Management Accounting - A30

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Where break even sales are Rs. 20000,fixed cost is Rs.10000and profit is Rs. 5000 then the margin of safety will be Rs.
10000
1500
15000
2000

Valuation of material uses the following methods
FIFO and LIFO
Average price method
Market price
Special price

Goods distributed as free samples transfer to debit side of trading A/C .
True / False

In Citizen Ltd., Division X is a profit centre which produces three products, A, B and C. The details are as follows : External market price per unit:-Product A- Rs.48/-, Product B- Rs.46/-, Product C-Rs.40/-. Maximum external sales(units):-Product A- 800, Product B-500, Product C-300. Variable cost per unit:-Product A- Rs.33/-, Product B- Rs.24/-, Product C-Rs.28/-.
A-800 units; B-500 units; C-300 units
A-800 units; B-250 units; C-200 units
A-400 units; B-500 units; C-300 units
A-400 units; B-800 units; C-300 units

XYZ Ltd. has set up the following standards for variable production overheads : standard hours per unit -3 hours; standard variable overhead per hour -Rs.10/-. The actual data for the month is as follows : actual variable overheads incurred Rs.620,000/-; actual output -20,000 units and actual hours worked- 54,000 hours. Find variable overheads cost variance.
Rs.20,000/- (Adverse)
Rs.20,000/- (Favourable)
Rs.60,000/- (Adverse)
Rs.60,000/- (Favourable

A firm is able to break even at 60% capacity with budgeted fixed cost of Rs.300,000/-, budgeted selling price Rs.20/- per unit and budgeted contribution Rs.6/- per unit. The firm can produce and sell at 90% capacity but it is estimated that in that case
Rs.88,500/-
Rs.75,000/-
Rs.82,500/-
Rs.72,500/-
The annual variable production overheads of a factory are Rs.70,000/-. The production manager anticipates that in the next year, the production efficiency will decrease by 4%. Find out budgeted production overheads for the next year.
Rs.72,800/-
Rs.78,200/-
Rs.72,916.67
Rs.79,216.67

XYZ & Co. is a partnership with X and Z as partners. The capital of X is Rs.58,000/- and that of Z is Rs.75,000/-. Interest on capital is charged @ 12% p.a. and interest on drawings is charged @ 5% p.a. The drawings of X totaled to Rs.15,000/- and that of Z totaled to Rs.12,000/-. The profit for the year after considering interest on capital and drawings is Rs.125,000/- and the profits are shared in the ratio of their capitals, i.e. 58 : 75. Find the balance of capital accounts after giving
X - Rs.118,721.28 and Z -Rs.153,888.72
X - Rs.120,221.28 And Z - Rs.155,088.72
X - Rs.119,471.28 And Z - Rs.154,488.72
X - Rs.135,448.28 And Z - Rs.138,511.72

Factory rent is a direct cost to the factory as a whole but indirect to the production departments.
True / False

The wages paid to a trainee who constructs wooden mould for concrete laying on a building contract should be defined as :
Direct labour cost
Indirect labour cost
Fixed labour cost
Non-controllable labour cost

The following information relating to material X and its standard use for production has been extracted from the standard cost card: Price of material X = Rs.5/- per litre; consumptiion of X = 10 litres per unti of product.Data relating to actual material purchases and production during the period: Purchases of X = 4,000 litres; price paid for X =Rs.6/- per unit; actual production = 500units. Calculate material usage variance.
Rs.1,000/- (Favourable)
Rs.4,000/- (Adverse)
Rs.5,000/- (Favourable)
Rs.3,000/- (Adverse)

The following particulars are extracted from the books of a company relating to commodity "A" for the half year ending 30th June, 2004. (a) Purchase of raw materials - Rs.1,32,000/- (b) Direct wages - Rs.1,10,000/- (c) Rent, rates and insurance - Rs.44,000/- (d) Carriage inwards - Rs.1,584/- (e) Raw material as on 1st Jan, 2004 - Rs.22,000/- (f) Finished goods as on 1st Jan, 2004 - Rs.17,000/- (1600 tonnes) (g) Raw Material as on 30th June, 2004 - Rs.24,464/- (h) Finished goods as on 30th June,
Rs.64,800/-
Rs.46,800/-
Rs.86,400/-
Rs.68,400/-

Annual maintenance of Rs.28,000/- was paid on 15th June, 2003 for a period of one year therefrom. Find the amount of prepaid maitenance expenditure for the year ended 31st March.
Rs.28,000/-
Rs.22,167/-
Rs.7,000/-
Rs.5,833/

The Balance Sheet method of cash budget ignores any excess or shortage of cash during the budget period.
True / False

Compound journal entry avoids duplication of effort.
True / False

Metal India Ltd. is holding two accounts, savings and current, with the Central Bank of India. On 31st January, 2004 his ledger shows the following balances : Savings account Rs.5,000/-; Current accountRs.2,250/- (overdraft). It is found that a deposit of Rs.1,500/- made into the savings account on 20th January, 2004 has been entered in the ledger in the of Current account. Find the correct ledger balances of savings and current accounts.
Savings account-Rs.5,000/-, current account-Rs.3,750/- (overdraft
Savings account-Rs.5,000/-, current account-Rs.2,250/- (overdraft)
Savings account-Rs.6,500/-, current account-Rs.2,250/- (overdraft)
Savings account-Rs.6,500/-, current account-Rs.3,750/- (overdraft)

Which of the following source documetns in a cost accounting system is designed to exercise control voer the delivery of and accurate recording of the receipts of goods?
Goods received note
Order to the supplier
Material requisition note
Purchase requisition slip

Select the cases where convention of conservation is applied :
Closing stock is valued at cost or market price whichever is lower
Providing for discount on debtors
Amorisation of goodwill (goodwill being written off to Profit and Loss Account)
Providing for discount on creditors

M Ltd. manufactures three products P, Q and R. The unit selling price of these products are Rs.100/-, Rs.80/- and Rs.50/-, respectively. The corresponding unit variable costs are Rs.50/-, Rs.40/- and Rs.20/-, respectively. The quantitywise proportion in which these products are manufactured and sold are 20%, 30% and 50%, respectively. The total fixed costs are Rs.14,80,000/-. You are required to work out the overall break even point qunatity for
30,000 units
90,000 units
40,000 units
80,000 units

A firm is earning a profit of Rs.60,000/- at the present sales level of Rs.500,000/-. It has a profit volume ration of 60%, which remains unchanged. Fixed cost increases by 25% as soon as sales become twice the break even point. Find the profit for sal
Rs.240,000/-
Rs.180,000/-
Rs.120,000/-
Rs.200,000/-

At a break even point of 400 units, the variable costs are Rs.400/- and the fixed costs are Rs.200/-. What will the 401st unit sold contribute to profit?
Re.0
Re.0.50
Re.1.00
Rs.1.50

1. Advantage of budgetary control system 1. Motivates the managers to exceed the budgeted targets

2. Fixed budget 2. Managerial tool which decreases effectiveness of managerial control

3. Disadvantage of budgetary control system 3. More elastic and practical

4. Flexible budget 4. Difficult to implement in fast changing industrial scenario

5. Restricts the efforts of the managers to the budgeted targets

6. Managerial tool which increases effectiveness of managerial control

With the help of the given information, find actual fixed overheads for actual output. Fixed overheads volume variance -Rs.75,000/- (Favourable); fixed overheads efficiency variance -Rs.95,000/- (Favourable); fixed overheads calendar variance Rs.20,000/- (Adverse); fixed voerheads expenditure variance Rs.100,000/- (Adverse) and standard fixed overheads for actual output -Rs.575,000/-.
Rs.600,000/-
Rs.550,000/-
Rs.525,000/-
Rs.625,000/-

Existing sales are Rs.100,000/- (500 units), variable costs are Rs.60,000/-, fixed costs are Rs.24,000/-. If selling price is reduced by 10% which of the following is the breakeven sales quantity?
450 units
500 units
400 units
334 units

An operator engaged in machining certain components receives andordinary day rate of Rs.160/- per day of 8 hours. The standard output for machining the components has been fixed at 80 pieces per hour (time fixed for premium bonus). On a certain day, the output of the worker on this machine is 800 pieces. Find the labour cost per 100 pieces if a bonus of Rs.25/- is paid per 100 pieces of the extra output.
Rs.25/-
Rs.20/-
Rs.15/-
Rs.10/-

Under the accelerating premium system incentive increases at a fast rate with the decrease in output.
True /False

A manufacturer is producing alloy for which standard mix is 25% copper and 75% iron. Standard price for copper is Rs.80/- per kg. and for iron Rs.20/- per kg. 20% of input is standard loss. Actual output is 8,000 kg. of alloy using 2,000 kg of copper at Rs.90/- per kg. and 9,000 kg of iron at Rs.15/- per kg. Calculate the standard cost of copper.
Rs.200,000/-
Rs.150,000/-
Rs.350,000/-
Rs.180,000/-

Sold goods to Amitabh worth Rs. 15,000/- against 15% trade discount. In this case with what amount should the sales account be credited?
Rs. 15,000
Rs. 12,750
Rs. 13,500
Rs. 13,750

Material Yield variance -Rs.1,000/- (Adverse); material mix variance -Rs.250/- (Favourable) and material price variance - Rs.350/- (Favourable). Find material cost variance and material usage variance.
Material cost variance -Rs.400/- (Adverse)
Material usage variance -Rs.750/-
Material usage variance is favourable
Material usage variance is adverse

Insurance premium of Rs.18,000/- was paid on 15th January, 2004. The policy period is one year from the date of payment of insurance. On 31st March, 2004 what amount should be debited to the Profit and Loss account as expenditure on account of insurance premium?
Rs.18,000/-
Rs.14,250/-
Rs.10,500/-
Rs.3,750/-

The standard cost of actual hours when any employee remains idle due to abnormal circumstances is known as Standard labour cost / Idle time variance / Labour cost variance / Standard cost.

Keeping company's liquid position sufficiently sound to meet its daily obligation is the main object of preparing Cash Sales / Income / Expenditure / budget.

One of the major drawback of the contribution approach to costing is that it ignores fixed cost.
True / False

Salary given in trial balance Rs. 5000/-, and Rs. 2,000/- is yet to be paid . The outstanding salary account will be disclosed in the …
Profit and Loss Account - credit side
Balance Sheet - liability side
Balance Sheet - asset side
Trading Account - debit side

A withdrawal of Rs.500/- from Mr.Jone's account on 2nd October, 2004 has been entered by the bank in the pass book of Mr.Johny's account.' If you are preparing the bank reconciliation statement considering the balance as per pass book as on 31st October,2004 is Rs.2,250/- for Mr.Johny, find out the balance as per his bank book.
Rs.1,750/- (overdraft)
Rs.1,750/- (debit)
Rs.2,250/- (overdraft)
Rs.2,250/- (debit)

What will be the impact of following transactions on the cost of a lathe machine : (a) Transport charges on the lathe machine were debited to Carriage inward account, Rs.1,100/- (b) Cost of installing the machine stands debited to miscellaneous expenses account, Rs.200/-
Cost will increase by Rs.900/-
Cost will increase by Rs.1,300/-
Cost will decrease by Rs.1,300/-
Cost will decrease by Rs.900/-

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.
X - Rs.5.316, Y - Rs.5.952 and Z - Rs.3.936
X - Rs.5.952, Y - Rs.3.936 and Z - Rs.5.316
X - Rs.5.952, Y - Rs.5.316 and Z - Rs.3.936
X - Rs.5.316, Y - Rs.3.936 and Z - Rs.5.952

From the given information compute the total cost variance. Material cost variance -Rs.4,400/- (Favourable); labour cost variance -Rs.450/- (Adverse); fixed overhead cost variance -Rs.22,000/- (Adverse); variable overhead cost variance -Rs.6,000/- (adverse).
Rs.32,850/- (Adverse)
Rs.32,850/- (Favourable)
Rs.24,050/- (Adverse)
Rs.24,050/- (Favourable)

Judge the given statement according to the given criteria :- 'Provision for doubtful debts account' and 'provision for discount on debtors account' mean same account can be maintained under two account-heads, since both are related to debtors and indicate a loss to the organization.
The statement and the reason both are correct
The statement and the reason both are incorrect
The statement is correct but the reason is incorrect
The statement is incorrect but the reason is correct

1. Ordering cost 1. Cost of holding the inventory
2. Carrying cost 2. Cost of issuing the inventory
3. Material cost 3. Cost of administrative efforts
4. Cost of material consumed 4. Can be obtained subtracting opening stock from the sum of material cost and closing stock
5. Can be obtained subtracting closing stock from the sum of material cost and opening stock
6. Sum of possession cost, ordering cost and purchase cost

The pass book showed a credit balance of Rs.1,000/-. This balance was after considering the dividend of Rs.25/- collected by bank and Rs.5/- charged as collection expenses: these entries are not made in the bank book. Find the balance as per bank book.
Rs.1,000/-
Rs.1,030/-
Rs.1,020/-
Rs.980/-

Compute fixed overheads calendar variance when fixed overhead volume variance is Rs.250/- (Favourable); fixed overheads efficiency variance is Rs.2,150/- (Adverse) and fixed overheads capacity variance is Rs.800/-(Favourable).
Rs.1,100/- (Adverse)
Rs.1,100/- (Favourable)
Rs.1,600/- (Adverse)
Rs.1,600/- (Favourable)

Routing the purchase requisition through the purchase department entails unnecessary delay in receiving the required materials.
True /False

Large angle of incidence indicates Lower /Adjusted /Higher /Same amount of profits.

The method of overhead apportionment which considers both the material cost as well as the labour cost, is known as Supplementary rate /Prime cost percentage rate /Direct labour hour rate /Machine hour rate method.

Standard labour cost of producing 500 metre of cloth has been specified as 20 hours work by skilled workers @ Rs.15/- per hour and 30 hours work by unskilled workers @ Rs.10/- per hour. For producing 500 metre cloth they worked for 30 hours each they were paid at the rate of Rs.17/- per hour and Rs.10/- per hour, respectively. Calculate labour mix variance.
Rs.210/- (Adverse)
Rs.60/- (Adverse)
Rs.150/- (Adverse)
Rs.30/- (Adverse)

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.
Rs.3,000/-
Rs.2,000/-
Rs.3,320/-
Rs.2,320/-

Provision for discount on debtors account should be credited to the Profit and Loss Account.
True /False

Consideration to the fact that the repairs and maintenance cost is less in the initial years of life of the asset and hence needs to be counterbalanced by higher amount of depreciation in the :-
Straight line method
Written down value method
Endowment policy method
Sinking fund method

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.
Territory I -Rs.2,000/-; Territory II -Rs.2,000/- and Territory III -Rs.2,000/-
Territory I -Rs.2,700/-; Territory II -Rs.2,700/- and Territory III -Rs.2,700/-
Territory I -Rs.2,700/-; Territory II -Rs.2,700/- and Territory III -Rs.2,000/-
Territory I -Rs.2,000/-; Territory II -Rs.2,700/- and Territory III -Rs.2,000/-

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
Rs.880,000/-
Rs.800,000/-
Rs.600,000/-
Rs.660,000/-

Re-order level should be higher than Monthly requirement /Average stock level /Annual requirement /Minimum level but lesser than maximum stock level.

What is the balance of the cash account after considering the relevant transactions from the following set : 4th July, 2004-Sold goods to Deshmukh & Co. for Rs.2,500/-; 5th July, 2004-Received Rs.5,000/- for rent of June, 04; 7th July, 2004-Paid salaries by cheque for Rs.8,000/-; 15th July, 2004-Received commission, in cash, from XYZ Ltd., Rs.3,000/-; 21st July, 2004-Paid salaries by cash Rs.2,500/-; 22nd July, 2004-Deposited cash into Bank of India Rs.3,000/-; 25th July, 2004-Purchased furniture from Shantilal for Rs.10,000/-. Shantilal has given a credit period of 45 days; 26th July, 2004-Paid cash for purchase of machine from Elpro Ltd. For Rs.30,000/-; 28th July, 2004-Paid ready cash for advertisement inserted in newspaper, Rs.200/-; 28th July, 2004-Withdrawn cash from Bank of India Rs.50,000/-.
Rs.22,300 (debit)
Rs.22,300 (credit)
Rs.33,200 (debit)
Rs.33,200 (credit)

Factory cost is Rs.13,10,800/-. The administrative overheads are salaries Rs.40,000/-, rent and rates Rs.6,400/-, traveling expenses Rs.12,400/-, Depreciation Rs,2,400/-, Directors fees Rs.24,000/-, General Charges Rs.24,800/-, Manager's salary Rs.38,400/-. What will be the office cost?
Rs.14,59,200/-
Rs.11,72,200/-
Rs.13,10,800/-
Rs.15,10,800/-

XYZ Ltd. has set up the following standards for variable production overheads : standard hours per unit -3 hours; standard variable overhead per hour -Rs.10/-. The actual data for the month is as follows : actual variable overheads incurred Rs.620,000/-; actual output -20,000 units and actual hours worked- 54,000 hours. Find variable overheads cost variance.
Rs.20,000/- (Adverse)
Rs.20,000/- (Favourable)
Rs.60,000/- (Adverse)
Rs.60,000/- (Favourable)

The concept of marginal costing is based on the important distinction between product costs and Indirect /Direct /Variable /Period costs.

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?
Rs.177,000/-
Rs.200,000/-
Rs.178,000/-
Rs.277,000/-

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.
Rs.6,360/- (Favourable)
Rs.17,280/- (Adverse)
Rs.5,760/- (Adverse)
Rs.16,680/- (Adverse)


Industries which have high fixed cost burden but low variable cost have Narrow /Smaller /Larger /Flat angle of incidence.

Special aspects of co-partnership include:-
Workers are granted ownership rights
Indirect monetary remuneration
The morale of the workers is increased
The workers are rewarded for individual efficiency

The credit purchases are as follows : July Rs.80,000/- and August Rs.140,000/-. Creditors are paid either on a 'prompt basis' (on the spot) or 30 days basis. It is estimated that 10% of the creditors are in the prompt category. Find the amount paid :-
Rs.161,000/-
Rs.121,000/-
Rs.177,000/-
Rs.118,000/-

The use of contribution per unit of limiting factor as the basis for ranking products to be produced and sold is aimed at which of the following?
Maximization of turnover
Minimization of turnover
Maximization of short-term profit
Maximization of long-term profit

Obsolescence arises when a machine has to be discarded in favour of one better adopted to its purpose and giving better result.
True /False

A manufacturing unit produces electronic circuits at the rate of 6 pieces an hour. The unit works in single shift of 8 hours during a six-day week and remains close for 18 days a year on account of holidays. Average idle hours per month is 20 for cleaning and maintenance of equipments. Against an average annual output of 12,000 pieces during last ten years, the actual output achieved during the year was 10,800 pieces. The fixed overheads for the year amounted to Rs.540,000/-. You are required to calculate the idle capacity costs on the assumption that overhead recovery rate is based on maximum capacity.
Rs.207,121.60
Rs.200,000/-
Rs.193,121.60
Rs.187,000/-