Deck 11: Costing: Overview and Basic Techniques

Question 1

Peasnell & Peabody Limited use a standard component in their production of office machinery.During the first week in September 20X6, the following deliveries into inventory and transfers to production of the component take place: What is the total value of the inventory of the component issued to production in the first week in September 20X6? Assume that Peasnell & Peabody use the first in, first out valuation convention.

A)£2325
B)£4650
C)£5790
D)£5865

Answer 1

£5865

Question 2

Which one of the following statements describes prime cost?

A)Total cost less production and other overheads.
B)Total cost less other overheads.
C)Production cost less direct expenses.
D)Direct expenses plus production overheads.

Answer 2

Total cost less production and other overheads.

Question 3

Hussain and Hak Productions Limited makes anti-theft devices for motor vehicles.The company uses a standard bolt fitting in many of its products.During the first week in February 20X8, the following deliveries into inventory and transfers to production of the fitting take place: What is the value of closing inventory of the component at the end of the first week in February 20X8? Assume that Hussain and Hak Productions Limited adopts the first in first out convention of inventory valuation.

A)£2287
B)£4650
C)£2250
D)£2325

Answer 3

£2325

Question 4

Breech & Watkin Limited produces custom-built summerhouses.Each summerhouse is individually designed for the client, and no two are alike.Which method of accumulating costs is most appropriate for Breech & Watkin?

A)product costing
B)service costing
C)job costing
D)batch costing

Question 5

Weston Pemberley Limited manufactures coffee machines under licence from an Italian company.It incurs the following production costs for the month ended 31 July 20X6: What is the total of direct costs for July 20X6?

A)£13 674
B)£12 148
C)£12 812
D)£13 010

Question 6

Arif Productions Limited adopts the following convention in valuing issues of raw material to its production line: the assumption is made that the raw materials most recently delivered will remain in the warehouse until all the older inventories of material are used up in production.This valuation convention is commonly described as which of the following?

A)LILO
B)FIFO
C)FILO
D)LIFO

Question 7

Which one of the following statements about cost is not correct?

A)Prime cost is the total of all direct costs.
B)Production cost comprises all direct costs plus production overheads.
C)'Indirect costs' and 'overheads' mean the same thing.
D)Direct costs include materials, labour and production overhead costs.

Question 8

Slinn & Beazley Limited produces computer-controlled knitting machines.It incurs the following production costs in the month of March 20X3: What is the total of production overheads for the month of March 20X3?

A)£10 831
B)£3349
C)£4211
D)£5447

Question 9

Pendle Unsworth Limited manufactures baby buggies and pushchairs.One of the materials used in production is a heavily plasticized fabric.During the first week in January 20X4 the following deliveries into inventory and transfers into production of the fabric take place: What is the value of the closing inventory of the fabric, assuming that the company adopts the AVCO convention of inventory valuation (to the nearest £)?

A)£2315
B)£3069
C)£5875
D)£3019

Question 10

Which one of the following statements describes prime cost? Prime cost is the total of:

A)Direct and indirect production costs.
B)Direct materials, direct labour and expenses.
C)Production overheads.
D)The total of indirect costs.

Question 11

Prade Enterprises Limited produces handbags.It incurs the following production costs in the month of November 20X2: What is the total of production overheads for the month of November 20X2?

A)£3492
B)£2630
C)£3330
D)£3719

Question 12

Hanley Trowbridge Limited allocates direct labour and materials costs to specific jobs.Job No.1387 has been undertaken to produce 950 units of product.The following materials and labour have been booked to the job: Material ZYX: 330 kg at £25.35 per kilo
Direct labour Grade 6: 150 hours
Direct labour Grade 7: 40.5 hours
In addition, a royalty of £2.50p per unit is payable to the product designer.
Grade 6 labour costs £7.15 per hour.Grade 7 labour costs £8.30 per hour.
What is the prime cost per unit of product (to nearest penny)?

A)£32.12
B)£12.79
C)£10.29
D)£12.43

Question 13

Which one of the following statements is correct? The term 'absorption costing' describes:

A)The accumulation of direct costs and production overheads which is applied in the costing of work-in-progress and finished goods inventory.
B)The process of accumulating those direct costs that can be identified with a particular batch of products.
C)The calculations involved in working out the costs attributable to a particular cost centre.
D)The accumulation of costs for decision-making purposes.

Question 14

Gallifrey Components Limited produces a stylish reclining chair.Which one of the following is not an indirect production cost?

A)Cost of repairing leather cutting machine.
B)Insurance premium for factory building.
C)Costs of cleaning the factory
D)Royalty of £5.00 per chair payable to the designer.

Question 15

Spokane & Wildebeeste Limited is a clothing manufacturer.It incurs the following production costs in the month of April 20X9: What is the total of direct costs for April 20X9?

A)£4122
B)£3988
C)£3826
D)£4688