CIMA (Certificate level)First test of C01 (3rd December 2014)

Timings: 1:30 to 2:301. What are overheads?

A total direct costs only

B total indirect costs onlyC total non-production costs

D total production costs

2. In an organisation manufacturing a number of different products in one large factory, the rent of that factory is an example of a direct expense when costing a product.

Is this statement true or false?

A True

B False3. Variable costs are conventionally deemed to:

A. be constant per unit of output within relevant range.

B. vary per unit of output as production volumes changes

C. be constant in total when production volumes changes

D. Vary, in total, from period to period when production is constant.

4. Complete the following table

Per unitTotal

Fixed costIncreaseConstant

Variable cost

Total costIncreaseDecrease

a. Constant, Decrease

b. Decrease, Decrease

c. Constant , Increase

d. Increase, Decrease

5. An organization has found that there is a linear relationship between sales volume and delivery cost.

It has found that at sales volume of 400 units corresponds to delivery cost of 10,000 and that a sales volume of 800 units corresponds to delivery costs of 12,000.

Calculate expected delivery cost for a sales volume of 700 units _____________________.

6. Fixed cost per unit increases when

A. Production volume decreases

C. Production volume increases

B. Variable cost per unit decreases

D. Variable cost per unit increases

7. A company makes one delivery per week to all of its customers.

The cost of these deliveries will be

A. prime cost

B. selling and distribution cost

C. production overheads

D. direct production expense

8. The cost per unit of an expense item at different levels of activity is shown below:

Activity (units) Cost per unit ($)

200 1200

300 800

400 600

500 4.80

What is the behavioural classification of the expense item?

A Fixed cost

B Semi-variable cost C Stepped-fixed cost D Variable cost

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

A. sheet metal for car body

B. wages of factory worker

C. lubricants for machinery

D. fabric for car seats

10. A manufacturing company has four types of cost (identified as A, B, C and D).

The total cost for each type at two different production levels is:

Total cost for Total cost for

Cost type

500 units

1,000 units

A

1,000

2,000

B

5,000

5,000

C

5,250

10,250

D

250

500

Which two cost types would be classified as being variable cost?______________.11. Which of the following is most likely to be classified as a direct cost?

A Factory rent

B Supervisor costs

C Depreciation

D Material

12. The relationship between advertisement expenditure in (x) in one time period and sales (in ) (y) has been found to be y = 50 + 7x. which of the following interprets the value 7 correctly

A. for every 1 spent on advertising, sales increases by 7 on average

B. for every 1 spent on sales, 7 must on average be spent on advertising

C. for every 1 spent on advertising, sales will increase by 50

D. when advertising is zero, sales are 50/7

13. Which ONE of the following costs would NOT be classified as a production overhead cost in a food processing company?

A The cost of renting the factory building.

B The salary of the factory manager.

C The maintenance cost of equipment located in the materials store.

D The cost of ingredients.

14. A cost per unit which increases or decreases when volume of output decreases or increases respectively is known as

A. semi-variable

B. Variable cost

C. Step variable cost

15. A company is preparing a budget for the distribution department for the next year. For the previous two years the following is known:

No. of vehicles

Total cost

20X2

12

$19,800

20X3

15

$23,625

Total costs for 20X4, for 18 vehicles, is forecast to be:

A $22,950

B $25,750

C $27,450

D $28,35016. The following charts demonstrate various costs in relation to activity:

Which of the above charts represents unit fixed cost?

A Chart 1

B Chart 2

C Chart 3

D Chart 4

17. Cost Z is fixed in total for a period.

If the level of activity in the period is decreased by 50% what change would occur in total Cost of Z?

A Decrease by a third

B increase by a 100%

C Increase by a third

D remain same

18. Which of the following is most likely to be treated as indirect cost by a computer manufacturer?

A. factory worker wages

B. microchips

C. plastic housing for computer bodies

D. factory supervisor wages

19. Which of the following costs would be most likely description of cost curve given below?

A. direct material cost per unit

C. direct labour cost per unit

B. sales commission per unit

D. fixed production cost per unit

20. In calculating regression equation linking two variables, the standard formulae for the regression are given in terms of X and Y. which of the following is true regarding X and Y?

A. X should be the variable which will be forecast

B. It doesnt matter which variable is which

C. Y should be the dependent variable

D. X should be the dependent variable

21. Which of the following cost classifications can be applied to a percentage commission paid to salespersons on the basis of total sales values?

(1) Indirect

(2) Prime

(3) Variable

A (1) only

B (1) and (3) only

C (2) and (3) only

D (1), (2) and (3)

22. The following is an extract from the list of accounts of a motor vehicle manufacturer:

Cost codes

Direct materials

1000 1999

Indirect materials

2000 2999

Direct labour

3000 3999

Indirect labour

4000 4999

Which of the following is coded INCORRECTLY?

Code Description

A 4262

Wages of materials stores personnel

B 4131 Wages of canteen supervisor

C 1008 Metal for vehicle body

D 1361 Cleaning materials23. Which of the following would be classified as a variable cost in the operation of a motor vehicle?

A Oil change every 10,000 kilometres

B Petrol

C Insurance

D Tyre replacement

24. A cost has been classified as fixed. It production level increase by 20%, total fixed cost will

A. increase by 20%

B. remain same

C. increase by less than 20%

D. decrease by less than 20%

25. A company pay royalty of 0.20 per unit to the inventor of device which it manufacture and sell to customer. The royalty expense will be classified as

A. Selling expense

C. Direct expense

B. Production overhead

D. Administration expense

26. What type of cost is supervisors salary cost, where one supervisor is needed for every ten employees of the staff?

A. fixed cost

C. variable cost

B. semi-variable cost

D. step cost

27. Which of the following is the best description of direct cost?

A. A cost which is directly shared by one or more cost centre

B. A cost that can be directly identified per unit

C. A cost that is paid for in cash

D. A cost that is incurred by the factory

28. Which of the following costs would not be description of cost curve given below?

A. Direct material cost per unit.

B. direct labour cost per unit

C. fixed production cost per unit

D. salesman commission per unit

29. Which of the following costs would be most likely description of cost curve given below?

A. total material cost

B. factory rent

C. total wages cost

D. telephone expense

30. The table shows the total of Cost Y at different production levels of Product X:

Units of Product X

Total Cost Y ($000)

50

60

100

60

150

60

200

90

250

90

What could have been the cause of the increase in cost?

A lncreased fuel and maintenance costs for delivery vehicles

B lncreased storage requirements

C Loss of discounts on raw materials

D Pay increase for direct labour.

Miss ZAIRA ANEES

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Compiled by

Zaira Anees