Timings 10:00-12:00

Date: 13th December 2012

Mock # 1

Compiled By:

Miss Zaira Anees

Faculty member of College of Accounting
and Management Science (CAMS)

ASSOCIATION OF CHARTERED
CERTIFIED ACCOUNTANT (ACCA)

Foundation in
Management
Accounting (FMA)

1.
Following are some statements given about process costing. Identify
whether each statement is correct or incorrect.
i. If joint cost is distributed on the basis of output, then cost per unit will be same for all
products . ______________ True
ii. If joint cost is distributed on the basis of sales revenue, then different products can
have profit or losses at the same time. ___________ false
iii. If joint cost is distributed on the basis of output then gross profit % will remain same
for all products. ___________f

iv. NRV method of distribution is used when output require further processing.
___________t
2. Budgeted sales of product Y next period are 8,690 units. Each unit of product Y
requires 8 kg of material Z. Budgeted inventories are as follows:
Product Y
Material Z
units
kg
Opening inventory
875
6,300
Closing inventory
920
6,180
The budgeted purchases of material Z, in kg, next period are:
A 8,615
B 69,280
C 69,760
D 69,880
3. The term budget slack refers to:
A the extended lead time between the preparation of the functional budgets and the
master budget
B the difference between the budgeted output and the breakeven output
C the additional capacity available which can be budgeted for
D the deliberate overestimation of costs and underestimation of revenues in a budget
4. A flexible budget is:
A a budget which, by recognising different cost behaviour patterns, is designed to
change as the volume of activity changes
B a budget for a defined period of time which includes planned revenues, expenses,
assets, liabilities and cash flow
C a budget which is prepared for a period of one year which is reviewed monthly,
whereby each time actual results are reported, a further forecast period is added and
the intermediate period
forecasts are updated
D a budget of semi variable production costs only
5. The budgeted contribution for last month was $45,500. The following
variances arose:
$
Sales total variance
3,100 adverse
Direct material total variance
1,986 favourable
Direct labour total variance
1,090 adverse
Variable overhead total variance
465 adverse
The actual contribution for last month was $ ________________
42831

6. Which of the following items of information would be contained in the

budget manual? (Tick all that are correct.)
(a) An organisation chart.
yes
(b) The timetable for budget preparation.
yes
(c) The master budget.
no
(d) A list of account codes.
yes
(e) Sample forms to be completed during the budgetary process.
yes
7. Is the following statement true or false?
The principal budget factor is always the forecast sales volume.
A. True
B. False

8. Assuming that sales volume is the principal budget factor, place the following
budgets in the order that they would be prepared in the budgetary planning process.
Indicate the correct order by writing 1, 2, 3, etc. in the boxes provided.
Sales budget
1
Materials purchases budget
6
Materials inventory budget
5
Production budget
3
Finished goods inventory budget 2
Materials usage budget
4
9. Each finished unit of product H contains 3 litres of liquid L. Ten per cent of the input
of liquid L is lost through evaporation in the production process. Budgeted output of
product H for June is 3,000 units. Budgeted inventories of liquid L are:
The required purchases of liquid L for June are litres.
Opening inventory, 1 June
1,200 litres
Closing inventory, 30 June
900 litres
The required purchases of liquid L for June are ____________ litres 9700
10. A company makes one product, which passes through a single process.
Details of the process for last period are as follows:
Materials
5,000 kg at 2.00 per kg
Labour
$7,800
Production overheads
120% of labour
Normal losses are 10% of input in the process, and without further processing any
losses can be sold as scrap for 0.5 per kg.
The output for the period was 4,600 kg from the process.
There was no work in progress at the beginning or end of the period.
The value of the abnormal gain is ________________ 598
11. Which of the following best describes the principle of reporting by
exception?
A. Sending budget reports only to those exceptional managers who are able to
understand their content.
B. Providing detailed reports only on those areas of the business that are performing
exceptionally well and providing only subsidiary information about other areas of the
business.
C. Providing detailed reports only on those areas of the business that are not
performing according to budget and providing only subsidiary information about
aspects that are in line with budget.
12. A standard cost is:
A the planned unit cost of a product, component or service in a period:
B the budgeted cost ascribed to the level of activity achieved in a budget centre in a
control period:
C the budgeted production cost ascribed to the level of activity in a budget period:
D the budgeted non production cost for a product, component or service in a period.
13. A standard which assumes efficient levels of operation, but which
includes allowances for factors such as waste and machine downtime, is
known as an:
A. attainable standard
B. ideal standard
C. current standard
D. basic standard
Following details related to 14 and 15
The standard cost of providing a meal in a fast food restaurant is as follows:
$

Ingredient cost
1.80
Direct labour cost
0.30
Variable overhead cost
0.20
The standard price of the meal is $4.50 and the budgeted sales volume is 4,650 meals
each period. During period 9 a total of 4,720 meals were sold for $20,768. The actual
total variable cost per meal was $2.30.
14. The sales price variance for period 9 was:
A $465 favourable
B $465 adverse
C $472 favourable
D $472 adverse
15. The sales volume contribution variance for period 9 was:
A $147 favourable
B $147 adverse
C $154 favourable
D $154 adverse
16. XYZ Ltd uses standard costing. It makes an assembly for which the
following standard data are available:
Standard labour hours per assembly
24
Standard labour cost per hour
$8
During a period 850 assemblies were made, there was a nil direct labour rate variance
and an adverse direct labour efficiency variance of $4,400.
How many actual labour hours were worked?
A 19,850
B 20,400
C 20,950
D 35,200
17. ABC Ltd uses standard costing. It purchases a small component for which
the following information is available:
Actual purchase quantity
6,800 units
Standard allowance for actual production 5,440 units
Standard price
85c per unit
Material price variance (adverse)
($544)
What was the actual purchase price per unit?
A 75c
B 77c
C 93c
D 95c
18. During a period 17,500 labour hours were worked at a standard cost of $6.50 per
hour. The labour efficiency variance was $7,800 favourable. The number of standard
labour hours expected for the output achieved was:
A 1,200
B 16,300
C 17,500
D 18,700
19. The actual contribution for last month was $43,900 but the following
variances arose:
$
Sales price variance
3,100 adverse
Sales volume contribution variance
1,100 adverse
Direct material price variance
1,986 favourable
Direct material usage variance
2,200 adverse
Direct labour rate variance
1,090 adverse
Direct labour efficiency variance
512 adverse
Variable overhead expenditure variance
1,216 favourable
Variable overhead efficiency variance
465 adverse
The budgeted contribution for last month was $________________. 49165
20. The direct material usage variance for last period was $3,400 adverse. Which of
the following reasons could have contributed to this variance? (write yes or no)
(a) Output was higher than budgeted
_____ no

(b) The purchasing department bought poor quality material

(c) The original standard usage was set too high
(d) Market prices for the material were higher than expected
(e) An old, inefficient machine was causing excess wastage

_____ yes
_____ no
_____ no
_____yes

21. The standard cost card for product K shows that each unit requires four hours of
direct labour at a standard rate of $8 per hour. Last period, 420 units were produced
and the direct labour cost amounted to $15,300. The direct labour efficiency variance
was $160 adverse.
The actual rate paid per direct labour hour is $_________________. 9 per hour
22. Is the following statement true or false?
Standard costing cannot be applied in an organisation that manufactures specialist
furniture to customers specifications because every cost unit is unique.
True
False
23. Standard cost and selling price details are as follows
per unit
Variable cost
8
Fixed cost
2
Standard profit
5
Standard selling price
15
Sales volume variance was 9000 adv
Company is currently using absorption costing. If it switches to marginal costing then
sales volume contribution variance will be _______________________________.
16200 adv
24. In a process account, abnormal losses are valued:
A at their scrap value
B at the same rate as good production
C at the cost of raw materials
D at good production cost less scrap value
25. A chemical process has a normal wastage of 10% of input. In a period, 2,500 kg of
material were input and there was an abnormal loss of 75 kg. What quantity of good
production was achieved?
A 2,175 kg
B 2,250 kg
C 2,325 kg
D 2,475 kg
26. A principal budget factor is:
YES / NO
The factor on which total annual expenditure is highest
________ no
The factor with the highest unit cost
________ no
A factor which limits the activities of an undertaking
________yes
A factor common to all budget centres
________ no
A factor controllable by the manager of the budget centre
________ no
27. A carpet fitting firm estimates that it will take 3,520 actual active hours to carpet
an office block. Unavoidable interruptions and lost time are estimated to take 20% of
the operatives' time. If the wage rate is $7 per hour,
The budgeted labour cost is $ _______________ (to the nearest $) 30800
28. A company is currently preparing its production budget for product U for the
forthcoming year.

Budgeted sales of product U are 140,000 units. Opening inventory is estimated to be

11,500 units and the company wishes to reduce inventory at the end of the year by
20%.
The budgeted number of units of product U to be produced is ____________units.
137,700
29. Which one of the following statements about a fixed budget is/are
correct?
A fixed budget is:
YES / NO
A budget which ignores inflation
___________no
A budget for fixed assets
___________ no
A budget which is most generally used for planning purposes
___________ no
A budget for a single level of activity
___________ yes
A budget for fixed costs
___________ no
30. A company plans to sell 1,800 units of product F next year. Opening inventory of F
is budgeted to be 150 units and Lardy Co budgets to increase inventory by 10% by the
end of the year. How many units of product F should be produced next year?
_______________ units 1815
31. Opening WIP of a process during a period was 2,000 units (75%
complete) with value of 12,500. During the period 14,000 units were
completed. Cost per completed unit was 8.
Company uses FIFO method in process account
Calculate valuation of output (14,000 units) manufactured from the process
_______________112500
32. Following are the expected demand for two months of coming year
January
February
Sales volume (units) 15,000
24,000
There are 25 working days in one month. It is policy of company to maintain closing
stock of finished goods equals to 25% of next months sales volume. It is expected that
there will be 10% loss in the manufacturing of finished goods.
Labour hours are expected to be 3 per unit.
Calculate total labour hours required for January ________________.57500
33. Which of the following would be included in the master budget?
YES / NO
Budgeted income statement
___________ yes
All functional budgets
___________no
Budgeted cash flow
___________ yes
Budgeted statement of financial position
___________ yes
34. A company manufactures and sells one product which used 4kg (net of
wastage) of raw material.
Its budget for the next period shows:
Units
Sales
9,500
Opening inventory (finished goods)
2,000
Closing inventory (finished goods)
1,500
It is expected that there will be a 20% loss of raw material during production process
How many kg of raw material will be used in coming year?
_______________kg 45,000

35. In a period 4,800 units were made and there was an adverse labour efficiency
variance of $26,000. Workers were paid $8 per hour, total wages were $294,800 and
there was a nil rate variance.
Standard hours per unit __________________ 7
(2 marks)
36. In a period, there was an adverse labour efficiency variance of $27,000. The
standard wages rate per hour was $6 and 30 hours were allowed for each unit as
standard. Actual labour hours worked were 52,500. The number of units produced in
the period was _________________. 1900 (2 marks)
37. A company purchased 6,850 kgs of material at a total cost of $32,195. The
material price variance was $1,370 adverse.
The standard price per kg was $ ________________ (to the nearest cent) 4.5
(2
marks)
38. If a more expensive material than the standard material is used in the production
of product A, there will be an adverse material price variance. Which of the following
might be an interrelated variance? Put a tick in all boxes that apply.
YES / NO
A favourable sales volume variance
_____________ yes
A favourable labour efficiency variance
_____________
yes
A favourable material usage variance
_____________
yes
A favourable sales price variance
_____________ no
39. A company is reviewing actual performance to identify any significant differences
against budget. The following standard cost information is relevant.
$ per unit
Selling price
75
Direct materials
10
Direct labour
15
Fixed production overheads
4
Variable production overheads
2
Fixed selling costs
4
Variable selling costs
3
Budgeted sales units
7,200
Actual sales units
8,400
The favourable sales volume variance using marginal costing is $_______________.
54000 fav
40. What is a by-product?
A A product produced at the same time as other products which has no value
B A product produced at the same time as other products which requires further
processing to put it in a saleable state
C A product produced at the same time as other products which has a relatively low
volume compared with the other products
D A product produced at the same time as other products which has a relatively low
value compared with the other products
41. Which of the following would help to explain a favourable direct material
price variance?
(i) The standard price per unit of direct material was unrealistically high

(ii) Output quantity was greater than budgeted and it was possible to obtain bulk
purchase discounts
(iii) The material purchased was of a higher quality than standard
A (i), (ii) and (iii)
B (i) and (ii) only
C (ii) and (iii) only
D (i) and (iii) only
The following data is to be used for sub-questions 42 and 43.
DEF plc uses an absorption costing system in which machine hours are used as the
basis of recovering overhead costs. Its accounting year is divided into 13 four week
accounting periods, with fixed production overhead costs budgeted to be incurred at a
constant rate of 266,000 per four week period. Budgeted machine hours per four
week period are 38,000 hours and budgeted output 19,000 units.
In a recent accounting period, actual hours worked were 36,925, actual output was
18,620 units and the actual fixed overheads incurred were 270,000.
42. The fixed overhead expenditure variance was:
A 5,320 (A)
B 4,000 (A)
C 4,000 (F)

D 5,320 (F)

43. The fixed overhead volume variance was

A 5,320 (A)
B 4,000 (A)
C 4,000 (F)

D 5,320 (F)

44. 25,500 kilograms (kg) of a product were manufactured in a period. There is a

normal loss of 25% of the weight of material input. There was an abnormal gain of 10%
of the material input in the period.
How many kg of material were input in the period?
A 29,325
B 30,000
C 34,000
D 34,425
45. Identify which statement is incorrect or incorrect
i. Higher the abnormal losses, lower will be cost per unit
______________Incorrect
ii. Joint product is accidentally manufactured in a process
______________
Incorrect
iii. Joint is distributed is always distributed among all joint products ______________
correct
iv. Input less actual output is equals to expected output
______________
Incorrect

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