REVIEW QUESTIONS

ORDINARY DIPLOMA IN BUSINESS MANAGEMENT (ODBM 1)

ORDINARY DIPLOMA IN PROCUREMENT AND LOGISTICS MANAGEMENT (ODPLM 1)

BMT 05211: FUNDAMENTALS OF COST ACCOUNTING

ACADEMIC YEAR 2023/2024

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QUESTION ONE – Multiple choice questions
1. The break-even point is that level of activity where:
A. total revenue equals total cost. B. variable cost equals fixed cost. D. sales revenue equals variable cost.
C. total contribution margin equals the sum of variable cost plus fixed cost.

2. The unit contribution margin is calculated as the difference between:

A. selling price and fixed cost per unit. B. selling price and variable cost per unit.
C. selling price and product cost per unit. D. fixed cost per unit and variable cost per unit.

3. Which of the following would produce the largest increase in the contribution margin per unit?
A. A 7% increase in selling price. B. A 15% decrease in selling price.
C. A 14% increase in variable cost. D. A 17% decrease in fixed cost.

4. Which of the following would take place if a company were able to reduce its variable cost per unit?
Contribution Margin, Break-even Point
A. Increase, Increase B. Increase, Decrease C. Decrease, Increase D. Decrease, Decrease

5. Which of the following would take place if a company experienced an increase in fixed costs?
A. Net income would increase. B. The break-even point would increase.
C. The contribution margin would increase. D. The contribution margin would decrease.

6. Assuming no change in sales volume, an increase in a firm's per-unit contribution margin would:
A. increase net income. B. decrease net income. C. increase fixed costs. D. decrease fixed costs.

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7. A company that desires to lower its break-even point should strive to:
A. decrease selling prices. B. reduce variable costs. C. increase fixed costs. D. sell more units.

8. Sanderson sells a single product for Tsh50 that has a variable cost of Tsh30. Fixed costs amount to Tsh5
per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even
volume, the bottom-line profit will be:
A. Tsh15. B. Tsh20. C. Tsh50. D. Tsh10

9. At a volume of 1,500 units, Boston reported sales revenues of Tsh600,000, variable costs of Tsh225,000,
and fixed costs of Tsh150,000. The company's contribution margin per unit is:
A. Tsh500. B. Tsh250. C. Tsh300. D. Tsh600.

10. A recent income statement of Banks Corporation reported the following data: Sales revenue Tsh80,000,
Variable costs Tsh50,000, Fixed costs Tsh54,000. If these data are based on the sale of 200 units, the Break-
even point would be:
A. 400units. B. 150units. C. 300units. D. 360units.

11. Delightful Discs has the following inventory data:

Nov. 1 - Inventory 30 units @ Tshs.6,000 each;
Nov. 8 - Purchase 120 units @ Tshs.6,450 each;
Nov. 17 - Purchase 60 units @ Tshs.6,300 each;
Nov. 25 - Purchase 90 units @ Tshs.6,600 each
A physical count of merchandise inventory on November 30th reveals that there are 100 units on hand. Ending
inventory under LIFO periodic inventory system is
(A) Tshs.1,926,000 (B) Tshs.631,500 (C) Tshs.1,269,000 (D) Tshs.1,294,500

12. If the minimum stock level and average stock level of raw material ―A‖ are 4,000 and 9,000 units
respectively, find out its reorder quantity.
A. 8,000 units B. 11,000 units C. 10,000 units D. 9,000 units

13. A worker has a time rate of 15/hr. He makes 720 units of component (standard time: 5 minutes/ unit) in
a week of 48 hours. His total wages including Rowan bonus for the week is
A. 792 B. 820 C. 840 D. 864

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14. A company maintains a margin of safety of 25% on its current sales and earns a profit of Tsh.30 per
annum. If the company has a profit volume (P/V) ratio of 40%, its current sales amount to
A. Tsh.200 B. Tsh.300 C. Tsh.325 D. None of the above

15. Makutano club has fixed costs of 600,000 per annum. The club manufactures a single product which it
sells for 200 per unit. If its contribution to sales ratio is 40%, its break –even point in units will be
A. 7,500 B. 8,000 C. 3,000 D. 1,500

16. Halsey and Rowan are examples of:

A. Share scheme B. Premium bonus scheme C. Measured day work D. All of the above

17. Halsey (premium bonus scheme) is where employee receives ________ of the time saved.
A. 33 1/3% B. 75% C. 50% D. The ratio of time taken to time allowed

18. Identify the basic groups of remuneration method:

A. Time work, B. Piecework schemes C. Bonus/incentive schemes. D. All of the above

19. In ABC System, the allocation basis that is used for applying costs to services or procedures are called:
A. Cost Pool B. Cost Absorption C. Cost Object D. Cost Driver

20. An example of a production overhead would be:

A. Material B. Rent C. Labour cost. D. Supervisory cost

21. All such expenses which are incurred for creating and enhancing the demands for the products are
A. Selling expenses B. Administrative expenses C. Distribution expenses D. All of the above

22. A cost that is easily traceable to a cost object is known as:

A. Direct cost B. Indirect cost C. Variable cost D. Fixed cost

23. Which of the following best describes a fixed cost? A cost which:
A. Represents a fixed proportion of total costs B. Remains at the same level up to a particular level of output
C. Has a direct relationship with output. D. Remains at the same level when output increases

24. Which of the following is a valid classification of the salary paid to the foreman in charge of the packing
department?
A. Indirect departmental cost B. Direct product cost C. Direct departmental cost D. Service department cost.

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25. A cost that changes in total shilling amount with the change in the level of activity is known as:
A. Direct cost B. Indirect cost C. Variable cost D. Fixed cost

26. Which of the following costs is treated as indirect labour?

A. Idle time B. Overtime premium C. Fringe benefits D. All of the above

27. Which definition best describes indirect costs?

A. Indirect costs are those costs which are not controlled directly by a manager.
B. Indirect costs are those costs which cannot be directly associated with a product or service.
C. Indirect costs are always fix
D. Indirect costs are those costs which can easily be traced/identified with a product or service.

28. What would be the most appropriate way of apportioning depreciation costs across different
manufacturing departments in a business?
A. Floor space B. Numbers of personnel C. Value of buildings and equipment D. Administration costs

29. Which of the following cost is also known as overhead cost or on cost:
A. Cost of direct labour B. Cost of direct material C. Direct expenses D. Indirect expenses

30. Costing is specialized branch of accounting which deals with:

A. Classification, recording, allocation, and control of asset
B. Classification, processing, allocation and directing
C. Classification, recording, planning and control of asset
D. Classification, recording, allocation and directing

31. The stage of production at which separate products are identified is known as _______________:
A. Process costing B. Reverse cost method C. Subsequent cost D. Equivalent production

32. What item is not included in cost accounting?

A. Product costing B. Profit-sharing C. Planning D. Controlling

33. A total of all the direct costs is known as

A. Cost of production B. Cost of sales C. Prime cost D. Works cost

34. Which of the following is not included in functional classification of overheads?

A. Repairs and maintenance B. Lubricating oil C. Consumable stores D. Chargeable expenses

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35. The process of distribution of overheads allotted to a particular department or cost center over the units
produced is called:
A. Allocation B. Apportionment C. Absorption D. Departmentalization

36. To control costs it is essential to keep control on

A. Prime cost B. Overheads C. Indirect materials and tools cost D. All of the above

37. Which of the following is/are the basic object/s of job analysis?

A. Determination of wage rates B. Ascertain the relative worth of each job

C. All of the given options D. Breaking up job into its basic elements

38. An overhead absorption rate is used to:

A. Share out common costs over benefiting cost canters B. Find the total overheads for a cost centre
C. Charge overheads to products D. Control overheads

39. Delightful Discs has the following inventory data:

Nov. 1 - Inventory 30 units @ Tshs.6,000 each; Nov. 8 - Purchase 120 units @ Tshs.6,450 each;
Nov. 17 - Purchase 60 units @ Tshs.6,300 each; Nov. 25 - Purchase 90 units @ Tshs.6,600 each
A physical count of merchandise inventory on November 30th reveals that there are 100 units on hand. Ending
inventory under LIFO periodic inventory system is
(A) Tshs.631,500 (B) Tshs.1,926,000 (C) Tshs.1,269,000 (D) Tshs.1,294,500

40. Halsey-Wear (premium bonus scheme) is where employee receives ________ of the time saved.
A. 33 1/3% B. 75% C. 50% D. The ratio of time taken to time allowed

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QUESTION TWO – Matching items and Short answers questions
a) Matching items question about the Classification of costs based on cost function

b) Calculations on the labour cost chargeable to a job worked with the overtime at the customer’s request
to bring forward the delivery date.
c) Discussion on each of the following:
i) Labour incentive scheme: Definition, Advantages and the main principles of labour incentive
scheme
ii) Basic methods of labour remuneration and advantages of each
iii) Causes of high labour turnover and the ways on how to reduce such situation
iv) Different bases of apportionment
v) Meaning of Payroll, Dummy wages, Job evaluation, Merit rating, Secondary apportionment, and
Budget, Break-even point, Sunk costs, Direct costs and Conversion costs

QUESTION THREE - Calculations

The Musoma Textile Mills (Mutex) in Musoma, Tanzania is organized into five departments namely
Fabrication, Assembly, Finishing, Finance and Administration. In the month of May 2024, the departments’
overheads of the factory were as follows:
Production cost centres Service cost centres
Fabrication Assembly Finishing Finance Administration
65,000,000 60,000,000 50,000,000 12,000,000 10,000,000

In distributing overhead costs of service departments, the following pattern is used:

Fabrication Assembly Finishing Finance Administration

Maintenance 30% 40% 15% - 15%
Canteen 40% 30% 25% 5% -

Required
By using both, Simultaneous Equation and Repeated Distribution Methods, show the total overheads
chargeable to the three production departments

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QUESTION FOUR - Calculations
a) The behavior of a cost can be expressed algebraically as Cost = bx + cx2 +dx3, where
b = Labour hours, c = material in kgs, d = machine hours, x = output in units.
Required

Calculate the cost at output level of 80 units when b = 6, c = 0.7 and d = 0.04
b) Junior produced 444 units in a week of 40 hours but 44 units were rejected. Time allowed per unit is 18
minutes and the wage rate per unit is Tshs. 15,000/-.
Required
Calculate Junior’s total wage on the basis of Rowan premium bonus scheme.
c) Mr. Magoti is a seasonal carpenter with The Mtakuja Furniture Mart specializing in making office chairs.

Mr. Magoti is paid Tshs. 20,000/= for each chair he makes, but he is guaranteed a minimum wage of Tshs.
1,500,000/= for a work of 40 hours. In series of 4 weeks, Mr. Magoti managed to make 60, 80, 40 and 120
chairs respectively.
Required
i) Compute Mr. Magoti’s gross earnings for each week
ii) What was the conversion cost per chair if production overhead is charged at the rate of Tshs. 25,000
per direct labour hour?

QUESTION FIVE - Calculations

The following information relates to a factory which has four department:
i) Overheads
Rent Repair to plant Depreciation to plant Light and heat Supervision Repair to building
80,000 50,000 40,000 20,000 60,000 30,000

ii) Information in respect of four departments

Dept. A Dept. B Dept. C Dept. D
Area sq. metres 1,500 1,200 800 500
Nb of employees 35 25 25 15
Value of plant (Tsh) 500,000 300,000 200,000 -
Required
Prepare an overhead analysis sheet showing clearly the bases of apportionment

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QUESTION SIX - Calculations

Hapakazitu pays its casual labourers through the piece work scheme. The scheme is as follows:
 001 – 500 toys per day = Tshs. 50/- per toy
 501 – 700 toys per day = Tshs. 60/- per toy
 701 – 800 toys per day = Tshs. 70/- per toy
 801 – 1000 toys per day =Tshs. 80/- per toy
Juakali, a casual labour recorded the following performance in a five days week:
 Monday (680 toys),
 Tuesday (590 toys),
 Wednesday (940 toys),
 Thursday (830 toys) and
 Friday (470 toys).
Required
Calculate Mr. Juakali’s remunerations for the week.

QUESTION SEVEN - Calculations

a) Given the data below, compute an employee’s earnings as determined by piece work method.
 Hourly rate of pay is Tshs. 14,000
 Agreed rate of production is 100 snacks per hour
 Units produced were 1,200 snacks
 Actual hours worked were 8
b) Wapowapo company manufactures and sells a product called WAPO at Tshs.800/= per unit. The following
results are for the year ended 31st December, 2020.
Quantities
 Units produced 12,000
 Units sold 10,000
Costs
 Direct materials 1,800,000
 Direct wages 600,000
 Variable Factory Overheads 1,500,000
 Fixed Factory Overheads 2,400,000
 Selling & Administration Fixed Overheads 550,000

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There was no beginning and ending stocks of direct materials and Work-In-Progress (W.I.P.)
There was no beginning stocks of finished goods

Required
Prepare Income Statement for the year using Variable Costing technique

QUESTION EIGHT - Calculations

a) A company makes a single product with a sales price of Tshs. 500 and a variable cost of Tshs. 300.
Fixed cost are Tshs. 3,000, 000 per annum. You are required to calculate the following:
(i) Number of units at break-even point.
(ii) Sales at break-even point in Tshs.
(iii) Contribution to sales ratio (C/S ratio).
(iv) Number of units to be sold to achieve a profit of Tshs.1,000,000 per annum.
(v) Level of sales amount to achieve a profit of Tshs.1,000,000 per annum. Commented [A1]:

b) Record the following transactions in stores leger card by FIFO method and state the value of the inventory
at the end of the month of May, 2023.
01.05.2023 - There were 200 units of inventories in hand each costs Tshs.2,000
02.05.2023 – Received 300 units @ Tshs.2,200
08.05.2023 – Received 250 units @ Tshs.2,100
15.05.2023 – Issued 400 units
17.05.2023 – Issued 200 units
20.05.2023 – Received 600 units @ Tshs.2,300
25.05.2023 – Issued 300 units
30.05.2023 – Issued 400 units

QUESTION NINE - Calculations

Mwananchi Ltd manufactures two types of products for the printing industry namely product X and Y. The
company uses two materials A and B in the manufacture of these products. The following information is given
for the year 2021.
i) Budgeted sales
Product Quantity Price (Tshs)

X 2,000 60
Y 1,400 50

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ii) Material unit cost
Details Material A Material B

Unit cost (Tshs) 5 3

iii) Material quantities used

Details Material A Material B

Product X 5 3
Product Y 4 4

There were the following stocks at the beginning and ending of the period:
a) Finished goods
Details Opening stock Closing stock

Product X 1,700 1,300

Product Y 1,400 2,100

b) Materials

Details Opening stock Closing stock

Material A 2,000 4,000

Material B 1,000 3,000

You are required to prepare:

(a) Sales budget (b) Production budget (c) Material usage in quantity budget
(d) Material purchase in quantity budget (e) Material purchase in value budget

QUESTION TEN
A firm expects to have Tshs.100,000,000 in a bank on 1st May 2022 and requires you to prepare an estimate
of cash position during the three months, May – July, 2022. The following information is supplied to you.
Month Sales Purchases Wages Factory Exp Office Exp Selling Exp
Tshs.“000” Tshs.“000” Tshs.“000” Tshs.“000” Tshs.“000” Tshs.“000”
March 50,000 30,000 6,000 5,000 4,000 3,000
April 56,000 32,000 6,500 5,500 4,000 3,000
May 60,000 35,000 7,000 6,000 4,000 3,500
June 80,000 40,000 9,000 7,500 4,000 4,500
July 90,000 40,000 9,500 8,000 4,000 4,500

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Additional information:
 20% of sales are for cash; the remaining amount is collected in the month following that of sales.
 Suppliers supply goods at two month’s credit.
 All expenses are paid in the month following the one in which they are incurred.
 The company pays dividends to shareholders and bonus to workers of Tshs.10,000,000 and
Tshs,15,000,000 respectively in the month of May.
 Plant has been ordered and is expected to be received in June, it will cost Tshs.80,000,000
 Income Tax of Tshs.25,000,000 is payable in July.

Solution

CASH BUDGET FOR THE MONTHS OF MAY – JULY, 2020

May June July

Opening cash balance 100,000,000 82,800,000 14,300,000
Add: Total cash collections (W1) 56,800,000 64,000,000 82,000,000

Total cash available 156,800,000 146,800,000 96,300,000

Less: Total cash payments
 Cash payments to suppliers (W2) 30,000,000 32,000,000 35,000,000
 Operating expenses (W3) 19,000,000 20,500,000 25,000,000
 Dividends 10,000,000 - -
 Bonus 15,000,000 - -
 Plant ordered - 80,000,000 -
 Income Tax - - 25,000,000
Total cash payments 74,000,000 132,500,000 85,000,000
Closing cash balance 82,800,000 14,300,000 11,300,000

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