ICSAN Professional Programme I - Management Accounting (Nigeria)

A manufacturing firm in Lagos has the following output and total costs for two recent months: Month 1 (10,000 units: ₦250,000 total cost); Month 2 (15,000 units: ₦325,000 total cost). Using the high-low method, what is the estimated total cost for a month where 12,000 units are produced?

• A₦280,000
• B₦270,000
• C₦290,000
• D₦300,000

Which of the following descriptions best fits a 'step-up' fixed cost?

• AA cost that increases by a constant amount for each additional unit of output produced.
• BA cost that remains constant up to a certain level of activity, and then increases by a l…
• CA cost containing both a fixed and a variable component, such as electricity costs.
• DA cost that increases exponentially with output due to diminishing returns.

A direct factory worker is paid an overtime premium. In which of the following circumstances would this overtime premium be classified as a direct cost?

• AWhen the overtime is worked at the specific request of a customer to complete a special r…
• BWhen the overtime is worked due to general labour shortages in the local industrial area.
• CWhen the overtime is due to machine breakdown in the preceding production line.
• DOvertime premiums are always classified as indirect costs regardless of the circumstances.

How is 'conversion cost' defined in management accounting?

• AThe sum of direct materials cost and direct labour cost.
• BThe sum of direct labour cost and production overheads.
• CThe sum of prime costs and administrative overheads.
• DThe total cost required to acquire raw materials and transport them to the factory.

Which of the following best describes a 'sunk cost'?

• AA cost that can be saved or avoided by choosing an alternative course of action.
• BA cost that has already been incurred by a past decision and cannot be recovered or chang…
• CThe value of the benefit sacrificed when one alternative is chosen in preference to anoth…
• DAn estimated future cost that will vary depending on the decision made.

An opportunity cost is best defined as:

• AThe actual cash outflow required to implement a new project.
• BThe value of the benefit sacrificed when one course of action is chosen in preference to…
• CThe difference in total costs between two competing investment alternatives.
• DA cost that has already been committed and cannot be cancelled by management.

How does fixed cost per unit behave as the level of activity increases?

• AIt decreases as activity increases.
• BIt increases as activity increases.
• CIt remains constant regardless of the activity level.
• DIt changes in direct proportion to the volume of output.

Within the relevant range, variable cost per unit will generally:

• ADecrease as the level of activity increases.
• BRemain constant as the level of activity changes.
• CIncrease as the level of activity increases.
• DFluctuate randomly with output.

Which of the following represents the prime cost of a product?

• AThe total of direct materials and direct labour costs only.
• BThe total of direct materials and production overheads.
• CThe sum of all direct production costs (direct materials, direct labour, and direct expen…
• DThe sum of direct materials, direct labour, and all production overheads.

A firm has total maintenance costs of ₦180,000 for 4,000 machine hours and ₦220,000 for 6,000 machine hours. What is the fixed cost portion of this semi-variable cost?

• A₦100,000
• B₦80,000
• C₦120,000
• D₦140,000

Under the cost of quality framework, the cost of inspecting incoming raw materials at a factory in Aba is classified as a:

• APrevention cost
• BAppraisal cost
• CInternal failure cost
• DExternal failure cost

Which of the following quality costs is classified as a prevention cost?

• AThe cost of redesigning a production process to eliminate manufacturing defects.
• BThe cost of testing a finished batch of products before shipping.
• CThe cost of components scraped during trial runs.
• DThe cost of running a customer helpline to address product complaints.

The cost of reworking a defective item before it is shipped to a customer is classified as a(n):

• APrevention cost
• BAppraisal cost
• CInternal failure cost
• DExternal failure cost

Costs related to handling customer warranty claims and replacing defective products are classified under:

• APrevention costs
• BAppraisal costs
• CInternal failure costs
• DExternal failure costs

Which of the following fixed costs is best described as a discretionary fixed cost?

• AStraight-line depreciation on factory machinery.
• BR&D / annual employee training budget decided by the board.
• CRent on a factory building under a long-term lease contract.
• DInterest payments on long-term bank loans.

What is the most appropriate composite cost unit for a logistics company operating transport services between Lagos and Abuja?

• APassenger-kilometre
• BBus-load
• CDriver-hour
• DLitre of diesel consumed

A 'cost centre' is best defined as:

• AA unit of product or service for which costs are calculated.
• BA department, function, or location for which costs are accumulated.
• CA profit target set for a specific division.
• DA manager who has direct authority to incur expenditures.

In a linear cost equation represented by Y = a + bX, what does the coefficient 'b' represent?

• ATotal fixed cost.
• BVariable cost per unit.
• CTotal variable cost.
• DFixed cost per unit.

Which of the following costs would be classified as a period cost rather than a product cost?

• ADirect materials used in production.
• BFixed production overheads (factory rent).
• CAdministrative and selling expenses.
• DDirect labour costs of assembly workers.

Overtime premium paid to assembly workers due to a general labour shortage in the manufacturing sector should be classified as:

• ADirect labour cost.
• BIndirect production overhead.
• CAdministrative expense.
• DPeriod cost.

A firm has budgeted production overheads of ₦300,000 for 15,000 budgeted direct labour hours. In a month, actual overheads incurred were ₦310,000 and actual labour hours worked were 16,000 hours. What is the under- or over-absorption of overheads?

• A₦10,000 under-absorbed
• B₦10,000 over-absorbed
• C₦20,000 over-absorbed
• D₦20,000 under-absorbed

For a period, a company has opening inventory of 4,000 units and closing inventory of 6,000 units. The fixed production overhead absorption rate is ₦12 per unit. The marginal costing net profit is ₦120,000. What is the absorption costing net profit?

• A₦96,000
• B₦144,000
• C₦120,000
• D₦168,000

In a factory, Service Department S1 has direct overheads of ₦48,000 and Service Department S2 has ₦24,000. S1 allocates 20% of its total cost to S2, and S2 allocates 20% of its total cost to S1. What is the total overhead cost of S1 after reciprocal apportionment using the algebraic method?

• A₦55,000
• B₦52,800
• C₦60,000
• D₦48,000

Which of the following events would result in over-absorption of production overheads?

• AActual overhead expenditure is higher than budgeted, and actual hours worked are lower th…
• BActual hours worked exceed budget, and actual overhead expenditure is in line with the bu…
• CActual hours worked are lower than budget, and actual overhead expenditure is in line wit…
• DActual overhead expenditure exceeds budget, and actual hours are equal to budget.

Which of the following represents the primary argument in favour of marginal costing for short-term decision making?

• AIt complies with international financial reporting standards (IAS 2) for inventory valuat…
• BReported profits are not distorted by changes in inventory levels, and it highlights cont…
• CIt allocates fixed production overheads to inventory, reflecting the full product cost.
• DIt makes it easier to calculate and control overhead absorption variances.

How do inventory values compare between absorption costing and marginal costing?

• AInventory values under absorption costing are higher than under marginal costing.
• BInventory values under marginal costing are higher than under absorption costing.
• CInventory values under both methods are always equal.
• DInventory values under absorption costing are lower than under marginal costing.

Under Activity-Based Costing (ABC), what is a 'cost driver'?

• AA department where overhead costs are collected.
• BAn activity that incurs overhead costs.
• CAny factor or activity that causes a change in the cost of an activity.
• DThe predetermined rate used to absorb overheads into products.

A company implements Activity-Based Costing. The setup cost pool is ₦120,000, and the total number of setups is 40. Product X requires 5 setups. What is the total setup cost allocated to Product X?

• A₦15,000
• B₦3,000
• C₦24,000
• D₦120,000

A production process has opening inventory of 2,000 units (60% complete). During the period, 10,000 units are started. Closing inventory is 3,000 units (40% complete). Under the FIFO method of process costing, what are the equivalent units of production for the period?

• A9,000 units
• B10,200 units
• C8,200 units
• D9,800 units

A production process has opening inventory of 2,000 units (60% complete). During the period, 10,000 units are started. Closing inventory is 3,000 units (40% complete). Under the weighted average method of process costing, what are the equivalent units of production for the period?

• A10,200 units
• B9,000 units
• C9,800 units
• D11,200 units

In process costing, what is the accounting treatment for normal loss that has a scrap value?

• AIt is debited to the process account at scrap value.
• BIt is credited to the process account at scrap value.
• CIt is debited to the costing profit and loss account.
• DIt is ignored in the process account.

A process has input of 10,000 units at a total cost of ₦200,000. Normal loss is 10% of input and has no scrap value. Actual output was 8,500 units. What is the value of the abnormal loss?

• A₦11,111
• B₦10,000
• C₦11,765
• D₦12,500

What is the accounting entry to record abnormal gain in process costing?

• ACredit the Process Account and debit the Costing Profit and Loss Account.
• BDebit the Process Account and credit the Abnormal Gain Account.
• CDebit the Process Account and credit the Costing Profit and Loss Account.
• DCredit the Process Account and debit the Scrap Account.

Which of the following units is the most appropriate composite cost unit for a private hospital division?

• AInpatient-day (occupied bed-day)
• BOutpatient visit
• CSurgical operation performed
• DLitre of medicine dispensed

Which of the following is a key characteristic of process costing?

• AProduction is driven by unique, customer-specific jobs.
• BContinuous production of homogeneous (identical) units of output.
• CCosts are accumulated by specific project contracts.
• DProducts are made in distinct, low-volume batches.

Two joint products, A and B, are produced at a total joint cost of ₦200,000. At the split-off point, Product A has a sales value of ₦300,000 but requires ₦50,000 of further processing. Product B has a sales value of ₦200,000 and requires ₦50,000 of further processing. Using the Net Realisable Value (NRV) method, how much joint cost is allocated to Product A?

• A₦125,000
• B₦120,000
• C₦150,000
• D₦110,000

Which of the following is the standard treatment for by-product revenues in process costing?

• AThey are allocated a proportion of joint costs based on physical weight.
• BThey are credited to the process account to reduce the cost of the main joint products.
• CThey are capitalized as separate work-in-progress inventory.
• DThey are charged directly to the general capital reserve of the business.

What is the difference between cost allocation and cost apportionment?

• ACost allocation charges a whole cost directly to a cost centre, whereas cost apportionmen…
• BCost allocation relates to direct costs, whereas cost apportionment relates to indirect o…
• CCost allocation is used in absorption costing, whereas cost apportionment is only used in…
• DThere is no difference; they are interchangeable terms in cost accounting.

Why does Activity-Based Costing (ABC) lead to more accurate product costs compared to traditional absorption costing?

• AIt eliminates all indirect costs and makes them direct.
• BIt uses multiple cost pools and non-volume-based cost drivers to reflect how products con…
• CIt applies a single volume-based driver (such as direct labour hours) to all production o…
• DIt ensures that all administrative overheads are capitalized in finished goods inventory.

A printing company in Enugu prints a batch of 5,000 brochures. The following costs are incurred: Setup costs (₦10,000); Material costs (₦50,000); Labour costs (₦20,000). The predetermined overhead absorption rate is ₦5 per brochure. What is the total cost per brochure in this batch?

• A₦21
• B₦16
• C₦26
• D₦18

A company has a standard raw material price of ₦12 per kg. During a month, they purchased and used 8,000 kg of materials at a total cost of ₦104,000. What is the material price variance?

• A₦8,000 Adverse
• B₦8,000 Favourable
• C₦6,000 Adverse
• D₦6,000 Favourable

The standard raw material usage is 2 kg per unit of finished product, at a standard price of ₦12 per kg. Actual production in a period was 3,000 units. The actual quantity of material used was 6,400 kg. What is the material usage variance?

• A₦4,800 Adverse
• B₦4,800 Favourable
• C₦4,000 Adverse
• D₦4,000 Favourable

A firm has a standard labour rate of ₦30 per hour. Actual labour hours paid in a month were 5,000 hours at a total cost of ₦145,000. What is the direct labour rate variance?

• A₦5,000 Favourable
• B₦5,000 Adverse
• C₦4,000 Favourable
• D₦4,000 Adverse

The standard labour hour requirement for a product is 1.5 hours per unit, at a standard rate of ₦30 per hour. Actual production was 4,000 units, and actual labour hours worked were 5,800 hours. What is the direct labour efficiency variance?

• A₦6,000 Favourable
• B₦6,000 Adverse
• C₦5,400 Favourable
• D₦5,400 Adverse

A factory has a standard direct labour rate of ₦25 per hour. In a period, 4,000 hours were paid, but actual hours worked were only 3,800 hours due to a machine breakdown. What is the idle time variance?

• A₦5,000 Adverse
• B₦5,000 Favourable
• C₦4,500 Adverse
• D₦4,500 Favourable

A company has budgeted fixed overheads of ₦80,000 and budgeted variable overheads of ₦5 per unit at a budgeted level of 10,000 units. What is the total overhead cost in the flexed budget for an actual production level of 12,000 units?

• A₦140,000
• B₦130,000
• C₦150,000
• D₦160,000

What is meant by the 'principal budget factor' in the context of budgetary control?

• AThe board member who has final authority to sign off on the master budget.
• BThe limiting factor that restricts the activities of the organisation and must be the sta…
• CThe most expensive resource used by the firm in its production process.
• DThe inflation index used to adjust standard costs for the next year.