BS1054 Topic 8 Costing

Q1. Indirect costs are also known as___________?

• Marginal costs

• Prime costs

• Overheads

• Absorption costs

Q2. A manager is preparing a quotation for Job 0088. A specialised technician will be hired to work for this job using machinery that the company already owns. Which of the following is a TRUE statement?

• Both machinery depreciation and technician wage are direct

• Machinery depreciation is direct and technician wage are indirect

• Both machinery depreciation and technician wage are indirect

• Machinery depreciation is indirect and technician wage is direct

Q3. From the following options, ‘rent expense’ would most likely be absorbed on which basis?

• Machine value

• Kilo watt hours

• Square meters

• Machine hours

Q4. A business pays its employees £2.00 for each unit of X they assemble, and £3.20 for each unit of Y. Monthly output is 1,800 units of X and 1,000 units of Y. The factory supervisor is paid £1,000 per month. What is the direct labour cost per month?

• £6,800

• £7,760

• £7,800

• £8,760

Q5. Floor cleaning product in a textile industry is a type of ___________?

• Indirect labour

• Direct material

• Indirect material

• Direct labour

Q6. A company has been asked to quote a price for a specific job. Estimated costs are as follows:

Direct materials         £2,000

Direct labour              £3,300

Overheads                 50% of labour cost

Profit                           20% of total job cost

What is the price to be quoted for the job?

• £5,300

• £6,360

• £6,950

• £8,340

Q7. ABC Ltd has produced the following information for the current financial year:

                                    Dept. X            Dept. Y

Revenue                      £54,000           £26,000

Cost of Sales              £23,700           £16,600          

Gross Profit                £30,300           £9,400

The buildings rent and insurance total is £13,000. Heating and lighting total is £12,500. The floor area occupied by each department is X 60%, Y 40%. What is the profit or loss for the year for department Y?

• £800 loss

• £5,900 loss

• £15,000 profit

• £20,100 profit

Q8. Which of the following attempts to assign overhead cost more accurately to its products?

• Absorption Costing

• Activity Based Costing

Q9. What is the main use of Activity Based Costing?

• To identify what causes overheads to be incurred for a given activity

• To help with short term decision making

• To calculate the value of inventory for the financial statements

• To help make decisions such as make or buy a product

Q10. The following activity rates are associated with moving rail cars by train:

£4 per gross ton mile

£50 per rail car switch

£200 per rail car

A train with 20 rail cars travelled 100 miles. Each rail car carried 10 tons of product and was switched two times. What is the total cost of moving this train?  

• £5,400

• £10,000

• £44,100

• £86,000