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PRINT your nlme on lhc linc bclow and rct[rtr.

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do so mty relult ln.disqurlificstio0. TEST CODE O22OIOIO
FORM TP 2014I2 MAY/JUNE 20I4

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION*
ACCOUNTING

Unit2-Paper0l
I hour 30 minutes

l0 JUNE 2014 @.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

.
| This test consists of 45 items. You will have I hour and 30 minutes to answer them.

2. In addition to this test booklet, you should have an answer sheet.

3. Do not be concerned that the answer sheet provides spaces for more answers than there are
items in this test.

4. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and choose the correct answer.

5. On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.

Samole ltem

Overhead absorption rates are used to determine the

Sample Answer
(A) service department's overhead cost
(B) estimated overhead costs for products
@@o @
(C) allocation of overhead costs to products
(D) actual overhead cost for finished products

Tlre best answer to this item is "allocation of overhead costs to products", so answer space
(C) has been shaded.

6. lf you want to change your answer, erase it completely before you fill in your new choice.

7. When you are told to begin, turn the page and work as quickly and as carefully as you can.
lf you cannot. answer an item, go on to the next one. You may return to this item Iater. Your
score will be the total number of correct answers.

I
8. You may do any rough work in this booklet.

I
I
9. You rnay use a silent. non-programmable calculator to answer items.

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I
I DO NOT TURN THIS PAGB UNTIL YOU ARE TOLD TO DO SO.
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I Copyright O 2012 Caribbean Examinations Council
 2. One MAJOR difference between financial
l. Which of the flollowing statements relating
accounting and management accounting is
to cost and management accounting is
that
accurate?

(A) It requires an entirelY seParate (A) financial accounting uses onlY

group ofaccounts from financial
current and future information
accounting.
(B) generally accePted accounting
(B) lt focuses solely on determining
principles do not aPPIY to
management accounting
how much it costs to manu f'acture
a Product or Provide a service'
(c) management accounting is
mandatory for comPanies trading
(C) lt provides product or service cost
on the stock exchange
information for internal decision
(D) financial accounting reports are
making.
prepared PrimarilY for internal
(D) It is required for business record-
users
keeping in the same way as
financial accounting.

line are classified as a

3. Wages paid to machine operators on an assembly

(A) period cost

(B) direct material cost
(c) manufacturin g overhead cost
(D) direct manufacturing labour cost

4. lnwhichofthefollowingwaysshouldplasticthatisusedinthemanufactureofdoIlsbeclassified?

Prime Cost Product Cost Direct Cost Fixed Cost

No
(A) No Yes Yes
No
(B) Yes No Yes
No
(c) Yes Yes Yes
Yes
(D) Yes Yes No

J. Thefo|lowinginformationwasextractedfromthebooksofJameslnc.
$107 000
Cost of goods sold
Ending balance of finished goods inventory
$ 20 000
Cost of goods manufactured
s s7 000
goods inventory for the Period.
Calculate the beginning balance of finished

(A) $ 70 000
(B) s 77 000
(c) $127 000
(D) $157 000
 3-

Items G7 ref'erro the following inventory data fbr Company X.

Opening inventory 300 units at $8.80 per unit

Materials received | 000 units at $9.00 each and
600 units at $ I 0.00 each respectively
Materials requisitioned I 500 units
6. The value of closing inventory using the 7. The value of closing inventory using the
FIFO method is LIFO metlrod is

(A) sl 000 (A) $ 9oo

(B) s2 640 (B) $2 640
(c) $3 600 (c) $3 s4o
(D) $4 000 (D) $3 640

8. Susan f nc. is patd lOohofthe gross sales of Items 11-12 refer to the following
her department as her compensation each information from Preysal Company on an
month. Susan Inc. received $15 000 each item of inventory for the month of April.
month for the last three months. Which
of the fbllowing methods BEST describes Beginning inventory 500 units at $6.00 each
how Susan Inc. is paid?
Purchases during the month:

(A) Commission
April0T 600 units at $6.10 each
(B) Fixed salary
April l2 800 units at 55.80 each
(C) Piece rate
April 17 500 units at $6.25 each
(D) Individual bonus
April22 250 unis at $6.00 each
April28 100 units at $5.50 each

9. Conversion cost consists of which of the

Sales during the month totalled 2 000 units.
following?

(A) Direct labour cost

ll. lf Preysal uses the FIFO method of stock
valuation, the value assigned to ending
(B) Manufacturing overhead cost
inventory is
(C) Direct materials and direct labour
cost (A) $3 000
(D) Direct labour and manufacturing (B) 54 szs
overhead cost (c) $4 s3o
(D) $4 sso

10. Wh ich inventory cash flow method assumes

that ALL stock (inverrtory) units are the 12. lf Preysal uses a LIFO method of stock
same? valuation, what is the value of its closing
irrventory at the end of May?

(A) Average cost (A) s3 000

(B) Last-in, first-out (B) $4 s25
(C) First-in, first-out (c) $4 530
(D) Retail inventory (D) $4 550

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15. Gibson Manufacturing uses machine hours

13. A firm estimates that its annual carrying cost
to allocate manufacturing overhead to all
for materialABC is $0.30 per kg, demand
jobs. The budgeted manufacturing overhead
is 50 000kg and ordering cost is $100 per
cost is $30 000 and the budgeted labour
order. The economic order quantity (EOQ)
hours and machine hours are 60 000 and
rounded to the nearest kilogram is
100 000 respectively. The pre-determined
overhead rate is
(A) I l2s
(B) | 732 (A) $0'30 Per machine hour
(c) 4 082 (B) S0'50 Per machine ltour
(D) s 774 (C) $0.60 Per machine hour
(D) $3.33 Per machine hour
14. $'hich of the following are NOT period
costs?

(A) Marketing costs

(B) Manufacturing costs
(C) Research and development costs
ipl General and administrative costs

Item 16-17 refer to the following information'

system' The
Travis Inc. has two products, A and
B. The company uses an activity-based costing pools
activity cost
estimated total cost and expected
activity for each of the company's three
are as follows:
Expected ActivitY
ActivitY Cost Pool Estimated Cost

Product A Product B Total

800 300 I 100

Moulding $17 600 700
500 200
Waxing $12 000 | 200
800 400
Finishing $26 000

What cost is allocated to Product A

for
What cost is allocated to Product B
for 17.
16. waxing?
finishing?

(A) $ l 600 (A) $ s00

(B) $ 5s7l
(B) $ 4 800 (c) $ 8571
(c) $ 8 667 (D) $17 571
(D) $12 800

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18. Which of the following is a similarity 20. Which of the following distinguishes
between job-order costing and process activity-based costing from traditional
costing? costing?

(A) Both utilize the.iob cost sheet. (A) Each department is a different
(B) Costs are accum u lated bY activity in activ ity-based costing.
depanments. (B) M u ltiple cost drivers may be uti lized
(C) Both are used to collect the cost of- within a department in activitY-
production. based costing.
(D) Costsareaccunrulatedbyindividual (c) ;\ single cost driver is utilized irr
jobs. every department in activitY-
based costing.
(D) Overhead application rates can
19. Ashley Company uses a job order costing be based on direct labour in
system. Overheads are applied to jobs on traditional costing sYstems.
the basis of direct labour hours at a rate of
$20 per direct labour hour.

For Job No. l0l :

Direct material cost: $4 000

Direct labour cost: 150 hours at$12
per hour

What is the total cost of Job I 0l ?

(A) $4 800
(B) Ss 000
(c) $7 000
(D) 58 8oo

GO ON TO THE NEXT PAGE

 6-

ttems 21-23 refer to the following information.

Castries Inc. uses an activity-based costing system. The company's purchasing department incurs
costs of$550 000 peryear. Information relating to THREE major activities are as follows:

Activity Allocation Measure Total Cost

lssuing purchase orders N umber of purchase orders $r50 000

Reviewing and receiving reports Number of receiving reports $I 75 000

Making phone calls Number of phone calls $22s 000

During the year in the department, 50 000 phone calls were made, l5 000 purchase orders were
issued-and iO Ooo shipments were received. Product A required 2 000 phone calls, | 500 receiving
reports and 500 purchase orders.

2t. The total cost for purchase orders allocated 23. The total cost assigned to product A is
to product A is
(A) $ 40 2s0
(A) $l 000 (B) $ 95 7s0
(B) $s 000 (c) $r36000
(c) $6 ooo (D) $22s 000
(D) $e 0oo

71 The cost of receiving reports allocated to

product A is

(A) $ 262s0
(B) $ 61 250
(c) $ 70 000
(D) $l7s 000

24. peterwants to identify the total cost fbrcomputing the personal tax return he prepared for his client'
Labour is the only direct cost at $ I 50 per hour. Indirect costs are $80 per labour hour.
What is
preparing the tax
the total direct cost, indirect cost, and job cost respectively, if 8 hours are spent
return?

Direct Cost Indirect Cost Job Cost

(A) $ 640 $l 200 $l 840

(B) sl 100 $ e00 $2 000
(c) $l 2oo $ 640 $l 840
(D) $ I 240 $l 200 $2 480
 -7 -

ZS. The basic difference between marginaland 27. Both absorption (full) costing and variable
absorption costing is the treatment of
:ff:1i::?;i:il-.,j:,"::''ectmateriarcost
(A) direct labour cost
(B) direct material cost (A) fixed cost
(C) fixed, selling and administration (B) sunk cost
cost (C) Period cost
(D) fix6d manufacturing overhead cost ( D) product cost

26. A costing system can BEST be defined as

a method of establishing the costs of

(A) designing production schedules and

assigning roles
(B) manufacturing goods and/or
services
(C) production per unit only
(D) services rendered only

28. Young Corporation has the following costs associated with the manufacture of one of its products.

Variable Manufacturing Cost $7.30 per unit

Fixed Manufacturing Overhead $4.00 per unit
Variable Selling Expenses $0.25 per unit
Fixed Ceneral and Administrative (C&A) Expenses $75 000 per year

During 2013, Young Corporation manufactured 50 000 units and sold 48 000. Under absorption
costing, the standard production cost per unit for 2013 was

(A) $ 7.30
(B) $ | 1.30
(c) $l l.ss
(D) $13.0s

29. A service organization would MOST likely 30. Imran worked t hours on Job E. His regular
use a predetermined overhead rate based on rate is $7 per hour. Job E required 7 hours
of regular time and 2 hours overtime at the
(A) direct labour prem i um rate of 50%o above the regu lar rate.
(B) machine hours What was the cost of direct labour appliec
(C) number of complaints to Job E?
(D) standard material cost
(A) $56.00
(B) 563.00
(c) $70.00
(D) $94.s0

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31. Which of the.following is NOT a benefit of budgeting?

(A) It uncovers potential bottlenecks befbre they occur.

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

Items J2-34 ret'er to the fbllowing J5. A product has a selling price of $ 150 and a
information. variable cost of$30. The company has fixed
costs of $30 000. What is the breakeven
Nash Sports i,td sells football kits. Ten per point in units?
centofits sales are cash transactions and the
remainder is on one month's credit. Nash (A) 2s0
Sports Ltd gets one month's credit on all (B) 7s0
purchases made. Sales and purchases for (c) | 000
December20 I 2, January 20 I 3 and February (D) | 2s0
2013 arc as follows:

Sales Purchases 36. A primary purpose of using a standard

$ $ costing system is to
December 2012 30 000 t6000
January 2013 25 000 r4 000 (A) make things easier for managers in
February 2013 l8 000 20 000 the production facilitY
(B) provide a distinct measure of cost
control
32. How much cash was collected in the month (C) minimize the cost Per unit of
ofJanuary 2013? production
(A) $ | 800 (D) provide more information to
(B) $ 2 soo managers
(c) $2s 000
(D) $2e soo

33. How much cash was paid to suppliers in

the month of FebruarY 2013?

(A) $14 000

(B) $16 000
(c) $20 ooo
(D) $2s ooo

34. How much cash was collected from credit

sales in the month of February 2013?

(A) s l6 000
(B) $22 s00
(c) $24 soo
(D) '$27 000
 -9-
Item 37 refers to the following information.

A manufacturing company operates a system of standard costing as follows:

Budgeted Actual

Total variable overheads $400 000 $340 000

Total fixed overheads $ 60 000 $ 50 000
Volume of production (standard machine hours) l0 000 12 000
Units produced 200 200

37. What is the total variable overhead variance?

(A) 50 000 adverse

(B) 50 000 favourable
(C) 60 000 adverse
(D) 60 000 favourable

38. A large unanticipated reduction in property Items 39-40 refer to the following
taxes on a company's factory would, all information.
otherthings being equal, MOST I ikely cause
Mary makes homemade soap which she
(A) a favourable overhead spending sells at $ 100 per case. The variable cost is
variance $40 per case and fixed cost is $600.
( B) an unfavourable overhead spending
variance 39. what is the contribution margin per case?
(C) a favourable overhead volume
variance (A) $ 15
(D) an unf'avourable overhead volume (B) $ 40
variance (C) $ 60
(D) $100

40. What is the breakeven point in number of

cases?

(A) 6
(B) l0
(c) ls
(D) 20

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 l0

.ll. The standards that allow for no machine 44. The margin of safety, a key concept of
breakdown or other work interruptions and Cost-Volume-Profit analysis' is defined as
the difference between budgeted
which require peak efficiency at all times
are referred to as
(A) sales and breakeven sales
(B) contri bution margin and stakeholder
(A) ideal standards
margin
(B) normal standards
(C) (c) contribution margin and breakeven
practical standards
contribution
(D) budgeted standards
(D) contribution margin and actual
contribution margin
42. The Net Present Value and lnternal Rate
of Rcturn methods of decision making
in capital budgeting are superior to the
45. Which of the following statements about
Payback method. This is because they standard cost is TRUE?

(A) are easier to imPlement (A) It is used to reduce tax liabilitY'

(B) consider the time value of money (B) It is always greater than the actual
(c) require less inPut cost.
(D) reflect the effects of sensitivitY (c) It refers to the average cost of
analysis production in the cost Period'
(D) It is a target for the Period ahead'

43. Which of the following is the SIMPLEST

method of making capital budgeting
decisions?

(A) Incremental
(B) Payback period
(c) Net present value
(D) Accounting rate of return

END OF TEST

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