Paper T4. Accounting for Costs. Thursday 9 June Certified Accounting Technician Examination Intermediate Level

Transcription

1 ertified ccounting Technician Examination Intermediate Level ccounting for osts Thursday 9 June 2011 Time allowed: 2 hours This paper is divided into two sections: Section LL 20 questions are compulsory and MUST be attempted Section LL FOUR questions are compulsory and MUST be attempted Paper T4 o NOT open this paper until instructed by the supervisor. This question paper must not be removed from the examination hall. The ssociation of hartered ertified ccountants

2 Section LL 20 questions are compulsory and MUST be attempted Please use the space provided on the inside cover of the andidate nswer booklet to indicate your chosen answer to each multiple choice question. Each question within this section is worth 2 marks. 1 Which of the following states the responsibility of the manager of a profit centre? Responsibility for revenues but not costs Responsibility for costs but not revenues Responsibility for revenues and costs Responsibility for revenues, costs and investment 2 ost estimates at two levels of output show: Output (units) 100, ,000 $ $ irect materials 50,000 75,000 irect labour 40,000 60,000 Production overhead 35,000 45,000 Non-production overhead 12,000 12, , ,000 Using the high-low method, what is the estimated cost for an output of 120,000 units? $153,600 $155,182 $159,000 $164,400 3 Which of the following documents are used to update quantities in the inventory records? 1. Goods received note 2. Materials requisition 3. Purchase order 4. Purchase requisition 1 and 2 only 3 and 4 only 1, 2 and 3 1, 2 and 4 2

3 4 The purchases of an inventory item in a period were: ay Units Total cost ($) , ,125 There was no opening inventory. 700 units were issued on ay 15. The first-in first-out (FIFO) method is used. What is the valuation of the closing inventory? $1,170 $1,175 $1,325 $1,350 5 component has the following ordering lead times and usage: Lead time Usage (weeks) (units per week) verage Maximum Minimum What is the re-order level to avoid running out of inventory? 120 units 180 units 225 units 360 units 6 In the context of materials control, what is the formula for calculating the maximum inventory control level? Re-order level + (maximum usage x maximum lead time) re-order quantity Re-order level + re-order quantity (minimum usage x minimum lead time) Re-order quantity (average usage x average lead time) Re-order quantity + (maximum usage x maximum lead time) re-order level 7 Which of the following is normally treated as a direct labour cost? ontrollable idle time Uncontrollable idle time Overtime premium due to a temporary backlog in production Overtime premium at the specific request of a customer 8 Which of the following documents record how an employee s time at work has been spent? 1. lock card 2. Job card 3. Time sheet 1 and 3 only 2 only 2 and 3 only ll three documents 3 [P.T.O.

4 9 Which of the following is a measure of capacity utilisation? ctual hours worked budgeted hours udgeted hours actual hours worked udgeted hours standard hours of actual output Standard hours of actual output actual hours worked 10 What term is used for the arbitrary sharing of overheads among cost centres? Overhead absorption Overhead allocation Overhead analysis Overhead apportionment 11 company manufactures a variety of products using different processes which involve both labour and machines. Which of the following is likely to be preferred as the basis for production overhead absorption? lanket rate per actual machine hour lanket rate per unit of product Predetermined rates per direct labour hour Predetermined rates per $ of sales 12 Which of the following may result in fixed overheads being over-absorbed? 1. ctivity above budget 2. ctivity below budget 3. Expenditure above budget 4. Expenditure below budget 1 and 3 1 and 4 2 and 3 2 and 4 13 The following details relate to production overheads for a period: bsorption rate $15 00 per machine hour ctual machine hours 4,220 udgeted machine hours 4,130 Over-absorption $230 What was the actual production overhead expenditure in the period? $61,720 $63,070 $63,300 $63, What should be included in product costs when valuing inventory using absorption costing? irect materials + direct labour + direct expenses only irect costs + variable production overheads only Prime costs + production overheads only Prime costs + production overheads + non-production overheads 4

5 15 25,000 units of a company s single product are produced in a period during which 28,000 units are sold. Opening inventory was 7,000 units. Unit costs of the product are: $ per unit irect costs Fixed production overhead 7 60 Fixed non-production overhead 2 90 What is the difference in profit between absorption and marginal costing? $22,800 $30,400 $31,500 $42, ,150 kilograms (kg) were input to a manufacturing process in a period during which output was 5,820 kg. The normal weight loss in the process is 10%. What was the abnormal gain/loss? 285 kg abnormal gain 285 kg abnormal loss 330 kg abnormal gain 330 kg abnormal loss 17 7,000 units were started in a manufacturing process during a period. ompleted output from the process in the period was 5,400 units. The remaining units were 70% complete, as to both materials and conversion costs, at the end of the period. There was no work-in-progress at the beginning of the period and no process losses. What were the equivalent units of work-in-progress at the end of the period? 480 1,120 4,900 6, onversion costs incurred in a process in a period totalled $72,000. There was no opening work-in-progress. Output from the process in the period was 21,000 finished units. The work-in-progress at the end of the period, of 1,600 units, was 40% complete. What was the conversion cost per unit (to two decimal places of $) in the period? $3 19 $3 28 $3 33 $ [P.T.O.

6 19 $10,000 was invested in a savings account on 1 January year one. ompound interest at 5% per annum accumulated in the account for the period to 31 ecember year four. There were no withdrawals over the period. What total amount was in the account after the interest payment on 31 ecember year four? $11,500 $11,576 $12,000 $12, company plans to invest $50,000 in a non-current asset. The company expects to use the asset for 15 years at which time it is expected to have a residual value of $20,000. The expected annual cash inflows, at the end of each year, are $5,000. What is the payback period of the investment? 6 years 9 years 10 years 15 years (40 marks) 6

7 Section LL FOUR questions are compulsory and MUST be attempted 1 (a) The following shows a ledger account which has been extracted from the accounting system of a business: Raw materials inventory account $ $ Opening balance 6,860 Work-in-progress account 124,320 Trade payables account 129,320 Production overhead account 2,170 losing balance 9, , ,180 Required: State whether the business is using an integrated or an interlocking accounting system and explain your reasoning. (4 marks) (b) (c) escribe: (i) the main characteristic of job costing; (2 marks) (ii) how the concept of a cost unit is applied in job costing. (2 marks) State the costing term that is defined as: Expenditure on labour, materials or services which cannot be economically identified with a specific saleable cost unit. (2 marks) (10 marks) 7 [P.T.O.

8 2 The following information relates to a hotel for a 30-day period: Number of bedrooms 90 verage bedroom occupancy 78% Revenue for accommodation $157,950 Revenue in restaurant $44,760 Number of meals served 1,420 ost of restaurant food $14,760 Restaurant payroll costs $12,240 Laundering costs $8,240 leaning costs $26,200 General overheads $68,900 There are two profit centres in the hotel: accommodation and restaurant. ost apportionment is as follows: Laundering costs: 75% to accommodation; 25% to restaurant. leaning costs: 90% to accommodation; 10% to restaurant. General overheads: on the basis of sales revenue. Required: alculate for the period the: (a) ccommodation revenue per occupied bedroom per night. (5 marks) (b) Total costs in each profit centre. (9 marks) (c) ccommodation cost per occupied bedroom per night. (2 marks) (d) Restaurant profit/(loss) per meal served. (4 marks) (20 marks) 8

9 3 ompany X is considering two capital investment projects (Projects and ). Project requires an investment of $90,000 followed by an estimated constant annual cash inflow, at the end of each year, of $31,000 for four years. Project requires investment of $70,000 followed by an estimated constant annual cash inflow, at the end of each year, of $8,500 in perpetuity. The cost of capital is 10% per annum. The following discount factors are provided: Year iscount rate: 5% 10% 15% 20% Required: (a) alculate the net present value of Project. (4 marks) (b) Estimate the internal rate of return of Project. (7 marks) (c) alculate the net present value of Project. (4 marks) (15 marks) 9 [P.T.O.

10 4 company manufactures a single product which it currently sells for $10 00 per unit. The following estimates are available for the next period: Sales 6,000 units Variable costs $6 00 per unit Fixed costs $15,000 ased on the above, the break-even point for the period has been calculated as 3,750 units. If the selling price is increased to $11 00 per unit, sales are estimated to fall to 5,000 units in the period, with no change in unit variable costs or total fixed costs. Required: (a) (b) If the selling price is increased to $11 00 per unit for the next period: (i) alculate, in units, the break-even point and the margin of safety; (5 marks) (ii) Explain why the estimated break-even point and margin of safety would both reduce. (5 marks) If the selling price remains at $10 00 per unit, calculate the sales volume (units) that would be required to achieve a profit of $10,000 in the period. (5 marks) (15 marks) End of Question Paper 10