General Management Accounting MCQs

1. True or False: Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment.

2. Which of the following businesses would generally use job/order costing rather than process costing?

3. True or False: Decreasing a company's fixed expenses should reduce the break-even point.

4. What order of inventory classification best describes the manufacturing process?

5. True or False: While depreciation does not result in a payment of cash, tax depreciation does reduce the cash payments for income taxes.

6. Costs that cannot be easily or economically traced accurately to the final product are known as ...?

7. What is the name given to the difference between the actual cost of a product's inputs and the standard cost of one of the product's inputs?

8. The management accounting function produces a variety of financial reports set by the needs of management.

9. What is a hurdle rate?

10. A company makes computers. Which one of the following is likely to be a Variable Cost?

11. Should a project be accepted if the NPV is -632?

12. True or False: In calculating the cash flow in capital budgeting, depreciation is added back in the net profit to arrive at the cash flow figure.

13. Which of the following would NOT be a labor-related cost?

14. True or False: In variable costing, variable costs are considered for product costing inventory valuation and other allied management decisions.

15. True or False: BOTH variable and fixed manufacturing overhead are included in the Absorption Costing Method

16. Net present value (NPV) is best defined as:

17. True or False: Actual Costing is the system of costing in which actual cost incurred during the period is charged to the product.

18. Which option below correctly completes the statement: Involvement in the budgeting process should _____.

19. True or False: Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.

20. If the profitability index of the project is greater than 1 then this project should be...?

21. The project with shorter payback period should be...

22. Which of the following costs would NOT be an element of product (manufacturing) costs?

23. Which of the following is an example of qualitative data ...?

24. Product and service costing information is prepared for...

25. The appropriate and careful selection of financial resources results in ...?

26. Sunk cost is best defined as...

27. Manufacturing costs typically consist of ...?

28. Complete the sentence - Perpetuity is the annuity that lasts...?

29. If a product cost $50 and the required mark-up was 50%, what would the selling price be?

30. Working capital is ...?

31. The project should be accepted if NPV of the Cash flow is...

32. Indirect costs that cannot be easily and economically traced to a finished product are known as ....?

33. Which of the following would NOT be classified as a production department?

34. True of False: A general rule for profit maximization in the short run is: If the additional revenues exceed the additional expenses, do it.

35. True or False: Setup cost is an example of a batch-level cost.

36. True or False: In zero base budgeting, each item is redefined from zero instead of using last year's budget as a base.

37. The break-even point is the level of sales that ....?

38. The Discounted Payback Period is the length of time required for an investment's discounted cash flows to equal its initial cost. True or False?

39. Which of the mentioned payroll cost(s) represent direct labor?

40. Partly finished goods that a manufacturer may have on hand at the end of an accounting period is known as ...?

41. True or False: Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.

42. True or False: The standard cost of direct materials is the cost the manufacturer should have used to make the good output.

43. True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.

44. True or False: The value of inventory under full costing is higher then variable costing.

45. Which statement best describes the current role of the managerial accountant?

46. Which of the following is NOT a type of internal benchmark?

47. If marginal costing toal sales is $10000, total variable cost is $5000, and total fixed cost is $2500, what will the profit be?

48. A company is considering building a factory in Lahore. Which one of the following is a sunk cost to the decision?

49. The time value of money primarily focuses on ...?

50. Variable costs do NOT include:

51. The project should be accepted if its Profitability index is greater then

52. True or False: Activity based costing is recommended for the allocation of SG&A expenses in order to determine the true profitability of a product or a customer.

53. Which of the following is not considered to be an appropriate form of finance for capital investment projects?

54. The most likely strategy to reduce the breakeven point would be to:

55. Marginal cost is:

56. Opportunity cost in management accounting is best described as ...?

57. What is the most important purpose of a balanced scorecard?

58. The time value of money focuses on:

59. Which one of the following statements about budgeting is NOT true?

60. The profit center's revenues and expenses are held separate from the main company's in order to determine their profitability?

61. Which of the following is a monetary objective rather than a non-monetary objective?

62. True or False: Depreciation Expense is a negative cash flow that needs to be discounted.

63. Which of the following reports would be a produced under the management accounting function rather than the financial accounting function?

64. A subsidiary ledger containing only those accounts related to manufacturing costs is known as ....?

65. True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.

66. A Learning curve shows that as experience increases the amount of time taken to perform a function ________.

67. What is the formula for the contribution margin?

68. The comprehensive budget that covers all the activities of the organisation and which integrates the individual budgets that cover each of the subsidiary functions, is known as the ...?

69. If production increases, fixed cost per unit...

70. Which of the following is more the management accounting function than a financial accounting function?

71. Under responsibility accounting, the bottling plant of a soft drink company will most likely be treated as .....?

72. If sales are 100,000 variable costs are 40,000 and fixed costs are 10,000, what is contribution margin?

73. Which cost remains constant in total, but vary per unit?

74. The contribution margin (CM) is calculated by deducting all the .................... costs from sales?

75. True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.

76. SG&A is the acronym for ...?

77. A budget that is continuously updated by adding a new incremental period and dropping off the period just completed, is known as ...?

78. Which is the correct set of equations for cost objects?

79. What is the equation to calculate a difference in variance analysis?

80. True or False: Depreciation Expense can be ignored when computing the accounting rate of return.

81. A company can accelerate its cash receipts by all of the following except:

82. Sale is 100, variable cost is =? ,fixed cost is 20, profit is 25, what will the variable cost be using marginal costing?

83. Which of the following is the best example of discretionary cost?

84. What is the difference between break even sales and break even per units?

85. How do you calculate the break even point?

86. Which of the following is more a management accounting function than a financial accounting function?

87. You are given the cost/volume information below: 1 unit/$ 15, 10 units/$150, 100 units/$1500. What type of a cost is being described?

88. Which of the following factors is irrelevant when using the payback method?

89. What is the formula for breakeven?

90. If sales were $100,000, variable costs $70,000 and fixed costs $10,000: What is contribution margin?

91. Which of the following alternatives is generally chosen from a cost-benefit analysis? The one that shows the ...

92. Using Variable costing .IF fixed cost is 2500, variable cost is 3500, profit is 2000, what will be the sales price?

93. Which of the following statements regarding graphs of fixed and variable costs is true?

94. Fixed Expense + Target Income / Unit of Contribution Margin is the formula for:

95. If profit is 10000 Dollars ,and fixed cost is 25000 Dollars ,and variable cost is 40000 dollars what will be the sales price?

96. How do you calculate the Contribution Margin?

97. How do you calculate breakeven in units?

98. Management by exception means ...?

99. If sales were $100,000, contribution margin $60,000 and fixed costs $30,000: What would the variable costs be?

100. Contribution Margin/Net Income is the formula for

101. Break-even analysis assumes that over the relevant range:

102. True or False: The original cost of an asset presently in use is generally not relevant in the decision to replace the asset.

103. Fixed expense+target income /Contribution margin ratio is the formula of

104. How do you calculate the breakeven point in monetary value?

105. Breakeven $ is calculated by which formula?

106. Which of the following is NOT generally treated as a fixed cost in management accounting?

107. If profit under absorption costing is 4000, and profit under variable costing is 2000, and contribution margin is 5000 under variable costing, what will be the OPERATING LEVERAGE?

108. How do you calculate the Margin of Safety?

109. How do you calculate the margin of safety?

110. Which of the following is NOT generally identified as a reporting center under responsibility accounting?

111. How to you calculate breakeven in sales?

112. At the breakeven point, the contribution margin equals the total of the .........?

113. Which of the following BEST describes target costing?

114. True or False: Activity based costing is considered to be a traditional costing method.

115. Out of pocket cost requires

116. Net terminal value is=

117. The difference between the budgeted sales and the break-even sales, is known as ....?

118. The best example of committed cost is...

119. In a "Cost of Quality" report, which of the following is a nonconforming cost, as opposed to a conforming cost?

120. Under responsibility accounting, reports that show the budget and actual figures along with the variances that may arise, is known as ......?

121. True or False: If a company's sales were to triple, some fixed expenses are likely to increase.

122. Which of the following specialist information systems is management accounting least engaged?

123. Which of the following is NOT a job or process costing used in management accounting?

124. A business sells a product for $30 per unit. The variable cost of production per unit is $18 and the fixed cost has been calculated at $8 per unit. The contribution per unit is ...?

125. If the selling price was $100 per unit, the variable cost was $50 per unit and the fixed cost was $10,000 what would be the sales break even point in units?

126. True or False: The most relevant amounts for making a decision are found in the general ledger.

127. The contribution margin is calculated by ...?

128. The Scattergraph method is...

129. What is the flow of costs after direct materials, direct labor and manufacturing overhead is utilized?

130. Malik makes plastic windows and doors. Which one of the following is likely to be a Fixed Cost?

131. If the selling price was $200 and the cost price was $100, what is the Gross Profit %?

132. True or False: A project whose future cash flows are discounted by 10% will have a larger net present value than the same cash flows discounted by 8%.

133. Which one of the following is a Period Cost?

134. if ending inventory under absorption costing is 2500, and under variable costing is 1000 what is the difference between the profit under variable costing and absorption costing?

135. A company used the net present value method for evaluating a project. The project requires an immediate cash outlay of $950,000. The company discounted the cash flows by 16% and determined that the net present value of the project was a negative $600. From this information it is likely that the project...

136. In capital budgeting using profitability index if Npv of the cash flow is 2000, and initial investment is 2500, what will be the profitability index?

137. True or False: Selling expenses should be allocated to the cost of goods sold for external financial reporting.

138. A budget where past information is not considered relevant for future decisions, is known as a ...?

139. If a budgeted expense for the month was $100 and the actual was $110, the variance would be ....?

140. Managment accounting is LEAST concerned with which of the following?

141. Definition of cost accounting

142. Which of the following would NOT be a feature of 'bottom up' budgeting?

143. Which of the following correctly completes the statement? "As production increases within the relevant range ..."

144. The costs involved in converting raw materials into finished products is known as ...?

145. 'Relevant range' in budgeting and cost accounting relates to the:

146. In management accounting the terms 'cost' and 'expense' can be accurately used interchangeably?

147. A company wishes to evaluate a division which has the following extracts from income statement and statement of financial position. Income statement: $’000 Sales 500 Gross profit 200 Net profit 120 Statement of financial position: $’000 Non current assets 750 Current assets 350 Current liabilities (450) Net assets 650 What is the residual income for the division if the company has a cost of capital of 18%?

148. Which of the following bases is more an activity-based cost driver rather than a volume based cost driver in relation to applying overheads?

149. In a manufacturing overhead variance, which is excluded from a two-way variance, as opposed to a three-way?

150. Which of the following does NOT describe 'Backflush Costing'?

151. Operating Leverage Indicates

152. Which of the following is NOT a prime cost in management accounting?

153. A system whereby actual results for each sub-unit is an organisation is measured against budgets and significant differences investigated, is known as...?

154. Engineered cost is best defined as:

155. What is the ideal transfer price that would satisfy both the supplying and receiving segment?

156. Which of the following correctly completes the statement: Capital budgets are ...?

157. A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000 What is the company’s return on investment?

158. Which of the following specifically describes an 'expense' rather than a 'cost'?

159. Which of the following bases is a volume-based cost driver in relation to applying overheads?

160. What expenses are NOT included in fixed factory overhead?

161. In ABC the assumption is that __________________ use resources or cause costs.

162. Royalties paid are which type of cost?

163. Which of the following businesses would generally use process costing rather than job/order costing?

164. Which component is included in BOTH prime and conversion costs?

165. What is net profit if the contribution margin was $100,000 fixed costs were $60,000 and variable costs were $30,000?

166. When more factory overheads are incurred than have been applied to the product costing, it is known as...?

167. Which of the following would NOT be treated as a period cost in management accounting?

168. Rolling budgets are useful when

169. Which of the following is *NOT* a benefit likely to arise from the implementation of a ‘just in time’ cost approach?

170. Which of the following is NOT used as a treatment of fixed manufacturing costs in management accounting?

171. If sale is 1000, fixed cost is 200, and profit is 500, what is contribution margin ratio?

172. According to full costing method, if cost of sale is 800, Gross profit is 200, and variable cost is 400, what is the contribution margin?

173. The accumulation of the costs incurred in buying and/or making inventory items is known as ....?

174. Which of the following asset accounts is NOT used to record and capture the flow of manufacturing costs?

175. In throughput accounting if the sale is 100, fixed cost is 25, and variable material cost is 45, what is throughput ?

176. Which of the following cost classification methods is not relevant in decision-making?

177. A cost classification that identifies the degree to which a cost can be changed in the short term is known as ...?

178. Which of the following would NOT be a reason for setting up a standard cost system?

179. A manufacturing company benchmarks the performance of its accounts receivable department with that of a leading credit card company, what type of benchmarking is the company using?

180. What is the formula for operating leverage?

181. NIFO (Next-In First-Out) is an inventory valuation system where the cost of sale of the item is based on ...?

182. True or False: A variable expense means that the per unit amount will vary with sales.

183. Goal congruence best describes as

184. The total asset turnover ratio is calculated by which formula?

185. Which of the following models for evaluating capital expenditures considers the time value of money by discounting the future cash flows?

186. True or False: If the net present value of a project is $0, the project should be rejected.

187. Which of the following should you use 'process costing' rather than 'job/product' costing?

188. Find EVA (ECONOMIC VALUE ADDED) if operating profit is 10000, weighted averege cost of capital is 12%, and operating assets are 75000.

189. If contribution margin is 10000 and fixed expense is 8000, net income is 2000 what is OPERATING LEVERAGE?

190. Internal rate of return is the rate of return at which net present value becomes?

191. Total fixed costs 150000; contribution margin 60% of revenue per unit; unit price 125; What is break even in units?

192. Which of the following is considered a financial statement budget?

193. Which one of the following is not a technique used for capital investment appraisal?

194. Which one of the following is not normally a characteristic of major capital expenditure projects?

195. Job/order costing is used when there is a continuous production of similar products. True or false?

196. Operating leverage shows...

197. Which of the following is NOT a generally accepted method of valuing inventory for a business?

198. If profit before tax is 10 000, taxation is 35%, and depreciation for the year is 1 000, what will the cash flow be?

199. What is break even point if profit is 10000,fixed cost is 25000, and the sale is 60000?

200. Which of the following costs is likely to be the minimum price charged for a special order?

201. Total fixed cost 150000; CM 60% of revenue per unit; Price 125; What is break even in dollars?

202. The factory overhead recovery rate is best set based on a ........ analysis?

203. Which of the following expense groups is deducted from Gross Profit to calculate the Net Contribution Margin?

204. Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. What was the receivables turnover ratio?

205. Which of the following models does NOT use cash flows?

206. Which of the following would be the appropriate cost driver for the cost Package and Wrapping?

207. Which of the following is NOT a method used to allocate costs in management accounting?

208. The formula for material turnover ratio is...

209. Which of the following would NOT be classified as a service department in managerial accounting?

210. In variable costing or marginal costing if sale is 100 per unit, material cost 20 per unit, labour cost 10 per unit, variable overhead 10 per unit, fixed overhead 10 per unit, variable selling is expense 10 per unit, what will be the CONTRIBUTION MARGIN?

211. If net profit is 2,000 Dollars, sale 10,000 Dollars, fixed Cost is 4,000 Dollars, what is breakeven point in dollars.

212. If contribution margin is 600, fixed expenses 100,sale is 1500 what is break even point in dollars.

213. Management accounting assists the management

214. In planning, direction and control

215. Management accounting deals with

216. Which one of the following branches of accounting primarily deals with processing and presenting of accounting data for internal use?

217. Interpretation of accounts is the

218. he term current asset doesn’t cover _______.

219. Amount spent on an advertisement campaign, the benefit of which is likely to last for three years is a

220. The use of management accounting is

221. Accounting is concerned with

222. Which of the following accounting equation is correct?

223. The balance sheet is a __ of the assets, liabilities and capital of a concern as on particular date.

224. Profit and Loss Account is also called_______.

225. Financial accounts record only______.

226. Going concern concept assumes business as a_____.

227. Business entity concept distinguishes between _____.

228. Preparation of financial statements is essential under _______.

229. Retained earnings statement depicts _____

230. ____ analysis compares the financial data for several years.

231. ______ analysis compares various items in the financial data for one accounting year.

232. _____ analysis compares various items in the financial data for one accounting year.

233. ______ analysis involves comparison of financial data of a firm with other firms.

234. A ____ is a simple arithmetical expression of the relationship between two numbers.

235. If the stock turnover ratio is 4 times and the collection period is 30 days the operating cycle would be _____ days.

236. Given that current liabilities are at Rs. 300,000, current ratio is 3:1 and quick ratio is 1:1, the value of stock will be:

237. The stock turnover ratio is ____ .

238. The stock turnover ratio may be calculated as ___.

239. ROI stands for?

240. The gross profit ratio is the ratio of gross profit to ______.

241. Acid test ratio is equal to quick current assets divided by ____.

242. In the debt equity ratio, external equity refers to_____.

243. Acid test ratio should normally be ----

244. In the computation of the debtors turnover ratio accounts receivable includes

245. n the debt equity ratio, equity refers to

246. Current ratio is a ------ ratio

247. dentify the transaction that has no effect on the current ratio.

248. What does creditors turnover ratio take into account?

249. Current ratio should normally be

250. EPS is calculated as

251. Interest coverage Ratio is given by

252. To test the liquidity of a concern which of the following ratios are useful?

253. The word fund means the difference between _____ and current liabilities.

254. Stock in the beginning results in ______of funds.

255. Issue of capital will mean _____ working capital.

256. Purchase of plant will mean_____ working capital.

257. Goodwill is a ______ transaction.

258. Identify the item which is not an operating expense

259. Redeemable preference shares is __

260. Expenditure incurred on research is an example of

261. Which one of the following is capital expenditure?

262. Which one of the following is an example of sources of funds?

263. Goods withdrawn by the proprietor for his personal use are

264. Added to the purchases

265. If the change, because of a business transaction results in the increase of fund then the transactions responsible for such a change is said to be ____

266. .Which of the following cannot be treated as revenue expenditure?

267. AS- 3 deals with______statement.

268. Sale of goods is a _______ activity.

269. Dividend paid is ______ activity.

270. Cash flow include_______.

271. Increase in bills payable results in _______.

272. Provision for tax is _____ activity.

273. Marginal costing is the most useful technique for the ______

274. The term contribution refers to ____

275. Marginal costing technique helps the management in deciding _____

276. The other name of marginal costing is _______

277. Sales Rs. 100000, variable cost Rs. 50000 and net profit ratio is 10% on sales, find out fixed cost.

278. Profit volume ratio establishes the relationship between _______

279. Contribution/sales is equal to _______

280. The profit of an undertaking is affected by _______

281. The profit at which total revenue is equal to total cost is called ______

282. The profit at which total revenue is equal to total cost is called ______

283. The break even chart helps the management in _____

284. Expenses that do not vary with the volume of production are known as _______

285. _______ is the excess of sales over the break even sales.

286. The formula for Margin of Safety is one of the following ________

287. Managers utilizes marginal costing for

288. CVP stands for

289. Marginal cost does not include ______

290. At BEP ____ is equal to fixed cost

291. BEP is _____ by changes in fixed cost.

292. Contribution is also called ______.

293. In USA marginal costing is referred as_____.

294. Which of the following is a type of budget according to function?

295. Budgets can be classified according to

296. Sales budget is ______.

297. A budget is:

298. If variable and fixed costs at 60% capacity are Rs 12,000 and Rs 9,000 respectively, total cost at 80% capacity will be

299. Which one is usually a long term budget?

300. Operating budgets cover a period of_____.

301. Fixed – variable cost classification is significant in _______.

302. ______ budget is prepared first.

303. Zero based budgeting was first used by _______.

304. Budget is derived from the French word _______.

305. _______ refers to the length of the period for which a budget is prepared.

306. Working capital is also called as ______ capital.

307. Gross working capital represents_______.

308. Net working capital represents_______.

309. The Gross working capital is based on ______ concept.

310. _____ is a temporary source of working capital.

311. ______ is a long term source of working capital.

312. Operating cycle method uses _____.

313. ____ is using a single authentication credential that is shared across multiple networks.

314. Both job order costing and process costing ________.

315. Testing a prototype of a new product is an example of a ________.

316. Planned investments and cash dividends are deducted from ________ to arrive at free cash flow.