80+ Cost and Management Accounting and Financial Management Solved MCQs

1.

Type of accounting which measures, reports and analyse non-financial and financial information to help in decision making is called:

A. Financial Accounting
B. Management Accounting
C. Cost Accounting
D. Green Accounting
Answer» B. Management Accounting
2.

Which one of the following is not considered as a method of Transfer Pricing?

A. Negotiated Transfer Pricing
B. Market Price Based Transfer Pricing
C. Fixed Cost Based Transfer Pricing
D. Opportunity Cost Based Transfer Pricing
Answer» C. Fixed Cost Based Transfer Pricing
3.

In cost accounting, purpose of variance analysis is to:

A. understand reasons for variances.
B. take remedial measures.
C. improve future performance.
D. All of the above
Answer» D. All of the above
4.

Absorption Costing is also known as:

A. Total Costing
B. Committed Costing
C. Target Costing
D. Discretionary Costing
Answer» A. Total Costing
5.

Which of the following is not correct with regard to Margin of Safety (MOS)?

A. MOS = Profit PV Ratio
B. MOS = Total Sales – Sales at BEP
C. MOS = × 100 Total Sales - Sales at BEP Total Sales
D. MOS = PV Ratio × Sales – Fixed Cost
Answer» D. MOS = PV Ratio × Sales – Fixed Cost
6.

Which one of the following is not to be considered for preparing a production budget?

A. The production plan of the organization
B. The Sales Budget
C. Research and Development Budget
D. Availability of Raw Materials
Answer» C. Research and Development Budget
7.

The breakeven point is the point at which,

A. There is no profit, no loss
B. Contribution margin is equal to total fixed cost
C. Total fixed cost is equal to total revenue
D. All of the above.
Answer» A. There is no profit, no loss
8.

The P/V ratio of a product is 0.4 and the selling price is Rs. 40 per unit. The marginal cost of the product would be,

A. Rs. 8
B. Rs. 24
C. Rs. 20
D. Rs. 25
Answer» B. Rs. 24
9.

If standard hours are 400 @ Rs. 1 per hour and actual hours are 380 @ Rs. 1.25 per hour, the labour rate variance is:

A. Rs. 20 (Favourable)
B. Rs. 25 (Favourable)
C. Rs. 100 (Adverse)
D. Rs. 95 (Adverse)
Answer» D. Rs. 95 (Adverse)
10.

The time taken for initial unit of a product is 100 hours. At 80% learning rate what is the total time for 4 units.

A. 100 hours
B. 80 hours
C. 160 hours
D. 256 hours
Answer» D. 256 hours
11.

Sales Rs. 4,00,000; Variable Cost Rs. 3,00,000; Fixed Cost Rs. 75,000; Investments Rs. 1,50,000 and desired 20% on investments. What is residual income?

A. Rs. 25,000
B. Rs. 30,000
C. Rs. 20,000
D. Rs. (5,000)
Answer» D. Rs. (5,000)
12.

Sales in January month Rs. 3,00,000; Credit Sales are 80%; Credit period is 2 months. Amount collected in the month of March is

A. Rs. 50,000
B. Rs. 2,40,000
C. Rs. 40,000
D. None of the above
Answer» B. Rs. 2,40,000
13.

Planning and control are done by

A. top management
B. lowest level of management
C. all levels of management
D. None of the above
Answer» A. top management
14.

The use of management accounting is

A. Compulsory
B. Optional
C. Mandatory as per the law
D. None of the above
Answer» B. Optional
15.

The budgets are classified on the basis of

A. Time
B. Function
C. Flexibility
D. All of the above
Answer» D. All of the above
16.

Which of the following departments is most likely responsible for a price variance in direct materials?

A. Warehousing
B. Receiving
C. Purchasing
D. Production
Answer» C. Purchasing
17.

Idle time variance is always:

A. Favourable
B. Adverse
C. Favourable (or) Adverse
D. None of these
Answer» B. Adverse
18.

In marginal costing, stock is valued at _________

A. Fixed Cost
B. Variable Cost
C. Inventory
D. sales
Answer» B. Variable Cost
19.

In two consecutive periods, sales and profit were Rs. 1,60,000 and Rs. 8,000 respectively in the first period and Rs. 1,80,000 and Rs. 14,000 respectively during the second period. If there is no change in fixed cost between the two periods, the PV ratio must be:

A. 20%
B. 25%
C. 30%
D. 40%
Answer» C. 30%
20.

Budgeted sales for the next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000 units and equivalent units in ending WIP inventory is 60,000 units. The opening finished goods inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning WIP inventory. How many equivalent units should be produced?

A. 5,80,000
B. 5,50,000
C. 5,00,000
D. 5,75,000
Answer» A. 5,80,000
21.

Akash Ltd. is preparing its cash budget for the period. Sales are expected to be Rs. 1,00,000 in April, 2016; Rs. 2,00,000 in May 2016 Rs. 3,00,000 in June 2016 and Rs. 1,00,000 in July 2016. Half of all sales are cash sales and the other half are on credit. Experience indicates that 70% of the credit sales will be collected in the month following the sale, 20% the month after that and, 10% in the third month after the sale. The budgeted collection for the month of July, 2016 is:

A. Rs. 1,30,000
B. Rs. 1,80,000
C. Rs. 2,60,000
D. Rs. 3,60,000
Answer» B. Rs. 1,80,000
22.

During the month of March, 560 kg of material was purchased at a total cost of Rs. 15,904. The stock of material increased by 15 kg. it is the company’s policy to value the stocks at standard purchase price. If the material price variance was Rs. 224 (A), the standard price per kg. of material is :

A. Rs. 28.40
B. Rs. 28.80
C. Rs. 28.00
D. Rs. 29.20
Answer» C. Rs. 28.00
23.

Cost Price is not fixed in case of:

A. Cost plus contracts
B. Escalation clause
C. De escalation clause
D. All of the above
Answer» A. Cost plus contracts
24.

Continuous stock taking is a part of:

A. ABC analysis
B. Annual stock taking
C. Perpetual Inventory
D. None of these
Answer» C. Perpetual Inventory
25.

In Reconciliation Statements expenses shown only in financial accounts are:

A. Added to financial profit
B. Deducted from financial profit
C. Ignored
D. Added to costing profit
Answer» A. Added to financial profit
26.

Operating costing is applicable to:

A. Hospitals
B. Cinemas
C. Transport undertaking
D. All the above
Answer» D. All the above
27.

Flexible budget requires a careful study of:

A. Fixed, semi-fixed and variable expenses
B. Past and current expenses
C. Overheads, selling and administrative expenses
D. None of the above
Answer» A. Fixed, semi-fixed and variable expenses
28.

Which of the following items is not excluded while preparing a cost sheet?

A. Goodwill written off
B. Provision for taxation
C. Property tax on factory building
D. Interest paid
Answer» C. Property tax on factory building
29.

The most important element of cost is:

A. Material
B. Labour
C. Overheads
D. All the above
Answer» A. Material
30.

Depreciation is an example of:

A. Fixed cost
B. Variable cost
C. Semi variable cost
D. None of the above
Answer» A. Fixed cost
31.

Joint cost is suitable for:

A. Infrastructure industry
B. Ornament industry
C. Oil industry
D. Fertilizer industry
Answer» C. Oil industry
32.

Which statement best describes the role of the management accountant?

A. Management accountants prepare the financial statements for an organization.
B. Management accountants facilitate the decision making process within an organization.
C. Management accountants make the principal decisions within an organization.
D. Management accountants are basically information collectors.
Answer» B. Management accountants facilitate the decision making process within an organization.
33.

The main objective of budgetary control is:

A. to define the goal of the firm
B. to coordinate different departments
C. to plan to achieve its goals
D. all of the above
Answer» D. all of the above
34.

Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called:

A. dual pricing
B. functional pricing
C. congruent pricing
D. optimal pricing
Answer» A. dual pricing
35.

When are overhead variances recorded in a standard costing system?

A. when the goods are transferred out of work-in-progress.
B. when the factory overhead is applied to work-in-progress.
C. when the cost of goods sold is recorded
D. when the direct labour is recorded
Answer» B. when the factory overhead is applied to work-in-progress.
36.

Management Accounting is an integral part of management concerned with_______ information.

A. identifying, presenting and interpreting
B. identifying and presenting
C. identifying
D. None of the above
Answer» A. identifying, presenting and interpreting
37.

Management Accounting is related with _____________.

A. formulating strategy
B. planning and controlling activities
C. optimizing the use of resources
D. All of the above
Answer» D. All of the above
38.

Despite the development of Management Accounting as an effective discipline to improve the managerial performance, it has some limitations. Which of the following is a limitation of management accounting?

A. Psychological Resistance
B. Physiological Resistance
C. Both of the above
D. None of the above
Answer» A. Psychological Resistance
39.

The primary objective of Management Accounting is to _______________.

A. maximize profits
B. minimize losses
C. maximize profits or minimize losses
D. All of the above
Answer» D. All of the above
40.

Management accounting is concerned with data collection from _____________.

A. internal sources
B. external sources
C. internal and external sources
D. internal or external sources
Answer» C. internal and external sources
41.

Management Accounting is concerned with accounting information, which is useful to the management — This definition is given by ______________.

A. Robert N. Anthony
B. Brown and Howard
C. CIMA
D. The Institute of Chartered Accountants of England and Wales
Answer» A. Robert N. Anthony
42.

Marginal costs is taken as equal to

A. Prime Cost plus all variable overheads
B. Prime Cost minus all variable overheads
C. Variable overheads
D. None of the above
Answer» A. Prime Cost plus all variable overheads
43.

Marginal costing is also known as

A. Direct costing
B. Variable costing
C. Both A and B
D. None of the above
Answer» C. Both A and B
44.

Which of the following costs is relevant in decision-making?

A. committed costs
B. accounting costs
C. historical costs
D. cash costs
Answer» A. committed costs
45.

An opportunity cost is the cost of

A. lost business
B. unplanned new business
C. obtaining new business opportunities
D. the next best alternative course of action
Answer» A. lost business
46.

In a product mix decision, which is the most important factor to consider in order to try to maximize profit?

A. contribution per unit of a scarce resource used to make the product
B. contribution per unit of the product
C. variable cost per unit of the product
D. product unit selling price
Answer» A. contribution per unit of a scarce resource used to make the product
47.

Which of the following costs incurred by a commercial airline can be classified as variable?

A. Interest costs on leasing of aircraft
B. Pilots' salaries
C. Depreciation of aircraft
D. None of these three costs can be classified as variable
Answer» D. None of these three costs can be classified as variable
48.

The basic decision rule on acceptance of special contracts is:

A. Accept the special contract if additional fixed costs can be covered by contribution from other products
B. Accept the special contract if the additional revenue from the contract exceeds the fixed costs of manufacture
C. Accept the special contract if it produces a positive contribution to fixed costs
D. Accept the special contract if it produces a positive contribution to variable costs
Answer» C. Accept the special contract if it produces a positive contribution to fixed costs
49.

If budgets are prepared of a business concern for a certain period taking each and every function separately such budgets are called _________.

A. Separate Budgets
B. Functional Budgets
C. Both of them
D. None of the above
Answer» B. Functional Budgets
50.

Which of the following is not an example of functional budget?

A. Production budget
B. Cost of production budget
C. Materials budget
D. None of the above
Answer» D. None of the above
51.

Which of the following is an essential of a budget?

A. It is prepared for a definite future period
B. It is a statement prepared prior to a defined period of time
C. The Budget is monetary and I or quantitative statement of policy
D. All of the above
Answer» D. All of the above
52.

When preparing a production budget, the quantity to be produced equals

A. sales quantity + opening inventory of finished goods + closing inventory of finished goods
B. sales quantity – opening inventory of finished goods + closing inventory of finished goods
C. sales quantity – opening inventory of finished goods – closing inventory of finished goods
D. sales quantity + opening inventory of finished goods – closing inventory of finished goods
Answer» B. sales quantity – opening inventory of finished goods + closing inventory of finished goods
53.

In comparing a fixed budget with a flexible budget, what is the reason for the difference between the profit figures in the two budgets?

A. Different levels of activity
B. Different levels of spending
C. Different levels of efficiency
D. The difference between actual and budgeted performance
Answer» A. Different levels of activity
54.

When budget allowances are set without the involvement of the budget owner, the budgeting process can be described as:

A. top down budgeting
B. negotiated budgeting
C. zero based budgeting
D. participative budgeting
Answer» A. top down budgeting
55.

For which of the following would zero based budgeting be most suitable?

A. Building construction
B. Mining company operations
C. Transport company operations
D. Government department activities
Answer» D. Government department activities
56.

Which among the below is the reason behind Material Price Variance:

A. Change in basis purchase price of material.
B. Uneconomical size of purchase order.
C. Payment of excess or less freight.
D. All of the above
Answer» D. All of the above
57.

In a factory Standard rate per hour Rs. 4, Standard time per unit of output – 20 hours, Units produced - 500, Actual hours worked - 12,000. Compute Labour Efficiency Variance.

A. Rs. 6000 (Favourable)
B. Rs. 8000 (Adverse)
C. Rs. 9,600 (Favourable)
D. Rs. 8000 (Favourable)
Answer» B. Rs. 8000 (Adverse)
58.

MSE Manufacturing gives you the following details. Standard Price per kg of Material Rs. 2, Actual Material used 2,000 kg, Actual cost of Material Rs. 3,000. Actual output 2,100 kg. Compute Material Price Variance.

A. Rs. 1050 (Favourable)
B. Rs. 1142 (Favourable)
C. Rs. 1000 (Favourable)
D. None of the above
Answer» C. Rs. 1000 (Favourable)
59.

Which of the following factors does not affect Learning Curve

A. Method of production
B. Labour strike
C. Shut down
D. Efficiency rate
Answer» C. Shut down
60.

Which of the following is not a reason to use the concept of Learning Curve?

A. Labour efficiency
B. Introducing new technology
C. Value chain effect
D. Standardization, specialization, and methods improvements
Answer» B. Introducing new technology
61.

Learning curve theory is not applicable to

A. Direct labour
B. Material
C. Spoilage and defective works
D. Overhead
Answer» D. Overhead
62.

Decision-marking concerns with:

A. Past
B. Future
C. Past and Future both
D. None of the above
Answer» B. Future
63.

A large Margin of Safety indicates

A. Over-Capitalization
B. The soundness of business
C. Over Production
D. None of the above
Answer» B. The soundness of business
64.

Revision of budgets is

A. Unnecessary
B. Cannot determine
C. Necessary
D. Inadequate data
Answer» C. Necessary
65.

Which of the following operating measures would a manager would like to see decreasing over time?

A. Merchandise Inventory Turn-over
B. Total quality cost
C. % of on-time deliveries
D. Finished Goods Inventory Turn-over
Answer» B. Total quality cost
66.

Another name for the 'Learning Curve' is

A. Exponential Curve
B. Growth Curve
C. Production Curve
D. Experience Curve
Answer» D. Experience Curve
67.

The well known basic function of management is

A. Motivating
B. Leadership
C. Decision making
D. Communicating
Answer» C. Decision making
68.

Contribution margin is equal to

A. Sales - Fixed Cost - Profit
B. Profit + Variable Cost
C. Fixed Cost - Loss
D. None of the above
Answer» C. Fixed Cost - Loss
69.

In a system whereby all activities are revaluated each time a budget is formulated and starts with the assumption that requirement of funds does not exist is called

A. Performance Budgeting
B. Programme Budgeting
C. Flexible Budgeting
D. Zero- based Budgeting
Answer» D. Zero- based Budgeting
70.

The management’s time is saved by reporting only the deviations from the predetermined standards is called

A. Management by objectives
B. Budgetary Control
C. Standard Costing
D. Management by Exception
Answer» D. Management by Exception
71.

Marginal Costing is also known as

A. Direct Costing
B. Absorption Costing
C. Variable Cost
D. Variable Costing
Answer» D. Variable Costing
72.

Another name for ‘Contribution’ is

A. Marginal Income
B. Gross Profit
C. Net Income
D. None of the above
Answer» A. Marginal Income
73.

Management Accounting

A. accumulates, summarises and analyses the available data.
B. is primarily concerned with the requirements of the management.
C. makes Corporate Planning and Strategy effective.
D. All of the above
Answer» D. All of the above
74.

XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full capacity and incurs Rs. 15 Lakhs and Rs. 40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets were purchased from an outside supplier, the machine could be used to produce other items, which would earn a total contribution of Rs. 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the outside supplier for the gadgets, assuming there is no change in Fixed Costs?

A. Rs. 40 Lakhs
B. Rs. 65 Lakhs
C. Rs. 25 Lakhs
D. Rs. 15 Lakhs
Answer» A. Rs. 40 Lakhs
75.

The difference between hours paid and hours worked is known as

A. Labour rate variance
B. Labour efficiency variance
C. Idle time variance
D. Net efficiency variance
Answer» C. Idle time variance
76.

The difference in total cost that results from two alternative courses of action is called

A. Relevant Cost
B. Opportunity Cost
C. Differential Cost
D. Marginal Cost
Answer» C. Differential Cost
77.

A budget that gives a summary of all the functional budgets and projected Profit and Loss A/c is known as

A. Master budget
B. Flexible budget
C. Performance budget
D. Discretionary budget
Answer» A. Master budget
78.

When there are no opening or closing stocks, profit under marginal costing will be

A. Greater than in absorption costing
B. Less than in absorption costing
C. Equal to absorption costing
D. Greater, Lower or Equal depending on certain factors
Answer» C. Equal to absorption costing
79.

Break Even Point can be reduced by

A. Increasing selling price per unit
B. Reducing the variable costs
C. Reducing fixed costs
D. All of the above
Answer» D. All of the above
80.

One of the following is not within the scope of Management Accounting

A. Formulation of policies
B. Classification and collection of costs
C. Planning and co-ordinating the activities of the enterprise
D. Decision making on alternative courses of action
Answer» B. Classification and collection of costs
81.

AB company budgets for fixed overhead of Rs. 24,000 and Production of 4800 units. Actual Production is 4200 units. If fixed overhead cost increased is Rs. 22,000, the Fixed overhead volume variance will be

A. Rs. 1,000 (Adv.)
B. Rs. 2,000 (Fav.)
C. Rs. 3,000 (Adv.)
D. Rs. 3,000 (Fav.)
Answer» C. Rs. 3,000 (Adv.)
Tags
Question and answers in Cost and Management Accounting and Financial Management, Cost and Management Accounting and Financial Management multiple choice questions and answers, Cost and Management Accounting and Financial Management Important MCQs, Solved MCQs for Cost and Management Accounting and Financial Management, Cost and Management Accounting and Financial Management MCQs with answers PDF download