Choose the most appropriate answer to the following questions giving justification. Each question carries 2 (two)...
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Choose the most appropriate answer to the following questions giving justification. Each question carries 2 (two) marks. 2x10=20 (i) Stock Control data for Material P are: Annual usage: 3600 units; Cost per unit: 100/-; Cost of placing an order: *40; Stockholding Cost: 20% of the overall stock volume; Lead time: One month The EOQ based on the above data is: (a) 210 units (b) 175 units (c) 90 units (d) 120 units (ii) Which of the following would take place if a company is able to reduce its variable cost? Contribution Margin (a) Increase (b) Decrease (c) Increase (d) Decrease Increase (iii) The following details relate to Product P-1 of a manufacturing company: Level of activity (units) 1000 2000 Cost per unit (3): Direct materials Direct labour Production Overheads Selling Overheads Break-Even Point Increase Decrease Decrease 4.00 3.00 3.50 1.00 11.50 10.00 The total fixed cost and variable cost per unit are: Total Fixed Cost (3) Variable Cost per unit (3) 2,000 7.00 2,000 8.50 3,000 7.00 3,000 8.50 (iv) A company makes a single product which it sells at 10 per unit. Fixed costs are 48,000 per month and the product has a contribution to sales ratio of 40%. In a period when actual sales were 1,40,000, the company's margin of safety in units was: (a) (b) (c) (d) (a) 2000 (b) 3000 4.00 3.00 2.50 0.50 (c) 3500 (d) 4000 (v) The following tasks are associated with ABC system: I. Allocation of costs to products II. Identification of cost pools III. Identification of cost drivers IV. Calculation of pool rates The proper order of the preceding tasks is: (a) III, II, IV, I (b) I, II, III, IV (c) III, IV, II, I (d) IV, III, II, I (vi) A company has the capacity of production of 80000 units and presently it sells 20000 units at 100 each. The demand is sensitive to selling price and it has been observed that every reduction of 10 in selling price the demand is doubled. What should be the target cost at full capacity it profit margin on sales is taken at 25%? (a) 58 lakhs (b) 52 lakhs (c) 48 lakhs (d) * 50 lakhs (vii) The information relating to the direct material cost of a company is as follows: Standard price per unit Actual quantity purchased in units Standard quantity allowed for actual production in units Material price variance on purchase (Favourable) What is the actual purchase price per unit? (a) 7.50 (b) 36.40 (c) 6.50 (d) 36.90 (viii)Backflush costing is most likely to be used when: (a) Management desires sequential tracking of costs (b) A Just-in-Time inventory philosophy has been adopted (c) The company carries significant amount of inventory (d) Actual production costs are debited to work-in-progress (ix) The preparation and use of standard cost, their comparison with actual costs and the measurement and analysis of variances to originating causes is defined as: (a) Marginal Costing (b) Standard Costing (c) Throughput Costing (d) Kaizen Costing (x) The following are cost data for two alternative ways of processing the clerical work for legal cases brought before the district court: Semi-automatic Fully automatic Monthly fixed costs (3): Occupancy Maintenance contract Equipment lease Unit variable cost (per report) (3) Supplies Labour The cost indifference point will be: (a) 800 cases (b) 850 cases (c) 750 cases (d) 700 cases *7.20 1600 1450 *480 15,000 5,000 25,000 80 60 15,000 10,000 1,00,000 20 20 Choose the most appropriate answer to the following questions giving justification. Each question carries 2 (two) marks. 2x10=20 (i) Stock Control data for Material P are: Annual usage: 3600 units; Cost per unit: 100/-; Cost of placing an order: *40; Stockholding Cost: 20% of the overall stock volume; Lead time: One month The EOQ based on the above data is: (a) 210 units (b) 175 units (c) 90 units (d) 120 units (ii) Which of the following would take place if a company is able to reduce its variable cost? Contribution Margin (a) Increase (b) Decrease (c) Increase (d) Decrease Increase (iii) The following details relate to Product P-1 of a manufacturing company: Level of activity (units) 1000 2000 Cost per unit (3): Direct materials Direct labour Production Overheads Selling Overheads Break-Even Point Increase Decrease Decrease 4.00 3.00 3.50 1.00 11.50 10.00 The total fixed cost and variable cost per unit are: Total Fixed Cost (3) Variable Cost per unit (3) 2,000 7.00 2,000 8.50 3,000 7.00 3,000 8.50 (iv) A company makes a single product which it sells at 10 per unit. Fixed costs are 48,000 per month and the product has a contribution to sales ratio of 40%. In a period when actual sales were 1,40,000, the company's margin of safety in units was: (a) (b) (c) (d) (a) 2000 (b) 3000 4.00 3.00 2.50 0.50 (c) 3500 (d) 4000 (v) The following tasks are associated with ABC system: I. Allocation of costs to products II. Identification of cost pools III. Identification of cost drivers IV. Calculation of pool rates The proper order of the preceding tasks is: (a) III, II, IV, I (b) I, II, III, IV (c) III, IV, II, I (d) IV, III, II, I (vi) A company has the capacity of production of 80000 units and presently it sells 20000 units at 100 each. The demand is sensitive to selling price and it has been observed that every reduction of 10 in selling price the demand is doubled. What should be the target cost at full capacity it profit margin on sales is taken at 25%? (a) 58 lakhs (b) 52 lakhs (c) 48 lakhs (d) * 50 lakhs (vii) The information relating to the direct material cost of a company is as follows: Standard price per unit Actual quantity purchased in units Standard quantity allowed for actual production in units Material price variance on purchase (Favourable) What is the actual purchase price per unit? (a) 7.50 (b) 36.40 (c) 6.50 (d) 36.90 (viii)Backflush costing is most likely to be used when: (a) Management desires sequential tracking of costs (b) A Just-in-Time inventory philosophy has been adopted (c) The company carries significant amount of inventory (d) Actual production costs are debited to work-in-progress (ix) The preparation and use of standard cost, their comparison with actual costs and the measurement and analysis of variances to originating causes is defined as: (a) Marginal Costing (b) Standard Costing (c) Throughput Costing (d) Kaizen Costing (x) The following are cost data for two alternative ways of processing the clerical work for legal cases brought before the district court: Semi-automatic Fully automatic Monthly fixed costs (3): Occupancy Maintenance contract Equipment lease Unit variable cost (per report) (3) Supplies Labour The cost indifference point will be: (a) 800 cases (b) 850 cases (c) 750 cases (d) 700 cases *7.20 1600 1450 *480 15,000 5,000 25,000 80 60 15,000 10,000 1,00,000 20 20
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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