GRACE ACADEMY SENIOR HIGH SCHOOL

END OF TERM EXAMINATION

2024/2025

PRINCIPLES OF COST ACCOUNTING S.H. S

SECTION A

1. Cost accounting is primarily B. Wages of machine operator

concerned with: C. Depreciation of tools
A. Financial statements D. Electricity bill
B. Cost control and cost 8. Factory overheads are:
ascertainment A. Indirect factory costs
C. Tax computation B. Costs of selling goods
D. External auditing C. Costs incurred outside the
2. The main objective of cost factory
accounting is to: D. Direct expenses
A. Prepare profit and loss account 9. Which of the following is not part
B. Compute tax of prime cost?
C. Ascertain cost of production A. Direct materials
D. Allocate dividends B. Direct labour
3. Which of the following is not C. Factory overheads
within the scope of cost D. Direct expenses
accounting? 10. Prime cost + Factory overheads =
A. Cost ascertainment A. Cost of goods sold
B. Budgeting B. Factory cost
C. Cost control C. Total cost
D. Final accounts preparation D. Sales
4. The three major elements of cost 11. Cost of raw materials used is
are: calculated as:
A. Assets, liabilities, and capital A. Opening stock + purchases +
B. Material, labour, and overheads closing stock
C. Salary, rent, and taxes B. Purchases – opening stock
D. Income, expenses, and drawings C. Opening stock + purchases –
5. Direct costs are: closing stock
A. Not traceable to a unit D. Purchases + closing stock
B. Fixed costs only 12. Indirect materials are charged to:
C. Attributable to a specific A. Prime cost
product B. Direct cost
D. Depreciation costs C. Overheads
6. Indirect costs are also called: D. Finished goods
A. Fixed costs 13. Which of the following is a source
B. Direct materials document for material issue?
C. Overheads A. Purchase invoice
D. Variable costs B. Goods received note
7. Which of the following is a direct C. Materials requisition note
cost? D. Delivery note
A. Factory rent
14. Which method assumes materials breakdown
issued from the most recent D. Overtime
purchase? 23. Piece rate system of wage payment
A. FIFO means workers are paid:
B. LIFO A. Per hour
C. Simple average B. Monthly
D. Weighted average C. Based on output
15. FIFO stands for: D. A fixed salary
A. First-In-First-Out 24. Which of the following is a method
B. Fixed-In-Fixed-Out of labour remuneration?
C. Final-In-First-Out A. FIFO
D. Finished-Item-First-Out B. Job evaluation
16. LIFO assumes: C. Halsey bonus scheme
A. Latest materials are issued first D. Depreciation
B. Oldest materials are issued first 25. Which cost is not directly traceable
C. Equal issue of all items to a specific job or product?
D. Issuing is based on expiry date A. Direct materials
17. Which of the following is a method B. Direct wages
of inventory valuation? C. Indirect costs
A. Economic Order Quantity D. Direct expenses
B. Standard costing 26. Overhead absorption rate is used
C. FIFO to:
D. Job costing A. Allocate fixed assets
18. Labour cost includes: B. Absorb costs into products
A. Direct labour only C. Pay salaries
B. Indirect labour only D. Record sales
C. Salaries and wages 27. Overheads are classified by:
D. Only bonuses A. Source and location
19. The total cost of production is the B. Importance and frequency
sum of: C. Function and nature
A. Factory cost and administrative D. Quantity and quality
cost 28. Selling and distribution overheads
B. Selling and distribution cost include:
only A. Wages of salesmen
C. Prime cost only B. Factory rent
D. Factory cost only C. Purchase of raw materials
20. Indirect labour cost is classified as: D. Directors’ fees
A. Direct expenses 29. The most suitable method of
B. Selling expenses overhead absorption in a labour-
C. Overhead intensive industry is:
D. Administrative cost A. Machine hour rate
21. A time card is used for: B. Direct material cost
A. Issuing materials C. Direct labour hour rate
B. Recording attendance D. Floor area
C. Payment of creditors 30. Factory cost is also called:
D. Calculating EOQ A. Production cost
22. Idle time is: B. Cost of sales
A. Time spent working C. Prime cost
B. Time spent on leave D. Administration cost
C. Time lost due to machine
31. Cost incurred to bring raw C. Selling expenses
materials to the factory is called: D. Office rent
A. Selling cost 40. Carriage inward is treated as:
B. Freight-in A. Direct material
C. Distribution cost B. Indirect expense
D. Direct labour C. Administrative cost
32. Which of the following helps avoid D. Selling overhead
stock-out? 41. The cost incurred for inspection is
A. Minimum stock level classified as:
B. Maximum stock level A. Direct cost
C. Re-order level B. Administrative overhead
D. Average stock C. Factory overhead
33. What is the formula for Economic D. Selling expense
Order Quantity (EOQ)? 42. Bonus schemes in labour are
A. √(2DS/H) introduced to:
B. S ÷ D × H A. Increase cost
C. (D+S)/H B. Reduce workload
D. D × H ÷ 2S C. Motivate employees
34. Time rate system rewards workers D. Avoid overtime
based on: 43. Abnormal loss is recorded in:
A. Performance A. Cost of sales
B. Hours worked B. Profit and loss account
C. Quality output C. Prime cost
D. Targets D. Factory overhead
35. The normal loss in material 44. Scrap value of normal loss is:
processing is: A. Credited to factory account
A. Unavoidable B. Added to labour
B. Due to theft C. Debited to overhead
C. Charged to direct labour D. Ignored
D. A result of fraud 45. Payroll refers to:
36. Direct expenses include: A. Payment for goods
A. Royalties paid B. Loan repayments
B. Factory lighting C. List of employees and their
C. Office rent wages
D. Depreciation of machines D. Petty cash
37. Administrative overheads include: 46. A budget in cost accounting is used
A. Factory supervision for:
B. Factory rent A. Auditing
C. Salaries of accountants B. Future planning
D. Salesmen’s commission C. Tax computation
38. The document used to receive D. Staff discipline
materials from store is: 47. Over-absorbed overhead occurs
A. Material requisition note when:
B. Sales invoice A. Actual is less than absorbed
C. Purchase order B. Actual equals absorbed
D. Credit note C. Absorbed is less than actual
39. Which of the following is part of D. No overhead incurred
conversion cost? 48. A ledger used in cost accounting is:
A. Direct material A. General ledger
B. Direct labour and overheads B. Cost ledger
 C. Capital ledger C. Decision making
D. Purchases ledger D. Shareholder control
49. One of the benefits of cost 50. Cost of production includes:
accounting is: A. Prime cost + overheads
A. Tax reduction B. Selling cost + profit
B. Financial reporting C. Only labour
D. Depreciation only

SECTION B:
Answer any three (3) theory questions and three (3) practical questions.
Each question carries equal marks.

THEORY QUESTIONS (Answer any THREE)

Question 1
a. Define direct labour and give two examples.
b. Define indirect labour and give two examples.
c. State two differences between direct and indirect labour.
d. Explain why proper classification of labour cost is important in cost accounting.

Question 2:

a. What is labour remuneration?

b. State and explain two methods of remunerating labour.
c. What is an incentive scheme in cost accounting?
d. Explain one reason why incentive schemes are introduced in an organisation.

Question 3: Payroll Accounting

a. Define a payroll.
b. List four items typically found on a payroll.
c. State three deductions that can be made from gross pay.
d. Differentiate between gross pay and net pay.

Question 4

a. What is an overhead cost?

b. Mention three types of overheads based on function.
c. Distinguish between fixed overhead and variable overhead.
d. State two examples of administrative overheads.

Question 5:

a. Define overhead absorption.

b. List the four stages of overhead accounting.
c. Explain the difference between allocation and apportionment.
d. State two bases each for allocating factory rent and canteen expenses.

PRACTICAL QUESTIONS (Answer any THREE)

Question 6:

The following data relates to a worker in XYZ Ltd:

• Basic wage per hour: GH₵10

• Hours worked: 48 hours
• Overtime rate: Time-and-a-half for hours above 40

a. Calculate the total earnings of the worker for the week.

b. Classify the total earnings into direct and indirect labour cost if the worker is a machine
operator.

Question 7
A worker is paid under two systems:

• Time rate: GH₵6 per hour for 8 hours a day

• Piece rate: GH₵3 per unit, with 30 units produced per day

a. Calculate daily earnings under the time rate.

b. Calculate daily earnings under the piece rate.
c. Advise which method benefits the worker more.

Question 8

A factory has two production cost centers and two service cost centers. Overheads incurred
for the month of December were as follows:

Production Service cost center

cost center
X Y A B Total
Overheads GH₵ GH₵ GH₵ GH₵ GH₵

Indirect labour 10,000 15,000 5000 7,000 37,000

Indirect material 20,000 25,000 10,000 8,000 63,000
Rent 10,000
Canteen 16,000
Repairs to 12,000
building
Maintenance 12,000
Depreciation on 15,000
machinery

Additional information:

Production cost Service cost

center center
X Y A B
Area occupied 20 30 15 15
Maintenance hours 80 60 30 30
No. of employees 20 15 10 5
Cost of machinery
200,000 250,000 100,000 50,000
(GH₵)

Service cost centers’ overheads are apportioned to the production cost centers in the
following proportion:

Service Cost Center A

 • Production cost center X – 50%
• Production cost center Y – 30%
Service Cost Center B

• Production cost center X – 60%

• Production cost center Y – 40%

You are required to prepare an overhead analysis sheet showing the total overhead to
be allotted to each production department.

QUESTION 9

XYZ Ltd has three departments: A, B, and C. The following overheads are to be apportioned
based on floor area:

• Total rent: GH₵9,000

• Floor area: A = 1,500m², B = 2,000m², C = 1,500m²

a. Apportion the rent among the departments.

b. What basis of apportionment has been used?

Question 10: Payroll Preparation

Prepare a payroll for three workers given the following information:

Prepare a payroll for three workers given the following information:

Name Basic Pay (GH₵) Overtime (GH₵) Tax (GH₵) SSNIT (GH₵)
Kwame 700 100 90 60
Akua 600 150 80 50
Kojo 750 120 95 65

a. Calculate the gross pay and net pay for each worker.
b. Present the data in a tabular form (payroll table).

EXAMINER; Mr. Manfred Asante Siaw