251. Which TWO are likely consequences of high labour turnover? (Select TWO.)

Multiple response
A) Lower disruption to production schedules
B) A fall in the cost of idle time
C) Higher staff morale
D) Lower productivity while new staff learn the job
E) Higher recruitment and training costs

Correct: D, E difficult Labour turnover

Correct answers: D, E. A is wrong: changes in staff increase disruption. B is wrong: idle time is more likely to increase. C is wrong: turnover is more often a symptom of low morale. D is correct: experience is lost. E is correct: each leaver must be replaced and trained.

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

Yes/No grid

1. FIFO values closing inventory at the most recent purchase prices.   Yes

2. When prices are rising, FIFO usually gives a higher profit than weighted average cost.   Yes

3. Weighted average cost uses the latest purchase price for every issue.   No

4. LIFO is permitted by IAS 2.   No

5. Inventory is valued at the lower of cost and net realisable value.   Yes

Correct: Y, Y, N, N, Y difficult Inventory valuation

(1) Yes: the oldest items are assumed to be issued first. (2) Yes: older, cheaper costs go to cost of sales. (3) No: it uses an average of the cost of the items held. (4) No: IAS 2 prohibits LIFO. (5) Yes: that is the IAS 2 rule.

253. A process uses 5,000 kg of material costing CU 8 a kg. Normal loss is 10% of input. What is the cost per kg of expected output?

A) CU 8.00
B) CU 8.89
C) CU 9.30
D) CU 7.20

Correct: B difficult Normal wastage

Working: Expected output = 5,000 x 90% = 4,500 kg. Cost per kg = 40,000 / 4,500. Correct answer: CU 8.89. Why the other options are wrong: 'CU 8.00': if you chose this, you used the purchase price and ignored the normal loss. 'CU 9.30': if you chose this, you divided by actual output of 4,300 kg, which includes abnormal loss. 'CU 7.20': if you chose this, you reduced the price by the normal loss percentage.

254. A material has maximum usage of 90 units a day, average usage of 70 units a day, and a lead time of between 5 and 9 days. What is the reorder level?

A) 630 units
B) 810 units
C) 450 units
D) 350 units

Correct: B difficult Inventory control levels

Working: Reorder level = maximum usage x maximum lead time = 90 x 9. Correct answer: 810 units. Why the other options are wrong: '630 units': if you chose this, you used average usage with the maximum lead time. '450 units': if you chose this, you used maximum usage with the minimum lead time. '350 units': if you chose this, you used average usage with the minimum lead time.

255. An employee is paid CU 12 an hour for a 40-hour week and time and a quarter for overtime. This week she worked 47 hours. What is her gross pay?

A) CU 585
B) CU 564
C) CU 480
D) CU 705

Correct: A difficult Overtime

Working: Normal pay = 40 x 12 = 480. Overtime = 7 x 12 x 1.25 = 105. Total = 585. Correct answer: CU 585. Why the other options are wrong: 'CU 564': if you chose this, you paid all 47 hours at the basic rate. 'CU 480': if you chose this, you paid the 40 normal hours only. 'CU 705': if you chose this, you paid all 47 hours at time and a quarter.

256. A worker is paid CU 9.50 an hour for a 35-hour week. During the week 5 hours were lost through a power failure. What is the cost of idle time?

A) CU 332.50
B) CU 285.00
C) CU 47.50
D) CU 5.00

Correct: C difficult Idle time

Working: Idle time cost = 5 hours x CU 9.50. It is treated as an overhead, not a direct labour cost. Correct answer: CU 47.50. Why the other options are wrong: 'CU 332.50': if you chose this, you gave the whole week's pay. 'CU 285.00': if you chose this, you gave the pay for the hours actually worked. 'CU 5.00': if you chose this, you gave the idle hours and did not value them.

257. A factory had 90 employees at the start of the year and 110 at the end. During the year 12 employees were replaced. What was the labour turnover rate?

A) 13.3%
B) 12.0%
C) 10.9%
D) 24.0%

Correct: B difficult Labour turnover

Working: Labour turnover = replacements / average workforce = 12 / 100. Correct answer: 12.0%. Why the other options are wrong: '13.3%': if you chose this, you divided by the opening workforce instead of the average. '10.9%': if you chose this, you divided by the closing workforce instead of the average. '24.0%': if you chose this, you counted the replacements twice.

258. Which TWO are costs of holding too much inventory? (Select TWO.)

Multiple response
A) A greater risk of obsolescence
B) Storage and insurance costs
C) Higher ordering costs for every unit
D) Lost sales from shortages
E) A greater risk of stockouts

Correct: A, B difficult Inventory management

Correct answers: A, B. A is correct: items may become outdated or damaged. B is correct: holding inventory has a running cost. C is wrong: large orders reduce the number of orders. D is wrong: it arises from too little inventory. E is wrong: high inventory reduces this risk.

259. Consider the following statements about inventory valuation. The context is a manufacturing company. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. In a period of falling prices, FIFO gives a lower profit than weighted average cost.   Yes

2. FIFO values closing inventory at close to current replacement cost.   Yes

3. Under IAS 2, inventory is valued at the higher of cost and net realisable value.   No

4. Weighted average cost can be recalculated after each receipt.   Yes

5. LIFO is accepted under IAS 2.   No

Correct: Y, Y, N, Y, N difficult Inventory valuation

(1) Yes: older, higher costs go to cost of sales. (2) Yes: the latest purchases remain in inventory. (3) No: it is the lower of the two. (4) Yes: it gives a continuous average. (5) No: IAS 2 prohibits LIFO.

260. A process uses 8,000 kg of material costing CU 5 a kg. Normal loss is 5% of input. What is the cost per kg of expected output?

A) CU 5.00
B) CU 5.41
C) CU 5.26
D) CU 4.75

Correct: C difficult Normal wastage

Working: Expected output = 8,000 x 95% = 7,600 kg. Cost per kg = 40,000 / 7,600. Correct answer: CU 5.26. Why the other options are wrong: 'CU 5.00': if you chose this, you used the purchase price and ignored the normal loss. 'CU 5.41': if you chose this, you divided by actual output of 7,400 kg, which includes abnormal loss. 'CU 4.75': if you chose this, you reduced the price by the normal loss percentage.