CORK INSTITUTE OF TECHNOLOGY
INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ
Semester 1 Examinations 2016/17
Cost Accounting
Module Code:
ACCT6002
School:
School of Business
Programme Title(s):
Bachelor of Business in Accounting
Bachelor of Business
Programmes Code(s):
BACCT_7_Y1
BACCT_8_Y1
BBUSA_6_Y2
BBUSE_6_Y2
BBUSS_7_Y2
External Examiner(s):
Mr Peter Weadack
Internal Examiner(s):
Ms Ruth Vance
Ms Susan Flannery
Mr Bert Ahern
Instructions: Answer Question 1 and two other questions.
Duration:
2 hours
Sitting:
Winter 2016 (Semester 1)
Requirements for this examination: Calculator
Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received
the correct examination. If in doubt please contact an Invigilator.
NB: If you attempt more than three questions you should clearly indicate which ones
you wish to be corrected. Otherwise the first three will be corrected in the order in
which they appear in your answer book.
1
Multiple Choice Questions: 20 questions * 2 marks each
Total 40 marks
Q1. A food company produces a condiment in a single process. Normal losses are 5% of
quantity input. Because of quality control requirements there is no opening or closing
work-in-progress. The following details are relevant for Batch No 8/12.
Litres
Input
6,000
Output
5,640
The process resulted in:
(a)
An abnormal loss of 23 litres
(b)
An abnormal gain of 60 litres
(c)
An abnormal loss of 60 litres
(d)
An abnormal gain of 23 litres
Q2. A manufacturing company incurred process costs totalling €329,063 for the latest week.
66,000 kg of raw materials were processed with the following result:
Completed good output
64,050 kg
Normal loss [no sale value]
3% of input quantity
Abnormal gain
30 kg
The cost (to the nearest cent) per kg of a completed unit of output was:
Q3.
(a)
€5.22
(b)
€4.99
(c)
€5.30
(d)
€5.14
What is an equivalent unit?
(a)
(b)
(c)
(d)
A unit of output which is identical to all others manufactured in the same
process.
A unit of product in relation to which costs are ascertained.
Notional whole units used to represent uncompleted work/work in progress.
A unit of output which is similar in characteristics to those of your
competitors.
2
Q4. For which of the following would process costing be most appropriate?
(a)
(b)
(c)
(d)
A construction company
An engineering company
A transport company
A pharmaceutical company
Q5. Technical Ltd. manufactures a range of different products using sophisticated
machinery. The following budgeted monthly information is available for the next
financial year:
€138,000
4,600 hours
17,250 hours
3,000 units
Production overheads
Direct labour hours
Machine hours
Units of output
The most appropriate pre-determined overhead application (or absorption) rate is:
(a)
(b)
(c)
(d)
€46 per unit of output
€30 per direct labour hour
€8 per machine hour
None of the above
Q6. A company applies (or absorbs) production overheads on the basis of machine hours.
Details of budgeted and actual figures for the latest period are as follows:
Overheads
Output (in units)
Machine hours
Budgeted
€1,272,000
4,700 units
24,000 hours
Actual
€1,279,280
4,950 units
23,760 hours
Which of the following statements is correct?
(a)
(b)
(c)
(d)
Overheads were over-applied (over-absorbed) by €20,000
Overheads were under-applied (under-absorbed) by €20,000
Overheads were over-applied (over-absorbed) by €7,280
Overheads were under-applied (over-absorbed) by €7,280
Q7. Simon Inc. currently produces 110,000 units at a cost of €440,000. The cost is variable.
Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for
production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the
expected variable cost?
A) €420,000
B) €440,000
C) €430,000
D) €460,000
3
Q8. The following data points are available. This is an example of a ________ cost.
Units Costs
600
€560
650
€565
800
€580
900
€590
A) Mixed
B) variable
C) fixed
D) none of the above
Q9. The primary users of management accounting information are ________.
A) Governmental regulatory bodies
B) managerial accountants
C) Bankers
D) managers in organizations
Q10. USC Company has the following information available:
€90,000
Budgeted factory overhead costs
Actual factory overhead costs €80,000
Budgeted direct labor hours 20,000
Actual direct labor hours
21,000
Assume direct labor hours are the cost driver of factory overhead costs. The budgeted factory
overhead rate is ________.
A) €3.81 per direct labor hour
B) €4.50 per direct labor hour
C) €4.00 per direct labor hour
D) €3.57 per direct labor hour
Q11. ) In a clothing factory, clothing items are sewn by hundreds of workers using sewing
machines and hand stitching. The sewing machines are used 80 percent of the time it takes to
make the clothing items. Overhead costs relate primarily to electricity and indirect materials
such as needles, bobbins, thread and thimbles. What is the most appropriate cost-allocation
base for applying overhead costs to the clothing items?
A) the number of direct labor hours
B) the number of sewing machine hours
C) the number of sewing machines
D) the number of workers
4
Q12. FIFO stock valuation method assumes:
A) Stocks acquired most recently are used first
B) The average purchase price is the most accurate valuation
C) Stocks acquired first are used first
D) The higher of cost or replacement value is the most accurate FIFO valuation
Q13. Rocky Company had the following information:
Budgeted factory overhead costs
€90,000
Actual factory overhead costs
€80,000
Budgeted production setups
12,000
Actual production setups
11,500
Assume production setups are the cost driver for factory overhead costs. The budgeted
factory overhead rate is ________.
A) €7.50 per setup
B) €6.52 per setup
C) €6.78 per setup
D) €6.25 per setup
Q14. Kingsway Company had the following information available for the past quarter:
Budgeted factory overhead costs
€75,000
Actual factory overhead costs
€80,000
Budgeted direct labour hours
20,000
Actual direct labour hours
21,000
Assume the cost driver for factory overhead costs is direct labour hours and a job uses 2,000
direct labour hours. The job was budgeted to use 2,100 direct labour hours. What amount of
factory overhead is applied to the job?
A) €7,875
B) €8,000
C) €7,140
D) €7,500
5
Q15. The most important contributor to the variance between actual and applied overhead
costs is ________.
A) poor forecasting
B) price changes in overhead items
C) operating at a different level of volume than the level used as a denominator in calculating
the budgeted overhead rate
D) inefficient use of overhead items
Q16. The Parker Cellular Company is charged a total cost that changes in proportion to the
number of minutes used. The number of minutes used is the only factor that causes a change
in total cost. How would the managerial accountant classify total costs of phone charges?
A) Fixed cost in the relevant range.
B) Variable.
C) Mixed cost in the relevant range.
D) Fixed.
E) Mixed.
Q17. The following data relate to two activity levels of an out-patient department at a hospital
Number of consultations
4,500
5,750
Overheads
€269,750
€289,125
The variable cost per consultation:
A) approx €15.50.
B) approx. €44.44.
C) approx. €59.94.
D) cannot be calculated without more information.
6
Q18.
Received
Issued
Balance
Quantity
Value/
kg €
Total
Value
€
01-Aug
10000
4
40000
10000
40000
10-Aug
5000
4.3
21500
15000
61500
18-Aug
7500
4.4
33000
22500
94500
Date
23-Aug
Quantity
12000
Value
/kg €
Total
Value €
Quantity
Value/k
g€
xxxx
Using the Weighted Average Inventory Valuation method the value that the stock on 23
August would be issued at is ___________ per kg:
A) €4
B)
€4.30
C)
€4.40
D)
€4.20
Q19. Piece rates are appropriate in the following cases:
A)
Where quality is paramount
B)
Where the worker cannot influence the level of production
C)
Where production is easily measured and is repetitive
D)
Where production is very difficult to measure
Q20. A job needs 3000 worked hours to complete. Idle time is normally 25% of paid time.
The rate per hour is €20. What is the budgeted labour cost of the job?
A)
€80,000
B)
€60,000
C)
€45,000
D)
€40,000
7
Total
Value
€
Question 2:
SBR Ltd has the following information available in relation to its raw material stocks:
Opening stock at 1st November of 3,000 kg at €16 per kg.
2nd Nov
Purchase of 12,000 kgs at €19 per per kg.
14th Nov
Purchases of 7,000 kg at €21 per kg
15th Nov
Sales of 9,000 kg
17th Nov
Purchases of 13,000 kg at €22 per kg
20th Nov
Sales of 8,000 kg
22nd Nov
Purchases of 14,000 kg at €23 per kg
26th Nov
Sales of 10,000 kg
28th Nov
Purchases of 12,000 kg at €24 per kg
30th Nov
Sales of 11,000 kg
Required:
Prepare a stock card showing all stock movements using both the FIFO and Weighted Average Method
2*15 marks = Total 30 marks
Question 3
The following details relate to the Jumbo product, a compound used in insulation processes.
The product is manufactured by passing raw materials through a single stage process. The
details of the costs incurred during November 2016 were as follows:
1) Opening work in progress
Nil
2) Raw material input during November 265,000 Kgs. costing
€580,455
3) Conversion costs for November
€911,770
4) Normal loss is 2% of the input (raw material) during the period and has a scrap value of
€0.40 (40 cents) per Kg.
5) Completed good output transferred to Finished Goods was 243,000 Kgs.
8
6) Closing work in progress was 16,500 Kgs, which were 50% complete for materials and
40% complete for conversion costs.
7) The company uses the weighted average method of valuation.
Required:
Prepare the Process Account for the month of November 2016
Show both Kgs and € in your answer.
Total 30 marks
Question 4
Walsh’s Window Washing Ltd. is a company specializing in cleaning windows in domestic
properties. The business is growing rapidly and, in the near future, Terry Walsh intends to
recruit additional staff.
In the meantime, as an incentive to encourage his existing staff to increase their productivity,
each of his three window-cleaners have been placed on a group bonus scheme. Details are as
follows;
The basic working week is 37 hours.
Overtime is paid at time and a half.
The standard rate paid per hour is €12.50.
The target number of semi-detached properties with windows to be cleaned each hour is 1.
Employee Name
Hours Worked
Week 8
Mick
Dick
Vic
43
39
35
The bonus paid is one-half the productivity index over 100.
The actual number of properties completed in week 8 was 140.
Required:
Calculate the total gross pay (including bonus) for each employee for Week 8.
Total 30 marks
End of Paper
9