Month: March 2022

A company uses a machine hour basis to absorb its overheads.

The following information is provided for its last period.

                                                                        actual              budgeted

• overheads £299,000 £350,000
• machine hours 46,000 50,000

Which statement regarding overheads is correct?

Select ONE answer:

1. They were over absorbed by £23,000.
2. They were under absorbed by £23,000.
3. They were over absorbed by £51,000.
4. They were under absorbed by £51,000.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct ==> £350,000 / 50,000 hours = £7 * 46,000 hours = £322,000 – £299,000 = £23,000
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A business has provided the following costing information for its production departments.

                                                                            machining           assembly 

total production overheads £180,000 £260,000
machine hours 65,000 38,000
labour hours 42,000 76,000

What would be a suitable overhead absorption rate for each department?

Select ONE answer:

1. machining £2.77 & assembly £3.42
2. machining £2.77 & assembly £6.84
3. machining £4.29 & assembly £3.42
4. machining £4.29 & assembly £6.84

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct ==> £180,000 / 65,000 & £260,000 / 76,000
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A manufacturer has an inventory at the end of the first year of operation.

What is the impact on profit if the manufacturer is considering using either marginal costing or absorption costing?

Select ONE answer:

1. The profit is the same if using either marginal costing or absorption costing.
2. The profit using absorption costing is higher because the inventory includes fixed overheads.
3. The profit using absorption costing is lower because all the fixed overheads are deducted.
4. The profit using absorption costing is lower because fixed overheads are under absorbed.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company’s production workers are paid £16 an hour basic pay for working 7 hours a day.

Overtime is paid at the rate of a time and a quarter (basic pay plus 25%).

An additional bonus is also paid at the rate of £4 per unit for output in excess of 20 units per day.

On Monday one employee worked 10 hours and produced 25 units.

What is the employee’s pay for Monday?

Select ONE answer:

1. £192
2. £220
3. £272
4. £300

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct ==> £16 * 7 hours + (£16 *1.25 * 3 hours) + £4 * 5 extra units
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

In 2020 a company was entirely financed by its equity and reserves which total £1,000,000.

Its return on capital employed (ROCE) was 28%.

On 1 January 2021 the company issued a 10% debenture of £300,000.

During 2021 the profit from operations increased by 20%.

No dividends were paid.

What was the ROCE for 2021?

Select ONE answer:

1. 19.1%
2. 20.9%
3. 23.4%
4. 25.8%

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct ==> 28% of £1M = £280k * 1.2 = £336K / (£1,000K + £300k + £336k)
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.