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Management Accounting - A14

1. Narration must be mentioned in the ledger.
a) true
b) false
Ans. B
2. According to the standard costing principles, only adverse variance must be further
a) true
b) false
Ans. B
3. Trading account is used to analyze how successfully and how efficiently the firm runs,
particularly with regards to the maintenance of the gross profit margin.
a) true
b) false
Ans. A
4. Choose all that apply.
Special aspects of co-partnership include:-
a)____ Workers are granted ownership rights
b)____ Indirect monetary remuneration
c)____ The morale of the workers is increased
d)____ The workers are rewarded for individual efficiency
Ans. A,b,c
5. Choose all that apply.
The key factor determines the :-
a)____ Level of activity
b)____ Capacity utilization
c)____ Level of sales
d)____ Capacity installation
Ans. A,b,c
6. The purchase account should be debited when an order is placed with the supplier of
a) true
b) false
Ans. B
7. Cost volume profit analysis focuses attention on the ______________effect of a
particular course of action.
Short and long run; Medium run; Short run; Long run
Ans. Short run
8. Choose the correct answer.
Quantify the increase in profit on account of following errors : (a) Repairs of furniture
amounting to Rs.2,000/- were debited to furniture account. Furniture is depreciated
@10% p.a. (b) Interest received on bank deposits was credited to dividend received
account, Rs.1,550/- (c) A television purchased for the managing director's office for
Rs.45,000/- was debited to Interior decoration expenses.
a) Rs.41,650/-
b) Rs.45,000/-
c) Rs.43,200/-
d) Rs.44,750/-
Ans. C
9. Choose the correct answer.
XYZ Ltd. has sufficient idle capacity. It has received an enquiry for the supply of 300
units (packed in better box at an additional cost of Rs.20/- per box). The variable cost
of manufacturing the product is Rs.150/-. The company expects a profit of Rs.6,000/-
from this wholesale offer. What minimum price should it quote for this deal?
a) Rs.150/-
b) Rs.170/-
c) Rs.190/-
d) Rs.200/-
Ans. C
10. Choose all that apply.
The main advantages of profit sharing are :-
a)____ Employees try to increase productivity
b)____ Incentives are shared by all the employees
c)____ Augments employees' efficiency
d)____ Incentives are shared by the management
Ans. A,b,c
11. Choose the correct answer.
SRR Ltd. producing a single product, sells it at Rs.50/- per unit. Unit variable cost is
Rs.35/- and fixed costs amounts to Rs.12,00,000/- per annum. Calculate the increase
in sales required if profits are to be increased by Rs.2.4 lakhs
a) Rs.880,000/-
b) Rs.800,000/-
c) Rs.600,000/-
d) Rs.660,000/-
12. Choose the correct answer.
If the raw material prices are suffering from inflation, which of the following methods
of valuing stocks will give the lowest gross profit?
a) First-in-first-out
b) Last-in-first-out
c) Simple average
d) Standard cost
13. Choose the correct answer.
Double entry system of accounting follows the principle of :-
a) Every debit has corresponding credit
b) Every asset has corresponding liability
c) Every expenditure has corresponding income
d) Every profit has corresponding loss
Ans. A
14. An error of partial omission can be rectified by either debiting or crediting the
________________ account, as the case maybe.
Adjusted profit and loss;Credit;Suspense;Profit and loss
Ans. Suspense
15. Choose the correct answer.
Which system involves adoption of same costing principles, practices and procedures
by the individual firms of an industry?
a) Uniform costing
b) Standard costing
c) Absorption costing
d) Multiple costing
Ans. A
16. Piece rate system is suitable when quality of goods produced is of extreme
a) true
b) false
Ans b
17. Match the following:
1. Spirit of mutual trust (2) 1. Scope of uniform costing
2. Avoids cut throat competition (6) 2. Requisite for uniform costing
3. Treatment given to research
and development costs (3) 3. Fields covered by uniform costing
4. Advantageously applicable
in similar industries (1) 4. Process of uniform costing
5. Disadvantage of uniform costing
6. Advantage of uniform
18. If the customer is not likely to pay the amount receivable from him, this amount
should to be treated as __________________.
Long term debts;Accrued income;Current liability;Bad debts
Ans. Bad debts
19. If the physical stock is less than the stock as per the stores ledger, such shortage
should be treated as an issue of material
a) true
b) false
Ans. A
20. Choose the correct answer.
Judge the given statement according to the given criteria :- Goods being real account,
when goods are lost by fire, the goods account should be debited because the goods
are not going out of the factory.
a) The statement and the reason both are correct
b) The statement and the reason both are incorrect
c) The statement is correct but the reason is incorrect
d) The statement is incorrect but the reason is correct
Ans. A
21. Choose the correct answer.
The store-keeper should initiate action for the purchase of a material, when it reaches
its :-
a) Maximum level
b) Minimum level
c) Average level
d) Re-order level
Ans. D
22. Choose all that apply.
From the following, select current assets:-
a)____ Sundry debtors
b)____ Stock
c)____ Pre paid expenses
d)____ Goodwill
Ans. A,b,c
23. If the total amount on the ______________-side of commission account is more than
the total of its credit side, the commission account is said to have a Debit balance
Ans. Debit
24. A written order sent to inform the purchasing department of a need for materials is
called a ___________________.
Goods received note; Purchase order;
Material requisition note; Purchase requisition note
Ans. Purchase requisition note
25. The process of recording the business transactions in a defined set of records is
referred to as __________________.
Trading account;Profit and Loss Account;Balance sheet;Trial Balance
Ans. Balance sheet
26. Choose the correct answer.
In a factory Beduax Point Premium system is in operation. The following are the
particulars with regard to a job in a factory : allowed time for the job =600 B's; time
taken = 480 minutes (or B's); rate = Rs.12/- per hour. Calculate the amount of bonus.
a) Rs.114/-
b) Rs.96/-
c) Rs.104/-
d) Rs.106/-
Ans. A
27. Choose the correct answer.
As a part of the data presented in support of a proposal to increase the production of
clock radios, the sales manager of Wittman Electronics reported the total additional
cost required for the proposed increased production level. The increase in total cost is
known as :-
a) Controllable cost
b) Opportunity cost
c) Out-of-pocket cost
d) Incremental cost
Ans. D
28. Financial statements are basically in two forms i.e. profitability statement and
balance sheet.
a) true
b) false
Ans. A
29. Choose all that apply
Select the steps to be followed while preparing bank reconciliation statement :-
a)____ Compare the transactions in the bank book and the pass book
b)____ Check the totals and the balancing of both the books
c)____ Confirm that the opening balances of both the books are tallying
d)____ Confirm that the closing balances of both the books are tallying
Ans. A,b,c
30. Choose all that apply
The factors which influence the selection of the method for absorption of overheads
a)____ Type of industry
b)____ Nature of products
c)____ Manufacturing process
d)____ Demand for products
31. Choose all that apply.
From the available information calculate sales value variance and budgeted sales
quantity of X. Actual sales of X -500 units; budgeted price per unit -Rs.12/-; actual
price per unit-Rs.15/- and sales volume variance -Rs.1,200/- (Favourable).
a)____ Budgeted sales - 400 units
b)____ Sales value variance -Rs.2,700/-
c)____ The sales value variance is adverse
d)____ The sales value variance is favourable
Ans. A,b,d
32. Goods returned by Pawan worth Rs.1,000/- is debited to Pawan's Account. In order to
rectify the mistake, ________________-account should be debited.
Ans. Suspense
33. Bank reconciliation statement can be prepared on weekly basis.
a) true
b) false
Ans. A
34. Choose all that apply
Merits of break even point analysis are as follows:-
a)____ Useful diagnostic tool.
b)____ Used for analyzing the risk implication of alternative actions
c)____ Used to graphically represent complicated data.
d)____ Useful in the long run.
Ans. A,b,c
35. Choose all that apply
If you are required to enforce uniform costing system in your industry, how would
you proceed?
a)____ Collecting data from all units of your industry
b)____ Ensuring that the data collected is complete and correct
c)____ Maintaining secrecy of the data collected
d)____ Allowing free access to all the units to the collected data
Ans. A,b,c
36. A standard that is never altered, after being established, is known as ______________
Ans. Ideal
37. Choose the correct answer.
The main object of establishing the maximum stock level for material is :-
a) To ensure that inventory exceeds this limit
b) To ensure that inventory never exceeds this limit
c) To maintain safety stock to take care of emergencies
d) To avoid production stoppage due to lack of material
Ans. B
38. Choose all that apply.
For the given transaction find the wrong entry that has been passed in the books of
accounts, the correct entry that should have been passed and the rectification entry
required to rectify the mistake. "On 1st September, 2004 the total of the previous
month's wages was debited to 'Manufacturing Wages Account". During the previous
month, a new machine was installed, and the firm's own employees had spent time
thereon; the previous month's wages for all such employees amounted to :-
a)____ Manufacturing Wages A/c. . . Dr. Rs.14,100/- To Machinery A/c
b)____ Machinery A/c. . . Dr. Rs.14,100/- To Manufacturing Wages A/c
c)____ Machinery A/c . . . Dr. Rs.14,100/- To Cash A/c Rs.14,100/-
d)____ Rs.14,100/- To Cash A/c Rs.14,100/-
39. Choose the correct answer.
Which of the following costs is most likely to have a cost behaviour pattern described
as a fixed cost upto an activity level of 1,000 units, with a variable cost there after
which decreases from 10 paisa to 8 paise per unit at 2,000 units?
a) Photocopying equipment with a fixed hire charge plus a reducing charge per
b) Wages payment which is fixed for a minimum output quantity after which a
bonus per unit is paid which reduces when activity level exceeds 1,000 units
c) Royalty payment per unit which reduces after 2,000 units
d) Material cost 12 paise per unit for the first 1,000 units followed by 10 paise per
unit upto 2,000 units and 8 paise per unit thereafter.
40. Absorption costing is more suitable for decision making than marginal costing
a) true
b) false
Ans. B
41. Primary distribution is effected on the basis of service rendered to the service
departments by the production departments.
a) true
b) false
42. _____________-system of wage payment is a combination of Halsey system and
Gantt system.
Diemer;Barth premium;Halsey-Weir;Rowan premium
Ans. Diemer
43. Choose the correct answer.
As cost centers facilitate the control function, in many cases, they are termed as :-
a) Responsibility centers
b) Decision centers
c) Service centers
d) Accounting centers
Ans. A
44. Choose all that apply.
Purchased goods worth Rs.6,450/- on 10th March, 2004. However the goods were
delivered directly to the plant situated at Nagar and hence this transaction was not
recorded in the purchase book, which is maintained at the corporate office. Analyse
the impact of this transaction.
a)____ The purchases will increase by Rs.6,450/-
b)____ The closing stock will increase by Rs.6,450/-
c)____ The gross profit will increase by Rs.6,450/-
d)____ The gross profit will not be affected
Ans. C
45. Under the ______________-of wage payment the worker is paid on the basis of
production achieved irrespective of the time taken for its performancex
Merrick piece-rate system; Taylor's piece rate system;
Straight piece rate system; Differential time rate
Ans. Straight piece rate system
46. Choose the correct answer
A firm of boiler-house engineers provides engineering services to large number of
factories having boiler houses. The firm charges on the basis of number of hours its
engineers have worked for the client. Each engineer works for eight hours on each
working day. Each engineer enjoys Saturday and Sunday as holiday. In addition he is
granted a total of 21 more paid holidays in a year. An engineer's annual remuneration
comprises (for the year 2003) : basic pay Rs.2,00,000/-, house rent allowance 30%,
dearness allowance 20% and other allowances 15%. Employer also contributes 10%
of basic pay towards provident fund, which is taken as part of the salary. Calculate
the rate of charge(on total cost basis) for an hour's work done by the engineer for
the client.
a) Rs.182.29
b) Rs.182.00
c) Rs.183.29
d) Rs.183.00
47. Management Accounting is the process of analysis and interpretation of financial data
collected with help of financial accounting and cost accounting.
a) true
b) false
Ans. A
48. The concept of marginal costing is based on the important distinction between
product costs and _________costs.
Indirect; Direct; Variable; Period
Ans. Period
49. P&L statement which is a period statement & relates to a certain period tells about
results of operations.
a) true
b) false
Ans. A
50. Match the following:
1. Plan of investment in fixed assets (3) 1. Issue of shares
2. Plan for surplus/shortage of cash (6) 2. Cash Sales
3 Operating income (2) 3. Capital Expenditure Budget
4. Non-Operating income (1) 4. Income and expenditure budget
5. Revenue expenditure budget
6. Cash Budget
51. Financial Accounting discloses the financial performance & financial statements of
the business as a whole.
Ans. A
52. 1) Financial statements are basically in two forms i.e. profitability statement and balance sheet.
Ans. A
53. Choose the correct answer.
Following data has been extracted from the records of a manufacturing company
whose level of operations varies during different months. Minimum activity : 30,000
machine hours and manufacturing overheads Rs.400,000/-. Maximum activity :
80,000 machine hours and manufacturing overheads Rs.600,000/-. Determine the
fixed and variable components of manufacturing overheads.
a) Fixed overheads Rs.480,000/- and variable overheads Rs.4/- per machine hour
b) Fixed overheads Rs.480,000/- and variable overheads Rs.8/- per machine hour
c) Fixed overheads Rs.280,000/- and variable overheads Rs.8/- per machine hour
d) Fixed overheads Rs.280,000/- and variable overheads Rs.4/- per machine hour
54. Choose the correct answer.
Amit sold Goods to Atul for Rs. 50,000/- on cash & Rs. 50,000/- on credit basis.
Amit allowed 10% discount for on the spot transaction. What is the amount that
should be debited to the cash account?
a) Rs.50,000/-
b) Rs.45,000/-
c) Rs.40,000/-
d) Rs.55,000/-
Ans. B
55. Choose all that apply.
The objectives of Uniform costing system are as follows :-
a)____ To fix a common selling price for the industry as a whole
b)____ To compare efficiency of each unit against industry's overall performance
c)____ To compile reliable cost data for inter-firm comparison of costs
d)____ To fix a common selling price so as to maximize profits of each unit
Ans. A,b,c

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