MCQ for CA Final SCMPE - Chapter 7 Standard Costing
Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 5 - Strategic Cost Management and Performance Evaluation - Chapter 7: Standard Costing - For Practice relevant for May/Nov 23 Examinations
Q:1 Planning and Operational Variances
1.Managing Director of Petro-KL Ltd (PTKLL) thinks that Standard Costing has little to offer in the reporting of material variances due to frequent change in price of materials. PTKLL can utilize one of two equally suitable raw materials and always plan to utilize the raw material which will lead to cheapest total production costs. However, PTKLL is frequently trapped by price changes and the material actually used often provides, after the event, to have been more expensive than the alternative which was originally rejected.
During last accounting period, to produce a unit of ‘P’ PTKLL could use either 2.50 Kg of ‘PG’ or 2.50 kg of ‘PD’. PTKLL planned to use ‘PG’ as it appeared it would be cheaper of the two and plans were based on a cost of ‘PG’ of`1.50 per Kg. Due to market movements, the actual prices changed and if PTKLL had purchased efficiently the cost would have been:
‘PG’`2.25 per Kg;
‘PD’`2.00 per Kg
Production of ‘P’ was 1,000 units and usage of ‘PG’ amounted to 2,700 Kg at a total cost of `6,480/-
Calculate Traditional Usage Variance
- 300(A)
- 280(A)
- 320(A)
- None of these
Answer: 1
Q:2 Planning and Operational Variances
1.Managing Director of Petro-KL Ltd (PTKLL) thinks that Standard Costing has little to offer in the reporting of material variances due to frequent change in price of materials. PTKLL can utilize one of two equally suitable raw materials and always plan to utilize the raw material which will lead to cheapest total production costs. However, PTKLL is frequently trapped by price changes and the material actually used often provides, after the event, to have been more expensive than the alternative which was originally rejected.
During last accounting period, to produce a unit of ‘P’ PTKLL could use either 2.50 Kg of ‘PG’ or 2.50 kg of ‘PD’. PTKLL planned to use ‘PG’ as it appeared it would be cheaper of the two and plans were based on a cost of ‘PG’ of`1.50 per Kg. Due to market movements, the actual prices changed and if PTKLL had purchased efficiently the cost would have been:
‘PG’`2.25 per Kg;
‘PD’`2.00 per Kg
Production of ‘P’ was 1,000 units and usage of ‘PG’ amounted to 2,700 Kg at a total cost of `6,480/-
Calculate Operational Total Variance
- 505 (A)
- 455 (A)
- 855 (A)
- 805 (A)
Answer: 3
Q:3 AGF is a chemical processing company that produces sprays used by farmers to protect their crops. One of these sprays 'Agrofresh' is made by using either chemical A or chemical B. To produce one litre of Agrofresh spray they have the option to use either 12 litres of chemical A or 12 litres of chemical B. During the financial year, the purchase department of AGF has planned to use chemical B as it appeared that it would be the cheaper of the two and their plans were based on a cost of chemical B of`15 per litre.
Due to subsequent market movement during the year the actual prices changed and if the concerned department had purchased efficiently, the cost would have been:
Chemical A |
₹ 15.40 per litre |
Chemical B |
₹ 16.00 per litre |
Production of Agrofresh spray was 1,000 litres and the usage of chemical B was 12,800 litres at a cost of`2,09,920.
You are the CEO of AGF and the management accountant has sent to you the following suggestions through e-mail:
"I feel that in our particular circumstances the traditional approach to variance analysis is of little use as for some of our products we can utilize one of several equally suitable chemicals and we always plan to use such chemical which will lead to cheapest production costs.
However due to sharp market movements, we are frequently trapped by the sharp price changes which lead to the choice of expensive alternative at the end."
Calculate Traditional Usage Variance
- 10000 (A)
- 12000 (A)
- 10500 (A)
- 13000 (A)
Answer: 2
Q:4 AGF is a chemical processing company that produces sprays used by farmers to protect their crops. One of these sprays 'Agrofresh' is made by using either chemical A or chemical B. To produce one litre of Agrofresh spray they have the option to use either 12 litres of chemical A or 12 litres of chemical B. During the financial year, the purchase department of AGF has
planned to use chemical B as it appeared that it would be the cheaper of the two and their plans were based on a cost of chemical B of`15 per litre.
Due to subsequent market movement during the year the actual prices changed and if the concerned department had purchased efficiently, the cost would have been:
Chemical A |
₹ 15.40 per litre |
Chemical B |
₹ 16.00 per litre |
Production of Agrofresh spray was 1,000 litres and the usage of chemical B was 12,800 litres at a cost of`2,09,920.
You are the CEO of AGF and the management accountant has sent to you the following suggestions through e-mail:
"I feel that in our particular circumstances the traditional approach to variance analysis is of little use as for some of our products we can utilize one of several equally suitable chemicals and we always plan to use such chemical which will lead to cheapest production costs.
However due to sharp market movements, we are frequently trapped by the sharp price changes which lead to the choice of expensive alternative at the end."
Calculate Traditional Total Variance
- 27,920 (A)
- 29,900 (A)
- 29,920 (A)
- 29,950 (A)
Answer: 3
Q:5 AGF is a chemical processing company that produces sprays used by farmers to protect their crops. One of these sprays 'Agrofresh' is made by using either chemical A or chemical B. To produce one litre of Agrofresh spray they have the option to use either 12 litres of chemical A or 12 litres of chemical B. During the financial year, the purchase department of AGF has planned to use chemical B as it appeared that it would be the cheaper of the two and their plans were based on a cost of chemical B of`15 per litre.
Due to subsequent market movement during the year the actual prices changed and if the concerned department had purchased efficiently, the cost would have been:
Chemical A |
₹ 15.40 per litre |
Chemical B |
₹ 16.00 per litre |
Production of Agrofresh spray was 1,000 litres and the usage of chemical B was 12,800 litres at a cost of`2,09,920.
You are the CEO of AGF and the management accountant has sent to you the following suggestions through e-mail:
"I feel that in our particular circumstances the traditional approach to variance analysis is of little use as for some of our products we can utilize one of several equally suitable chemicals and we always plan to use such chemical which will lead to cheapest production costs.
However due to sharp market movements, we are frequently trapped by the sharp price changes which lead to the choice of expensive alternative at the end."
Calculate Operational Usage Variance
- 27,920 (A)
- 29,900 (A)
- 29,920 (A)
- 29,950 (A)
Answer: 3
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