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Share Your Current Mid Term Papers (Questions/Pattern) 17 December 2016 to 29 December 2016 & Past Papers as well here to help each other. Thanks
mft402 mid term latest exam
session 9--10 today .
Step fixed cost
A step fixed cost is the cost which is constant for a specific range of activity and rises to a new
constant level once the range exceeds. The range over which the fixed cost remains constant is
known as the relevant range
Semi Variable Cost
It is also known as mixed cost. It is the cost which is part fixed and par variable. It is in fact the
mixture of both behaviors.
Examples include: Utility bills
A blanket absorption rate is a single rate of absorption used throughout an organization’s
production facility and based upon its total production costs and activity.
Q:1 Pros and Cons of Group Bonus (3)
Advantages of group bonus systems
(a) Encouraging team spirit. Mutual dependence engenders mutual trust.
(b) Good group incentive plans assist in the reduction of labor turnover, accidents,
spoilage, waste and absenteeism.
(c) Good output will qualify for bonus and this can be earned only if each member has
performed his/her task satisfactorily. There is therefore a built-in system of inspection
and such a scheme reduces the amount of supervision necessary.
(d) High output should result as the slower workers in the group follow the example of faster
workers. The cost per unit should decrease as the fixed overhead will be spread over a
greater number of units.
Disadvantages of group bonus schemes
(a) A faster worker in the group may real dissatisfy with his earnings; this may cause dissension
within the group. In such cases he may be paid a higher rate;
Alternatively, he may be transferred.
(b) Sickness of members may cause the output of the group to suffer. For the incentive scheme to
be successful, it is necessary lo have able substitutes to cover sickness, holidays and other absences.
(c) Additional administrative costs may result.
(d) In attempting to produce greater output, quality of the work may deteriorate and there could be
excessive material wastage.
Q:2 Why is it necessary to select an appropriate capacity level for calculating factory overhead absorption rate? (3)
Selection of an appropriate capacity level is necessary because:
(1) Fixed factory overhead absorption rate is inversely related with capacity level i.e. the fixed
rate is higher at a lower capacity level and it is lower at a higher capacity level,
(2) Amount of unabsorbed fixed factory overhead at the end of an accounting period is used
to denote cost of failing to achieve the target production i.e. cost of unutilized capacity (the idle
capacity variance to be discussed later)
.Q:3 The company pay wages on the basis of production.
Units of 110% efficiency are paid basic piece rate
Units more than 110% efficiency get 25% above basic piece rate
Units above 130% efficiency get 50% above basic piece rate
The standard output is 1200 units. The basic piece rate is Rs. 0.40
Required : Prepare a schedule of piece rate and calculate the earnings of A,B, and C when their actual output is 1300, 1400, and 1550 respectively. (5)
Efficiency = Actual Output/Standard Output x 100
Efficiency of A = 1300/1200 x 100 =108.33% (Below 110%)
Earnings of A = Rs. 0.40 x 1300 = Rs. 520
Efficiency of B = 1400/1200 x 100 = 116.67% (Between 110% - 130%)
Earnings of B = Rs. 0.40 x 125% x 1400 = Rs. 700
Efficiency of C = 1550/1200 x 100 = 129.17% (Between 110% - 130%)
Earnings of C = Rs. 0.40 x 125% x 1550 = Rs. 775 ??
OR Earnings of C = Rs. 0.40 x 150% x 1550 = Rs. 930 ??
(Im not sure whether 25% increase or 50% increase will be applied for Earnings of C)
Q:4 The company produced 400 bulbs and incurred:
FOH (25% of DLC) xxx
Total Production Cost xxx
Some of the work was found defective. Additional cost incurred on defective work:
Required: Pass the accounting entries to record the cost incurred along with the adjusting entry for re-work cost, treating the loss as Normal. (5)
Solution: (Pg:62 Q1(a) in the printed handouts/book) Values were different in the exam.
Q:5 Factory overhead absorption rate of a pharmaceutical is Rs 2.50. Budgeted Factory overhead at two activity levels is as follows for that period.
Activity level Budgeted factory overhead
Low 20,000 Hours Rs. 45,000
High 40,000 Hours Rs. 75,000
Actual Factory overhead for that period was Rs. 42,000 and actual volume was 25,000 hours.
i. Variable factory overhead absorption rate
ii. Budgeted fixed factory overhead
Solution = (Pg: 3 = Q:37 in the file attached) Its a past paper file of subjective questions
My paper 2015
Q1) Normal and abnormal loss
Occurrence of this type of loss is always expected. It is unavoidable loss and is inherent in the
manufacturing process or its chances of happening are more likely than not. For example; while
transporting petrol, it is normal that a little quantity will be evaporated.
It is an unexpected loss. Measures are always taken to avoid abnormal losses. For example; security system is installed to secure loss by theft from godown of finished goods. Safety measures are undertaken during manufacturing process against any loss of breakage of the output. Special care is taken during transportation of petrol to avoid its leakage.
Q2) Process costing system
Process costing system applies when standardised goods are produced tom a series of interconnected operations.In some industries, the output produced emerges from a continuous process. An example might be an oil refinery; Oil in a raw state is input and subjected to a process of purification. Refined oil.emerges at the end of the process.Problems that arise in such situations include the attribution of materials costs and conversion
costs to units of finished output and the occurrence of losses during the process (spoilt or lost
production).The characteristics and application of process costing
Q3) What type of info on employee slip.
Employer name, Date, Basic Pay, OverTime, Shift Allowance, gross pay, Pension, Total pay, Income Tax, Net pay
Q4) Info di thi phir Efficiency ratio.
Actual output measured in standard hours Actual hours/ Actual hours. %
Q5 What is effect on Carrying cost and Order cost if order quantity increase or decrease.
Q1 --- blanket rate related. theory question
A blanket absorption rate is a single rate of absorption used throughout an organization’s
production facility and based upon its total production costs and activity.
The use of a single blanket rate makes the apportionment of overhead costs unnecessary since
the total production costs are to be used. How ever this is not recommended for the following
• It relies on a single activity measure being appropriate for the entire production function.
• It does not distinguish between the miming costs of particular activities or departments
when absorbing costs into cost units.
Q2 --- cost production rate .... numerical question
(1) To avoid the chances of error, what electronic methods have been used to record the attendance of workers?
results with less time consumption and lesser chance of errors can be obtained with the
application of electronic devices. Now a days clock cards have been substituted with the smart
cards.Clock cards may be replaced by smart cards. These record the same information, but it is
recorded on the magnetic strip on the card. Smart cards may also be used for other purposes not
related to the payroll.
(2) Why is it considered that job order costing is more expensive as compared to process costing?
What is inventory turnover ratio and inventory holding period? How are these calculated? Marks: 2.5+2.5
Inventory Turnover ratio shows the stock position of the store room. In how many times
inventory is used in a year and for how long the inventory is held in the store.
Inventory turnover ratio = Cost of goods sold/Average inventory = Time
(4) Briefly explain “statutory deductions” and “non-statutory deductions” with reference to payroll. Marks: 2.5+2.5
Statutory deductions are deductions from pay that are made by law. In the Pakistan income tax
is taken away from gross pay and paid to Income Tax Department, which is the main tax collecting
department of the government
Non-statutory deductions are voluntary deductions from pay that the employee chooses
to make. Examples of these are:
• Subscriptions to a trade union
• Contributions by the employee to a pension scheme.
(5) Enlist the causes of high labor turnover in organizations.
The high labor turnover rate is an important indication of high labor cost. It is therefore not desirable
Separation method, Flux method , Replacement method:
19) Define job order costing? 3 marks
Job order costing or job costing is a system for assigning manufacturing costs to an individual product or batches of products. Generally, the job order costing system is used only when the products manufactured are sufficiently different from each other.
20) What is maximum level of stock? Enlist facts. 3 marks
Maximum Stock Level
The maximum stock level indicates the maximum quantity of an item of material which can be
held in stock at any time. The maximum stock level is fixed by taking into consideration the
1)Minimum rates of consumption.
2)The Lead Time
3) Economic Ordering quantity
21) Differential piece rate plan by Tayler. 5 marks
Taylor's Differential Piece Rate Plan:
This system was originated by W.F. Taylor, the father of scientific management. It is based on the assumption that the degree of efficiency varies from worker to worker and hence the worker must be paid according to their degree of efficiency.
Under this system two piece rates are fixed; one lower rate applicable to worker whose
production is below standard and another higher rate and is applicable to a worker whose
production is above the standard.
The efficiency of a worker may be determined as a percentage, either:
(i) of the time allowed for a job to the actual time taken, or
(ii) of actual output to the standard output, within a specified time.
22) Job costing sheet (Numerical). 5 marks
23) Calculate cost per unit and equitant produce units. (Numerical).5 marks
Calculate total ordering cost with the help of following information: Data Given 3 marks
Total Ordering cost
Ordering cost is arrived by multiplying the number of orders in a year with the cost
per order. Number of order is calculated by dividing annually required units by the
Step I: Required Units/Order Quantity = Number of orders
Step II: Number of orders x Cost per order
Why is it necessary to select the appropriate capacity level for the calculation of overhead absorption rate? 3 marks
Over/under-absorption of overhead
In the previous LESSON s reference was made to an accounting problem associated with the use
of predetermined absorption rates.
Where the amount of overhead absorbed exceeds the actual overhead cost incurred, the excess is
known as over-absorption; if the amount absorbed is less than the cost incurred then the
difference is know as under-absorption.
How is the variance between actual and applied FOH cost calculated? What is favorable and unfavorable variance? 5 marks
Such variance should be eliminated form the financial statements through adjustment.
Under/Over applied FOH cost can be adjusted in following costs/profit figures:
1. Entire Production
a) work in process inventory
b) finished goods inventory
c) cost of goods sold
2. Cost of Goods Sold
3. Net profit
Difference between the actual cost and applied cost is calculated by subtracting actual cost from
the applied cost. Where the applied cost is greater than the actual cost it is favorable variance,
but where the applied cost is lesser than the actual cost it is unfavorable variance.
Write down any two methods to measure labor turnover, also mention their formulas. 5 marks
Measuring labor efficiency
To measure labor efficiency: Compare actual efficiency with predetermined targets (or budgets)
using ‘standard hours’.
A standard hour is the number of production units which should be achieved by an experienced
worker within a period of one hour.
We can assume that all organisations will benefit from efficient labor, thus it is important to
measure how efficient workers are and identify opportunities for improvement.
The following practice question shows the calculation of the efficiency ratio.
MGT402 Midterm Spring 2016 Paper
Difference between Salary and wages?
Salaries & Wages
Salary is a fixed amount of remuneration paid to the employees after a month or a year.
Wage is remuneration of the employees/workers who work on hourly or unit produced basis.
Define FOH absorption rate and how it is calculated?
FOH Absorption Rate
Finally FOH absorption rate is calculated at which the cost is absorbed in the cost unit. This is also known as overhead absorption rate (OAR) this can be calculated as under:
OAR = Estimated F.O.H cost/Base
What are the main reasons for labor turnover?
Labor turnover may be defined as the rate of change in the composition of the labor force of an
organization high rate of labor turnover denotes that labor is not stable and there is frequent
change in the labor force in the organisation. The high labor turnover rate is an important
indication of high labor cost.
Define Flux Method
Labor turnover is measured by dividing the total number of separations and replacements by the average number of workers.
Labor turnover=(Number of separations + number of replacement)/(Average number of workers during the period ) x 100
Abnormal Loss treated in Cost accounting report 3
Charged to specific WIP account.
FiFO method under Periodic System 5
Under first-in, first-out (FIFO) method In a periodic inventory system when a sale is made, the entry to record the cost of goods sold is not made. At the end of accounting period, the quantity of inventory on hand (ending inventory) is found by a physical count and if the FIFO method is used to compute the cost of ending inventory, the cost of most recent purchases are used. Once the cost of ending inventory has been computed, the cost of goods sold can be computed easily using the following formula:
Cost of goods sold (COGS) = (Beginning inventory + Purchases) – Ending inventory
The following example illustrates the use of FIFO method in a periodic inventory system:
Payroll Journal Entries 5
Equivalent Unit Cost 5
Equivalent Unit Cost
Once processing has started on a unit; of output, to the extent that it remains in an uncompleted
state it can be expressed as a proportion of a completed unit. For example, if 100 units are exactly half-way through the production process in terms of the amount of cost they have absorbed, they are effectively equal to 50 complete units. Therefore, 100 units which are half-complete can be regarded as 50 equivalent units that are complete
Calculation of equivalent units produced.
In order to arrive at cost per unit of output, total of each cost element is divided by the number of
units produced, For this purpose, where at the end of costing period, there are some partially
completed units in process, these units must be stated in terms of equivalent completed units, For
example, if 4,000 units. are in process at the end of month estimated as 50% complete, these will
be equivalent to 2,000 completed units. These equivalent units are added to units completed by
the department to arrive at equivalent production. Then total cost is divided by this equivalent
production figure to calculate unit cost.
Calculation of Equivalent Units Produced
100% of completed units + % completed of the in process units
MGT402 Solved Mid Terms & MGT402 Solved MCQs Files For MGT402 Mid Term Exam Preparation
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