MGT402 Final Term 2010

FINALTERM  EXAMINATION

Spring 2010

MGT402- Cost & Management Accounting (Session - 2)

Time: 90 min

Marks: 69

Student Info
StudentID:
Center:	OPKST
ExamDate:	16 Aug 2010

For Teacher's Use Only
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Q No.	9	10	11	12	13	14	15	16
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Q No.	17	18	19	20	21	22	23	24
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Q No.	25	26	27	28	29	30	31	32
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Q No.	41	42	43	44	45	46	47	48
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Q No.	49	50	51	52	53
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Question No: 1    ( Marks: 1 )    - Please choose one

 Superior Products makes a special ski. Next year Superior expects to produce 20,000 pairs of skis. Seven pounds of fiberglass are required to make each pair of skis. The company expects to have 21,000 lbs of fiberglass in inventory at the end of this year and next year wants to have an ending inventory of fiberglass of 18,000 lbs. How much fiberglass does Superior expect to purchase next year?

       ► 137,000 lbs 

       ► 140,000 lbs 

       ► 158,000 lbs 

       ► 160,000 lbs

   

Question No: 2    ( 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?

       ► Rs. 756,000

       ► Rs. 390,000

       ► Rs. 684,000

       ► Rs. 330,000

   

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

 Consider the following data: 

Particulars	Rs.
Raw material inventory beginning	14,000
Purchases of Raw materials	120,000
Raw material inventory Ending	10,000
Direct labor	200,000
Manufacturing Overhead (actual)	402,000
Manufacturing Overhead (applied)	404,000

What is the amount of under or over applied manufacturing overhead cost?

       ► Over applied Rs. 2,000

       ► Over applied Rs. 3,000

       ► Under applied Rs. 3,000

       ► Under applied Rs. 2,000

   

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

 Which of the following is calculated by a formula that uses net sales as denominator?

       ► Inventory turnover ratio

       ► Gross profit rate

       ► Return on Investment

       ► None of the given options

   

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

 An average cost is also known as:

       ► Variable cost

       ► Unit cost

       ► Total cost

       ► Fixed cost

   

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

 Finished goods inventory costs represent the costs of goods that are:

       ► Currently being worked on

       ► Waiting to be worked on

       ► Waiting to be sold

       ► Already delivered to customers

   

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

 If, Basic Salary                   Rs.10,000

Per Piece commission Rs. 5

Unit sold                                 700 pieces

Amount of commission received will be:

       ► Rs. 3,500

       ► Rs. 13,500

       ► Rs. 10,000

       ► Rs. 6,500

   

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

 Increased cost of production due to high labor turnover is a result of which of the following factor?

       ► Interruption of production

       ► Coordination between new and old employee to produce more

       ► Increased production due to newly motivated employees

       ► Decrease losses as new employees will be more concerned towards output

   

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

 In order to compute equivalent units of production, which of the following must be reasonably estimated?

       ► Units

       ► The percentage of completion

       ► Direct material cost

       ► Units started and completed

   

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

 Which of the following loss is not included as part of the cost of transferred or finished goods, but rather treated as a period cost?

       ► Operating loss

       ► Abnormal loss

       ► Normal loss

       ► Non-operating loss

   

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

 Variable costing is also known as:

       ► Direct Costing

       ► Marginal Costing

       ► Both Direct Costing & Marginal Costing

       ► Indirect Costing

   

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

 Hyde Park Company produces sprockets that are used in wheels. Each sprocket sells for Rs. 50 and the company sells approximately 400,000 sprockets each year. Unit cost data for the year follows:

Direct material	Rs. 15
Direct labor	Rs. 10
Other cost: Manufacturing Distribution	Fixed Rs. 5 Rs. 4	Variable Rs. 7 Rs. 3

Required: Identify the unit cost of sprockets under direct costing

       ► Rs. 44

       ► Rs. 37

       ► Rs. 32

       ► Rs. 35

   

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

 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?

       ► Contribution margin per unit and the contribution margin ratio both remains unchanged

       ► Contribution margin per unit and the contribution margin ratio both increases

       ► Contribution margin per unit decreases and the contribution margin ratio remains unchanged

       ► Contribution margin per unit increases and the contribution margin ratio remains unchanged

   

Question No: 14    ( 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

   

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

 All of the following are the objectives of budgeting EXCEPT:

       ► Maximization of sales

       ► Profit maximization

       ► Compete with competitors

       ► Increased cost

   

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

   

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

 Which of the following is a reason of main difference between production budget and Production cost budget?

       ► Production budget is constructed in units

       ► Production budget is constructed in Rs.

       ► Production cost budget is constructed in units

       ► Both are same budgets

   

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

 Which of the following budget is the most important in service organizations?

       ► Production budget 

       ► Merchandise purchases budget 

       ► Direct labor budget 

       ► Direct materials budget

   

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

 Which of the following would be found in a cash budget?

       ► Depreciation

       ► Accrued expenditure

       ► Provision for doubtful debts

       ► Capital expenditure

   

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

 Which of the following is not true about differential costs?

       ► It is a broader concept than variable cost as it takes into account additional fixed costs caused by management decisions

       ► With the passage of time and change in situation, differential costs will vary

       ► The difference in cost between buying them from outside or make them in the company is differential cost, irrelevant for decisions

       ► They are extra or incremental costs caused by a particular decision

   

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

 In short term decision making which of the following is not concerned?

       ► Cash flows

       ► Time value of money

       ► Pay back period

       ► Capital investments

   

Question No: 22    ( 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: 23    ( Marks: 1 )    - Please choose one

 Which of the following is NOT an assumption of the basic economic-order quantity model?

       ► Annual demand is known

       ► Ordering cost is known

       ► Carrying cost is known

       ► Quantity discounts are available

   

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

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