Accounting 9706 · AS & A Level
Costs and cost behaviour
100 practice questions on Costs and cost behaviour, with worked solutions and instant marking.
A certain cost is described as ‘semi-variable’. What effect will a $20\%$ fall in activity have on the unit cost?
Feb/March 2016
Which items are part of the marginal cost of producing one unit?
Feb/March 2016
Which of the following statements about cost-volume-profit analysis are correct?
Feb/March 2016
What are the principal purposes of budgeting?
Feb/March 2016
Lin is a manufacturer who produces three products: X, Y and Z. In his business, he applies cost-volume-profit (CVP) analysis.
Feb/March 2016
Which item counts as a direct cost?
Feb/March 2017
Samuel produces one product. The total cost per unit is $70$ at a production level of $100$ units per week, and $62.50$ when output is $160$ units per week. Calculate the total fixed costs per week.
Feb/March 2017
Actual output is greater than budgeted output. Which cost is above budgeted?
Feb/March 2017
A firm produces three products. The information below applies to next month’s budgeted output. Product X: contribution per unit $7$, contribution per kilo $3$, kilos of material needed $400$. Product Y: contribution per unit $6$, contribution per kilo $4$, kilos of material needed $600$. Product Z: contribution per unit $8$, contribution per kilo $6$, kilos of material needed $1000$. The firm has been told that only $1800$ kilos of material will be available for production next month. What is the greatest contribution the company can achieve?
Feb/March 2017
The information below is provided. Direct materials: $20000$ Direct labour: $45000$ Direct expenses: $6000$ Variable overheads: $11000$ Fixed overheads: $38000$ Sales: $240000$ Determine the contribution to sales ratio.
Feb/March 2017
The information below refers to a business. Planned fixed costs each month: $2000$ Desired profit each month: $3000$ Planned variable cost per unit: $15$ Selling price for each unit: $40$ Fixed costs are expected to rise by $500$ per month, while variable costs rise by $5$ per unit. What value of revenue will be needed to achieve the target profit?
Feb/March 2017
A company that sells $10000$ units each year has these costs: Direct material: $50000$ Assembly labour: $100000$ Factory overheads: $70000$ The usual selling price per unit is $50$. How many extra units must be sold to break even if the selling price is cut to $35$?
Feb/March 2017
Which statements identify a drawback of break-even analysis?
Feb/March 2017
What does direct cost mean?
Feb/March 2018
Employees at a company receive $\$6.80$ per hour for a standard $40$-hour week. For overtime, a $50\%$ premium is paid, and a production bonus of $\$0.25$ per unit is also earned on all units made above $350$. A minimum weekly wage of $\$330$ is guaranteed. One employee worked $45$ hours last week and made $410$ units. What was the employee’s gross pay for that week?
Feb/March 2018
How do you calculate the margin of safety?
Feb/March 2018
A business gives the following data for a product: Variable cost per unit $16$, selling price per unit $30$, total fixed costs $35000$, budgeted profit $95000$. How many units must it make in order to achieve the budgeted profit?
Feb/March 2018
A business gives the following financial data. Selling price $41$ per unit, direct materials $5$, direct labour $8$, variable overhead $3$, fixed overhead $4$, profit $21$. Determine the marginal cost per unit.
Feb/March 2018
Which factor decides the optimum production plan in a limited resource situation?
Feb/March 2018
A business produces two products. The figures per unit are as follows: product X selling price $20$, direct labour $10$, direct materials $4$; product Y selling price $30$, direct labour $20$, direct materials $2$. Total fixed costs amount to $\$54\,000$. Only $3000$ units of Y can be produced and sold. What number of units of product X must be produced and sold to break even?
Feb/March 2018
A company operates using absorption costing and produces and sells only one product. In the previous month, budgeted overheads came to $\$60\,000$. Planned output was $15\,000$ units, while planned sales were $14\,000$ units. The company now chooses to use marginal costing principles for the previous month. What impact will this have on profits?
Feb/March 2018
A business has recorded the following total costs over the previous two months. Month 1: $8000$ units produced, total costs $\$31\,800$. Month 2: $10\,000$ units produced, total costs $\$36\,700$. What was the total fixed cost per month?
Feb/March 2018
A company has only recently put in place a budgetary control system. Workers have suggested the following explanations for materials costs exceeding the budgeted amount.
Feb/March 2018
Which of the following are stepped costs?
Feb/March 2019
A worker completed a standard 35-hour week at $15$ per hour. On top of that, he did 5 hours of overtime, which was paid at $20$ per hour, and he was awarded a bonus of $50$. How much total pay did he receive for the week?
Feb/March 2019
Which line indicates total variable cost?
Feb/March 2019
The information below applies to a product. Data per unit: Selling price = $\$25$ Variable costs = $\$15$ Contribution per unit = $\$10$ Output is $50\,000$ units. Fixed costs amount to $\$300\,000$. Margin of safety = $20\,000$ units. The directors plan to raise the unit selling price by $10\%$. What is the percentage increase in the margin of safety?
Feb/March 2019
A business produces one item and charges $\$12$ for each batch. Its variable cost comes to $\$4$ per batch. Fixed costs are absorbed using a normal output level of $1000$ batches at $\$3$ per batch. What is the profit under marginal costing if the business produces and sells $1500$ batches?
Feb/March 2019
The information below applies to one unit of a product. Per-unit details: Selling price = $\$20$ Marginal cost = $\$8$ Fixed costs = $\$5$ What is the contribution to sales ratio?
Feb/March 2019
The budgeted figures for one month are presented below. Units sold = $20\,000$ Selling price per unit = $\$12$ Variable cost per unit = $\$3$ Fixed costs = $\$50\,000$ The quantity of units sold is expected to rise by $10\%$. Fixed costs are expected to rise by $5\%$. What increase in profit will result from these changes?
Feb/March 2019
W Limited uses marginal costing and manufactures two items, Product A and Product B.
Feb/March 2019
A mechanic undertakes routine maintenance on factory machines. He earns an annual salary of $20000$. What type of cost is this?
Feb/March 2020
Which statement is correct as production rises?
Feb/March 2020
A business intends to sell every one of the $10000$ units it will make next year at this year's price. Direct costs are expected to fall by $2$ per unit, and total fixed costs are expected to rise by $40000$. What effect will this have?
Feb/March 2020
The business has the following data. Sales revenue $600000$ Variable cost $180000$ Break-even sales revenue $400000$ What profit is earned for the period?
Feb/March 2020
Which of the following statements about cost-volume-profit analysis are correct?
Feb/March 2020
A business is predicting its profits at two different activity levels. When $5000$ units are sold: Combined fixed and variable costs are $20000$ Profit is $15000$ Sales revenue is $35000$ When $8000$ units are sold: Combined fixed and variable costs are $26000$ Profit is $30000$ Sales revenue is $56000$ Within the range of activity above, fixed costs and selling prices stay unchanged. What forecast profit would there be if sales were $7000$ units?
Feb/March 2020
A manufacturing company pays its production workers a basic wage at the same hourly rate each week. In addition, they receive a bonus linked to meeting production targets. What type of cost does this illustrate?
Feb/March 2021
The following budgeted figures relate to N Limited. production level 15000 units, total costs $406000$ production level 25000 units, total costs $546000$ What is the budgeted fixed cost?
Feb/March 2021
Which type of situation is generally unsuitable for using marginal costing?
Feb/March 2021
Budgeted data for $10000$ units are given below. Selling price for each unit: $53$ Direct materials and wages for each unit: $22$ Variable manufacturing overhead for each unit: $2$ Fixed manufacturing overhead for each unit: $21$ Variable selling expenses for each unit: $1$ Fixed selling expenses for each unit: $5$ What is the budgeted break-even point in units?
Feb/March 2021
The budgeted income statement for J Limited gives the figures below. Sales: $400000$ Variable costs: $240000$ Fixed costs: $132000$ Profit for the year: $28000$ What is the margin of safety in dollars?
Feb/March 2021
A business has given the budgeted figures below. Break-even sales revenue: $300000$ Fixed costs: $180000$ Target profit: $144000$ What sales revenue is needed to reach the target profit?
Feb/March 2021
What factors should be taken into account when preparing a budget?
Feb/March 2021
K Limited manufactures goods at two locations and applies marginal costing. At one of the locations, the company makes only one product.
Feb/March 2021
Which of the following statements about stepped costs are correct?
Feb/March 2022
A production worker receives $15$ per hour for an $8$-hour day. Overtime is paid at the rate of time and a fifth, which means basic pay plus $20\%$. There is also a productivity bonus of $21$ per unit for every unit made above $12$ units per day. Last Friday, the production worker was at work for $12$ hours and put together $14$ units. Calculate how much he earned on Friday?
Feb/March 2022
For the production of 2000 units of a product, a company has the following data. Sales revenue: 85 000 Direct materials: 30 000 Direct labour: 14 000 Direct expenses: 2 500 Other variable overheads: 10 200 Fixed overheads: 8 000 Calculate the contribution to sales ratio.
Feb/March 2022
Data for two products are given below. Per unit for Product 1 / Per unit for Product 2 Material X: 2 kilos / 4 kilos Material Y: 3 kilos / 1 kilo Direct labour: 3 hours / 6 hours Output is planned at 100 units for each product. 700 kilos of material X and 400 kilos of material Y are available. In total, 800 direct labour hours can be worked. Which factors are limiting?
Feb/March 2022
A firm gives the following details for one of its products. Selling price: $100 Variable cost per unit: $40 Fixed costs: $21 600 Break-even point: 360 units If the firm alters its production method, contribution will rise by 10% and fixed costs will rise by 5%. What effect would this have on the break-even point?
Feb/March 2022
A manufacturer uses a bonus system. He gives the following details. output needed from each worker: 175 units time permitted to finish output: 10.5 hours actual time taken by Fred: 7 hours A bonus equal to 25% of the labour costs for time saved is paid, as well as the hourly rate of $8.75. What amount did Fred earn for producing 175 units?
Feb/March 2023
What effect does a rise in a product’s marginal cost have?
Feb/March 2023
Which statements explain what cost-volume-profit analysis is useful for?
Feb/March 2023
At one of its factories, G Limited makes only one kind of product. The company applies marginal costing.
Feb/March 2023
Which cost item for a business could be described as a stepped cost?
Feb/March 2024
Which statements describe just in time (JIT) management of inventory?
Feb/March 2024
Which changes would lead to a reduction in the margin of safety?
Feb/March 2024
A company has these budgeted figures for each unit: selling price = $25 variable costs = $10 Fixed costs amount to $72 000. What is the extra break-even sales if fixed costs increase by $33\frac{1}{3}\%$?
Feb/March 2024
Which statements concerning cost-volume-profit analysis are correct?
Feb/March 2024
A factory makes $1100$ units each day. The daily machinery set-up expense is $2000$. The direct material cost for each unit is $3$. Machine operators receive $400$ per day. Each operator is able to produce at most $200$ units per day. What is the average cost per unit?
Feb/March 2025
The data below were given for a product: - unit selling price: $50$ - variable cost per unit: $26$ - total fixed costs: $10\,000$ - demand: $1800$ units If the selling price rises, then only demand is affected. After the selling price went up by $4$, profit dropped by $1200$. What was the fall in demand?
Feb/March 2025
A manufacturing firm supplied the information below, for each unit: - selling price: $80$ - variable production costs: $44$ - variable selling costs: $6$ - fixed production costs: $12$ - fixed selling costs: $10$ Calculate the contribution to sales ratio.
Feb/March 2025
Which assumptions apply to cost-volume-profit analysis?
Feb/March 2025
A business gives its employees $2 for every unit of X assembled and $3.20 for every unit of Y assembled. Each month, output is 1800 units of X and 1000 units of Y. The factory supervisor receives $1000 per month. What is the direct labour cost per month?
May/June 2016
A garage owner incurred the costs listed below. 1 mechanics’ wages 2 repairs to garage equipment 3 spare parts used in vehicle repairs 4 rent for the garage premises Which of these are direct costs?
May/June 2016
How is the margin of safety worked out?
May/June 2016
A company has total costs of $2200 when 100 units are produced and $4600 when 300 units are produced. Each unit sells for $20. At an output level of 200 units, what is the overall profit or loss?
May/June 2016
A company gives the following data about its carriage costs. Units transported and total cost ($): 2000 units: 6000 5000 units: 13500 If more than 5000 units are transported, the cost will raise the fixed charge by another $2000. What would the cost be to transport 6000 units?
May/June 2016
An employee has a normal $40$-hour week. During this period, he is expected to produce $200$ complete units. He receives a bonus of $10$ for each hour saved in production. In week $25$ he worked $44$ hours and made $250$ units. What was his bonus payment for week $25$?
May/June 2016
A manager is drawing up a quotation for Job 88. A specialised technician is employed to carry out only this job. He will operate machinery already owned by the company. Which statement about the expenses for Job 88 is correct?
May/June 2016
Why could a business choose to use marginal costing?
May/June 2016
A business gave the information below for the last two months. February: labour hours totalled 64 000, and total overheads were $918 000. March: labour hours totalled 76 000, and total overheads were $1 062 000. Calculate the monthly fixed overhead cost.
May/June 2016
A company applies marginal costing. Which costs are counted in its inventory valuation?
May/June 2016
A company’s break-even sales level is 1000 units, with variable costs of $30 000 and fixed costs of $20 000. What profit will be earned if sales are 70 units above the break-even level?
May/June 2016
A business pays employees $2 for every unit of X assembled and $3.20 for every unit of Y assembled. The monthly production level is 1800 units of X and 1000 units of Y. The factory supervisor receives $1000 each month. What is the direct labour cost per month?
May/June 2016
A garage owner incurred the costs listed below. 1 wages of mechanics 2 repairs to garage equipment 3 spare parts used in vehicle repairs 4 rent for the garage premises Which of these count as direct costs?
May/June 2016
By what method is margin of safety calculated?
May/June 2016
A company has total costs of $2200 when it makes 100 units and $4600 when it makes 300 units. Each unit is sold for $20. What is the overall profit or loss when the output level is 200 units?
May/June 2016
A company gives the following details about its carriage costs. If 2000 units are transported, the total cost is $6000. If 5000 units are transported, the total cost is $13500. For quantities above 5000 units, the cost will raise the fixed charge by another $2000. What is the cost of transporting 6000 units?
May/June 2016
Rahel produces only product X and wants to find the break-even point.
May/June 2016
Rahel makes one product, X, and wants to determine the break-even point.
May/June 2016
Which item counts as a direct cost?
May/June 2017
The following data are available for a business. selling price per unit $35$ direct labour per unit $9$ direct material per unit $6$ budgeted sales 8000 units margin of safety 2000 units What are the fixed costs worth?
May/June 2017
Vikram earns $10$ per hour for a 40-hour week and receives time and a half for any overtime. He is meant to make four units each hour. If he makes above this amount, he is paid a bonus of $2$ for every extra unit. In the previous week, Vikram worked 41 hours and made 161 units. How much money was Vikram paid?
May/June 2017
A business produces and sells 10\,000 units. The revenue and cost figures are given below. Sales revenue $200\,000$ Variable costs $80\,000$ Fixed costs $90\,000$ Profit $30\,000$ What is the break-even point in units?
May/June 2017
The figures in the table are for a business. Sales $6000$ Variable costs $4500$ Fixed costs $900$ Profit for the year $600$ Calculate the contribution to sales ratio.
May/June 2017
In what way can stepped costs be best described?
May/June 2017
A business produces wedding dresses. Every machinist receives $30 per day and every supervisor receives $40 per day. One supervisor is able to oversee up to 10 machinists, and each machinist is capable of making one wedding dress per day. If 95 wedding dresses are produced in a day, what is the daily labour cost?
May/June 2017
Which statement most accurately describes variable costs?
May/June 2017
A company produces and sells chairs. The per-unit data below are given: selling price: $25 direct material and labour: $12 other variable production costs: $3 variable selling costs: $2 fixed costs: $4 The company could choose to purchase the chairs for resale rather than manufacture them. At what purchase price would the company's profit remain unchanged?
May/June 2017
J Limited’s budgeted income statement is presented below: sales revenue: $400000 variable costs: $240000 fixed costs: $132000 profit for the year: $28000 How much is the margin of safety in dollars?
May/June 2017
A company has fixed costs amounting to $40000 each month. The following details were given: Production: March units: 30000 April units: 15000 The total production costs in March came to $90000. What was the total production cost for April?
May/June 2017
The production of product X involves a particular cost. The information for this is given below. Units produced: $6000$, $9000$ Cost per unit: $3$, $2$ This cost is an example of which type of cost?
May/June 2017
A company’s labour costs are calculated from hours worked together with a bonus scheme. Every production worker receives the same hourly pay rate and the same bonus. The daily pay rate is $6$ per hour for an $8$-hour day, over $5$ days each week. The bonus depends on the number of units made above $2000$ units in a week, at a rate of $2$ for each $100$ units. During one week, each worker makes $2600$ units. Every worker completes all the hours. Calculate the gross weekly wage for one worker.
May/June 2017
Actual production falls short of forecast production. Which cost is greater than forecast?
May/June 2017
The data below are provided for a business. Planned sales each month: $500$ units Selling price for each unit: $\$30$ Variable cost for each unit: $\$24$ Planned fixed costs per month: $\$600$ The business intends to hire a machine that would raise monthly fixed costs to $\$2400$ and lower variable costs to $\$18$ per unit. What effect would this have on the business’s margin of safety?
May/June 2017
The data below relate to one product. Selling price: $\$10.00$ per unit Variable labour costs: $\$3.50$ per unit Production material costs: $\$2.50$ per unit Break-even point: $2500$ units Calculate the total fixed cost.
May/June 2017
The figures below present the budget for a small manufacturing company. Sales in units: $6000$ and $12000$ Direct materials: $\$18000$ and $\$36000$ Direct labour: $\$6000$ and $\$12000$ Production overheads: $\$33000$ and $\$45000$ Administrative overheads: $\$27000$ and $\$27000$ Each unit is sold at $\$16$. What is the break-even point in units?
May/June 2017
A company’s limiting factor is production materials, and it makes three different products. Which product should it produce first to maximise profits?
May/June 2017
For the year, the figures below have been given. Sales: $\$400000$ Variable costs: $\$240000$ Total contribution: $\$160000$ Fixed administrative expenses: $\$90000$ Fixed selling expenses: $\$50000$ Profit for the year: $\$20000$ The company intends to raise the selling price by $10\%$. By how much will profit for the year rise?
May/June 2017