Complete Solved Final Term Past Paper of MGT402- Cost & Management Accounting 2010

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FINALTERM  EXAMINATION

Spring 2010

MGT402- Cost & Management Accounting (Session - 4)

Ref No:

Time: 90 min

Marks: 69

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Question No: 1    ( Marks: 1 )    - Please choose one

 All of the following are the features of fixed costs EXCEPT:

       ► Although fixed within a relevant range of activity level but are relevant to a decision making when it is avoidable.

       ► Although fixed within a relevant range of activity level but are relevant to a decision making when it is incremental.

       ► Generally it is irrelevant

       ► It is relevant to decision making under any circumstances

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Question No: 2    ( Marks: 1 ) By: Adeel Abbas, www.allvupastpapers.blogspot.com    - Please choose one

 All of the following are features of Zero based budgeting EXCEPT:

       ► It provides the organization with a systematic way to evaluate different operations and programmes undertaken. It enables management to allocate resources according to the priority of the programmes

       ► It ensures that each and every programme undertaken by management is really essential for the organization, and is being performed in the best possible way

       ► It disables the management to approve departmental budgets on the basis of cost-benefit analysis. No arbitrary cuts or increases in budget estimates are made

       ► It links budgets with the corporate objectives. Nothing will be allowed simply because it was being done in the past. An activity may be shelved it does not help in achieving the goals of the enterprises

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Question No: 3    ( Marks: 1 )    - Please choose one

 If Selling price per unit Rs. 15.00; Direct Materials cost per unit Rs. 3.50; Direct Labour cost per unit Rs. 4.00 Variable Overhead per unit Rs. 2.00; Budgeted fixed production overhead costs are Rs. 60,000 per annum charged evenly across each month of the year. Budgeted production costs are 30,000 units per annum. What is the Net profit per unit under Absorption costing method.

       ► Rs. 9.50

       ► Rs. 15.00

       ► Rs. 11.50

       ► Rs. 3.50

   

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Question No: 4    ( Marks: 1 )    - Please choose one

 Net sales = Sales less:

       ► Sales returns

       ► Sales discounts

       ► Sales returns & allowances

       ► Sales returns & allowances and sales discounts

   

Question No: 5    ( Marks: 1 )    - Please choose one

 Which of the following is TRUE when piece rate system is used for wage determination?

       ► Under this method of remuneration a worker is paid on the basis of time taken by him to perform the work

       ► Under this method of remuneration a worker is paid on the basis of production

       ► The rate is expressed in terms of certain sum of money for total production

       ► The rate is not expressed in terms of certain sum of money for total production

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Question No: 6    ( Marks: 1 )    - Please choose one

 The salary of factory clerk is treated as:

       ► Direct labor cost

       ► Indirect labor cost

       ► Conversion cost

       ► Prime cost

   

Question No: 7    ( Marks: 1 )   By: Adeel Abbas, www.allvupastpapers.blogspot.com - Please choose one

 Which of the following is CORRECT to calculate cost of goods manufactured?

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       ► Direct labor costs plus total manufacturing costs

       ► The beginning work in process inventory plus total manufacturing costs and subtract the ending work in process inventory

       ► Beginning raw materials inventory plus direct labor plus factory overhead

       ► Conversion costs and work in process inventory adjustments results in cost of goods manufactured

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Question No: 8    ( Marks: 1 )    - Please choose one

 Which of the following is TRUE regarding the use of blanket rate?

       ► The use of a single blanket rate makes the apportionment of overhead costs unnecessary

       ► The use of a single blanket rate makes the apportionment of overhead costs necessary

       ► The use of a single blanket rate makes the apportionment of overhead costs uniform

       ► None of the given options

   

Question No: 9    ( Marks: 1 )    - Please choose one

 Capacity Variance / Volume Variance arises due to

       ► Difference between Absorbed factory overhead and budgeted factory for capacity attained

       ► Difference between Absorbed factory overhead and absorption rate

       ► Difference between Budgeted factory overhead for capacity attained  and FOH actually incurred

       ► None of the given options

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Question No: 10    ( Marks: 1 )  By: Adeel Abbas, www.allvupastpapers.blogspot.com   - Please choose one

 By using absorption costing method, which of the following is NOT shown in Income Statement?

       ► Cost of goods manufactured

       ► Contribution margin 

       ► Selling and administrative expenses 

       ► Cost of goods sold

   

Question No: 11    ( Marks: 1 )    - Please choose one

 Cost volume Profit analysis (CVP) is a behavior of how many variables?

       ► 2

       ► 3

       ► 4

       ► 5

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Question No: 12    ( Marks: 1 )    - Please choose one

 Once the fixed cost has been met, the remaining increase in contribution margin will be shows as which of the following option?

       ► Profit

       ► Variable cost

       ► Operating profit

       ► Sales volume

   

Question No: 13    ( Marks: 1 )    - Please choose one

 Company A's fixed costs were Rs. 42,000, its variable costs were Rs. 24,000 and its sales were Rs. 80,000 (8,000 units). What is the company's break-even point in units?

       ► 1,400 units

       ► 5,000 units

       ► 6,000 units

       ► 7,000 units

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Question No: 14    ( Marks: 1 )    - Please choose one

 Company A's fixed costs were Rs. 45,000, its variable costs were Rs. 24,000 and its sales were Rs. 80,000. What is the company's break-even point in sales Rs?

       ► Rs. 33,000

       ► Rs. 57,000

       ► Rs. 79,000

       ► None of the given options

    80 000 – 24 000 = 56000

56000 / 80 000 = .70

45000  / .70 = 64285

Question No: 15    ( Marks: 1 )    - Please choose one

 The by-product of Soap is:

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       ► Glycerin

       ► Meat Hides

       ► Fats

       ► Flour Bran

   

Question No: 16    ( Marks: 1 )    - Please choose one

 The by-product of oil and fuel is: By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► Mobil oil and lubricating oils

       ► Kerosene oil and Asphalt and Tar

       ► Gasoline and Petroleum coke

       ► All of the given

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Question No: 17    ( Marks: 1 )    - Please choose one

 Budget for an organization is prepared by which of the following person?

       ► Functional head

       ► Manager

       ► Auditor

       ► Administrator

   

Question No: 18    ( Marks: 1 )    - Please choose one

 All of the following compose cost of goods sold EXCEPT:

       ► Raw material

       ► Labor

       ► Capital

       ► Factory overhead

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Question No: 19    ( Marks: 1 )    - Please choose one

 Which of the following is true for the direct labor cost budget?

       ► It is prepared from the sales budget

       ► It is prepared from the production budget

       ► In the direct labor budget, ending inventory is subtracted and beginning inventory is added

       ► The first line of the direct labor budget is total direct labor cost

   

Question No: 20    ( Marks: 1 )    - Please choose one

 All of the following are balance sheet budgets EXCEPT:

       ► Selling and administrative expenses budget

       ► Cash budget

       ► Accounts receivable budget

       ► Liabilities budget

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Question No: 21    ( Marks: 1 )    - Please choose one

 The payments that a firm collects from its customers are called:

       ► Cash disbursements

       ► Cash outflows

       ► Cash receipts

       ► Capital expenditures

   

Question No: 22    ( Marks: 1 )    - Please choose one

 Which of the following sentences is the best description of zero-base budgeting?

       ► Zero-base budgeting is a technique applied in government budgeting in order to have a neutral effect on policy issues    By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► 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  

       ► Zero-base budgeting starts with the figures of the previous period and assumes a zero rate of change 

       ► Zero based budgeting is an alternative name of flexible budget

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Question No: 23    ( Marks: 1 )    - Please choose one

 Optimum production plan is based on which of the following factor(s)?

       ► Identify the limiting factor

       ► Calculate contribution per unit of limiting factor

       ► Calculate contribution per unit for each product

       ► All of the given options

   

Question No: 24    ( Marks: 1 )    - Please choose one

  During the year 50,000 units put in to process.30, 000 units were completed. Closing WIP were 20,000 units, 70% completed. How much the equivalent units of output would be produced?

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       ► 20,000 units

       ► 30,000 units

       ► 36,000 units

       ► 44,000 units

   

Question No: 25    ( Marks: 1 )    - Please choose one

 Which of the following is NOT a base of cost allocation under joint products?

       ► Physical quantity ratio

       ► Selling price ratio

       ► Hypothetical market value ratio

       ► Inventory turnover ratio

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Question No: 26    ( 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

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Question No: 27    ( Marks: 1 )    - Please choose one

 Amount of equivalent units under FIFO method consists of:

       ► The work needed to complete the units in the beginning inventory

       ► The work expended on the units started and completed during the period

       ► The work expended on partially completed units in the ending inventory

       ► All of the given options

     By: Adeel Abbas, www.allvupastpapers.blogspot.com

Question No: 28    ( Marks: 1 )    - Please choose one

 A company ABC has contribution to sales ratio of 17% and a profit to sales ratio of 6%. What will be the margin of safety ratio?

       ► 283.3%

       ► 35.3%

       ► 11.5%

       ► It can not be calculated from the given data

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Question No: 29    ( Marks: 1 )    - Please choose one

 If cost is taken at vertical axis on a break even chart then which of the following will be taken at horizontal level?

       ► Revenue

       ► Input

       ► Output

       ► sales

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Question No: 30    ( 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: 31    ( Marks: 1 )    - Please choose one

 Which of the following budget includes an item of indirect material cost?

       ► FOH cost budget

       ► Direct labor cost budget

       ► Direct material cost budget

       ► None of the given options

   

Question No: 32    ( Marks: 1 )    - Please choose one

 Which of the following budget includes the item of depreciation of plant?

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       ► Direct labor cost budget

       ► Variable FOH cost budget

       ► Fixed FOH cost budget

       ► Direct material cost budget

   

Question No: 33    ( Marks: 1 )    - Please choose one

 Which of the following is the best example of a fixed administrative expense?

       ► Rent of building used for office

       ► Commission paid

       ► Repair and maintenance

       ► Stationery expense

   

Question No: 34    ( Marks: 1 )    - Please choose one

 Which of the following factor (‘s) will be kept in mind while preparing sales and marketing budget? By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► Fixed and variable behavior of costs

       ► Past experience

       ► Promotional activities opted by company

       ► All of the given options

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Question No: 35    ( Marks: 1 )    - Please choose one

 Which of the following is NOT suitable action taken by the firm to overcome the problem of cash shortage during a period?

       ► Overdraft arrangement

       ► Selling off assets

       ► Extension in credit period with suppliers

       ► Issue of bonus shares

   

Question No: 36    ( Marks: 1 )    - Please choose one

 All of the following costs are irrelevant to decision making EXCEPT:

       ► Incremental cost

       ► Sunk cost

       ► Fixed cost

       ► Supervisor’s routine salary

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Question No: 37    ( Marks: 1 )    - Please choose one

 A company is undergoing a decision to select one product. The options available are Product ‘A’ which has a positive contribution margin and product ‘B’ which has a negative contribution margin. Which product would be selected?

       ► Product "A"

       ► Product "B"

       ► Both Product "A" and "B"

       ► Decision depends upon the availability of  fixed cost.

   

Question No: 38    ( Marks: 1 )    - Please choose one

 Which of the following statement is TRUE about historical cost?

       ► It is always relevant to decision making

       ► It is always irrelevant to decision making

       ► It is always an opportunity cost

       ► It is always realizable value

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Question No: 39    ( Marks: 1 )    - Please choose one

 Inventory of Rs. 96,000 was purchased during the year. The cost of goods sold was Rs. 90,000 and the ending inventory was Rs. 18,000. What was the inventory turnover ratio for the year?

       ► 5.0 times

       ► 5.3 times

       ► 6.0 times

       ► 6.4 times

   

Question No: 40    ( Marks: 1 )    - Please choose one

 Consider the given data and calculate effective wage rate. Gross pay of Mr. A was Rs. 330 and time allowed for completion of job was 15 hrs but he saved 5 hrs.

       ► Rs. 44/hr

       ► Rs. 22/hr

       ► Rs. 33/ hr

       ► Rs 66/hr

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Question No: 41    ( Marks: 1 )    - Please choose one

 In which of the situation volume variance will give favorable result?

       ► Actual factory overhead is less than absorbed factory overhead

       ► Actual factory overhead is greater than absorbed factory overhead

       ► Absorbed factory overhead greater than budgeted factory overhead for actual volume

       ► Absorbed factory overhead less than budgeted factory overhead for actual volume

    

Question No: 42    ( Marks: 1 )    - Please choose one

 Budgeted FOH for actual volume = Fixed FOH + (Actual Volume X   ?)

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       ► Applied rate

       ► Blanket rate

       ► Variable rate

       ► Departmental rate

   

Question No: 43    ( Marks: 1 )    - Please choose one

 Change in budgeted Factory overhead ÷ Change in activity level =?

       ► Absorption rate

       ► Variable rate

       ► Burden rate

       ► Fixed rate

   

Question No: 44    ( Marks: 1 )    - Please choose one

Lost units (Normal loss)	500 units
Units received from preceding department	13,500 units
Units completed in this department	11,750 units

Required: Identify units still in process with the help of above data.

By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► 1,250 units

       ► 14,000 units

       ► 12,250 units

       ► 1,750 units

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Question No: 45    ( Marks: 1 )    - Please choose one

 Raymond Corporation estimates factory overhead of Rs. 345,000 for next fiscal year. It is estimated that 60,000 units will be produced at a material cost of Rs. 575,000 and conversion required Rs. 60,500.

Required: FOH rate on the bases of Budgeted Production would be?

       ► Rs. 5.75 per unit

       ► Rs. 6.65 per unit

       ► Rs. 6.00 per unit

       ► Rs.1.00 per unit

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Question No: 46    ( Marks: 1 )    - Please choose one

 The Superior Company manufactures paint and uses a process costing system. During February, Superior transferred out 60,000 units.  Superior had 30,000 gallons (30% complete as to conversion) in beginning inventory and 20,000 gallons (100% complete as to material, 20% complete as to conversion) in ending inventory. The company uses a FIFO costing.

Required:  What were the equivalent units for material costs during February?

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       ► 50,000 units

       ► 30,000 units

       ► 20,000 units

       ► 90,000 units

   

Question No: 47    ( Marks: 1 )    - Please choose one

 Mr. A purchased a machine cost Rs. 60,000 five years ago. It is expected that the machine will generate future revenue of 40,000. Alternatively, the machine could be scrapped for Rs. 35,000. An equivalent machine in the same condition cost 38,000 to buy now.

Required: Identify the value in use with the help of given data.

       ► Rs. 60,000 

       ► Rs. 40,000

       ► Rs. 35,000

       ► Rs. 38,000

   

Question No: 48    ( Marks: 1 )    - Please choose one

 Jones, Industries uses process costing system. In October, the finishing department had 20,000 (20% as to conversion) units in beginning work-in-process, 40,000 (40% as to conversion) units in ending inventory and had 95,000 units transferred in from the previous department.

Required: Identify units transferred out

       ► 75,000 units

       ► 115,000 units

       ► 60,000 units

       ► 135,000 units

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Question No: 49    ( Marks: 3 )

 What is a principle budget factor? By: Adeel Abbas, www.allvupastpapers.blogspot.com

   

Question No: 50    ( Marks: 3 )

 If:

·          Company’s sales forecast for 3rd quarter, ending September 30, was 54,300 units.

·          The beginning inventory was 13,000 units.

·          Ending inventory was 12,200 units.

Then:

            Prepare production budget for 3rd quarter?

Production Budget for 3^rd quarter ending September 30

Sales forecast                           = 54,300

Add Ending Inventory               = 12,200

Total Need                               = 66,500

Less: Beginning inventory          = 13,000

Required Production  = 53,500

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Question No: 51    ( Marks: 5 )

 Garrett Company sells hand-crafted furniture. One item it sells is a small table that sells for Rs. 30 per unit. The variable costs related to the table, including product and shipping costs, are Rs. 18 per unit. Total fixed costs for the company are Rs. 60,000. Assume the tables are the only product the company sells this year and draw a CVP graph to represent the company’s sales and expenses. From this graph, compute the approximate breakeven point in rupees and units.

Sale Price                     = 30

Variable cost                = 18

Contribution margin      = 12

Break even in unit         = 60,000 / 12 = 5000

Break even in rupees    = 5000 x 30 = 150,000

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Question No: 52    ( 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

By: Adeel Abbas, www.allvupastpapers.blogspot.com

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

Prepare for the six months period ending June 1999, a production budget for ‘’Product A”

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	January	February	March	April	May	June
Budgeted sales in units	1000	1200	1610	2000	2400	2400
Ending inventory	600	805	1000	1200	1200	1000
Total need	1600	2005	2610	3200	3600	3400
Opening Inv	600	600	805	1000	1200	1200
Required Production	1000	1405	1805	2200	2400	2200

Budgeted Production = 1000+1405+1805+2200+2400+2200 = 11010

Direct Material = 11010 x 12.50 = 137,625

Direct labor = 11010 x 4.50 = 49545

FOH = [66000 / 22500 ] 11010 x 2.9333 = 32296

Production Budget Cost = 137625+49545+32296 = 219466

Question No: 53    ( Marks: 5 )

 Golden Company sells its product for Rs. 40 per unit. The company’s unit product cost based on the full capacity of 600,000 units is as follows:

                       

Direct materials	Rs.   10
Direct labor	15
Manufacturing overhead	12
Unit product cost	Rs. 37

By: Adeel Abbas, www.allvupastpapers.blogspot.com

A special order offering to buy 50,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be Rs. 10 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. Two-thirds of the manufacturing overhead is fixed and would not be affected by this order. Assume that direct labor is an avoidable cost in this decision. In negotiating a price for the special order, what is the minimum acceptable selling price per unit?

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direct labor = 10

direct material = 8

variable over head = 4

selling cost = 6

total variable cost = 10 + 8 + 4 + 6 = 28

so 28 is the minimum price to cover the variable cost

thus 28 is the minimum acceptable price

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