FM015 PART C SET 2

1. How is the activity (production volume) ratio calculated?

• Actual hours ÷ Budgeted hours
• Budgeted hours ÷ Actual hours
• Standard hours for actual output ÷ Budgeted hours
• Standard hours for actual output ÷ Actual hours

2. Which TWO of the following are items of revenue expenditure?

• 3 and 4 only
• 1 and 3 only
• 2 and 4 only
• 1 and 2 only

3. A law firm recovers overheads on chargeable consulting hours. Budgeted overheads were $615,000 and actual consulting hours were 32,150. Overheads were under-recovered by $35,000. Actual overheads were $694,075.What is the budgeted overhead absorption rate per hour (to 2 decimal places)?

• $20.21
• $20.50
• $21.59
• $22.68

5. A particular cost is classified as being ‘semi-fixed’.If activity increases by 50% what will happen to the cost per unit?

• Increase
• Reduce but not in proportion to the change in activity
• Reduce in proportion to the change in activity
• Remain constant

6. A company needs to produce 340 litres of Chemical X. There is a normal loss of 10% of the material input into the process. During a given month the company did produce 340 litres of good production, although there was an abnormal loss of 5% of the material input into the process.How many litres of material were input into the process during the month?

8. A company manufactures a product in batches and then holds the items produced in finished goods inventory until they are sold. It is capable of replenishing the product at the rate of 100,000 units/year, but annual sales demand is just 40,000 units. The cost of setting up a batch production run is $1,500 and the cost of holding a unit of the product in inventory is $25/year.What is the economic batch quantity for manufacturing this product?

• 2,191 units
• 2,828 units
• 4,472 units
• 10,954 units

9. The following statements relates to the reapportionment of service cost centre overheads to production cost centres, where reciprocal servives exist:Which of these statements are correct?

• The direct method results in costs being reapportioned between cost centres
• If the direct method is used, the order in which the service cost centre overhead is apportioned is irrelevant
• The step-down method results in costs being reapportioned between cost centres.
• If the step-down method is used, the order in which the service cost centre overhead is apportioned is irrelevant

10. Manufacturing costs are also known as product costs.Which of the following best describes those costs which are considered to be manufacturing costs?

• Direct materials, direct labor and factory overhad
• Direct materials and direct labor only
• Direct materials, direct labor, factory overhead and administrative overhead
• Direct labor and factory overhead

11. Production cost centre TY absorbs overheads on the basis of machine hours and has the following budgeted and actual figures:

12. How would the cost be recorded in the cost ledger if the direct labour costs in a manufacturing company are $95,000?

• Debit Work-in-progress $95,000, Credit Wages and salaries $95,000
• Debit Wages and salaries $95,000, Credit Bank $95,000
• Debit Wages and salaries $95,000, Credit Work-in-progress $95,000
• Debit Bank $95,000, Credit Wages and salaries $95,000