Institute of Certified Management Accountants of Sri Lanka

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Institute of Certified Management Accountants of Sri Lanka

Foundation Level

Pilot Paper

Instructions to Candidates

1. Time allowed is two (2) hours. 2. Total 100 Marks. 3. Answer all questions. 4. Encircle the number of your choice in relation to Multiple Choice Questions. 5. Candidates are allowed to use non-programmable calculators. 6. The answers should be given in English Language.

Subject

Subject Code

Management Accounting Fundamentals

(MAF / FL 1)

1. Which of the following criteria have differences between management accounting and financial accounting? (i) Types of reports produced (ii) Frequency of reports (iii) The format of reports (iv) The users of reports

a) All of the above b) Only (ii), (iii) &(iv) c) Only (i), (ii) & (iii) d) Only (iv)

2. All of the following are characteristics of management accounting (MA), except: a) MA reports are used primarily by insiders rather than by persons outside of the business entity b) Purpose of MA is to assist managers in planning and controlling business operations c) MA information must be developed in conformity with generally accepted accounting principles or with income tax regulations d) MA information may be tailored to assist in specific managerial decisions

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

3. The following two statements are given:

______________________ is concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurement.

______________________ relates to the provision of appropriate information for decision making, planning, control and performance evaluation.

The blanks for (i) and (ii) above should be respectively:

a) Cost accounting, Management accounting b) Management accounting, Cost accounting c) Financial Accounting, Cost accounting d) None of the above

4. Sayanu (Pvt) Ltd. develops software. The salaries paid to the software engineers of the company are considered as; a) Administration cost b) Indirect cost c) Distribution cost d) Direct cost

5. An apparel company is to pay their machine operators a fixed salary of Rs.12,000 plus a

piece rate per unit of Rs.10 each on the number of units produced. This type of cost is an

example for;

a) Semi ? fixed cost b) Fixed cost c) Semi- variable cost d) Variable cost

6. Following information on the activity levels and its total costs is given;

Activity Level (Units) 8,000 12,000 15,000

Total Cost (Rs) 230,000 285,000 315,000

Variable cost per unit is constant whereas the total fixed cost steps up by 10% when the activity level exceeds 9999 units. Calculate the total cost of the company at an activity level of 10000 units is,

a) Rs 265000 b) Rs 260000 c) Rs 237500 d) Rs 272500

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

7. ______ are future costs that affect the management decision.

(a) Sunk costs (b) Standard costs (c) Relevant costs

(d) Irrelevant costs

8. Chathura is a wholesale rice seller. As at 30th September 2015 he had 600kgs of rice

valued at Rs.65 per kilo at his stores. The movements of the stocks during the first week

of the month of October 2015 are as follows.

Date

Purchases (Kgs) Sales (Kgs)

Price per Kg. (Rs.)

02.10.2015

400

04.10.2015

-

06.10.2015

500

-

68

700

-

70

If Chathura uses First in First out (FIFO) method to value his stocks, the value of the stock as at the end of 06th October 2015 is;

a) Rs.54,500 b) Rs.55,400 c) Rs.54,860 d) None of the above

9. A company is to maintain an optimum stock level, which is also known as "Economic Order Quantity" when it's; a) Stock carrying cost is equal to the stock ordering cost b) Stock ordering cost is higher than the stock carrying cost c) Stock carrying cost is higher than the stock ordering cost d) Stock carrying cost, stock ordering cost and stock out cost are equal

10. A cosmetic retailer has an annual demand of units 60,000 for an imported cosmetic product. The purchasing cost per unit is Rs.800. the holding cost per unit is calculated as 10% of the purchase price. The ordering cost per unit is Rs.60.The most cost efficient cosmetic order size (units) to order would be;

a) 300 b) 400 c) 212 d) 109

11. Which of the following instances suitably classify the business applications to process costing system and job costing system?

Process costing a) Oil refinery

Job costing Biscuit manufacturer

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

b) Beverage manufacturer c) Paint manufacturer d) Automobile manufacturer

Garage Biscuit manufacturer Garment

12. The cost of labor turnover includes a) Leaving costs b) Training costs c) Learning costs d) All of the above

13. A toy manufacturing company pays Rs.60 per hour for its workers and the expected output per hour is 10 units. Every additional unit of output will be paid at Rs.8. If a worker produced 82 units within 7 hours of work, the total earnings for him would be; a) Rs.420 b) Rs. 656 c) Rs.615 d) Rs.516

14. J PLC uses traditional absorption costing and absorbs production overheads on the basis

of standard machine hours. The following budgeted and actual information is extracted

from the last accounting period.

Budget

Actual

Production overhead (Rs) Machine hours Units produced

180,000 50,000 40,000

178,080 48,260 38,760

At the end of the period, production overhead will be reported as:

a) Under-absorbed by Rs. 4,344 b) Under-absorbed by Rs. 3,660 c) Over-absorbed by Rs. 4,344 d) Over-absorbed by Rs. 3,660

Use the following information to answer question nos. 15 and 16.

Budgeted overhead cost for the year Actual machine hours for the 1st quarter Actual overhead cost for the 1st quarter Actual output for the 1st quarter

Prime cost per unit

Absorbed overhead cost on the basis of machine hours is

Rs. 450,000 Rs. 8,000 Rs 90,000 Rs. 2,000 Rs. 61 Rs. 72,000

15. Budgeted overhead absorption rate is a) Rs. 12.50 per machine hour

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

b) Rs. 9.00 per machine hour c) Rs. 56.25 per machine hour d) Rs. 14.06 per machine hour

16. Total cost per unit is

a) Rs. 106.00 b) Rs. 73.50 c) Rs. 117.25 d) Rs. 97.00

17. Which of the following statements is incorrect as a feature of marginal costing?

a) Cost are classified as fixed and variable. b) Only the variable costs are charged to the product as product costs. c) Fixed costs are charged against the profit. d) Stock is valued at both fixed and variable costs.

18. Variable costing is also known as ; a) Direct costing b) Indirect costing c) Marginal costing d) Both (A) & (C)

19. Using the following data, the unit product cost under absorption costing method is;

Units produced

1,000

Direct materials

Rs 6

Direct labour

Rs 10

Fixed production overhead

Rs 6000

Variable production overhead

Rs 6

Fixed selling and administration cost

Rs 2000

Variable selling and distribution cost

Rs 2

a) Rs 24 b) Rs 28 c) Rs 30 d) None of the above

20. At the breakeven point:

(a) Profit is Rs. 0. (b) Fixed Cost + Variable Cost = Sales. (c) Fixed Cost = Contribution Margin. (d) All of the above.

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

21. Janit sells a product for Rs 6.25. The variable cost is Rs 3.75 per unit. Janet's break-even units are 35,000. What is the amount of fixed costs?

a) Rs 87,500 b) Rs 35,000 c) Rs 131,250 d) Rs 104,750

Use the following information to answer question nos. 22 and 23

Ama (Pvt) Ltd. commenced its business in 2014. The company had drawn up the following budgets for its first two accounting periods 2014 and 2015.

Sales units Production capacity

2014 95,000 100,000

2015 103,000 100,000

The following budgeted information is relevant to both periods.

Selling price per unit Variable cost per unit Fixed production overhead per period

Rs 6.40 3.60 150,000

22. In 2014, the budgeted profit will be

a) The same under both absorption costing and marginal costing. b) Rs 7500 higher under marginal costing. c) Rs 7500 higher under absorption costing. d) Rs 14000 higher under absorption costing.

23. In the 2015, everything was as budgeted, except for the fixed production overhead, which was Rs 157,000. The reported profit, using absorption costing in 2015, would be

a) Rs 123,000 b) Rs 126,900 c) Rs 133,900 d) Rs 138,400

24. Select the correct statement with respect to Integrated Accounting System. a) A separate cost ledger is maintained b) A separate financial ledger is maintained c) A self-balancing ledger system is maintained. d) A single ledger is maintained for both financial and cost accounting purposes

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

25. The costing system used in entities providing goods or services in response to customer orders and specifications is known as: a) Process costing. b) Job costing. c) Equivalent unit costing. d) Conversion costing.

26. Select the correct statement with respect to the process costing a) Cost of the normal loss should be charged to the profit and loss account. b) Cost of the normal loss should be absorbed by completed units c) Cost of the normal loss should be absorbed by remaining good items d) Cost of the normal loss should be ignored

27. The following information is given with respect to the job No 602

Direct material used - X - Y

Direct labour -Grade I -Grade II

Quantity 30 Units 20 Units 10 Hours 18 Hours

Price/Rate (Rs.) 60 40 100 70

Overhead absorption rate is Rs. 30/= per labour hour. Expected profit markup is 50% on cost. The price to be charged from the customer for this job is

a) Rs. 8,550 b) Rs. 7,740 c) Rs. 5,700 d) Rs. 7,290

28. Completed output from a process in a period was 160,000 units. There was no opening work-in-progress. However, there were 12,000 unfinished units at the end of the period, which were fully completed for materials but only 40% processed in respect of conversion costs,

The costs per equivalent unit for the period were:

Materials

Rs 12.60

Conversion costs Rs 8.70

What was the value of the closing work-in-progress? a) Rs 255,600 b) Rs 127,800 c) Rs 192,960 d) Rs 213,840

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Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

29. Select the correct treatment for the scarp sales value of normal and abnormal losses.

Normal Loss (a) Charged to income statement (b) Deducted from the process cost (c) Deducted from the process cost (d) Charged to income statement

Abnormal Loss Charged to income statement Deducted from the process cost Deducted from cost of abnormal loss Deducted from process cost

30. What will be the impact of normal loss on the overall per unit cost compared to a situation where no normal loss exist? (a) Per unit cost will decrease. (b) Per unit cost remains unchanged. (c) Per unit cost will increase. (d) Normal loss has no relation to unit cost.

31. Cost of abnormal wastage is: (a) Charged to the product cost (b) Charged to the income statement (c) Charged partly to the product and partly to income statement (d) Not charged at all to income statement

Use the following information to answer question nos. 32 to 34

The costs relevant for the process I : Direct material Direct labor Absorbed overhead

Rs. 28,100 13,800 15,870

1,000 units were introduced to the process. Normal losses are expected to be 10% from the input. Scrap value of both normal and abnormal loss is Rs. 20 per unit.

Completed units were 600 units. The working progress 150 units were complete 100% from direct material and 40% from conversion costs. Raw materials are added at the beginning of the period and losses are recognized at 20% of completion. Scrap value of the normal loss should be adjusted to the direct material costs.

32. The cost of finished goods is a) Rs. 39,378 b) Rs. 45,180 c) Rs. 43,200 d) Rs. 43,800 8

Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper

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