THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA MAY 2010 INTERMEDIATE EXAMINATION Question Papers Suggested Solutions Plus Examiners‟ ReportsFOREWORD This issue of the PATHFINDER is published principally, in response to a growing demand for an aid to: (i) Candidates preparing to write future examinations of the Institute of Chartered Accountants of Nigeria (ICAN). (ii) Unsuccessful candidates in the identification of those areas in which they lost marks and need to improve their knowledge and presentation. (iii) Lecturers and students interested in acquisition of knowledge in the relevant subjects contained herein, and (iv) The profession in improving pre-examinations and screening processes, and so the professional performance of candidates. The answers provided in this publication do not exhaust all possible alternative approaches to solving the questions. Efforts have been made to use the methods which will save much of the scarce examination time. Also, in order to facilitate teaching, questions may be altered slightly so that some principles or application of them may be more clearly demonstrated. It is hoped that the suggested answers will prove to be of tremendous assistance to students and those who assist them in their preparations for the Institute‟s Examinations. NOTES Although these suggested solutions have been published under the Institute‟s name, they do not represent the views of the Council of the Institute. The suggested solutions are entirely the responsibility of their authors and the Institute will not enter into any correspondence on them. INTERMEDIATE EXAMINATION – MAY 2010 2TABLE OF CONTENTS SUBJECTS PAGES COSTING AND QUANTITATIVE TECHNIQUES 3 – 41 AUDIT AND ASSURANCE 42 – 69 TAXATION 70 – 89 BUSINESS COMMUNICATION AND RESEARCH METHODOLOGY 90 – 111 INTERMEDIATE EXAMINATION – MAY 2010 3THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA INTERMEDIATE EXAMINATION – MAY 2010 COSTING AND QUANTITATIVE TECHNIQUES Time allowed – 3 hours SECTION A: Attempt All Questions PART I MULTIPLE-CHOICE QUESTIONS (20 Marks) 1. The most acceptable method of pricing stores issues for decision making is A. FIFO B. LIFO C. Replacement cost D. Weighted average cost E. Average cost. 2. In using predetermined overhead rates, under/over recovery of overheads do occur. What is the accounting treatment of under/over recovery of overhead? A. Write off by treating it as a period cost B. Share it among the entire job worked during the period C. Carry their cost forward to future accounting periods D. Add it to stock valuation E. Disregard under/over recovery of overhead. 3. Which of the following is NOT a typical cause of material usage variance? A. Greater or lower yield from materials than planned B. Buying higher or lower quantity than planned C. Buying substitute material due to unavailability of planned material D. Losses or gains from quantity demanded E. Losses or gains due to use of substitute 4. A company makes a single product with a marginal cost of N30.00. Up to 50,000 units can be sold at N50.00 per unit, but additional sales can only be made by reducing the selling price to N40.00 per unit. Fixed cost is INTERMEDIATE EXAMINATION – MAY 2010 4N350,000.00 and planned profit of N950,000.00. How many units must be made and sold? A. 65,000 units B. 80,000 units C. 47,500 units D. 130,000 units E. 70,000 units. 5. A Cost driver is A. an item of production overhead. B. an activity which generates cost. C. the cost of operating a department. D. a common cost which is shared over cost centre. E. any cost relating to transport. 6. Which of the following is NOT ONE of the problems with activity based costing? A. The choice of cost driver. B. The assumption of a direct, linear relationship between the usage of a cost driver and the amount of overhead. C. The production of common cost D. The ability to recognize activities which cause cost E. Complexity. 7. Which of the following costs are likely to be controllable by head of the production department? A. Price paid for materials B. Change for floor space C. Raw materials used D. Machinery depreciation E. Insurance on machinery. INTERMEDIATE EXAMINATION – MAY 2010 58. ONE of the following is NOT a feature of a good coding system. A. Uniqueness B. Clear symbolization C. Distinctiveness D. Indexing E. Uniformity. 9. Which of the following is NOT a reason why coding is necessary? A. To identify unique items, materials and parts. B. To increase data storage. C. To avoid ambiguity. D. To aid processing. E. To reduce data storage. 10. Which ONE of the following activities is NOT a holding cost under inventory control? A. Interest or capital invested in stocks B. Storage charges C. Transport charges D. Deterioration and obsolence E. Insurance and security. 11. Typical of the factors to be considered in wage determination are the following EXCEPT A. General economic climate of the industry B. Government policy C. Extent of employment locally and nationally D. Profitability of the firm E. Cost structure of firm and industry 12. Which of the following activities and possible cost drivers is incorrect? A. Customer order processing - number of orders INTERMEDIATE EXAMINATION – MAY 2010 6B. Production control - number of engineering change C. Inventory control - number of deliveries D. Engineering support - number of inspections E. Number of supplies and customers - frequency of deliveries 11 12 A , then the inverse of A is 17 13. If 13 12 11 A. 1 31 17 13 12 B. 1 31 17 13 11 11 C. 1 31 17 13 12 17 D. 1 31 11 13 12 12 E. 1 31 11 13 17 14. Two matrices A and B are said to be conformable for multiplication if A. the number of rows of A is equal to the number of rows of B B. the number of columns of A is equal to the number of rows of B C. the number of columns of A is equal to the number of columns of B D. A and B are symmetrical matrices E. A and B are triangular matrices 2 0 15. If 2 1 3 4 3 1 4 B , then AB is 2 A and 26 1 26 A B 4 1 4 0 2 1 1 INTERMEDIATE EXAMINATION – MAY 2010 7 1 4 1 26 1 1 1 1 26 4 4 C D E 16. The proportions of components failing each week are as shown in the table below: Week 1 2 3 4 % failing 15 20 25 40 Find the average life of a component A. 5.0 weeks B. 10.0 weeks C. 2.5 weeks D. 2.0 weeks E. 2.9 weeks 17. The values that are set to zero at each feasible solution while using simplex method are called ……………………….. variables. A. dummy B. non-basic C. logical D. slack E. basic 18. In the analysis to maximise an objective function 30S + 20T, one of the extreme points of the feasible region (S,T) is found to be (2.5, 1.75). The value of the objective function is A. 102.5 INTERMEDIATE EXAMINATION – MAY 2010 8 B. 110 C. 90D. 40 E. 50 Use the following information to answer questions 19 and 20: The transportation table below indicates allocation by Least Cost Method and unit costs are indicated in parenthesis ( ). Plants A B C Available Ikorodu 400(3) (6) (3) 400 Bida (5) S (2) (5) 470 Enugu 50(7) T (4) G (4) 680 Required 450 600 500 1550 19. The values of S, T, and G respectively are: A. 470, 130, 500 B. 130, 500, 470 C. 400, 380, 200 D. 200, 400, 380 E. 500, 470, 130. 20. Calculate the total cost of transportation in Naira. A. 5120 B. 5110 C. 5010 D. 5500 E. 5150. INTERMEDIATE EXAMINATION – MAY 2010 9
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