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Management Accounting - A13

1. Choose all that apply
S Ltd. operates a system of standard costing in respect of one of its products which is
manufactured within a single cost centre. For one unit of product the standard material
input is 20 litres at a standard price of Rs.2/- per litre. The standard wage rate is Rs.6/-
per hour and 5 hours are allowed to produce one unit. Fixed production overhead is
absorbed at the rate of 100% of direct wages cost. During the month just ended the
following occurred : acutal price paid for materials purchased Rs.1.95 per litre; total
direct wages cost was Rs.156,000/- and fixed production overheads was Rs.158,000/-.
Direct material price variance-Rs.8,000/- (Fabourable); direct material usage variance –
Rs.5,000/- (Adverse); direct labour rate variance -Rs.5,760/-(Adverse); direct labour
efficiency variance -Rs.2,760/- (Favourable) and fixed produciton overheads
expenditure variance -Rs.8,000/-(Adverse). Calculate budgeted output in units for the
month, actual hours worked and number of litres purchased during the month.
a)____ Budgeted output - 5,000 units
b)____ Actual hours worked - 24,040 hours
c)____ Litres purchased - 160,000 litres
d)____ Litres purchased - 157,500 litres
2. A cash payment of Rs.1,000/- for traveling expenses has been entered in the books but
not debited to traveling A/c. The trial balance will NOT agree.
a) true
b) false
Ans. A
3. Purchase of national saving certificates by the company from its profits, should be
debited to _____________ account.
Ans. Investments
4. Variable cost + Profit = Sales.
a) true
b) false
Ans. B
5. A business is an activity carried out with the intention of earning the profit.
a) true
b) false
Ans. A
6. Choose all that apply
Features of material usage variance are :-
a)____ Measures the difference between the quantity of materials actually used
and that should have been used.
b)____ Measures the difference between the quantity of materials actually
purchased and that should have been purchased.
c)____ Considers standard price X actual quantity
d)____ Considers standard price X standard quantity
Ans. A,c,d
7. Marginal costing rewards sales whereas absorption costing rewards production.
a) true
b) false
Ans. A
8. The term _________ indicates expenditure incurred on or attributable to a given thing.
Ans. Cost
9. Under the average cost method of valuing material issues, new issue price is
determined after ________________ issue.
Each;Every alternative;The next;Previous
Ans. Each
10. An adjustment relating to outstanding expenses will ____________ the net profit.
Decrease;Enhance;Increase;Not affect
Ans. Decrease
11. Choose the correct answer.
In a factory, bonus to workmen is paid according to the Rowan plan. The allotted
time for a job is 40 hours and the normal rate of wages is Rs.1.25 per hour. The
factory overhead charges are 50 paisa per hour for the hours taken. The factory cost
of a work order, executed by one worker, X, is Rs.161.875 and that by another, Y, is
Rs.155.46. The cost of material in each case is Rs.100/-. Calculate the amount of time
taken by the workman X to complete the work order.
a) 25 hours
b) 28 hours
c) 30 hours
d) 32 hours
12. Choose the correct answer.
A new computer worth Rs.35,000 was purchased on 18th June, 2003. The company
has 10 such computers costing Rs.20,000/- each. The depreciation is charged @ 18%
p.a. Find the depreciation on computers to be charged for the year.
a) Rs.36,000/-
b) Rs.40,953.70
c) Rs.37,353.70
d) Rs.32,400/-
Ans. B
13. Negative profit volume ratio means variable cost is ___________ the selling price.
One-fifth of;More than;Less than;Equal to
Ans. More than
14. Choose all that apply
Features of convention of consistency are :-
a)____ The accounting policies and procedures should be followed consistently
b)____ Facilitates the comparison of financial statements
c)____ The accounting policies and procedures should be changed consistently.
d)____ It facilitates comparison of financial statements on period-to-period basis
Ans. A,b,d
15. The actual hours taken by the labour are compared with the standard hours allowed
for output to find out the labour yield variance.
a) true
b) false
Ans. A
16. Predetermined rate of absorption of overheads helps in quick preparation of cost
estimates and quoting prices.
a) true
b) false
Ans. A
17. Choose the correct answer.
An analysis of the time card of a worker on a machine shows that of the total 48
hours, he worked 45 hours (including 4 hours overtime) on production and that 3
hours was idle due to machine break-down. The rate of the worker is rupees ten per
hour : but overtime is paid at 50 per cent extra. You are required to calculate the
earnings of the worker.
a) Rs.470/-
b) Rs.500/-
c) Rs.510/-
d) Rs.450/-
Ans. B
18. Choose the correct answer.
The profit volume ratio of BB & Co,. dealing in precision instruments, is 50% and the
margin of safety is 40%. You are required to work out the break-even point and the
net profit if the sale volume is Rs.50,00,000/-
a) Break even point-Rs.300,000/-, net profit-Rs.100,000/-
b) Break even point-Rs.30,00,000/-, net profit-Rs.10,00,000/-
c) Break even point-Rs.20,00,000/-, net profit-Rs.5,00,000/-
d) Break even point-Rs.200,000/-, net profit-Rs.50,000/-
Ans. B
19. Choose all that apply
The objectives of cost accounting are :-
a)____ Cost control
b)____ Cost reduction
c)____ Ascertainment of cost of each product
d)____ Assist in managerial decision-making
Ans. A,c,d
20. The greater the volume of production, the greater is the unit cost of production.
a) true
b) false
Ans. B
21. Choose the correct answer.
An order for goods worth Rs.18,000/- was placed on 25th March, 2004. The goods
were received on 1st April, 2004. Calculate the impact of this transaction on the final
statements of accounts for the year ended 31st March, 2004.
a) The net profit will not be affected
b) The purchases will be increase by Rs.18,000/-
c) The purchases will be decrease by Rs.18,000/-
d) The creditors will increase by Rs.18,000/-
Ans. A
22. Match the following
1. Trade Discount (1) 1. Not accounted for in the books of Accounts
2. Cash Discount (5) 2. Every asset has corresponding liability
3. Rs.1 Personal A/C (3) 3. Debit the receiver, Credit the giver
4. Real A/C (4) 4. Debit what comes in, Credit what goes out
5. Accounted for in the books of Accounts
6. Every profit has corresponding loss
23. Choose all that apply
International Motors manufactures crankshafts for jeeps and trucks. They have
furnished the following particulars for the quarter ended 31st March : Materials
Rs.298,000/-; direct wages Rs.42,000/-; store expenses Rs.20,000/-; machinery
maintenance Rs.4,600/-; depreciation Rs.22,300/-; staff welfare Rs.12,000/-; general
expenses Rs.30,000/-; administration and selling expenses Rs.27,000/-. Additional
information provided by them : Production 300 numbers of jeep and 400 trucks;
material cost ratio per vehicle between jeep and truck is 1 : 2. Direct labour ratio per
vehicle for jeep and truck is 2 : 3. Machine hour ratio per vehicle for jeep and truck is
1 : 2. Select the statements which are true and correct.
a)____ Cost per crankshaft for jeep is Rs.445.45
b)____ Cost per crankshaft for truck is Rs.805.66
c)____ Cost per crankshaft for truck is Rs.1,139.75
d)____ General expenses should be apportioned on direct labour ratio
24. Accounting refers to the process of analyzing & interpreting the information already
recorded in the books of accounts.
a) true
b) false
Ans. A
25. The treatment of _____________ time in cost accounting depends upon the
distinction between normal and abnormal time.
Ans. Idle
26. Choose the correct answer.
The following information is available regarding two orders for the same product.
Order I : material Rs.20,000/-; wages Rs.25,000/-; selling price Rs.120,000/- and
percentage of profit on cost 20%. Order II : material Rs.30,000/-; wages Rs.40,000/-;
selling price Rs.195,000/- and percentage of profit on cost 25%. Factory overheads
are charged on a fixed percentage basis on wages and office overheads are based on
percentage to works cost. Find out percentage of office overheads.
a) 20% of works cost
b) 60% of works cost
c) 100% of works cost
d) 140% of works cost
27. Choose the correct answer.
The gross profit before considering closing stock in the trading account is
Rs.117,560/-. Total current assets excluding closing stock is Rs.267,500/-. The value
of closing stock is Rs.45,060/-. Find the gross profit and total of current assets
considering the closing stock.
a) Gross profit -Rs.72,500/-; Total current assets-Rs.222,400/-
b) Gross profit -Rs.117,560/-; Total current assets-Rs.267,500/-
c) Gross profit -Rs.162,620/-; Total current assets-Rs.312,560/-
d) Gross profit -Rs.162,560/-; Total current assets-Rs.310,560/-
Ans. C
28. Choose the correct answer.
Ram is the owner of Dashrath & Sons. He is entitled to annual salary of Rs.8,000/-.
Find its impact on profit of the enterprise.
a) The net profit will not be affected
b) The gross profit will decrease by Rs.8,300/-
c) The net profit will increase by Rs.8,300/-
d) The net profit will decrease by Rs.8,000/-
Ans. D
29. Bank reconciliation statement must be prepared before the preparation of profit and
loss account and balance sheet.
a) true
b) false
Ans. A
30. Choose the correct answer.
The type of costs presented to management for elimination of a product-line should
be limited to :-
a) Relevant costs
b) Standard costs
c) Controllable costs
d) Conversion costs
Ans. A
31. Choose all that apply
Features of convention of conservation are :-
a)____ Anticipates all future losses and expenses
b)____ Ignores all future incomes and profits, unless they are actually realized
c)____ Applicable to valuation of current assets
d)____ Applicable to valuation of non-current asset
Ans. A,b,c
32. Choose all that apply
From the following select the examples of errors of commission :-
a)____ Purchases of fixed assets recorded in the purchase register
b)____ Sales recorded in the sales register as Rs.2,020/- instead of Rs.2,200/-
c)____ Received cash from Sham, credited to Ram's account
d)____ Paid transport charges, credited to transport charges account
Ans. B,c,d
33. Choose all that apply
The management of Horngreen Ltd. is deciding whether to continue working at loss
or to temporarily shut down the factory. State the qualitative aspects that must be
considered before arriving at a decision :-
a)____ Loss of trained personnel
b)____ Loss of regular customers
c)____ Expenditure required to restart the factory
d)____ Expenditure relating to expanding the business
Ans. A b c
34. Choose the correct answer.
The integrated form of all functional budgets is known as :-
a) Budget manual
b) Operating budget
c) Master budget
d) Budgeted Balance Sheet
Ans. C
35. Token or disc method is a related to the system of ______________________.
Time-keeping;Recording idle time;Time-booking;Recording units produced
Ans. Time-keeping
36. Choose the correct answer.
Where, in the final statements of accounts, should we disclose the closing balance of
income received in advance?
a) Trading account
b) Profit and Loss account
c) Balance sheet - on the asset side
d) Balance sheet - on the liability side
Ans. D
37. Match the following
1. Freight inwards (4) 1. Balance sheet
2. Sales (6) 2. Profit and loss account
3. Freight outwards (2) 3. Capital account
4. Dividend paid (5) 4. Manufacturing account
5. Profit and loss appropriation account
6. Trading account
38. Choose all that apply
Select the various methods adopted for treatment of under or over absorbed
a)____ Use of supplementary rates
b)____ Carrying over the amount to remaining period
c)____ Writing off to the Costing Profit and Loss Account
d)____ Writing off to the Financial Profit and Loss Account
Ans. A,b,c
39. A firm earns profit when contribution is equal to fixed costs under variable costing.
a) true
b) false
Ans. B
40. The expenses relating to maintenance and creation of demand for the product should
be included in the _________________________ budget.
Financial;Production;Selling expenses;Administrative expenses
Ans. Selling expenses
41. Balance sheet indicates the financial status of the business at given period.
a) true
b) false
Ans. A
42. Choose all that apply
The balance as per bank book as on 30th June, 2004 is Rs.10,298/- while the balance
as per pass book as on the same date is Rs.10,123.60. Select the transactions
representing the reasons for this difference :-
a)____ Interest credited by bank, not entered in the bank book, Rs.125.60
b)____ Cheques dishonoured not entered in the bank book Rs.200/-
c)____ Debit side of the cash book is overcast by Rs.100/-
d)____ Debit side of the cash book is undercast by Rs.100.60
Ans. A,b,c
43. Choose all that apply
The advantages of Halsey plan are :-
a)____ Bonus goes on increasing with increase in time saved.
b)____ Bonus goes on decreasing with increase in time saved
c)____ Provides more incentive to speed up production
d)____ Guaranteed time rate payment is made
Ans. A,c,d
44. Choose all that apply
Different types of tenders are :-
a)____ Singly tender
b)____ Multiple tender
c)____ Open tender
d)____ Global tender
Ans. A,c,d
45. Choose all that apply
From the following, select intangible assets:-
a)____ Goodwill
b)____ Patents
c)____ Trade Marks
d)____ Investments
Ans. A,b,c
46. Choose the correct answer.
Select the cost that indicates increased or decreased total cost due to the increased or
decreased volume of operations :-
a) Differential cost
b) Opportunity cost
c) Sunk cost
d) Variable cost
Ans. A
47. Choose the correct answer.
Which of the following aspects are mainly responsible for difficulty in application of
Uniform costing system?
a) Capital investment
b) Plant size
c) Location
d) Loans taken
Ans. A,b,c
48. The _______________________ variance is the difference between the actual
variable overhead incurred and the standard variable overhead charged to production.
Variable overhead volume; Total fixed overhead;
Total variable overhead; Variable overhead efficiency
49. Accounting is an art of recording, classifying & summarizing in a significant manner.
a) true
b) false
Ans. A
50. Choose the correct answer.
A company manufactures and sells four products, viz. A, B, C and D. The details are
as follows : Profit volume ratio:-Product A- 20%, Product B- 40%, Product C-25%,
Product D-18%; Incremental rupee sale for each Rupee spent on advertisement:-
Product A- Rs.11/-, Product B-Rs.6/-, Product C-Rs.12/-, Product D-Rs.10/-. Amount
of advertisement available is only Rs.5,000/-. On which product should the company
spend this amount of Rs.5,000/-?
a) Product A
b) Product B
c) Product C
d) Product D
51 Profitability statement indicates the amount of assets & liabilities.
a) true
b) false
Ans. B
52. Choose the correct answer.
Calculate inventory holding period. Safety stock - 250 units; maximum stock - 6,500
units; re-order quantity - 3,800 units and material issued during 2003 is 24,000 units.
a) 66 days
b) 66.9 days
c) 67 days
d) 67.9 days
53. Balance sheet indicates the expenditure & income from the business.
a) true
b) false
Ans. B
54. If the owner brings in personal calculator for office use, _______________ account
should be credited.
Ans. Capital
55. If the profit volume ratio is 25%, then the variable cost is equal to ___________ of
sales value.
56. The process of accounting split into three steams i.e. financial, cost, management
a) true
b) false Ans. A

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