Composed by sadia ali sadi

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1 Composed by sadia ali sadi MGT402 Quiz Lecture In a repeated distribution method: Each service department in turn does not re-allocate its costs to all departments Each service department in turn and re-allocates its costs to all departments Each service department in turn and allocates its costs to all departments Only one service department in turn and re-allocates its costs to all departments. Repeated distribution method: This method takes each service department in turn and re-allocates its costs to all departments which benefit. The difference over the period of time between actual and applied FOH will usually be minimal when the predetermined overhead rate is based on: Normal capacity Designed capacity Direct Labor hours Machine hours The cost of goods sold was Rs. 240,000. Beginning and ending inventory balances were Rs. 20,000 and Rs. 30,000, respectively. What was the inventory turnover? 8.0 times 12.0 times 7.0 times 9.6 times By using table method where is equal, that point is called Economic order quantity. Ordering cost Carrying cost Ordering and carrying cost Per unit order cost A cost unit is The cost per hour of operating a machine

2 The cost per unit of electricity consumed A unit of product or services in relation to which costs are ascertained A measure of work output in a standard hour Loss by fire is an example of: Normal Loss Abnormal Loss Incremental Loss Can not be determined The main purpose of cost accounting is to Maximize profits Help in inventory valuation Provide information to management for decision making Aid in the fixation of selling price If, Sales = Rs. 600,000 Markup = 20% of cost What would be the value of Gross profit? Rs. 200,000 Rs. 100,000 Rs. 580,000 Rs. 740,000 Gross profit = Sales (absolute amount) x 20%/120% Where the applied FOH cost is less than the actual FOH cost it is: Unfavorable variance Favorable variance Normal variance Budgeted variance Variance When the applied cost is lesser than the actual cost it is unfavorable variance. Which of the following is correct? Units sold=opening finished goods units + Units produced Closing finished goods units Units Sold = Units produced + Closing finished goods units - Opening finished goods units Units sold = Sales + Average units of finished goods inventory Units sold = Sales - Average units of finished goods inventory Which of the following items of expense are to be add in FOH cost

3 Rent of factory + Head office rent + salaries to factory watchman Rent of factory + factory lighting bill + Directors salaries Rent of factory + factory lighting bill + Factory employees salaries Head office rent + Factory property tax + Factory small tools If, Gross profit = Rs. 40,000 GP Margin = 20% of sales What will be the value of cost of goods sold? Rs. 160,000 Rs. 120,000 Rs. 40,000 Rs. 90,000 Cost of goods sold = Gross profit (absolute amount) x 80%/20% Taking steps for the fresh purchase of those stocks which have been exhausted and for which requisitions are to be honored in future is an easy explanation of: Overstocking Under stocking Replenishment of stock Acquisition of stock Net Income before Interest and tax is also called: Operating Income/Profit Gross Profit Marginal Income Other Income Which of the following is indirect cost? The depreciation of machinery The overtime premium incurred at the specific request of a customer The hire of tools for a specific job All of the given options In which of the following center FOH cost NOT incurred Production Center Service Center General Cost Center Head Office

4 Which of the following is considered as basic systems of remunerating labor? Time rate system Piece rate system Halsey Premium plan Both time rate and piece rate system Net sales = Sales less: Sales returns Sales discounts Sales returns & allowances Sales returns & allowances and sales discounts An organistation sold units 4000 and have closing finished goods 3500 units and opening finished goods units were 1000.The quantity of unit produced would be: 7500 units 6500 units 4500 units 8500 units Units produced = Units sold + Closing finished goods units - Opening finished goods units A store ledger card is similar to the. Stock ledger Bin card Material card Purchase requsition card Which of the following element must be taken into account while calculating total earnings of a worker under different incentive wage schemes? Rate per unit Units of production Extra time taken by employee to complete the production Number of workers employed The journal entry of purchase of stock under periodic inventory system would be? Inventory to Cash

5 Cash to Purchases Purchases to Inventory None of the given options Closing work in process Inventory of last year: Is treated as Opening inventory for current year Is not carried forward to next year Become expense in the next year Charge to Profit & Loss account The FIFO inventory costing method (when using a perpetual inventory system) assumes that the cost of the earliest units purchased is allocated in which of the following ways? First to be allocated to the ending inventory Last to be allocated to the cost of goods sold Last to be allocated to the ending inventory First to be allocated to the cost of good sold Sales are Rs. 450,000. Beginning finished goods were Rs. 23,000. Ending finished goods are Rs. 30,000. The cost of goods sold is Rs. 300,000. What is the cost of goods manufactured? Rs. 323,000 Rs. 330,000 Rs. 293,000 None of the given options While transporting petrol, a little quantity will be evaporated; such kind of loss is termed as: Normal Loss Abnormal Loss It is incremental loss It can not be abnormal loss The cost of electricity bill of the factory is treated as: Fixed cost Variable cost Step cost Semi variable cost Semi Variable Cost It is also known as mixed cost. It is the cost which is part fixed and par variable. It is in fact the mixture of both behaviors. Examples include: Utility bills there is a fixed line rent plus charges for units consumed. Salesman s salary there is a fixed monthly salary plus commission per units sold.

6 A cost centre is A unit of product or service in relation to which costs are ascertained An amount of expenidure attributable to an activity A production or service location,function,activity or item of equipment for which costs are accumulated A centre for which an indvidual budget is drawn up Cost accounting department prepares that helps the in preparing final accounts. Cost sheets Cost of goods sold statement Cost of production Report Material requisition form When FOH is under applied and charged to Net profit, the treatment would be: Under applied Add net profit Under applied Less net profit Under applied Less operating expense None of the given options A worker is paid Rs per unit and he produces 18 units in 7 hours. Keeping in view the piece rate system, the total wages of the worker would be: 18 x 7 x 0.50 = Rs x 0.50 = Rs x 7 = Rs x 0.5 = Rs. 3.5 Units produced x Rate per unit. Weighted average cost per unit is calculated by which of the following formula? Cost of goods issued/number of units issued Total cost/total units Cost of goods manufactured/closing units Cost of goods sold/total units Weighted average rate per unit =Total Cost/Total Units Buyer produced 20,000 units and their total factory cost was Rs. 450,000,other cost like property tax on factory building was Rs. 10,000 included in that cost till year ended the cost of per unit would be: Rs.22.5 Rs.23.5

7 Rs.24.5 Rs.26.5 Cost per unit = Cost of goods manufactured / Number of units manufactured A standard rate is paid to the employee when he completed his job: In time less than the standard In standard time In time more than standard Both in standard time and more than the standard time Store incharge after receiving the material as per the goods received note, places the material at its location and makes an entry in. Bin Card Store Ledger Card Stock Ledger None of the given options EOQ is a point where: Ordering cost is equal to carrying cost Ordering cost is higher than carrying cost Ordering cost is lesser than the carrying cost Total cost is maximum If opening inventory of material is Rs.20,000 and closing inventory is Rs. 40,000.the Average inventory amount will be: Rs. 40,000 Rs. 30,000 Rs. 20,000 Rs. 10,000 Average Inventory= Opening Inventory + Closing Inventory/2 A company has calculated that volume variance for a given month was unfavorable. This could have been caused by which of the following factors? The number of rejected units was higher than normal Machine breakdowns were higher than normal Delays were experienced in the issuing of material to production All of the given options

8 PVC Company has ordering quantity 10,000 units. They have storage capacity 20,000 units, the average inventory would be: 20,000 5,000 10,000 25,000 Average ordering quantity= Ordering Quantity/2 If, Gross profit = Rs. 40,000 GP Margin = 25% of sales What will be the value of cost of goods sold? Rs. 160,000 Rs. 120,000 Rs. 40,000 Can not be determined Cost of goods sold= *.75 /.25 All Indirect cost is charged/record in the head of Prime cost FOH cost Direct labor cost None of the given options Under/Over applied FOH cost can be adjusted in which of the following: Entire Production Cost of Good sold Net Profit All of given options The FIFO inventory costing method (when using a perpetual inventory system) assumes that the cost of the earliest units purchased is allocated in which of the following ways? First to be allocated to the ending inventory Last to be allocated to the cost of goods sold Last to be allocated to the ending inventory First to be allocated to the cost of good sold The danger Level can be calculated? Average consumption x Lead time to get urgent supplies Normal consumption x Lead time to get urgent supplies Maximum consumption x Lead time to get urgent supplies

9 Minimum consumption x Lead time to get urgent supplies Danger Level = Average consumption x Emergency time Which of the following is considered as basic systems of remunerating labor? Time rate system Piece rate system Halsey Premium plan Both time rate and piece rate system Which of the following is sales force payroll incentive? Commission Shift allowance Over time payment Bonus Factory Over head cost includes Factory Rent Property Tax Salaries of Factory Clerk All of the given Which of the following cannot be used as a base for the determination of overhead absorption rate? Number of units produced Prime cost Conversion cost Discount Allowed Cost of goods sold Rs. 30, 000, opening Inventory Rs. 9, 000, Closing inventory Rs. 7,800.What was the inventory turnover ratio? 3.57 times 3.67 times 3.85 times 5.36 times Inventory turnover ratio = Cost of goods sold/average inventory FOH applied rate of Rs per machine hour. During the year the FOH to Rs.275,000 and 48,000 machine hours were used. Which one of following statement is correct? Overhead was under-applied by Rs.6,200

10 Overhead was over-applied by Rs.6,200 Overhead was under-applied by Rs.7,200 Overhead was over-applied by Rs.7,200 Cost accounting concepts include all of the following EXCEPT: Planning Controlling Sharing Costing are future costs that effect the current management decision. Sunk Cost Standard Cost Relevant Cost Irrelevant Cost Relevant Cost: Relevant cost is which changes with a change in decision. These are future costs that effect the current management decision. Which of the following costs is part of the prime cost for manufacturing company? Cost of transporting raw materials from the suppliers premises Wages of factory workers engaged in machine maintenance Depreciation of truck used for deliveries to customers Cost of indirect production materials Direct material opening inventory add net purchases is called Material consumed Material available for use

11 Total material purchased Material ending inventory Which of the following is to be called product cost Material cost Labor cost FOH cost All of the given options Which of the following cannot be used as a base for the determination of overhead absorption rate? Number of units produced Prime cost Conversion cost Discount Allowed Predetermined (FOH cost) rate Factory overhead rate is determined on the basis of normal activity level. Normal activity level means the capacity level at which the business can operate in normal circumstances. Capacity level can be in terms of: Direct Labor Cost Direct Material Cost Direct Labor Hours Machine Hours Prime Cost Selection of capacity level depends upon the nature of the business, if its inclination is towards machine hours then machine hours will be taken as a base as capacity level. It is also known as overhead absorption rate (OAR). A Blanket Rate is: A single rate which used throughout the organization departments A double rates which used throughout the organization departments A single rates which used in different departments of the organization None of the given options Blanket rates: A blanket absorption rate is a single rate of absorption used throughout an organization s production facility and based upon its total production costs and activity. A standard rate is paid to the employee when he completed his job: In time less than the standard In standard time In time more than standard

12 Both in standard time and more than the standard time While deducting Income Tax from the gross pay of the employee, the employer acts as a (an) for Income Tax Department. Agent of his own Company Paid tax collection agent Unpaid tax collection agent None of the given options Gross pay less deductions represents all except: Net pay Take home pay Total pay Other income Which of the following best describes the manufacturing costs? Direct materials, direct labor and factory overhead Direct materials and direct labor Direct materials, direct labor, factory overhead, and administrative overhead Direct labor and factory overhead High labor turnover is NOT desirable because: It denotes the instability of the labor force It is an indication of high labor cost It shows frequent changes in the labor force All of the given options Manufacturing entities classified the inventory in which of three kinds? Material inventory,wip inventory,finished goods inventory Material inventory,purchased good inventory,wip inventory Material inventory,purchased good inventory,finished goods inventory WIP inventory,finished goods inventory,purchased good inventory Which of the following is correct for maximum level? Reorder level (Minimum consumption x Lead time) + EOQ (Maximum consumption x Lead time) (Minimum consumption x Lead time) + EOQ [(Maximum consumption - Minimum consumption) Lead time]+ EOQ All of the given options

13 Inventory turnover ratio can be calculated as follow? Cost of goods sold/average inventory Gross profit/average inventory Cost of goods sold/sale Cost of goods sold/gross profit Which of the following is an example of Statutory deductions: Deduction as Income Tax Deduction as social security Subscriptions to a trade union None of the given Which of the following is indirect cost? The depreciation of machinery The overtime premium incurred at the specific request of a customer The hire of tools for a specific job All of the given options The component of Factory overhead are as follow Direct material + Indirect material + Direct expences Indirect material + Indirect labor + Others indirect cost Direct material + Indirect expences + Indirect labor Direct labor + Indirect labor + Indirect expences Which of the following best describes the manufacturing costs? Direct materials, direct labor and factory overhead Direct materials and direct labor Direct materials, direct labor, factory overhead, and administrative overhead Direct labor and factory overhead Overtime that is necessary in order to fulfill customer orders is called: Avoidable overtime Unavoidable overtime

14 Premium Overtime Flex time Overtime that is necessary in order to fulfill customer orders is unavoidable overtime. Where the applied FOH cost is greater than the actual FOH cost it is: Unfavorable variance Favorable variance Normal variance Budgeted variance The Process of cost apportionment is carried out so that: Cost may be controlled Cost unit gather overheads as they pass through cost centers Whole items of cost can be charged to cost centers Common costs are shared among cost centers A company has calculated that volume variance for a given month was unfavorable. This could have been caused by which of the following factors? The number of rejected units was higher than normal Machine breakdowns were higher than normal Delays were experienced in the issuing of material to production All of the given options Taylor's Differential Piece Rate Plan uses piece rates. Three Two Four Five The components of the prime cost are: Direct Material + Direct Labor + Other Direct Cost Direct Labor + Other Direct Cost + FOH Direct Labor + FOH None of the given options A cost unit is The cost per hour of operating a machine

15 The cost per unit of electricity consumed A unit of product or services in relation to which costs are ascertained A measure of work output in a standard hour Increase in material Inventory means: The ending inventory is greater than opening inventory The ending inventory is less than opening inventory Both ending and opening inventories are equal Can not be determined Working hours of labor can be calculated with the help of all except: Smart card Time sheet Clock card Store card Amount of net purchase can be calculated as follow Purchase of direct material add trade discount less purchase return add carriage inward less other material handling cost Purchase of direct material less trade discount l add purchase return add carriage inward less other material handling cost Purchase of direct material less trade discount less purchase return less carriage inward add other material handling cost Purchase of direct material less trade discount less purchase return add carriage inward add other material handling cost Which of the following costs is part of the prime cost for manufacturing company? Cost of transporting raw materials from the suppliers premises Wages of factory workers engaged in machine maintenance Depreciation of truck used for deliveries to customers Cost of indirect production materials All of the following are terms used to denote Factory Overheads EXCEPT: Factory burden Factory expenses Manufacturing overhead Conversion costs Reduction of labor turnover, accidents, spoilage, waste and absenteeism are the results of which of the following wage plan? Piece rate plan Time rate plan Differential plan

16 Group bonus system Costs which are constant for a relevant range of activity and rise to new constant level once that range exceeded is called: A fixed cost A variable cost A mixed cost A step cost Cost of goods sold can be calculated as follow Cost of goods manufactured Add Opening finished goods inventory Less Closing finished goods inventory Cost of goods manufactured Less Opening finished goods inventory Less Closing finished goods inventory Cost of goods manufactured Less Opening finished goods inventory Add Closing finished goods inventory Cost of goods manufactured Add Opening finished goods inventory Add Closing finished goods inventory Which of the following statement measures the financial position of the entity on particular time? Income Statement Balance Sheet Cash Flow Statement Statement of Retained Earning Which of the following statement is correct regarding reasons of variance? Difference between capacity level over which overhead absorption rate is calculated & capacity level attained. Difference between FOH cost budgeted or estimated over which overhead absorption rate and FOH actually incurred. Difference between the actual level which company achieved and budget level which company determined. All of the given Which of the following best describes piece rate system? The increased volume of production results in decreased cost of production The increased volume of production in minimum time Establishment of fair standard rates Higher output is a result of efficient management If, COGS = Rs. 70,000 GP Margin = 30% of sales What will be the value of Sales? Rs. 200,000 Rs. 66,667

17 Rs. 100,000 Rs. 62,500 Sales =30000 *100% / 30% = Rs. 100,000 Cost of finished goods inventory is calculated by: Multiplying units of finished goods inventory with the cost per unit Dividing units of finished goods inventory with the cost per unit Dividing per unit cost with finished goods inventory Deducting total cost from finished goods inventory Closing Finish Goods inventory = Closing finished goods units x cost per unit Period costs are Expensed when the product is sold Included in the cost of goods sold Related to specific Period Not expensed Annual requirement is 7800 units; consumption per week is 150 units. Unit price Rs 5, order cost Rs 10 per order. Carrying cost Rs 1 per unit and lead time is 3 week, The Economic order quantity would be. 395 units 300 units 250 units 150 units EOQ = 2xRUxOC/UC x CC% What will be the impact of normal loss on the overall per unit cost. Per unit cost will increase Per unit cost will decrease Per unit cost remain unchanged Normal loss has no relation to unit cost Which of the following is true when piece rate system is used for wage determination? worker is paid on the basis of time taken by him to perform the work worker is paid on the basis of production Piece rate system is more beneficial than a guaranteed minimum wage system

18 None of the given options Alpha company purchased a machine worth Rs 200,000 in the last year.now that machine can be use in a new project which company has received this year. Now the cost of that machine is to be called: Project cost Sunk cost Opportunity cost Relevant cost FOH absorption rate is calculated by the way of Estimated FOH Cost/Direct labor hours Estimated FOH Cost/No of units produced Estimated FOH Cost/Prime Cost All of the given options Which of the following is/are not associated with ordering costs? Interest Insurance Opportunity costs All of the given options A company has calculated that volume variance for a given month was unfavorable. This could have been caused by which of the following factors? The number of rejected units was higher than normal Machine breakdowns were higher than normal Delays were experienced in the issuing of material to production All of the given options Merrick Differential Piece Rate System: worker is not penalized even if his performance does not exceed 80 per cent of the High Task. worker is not penalized even if his performance does not exceed 70 per cent of the High Task. worker is not penalized even if his performance does not exceed 50 per cent of the High Task. worker is not penalized even if his performance does not exceed 30 per cent of the High Task An organistation sold units 4000 and have closing finished goods 3500 units and opening finished goods units were 1000.The quantity of unit produced would be:

19 7500 units 6500 units 4500 units 8500 units The Hino Corporation has a breakeven point when sales are Rs. 160,000 and variable costs at that level of sales are Rs. 100,000. How much would contribution margin increase or decrease, if variable expenses dropped by Rs. 20,000? 37.5%. 60%. 12.5%. 26% Sales=160,000 VC=100,000 CM=60,000 Contribution to sales ratio (C/S ratio) =Contribution Margin in Rs/Sales in Rs 60,000/160,000= *100=37% New VC=80,000, Sales=160,000 CM=80,000 Contribution to sales ratio (C/S ratio) =Contribution Margin in Rs/Sales in Rs 80,000/160,000=0.5=50% Rise in CM=( )=12.5

20 Buyer produced 20,000 units and their total factory cost was Rs. 450,000,other cost like property tax on factory building was Rs. 10,000 included in that cost till year ended the cost of per unit would be: Rs.22.5 Rs.23.5 Rs.24.5 Rs.26.5 The abbreviation LIFO is: Large integrated financial organization Least interesting financial option The last in first out method None of the given options Amount of net purchase can be calculated as follow Purchase of direct material add trade discount less purchase return add carriage inward less other material handling cost Purchase of direct material less trade discount add purchase return add carriage inward less other material handling cost Purchase of direct material less trade discount less purchase less carriage inward add other material handling cost Purchase of direct material less trade discount less purchase return add carriage inward add other material handling cost Cost accounting department prepares that helps the in preparing final accounts. Cost sheets Cost of goods sold statement Cost of production Report Material requisition form Opportunity cost is the best example of: Sunk Cost Standard Cost Relevant Cost Irrelevant Cost Which of the following items of expense are to be add in FOH cost: Rent of factory + Head office rent + salaries of factory watchman Rent of factory + factory lighting bill + directors salaries Rent of factory + factory lighting bill + factory employees salaries Head office rent + factory property tax + factory small tools The components of factory overhead are as follows: Direct material + Indirect material + Direct expences Indirect material + Indirect labor + Others indirect cost Direct material + Indirect expences + Indirect labor Direct labor + Indirect labor + Indirect expences Factory Overhead include:

21 1. Indirect materials 2. Indirect labor and 3. Indirect costs attributable to production and the service activities associated with manufacturing. Net sales=sales less: Sales returns Sales discounts Sales returns & allowances Sales return & allowances and sales discount Closing work in process inventory of last year: Is treated as opening inventory for current year Is not carried forward to next year Become expense in the nest year Change to profit & Loss account The term Maximum level represents: The maximum stock level indicates the maximum quantity of an item of material which can be held in stock at any time. The maximum stock level indicates the maximum quantity of an item of material which cannot be held in stock at any time. The average stock level indicates the maximum quantity of an item of material which can be held in stock at any time. The available stock level indicates the maximum quantity of an item of material which can be held in stock at any time. Which of the following statement measures the financial position of the entity on particular time? Income statement Balance sheet Cash Flow statement Statement of Retained earning The supervisor salary is treated as: Direct labor cost Indirect labor coat Conversion cost None of the given options Indirect Cost Examples include: Wages of supervisor, cleaning material and workshop insurance. The main purpose of cost accounting is to: Maximize profits Help inventory valuation Provide information to management for decision making Aid in the fixation of selling price An organization sold units 4000 and have closing finished goods 3500 units and opening finished goods units were The quantity of unit produced would be:

22 7500 units 6500 units 4500 units 8500 units. Units produced = Units sold + Closing finished goods units - Opening finished goods units Q.1) Q.2) Q.3) Cost is expenditure incurred. A. TRUE B. FALSE Accounting has branches A. 1 B. 2 C. 3 D. 4 Cost that can be traced in full to the product or services is called A. Direct Cost B. Indirect Cost Q.4) Direct Material + Direct Labor + other direct cost = A. Prime Cost B. Factory OverHead (FOH) C. Conversion Cost D. None Q.5) Q.6) A firm Uses its own capital or Uses its owner's time and/or financial resources both are examples of A. Implicit Cost B. Explicit Cost Explanation A cost that is represented by lost opportunity in the use of a company's own resources, excluding cash These are intangible costs that are not easily accounted for. For example, the time and effort that an owner puts into the maintenance of the company rather than working on expansion accounting is always a language of business A. TRUE B. FALSE Q.7) If Direct Material = 12,000 Direct Labor = 8000 other Direct Cost = 2000 then what will be the Prime Cost? A B

23 Q.8) C D Financial Accounting is a branch of management accounting. Q.9) A. TRUE B. FALSE is a Predetermine cost of the units. A. Standard cost (correct answer) B. Implicit Cost C. Product Cost D. None Explanation The budgeted or planned cost of material, labour, or overheads expected to be paid during a given accounting period. Q.10) standard cost- The normal or specified cost used as the basis for measurement against an actual. Standard costs for manufactured items include labor, material and overhead, and vendor acquisition, freight, duty fees and other categories for purchased items. Wage, Rent & Materials are examples of. A. Implicit Cost B. Explicit Cost Explanation A business expense that is easily identified and accounted for. Explicit costs represent clear, obvious cash outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods. With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attributed Q.11) An investor invests in stock exchange he foregoes the opportunity to invest further in his hotel. The profit which the investor will be getting from the hotel is. A. opportunity cost B. Period Cost C. Product Cost D. Historical Cost Explanation 1. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. 2. The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6% - 2%) Q.12) Cost is classified in categories.

24 Q.13) Q.14) Q.15) Q.16) Q.17) A. 1 B. 2 C. 3 D. 4 Cost Accounting is an art of Recording, Classifying, summarizing, Reporting, Interpreting of the Financial Information. A. TRUE B. FALSE Management Accounting deals with Ascertainment, Measurement, Accumulation, Budgeting & Evaluating cost structure of the entity. A. True B. FALSE Explanation Its done by Cost Accounting Accounting is a language of. A. Accountants B. Mathematics C. Mathematics D. NONE is the cost that is subject to actual payment or will be paid for in future. A. Implicit Cost B. Explicit Cost Explanation A business expense that is easily identified and accounted for. Explicit costs represent clear, obvious cash outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods. With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attributed. Indirect cost is also known as overhead cost. A. True B. False Explanation Indirect Cost/Overhead Cost An indirect cost or overhead cost is a cost that is incurred in the course of producing product or rendering service, but which cannot be traced in the product or service in full. Expenditure incurred on labor, material or other services which cannot be economically identified with a specific cost product or service (cost unit). Examples include: Wages of supervisor, cleaning material, workshop insurance Q.18) Direct Labour + Other Direct Cost + FOH = Q.19) A. Prime Cost B. Factory OverHead (FOH) C. Conversion Cost D. None is verifiable through invoices/agreements.

25 Q.20) A. Opportunity Cost B. Product Cost C. Period Cost D. Historical Cost Cost Accounting deals with decisions relating to the generation & effective utilization of the financial resources of an entity. A. TRUE B. FALSE Explanation Its done by Management Accounting. 1 Merrick Differential Piece Rate System: worker is not penalized even if his performance does not exceed 80 per cent of the High Task. worker is not penalized even if his performance does not exceed 70 per cent of the High Task. worker is not penalized even if his performance does not exceed 50 per cent of the High Task. worker is not penalized even if his performance does not exceed 30 per cent of the High Task. 2 Which of the following statement measures the financial position of the entity on particular time? Income Statement Balance Sheet Cash Flow Statement Statement of Retained Earning Generally, the danger level of stock is fixed the minimum level. Below Above Equal Danger level has no relation to minimum level The Process of cost apportionment is carried out so that: Cost may be controlled Cost unit gather overheads as they pass through cost centers Whole items of cost can be charged to cost centers Common costs are shared among cost centers The appropriate journal entry to transfer the cost of completed units from the Work in Process account would involve a credit to Work in Process and a debit to which of the following accounts?

26 Income Summary Raw Materials Inventory Finished Goods Manufacturing Summary In which of the following center FOH cost NOT incurred Production Center Service Center General Cost Center Head Office Which of the following is/are reported in production cost report? The costs charged to the department How the costs were assigned to the output? The equivalent units of production by the department All of the given options (not 100% sure) 8 Direct materials cost is Rs. 80,000. Direct labor cost is Rs. 60,000. Factory overhead is Rs. 90,000. Beginning goods in process were Rs. 15,000. The cost of goods manufactured is Rs. 245,000. What is the cost assigned to the ending goods in process? Rs. 45,000 Rs. 15,000 Rs. 30,000 There will be no ending Inventory Solution: Direct Material ,000 (Given) Direct labor ,000 (Given) FOH ,000 (Given) Open WIP ,000 Total (cost of goods manufactured is also so balance is zero) Sales are Rs. 450,000. Beginning finished goods were Rs. 23,000. Ending finished goods are Rs. 30,000. The cost of goods sold is Rs. 300,000. What is the cost of goods manufactured? Rs. 323,000 Rs. 330,000 Rs. 293,000 None of the given options Under Periodic Inventory system Purchase of inventory is treared as: Assets

27 Expense Income Liability When prices are rising over time, which of the following inventory costing methods will result in the lowest gross margin/profits? FIFO LIFO Weighted Average Cannot be determined The main difference between the profit center and investment center is: Decision making Revenue generation Cost in currence Investment Which of the following is a characteristic of process cost accounting system? Material, Labor and Overheads are accumulated by orders Companies use this system if they process custom orders Opening and Closing stock of work in process are related in terms of completed units Only Closing stock of work in process is restated in terms of completed units Reference The Inventory Turn over ration is 5 times and numbers of days in a year is 365.Inventory holding period in days would be 100 days 73 days 50 days 10 days 15 Which of the following manufacturers is most likely to use a job order cost accounting system? A soft drink producer A flour mill A textile mill A builder of offshore oil rigs (see page # 131 of handouts (pdf file) under "Examples of industries using process costing include". Bottling, flour, textile industries will use process costing, so the last option "A builder of offshore oil rigs" should be correct as this industry will use job order) Which of the following is a point of differentiation between blanket rates and department rates? Blanket rate is a single overhead rate established for the entire factory

28 Department rates are separate overhead rates for all departments of factory through which the products pass Department rate is a single overhead rate established for the entire factory Blanket rates are separate overhead rates for all departments of factory through which the product passes Production volume of 1,200 units cost incurred Rs. 10,000 and production volume of 1,400 units cost incurred Rs.20, 000. The variable cost per unit would be? Rs per unit Rs per unit Rs per unit Rs. 100 per unit (I got confused in this question, what I'm getting: variable cost per unit = total variable cost/total number of units produced one solution could be; in producing 1200 units, total cost incurred was 10000, and in producing 1400 units, total cost incurred was = 200 units = cost which means when we produced 1200 units the total cost was but when we increased production to 1400 units, the total cost increased to 20000, so the difference ( = 10000) should be of variable cost now by dividing "total variable cost by quantity" i.e, 10000/200 = 50 per unit but the confusion is in order to get variable cost per unit, we divide total variable cost by total number of units produced, and total number of units in the above MCQ seems to be if we divide 10000/1400 = 7.14 which is not in the options if we divide 10000/2600 = 3.84 (not there in the options) so i guess 50 per unit might be a correct answer. but please if anyone know about this question, kindly explain it Cost accounting concepts include all of the following EXCEPT: Planning Controlling Sharing (see page # 10, this is the same MCQ on page # 10 of handouts) Costing

29 The main purpose of cost accounting is to Maximize profits Help in inventory valuation Provide information to management for decision making (again the same MCQ is on handouts page # 9) Aid in the fixation of selling price Over applied FOH will always result when a predetermined FOH rate is applied and: Production is greater than defined capacity Actual overhead costs are less than budgeted overhead Budgeted capacity is less than normal capacity Actual overhead incurred is less than applied Overhead A spending variance for factory overhead is the difference between actual factory overhead cost and factory overhead cost that should have been incurred for actual hours worked and results from: Price difference of FOH costs Quantity differences of FOH costs Price and quantity differences for FOH costs Difference caused by production volume variations Period costs are Expensed when the product is sold Included in the cost of goods sold Related to specific Period Not expensed The cost of goods sold was Rs. 240,000. Beginning and ending inventory balances were Rs. 20,000 and Rs. 30,000, respectively. What was the inventory turnover? 8.0 times 12.0 times 7.0 times 9.6 times Inventory turnover ratio = CGS/Average inventory

30 inventory turnover ratio = /25000 = 9.6times average inventory = opening inventory + closing inventory / 2 If opening inventory of material is Rs.20,000 and closing inventory is Rs. 40,000.the Average inventory amount will be: Rs. 40,000 Rs. 30,000 Rs. 20,000 Rs. 10,000 Which of the following is/are reported in production cost report? The costs charged to the department How the costs were assigned to the output? The equivalent units of production by the department All of the given options An organistation sold units 4000 and have closing finished goods 3500 units and opening finished goods units were 1000.The quantity of unit produced would be: 7500 units 6500 units 4500 units 8500 units Solution: Number of units manufactured/produced = units sold + closing balance of finished goods units - opening balance of finished goods units number of units produced/manufactured = = 6500 Where the applied FOH cost is less than the actual FOH cost it is: Unfavorable variance Favorable variance Normal variance Budgeted variance Examples of industries that would use process costing include all of the following EXCEPT: Beverages Food Hospitality Petroleum The flux method of labor turnover denotes: Workers appointed against the vacancy caused due to discharge or quitting of the organization Workers appointed in replacement of existing employees Workers employed under the expansion schemes of the company The total change in the composition of labor force The flux method of labor turnover denotes the total change in the composition of labor force.while replacement method takes into account only

31 workers appointed against the vacancy caused due to discharge or quitting of the organisation. A worker is paid Rs per unit and he produces 18 units in 7 hours. Keeping in view the piece rate system, the total wages of the worker would be: 18 x 7 x 0.50 = Rs x 0.50 = Rs x 7 = Rs x 0.5 = Rs. 3.5 All of the following are essential requirements of a good wage system EXCEPT: Reduced overhead costs Reduced per unit variable cost Increased production Increased operating costs The components of the prime cost are: Direct Material + Direct Labor + Other Direct Cost Direct Labor + Other Direct Cost + FOH Direct Labor + FOH None of the given options If, Gross profit = Rs. 40,000 GP Margin = 25% of sales What will be the value of cost of goods sold? Rs. 160,000 Rs. 120,000 Rs. 40,000 Can not be determined Opportunity cost is the best example of: Sunk Cost Standard Cost Relevant Cost Irrelevant Cost Which of the following is an example of Statutory deductions: Deduction as Income Tax Deduction as social security Subscriptions to a trade union None of the given By useing table method where is equal, that point is called Economic order quanity. Ordering cost

32 Carrying cost Ordering and carrying cost Per unit order cost Which of the following statement is TRUE about FOH applied rates? They are used to control overhead costs They are based on actual data for each period They are predetermined in advance for each period None of the given Annual requirement is 7800 units; consumption per week is 150 units. Unit price Rs 5, order cost Rs 10 per order. Carrying cost Rs 1 per unit and lead time is 3 week, The Economic order quantity would be: 395 units 300 units 250 units 150 units Period costs are Expensed when the product is sold Included in the cost of goods sold Related to specific Period Not expensed Question # 1 of 15 ( Start time: 12:23:43 PM ) Total M a r k s: 1 A store ledger card is similar to the. Stock ledger Bin card Material card Purchase requisition card Question # 2 of 15 ( Start time: 12:28:02 PM ) Total M a r k s: 1 Cost of goods sold Rs. 30,000, opening Inventory Rs. 9,000,Closing inventory Rs. 7,800.What was the inventory turnover ratio? 3.57 times 3.67 times 3.85 times 5.36 times Inventory turnover ratio = Cost of goods sold / Average inventory 30,000/(( )/2) = 3.57 Question # 3 of 15 ( Start time: 12:29:34 PM ) Total M a r k s: 1

33 Opportunity cost is the best example of: Sunk Cost Standard Cost Relevant Cost Irrelevant Cost Relevant Cost Relevant cost is which changes with a change in decision. These are future costs that effect the current management decision. Examples Variable cost Fixed cost which changes with in an alternatives Opportunity cost Question # 4 of 15 ( Start time: 12:31:06 PM ) Total M a r k s: 1 Cost of Goods Manufactured can be calculated as follow Total factory Cost Add Opening Work in process inventory Less Closing Work in process inventory Total factory Cost Less Opening Work in process inventory Add Closing Work in process inventory Total factory Cost Less Opening Work in process inventory Less Closing Work in process inventory Total factory Cost Add Opening Work in process inventory Add Closing Work in process inventory Question # 5 of 15 ( Start time: 12:32:03 PM ) Total M a r k s: 1 A cost centre is A unit of product or service in relation to which costs are ascertained An amount of expenditure attributable to an activity A production or service location, function, activity or item of equipment for which costs are accumulated A centre for which an individual budget is drawn up Question # 6 of 15 ( Start time: 12:32:44 PM ) Total M a r k s: 1 is the time worked over and above the employee's basic working week. Flex time Overtime Shift allowance Commission Question # 7 of 15 ( Start time: 12:33:13 PM ) Total M a r k s: 1 Closing work in process Inventory of last year: Is treated as Opening inventory for current year Is not carried forward to next year Become expense in the next year Charge to Profit & Loss account Question # 8 of 15 ( Start time: 12:33:38 PM ) Total M a r k s: 1 In furniture manufacturing use of nail, pins, glue, and polish which use to increase its esteem value that cost is treated as: Direct material cost Indirect material cost

34 FOH cost Prime cost Question # 9 of 15 ( Start time: 12:34:51 PM ) Total M a r k s: 1 Increase in material Inventory means: The ending inventory is greater than opening inventory The ending inventory is less than opening inventory Both ending and opening inventories are equal Can not be determined Question # 10 of 15 ( Start time: 12:35:28 PM ) Total M a r k s: 1 Direct materials cost is Rs. 80,000. Direct labor cost is Rs. 60,000. Factory overhead is Rs. 90,000. Beginning goods in process were Rs. 15,000. The cost of goods manufactured is Rs. 245,000. What is the cost assigned to the ending goods in process? Rs. 45,000 Rs. 15,000 Rs. 30,000 None of above (245,000, ,000 60,000 80,000 = 0) Question # 11 of 15 If labor is satisfied with high wages it may ultimately lead to: Increased production and productivity Increased efficiency Reduced labor and overhead costs All of the given options Question # 12 of 15 Which of the following is a mechanical device to record the exact time of the workers? Clock Card Store Card Token System Attendance Register Question # 13 of 15 According to IASB framework, Financial statements exhibit to its users the: Financial position Financial performance Cash inflow and outflow analysis All of the given options Question # 14 of 15 where the applied FOH cost is less than the actual FOH cost it is: Unfavorable variance Favourable variance Normal variance Budgeted variance

35 Question # 15 of 15 ( Start time: 12:40:04 PM ) Total M a r k s: 1 If, COGS = Rs. 70,000 GP Margin = 30% of sales What will be the value of Sales? Rs. 200,000 Rs. 66,667 Rs. 100,000 Rs. 62,500 Question # 1 of 15 ( Start time: 11:45:23 PM ) Total M a r k s: 1 Which of the following is / are element / s of production payroll? Direct labor force wages Administrative wages Selling wages All of the given options (Correct) Question # 2 of 15 ( Start time: 11:46:47 PM ) Total M a r k s: 1 The compnent of Factory overhead are as follow Direct material + Indirect material + Direct expences Indirect material + Indirect labor + Others indirect cost (Correct) Direct material + Indirect expences + Indirect labor Direct labor + Indirect labor + Indirect expences 11:47 AM Question # 3 of 15 ( Start time: 11:48:10 PM ) Total M a r k s: 1 While deducting Income Tax from the gross pay of the employee, the employer acts as a (an) for Income Tax Department. Agent of his own Company Paid tax collection agent Unpaid tax collection agent (Correct) None of the given options Question # 4 of 15 ( Start time: 11:49:06 PM ) Total M a r k s: 1 Loss by fire is an example of: Normal Loss (Correct) Abnormal Loss Incremental Loss Can not be determined Question # 5 of 15 ( Start time: 11:50:27 PM ) Total M a r k s: 1 What will be the impact of normal loss on the overall per unit cost?

36 Per unit cost will increase (Correct) Per unit cost will decrease Per unit cost remain unchanged Normal loss has no relation to unit cost Question # 6 of 15 ( Start time: 11:51:51 PM ) Total M a r k s: 1 The flux method of labor turnover denotes: Workers appointed against the vacancy caused due to discharge or quitting of the organization Workers appointed in replacement of existing employees Workers employed under the expansion schemes of the company The total change in the composition of labor force (Correct) Question # 7 of 15 ( Start time: 11:52:29 PM ) Total M a r k s: 1 Which of the following element must be taken into account while calculating total earnings of a worker under different incentive wage schemes? Rate per unit Units of production (Correct) Extra time taken by employee to complete the production Number of workers employed Question # 8 of 15 ( Start time: 11:52:59 PM ) Total M a r k s: 1 A worker is paid Rs per unit and he produces 18 units in 7 hours. Keeping in view the piece rate system, the total wages of the worker would be: 18 x 7 x 0.50 = Rs x 0.50 = Rs. 9 (Correct) 18 x 7 = Rs x 0.5 = Rs. 3.5 Question # 9 of 15 ( Start time: 11:53:23 PM ) Total M a r k s: 1 Merrick Differential system uses rates. Two Three Four Five (Correct) Question # 10 of 15 ( Start time: 11:53:49 PM ) Total M a r k s: 1 Which of the following statement is correct regarding reasons of variance?

37 Difference between capacity level over which overhead absorption rate is calculated & capacity level attained. (Correct) Difference between FOH cost budgeted or estimated over which overhead absorption rate and FOH actually incurred. Diffrence between the actual level which company achived and budget level which company determined. All of the given Question # 11 of 15 ( Start time: 11:54:30 PM ) Total M a r k s: 1 Which of the following best describes piece rate system? The increased volume of production results in decreased cost of production The increased volume of production in minimum time (Correct) Establishment of fair standard rates Higher output is a result of efficient management Question # 12 of 15 ( Start time: 11:55:16 PM ) Total M a r k s: 1 The danger Level can be calculated? Average consumption x Lead time to get urgent supplies Normal consumption x Lead time to get urgent supplies Maximum consumption x Lead time to get urgent supplies Minimum consumption x Lead time to get urgent supplies (Correct) Question # 13 of 15 ( Start time: 11:55:58 PM ) Total M a r k s: 1 Weighted average cost per unit is calculated by which of the following formula? Cost of goods issued/number of units issued Total cost/total units (Correct) Cost of goods manufactured/closing units Cost of goods sold/total units Question # 14 of 15 ( Start time: 11:56:46 PM ) Total M a r k s: 1 Factory Over head cost includes Factory Rent Property Tax Salaries of Factory Clerk All of the given (Correct) Question # 15 of 15 ( Start time: 11:57:29 PM ) Total M a r k s: 1 Store incharge after receiving the material as per the goods received note, places the material at its location and makes an entry in. Bin Card (Correct) Store Ledger Card