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WorksheetsMA- Cost Classification
Total questions: 25
Worksheet time: 42mins
Variable cost per unit is constant within this activity range and there is a step up of 10% in the total fixed costs when the activity level exceeds 11,000 units.
What is the total cost at an activity level of 10,000 units?
$220,000
$224,000
$227,000
$234,000
A firm has to pay a $0.50 per unit royalty to the inventor of a device which it manufactures and sells.
How would the royalty charge be classified in the firm’s accounts?
selling expense
direct expense
production overhead
administrative overhead
Pliant plc produces cars and motorbikes. The company is split into four different divisions:
Car sales division – this department’s manager has been given responsibility for selling the cars, as well as keeping control of the division’s costs.
Motorbike sales division – this department’s manager has been given responsibility for selling the motorbikes as well as controlling divisional costs. In addition, they have been told to plan what assets they should purchase for the coming year.
Manufacturing division – this division makes the cars and bikes and passes them to the finishing division. The divisional manager is only responsible for controlling the division’s costs.
Finishing division – this division tests the cars and cleans them ready to be sold. They transfer the goods to the sales divisions and charge the sales divisions a set price, which is set by the finishing division’s manager. The manager is also responsible for managing the division’s costs as well as the investment in divisional assets.
Are these centers being operated as a cost, profit or investment center?
Which of the following can be included when valuing inventory?
(i) Direct material
(ii) Direct labour
(iii) Administration costs
(iv) Production overheads
(i), (ii) and (iii)
(i), (ii) and (iv)
(ii), (iii) and (iv)
(i), (iii) and (iv)
Which of the following is usually classed as a step cost?
Supervisor’s wages
Raw materials
Rates
Telephone
Which of the following is NOT a cost object?
A cost Centre
A Customer
A Manager
A Product
Which of the following describes depreciation of fixtures?
Not a cash cost so is ignored in the cost accounts
Part of overheads
Part of prime cost
Is a cash outflow
Which of the following costs would NOT be classified as a production overhead cost in a food processing company?
The cost of renting the factory building
The salary of the factory manager
The depreciation of equipment located in the materials store
The cost of ingredients
Which TWO of the following are included in the prime cost of a product?
(a) Direct material
(b) Direct labour
(c) Administration costs
(d) Production overheads
(a) & (b)
(b) & (d)
(a) & (d)
(b) & (c)
There is to be an increase next year in the rent from $12,000 to $14,000 for a warehouse used to store finished goods ready for sale.
What will be the impact of this increase on the value of inventory manufactured and held in the warehouse?
an increase of $14,000
a decrease of $14,000
no change
an increase of $2,000
Gilbert plc is a furniture manufacturer. How would they classify the following costs?
Bytes Limited operates an IT consultancy business and uses a coding system for its elements of cost (materials, labour or overheads) and then further classifies each element by nature (direct or indirect cost):
What would the codes be for the following costs?
Cost Code
Salary of trainee IT consultant -
Planning costs to renew lease of the office -
Wages of the office manager -
Cleaning materials used by cleaner -
Salary of trainee IT consultant - B100
Planning costs to renew lease of the office - C200
Wages of the office manager - B200
Cleaning materials used by cleaner - A200
Salary of trainee IT consultant - B100
Planning costs to renew lease of the office - C200
Wages of the office manager - B100
Cleaning materials used by cleaner - A200
Salary of trainee IT consultant - B200
Planning costs to renew lease of the office - C200
Wages of the office manager - B200
Cleaning materials used by cleaner - A100
Salary of trainee IT consultant - B200
Planning costs to renew lease of the office - C100
Wages of the office manager - B200
Cleaning materials used by cleaner - A200
How would a clothes retailer classify the following costs?
Designer skirts - Material
Heating costs - Expenses
Depreciation of fixtures and fittings - Expenses
Cashier staff salaries - Expenses
Designer skirts - Material
Heating costs - Labour
Depreciation of fixtures and fittings - Expenses
Cashier staff salaries - Expenses
Designer skirts - Material
Heating costs - Material
Depreciation of fixtures and fittings - Expenses
Cashier staff salaries - Expenses
Designer skirts - Material
Heating costs - Expenses
Depreciation of fixtures and fittings - Expenses
Cashier staff salaries - Labour
Which of the following would be classified as direct labour?
Personnel manager in a company servicing cars
Bricklayer in a construction company
General manager in a DIY shop
Maintenance manager in a company producing cameras
Which of the following describes cost centres?
units of product or service for which costs are ascertained
amounts of expenditure attributable to various activities
functions or locations for which costs are ascertained
a section of an organisation for which budgets are prepared and control exercised
What is the amount of fixed overheads?
$187,000
$2,46,500
$3,00,000
$167,000
A kitchen fitting company receives an invoice for sub‐contractors who were used to connect the gas supply to a cooker installed in a new kitchen.
How would this invoice be classified?
Direct expenses
Indirect expenses
Direct labour
Indirect labour
A manufacturing company has four types of cost (identified as T1, T2, T3 and T4).
Which two cost types would be classified as being semi‐variable?
T1 and T3
T1 and T4
T2 and T3
T2 and T4
The following data relate to the overhead expenditure of contract cleaners at two activity levels:
Square meters cleaned 12,750 15,100
Overheads $73,950 $83,585
Using the high‐low method, what is the estimate of the overhead cost if 16,200 square meters are to be cleaned?
$88,095
$89,674
$93,960
$98,095
A company manufactures and sells toys and incurs the following three costs:
(i) Rental of the finished goods warehouse
(ii) Depreciation of its own fleet of delivery vehicles
(iii) Commission paid to sales staff. Which of these are classified as distribution costs?
(i) and (ii) only
(ii) and (iii) only
(ii) only
(i) and (iii)
Using the high‐low method what is the variable cost per unit?
$25
$30
$35
$40
An organisation manufactures a single product. The total cost of making 4,000 units is $20,000 and the total cost of making 20,000 units is $40,000. Within this range of activity the total fixed costs remain unchanged.
What is the variable cost per unit of the product?
$0.80
$1.20
$1.25
$2.00
The variable cost per unit is constant up to a production level of 2,000 units per month but a step up of $6,000 in the monthly total fixed cost occurs when production reaches 1,100 units per month.
What is the total cost for a month when 1,000 units are produced?
$54,200
$55,000
$59,000
$60,200
Camberwell runs a construction company. Classify the following costs by nature (direct or indirect) in the table below.
Bricks - Direct
Plant hire for long term contract - Indirect
Builders’ wages - Direct
Accountants’ wages - Direct
Bricks - Direct
Plant hire for long term contract - Indirect
Builders’ wages - Indirect
Accountants’ wages - Indirect
Bricks - Indirect
Plant hire for long term contract - Direct
Builders’ wages - Indirect
Accountants’ wages - Indirect
Bricks - Direct
Plant hire for long term contract - Indirect
Builders’ wages - Indirect
Accountants’ wages - Direct
George plc makes stationery. How would they classify the following costs?
