226. Opening inventory is 400 units at CU 12. 600 units are bought at CU 14, then 700 units are issued, then 500 units are bought at CU 15. Using perpetual (cumulative) weighted average costing, what is the value of closing inventory?

A) CU 11,700
B) CU 11,460
C) CU 10,933
D) CU 12,000

Correct: B difficult Inventory valuation

Working: After the second receipt: 1,000 units at (4,800 + 8,400)/1,000 = CU 13.20. After the issue: 300 x 13.20 = 3,960. Add 500 x 15 = 7,500. Closing = 11,460. Correct answer: CU 11,460. Why the other options are wrong: 'CU 11,700': if you chose this, you priced the issue as FIFO (oldest first), leaving the remaining 300 units at CU 14. 'CU 10,933': if you chose this, you used a simple average of the three purchase prices (CU 13.67) instead of weighting by quantity. 'CU 12,000': if you chose this, you valued all 800 closing units at the latest price of CU 15.

227. A worker is paid CU 0.40 per unit with a guaranteed minimum of CU 160 a week. In week 1 the worker makes 350 units and in week 2, 500 units. What is the total pay for the two weeks?

A) CU 340
B) CU 360
C) CU 320
D) CU 400

Correct: B difficult Piecework

Working: Week 1: 350 x 0.40 = 140, below the guarantee, so pay is 160. Week 2: 500 x 0.40 = 200. Total = 160 + 200. Correct answer: CU 360. Why the other options are wrong: 'CU 340': if you chose this, you paid week 1 at the piece rate (350 x 0.40 = 140) and ignored the guaranteed minimum. 'CU 320': if you chose this, you paid the guaranteed minimum in both weeks and ignored the extra output in week 2. 'CU 400': if you chose this, you paid the higher week (CU 200) twice.

228. Twenty-five workers are paid for a 38-hour week but are productive for 32 hours at CU 15 an hour. How should the idle time be treated and what is its weekly cost?

A) CU 2,250, charged to the jobs worked on in the week
B) CU 14,250, treated as a production overhead
C) CU 2,250, treated as a production overhead
D) CU 12,000, treated as a production overhead

Correct: C difficult Idle time

Working: Idle hours = 38 - 32 = 6 per worker. Cost = 25 x 6 x 15 = 2,250, treated as overhead because it is not caused by a particular job. Correct answer: CU 2,250, treated as a production overhead. Why the other options are wrong: 'CU 2,250, charged to the jobs worked on in the week': if you chose this, you charged idle time to the jobs; abnormal idle time is an overhead, not a direct job cost. 'CU 14,250, treated as a production overhead': if you chose this, you used all paid hours (25 x 38 x 15), not the idle hours. 'CU 12,000, treated as a production overhead': if you chose this, you used the productive hours (25 x 32 x 15), which are the direct labour.

229. Which THREE statements about inventory valuation are correct? (Select THREE.)

Multiple response
A) Under FIFO, closing inventory is valued at the oldest prices
B) Weighted average smooths the effect of price changes
C) Under weighted average, each issue is priced at the latest purchase price
D) FIFO prices issues at the oldest purchase cost
E) When prices are rising, FIFO gives a higher closing inventory value than weighted average

Correct: B, D, E difficult Inventory valuation

Correct answers: B, D, E. A is wrong: closing inventory is valued at the most recent prices. B is correct: it blends all purchases into one price. C is wrong: it is priced at the average of all inventory held. D is correct: the oldest layer is issued first. E is correct: closing inventory is made up of the newest, dearest purchases.

230. Consider the following statements about labour costing. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. An overtime premium is normally an overhead when overtime arises from general pressure of work.   Yes

2. The basic pay of overtime hours is always indirect.   No

3. Piecework payments vary with output.   Yes

4. Labour turnover costs include training and lost output.   Yes

5. Idle time cost is charged to the last job worked on.   No

Correct: Y, N, Y, Y, N difficult Labour costing

(1) Yes: it is not caused by a specific job. (2) No: basic pay for hours worked on a job is direct labour. (3) Yes: pay is based on units produced. (4) Yes: they include recruitment, training, lost output and scrap. (5) No: it is an overhead spread across all production.

231. 500 units of inventory cost CU 24 each. They can be sold for CU 30 each, but selling costs will be CU 8 a unit. At what amount should the write-down be?

A) CU 1,000
B) CU 3,000
C) Nil
D) CU 4,000

Correct: A difficult Inventory valuation

Working: Net realisable value = 30 - 8 = 22 per unit. Cost 24 is above NRV, so write down by (24 - 22) x 500 = 1,000. Correct answer: CU 1,000. Why the other options are wrong: 'CU 3,000': if you chose this, you treated the selling margin (30 - 24 = 6) as a loss. 'Nil': if you chose this, you compared cost with selling price and ignored the selling costs that reduce net realisable value. 'CU 4,000': if you chose this, you deducted only the selling costs (500 x 8) from cost.

232. A material has maximum usage of 120 units a day, average usage of 100 units a day and minimum usage of 80 units a day. Lead time varies from 8 to 12 days. What is the reorder level?

A) 1,200 units
B) 1,000 units
C) 960 units
D) 1,440 units

Correct: D difficult Inventory control levels

Working: Reorder level = maximum usage x maximum lead time = 120 x 12 = 1,440. Correct answer: 1,440 units. Why the other options are wrong: '1,200 units': if you chose this, you used average usage with maximum lead time. '1,000 units': if you chose this, you used average usage with average lead time (10 days). '960 units': if you chose this, you used maximum usage with minimum lead time.

233. Opening inventory is 300 units at CU 20. 500 units are bought at CU 22, then 600 units are issued, then 400 units are bought at CU 24. Using FIFO, what is the cost of the 600 units issued?

A) CU 12,750
B) CU 13,200
C) CU 12,600
D) CU 12,000

Correct: C difficult Inventory issues: FIFO

Working: FIFO takes the oldest layer first: 300 x 20 = 6,000 plus 300 x 22 = 6,600. Correct answer: CU 12,600. Why the other options are wrong: 'CU 12,750': if you chose this, you priced the issue at the weighted average of CU 21.25. 'CU 13,200': if you chose this, you priced the issue at the latest price of CU 22. 'CU 12,000': if you chose this, you priced the whole issue at the opening price of CU 20.

234. Using the same data and perpetual weighted average costing, what is the value of closing inventory?

A) CU 13,850
B) CU 14,000
C) CU 13,200
D) CU 9,600

Correct: A difficult Inventory valuation: weighted average

Working: After the second receipt: 800 units at (6,000 + 11,000) / 800 = 21.25. After the issue: 200 x 21.25 = 4,250. Add 400 x 24 = 9,600. Closing = 13,850. Correct answer: CU 13,850. Why the other options are wrong: 'CU 14,000': if you chose this, you valued closing inventory on FIFO layers (200 x 22 + 400 x 24). 'CU 13,200': if you chose this, you valued 600 closing units at a simple average of the three purchase prices (CU 22). 'CU 9,600': if you chose this, you valued only the 400 units bought last, at CU 24.

235. A worker is paid CU 14 an hour for 40 hours and 50% extra (time and a half) for 6 overtime hours, which arose from general pressure of work. How much of the week's pay is charged to overhead?

A) CU 126
B) CU 42
C) CU 686
D) CU 84

Correct: B difficult Overtime

Working: Overtime premium = 6 x 14 x 50% = 42, an overhead because overtime was not caused by a particular job. The basic pay of 6 x 14 = 84 stays direct. Correct answer: CU 42. Why the other options are wrong: 'CU 126': if you chose this, you charged all of the overtime pay to overhead, but the basic rate for those hours is direct labour. 'CU 686': if you chose this, you charged the whole week's pay to overhead. 'CU 84': if you chose this, you used the basic rate for the six hours instead of the premium.

236. Which THREE are costs of labour turnover? (Select THREE.)

Multiple response
A) Advertising and recruitment costs
B) Training of new staff
C) Depreciation of machinery
D) Settlement discounts to customers
E) Lost output while new staff learn

Correct: A, B, E difficult Labour turnover

Correct answers: A, B, E. A is correct: replacing leavers costs money. B is correct: new staff must learn the job. C is wrong: it is unrelated to staff leaving. D is wrong: they relate to receivables. E is correct: productivity is lower at first.

237. Consider the following statements about inventory control levels. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Reorder level = maximum usage x maximum lead time.   Yes

2. Minimum level = reorder level - average usage x average lead time.   Yes

3. Maximum level = reorder level + reorder quantity - minimum usage x minimum lead time.   Yes

4. Buffer stock is held to cover normal usage only.   No

5. A higher reorder level lowers average holding cost.   No

Correct: Y, Y, Y, N, N difficult Inventory control levels

(1) Yes: it covers the worst case during the lead time. (2) Yes: it is the level expected at delivery. (3) Yes: it is the highest expected level. (4) No: it covers unexpected variations. (5) No: it raises average inventory.

238. An employee is paid for 160 hours at CU 12.50 an hour. 148 hours are spent on jobs and 12 hours are idle. How much is charged directly to jobs?

A) CU 2,000
B) CU 150
C) CU 1,776
D) CU 1,850

Correct: D difficult Idle time

Working: Direct labour = 148 x 12.50 = 1,850. Idle time of 12 x 12.50 = 150 is an overhead. Correct answer: CU 1,850. Why the other options are wrong: 'CU 2,000': if you chose this, you charged all hours paid to jobs, including the idle time. 'CU 150': if you chose this, you gave the idle time cost only. 'CU 1,776': if you chose this, you used CU 12 instead of CU 12.50 for the productive hours.

239. 1,000 kg of material is bought for CU 9,000. Normal wastage is 5% of the input. What is the cost per usable kilogram?

A) CU 9.00
B) CU 9.47
C) CU 9.45
D) CU 8.55

Correct: B difficult Normal wastage

Working: Usable quantity = 1,000 x 95% = 950 kg. Cost per kg = 9,000 / 950. Correct answer: CU 9.47. Why the other options are wrong: 'CU 9.00': if you chose this, you ignored the normal wastage. 'CU 9.45': if you chose this, you added 5% to the price instead of dividing by the usable quantity. 'CU 8.55': if you chose this, you reduced the price by 5%.

240. Scenario: Raven Ltd holds opening inventory of 1,000 kg at CU 8.00. It then buys 2,000 kg at CU 9.00 and later 1,000 kg at CU 10.00. A total of 2,500 kg is issued to production. Question 1 of 3: What is the value of closing inventory under FIFO?

A) CU 13,500
B) CU 12,000
C) CU 15,000
D) CU 14,500

Correct: D difficult Inventory valuation: FIFO

Working: FIFO issues the oldest first: 1,000 x 8 + 1,500 x 9 = 21,500. Total available = 8,000 + 18,000 + 10,000 = 36,000. Closing = 36,000 - 21,500 = 14,500 (500 x 9 + 1,000 x 10). Correct answer: CU 14,500. Why the other options are wrong: 'CU 13,500': if you chose this, you used the weighted average cost of CU 9.00 for the closing 1,500 kg. 'CU 12,000': if you chose this, you valued the closing inventory at the opening price of CU 8.00. 'CU 15,000': if you chose this, you valued all closing units at the latest price of CU 10.00 instead of 500 kg at CU 9.00 and 1,000 kg at CU 10.00.

241. Scenario: Raven Ltd holds opening inventory of 1,000 kg at CU 8.00. It then buys 2,000 kg at CU 9.00 and later 1,000 kg at CU 10.00. A total of 2,500 kg is issued to production. Question 2 of 3: Compared with the cumulative weighted average method, how does FIFO affect the profit for the period?

A) CU 1,000 higher
B) CU 1,000 lower
C) CU 500 higher
D) No difference

Correct: A difficult Inventory valuation: comparison

Working: Weighted average cost of the issue = 2,500 x 9.00 = 22,500. FIFO cost of the issue = 21,500. Cost of sales is 1,000 lower, so profit is 1,000 higher (closing inventory is 1,000 higher: 14,500 v 13,500). Correct answer: CU 1,000 higher. Why the other options are wrong: 'CU 1,000 lower': if you chose this, you reversed the direction; with rising prices FIFO charges lower old costs to production. 'CU 500 higher': if you chose this, you took half of the cost difference. 'No difference': if you chose this, you assumed the methods give the same profit; they differ when prices change.

242. Scenario: Raven Ltd holds opening inventory of 1,000 kg at CU 8.00. It then buys 2,000 kg at CU 9.00 and later 1,000 kg at CU 10.00. A total of 2,500 kg is issued to production. Question 3 of 3: Daily usage is 180 kg on average and 220 kg at most. The lead time is 6 to 10 days. What is the reorder level?

A) 1,800 kg
B) 1,320 kg
C) 2,200 kg
D) 1,080 kg

Correct: C difficult Inventory management: reorder level

Working: Reorder level = maximum usage x maximum lead time = 220 x 10 = 2,200 kg. Correct answer: 2,200 kg. Why the other options are wrong: '1,800 kg': if you chose this, you used average usage with the maximum lead time. '1,320 kg': if you chose this, you used maximum usage with the minimum lead time. '1,080 kg': if you chose this, you used average usage with the minimum lead time.

243. Which TWO statements about labour costing are correct? (Select TWO.)

Multiple response
A) Overtime premium is normally treated as an overhead when overtime arises from general pressure of work
B) Labour turnover costs are only the costs of recruiting new staff
C) Overtime premium is always charged directly to the job that worked the overtime
D) Under piecework, pay varies with output
E) Idle time is always charged to the job on which the worker was last engaged

Correct: A, D difficult Labour costing

Correct answers: A, D. A is correct: When overtime arises from general pressure of work the premium is spread as overhead. B is wrong: Turnover costs include recruitment, training, lost output and scrap, not recruitment alone. C is wrong: When overtime arises from general pressure of work the premium is an overhead; only overtime requested by a specific customer is charged to that job. D is correct: Under piecework pay varies with output. E is wrong: Idle time cost is an overhead and is not charged to the last job.

244. Consider the following statements about labour incentive schemes. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. A guaranteed minimum wage applies in a piecework scheme.   Yes

2. The basic pay of overtime hours is always an overhead.   No

3. Group bonus schemes can encourage teamwork.   Yes

Correct: Y, N, Y difficult Labour incentive schemes

(1) Yes: many schemes guarantee a minimum. (2) No: basic pay is direct labour; only the premium is normally overhead. (3) Yes: group schemes reward collective output.

245. A job has an allowed time of 50 hours and takes 40 hours at CU 12 an hour. Under a Rowan scheme the bonus is time saved / time allowed x time taken x hourly rate. What is the total pay?

A) CU 540
B) CU 576
C) CU 600
D) CU 480

Correct: B difficult Labour incentive schemes: Rowan

Working: Basic = 40 x 12 = 480. Bonus = 10 / 50 x 40 x 12 = 96. Total = 576. Correct answer: CU 576. Why the other options are wrong: 'CU 540': if you chose this, you used the Halsey scheme (50% of time saved). 'CU 600': if you chose this, you paid for the full 50 hours allowed. 'CU 480': if you chose this, you paid the basic wage for hours taken and left out the bonus.

246. A worker earns CU 0.80 a unit with a guaranteed weekly minimum of CU 240. Output is 290 units in week 1 and 340 units in week 2. What is the total pay for the two weeks?

A) CU 512
B) CU 504
C) CU 480
D) CU 744

Correct: A difficult Labour incentive schemes: piecework

Working: Week 1: 290 x 0.80 = 232, below the guarantee, so pay is 240. Week 2: 340 x 0.80 = 272. Total = 240 + 272. Correct answer: CU 512. Why the other options are wrong: 'CU 504': if you chose this, you ignored the guarantee in week 1 (290 x 0.80 = 232 is below 240). 'CU 480': if you chose this, you paid the minimum in both weeks. 'CU 744': if you chose this, you added the piecework earnings to the guarantee in week 1.

247. A material has maximum usage of 150 units a day, average usage of 120 units a day, and a lead time of between 8 and 12 days. What is the reorder level?

A) 1,440 units
B) 1,800 units
C) 1,200 units
D) 960 units

Correct: B difficult Inventory control levels

Working: Reorder level = maximum usage x maximum lead time = 150 x 12. Correct answer: 1,800 units. Why the other options are wrong: '1,440 units': if you chose this, you used average usage with the maximum lead time. '1,200 units': if you chose this, you used maximum usage with the minimum lead time. '960 units': if you chose this, you used average usage with the minimum lead time.

248. An employee is paid CU 14 an hour for a 38-hour week and time and a half for overtime. This week he worked 44 hours. What is his gross pay?

A) CU 616
B) CU 574
C) CU 784
D) CU 658

Correct: D difficult Overtime

Working: Normal pay = 38 x 14 = 532. Overtime = 6 x 14 x 1.5 = 126. Total = 658. Correct answer: CU 658. Why the other options are wrong: 'CU 616': if you chose this, you paid all 44 hours at the basic rate. 'CU 574': if you chose this, you paid only the 38 normal hours and 6 overtime hours at the premium element. 'CU 784': if you chose this, you paid all 44 hours at time and a half.

249. A worker is paid CU 11 an hour for a 40-hour week. During the week 6 hours were lost through a machine breakdown. What is the cost of idle time?

A) CU 440
B) CU 374
C) CU 66
D) CU 6

Correct: C difficult Idle time

Working: Idle time cost = 6 hours x CU 11. It is treated as an overhead, not a direct labour cost. Correct answer: CU 66. Why the other options are wrong: 'CU 440': if you chose this, you gave the whole week's pay. 'CU 374': if you chose this, you gave the pay for the hours actually worked. 'CU 6': if you chose this, you gave the idle hours and did not value them.

250. A factory had 140 employees at the start of the year and 160 at the end. During the year 18 employees were replaced. What was the labour turnover rate?

A) 12.0%
B) 12.9%
C) 11.3%
D) 18.0%

Correct: A difficult Labour turnover

Working: Labour turnover = replacements / average workforce = 18 / 150. Correct answer: 12.0%. Why the other options are wrong: '12.9%': if you chose this, you divided by the opening workforce instead of the average. '11.3%': if you chose this, you divided by the closing workforce instead of the average. '18.0%': if you chose this, you gave the number of replacements as a percentage.