MCQ Practice

The manufacturers of wooden crafted items provides you with the following information regarding the costs for the next month of production. The manufacturers’ labour rate is $60 per hour and it usually takes 6 hours to make one item. The overhead costs are allocated on the direct labour hours.

What are the total direct labour hours per month?

• 54

• 650

• 704

• 540

What is the allocated overhead cost per item?

• $5737

• $2655

• $1770

• $6103

An example of internal control over inventory includes

• transporting materials in trucks rather than post.

• authorising job costing sheets.

• ensuring cash is securely locked away.

• establishing minimum reordering points.

The electricity bill for a manufacturing business that utilises power in their factory, office and employee car park is a type of

• direct, variable cost

• product, mixed cost.

• indirect, variable cost.

• past, mixed cost

Which of the following are the characteristics of an indirect cost?

I. always vary with the level of output

II. can be accurately assigned to a specific cost object

III. are also known as manufacturing overheads

IV. can be allocated to cost objects based on direct or machine hours

• I,II

• III,IV

• I,III

• I,III,IV

Ziggy Thomas Productions aims to provide affordable, local and dramatic productions to the everyday citizen. It’s focus is on a new business strategy that maximises the number of dramatic performances possible across the Perth metropolitan area by offering the most competitive cost per performance. This generic business strategy is known as

• performance analysis.

• differentiation.

• cost leadership.

• business analysis.

Which statement most accurately defines internal controls?

• Internal controls aim to prevent errors from being made, to prevent theft and fraud from occurring and to increase profitability.

• Internal controls are procedures that safeguard the assets of a business and to enhance efficiency and reliability of accounting records.

• Internal controls are all processes used by owners to ensure compliance with laws, regulations, internal policies and procedures.

• Internal controls assign the responsibility to management of monitoring compliance with the firm’s policies and procedures.

Which statement is NOT valid for the payback method?

• Projects with the highest payback period would be selected.

• Calculations are simple compared with the NPV method.

• The longer the payback period the higher the risk of the project.

• Cash flows after the payback period are not considered.

Which sources of finance would be appropriate for a large proprietary company?

• public share issue, bank loan and trade credit

• bank overdraft, retained earnings and trade credit

• trade credit, accounts receivable and bank overdraft

• debentures, accounts payable and bank overdraft

Jolly Chairs Ltd manufactures quality dining chairs. The total fixed costs amount to $72,000. The variable cost per chair is $11. The business currently produces 8,000 chairs and the selling price per chair is $22.50. The maximum capacity of the factory is 9,750 chairs.

A furniture retailer has offered to purchase 2,500 chairs for $15 each. Calculate the gain or loss if the order is accepted.

• Gain of $1,375

• Gain of $7,000

• Gain of $10,000

• Loss of $18,750