Management Accounting - A12

MANAGEMENT ACCOUNTING ASSIGNMENT QUESTIONS

1. Balance sheet is a part of the ledger accounts maintained by the company.
a) true
b) false
Ans. B

2. Accounting is an art of recording, classifying & summarizing in a significant manner.
a) true
b) false
Ans. A

3. Credit balance in interest account indicates income for the organization.
a) true
b) false
Ans. A

4. Choose all that apply.
Features of Taylor's differential piece rate system are as follows :-
a)____ Strong incentive to inefficient and new workers
b)____ Minimal clerical work is involved in calculating the wages
c)____ Helps in building up an efficient labour force
d)____ Strong incentive to efficient and ambitious workers.
Ans. B,c,d

5. Choose all that apply.
The components of the selling and distribution cost budget are :-
a)____ Distribution expenses
b)____ Publicity expenditure
c)____ Salary of shop-floor workers
d)____ Salary of sales-office workers
Ans. A,b,d

6. One of the main objection to the contribution approach of costing is that it ignores
fixed cost
a) true
b) false
Ans. A

7. Loans which are borrowed from financial institutions are to be paid off in 8 years,
should be disclosed as ______________-in the balance sheet.
Investments;Long term liabilities;Capital;Current liabilities
Ans. Long term liabilities

8. Choose the correct answer.
A written request sent to a supplier for specified goods at an agreed upon price is often
called as :-
a) Goods received note
b) Purchase order
c) Material requisition note
d) Purchase requisition slip
Ans. B

9. Choose the correct answer.
Included in the trial balance is the sales promotion suspense account with a debit
balance of Rs.6,300/-. It is given that this balance should be written off. Calculate its
impact on profit of the company.
a) The gross profit will increase by Rs.6,300/-
b) The gross profit will decrease by Rs.6,300/-
c) The net profit will increase by Rs.6,300/-
d) The net profit will decrease by Rs.6,300/-
Ans. D

10. Choose all that apply.
The net profit before certain adjustments was Rs.95,040/-. After giving due
effects to the adjustments, the revised net profit (after considering the adjustments) is
Rs.78,560/-. Select the adjustments which might have brought this change.
a)____ Accrued commission income of Rs.32,960/- was not entered in the books
b)____ Rent for the month of March was payable and yet to be recorded
Rs.19,280/-
c)____ Rent for the month of March was receivable and yet to be recorded
Rs.19,280/-
d)____ Repairs expenditure to the extent of Rs.30,160/- was wrongly transferred
to Machinery account
Ans. A,b,d

11. 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
11Ans. C

12. Choose the correct answer.
A dividend warrant of Rs.2,076/- was paid direct to the bank and nothing appeared in
the cash book. This is an example of :-
a) Direct deposit into the bank
b) Direct payment by the bank
c) Cheque deposited but not cleared
d) Cheque issued but not presented
Ans. A

13. Choose the correct answer.
From the given information, calculate the earnings of Lal, Mohan and Krishna.
Rolland Ltd. operates in one of its departments, a group incentive scheme. A
minimum hourly rate is guaranteed to each of the six employees in the group, if actual
output for the week is less than the standard output. If actual output is greater than the
standard output, the hourly rate of each employee is increased by 4% for every
additional 600 units of output produced. The standard output for the group is 12,000
units for a 40-hour week. During the week ending 31st December, each employee in
the group worked 40 hours; actual output and minimum hourly rates were as follows
:Lal - 2,500 units and Rs.60/-; Hari - 2,700 units and Rs.100/-; Mohan - 2,400 units
and Rs.60/-; Shyam - 2,500 units and Rs.80/-; Gopal - 2,460 units and Rs.60/-;
Krishna - 2,440 units and Rs.40/-.
a) Lal - Rs.3,500/-; Mohan - Rs.3,000/-; Krishna - Rs.2,000/-
b) Lal - Rs.3,840/-; Mohan - Rs.3,500/-; Krishna - Rs.2,880/-
c) Lal - Rs.4,800/-; Mohan - Rs.3,840/-; Krishna - Rs.1,020/-
d) Lal - Rs.2,880/-; Mohan - Rs.2,880/-; Krishna - Rs.1,020/-
Ans.

14. Fixed overhead volume variance = Expenditure variance + Capacity variance +
________________variance
Productivity;Expenditure;Price;Calendar
Ans. Calendar

15. Choose the correct answer.
Compute actual total cost based on the data given below: Total standard cost
(standard material cost + standard labour cost) -Rs.19,633.33; labour rate variance-
Rs.900/- (adverse); material price variance -Rs.90/- (Favourable); material yield
variance -Rs.700/- (Favourable); labour yield variance -Rs.333.33 (Favourable).
a) Rs.19,410/-
b) Rs.17,610/-
c) Rs.19,856.66
d) Rs.21,656.66
15Ans.

16. Control on purchase of material is exercised by the storekeeper..
a) true
b) false
Ans. B

17. Match the following:
1. Selling and distribution budget ( ) 1. Scrap generated during production
2. Administration budget ( ) 2. Cost of demand creation
3. Materials budget ( ) 3. Carriage inwards
4. Cash budget ( ) 4. Cost of spoilage and defective work
5. Interest on loan
6. Salary of CEO

18. A ____________note is prepared when excess material is returned to stores.
Material returned;Goods received;Material requisition;Material transfer
Ans. Material returned

19. Primary distribution is effected on the basis of service rendered to the service
departments by the production departments.
a) true
b) false
Ans. B

20. 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

21. Choose the correct answer.
Balance sheet is statement of :-
a) Purchases and Sales
b) Income and Expenses
c) Receivables and Payables
d) All Assets and Properties
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. Non-trading income is disclosed on the credit side of ___________________account.
Trading;Profit and loss appropriation;Profit and loss;Manufacturing
Ans. Profit and loss

24. The _________________________is a perpetual inventory record.
Material requisition note;Job card;Goods received note;Bin card
Ans. Bin card

25. Indirect Cost is termed as ____________________.
Overhead;Prime cost;Direct expenses;Production cost
Ans. Overhead

26. Choose the correct answer.
In a factory Ram and Shyam produce the same product using the same input of same
material and at the same normal wage rate. Bonus is paid to both of them in the form
of normal time wage rate adjusted by the proportion which time save bears to the
standard time for the completion of the product. The time allotted to the product is
fifty hours. Ram takes thirty hours and Shyam takes forty hours to produce the
product. The factory cost of the product for Ram is Rs.3,100/- and for Shyam is
Rs.3,280/-. The factory overhead rate is Rs.12/- per hour. Calculate the cost of
material used for the product, for each worker, Ram and Shyam
a) Rs.3,000/-
b) Rs.2,000/-
c) Rs.3,320/-
d) Rs.2,320/-
Ans.

27. Choose the correct answer.
The total production cost for making 20,000 units was Rs.21,000/- and the total
production cost for making 50,000 units was Rs.34,000/-. Once production exceeds
25,000 units, additional fixed costs of Rs.4,000/- are incurred. The full production
cost per unit of making 30,000 units is
a) Re.0.68
b) Re.0.84
c) Re.0.93
d) Re.0.98
Ans. D

28. While preparing the labour cost budget, factors such as overtime working or night
shift working may be ignored.
a) true
b) false
Ans. B

29. Choose all that apply.
Accounting is the art where transactions are :-
a)____ Summarized
b)____ Classified
c)____ Recorded
d)____ Processed
Ans. A,b,c

30. Choose all that apply
Management accounting is concerned with the following activities :-
a)____ Decision making
b)____ Safeguarding assets
c)____ Planning and controlling activities
d)____ Minimizing workload on management
Ans. A,b,c

31. Choose all that apply.
XYZ Ltd. has purchased a consignment of material P and Q. The following are the
costs in purchasing : Material P - 5,000 kg @ Rs.10/- per kg.; Material Q - 8,000 kg
@ Rs.5/- per kg, sales tax @ 3% amounting to Rs.2,700/- and railway freight Rs.650/-.
Other handling charges have been estimated at Rs.260/- common to both materials. In
addition material P involves special handling costs of Rs.160/- in stores. Normal
breakage of materials in transit and in storage has been estimated at 5% in case of P
and 10% in case of Q. Determine the per kg. issue price for P and Q so as to recover
the normal losses of materials as well as costs incidental to purchases and storage. Also
calculate the amount of normal loss..
a)____ Issue price for material P -Rs.10.95
b)____ Issue price for material Q -Rs.5.80
c)____ Normal loss for materials P and Q -Rs.1,050/-
d)____ Issue price for material P -Rs.11/-
Ans.

32. The short run financial plan which acts as a guide to achieve the predefined targets is
known as ______________________.
Budgeted Profit & loss account; Budget; Manual; Budgeted Balance Sheet
Ans. Budget

33. Accounting is an art of recording, classifying & summarizing in a significant manner.
a) true
b) false
33Ans. A

34. 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

35. Choose all that apply.
Select the items which may be classified as administration overheads :-
a)____ Depreciation on office furniture
b)____ Depreciation on plant and machinery
c)____ Director's remuneration
d)____ Telephone expenses
Ans. A,c,d

36. Interest receivable is a _______________for the organization.
. Long term asset;Current asset;Liability;Current liability
Ans. Current asset

37. 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

38. Choose all that apply.
A gang of 10 men, 20 women and 30 boys at the standard rate of Rs.15/-, Rs.10/- and
Rs.8/- per hour, respectively, is expected to produce 5,000 units in a week of 40
working hours. In a particular week the gang which consisted of 12 men, 16 women
and 40 boys was paid at the rate of Rs.13/-, Rs.11/- and Rs.5/- per hour, respectively.
This gang actually produced 6,000 units. Due to a serious machine break-down three
hours work was totally lost during the week. Calculate labour efficiency variance
(exclusive of idle time) for each category of workers, viz. men, women and boys.
a)____ Men -Rs.540/- (Favourable)
b)____ Women -Rs.3,680/- (Favourable)
c)____ Boys - Rs.320/- (Adverse)
d)____ Women -Rs.368/- (Adverse)
38Ans.

39. Choose the correct answer.
A perpetual inventory system may be defined as :-
a) The checking of physical stock against the quantity and quality of new material
required
b) The documentation system which records all stores transactions on a continuous
basis
c) The checking of stock on the same date in each accounting period
d) Ensuring that stocktaking procedures conform to a previously agreed procedure.
Ans. B

40. Profitability statement indicates the amount of assets & liabilities.
a) true
b) false
Ans. B

41. Balance sheet indicates the expenditure & income from the business.
a) true
b) false
Ans. B

42. The cash flow format is used for preparing the cash budget by the
_____________________ method
Adjusted Profits/Losses; Balance Sheet; Receipts and Payments; Cash flow statement
Ans. Adjusted Profits/Losses

43. Choose the correct answer.
Annual subscription paid by bank to the Chamber of Commerce on 31/03/04, as per
the standing instructions, and advise sent thereafter, may lead to:-
a) Reduction in cash in hand
b) Balance as per bank book < Balance as per pass book
c) Balance as per bank book > Balance as per pass book
d) Increase in cash in hand
Ans. C

44. Choose all that apply.
For the following transactions find out the value of material issued using FIFO (First
in first out) method. 1/7/04 - Opening balance 200 units @ Rs.10/- 3/7/04 - Issued to
production department 80 units. 4/7/04 - Purchased 300 units @ Rs.11/-. 6/7/04 –
Issued to production department 150 units. 8/7/04 - Purchased 250 units @ Rs.13/-.
11/7/04 - Issued to production department 170 units..
a)____ 3/7/04 - 80 units @ Rs.10/-
b)____ 6/7/04 - 120 units @ Rs.10/- and 30 units @ Rs.11/-
c)____ 11/7/04 - 170 units @ Rs.11/-
d)____ 11/7/04 - 170 units @ Rs.13/-
44 Ans. A,b,c

45. A ________________________can be defined as a part of the organization for which
separate budget can be prepared and implemented.
Profit centre;Cost centre;Budget centre;Responsibility centre
Ans. Budget centre

46. Choose the correct answer.
Cash budget is extremely useful since it:-
a) Gives information about estimated cash inflows only
b) Gives information about estimated cash outflows only
c) Gives information about estimated cash inflows and outflows
d) Gives information about estimated material inflows and outflows
Ans. C

47. Receipts and payments method of cash budget is useful for preparing long term
estimates.
a) true
b) false
Ans. B

48. If the owner brings in personal calculator for office use, ______________account
should be credited.
Drawings;Donation;Capital;Cash
Ans. Capital

49. For a manufacturing company, dividend received is a non-operating income. .
a) true
b) false
Ans. A

50. Match the following:
1. Accounting (3) 1. Profitability statement & Balance-sheet
2 Profitability statement (2) 2. Indicates the amount of profit earned
3 Balance-sheet (4) 3. Process of analyzing & interpretation
4 Book-Keeping (5) 4. Financial status
5. Financial statement (1) 5. Books of Accounts

51. Financial Accounting discloses the financial performance & financial statements of
the business as a whole.
a)true
b)false
Ans. A


52. Choose all that apply.
Locate the steps involved in rectifying the errors in the books of accounts :-
a) _____ Find the wrong entry passed
b) _____ Find the correct entry to be passed
c) ____ Find the person responsible for the wrong entry
d) ____ Find the entry that will resolve the mistake in the books
Ans. A,b,d

53. Choose all that apply
Select the appropriate rectification entries for the following transactions (i) Rs.200/-
received in respect of a bad debt previously written off was credited to Debtors
account. (ii) Paid Rs.6,000/- to a Mr. Rao, clerk, as salary in lieu of notice. This
amount was debited to his personal account (iii) Interest @ 5% p.a. on a loan of
Rs.5,000/- was debited to general expenses account.
a) ____ Debtors A/c ..........Dr. Rs.200/- to bad debts recovered A/c Rs.200/-
b) ____ Profit and Loss A/c .......... Dr. Rs.5000/-
c) ____ Rs.6,000/- to Rao's A/c Rs.6,000/-
d) ____ Rs.250/- to General Expenses A/c Rs.250/-
Ans. A,c,d

54. Choose the correct answer
A firm employs ten workers at an hourly rate of Rs.20/-. They worked for 40 hours
each and completed the job for which standard time was 48 hours for each worker.
Calculate labour cost for the job under the Rowan Plan.
a) Rs.8,000/-
b) Rs.8,800/-
c) Rs.9,666.67
d) Rs.9,333.33
Ans.

55. The process of accounting split into three steams i.e. financial, cost, management
accounting.
a) true
b) false
Ans. A

56. Match the following
1. Audit (4) 1. Maintain all types of accounts
2. Accounting (5) 2. Process of estimating profits
3. Journal (6) 3. List of all types of accounts
4. Ledger (1) 4. Reviewing internal control system
5. Process of analyzing & interpretation
6. Book of original entry