1.1 Which of the following is NOT a function of the human resources department?

A Hiring employees
B Firing employees
C Paying employees
D Arranging training of employees (2 marks)

1.2 Which of the following statements relate to the policy manual of an organisation?
1 Policies should be in place to deal with the authorisation of the purchase of fixed assets.
2 Employees will need to know where to find the policy manual to refer to but need not have read it.
3 Strict adherence to the manual can lead to inflexibility.
A 1, 2 and 3
B 1 and 2 only
C 1 and 3 only
D 2 and 3 only (2 marks)

1.3 Which of the following personnel in an organisation would NOT be involved in the sale of goods on
credit?
A Warehouse manager
B Purchase ledger controller
C Credit controller
D Accountant (2 marks)

1.4 What is the double entry for a purchase of goods on credit?

A Debit Payables
Credit Materials control
B Debit Receivables
Credit Materials control
C Debit Materials control
Credit Payables
D Debit Materials control
Credit Receivables (2 marks)

1.5 What is the double entry for materials returned to a supplier which had been purchased on credit?
A Debit Payables
Credit Materials control
B Debit Receivables
Credit Materials control
C Debit Materials control
Credit Payables
D Debit Materials control
Credit Receivables (2 marks)
1.6 Which of the following statements, relating to the recording of accounting transactions in books of
prime entry, are TRUE?
1 Credit notes from suppliers are recorded in the sales returns day book.
2 Invoices to customers are recorded in the sales day book.
3 Payments for expenses are recorded in the cash payments book.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D All three (2 marks)

1.7 Which of the following statements, relating to cost ledger accounting, are TRUE?
1 An integrated system is one where separate ledgers are kept for cost accounting and management
accounting.
2 An interlocking system is one where there is just one system of ledger accounts for cost
accounting and for management accounting.
A Both statements are correct
B Neither statement is correct
C Statement 1 is correct but statement 2 is incorrect
D Statement 2 is correct but statement 1 is incorrect (2 marks)

1.8 Which of the following describes the cost ledger control account?
A An account which can be used to reconcile creditor (supplier) balances
B An account which can be used to reconcile debtor (customer) balances
C An account in the cost ledger to record financial items
D An account in the financial ledger to record costing items (2 marks)

1.9 Purchase invoices are entered into an organisation's computer system at the end of each day.
What is this an example of?
A Batch processing
B Real time online processing
C File maintenance
D File updating (2 marks)

1.10 Which of the following is a disadvantage of batch processing?

A Information will not always be up-to-date
B It is not suitable for internal regular tasks
C A 'missing' record cannot be located
D Batches sent off for processing cannot be tracked (2 marks)

1.11 Which of the following statements about integrated accounts is/are correct?
1 Integrated systems save time and administrative effort.
2 Integrated systems maintain two separate sets of accounts: one for financial accounts and one for
cost accounts.
3 Integrated systems avoid the need for periodic profit reconciliations.
A 1 only
B 1 and 2
C 1 and 3
D 2 and 3 (2 marks)
1.12 What is the book of prime entry where invoices from credit suppliers are recorded?
A Sales day book
B Purchases day book
C Petty cash book
D Cash payments book (2 marks)

1.13 Which of the following statements about an organisation chart is NOT true?
A An organisation chart provides a summary of the structure of a business
B An organisation chart can improve internal communications within a business
C An organisation chart can improve employees' understanding of their role within a business
D An organisation chart cannot indicate authority within a business (2 marks)

1.14 Which of the following is an advantage of centralisation?

A It helps to develop the skills of junior managers
B It avoids overburdening top managers in terms of workload and stress
C Senior managers can take a wider view of problems and consequences
D Local factors can be taken into account when making decisions (2 marks)

1.15 A company's accounting system operates so that the cost accounts are independent of the financial
accounts. The two sets of accounts are reconciled on a regular basis to keep them continuously in
agreement.
What is this type of accounting system known as?
A Independent accounts
B Interlocking accounts
C Reconciled accounts
D Integrated accounts (2 marks)

1.16 When materials are purchased on credit and an interlocking costing system is in use what is the
double entry for the purchase?
A Debit Materials control
Credit Payables
B Debit Materials control
Credit Cost ledger control
C Debit Payables
Credit Materials control
D Debit Cost ledger control
Credit Materials control (2 marks)

1.17 Which of the following describes how management controls the transactions of a business?
A Through a system of control of transactions
B Through a system of authorisation of transactions
C Through strict control of sales on credit made to new customers
D Through strict control of purchases of non-current assets (2 marks)
1.18 This question has been taken from the July–December 2018 examining team report.
Which of the following are necessary aspects of the control which the management of a business
exercises over transactions?
1 Ensuring that new customers have a good credit rating
2 Ensuring that only bona fide employees are on the payroll
3 Ensuring that payments to suppliers are appropriately authorised
A 1, 2 and 3
B 1 and 3 only
C 2 and 3 only
D 1 and 2 only (2 marks)

(Total = 36 marks)
2.1 How would facts and figures that have been processed and communicated to another party be best
described?
A Data
B Statistics
C Information
D Coding (2 marks)

2.2 Which of the following is NOT an external source of information?

A Newspapers
B Internet
C Employees
D Industry report (2 marks)

2.3 The following statements are about data and information.

1 Data is a scientific term for facts, figures and measurements.
2 Information is data that has been processed.
Which of the following is correct with regard to the above two statements?
A Both statements are false
B Both statements are true
C Statement 1 is true but statement 2 is false
D Statement 1 is false but statement 2 is true (2 marks)

2.4 Which of the following combinations describe the purposes of management information?
A Planning, negotiating and decision making
B Control, decision making and publication
C Decision making, negotiating and implementing
D Planning, control and decision making (2 marks)

2.5 The cost accountant has produced a report showing the hourly output from the factory floor for the last
week.
Who in the organisation is most likely to require this information?
A The financial accountant
B The sales director
C The production manager
D The human resources manager (2 marks)

2.6 Which of the following is NOT a quality of good management information?

A Clarity
B Reliability
C Accuracy
D Computerised (2 marks)

2.7 The cost accountant has provided information about the actual and budgeted cost of the materials used
in production in the last month.
In which of the following areas will the information above primarily aid management?
A Planning
B Implementing
C Control
D Decision making (2 marks)
2.8 Which of the following is NOT an example of internal information for the accounts department?
A Goods received note
B Time sheets for employees
C Materials requisitions from the factory
D Purchase invoices from suppliers (2 marks)

2.9 Which of the statements about management accounting are TRUE?

1 Management accounts are a legal requirement for a company.
2 Management accounts consider future data only.
3 Management accounts include financial and non-financial information.
A 1 and 3
B 2 and 3
C 2 only
D 3 only (2 marks)

2.10 Which of the following is NOT an attribute of management accounts?

A Based on historical data only
B Produced for internal use only
C Used for planning, decision making and control
D Presented according to management's requirements (2 marks)

2.11 Which of the following could be considered to be a limitation of cost and management accounting
information?
A Affected by changing prices over time
B Includes non-financial as well as financial information
C Produced periodically
D Produced in the format required by management (2 marks)

2.12 Which is true of management information?

A It is the same as operating information
B It must be produced by a computer
C It should be completely accurate regardless of cost
D It should be produced if its cost is less than the increased revenue it leads to (2 marks)

2.13 Which of the following statements is correct?

A Cost accounting is only relevant to manufacturing organisations
B Management accounts must be presented in a regulated format
C Financial and management accounts are prepared from completely separate sets of data
D Management accounts are normally prepared for internal use within a company
(2 marks)

2.14 Which of the following is NOT an example of a question that a trainee accountant may be asked in
respect of a cost and management accounting system?
A Which revenue streams should the company seek to maximise in the next year?
B What have revenues for each stream been in the last period?
C What has the cost of goods produced or services provided been for the last period?
D What has the cost of operating a department been for the last period?
(2 marks)
2.15 This question has been taken from the July–December 2017 examining team report.
Which of the following is an essential feature of useful management information?
A Completely accurate
B Appropriate for any purpose
C Cost effective
D Distributed regularly
(2 marks)

2.16 This question has been taken from the January–June 2019 examining team report.
Which of the following statements about management information is/are true?
1 It can only be sourced from within the organisation
2 To be reliable it must be written and verified
3 It can consist of both numeric and non-numeric information
A 3 only
B 1 and 3 only
C 1 and 2 only
D 1, 2 and 3 (2 marks)

(Total = 32 marks)
3.1 Which of the following would NOT be a cost unit in a hospital?
A Patient night
B Ward bed
C X-Ray department
D Canteen meal (2 marks)

3.2 Which of the following is the best description of a direct cost?

A A cost which is directly shared by one or more cost centres
B A cost that can be directly traced to a cost unit
C A cost that is paid for in cash
D A cost that is incurred by the factory (2 marks)

3.3 Which of the following is most likely to be treated as an indirect cost by a car manufacturer?
A Sheet metal for car body
B Wages of production line workers
C Lubricant for machinery
D Fabric for car seats (2 marks)

3.4 Which of the following is most likely to be treated as an indirect cost by a computer manufacturer?
A Production line worker wages
B Microchips
C Plastic housing for computer bodies
D Factory supervisor's wages (2 marks)

3.5 Which of the following costs would be most likely to be illustrated by the diagram given below?

Total
cost
$

Level of activity
A Total materials cost
B Factory rent
C Total wages cost
D Telephone expense (2 marks)
3.6 Which description best fits the cost curve shown below?

Cost
Total
per cost
unit
$$

Level of activity
A Direct material cost per unit
B Direct labour cost per unit
C Variable production cost per unit
D Fixed production cost per unit (2 marks)

3.7 Which of the following is the best description of a stepped-fixed cost?

A A cost with both a fixed element and a variable element
B A cost which increases as the level of activity increases
C A cost which is fixed no matter what the level of activity
D A cost which is fixed for a certain level of activity and then increases (2 marks)

3.8 Which of the following would NOT be illustrated by the diagram shown below?

Cost
Total
per cost
unit
$$

Level of activity
A Direct material cost per unit
B Direct labour cost per unit
C Fixed production cost per unit
D Variable production cost per unit (2 marks)
3.9 Which of the following costs would be most likely to be illustrated by the diagram given below?

Total
cost
$

Level of activity
A Factory rent
B Telephone costs
C Materials cost
D Factory supervisors' salaries (2 marks)

Data for questions 3.10–3.12

A product that a company manufactures requires 3kg of material A costing $6.20 per kg and 4kg of material B
costing $5.60 per kg. The product requires 2 hours of labour at a cost of $7.40 per hour. The product is sold
in packs of 10 and the packaging for 10 units costs $22. Fixed production costs are $60,000 per annum and
selling, distribution and administration costs are $24,000 per annum. The company makes 15,000 units of
the product each year.

3.10 What is the prime cost of the product?

A $55.80
B $58.00
C $62.00
D $77.80 (2 marks)

3.11 What is the production cost of the product?

A $55.80
B $58.00
C $62.00
D $77.80 (2 marks)

3.12 What is the total cost of the product?

A $62.00
B $63.60
C $81.80
D $83.40 (2 marks)

3.13 Which of the following costs would NOT be included as part of the prime cost of a product?
A Hire charge for specialised machine required for product
B Rent and rates for factory
C Material input for product
D Direct labour cost of product (2 marks)
3.14 Which costs would NOT be included as a product cost in marginal costing?
A Direct materials costs
B Direct labour costs
C Variable production costs
D Fixed production costs (2 marks)

3.15 Which of the following statements, relating to absorption and marginal costing, are TRUE?
1 As inventory levels rise marginal costing profit will be higher than absorption costing profit.
2 Fixed production costs are treated as period costs under marginal costing.
A Both statements are incorrect
B Both statements are correct
C Statement 1 is correct but statement 2 is incorrect
D Statement 2 is correct but statement 1 is incorrect (2 marks)

Data for questions 3.16 and 3.17

A manufacturing company makes one product which uses 2kg of raw material per unit of product, at a cost of
$3.80 per kg. Each unit of the product requires 2.5 hours of labour, which is paid at $7.80 per hour. The
company incurs fixed production costs of $6,000 per month, and the factory produces 2,000 units of the
product each month. There is no inventory of the product at 1 June 20X3 but only 1,600 units of the product
were sold in June.

3.16 What is the closing inventory valuation at 30 June 20X3 under absorption costing?
A $10,840
B $12,040
C $12,340
D $48,160 (2 marks)

3.17 What is the closing inventory valuation at 30 June 20X3 under marginal costing?
A $10,840
B $12,040
C $43,360
D $54,200 (2 marks)

3.18 Which of the following would be classed as indirect labour?

A A coach driver in a transport company
B Machine operators in a milk bottling plant
C A maintenance assistant in a factory maintenance department
D Plumbers in a construction company (2 marks)

3.19 A production worker is paid a salary of $650 per month, plus an extra 5 cents for each unit produced
during the month.
Which of the following best describes the labour cost?
A A variable cost
B A fixed cost
C A step cost
D A semi-variable cost (2 marks)
3.20 Which of the following would be an appropriate cost unit for a manufacturing company?
1 1 unit of product
2 1 batch of product consisting of 1,000 units
3 The finance department
4 A member of the sales team

A 1 and 4 only
B 1, 2, and 4
C 3 and 4
D 1 and 2 only (2 marks)

3.21 Which of the following would NOT be a cost unit for a hotel?
A Guest per night
B Person employed in the hotel spa
C Meal served in hotel restaurant
D Bed occupied per night (2 marks)

3.22 This question has been taken from the January–June 2014 examining team report.

Supervisors' salaries and computer services are among the costs incurred in a factory. Costs expected at
a range of activity levels are:
Activity (000 units) 125 150 175 200
Costs ($'000):
Supervisors' salaries 60 66 66 72
Computer services 42 46 50 54
Which of the following classifications could describe the cost behaviour?
Supervisors' salaries Computer services
A Semi-variable Semi-variable
B Semi-variable Variable
C Stepped-fixed Semi-variable
D Stepped-fixed Variable (2 marks)

3.23 This question has been taken from the January–June 2014 examining team report.
Company Z uses a marginal costing system as the basis for its profit statements for management. 4,660
units of the Company's single product were sold in Period 6 for a total revenue of $88,540. Production
in the period was 4,730 units.
Unit costs of the product are:
$ per unit $ per unit
Direct costs 6.20
Variable production overhead 0.90
Fixed production overhead 4.60 11.70
Variable non-production overhead 1.40
Fixed non-production overhead 2.90 4.30
Total costs 16.00

What is the total contribution in Period 6?

A $48,335
B $55,454
C $34,018
D $48,930 (2 marks)
3.24 This question has been taken from the July–December 2014 examining team report.

A company manufactures a single product with the following unit costs:

$ per unit
Direct materials 7.45
Direct labour 5.20
Variable production overhead 1.75
Fixed production overhead 6.40
Variable non-production overhead 0.90
Fixed non-production overhead 3.25
In marginal costing, what amount would be deducted from sales to calculate the contribution per unit
of the product?
A $14.40
B $20.80
C $12.65
D $15.30 (2 marks)

3.25 This question has been taken from the July–December 2015 examining team report.

Production costs of product X have been classified in various ways:

Prime costs $50.80 per unit
Variable costs $54.44 per unit
Fixed overheads $15.20 per direct labour hour
Direct labour 2.6 hours per unit at $12.00 per hour
Variable overheads $1.40 per direct labour hour
Direct materials $19.60 per unit
What is the total production cost per unit of product X?
A $105.24
B $144.76
C $93.96
D $125.16 (2 marks)

3.26 This question has been taken from the January–June 2016 examining team report.

A company's single product has the following costs:

$ per unit $ per unit
Production costs:
Direct 4.60
Variable overhead 0.80
Fixed overhead 2.70 8.10
Non-production costs:
Variable overhead 0.50
Fixed overhead 1.40 1.90
10.00

Marginal costing is used for the preparation of profit statements. In the last period, sales were 8,400
units, at $11.20 per unit, and production was 8,530 units.
What was the total contribution in the period?
A $26,040
B $48,720
C $43,753
D $44,520 (2 marks)
3.27 This question has been taken from the January–June 2019 examining team report.

A bakery recorded the following information:

Number of loaves produced Total production costs
$
6,000 9,800
8,000 11,800
10,000 13,800
All loaves baked were identical and there was no wastage.
What cost behaviour pattern describes the bakery's total production cost?
A Semi-variable
B Variable
C Fixed
D Step fixed (2 marks)

(Total = 54 marks)