2003

MULTIPLE CHOICE SECTION

1.

Managerial accounting places emphasis

on
(A)
(B)
(C)
(D)

2.

8.

Fast food restaurant

Fishing boat building
Sugar refining
Potato chips making

(B)
(C)
(D)
6.

$207 000
3 764 units
$253 000
2 070 units

A product sells for $20 per unit. The product

has a contribution margin ratio of 40% and
variable cost of $12 per unit. Fixed expenses
total $120,000 annually. How many units must
be sold to yield a profit of $30,000?

minimizing the number of journal

entries related to the production process
activities as the basic cost objects
minimizing production costs
inventory management

Shipping costs incurred by a manufacturing

company to ship its product to customers
would be classified as
(A)
(B)
(C)
(D)

7.

12 500
18 750
20 000
25 000

When using activity-based costing in a

manufacturing setting, its distinctive feature is
its focus on
(A)

Roberts Company sells a single product at a

selling price of $55 per unit. Variable costs are
$30.25 per unit and fixed costs are $113 850.
Roberts Companys break-even point is
(A)
(B)
(C)
(D)

4.

5.

Which of the following companies would be

MOST LIKELY to use a job-order costing
system instead of a process costing system?
(A)
(B)
(C)
(D)

3.

the conceptual framework of accounting

an entitys financial history
the accurate recording of all transactions
detailed segment reports about
departments, products, and customers

(A)
(B)
(C)
(D)

period cost
manufacturing overhead
product cost
administrative cost

When a decision is made among a number of

alternatives, the benefit that is lost by choosing
ONE alternative over another is the
(A)
(B)
(C)
(D)

realized cost
opportunity cost
conversion cost
accrued cost

Meave Company used a predetermined overhead rate last year of $2 per direct labour hour, based on an estimate

of 37 500 direct labour hours to be worked during the year. Actual costs and activity during the year were:
Actual manufacturing overhead cost incurred
Actual direct labour hours worked

$70 500
36 000

The under or over-applied overhead last year was

(A)
(B)
(C)
(D)
9.

Which of the following is NOT a benefit of

budgeting?
(A)
(B)
(C)
(D)

10.

$1 500 under-applied
$1 500 over-applied
$3 000 under-applied
$4 500 over-applied

It uncovers potential bottlenecks

before they occur.
It coordinates the activities of the entire
organization by integrating the plans and
objectives of the various parts
It ensures that accounting records
comply with generally accepted
accounting principles.
It provides benchmarks for evaluating
subsequent performance.

The PDQ Company makes collections on

credit sales according to the following
schedule:25% in month of sale; 70% in month
following sale; 4% in second month following
sale, and 1% uncollectible. If the company
makes sales in April, May and June of $100
000, $120 000 and $110 000 respectively then
the cash collections in June would be
(A)
(B)
(C)
(D)

$110 000
$111 000
$113 400
$115 500

cost. If Job No. 107 shows $15 000 of

manufacturing overhead applied, how much
was the direct labour cost on the job?
(A)
(B)
(C)
(D)
12.

$12 000
$15 000
$16 875
$18 750

A manufacturing company prepays its

insurance coverage for a three-year period.
The premium for the three years is $2 970
and is paid at the beginning of the first
year. Eighty per cent of the premium
applies to manufacturing operations and
twenty per cent applies to selling and
administrative activities. What amounts
should be considered product costs and
period costs respectively for the first year
of coverage?
(A)
(B)
(C)
(D)

Product Period
$ 792
$198
$2 376
$594
$1 584
$396
$2 970
$0

11.

The Lime Pepper Company applies overheads

to jobs on the basis of 125% of direct labour

13.

The Malda Company requires 60 000 units of Product Q for the year. The units will be used evenly throughout
the year. It costs $90 to place an order. It costs $10 to carry a unit in inventory for the year. What is the
economic order quantity (EOQ) rounded to the nearest whole unit?
(A) 600
(B)
735
(C)
900
(D) 1 040

14.

Pinder Company uses FIFO method in its process costing system. Department A is the first stage of the
companys production process. The following pertains to conversion costs for May for Department A:
Units
Work in process, beginning (40% complete)
44 000

Started in April
Completed in April and transferred to Department B
Work in process, ending (60% complete)

352 000
374 000
22 000

The equivalent units of production for conversion costs are

(A)
(B)
(C)
(D)

352 000
369 600
387 200
396 000

Use the following information to answer items 15 and 16

The Al Gore Company uses standard costing. For EACH unit of a single product the standard direct materials is
2 gallons of input at a cost of $3 per gallon. During November, the company made 4 000 units and incurred the
following costs:
Direct materials purchased
Direct materials used

8 100 gallons at $3.10 per gallon

7 600 gallons

15.

The material price variance for November was

(A)
$ 810 U
(B)
$ 810 F
(C)
$ 2 310 U
(D)
$ 2 310 F

16.

The material quantity variance for November was

(A)
$ 300 U
(B)
$ 1 200 F
(C)
$ 1 200 U
(D)
$ 1 500 F

17.
A cost that would be included in product costs under BOTH absorption costing and
variable costing would be
(A)
(B)
(C)
(D)
18.

The following diagrams represent cost behaviour patterns that might be found in a company's
cost structure. The vertical axis represents the total costs and the horizontal axis represents
levels of activity (volume). Which graph illustrates the cost pattern for an electricity bill made
up of flat charge plus a variable cost after a certain number of kilowatt hours are used?

(A)
19.

Output

(B)

Output

Financial accounting provides information on

past performance, whereas management
accounting
(A)
(B)
(C)
(D)

20.

supervisor's salary
machinery depreciation
variable manufacturing costs
variable selling expenses

(A)
(B)
(C)
(D)

Direct materials cost, direct labour

cost, but no manufacturing overhead
cost
Direct materials cost, direct labour
cost, and variable manufacturing
overhead cost
Prime cost but not conversion cost
Prime cost and all conversion
cost

50

Output

(C)
21.

provides information on current

performance only
focuses on reports to
shareholders
considers future and past performance
focuses on reports to creditors

Which of the following product costs are

included in the variable costing method?

Output

The standards that allow for NO machine

breakdowns or other work interruptions and
which require peak efficiency at ALL times
are referred to as
(A)
(B)
(C)
(D)

22.

(D)

normal standards
practical standards
ideal standards
budgeted standards

The net present value and internal rate of

return are more effective and superior
methods of capital budgeting than the payback
method because they
(A) , are easier to implement
(B)
consider the time value of money
(C)
require less input
(D)
reflect the effects of depreciation and
corporation taxes

23.

The Caswell Company uses a job-order cost system. The following information was recorded for
September:
Added during September
Job Number

September 1
Inventory

Direct
Materials

Direct Labour

$1 500

$ 450

$300

2
3
4

2 100
750

375
2 250
6 000

450
225
600

1 125

The direct labour wage rate is $15 per hour. Overhead is applied at the rate of $7.50 per
direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods.
Job 2 has been delivered to the customer.
The ending Work in Process inventory is
(A)
(B)
(C)
(D)

$ 6488
$ 7 725
$ 8025
$11363

26.
24.

The Penny Corporation's direct labour cost is 25% of its conversion cost. If the
manufacturing overhead cost for the last period was $45 000 and the direct materials
cost was $25 000, what was the direct labour cost?
(A) $15 000 (B) $20 000 (C) $33 333 (D)

25.

$60 000

Joan Giles is paid 10 % of the gross sales of her department as salary per month. Joan
27.
received $15 000 each month for the last three months. Which of the following
methods BEST describes how Joan is paid?

(A) Commission on sales

(B) Fixed salary
(C) Hourly rate
(D) Piece rate
Philmore wants to identify the total cost for computing the personal tax return he prepared for
his client. Labour is the only direct cost at $75 per hour. Indirect costs are $40 per labour hour.
What is the total direct cost, indirect cost, and job cost, respectively, if 8 hours are spent
preparing the tax return?
Direct
Cost
(A)
(B)
(C)
(D)

$320,
$550,
$600,
$640,

Indirect
Cost

Job
Cost

$600,
$450,
$320,
$600,

$ 920
$1 300
$ 920
$1 240

A machine was purchased at a cost of $20000. The machine will provide cost savings of $3
500 EACH year for TEN years, after which time it will have a salvage value of $2 500. If the
company's discount rate is 12 %, what is the net present value of the machine? (See
Appendix on page 13 for tables)
(A)
(B)
(C)
(D)

($ 225)
$ 580
$ 2 275
$17 500

2004
28.

Cost
and
Management
Accounting is different from
Financial Accounting in ALL of
the following ways EXCEPT that

31.

(A) it does not follow

generally
accepted accounting
principles
(B) the information provided
is used inside the
organization
(C) it provides detailed
analytical data for users
(A) it provides useful
information for users
29.

Mary worked 9 hours on Job ABX.

The regular rate is $7 per hour. Job
ABX required 7 hours of regular time
and 2 hours overtime at a rate of 50
per cent above the regular rate.
What was the cost of labour applied
to Job ABX?
(A)
(B)
(C)
(D)

30.

$56
$63
$70
$94.50

A standard cost is
(A)
maxi

the cost that will produce

James intends to sell tyres at a

special rate. He is able to
purchase tyres at $300 each and
intends to sell them at $400 each.
His fixed costs include $8 000 for
advertising. He will be reimbursed
for any tyre not sold due to
damage How many tyres will
James need to sell in order to
break even?
(A) 40
(B) 60
(C) 80
(D) 100

ahead

cost

(B)

mum profit
a target cost for the period

(C)
the average cost of
production in
the cost period
(D)
always greater than active

32.

Which of the following is the

MAIN advantage of activity-based
costing over conventional methods?
(A)

(B)

(C)
(D)

34.

33.

Product costs more

accurately reflect those
activities which
influence the level of
support overheads.
A single cost driver can
explain the cost behaviour of
ALL items in its associated
pool.
Some overheads may
(D)
require arbitrary cost
apportionment.
It is easier to operate than the

Which stock valuation method

assumes that ALL stocks are the
same?
(A)
(B)
(C)
(D)

other conventional
methods.
Controllable costs can BEST be
defined as

Last in first out (L.I.F.O.)

Average cost
52 out (F.I.F.O.)
First in first
Retail inventory

(A)
(B)
of

processing costs before

transfer to a department
costs incurred as a result

plant expansion
costs which are the
responsibility of a
manager
costs which are the
responsibility of employees

(C)

35.

Which of the following statements

about activity-based costing is
FALSE?
(A)
(B)
(C)
(D)

It promotes cost control.

Indirect cost allocation
bases are likely to be cost
drivers.
It provides less information
than cost systems used
before.
It provides more accurate
product costs.

The following information refers to items 36-37.

Nash Sports Ltd sells football kits. Ten per cent of its sales are cash transactions and the
remainder is on one month's credit. Nash Sports Ltd gets one month's credit on ALL
purchases made. Sales and purchases are as follows:

December 2001
January 2002
February 2002
36.

Purchases
$
16 000
14 000
20 000

How much cash was collected in the month of January 2002?

(A)
(B)
(C)
(D)

37.

Sales
$
30 000
25 000
18 000

$ 1 800
$ 2 500
$ 25 000
$ 29 500

How much was paid to suppliers in the month of February 2002?

(A)
(B)
(C)
(D)

38.

$14 000
$16 000
$20 000
$25 000

How much cash was collected from credit sales in the month of February 2002?
(A)
(B)
(C)
(D)

$16 200
$22 500
$24 000
$27 000

53

39.

What is the BEST method of payment to employees that could be used by a firm when
output is difficult to measure and where wages are not affected by the level of output?
(A)
(B)
(C)
(D)

40.

Bonus
Piece-rate
Fixed salary
Commission

Which of the following BEST describes the type of costing often called 'full costing'?
(A)
(B)
(C)
(D)

Standard costing
Variable costing
Activity-based costing
Absorption costing

The following information relates to items 41 and 42.

The Hilary Firm uses a job-order costing system. The firm uses machine hours as the basis for overhead

allocation in its cost centre No. 10. Cost data for a production period are as follows:
Estimated
Overheads
Machine hours
Prime cost
41.

$
82 605
7 210
126 000

What is the predetermined overhead rate?

(A)
(B)
(C)
(D)

42.

$
85 000
7 500
125 000

Actual

$11.33 per machine hour

$ 11.45 per machine hour
$28.00 per machine hour
$29.00 per machine hour

What is the amount of over- OR under-absorbed overhead?

(A)
(B)
(C)
(D)

$ 619 under-absorption
$ 916 over-absorption
$ 916 under-absorption
$9 116 over-absorption

54

43.

An investment project with an initial

investment of $10 000 will produce cash
flows as follows: $5 100 in year one; $3
600 in year two; $1 300 in year three; and
$2 800 in year four. What is the payback
period for this project?
(A
)
(B)
(C)

44.

Managerial accounting
(A)
(B)
(C)

1 year
2 years
3 years
4 years

(D)

ensures that all transactions are

properly recorded
is required by generally
accepted accounting principles
focuses on the organization as a
whole, rather than on its
departments
has its primary emphasis on the
future

The following information refers to items 45 and 46.

Worme Company has the following data related to an item of inventory during August 2001.
Beginning inventory
Purchases August 5
Purchases August 15
Ending inventory

45.

What is the value assigned to the ending inventory if Worme uses the last in first out method
LIFO)?
(A)
(B)
(C)
(D)

46.

600 barrels at $9.00 each

950 barrels at $9.50 each
200 barrels at $9.70 each
560 barrels

$4 480
$5 040
$5 360
$5 432

What is the value assigned to the ending inventory if Worme uses the first in first out method
(FIFO)?
(A)
(B)
(C)
(D)

$4 480
$5 040
$5 360
$5 432

55

The following information refers to items 47 and 48.

John Mayor uses a standard costing system. For the month of May the budgeted production was
2 000 units with each unit requiring 8 kilograms of materials at a cost of $5 per kilogram. Actual
production in May was 1 800 units and 16 200 kilograms of materials costing $72 900 were used
in producing that number of units.
47.

What was the material efficiency

variance for the month of May?
(A)
(B)
(C)
(D)

49.

(B)
(C)
(D)

50.

$1000 adverse
$7 100 adverse
$8 100 adverse
$9 000 adverse

The net present value of a project is positive. However, the company did not accept
this project. One can assume that for this
project
(A)

the qualitative factors outweigh the

benefit of the investment
a positive net present value is
unacceptable
the net initial investment cannot
be recovered
the return is greater than that
required by the company

The Ramsaran Co. requires 70 000

units of product G for the year. The
units will be used evenly throughout
the year. It costs $80 to place an order.
Its carrying cost is $15 per unit. What is
the economic order quantity (EOQ)
(rounded to the nearest whole unit)?
(A
)
(B)
(C)

48.

600
690
800
864

What was the material price variance for

the month of May?
(A)
(B)
(C)
(D)

51

The income statement of Black River

Factory showed the following:
$
Direct labour cost
55 000
Indirect raw materials
70 000
Factory rent and rates
25 000
Factory light and heat
8 000
Depreciation on plant
60 000
What was the total factory overhead cost?

(A)
(B)
(C)
(D)
$93000
000 $163 000
000
52.

$158
$218

.
Berbice Co. applies overheads to jobs at the
rate of 40 per cent of direct labour cost. Direct
materials of $1 250 and direct labour of
$ 1 400 were expended on Job AB - 424 during
June. At May 31, the balance of Job AB
-424 was $2 800. What was the June 30
balance ?
(A)
(B)
(C)
(D)

56

$7 100 adverse
$7 200 favourable
$8 100 adverse
$8 100 favourable

$3210
$4760
$5450
$6010

53.

During April, City employees worked on Job

Siera. At the end of the month, $714 of
overhead had been applied to this job. The
company allocates overhead at the rate of
50% of direct labour cost. Total work-inprocess inventory at the end of the month
was $2819. What amount of direct materials
is included in Job Siera?

54.

A service organization would most likely use a

predetermined overhead rate based on
(A)
(B)
(C)
(D)

machine hours
standard material cost
direct labour
number of complaints

(A)
(B)
(C)
(D)

$ 677
$1 391
$2 142
$4658

57

2005

55.
28.

One MAJOR difference between financial

accounting and management accounting is
that
(A)
(B)
(C)
(D)

financial accounting reports are

prepared primarily for internal
users
management accounting is mandatory for companies trading on the
stock exchange
government regulations do not
apply to management accounting
financial accounting uses only
current and future information

58.

ESPU is a print shop that produces

jobs to customer specifications.
During January 2005, Job No.
1253 was worked on and the
following
information
was
available.

Direct material used

$2500

Direct labour hours worked

15

Machine time used

56.

Direct labour rate per hour

Overhead application rate

per hour of machine time

18

(B)

(C)

(D)

1 125 (A)
Ibs 1 (B)
732 Ibs (C)
4 082 (D)
Ibs

1 125 lbs
1 732 lbs
4 082 lbs
5 774 lbs

What was the total cost of Job

No. 1253 for January?

Cost and management accounting

(A)

57.

requires a group of
accounts that is entirely
different from the group
of accounts used in
financial accounting
focuses solely on
determining how much it
costs to manufacture a
product or provide a
service
provides
product/service cost
information as well as
information for internal
decision making
is required for business
record-keeping as are
financial accounting and
tax accounting

59.

(A) $2 713
(B) $2 770
(C) $2 812
(D) $3 025
Tony Persad applies overheads to
jobs at the rate of 40 per cent of
direct labour cost. Direct material of
$1 250 and direct labour of $1 400
were expended on Job No. 44
during June. At May 31, the balance
of Job No. 44 was $2 800. What was
the June 30 balance of job No. 44?

(A) $3 210
(B) $4 760
(C) $5 450
(D) $6 010
A firm estimates that its annual carrying cost for material ABC is $.30 per lb, demand is 50 000 lbs, and ordering costs are $100 per order. The EOQ (rounded to the
nearest pound) is

60.

Which of the following statements regarding standard cost systems is TRUE?

(A)
Favourable variances are not necessarily good variances.
58
(B)
Managers will investigate all variances from standard.
(C)
The production supervisor is generally responsible for material price
variances.
(D)
Standard costs cannot be used for planning purposes since costs
normally change in the future.
Use the following information to answer items 61
and 62.
The following July information is for Kingston
Company.
Standards:
Material: 3.0 feet per unit at $4.20 per foot
Actual:
Production: 2 750 units produced during the month
Material: 9 000 feet purchased and used at $4.50
per foot

61.

What is the material price variance calculated at point of purchase?

(A)
(B)
(C)
(D)

62. What is the material quantity variance?

(A)
(B)
(C)
(D)

$2 700 U
$2 700 F
$2 610 F
$2 610 U

$1 050 F
$1 890 F
$3 105 F
$3 105 U

Use the following information to answer items 63 and 64.

Travis Inc. has two products, A and B. The company uses an activity-based costing
system. The estimated total cost and expected activity for EACH of the company's
THREE activity cost pools are as follows:

63.

Activity
Cost Pool

Estimated
Cost

Expected Activity
Product A
Product B Total

Moulding
Waxing
Finishing

$17 600
$12 000
$26 000

800
500
800

300
200
400

The activity rate under the

activity- based costing system for
finishing is
64.

1 100
700
1 200
(A) $18.53
(B) $21.67
(C) $46.33
(D) $65.00
What cost is to be allocated to
Product A for moulding?

(A)
(B)

$12 800
$17 336

(C)
(D)

$17 600
$38 700

65.

Pardee Company plans to sell 12 000 units A

during the month of August. If the company
has 2 500 units on hand at the start of the month
and plans to have 2 000 units on hand at the end of
the month, how many units must be produced
during the month?
(A)
(B)
(C)
(D)

Which of the following is NOT a benefit of

budgeting?
(A)
(B)

11500
12000
12500
14000

(C)
(D)

67.

It uncovers potential bottlenecks before

they occur
It coordinates the activities of the entire
organization by integrating the plans and
objectives of the various parts
It ensures that accounting records comply
with generally accepted accounting
principles
It provides benchmarks for evaluating
subsequent performance

When a decision is made among a number of alternatives, the

benefit that is lost by choosing one alternative over another is
the
(A)
(B)
(C)
(D)

68.

66.

realized cost
opportunity cost
conversion cost
accrued cost

Plastic used to manufacture dolls is a

Fixed Cost

(A)
(B)
(C)
(D)
69.

Prime Cost
no
yes
yes
yes

Product Cost
yes
no
yes
yes

Direct Cost
yes
yes
no
yes

yes
no
yes
no

Eversley Inc. manufactures products on a job order basis. The job cost sheet for Rose Hill job shows the
following for March:
Direct materials
Direct labour (100 hours at $7.25)
Machine hours incurred
Predetermined overhead rate per machine hour

$5 000
$ 725
40 hours
$ 26

At the end of March, the total cost appearing on the Rose Hill job cost sheet will be
(A)
(B)
(C)
(D)

$5725
$5765
$6765
$8325

60

70.

Kenny G. Co. uses a weighted average

process costing system. In May, Kenny
G started 30 000 units into production.
The company had 12 000 units that were
20 per cent completed as to conversion
costs in its beginning work-in-process
inventory, and 3 000 units that were 40
per cent completed as to conversion
costs in its ending work-in-process
inventory. What are the equivalent
units for conversion costs?

(A)
(B)
(C)
(D)

37 800
40 200
40 800
42 000

73.

The Net Present Value and Internal Rate

of Return methods of decision
making in capital budgeting are
superior to the payback method, in
that they
(A)
(B)
(C)
(D)

74.

Which of the following distinguishes

activity-based costing from traditional
costing?
(A)
(B)

71.
Alex Co. makes small metal containers. In
December the company began with 250
containers in its work-in-process inventory
that were 30 per cent completed as to
material and 40 per cent completed as to
conversion costs. During the month, 5 000
containers were started. At month end, 1
700 containers were still in its work-inprocess inventory (45 per cent completed
as to material and 80 per cent completed
as to conversion costs). The company uses
the weighted average method. The
equivalent units for conversion costs for the
month of December are
(A)
(B)
(C)
(D)

(C)
(D)

75.

are easier to implement

consider the time value of
money
require less input
reflect the effects of
sensitivity analysis

Each department is a different

activity in activity based costing.
A single cost driver is utilized in
every department in activitybased costing.
Multiple cost drivers may be
utilized within a department in
activity-based costing.
Overhead application rates can be
based on direct labour in traditional costing systems.

Peter wants to identify the total cost for

computing the personal tax return he
prepared for his client. Labour is the only
direct cost at $150 per hour. Indirect costs
are $80 per labour hour. What is the total
direct cost, indirect cost, and job cost
respectively, if 8 hours are spent preparing
the tax return?

3450
4560
4610
4910

(A)
72.
(B)
(C)
(D)

Direct
Job Cost
Indirect
Cost
Cost
The Net Present Value method of evaluating proposed investments
measures a project's internal rate of
ignores cash flows beyond the
return
payback period

applies only to mutually exclusive

investment proposals discounts cash
flows at a minimum desired rate of
return

(A)
(B)
(C)
(D)

$ 640
$1 100
$1200
$1240

$1200
$ 900
$ 640
$1200

$1 840
$2000
$1 840
$2480

61

A product has a selling price of $150 and

variable costs of $30. The company has
fixed costs of $30 000
and targets an operating income of
$12 000. What is the break-even point in
units?

78.
76..

What is the source document that records

the amount of raw material that has been
requested for use in production?
(A)
(B)
(C)
(D)

Job order cost sheet

Bill of lading
Inter-office memo
Material requisition

77.
RoseHall Inc. is considering the purchase
of a $100 000 machine that is expected to
result in a decrease of $15 000 per year in
cash expenses. This machine, which has
no residual value, has an estimated useful
life of 10 years and will be depreciated on
the straight-line basis. What would be the
accounting rate of return for this machine?
(A)
(B)
(C)
(D)

(A)
(B)
(C)
(D)
250
750
1 000
1250
79. .

The support department allocation

method that is the most widely used
because of its simplicity is the
(A)
(B)
(C)
(D)

15 per cent
20 per cent
25 per cent
35 per cent
80

Wages paid to machine operators on an

assembly line are classified as a
(A)

81.

step-down method
reciprocal allocation method
direct allocation method
sequential allocation method

direct material cost

(B) direct manufacturing labour cost
(C) manufacturing overhead cost
(D) period cost

The Indian Grill Corporation had the following balances in its records:

Beginning work-in-process inventory

Ending work-in-process inventory
Beginning finished goods inventory
Ending finished goods inventory
Cost of goods manufactured
What was the cost of goods sold?
(A) $1 205 000
(B) $1 218 000
(C) $1 222 000
(D) $1 235 000

50 000
48 000
180 000
195 000
1 220 000

62

2007
82.

83.

The Webster Company requires 140

000 units of product XYZ for the
year. The cost of placing an order
is $80. Its carrying cost is $15 per
unit. The economic order
quantity (EOQ) rounded to the
nearest whole unit is
(A)
229
(B)
374
(C)
864
(D) 1 222
Financial accounting provides a
historical perspective, whereas
mangement accounting
(A)
(B)

Item5 - 6 refer to the following inventory

details of Kareen Alzere Inc.
86.

The value assigned to the ending

inventory if Kareen Alzere Inc uses
L.I.F.O. is

Beginning inventory
Purchases August 5
Purchases August 15
Ending inventory

emphasizes the future in

addition to historical reports
only enables managers to
make decisions

(C)

85.

(A)
(B)
(C)
(D)

(D)
84.

(D)

emphasizes a current
perspective
allows the use of a budget

processing costs before

transfer to a department
(B)
costs incurred as a result of
plant expansion
(C)
costs which are the
responsibility of a manager
costs which are the responsibility of
employees

Which stock valuation

method assumes that
ALL stocks are the
same?
(A)
Lastin-first-out
(L.I.F.O.)
(B)Average cost
(C)First-in-firstout (F.I.F.O.)
(D)
Retail
inventory

$ 8 960
$10 080
$10 720
$10 864

Controllable costs can BEST be

defined as
(A)

1 200 barrels at $9.00 each

1 900 barrels at $9.50 each
400 barrels at $9.70 each
1 120 barrels

87.
88.

Mary worked 9 hours on Job ABX.

Her regular rate is $7 per hour. Job
ABX required 7 hours of regular time
and 2 hours overtime at the premium
of 50 per cent above the regular rate.
What was the cost of labour applied
to Job ABX?
(A)
(B)
(C)
(D)

$56.00
$63.00
$70.00
$94.50

63

89.

Which of the following is the MAIN

advantage of activity-based costing
over
conventional methods?
(A)

(B)
(C)
(D)

90.

(C)
(D)

(B)
(C)
(D)

engage in road and

bridge construction
produce sailboats made to
customer specifications
produce bricks for sale to the
public
construct houses according
to customer plans

(C)
(D)

supervisor's salaries
machinery depreciation
variable manufacturing costs
variable selling expenses

units produced exceed units sold

variable manufacturing
costs decrease
units sold exceed units produced
fixed manufacturing costs
decrease

Items 94 - 95 refer to the f ol lo w i ng

information.
Nash Sports Ltd sells football kits. Ten
per cent of the sales are cash
transactions and the remainder is on one
month's credit. Nash Sports Ltd receives
one month's credit on all purchases made.
Sales and purchases are as follows:
Sales
Purchases
$
$
Dec.2005 30 000
16 000
Jan. 2006 25 000
14 000
Feb. 2006 18 000
20 000

94.

How much cash was collected in the

month of January 2006?
(A) $ 1 800
(B) $ 2 500
(C) $ 25 000
(D) $ 29 500
How much was paid to suppliers during

95.

Costs that would be included in product

costs under both absorption costing and
variable costing are
(A)
(B)
(C)
(D)

Income computed by the absorption

costing method will tend to exceed income
computed by the variable costing method
when
(A)
(B)

It promotes cost control.

Indirect cost allocation bases
are likely to be cost drivers.
It provides more accurate
product costs.
It provides less information than
cost systems used before.

Process costing is used in companies that

(A)

92.

Product costs more accurately

reflect those activities which
influence the level of support
overheads.
A single cost driver can explain
the cost behaviour of ALL items
in its associated pool.
Some overheads may require
arbitrary cost apportionment.
It is easier to operate than the
other conventional methods.

Which of the following statements

about
activity-based costing is FALSE?
(A)
(B)

91.

93.

(A) $14 000

(B) $ 16 000
(C) $ 20 000
(D) $ 25 000
the month of February, 2006?
How much cash was collected from
credit sales in the month of February,
2006?

96.

(A) $16 200

(B) $ 22 500
(C) $ 24 000
(D) $ 27 000

64

97.

If the cost of goods manufactured is LESS

than the cost of goods sold, then

101.
An investment project with an initial
investment of $ 10 000 will produce cash flows as
follows: $5 100 in Year 1, $3 600 in Year 2, $1
300 in Year 3, and $2 800 in Year 4. What is
the payback period for this project?
(A)
(B)
(C)
(D)

(B)
(C)
(D)

the qualitative factors outweigh the

benefit of the investment
a positive net present value is
unacceptable
the net initial investment cannot be
recovered
the return is greater than that required by
the company

99.
The net present value and the internal rate of
return are MORE effective methods of capital
budgeting than the payback method because
they
(A)
(B)
(C)
(D)

are easier to implement

consider the time value of money
require less input
reflect the effects of depreciation and
taxes

100.
Which of the following are NOT period
costs?
(A)
(B)
(C)
(D)

(B)
(C)

1 year
2 years
3 years
4 years

98.
The net present value of a project is positive.
However, the company did not accept this
project. One can assume that, for this project,
(A)

(A)

Marketing costs
General and administrative costs
Research and development costs
Manufacturing costs

(D)

finished goods inventory has

decreased during the period
total manufacturing costs exceed
cost of goods manufactured
finished goods inventory has
increased during the period
work-in-process inventory has
decreased during the period

In decision making, costs which are

ALWAYS relevant are those that are

102.
(A)
fixed
(B)
variable
(C)
avoidable
(D)
sunk
In March 2007, the beginning balance of the
raw materials inventory account for Kyla Inc
was $46 000. The ending inventory balance for
103.
July was $47 000. Raw materials used during
the month totalled $127 120. The cost of raw
materials purchased during the month was
(A)
(B)
(C)
(D)

$125320
$126120
$128120
$174120

Gibson Manufacturing used machine hours to

allocate manufacturing overhead to ALL jobs.
The budgeted manufacturing overhead cost is
$30 000 and the budgeted labour hours and
104.
machine hours were 60 000 and 100 000
respectively. The pre-determined overhead rate
is
(A)
(B)
(C)
(D)

$0.30 per machine hour

$0.50 per machine hour
$0.60 per machine hour
$3.33 per machine hour

65

105.

A firm used 50 000 items of stationery per

year at a cost of $ 10 per item. The ordering
costs are $150 per order and carrying costs
are 15 per cent per year. Assuming that the
company makes one order at the beginning
of the year, the amount that will be spent on
carrying costs is

Items 108-109 refer to the f o l l o w i n g

information.
Wright Inc manufactures telephones using a
weighted-average process costing system.
The equivalent units produced in April were 1
000 with respect to direct materials and 900
with respect to conversion costs.

(A)
(B)
(C)
(D)
$15 000
$25000
$37500
$75 000
Items 106- 107 refer to the f o llo w in g

The beginning work-in-process inventory

consisted of direct materials $180 000 and
conversion costs $270 000. The costs added
during April consisted of $1 000 000 in direct
materials and
$1 000 000 in conversion
costs.
What is the direct materials cost per equivalent
unit during April?

108.
information.
The Claudia Corporation used a weightedaverage process costing system. The firm
started production of 75 000 units. It
completed and transferred out 85 000 units.
The ending work-in-process comprised 10 000

(A)
(B)
(C)
(D)

$ 180.00
$ 1 000.00
$ 1 180.00
$ 2 450.00
What is the conversion cost per equivalent
unit in April?

109.
units that were 40 per cent complete. All
direct material costs were added at the
beginning of the process.
106.

(A)
(B)
(Q
(D)
The equivalent units for direct materials are
(A)
(B)
(C)
(D)
75000
85000
89000
9500
107.

The equivalent units for conversion costs are

(A)
75 000
(B)
85 000
(Q
89 000
(D)
95 000

$ 300.00
$1 111.11
$1 411.11
$2 722.22

66

110.

GuyCo Disk Company has beginning work-inprocess of 100 000 units that is 90 per cent
complete as to conversion costs. The
company started production of 300 000 units
during the current period and completed and
transferred out 350 000 units. The ending
work-in-process inventory consisted of 50 000
units which were 65 per cent complete as to
conversion costs. The equivalent units of
production for conversion cost using the
F.I.F.O. method are

113.

(A) 292 500 units

(B) 300 000 units
(C) 350 000 units
(D) 401 500 units

112.
James purchases tyres at $300 each and sells
them for $400 each. His fixed costs are $8
000. How many tyres will James need to sell in
order to break even?
(A)
(B)
(C)
(D)

After the level of volume of a product exceeds the

break-even point
(A)
(B)
(C)

111.

40
60
80
100

(D)

the contribution margin ratio increases

the total contribution margin exceeds the
total fixed costs
total fixed costs per unit will remain
constant
the total contribution margin will
change from negative to positive

Young Corporation has the following costs

associated with the manufacture of one of its
products:
Variable manufacturing
cost
Fixed manufacturing
overhead
Variable selling
expenses
Fixed SG&A expense

7.30 per unit

4.00 per unit
0.25 per unit
$75 000 per year

During 2006, Young manufactured 50 000

units and sold 48 000. Under absorption
costing, the standard production cost per unit for
2006 was
(A
)
(B)
(C)
(D

$ 7.30
$11.30
$11.55
$13.05
67

Items 114 - 115 refer to the following

information.

117.

Redd Co uses a standard cost system and

applies overhead based on direct labour hours
(DLH). The following information is available for
August when Redd produced 4 500 units:
Standard:
DLH per unit
Variable overhead per DLH
Budgeted variable overhead
Actual:
Direct labour hours
Variable overhead
114.

2.50
$ 1.75
$21 875

(A)
(B)
(C)
(D)

10 000
$26 250

What is the variable overhead spending

variance?

The ABC Company makes collections on

credit sales according to the following
schedule: 25 per cent in the month of the sale; 70
per cent in the month following the sale; 4 per
cent in second month following the sale and 1 per
cent uncollectible. If the company makes sales
in April, May and June of $100 000, $120 000
and $110 000 respectively, then the cash
collections in June would be

118.

Managerial accounting places emphasis on

(A)

(A) $4 375.00 U
(B) $4 375.00 F
(C) $6 562.50 U
(D) $8 750.00 U

(B)
(C)
(D)

119.
115.
What is the variable overhead efficiency
variance?
(A)
(B)
(C)
(D)
$2187.50
U
$2187.50 F $2
937.50 F $9
937.50 F

116.

The margin of safety is a key concept of CVP

analysis. The margin of safety is the
(A)
(B)
(C)
(D)

contribution margin rate

difference between budgeted
contribution margin and actual
contribution margin
difference between budgeted
contribution margin and breakeven
contribution
difference between budgeted sales
and break-even sales

the conceptual framework of

accounting
an entity's financial history
the accurate recording of all
transactions
detailed segment reports about
departments,
products
and
customers

A cost management system should provide

information to
(A)
(B)
(C)
(D)

120.

$110 000 $111

000 $113 400
$115 500

all functional areas of the organization

only the accounting area of the
organization
only the production area of the
organization
organizational managers, but not to staff
personnel

The indirect costs of converting raw materials

into finished goods are called
(A)
(B)
(C)
(D)

period costs
prime costs
overhead costs
conversion costs

121.

The formula to compute cost of goods

manufactured is
(A) $43 100
(B) $43 500
(A) beginning work-in-process inventory
(C) $46 500
plus purchases of raw material
(D) $58 500
minus ending work-in-process
inventory
(B) beginning work-in-process inventory
plus direct labour plus direct
material used plus overhead
incurred minus ending work-inprocess inventory
(C) direct material used plus direct labour
plus overhead incurred
(D) direct material used plus direct labour
overhead incurred plus beginning
work-in-process inventory
Items 122 - 123 refer to the following
information.
Trincity Co manufactures wooden file
cabinets. The following information is
Beginning

Ending

$ 6 000

$ 7 500

$17 300

$11 700

available for June 2006:

Raw material
inventory Workin-process
inventory

122.
Direct labour is $9.60 per hour and overhead
for the month is $9 600. The company uses 1
500 direct labour hours and purchases $21
000 of raw material.
The total manufacturing costs for June are

123.
The prime costs for June are
A.
B.
C.
D.

$14 400
$33 900
$
$

Items 124 - 126 refer to the f ollowing

information.
Castries Inc. uses an activity-based costing
system. The company's Purchasing
Department incurs costs of $550 000 per year.
Information relating to the THREE major
activities are as follows:
Activity

Allocation
measure

Issuing purchase Number of

orders
purchase orders

Total Cost
$150 000

Reviewing
Number of
$175 000
receiving reports receiving reports
Making phone
calls

Number of
phone calls

$225 000

During the year in the department, 50,000

phone calls were made, 15 000 purchase
orders were issued, and 10 000 shipments
were received. Product A required 2 000
phone calls, 1 500 receiving reports, and 500
purchase orders.
The total cost for purchase orders allocated to
124.Product A is
$1 000 $5000
$6000$9000
(A)
(B)
(C)
(D)

125. The cost of receiving

reports allocated to product
A is
A.
B.
C.
D.
126.

$ 26 250
$ 61 250
$ 70 000
$175 000

The total cost assigned to product A is

A.
$ 40 250
B.
$ 95 750
C.
$136 000
D.
$225 000
Items 127 129
refer to the following information.
Panday Inc uses a job order costing system
and the following information is available
from its records. The company has the
following jobs in process: Numbers 5, 8, and
12. The raw materials used cost $120 000,
direct labour costs $8.50 per hour; and factory
overhead is applied at a rate of $10.20 per
direct labour hour. Direct labour hours per
job are 2 500, 3 100, and 4 200, respectively.
127.

130.
What is the total amount of overhead applied
to Job Number 8?
(A)
(B)
(C)
(D)
$18 250 $26 350
$30 000 $31 620

.128

(A)
(B)
(C)
(D)
129.
The direct material was requisitioned for each
job (Numbers 5, 8 and 12) at 30 per cent, 25
per cent, and 25 per cent, respectively. The

Items 130 - 131 refer to the following

information from Arnos Vale Company,
for the month of August:
6.0 feet per unit at $2.10 per
Standards:
foot
Material
2 750 units produced during
Actual:
the month
Production
17 400 feet used; 18 000 feet
purchased at $2.25 per foot
Material

The material price variance (calculated

at point of purchase) is
(A)
(B)
(C)
(D)

$2 700 F
$2 700 U
$2610F
$2610U

balance of the requisitions were considered indirect.

What is the value of the work in process?
$183 260 $279 260 $303
260 $444 000
At the end of the accounting period, the actual overhead
costs total $93,000. The amount of over-or-under
applied overhead is

(A)
(B)
(C)
(D)

$6 960 under-applied
$6 960 over-applied
$63 960 over-applied
$63 960 under-applied

131. The material quanitity variance is

(A)
(B)
(C)
(D)

132.

$1 050 F
$1 890 U
$3 105 F
$3 105 U

Which of the following is NOT a benefit of

budgeting?
(A)

It uncovers potential bottlenecks

before they occur.
(B) It coordinates the activities of the
entire organization by integrating
the plans and objectives of the
various parts.
(C) It ensures that accounting records
comply with generally accepted
accounting principles.
(D)
It provides benchmarks for
evaluating subsequent performance.
70

133.

The standards that allow for NO

machine breakdown or other work
interruptions and which require peak
efficiency at ALL times are referred to as
(A)
(B)
(C)
(D)

134.

A weakness of the internal rate of return

for screening investment projects is that it
(A)

ideal standards
practical standards
normal standards
budgeted standards

(B)

(C)
(D)

does not consider the time value of

money
assumes that the company is able to
re-invest cash flows from the
project at the company's discount
rate
assumes that the company is able to
re-invest cash flows from the
project at the internal rate of return
does not take into account all of the
cash flows from a project

Item 135 refers to following data on a proposed investment

project:
Initial investment
Annual cash inflows
Life of the investment
Required rate of return

$ 141 550
$30 000
8 years
12 per cent

The present value interest factor (PVIFA) of an annuity of

$1 for 8 years is given as follows:
Per cent
PVIFA

10.0
5.335

12.0
4.968

12.5
4.882

13.0
4.799

13.5
4.718

14.0
4.639

14.4
4.562

135. The internal percentage rate of return, to the

nearest tenth of a per cent, will be
(A
)
12.5
13.5
(B)
14.5
(C)

71

APPENDIX
Present Value of $1
1%
1
2
3
4
5
6
7
8
9
10

0.9901
0.9803
0.9706
0.9610
0.9515
0.9420
0.9327
0.9235
0.9143
0.9053

2%
0.9804
0.9612
0.9423
0.9238
0.9057
0.8880
0.8706
0.8535
0.8368
0.8203

4%
0.9615
0.9246
0.8890
0.8548
0.8219
0.7903
0.7599
0.7307
0.7026
0.6756

6%
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
0.6651
0.6274
0.5919
0.5584

8%
0.9259
0.8573
0.1400
0.0840
0.5194
0.6162
0.0535
0.0215
0.6256
0.8086

10%
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3855

12%

14%

16%

0.8929
0.7972
0.7118
0.6355
0.5674
0.5066
0.4523
0.4039
0.3606
0.3220

0.8772
0.7695
0.6750
0.5921
0.5194
0.4556
0.3996
0.3506
0.3075
0.2697

0.8621
0.7432
0.1549
0.1083
0.4867
0.5396
0.0623
0.0317
0.5806
0.7321

12%

14%

16%

Present Value of an Annuity of $1

1%

2%

4%

6%

8%

10%

0.9901

0.9804

0.9615

0.9434

0.9259 0.9091

0.8929

0.8772

0.8621

2
3
4
5
6
7
8
9
10

1.9704
2.9410
3.9020
4.8534
5.7955
6.7282
7.6517
8.5660
9.4713

1.9416
2.8839
3.8077
4.7135
5.6014
6.4720
7.3255
8.1622
8.9826

1.8861
2.7751
3.6299
4.4518
5.2421
6.0021
6.7327
7.4353
8.1109

1.8334
2.6730
3.4651
4.2124
4.9173
5.5824
6.2098
6.8017
7.3601

1.7833
1.9232
2.0073
2.5267
3.1429
3.1964
3.2179
3.8435
4.6521

1.6901
2.4018
3.0373
3.6048
4.1114
4.5638
4.9676
5.3282
5.6502

1.6467
2.3216
2.9137
3.4331
3.8887
4.2883
4.6389
4.9464
5.2161

1.6052
1.7601
1.8684
2.3552
2.8947
2.9570
2.9887
3.5693
4.3013

1.7355
2.4869
3.1699
3.7908
4.3553
4.8684
5.3349
5.7590
6.1446

72