Cost and
Managerial Accounting
Assignment - A
Q1: ZEE is product, manufactured out of three raw materials M,N, &
Q. Each unit of ZEE requires 10 kg, 8 kg, & 6 kg of M, N, Q, respectively.
The reorder levels of M, & N are 15000 & 10,000 kg respectively., while
the minimum level of Q is 2500 kg. The weekly production of ZEE varies from 300
to 500 units, while the weekly average production is 400 units. You are required
to compute:-
1. The
minimum stock level of M
2.
The maximum stock level of N
3. the reorder level of Q Additional Information:-
|
Re-order quantity (kg)
|
M
20000
|
N 15000
|
Q
20000
|
|
Delivery time (in weeks)
|
|||
|
Minimum
|
2
|
4
|
3
|
|
Average
|
3
|
5
|
4
|
|
maximum
|
4
|
6
|
5
|
Q2 M/s Cotton Mills Ltd. Take a periodic inventory of their stocks on
chemical Y at the end of each month, The physical inventory taken on June 30*
shows a balance of 1,000 litres of chemical Y in hand@Rs.2.281itre.
The following purchases were made during July.
July 1 14,000Litres @ Rs.2.30 per litre July 7 10,000Litres @ Rs.2.32
per litre July 9 20,000Litres @ Rs.2.33 per litre July 25 5,000Litres @ Rs.2.3
5 Per Litre
A physical
inventory taken on July 31st discloses that there is a stock of
10,000 Litres.
You are required to compute the inventory value on July 31, by each of the following methods:
i) LIFO
You are required to compute the inventory value on July 31, by each of the following methods:
i) LIFO
ii) FIFO
Q3 From the following figures find B.E volume:
S.P. per
tonne Rs.69.50
V.C per tonne Rs.35.50
F.C. Rs. 18.02 Lacs
If this volume represents 40%
capacity, what is the additional profit for an added production of 40% cpacity, the selling price of which is 10% lower for
20% capacity production and 15% lower than the existing price for the
other 20% capacity.
Q4 State whether
the following statements are true or false. Give reasons.
a)
Direct costs are costs which vary with
variation in output.
b) Total
fixed cost remains unaffected by changes in the volume of output.
c)
In relation to
normal sales, a low margin of safety alongwith a high P/V ratio is generally an
indication of high fixed cost.
d)
Cost unit and cost
centre have the same meaning.
Q5: P Ltd.
Manufactures two products using one type of material. Shown below is an extract
from the company's papers for the next period budget.
Product A Product B
Budgeted
Sales (In units) 3,600 4,800
Budgeted
material consumption per products (kg) 5 3
Budgeted material cost Rs. 12 per
Kg.
There are 12 five days weeks in a budget period and it
is anticipated that sales and production
will occur evenly throughout.
Opening stock : Product A l,020 units, Product B 2,400
units, Raw material 4,300 kgs.
The target closing stock: Product A = 15 days sales,
Product B = 20 days sales, Raw material =
10 days consumption.
Prepare material purchase budget showing the
quantities and values for the next period.
Assignment - B
Q1: Comment on the
relative profitability of the following products when there is a) no key
factor, b) Machine Hrs are limited (Key factor)
|
|
Alpha
|
Beta
|
|
|
Rs.
|
Rs.
|
|
Selling price
|
100
|
150
|
|
Material
|
25
|
30
|
|
Wages
|
5
|
10
|
|
Machine hr rate:
|
|
|
|
Variable
|
2
|
3
|
|
Fixed
|
1
|
1
|
|
Variable overhead
|
15
|
20
|
|
Fixed Expenses
|
2
|
2
|
|
Machine hrs.used
|
10
|
15
|
|
Production
|
300Units
|
250Units
|
Q2: Define the term
"Budgetary Control." Discuss its limitations.
Q3 (a) Discuss various classifications of costs.
Q3 (b) Determine the amount of fixed expenses from the following
particulars:
Sales Rs.2,40,000, Direct Material Rs. 80,000, Direct Labour Rs.50,000,
variable overheads Rs. 20, 000, Profit Rs. 50,000
Q4:
A product passes through two distinct process A & B & thereafter it is
transferred to finished stock. From the following information you are required
to prepare Process Accounts:
|
Process A
|
Process B
|
|
|
Rs
|
Rs
|
|
|
Material
consumed
|
24000
|
12000
|
|
Wages
|
28000
|
16000
|
|
Manufacturing
expenses'
|
8000
|
8000
|
|
Input in
Process A (units)
|
20,000
|
-----
|
|
Input in
process A (value in Rs)
|
20000
|
----
|
|
Output
(units) 31th Dec 2003
|
18,800
|
16,600
|
|
Normal
wastage percentage of input
|
5%
|
10%
|
|
Value of
normal wastage (per 100 units)
|
8
|
10
|
Assignment – C
Q1: Which of the following statements is/are true?
a) Cost accounting is not a part
of management accounting.
b) Cost accounting is a system to
record, summarize and report cost information.
c) Cost accounting is a post
mortem of past costs.
d) Cost accounting is not
necessary if financial accounting provides necessary analysis.
Q2 Which of the following is least likely to be an objective of cost
accounting system?
(a) Product costing
(b) Optimum sales mix
determination
(c) Maximization of profit
(d) Sales commission determination
Q3 Costing Technique in which all costs, variable as well as fixed, are
charged to product, operations or services is
(a) Historical costing
(b) Absorption costing
(c) Marginal costing
(d) Direct costing
Q4 The costing approach wherein actual costs are ascertained after they
have been incurred is
(a) Marginal costing
(b) Direct costing
(c) Standard costing
(d) Historical costing
Q5 The cost which reflects the
policies of the top management which result in periodic appropriations are
called as
(a) Future cost
(b) Discretionary cost
(c) Committed cost
(d) Programmed cost
Q6 In a given situation if a product is not produced the company can
save on the salary of workers to the tune of Rs. 1,00,000. In this case the
salary of the worker is
(a) Imputed cost
(b) Unavoidable cost
(c) Avoidable cost
(d) None of the above
Q7 Depreciation charged on Plant & Machinery is
(a) Future cost
(b) Discretionary cost
(c) Committed cost
(d) Programmed cost
Q8 Costs that are not relevant for decision-making and are not affected
by increase or decrease in volume are
(a) Out of pocket cost
(b) Sunk cost
(c) Differential cost
(d) Imputed cost
Q9 Which of the following statements is not true of pricing of
inventories?
a) In FIFO method, the issue of
material from the stores will be in the order which it was received.
b) In LIFO method, the material
issued will be priced based on the material that has been purchased recently.
c) Under current price method,
material is priced at the value that is realizable at the time of issue.
d) Under standard price method,
material is priced based on the current market price.
Q10 Which of the following statements is false?
a) In an inflationary period the
FIFO method of inventory pricing tends to inflate reported profits.
b) LIFO method of inventory
pricing causes reported profits to be low in an inflationary period.
c) The weighted average cost
method of inventory pricing tends to smooth out price luctuations.
d) None of the above.
11. A cost centre is:
(a) The part of the business where
all costs are paid to suppliers
(b) A production department where
all production costs are aggregated
(c) An area of the business
accountable for both costs and revenues
(d) An area for which costs are
accumulated
12. An investment centre is a
responsibility centre where the manager has control of:
(a) Costs, profits and product
quality
(b) Costs
(c) Costs and profits
(d) Costs, profits and assets
13. Responsibility accounting aims to:
(a) Ensure that a manager is
punished if things go wrong
(b) Reduce the costs that a
department incurs
(c) Allocate costs to all areas of
a business
(d) Ensure that costs become the
responsibility of a specific manager
14. Prime cost can be defined as:
(a) The total costs of operating
the production department where the product is made
(b) The total direct costs of
manufacturing a product
(c) The total costs of
manufacturing a product
(d) The cost of the first stage of
the manufacture of a product
15. Which of the following best
describes a fixed cost?
(a) Has a direct relationship with
output
(b) Increases proportionately with
output
(c) Remains constant irrespective
of the level of activity
(d) Represents a fixed proportion
of total costs
16. A business has the following transactions in a
month:
2 Jan
Bought 80 units at a total cost of £160
12 Jan Bought 50
units at a total cost of £150
19 Jan Sold 90 units
earning total revenue of £540
22 Jan Bought 70 units at a total cost of
£280
29 Jan Sold 80 units
earning a total revenue of £480
Using the first-in, first-out (FIFO) method of stock
valuation the cost of sales is:
(a)
£470
(b)
£510
(c)
£1,020
(d)
£120
17. A business has
bought and sold identical items of stock during 2006 as follows:
1/6/06 Bought 1,000 units @ £10 each 1/9/06
Bought 1,000 units @ £16 each 5/9/06 Sold 1,200 units @ £20 each
Using the first-in, first-out (FIFO) method what is
the value of the 800 units of stock left unsold at 31/12/06?
(a)
£10,400
(b)
£8,000
(c)
£16,000
(d)
£12,800
18. The weighted average method of stock valuation would be most
appropriate for:
(a)
A food retailer
(b)
A motor components
retailer
(c)
A building contractor
(d)
A chemical
manufacturer
19. Direct labour costs will include:
(a)
Total direct labour hours at the normal
hourly rate of pay
(b)
All labour costs attributable to a product
(c)
Direct labour costs plus any bonuses
(d) Direct
labour costs plus any bonuses and overtime premiums
20. An example of a production overhead would be:
(a) Labour costs
(b) Rent
(c) Supervisory costs
(d) Materials
21. Absorption costing is closely related to which of the following cost
elements?
(a)
Overheads
(b)
Direct labour
(c)
Total costs
(d) Prime costs
22. Which of the
following would not be classed as a service department?
(a)
The assembly department
(b)
The finance
department
(c)
The canteen
(d)
The maintenance department
23. Cost apportionment involves:
(a)
The sharing out of
costs to products
(b)
The sharing out of common costs to
departments
(c)
The allocation of
direct costs to departments
(d)
The sharing out of overheads to service
departments
24. Which of the following would be an inappropriate method of
apportioning service department costs?
(a) Apportioning on the basis of service department activity
(b) Apportioning on the basis of floor area
(c) Sharing costs out equally between departments
(d) Apportioning on the basis of number of employees
25. Which of the following is an unsatisfactory method of dealing with
reciprocal service costs?
(a) Ignore the service department
costs
(b) Use mathematical
apportionment techniques
(c) Apportion the service costs
over production departments only
(d) Use a specified order of apportioning service department costs
26. The most appropriate method of apportioning the rent of a building
would be:
(a) On the basis of value of assets
(b) To share them out equally amongst all departments
(c) On the basis of number of employees
(d) On the basis of area of each department
27. Absorption costing refers to the process of:
(a) Absorbing the direct costs of production and service departments
into products
(b) Absorbing direct costs of production into products
(c) Absorbing only production service cost centre costs into product
costs
(d) Absorbing both production and non-production service cost centre
costs into product costs
28. Which of the following would not normally be a suitable method of
absorbing costs into products
(a) Total cost centre overhead / Number of employees
(b) Total cost centre overhead / Number of units processed in
department
(c) Total cost centre overhead / Cost centre total machine hours
(d) Total cost centre overhead / Total cost centre direct labour cost
29. The following details relate to a particular
company:
i. Machining Assembly
ii. Total cost centre overhead £120,000 £180,000
iii. Machine hours 15,000 9,000
iv. Labour hours 2,000 8,000
The most
appropriate overhead rate to use for the machining department would be:
(a)
£5 per direct machine hour
(b)
£7.06 per hour
(c)
£8 per direct machine hour
(d)
£60
per direct labour hour
30. The following details were extracted from the
cost records of a company:
Machining Assembly Maintenance
Administration Area sq/m 5,000 6,000 2,000 1,200 No. of employees 6
13 2 3
If it cost £3,500 to insure the buildings, the amount that would be apportioned to
the assembly department would be:
(a)
£1,479
(b)
£72
(c)
£1,896
(d)
£372
31 . Which of the following is true?
(a)
Overhead absorption
rates will normally be based on estimates of what costs are expected to be
(b)
Once set, overhead absorption rates will
not change from one year to the next
(c)
Absorption rates will change continuously
to reflect changes in output and costs
(d)
Overhead absorption rates will only be
calculated when all actual costs are known
32.The total cost of a product will include:
(a)
Prime cost only
(b)
Prime cost plus non production overhead
(c)
Prime costs plus direct production
overhead plus indirect production overhead plus tax
(d) Prime
costs plus direct production overhead plus indirect production overhead
33.Overhead absorption exercises will be most useful
where:
(a)
The market determines the selling price of
a product
(b)
The total direct cost of a department is
needed
(c)
Selling prices can
be based on costs
(d)
A departmental manager will be held
responsible for the costs that are apportioned to them
34.A company has a budgeted level of fixed overheads
of £385,000 and the
overhead recovery rate is £4.25 per machine hour, What is the number of machine
hours we expect to use?
(a)
90,600
(b)
4,250
(c)
385,000
(d)
1,636,25
35.Under-recovery of
overheads occurs when:
(a) The overhead charged to production is
lower than the actual overhead incurred
(b) The basis of apportioning overheads
has changed during the period
(c) Actual overheads have fallen in
relation to what they were expected to be
(d) The actual overhead incurred is less
than the overhead that has been charged to production
36. A semi variable
cost would:
(a) Be more than zero if no products were
made and would then increase in direct proportion to output
(b) Be zero if output were zero and would
change erratically as output increased
(c) Be zero when output is zero and would
increase in direct proportion to output
(d) Be a fixed amount when output was
zero and would not increase in direct proportion to output
37. An example of a semi variable cost
would be:
(a) The costs of insuring assets
(b) The costs of material to be used for
production
(c) The salaries of supervisors in a
department
(d) Electricity costs
38. If actual units produced are lower
than the budgeted level of production which of the following types of cost
would you expect to be lower than the budget?
(a) Variable costs per unit
(b) Fixed costs per unit
(c) Total fixed costs
(d) Total variable costs
39. In the long run a business must:
(a) Charge a price that covers its
variable costs only
(b) Charge a price that covers both fixed
and variable costs
(c) Charge a price that covers its fixed
costs only
(d) Charge a price that leads to a
positive contribution
40. The break even
point in units is represented by the equation:
(a) (Sales revenue - Fixed costs) /
Contribution per unit
(b) Fixed costs / selling price per unit
(c) Fixed costs / Contribution per unit
(d) Fixed costs / Variable costs
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