MA1 Management

Information
First Test
 MA1 Management Information
1 A company pays its employees using a piecework scheme. The rates are as follows:

0-100 units per week $4 per unit

101-150 units per week $4.50 per unit
151-200 units per week $5 per unit
201 + units per week $5.50 per unit

If an employee produces 163 units in week 48 including 15 defective units, defective units are paid at $1.5.

what would their pay be for that week?

$________

2 Which of the following will be completed by a production department requiring materials to be obtained
from store?

A A purchase order

B A delivery note

C A goods requisition note

D A goods received note

3 Which Two of the followings are direct expense?

A Material used in production

B Royalties
C Sub Contractor pay
D Depreciation

4 Which TWO of these documents are matched with the goods received note in the buying process?

A Invoice from supplier

B Purchase order

C purchase requisition

D Stores requisition

24 A company uses an overhead absorption rate of £3·50 per machine hour, based on 32,000 budgeted machine
hours for the period. During the same period the actual total overhead expenditure amounted to £109,875 and 30,000
machine hours were recorded on actual production.

By how much was the total overhead under or over absorbed for the period?

A Under absorbed by £3,975

B Under absorbed by £7,000
C Over absorbed by £3,975
D Over absorbed by £7,000

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 MA1 Management Information
6 Employee A is a carpenter and normally works 40 hours per week. The standard rate of pay is $6.60 per
hour. An overtime pay of 150% of the basic hourly rate is paid for all overtime hours worked. During the last week
of October, Employee A worked for 7 hours of overtime.

How much of Employee A's earnings for the last week of October would have been treated as labour cost?

$________

7 Conversion Cost comprises:

A Material cost and labour cost

B Indirect labour indirect material and indirect expense relating to production
C Direct labour direct material and direct expense relating to production
D Direct labour and production overhead cost

8 ARM Co has established the following information regarding fixed overheads for the coming month

Budgeted information:

Fixed overheads £180,000

Labour hours 3,000 hours
Machine hours 10,000 hours
Units of production 5,000 units

Actual fixed costs for the last month were £160,000.

ARM Co produces many different products using highly handmade process and absorbs overheads on the most
appropriate basis.

What will be the pre-determined overhead absorption rate?

A £16
B £18
C £36
D £60

9 Which of the following is most likely to be treated as an indirect cost by a house builder?

A Water
B Bricks
C Cement
D Electrical cables

10 Which of the following is most likely to be treated as an indirect cost by a car manufacturer?

A Royalties
B Wages for factory supervisor
C Wages for factory Assembler
D Fabric for car seats

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 MA1 Management Information
11A jobbing company operates a premium bonus scheme for its employees of Two third of the time saved
compared with the standard time allowance for a job, at the normal hourly rate. The data relating to Job
1260 completed by an employee is as follows:

Allowed time for Job 1260 6 hours

Time taken to complete Job 1260 4 hours
Normal hourly rate of pay £6

What is the total pay of the employee for Job 1260?

12 Which of the following best describes a period cost?

A A cost that relates to a time period which is deducted as expenses for the period and is not included in
the inventory valuation.

B A cost that can be easily allocated to a particular period, without the need for arbitrary apportionment
between periods.

C A cost that is identified with a unit produced during the period, and is included in the value of
Inventory. The cost is treated as an expense for the period when the inventory is actually sold.

D A cost that is incurred regularly every period, eg every month or quarter.

13 Which TWO of the following statements describe the information a Goods Received Note(GRN) provides?

A Information used to update inventory records

B Information to check that the correct price has been recorded on the supplier’s invoice

C Information to check that the correct quantity of goods has been recorded on the supplier’s invoice

D Information to record any unused materials which are returned to stores

14 An employee is paid according the following differential piecework scheme,

Weekly output Rate of pay per unit

Units $

1–25 2.30

26–40 2.40

41 and above 2.60

He receives a guaranteed weekly wage of $420. In a 6 days working week when he produces 32 units per day,
his gross wage will be

$________

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 MA1 Management Information
15 Which one of the following would be classified as indirect labour?

A Painter on a car production line

B Bricklayers in a house building company
C Machinists in a factory producing clothes
D Store supervisor of an engineering company

16 In times of rising prices, the valuation of inventory using the Last In First Out method, as opposed to the
Weighted Average Cost method, will result in which ONE of the following combinations?

Cost of sales Profit Closing inventory

A Lower Higher Higher

B Lower Higher Lower

C Higher Lower Lower

D Higher Higher Lower

17 Cost type Cost @ Cost @

100 units 150 units
W 8,000 12,000
X 7,000 7,000
Y 7,500 11,250
Z 10,000 13,000

Where V = variable, SV = semi-variable and F = fixed, assuming linearity, the four cost types W, X, Y and Z
are respectively

W X Y Z
A V F SV V
B SV F V SV
C V F V SV
D SV F SV SV

18 Jane works as a member of a three-person team in the assembly department of a factory. The team is
rewarded by a group bonus scheme whereby the team leader receives 40 per cent of any bonus earned by the
team, and the remaining bonus is shared evenly between Jane and the other team member. Details of output
for one day are given below.

Hours worked by team 8 hours

Team production achieved 80 units
Standard time allowed producing one unit 9 minutes
Group bonus payable at $6 per hour 70% of time saved

The bonus element of Jane's pay for this particular day will be
A $5.04
B $7.20
C $10.08
D $16.80

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 MA1 Management Information
19 A company employs 10 direct production operatives and 5 indirect staff in its manufacturing department. The
normal operating hours for all employees is 38 hours per week and all staff are paid a basic rate of $5 per hour.
Overtime hours are paid at a basic rate plus 50%. During a week all employees worked for 44 hours to meet the
company’s general production requirements.

What amount should be charged as indirect labour cost?

$________

20 Budgeted labour hours 8,500

Budgeted overheads $148,750
Actual labour hours 7,928
Actual overheads $146,200

Based on the data given above, what is the labour hour overhead absorption rate?

A $17.50 per unit

B $17.50 per hour
C $18.44 per hour
D $18.44 per unit

21 A business is preparing its production budget for the year ahead for product A998. It is estimated that 100,000
units of A998 can be sold in the year and the desired closing inventory is 24,000 units which is 20% higher than the
opening inventory.

How many units of A998 need to be produced?

22

23 A company employs four supervisors to oversee the factory production of all its products. The salaries
paid to these supervisors are:

A Variable cost
B Semi variable cost
C Fixed cost
D Stepped fixed cost

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 MA1 Management Information
24 What is an overhead absorption rate used for?

A share out common costs over benefiting cost centres

B find the total overheads for a cost centre
C charge overheads to products
D control overheads

25 Job 198 requires 630 active labour hours to complete. It is expected that there will be ten percent idle time.

The wage rate is $20 per hour. The labour cost of Job 198 is:

A $12,600
B $14,000
C $13,860
D $16,000

26 Which TWO of the followings are characteristics of a revenue centre?

A Managers have control over marketing.

B Management have a sales team.
C Management have a sales team and also have control over production cost.
D Managers can purchase capital assets.

27 Which of the following may be used to support claims for overtime payments for salaried staff

A Employee record card

B Job cards
C Pay slips
D Timesheets

28 Which of the following describes a purchase requisition?

A Issued by the purchasing department, sent to the supplier requesting materials

B Issued by the stores department, sent to the purchasing department requesting materials

C Received together with the materials and compared to the materials received

D Issued by the production department, sent to the stores department requesting materials

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 MA1 Management Information
29 Factory overheads can be absorbed by which of the following methods?

(i) Indirect labour hours

(ii) Machine hours
(iii) As a percentage of variable cost
(iv) Material cost

A (i), (ii), (iii) and (iv)

B (i) and (ii) only
C (i), (ii) and (iii) only
D (ii) and (iv) only

30 Which of the following best describes a direct cost?

A Cost which arises from a decision already taken, which cannot, in the short run, be changed.
B A cost for which the behavior pattern can be easily analyzed to facilitate valid budgetary control comparison.
C Cost which can be influenced by its budget holder.
D A specific cost which can be traceable on specific cost unit or product.

31 A differential piecework scheme has a basic rate of $0.50 per unit. Output in addition to500 units is paid at higher
rates. The premiums over and above the basic rate, which apply only to additional units over the previous threshold,
are:

Output (units) Premium (per unit)

501–600 $0.05

above 600 $0.10

What is the total amount paid if output is 620 units?

A $317

B $318

C $322

D $372

32 Which of the following is usually classed as a mixed cost?

A Supervisor’s wages

B Raw materials

C Rates

D Telephone

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 MA1 Management Information
33 Inventory movements for product X during the last quarter were as follows:

January Purchases 10 items at $15 each

February purchases 10 items at $17 each

March Purchases 20 items at $19 each

Sales 38 items at $30 each

Opening inventory at 1 January was 6 items valued at $14 each.

What would the value of closing inventory using the weighted average cost method?

34 Which of the following statements about overhead absorption rates are true?

(i) They are predetermined in advance for each period

(ii) They are used to charge overheads to cost centres
(iii) They are based on budgeted data for each period
(iv) They are used to spread overhead costs on cost centres

A (i) and (iii) only

B (i), (ii) and (iv) only
C (ii), (iii) and (iv) only
D (iii) and (iv) only

35 Inventory movements for product X during the last quarter were as follows:

January Purchases 10 items at $19.80 each

February Sales 10 items at $30 each

March Purchases 20 items at $24.50

Sales 5 items at $30 each

Opening inventory at 1 January was 6 items valued at $15 each.

What would the Gross profit be for the quarter using the FIFO cost method?

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 MA1 Management Information
36 A factory consists of two production cost centres (G and H) and two service cost centres (J and K). The
total overheads allocated and apportioned to each centre are as follows:

G H J K

$40,000 $50,000 $30,000 $18,000

The work done by the service cost centres can be represented as follows:

G H J K

Percentage of service cost centre J to 30% 70% – –

Percentage of service cost centre K to 50% 40% 10% –

The company apportions service cost centre costs to production cost centres using amethod that fully recognises any
work done by one service cost centre for another.

What are the total overheads for production cost centre G after the reapportionment of all service cost centre
costs?

37 Inventory movements for product X during the last quarter were as follows:

January Purchases 10 items at $30 each

February Sales 20 items at $40 each

March Purchases 20 items at $37

Sales 5 items at $43 each

Opening inventory at 1 January was 20 items valued at $25 each.

What would the Cost of issue for the quarter using the LIFO method?

38 Which of the following would be the most appropriate basis for apportioning machinery running costs to
cost centres within a factory?

A The number of machines in each cost centre

B The floor area occupied by the machinery in each cost centre

C The value of the machinery in each cost centre

D The operating hours of the machinery in each cost centre

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 MA1 Management Information
39 There are 30,500 units of Part Number X35 on order with the suppliers and 19,250 units outstanding on existing
customers' orders.

If the free inventory is 15,000 units, what is the physical inventory?

40 Lerna produces hydras in three production departments and needs to apportion budgeted monthly fixed
costs between those departments. Budgeted costs are as follows:

Rent 2,000

Rates 1,000

Plant insurance 1,000

Plant depreciation 10,000

Supervisor’s salary 7,000

–––––––

21,000

The following additional information is available.

Department A Department B Department C

Area (square feet) 3,800 3,500 700

Value of machinery ($000) 210 110 80

Number of employees 34 16 20

What is the total budgeted monthly fixed overhead cost for Department C?

A $1,837.50

B $4,462.50

C $7,000.00

D $10,600.00

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 MA1 Management Information
42 A business is preparing its production budget for the year ahead for product A998. It is estimated that 200,000
units of A998 can be sold in the year and the opening inventory is currently 25,000 units. The inventory level is to
be reduced by two fifth by the end of the year.

How many units of A998 need to be produced?

43 What is the formula to calculate the production budget?

A Sales budget + opening inventory – closing inventory

B Sales budget – opening inventory + closing inventory
C Sales budget – opening inventory – closing inventory
D Sales budget + opening inventory + closing inventory

44 The cost structure for a product is as follows:

Per unit
$
Selling price 30
Variable production costs 9
Fixed production costs 6
Total production costs 15

Non-production overheads:
Variable 2
Fixed 3
Total cost 20

What is the Gross profit per unit?

A $10
B $15
C $19
D $21

45 The cost structure for a product is as follows:

Per unit
$
Selling price 30
Variable production costs 9
Fixed production costs 6
Total production costs 15

Non-production overheads:
Variable 2
Fixed 3
Total cost 20

What is the absorption cost per unit?

A $10
B $15
C $19
D $21

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 MA1 Management Information
46 The number of units of finished goods inventory at the end of a period is greater than at the beginning.

What would the effect be of using the marginal costing method of inventory valuation?

A less Closing inventory value than the absorption costing method

B the same Closing inventory value as the absorption costing method
C more Closing inventory value than the absorption costing method

47 Duo Co makes and sells two products, Alpha and Beta. The following information is available for period 1.

Production Sales
Units Units
Alpha 2,500 2,300
Beta 1,750 1,600

Product Alpha Beta

$ $
Unit selling price 90 75

Unit variable costs

Direct materials 15 12
Direct labour ($6/hr) 18 12
Variable production overheads 12 8

Fixed costs for the company in total were $254,000 in period 1 and are recovered on the basis of direct labour hours.

The Alpha Gross profit per unit using absorption costing method
$______

48 Last year, a firm started to produce a single product with a unit selling price of $14. In the first year of
operation standard capacity was 100,000 units, production was 110,000 units, and sales were 95,000 units.

The actual costs incurred were:

Fixed Variable
Raw materials – $3.00 per unit produced
Direct labour – $2.00 per unit produced
Factory overhead $200,000 $1.00 per unit produced
Selling and administrative expenses $80,000 $1.00 per unit sold

Using absorption costing, what was the value of closing inventory?

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 MA1 Management Information
49 For a product that has a positive unit contribution, which of the following events would tend to increase
total contribution by the greatest amount?

A 10% decrease in variable cost

B 10% increase in selling price

C 10% increase in volume sold

D 15% decrease in total fixed costs

50 ALS sells one product. The cost card for that product is given below:

Direct materials 4

Direct labour 5

Variable production overhead 3

Fixed production overhead 2

Variable selling cost 3

The selling price per unit is $20. Budgeted fixed overheads are based on budgeted production of 1,000 units.
Opening inventory was 200 units and closing inventory was 150 units. Sales during the period were 800 units and
actual fixed overheads incurred were $1,500.

What was the net profit during the period using absorption costing?

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