Cost Accounting solved MCQs

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1. Which of the following statements is false ?

a. the limitations of financial accounting have led to the origin and evolution of cost accounting

B. financial accounts fail to give a product wise break up of profit or loss

c. financial accounts helps to judge the efficiency or productivity of the concern

d. cost accounting techniques helps the management in making decision or planning for future

2. Cost Accounting is directed towards the needs of

a. government

B. external users

c. internal users

d. shareholders

3. Which of the following is not function of Cost Accounting

a. cost ascertainment

B. planning and control

c. decision making

d. external reporting

4. Cost behaviour refers to

a. how costs react to a change in the level of activity

B. whether a cost is incurred in a manufacturing trading or service company

c. classifying costs as either product or period costs

d. whether a particular expense has been incurred honestly

5. An example of fixed cost is

a. materials consumed

B. depreciation

c. factory power

d. packing material

6. Which of the following would not be considered a fixed cost

a. rent

B. depreciation

c. cost of bottles use in the production of soft drinks

d. property taxes

7. Variable Cost per Unit

a. varies when output varies

B. remain constant

c. increases when output increases

d. decreases when output decreases

8. Which of the following is not an example of variable cost

a. straight line depreciation on a machine expected to last five years

B. piece-rate wages paid to manufacturing workers

c. wood used to make furniture

d. commissions paid to sales personnel

9. Which of the following costs will vary directly with the level of production

a. total manufacturing costs

B. total cost of sales

c. variable selling costs

d. variable product costs

10. Which of the following is / are true with regard to the period of budget?
i) the budget period depends on the nature of industry
ii) master budget is prepared annually while functional budget may be for different periods
iii) Basic budget is the long term budget

a. only (i) above

B. only (ii) above

c. both (i) and (ii) above

d. all (i), (ii) and (iii) above

11. Which of the following statements is / are true with regard to flexible budgeting?

a. both (a) and (b)

B. it involves a careful differentiation between fixed and variable expenses

c. it is a system of budgeting under which budgets are recast quickly for changes in the volume of activity

d. a flexible budget is one which changes from year to year

12. The classification of fixed and variable cost has a specific significance in the preparation of

a. zero-based budget

B. flexible budget

c. capital budget

d. cash budget

13. When a flexible budget is used a decrease in the actual production level within a relevant range would

a. increased total fixed cost

B. decrease variable cost per unit

c. decrease variable cost

d. increase variable cost per unit

14. If the activity level is reduced from 80 % to 70%, the fixed cost

a. will increase by 10%

B. per unit will decrease

c. will decrease by 10%

d. per unit will increase

15. Which of the following are purpose of a budget?
i) Establishing strategic options ii)Motivating management
iii) Establishing long term objectives iv) Planning operations

a. (i) and (ii) only

B. (ii), (iii) and (iv) only

c. (i) and (iv) only

d. (ii) and (iv) only

16. Which of the information below should be contained in a budget manual?

a. a list of account codes

B. an organisation chart

c. timetable for budget preparation

d. all of the above

17. A budget that gives a summary of all the functional budget is known as

a. fixed budget

B. capital budget

c. master budget

d. flexible budget

18. Master budget comprises

a. a the budgeted profit and loss account

B. budget cash flow

c. budgeted cash flow budgeted profit and loss budgeted balance sheet

d. entire sets of budgets prepared

19. A master budget comprises the

a. budgeted income statement budgeted balance sheet and budgeted cash flow only

B. budgeted income statement and positive cash flow only

c. budgeted income statement and budgeted balance sheet only

d. budgeted income statement and budgeted capital expenditure only

20. Which of the following is normally the most appropriate sequence of events in the preparation of the indicated budgets?

a. sales budget, cash budget, production budget, budgeted balance sheet

B. sales budget, cash budget, budgeted balance sheet, production budget

c. sales budget, production budget, budgeted balance sheet, cash budget

d. sales budget, production budget, cash budget, budgeted balance sheet

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

a. sales quantity plus opening stock minus closing stock

B. sales quantity - opening stock + closing stock

c. sales quantity + opening stock + closing stock

d. sales quantity - opening stock minus closing stock

22. Which one of the following items would NOT be included in a cash budget?

a. dividend payments

B. capital repayments of loans

c. depreciation charges

d. proceeds of sale of fixed assets

23. Which of the following items should be included in a cash budget?
(i) Loan repayments (ii) depreciation charges
(iii) tax provision (iv) wages paid

a. (i) and (ii)

B. (iii) and (iv)

c. (ii) and (iii)

d. (i) and (iv)

24. The CIMA definition of zero-based budgeting is set out below, with two blank sections.
"Zero-based budgeting: A method of budgeting which requires each cost element ____________, as through the activities to which the budget relates ____________."
Which combination of two phrases correctly complete the definition?

a. to be specifically justifies,&were being undertaken for the first time

B. to be set zero, &could be out-sourced to an external supplier

c. to be specifically justifies,&could be out-sourced to an external supplier

d. to be set zero,&were being undertaken for the first time

25. A company estimates its direct material requirements for the month of November 2014 to be Rs. 2,40,000 and the direct labour to be Rs. 1,500,00. It is the policy of the company to absorb overheads as under :
Factory overheads 60% of direct wages
Administrative overheads 20% of work cost
Selling and distribution overheads 25% of work cost
it is estimated that the selling and distribution overheads will increase by 15% in November the budgeted sales for the month of November 2014 is

a. rs. 9,21,600

B. rs. 8,56,800

c. rs. 6,87,150

d. rs. 9,09,900


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