SUBJECT: Week 1 Assignment 1

DATE: 05 February 2018

TIME ALLOWED: 60 minutes

______________________________________________________________

INSTRUCTIONS TO CANDIDATES:

1. Answer ALL questions. There are 20 questions

2. There is only one correct answer to each question.

3. An answer grid is attached to the back of this paper. Put an "X" in the relevant box to
show your answer.

4. Hand in the answer grid.

THIS PAPER CONTAINS 9 PAGES INCLUDING THIS SHEET

The roots of education are bitter,

but the fruits are sweet.
1. Total variable costs are classified as “variable” because in total they vary:

A With the variety of products

B With output
C Between locations
D With temperature
E With all of the above

2. The formula for the overhead absorption rate is:

A Actual overhead divided by actual base

B Actual overhead divided by budgeted base
C Budgeted overhead divided by budgeted base
D Budgeted overhead divided by actual base
E Last year’s overhead divided by last year’s base

3. Which of the following is NOT a basis for absorbing overheads into products
or services

A Direct labour cost

B Direct labour hours
C Machine hours
D Machine value
E Number of patients

4. Factory cost is defined as:

A Direct materials plus production overhead

B Direct labour plus production overhead
C Prime cost plus production overhead
D Direct expenses plus all overheads
E Prime cost plus all overheads

5. Costs may be:

A Direct or indirect
B Fixed or variable
C Materials, labour or expenses
D Production, administration or selling and distribution
E All of the above

The roots of education are bitter,

but the fruits are sweet.
6. Underworld has the following budgeted information:

Factory overhead £600,000

Production 100,000 units
Direct material cost £300,000
Direct labour hours 120,000 hours
Direct labour cost £900,000
Machine hours 50,000

The overhead absorption rate based on Prime Cost will be:

A 50%
B £5.00
C 100%
D £6.00
E 200%

7. Overheads will always be under-absorbed when:

A Actual overheads are less than those absorbed

B Actual overheads are more than those absorbed
C Budgeted overheads are less than those absorbed
D Budgeted overheads are more than those absorbed
E Budgeted overheads are less than the actual overheads

8. Which of the following statements is/are true:

(i) It is better to use a factory-wide absorption rate rather than using

individual rates for each department
(ii) An absorption rate based on labour cost is better than one based on labour
hours
(iii) Prime cost is a good base to use for an overhead absorption rate.

A None of the above

B (i)
C (ii)
D (i) and (ii)
E (ii) and (iii)

The roots of education are bitter,

but the fruits are sweet.
The following data is for questions 9 and 10:

Diggery Bakers classifies electricity as a semi-variable cost. The total electricity

cost for two levels of usage was as follows:

Usage Total cost

6,000 kilowatt hours £25,500
8,000 kilowatt hours £31,500

9. The fixed part of the electricity cost is:

A £3,000
B £4,500
C £6,000
D £7,500
E £18,000

10. The total cost of using 3,250 kilowatt hours will be:

A £15,000
B £17,250
C £17,500
D £17,750
E £20,000

11. Yellow plc has an overhead absorption rate of £4.00 per unit. During the period
the actual overheads were £290,000 (the budgeted overheads were £310,000).
The output for the period was 79,000 units. The overheads were

A £20,000 over absorbed

B £20,000 under absorbed
C £26,000 over absorbed
D £26,000 under absorbed
E £6,000 over absorbed

12. Street Cars wants to estimate the total costs of the car fleet for the next period.
The details for the previous two periods were as follows:
Mileage Total Cost
Period 1 35,250 £14,825
Period 2 42,750 £16,925

In Period 3 the company expects the car fleet to travel 55,000 miles. The
estimated cost of the car fleet for Period 3 will be nearest to:
A £23,135
B £17,055
C £20,355
D £20,855
E £18,555
The roots of education are bitter,
but the fruits are sweet.
 13. Whizzbang produces fireworks. The company increased stocks ready for
Bonfire Night. Stock levels increased from 150,000 boxes at the beginning of
September to 175,000 boxes at the end off September.

Using absorption costing the estimated profit for September was £275,400.
However when the Management Accountant used marginal costing the profits
were only £259,900.

The company's fixed overhead absorption rate per box of fireworks was:

A £0.52
B £0.62
C £1.49
D £1.79
E £2.10

14. “Contribution” is defined as:

A Selling price minus fixed costs plus variable costs

B Selling price plus variable costs minus profit
C Variable costs plus fixed costs
D Selling price minus variable costs
E Variable costs minus fixed costs

PLEASE TURN OVER: THERE ARE MORE QUESTIONS!

The roots of education are bitter,

but the fruits are sweet.
 The following information is for questions 15 and 16:

Elliott Butchers has developed a new pie. The costing information, per unit, for the
pie is as follows:

Selling Price £2.00

Direct materials £0.80
Direct labour £0.60
Variable production overhead £0.15

The budgeted fixed production overheads are £1,200 per month. These will be
recovered on the basis of an expected monthly production of 4,000 pies. Any under
or over absorbed overheads are charged against the month’s profit.

In October was the first month of business. October's production was 3,800 pies, but
only 3,500 pies were sold. The actual fixed production overheads incurred in
October were £1,160

15. The profit for October using absorption costing was:

A £505
B £525
C £570
D £590
E £595

16. The profit for October using marginal costing was:

A £375
B £415
C £505
D £510
E £550

PLEASE TURN OVER - THERE ARE MORE QUESTIONS!

The roots of education are bitter,

but the fruits are sweet.
17. The Go Company has produced the following budgeted profit statement. All
values are expressed as percentages of the budgeted revenue:
%
Revenue 100
Variable costs 60
Fixed Costs 10
Profit 30

If the actual sales were only 50% of budgeted sales the actual profit expressed as a
percentage of actual revenue will be

A 5%
B 10%
C 15%
D 20%
E 25%

18. Hugh Knock, the financial accountant, has recorded the following figures for
the Rockets 66 Company:

Output (units) 1,000 2,000 4,000 8,000

Cost per unit £2,000 £1,000 £500 £250

The type of cost represented by the above figures is:

A Curvi-linear
B Fixed
C Semi-variable
D Variable
E Stepped

19. What is the process called when a cost is shared between cost centres?

A Absorption
B Apportionment
C Digestion
D Distribution
E Regression

20. Stalker Ltd produces a wide variety of products. The least appropriate base for
it to use as an overhead absorption rate is:

A Labour cost
B Labour hours
C Machine hours
D Number of products made
E Prime cost

The roots of education are bitter,

but the fruits are sweet.
The roots of education are bitter,
but the fruits are sweet.
The roots of education are bitter,
but the fruits are sweet.
 Management Accounting – Week 1 Assignment 1

Your Name _______________________ Student Number ________________

Indicate your answer by putting “X” in the appropriate box

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The roots of education are bitter,

but the fruits are sweet.