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CIMA - C01 Fundamentals Of Management Accounting Revision Kit 1st Edition BPP Learning Media - Solutions
Which of the following are not characteristics of job costing?I Customer driven production II Complete production possible within a single accounting period III Homogeneous products A I and II only C II and III only B I and III only D III only
A factory operates a processing operation which has a normal loss of 10%. Scrapped units sell for $2 per kg. The following information is available for June.Materials used 2,000 kg @ $4 per kg Output 1,700 kg What is the scrap value for the abnormal loss?A Nil B $200 What would the double entry be
Yum Co makes a fizzy drink which passes through several processes. The normal loss is 5% of the input from the previous period and can be sold at $0.50 per litre. The equivalent cost per litre has been calculated as $9.50 per complete litre.The following information is available for June.From
Choose the correct words from those highlighted.The weighted average cost method of inventory valuation makes no distinction/makes a distinction between units of opening WIP and new units introduced to the process during the current period.
When there is closing WIP at the end of a process, the first step in the four-step approach to process costing questions is to draw up a statement of evaluation.True False
How is revenue from scrap treated?A As an addition to sales revenue B As a reduction in costs of processing C As a bonus to employees D Any of the above
Match the types of loss with the correct method of valuation. Normal loss (no scrap value) ? Abnormal loss Abnormal gain Same value as good output (positive cost) No value Same value as good output (negative cost)
Abnormal gains result when actual loss is less than normal or expected loss.True False
Process costing is centred around four key steps. What are they?Step 1………………………………………………………………………………………..Step 2………………………………………………………………………………………..Step
Choose the correct words from those highlighted.Process costing is often identified with construction of large buildings/paint manufacture/services provided in a supermarket.
Which three of the following variances are recorded in the work-in-progress control account in a standard cost bookkeeping system?Material price variance Material usage variance Labour rate variance Variable overhead efficiency variance Sales variance Idle time variance
Indicate whether the following statements are true or false.True False I Integrated systems conform to statutory requirements II Integrated systems are preferable to two systems because they conform to statutory requirements III Integrated systems reduce the number of account reconciliations IV
What is the double entry for recording sales variances in cost accounts?
The material usage variance is recorded in the raw materials control account.True False
The wages control account for X Co for October looks like this.WAGES CONTROL ACCOUNT$'000 $'000 Bank 110 Work in progress 101 Production overhead 7 Balance c/d 2 110 110 Indicate whether the following statements are true or false.True False I Total wages incurred during October was $110,000 II
GF Co bought $100,000 worth of materials and issued $75,000 to production. Which of the following entries represents the correct bookkeeping treatment? (Select three options.)I Dr Raw materials $75,000 II Dr Raw materials $100,000 III Cr Work-in-progress $75,000 IV Cr Raw materials $75,000 V Cr Raw
What is the double entry for the following in an integrated accounts system?(a) Production overhead absorbed in the cost of production(b) Completed work transferred from the production process to inventory
What is the correct approach to budgetary control?
What is the wrong approach to budgetary control?
Fill in the gaps.Budget cost allowance = ……………………. + (……………………. × …………………….)
Flexible budgets are normally prepared on a marginal costing basis.True False
Fill in the blanks with the word 'fixed' or the word 'flexible'.(a) At the planning stage, a ……………………. budget can show what the effects would be if the actual outcome differs from the prediction.(b) At the end of each period, actual results may be compared with the relevant activity
Jay Co produces a product called the Bee. There has been a surge in Bee sales as a result of an advertising campaign and so Jay Co is paying its staff overtime to build up the inventory levels.Labour hours per unit 3 Basic wage rate per hour $20 Overtime premium 25%Normal number of labour hours per
The following information is available for Biscuit Co.Jan Feb$ $Budgeted sales 60,000 80,000 Gross profit as a percentage of sales 40% 40%Closing trade payables as a percentage of cost of sales 50% 50%Opening inventory nil nil Closing inventory nil nil Note that all cost of sales are paid for on
Which of the following are included in the master budget?I Budgeted income statement II Budgeted statement of financial position III Budgeted cash flow IV Functional budgets A I, II and III B II and III C II, III and IV D IV only
Depreciation has an effect on net profit and is therefore included in a cash budget.True False
Match the following cash positions with the appropriate management action. Short-term surplus Long-term surplus ? Short-term shortfall Long-term shortfall Increase payables Replace/update non-current assets Issue share capital Increase receivables and inventory
If the principal budget factor is sales demand, in which order would the following budgets be prepared? Materials usage Materials purchase Production Sales Cash 1st 2nd 3rd 4th 5th
The factor which limits the activities of an organisation is known as:I The key budget factor III The principal budget factor II The limiting budget factor IV The main budget factor A I, II and IV C II and III B I and III D I, II and III
Which of the following is unlikely to be contained with a budget manual?A Organisational structures B Objectives of the budgetary process C Selling overhead budget D Administrative details of budget preparation
Budgets have a number of purposes. Fill in the key words which are missing from the statements below.(a) To ……………… the activities of different departments towards a single plan.(b) To ……………… targets to managers responsible for achieving them.(c) To establish a system of
Using the information in question 10, calculate the actual direct material cost for June.A $825 B $4,125 C $4,950 D $5,775
HF Co budgeted to produce 3,000 units of product K in June. The budgeted materials for product K were 1,500 kg at a cost of $3 per kg. The actual number of units produced was 2,200 and the material variances were as follows:Direct material price variance $825(A)Direct material efficiency variance
The sales volume variance considers the difference between ………………… sales volume and ………………… sales volume.Fill in the gaps using two of the following words.• total • budgeted • actual • future• incremental • estimated • past • confirmed
If two variances are interdependent, both must be either favourable or adverse.True False
A favourable sales price variance can result from a combination of a lower than budgeted sales volume and a higher than standard selling price.True False
A regular report for management of actual cost and revenue, and usually comparing actual with budget (and showing variances) is known as A Bank statement C Budget statement B Variance statement D Operating statement
Hat Co makes a product Kap which requires material budgeted at 50c per kg. During June, 6,200 kg were purchased for$3,224 and 6,000 kg were used. There was no opening inventory at the start of June. Inventory is valued at standard cost.(a) Calculate the material price variance for June.A $224 C
Adverse material usage variances might occur for the following reasons.I Defective material II Excessive waste III Theft IV Unforeseen discounts received A I B I and II C I, II and III D I, II, III and IV
What are the two main advantages in calculating the material price variance at the time of receipt of materials?
Subdivide the following variances.(a) Direct materials cost variance(b) Direct labour cost variance(c) Variable production overhead variance
L Co has paid its staff for the following number of hours in September.Basic pay 14,000 hours Overtime 3,000 hours Idle time 1,000 hours Basic pay is paid at $20 per hour and overtime is paid at basic pay plus 20%Calculate the indirect labour cost for September. $
Which of the following are advantages of standard costing?A Standards are an aid to more accurate budgeting B Cost consciousness is stimulated C Inflation can be dealt with easily D The principle of management by exception can be operated
The standard time per unit of product W is five hours. Ten employees work a 40-hour week. Idle time is two hours per employee per week. Efficiency levels are 125%.The weekly output is units.
List three problems in setting standards.(a) …………………………………………….(b) …………………………………………….(c) …………………………………………….
The formula for standard material cost per unit = ………………………….
Four types of performance standard are(a) ………………………….. (c) …………………………..(b) ………………………….. (d) …………………………..
Standard costs may only be used in absorption costing.True False
A control technique which compares standard costs and revenues with actual results to obtain variances which are used to stimulate improved performance is known as:A Standard costing C Budgetary control B Variance analysis D Budgeting
The only use of standard costing is to value inventory.True False
Choose the correct words from those highlighted.A standard cost is a planned/historical unit/total cost.
When determining the optimum production plan using limiting factor analysis, what five steps are involved?Step 1……………………………………………………………………………………………Step
Give seven limitations of CVP analysis.• ………………………………………………………………………………………………………• ………………………………………………………………………………………………………•
The following information is available for product H.Breakeven point 70,000 units Contribution per unit $4.50 Margin of safety 30%Calculate the budgeted profit A $100,000 C $315,000 B $135,000 D $765,000
Thornbury produces a single product X and has a contribution to sales ratio of 35%. The annual fixed costs are$157,500. In order to breakeven, how many units of X will Thornbury need to make and sell?A 196,000 B 450,000 C 60,000 D Cannot say without more information
On a breakeven chart, the distance between the breakeven point and the expected (or budgeted) sales, in units, indicates the ………………………………. .
Breakeven charts show approximate levels of profit or loss at different sales volume levels within a limited range. Which of the following are true?I The sales line starts at the origin II The fixed costs line runs parallel to the vertical axis III Breakeven charts have a horizontal axis showing
The total contribution required for a target profit = ……………………………………………….. .
At the breakeven point, total contribution = …………………………………. .
Profits are maximised at the breakeven point.True False
The P/V ratio is a measure of how much profit is earned from each $1 of sales.True False
Use the following to make up four formulae which can be used to calculate the breakeven point. (a) Breakeven point (sales units) Contribution per unit Contribution per unit Fixed costs Fixed costs Contribution required to break even Contribution required to break even C/S ratio C/S ratio
A wholesaler had opening inventory of 600 units of product C valued at $50 per unit at the beginning of May. The following receipts and sales were recorded during May.Date 2May 12 May 21 May 29 May Receipts 800 Issues 500 400 150 The purchase cost of receipts was $51.50 per unit. Using a
Choose the correct words from those highlighted.AVCO requires that a new weighted average price is calculated whenever materials are issued/a new delivery of materials is received/at the end of each accounting period.
Fill in the blanks.When using ………………….. method of inventory valuation, issues are at a price which approximates to economic cost.
LIFO is essentially an historical cost method.True False
Which of the following are true?I With FIFO, the inventory valuation will be very close to replacement cost.II With LIFO, inventories are issued at a price which is close to the current market value.III Decision making can be difficult with both FIFO and LIFO because of the variations in prices.IV
When comparing the profits reported under absorption costing and marginal costing during a period when the level of inventory increased:A Absorption costing profits will be higher and closing inventory valuations lower than those under marginal costing B Absorption costing profits will be higher
XYZ Co produces a component W. The standard cost card for component W is as follows:$Production costs Fixed 255.70 Variable 483.50 Selling costs Fixed 124.80 Variable 75.60 Profit 60.40 Selling price 1,000.00(a) Under an absorption costing system, what would be the value of inventory?• $255.70
ABC Co plans to sell 1,200 units of product B. A 12% return is required on the $1,000,000 annual investment in product B. A selling price of $500 per unit has been set.The full cost of product B is $ .
Which of the following are arguments in favour of marginal costing?(a) It is simple to operate.(b) There is no under or over absorption of overheads.(c) Fixed costs are the same regardless of activity levels.(d) The information from this costing method may be used for decision making.
Identify which of the following relate to either A = Absorption costing M = Marginal costing (a) Closing inventories valued at marginal production cost (b) Closing inventories valued at full production cost (c) Cost of sales include some fixed overhead incurred in previous period in opening
Sales value – marginal cost of sales = …………………………………………………………..
H Co bases its overhead absorption rate on labour hours. The following information is available for 20X9.Budgeted overheads $600,000 Actual overheads $660,000 Budgeted labour hours 120,000 Actual labour hours 110,000 Calculate the over- or under-absorption of overheads for 20X9.A $60,000
The following statements concern methods of absorbing fixed production overheads into units of production. Are they true or false?It is generally accepted that a time-based method should be used wherever possible (for example labour rate hours or machine rate hours).Direct materials price
Choose the correct words from those highlighted.Traditional costing systems tend to allocate too great/too small a proportion of overheads to high volume products and too great/too small a proportion of overheads to low volume products.
Over absorption occurs when absorbed overheads are greater than actual overheads.True False
A direct labour hour basis is most appropriate in which of the following environments?A Machine-intensive B Labour-intensive C When all units produced are identical D None of the above
In order to recognise the work service departments do for each other, the ………………….. method of reapportioning service department overheads should be used.
In relation to calculating total absorption cost, label the following descriptions in the correct order as Steps 1–5.Description Step A Apportion fixed costs over departments B Establish the overhead absorption rate C Choose fair methods of apportionment D Apply the overhead absorption rate to
Which of the following departments are directly involved in production? Department Finished goods warehouse Canteen Machining department Offices Assembly department Involved in production ()
Match the following overheads with the most appropriate basis of apportionment.Overhead Basis of apportionment(a) Depreciation of equipment (1) Direct machine hours(b) Heat and light costs (2) Number of employees(c) Canteen (3) Book value of equipment(d) Insurance of equipment (4) Floor area
Allocation involves spreading overhead costs across cost centres.True False
The management accountant at G Co is analysing some costs which have been entered onto the computer as'miscellaneous staff expenses'.No of staff Cost per member of staff 20$5 100$5 150$5 250$5 What type of cost is the miscellaneous staff expense?A Fixed B Variable C Semi-variable D Non-linear
Pen Co produced the following units at the following costs during October, November and December.Month Number Total Cost of units $October 4,700 252,800 November 5,500 264,000 December 9,500 320,000 The costs could be sub-divided into variable costs of $14 per unit and fixed costs of
The costs of operating the canteen at 'Eat a lot Company' for the past three months are as follows.Month Cost Employees$1 72,500 1,250 275,000 1,300 368,750 1,175 Variable cost (per employee per month) =Fixed cost per month =
Costs are assumed to be either fixed, variable or semi-variable within the normal or relevant range of output.True False
Fill in the gaps for each of the graph titles below. 1 (b) Cual Cost (c) $ Cost (d) $ Cost Activity Activity: Activity Graph of a Example: cost Graph of a cost Example: Graph of a cost Example: Graph of a cost Example:
The basic principle of cost behaviour is that as the level of activity rises, costs will usually fall.True False
Which of the following options describes the value of a benefit sacrificed when one course of action is chosen in preference to an alternative?A Relevant cost B Differential cost C Opportunity cost D Sunk cost
The following information is available for product M for the month of December.Production costs:Variable $4 per unit Fixed $6,000 The total production cost of producing 4,000 units of product M in December is $
In the composite code 374.152, the last three digits indicate the cost centre to be charged. This is:A classification by responsibility B cost classification C objective classification D subjective classification
Which of the following would be classified as indirect labour?A Assembly workers in a company manufacturing televisions B A stores assistant in a factory store C Plasterers in a construction company D An audit clerk in a firm of auditors
Categorise these costs:Sales commission Rent Research and development costs ] ? Functional cost Fixed cost Variable cost
A fixed cost is a cost which tends to vary with the level of activity.True False
There are a number of different ways in which costs can be classified.(a) ……………… and ……………… (or overhead) costs(b) ……………… costs (production costs, distribution and selling costs, administration costs and financing costs)(c) Fixed costs and …………..costs
Classification of expenditure into material, labour and expenses, say, is an example of:A subjective classification B objective classification C classification by responsibility D classification by behaviour
Choose the correct words from those highlighted.In practice, most cost accounting systems use historical cost/economic cost/economic value/cost value as a measurement basis.
(a) A ………………… is a unit of product or service to which costs can be related. It is the basic control unit for costing purposes.(b) A ………………… acts as a collecting place for certain costs before they are analysed further.(c) A ………………… is anything that users
In general terms, financial accounting is for internal reporting whereas cost accounting is for external reporting.True False
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