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CANDIDATE - PLEASE NOTE!

PRINT your name on tile line below and return this booklet with your Answer Sheet. Failure to TEST CODE 02201010 do SI!J!lay result in disqualification.

FORM TP 2013129 MAY/JUNE2013

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CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION

ACCOUNTING

Unit 2 - Paper 01

1 hour 30 minutes

( 11 JUNE 2013 (p.m.))

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This test consists of 45 items. You will have 1 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. Look at the sample item below.

Sample Item

Overhead absorption rates are used to determine the

(A) (B) (C) (D)

service department's overhead cost estimated overhead costs for products allocation of overhead costs to products actual overhead cost for finished products

Sample Answer

The best answer to this item is "allocation of overhead costs to products", so answer space (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, tum the page and work as quickly and as carefully as you can.

8.

9.

If you cannot answer an item, go on to the next one. You may return to this item later. Your score will be the total number of correct answers.

You may do any rough work in this booklet.

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

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright 2012 Caribbean Examinations Council All rights reserved.

0220101 0/CAPE 2013

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1. Financial accounting provides a historical perspective, whereas management accounting

(A) emphasizes the future in addition to historical reports (B) only enables managers to make decisions (C) emphasizes a current perspective (D) allows the use of a budget

2. In which of the following ways sh~uld plastic that is used in the manufacture of dolls be classified?

Prime cost Product cost Direct cost Fixed cost

(A) No Yes Yes No (B) Yes No Yes No (C) Yes Yes Yes No (D) Yes Yes No Yes

3. Variable cost behaviour means that with an increase in activity,

(A) total cost and cost per unit remain constant (B) total cost remains constant and cost per unit increases (C) total cost and cost per unit increase (D) total cost increases and cost per unit remains constant

Item 4 refers to the following information which was extracted from the records of James Inc:

Cost of goods sold Ending balance of finished goods inventory Cost of goods manufactured

$107 000 $ 20 000 $ 57 000

4. The beginning balance of finished goods inventory for the period was

(A) $ 70 000 (B) $ 77 000 (C) $127 000 (D) $157 000

5. What is the source document that records the amount of raw material that has been requested for use in production?

(A) Bill of lading (B) Job order cost sheet (C) Inter-office memo (D) Material requisition form

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6.

7.

- 3 -

Which of the following statements relating to cost and management accounting is ACCURATE?

(A)

(B)

(C)

(D)

It requires an entirely separate group of accounts than financial accounting.

It focuses solely on determining how much it costs to manufacture a product or provide a service.

It provides product or service cost information for internal decision making.

It is required for business record-keeping as are financial and tax accounting.

Keystone Ltd produces a product under licence from Xango Ltd. At the end of each year, Keystone Ltd has to pay Xango Ltd the licence fee as follows:

For the first 60 000 litres $30 000 and for every litre THEREAFTER the company pays $0.30.

How is the licence fee classified?

(A) Fixed (B) Variable (C) Step (D) Mixed

8. In July 2010, the beginning balance of the raw materials inventory account for Kyla Inc. was $46 000. The ending inventory balance forJuly was $4 7 000. Raw materials used during the month totalled $127 120. The cost of raw materials purchased during the month was

(A) $125 320 (B) $126 120 (C) $128 120 (D) $174 120

02201010/CAPE 2013

9.

10.

11.

Which inventory cost flow method assumes that ALL stock (inventory) units are the same?

(A) (B) (C) (D)

Average cost Last-in, first-out First-in, first-out Retail inventory

A firm estimates that its annual carrying cost for material ABC is $0.30 per kg, demand is 50 000 kg, and ordering cost is $100 per order. The economic order quantity (EOQ) rounded to the nearest kilogram is

(A) (B) (C) (D)

1 125 1 732 4 082 5 774

How are wages of factory maintenance personnel USUALLY classified?

Indirect Manufacturing labour cost overhead cost

(A) No Yes (B) Yes No (C) Yes Yes (D) No No

GO ON TO THE NEXT PAGE

I I

- 4 -

Items 12-13 refer to the following inventory data for Company X.

Opening inventory

Materials received

300 units at $8.80 per unit

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) $1 000 (B) $2 640 (C) $3 600 (D) $4 000

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

14.

15.

(A) $ 900 (B) $2 640 (C) $3 540 (D) $3 640

Which of the following are NOT period costs?

(A) Marketing costs (B) Manufacturing costs (C) Research and development costs (D) General and administrative costs

The cost of a foreman's salary in a factory is classified under

(A) (B) (C) (D)

fixed production costs variable production costs distribution costs administrative costs

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16.

17.

Which of the following is a similarity between job-order costing and process costing?

(A)

(B)

(C)

(D)

Costs are accumulated by individual jobs.

Costs are accumulated by departments.

Both are used to compute the cost of production.

Both utilise the job cost sheet.

A service organization would MOST likely use a predetermined overhead rate based on

(A) direct labour (B) standard material cost (C) machine hours (D) number of complaints


18.

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

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

19. Imran worked9hoursonJobE. 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) $56.00 (B) $63.00 (C) $70.00 (D) $94.50

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

Variable manufacturing cost Fixed manufacturing overhead Variable selling expenses Fixed Sales, General and Administrative (SG&A) expenses

$7.30 per unit $4.00 per unit $0.25 per unit $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

21.

(A) $ 7.30 (B) $11.30 (C) $11.55 (D) $13.05

The BASIC difference between marginal and absorption costing is the treatment of

(A) (B) (C) (D)

direct labour cost direct materials cost fixed selling and administration cost fixed manufacturing overhead cost

22. Both absorption costing and marginal costing treat direct materials cost and direct labour costs as

(A) fixed cost (B) sunk cost (C) period cost (D) product cost

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23. A costing system can BEST be defined as a method of establishing the costs of

(A)

(B)

(C) (D)

designing production schedules and assigning roles

manufacturing goods and/or services

production per unit only services rendered only


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Item 24 refers to the following information.

Travis Inc. has 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 cost pools are as follows:

Activity Estimated Expected activity cost pool cost Product A Product B Total

Moulding $17 600 800 300 1 100 Waxing $12 000 500 200 700 Finishing $26 000 800 400 1 200

24. What cost is allocated to Product B for finishing?

25.

(A) $ 1 600 (B) $ 4 800 (C) $ 8 667 (D) $12 800


Panday Inc uses a job-order costing system and the following information is available from its records. The company has the following jobs in process: Numbers 5, 8, and 12. The cost of the raw materials used was $120 000; direct labour was $8.50 per hour; factory overhead is applied at a rate of $10.20 per direct labour hour. Direct labour hours per job are 2 500, 3 100, and 4 200, respectively.

At the end of the accounting period, the actual overhead costs total $93 000. The amount of over-or-under applied overhead is

(A) (B) (C) (D)

$ 6 960 over-applied $ 6 960 under-applied $63 960 over-applied $63 960 under-applied

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26.

27.

Which of the following statements about activity-based costing is FALSE?

(A) (B)

(C)

(D)

It improves control. Indirect cost allocation bases used

are likely to be cost drivers. It provides less information than

cost systems previously used. It provides more accurate product

costs.

Which of the following is a common fixed cost to the sales department in a hardware store?

(A)

(B)

(C)

(D)

Salaries of the security guards in the store

Salaries of the supervisors in the department

Cost of goods removed from the store after expiry dates have passed

Depreciation on the fittings used exclusively in a specific department.


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Suzy operates a beauty salon and has provided the following cost data pertaining to two customers, Jacklyn and Jowelle

Direct materials Direct labour hours

Jacklyn $250

3

Jowelle $190

2

Overheads are charged to customers based on a pre-determined rate of75% per labour hour. The direct labour cost per hour is $120.

28. The total cost of providing the service to Jacklyn is

29.

30.

(A) (B) (C) (D)

$440 $450 $610 $880

Which of the following BEST describes the GREATEST difficulty associated with costs in the service sector?

(A)

(B) (C)

(D)

There is very little material involved.

Activities are labour intensive. The amount of time taken will vary

with each activity. Deciding whether to use job costing

or process costing.

Which of the following statements about a company that employs absorption costing procedures is TRUE?

(A)

(B)

The company cannot use the procedures for external reporting

The company applies only variable production cost to determine cost per unit

(C) The company applies both variable and fixed production costs to determine cost per unit

(D) The company treats fixed manufacturing overhead cost as period cost

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31.

32.

33.

Items 31- 33 refer to the following information.

Nash Sports Ltd sells football kits. Ten per centofits sales are cash transactions and the remainder is on one month's credit. Nash Sports Ltd gets one month's credit on ALL purchases made. Sales and purchases for December 2009, January 2010 and February 2010 are as follows:

., Sales Purchases $ $

December 2009 30 000 16 000 January 2010 25 000 14 000 February 2010 18 000 20 000

How much cash was collected in the month of January 20 1 0?

(A) (B) (C) (D)

$ 1 800 $ 2 500 $25 000 $29 500

How much cash was paid to suppliers in the month of February 2010?

(A) $14 000 (B) $16 000 (C) $20 000 (D) $25 000

How much cash was collected from credit sales in the month ofFebruary 2010?

(A) (B) (C) (D)

$16 200 $22 500 $24 000 $27 000


34.

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The margin of safety, a key concept of Cost-Volume-Profit analysis, is defined as the difference between budgeted

(A) contribution margin and stakeholder margin

(B) sales and break -even sales (C) contribution margin and break -even

contribution (D) contribution margin and actual

contribution margin

Items 35-36 refer to the following information.

Mary makes homemade 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?

36.

37.

(A) (B) (C) (D)

$ 15 $ 40 $ 60 $100

What is the break-even point in the number of cases?

(A) (B) (C) (D)

6 10 15 20

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

(C) (D)

cost. It refers to the average cost of

production in the cost period. It is a target for the period ahead.

02201010/CAPE 2013


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: 10 sheets ply per unit @$1 00 per sheet

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

Actual

Materials purchased: 44 000 sheets ply @ $110 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) (B) (C) (D)

$ 90 000 F $130 000 F $ 90 OOOA $130 OOOA

39. The Net Present Value and Internal Rate of Return methods of decision making in capital budgeting are superior to the Payback method. This is because the Net Present Value and the Internal Rate of Return methods

(A) (B) (C) (D)

require less imput consider the time value of money are easier to implement reflect the effects of sensitivity

analysis


40.

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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 break-even point in units?

(A) 250 (B) 750 (C) 1 000 (D) 1 250


41. A primary purpose of using a standard-cost system is to

(A) mak~ things easier for managers in the production facility

(B) provide a distinct measure of cost control

(C) minimize the cost per unit of production

(D) provide more information to managers

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 $ 50 000 Volume of production (Standard machine hours) 10 000 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

43. A standard cost is one that

(A) produces maximum profit (B) is a target for the period ahead (C) is always greater than the actual cost (D) is the average cost of production in the cost period

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44.

- 10-

A large unanticipated reduction in property taxes on a company's factory would, all other things being equal, MOST likely cause

(A) a favourable overhead spending

(B)

(C)

(D)

variance an unfavourable overhead spending

vanance

a favourable overhead .volume variance

an unfavourable overhead volume variance

45.

ENDOFTEST

Thenetpresentvalue of a project is positive. However, the company did not accept this project. The MOST likely reason for the rejection is that

(A)

(B)

(C)

(D)

the qualitative factors outweigh the benefit of the investment

a positive net present value is unacceptable

the net initial investment cannot be recovered

the return is greater than that required by the company

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

02201010/CAPE 2013

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