ACCA MA · Chapter 8
Job, batch and process costing MCQs with Answers
12 multiple-choice questions on Job, batch and process costing for ACCA MA Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
For which of the following businesses would job costing be most appropriate?
- A) A firm that designs and fits bespoke kitchens to each customer's requirements
- B) An oil refinery
- C) A brewery producing a single lager in continuous runs
- D) A bus company
Show answer & explanation
Answer: A) A firm that designs and fits bespoke kitchens to each customer's requirements
Job costing suits work done to each customer's specific order, where each job is separately identifiable and usually short. A refinery and a brewery would use process costing, and a bus company would use service costing.
Question 2
A job requires direct materials of $1,200 and 40 hours of direct labour at $15 per hour. Production overheads are absorbed at $20 per direct labour hour. Administration overheads are added at 20% of total production cost. The selling price is set to give a profit margin of 25% of the selling price. What is the selling price of the job?
- A) $3,900
- B) $3,250
- C) $4,160
- D) $3,467
Show answer & explanation
Answer: C) $4,160
Production cost = 1,200 + (40 x 15) + (40 x 20) = 1,200 + 600 + 800 = $2,600. Administration = 20% x 2,600 = $520, so total cost = $3,120. With a 25% margin on selling price, cost is 75% of price: 3,120 / 0.75 = $4,160. A 25% mark-up on cost would give $3,900.
Question 3
A batch of 500 units incurs the following costs: direct materials $3,000, direct labour $1,800 and machine set-up $450. Production overheads are absorbed at 150% of direct labour cost. What is the cost per unit?
- A) $15.00
- B) $10.50
- C) $15.90
- D) $19.50
Show answer & explanation
Answer: C) $15.90
Overheads = 150% x 1,800 = $2,700. Total batch cost = 3,000 + 1,800 + 450 + 2,700 = $7,950. Cost per unit = 7,950 / 500 = $15.90. The set-up cost is a batch cost and must be included.
Question 4
A process takes in 10,000 kg of material costing $46,000, and conversion costs are $20,600. Normal loss is 4% of input and can be sold as scrap for $1.50 per kg. What is the cost per kg of expected output?
- A) $6.938
- B) $6.660
- C) $6.984
- D) $6.875
Show answer & explanation
Answer: D) $6.875
Total cost = 46,000 + 20,600 = $66,600. Normal loss = 4% x 10,000 = 400 kg, scrap value 400 x 1.50 = $600. Expected output = 10,000 - 400 = 9,600 kg. Cost per kg = (66,600 - 600) / 9,600 = 66,000 / 9,600 = $6.875. Forgetting to deduct the scrap value gives $6.938.
Question 5
A process takes in 10,000 kg of material costing $46,000, and conversion costs are $20,600. Normal loss is 4% of input and can be sold as scrap for $1.50 per kg. Actual output was 9,450 kg, and all losses are sold as scrap. What is the net cost of the abnormal loss charged to the statement of profit or loss?
- A) $806.25
- B) $1,031.25
- C) $1,256.25
- D) $225.00
Show answer & explanation
Answer: A) $806.25
Expected output = 9,600 kg, so abnormal loss = 9,600 - 9,450 = 150 kg. Cost per kg = (66,600 - 600) / 9,600 = $6.875, so the abnormal loss is valued in the process account at 150 x 6.875 = $1,031.25. The scrap proceeds of 150 x 1.50 = $225 are set against this, so the net charge to profit or loss is 1,031.25 - 225 = $806.25.
Question 6
A process takes in 5,000 units costing $27,000 in total. Normal loss is 10% of input and has no scrap value. Actual output was 4,600 units. What is the value of the abnormal gain, and where is it entered in the process account?
- A) $600, credited in the process account
- B) $587, debited in the process account
- C) $600, debited in the process account
- D) $540, credited in the process account
Show answer & explanation
Answer: C) $600, debited in the process account
Expected output = 5,000 x 90% = 4,500 units, so the abnormal gain = 4,600 - 4,500 = 100 units. Cost per expected unit = 27,000 / 4,500 = $6, so the gain is valued at 100 x 6 = $600. An abnormal gain is debited in the process account (with the matching credit in the abnormal gain account), because more output has come out than expected.
Question 7
In a process with no opening work in progress, 8,000 units were started. 6,500 units were completed, and 1,500 units were still in progress at the end of the period. The closing WIP is 100% complete for materials and 60% complete for conversion. Costs were materials $32,000 and conversion $22,200. What is the value of closing work in progress?
- A) $10,500
- B) $6,300
- C) $8,100
- D) $8,700
Show answer & explanation
Answer: D) $8,700
Equivalent units: materials = 6,500 + 1,500 = 8,000, so $4.00 per EU. Conversion = 6,500 + (1,500 x 60%) = 7,400, so 22,200 / 7,400 = $3.00 per EU. Closing WIP = (1,500 x 4.00) + (900 x 3.00) = 6,000 + 2,700 = $8,700. Check: completed output 6,500 x 7 = 45,500, and 45,500 + 8,700 = 54,200, which equals total costs.
Question 8
A process uses the weighted average method. Opening WIP was 1,000 units, valued at materials $3,800 and conversion $1,500. 9,000 units were started, with costs of materials $36,200 and conversion $30,000. 8,000 units were completed, and closing WIP of 2,000 units was 100% complete for materials and 50% complete for conversion. What is the value of the completed output?
- A) $57,200
- B) $60,000
- C) $55,627
- D) $11,500
Show answer & explanation
Answer: B) $60,000
Weighted average combines opening WIP costs with period costs. Materials: EU = 8,000 + 2,000 = 10,000; cost = 3,800 + 36,200 = 40,000, giving $4.00 per EU. Conversion: EU = 8,000 + (2,000 x 50%) = 9,000; cost = 1,500 + 30,000 = 31,500, giving $3.50 per EU. Completed output = 8,000 x (4.00 + 3.50) = $60,000. Closing WIP would be (2,000 x 4) + (1,000 x 3.5) = $11,500.
Question 9
What is the main difference between a joint product and a by-product?
- A) Joint products are produced in separate processes, whereas by-products come from the same process
- B) By-products have no sales value at all, whereas joint products do
- C) Joint products are always sold without further processing, whereas by-products need further processing
- D) A by-product has a relatively low sales value compared with the main products, whereas joint products each have significant sales value
Show answer & explanation
Answer: D) A by-product has a relatively low sales value compared with the main products, whereas joint products each have significant sales value
Joint products and by-products both come from the same process. Joint products each have significant sales value, while a by-product is produced incidentally and has relatively small sales value. A by-product does have some value; output with no value would be waste.
Question 10
A joint process costs $90,000 and produces 4,000 kg of Product X, which sells for $15 per kg, and 6,000 kg of Product Y, which sells for $20 per kg, at the split-off point. Using the sales value at split-off method, how much of the joint cost is apportioned to Product X?
- A) $36,000
- B) $60,000
- C) $45,000
- D) $30,000
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Answer: D) $30,000
Sales values: X = 4,000 x 15 = $60,000; Y = 6,000 x 20 = $120,000; total $180,000. X's share = 90,000 x 60,000 / 180,000 = $30,000. Apportioning by physical quantity would give 90,000 x 4,000 / 10,000 = $36,000.
Question 11
A joint process costs $72,000 and produces 3,000 units of P and 5,000 units of Q. P needs further processing costing $4 per unit and then sells for $20 per unit. Q needs further processing costing $8,000 in total and then sells for $16 per unit. Using the net realisable value method, how much of the joint cost is apportioned to P?
- A) $28,800
- B) $30,857
- C) $27,000
- D) $36,000
Show answer & explanation
Answer: A) $28,800
NRV of P = 3,000 x (20 - 4) = $48,000. NRV of Q = (5,000 x 16) - 8,000 = $72,000. Total NRV = $120,000. P's share = 72,000 x 48,000 / 120,000 = $28,800. Using final sales values without deducting further processing costs would give $30,857, and physical units would give $27,000.
Question 12
How are the sales proceeds of a by-product commonly treated in process costing?
- A) Given a share of the joint costs and reported as a separate product profit
- B) Added to the cost of the main products
- C) Ignored, as by-products have no value
- D) Deducted from the cost of the process, in the same way as the scrap value of normal loss
Show answer & explanation
Answer: D) Deducted from the cost of the process, in the same way as the scrap value of normal loss
A common treatment is to deduct the net sales value of the by-product from the process costs (often by crediting the process account, as with normal loss scrap). This lowers the cost of the main products. By-products are usually not given a share of joint costs because their value is small.