CIMA - C1 Fundamentals of Management Accounting
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350
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Question Bank 351
1 Which of the following are part of the prime cost for a manufacturing company?
A Maintenance cost of a machine used in production
B Salary cost of a supervisor overseeing direct employees
C Cost of a canteen used by production employees
D Royalties payable to the designer of the basic product
2 Employee A is a carpenter and normally works 36 hours per week, which is treated as direct labour. The standard
rate of pay is $7.00 per hour. A premium of 50% of his basic hourly rate is paid for all overtime hours worked.
During the last week of October, Employee A worked for 42 hours. The overtime hours worked were for the
following reasons:
Machine breakdown: 4 hours
To complete a special job at the request of a customer: 2 hours
How much of Employee A's earnings for the last week of October would have been treated as direct wages?
A $315.00 B $252.00 C $273.00 D $294.00
3 Fill in the blanks in the statements below, using the words in the box.
• Costs can be divided into the following three categories (1)…………….; (2)………….. ; (3) …………..
• There are a number of different ways in which costs can be classified.
– (4)………… and (5)………... (or overhead) costs
– (6)………………………….costs (production costs, distribution and selling costs, administration
costs and financing costs)
– Fixed and (7)………… costs
• A (8)…………. is a unit of product which has costs attached to it. A (9) ………… is a type of
responsibility centre where managers are responsible for expenses only.
• A (10)…………. cost tends to vary with the level of activity. A (11) ………… cost is unaffected by
changes in the level of activity.
• Cost centre • Direct • Fixed • Cost unit
• Variable • Variable • Indirect • Other costs
• Material • Functional • Labour
4 Direct costs are:
A costs which can neither be identified with a cost centre nor identified with a single cost unit
B costs which can be identified with a single cost unit
C costs incurred as a direct result of a particular decision
D costs incurred which can be attributed to a particular accounting period
5 A system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor
and assess the performance of each part of the organisation is known as:
A Control accounting C Controllable accounting
B Responsibility accounting D Centre accounting
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352 Question Bank
6 DP Co is preparing its estimate of distribution costs for the next period. Based on previous experience, a linear
relationship has been identified between sales volume and distribution costs. The following information has been
collected concerning distribution costs.
Sales volume Distribution cost
Units $
22,000 58,600
34,000 73,000
What would be the estimated distribution costs for a sales volume of 28,000 units?
A $32,200 B $33,600 C $65,800 D $74,582
7 A delivery driver for a courier company is paid a salary of $1,000 per month, plus an extra 12 cents per delivery
made. This labour cost is best described as:
A a variable cost C a fixed cost
B a step cost D a semi-variable cost
8 The following is a graph of cost against level of activity
Total cost
Level of activity
To which one of the following costs does the graph correspond?
A Sales commission payable per unit up to a maximum amount of commission
B Electricity bills made up of a standing charge and a variable charge
C Bonus payments to employees, paid per unit when production reaches a certain level
D Machine rental costs, where a fixed amount is payable up to a certain level of output, and thereafter an
additional rate per unit is payable
9 Identify which type of cost is being described in (a)-(d) below.
VARIABLE COST FIXED COST STEPPED FIXED
COST
SEMI-VARIABLE
COST
(a) This type of cost stays the same, no matter how many products you
produce
(b) This type of cost increases as you produce more products. The sum
of these costs are also known as the marginal cost of a product
(c) This type of cost is fixed but only within certain levels of activity
(d) This type of cost contains both fixed and variable elements
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Question Bank 353
10 Total cost
Level of activity
Which of the following costs is depicted by this graph?
A Labour costs where employees are paid a guaranteed wage. When output exceeds an agreed level a bonus
is paid for each additional unit produced.
B Labour costs where employees are paid a guaranteed wage plus a bonus per unit for all units produced.
C Gas costs which comprise a standing charge each period and an additional charge for each unit of gas
consumed.
D Rental of a car which comprises a fixed charge per month plus an additional charge for mileage.
11 Factory overheads can be absorbed by which of the following methods?
1 Direct labour hours
2 Machine hours
3 As a % of prime cost
4 $x per unit
A 1, 2, 3 or 4
B 1 and 2 only
C 1, 2 or 3 only
D 2, 3 or 4 only
12 Which of the following would be the most appropriate basis for apportioning machinery insurance costs to cost
centres within a factory?
A The number of machines in each cost centre
B The floor area occupied by the machinery in each cost centre
C The value of the machinery in each cost centre
D The operating hours of the machinery in each cost centre
13 Department L production overheads are absorbed using a direct labour hour rate. Budgeted production overheads
for the department were $480,000 and the actual labour hours were 100,000. Actual production overheads
amounted to $516,000.
Based on the above data, and assuming that the production overheads were over absorbed by $24,000, what was
the overhead absorption rate per labour hour?
A $4.80
B $4.92
C $5.16
D $5.40
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354 Question Bank
14 AC Co absorbs production overhead in the assembly department on the basis of direct labour hours. Budgeted
direct labour hours for the period were 200,000. The production overhead absorption rate for the period was $2
per direct labour hour.
Actual results for the period were as follows.
Direct labour hours worked 220,000
Production overheads incurred $480,000
Which one of the following statements is correct?
A Production overheads were $40,000 over absorbed
B Production overheads were $40,000 under absorbed
C Production overheads were $80,000 under absorbed
D No under or over absorption occurred
15 The budgeted production overheads and other budget data of Eiffel Co are as follows.
Production
Budget dept X
Overhead cost $36,000
Direct materials cost $32,000
Direct labour cost $40,000
Machine hours 10,000
Direct labour hours 18,000
What would be the absorption rate for Department X using the various bases of apportionment?
(a) % of direct material cost =
(b) % of direct labour cost =
(c) % of total direct cost =
(d) Rate per machine hour =
(e) Rate per direct labour hour =
16 Cost and selling price details for product Q are as follows.
$ per unit
Direct material
4.20
Direct labour
3.00
Variable overhead
1.00
Fixed overhead
2.80
11.00
Profit
4.00
Selling price
15.00
Budgeted production for month 10,000 units
Actual production for month 12,000 units
Actual sales for month 11,200 units
Actual fixed overhead cost incurred during month $31,000
(a) Based on the above data, the marginal costing profit for the month is
A $44,800 B $45,160 C $50,600 D $76,160
(b) Based on the above data, the absorption costing profit for the month is
A $42,200 B $44,800 C $45,160 D $47,400
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Question Bank 355
17 B Company makes a product which has a variable production cost of $21 per unit and a sales price of $39 per unit.
At the beginning of 20X5, there was no opening inventory and sales during the year were 50,000 units. Fixed costs
(production, administration, sales and distribution) totalled $328,000. Production was 70,000 units.
(a) The contribution per unit is $
.
(b) The profit per unit is $
.
18 A Co requires a 25% return on sales. The full cost of product R is $27.
The selling price of product R should be $
.
19 R Co expects to sell 10,000 units of product Y in the coming year. The organisation makes an annual investment of
$1,700,000 in production of product R and requires a return of 22% on its investment. The full cost of product Y is
$15.
The required selling price of product Y is $
.
20 (a) Product S's unit cost is $5. A selling price is based on a margin of 25%. The selling price is $
to
the nearest cent.
(b) Product H sells for $175. The mark-up is 12%. The unit cost of product H is $
to the nearest
cent.
21 800 units of component L valued at a price of $4.20 each were in inventory on 1 May.
The following receipts and issues were recorded during May.
9 May Received 2,500 units at $4.50 per unit
21 May Received 1,800 units at $4.80 per unit
24 May Issued 4,500 units
Using the LIFO method of inventory valuation, the total value of the components issued on 24 May was:
A $18,900 B $20,370 C $20,730 D $21,600
Questions 22 and 23 are based on the following data
Date Units Unit Price Value
$ $
1 Jan Balance b/f 100 5.00 500.00
3 Mar Issue 40
4 June Receipt 50 5.50 275.00
6 June Receipt 50 6.00 300.00
9 Sept Issue 70
22 If the first-in, first-out method of pricing had been used the value of the issue on 9 September would have been:
A $350 B $355 C $395 D $420
23 If the last-in, first-out method of pricing had been used the value of the issue on 9 September would have been:
A $350 B $395 C $410 D $420
Questions 24 and 25 are based on the following data.
At the beginning of week 3 there were 200 units of Product G held in the stores. Eighty of these units had been purchased
for $8.00 each in week 2 and 120 had been purchased for $9.00 each in week 1.
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356 Question Bank
On day 3 of week 3 a further 60 units were received into stores at a purchase cost of $10.00 each.
The only issue of Product G occurred on day 4 of week 3, when 75 units were issued to production.
24 Using the LIFO valuation method, what was the total cost of the units issued on day 4?
A $500.05 B $580.75 C $720.00 D $980.00
25 The total cost of the units issued on day 4 using AVCO valuation method is, to the nearest $, $
.
26 J Co manufactures three products, details of which are as follows.
Product K Product L Product M
$ per unit $ per unit $ per unit
Selling price 105 133 133
Direct materials ($3/litre) 15 6 21
Direct labour ($8/hour) 24 32 24
Variable overhead 9 12 9
Fixed overhead 23 50 42
In a period when direct labour is restricted in supply, the most and least profitable use of labour are:
Most profitable Least profitable
A K M
B L K
C M K
D M L
27 V Co manufactures three products which have the following selling prices and costs per unit.
V1
V2
V3
$
$
$
Selling price
30.00
36.00
34.00
Costs per unit
Direct materials
8.00
10.00
20.00
Direct labour
4.00
8.00
3.60
Overhead
Variable
2.00
4.00
1.80
Fixed
9.00
6.00
2.70
23.00
28.00
28.10
Profit per unit
7.00
8.00
5.90
All three products use the same type of labour.
In a period in which labour is in short supply, the rank order of production is:
V1 …………………………
V2 …………………………
V3 …………………………
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Question Bank 357
28 Product N generates a contribution to sales ratio of 20%. Annual fixed costs are $80,000.
The breakeven point, in terms of units sold per annum,
A is 96,000
B is 400,000
C is 480,000
D cannot be calculated without more information
29
$
Level of activit
y
0
H
(a) H on the graph indicates the value of
A contribution B fixed cost C sales value D variable cost
(b) This graph is known as a
A contribution breakeven chart C profit-volume chart
B conventional breakeven chart D semi-variable cost chart
30 S Co manufactures a single product, V. Data for the product are as follows.
$ per unit
Selling price
40
Direct material cost
8
Direct labour cost
6
Variable production overhead cost
4
Variable selling overhead cost
2
Fixed overhead cost
10
Profit per unit
10
The profit/volume ratio for product V is
31 Fast Fandango Co manufactures a single product, the FF, which sells for $10. At 75% capacity, which is the normal
level of activity for the factory, sales are $600,000 per period.
The cost of these sales are as follows.
Direct cost per unit $3
Production overhead $156,000 (including variable costs of $30,000)
Sales costs $ 80,000
Distribution costs $ 60,000 (including variable costs of $15,000)
Administration overhead $ 40,000 (including variable costs of $9,000)
The sales costs are fixed with the exception of sales commission which is 5% of sales value.
(a) The contribution per unit of product FF is $
(b) The fixed cost per period is $
(c) The breakeven volume of sales per period is
units
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358 Question Bank
32 A factory manufactures three components A, B and C.
During week 26, the following data were recorded.
Labour Number of Rate per Individual
grade employees hour hours worked
$
I 6 12.00 40
II 18 9.60 42
III 4 8.40 40
IV 1 4.80 44
Output and standard times during the same week were as follows.
Component Output Standard minutes
(each)
A 444 30
B 900 54
C 480 66
The normal working week is 38 hours. Overtime is paid at a premium of 50% of the normal hourly rate.
A group incentive scheme is in operation. The time saved is expressed as a percentage of hours worked and is
shared between the group as a proportion of the hours worked by each grade.
The bonus rate paid is 75% of the normal hourly rate.
(a) The overtime premium payable to each grade of labour is:
Grade I $
Grade II $
Grade III $
Grade IV $
(b) The number of standard hours produced is
(c) The amount of bonus payable in total to all employees is $
33 Standard costing provides which of the following? Tick all that apply.
(a) Targets and measures of performance
(b) Information for budgeting
(c) Simplification of inventory control systems
(d) Actual future costs
34 CC Co manufactures a carbonated drink, which is sold in 1 litre bottles. During the bottling process there is a 20%
loss of liquid input due to spillage and evaporation. The standard usage of liquid per bottle is
A 0.80 litres B 1.00 litres C 1.20 litres D 1.25 litres
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Question Bank 359
35 PM Co is in the process of setting standard unit costs for next period. Period J uses two types of material, P and S.
7 kg of material P and 3 kg of material S are needed, at a standard price of $4 per kg and $9 per kg respectively.
Direct labour will cost $7 per hour and each unit of J requires 5 hours of labour.
Production overheads are to be recovered at the rate of $6 per direct labour hour, and general overhead is to be
absorbed at a rate of ten per cent of production cost.
The standard prime cost for one unit of product J will be:
A $55 B $90 C $120 D $132
36 Calculate the standard cost of producing 100 wheels for a toy car using the information given below. Fill in the
shaded box.
Bending Cutting Assembly
Standard labour rates of pay per hour $ 4 6 5
Standard labour rates per 100 wheels (hours) 0.8 0.5 1.2
STANDARD COST CARD
Toy car wheels Part number 5917B - 100 wheels Date:
Quantity Rate/price Total
$
Direct materials
Tyres 100 10c each
Steel strip 50 $10.40 per 100
Wire 1000 2c each
Direct labour hours $
Bending
Cutting
Assembly
STANDARD COST
37 SG Co has extracted the following details from the standard cost card of one of its products.
Direct labour 3.5 hours @ $9.20 per hour
During period 4, SG Co produced 1,600 units of product and incurred direct labour cost of $55,100 for 5,800
hours.
The direct labour rate and efficiency variances for period 4 were
Rate Efficiency
$ $
A 1,740 adverse 1,840 adverse
B 1,740 adverse 1,900 adverse
C 1,740 adverse 1,840 favourable
D 1,740 favourable 1,840 favourable
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