201. A worker is paid CU 0.55 per unit with a guaranteed weekly wage of CU 220. The worker makes 480 units in the week. What is the gross pay?

A) CU 220
B) CU 484
C) CU 264
D) CU 44

Correct: C difficult Labour costing: piecework

Piece earnings = 480 x 0.55 = 264, which exceeds the guarantee, so pay is CU 264. If you answered CU 220 you paid the guarantee only. If you answered CU 484 you added the guarantee to the piece earnings. If you answered CU 44 you gave the excess over the guarantee.

202. Nine employees left in the year. Each leaver caused recruitment costs of CU 3,100, training costs of CU 2,200 and lost output of CU 1,500. What is the total cost of labour turnover?

A) CU 61,200
B) CU 6,800
C) CU 47,700
D) CU 5,300

Correct: A difficult Labour costing: turnover

Cost per leaver = 6,800. Total = 9 x 6,800 = CU 61,200. If you answered CU 6,800 you gave the cost of one leaver. If you answered CU 47,700 you left out lost output. If you answered CU 5,300 you gave the recruitment and training cost for one leaver.

203. A material costs CU 6.30 a kg. A purchase of 5,000 kg has a normal loss of 10% of input. What is the cost per usable kg?

A) CU 6.30
B) CU 6.93
C) CU 5.67
D) CU 7.00

Correct: D difficult Material costing: normal loss

Total cost = 31,500. Usable = 4,500 kg. Cost = CU 7.00. If you answered CU 6.30 you ignored the loss. If you answered CU 6.93 you added 10% to the price instead of dividing by 90%. If you answered CU 5.67 you deducted 10% from the price.

204. The standard time is 1.5 hours a unit. A team makes 400 units in 540 hours. The rate is CU 16 an hour and the team receives 50% of time saved as a bonus. What is the bonus?

A) CU 480
B) CU 960
C) CU 30
D) CU 9,600

Correct: A difficult Labour costing: incentive schemes

Standard hours = 600, hours saved = 60. Bonus = 60 x 16 x 50% = CU 480. If you answered CU 960 you paid the full time saved. If you answered CU 30 you gave the hours bonus, not CU. If you answered CU 9,600 you valued all standard hours.

205. A worker's gross salary is CU 5,200 a month. The employer also pays 6% pension and 9% social security contributions. What is the cost to the employer?

A) CU 5,200
B) CU 5,512
C) CU 5,980
D) CU 5,668

Correct: C difficult Labour costing: employment costs

Employer cost = 5,200 x 1.15 = CU 5,980. If you answered CU 5,200 you ignored employer contributions. If you answered CU 5,512 you added only the pension. If you answered CU 5,668 you added only social security.

206. Which TWO statements are correct? (1) Perpetual inventory records are updated after each receipt and issue. (2) Reorder level = maximum usage x maximum lead time. (3) The maximum level is unaffected by the reorder quantity. (4) Minimum level = reorder level + average usage during the lead time.

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

Correct: A difficult Inventory control: levels

Maximum level = reorder level + reorder quantity - minimum usage in the minimum lead time, so it depends on the reorder quantity. Minimum level = reorder level - average usage in the average lead time. If you chose (3) you left out the reorder quantity. If you chose (4) you added instead of deducting.

207. Inventory of 500 units cost CU 62 each. The expected selling price is CU 68 and selling costs are CU 9 a unit. At what amount should inventory be carried?

A) CU 31,000
B) CU 34,000
C) CU 1,500
D) CU 29,500

Correct: D difficult Inventory valuation: NRV

IAS 2 requires the lower of cost (62) and net realisable value (68 - 9 = 59). 500 x 59 = CU 29,500. If you answered CU 31,000 you used cost. If you answered CU 34,000 you used the selling price. If you answered CU 1,500 you gave the write-down.

208. Annual costs of holding inventory: rent of the store CU 8,000 (unavoidable), insurance on inventory value CU 4,200, interest at 10% on average inventory of CU 52,000, spoilage CU 1,800. What holding cost is relevant to an inventory decision?

A) CU 19,200
B) CU 11,200
C) CU 7,000
D) CU 5,200

Correct: B difficult Inventory management: holding costs

Only costs that vary with inventory level are relevant: 4,200 + 5,200 + 1,800 = CU 11,200. If you answered CU 19,200 you included the unavoidable rent. If you answered CU 7,000 you left out insurance. If you answered CU 5,200 you included interest only.

209. Opening inventory was 500 units at CU 6. A receipt of 700 units at CU 7.50 followed. Using FIFO, what is the cost of an issue of 800 units?

A) CU 6,000
B) CU 4,800
C) CU 5,400
D) CU 5,250

Correct: D difficult Inventory valuation: perpetual FIFO

FIFO: 500 x 6 + 300 x 7.50 = 3,000 + 2,250 = CU 5,250. If you answered CU 6,000 you used the latest price for all units. If you answered CU 4,800 you used the oldest price for all units. If you answered CU 5,400 you used the simple average of the two prices.

210. Gross wages were CU 94,000. This includes idle time CU 6,300, indirect labour CU 13,700 and overtime premium CU 5,000. How much is debited to production overhead?

A) CU 69,000
B) CU 25,000
C) CU 18,700
D) CU 20,000

Correct: B difficult Labour costing: wages analysis

Overhead = 6,300 + 13,700 + 5,000 = CU 25,000. The remaining CU 69,000 is direct labour. If you answered CU 69,000 you gave the direct labour. If you answered CU 18,700 you left out idle time. If you answered CU 20,000 you left out the overtime premium.

211. Receipts were 500 units at CU 14, 700 at CU 16 and 400 at CU 18, in that order. 1,000 units are issued. What is the cost of the issue on a FIFO basis?

A) CU 15,000
B) CU 15,875
C) CU 16,800
D) CU 16,000

Correct: A difficult Inventory valuation: FIFO

FIFO issues the oldest units first: 500 x 14 + 500 x 16 = 7,000 + 8,000 = CU 15,000. If you answered CU 15,875 you used the weighted average cost. If you answered CU 16,800 you issued the latest purchases first. If you answered CU 16,000 you used the middle price.

212. Opening inventory was 800 units at CU 9.50 and 1,200 units were then bought at CU 10.50. 1,500 units are issued. Using the cumulative weighted average, what is the value of the closing inventory?

A) CU 5,250
B) CU 5,000
C) CU 4,750
D) CU 5,050

Correct: D difficult Inventory valuation: weighted average

Weighted average = (7,600 + 12,600) / 2,000 = CU 10.10. Closing inventory = 500 x 10.10 = CU 5,050. If you answered CU 5,250 you valued it at the latest price (FIFO). If you answered CU 5,000 you used the simple average of the two prices. If you answered CU 4,750 you valued it at the opening price.

213. Daily usage is 100 units on average and 120 units at most. The lead time is 9 days on average and 12 days at most. What is the reorder level?

A) 900 units
B) 1,440 units
C) 1,080 units
D) 1,200 units

Correct: B difficult Inventory management: reorder level

Reorder level = maximum usage x maximum lead time = 120 x 12 = 1,440. If you answered 900 you used both averages. If you answered 1,080 you used maximum usage with average lead time. If you answered 1,200 you used average usage with maximum lead time.

214. A worker is paid CU 8.50 an hour for a 38-hour week, with overtime at time and a half. The worker works 46 hours. What is gross pay for the week?

A) CU 425.00
B) CU 391.00
C) CU 586.50
D) CU 357.00

Correct: A difficult Labour costing: overtime

Basic = 38 x 8.50 = 323. Overtime = 8 x 12.75 = 102. Total = CU 425. If you answered CU 391 you paid all hours at the basic rate. If you answered CU 586.50 you paid all hours at the overtime rate. If you answered CU 357 you added only the premium for the overtime hours.

215. A worker earns CU 0.60 a unit with a guaranteed minimum of CU 210 a week. The worker produces 320 units in week 1 and 395 in week 2. What is total pay for the two weeks?

A) CU 429
B) CU 420
C) CU 639
D) CU 447

Correct: D difficult Labour incentive schemes: piecework

Week 1: 192 is below the guarantee, so pay is 210. Week 2: 395 x 0.60 = 237. Total = CU 447. If you answered CU 429 you ignored the guarantee in week 1. If you answered CU 420 you paid the guarantee in both weeks. If you answered CU 639 you added the piecework earnings to the guarantee in week 1.

216. Opening staff was 190 and closing staff 210. During the year 24 employees left and 20 were recruited as replacements. What is the labour turnover rate?

A) 12.0%
B) 10.5%
C) 10.0%
D) 9.5%

Correct: C difficult Labour costing: turnover

Turnover = replacements / average staff = 20 / 200 = 10.0%. If you answered 12.0% you used leavers. If you answered 10.5% you divided by opening staff. If you answered 9.5% you divided by closing staff.

217. 12 workers are each paid for 40 hours at CU 11 an hour, but each is idle for 5 hours because of a machine breakdown. What amount is treated as idle time and charged to overhead?

A) CU 4,620
B) CU 5,280
C) CU 55
D) CU 660

Correct: D difficult Labour costing: idle time

Idle time cost = 12 x 5 x 11 = CU 660. If you answered CU 4,620 you gave the cost of productive hours. If you answered CU 5,280 you gave the total wages. If you answered CU 55 you gave the idle cost for one worker.

218. A job has an allowed time of 40 hours and takes 32 hours at CU 9.60 an hour. Under a Halsey scheme the worker receives 50% of the time saved as a bonus. What is the total pay?

A) CU 368.64
B) CU 384.00
C) CU 345.60
D) CU 307.20

Correct: C difficult Labour incentive schemes: Halsey

Pay = 32 x 9.60 + 50% x 8 x 9.60 = 307.20 + 38.40 = CU 345.60. If you answered CU 368.64 you applied the Rowan formula (time saved / time allowed). If you answered CU 384 you paid for the full 40 hours allowed. If you answered CU 307.20 you left out the bonus.

219. Which TWO statements are correct when prices are rising? (1) FIFO values closing inventory at recent prices. (2) FIFO gives a higher profit than the weighted average method. (3) The weighted average method prices issues at the latest receipt price. (4) FIFO gives a lower profit than the weighted average method.

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

Correct: B difficult Inventory valuation: comparison

With rising prices FIFO charges older, lower costs to issues, so profit is higher and closing inventory is at recent prices. If you chose (3) you described FIFO pricing of closing stock, not an average. If you chose (4) you reversed the profit effect.

220. 600 units cost CU 25 each. They can be sold for CU 29 each after further work costing CU 4 a unit and selling costs of CU 2 a unit. At what value should they be included in inventory?

A) CU 15,000
B) CU 16,200
C) CU 17,400
D) CU 13,800

Correct: D difficult Inventory valuation: NRV

Net realisable value = 29 - 4 - 2 = CU 23, which is below cost of 25, so inventory is valued at 23 x 600 = CU 13,800. If you answered CU 15,000 you used cost. If you answered CU 16,200 you forgot the cost to complete. If you answered CU 17,400 you used the selling price.

221. Reorder level is 1,100 units, reorder quantity 1,500 units, minimum usage 40 units a day and minimum lead time 6 days. What is the maximum stock level?

A) 2,600 units
B) 1,260 units
C) 2,360 units
D) 2,840 units

Correct: C difficult Inventory management: maximum level

Maximum level = reorder level + reorder quantity - (minimum usage x minimum lead time) = 1,100 + 1,500 - 240 = 2,360. If you answered 2,600 you did not deduct minimum usage in the lead time. If you answered 1,260 you omitted the reorder level. If you answered 2,840 you added the minimum usage instead of deducting it.

222. Gross wages are CU 84,000. Employees' deductions are CU 18,000. The employer also pays contributions of 10% of gross wages. What is the total labour cost to the employer?

A) CU 84,000
B) CU 92,400
C) CU 66,000
D) CU 102,000

Correct: B difficult Labour costing: employer cost

Employer cost = gross wages + employer contributions = 84,000 + 8,400 = CU 92,400. Employees' deductions come out of gross pay and are not an extra cost. If you answered CU 84,000 you ignored employer contributions. If you answered CU 66,000 you gave net pay. If you answered CU 102,000 you added the deductions.

223. Workers cost CU 12 an hour for 40 paid hours, but only 32 hours are productive. What is the labour cost per productive hour?

A) CU 15.00
B) CU 12.00
C) CU 9.60
D) CU 18.75

Correct: A difficult Labour costing: effective rate

Total cost = 40 x 12 = 480. Per productive hour = 480 / 32 = CU 15.00. If you answered CU 12 you ignored non-productive time. If you answered CU 9.60 you multiplied by the productive proportion instead of dividing. If you answered CU 18.75 you applied the 80% productive proportion twice.

224. A worker is paid CU 9.60 an hour. Ten hours of overtime are worked at time plus a quarter, as general pressure of work. What amount is charged to overhead?

A) CU 96
B) CU 120
C) CU 24
D) CU 2.40

Correct: C difficult Labour costing: overtime premium

When overtime is general, only the premium goes to overhead: 10 x 9.60 x 25% = CU 24. The basic cost of 96 is direct labour. If you answered CU 96 you gave the basic element. If you answered CU 120 you gave all the overtime pay. If you answered CU 2.40 you gave the premium for one hour.

225. Which TWO statements about labour costing are correct? (1) Overtime premium is normally charged to overhead. (2) Idle time cost is charged to the job being worked on. (3) Labour turnover costs include recruitment and training. (4) Piecework pay falls when output is higher.

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

Correct: A difficult Labour costing: classification

Overtime premium is normally overhead, and turnover costs include recruitment and training. Idle time is charged to overhead and piecework pay rises with output. If you chose (2) you charged idle time to jobs. If you chose (4) you reversed the effect of piecework.