rESr coDE 02201010

FORM TP 20151 MAY/JUNE 20I5

CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@
ACCOUNTING
Unit2-Paper0l
I hour 30 minutes

09 JUNE 2015 (p.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1
This test consists of 45 items. You will have t hour and 30 minutes
to answer them.
2. In addition to this test booklet, you should have an answer sheet.

3. Do not be concerned that the answer sheet provides spaces for more answers
than there are
items in this test.

4. Each item in this test has four suggested answers lettered (A), (B), (c),
(D). Read each item
you are about to answer and choose the correct answer.

5. On your answer sheet, find the number which corresponds to your

item and shade the space
having the same letter as the answer you have chosen. Lookat the
sample item below.
Sample Item

Overhead absorption rates are used to determine the

Sample Answer
(A) service department's overhead cost
(B)
(C)
estimated overhead costs for products
allocation of overhead costs to products @@o @
(D) actual overhead cost for finished products

The best answer to this item is "allocati'n of overhead costs to products",

so (C) has been
shaded.

6 If you want to change your answer, erase it completely before you fill in your new choice.
7. When you are told to begin, turn the page and work as quickly and
as carefully as you can.
If you cannot answer an item, go on to the next one. You may return to that
item later.
8. You may do any rough work in this booklet.

- 9. You may use a silent, non-programmable calculator to answer items.

I

m I
DO NOT TURI\ THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
-
I
I Copyright (o 2013 Caribbean Examinations Council
E
AII rights reserved.
I
 -2-
1. Financial accounting provides a historical ltems4-5rejfertothefollowing information.
perspective, whereas management
accounting Gladstone l.,td operates the following
differential piece rate system of paying for
(A) emphasizes the future in addition units of goods produced by employees.
to historical reports
(B) only enables managers to make First 100 units $5.00each
decisions Any extra unit above 100 units $5.50 each !

(C) emphasizes a current perspective

(D) allows the use of abudget Theemployeesnamedbelowhaveproduced l

the following units:

2. In which of the following ways should Larry 140 units

plastic that is used in the manufacture of James 165 units
dolls be classified? Roland 155 units
Clvde 180 units
Prime cost Product cost
Direct cost Fixed cost 4- Larry earned

(A) No Yes (A) $ sOo

Yes No (B) S 720
i (B) Yes No (c) $ 770
Yes No (D) $l 270
(C) Yes Yes
Yes No
(D) Yes Yes 5. James and Clyde together earned
No Yes
(A) $l ooo.oo
(B) Sr 247.s0
3. Wages paid to machine operators on an (C) $l 797.50
assembly line are classified as a (D) $1 897.50

(A) period cost

(B) direct material cost 6. Which of the following is an advantage of
(C) manufacturing overhead cost the piece rate method of paying wages?
(D) direct manufacturing labour cost
(A) It helps to reduce production
reJects.
(B) It can help to reduce monotony at
the workplace.
(C) It is guaranteed to lead to an
increase in product quality.
(D) It is an inc0ntive to produce more
within a given time.

GO ON TO THE NEXT PAGE

7. Gibson Manufacturing uses machine hours 9. Which inventory costflow method assumes
to allocate manufacturing overhead to all thatall stock(inventory) units are the same?
jobs. For a particular job, the budgeted
manufacturing overhead cost is $30 000 (A) Average cost
and the budgeted labour hours and budgeted (B) Last-in, first-out
machine hours are 60 000 and 100 000 (C) First-in, first-out
respectively. The predetermined overhead (D) Retail inventory
rate per machine hour is

(A) $0.30 10. Afirm estimates that its annual carying cosl
(B) $0.s0 for materialABC is $0.30 per kg, demand
(c) $0.60 is 50 000 kg, and ordering cost is $100 per
(D) $3.33 order. The economic order quantity (EOQ)
rounded to the nearest kilogram is

8. In July 2010, the beginning balance of the (A) | rzs

raw materials inventory account for Kyla (B) | 732
Inc. was $46 000. The ending inventory (c) 4 082
balance for July was $47 000. Raw (D) s 774
materials used during the month totalled
Sl27 120. The cost of raw materials
purchased during the month was 11. How are the wages of factory maintenance
personnel usually classified?
(A) $l2s 320
(B) $126 120 In<lirect Manufacturing
(c) $128 120 labour cost overhead cost
(D) $174 120
(A) No Yes
(B) Yes No
(C) Yes Yes
(D) No No

GO ON TO THE NEXT PAGE

022010r0/CAPE 2015
 -4-
Items 12-13 refer to the following inventory data for Company X.

Opening inventory 300 units at $8.80 per unit

Materials received 1 000 units at $9.00 each

600 units at $10.00 each

Materials requisitioned 1 500 units

12. The value of the closing inventory using the FIFO method is

(A) $l ooo
(B) $2 640
(c) $3 600
(D) $4 000

13. The value of the closing inventory using the LIFO method is

(A) $ eoo
(B) S2 640
(c) $3 540
(D) $3 640

14. Which of the following are NOT period costs?

(A) Marketirrg costs

(B) Direct manufacturing costs
(C) Research and development costs
(D) General and administrative costs

15. The following information was extracted from the books of James Inc.

Cost of goods sold $107 000

Ending balance of finished goods inventory $ 20 000
Cost of goods manufactured $ 57 000
What is the beginning balance of finished goods inventory for the period?

(A) $ 70 000
(B) $ 77 ooo
(c) $127 0oo
(D) $ls7 000

GO ON TO THE NEXT PAGE

 Items IGlT refer to the following information.

Travis Inc. manufactures two products, A and B. The company uses an activity-based costing
system.

The estimated total cost and expected activity for each of the company's three activity pools are
as follows:

Activity Cost Pool Estimated Cost Expected Activity (Units)

ProductA Product B Total

Moulding $r7 600 800 300 1 100
Waxing $12 000 500 200 700
Finishing $26 000 800 400 | 200

16. What is the cost allocated to Product B for finishing?

(A) $ I 600
(B) $ 4 800
(c) $ 8 667
(D) $ l2 800

t7. What cost is allocated to Product A for waxing?

(A) s soo
(B) $ s 571
(c) $ 8 57r
(D) $17 s7l

18. Which of the following costing methods uses cost drivers in the allocation of overheads?

(A) Process
(B) Marginal
(C) Absorption
(D) Activity-based

19. Imran worked t hours on Job E. His regular rate is $7 per hour. Job E required 7 hours of regular
time and 2 hours overtime at the premium rate of 50 per cent above the regular rate. What was
the cost of direct labour applied to Job E?

(A) $s6.00
(B) $63.00
(c) $70.00
(D) S94.s0

CO ON TO THE NEXT PAGE

02201010/CAPE 2015
 6-

20. Young Corporation has the following costs associated with the manufacture of one of its products:

Variable manufacturing cost $7.30 per unit

Fixed manufacturing overhead $4.00 per unit
Variable selling expenses $0.25 per unit
Fixed Sales, General and Administrative (SG&A) expenses $75 000 per year

During 2010, Young manufactured 50 000 units and sold 48 000. Under absorption costing, the
standard production cost per unit for 2010 was

(A) $ 7.30
(B) $ I 1.30
(c) $l l.ss
(D) $13.05

21. The basic difference between marginaland 24. A baker mixed enough flour to produce
absorption costing is the treatment of I 000 loaves of bread. At the end of the
accounting period, the ending work-in-
(A) direct labour cost process was only 25Yo contplete for all
(B) direct materials cost inputs inclusive of overheads, materials
(c) fixed selling and administration and labour.
cost
(D) fixed manufacturing overhead cost Calculate the equivalent units of bread in
work-in-process.

22. Roth absorption cclsting and marginal costing (A) 100

treat direct materials costs and direct labour (B) rso
costs as (c) 2s0
(D) s00
(A) fixed cost
(B) sunk cost Item 25 refers to the following information.
(C) period cost
(D) product cost Panday Inc. uses ajob-ordercosting system.
The company has the following jobs in
process: Numbers 5, 8, and 12. The cost
23. A costing system can BEST be defined as of the raw materials used was $120 000;
a method of establishing the costs of direct labour was $8.50 per hour; factory
overhead is applied at a rate of $10.20 per
(A) designing production schedules and direct labour hour. Direct labour hours per
assigning roles job are 2 500, 3 100 and 4 200, respectively.
(B) manufacturing goods and/or
services 25. At the end of the accounting period, the
(C) production per unit only actual overhead costs totalled $93 000. The
(D) services rendered only amount of over or under-applied overhead
is

(A) $ 6960over-applied
(B) $ 6960under-applied
(C) $63 960 over-applied
(D) $63 960 under-applied

GO ON TO THE NEXT PAGE

26. Which of the following statements about Item 28 refers to the following inFormation.
activity-based costing is FALSE?
Suzy operates a beauty salon and has
(A) lt improves control. provided the cost data pertaining to two
(B) Indirect cost allocation bases used customers, Jacklyn and Jowelle.
are likely to be cost drivers.
(C) It provides less information than Jacklyn Jowelle
cost systems previously used. Direct materials $250 $190
(D) It provides more accurate product Direct labour hours 3 2
costs.
Overheads are charged to customers based
on a predetermined rate of 75%o per labour
Item 27 refers to the following data related hour. The direct labour cost per hour is
to Crown Inc. which uses the activiW-based s120.
costing system.
28. The total cost of providing the service to
ACTIVITY TOTAL COST COST DRIVER Jacklyn is
Machine set up $64 000 No. of set ups
Inspections 000 (A) $440
$52 No. ofinspections
(B) $4so
Other available data:
(c) $610
Products
(D) $880
LM
No. of set ups 1 200 5 200
No. of inspections I 000 I 500 29. A service organization would MOST likely
No. of units produced 5 000 4 000 use a predetermined overhead rate based on

(A) direct labour

27. What is the total overhead cost charged to (B) machine hours
Product L? (C) number of,complaints
(D) standard material cost
(A) $ 20 800
(B) $ 51 040
(c) $ 83 200 30. Which of the following statements about a
(D) $r r6 000 company that employs absorption costing
procedures is TRUE?

(A) The company treats fixed

manufacturing overhead costs
as a period cost.
(B) The company cannot use the
procedures for extemal reporting.
(c) The company applies only variable
production costs to determine
cost per unit.
(D) The company applies both variable
and fixed production costs to
determine cost per unit.

CO ON TO THE NEXT PAGE

0220t010/CAPE 2015
 ,8-

Items 3l-32 refer to the following information.

Quarters I 2 3 4 Total
Unit sales I 000 000 l 200 000 600 000 120 000 4 000 000
Unit selling price $1.s0 $1.7s $1.7s $l 75
lbtal sales $r 500 000 $ 2 100 000 $ l 0s0 000 $2r0 000 $ 4 860 000

Adugu Inc. has prepared the following production budget for four quarters of the financial year.

31. what is the significance of the 4 million units of sares in column 6?

(A) It represents the total ending inventory.

(B) It is the total budgeted output for the last quarter.
(C) It is the total budgeted output for the first quarter.
(D) It represents the total budgeted output for the four quarters.

32. If the budgeted unit price for the second quarter fell to $ I .00, by what percentage total did budgetect
revenue decrease?

(A) 18.s2
(B) 21.s2
(c) 7s.s2
(D) 1 18.s2

33. When inferior materials are purchased for 34. The margin of safety, a key concept of Cost
production at aprice lowerthan the standard. Volume Profit analysis, is defined as the
the result may be difference between budgeted

(A) favourable material price variance (A) sales and breakeven sales
or favourable labour efficiency (B) contributionmarginandstakeholder
(B) unfavourable rnaterial price margin
variance or favourable labour (C) contribution margin and breakeven
efficiency contribution
(c) favourable material price variance (D) contribution margin and actual
or unfavourable labour effi ciency contribution margin
(D) unfavourable material price
variance or unfavourable labour
efficiency
.

\
)

GO ON TO THE NEXT PAGE

 Items 35-36 refer to the following information.

Mary makes home-made soap which she sells at $100 per case. The variable cost is $40 per case
and fixed cost is $600.

35. What is the contribution margin per case?

(A) $ 15
(B) $40 '

(c) $ 60
(D) $loo

36. What is the breakeven point (number of cases)?

(A) 6
(B) 10
(c) ls
(D) 20

37. which of the following statements about standard cost is TRUE?

(A) It is used to reduce tax liability.

(B) It is always greater than the actual cost.
(c) It refers to the average cost of production in the cost period.
(D) It is a target for the period ahead.

Item 38 refers to the following information.

Deluxe Cabinet Makers produces the Executive Kitchen Cabinet. The following information
is
provided for the month of November when 4 000 cabinets were produced.

Standards

Direct Material: l0 sheets ply per unit @ $100 per sheet

Direct Labour: 6 hours per unit @ $50 per hour

Actual

Materials purchased: 44 000 sheets ply @ $l l0 per sheet

Materials used: 38 500 sheets ply

26 000 direct labour hours used at $45 per hour

38. What is the labour rate variance for November?

(A) $ e0 000 F
(B) S130 000 F
(c) $ e0 000 A
(D) $130 000A

GO ON TO THE NEXT PAGE

02201010/CAPE 2015
 10-

39. 'lhe net present value (NPV) and internal 41. A primary purpose of using a standard
rate of return (lRR) methods of decision cost system is to
making in capital budgeting ,up".ioi
"."
to the payback method. This is because (A) make things easier for managers in
the NPV and IRR methods the production facilitY
(B) provide a distinct measure of cost
(A) require less input control
(B) are easier to implement (C) minimize the cost Per unit of
(C) consider the time value of money production
(D) reflect the effects of sensitivity (D) prqvide more information to
analysis managers

40. A product has a selling price of $150

and variable costs of $30. The company
has fixed costs of $30 000 and targets an
operating income of $12 000. What is the
breakeven point in units?

(A) 250
(B) 750
(c) 1 000
(D) | 250

Item 42 refers to the following information.

A manufacturing company operates a system of standard costing as follows:

Budgeted Actual

Total variable overheads $400 000 $340 000

Total fixed overheads $ 60 000 $ s0 000

Volume of production
Standard machine hours l0 000 12 000
Units produced 200 200

42. What is the total overhead variance?

(A) 50 000 adverse

(B) 60 000 adverse
(c) 50 000 favourable
(D) 60 000 favourable

GO ON TO THE NEXT PAGE

 43' Which of the following pieces of information are
required when using the payback period method
to evaluate a project?

I. The initial cost of the project (asset)

II. The useful life of the project (asset)
I II. The net savings (receipts) from the project (asset)

(A) I and II only

(B) I and III only
(c) II and III only
(D) I, II and III

Items 44-45 refer to the fol lowing information :

Direct materials used 4 000 pounds

Purchase price of direct material
$3.20 per unit
Standard quantity direct material units 4 300 pounds
Standard price of direct material
$3.30 per unit

44. What was the material price variance?

(A) 400 favourable

(B) 400 unfavourable
(c) 430 favourable
(D) 430 unfavourable

45. What was the material quantity (usage) variance?

(A) 990 unfavourable

(B) 990 favourable
(C) I 390 unfavourable
(D) I 390 favourable

END OF TEST

IF YOU F'INISH BEFORE T'IME IS CALLED, CHECK

YOUR WORK ON THIS TEST.

0220t01O/CAPE 2015