1. A firm use standard absorption costing. The results for the recent period are as follows.

Actual profit for the period $175,000

Sales price variance $25,000 favourable
Sales volume profit variance $22,000 Adverse
cost variances $8000 Adverse

What was the budget profit for the period

A. $1,64,000
B. $1,86,000
C. $1,70,000
D. $1,80,000

2. Cost totalled $7,640 and $9,620 are incurred at activity level of 800 units and 1100 unit respectively.
A step increase in fixed cost of $300 occurs at an output level of 1,000 units.

What is the best estimate of the variable cost per unit? _________________

3. A firm recorded a profit of $50,000 under marginal costing, when inventory increase from 1000
units at the start of the year to 1400 units at the end of the year.

Under absorption costing the fixed production overhead absorption rate for the period would be
$12 per unit.

What would be the profit for the period under absorption costing? $_______________

4. An organization budgets to spray paint 400 cars each month. The estimated spray painter hours
per car is 2 hours. In the month of June 384 cars were spray painted and total hours worked by the
spray painter was 640 hours.

What is the efficiency ratio for the month of June? _____________%

5. Budgeted fixed overhead for the period are $400,000, and budgeted variable cost per unit is $10,
budgeted production is 80,000 units. Inventories will be 200 unit higher at the end of the period
than the beginning.

Which of the following statement is correct?

A. The marginal costing profit will exceed the absorption costing profit by $1000
B. The absorption costing profit will exceed the marginal costing profit by $1000
C. The absorption costing profit will exceed marginal costing profit by $2000
D. The marginal costing profit will exceed absorption costing profit by $2000

6. The following information for the period related to the company using standard costing.
Material price variance $5000 adverse
Material used in production 2000 units
Material purchase 2500 units

Inventory is valued at standard material cost of $10 per unit

What was the actual material cost per unit for the period?
A. $8.00
 B. $12.00
C. $10.00
D. $12.50

7. A firm worked on THREE jobs during the period. Cost details of the job are as follows:

Job 1 Job 2 Job 3

$ $ $
Opening work in progress 10,200 24,600 Nil
Direct material in a period 6760 Nil $11,520
Direct labour in a period 5340 4760 7200

Production overhead, which are apportioned to Job each period on the basis of actual direct labour
cost, totalled $23,355 in the period. Job 1 and 2 were complete during the period.

What was the value of work in progress (WIP)? $ ______________________

8. A farmer weighs his group of pumpkins and record that the mean weight is 2.6 kilogram and
variance is 0.640 kilogram.

What is the coefficient of variation of pumpkin crop (to 2 decimal places)?

A. 0.80
B. 0.16
C. 0.25
D. 0.31

9. Perform major labour activity information for the last period is as follows
Production budget in standard units 4800 units
Actual production in standard units 6000 units
Actual hours worked 75,000 hours
Standard hour per unit 20 hours

What was the labour production volume ratio in the last.

A. 78.125%
B. 80%
C. 125%
D. 160%

10. One unit of the product is expected to use 2 kilograms of material at an expected cost of 2.40 per
kilogram and takes 6 minutes of direct labour hour paid at the rate of $1.00 per hour. Fixed
overheads are absorbed at the rate of $2.00 per labour hour.

What is a standard cost per unit under absorption costing?

A. $7.80
B. $5.10
C. $4.90
 D. $5.40

11. The following table refers to an inventory item.

Reorder level units 800
Average lead time days 7
Average daily demand units 100
Economic order quantity unit 2000

A purchase order was placed in accordance with the above and demand was as expected. The
material was delivered as expected 7 days from the date of order.

How many units in total were in inventory immediately after delivery? ________________ units

12. An investment of $78,000 is made immediately. The investment will produce an annual net income
of $5000 in perpetuity starting in one year time. The discount rate on the investment is 5%.

What is the net present value of the investment? $________________

13. 25,000 units of the company’s single product were manufactured in a period during which 20,000
units were sold the cost of the product were:
Direct cost $16.20
Fixed production overheads $7.60
Non production overhead $2.90

What is the difference between the absorption costing profit and the marginal costing profit for the
period? $________________

14. The following information refer to the process in which there was no work in progress

Unit produced 4000

Process cost $225,000
Output units 3600

The statement below refers to the calculation of process cost and whether the process loss is
expected or unexpected.

True False
If the loss is unexpected then the cost of output is $2,25,000
If the loss is expected that the cost per unit is $62.50

15. A company has 2 production cost centres A and B and 2 service cost centres C and D. The allocated
and apportioned overheads for each cost centre are as follows:
Cost centre A B C D
Overheads $140,000 $300,000 $80,000 $40,000

Usage of service department services is as follows:

 Cost centre A B C D
% Of C services 40 60 - -
% Of D services 60 10 30 -

What would be the total overhead of cost centre B after service department cost has been
reapportioned? $_________________________

16. In a budget prepare for an output of 20,000 units the total labour cost is $48,000. Of this total 40%
is the fixed salary of the supervisor, the remainder is variable cost of direct labour.

What will be the total labour cost if budget is flexed to 24,000 units?

A. $53,760
B. $57,600
C. $34,560
D. $51,840

17. Company makes 2 product X and Y. The products X and Y are budgeted to be sold in a ratio of 2:1
at the following prices product
Product X $8 per unit
Product Y $12 per unit

The total sales revenue budget for the period is $140,000

What is a sales revenue budget for the product Y? $___________________

18. The following data has been recorded for the number of units Zee produced and the total cost

Number of units Total cost

$
1 20
2 38
3 57
4 75
5 92

What degree of correlation is shown in this data?

A. Perfect negative
B. Partial negative
C. Partial positive
D. Perfect positive

19. Monthly demand for an item is 5000 units, and the purchase cost is $10 per unit. It costs $105 to
place an order and annual cost of holding one unit is $1.40.

What is the economic order quantity? ________________ Units

20. The selling price of product Z for the year from 20X3 to 20X8 are shown in the table below
Year Selling price
20X3 24
20X4 23
20X5 24
20X6 22
20X7 21
20X8 20

What is the median selling price for the product Z for the year 20X3 to 20X8?

A. $23.00
B. $24.00
C. $22.00
D. $22.50

21. Which statement BEST describe value analysis when managing costs?
A. A technique used to assess the value added to a product’s raw materials by an organization
B. A technique used to calculate the monetary value that a customer has for a product
C. A technique used to identify possible cost reductions that would not reduce the product value
to the customer
D. A technique used to measure the value of a department to an organization versus its costs

22. Are the following statements regarding the setting of budgets true or false?
(1) Expectations budgets are useful for resource planning
(2) Aspirations budgets are useful for motivational budgets

A. Both statements are true

B. Statement 1 is true, Statement 2 is false
C. Both statements are false
D. Statement 2 is true, Statement 1 is false

23. Which of the following variances may be reported only in a standard absorption costing
system but NOT in a standard marginal costing system?
(1) Sales Volume Variance
(2) Fixed production overhead expenditure variance
(3) Fixed production overhead capacity variance
(4) Variable Production Overhead Efficiency Variance
A. 3 only
B. 1,2 and 4
C. 2 and 3
D. 1,3 and 4
24. A company is about to make a decision on whether to purchase a new machine in order to
expand production. A feasibility study has already been conducted but not yet paid for.
The company uses net present value (NPV) to evaluate new investments.
Which of the following is relevant cost for calculating the NPV of the new machine?
A. Depreciation on the new machine
B. The finance director’s current salary
C. Installation cost of the machine
D. The cost of the feasibility study

25. Which of the following BEST describes what is meant by a frequency distribution?
A. A graph displaying results by drawing a line between set points
B. A range of values between the highest and the lowest figures in a data set
C. A chart displaying only the occurrence of a particular event
D. A measure of the number of times that various outcomes occur in a sample

26. Which of the following is/are key performance indicator(s) of an organization?

(1) Financial success
(2) Revenue growth
(3) Return on capital employed
A. 3 only
B. 1 only
C. 2 and 3 only
D. 1, 2 and 3

27. Sales data for a food outlet are presented below:

Chart Title
120,000

100,000

80,000

60,000

40,000

20,000

0
20X7 20X8 20X9

Alpha Bata Gema

 What is the name for this type of chart?
A. Histogram
B. Component bar chart
C. Multiple line graph
D. Compound bar chart

28. Which of the following statements relating to management accounting and financial
accounting is/are correct?
(1) Management accounting provides information to people outside an organization to
enable them to make better decisions
(2) Financial accounting provides information to facilitate the production of annual
financial statements
A. Both 1 and 2
B. 2 only
C. 1 only
D. Neither 1 nor 2

29. Consider the following statements about strategic planning.

(1) It is confined to larger organizations and is not appropriate in small organizations
(2) It is appropriate for private sector but not public sector organizations
Are the statements correct?
YES NO
Statement 2
Statement 1

30. What is the purpose of a mission statement?

A. To set out critical success factors fundamental to an organization’s competitive position
B. To briefly encapsulate the vision of top management as to what they are aiming to achieve
C. To describe a series of proposed long-term actions to achieve the various objectives of a
business
D. To provide a set of plans detailing the short-term tactics of a business

31. Consider the following statements about the normal distribution

(1) The total area under the standard normal distribution curve is one
(2) In any normal distribution, the mean and median are the same
 Are each of statements true or false?
YES NO
Statement 2
Statement 1

32. Which TWO of the following are true of job costing?

A. It is a form of specific order costing
B. It may be used where mass production occurs
C. A separate cost sheet is maintained for each other
D. An average cost per unit is calculated over a period of time

33. Which of the following are common uses of spreadsheet?

(1) Comparison of actual data with budgeted data
(2) Filtering and sorting data
(3) Identifying the causes of variances
A. 2 only
B. 1 and 3
C. 1 only
D. 1 and 2

34. Consider the following incomplete statements.

(1) Assesses the profitability of products and services
(2) Provides a financial information system for management
(3) Follows all accounting standards and company law
Which statement(s) is/are describing aspects of cost and management accounting?
A. 2 and 3 only
B. 1,2 and 3
C. 1 and 2 only
D. 1 only

35. The following statements refer to overhead absorption using a predetermined hourly rate.
Is each statement true or false?
Any over-absorption calculated will be transferred to statement of profit or True False
loss and will increase profit
If actual hours multiplied by the predetermined hourly rate is less than actual
expenditure there will be an over-absorption
36. Lance co is appraising a number of capital investment projects. Its cost of capital is 10% per year.

The following spreadsheet gives details of project A. the values in some of the cells have been
deliberately obscured. All cash flows occur at the end of the year, apart from the initial investment that
occurs immediately.

Task 1

What value would be calculated foe cell E4? $

What value should be entered into cell E10 (round to the nearest dollar)? $

Task 2
The following spreadsheet shows an evaluation of project B. All cash flows occur at the end of relevant
year, apart from the initial investment which occur immediately.
 What is the discounted payback period of Years
project B (to nearest whole number)?

What is the internal rate of return (IRR) of

the project (to nearest whole number)?

Task 3
If the project 3 has an IRR of 15% and a discounted payback period of four years, which of the
following statement is False?
o The project has a compound annual rate of return of 15%
o The project has positive NPV at the company’s cost of capital
o The project’s NPV is 15% of its initial investment
o The project will increase investor wealth

37. Healey Co Manufactures a single product the upright. In the last accounting period the company budgeted
to produce and sell 850 units. The company operates a standard costing system. The standard cost
associated with the manufacture of a product were as follows:
Direct materials 1.6kg/unit $10/kg
Direct labour 2hours/unit $5/hour

The variable overheads absorption rate was $3.80 per direct labour hour.
Fixed overheads absorption rate was $4.50 per direct labour hour based upon budgeted production.
Actual performance for the last period was as follows:

(1) 800 units were produced

(2) 1,750 direct labour hours were worked.
(3) Fixed overheads incurred were $7,240
(4) Variable overheads were $6,600

An analysis of the material and labour variances for the period showed.
Direct material price $1,435 Fav
Direct material usage $1,150 Adv
Direct labour rate $50 Fav
Direct labour efficiency $1,500 Adv

Task 1
Calculate the following overheads variances and identify whether they are Favourable or Adverse.
 Variable overheads variance $

Variable overheads efficiency variance $

Fixed overheads expenditure variance $

Fixed overheads volume variance $

Task 2

Which of the following statement would explain the material usage variance for the last period?

 Material usage variance is due to upgrading skill of production worker

 Material usage variance is due to difficulty in working with low grade materials
 Material usage variance is due to using better quality materials
Task 3

Which of the following is a good reason to investigate the labour efficiency variance?
 The variance is non-recurring
 The potential benefits would be small
 The variance continues an adverse trend

38. A company manufactures two products (A and B) using two types of raw material (M1 and M2) and one
grade of labour. The company is preparing budgets for the next two periods (P1 and P2). The sales and
finished goods inventory budget, in units of product, have already been prepared. The budgets for period
P1 are:

Product A Product B
(units) (units)
Sales 7,200 12,500
Finished goods inventory
Beginning of period 620 900
End of period 550 1,000

There is no inventory of raw material

Standard raw material content of the finished products, in kg per unit of product, is

Product A Product B
Raw material M1 0.3 15
Raw material M2 0.6 0.8
Losses occur in the preparation of raw material M1 prior to use its use in product manufacture. 25% of
inputs are lost in the production process.
Ideal standards have been set for labour efficiency. The ideal standards for product A and product B
respectively are 0.30 and 0.16 hours per unit. Achievement of an efficiency ratio of 80% (compared with
the ideal standard) is to be budget.

Task 1

What is budgeted production of product A, in units in period P1? ____________ Units.

Task 2
The production budget for period P2 is:
Product A 7,600 units
Product B 13,040 units

Calculate the following for period 2

Total quality of raw material M1 required for production of product A __________________ kg

Total quantity of raw material M2 required for the production of both products ______________ kg
Budgeted labour hours for production of product A _______________ hours

Task 3

The high low method or linear regression analysis can be used in the analysis of cost behaviour. Which of
the following are advantages of linear regression analysis?
(1) It assumes linear behaviour
(2) It takes into account all of the data
(3) The strength of the linear relationship can be tested
(4) It excludes the highest and lowest observations of cost

o 2 and 3 only
o 1 and 3 only
o 2, 3 and 4 only
o 1,2 and 4 only