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Question No: 21 ( Marks: 1 ) - Please choose one
The following data related to production of ABC Company:

Units produced 8,000 units
Direct materials Rs.6
Direct labor Rs.12
Fixed overhead Rs.24000
Variable overhead Rs.6
Fixed selling and administrative Rs.2000
Variable selling and administrative Rs.2
Using the data given above, what will be the unit product cost under
marginal costing?
► Rs. 22
► Rs. 24
► Rs. 28
► Rs. 30

Question No: 22 ( Marks: 1 ) - Please choose one
Net income reported under direct costing will exceed net income
reported under absorption costing for a given period if:
► The fixed overhead exceeds the variable overhead
► Production equals sales for that period
► Production exceeds sales for that period
► Sales exceed production for that period

Question No: 23 ( Marks: 1 ) - Please choose one
Profit under absorption costing will be higher than under marginal
costing if:
► Produced units > Units sold
► Produced units < Units sold
► Produced units =Units sold
► Profit cannot be determined with given statement

Question No: 24 ( Marks: 1 ) - Please choose one
A firm sells bags for Rs. 14 each. The variable cost for each unit is
Rs. 8. What is the contribution margin per unit?
► Rs. 6
► Rs. 12
► Rs. 14
► Rs. 8

Question No: 25 ( Marks: 1 ) - Please choose one
The break-even point in units is calculated using which of the
following factors?
► Fixed expenses and the contribution margin ratio
► Variable expenses and the contribution margin ratio
► Fixed expenses and the unit contribution margin
► Variable expenses and the unit contribution margin

Question No: 26 ( Marks: 1 ) - Please choose one
The point at which the cost line intersects the sales line will be
called:
► Budgeted sales
► Break Even sales
► Margin of safety
► Contribution margin

Question No: 27 ( Marks: 1 ) - Please choose one
If one would prepare a graph with a horizontal axis representing
units of production and a vertical axis representing per-unit
production cost, how would a line representing fixed production cost
is drawn?
► As a horizontal line
► As a vertical line
► As a straight line sloping upward to the right
► As a straight line sloping downward to the right

Explanation: The per-unit fixed cost would decline as production
increased. That is, total production divided into the constant fixed
cost amount would result in a decreasing per unit fixed cost. A line
sloping downward to the right would represent this situation.

Question No: 28 ( Marks: 1 ) - Please choose one
Budget for an organization is prepared by which of the following
person?
► Functional head
► Manager
► Auditor
► Administrator

Question No: 29 ( Marks: 1 ) - Please choose one
Amount of Depreciation on fixed assets will be fixed in nature if
calculated under which of the following method?
► Straight line method
► Reducing balance method
► Some of year's digits method
► Double declining method

Question No: 30 ( Marks: 1 ) - Please choose one
Which of the following factor/s should be considered while
constructing an administrative selling expense budget?
► Fixed expenses
► Past experience
► Variable expenses
► All of the given options

Question No: 31 ( Marks: 1 ) - Please choose one
All are examples of cash disbursements EXCEPT:
► Payment for materials purchased
► Payment received as collection of accounts receivable
► Payment of dividends
► Payment of taxes

Question No: 32 ( Marks: 1 ) - Please choose one
A budget that requires management to justify all expenditures, rather
than just changes from the previous year is referred to as:
► Self-imposed budget
► Participative budget
► Perpetual budget
► Zero-based budget

Question No: 33 ( Marks: 1 ) - Please choose one
Which of the following sentences is the best description of zero-base
budgeting?
► Zero-base budgeting is a technique applied in government
budgeting in order to have a neutral effect on policy issues
► Zero-base budgeting requires a completely clean sheet of
paper every year, on which each part of the organization must justify
the budget it requires
► Zero-base budgeting starts with the figures of the previous
period and assumes a zero rate of change
► Zero based budgeting is an alternative name of flexible
budget

Question No: 34 ( Marks: 1 ) - Please choose one
Which of the following is the first step in the decision-making
process?
► Clarify the decision problem
► Collect the data
► Select an alternative
► Develop a decision model

Question No: 35 ( Marks: 1 ) - Please choose one
Which the following would be considered a Relevant Cost?
► The book value of the old equipment
► Depreciation expense on the old equipment
► The current disposal price of the old equipment
► Historical cost of an equipment

Question No: 36 ( Marks: 1 ) - Please choose one
The Auslander Company has 1,600 obsolete calculators that are carried
in inventory at a total cost of Rs. 106,800. If these calculators are
upgraded at a total cost of Rs. 40,000, they can be sold for a total
of Rs. 120,000. As an alternative, the calculators can be sold in
their present condition for Rs. 44,800. What will be the sunk cost in
this situation?
► Rs. 0
► Rs. 40,000
► Rs. 44,800
► Rs. 106,800

Question No: 37 ( Marks: 1 ) - Please choose one
Costs that have been incurred include which of the following?
► Only opportunity costs
► Costs that have already been paid
► Costs that have been committed
► Both costs that have already been paid and committed

Question No: 38 ( Marks: 1 ) - Please choose one
For a retail outlet chain with multiple stores, which of the
following statements would be correct?
► Stores which have a net loss should be discontinued
► Stores with a negative contribution margin should be
discontinued
► Stores with a negative contribution margin should be
discontinued provided such discontinuation will not cause an increase
in sales at other stores
► Stores with a negative contribution margin should not be
discontinued if such discontinuation will cause profitable stores to
bear a portion of the unprofitable store's overhead

Question No: 39 ( Marks: 1 ) - Please choose one
In the process costing when material is issued for production to
department no 1.what would be the journal entry Passed?

► W.I.P (Dept-I)
To Material a/c

► W.I.P (Dept-ii)
To Material a/c

► Material a/c
To W.I.P (Dept-ii)

► W.I.P (Dept-ii)
To FOH applied.





Question No: 40 ( Marks: 1 ) - Please choose one
FIFO is the abbreviation of:
► Final Interest-Free Option
► First in First out Method
► None of the given options
► Fixed income Financial Operations

Question No: 41 ( Marks: 5 )
Bouch Company has the following data of year 02 given below

Year 02
Sales Rs. 120/unit
Direct Materials Rs. 8/unit
Direct labor Rs. 10/unit
Variable overhead Rs. 7/unit
Selling & Admin expenses Rs. 2/unit
Fixed overhead Rs. 7,500

Normal volume of production 250 units per year

Information regarding units as follows

Item
1st year
2nd year
3rd year
4th year


units
units
units
units

Opening stock
200
300
300

Production
300
250
200
200

Sales
100
150
200
300


Required: Prepare income statement of year 2 under absorption costing.


Question No: 42 ( Marks: 5 )
A Company manufacturers two products A and B. Forecasts for first 7
months is as under:

Month Sales in Units
A B
January 1,000 2,800
February 1,200 2,800
March 1,610 2,400
April 2,000 2,000
May 2,400 1,600
June 2,400 1,600
July 2,000 1,800

No work in process inventory has been estimated in any moth however
finished goods inventory shall be on hand equal to half the sales to
the next month, in each month. This is constant practice.
Budgeted production and production costs for the year 1999 will be as
follows:

Production units 22,500 24,000
Direct Materials (per unit) 12.5 19
Direct Labor (per unit) 4.5 7
F.O.H. (apportioned) Rs. 66,000 Rs 96,000

Prepare for the six months period ending June 1999, a production
budget for ‘’Product A”



Question No: 43 ( Marks: 10 )
The managing director of Parser Limited, a small business, is
considering undertaking a one-off contract. She has asked her
inexperienced accountant to advise on what costs are likely to be
incurred so that she can price at a profit. The following schedule has
been prepared:

Costs for special order Notes Rs.
Direct wages 1 28,500
Supervisor costs 2 11,500
General overheads 3 4,000
Machine depreciation 4 2,300
Machine overheads 5 18,000
Materials 6 34,000
Total 98,300

Notes
v Direct wages comprise the wages of two employees,
particularly skilled in the labor process for this job. They could be
transferred from another department to undertake the work on the
special order. They are fully occupied in their usual department and
sub-contracting staff would have to be brought in to undertake the
work left behind.
v Sub-contracting costs would be Rs. 32,000 for the period of
the work. Other sub-contractors who are skilled in the special order
techniques are also available to work on the special order. The costs
associated with this would amount to Rs. 31,300.
v A supervisor would have to work on the special order. The
cost of Rs. 11,500 is made up of Rs. 8,000 normal payments plus a Rs.
3,500 additional bonus for working on the special order. Normal
payments refer to the fixed salary of the supervisor. In addition, the
supervisor would lose incentive payments in his normal work amounting
to Rs. 2,500. It is not anticipated that any replacement costs
relating to the supervisors' work on other jobs would arise.
v General overheads comprise an apportionment of Rs. 3,000
plus an estimate of Rs. 1,000 incremental overheads.

Required
Produce a revised costing schedule for the special project based on
relevant costing principles. Fully explain and justify each of the
costs included in the costing schedule.

Question No: 44 ( Marks: 10 )
Due to the declining popularity of digital watches, Swiss Company’s
digital watch line has not reported a profit for several years. An
income statement for last year follows:

Segment Income Statement—Digital Watches

Rs. Rs.
Sales.....................................................................
500,000
Less variable expenses:
Variable manufacturing costs.............................. 120,000
Variable shipping costs...................................... 5,000
Commissions.....................................................
75,000 200,000
Contribution margin...............................................
300,000
Less fixed expenses:
General factory overhead(1).............................. 60,000
Salary of product line manager........................... 90,000
Depreciation of equipment (2)............................ 50,000
Product line advertising......................................
100,000
Rent—factory space (3).................................... 70,000
General administrative expense (1)..................... 30,000
400,000
Net operating loss.................................................
(100,000)

1) Allocated common costs that would be redistributed to other
product lines if digital watches were dropped
2) This equipment has no resale value and does not wear out
through use
3) The digital watches are manufactured in their own facility

Should the company retain or drop the digital watch line?



Question No: 45 ( Marks: 10 )

Production component Rates Per unit Rate
Direct material 2.5 lbs @ Rs. 4.00 Rs. 10.00
Direct Labor .5 hr @ Rs. 16.00 Rs. 8.00
VOH .5 hr @ Rs. 4.00 Rs. 2.00
Fixed FOH Rs. 40,000 Rs. 2.50
Actual Output 16,000 units
Variable S&A Rs. 6.00 per unit
Fixed S&A Rs. 60,000
Selling price Rs. 40

Assume sales of 12,000 units.
Required: What is the profit under marginal and absorption costing
method?