Cost and Management Accounting and Financial Management | Set 1
1. Type of accounting which measures, reports and analyse non-financial and financial
information to help in decision making is called:
Correct : B. Management Accounting
2. Which one of the following is not considered as a method of Transfer Pricing?
Correct : C. Fixed Cost Based Transfer Pricing
3. In cost accounting, purpose of variance analysis is to:
Correct : D. All of the above
4. Absorption Costing is also known as:
Correct : A. Total Costing
5. Which of the following is not correct with regard to Margin of Safety (MOS)?
Correct : D. MOS = PV Ratio × Sales – Fixed Cost
6. Which one of the following is not to be considered for preparing a production
budget?
Correct : C. Research and Development Budget
7. The breakeven point is the point at which,
Correct : A. There is no profit, no loss
8. The P/V ratio of a product is 0.4 and the selling price is Rs. 40 per unit. The marginal
cost of the product would be,
Correct : B. Rs. 24
9. If standard hours are 400 @ Rs. 1 per hour and actual hours are 380 @ Rs. 1.25 per
hour, the labour rate variance is:
Correct : D. Rs. 95 (Adverse)
10. The time taken for initial unit of a product is 100 hours. At 80% learning rate what is the
total time for 4 units.
Correct : D. 256 hours
11. Sales Rs. 4,00,000; Variable Cost Rs. 3,00,000; Fixed Cost Rs. 75,000; Investments Rs.
1,50,000 and desired 20% on investments. What is residual income?
Correct : D. Rs. (5,000)
12. Sales in January month Rs. 3,00,000; Credit Sales are 80%; Credit period is 2 months.
Amount collected in the month of March is
Correct : B. Rs. 2,40,000
13. Planning and control are done by
Correct : A. top management
14. The use of management accounting is
Correct : B. Optional
15. The budgets are classified on the basis of
Correct : D. All of the above
16. Which of the following departments is most likely responsible for a price variance in
direct materials?
Correct : C. Purchasing
17. Idle time variance is always:
Correct : B. Adverse
18. In marginal costing, stock is valued at _________
Correct : B. Variable Cost
19. In two consecutive periods, sales and profit were Rs. 1,60,000 and Rs. 8,000 respectively in the first period and Rs. 1,80,000 and Rs. 14,000 respectively during the second period. If there is no change in fixed cost between the two periods, the PV ratio must be:
Correct : C. 30%
20. Budgeted sales for the next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000 units and equivalent units in ending WIP inventory is 60,000 units. The opening finished goods inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning WIP inventory. How many equivalent units should be produced?
Correct : A. 5,80,000
21. Akash Ltd. is preparing its cash budget for the period. Sales are expected to be Rs. 1,00,000 in April, 2016; Rs. 2,00,000 in May 2016 Rs. 3,00,000 in June 2016 and Rs. 1,00,000 in July 2016. Half of all sales are cash sales and the other half are on credit. Experience indicates that 70% of the credit sales will be collected in the month following the sale, 20% the month after that and, 10% in the third month after the sale. The budgeted collection for the month of July, 2016 is:
Correct : B. Rs. 1,80,000
22. During the month of March, 560 kg of material was purchased at a total cost of Rs. 15,904. The stock of material increased by 15 kg. it is the company’s policy to value the stocks at standard purchase price. If the material price variance was Rs. 224 (A), the standard price per kg. of material is :
Correct : C. Rs. 28.00
23. Cost Price is not fixed in case of:
Correct : A. Cost plus contracts
24. Continuous stock taking is a part of:
Correct : C. Perpetual Inventory
25. In Reconciliation Statements expenses shown only in financial accounts are:
Correct : A. Added to financial profit
26. Operating costing is applicable to:
Correct : D. All the above
27. Flexible budget requires a careful study of:
Correct : A. Fixed, semi-fixed and variable expenses
28. Which of the following items is not excluded while preparing a cost sheet?
Correct : C. Property tax on factory building
29. The most important element of cost is:
Correct : A. Material
30. Depreciation is an example of:
Correct : A. Fixed cost
31. Joint cost is suitable for:
Correct : C. Oil industry
32. Which statement best describes the role of the management accountant?
Correct : B. Management accountants facilitate the decision making process within an organization.
33. The main objective of budgetary control is:
Correct : D. all of the above
34. Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called:
Correct : A. dual pricing
35. When are overhead variances recorded in a standard costing system?
Correct : B. when the factory overhead is applied to work-in-progress.
36. Management Accounting is an integral part of management concerned with_______
information.
Correct : A. identifying, presenting and interpreting
37. Management Accounting is related with _____________.
Correct : D. All of the above
38. Despite the development of Management Accounting as an effective discipline to improve the managerial performance, it has some limitations. Which of the following is a limitation of management accounting?
Correct : A. Psychological Resistance
39. The primary objective of Management Accounting is to _______________.
Correct : D. All of the above
40. Management accounting is concerned with data collection from _____________.
Correct : C. internal and external sources
41. Management Accounting is concerned with accounting information, which is useful
to the management — This definition is given by ______________.
Correct : A. Robert N. Anthony
42. Marginal costs is taken as equal to
Correct : A. Prime Cost plus all variable overheads
43. Marginal costing is also known as
Correct : C. Both A and B
44. Which of the following costs is relevant in decision-making?
Correct : A. committed costs
45. An opportunity cost is the cost of
Correct : A. lost business
46. In a product mix decision, which is the most important factor to consider in order to
try to maximize profit?
Correct : A. contribution per unit of a scarce resource used to make the product
47. Which of the following costs incurred by a commercial airline can be classified as
variable?
Correct : D. None of these three costs can be classified as variable
48. The basic decision rule on acceptance of special contracts is:
Correct : C. Accept the special contract if it produces a positive contribution to fixed costs
49. If budgets are prepared of a business concern for a certain period taking each and
every function separately such budgets are called _________.
Correct : B. Functional Budgets
50. Which of the following is not an example of functional budget?
Correct : D. None of the above
51. Which of the following is an essential of a budget?
Correct : D. All of the above
52. When preparing a production budget, the quantity to be produced equals
Correct : B. sales quantity – opening inventory of finished goods + closing inventory of finished goods
53. In comparing a fixed budget with a flexible budget, what is the reason for the difference between the profit figures in the two budgets?
Correct : A. Different levels of activity
54. When budget allowances are set without the involvement of the budget owner, the budgeting process can be described as:
Correct : A. top down budgeting
55. For which of the following would zero based budgeting be most suitable?
Correct : D. Government department activities
56. Which among the below is the reason behind Material Price Variance:
Correct : D. All of the above
57. In a factory Standard rate per hour Rs. 4, Standard time per unit of output – 20 hours, Units produced - 500, Actual hours worked - 12,000. Compute Labour Efficiency Variance.
Correct : B. Rs. 8000 (Adverse)
58. MSE Manufacturing gives you the following details. Standard Price per kg of Material Rs. 2, Actual Material used 2,000 kg, Actual cost of Material Rs. 3,000. Actual output 2,100 kg. Compute Material Price Variance.
Correct : C. Rs. 1000 (Favourable)
59. Which of the following factors does not affect Learning Curve
Correct : C. Shut down
60. Which of the following is not a reason to use the concept of Learning Curve?
Correct : B. Introducing new technology
61. Learning curve theory is not applicable to
Correct : D. Overhead
62. Decision-marking concerns with:
Correct : B. Future
63. A large Margin of Safety indicates
Correct : B. The soundness of business
64. Revision of budgets is
Correct : C. Necessary
65. Which of the following operating measures would a manager would like to see decreasing over time?
Correct : B. Total quality cost
66. Another name for the 'Learning Curve' is
Correct : D. Experience Curve
67. The well known basic function of management is
Correct : C. Decision making
68. Contribution margin is equal to
Correct : C. Fixed Cost - Loss
69. In a system whereby all activities are revaluated each time a budget is formulated
and starts with the assumption that requirement of funds does not exist is called
Correct : D. Zero- based Budgeting
70. The management’s time is saved by reporting only the deviations from the
predetermined standards is called
Correct : D. Management by Exception
71. Marginal Costing is also known as
Correct : D. Variable Costing
72. Another name for ‘Contribution’ is
Correct : A. Marginal Income
73. Management Accounting
Correct : D. All of the above
74. XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full capacity and incurs Rs. 15 Lakhs and Rs. 40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets were purchased from an outside supplier, the machine could be used to produce other items, which would earn a total contribution of Rs. 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the outside supplier for the gadgets, assuming there is no change in Fixed Costs?
Correct : A. Rs. 40 Lakhs
75. The difference between hours paid and hours worked is known as
Correct : C. Idle time variance
76. The difference in total cost that results from two alternative courses of action is called
Correct : C. Differential Cost
77. A budget that gives a summary of all the functional budgets and projected Profit and
Loss A/c is known as
Correct : A. Master budget
78. When there are no opening or closing stocks, profit under marginal costing will be
Correct : C. Equal to absorption costing
79. Break Even Point can be reduced by
Correct : D. All of the above
80. One of the following is not within the scope of Management Accounting
Correct : B. Classification and collection of costs
81. AB company budgets for fixed overhead of Rs. 24,000 and Production of 4800 units. Actual Production is 4200 units. If fixed overhead cost increased is Rs. 22,000, the Fixed overhead volume variance will be