MGT402- Cost & Management Accounting Complete Solved Finalterm Paper 2010

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FINALTERM  EXAMINATION

Spring 2010

MGT402- Cost & Management Accounting (Session - 3)

Time: 90 min

Marks: 69

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

 BDH produced 30,500 units of Kisty (a product). Each unit of Kisty takes two units of component L. Component L is budgeted to cost Rs. 12 per unit. Current inventory of L is 4,000 units. BDH wants 6,000 units of L on hand at the end of the next year. How much will the direct materials budget show as the cost of materials to be purchased?

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       ► Rs. 756,000

       ► Rs. 390,000

       ► Rs. 684,000

       ► Rs. 330,000

    30500*2 = 61000 + 6000 – 4000 = 63000*12 = 756000

Question No: 2    ( Marks: 1 )    - Please choose one

 The average cost method of process costing has an advantage when compared to the FIFO method relative to simplicity because under the average method:

       ► It provides that units started within the current period are valued at the current period cost

       ► The costs in the beginning inventory in a processing department maintain their separate identity

       ► The identity of the beginning units in process is typically maintained when they are transferred to the next department

       ► All units completed during the period will be assigned the same unit cost

   

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

 Restocking of stores, in order to ensure efficient functioning of the stores department and steady flow of materials to the production departments, is duty of:

       ► Managers

       ► Storekeeper

       ► Production In charge

       ► Sales supervisor

    One important duty of a storekeeper is the restocking of stores in order to ensure efficient functioning of the stores department and steady flow of materials to the production departments

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

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 Which of the following is very uncommon method of employee wage payments now a day?

       ► Payment by cash page 78

       ► Payment by cheque

       ► Payment by bank transfer

       ► Payment through the Banks Automated Clearing System (BACS)

   

Question No: 5By: Adeel Abbas, www.allvupastpapers.blogspot.com     ( Marks: 1 )    - Please choose one

 Which of the following is TRUE regarding Departmental Rates.

       ► A departmental absorption rate is a rate of absorption based upon the particular department's overhead cost and activity level page 104

       ► A departmental absorption rate is a rate of absorption not based upon the particular department's overhead cost and activity level

       ► A single rate of absorption used throughout an organization’s production facility and based upon its total production costs and activity

       ► None of the given options

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

 In a job order cost system, the use of direct materials would be recorded as a debit to:

       ► Finished Goods inventory

       ► Manufacturing Overhead

       ► Raw Materials inventory

       ► Work in Process inventory

   

Question No: 7    ( Marks: 1 )    - Please choose one

 Which of the following industries would most likely use a Process cost Accounting system?

       ► Construction

       ► Beer

       ► Hospitality

       ► Consulting

   

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

 When two products are manufactured during a common process, the factor that determine whether the products are joint product or one main product and one is by product is the:

       ► Potential marketability for each product

       ► Amount of work expended in the production of each product

       ► Relative total sales value of each product

       ► Management policy

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

 Which of the following costs are treated as period costs under direct costing?

       ► Only direct cost  By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► Fixed selling and administrative expenses

       ► Fixed manufacturing overhead

       ► Both fixed manufacturing overhead and fixed selling and administrative expenses

   

Question No: 10    ( Marks: 1 )    - Please choose one

 Janet sells a product for Rs. 6.25. The variable costs are Rs. 3.75. Janet's break-even units are 35,000. What is the amount of fixed costs?

       ► Rs. 87,500

       ► Rs. 35,000

       ► Rs.131,250

       ► Rs. 104,750

    35000x6.25=218,750

35000 x 3.75 = 131250

CM= 87500

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

 The Environmental Filter Company is planning to sell air filter systems for Rs. 2,500 per unit.  Variable costs are Rs. 1,500 per unit and total fixed costs are Rs. 1,000,000.  What is the value of sales necessary to break even?

       ► Rs. 1,000,000

       ► Rs. 2,000,000

       ► Rs. 2,500,000

       ► Rs. 5,000,000

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

 Terrell, Inc. sells a single product at a selling price of Rs. 40 per unit. Variable costs are Rs. 22 per unit and fixed costs are Rs. 82,800. Terrell's break- even point is:

       ► Rs. 184,000

       ► 3,764 units

       ► Rs. 150,540

       ► 2,070 units

40 – 22 = 18

82800/18 =4600 x 40 = 184000   

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

 The by-product of flour is:

       ► Fats

       ► Bran

       ► Glycerin

       ► Meat Hides

   

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

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

       ► Functional head

       ► Manager

       ► Auditor

       ► Administrator

   

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

 While constructing production budget, numbers of units manufactured are calculated by which of the following formula?

       ► Number of units to be sold + closing units – opening units

       ► Number of units to be sold - closing units + opening units

       ► Number of units to be sold - closing units – opening units

       ► Number of units to be sold + closing units + opening units

   

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

 Consider the following data for the month of January:

 Sales 600 units

Opening stock 80 units

If the closing stock has to be 50% higher than the previous month then production will have to be:

       ► 700 units

       ► 720 units

       ► 640 units

       ► 600 units

    600 + 120 – 80 =

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

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 If B Limited shows required production of 120 cases of product for the month, direct labor per case is 3 hours at Rs. 12 per hour. Budgeted labor costs for the month should be:

       ► Rs. 1,360

       ► Rs. 1,440

       ► Rs. 4,320

       ► Rs. 5,346

   

Question No: 18    ( Marks: 1 ) By: Adeel Abbas, www.allvupastpapers.blogspot.com    - Please choose one

 Which of the following is the first step in the decision-making process?

       ► Clarify the decision problem

       ► Collect the data

       ► Select an alternative

       ► Develop a decision model

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

 The Auslander Company has 1,600 obsolete calculators that are carried in inventory at a total cost of Rs. 106,800. If these calculators are upgraded at a total cost of Rs. 40,000, they can be sold for a total of Rs. 120,000. As an alternative, the calculators can be sold in their present condition for Rs. 44,800. What will be the sunk cost in this situation?

       ► Rs. 0

       ► Rs. 40,000 

       ► Rs. 44,800

       ► Rs. 106,800

   

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

 Where labor must be hired from outside the organization, what would be the relevant cost of labor?

       ► Equal to the variable costs incurred

       ► Equal to the standard cost

       ► It would be nil

       ► Equal to the replacement cost

   

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

 Perpetual inventory system is:

       ► A stock control system designed to ensure that the level of stock never falls to zero

       ► A system of counting and valuing selected stock items at different times on a perpetually rationing basis

       ► A system of recording receipts and issues of stock as they occur, showing the resulting balance of each stock item at all times

       ► A system of stock recording which remains unchanged over time,in rder to monitor trends By: Adeel Abbas, www.allvupastpapers.blogspot.com

   

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

 Which of the following method(s) is/are most commonly used for dealing with beginning work in process inventory units while preparing the Cost of Production Report?

       ► FIFO Method

       ► Weighted-Average Method

       ► Both FIFO and Weighted-Average Method

       ► LIFO Method

   

Question No: 23    ( 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: 24    ( 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

   

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

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 Which of the following is NOT  a requirement of the general principles of budgeting?

       ► Responsibility for forecasting costs must be clearly defined

                                    ► Changes are not Changes are not made just because of more favorable results are                                 expected

       ► Accountability for actual results must be enforced

       ► Goals must be realistic and possible to attain

   

Question No: 26    ( 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 is the required production?

       ► 900 units

       ► 1,000 units

       ► 700 units

       ► 600 units

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

 Which of the following item is NOT included in FOH cost budget?

       ► Indirect material cost

       ► Indirect labor cost

       ► Power and fuel

       ► Direct material cost

   

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

 All of the following are the examples of administrative expenses EXCEPT:

       ► Salaries of employees

       ► Utility bills

       ► Interest paid on debt

       ► Depreciation of office equipment

 

 

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

 If, cost of goods sold amounts to Rs. 50,000 and the sales are projected to be 130% of cost of sales. The selling expenses are projected to be 15% of cost of sales.  What will be the amount of gross profit?

       ► Rs. 15,000

       ► Rs. 25,000

       ► Rs. 7,500

       ► Can not be calculated from given information

    Sales = 50000x130%= 65000

Selling exp = 50000 x 15% = 7500

65000 – 50000-7500 = 

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

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 Which of the following statement is TRUE about the relevant cost?

       ► It is a sunk cost

       ► It is an opportunity cost

       ► It do not affect the decision making process

       ► All costs are relevant

  

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

 If product "A" costs Rs. 25 replaced with product "B" costing Rs. 35, what would be the differential cost?

       ► Rs. 10

       ► Rs. 60

       ► Rs. 35

       ► None of the given options

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

 Advertisement and Research & development cost for a certain campaign is the best example of: By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► Committed fixed cost

       ► Discretionary fixed cost

       ► Incremental cost

       ► Opportunity cost

  

Question No: 33    ( 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.

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

 Which of the following statement is TRUE about historical cost?

       ► It is always relevant to decision making

       ► It is always irrelevant to decision making

       ► It is always an opportunity cost

       ► It is always realizable value

   

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

 The total cost to produce one unit is Rs. 600. Direct materials are 20% of the total cost and direct labor is 1/3 of the combined total of direct labor and FOH. What was the cost for direct materials, direct labor, and factory overhead?  By: Adeel Abbas, www.allvupastpapers.blogspot.com

       ► Rs. 320, Rs. 160 and Rs. 120, respectively

       ► Rs. 160, Rs. 120 and Rs. 320, respectively

       ► Rs. 120, Rs. 160 and Rs. 320, respectively

       ► Rs 160, Rs. 320 and Rs. 120, respectively

 

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

 Direct labor cost is charged to which of the following?

       ► It is charged to work in process account

       ► It is charged to factory overhead account

       ► It charged to selling overhead control account

       ► It charged to administration overhead control account

   

Question No: 37    ( 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: 38    ( Marks: 1 )    - Please choose one

 Consider the given information.

Estimated FOH	Rs. 100,000
Estimated Direct labour hours	50,000 Hours
Over applied FOH	Rs. 50,000
Under applied FOH	Rs. 15,000
Overhead absorption rate	?

       ► Rs. 2.00

       ► Rs. 1.00

       ► Rs. 0.30

       ► Rs. 5.00

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

 General overhead cost may apportion on the basis of:

       ► Direct labor hours

       ► Direct wages

       ► Machine hours

       ► All of the given options

   

Question No: 40 By: Adeel Abbas, www.allvupastpapers.blogspot.com    ( Marks: 1 )    - Please choose one

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

       ► Actual factory overhead is less than absorbed factory overhead

       ► Actual factory overhead is greater than absorbed factory overhead

       ► Budgeted factory overhead for actual volume is greater than actual factory overhead

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

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

 How normal loss is treated in first department at the preparation of Cost of Production Report?

       ► It is only shown in quantity schedule

       ► It is used to calculate equivalent units

       ► Its is used to calculate per unit cost

       ► It is transferred to next units

   

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

 You are required to identify how many good units were outputs from the process.

	Units
Units put in process	4,000
Lost units	500
Units in process	200

      ► 3,300 units

       ► 4,000 units

       ► 4,200 units

       ► 4,500 units

  

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

Total cost of beginning inventory	Rs.37,000
Unit cost of material	Rs. 4.00
Unit cost of labour & FOH	Rs. 8.00
Units transferred out	60,000
Ending work in process	10,000

Required: Identify the total cost of the units completed and transferred out during the month.

       ► Rs. 720,000

       ► Rs. 240,000

       ► Rs. 480,000

       ► Rs. 12,000

   

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

 By products are also known as:

       ► Incidental product

       ► Main product

       ► Comparatively high quality product

       ► Joint product

   

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

 What type of relation exists between period cost and per unit cost?

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

       ► There is direct relation

       ► There is inverse relation

       ► There is no relation

       ► Given information is incomplete

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Question No: 46    ( 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: 47    ( Marks: 1 )    - Please choose one

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 While constructing a flexible budget, if budgeted costs are greater than actual cost, then variance will be:

       ► Favorable

       ► Unfavorable

       ► No variance

       ► It may be favorable or unfavorable

  

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

 Flexible budget at actual capacity Rs. 73,400 and Actual cost incurred at actual capacity Rs. 76,500. Identify the Expenditure Variance with the help of given data.

       ► Rs. 3,100 Favorable balance

       ► Rs. 3,100 Unfavorable balance

       ► Rs. 149,900 Favorable balance

       ► Rs. 149,900 Unfavorable balance

   

Question No: 49    ( Marks: 3 )

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 A study has been conducted to determine if one of the departments of Mead Company should be discontinued. The contribution margin in the department is Rs. 150,000 per year. Fixed expenses charged to the department are Rs. 195,000 per year. It is estimated that Rs. 120,000 of these fixed expenses could be eliminated if the department is discontinued. Will it be favorable to discontinue department operations? Support your answer with suitable working.

 

 

Question No: 50    ( Marks: 3 )

 How can you differentiate between production budget and production cost budget?

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Question No: 51    ( Marks: 5 )

 Basit Ali Company produces and sells Makka Cola to retailers. The Cola is bottled in 2-litter plastic bottles. The estimated budgeted sales for the year 2008 would be Rs. 80,000 and the estimated Profit for the year 2008 would be Rs. 4,060. The Margin of safety Ratio is calculated as 25%. By: Adeel Abbas, www.allvupastpapers.blogspot.com

Required:

1-     Breakeven Sales for the year 2008

2-     Projected Income statement for the year 2008

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Question No: 52    ( Marks: 5 )

 A textile company anticipates the following unit sales during the four months of 2008.

                                                             

Months	April	May	June	July
Sales units	20,000	30,000	25,000	40,000

                                     

The company maintains its ending finished goods inventory at 60% of the following month’s sale. The April1st, finished goods inventory will be 12,000 units.

Required: Prepare a production budget for second quarter of year.

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Question No: 53 By: Adeel Abbas, www.allvupastpapers.blogspot.com    ( Marks: 5 )

 Golden Company sells its product for Rs. 42 per unit. The company’s unit product cost based on the full capacity of 400,000 units is as follows:

                       

Direct materials	Rs.   8
Direct labor	10
Manufacturing overhead	12
Unit product cost	Rs. 30

A special order offering to buy 40,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be Rs. 6 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, calculate the minimum acceptable selling price per unit?

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