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CANNINAT[" - PI,F'AST'. NOTR!

PRINT your ntme on the llne below and return

this booklet with your answer sheet. Failure to
do so mry result ln disgurlification. rEsr coDE 02201010
FORM TP 201612 MAY/JUNE 20I6
CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEAN ADVANCED PROFICIENCY EXAMINATION.D
ACCOUNTING
Unit2-Paper0l
t hour 30 minutes

07 JUNE 2016 (p.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

l. This test consists of 45 items. You will have I hour and 30 minutes to answer them

2 In addition to this test booklet, you should have an answer sheet.

3 Do not be concerned that the answer sheet provides spaces for more answers than there are
items in this test.

4 Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and choose the correct answer.

5 On your answer sheet, find the number which corresDonds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.

Sample ltem

Overhead absorption rates are used to determine the

Sample Answer
(A) service department's overhead cost
(B)
(C)
estimated overhead costs for products
allocation of overhead costs to products
@@o@
(D) actual overhead cost for finished products

The best answer to this item is "allocation of overhead costs to products", so (C) has been
shaded.

6. If you want to change your answer. erase it completely before you fill in your new choice.

7. When you are told to begin. turn the page and work as quickly and as carefully as you can.
If you cannot answer an item, go on to the next one. You may return to that item later.
8. You may do any rough work in this booklet.
I
9. You may use a silent, non-programmable calculator to answer items.
I
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
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Copyright @ 201 4 Caribbean Examinations Council
-r AII rights reserved.
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 1

I What is the comect sequence ofthe following 4 You are employed as ajuniorcostaccounting
actions when seeking to purchase additional clerk at a wooden furniture manufacturing
materials? firm. The owner has recently introduced a
new, more efficient process. Which of the
Preparation of the purchase order following costs would be directly affected
and its dispatch by this change?
II. Passing of the bill for payment
III. Purchase requisition order (A) Warehouse rental
IV. Rece iptofmaterials, raising a goods (B) Factorycleaners'wages
received note (C) Overtime paid to carpenters
(D) Factory supervisor's salary
(A) III, I, IV, II
(B) II, III, I, IV
(c) IV, II, III, I 5. The following information was extracted
(D) I, IV, III, II from the books of James Inc.

Cost of goods sold sr07 000

2 One MAJOR difference between financial Ending balance of
accounting and management accounting is fi nished goods inventory s 20 000
that Cost of goods manufactured $ 57 000
(A) financial accounting uses only Calculatb the beginning balance of
current and future information finished goods inventory for the period.
(B) generally accepted accounting
principles do not apply to (A) $ 70 000
management accounting (B) $ 77 ooo
(c) management accounting is (c) $r27 000
mandatory for companies trading (D) $rs7 000
on the stock exchange
(D) financial accounting reports are
prepared primarily for internal 6. Indirect labour is NOT used in the
users calculation of

(n), prime cost

3 Wages paid to machine operators on an (B) factory overhead
assembly line are classified as a (C) total manufacturing costs
(D) cost of goods manufactured
(A) period cost
(B) direct material cost
(c) manufacturing overhead cost
(D) direct manufacturing Iabour cost

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Ilem J refers to the following inventory data for Company X.

Opening inventory 300 units at $8.80 per unit

Materials received 1000 units at $9.00 each and
600 units at $10.00 each respectively
Materials requi sitioned 1500 units

7. The value of closing inventory using the LIFO method is

(A) $ e00
(sl $2640
(c) $3s40
(D) $3640

8. When employees are paid on a piece rate 10 Which of the following graphs reflects the
basis their pay is considered as a renting of extra warehouse space by a firm
during periods of increased demand?
(A) variable cost
(B) fixed cost (A)
$
(C) mixed cost
(D) distribution cost

9. Conversion cost consists of

(B)
(A) direct labour $
(B) manufacturing overhead
(c) direct materials and direct labour
(D) direct labour and manufacturing
overhead

(c) $

(D)
$

output

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Item ll refers to the following information.

Purchases and sales for the past year for a firm are shown in the table below. Assume purchases are
made at the start of each rnonth, while sales occur at the end of each month.

Purchases Sales
Quantity Unit Price Quantity Unit Price
January 6000 $2.00
February 4000 $2.1 0
March 7000 $3.20
April 2000 $2.1 5
Mav 3000 $2.20 5000 $3.1s

11 If the finn uses a LIFO basis for its inventory valuation, what is the value of its closing inventory at
3l May?

(A) s3ooo
(B) $6000
(c) $6600
(D) $e600

12 Which ofthe following activities describes t4 Which of the following are NOT period
the role of managerial accounting? costs?

I. Determining the type of product/ (A) Marketing costs

service cost (B) Manufacturing costs.
II Evaluating the use of resources in (c) Research and development costs
a business (D) General and administrative costs
III Determining the cost of a product/
service
15 Gibson Manufacturing uses machine hours
(A) I and II only to allocate manufacturing overhead to all
(B): I and III only jobs. The budgeted manufacturing overhead
(c) II and III only cost is $30 000 and the budgeted labour
(D) I, II and lll hours and machine hours are 60 000 and
100 000 respectively. The predetermined
overhead rate per machine hour is
13. A firm's product has an annual demarrd of
20 000 units. The cost of placing one order (A) S0.30
is $800 and there is a holding cost of $8 per (B) $0.s0
unit. What is this firm's economic order (c) $0.60
quantity (EOQ)? (D) $3.33

(A) $ 800
(B), $2000
(c) $6400
(D) $8000

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Items 16-17 refer to the following information

Husky Corporation uses a job order costing system and is working on two jobs AB I and AB2.
Below are the details for these jobs:

ABl AB2 Total

WIP $r2 000 $r2 000
Material cost $36 000 (600/o) $24 000 (40%) $60 000
Direct labour $36 000 (7s%) $12 000 (2s%) $48 000

Overheads were charged to jobs using a rate of 150%o of direct labour cost. Both jobs were
completed at the end of the month but only AB2 was sold.

16. The total cost of Job ABI is

(A) $ 54 000
(B) s 66 000
(c) $r26 000
(D) $l 38 000

17. What entries should be made to record the sale of Job AB2?

(A) Debit work in process and credit cost of sales.

(B) Debit cost of sales and credit work in progress'
(c) Debit cost of sales and credit finished goods.
(D) Debit finislred goods and credit cost of sales,

18. Which of the following is a similarity between job-order costing and process costing?

(A) Both utilize the job cost sheetl

(B) Costs are accumulated by departments.
(c) Both are used to collect the cost of production.
(D) Costs are accumulated by individualjobs.

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Item 19 refers to the following information . 20 The type of costing system that would be
MOST appropriate fora pai nt manufacturing
Lakers Manufacturing Company uses a company to calculate unit cost is
weighted average process costing system.
In July, 7000 units were started and 5200 (A) activity-based costing
units were completed. The remaining (B) job-order costing
units of work-in progress were 60% (qi process costing
complete with respeCt to materials and (D) full costing
conversion.

19. Closing work-in-progress under materials

was

(A) 720
(B) 1080 {:
(c) 3120
(D) 4200

Items 2l-23 refer to the following information.

Derek's Ltd produces and sells electronic readers. During the. year, the company produced 20 000
units and sold l5 000 units. Cost data relating to the products show the following:

Direct material per unit $3s

Direct labour per unit $20
Variable manufacturing overhead per unit $10
Total fi xed manufacturing overheads $2r6 000
Budgeted production for the year l8 000 units
Actual fixed manufacturing overheads $245 000

21. The marginal (variable) inventoriable cost per unit is

(A) $ ss.00
€) $ 6s.00
(c) $ 75.80
(D) $ 77.00

22. The absorption inventoriable cost per unit is

(A) $ ss.00
(B) $ 6s.00
(c) $ 7s.80
(D) r $ 77.00

23. The amount of fixed manufacturing overhead over/under applied for the year is

(,$ 5 000 under applied

(B) 5 000 over applied
(C) 50 600 over applied
(D) 50 600 under applied

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24. Which of the following does NOTdescribe 27 Thunder Ltd uses a weighted average
the nature ofcosting in the service industry? process costing system. In June,6000 units
were used. At the end of June, completed
(A) It is difficult to measure output. units totalled 4000, and the remaining
(B) There is only one cost unit involved. 2000 units were 60%o complete with
(C) A large proportion of the cost is respect to materials and 45%o with respect
indirect. to conversion costs. The equivalent units
(D) It is difficult to'trace cost to cost of production for conversion costs is
units.
(A) 4000
(B) 4e00
25 Jim operates a business by providing lawn (c) s200
mowing services to clients. Overheads are (D) 6000
charged to customers using a predetermined
rate of 80% per direct labour cost. The
rate perdirect labour is $60. The following 28 Which of the following are characteristics
cost data relates to three jobs that were of activ ity-based costing?
covered during the month of April.
I. Each activity generates a cost.
Innuts James Moses Josh IL Volume is used as the basis for cost
Direct materials $4s $80 $62 allocation.
Direct labour hours 2 2.5 5 III. 'Cost pools accumulate cost as they
are incurred.
The total overhead charged on al I threejobs
is (A) I and II only
(B) I and lll only
(A) $ 4s6 (c) II and III only
(B) $ s70 rD)., I, II and lll
(c) $ 757
(D) $r 060

26 A costing system can BEST be dehned as

a method of establishing the costs of

(A) services rendered only

(B) production per unit only
(Cl manufacturing goods and/or ir
services
(D) designing production schedules
and assigning roles

GO ON TO THE NEXT PAGE

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Items 29-30 refer to the tbllowing infbrmation.

Specimen Inc. has two products Speak and Spark. The company uses an activity-based costing
system. The estimated total cost-and expected activity for EACH of the company-,s three activit!
cost pools al'e as follows:

ACTIVITY COST POOL ESTIMATED COST EXPECTED ACTIVITY

SPEAK SPARK TOTAL
Mixing $20 400 500 600 I 100
Assembling $r 4 000 600 800 1400
Finishing $19 200 1000 200 1200

29. The activity rate for each activity cost pool is

Mixine Assembling Finishirrg

(A) $34.00 $I 7.s0 $ r9.20
(B) $40.80 $23.33 $96.00
(c) $r s.4s $ 13.33 $60.80
(oI $ l8.ss $ 10.00 $ r 6.00

30. The amount allocated to product Speak forAssembling is

(A) $ 2000
(P) $ 6000
(c) $ 8000
(D) $r0 000

31. Which of the following is NOT a benefit of budgeting?

(A) It uncovers potential botttenecks before they occur.

(BJ It provides benchmarks for evaluating subsequent performance.
(Cj It ensures that accounting records comply with generally accepted accounting principles.
(D) It coordinates the activities of the entire organization by integrating the plans and objectives
of the various parts.
 .9

Item 32 refers to the following information.

Nash Sports Ltd sells football kits. Ten per cent of its sales are cash transactions and the remainder
is on one month's credit. Nash Sports Ltd gets one month's credit on all purchases made. Sales
and purchases for December 2012, January 2013 and February 2013 are as follows:

Sales Purchases
s $
December 2012 30 000 r6000
January 2013 2s 000 r4 000
February 20 I 3 r8000 20 000

32. How much cash was collected in the month of January 2013?

(A) $ 1800
(B) $ 2s00
(Q) $2s 000
(D) $29 s00

33. Margin of safety measures sales less

(+) fixed and variable costs

(P) breakeven sales
(c) variable costs
(D) fixed costs

Items 34-35 refer to the following information

Digi Telecom Systems sells iPhones.

Unit selling price $ I 000

Unit variable costs $ s00
Total monthly fixed costs $ 100 000

34. What was the contribution margin ratio?

(A) 1.5 o/o

(B) 220
(cl 50%
(D) 66Y"

35. What was the breakeven point in units?

(A) 67
(Pl r00
(c) 200
(D) 300

GO ON TO THF'. Ntr.XT PAGF'

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36. Which of the following elements would be included to set the direct labour quantity (efficiency)
standard?

(A) Required direct materials and allowance for spoilage

(B) Actual production time and allowances for downtime
(cx Standard predetermined overhead rate
(D),) Hourly wage rate and payroll taxes

Item 37 refers to the following information.

A manufacturing company operates a system of standard costing as follows

Budgeted Actual
Total variable overheads $400 000 $340 000
Total fixed overheads $ 60 000 $ s0 000
Volume of production (standard machine hours) l0 000 r2 000
Units produced 200 200

37. What is the total variable overhead variance?

(A) 50 000 adverse

(B) 50 000 favourable
(c) 60 000 adverse
(D) 60 000 favourable

38 A large unanticipated reduction in property taxes on a company's factory would, all other things
being equal, MOST likely cause

((A)) a favourable overhead spending variance

(B) an unfavourable overhead spending variance
(c) a favourable overhead volume variance
(D) an unfavourable overhead volume variance

39. Which of the following budgets shows anticipated cash flows?

(A) Cash
(B) Purchases
(e)l Schedule of collections
(D) Schedule of d isbursements

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Item 40 refers to the following production 43. Which ofthe following variances measures
information for G.Y. Company deviations in amounts spent for overhead
inputs?
Opening inventory on hand 100
Planned sales 2200 (4) Fixed overhead volume
Ending inventory 400 ts) Variable overhead spending
(c) Variable overhead efficiency
40 How many items should be produced to variance
satisfy the production budget? (D) Fixed overhead (expenditure)
budget variance
(A) le00
(B) 2200
(c) 2300 44. Which ofthe following techniques identify
(p) 2s00 the time period to recover the initial
investment from an annual cash flow?
.;

41. The standards that allow for no machine i(A) Payback

breakdown or other work interruptions and (B) Net present value
which require peak efficiency at all times (C) Internalrate of return
are referred to as (D) Accounting rate of return

'(o) ideal standards

(B) normal standards 45 Which of the following statements about
(c) practical standards standard cost is TRUE?
(D) budgeted standards
(A) It is used to reduce tax liability.
(B) It is always greater than the actual
42 The net present value (NPV) and internal cost.
rate of return (lRR) methods of decision- (c) It refers to the average cost of
making in capital budgeting are superiorto production in the cost period.
,'(o) It is a target for the period ahead.
the payback method. This is because they

(A) require less input

(B) are easier to implement
i 1c;' consider the time value of money
(D) reflect the effects of sensitivity
analysis

END OF TEST.

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.