1. Overheads in production cost centre Z are absorbed on the basis of labour hours.

Budgeted
overheads for a period in the cost centre are:
Allocated $25,800
Apportioned $16,200
Budgeted production in the period is 210,000 units of product which are produced at a rate 70
units per labour hour in cost centre Z.
What is the production overhead absorption rate per labour hour in production cost centre Z?
 $14.00
 $8.60
 $5.00
 $5.40
2. Budgeted fixed overheads for the period are $400,000 and the budgeted variable cost per unit is
$10.00. Budgeted production is 80,000 units. Inventories will be 200 units higher at the end of
the period than at the beginning.
Which of the following statements is correct?
 The marginal costing profit will exceed the absorption costing profit by $2,000
 The absorption costing profit will exceed the marginal costing profit by $1,000
 The absorption costing profit will exceed the marginal costing profit by $2,000
 The marginal costing profit will exceed the absorption costing profit by $1,000
3. A division has sales for the period of $300,000 and makes gross profit margin of 25%. Operating
expenses for the period are $35,000 and net assets are $200,000. The division must bear a
charge on capital employed of 12%.
What is the residual income of the division?
$_______
4. An accountant wishes to select a sample of sales invoices to check their accuracy. She wants the
sample to be as unbiased as possible. She also wants to ensure that some invoices are chosen
from each month of the wear.
Which method of sampling is MOST appropriate?
 Quota
 Random
 Stratified
 Cluster
5. The costing method that evaluates costs on a product, batch, plant and facility level and then
attributes these costs to products using cost drivers is known as which of the following?
 Process costing
 Activity based costing
 Life cycle costing
 Target costing
6. Which of the following would be considered controllable by an investment centre manager in
a car manufacturing company?
 A decrease in sales volume due to a decrease in product quality
 A decrease in sales volume due to an increase in sales taxes
 A decrease in sales volume due to the entry of a new competitor
 A decrease in sales volume due to an economic recession
7. A statement has been prepared with regard to a company’s variances. It states that the
budgeted profit was $96,000. The variances were as follows:
 $

Materials price 1,200 favourable

Labour efficiency 600 favourable

Fixed overhead expenditure 400 favourable

Sales volume 900 adverse

Fixed overhead volume 800 adverse

Which of the following is/are true or false?

True False

The actual profit must have been $95,500 and marginal costing must have been used

The actual profit must have been $96,500 and absorption costing must have been used

8. Which statement BEST describes value analysis when managing costs?

 A technique used to measure the value of a department to an organization versus its
costs
 A technique used to assess the value added to a product’s raw materials by an
organization
 A technique used to identify possible cost reductions that would not reduce the product
value to the customer
 A technique used to calculate the monetary value that a customer has for a product
9. Which TWO of the following are the budget committee responsible for?
o Checking budgets are property coordinated
o Planning the strategy of the organization
o Monitoring the budget process
o Preparing departmental budgets
10. Total costs incurred have been recorded over a period of four years, along with the cost inflation
index (Year 0=100)
Year Total costs ($) Inflation index
1 255,520 105.0
2 281,200 108.2
3 335,200 116.1
4 332,380 120.6
What are the total costs in Year 4 adjusted for Year 1 prices (to the nearest hundred $) ?
 $289,400
 $264,000
 $293,500
 $275,600
11. Manishas is recorded the performance of a new machine. She wants show the time taken by the
machine to produce a series of different batch sizes. She will then have to present her result to
management
Which of the following formats is MOST useful for the presentation of Manisha’s results?
 Bar chart
  Table
 Scattergraph
 Pie chart
12. The following information relates to a process for June 20X5:
Opening work-in-progress (WIP) 400 units (degree of completion 60%)
Total completed output for June 20X5 2,500 units
Closing WIP 300 units (degree of completion 40%)

There were no losses during the process.

What are the equivalent units of production for June 20X5?
________units
13. The following statements refer to overhead absorption using a predetermined hourly rate.
Is each statement true or false?
True False
Over absorption occurs if actual hours are less than budgeted or planned hours
Under-absorption occurs if budgeted expenditure is less than actual expenditure
14. How is the efficiency ratio calculated?

Actual production hours

 Actual output measured in standard hours

 Actual hours worked

Budgeted hours

 Actual output measured in standard hours

Actual production hours

Actual output measured in standard hours

 Budgeted production hours

15. A company has the following annual budget based on an activity level of 5,000 units
$ $

Sales 500,000

Material 75,000

Labour 300,000

Fixed overheads 80,000

Profit 45,000

Material costs vary with sales, and labour costs are 50% fixed and 50% variable with sales.
 What is the budgeted profit at an activity level of 6,000 units?

$_____________

16. Are each of the following statements regarding the use of fixed budgets in planning and
control true or false?
True False
They aim to define the broad objectives of the organization
They respond to changes in levels of activity
17. 12,000 kilogrammes (kg) of Material Z are used evenly over the course of a year. The cost of
placing an order is $170 and the cost of holding inventory for the year is 20% of the purchase
price of $11 per kg
What is the economic order quantity of Material Z (to the nearest kg)?
____________kg
18. A firm of accountants charges its clients at an hourly rate. Senior staff are charged at twice the
rate of junior staff. In a period the total amount to be charged to clients was $102,340 and the
chargeable staff hours were
Senior 440 hours
Junior staff 1,260 hours
What is the hourly rate to be charged to clients for senior staff time (to the nearest $)?
 $96
 $120
 $60
 $48
19. The direct labour budget of a firm is being prepared. The total direct labour hours available are
the same as for last period and the budget policy is to fully utilize these hours. Last period five
hours per unit were allowed and 8,800 units were produced. The direct labour production
volume ratio was 110%.
What are the budgeted direct labour hours?
 44,000
 48,400
 39,600
 40,000
20. Based on budgeted overheads of $22,000, an overhead absorption rate of $22 per labour hour
was used last period. During the period, actual overheads incurred were $22,600 and actual
labour hours were 1,120 hours.
Which entry will be made to record the total under or over absorption of overheads for last
period in the statement of profit or loss?
 Charge (debit) of $2,040
 Credit of $600
 Credit of 2,040
 Charge (debit) of $600
21. Which TWO of the following are features of cost accounting but not financial accounting?
o Cost variances
o Periodic stocktaking
o Overheads absorption
o Control accounts
22. The following is an extract from the budgeted overheads statement of a company with two
production departments A and B:
Overhead category Total overhead Apportionment basis
$
Insurance of machinery 300,000 Cost of machinery
Factory cleaning 100,000 Floor area occupied
Employee costs 360,000 Number of employees
Further information is available as follows:
Department A Department B Total
Cost of machinery ($) 1,000,000 500,000 1,500,000
Floor area occupied (square metres) 20,000 5,000 25,000
Number of employees 72 48 120
What is the total apportioned overhead for Department A?
$__________
23. The following date relate to a process:
Input 1,000 units at a cost of $2,700
Output 860 units
Normal loss 10% of input
No inventory is held
What is the cost per unit of the process output?
$__________
24. A product has a standard selling price of $80 per unit and a standard contribution of $18 per
unit. In the last period the sales volume contribution variance was $3,600 adverse. The
management accountant calculates that if the company had used standard absorption costing
the sales volume profit variance would have been $2,000 adverse.
What is the standard absorption cost per unit?
 $8
 $70
 $52
 $62
25. Which of the following could describe the purpose of a mission statement?
(1) To state the goal of an organization
(2) To inform investors about financial performance
(3) To form a contract between a business and its customer
 1 and 2 only
 2 and 3 only
 1,2 and 3
 1 only
26. Which TWO of the following could be example of areas where a profit centre manager should
be able to exercise control?
o Sales price variance
o Depreciation of plant
o Material usage
o Head office apportioned costs
27. The following statements set out to explain why it is necessary to distinguish between
production and non-production costs. Are they true or false?
 True False
To facilitate the valuation of inventory
To establish period costs
28. A firm monitors labour turnover. At the beginning of the year staff numbers were 1,600. During
the year 860 staff left and 260 of these were replaced.
What is the labour turnover rate for the year?
 16.25%
 26.00%
 20.00%
 10.00%
29. The following budget for the next period has been based on an output of 10,000 units:
$
Sales 500,000
Variable costs (200,000)
Fixed costs (120,000)
Profit 180,000

What is the contribution per unit?

$___________
30. In which of the following businesses would service costing be used?
(1) Dressmaker
(2) Baker
(3) Hairdresser
 1 and 2
 3 only
 1 only
 2 and 3
31. Hopwood research the way that budgetary information is used to evaluate managerial
performance.
For each of the following Hopwood styles of performance evaluation what are the expected
consequences for personal relationships within a responsibility centre?
Good relationships Poor relationships
Non-accounting style
Budget-constrained style
32. The following fixed production overhead variances occurred in a period:

Expenditure $1,710 Adverse

Volume $3,650 Favourable
Efficiency $4,220 Favourable
Capacity $570 Adverse
What was the total fixed production overhead variance?
 $1,940 Favourable
 $2.510 Favourable
 $1,370 Favourable
 $5,590 Favourable
33. The following statements relate to measuring the performance of a charity which provides aid
to starving people:
(1) The value of the benefits are difficult to measure in monetary terms
(2) Only non-financial measures can be used to measure their performance
(3) Measurable objectives cannot be set

Which statement(s) is\are true?

 1 and 3
 1 only
 2 and 3
 1 and 2
34. ABC Co have $1,000,000 to invest for a two year period. The bank has offered the following
alternative interest rates:
Two year’s simple interest at 5% per annum
Two year’s compound interest at 4% per annum

Interest is payable at the end of each year

How much less interest will ABC Co earn if they take the compound interest deal (to the
nearest $)?
$__________
35. The sales trend of a product is represented by the equation y=a+bx where:
y is the sales units in a quarter
a is 40,000
b is 1,000
x is the quarter number (for example year 1 quarter 1 is 1,year 1 quarter 2 is 2)
Seasonal variations are applied as a proportion of the trend and the actual sales in year 1
quarter 1 were 47,560 units. It has been decided that this year 1 data is to be used to forecast
sales in year 2.
Using the multiplicative times series model, what are the forecast sales for year 2 quarter 1?
___________units
36. Boxl Co manufactures wooden storage boxes. The boxes are made on separate production lines,
but the purchasing of material is a centralized function.
Company sales data for the months of January to April 20X3 are budgeted as:
January February March April
Sales (boxes) 10,000 12,000 16,000 20,000
6,000 boxes were in inventory on 1 January 20X3. The company policy is that sufficient boxes
should always be in inventory at the beginning of each month to meet 60% of that month’s sales
requirement.
-Task 1 4 mark
Calculate the budgeted production for February and March 20X3.
February ___________boxes
March ___________boxes
-Task 2 4 mark
On production line 4, the inventory of wood on 1 January 20X3 was 3,200 metres (m). The
company policy was that sufficient wood should always be in inventory at the beginning of each
month to meet that month’s production requirement. Each box on production line 4 requires
 0.8m of wood for its completion. The budgeted output of production line 4 for the first three
months of 20X3 was as follows:
January February March
Production (boxes) 4,000 4,500 5,200
The purchases to be made for production line 4 for January and February 20X3 would be:
January ______________metres
February _____________metres
Task 3 2 marks
The storage boxes are sold for $18 each. On 1 February 20X3 the balance of accounts receivable
was $72,000. All sales are made on the following terms:
60% of the invoiced amount is paid in the month of sales with remaining 40% being paid in the
month after the sale.
Calculate the accounts receivable balance at 1 March 20X3.
$____________

37. Coolidge Co uses standard marginal costing to control its costs and revenues. The standard cost
card for its only product is given below:
Standard cost card
$ per unit $ per unit
Sales price 150
Direct labour 3 hours at $15 per hour 45
Direct material 2 kg at $6 per kg 12
Variable overhead 3 hours at $10 per hour 30
87
Contribution 63

In period 1, when 22000 units were manufactured and sold, 41000 kg of raw material was
purchased at a total cost of $266500. Actual direct wages were $1023000 for the 66000 hours
actually worked. Actual variable overheads were $700000. Coolidge Co carries no inventory.

Task 1 6 marks
What was the direct labour rate variance for period 1? $_________ adv/fav
What was the direct material usage variance for period 1? $_________ adv/fav
What was the total variable overhead variance for period 1? $_________ adv/fav

Task 2 4 marks
In period 2 Coolidge Co’s management accountant correctly completed the following standard
costing operating statement
Period 2: Standard costing operating statement
$
Budgeted contribution 1260000
Sales volume contribution variance 157500 adverse
Standard contribution on actual sales 1102500
Sales price variance 25000 favourable
1127500
Production cost variances favourable adverse
$ $
Direct labour rate 10500
Direct labour efficiency 24000
Direct material price 15000
Direct material usage 20000
Variable overhead rate 8400
Variable overhead efficiency 16000
70500 23400 47100 favourable
Actual contribution 1174600

The following report extract relates to Coolidge Co’s performance in period 2. Complete the
extract by selecting the correct words or phrases.

In period 2 we charged a higher/lower price that budgeted

This resulted in actual sales units being less/more than budgeted

As the total sales variance was adverse/favourable this price change was a failure/success

We purchased a better/lower quality material than planned

This resulted in less/more material per unit being used and more/less efficient working by
labour

The favourable variable overhead efficiency is caused by the labour rate/variance variance