BAIT - Objective Assessment on Manufacturing Accounts

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Accounting

Objective Assessment on Manufacturing Accounts

by Ken Delaney-Moore, Sheffield Hallam University

This assessment covers the following material:

Terminology used in manufacturing accounts
Direct and indirect costs
Adjustments for opening and closing stocks of materials at different stages of production
Construction of manufacturing accounts
Factory profit and provision for unrealised profit

If you are unsure about attempting the assessment, it may be advisable to have a look at the worksheets first. When you are done, please fill in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. Tell us what we're doing right and wrong. It takes very little time, and your opinions are valued - thank you.

Each question comes with three buttons:

'HINT' - provides help if you need it
'MARK' - will tell you your mark for that question and (if you were incorrect in any way, it may give advice - be careful to read this advice).
'EXPLAIN' - should provide you with a full explanation of the answer, but this button is only active after you have attempted the question (twice, in the case of the first ten questions).

THE ASSESSMENT STARTS BELOW. NO - ONE EXCEPT YOU WILL SEE YOUR SCORE - 'BIZ/ED' DOES NOT KEEP A RECORD. YOU WILL NEED A PEN, SOME PAPER AND A CALCULATOR TO HELP YOU ANSWER SOME OF THESE QUESTIONS.

Note that in some of these questions there is only one correct answer, but for other questions there may be more than one answer. You will be told this information in advance, so read carefully:

For questions 1 to 10 there is only ONE correct answer. Each correct answer is worth two marks. You are allowed TWO ATTEMPTS for each question. (i.e. you are allowed a second choice if your first choice is incorrect).

Q1. What is the MAIN purpose of drawing-up the manufacturing account? (Select one answer) (a) To calculate and show the prime cost (b) To calculate and show the total production cost (c) To calculate and show the cost of goods completely manufactured (d) To calculate and show the factory overheads

Did you read the explanation provided by the 'explain' 'button for the previous question?

Q2. Which one of the following is NOT a factory overhead in a factory which makes denim clothing? (Select one answer) (a) First-line supervisors wages (b) Floor cleaners wages (c) Canteen workers wages (d) Sewing machinists wages

Don't forget that the MARK button often provides hints as well!

Q3. Which of the following does NOT form part of the cost of production in the same denim clothing factory? (Select one answer) (a) Oil for the sewing machines (b) Carriage in on raw materials (c) Factory security guard's wages (d) Road tax on delivery vehicles

Q4. Which stock adjustment takes place at or near the END of the manufacturing account? (Select one answer) (a) An adjustment for opening and closing raw materials (b) An adjustment for opening and closing work-in-progress (c) An adjustment for opening and closing finished goods (d) An adjustment for opening and closing loose tools

Don't forget that the MARK button often provides hints as well!

Q5. Which 'basis' (method) of depreciation is considered most appropriate to the asset of 'loose tools' in a factory? (Select one answer) (a) Re-valuation (b) Straight-line (c) Reducing-balance (d) Machine-hour

USE THE COST INFORMATION LINKED TO BELOW TO ANSWER QUESTIONS 6, 7, 8 AND 9 - (this link will be repeated for each question to save you having to scroll up / down).

Right - clicking on the link should give you an 'open in new window' option. This displays the data in a new window; you can easily SWITCH BETWEEN WINDOWS BY PRESSING THE 'ALT' AND TAB' BUTTONS TOGETHER (the 'tab' button is normally on the left above 'caps lock' - it usually has a couple of arrows on it).

Cost Information

If you closed down the cost data window, here is the cost information again, for use in Q7. Don't forget to right-click and 'open in new window' (If you didn't close the window you should still be able to find it by using the 'alt' and 'tab' buttons again).

If you closed down the cost data window, here is the cost information again, for use in Q8. Don't forget to right-click and 'open in new window' (If you didn't close the window you should still be able to find it by using the 'alt' and 'tab' buttons again).

If you closed down the cost data window, here is the cost information again, for use in Q9. Don't forget to right-click and 'open in new window' (If you didn't close the window you should still be able to find it by using the 'alt' and 'tab' buttons again).

Don't forget to fully utilise the 'hint', 'mark' and 'explain' buttons - read carefully what it says.

Q10. Factory profit is BEST described as: (Select one answer) (a) The difference between closing stock of work-in-progress and closing stock of finished goods (b) The difference between total production cost and production cost of goods completed (c) The difference between total production cost of goods completed and the cost of buying in the same amount of completed units (d) The difference between the total production cost and the cost of buying in the same amount of completed units

The EXPLAIN button should provide you with a full explanation of the workings to the previous question.

For the last five questions there MAY BE MORE THAN ONE correct answer. You are allowed only ONE ATTEMPT at these questions. Each question carries a total of four marks.

On questions 11 to 15, the 'MARK' button will only provide you with an explanation for the options that you selected. The 'EXPLAIN' button will give a more general explanation.

Q11. Guar-Cam Ltd normally produces enough security cameras to satisfy demand, but last year one of their key machines broke - down and they had to buy - in completed units from a competitor in order to deliver on their order book. Which of the following would be the correct accounting treatment? (Select one or more answers) (a) Add the bought-in finished goods onto onto raw materials bought - in at the start of the manufacturing a/c (b) Add the bought-in finished goods onto 'production cost of goods completed' at the end of the manufacturing a/c (c) Any left-over (excess) finished goods bought-in should be shown with the closing stock of produced finished goods in the balance sheet (d) Add the bought-in finished goods onto 'production cost of goods completed' in the trading account

Q12. Which of the following are direct costs? (Select one or more answers) (a) Wages of fork-lift truck drivers who transport raw materials. (b) Carriage in on purchase of raw materials (c) Royalties payable on music broadcast throughout factory (d) Wages of those who assemble, and polish and package the various parts that have been produced

Q14. A manufacturer of copper products owned a nearby copper mine. The ore is extracted manually since labour in this country is very cheap, making automation uneconomic. Which of the following methods could be used to depreciate the asset of copper in the mine? (Select one or more answers) (a) Straight-line (b) Depletion unit (c) Machine-hour (d) Reducing-balance

Q15. Navarro Ltd. recently entered the market for Push-chairs. In its first year of production, Navarro Ltd. manufactured 5,000 complete 'Pushkins' at a combined production cost of £310,000. They sold 4,800 Pushkins at a price of £86 each. An earlier quote from a local competitor revealed that they were prepared to supply these to Navarro at a cost of £64 each. Administration, selling and distribution expenses excluding provision for unrealised profit) amounted to £59,000. Which of the following are true: (Select one or more answers) (a) Navarro made a factory loss of £10,000 (b) Navarro made a gross profit of £105,600 (c) The 'provision for unrealised profit' is £400 (d) Navarro made a net profit of £46,600

Now please fill-in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. Tell us what we're doing right and wrong. It takes very little time, and your opinions are valued - thank you.

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