Mixed Question Bank 1

Which of the following criticisms of standard costing apply in all circumstances?

(i) Standard costing can only be used where all operations are repetitive and output is homogeneous.

(ii) Standard costing systems cannot be used in environments which are prone to change. They assume stable conditions

. (iii) Standard costing systems assume that performance to standard is acceptable. They do not encourage continuous improvement.

• Criticism(i)

• Criticism (ii)

• Criticism (iii)

• None of them

A product is made in two consecutive processes. Data for the latest period are as follows:

process 2 process 2

input (kg ) 47,000 42,000

normal loss (%) of input 8 5

output kg 42000 38,915

No work in progress is held at any time in either process.

Was there an abnormal loss or abnormal gain arising in each process during the period?

process1 processs2

• Abnormal loss Abnormal loss

• Abnormal loss Abnormal gain

• Abnormal gain Abnormal loss

• Abnormal gain Abnormal gain

Variable costs are conventionally deemed to:

• Be constant per unit of output

• Vary per unit of output as production volume changes

• Be constant in total when production volume changes

• Vary, in total, from period to period when production is constant

Which of the following relates to capital expenditure?

• Cost of acquiring or enhancing non-current assets

• Expenditure on the manufacture of goods or the provision of services

• Recorded as an asset in the statement of profit or loss

• Recorded as a liability in the statement of financial position

A company sold 56,000 units of its single product in a period for a total revenue of $700,000. Finished inventory increased by 4,000 units in the period. Costs in the period were

Variable production - $3.60 per unit

Fixed production - $258,000 (absorbed on the actual number of units produced)

fixed non-production - $144.00

Using absorption costing, what was the profit for the period?

• $82,000

• $ 96,400

• $113,600

• $123,200

A company with a single product sells more units than it manufactures in a period. Which of the following correctly describes the use of marginal costing in comparison with absorption costing in the above situation?

• Both profit and inventory values will be higher

• Both profit and inventory values will be lower

• Profit will be higher; inventory values will be lower

• Profit will be lower; inventory values will be higher

What is a by-product?

• A product produced at the same time as other products which has no value

• A product produced at the same time as other products which requires further processing to put it in a saleable state

• A product produced at the same time as other products which has a relatively low volume compared with the other products

• A product produced at the same time as other products which has a relatively low value compared with the other products

CA Co manufactures a single product and has drawn up the following flexed budget for the year

What would be the total cost in a budget that is flexed at the 77% level of activity?

• $330,300

• $370,300

• $373,300

• $377,300

An investment project has net present values as follows:

At a discount rate of 10% $2,700 positive

At a discount rate of 15% $3,740 negative

Using the above figures, what is the BEST approximation of the internal rate of return of the investment project?

• 2.1%

• 7.9%

• 12.1%

• 13.0%

A company has decided to lease a machine. Six annual payments of $8,000 will be made with the first payment on receipt of the machine. Below is an extract from an annuity table:

What is the present value of the lease payments at an interest rate of 10%?

• $30,328

• $34,840

• $38,328

• $48,000