Management Accounting - A16

ASSIGNMENT QUESTIONS
1. Choose the correct answer.
Mr.X has Rs.200,000/- invested in his business firm. He wants a 15% return on his
money. From an analysis of recent cost figures, he finds that his variable cost of
operating is 60% of sales, his fixed costs are Rs.80,000/- per year. Mr.X estimates that
even if he closed the doors of his business, he would incur Rs.25,000/- as expenses per
year. At what sales would he be better off by locking his business up.
a) Rs.42,500/-
b) Rs.52,500/-
c) Rs.62,500/-
d) Rs.72,500/-
Ans.
2. 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
Ans.
3. Choose all that apply
The quarterly production of a company's product which has a steady market is 20,000
units. Each unit of product requires 0.5 kg of raw material. The cost of placing one
order for raw material is Rs.100/- and the inventory carrying cost is Rs.2/- per kg per
annum. The lead time for procurement of raw material is 36 days and a safety stock of
1,000 kg of raw materials is maintained by the company. The company has been able
to negotiate the following discount structure with the raw material supplier : For order
quantity below 7,000 kg -discount per order is NIL. For order quantity between 7,000
kg and 8,000 kg., discount per order is Rs.400/-. For order quantity between 8,000 kg
and 16,000 kg., discount per order is Rs.2,000/-. For order quantity between 16,000 kg
and 30,000 kg., discount per order is Rs.3,200/-. Find the statements which indicate the
correct costs for the different order sizes.
a)____ If order size is 6,667 units, total cost is Rs.6,867/-
b)____ If order size is 10,000 units, total cost is Rs.8,400/-
c)____ If order size is 20,000 units, total cost is Rs.17,000/-
d)____ If order size is 5,000 units, total cost is Rs.5,400/-
Ans.
4. Choose the correct answer.
From the following particulars, calculate the machine hour rate of overhead absorption.
A company has three production departments and two service departments. The
overhead analysis sheet provides the following totals of the overheads analysed to
production and service departments. Production Departments :X- Rs.48,000; Y-
Rs.42,000; Z-Rs.30,000.Service Departments : A-Rs.14,040; B-Rs.18,000. The
expenses of the service departments are apportioned as follows : Service department A
- Production department X-20%; Production department Y - 40%; Production
department Z- 30%; Service department B - 10%.Service department B- Production
department X-40%; Production department Y - 20%; production department Z- 20%;
Service department A - 20%. Details of machine hours are as follows: Production
department X -1,000 hours; Production department Y-1,000 hours; Production
department Z-1,000 hours.
a) X - Rs.5.316, Y - Rs.5.952 and Z - Rs.3.936
b) X - Rs.5.952, Y - Rs.3.936 and Z - Rs.5.316
c) X - Rs.5.952, Y - Rs.5.316 and Z - Rs.3.936
d) X - Rs.5.316, Y - Rs.3.936 and Z - Rs.5.952
Ans.
5. 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
Ans.
6. Choose the correct answer.
The following data is available for a company for the month of April, 2004 : Territory
I : selling expenses Rs.7,600/-; distribution cost Rs.4,000/-; number of units sold –
16,000; sales Rs.76,000/-. Territory II : selling expenses Rs.4,200/-; distribution cost
Rs.1,800/-; number of units sold -6,000; sales Rs.28,000/-. Territory III : selling
expenses Rs.6,240/-; distribution cost Rs.2,000/-; number of units sold -10,000; sales
Rs.52,000/-. The company adopts sales basis and quantity basis for application of
selling and distribution costs respectively. Compute the amount of selling and
distribution costs chargeable to a consignment of 4,000 units of a product sold in each
territory at Rs.2.50 per unit.
a) Territory I -Rs.2,000/-; Territory II -Rs.2,000/- and Territory III -Rs.2,000/-
b) Territory I -Rs.2,700/-; Territory II -Rs.2,700/- and Territory III -Rs.2,700/-
c) Territory I -Rs.2,700/-; Territory II -Rs.2,700/- and Territory III -Rs.2,000/-
d) Territory I -Rs.2,000/-; Territory II -Rs.2,700/- and Territory III -Rs.2,000/-
6Ans.
7. Choose the correct answer.
Currently Beta Ltd. is earning a contribution of Rs.80/- per unit and the variable cost is
Rs.180/- per unit. Its fixed costs are Rs.200,000/-. Its existing sales are 5,000 units.
The company has a proposal that the sales staff may be paid a commission of 10% of
sales instead of fixed salaries totaling Rs.80,000/-. This action is expected to increase
the sales by 10%. Compute the amount of profit assuming the proposal is accepted?
a) Rs.177,000/-
b) Rs.200,000/-
c) Rs.178,000/-
d) Rs.277,000/-
Ans.
8. Choose the correct answer.
The quantity of raw material in the purchases budget may be higher than the quantity
of raw material in the production budget because :-
a) The stock levels are being reduced
b) The raw material prices are falling
c) The company obtains discount for bulk purchases
d) The units sold will be higher than units made
Ans.
9. Choose all that apply.
The data for XYZ Ltd. is as follows : Fixed assets Rs.60,000/-; total cost Rs.105,000/-
; working capital is equal to 25% of the sales value. The company expects 25% return
on capital employed. Capital employed is equal to fixed assets plus working capital.
Select the correct answers:-
a)____ Sales Rs.128,000/-
b)____ Return on capital employed
c)____ Rs.15,000/-
d)____ Working capital Rs.32,000/-Ans.
MANAGEMENT ACCOUNTING ASSIGNMENT QUESTIONS
1. Match the following
1. Debit side of bank book (4) 1. Henceforth, there shall be maximum
is overcast differences in overdraft balances
2. Interest on debentures (5) 2. Henceforth, there shall be no difference
directly credited by bank in overdraft balances
3. Received sanction for a (3) 3. Overdraft as per bank book =
loan of Rs.10 lakhs Balances per pass book
4. Closed the account with (2) 4. Overdraft as per bank book <
State Bank of India Overdraft as per pass book
5. Overdraft as per bank book >
Overdraft as per pass book
6. Overdraft as per bank book =
Overdraft as per pass book
2. _______________ Accounting assists the management in establishing the plans to
attain the economic objectives and take proper decisions for the attainment of its
objectives.
Inflation; Cost; Management; Financial
Ans. Management
3. The __________________________ variance is the difference between the actual
variable overhead incurred and the standard variable overhead charged to production.
Variable overhead efficiency; Variable overhead volume;
Total variable overhead; Total fixed overhead
Ans. Total variable overhead
4. 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
5. Choose all that apply
Which of the following transactions should be excluded while preparing a cost sheet?
a)____ Sale of scrap material
b)____ Interest on loan
c)____ Bad debts
d)____ Expenses on criminal law suit
Ans. B,c,d
6. The closing stocks should ____________________ the cost of the goods which sent on
approval basis.
Be decreased by; Exclude; Not get affected by; Be increased by
Ans. Be increased by
7. Choose all that apply
Marginal costing is found to be unsuccessful in the following situations :-
a)____ Impossible to distinguish costs into fixed and variable component.
b)____ Existence of key factor which will limit the volume of output.
c)____ With respect to capital intensive industries where fixed costs are very large
and hence cannot be ignored
d)____ With respect to service industries where employee costs are very large and
almost fixed in nature
Ans. A,c,d
8. Choose all that apply
You are using petrol as one of the raw materials. Daily you purchase 1,000 liters of
petrol at Rs.28.50 per liter. 5% of it generally gets lost due to spillage and evaporation.
On a particular hot and dry day, the issue of petrol from 1,000 liters drum was as
follows : To job X 200 liters; job Y 400 liters and job Z 320 liters. After these issues
the drum was empty. Calculate per liter charge for use of petrol, quantum of loss and
total quantum of petrol used for jobs X,Y and Z.
a)____ Loss due to spillage and evaporation - 30 liters.
b)____ Rate of charge per liter of petrol - Rs.30/-
c)____ Rate of charge per liter of petrol - Rs.30.98
d)____ Total petrol used for jobs X, Y and Z - 920 liters
Ans. A,b
9. Penalty paid for delay in payment to creditors represents uncontrollable cost.
a) true
b) false
Ans. B
10. A complete list of all material required, with quantities, for a particular job is given in
the ______________________________.
Bill of material; Bill of exchange; Purchase order; Material requisition
Ans. Bill of material
11. Choose all that apply
The production budget may be prepared in terms of :-
a)____ Units produced
b)____ Production cost
c)____ Material cost, selling cost and overheads
d)____ Material cost, labour cost and overheads
Ans. A,b,d
12. Creche expenses may be appropriately apportioned on the basis of ______________.
Total number of employees; Direct labour cost;
Number of female workers; Direct labour hours
Ans. Number of female workers
13. Bank charges debited in the pass book represent clerical mistake on the part of the
bank employees.
a) true
b) false
Ans. B
14. ______________________ variance arises when the mix of materials used in the
production is different from the predetermined standard mix of operation.
Sales margin mix; Materials mix; Labour mix; Product mix
Ans. Materials mix
15. Choose the correct answer.
A cost incurred in the past and irrelevant for decision making is known as :-
a) Discretionary cost
b) Controllable cost
c) Sunk cost
d) Standard cost
Ans. C
16. Choose all that apply
Labour turnover means :-
a)____ Influx and exit of employees
b)____ Quantitative measurement of instability of working force
c)____ Rate of change in the average working force
d)____ Influx and exit of customers
Ans. A,b,c
17. Choose all that apply
Select the examples of functional budgets:-
a)____ Sales budget
b)____ Production budget
c)____ Research and development budget
d)____ Capital expenditure budget
Ans. A,b,c
18. Malik started business by contributing cash Rs.50,000/- and his personal car worth
Rs.25,000/-; thus his capital account should be credited with Rs.75,000/-.
a) true
b) false
Ans. A
19. Choose the correct answer.
A company budgets for a production of 150,000 units. The variable cost per unit is
Rs.14/- and fixed cost is Rs.2/- per unit. The company fixes its selling price to fetch a
profit of 15% on total cost. What is the break even point for the company?
a) 68,182 units
b) 68,100 units
c) 61,182 units
d) 61,100 units
Ans. A
20. 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
21. Accounts representing expenses will have ____________ balance.
Debit; Nil; Negative; Credit
Ans. Debit
22. Receipts and payments method of cash budget is useful for preparing long term
estimates.
a) true
b) false
Ans.
23. Match the following
1. Basic Standards (6) 1. Once established can never be altered
2. Current Standards (5) 2. Anticipated to be unachievable in future
3. Expected Standards (3) 3. Anticipated to be achieved in the budget period
4. Normal Standards (4) 4. Anticipated to be achieved in future
5. Established for a shorter period of time
6. Established for a longer period of time
24. If the customer is not likely to pay the amount receivable from him, this amount
should to be treated as __________________.
Bad debts; Long term debts; Accrued income; Current liability
Ans. Bad debts
25. Direct labour hour rate method of absorption of overheads is suitable where most of
the production is done by using machines.
a) true
b) false
Ans. B
26. Purchased goods by paying Rs.35,000/-: In this case, the cash account should be
debited.
a) true
b) false
Ans. A
27. Profit = Contribution per unit X ___________________________.
Sales (units); Production (units); Break even point (units); Margin of safety (units)
Ans. Margin of safety (units)
28. 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
29. Choose all that apply
Select the transactions which can be entered in the Journal proper :-
a)____ Opening entries
b)____ Closing entries
c)____ Average entries
d)____ Rectification entries
Ans. A,b,d
30. Choose all that apply
Which of the following budgets may be termed as a long term budget?
a)____ Capital expenditure budget
b)____ Research and Development expenditure budget
c)____ Budget of a transportation company
d)____ Budget of a two-wheeler manufacturing company
Ans. A,b,c
31. Choose all that apply
Features of double entry accounting system are :-
a)____ Every business transaction has two elements
b)____ When business receives something, it has to pay something
c)____ Every entry is to be recorded twice
d)____ Every debit has a corresponding credit
Ans. A,b,d
32. Choose the correct answer.
M/s Vivek Enterprises has paid rent relating to the residence of Mr. Vivek, proprietor
of Vivek Enterprises. This payment should be treated as :-
a) Business expenditure
b) Capital expenditure
c) Drawings
d) Capital
Ans. C
33. One of the main objection to the contribution approach of costing is that it ignores
fixed cost.
a) true
b) false
Ans.
34. Financial Accounting discloses the financial performance & financial statements of
the business as a whole.
a) true
b) false
Ans. A
35. Financial statements can be presented in two forms i.e. profitability statement and
balance sheet.
a) true
b) false
Ans. A
36. Choose the correct answer.
A company has a normal capacity of 120 machines, working 8 hours per day of 25
days in a month. The fixed overheads are budgeted at Rs.144,000/- per month. The
standard time required to manufacture one unit of product is 4 hours. In April, 2004,
the company worked 24 days of 840 machine hours per day and produced 5,305 units
of output. The actual fixed overheads were Rs.142,000/-. Compute calendar variance.
a) Rs.6,360/- (Favourable)
b) Rs.17,280/- (Adverse)
c) Rs.5,760/- (Adverse)
d) Rs.16,680/- (Adverse)
Ans.
37. Choose the correct answer.
Find the budget which is inadequate as a cost control technique :-
a) Flexible budget
b) Budgeted Balance Sheet
c) Fixed budget
d) Sales budget
Ans. C
38. 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. C
39. Financial, cost and management accounting are the three steams of accounting.
a) true
b) false
Ans. A
40. Choose the correct answer.
XYZ & Co. has taken a loan of Rs.100,000/- @ 15% p.a. on 1st October, 2003.
Interest is to be paid on half yearly basis. What treatment should be given in the
books of accounts of XYZ & Co. as on 31st March, 2004?
a) Since interest is not due on 31st March, 2004, no entry should be passed
b) Interest account should be debited with Rs.7,520.55 and outstanding interest
account should be credited with Rs.7,520.55
c) Interest account should be debited with Rs.15,000/- and outstanding interest
account should be credited with Rs.15,000/-
d) Since interest is due on 31st March, 2004, entry should be passed for its
payment
Ans. B
41. Choose all that apply
The factors to be considered while preparing the direct materials budget are :-
a)____ Adequacy of material storing space
b)____ Packing material lying in stores but reserved for specific purposes
c)____ Availability of funds
d)____ Material in stores but reserved for specific purposes
Ans. A,c,d
42. 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
43. The phrase 'By Balance c/d.' written on the credit side of the rent account, indicates
credit balance for this account.
a) true
b) false
Ans. B
44. Graphically, fixed cost line will be __________________ the 'x-axis'.
Intersecting; Tangential to; Perpendicular to; Parallel to
Ans. Parallel to
45. Choose the correct answer.
It is difficult to apply Uniform costing system for an industry which has labour
intensive companies as well as capital intensive companies, because :-
a) The cost structure is the same
b) The cost structure is different
c) The quality is the same
d) The quality is different
Ans. B
46. 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
47. Revenue expenditure indicates the amount of funds spent during a certain period with
the intention to receive the returns in future.
a) true
b) false
Ans. B
48. Purchase day book for the month of April was under cast by Rs.1000/- ____________
account should be credited.
Cash; Purchase; Suspense; Sales
Ans. Suspense
49. 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
50. Choose the correct answer.
The present unit cost data for a product is as follows: selling price Rs.15/-, variable
costs Rs.8/-. If selling prices are reduced by 10% and variable costs are increased by
12.5%. Which of the following is the amended contribution to sales ratio?
a) 0.5
b) 0.666
c) 0.333
d) 0.25
Ans.
51. P&L statement which is a period statement & relates to a certain period tells about
results of operations.
a) true
b) false
Ans. A
52. Choose the correct answer.
A company wishes to earn a 15% profit margin on selling price when quoting for a
job. Which of the following is the profit margin of cost which will achieve the
required profit margin?
a) 0.15
b) 0.1765
c) 0.155
d) 0.1304
Ans.
53. Cost Accounting is concerned with calculation of the profitability and state of affairs
of the organization as a whole.
a) true
b) false
Ans. B
54. Financial accounting may deal with the ascertainment of cost & calculation of
profitability of the individual product.
a) true
b) false
Ans. B
55. Management Accounting aims at enabling the management to take the decisions
about the future. It may consider future data as well as non-financial factors.
a) true
b) false
Ans. A