McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Cost Accounting .
| 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 | |
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