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| 1 | Which of the following costs would be included both as part of prime cost and as part of conversion cost
(Learning Objective 1 Ch 2) |
 | A) | Direct materials. |
| B) | Direct labour. |
| C) | Manufacturing overhead. |
| D) | Marketing costs |
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| 2 | Which of the following combinations of costs make up prime cost?
(Learning Objective 1 Ch 2) |
| A) | Direct materials cost and manufacturing overhead cost. |
| B) | Direct labour cost and manufacturing overhead cost. |
| C) | Marketing cost and administrative cost. |
| D) | Direct materials costs and direct labour cost. |
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| 3 | Which of the following costs is a product cost?
(Learning Objective 2 Ch 2) |
| A) | Direct labour |
| B) | Marketing |
| C) | Selling and distribution |
| D) | Indirect materials |
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| 4 | Which of the following costs is a period cost?
(Learning Objective 2 Ch 2) |
| A) | Factory supervisors’ wages |
| B) | Factory heating and lighting |
| C) | Administration |
| D) | Materials handling costs |
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| 5 | Abburi Company's manufacturing overhead is 60% of its total conversion costs. If direct labour is £52,000 and if direct materials are £28,000, the manufacturing overhead is
(Learning Objective 3 Ch 2) |
| A) | £34,667. |
| B) | £78,000. |
| C) | £42,000. |
| D) | £120,000. |
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| 6 | The manufacturing cost of goods completed is shown in the Balance sheet as:
(Learning Objective 4 Ch 2) |
| A) | Work in progress |
| B) | Finished goods |
| C) | Cost of goods sold |
| D) | Selling and administrative expenses |
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| 7 | Service organisations have the following characteristics that are not shared with manufacturing organisations: (there may be more than one)
(Learning Objective 4 Ch 2) |
| A) | They have no significant inventory |
| B) | They have more fixed costs than variable costs |
| C) | The service sold is customised to the individual’s requirements |
| D) | Services cannot be measured or counted in advance of sale |
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| 8 | Which of the following is a direct cost? (there may be more than one)
(Learning Objective 5 Ch 2) |
| A) | Labour working on a production line assembling the product |
| B) | Factory supervisors’ costs |
| C) | Business rates paid on the factory building |
| D) | Royalties paid to artistes when manufacturing CDs |
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| 9 | When the level of activity doubles, variable costs per unit will
(Learning Objective 6 Ch 2) |
| A) | double. |
| B) | half. |
| C) | remain constant. |
| D) | None of the above |
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| 10 | Noel Howard receives an order for a product that uses material C. He has some in stock that he bought 2 years ago for £300.He no longer uses it for his normal work, and if he doesn’t accept the order he could sell his stock of C for £200. It would cost £400 to buy new stock of replacement C, and the finshed product could be sold for £650. In this decision, Noel would consider the sunk cost to be
(Learning Objective 8 Ch 2) |
| A) | £300. |
| B) | £200. |
| C) | £400. |
| D) | £650. |