101. In a period of rising prices, which TWO statements comparing FIFO with weighted average cost are correct? (1) FIFO gives a higher closing inventory value. (2) FIFO gives a higher profit. (3) FIFO gives a higher cost of sales. (4) FIFO gives a lower closing inventory value.

A) (1) and (2) only
B) (1) and (3) only
C) (2) and (4) only
D) (3) and (4) only

Correct: A difficult IAS 2: cost formulas

With FIFO the oldest, lower costs go to cost of sales and the latest, higher costs remain in inventory. So FIFO shows a lower cost of sales, higher profit and higher closing inventory than weighted average. If you chose (3) or (4) you reversed the direction of the effect.

102. A count on 3 January found 12,300 units. Between 31 December and 3 January 900 units were received and 1,500 units were issued. Each unit costs CU 4. What was the inventory value at 31 December?

A) CU 46,800
B) CU 51,600
C) CU 49,200
D) CU 39,600

Correct: B difficult IAS 2: year-end counts

Roll the count back to the year end: add back issues and deduct receipts. 12,300 + 1,500 - 900 = 12,900 units x 4 = CU 51,600. If you answered CU 46,800 you rolled in the wrong direction (receipts added, issues deducted). If you answered CU 49,200 you used the count with no adjustment. If you answered CU 39,600 you deducted both movements.

103. Opening inventory 300 units at CU 8. Purchases: 500 units at CU 9 (day 4) and 400 units at CU 10 (day 9). Issues: 600 units (day 6) and 350 units (day 12). Using perpetual FIFO, what is the total cost of issues?

A) CU 8,629
B) CU 3,300
C) CU 8,400
D) CU 2,500

Correct: C difficult IAS 2: cost formulas

Day 6: 300 x 8 + 300 x 9 = 5,100. Day 12: the remaining 200 at CU 9 and 150 at CU 10 = 3,300. Total = CU 8,400. If you answered CU 8,629 you used a periodic average cost (10,900 / 1,200 x 950). If you answered CU 3,300 you gave the second issue only. If you answered CU 2,500 you gave the value of closing inventory.

104. Which TWO statements about methods of paying direct labour are correct? (1) A piece rate rewards output but may lead to quality problems. (2) A time rate gives certainty of pay but offers no direct incentive to increase output. (3) A piece rate is the best method where output cannot be measured. (4) A guaranteed minimum wage removes any incentive to produce under a piece rate.

A) (1) and (3) only
B) (2) and (4) only
C) (3) and (4) only
D) (1) and (2) only

Correct: D difficult Labour: remuneration

A piece rate pays by output, so quality can be sacrificed for speed. A time rate pays for hours, so there is no direct reward for extra output. A piece rate needs measurable output, and a guarantee only protects low earners; workers above the guarantee still gain from extra output. If you chose (3) you applied piece rates where output cannot be measured. If you chose (4) you overstated the effect of a guarantee.

105. A firm bought 5,000 kg at CU 6.30 a kg with delivery costs of CU 1,500. A normal storage loss of 2% is expected. What is the cost per kg of usable material, to the nearest cent?

A) CU 6.60
B) CU 6.73
C) CU 6.43
D) CU 6.30

Correct: B difficult IAS 2: normal loss

Total cost = 31,500 + 1,500 = 33,000. Usable quantity = 5,000 x 98% = 4,900 kg. Cost per kg = 33,000 / 4,900 = CU 6.73. If you answered CU 6.60 you ignored the normal loss. If you answered CU 6.43 you omitted the delivery costs. If you answered CU 6.30 you gave the purchase price.

106. Opening inventory was 500 units at CU 9.00. Purchases were 700 units at CU 9.60 and then 600 units at CU 10.20. Issues in the period totalled 1,300 units. Using periodic FIFO, what is the value of closing inventory?

A) CU 5,100
B) CU 4,500
C) CU 4,817
D) CU 4,800

Correct: A difficult IAS 2: cost formulas

Closing inventory is 1,800 - 1,300 = 500 units, taken from the latest purchase: 500 x 10.20 = CU 5,100. If you answered CU 4,500 you valued closing stock at the opening price. If you answered CU 4,817 you used the weighted average cost (17,340 / 1,800 x 500). If you answered CU 4,800 you used the simple average of the purchase prices (CU 9.60).

107. Inventory records: 300 units at CU 4.00 on hand. Purchases: 200 units at CU 5.00 (day 2) and 400 units at CU 5.50 (day 9). Issues: 250 units (day 5) and 500 units (day 12). Using perpetual weighted average cost, what is the value of closing inventory, to the nearest CU?

A) CU 733
B) CU 762
C) CU 825
D) CU 660

Correct: B difficult IAS 2: cost formulas

After day 2: 500 units at CU 4.40. After the day 5 issue: 250 units, 1,100. After day 9: 650 units, 3,300, average CU 5.0769. After the day 12 issue 150 units remain = CU 762. If you answered CU 733 you used a single periodic average (4,400 / 900). If you answered CU 825 you used FIFO. If you answered CU 660 you kept the average from day 2 and did not recalculate after day 9.

108. Which TWO statements about the cost of inventory under IAS 2 are correct? (1) Cost includes the purchase price and import duties. (2) Trade discounts and rebates are deducted in arriving at the purchase cost. (3) Selling costs are included in the cost of inventory. (4) General administrative overheads unrelated to production are included in the cost of inventory.

A) (1) and (2) only
B) (1) and (3) only
C) (2) and (4) only
D) (3) and (4) only

Correct: A difficult IAS 2: cost of inventory

Purchase cost includes duties and is net of trade discounts and rebates. Selling costs and unrelated administrative overheads are excluded from inventory cost. If you chose (3) you capitalised selling costs. If you chose (4) you capitalised administration overheads.

109. Item P: cost 9,200, selling price 11,000, costs to complete 500, selling costs 600. Item Q: cost 7,400, selling price 8,300, selling costs 700. Item R: cost 5,600, selling price 5,900, costs to complete 900, selling costs 450. All figures in CU. At what total value should the items be stated, item by item?

A) CU 21,150
B) CU 22,200
C) CU 22,050
D) CU 21,600

Correct: A difficult IAS 2: net realisable value

NRV: P = 9,900; Q = 7,600; R = 5,900 - 900 - 450 = 4,550. Only R is below cost, so the total is 9,200 + 7,400 + 4,550 = CU 21,150. If you answered CU 22,200 you used cost for all items. If you answered CU 22,050 you compared in total (NRV 22,050 against cost 22,200) rather than item by item. If you answered CU 21,600 you ignored the selling costs of R.

110. A direct worker is paid CU 14 an hour basic, with overtime at a 25% premium. Twelve hours of overtime were worked solely to complete Job K, which the customer asked to be rushed. What labour cost is charged to Job K for those 12 hours?

A) CU 168
B) CU 42
C) CU 252
D) CU 210

Correct: D difficult Labour: overtime

Overtime requested for a specific job is charged to that job in full, including the premium: 12 x 14 x 1.25 = CU 210. If you answered CU 168 you omitted the premium. If you answered CU 42 you gave the premium only. If you answered CU 252 you used a 50% premium.

111. A piece-rate scheme pays CU 0.60 a unit for the first 400 units in a week and CU 0.75 a unit for each unit above 400. A worker makes 520 units. What is the week's pay?

A) CU 390
B) CU 312
C) CU 372
D) CU 330

Correct: D difficult Labour: piecework

First 400 units: 240. Next 120 units: 90. Total = CU 330. If you answered CU 390 you paid CU 0.75 on all units. If you answered CU 312 you paid CU 0.60 on all units. If you answered CU 372 you reversed the rates.

112. Direct workers were paid for 2,000 hours at CU 11 an hour. Idle time was 10% of hours paid, of which 4% is normal and 6% was caused by a strike. What labour cost is included in the cost of production?

A) CU 22,000
B) CU 19,800
C) CU 21,120
D) CU 20,680

Correct: D difficult Labour: idle time

Normal idle time stays in production cost. Abnormal idle time (6% x 2,000 = 120 hours x 11 = CU 1,320) is charged to profit or loss. Production cost = 22,000 - 1,320 = CU 20,680. If you answered CU 22,000 you included all idle time. If you answered CU 19,800 you excluded all 10%. If you answered CU 21,120 you excluded the normal 4% instead of the abnormal 6%.

113. A job has an allowed time of 40 hours and takes 32 hours. The hourly rate is CU 15. Under a Halsey scheme, a bonus of 50% of the time saved is paid. What is the total pay for the job?

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

Correct: B difficult Labour: bonus

Pay = 32 x 15 = 480, plus bonus 8 hours x 50% x 15 = 60. Total = CU 540. If you answered CU 480 you omitted the bonus. If you answered CU 600 you paid for the full allowed time. If you answered CU 576 you used the Rowan formula.

114. Gross wages were CU 120,000, employees' deductions CU 24,000 and the employer's social security cost CU 12,000. Indirect labour cost, including the employer's cost, was CU 34,500. What is charged to work in progress as direct labour?

A) CU 85,500
B) CU 97,500
C) CU 108,000
D) CU 73,500

Correct: B difficult Labour: wages control

Total wages cost = 120,000 + 12,000 = 132,000. Direct labour = 132,000 - 34,500 = CU 97,500. If you answered CU 85,500 you omitted the employer's cost. If you answered CU 108,000 you deducted the employees' deductions, which are part of gross pay. If you answered CU 73,500 you deducted the employees' deductions from direct labour.

115. A buyer purchased 800 units at list price CU 15 less a 12% trade discount. Import duty is 4% of the discounted price, carriage inwards CU 640 and insurance in transit CU 160. What is the cost per unit for inventory valuation, to the nearest cent?

A) CU 14.73
B) CU 13.20
C) CU 14.53
D) CU 14.80

Correct: A difficult IAS 2: cost of purchase

Cost = 10,560 + duty 422.40 + carriage 640 + insurance 160 = 11,782.40, so CU 14.73 a unit. If you answered CU 13.20 you included only the discounted price. If you answered CU 14.53 you omitted the insurance. If you answered CU 14.80 you charged duty on the list price.

116. In a period of falling prices, which TWO statements comparing FIFO with weighted average cost are correct? (1) FIFO gives a lower profit. (2) FIFO gives a lower closing inventory value. (3) FIFO gives a higher profit. (4) FIFO gives a higher closing inventory value.

A) (1) and (3) only
B) (1) and (2) only
C) (2) and (4) only
D) (3) and (4) only

Correct: B difficult IAS 2: cost formulas

When prices fall, FIFO charges the older, higher costs to cost of sales and leaves the latest, lower costs in inventory. So FIFO gives a lower profit and a lower closing inventory value than weighted average. If you chose (3) or (4) you applied the rising-price effect.

117. A count on 4 January found 8,640 units. Between 31 December and 4 January 1,200 units were received and 700 units were issued. Each unit costs CU 6.50. What was the inventory value at 31 December?

A) CU 59,410
B) CU 56,160
C) CU 52,910
D) CU 43,810

Correct: C difficult IAS 2: year-end counts

Roll back: 8,640 - 1,200 received + 700 issued = 8,140 units x 6.50 = CU 52,910. If you answered CU 59,410 you rolled in the wrong direction. If you answered CU 56,160 you used the count with no adjustment. If you answered CU 43,810 you deducted both movements.

118. Opening inventory 250 units at CU 12. Purchases: 400 units at CU 13 (day 3) and 300 units at CU 14 (day 8). Issues: 500 units (day 5) and 350 units (day 10). Using perpetual FIFO, what is the total cost of issues?

A) CU 11,095
B) CU 4,750
C) CU 11,000
D) CU 1,400

Correct: C difficult IAS 2: cost formulas

Day 5: 250 x 12 + 250 x 13 = 6,250. Day 10: 150 x 13 + 200 x 14 = 4,750. Total = CU 11,000. If you answered CU 11,095 you used a periodic average cost. If you answered CU 4,750 you gave the second issue only. If you answered CU 1,400 you gave the closing inventory.

119. Which TWO statements about methods of paying direct labour are correct? (1) A time rate gives certainty of pay and suits work where quality matters more than speed. (2) A piece rate suits repetitive work with measurable output. (3) A premium bonus scheme always reduces the labour cost per unit. (4) A guaranteed minimum under a piece rate is paid only to workers who exceed the standard.

A) (1) and (3) only
B) (2) and (4) only
C) (1) and (2) only
D) (3) and (4) only

Correct: C difficult Labour: remuneration

Time rates suit quality-sensitive work and piece rates suit measurable repetitive output. A bonus scheme does not always reduce unit cost, and a guaranteed minimum protects workers who fall below the standard. If you chose (3) you assumed bonuses always reduce unit cost. If you chose (4) you reversed the purpose of the guarantee.

120. A firm bought 8,000 litres at CU 2.40 a litre with delivery costs of CU 1,600. A normal evaporation loss of 4% is expected in storage. What is the cost per litre of usable material, to the nearest cent?

A) CU 2.60
B) CU 2.50
C) CU 2.40
D) CU 2.71

Correct: D difficult IAS 2: normal loss

Total cost = 19,200 + 1,600 = 20,800. Usable = 8,000 x 96% = 7,680 litres. Cost per litre = CU 2.71. If you answered CU 2.60 you ignored the normal loss. If you answered CU 2.50 you omitted the delivery costs. If you answered CU 2.40 you gave the purchase price.

121. Opening inventory was 600 units at CU 7.50. Purchases were 500 units at CU 8.00 and then 700 units at CU 8.40. Issues in the period totalled 1,200 units. Using periodic FIFO, what is the value of closing inventory?

A) CU 4,500
B) CU 5,040
C) CU 4,793
D) CU 4,800

Correct: B difficult IAS 2: cost formulas

Closing inventory is 1,800 - 1,200 = 600 units, taken from the latest purchase: 600 x 8.40 = CU 5,040. If you answered CU 4,500 you valued closing stock at the opening price. If you answered CU 4,793 you used the weighted average cost (14,380 / 1,800 x 600). If you answered CU 4,800 you used the simple average of the purchase prices (CU 8.00).

122. Inventory records: 400 units at CU 3.00 on hand. Purchases: 600 units at CU 3.50 (day 2) and 500 units at CU 3.90 (day 9). Issues: 700 units (day 5) and 450 units (day 12). Using perpetual weighted average cost, what is the value of closing inventory, to the nearest CU?

A) CU 1,225
B) CU 1,365
C) CU 1,286
D) CU 1,155

Correct: C difficult IAS 2: cost formulas

After day 2: 1,000 units at CU 3.30. After the day 5 issue: 300 units, 990. After day 9: 800 units, 2,940, average CU 3.675. After the day 12 issue 350 units remain = CU 1,286. If you answered CU 1,225 you used a single periodic average (5,250 / 1,500). If you answered CU 1,365 you used FIFO. If you answered CU 1,155 you kept the average from day 2 and did not recalculate after day 9.

123. Which TWO statements about IAS 2 Inventories are correct? (1) Inventory is measured at the lower of cost and net realisable value. (2) FIFO and weighted average cost are acceptable cost formulas. (3) LIFO is an acceptable cost formula. (4) Abnormal waste is included in the cost of inventory.

A) (1) and (3) only
B) (2) and (4) only
C) (3) and (4) only
D) (1) and (2) only

Correct: D difficult IAS 2: measurement

IAS 2 requires the lower of cost and NRV and permits FIFO or weighted average, but not LIFO. Abnormal waste is expensed. If you chose (3) you allowed LIFO, which is a management-accounting method but not permitted by IAS 2. If you chose (4) you capitalised abnormal waste.

124. Item A: cost 14,000, selling price 15,500, costs to complete 900, selling costs 800. Item B: cost 8,200, selling price 9,600, selling costs 500. Item C: cost 6,500, selling price 6,900, costs to complete 1,100, selling costs 600. All figures in CU. At what total value should the three items be stated, item by item?

A) CU 27,200
B) CU 28,700
C) CU 28,300
D) CU 28,100

Correct: A difficult IAS 2: net realisable value

NRV: A = 13,800; B = 9,100; C = 6,900 - 1,100 - 600 = 5,200. A and C are below cost, so the total is 13,800 + 8,200 + 5,200 = CU 27,200. If you answered CU 28,700 you used cost for all items. If you answered CU 28,300 you ignored the completion costs of C. If you answered CU 28,100 you compared in total (NRV 28,100 against cost 28,700) rather than item by item.

125. A direct worker is paid CU 16 an hour for a 40-hour week and time and a half for overtime. Last week she worked 46 hours because of general pressure of work, not for any particular job. What overtime premium is treated as production overhead?

A) CU 144
B) CU 96
C) CU 784
D) CU 48

Correct: D difficult Labour: overtime

The premium is the extra half-rate on the overtime hours: 6 x 16 x 0.5 = CU 48. The basic rate is direct labour as the hours are worked on production. If you answered CU 144 you included the basic pay for the overtime hours. If you answered CU 96 you took the overtime hours at basic rate only. If you answered CU 784 you gave the total pay for the week.