production cost budget
c) Sales budget in units

e) The costs that can not be identified with specific cost centers.
f) The total cost of factory overhead needs to be distributed among specific
centers.
g) The total cost of factory overhead needs to be distributed among
specific cost centers.
e) No change occurs to inventories for either use absorption costing or

variable costing methods
f) The use of absorption costing produces a higher net income than the use of
variable costing
g) The use of absorption costing produces a lower net income than the use of
variable costing
h) The use of absorption costing causes inventory value to increase more than they
would though the use of variable costing
37. A budget that requires management to justify all expenditures, rather than just changes
from the previous year is referred to as:
e) Self-imposed budget
f) Participative budget
g) Perpetual budget
h) Zero-based budget
38. For external-reporting purposes, generally accepted accounting principles require

that Net income be based on?
e) Absorption costing.
f) Variable costing.
g) Direct costing.
h) Activity-based costing.
e) A periodic investment of cash resources that has been made and should be
relevant for decision making
f) It is a past cost which is not directly relevant in decision making
g) Management will treat it as variable cost each time in decision making
e) Direct labor cost budget
f) Variable FOH cost budget
g) Fixed FOH cost budget
h) Direct material cost budget
41. After the development of master budget, which of the following ratio (‘s) can be used
to compare actual performance with budgeted performance?
i) Activity ratio
j) Capacity ratio
k) Efficiency ratio
l) All of the given options
e) A by-product is a product arising from a process where the wastage rate is

higher than a defined level
f) A by-product is a product arising from a process where the sales value is
insignificant by comparison with that of the main product or products
g) A by-product is a product arising from a process where the wastage rate is
unpredictable
h) A by-product is a product arising from a process where the sales value is
significant by comparison with that of the main product or products
43. Which of the given will NOT be included for the calculation of equivalent units of
material under weighted average costing method?
e) Opening work in process units
f) Closing work in process units
g) Unit completed and transferred out
e) Reduced labor and overhead costs
f) Reduced per unit variable costs
g) Increased production
h) Increased operating costs
e) Decision making
f) Revenue generation
g) Cost incurrence
h) Investment
46. If the selling price and the variable cost per unit both decrease at10% and fixed costs do
not change, what is the effect on the contribution margin per unit and the contribution margin
ratio?
e) Contribution margin per unit and the contribution margin ratio both remains
unchanged
f) Contribution margin per unit and the contribution margin ratio both increases
g) Contribution margin per unit decreases and the contribution margin ratio
remains unchanged
h) Contribution margin per unit increases and the contribution margin ratio remains
unchanged
47. ABC Company makes a single product which it sells for Rs. 20 per unit. Fixed costs are
Rs. 75,000 per month and product has a profit/volume ratio of 40%. In that period actual
sales were Rs. 225,000.
e) Rs.187, 500
f) Rs.562, 500
g) Rs. 1,500,000
e) Provides a schedule of all costs of production other than direct materials and direct labor
f) Includes both variable and fixed costs associated with overhead
g) Depreciation has to be deducted as a non-cash expense in order to determine the level of cash
required for overhead
h) All of the given options
e) Occurs where its revenue equals its expenses
f) Shows entrepreneurs’ minimum level of activity required to keep the company in operation
g) Is the point at which a company neither earns a profit nor incurs a loss
h) Total contribution margin equals total variable expenses
50. The little Rock Company shows Break even sales is Rs. 40, 500 and Budgeted Sales is Rs.
50,000. Identify the Margin of safety ratio?
e) 19%
f) 81%
g) 1.81%
h) Required more data to calculate
Q1: Margin of Safety will increase if;
a) Fixed cost is increased

b) Variable cost is increased
c) Actual sales increasesnits
Q2: In Capital Budgeting the re-investment rate is assumed to be
a) IRR
b) Cost of capital
c) YTM
Q3: Product cost in throughput accounting is comprised of;

a) Direct material only
b) Direct material, Direct labour and variable overheads
c) manufacturing costs
Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been
very erratic, with some months showing a profit and some months showing a loss. The
company’s contribution format income statement for the most recent month is given below:
Sales (13,500 units at $20 per unit)..................$270,000

Variable expenses.......................................................189,000
Contribution margin.................................................81,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . . 90,000
Net operating loss . . . . . . . . . . . . . . . . . . . . $ (9,000)
Q4: The Company’s break-even point was;
a) 15,000 units
b) 15,000 $
c) 40%
Q5: Refer to the original data. The sales manager feels that an $8,000 increase in the monthly
advertising budget, combined with an intensified effort by the sales staff, will result in a $70,000
increase in monthly sales. If the sales manager is right, what will be the effect on the company’s
monthly net operating income or loss?
a) Increase in Net income of 4,000$.
b) Increase in net income of 62,000
c) A net loss of 4,000
Q6: Refer to the original data. The president is convinced that a 10% reduction in the selling price,
combined with an increase of $35,000 in the monthly advertising budget, will double unit sales.
What will be the net income in the new contribution format income statement?
a) An increase in net income of 17,000
b) A net loss of 17,000
c) A net loss of 35,000
d) A net income of 35,000
Hetty kett Ltd plans to produce and sell 5000units of its product, the Manna, for which the
Units Total Value
$
Material X 8,000 16,000
Material Y 10,000 5,000
Manna. There are no opening stocks or planned closing stocks of Mannas.
will be.
Debtors $80,000
a) $41,900
b) $43,000
c) $44,300
d) $47,300
allowable?
a) $119,000
b) $122,000
c) $125,000
d) $131,000
a) $40,000
b) $44,300
c) $46,000
d) $50,300
Sales
19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
The company sells food products with a very short shelf life, and so it carries no stock goods
a) $77,500
b) $102,500
c) $132,500
d) $175,000
a) $ 600,000
b) $615,000
c) $625,000
d) $650,000
19X2?
a) $450,000
b) $495,000
c) $510,000
d) $680,000
a) The budgeted income statement

b) The budgeted cash flow, budgeted income statement and budgeted balance sheet
c) The budgeted cash flow
d) The capital expenditure budget
The following relates to Kitt n Kite
Ltd. At 1.1.2002
The cost of goods sold consists entirely of materials, and amounts to 80% of sales value. Sales in
2001 occurred at an even rate of 30,000 per month, and this time sane rate is budgeted to
continue throughout 2002. No discounts are currently offered to customers.
There has been a proposal by the budget committee to improve working capital management,
and from 1 January 2002 the following changes will be made.
Debtors; 25% of sales will be for cash, with a discount of 5% now offered for cash payment. Of
the 75% credit sales, one half would be expected to pay after 1 month and one half after 2
months.
Stocks; Stocks turnover will be reduced to ½ month.
Creditors; Credit taken from suppliers will be extended to 2 months.
Q14: What are the budgeted payments to suppliers of raw material purchases in 2002?
a) A 252,000
b) B 264,000
c) C 276,000
d) D 315,000
Q15: What are the budgeted cash receipts for cash and credit sales for 2002?
a) A 368,250
b) 370,350
c) 381,750
d) 386,250
Q16: Compare the budgeted cash flows in 2002 with what the cash flows would have been if
debtors continued to pay after 2 months, stock turnover remained at 1 month and suppliers
continued to be paid after 1 month. In comparison, the changes in working capital management
will improve the net cash flows in 2002 by:
a) 34,500
b) 45,750
c) 57,750
d) 62,250
Q17: A product cost in an ABC system consists of;
a) Variable cost and non-manufacturing costs

b) Only costs which will be included in Absorption costing
c) Direct material, Direct labour, most of Manufacturing overheads and some non-
manufacturing costs
Q18: The use of unit based activity drivers to assign costs tends to;
a) Overcast low volume products

b) Overcast high volume products
c) Undercast all products
d) Overcast all products
Q19: A firm using an Activity Based Costing will adopt the following procedures
a) Overhead costs are traced to departments, then costs are traced to products
b) Overhead costs are traced to activities, then costs are traced to products
c) Overhead costs are traced directly to products
d) All overhead costs are expensed as incurred
Q 20: If the inventory increased throughout the year, the income reported under absorption
costing would be;
a) Same as reported under marginal costing

b) Higher than as reported under marginal costing
c) Lower than as reported under marginal costing
d) Different from the income as reported under marginal costing, the direction
of which can not be determined from the given information
e) Less than that would be reported in the previous period
Q 21: If JIT manufacturing is used and each manufacturing cell produces a single product,
which of the following is considered a direct product cost?
a) Inspection cost
b) Materials
c) Setup cost
d) All of the above are direct product costs
Q 22: One of the traditional reasons for holding inventory is to avoid shutdowns due to
a) Reduce setup cost

b) Reduce lead time
c) Use total preventive maintenance
d) Use total quality control
Bahamas Ltd’s budget for the next year, when it expects to be operating at 75% capacity, is as
follows:
Sales 18,000 units @ 40 864,000

Fixed 126,000
Variable 54,000
(558,000)
vol.
Net Profit 117,000
a) 414,700
b) 448,000
c) 576,000
d) 630,000
a) 16,000
b) 32,000
c) 36,000
d) 57,600
a) 859,000
b) 843,000
c) 831,000
d) 816,000
Component Q - 10
Raw material 2 2
Direct labour 4 8
Fixed overhead 3 6
10 28
Sale price 35
Profit 7
Direct labour is a variable cost. The company is working at full capacity, and can only just
produce enough components of Q to meet the demand for product T.
An outside customer asks Finnish Inline to sell it 3000units of component Q. if the company
agrees, it will incur additional inspection and testing cost of £3000.
a) £17
b) £21
c) £24
d) £31
Q27: TimeKeeper ltd has been making a new product and the time taken to produce successive
units has been recorded:

2 500
3 635
4 750
6 951
8 1,125
a) 50%
b) 60%
c) 70%
d) 75%
a) FIFO
b) LIFO
c) HIFO
d) Weighted average
Indigo Ltd. is having serious problems in obtaining supplies of raw material M, which is used
in the four products that it makes. The company has current stocks of M amounting to
15000kilos, which costs £60000. Expected demand, selling prices and costs for each of the four
products are as follows:

per unit
KG £ £ Units
W 0.7 15 22 8000
X 0.5 8 14 7200
Y 1.0 12 23 12000
Z 1.5 10 22 10000
Q29: If Indigo Ltd. cannot obtain any further supplies of material M in the period, what

A 4000 6400 0 6000
B 8000 0 9400 0
C 0 0 12000 2000
D 0 7200 11400 0
Q30: If Indigo Ltd can obtain supplies of material M, but at a price of £9.50 per kilo, how many
kilos the company should purchase in the period in order to maximize profits? (It can be
assumed that the price of the material will subsequently fall to £4 per kilo in future periods).
a) None
b) 600 kilos
c) 6200 kilos
d) 21200 kilos
Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted data
is as follows:

Q31: On the basis of the data provided, if no overtime hours are worked, what monthly
production budget should be planned, in order to maximize profits?
i) 500 100 400

j) 0 300 375
k) 0 300 400
l) 50 250 400
made available in the overtime. What additional product should be planned to use up the extra
hours available (if required) in order to maximize profits and by how much would profits
i) None None None £0

j) 100 0 100 £350
k) 350 50 0 £325
l) 400 0 25 £275
Q33: The Shadow Price of a resource is an increase in value (usually extra
contribution whichwould be created by having available one additional unit of a
limiting resource at its increasedprice
(TRUE or FALSE)
(TRUE or FALSE)
Q35: That point in the manufacturing process where some or all of the joint products
can berecognized as individual products is called a sell off point
(TRUE or FALSE)
Q36: An action that increases the amount of a constrained resource, or, an action that
increasesthe capacity of the bottleneck is called relaxing the constraint
TRUE or FALSE)
Q37: An Internal Rate of Return is a better measure than the Net Present Value in
discountedcash flow approach
(TRUE or FALSE)
Q38: A Project may have more than one Internal Rate of Returns
(TRUE or FALSE)
Q39: A Bottleneck is a machine or some other part of a process that limits the total output
of theentire system.
(TRUE or FALSE)
Q40: A product cost in Target costing will consist of;
1. All manufacturing and non-manufacturing costs

2. Only the production related costs
3. Production costs and some non-manufacturing costs
Use the following information to solve questions 1 & 2

Mustajab Ltd incurred the following cost during the past year when planned production and actual
production each totaled 20,000 units:
Direct materials used...............................................240,000

Direct Labour.............................................................120,000
Variable MOH.........................................................160,000
Fixed MOH..............................................................100,000
Variable Selling and admin overheads.................60,000
Fixed selling and admin overheads......................90,000
1) If Mustajab Ltd uses variable costing the total inventorable cost for the year would
be; i.360,000
ii. 420,000
iii. 520,000
iv. 580,000
v. 620,000
2) The per unit inventorable cost under Absorption costing would
be; i.9.50
ii. 23
iii. 26
iv. 31
v. 38.5
Q3: JOSS Ltd manufactures two products by passing materials through two consecutive processes.
Results for June were as follows.
Output: Joint product X: 2,500 kilos, sales price 16 per
kilo Joint product Y: 2,500 kilos, sales price 8 per kilo
There were no opening or closing stocks in either process. Normal loss is 10% in process 1 and nil in
process 2. Joint product costs are apportioned on a sales value basis. By-product income is credited
to the process account. All output of Z was sold in June.
Taking profits as a difference between sales and full production costs, what was the profit per kilo of
joint product X in June, to two decimal places?
A. 8.05
B. 8.32
C. 8.39
D. 8.72
Amjad cereals Ltd has developed a new design of short-handled tennis racket. He has done this in
his spare time and must now decide whether or not to set in business to market this new product.
The potential sales volume is difficult to predict, but the following estimates have been made.
14$ 17,500 rackets
15$ 15,000 rackets
21$ 10,000 rackets
23$ 9,000 rackets
He plans to have the rackets manufactured for him by an external supplier and to organize selling
and distributing through his own company. Production and selling costs would be as follows.
 Amjad has already spent 5,000 on market research and he intends to spend a further 2,000.
Amjad will pay himself a monthly salary of 1,000. If he decides to go ahead with the product
development, he will have to give up his job with a sports goods manufacturer, which pays
his a salary of 800 per month.
In deciding whether or not to set up the business, Amjad should consider the relevant costs and
research costs are;
Q5: In the assessment of the relevant costs of the decision to set up in business, Antonio’s salary cost
should be treated as:
A. An incremental benefit of 200 per month net
B. An opportunity cost of 200 per month net
C. An opportunity cost of 800 per month
D. An opportunity cost of 1,000 per month
Q6: If Antonio does decide to set up in business, which of the four selling prices per racket should
he charge, on the basis of estimates provided, in order to maximize profits?
A. $14 per racket
B. $15 per racket
C. $21 per racket
D. $23 per racket

Hajveri Ltd plans to produce and sell 5000units of its product, the Mann-o-Salwa, for which the
1 unit of Mann-o-Salwa requires 3 units of material X and 4 units of material Y. Opening stocks of
raw material are as follows.
Units Total Value

$
Material X 8,000 16,000
Material Y 10,000 5,000
The closing stock of raw material is to be a level which is sufficient to produce 3,000 units of Mann-
o- Salwa.
There are no opening stocks or planned closing stocks of Mann-o-Salwa.
Hameed, the company’s cost accountant, has made the following estimates.
1) Purchase prices for all raw materials next year will be 10% higher than the prices reflected in
the opening stock values.
will be.
Debtors $80,000
Q 7: What is the budgeted cost of the raw material purchases for the year?
A. $41,900
B. $43,000
C. $44,300
D. $47,300
allowable?
A. $119,000
B. $122,000
C. $125,000
D. $131,000
A. $40,000
B. $44,300
C. $46,000
D. $50,300

Sales
$
19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
The purchase price of the good for markup Ltd is 75% of their retail price. Purchases are on one and a
half months’ credit. Sales are 50% on cash and 50% on credit. One half of credit customers pay after 1
month and the other half pay after 2 months.
A. $77,500
B. $102,500
C. $132,500
D. $175,000
A. $ 600,000
B. $615,000
C. $625,000
D. $650,000
A. $450,000
B. $495,000
C. $510,000
D. $680,000

Q14: One of the traditional reasons for holding inventory is to avoid shutdowns due to defective
parts, the JIT solution is to;
Q15: One of the traditional reasons for holding inventory is to minimize total carrying cost and
holding cost, the JIT solution is to;

Charter Sports Equipment manufactures round, rectangular, and octagonal trampolines. Sales and
expense data for the past month follow:
Trampoline
Total Round Rectangular Octagonal
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 $140,000 $500,000 $360,000
Variable expenses . . . . . . . . . . . . . 410,000 60,000 200,000 150,000
Contribution margin . . . . . . . . . . .590,000 80,000 300,000 210,000
Fixed expenses:
Advertising—traceable . . . . . . . . 216,000 41,000 110,000 65,000
......
Depreciation of special 95,000 20,000 40,000 35,000
equipment . . . .
Line supervisors’ salaries . . . . . . 19,000 6,000 7,000 6,000
General factory overhead* . . . . . .200,000 28,000 100,000 72,000
Total fixed expenses . . . . . . . . . . . 530,000 95,000 257,000 178,000
Net operating income (loss) . . . . $60,000 $ (15,000) $ 43,000 $ 32,000
*A common fixed cost that is allocated on the basis of sales dollars.
Management is concerned about the continued losses shown by the round trampolines and
wants a recommendation as to whether or not the line should be discontinued. The special
equipment used to produce the trampolines has no resale value. If the round trampoline model is
dropped, the two line supervisors assigned to the model would be discharged.
16. What would be the decrease in net operating income for the company as a whole should
production and sale of the round trampolines be discontinued? (The company has no other use
for the capacity now being used to produce the round trampolines.)
A. 33,000
B. 23,000
C. 35,000
D. 30,000
Q17. The avoidable fixed costs would be;
A. Depreciation of equipment and line supervisors salary
B. Advertising and line supervisors salary
C. Depreciation of equipment and Advertising
Q18: The Shadow Price of a resource is an increase in value (usually extra contribution which
would be created by having available one additional unit of a limiting resource at its increased price
(TRUE or FALSE)
Q19: When you have to decide the “order/sequence of production” in case of a limiting resource, the
main criteria for deciding the order is, contribution per limiting factor
(TRUE or FALSE)
Q20: The unit product cost, in Activity Based Costing may include some “Non-manufacturing cost”
(TRUE or FALSE)
(TRUE or FALSE)
Q22: An Internal Rate of Return is a better measure than the Net Present Value in discounted cash
flow approach
(TRUE or FALSE)
Q23: An Internal Rate of Return calculated using WACC (re-investment rate) is a Cross over rate
(TRUE or FALSE)
Q24: The price charged when one division or segment provides goods or services to another division
or segment of an organization is called a Transfer Price
(TRUE or FALSE)
Q25: Residual Income (RI) is generally considered a better measure of performance by divisional
managers than a Return on Investment (ROI)
(TRUE or FALSE)
Q26: The Woody Company manufactures slippers and sells them at $10 a pair. Variable
manufacturing cost is $4.50 a pair, and allocated fixed manufacturing cost is $1.50 a pair. It has
enough idle capacity available to accept a one-time-only special order of 20,000 pairs of slippers at
$6 a pair. Woody will not incur any marketing costs as a result of the special order. What would the
effect on operating income be if the special order could be accepted without affecting normal sales:
(a) $0,
(b) $30,000 increase
(c)$90,000 increase
(d) $120,000 increase.
Q27: The Reno Company manufactures Part No. 498 for use in its production line. The
manufacturing cost per unit for 20,000 units of Part No. 498 is as follows:
Direct materials....................................................................$6
Direct manufacturing labor.........................................30
Variable manufacturing overhead............................12
Fixed manufacturing overhead allocated..............16
Total manufacturing cost per unit........................$64
The Tray Company has offered to sell 20,000 units of Part No. 498 to Reno for $60 per unit. Reno will
make the decision to buy the part from Tray if there is an overall savings of at least $25,000 for Reno.
If Reno accepts Tray’s offer, $9 per unit of the fixed overhead allocated would be eliminated.
Furthermore, Reno has determined that the released facilities could be used to save relevant costs in
the manufacture of Part No. 575. For Reno to achieve an overall savings of $25,000, the amount of
relevant costs that would have to be saved by using the released facilities in the manufacture of Part
No. 575 would be which of the following:
(a) $80,000
(b) $85,000
(c) $125,000
(d) $140,000
Q28: The Shadow Price of a resource is an increase in value (usually extra contribution which would
be created by having available one additional unit of a limiting resource at its increased price
(TRUE or FALSE)
Truman Industries is considering an expansion. The necessary equipment would be purchased for
$9 million, and it would also require an additional $3 million investment in working capital. The tax
rate is 40 percent.
Q29: What is the initial investment outlay?
a. 9 Million
b. 12 Million
c. 5.4 Million
d. 7.2 Million
Q30: The company spent and expensed $50,000 on research related to the project last year.This
amount would be
a. Added to the initial investment as it is
b. The After tax amount would be added to the cost of the project
c. Already charged as an expense, therefore, ignored
Q31: The company plans to use a building it owns but is not now using to house the project. The
building could be sold for $1 million after taxes and real estate commissions. How would that affect
your answer?
a. It would be added to the initial Investment
b. It would not be added to the cost of the investment

Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each
year as shown in the company’s sales budget for the third quarter, given below:
July August September Total
Budgeted sales (all on account) . . . . . . . $300,000 $500,000 $200,000 $1,000,000
From past experience, the company has learned that 20% of a month’s sales are collected in the
month of sale, another 70% are collected in the month following sale, and the remaining 10% are
collected in the second month following sale. Bad debts are negligible and can be ignored. May sales
totaled $230,000, and June sales totaled $260,000.
Q32. The expected cash collections from sales, for the month of September were:
a. 420,000
b. 450,000
c. 410,000
d. 415,000
Q33: The total Cash Collections for the quarter were:

a. 1,021,000
b. 1,000,000
c. 1,015,000
d. 850,000
Q34: Assume that the company will prepare a budgeted balance sheet as of September 30. The
accounts receivable as of that date would be;
a. 211,000
b. 215,000
c. 220,000
d. 210,000

Glade Company produces a single product. The costs of producing and selling a single unit of this
product at the company’s current activity level of 8,000 units per month are:
Direct materials..........................................................................$2.50
Direct labor................................................................................... $3.00
Variable manufacturing overhead...................................$0.50
Fixed manufacturing overhead.........................................$4.25
Variable selling and administrative expenses............$1.50
Fixed selling and administrative expenses..................$2.00
The normal selling price is $15 per unit. The company’s capacity is 10,000 units per month. An
order has been received from a potential customer overseas for 2,000 units at a price of $12.00 per
unit. This order would not affect regular sales.
Q35: If the order is accepted, by how much will monthly profits increase or decrease? (The order
would not change the company’s total fixed costs.)
a. 9,650
b. 9,500
c. 9,000
d. 9,850
Q36: Assume the company has 500 units of this product left over from last year that are inferior to
the current model. The units must be sold through regular channels at reduced prices. What unit
cost is relevant for establishing a minimum selling price for these units?
a. 1.50
b. 4.50
c. 7.50
d. 5.50
(TRUE or FALSE)
Q38: A project requiring a capital investment can have single, multiple or no internal rate of returns
(True or False)
Q39: In order to bifurcate the joint cost in a Joint and By-product production environment, NRV
method is the only respite we have.
(True or False)
Q40: A flexible budget is a budget that adjusts to the activity or volume levels of a company.
(True or False)
Data For Questions 1-3
Pietarsaari Oy, a Finnish company, produces cross-country ski poles that it sells for €32 a pair.(The
Finnish unit of currency, the euro, is denoted by €.) Operating at capacity, the company can
produce 50,000 pairs of ski poles a year. Costs associated with this level of production and sales are
given below:
Per Pair Total
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . €12 € 600,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 150,000
Variable manufacturing overhead . . . . . . . . . . . 1 50,000

.
Fixed manufacturing overhead . . . . . . . . . . . . . . 5 250,000
Variable selling expenses . . . . . . . . . . . . . . . . . . 2 100,000
Fixed selling expenses . . . . . . . . . . . . . . . . . . . . 4 200,000
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . €27 €1,350,000
The Finnish army would like to make a one-time-only purchase of 10,000 pairs of ski poles for its
mountain troops. The army would pay a fixed fee of €4 per pair, and in addition it would reimburse
the Pietarsaari Oy company for its unit manufacturing costs (both fixed and variable). Due to a
recession, the company would otherwise produce and sell only 40,000 pairs of ski poles this year.
(Total fixed manufacturing overhead cost would be the same whether 40,000 pairs or 50,000 pairs
of ski poles were produced.) The company would not incur its usual variable sellingexpenses with
this special order. from what it would be if only 40,000 pairs of ski poles wereproduced and sold
during the year?
Q1: If the Pietarsaari Oy company accepts the army’s offer, by how much would
net
operating income increase or decrease
a. 90,000 increase
b. 90,000 decrease
c. 87,000 increase
d. 250,000 increase
Q2: If the Pietarsaari Oy company accepts the army’s offer, by how much would
mentalrevenues would go up
a. 255,000
b. 225,000
c. 250,000
d. 260,000
Q3: Assume the same situation as described in (1) above, except that the company is already
operating at capacity and could sell 50,000 pairs of ski poles through regular channels. Thus,
accepting the army’s offer would require giving up sales of 10,000 pairs at the normal price of
€32 a pair. If the army’s offer is accepted, by how much will net operating income increase
or decrease from what it would be if the 10,000 pairs were sold through regular channels?
a. 50,000 increase
b. 50,000 decrease
c. 55,000 decrease
d. 45,000 decrease
Data for Questions 4 & 5

Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2012, itsfirst
year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating
(nonmanufacturing) cost was $10 per unit sold. Planned and actual fixedmanufacturing costs were
$600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Osawa
sold 120,000 units of product at $40 per unit.
4) Osawa’s 2012 operating income using absorption costing is

A. $440,000,
B. $200,000,
C. $600,000,
D. $840,000, or
(e) None of these.
5) Osawa’s 2012 operating income using variable costing isA.

$800,000,
B. $440,000,
C. $200,000,
D. $600,000, or
E. None of these.
Data For Questions 6 & 7

6) Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August
ofeach year as shown in the company’s sales budget for the third quarter, given below:
July August September Total
Budgeted credit 300,000 500,000 200,000 1,000,000
Sales
From past experience, the company has learned that 20% of a month’s sales are collected in the month
of sale, another 70% are collected in the month following sale, and the remaining 10% are
collected in the second month following sale. Bad debts are negligible and can be ignored.
Maysales totaled $230,000, and June sales totaled $260,000.
6. The expected cash collections from sales, for the month of September would
beA. 265,000
B. 330,000
C. 420,000
D. 320,000
7. Assume that the company will prepare a budgeted balance sheet as of September 30. The
accounts receivable as of that date will be .
A. 210,000
B. 230,000
C. 225,000
D. 215,000
Data for Questions 8 & 9
Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining
rapid market acceptance. The company’s revenues and expenses (in British pounds) forthe last three
months are given below:
Frankel Ltd.
Comparative Income Statements
For the Three Months Ended June 30
April May June
Sales in units 3,000 3,750 4,500
Sales Revenue $ 420,000 525,000 630,000
Cost of goods sold 168,000 210,000 252,000
Gross margin 252000 315,000 378,000
Shipping expense 44000 50,000 56,000
Advertising expense 70000 70,000 70,000
Salaries and commissions 107000 125,000 143,000
Insurance expense 9000 9,000 9,000
Depreciation expense 42,000 42,000 42,000
Total selling and 272,000 296,000 320,000
administrative expenses
Net operating income (loss) (20,000) 19,000 58,000
8. The mixed cost(s) in the above mentioned income statement

A. Cost of Goods Sold , Shipping Cost and salaries and commissions
B. Shipping Cost and salaries and commissions
C. Cost of Goods Sold only
D. All of them are variable costs except Advertising, insurance and Depreciation costs
9. Using
the high-low method, the cost formula for Shipping
expense is;A. Y = 20,000+ 8x
B. Y= 24,000 + 6x
C. Y= 26,000 + 8x
Data For Questions 10&11
Convad Company is one of the world’s leading corn refiners. It produces two joint products—corn
syrup and corn starch—using a common production process. In July 2012, Convad reported the
following production and selling-price information:
Corn Syrup Corn Starch

Joint Costs 325,000
Traceable Completion Costs beyond split-off point 315,000 93,750
Opening inventory 0 0
Production and sales 12,500 6,250
Traceable Selling Cost 20,500 8,500
Selling Price per case 65 35
10. The Net realizable value at split off point according for each product would be
A. 250,000 and 60,000 respectively
B. 50,000 and 62,500 respectively
C. 220,000 and 62,500 respectively
D. 255,000 and 62,500 respectively
11. The amount of Joint Cost Allocated to each of the products will be;
A. 250,000 and 75,000
B.260,000 and 65,000

C.270,000 and 55,000
D.300,000 and 25,000
12 The use of unit based activity drivers to assign costs tends to;
A. Overcast low volume products
B. Overcast high volume products
C. Undercast all products
D. Overcastcast all products
13. A firm using an Activity Based Costing will adopt the following procedures
A. Overhead costs are traced to departments, then costs are traced to products
B. Overhead costs are traced to activities, then costs are traced to products
C. Overhead costs are traced directly to products
D. All overhead costs are expensed as incurred
14. IfJIT manufacturing is used and each manufacturing cell produces a

single product, which of the following is considered a direct product
cost?
A. Inspection cost
B. Materials
C. Setup cost
D. All of the above are direct product costs
15. One of the traditional reasons for holding inventory is to avoid shutdowns due to
A. Reduce setup cost
B. Reduce lead time
16. One of the traditional reasons for holding inventory is to minimize total carrying cost
andholding cost, the JIT solution is to;
A. Reduce setup cost
B. Reduce lead time
17. Which of the following manufacturing costs are assigned to the products in a
JIT environment using direct tracing?
A. Materials handling
B. Repairs and maintenance
C. Custodial services
D. All of the above
18. Wilson corporation is budgeting its equipment needs on an ongoing basis, with a new quarter
being added to the budget as the current quarter is completed, this type of budget ismost
commonly known as;
A. Capital budget
B. Rolling budget
C. Revised budget
D. Proforma budget
E. Financial budget
19. If a JIT manufacturing environment is used and each manufacturing unit produces a single
product, all of the following would be considered a direct product cost except
A. Overtime wages for cell workers
51. Global Company has developed the following sales projections for the calendar year:
May Rs.100, 000
June 120,000
July 140,000
August 160,000
September 150,000
October 130,000
Normal cash collection experience has been that 50% of sales are collected during the month of sale and
45% in the month following sale. The remaining 5% of sales is never collected. Global’s budgeted cash
collections for the third calendar quarter are:
a) Rs.427,500
b) Rs.422,500
c) Rs.414,000
d) Rs.450,000
a) Units sold equaled units produced.

b) Units sold were less than units produced.
c) Selling expenses increased.
d) Units sold exceeded units produced.
a) A periodic investment of cash resources that has been made and should be relevant for
decision making
b) It is a past cost which is not directly relevant in decision making
c) Management will treat it as variable cost each time in decision making
a) Avoid the opportunity costs of non-invested excess cash and minimize the cost of interim financing.
b) Support the preparation of its cash flow statement for the annual report.
c) Ascertain which capital expenditure projects are feasible and which capital expenditure projects should
be deferred.
d) Determine the opportunity costs of alternative sales and production strategies.
55. After the development of master budget, which of the following ratio (‘s) can be used to
compare actual performance with budgeted performance?
a) Activity ratio
b) Capacity ratio
c) Efficiency ratio

a) Large numbers of identical products that are produced in a
b) Small numbers of products that are produced in batches
c) Finished goods that are refined and processed further
d) Large numbers of products that are produced in a non-repetitive process
57. A budget that requires management to justify all expenditures, rather than just changes from the
previous year is referred to as:
a) Self-imposed budget
b) Participative budget
c) Perpetual budget
d) Zero-based budget
a) Overhead ratio.
b) Consumption ratio.
c) Quick ratio.
d) Fixed ratio.
a) a volume-based , plant wide rate.

b) Volume –based, departmental rates.
c) activity-based pool rates.

a) Matching concept
b) Cost concept
c) Cash concept
61. A(n) Is a collection of overhead costs for which cost variation can be explained by
a) cost objective
b) Homogeneous cost pool
c) Allocation base
d) Heterogeneous cost pool

a) A budget of variable production costs only
b) A budget which shows the costs and revenues at different levels of activity
c) A budget which is prepared using a computer spreadsheet model
d) A budget which is updated with actual costs and revenues as they occur during the budget period
63. If the selling price and the variable cost per unit both decrease at10% and fixed costs do not
change, what is the effect on the contribution margin per unit and the contribution margin ratio?
a) Contribution margin per unit and the contribution margin ratio both remains unchanged
b) Contribution margin per unit and the contribution margin ratio both increases
c) Contribution margin per unit decreases and the contribution margin ratio remains
unchanged
d) Contribution margin per unit increases and the contribution margin ratio remains
unchanged
64. Process costing would be used in all of the following industries except?
a) Petroleum refining.
b) Chemicals.
c) Truck tire manufacturing.
d) Automobile repair.
a) The cost of a unit of product changes because of changes in number of units manufactured
b) Profits fluctuate with sales
c) An idle facility variation is calculated
d) Product costs include variable administrative costs

a) Direct material costs only.

b) Conversion and transferred-in costs.
c) Direct material and conversion costs.
d) Direct material, conversion, and costs.
67. The profit and loss statement of Majid Mining Inc. includes the following information for the
current fiscal year
Sales $160,000
Gross profit 48,000
The cost of goods manufactured by Majid for the current fiscal year is
a) $46,110
b) $49,890
c) $110,110
d) $113,890
a) Occurs where its revenue equals its expenses
b) Shows entrepreneurs’ minimum level of activity required to keep the company in operation
c) Is the point at which a company neither earns a profit nor incurs a loss
d) Total contribution margin equals total variable expenses
a) Product cost
b) Period cost
c) Both product and period cost
d) Historical cost
a) Set-up costs
b) Direct labor
c) Maintenance of machinery
d) Inspection costs

a) Establish a separate work-in-process inventory account for each
manufacturing department.
b) Establish a separate finished-goods inventory account for each manufacturing department
c) Pass completed production directly to cost of goods sold
d) Charge goods produced with actual overhead amounts rather than applied
overhead amounts

a) In process costing, costs are accumulated by department
b) In process costing, the cost per unit in a department is found by spreading
the period’s manufacturing costs over the units produced
c) In process costing, the total cost of each unit is found by dividing the total
factory costs by the number of units completed
d) In job order costing, the unit cost of a particular job is found by dividing the
job’s total cost by the number of units in the job
a) Profits will always increase with increases in sales

b) Profits will always increase with increases in sales
c) Profits may decrease with increased sales even if there is no change in
selling prices and costs
d) Decreased output and constant sales result in increased profits
74. In a JIT manufacturing environment, product costing information is used mainly for all of
the following EXCEPT
a) Product costing of inventory for financial reporting purposes

b) Pricing decisions
c) Product profitability analysis
d) Make-or-buy decisions
a) The retail price

b) The price representing the cash outflows of the supplying division plus the contribution
t the supplying division from an outside sale
c) The price usually set by an absorption-costing calculation
d) The price set by charging for variable costs plus a lump sum or an additional markup, but
less than full markup
a) Variable costing complies with the U.S. Internal Revenue Code

b) Variable costing complies with generally accepted accounting principles
c) Variable costing makes cost-volume relationships more easily apparent
d) Variable costing is more relevant to long-run pricing strategies
77. Shezan Co.’s master budget was prepared based on the following projections:
Sales Rs.2, 400,000
Decrease in inventories 60,000
Decrease in accounts payable 100,000
Gross margin 40%
Shezan’s estimated cash disbursements for inventories are
a) Rs.920,000
b) Rs.1,000,000
c) Rs.1,400,000
d) Rs.1,480,000
78. A learning curve of 80% assumes that direct labor costs are reduced by 20% for each doubling of output.
What is the
incremental cost of the sixteenth unit produced as an approximate percentage of the first unit produced?
a) 64%
b) 64%
c) 31%
d) 41%

a) Charge inefficiencies to the department that is transferring the goods.
b) Can lead to suboptimal decisions for the company as a whole.
c) Must be adjusted by some markup.
d) Lack clarity and administrative convenience.
80. The series of activities in which customer usefulness is added to the product is the definition of:
a) A value chain
b) Process value analysis
c) Integrated manufacturing
d) Activity-based costing
a) Cash flows
b) Time value of money
c) Pay back period
d) Capital investments
82. Which of the following is NOT suitable action taken by the firm to overcome the problem of
cash shortage during a period?
a) Overdraft arrangement
b) Selling off assets
c) Extension in credit period with suppliers
d) Issue of bonus shares
83. The Shan Foods Company’s budgeted sales of Rs.200,000 for July, Rs.280,000 for August,
Rs.198,000 for September and Rs.200,000 for October. Approximately 75% of sales are on credit;
the remainder are cash sales. Collection experience indicates that 60% of the budgeted credit sales
will be collected the month after the sale, 36% will be collected the second month, and 4% will be
uncollectible. The cash receipts budgeted for October equals to:
a) Rs.164,700
b) Rs.200,000
c) Rs.214,700
d) Rs.244,400
84. A carpet manufacturer maintains a retail division consisting of stores stocking its brand and
other brands, and a manufacturing division that makes carpets and pads. An outside market exists
for carpet padding material in which all padding produced can be sold. The proper transfer price
for padding transferred from the manufacturing division to the retail division is:
a) Variable manufacturing division production cost.

b) Variable manufacturing division production cost plus allocated fixed factory overhead.
c) Variable manufacturing division production cost plus variable selling and administrative cost.
d) The market price at which the retail division could purchase padding.

a) The costs that can not be identified with specific cost centers.
b) The total cost of factory overhead needs to be distributed among specific
centers.
c) The total cost of factory overhead needs to be distributed among specific cost centers.
a) No change occurs to inventories for either use absorption costing or variable costing
methods
b) The use of absorption costing produces a higher net income than the use of variable costing
c) The use of absorption costing produces a lower net income than the use of variable costing
d) The use of absorption costing causes inventory value to increase more than they would
though the use of variable costing
87. One department of an organization, Final Assembly, is purchasing subcomponents from

another department, Materials
Fabrication. The price that will be charged to Final Assembly by Materials Fabrication is to be determined.
Outside market prices for the subcomponents are available. Which of the following is the most correct
statement regarding a market-based transfer price?
a) Marginal production cost transfer prices provide incentives to use otherwise idle capacity.
b) Market transfer prices provide an incentive to use otherwise idle capacity.
c) Overall long term competitiveness is enhanced with a market-based transfer price.
d) Corporate politics is more of a factor in a market-based transfer price than with other methods
88. For external-reporting purposes, generally accepted accounting principles require that Net income
be based on?
a) Absorption costing.
b) Variable costing.
c) Direct costing.
d) Activity-based costing.
a) Zero-base budgeting is a technique applied in government budgeting in order to have a neutral effect on
policy issues
b) Zero-base budgeting requires a completely clean sheet of paper every year, on which each part of
the organization must justify the budget it requires
c) Zero-base budgeting starts with the figures of the previous period and assumes a zero rate of change
d) Zero based budgeting is an alternative name of flexible budget
a) Direct labor cost budget
b) Variable FOH cost budget
c) Fixed FOH cost budget
d) Direct material cost budget
91. The Eastern division sells goods internally to the Western division of the same company. The
quoted external price in industry publications from a supplier near Eastern is Rs.200 per ton plus
transportation. It costs Rs.20 per ton to transport the goods to Western. Eastern’ s actual market
cost per ton to buy the direct materials to make the transferred product is Rs.100. Actual per ton
direct labor is Rs.50. Other actual costs of storage and handling are Rs.40. The company president
selects a Rs.220 transfer price. This is an example of
a) Market-based transfer pricing.

b) Cost-based transfer pricing.
c) Negotiated transfer pricing.
d) Cost plus 20% transfer pricing

a) A by-product is a product arising from a process where the wastage rate is higher than a defined
level
b) A by-product is a product arising from a process where the sales value is insignificant by
c) A by-product is a product arising from a process where the wastage rate is unpredictable
d) A by-product is a product arising from a process where the sales value is significant by
93. Which of the given will NOT be included for the calculation of equivalent units of material under
weighted average costing method?
a) Opening work in process units
b) Closing work in process units
c) Unit completed and transferred out
a) Reduced labor and overhead costs
b) Reduced per unit variable costs
c) Increased production
d) Increased operating costs
a) Decision making
b) Revenue generation
c) Cost incurrence
d) Investment
a) The cost of measurement.

b) The time of the year.
c) the cause and effect between the activity driver and the cost pool.
d) Both a and c.
97. ABC Company makes a single product which it sells for Rs. 20 per unit. Fixed costs are Rs.
75,000 per month and product has a profit/volume ratio of 40%. In that period actual sales were Rs.
225,000.
a) Rs.187, 500
b) Rs.562, 500
c) Rs. 1,500,000
a) Provides a schedule of all costs of production other than direct materials and direct labor
b) Includes both variable and fixed costs associated with overhead
c) Depreciation has to be deducted as a non-cash expense in order to determine the level of cash required for
overhead
99. A particular manufacturing job is subject to an estimated 80% learning curve. The first unit
required 50 labor hours to complete. What is the cumulative average time per unit after eight
units are completed?
a) 40.0 hours
b) 32.0 hours
c) 25.6 hours
d) 20.0 hours
100. The little Rock Company shows Break even sales is Rs. 40, 500 and Budgeted Sales is Rs. 50,000.
Identify the Margin of safety ratio?
a) 19%
b) 81%
c) 1.81%
i) Required more data to calculate
Q1: Will Klampps Ltd manufactures joint products S and T in a joint process. Data for February are as
follows.
T 1,200 units:
Normal loss which is 10% of input in a period is not accounted for. Abnormal loss which is written off to
the P & L account is assumed to occur at the end of the process.
Process costs are apportioned between products on a sales revenue basis. Stock is valued on a FIFO basis.
A. 8.75
B. 9.15
C. 9.25
D. 14.80
Q2: Pardell Steamers Ltd produces two joint products L and M and a by-product N in a joint process.
Product L is then further processed to manufacture product LA and a waste material Z.
Variable 12,000
Fixed 10,000
Rowan Bote, the company’s chief executive, believes that it would be possible to produce and sell an extra
50 units of product LA in the period at budgeted sales price of 160 without any increase in fixed costs.
The extra by-product N could be sold at its budgeted price although to sell any extra quantities of product
M, the sales price would need to be reduced to 25 for all units of M produced in the period. Any unsold
quantities of M must be disposed of at a cost of 4 per unit.
If all sales and distribution costs are fixed, by how much could the company’s profits be increased if the
extra 50 units of LA are made and sold during the period?
A. 3,175
B. 3,675
C. 4,175
D. 4,925

There were no opening or closing stocks in either process. Normal loss is 10% in process 1 and nil
in process 2. Joint product costs are apportioned on a sales value basis. By-product income is credited to
the process account. All output of Z was sold in June.
Taking profits as a difference between sales and full production costs, what was the profit per kilo of joint
product X in June, to two decimal places?
A. 8.05
B. 8.32
C. 8.39
D. 8.72
Annette Cord Ltd has developed a new design of short-handled tennis racket. She has done this in her
spare time and must now decide whether or not to set in business to market this new product. The
potential sales volume is difficult to predict, but the following estimates have been made.

14$ 17,500 rackets
15$ 15,000 rackets
21$ 10,000 rackets
23$ 9,000 rackets
She plans to have the rackets manufactured for her by an external supplier and to organize selling and
distributing through her own company. Production and selling costs would be as follows.

 Annette has already spent 5,000 on market research and she intends to spend a further 2,000.
 Annette will pay herself a monthly salary of 1,000. If she decides to go ahead with the product
development, she will have to give up her job with a sports goods manufacturer, which pays her a
salary of 800 per month.
In deciding whether or not to set up the business, Annette Cord should consider the relevant costs and
research costs are;
E. a sunk cost of 7,000
F. a sunk cost of 5,000 and an incremental cost of 2,000
G. a suck cost of 2,000 and an incremental cost of 5,000
H. an opportunity cost of 7,000
Q5: In the assessment of the relevant costs of the decision to set up in business, Annette Cord’s salary
cost should be treated as:
E. An incremental benefit of 200 per month net

F. An opportunity cost of 200 per month net
G. An opportunity cost of 800 per month
H. An opportunity cost of 1,000 per month
Q6: If Annette Cord does decide to set up in business, which of the four selling prices per racket should
she charge, on the basis of estimates provided, in order to maximize profits?
E. $14 per racket

F. $15 per racket
G. $21 per racket
H. $23 per racket
Hetty kett Ltd plans to produce and sell 5000units of its product, the Manna, for which the selling price is
$25 per unit.
1unit of manna requires 3units of material X and 4 units of material Y .Opening stocks of raw material are
as follows.
Units Total Value
Material X 8,000 16,000
Material Y 10,000 5,000
The closing stock of raw material is to be a level which is sufficient to produce 3,000 units of Manna.
1) Purchase prices for all raw materials next year will be 10% higher than the prices reflected in the
opening stock values.
2) Sales and purchases are all on credit. The opening balances at the beginnings of the year will be.
Debtors $80,000
3) Expected receipts from debtors in the year are $86,000 and expected payments to trade creditors
are $26,000
A. $41,900
B. $43,000
C. $44,300
D. $47,300
Q 8: what is the budgeted closing balance for debtors, given no bad debts and no discounts allowable?
A. $119,000
B. $122,000
C. $125,000
D. $131,000
Q9: the budgeted amount for the trade creditors at the end of the budget period, given on discounts
receivables, is?
A. $40,000
B. $44,300
C. $46,000
d. $50,300
Sales

19X2 January 80,000
February 60,000
March 100,000
April 90,000
May 120,000
June 150,000
The company sells food products with a very short shelf life, and so i* carries no stock goods beyond the
end of any day. All good purchased on any day are resold during the day
The purchase price of the good for markup Ltd is 75% of their retail price. Purchases are on one and a half
months’ credit. Sales are 50% on cash and 50% on credit. One half of credit customers pay after 1 month
and the other half pay after 2 months.
A. $77,500
B. $102,500
C. $132,500
D. $175,000
A. $ 600,000
B. $615,000
C. $625,000
D. $650,000
A. $450,000
B. $495,000
C. $510,000
D. $680,000
E. The budgeted income statement

F. The budgeted cash flow, budgeted income statement and budgeted balance sheet
G. The budgeted cash flow
H. The capital expenditure budget
The following relates to Holden Tile
Ltd. At 1.1.X2
Stocks 24,000(1 month’s cost of goods
sold) Creditors for material purchases 24000(1 month’s purchases)
The cost of goods sold consists entirely of materials, and amounts to 80% of sales value. Sales in 19X1
occurred at an even rate of 30,000 per month, and this time sane rate is budgeted to continue throughout
19X2. No discounts are currently offered to customers.
There has been a proposal by the budget committee to improve working capital management, and from
1 January 19X2 the following changes will be made.
Debtors 25% of sales will be for cash, with a discount of 5% now offered for cash payment.
Of the 75% credit sales, one half would be expected to pay after 1 month and one half after 2
months.
A. 252,000
B. 264,000
C. 276,000
D. 315,000
B. The salary of the plant supervisor
C. The salary of the cell supervisor
D. All of the above

Armela Sling Ltd manufactures and sells a single product. Shown below is a summary of thebudget
for the previous year (19X1) and actual results.
Budget Actual
Sales 500,000 600,000
costs
fixed)
450,000 550,000
Profit 50,000 50,000
2. She switched to a different supplier for direct materials, purchasing a lower quality material
but obtaining a 20% reduction on the budgeted price. There were no stock of direct
materials, work in process or finished goods on either 1 January 19X1 or 31 st December
19X1.
It is to be assumed that the original budget shown above was an accurate estimate of the likely
results for 19X1 before these two decisions were made.
The original is to be taken as a basis for comparison with actual results, for budgetary control
purposes.
A 60(F) 150(A)
B 150(F) 200(A)
C 180(F) 150(A)
D 180(F) 200(A)
A 20(F)
B 50 (F)
C 60 (F)
D 75 (F)
A 60(A)
B 55(A)
C 25(A)
D 20(F)

Sales 18,000 units @ 40 864,000

Fixed 126,000
Variable 54,000
(558,000)
vol.
Net Profit 117,000
A 414,700
B 448,000
C 576,000
D 630,000
A 16,000
B 32,000
C 36,000
D 57,600
capacity, the sales price must be reduced by 15% below budget and advertising campaign costing
$25,000 would be needed.
A. 859,000
B. 843,000
C. 831,000
D. 816,000
Component Q - 10
Raw material 2 2
Direct labour 4 8
Fixed overhead 3 6
10 28
Sale price 35
Profit 7
Direct labour is a variable cost. The company is working at full capacity, and can only justproduce
enough components of Q to meet the demand for product T.
An outside customer asks Finnish Inline to sell it 3000units of component Q. if the companyagrees, it
will incur additional inspection and testing cost of £3000.
A. £17
B. £21
C. £24
D. £31
Q27: Lufthansika ltd has been making a new product and the time taken to
producesuccessive units has been recorded:
2 500
3 635
4 750
6 951
8 1,125
Which one of the following Learning Curve rates is the company experiencing?A. 50%
B. 60%
C. 70%
D. 75%
A. FIFO
B. LIFO
C. HIFO
D. Weighted average

Roll and Maul Ltd. is having serious problems in obtaining supplies of raw material M, which isused
in the four products that it makes. The company has current stocks of M amounting to 15000kilos,
which costs £60000. Expected demand, selling prices and costs for each of the four products are as
follows:

per unit
KG £ £ Units
W 0.7 15 22 8000
X 0.5 8 14 7200
Y 1.0 12 23 12000
Z 1.5 10 22 10000

A 4000 6400 0 6000
B 8000 0 9400 0
C 0 0 12000 2000
D 0 7200 11400 0
Q30: If Roll and Maul can obtain supplies of material M, but at a price of £9.50 per kilo, how many
kilos the company should purchase in the period in order to maximize profits? (It can beassumed
that the price of the material will subsequently fall to £4 per kilo in future periods).
A. None
B. 600 kilos
C. 6200 kilos
D. 21200 kilos

Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted datais
as follows:

Q31: On the basis of the data provided, if no overtime hours are worked, what monthlyproduction
budget should be planned, in order to maximize profits?
a) 500 100 400

b) 0 300 375
c) 0 300 400
d) 50 250 400
made available in the overtime. What additional product should be planned to use up the
extrahours available (if required) in order to maximize profits and by how much would profits
a) None None None £0

b) 100 0 100 £350
c) 350 50 0 £325
d) 400 0 25 £275
Q33: The Shadow Price of a resource is an increase in value (usually extra contribution which would be created
by having available one additional unit of a limiting resource at its increased price
(TRUE or FALSE)
(TRUE or FALSE)
Q35: The unit product cost, in Activity Based Costing may include some “Non-manufacturingcost”
(TRUE or FALSE)
Q36: Generally, the decisive criteria followed by the organizations in selecting a mutuallyexclusive capital
project is a higher Internal Rate of Return
(TRUE or FALSE)
Q37: An Internal Rate of Return is a better measure than the Net Present Value in discountedcash flow
approach
(TRUE or FALSE)
Q38: An Internal Rate of Return calculated using WACC (re-investment rate) is a Cross overrate
(TRUE or FALSE)
Q39: The price charged when one division or segment provides goods or services to anotherdivision or
segment of an organization is called a Transfer Price
(TRUE or FALSE)
Q40: Residual Income (RI) is generally considered a better measure of performance bydivisional managers
than a Return on Investment (ROI)
(TRUE or FALSE)

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Just-in-time philosophy: Manufacturing and purchasing strategies that

seek to reduce throughput time.

Avoidable cost: A term used interchangeably with relevant cost.

12. The net income under absorption costing is:

24. The fixed-overhead volume variance under variable costing:

1 The overhead rates of the functional-based product costing use

are causal factors.

19. If activity-based costing is used, product inspections would be classified as a

Process costing is a method that is used to account for:

8. Unit costs in a process-costing system are derived by using:

Use The following information to solve multiple-choice questions 14 and 15.

14. The equivalent units of conversion for April total:

15. The equivalent units of direct materials for April total:

18, Assuming no beginning work-in-process inventory and an ending work-in-process

21. The equivalent-unit material cost is:

Number of Units Cost of Materials

Beginning work in process 30,000 Rs. 22 200

Started In May 80,000 72,400

46. Blacksmith processes a single t’pe of steel, Following information is available

6. Which of the following is a trait of a JIT system?

7. Which of the following is a trait of a traditional system?

15. If JIT manufacturing is used and each manufacturing cell produces a

(a) cafeteria services

22. With JIT manufacturing, the major variable cost remaining is

The labour rate variance is determine by multiplying the difference between me

17. What is an attainable standard?

(li) Information for budgeting

27, The labour rate variance is calculated by comparing the:

The denominator activity In the predetermined overhead rate is 360,000

Desired ending finished-goods inventory 2,500 2,100

18. The cost of platinum to be purchased in August is:

25, Grainger. expected cash balance at th. end of February is:

WhIch of the above statements Is (are) true?

Which of the above statements is (are) true?

C. JIT argues that inventory investments should be minimized.

Budgeted production units for November would be:

2. Which of the following condition would cause absorption-costing net income to be

a) Units sold equaled units produced.

4. A firm develops an annual cash budget in order to

6. Process costing is a method that is used to account for:

8. The proportion of an overhead activity consumed by a product is the?

9. More accurate product costing information is produced by assigning costs using?

a) a volume-based , plant wide rate.

10. Which of the following concept is used in absorption costing?

12. Which of the following best describe a flexible budget?

16. The first processing department in a sequence of sequential production

a) Direct material costs only.

21. Companies that use a process-cost accounting system would:

22. Which of the following statements is FALSE?

23. When a firm prepares financial reports by using absorption costing

a) Profits will always increase with increases in sales

a) Product costing of inventory for financial reporting purposes

a) The retail price

26. Which one of the following is an advantage of using variable costing?

a) Variable costing complies with the U.S. Internal Revenue Code

29. A limitation of transfer prices based on actual cost is that they

a) Variable manufacturing division production cost.

35. The term Cost apportionment is referred to:

37. One department of an organization, Final Assembly, is purchasing subcomponents from

a) Market-based transfer pricing.

42. Which of the following is the best define a by-product?

46. When selecting an activity driver, a company should consider?

a) The cost of measurement.