FINAL TERM EXAMINATION
Spring 2010
MGT402- Cost & Management Accounting (Session - 2)
Question No: 24 ( Marks: 1 ) - Please choose one
If 8,000 units were in beginning inventory, 24,000 units were started in process and 6,000 units were in the ending inventory, how many units were completed and transferred out?
► 30,000
► 20,000
► 26,000
► 24,000
Question No: 25 ( Marks: 1 ) - Please choose one
Which of the following business would most likely use process costing?
► A law firm
► A maker of frozen orange juice
► A hospital
► An auto repair shop
Question No: 26 ( Marks: 1 ) - Please choose one
Which of the following is NOT a method of allocating joint costs?
► Selling price method
► Hypothetical market value method
► By-product method
► Physical quantity method
Question No: 27 ( Marks: 1 ) - Please choose one
If, Total fixed cost Rs. 2,000, Variable manufacturing cost Rs. 3,000, Variable selling cost Rs. 1,000 and Sales Rs. 10,000 then what will be the profit under absorption costing?
► Rs.7,000
► Rs.5,000
► Rs.4,000
► Rs.8,000
Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following cannot becomes a part of product cost under marginal costing?
► Direct materials
► Variable manufacturing overhead
► Fixed manufacturing overhead
► Direct labor
Question No: 29 ( Marks: 1 ) - Please choose one
If units started in process are 25,000, units still in process are 5,000 and degree of completion is 100% materials & 40% conversation cost. Which of the following is Equivalent Production quantity of labour cost?
► 25,000 units
► 30,000 units
► 22,000 units
► 15,000 units
Question No: 30 ( Marks: 1 ) - Please choose one
If units started in process are 25,000, units still in process are 5,000 and degree of completion is 100% materials & 40% conversation cost. Which of the following is Equivalent Production quantity of FOH cost?
► 25,000 units
► 22,000 units
► 15,000 units
► 15,000 units
Question No: 31 ( Marks: 1 ) - Please choose one
A company has budgeted sales of Rs. 48,000, breakeven sales of Rs. 35,000 and actual sales of Rs. 40,000 during a particular period. What will be the margin of safety?
► Rs. 8,000
► Rs. 13,000
► Rs. 5,000
► Rs. 21,000
Question No: 32 ( Marks: 1 ) - Please choose one
Which of the following is the value of the benefit scarified when one decision is taken in preference to an alternative decision?
► Sunk cost
► Fixed cost
► Opportunity cost
► Unavoidable costs
Question No: 33 ( Marks: 1 ) - Please choose one
What would be the attitude of the management in treating Sunk costs in decision making?
► A periodic investment of cash resources that has been made and should be relevant for decision making
► It is a past cost which is not directly relevant in decision making
► Management will treat it as variable cost each time in decision making
► None of the given options
Question No: 34 ( Marks: 1 ) - Please choose one
Which of the following is/are included in production budget?
► Raw material budget
► Direct labour budget
► Factory overhead budget
► All of the given options
Question No: 35 ( Marks: 1 ) - Please choose one
A company produced a desired level of product ‘A’ in 5,500 Hours. The standard hours required to produce the same product are 5,000 Hours. What is the amount & nature of variance?
► 500 hours (Favorable)
► 500 hours (Unfavorable)
► 5,000 hours (Favorable)
► 5,000 hours (Unfavorable)
Question No: 36 ( Marks: 1 ) - Please choose one
Which of the following cost would be increases with an increase in activity level?
► Incremental cost
► Avoidable cost
► Sunk cost
► Opportunity cost
Question No: 37 ( Marks: 1 ) - Please choose one
Consider the following data:
| Salary | Rs.5000 |
| Per Piece commission | 10 % per piece |
| Unit sold | 700 pieces |
| Price per piece | Rs. 10 |
| Amount of commission received | ? |
► Rs. 100
► Rs. 500
► Rs. 600
► Rs. 700
Question No: 38 ( Marks: 1 ) - Please choose one
Calculate Estimated direct labor hours with the help of given data
| Estimated FOH | Rs. 75,000 |
| Over applied FOH | Rs. 5,000 |
| Under applied FOH | Rs. 15,000 |
| Overhead absorption rate | Rs. 5.00/hour |
► 5,000 hours
► 1, 000 hours
► 3,000 hours
► 15,000 hours
Question No: 39 ( Marks: 1 ) - Please choose one
If absorbed factory overhead is Rs. 720,000 and Budgeted factory overhead for actual volume is Rs. 740,000 then difference of both will be:
► Spending variance of Rs. 20,000
► Budgeted variance of Rs. 20,000
► Volume variance of Rs. 20,000
► Overhead variance of Rs. 20,000
Question No: 40 ( Marks: 1 ) - Please choose one
Which of the given units can never become part of first department of Cost of Production Report?
► Units received from preceding department
► Units transferred to subsequent department
► Lost units
► Units still in process
Question No: 41 ( Marks: 1 ) - Please choose one
Factory overheads can be absorbed by which of the following methods?
i. Direct labours hours
ii. Machine hours
iii. As a percentage of prime cost
iv. Rs. * Per unit
► i,ii iii and iv
► i and ii only
► iii and iv only
► i and iv only
Question No: 42 ( Marks: 1 ) - Please choose one
Information concerning Label Corporation’s Product A is as follows:
| | Rs. |
| Sales price | 300,000 |
| Variable cost | 240,000 |
| Fixed Cost | 40,000 |
Assuming that Label increased sales of Product A by 20%, the profit of the product A would be which of the following?
► Rs. 20,000
► Rs. 24,000
► Rs. 32,000
► Rs. 80,000
Question No: 43 ( Marks: 1 ) - Please choose one
Income Statement Budget include(s) all of the following EXCEPT:
► Selling & distribution expenses budget
► General & administrative expenses budget
► Financial charges budget
► Cash budget
Question No: 44 ( Marks: 1 ) - Please choose one
Which of the following factor is responsible for a difference between direct materials consumed and direct materials purchased?
► Factory overhead
► Direct Labor
► Change in Inventory
► Total production cost
Question No: 45 ( Marks: 1 ) - Please choose one
If, units of goods to be sold are 800, closing finished goods units are 200 and opening finished goods units are 100. What are the units of goods available for sale?
► 900 units
► 1,000 units
► 700 units
► 600 units
Question No: 46 ( Marks: 1 ) - Please choose one
Which of the given is (are) part of budgeted balance sheet?
► Assets
► Liabilities
► Owner’s equity
► All of the given options
Question No: 47 ( Marks: 1 ) - Please choose one
A cost that will not be incurred if an activity is suspended is called as:
► Avoidable cost
► Sunk cost
► Historical cost
► Opportunity cost
Question No: 48 ( Marks: 1 ) - Please choose one
With reference to decision making, a business which has entered a binding contract to spend money in future, this incurred cost will be considered as which of the following?
► Historic cost
► Committed cost
► Binding cost
► Sunk cost
Question No: 49 ( Marks: 3 )
A company is considering publishing a limited edition book bound in special leather. It has in stock the leather bought some years ago for Rs. 1,000. To buy an equivalent quantity now would cost Rs. 2,000. The company has no plans to use the leather for other purposes, although it has considered the possibilities:
v Of using it to cover desk furnishings, in replacement for other material which could cost Rs. 900
v Of selling it if a buyer could be found (the proceeds are unlikely to exceed Rs. 800).
What should be the opportunity costs?
Question No: 50 ( Marks: 3 )
The Midnight Corporation budget department gathered the following data for the third quarter:
| | July |
| Projected Sales (units) | 1,000 |
| Selling price per unit (Rs.) | 30 |
| Direct material purchase requirement (units) | 1,500 |
| Purchase cost per unit (Rs.) | 15 |
| Production requirements (units) | 800 |
Additional Information
| Direct labor hours Rs. 1.5 per unit |
| Direct Labor rate Rs. 2.5 per direct labor hour |
| Fixed FOH is Rs. 2600, included depreciation Rs. 300 |
| Selling and Admin expense 4% of sales |
Net Income before tax is as follows
| July | 8,000 |
| August | 10,000 |
| September | 8,000 |
All sales and purchase are for cash and all expenses are paid in the month incurred. Assuming that the opening cash balance on July 01 is Rs. 40,000 and tax rate is 35%,
Requirement:
Prepare cash budget for the month of July.
Question No: 51 ( Marks: 5 )
| Production component | Rates | Per unit Rate |
| Direct material | 2.5 lbs @ Rs. 4.00 | Rs. 10.00 |
| Direct Labor | .5 hr @ Rs. 16.00 | Rs. 8.00 |
| VOH | .5 hr @ Rs. 4.00 | Rs. 2.00 |
| Fixed FOH | Rs. 40,000 | Rs. 2.50 |
| Actual Output | 16,000 units | |
| Variable S&A | Rs. 6.00 per unit | |
| Fixed S&A | Rs. 60,000 | |
| Selling price | Rs. 40 | |
Assume sales of 18,000 units.
Required: What is the profit under marginal costing method?
Question No: 52 ( Marks: 5 )
A study has been conducted to determine if one of the departments of Sparrow Company should be discontinued. The contribution margin in the department is Rs. 150,000 per year. Fixed expenses charged to the department are Rs. 130,000 per year. It is estimated that Rs. 120,000 of these fixed expenses could be eliminated if the department is discontinued.
v If the department is discontinued, what will be the impact on the company’s overall net operating income?
v Which costs are irrelevant to this decision?
Question No: 53 ( Marks: 5 )
A Company manufacturers two products A and B. Forecasts for first 7 months is as under:
| Month | Sales in Units | |
| | A | B |
| January | 1,000 | 2,800 |
| February | 1,200 | 2,800 |
| March | 1,610 | 2,400 |
| April | 2,000 | 2,000 |
| May | 2,400 | 1,600 |
| June | 2,400 | 1,600 |
| July | 2,000 | 1,800 |
No work in process inventory has been estimated in any moth however finished goods inventory shall be on hand equal to half the sales to the next month, in each month. This is constant practice.
Budgeted production and production costs for the year 1999 will be as follows:
| Production units | 22,500 | 24,000 |
| Direct Materials (per unit) | 12.5 | 19 |
| Direct Labor (per unit) | 4.5 | 7 |
| F.O.H. (apportioned) | Rs. 66,000 | Rs 96,000 |
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