126. Piece rate is CU 0.70 a unit with a guaranteed weekly minimum of CU 280. Four workers made 380, 410, 450 and 500 units. What is the total wages cost?

A) CU 1,218
B) CU 1,120
C) CU 1,225
D) CU 1,232

Correct: D difficult Labour: piecework

Piece pay: 266, 287, 315 and 350. Only worker 1 falls below the guarantee and receives CU 280. Total = 280 + 287 + 315 + 350 = CU 1,232. If you answered CU 1,218 you paid piece rate with no guarantee. If you answered CU 1,120 you paid the minimum to everyone. If you answered CU 1,225 you topped up the two lowest-paid workers.

127. Direct workers were paid for 3,000 hours at CU 9 an hour. Idle time was 12% of paid hours, of which 8% is normal and the remainder was caused by a power failure. What labour cost is included in the cost of production?

A) CU 25,920
B) CU 27,000
C) CU 23,760
D) CU 24,840

Correct: A difficult Labour: idle time

Normal idle time is part of production cost. Abnormal idle time (4% x 3,000 = 120 hours x 9 = CU 1,080) is charged to profit or loss. Production cost = 27,000 - 1,080 = CU 25,920. If you answered CU 27,000 you included all idle time. If you answered CU 23,760 you excluded all 12%. If you answered CU 24,840 you excluded the normal 8% instead of the abnormal 4%.

128. A job has an allowed time of 50 hours and takes 40 hours. The hourly rate is CU 12. Under a Rowan scheme, the bonus is the proportion of time saved to time allowed, applied to the pay for time taken. What is the total pay for the job?

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

Correct: C difficult Labour: bonus

Time-based pay = 40 x 12 = 480. Bonus = 10 / 50 x 480 = 96. Total = CU 576. If you answered CU 540 you used the Halsey method with a 50% share. If you answered CU 480 you omitted the bonus. If you answered CU 600 you paid for the full allowed time.

129. Gross wages were CU 96,000, employees' deductions CU 19,200 and the employer's social security cost CU 8,640. Indirect labour cost, including the employer's cost, was CU 21,000. What is charged to work in progress as direct labour?

A) CU 75,000
B) CU 83,640
C) CU 64,440
D) CU 104,640

Correct: B difficult Labour: wages control

Total wages cost = 96,000 + 8,640 = 104,640. Direct labour = 104,640 - 21,000 = CU 83,640. If you answered CU 75,000 you omitted the employer's cost. If you answered CU 64,440 you deducted the employees' deductions, which are part of gross pay. If you answered CU 104,640 you charged the total wages cost to production without deducting the indirect labour.

130. A buyer purchased 1,500 units at list price CU 6.00 less a 15% trade discount. Import duty is 6% of the discounted price and freight inwards is CU 1,200. Handling in the warehouse after receipt costs CU 450. What is the cost per unit for inventory valuation, to the nearest cent?

A) CU 6.21
B) CU 5.10
C) CU 6.51
D) CU 6.26

Correct: A difficult IAS 2: cost of purchase

Cost = 7,650 + duty 459 + freight 1,200 = 9,309, so CU 6.21 a unit. Handling after receipt is not part of the cost of purchase. If you answered CU 5.10 you included only the discounted price. If you answered CU 6.51 you included the handling costs. If you answered CU 6.26 you charged duty on the list price.

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

With rising prices FIFO charges older, lower costs to cost of sales and keeps the latest costs in inventory. Weighted average therefore gives a higher cost of sales, lower profit and lower closing inventory than FIFO. If you chose (3) or (4) you reversed the effect.

132. A count on 5 January found 7,400 units. Between 31 December and 5 January 1,350 units were received and 900 units were issued. Each unit costs CU 11.20. What was the inventory value at 31 December?

A) CU 87,920
B) CU 77,840
C) CU 82,880
D) CU 57,680

Correct: B difficult IAS 2: year-end counts

Roll back: 7,400 - 1,350 received + 900 issued = 6,950 units x 11.20 = CU 77,840. If you answered CU 87,920 you rolled in the wrong direction. If you answered CU 82,880 you used the count with no adjustment. If you answered CU 57,680 you deducted both movements.

133. Opening inventory 350 units at CU 6.00. Purchases: 450 units at CU 6.50 (day 2) and 300 units at CU 7.00 (day 7). Issues: 600 units (day 4) and 400 units (day 9). Using perpetual FIFO, what is the total cost of issues?

A) CU 6,477
B) CU 2,700
C) CU 6,425
D) CU 700

Correct: C difficult IAS 2: cost formulas

Day 4: 350 x 6.00 + 250 x 6.50 = 3,725. Day 9: 200 x 6.50 + 200 x 7.00 = 2,700. Total = CU 6,425. If you answered CU 6,477 you used a periodic average cost. If you answered CU 2,700 you gave the second issue only. If you answered CU 700 you gave the closing inventory.

134. Which TWO statements about methods of paying direct labour are correct? (1) A time rate suits work where quality is more important than speed. (2) A piece rate suits repetitive work with measurable output. (3) A piece rate guarantees consistent quality. (4) A time rate rewards extra output directly.

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

Correct: A difficult Labour: remuneration

Time rates suit quality-sensitive work and piece rates suit measurable repetitive output. A piece rate can lead workers to sacrifice quality, and a time rate pays for hours, not output. If you chose (3) you assumed piece rates protect quality. If you chose (4) you assumed time rates reward output.

135. A firm bought 6,000 kg at CU 5.00 a kg with carriage of CU 2,400. A normal loss of 5% is expected in storage. What is the cost per kg of usable material, to the nearest cent?

A) CU 5.40
B) CU 5.26
C) CU 5.68
D) CU 5.00

Correct: C difficult IAS 2: normal loss

Total cost = 30,000 + 2,400 = 32,400. Usable = 6,000 x 95% = 5,700 kg. Cost per kg = CU 5.68. If you answered CU 5.40 you ignored the normal loss. If you answered CU 5.26 you omitted the carriage. If you answered CU 5.00 you gave the purchase price.

136. Opening inventory is 600 units at CU 8.00. Purchases in the period were 1,400 units at CU 9.00 and 1,000 units at CU 9.60. Issues were 2,200 units and closing inventory is 800 units. Using the periodic weighted average cost, what is the closing inventory value?

A) CU 7,680
B) CU 7,200
C) CU 7,093
D) CU 6,400

Correct: B difficult Inventory valuation: weighted average

Total cost = 4,800 + 12,600 + 9,600 = 27,000 for 3,000 units, so the average is CU 9.00. Closing inventory = 800 x 9.00 = CU 7,200. If you answered CU 7,680 you used the latest purchase price. If you answered CU 7,093 you took a simple average of the three prices. If you answered CU 6,400 you used the opening price.

137. A job has a standard time of 40 hours. A worker is paid CU 18 an hour and takes 34 hours. Under a Halsey scheme the worker receives 50% of the time saved as a bonus, at the hourly rate. What is the total pay for the job?

A) CU 666
B) CU 612
C) CU 720
D) CU 774

Correct: A difficult Labour costing: Halsey scheme

Basic pay = 34 x 18 = 612. Bonus = 50% x 6 hours x 18 = 54. Total = CU 666. If you answered CU 612 you left out the bonus. If you answered CU 720 you paid the full 40 standard hours (a 100% share). If you answered CU 774 you added the 50% bonus to the 40 standard hours.

138. A worker is guaranteed CU 14 an hour for a 40-hour week or the piece rate of CU 0.85 a unit if higher. In one week 620 units are made. What is the worker's pay?

A) CU 527
B) CU 1,087
C) CU 560
D) CU 33

Correct: C difficult Labour costing: guaranteed minimum wage

Piece-rate earnings are 620 x 0.85 = 527, below the guaranteed 560, so the worker receives CU 560. If you answered CU 527 you ignored the guarantee. If you answered CU 1,087 you added both amounts. If you answered CU 33 you gave the top-up only.

139. Three product lines are held in inventory: A cost CU 24,000 (NRV CU 30,000); B cost CU 18,000 (NRV CU 13,500); C cost CU 9,000 (NRV CU 9,000). Under IAS 2, what is the total value of inventory?

A) CU 51,000
B) CU 52,500
C) CU 4,500
D) CU 46,500

Correct: D difficult IAS 2: lower of cost and NRV

IAS 2 values each item at the lower of cost and NRV: 24,000 + 13,500 + 9,000 = CU 46,500. If you answered CU 51,000 you used cost for everything. If you answered CU 52,500 you used NRV for everything, which also ignores the 'lower of' rule. If you answered CU 4,500 you gave the write-down only.

140. A store holds 500 units at CU 10. It then receives 300 units at CU 11, issues 400 units, receives 600 units at CU 12 and issues 500 units. Using perpetual weighted average cost, what is the cost of the second issue?

A) CU 5,500
B) CU 5,536
C) CU 6,000
D) CU 5,675

Correct: D difficult Inventory valuation: perpetual weighted average

After the first receipt the average is 8,300 / 800 = 10.375, and the first issue leaves 400 units at CU 4,150. Adding 600 at CU 12 gives 11,350 / 1,000 = CU 11.35. The second issue is 500 x 11.35 = CU 5,675. If you answered CU 5,500 you used FIFO. If you answered CU 5,536 you used a single average for the whole period. If you answered CU 6,000 you used the latest price.

141. Which TWO statements about labour remuneration are correct? (1) A time-based system provides no direct incentive to produce more. (2) Piecework rewards output but can reduce quality. (3) A bonus scheme always lowers labour cost per unit. (4) An overtime premium is always a direct cost of the job being worked on.

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

Correct: A difficult Labour costing: payment methods

Time rates pay for time and piece rates pay for output, which can encourage speed over quality. Bonuses do not always lower unit costs, and a general overtime premium is normally an overhead. If you chose (3) you assumed bonuses always reduce unit cost. If you chose (4) you charged all premiums to jobs.

142. A worker is paid CU 15 for each of 2,000 hours a year, of which 1,800 hours are productive. Employer's pension and national insurance add 16% to gross pay. What is the cost per productive hour?

A) CU 17.40
B) CU 16.67
C) CU 15.00
D) CU 19.33

Correct: D difficult Labour costing: on-costs and non-productive time

Total cost = 2,000 x 15 x 1.16 = 34,800. Per productive hour = 34,800 / 1,800 = CU 19.33. If you answered CU 17.40 you divided by all paid hours. If you answered CU 16.67 you left out the on-costs. If you answered CU 15.00 you used the basic hourly rate.

143. Maximum usage is 150 units a day, minimum usage 90 and the lead time varies from 8 to 12 days. The reorder quantity is 2,500 units. What is the maximum inventory level?

A) 4,300 units
B) 3,580 units
C) 3,220 units
D) 1,080 units

Correct: B difficult Inventory control: maximum level

Reorder level = 150 x 12 = 1,800. Maximum level = reorder level + reorder quantity - minimum usage x minimum lead time = 1,800 + 2,500 - 720 = 3,580. If you answered 4,300 you did not deduct minimum usage in the minimum lead time. If you answered 3,220 you used the maximum lead time for the deduction. If you answered 1,080 you gave minimum usage in the maximum lead time.

144. A process has a normal loss of 4% of input. To produce 1,200 kg of good output, what is the material cost if material costs CU 6.40 a kg?

A) CU 8,000
B) CU 7,987
C) CU 7,680
D) CU 320

Correct: A difficult Material costing: normal loss

Input = 1,200 / 0.96 = 1,250 kg. Cost = 1,250 x 6.40 = CU 8,000. If you answered CU 7,987 you applied 4% to the output rather than the input. If you answered CU 7,680 you ignored the loss. If you answered CU 320 you gave the cost of the lost material only.

145. A differential piece rate pays CU 0.60 for each of the first 400 units and CU 0.80 for each unit above 400. What does a worker earn for 520 units?

A) CU 416
B) CU 312
C) CU 96
D) CU 336

Correct: D difficult Labour costing: differential piece rate

Pay = 400 x 0.60 + 120 x 0.80 = 240 + 96 = CU 336. If you answered CU 416 you paid CU 0.80 on all units. If you answered CU 312 you paid CU 0.60 on all units. If you answered CU 96 you paid for the excess units only.

146. Opening inventory was CU 52,000, closing inventory CU 68,000 and cost of sales CU 540,000. Using average inventory and a 365-day year, what are inventory days?

A) 46.0 days
B) 35.1 days
C) 40.6 days
D) 9.0 days

Correct: C difficult Inventory management: inventory days

Average inventory = 60,000. Days = 60,000 / 540,000 x 365 = 40.6. If you answered 46.0 days you used closing inventory. If you answered 35.1 days you used opening inventory. If you answered 9.0 days you gave the inventory turnover in times.

147. A company buys 5,000 units at a list price of CU 20 less 10% trade discount, with a further 2% settlement discount if paid within 10 days. Delivery costs CU 1,500. What is the cost of the inventory under IAS 2?

A) CU 89,700
B) CU 91,500
C) CU 101,500
D) CU 90,000

Correct: B difficult IAS 2: purchase cost

Cost = 5,000 x 18 + 1,500 = CU 91,500. Trade discounts reduce the cost, but a settlement discount is not deducted from the purchase cost. If you answered CU 89,700 you deducted the settlement discount (1,800). If you answered CU 101,500 you ignored the trade discount. If you answered CU 90,000 you left out delivery costs.

148. A worker is paid CU 13.20 an hour or CU 0.88 for each unit produced. How many units an hour give the same pay under both methods?

A) 11.6 units
B) 0.07 units
C) 15 units
D) 13.2 units

Correct: C difficult Labour costing: time rate v piece rate

Equal pay when units x 0.88 = 13.20, so units = 13.20 / 0.88 = 15. If you answered 11.6 you multiplied the two rates. If you answered 0.07 you divided the piece rate by the hourly rate. If you answered 13.2 you used the hourly rate as a number of units.

149. Damaged goods cost CU 8,400. They can be sold for CU 7,000 after rework costing CU 1,200. What write-down is required under IAS 2?

A) CU 1,400
B) CU 1,200
C) CU 2,600
D) CU 3,800

Correct: C difficult IAS 2: net realisable value

NRV = selling price less costs to complete = 7,000 - 1,200 = 5,800. Write-down = 8,400 - 5,800 = CU 2,600. If you answered CU 1,400 you ignored the rework costs. If you answered CU 1,200 you gave the rework cost. If you answered CU 3,800 you added the rework cost to the correct write-down.

150. An employee works 46 hours in a week. The first 40 hours are paid at CU 12.50 and the remaining hours at time-and-a-half. What is the gross pay?

A) CU 575.00
B) CU 612.50
C) CU 862.50
D) CU 650.00

Correct: B difficult Labour costing: overtime

Pay = 40 x 12.50 + 6 x 18.75 = 500 + 112.50 = CU 612.50. If you answered CU 575.00 you paid all hours at the basic rate. If you answered CU 862.50 you paid all hours at the overtime rate. If you answered CU 650.00 you paid double time on the overtime hours.