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Basic Management Accounting MCQ

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

Net cash provided by investing activities

Net cash provided by operating activities

Net income

Net cash provided by financing activities

Answer

Correct Answer: Net cash provided by operating activities

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

Unit-level activity

Batch-level activity

Product-level activity

Organization-sustaining activity

Answer

Correct Answer: Product-level activity

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3. Both job order costing and process costing ________.

Maintain a single Work-in-Process Inventory account

Treat all period costs as product costs

Follow last-in, first-out method for inventory valuation

Have the same type of product costs

Answer

Correct Answer: Have the same type of product costs

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

Identity management

Single Sign On

Standard biometric

Charmap.exe

Answer

Correct Answer: Identity management

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5. Operating cycle method uses _____.

Cost of goods purchased

Cost of goods produced

Cost of goods sold

Cost of goods manufactured

Answer

Correct Answer: Cost of goods sold

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

Trade credit

Issue of share

Advances

Commercial papers

Answer

Correct Answer: Issue of share

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7. _____ is a temporary source of working capital.

Trade credit

Issue of share

Public deposits

Issue of debentures

Answer

Correct Answer: Trade credit

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

Cost

Going concern

Historical

Replacement

Answer

Correct Answer: Going concern

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9. Net working capital represents_______.

Total current liabilities

Excess of current assets over current liabilities

Current assets less current liabilities

Total Current assets

Answer

Correct Answer: Total Current assets

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10. Gross working capital represents_______.

Total current liabilities

Excess of current assets over current liabilities

Current assets less current liabilities

Total Current assets

Answer

Correct Answer: Total Current assets

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11. Working capital is also called as ______ capital.

Circulating

Circumference

Contribution

None of the above

Answer

Correct Answer: Circulating

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

Budget period

Budgeting

Budget control

Budget month

Answer

Correct Answer: Budget period

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13. Budget is derived from the French word _______.

Bougette

Bounet

Bonqet

Budgtte

Answer

Correct Answer: Bougette

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14. Zero based budgeting was first used by _______.

Adam smith

Alfred marshall

Philip kotler

Jimmy carter

Answer

Correct Answer: Jimmy carter

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15. ______ budget is prepared first.

Master

Cash

Key factor

Flexible

Answer

Correct Answer: Key factor

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

Fixed budget

Cash budget

Sales budget

Flexible budget

Answer

Correct Answer: Flexible budget

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17. Operating budgets cover a period of_____.

One year

Two years

Ten years

Twenty years

Answer

Correct Answer: One year

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18. Which one is usually a long term budget?

Fixed budget

Cash budget

Sales budget

Capital expenditure budget

Answer

Correct Answer: Capital expenditure budget

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

Rs 25,000

Rs 28,000

Rs 24,000

None of the above

Answer

Correct Answer: Rs 25,000

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20. A budget is:

Aid to management

Substitute to managemen

Post mortem analysis

None of the above

Answer

Correct Answer: Aid to management

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21. Sales budget is ______.

Functional budget

Expenditure budget

Fixed budget

Master budget

Answer

Correct Answer: Functional budget

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22. Budgets can be classified according to

Time

Functions

Flexibility

All of the above

Answer

Correct Answer: All of the above

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

Fixed Budget

Production budget

Long term Budget

Flexible Budget

Answer

Correct Answer: Production budget

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24. In USA marginal costing is referred as_____.

Direct costing

Variable costing

Incremental costing

All of the above

Answer

Correct Answer: All of the above

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25. Contribution is also called ______.

Marginal income

Gross profit

Net profit

Fixed cost

Answer

Correct Answer: Marginal income

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26. BEP is _____ by changes in fixed cost.

Not affected

Affected

Not influenced

Implemented

Answer

Correct Answer: Affected

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27. At BEP ____ is equal to fixed cost

Contribution

Profit

Sales

Variable cost

Answer

Correct Answer: Contribution

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28. Marginal cost does not include ______

Variable cost

Semi variable cost

Fixed cost

Additional cost

Answer

Correct Answer: Fixed cost

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29. CVP stands for

Cost variance profit

Cost volume profit

Cost variance prime

Contribution volume profit

Answer

Correct Answer: Cost volume profit

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30. Managers utilizes marginal costing for

Managers utilizes marginal costing for

Utilization of additional capacity

Determination of dumping price

All of the above

Answer

Correct Answer: All of the above

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

Actual sales

Total sales

Margin of safety

Net sales

Answer

Correct Answer: Margin of safety

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

Fixed expenses

Variable expenses

Semi‐variable expenses

None

Answer

Correct Answer: Fixed expenses

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33. The break even chart helps the management in _____

Forecasting costs and profits

Cost control

Long term planning and growth

All of the above

Answer

Correct Answer: All of the above

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

Break Even Point

reak Even Point Margin of safety

Break even analysis

None

Answer

Correct Answer: Break Even Point

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

Break Even Point

reak Even Point Margin of safety

Break even analysis

None

Answer

Correct Answer: Break Even Point

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36. The profit of an undertaking is affected by _______

Selling price of the products

Volume of sales

Variable cost per unit and total fixed cost

All of the above

Answer

Correct Answer: All of the above

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37. Profit volume ratio establishes the relationship between _______

Contribution and profit

Fixed cost and contribution

Profit and sales

Contribution and sales value

Answer

Correct Answer: Contribution and sales value

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

50000

40000

20000

The data inadequate

Answer

Correct Answer: 40000

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39. The other name of marginal costing is _______

Direct costing

Variable costing

Incremental costing

All of the above

Answer

Correct Answer: All of the above

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40. Marginal costing technique helps the management in deciding _____

Pricing

To accept fresh orders at low price

To make or buy

All of the above

Answer

Correct Answer: All of the above

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41. The term contribution refers to ____

The difference between selling price and fixed cost

The difference between selling price and variable cost

Profit

None of these

Answer

Correct Answer: The difference between selling price and variable cost

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

Shareholders

Management

Auditors

Creditors

Answer

Correct Answer: Management

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43. Provision for tax is _____ activity.

Operating

Investing

Financing

Manipulating

Answer

Correct Answer: Operating

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44. Increase in bills payable results in _______.

No change in cash

Change in cash

Increase in cash

Decrease in cash

Answer

Correct Answer: Increase in cash

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45. Cash flow include_______.

Cash payments only

Cash receipts only

Cash receipts and payments only

Cash and non cash expenses

Answer

Correct Answer: Cash receipts and payments only

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46. Dividend paid is ______ activity.

Operating

Investing

Financing

Manipulating

Answer

Correct Answer: Financing

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47. Sale of goods is a _______ activity.

Operating

Investing

Financing

Manipulating

Answer

Correct Answer: Operating

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48. AS- 3 deals with______statement.

Fund flow

Cash flow

Income

Expenditure

Answer

Correct Answer: Cash flow

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

Cost of goods purchased for resale.

Wages paid for the erection of plant and machinery.

Obsolescence cost.

Expenses incurred by way of repairs of existing assets which do not have earning capacity

Answer

Correct Answer: Wages paid for the erection of plant and machinery.

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50. 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 ____

Uses of fund

Schedule of change in working capital

Source of fund

Funds flow statements

Answer

Correct Answer: Source of fund

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51. Added to the purchases

Cost

Market value

Cost or market price whichever is lower

None of the above

Answer

Correct Answer: Cost or market price whichever is lower

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

Shown as a deduction from the purchases

Shown as a deduction from the sales

Treated as sales at cost price

Added to the purchases

Answer

Correct Answer: Shown as a deduction from the sales

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

Decrease in share capital

Increase in long-term liabilities

Decrease in long-term liabilities

Increase in fixed assets

Answer

Correct Answer: Increase in long-term liabilities

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54. Which one of the following is capital expenditure?

Cost of advertisement

Purchase of a delivery van

Answer

Correct Answer: Purchase of a delivery van

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55. Expenditure incurred on research is an example of

Capital expenditure

Revenue expenditure

Deferred revenue expenditure

None of the above

Answer

Correct Answer: Capital expenditure

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56. Redeemable preference shares is __

Current assets

Non-current assets

Current liability

Non-Current liability

Answer

Correct Answer: Non-Current liability

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57. Identify the item which is not an operating expense

Advertising expenses

General management salaries

Depreciation of office equipment

Loss on sale of motor car

Answer

Correct Answer: Loss on sale of motor car

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58. Goodwill is a ______ transaction.

Current

Non current

Fixed

Source of fund

Answer

Correct Answer: Non current

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59. Purchase of plant will mean_____ working capital.

Decrease

Increase

Distribute

Rise

Answer

Correct Answer: Decrease

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60. Issue of capital will mean _____ working capital.

Decrease

Increase

Diminish

Distribute

Answer

Correct Answer: Increase

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61. Stock in the beginning results in ______of funds.

Application

Source

No flow

Inflow

Answer

Correct Answer: Application

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

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

Current assets

Fixed assets

Intangible assets

Answer

Correct Answer: Current assets

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

Acid test ratio

Capital turnover ratio

Bad Debt to sales ratio

Answer

Correct Answer: Acid test ratio

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64. Interest coverage Ratio is given by

Net profit / fixed interest charges

Debt capital / Interest on Debt

Earning Before Interest and Tax / lnterest on Debt

Profit Before Tax / Interest on Debt

Answer

Correct Answer: Net profit / fixed interest charges

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65. EPS is calculated as

EBIT / Equity shares

(EBIT - Preference Dividend) / Equity shares

(EAT - Preference Dividend) / Equity shares

EIT / Equity shares

Answer

Correct Answer: (EBIT - Preference Dividend) / Equity shares

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66. Current ratio should normally be

2:1

1:1

1:2

2:2

Answer

Correct Answer: 2:1

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67. What does creditors turnover ratio take into account?

Total credit sales

Total credit purchase

Total cash sales

Total cash purchases

Answer

Correct Answer: Total credit sales

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

Preference shares redeemed

Bills receivable collected

Motor car sold for cash

Machinery bought for cash

Answer

Correct Answer: Bills receivable collected

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69. Current ratio is a ------ ratio

Trading account

Profit and loss

Profitability

Balance shee

Answer

Correct Answer: Balance shee

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70. n the debt equity ratio, equity refers to

Only preference capital

Only equity capital

Both preference and equity capitals plus all reserves

Only reserves

Answer

Correct Answer: Both preference and equity capitals plus all reserves

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

Debtors and B/R

Creditors and B/P

Bank overdraft and loan

Debtors and creditors

Answer

Correct Answer: Debtors and B/R

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

2:1

1:1

1:2

2:2

Answer

Correct Answer: 1:1

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

Current liabilities

Current assets

Total liabilities

Total assets

Answer

Correct Answer: Current liabilities

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

Net sales

Net purchase

Closing stock

Net total sales

Answer

Correct Answer: Net sales

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75. ROI stands for?

Return on Investment

Ratio of Investment

Return of Income

None of these

Answer

Correct Answer: Return on Investment

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

Cost of goods sold / Average stock

Turnover at cost / stock at cost

Turnover at selling price / Stock at selling price

Any of the above

Answer

Correct Answer: Cost of goods sold / Average stock

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77. The stock turnover ratio is ____ .

Financial ratio

Activity ratio

Solvency ratio

Profitability ratio

Answer

Correct Answer: Activity ratio

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78. 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:

6,00,000

16,00,000

9,00,000

12,00,000

Answer

Correct Answer: 6,00,000

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

120

Answer

Correct Answer: 90

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

Fund flow analysis

Cash flow analysis

Ratio

Marginal costing

Answer

Correct Answer: Ratio

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

Vertical

Cross sectional

Horizontal

Internal

Answer

Correct Answer: Cross sectional

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

Vertical

Static

Horizontal

Internal

Answer

Correct Answer: Vertical

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

Vertical

Static

Horizontal

Internal

Answer

Correct Answer: Horizontal

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

Vertical

Static

Horizontal

Internal

Answer

Correct Answer: Horizontal

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85. Retained earnings statement depicts _____

Appropriation of profits

Estimates of profits

Estimates of costs

All the above

Answer

Correct Answer: Appropriation of profits

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86. Preparation of financial statements is essential under _______.

Income tax

Company law

Business law

All the above

Answer

Correct Answer: Company law

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87. Business entity concept distinguishes between _____.

Individual and business

Businesss and business

Owners

All the above

Answer

Correct Answer: Individual and business

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88. Going concern concept assumes business as a_____.

Going concern

Dissolving concern

Realizing concern

None of the above

Answer

Correct Answer: Going concern

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89. Financial accounts record only______.

Actual figures

Budgeted figures

Standard figures

None of the above

Answer

Correct Answer: Actual figures

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90. Profit and Loss Account is also called_______.

Funds Flow Statement

Income Statement

Cash Flow

None of the above Statement

Answer

Correct Answer: Income Statement

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

Statement

Document

Picture

Balance

Answer

Correct Answer: Statement

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92. Which of the following accounting equation is correct?

Capital + Liabilities= Assets

Capital = Assets + Liabilities

Capital- Liabilities = Assets

Capital + Assets = Liabilities

Answer

Correct Answer: Capital + Liabilities= Assets

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93. Accounting is concerned with

Monetary transactions

Non-monetary transactions

Monetary and non-monetary transactions

None of the above

Answer

Correct Answer: Monetary transactions

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94. The use of management accounting is

Optional

Compulsory

Legally obligatory

Compulsory to some and optional to others

Answer

Correct Answer: Optional

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

Capital expenditure

Revenue expenditure

Deferred revenue expenditure

None of the above

Answer

Correct Answer: Deferred revenue expenditure

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

Car

Debtors

Stock

Prepaid expenses

Answer

Correct Answer: Car

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97. Interpretation of accounts is the

Art and science of translating the figures

To know financial strengths and weaknesses of a business

To know the causes for the prevailing performance of business

All of the above

Answer

Correct Answer: All of the above

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

Financial accounting

Tax accounting

Management accounting

Inflation accounting

Answer

Correct Answer: Financial accounting

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99. Management accounting deals with

Quantitative information

Qualitative information

Both a and b

None of the above

Answer

Correct Answer: Both a and b

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100. In planning, direction and control

1960

1950

1945

1955

Answer

Correct Answer: 1950

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101. Management accounting assists the management

Only in control

Only in planning

In planning, direction and control

Answer

Correct Answer: In planning, direction and control

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

200

250

300

400

500

Answer

Correct Answer: 250

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

6667

8888

5555

4444

7777

Answer

Correct Answer: 6667

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104. 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?

Answer

Correct Answer: 70

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

repairs

cafeteria

assembly

stores

Answer

Correct Answer: assembly

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

Gross Operating Profit / Average Operating Assets

Average Operating Assets / Avg Stock

Material consumed / Avg Stock

Cost of sale / Avg Stock

Sales / Avg Stock

Answer

Correct Answer: Cost of sale / Avg Stock

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

Indirect costing

Activity-based costing

Normal costing

Standard costing

Answer

Correct Answer: Indirect costing

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

customers served

kilometers traveled

pallets delivered

staff hours worked

machine hours worked

Answer

Correct Answer: customers served

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109. 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?

8.0

4.0

6.4

5.3

Answer

Correct Answer: 6.4

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

Fixed factory overheads

Fixed administration costs

Variable administration and sales expenses

Cost of Goods sold

Depreciation expense

Answer

Correct Answer: Variable administration and sales expenses

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

daily

monthly

yearly

fortnightly

weekly

Answer

Correct Answer: yearly

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

120000

2500

250000

1200

Answer

Correct Answer: 250000

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

Variable cost

Labor Cost

Material cost

All of the above

Fixed cost

Answer

Correct Answer: Variable cost

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

52000

41900

45000

42860

Answer

Correct Answer: 42860

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

8 500

7 500

6 500

5 500

4 500

Answer

Correct Answer: 7 500

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

Liquidation value

FIFO

Weighted average

Specific identification

Standard cost

Answer

Correct Answer: Liquidation value

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117. Operating leverage shows...

how an organization used variable cost for the period

how an organization used contribution margin

how an organization used net profit for the period

how an organization used fixed cost for the period

Answer

Correct Answer: how an organization used fixed cost for the period

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

False

True

Answer

Correct Answer: False

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

The costs can be estimated with a fair degree of certainty.

The benefits from the expenditure will rise over a number of years.

The project is an important part of a company’s strategic planning

The project is likely to involve considerable expenditure.

Answer

Correct Answer: The costs can be estimated with a fair degree of certainty.

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

Accounting rate of return

Payback method

Capital budgeting.

Discounted cash flow technique

Net present value

Answer

Correct Answer: Capital budgeting.

Note: This Question is unanswered, help us to find answer for this one

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

Trading account budget

Purchasing budget

Production budget

Sales budget

Capital expenditure budget

Answer

Correct Answer: Trading account budget

Note: This Question is unanswered, help us to find answer for this one

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

250,000

cant be determined

2000

1200

2500

Answer

Correct Answer: 2000

Note: This Question is unanswered, help us to find answer for this one

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

positive

negative

Answer

Correct Answer: 0

Note: This Question is unanswered, help us to find answer for this one

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

80%

20%

Answer

Correct Answer: 5

Note: This Question is unanswered, help us to find answer for this one

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

9500

12000

7500

1000

8500

Answer

Correct Answer: 1000

Note: This Question is unanswered, help us to find answer for this one

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

producing movies

Brick and tile manufacturing

law firms cases

accounting firm audit work

building yachts to customer specifications

Answer

Correct Answer: Brick and tile manufacturing

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

False

True

Answer

Correct Answer: True

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

Internal Rate of Return

Payback period

Profitability Index

Net present value

Accounting rate of return

Answer

Correct Answer: Internal Rate of Return

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

Cost of sales ÷ Total assets

Net Annual Sales ÷ Total assets

Total assets ÷ Cost of good sold

Total assets ÷ Net Annual Sales

Answer

Correct Answer: Net Annual Sales ÷ Total assets

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

False

True

Answer

Correct Answer: False

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

the cost to replace it rather than on historical cost.

the cost flow based on a weighted average of unit costs

the cost flow in a reverse chronological order

the cost flow on the chronological order purchases are made

the estimated selling price less any expense incurred to dispose of the good

Answer

Correct Answer: the cost to replace it rather than on historical cost.

Note: This Question is unanswered, help us to find answer for this one

132. What is the formula for operating leverage?

net income / contribution margin

Contribution margin/net income

Contribution margin/variable expense

contribution margin / fixed expense

Answer

Correct Answer: Contribution margin/net income

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

for financial statement auditing purposes

for inventory valuation

for management control of costs

for motivation of employees

Answer

Correct Answer: for financial statement auditing purposes

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

Historical costs

Discretionary costs

Conversion costs

Prime costs

Answer

Correct Answer: Discretionary costs

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

Direct and Indirect Cost

Fixed and variable cost

Controllable an Uncontrollable cost

Avoidable and unavoidable cost

Answer

Correct Answer: Direct and Indirect Cost

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

Answer

Correct Answer: 55

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

Finished goods

Cost of Goods Sold

Materials control

Work in progress

Answer

Correct Answer: Cost of Goods Sold

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

Merchandising

Overheads

Service costs

Product costs

Direct costs

Answer

Correct Answer: Product costs

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139. 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?

400

600

300

200

700

Answer

Correct Answer: 600

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

50%

30%

40%

70%

80%

Answer

Correct Answer: 70%

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

Margin costing

Absorption costing

Direct costing

Answer

Correct Answer: Margin costing

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

Reduction in the inventory handling cost

Reduction in the ordering cost

A reduction in production delays as a result of ‘stockouts’.

Reduction in the inventory carrying cost

Answer

Correct Answer: A reduction in production delays as a result of ‘stockouts’.

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143. Rolling budgets are useful when

Future events can be forecast ed with assurance

Future event cannot be forecast reliably

All of the above

Non of the above

Future events can be forecast reliably

Answer

Correct Answer: Future event cannot be forecast reliably

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

Material costs

Selling and distribution costs

Audit and accounting fees

Marketing costs

Interest and finance costs

Answer

Correct Answer: Material costs

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

under-applied overhead

depreciation

amortization

over-applied overhead

under-utilized assets

Answer

Correct Answer: under-applied overhead

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

$100,000

$10,000

$70,000

$40,000

$30,000

Answer

Correct Answer: $40,000

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

direct labor

direct materials

factory overhead

Answer

Correct Answer: direct labor

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

Dressmaking to order

Manufacturing cars

Quick printing/photocopying service

Public accountants

Renovating kitchens

Answer

Correct Answer: Manufacturing cars

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149. Royalties paid are which type of cost?

Fixed

Semi-variable

Variable

Answer

Correct Answer: Variable

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

Activites

Products

Direct cost

Indirect cost

All of the above

Answer

Correct Answer: Activites

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

insurance and taxes

depreciation

freight in

fringe benefits

indirect labor

Answer

Correct Answer: freight in

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

number of inspections

actual units made

number of set-ups

number of design change orders

number of materials requisitions

Answer

Correct Answer: actual units made

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

it is the sacrifice of resources where we cease to have the ability to use that resource to buy something else.

it is a measured value that includes unused economic benefit

it is the monetary value that was used up in the generation of revenue for an accounting period

it is the amount of cash or cash equivalents paid to initially acquire an asset

Answer

Correct Answer: it is the monetary value that was used up in the generation of revenue for an accounting period

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154. 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?

20%

50%

30%

40%

10%

Answer

Correct Answer: 30%

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

prepared for operational activities

only prepared by the top-level management

the detailed capital investments of the owners

prepared for the acquisition of capital items

prepared for production activities

Answer

Correct Answer: prepared for the acquisition of capital items

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

opportunity cost plus the Standard variable cost

Market price

Variable price plus profit

Fixed price plus variable price

Answer

Correct Answer: opportunity cost plus the Standard variable cost

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157. Engineered cost is best defined as:

Cost that has a clear relationship between the input and output of that process

Cost that is related to the newest technology used in the production

Cost that does not have clear relationship between the input and output of that process

Answer

Correct Answer: Cost that has a clear relationship between the input and output of that process

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

tax accounting

financial accounting

cost accounting

bookkeeping

responsibility accounting

Answer

Correct Answer: responsibility accounting

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

Direct labor

Job subcontracting costs

Factory overhead costs

Direct materials

Answer

Correct Answer: Factory overhead costs

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160. Operating Leverage Indicates

how for an organization used variable cost for the period

how for an organization used historical cost for the period

how for an organization used current cost for the period

how for an organization used fair cost for the period

how for an organization used fixed cost for the period

Answer

Correct Answer: how for an organization used fixed cost for the period

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

A product costing system that usually eliminates separate accounting for work-in-process

A product costing system also called delayed costing, endpoint costing or post-deduct costing.

A product costing system generally used in a just-in-time inventory environment or where inventory is kept at a minimum.

A costing system that delays recording changes in the status of a product being produced until good finished units appear

A product costing system that requires detailed tracking of costs throughout the production process

Answer

Correct Answer: A product costing system that requires detailed tracking of costs throughout the production process

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

spending variance

budget (controllable) variance

volume (uncontrollable) variance

Answer

Correct Answer: spending variance

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

machine hours

materials cost

actual units made

direct labor costs

number of inspections

Answer

Correct Answer: number of inspections

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164. 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%?

2,000

4,000

1,000

5,000

3,000

Answer

Correct Answer: 3,000

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

False

True

Answer

Correct Answer: False

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

the range of inventory valuation methods

the span of activity

the number of projects

the number of accounts

the types of expenses

Answer

Correct Answer: the span of activity

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

Conversion costs

Prime costs

Direct manufacturing costs

Fixed costs

Variable costs

Answer

Correct Answer: Conversion costs

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

variable costs will vary in total.

variable costs will vary on a per unit basis.

none of the other four answers is true.

fixed and variable cost stay the same in total.

fixed costs will vary in total.

Answer

Correct Answer: variable costs will vary in total.

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

determined by senior management

budget outcomes are more flexible and less ridged

management only provide structural budgetary guidelines

goals are generally more realistic

greater involvement by staff at all levels

Answer

Correct Answer: determined by senior management

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170. Definition of cost accounting

all of the above

The establishment of budget standard cost and actual cost of operation process activities or products and the analysis of the variance profitability or the social use of funds.

none of the above

cost accounting deals in cost of the products,like raw material ,labor and Factory overhead

Cost accounting deals in the cost of producing the good

Answer

Correct Answer: The establishment of budget standard cost and actual cost of operation process activities or products and the analysis of the variance profitability or the social use of funds.

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

focusing on particular products and cost centers

decisions about the day to day operations of a business.

Preparing financial statements for prior periods.

Preparing financial reports for future periods.

Internal controls.

Answer

Correct Answer: Preparing financial statements for prior periods.

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

+10% and favorable

+9.09% and unfavorable

+10% and unfavorable

-10% and unfavorable

+110% and favorable

Answer

Correct Answer: +10% and unfavorable

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

continuous budget

program budget

zero-sum budget

global budget

master budget

Answer

Correct Answer: zero-sum budget

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

True

False

Answer

Correct Answer: False

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175. 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?

.85

2.25

1.25

.825

Answer

Correct Answer: .8

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176. 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...

had an internal rate of return that was slightly LESS than 16%

had negative internal rate of return

had an internal rate of return that was slightly Greater than 16%

had positive internal rate of return

Answer

Correct Answer: had an internal rate of return that was slightly LESS than 16%

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177. 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?

The profit under absorption costing will be lower 1500 from variable costing

The profit under variable costing will be same

The profit under absorption costing will be higher 1500 from variable costing

The profit under variable costing will be higher 1500 from absorption costing

Answer

Correct Answer: The profit under absorption costing will be higher 1500 from variable costing

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

Direct labor

Variable Overhead

Raw material

Fixed Overhead

Answer

Correct Answer: Fixed Overhead

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179. 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%.

True

False

Answer

Correct Answer: False

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

33.33%

25%

100%

10%

50%

Answer

Correct Answer: 50%

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

Sales commission

All of these

The labor cost of assembly

Non of these

The cost of heating the factory

Answer

Correct Answer: The cost of heating the factory

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

Work in Process, finished goods, cost of goods sold

cost of goods sold, finished goods, work in process

work in process, cost of goods sold, finished goods

finished goods, work in process, cost of goods sold

Answer

Correct Answer: Work in Process, finished goods, cost of goods sold

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183. The Scattergraph method is...

a more accurate method of analysing mixed costs than the high-low method

relatively less accurate method of analyzing mixed cost than the high and low method.

none of these.

not an accurate method of analyzing mixed cost than high and low method

Answer

Correct Answer: a more accurate method of analysing mixed costs than the high-low method

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

deducting variable costs from gross profit

deducting all variable costs from sales

deducting variable costs from total costs

deducting all costs from sales

deducting all fixed costs from sales

Answer

Correct Answer: deducting all variable costs from sales

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

False

True

Answer

Correct Answer: False

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186. 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 ...?

$12

$30

$22

Answer

Correct Answer: $12

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

Accumulation costing

Job/order costing

Joint or by-product costing

Process costing

Operation costing

Answer

Correct Answer: Accumulation costing

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

Material requirement planning

Cost accounting

Management information system

Double-entry bookkeeping system

Operational budgets

Answer

Correct Answer: Double-entry bookkeeping system

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

False

True

Answer

Correct Answer: True

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

cost/benefit analysis reports

financial statements

performance reports

statutory reports

compliance reports

Answer

Correct Answer: performance reports

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

Prevention Costs

Appraisal costs

External failure reworking costs

Internal Costs

Answer

Correct Answer: External failure reworking costs

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

Depreciation, Research

Advertising, Rent of building

Depreciation, Rent of building

Advertising, Research

Answer

Correct Answer: Depreciation, Rent of building

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

the contribution margin

the margin of safety

the gross profit margin

the margin call

the actual variance

Answer

Correct Answer: the margin of safety

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194. Net terminal value is=

All of these

Repayment of capital payment + interest due on it or surplus arising after the repayment of capital amount with interest

value after payment of interest amount

value after payment of capital payment

Answer

Correct Answer: Repayment of capital payment + interest due on it or surplus arising after the repayment of capital amount with interest

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195. Out of pocket cost requires

expenditure of fixed cost

cash expenditure

None of these

expenditure of variable cost

Answer

Correct Answer: cash expenditure

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

False

True

Answer

Correct Answer: False

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

selling and administrative costs

variable costs

fixed costs

sales revenues

Answer

Correct Answer: fixed costs

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198. How to you calculate breakeven in sales?

fixed costs ÷ sales

variable costs ÷ sales

fixed costs ÷ contribution margin ratio

contribution margin ÷ fixed costs

variable costs ÷ contribution margin ratio

Answer

Correct Answer: fixed costs ÷ contribution margin ratio

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

cost center

revenue center

profit center

equity center

investment center

Answer

Correct Answer: equity center

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200. How do you calculate the margin of safety?

sales - fixed sales - break even sales

sales - variable costs

break even sales - sales

sales - break even sales

sales - fixed costs

Answer

Correct Answer: sales - break even sales

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201. How do you calculate the Margin of Safety?

break even sales - fixed costs

total sales - fixed costs

fixed costs - variable costs

total sales - variable costs

total sales - break even sales

Answer

Correct Answer: total sales - break even sales

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202. 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?

4.5

2.5

Answer

Correct Answer: 2.5

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

Management salaries

Direct materials

Property rates

Depreciation on equipment

Rent

Answer

Correct Answer: Direct materials

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204. Breakeven $ is calculated by which formula?

'Fixed costs' ÷ 'Variable cost %'

'Fixed costs' ÷ 'Contribution margin ratio'

'Variable costs' ÷ 'Contribution margin ratio'

'Total costs' ÷ 'Contribution margin ratio'

Answer

Correct Answer: 'Fixed costs' ÷ 'Contribution margin ratio'

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

fixed costs ÷ sales

variable costs ÷ contribution margin ratio

variable costs ÷ sales

fixed costs ÷ contribution margin ratio

sales - variable costs

Answer

Correct Answer: fixed costs ÷ contribution margin ratio

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

Sales volume in dollars required to earn target income

Sales volume in units require to earn target in income

Answer

Correct Answer: Sales volume in dollars required to earn target income

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

True

False

Answer

Correct Answer: True

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208. Contribution Margin/Net Income is the formula for

Operating leverage

Break even point

Answer

Correct Answer: Operating leverage

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

$90,000

$30,000

$10,000

$70,000

$40,000

Answer

Correct Answer: $40,000

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210. Management by exception means ...?

that management can report in a no-fault environment

that management can delegate all responsibilities

that management can concentrate on investigating areas not included in the reports

that management can concentrate on significant matters that require attention

that management provides different reports for different stakeholders

Answer

Correct Answer: that management can concentrate on significant matters that require attention

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211. How do you calculate breakeven in units?

fixed costs ÷ variable costs

variable costs ÷ unit sales

fixed costs ÷ unit sales

fixed costs ÷ contribution margin per unit

variable costs ÷ contribution margin per unit

Answer

Correct Answer: fixed costs ÷ contribution margin per unit

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212. How do you calculate the Contribution Margin?

sales - fixed costs

sales - (variable costs + fixed costs)

fixed costs - sales

sales - variable costs

variable costs - sales

Answer

Correct Answer: sales - variable costs

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

65000 dollars

70000 dollars

80000 dollars

75000 dollars

85000 dollars

Answer

Correct Answer: 75000 dollars

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

Purchase volume in units required to pay target expense

Sale volume in units required to earn target income

None of these

Sale volume in Dollars Required to earn target income

Answer

Correct Answer: Sale volume in units required to earn target income

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

7000

2500

5000

9000

8000

Answer

Correct Answer: 8000

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

highest benefit, regardless of the cost

highest cost to benefit ratio

highest benefit to cost ratio

lowest benefit to cost ratio

lowest cost to benefit ratio

Answer

Correct Answer: highest benefit to cost ratio

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

$70,000

$30,000

$20,000

$100,000

$90,000

Answer

Correct Answer: $30,000

Note: This Question is unanswered, help us to find answer for this one

218. What is the formula for breakeven?

Fixed costs ÷ gross profit %

Fixed cost ÷ net profit %

Variable cost ÷ contribution margin %

Total costs ÷ contribution margin %

Fixed costs ÷ contribution margin %

Answer

Correct Answer: Fixed costs ÷ contribution margin %

Note: This Question is unanswered, help us to find answer for this one

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

Cash flow arising from the project

The incidence of cash flows arising from the project

Depreciation of the initial asset acquired

Initial investment

Answer

Correct Answer: Depreciation of the initial asset acquired

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220. 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?

step cost

mixed cost

rent cost

variable cost

fixed cost

Answer

Correct Answer: variable cost

Note: This Question is unanswered, help us to find answer for this one

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

Financial statement preparation

Statutory compliance

Tax accounting

Cost accounting

Auditing

Answer

Correct Answer: Cost accounting

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222. How do you calculate the break even point?

fixed cost ÷ contribution margin ratio

variable costs ÷ fixed costs

sales ÷ variable costs

fixed cost ÷ sales

fixed costs ÷ variable costs

Answer

Correct Answer: fixed cost ÷ contribution margin ratio

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

No difference

In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.

BE sales uses fixed costs BE units uses variable costs

CM Ratio is for break even units and CM Unit is for break even sales

BE units uses fixed costs and BE sales uses variable costs

Answer

Correct Answer: In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.

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

Answer

Correct Answer: 55

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

writing off receivables

selling receivables to a factor

accepting national credit cards for customer purchases

offering discounts for early payment

Answer

Correct Answer: writing off receivables

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

True

False

Answer

Correct Answer: False

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

Standard + Actual = Difference

Standard = Actual + Difference

Standard - Actual = Difference

Standard = Actual - Difference

Answer

Correct Answer: Standard - Actual = Difference

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

prime costs = direct materials + manufacturing overhead, conversion costs = direct labor + direct materials

prime costs = direct labor + manufacturing overhead, conversion costs = direct labor + direct materials

prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead

Answer

Correct Answer: prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead

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

a master budget

a rolling budget

a period budget

an operating budget

a static budget

Answer

Correct Answer: a rolling budget

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

Selling, General And Administration

Selling, General And Accounting

Selling, Goods And Accruals

Special Goods And Assets

Special Goals And Aims

Answer

Correct Answer: Selling, General And Administration

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

True

False

Answer

Correct Answer: False

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

Discretionary

Prime

Fixed

Variable

Conversion

Answer

Correct Answer: Variable

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

fixed costs

product costs

variable costs

period costs

Answer

Correct Answer: fixed costs

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

50,000

40,000

90,000

30,000

60,000

Answer

Correct Answer: 60,000

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

a cost center

an investment center

a revenue center

a profit center

Answer

Correct Answer: a cost center

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

The information produced allows outsiders to judge the overall past performance of a business

The information produced is not made public and is used for internal decision making only

It is focused on producing the balance sheet and income statement

The central outputs are audited financial statements

It is focused on producing a limited set of specific prescribed financial statements in accordance with generally accepted accounting principles

Answer

Correct Answer: The information produced is not made public and is used for internal decision making only

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

increases

decreases

remains the same

Answer

Correct Answer: decreases

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238. 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 ...?

cashflow budget

operating expenses budget

master budget

capital expenditure budget

sales budget

Answer

Correct Answer: master budget

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239. What is the formula for the contribution margin?

sales - variable costs

sales - fixed cost

sales - fixed costs - variable costs

sales - expenses

fixed cost - variable cost

Answer

Correct Answer: sales - variable costs

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

none of these

increases

experience has no link with time

remains the same

decreases

Answer

Correct Answer: decreases

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241. 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.

True

False

Answer

Correct Answer: True

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

Branch ledger

Factory ledger

Fixed assets schedule

Accounts payable ledger

Accounts receivable ledger

Answer

Correct Answer: Factory ledger

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

Income Statement

Variance report

Balance sheet

Equity Statement

Notes to the financial statements

Answer

Correct Answer: Variance report

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

True

False

Answer

Correct Answer: False

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

to increase the production output per employee

to achieve a targeted return on investment

to conduct a specific number of inspections per shift

to reduce product delivery times to customers

to reach a targeted % occupancy rate for a hospital

Answer

Correct Answer: to achieve a targeted return on investment

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

False

True

Answer

Correct Answer: True

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

Budgeting is a bookkeeping task.

The focus of budgeting is planning.

Budgeting helps managers determine the resources needed to meet their goals and objectives.

Budgeting is an executive responsibility.

Budgeting is a key ingredient in good decision-making.

Answer

Correct Answer: Budgeting is a bookkeeping task.

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

The economic value of what is given up when a person chooses one option over another.

The economic value derived from the chosen opportunity

The cost of analyzing various opportunities.

The amount of money required to invest in an opportunity

All the financial and non-financial costs in relation to sourcing and trialing new opportunities.

Answer

Correct Answer: The economic value of what is given up when a person chooses one option over another.

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249. Marginal cost is:

The variable cost of units

The fixed cost of units

None of these

The cost of one extra unit produced

Answer

Correct Answer: The cost of one extra unit produced

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

decrease both fixed costs and the contribution margin

increase both fixed costs and the contribution margin

increase fixed costs and decrease the contribution margin

Decrease fixed costs and increase the contribution margin

Answer

Correct Answer: Decrease fixed costs and increase the contribution margin

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

Issue of debenture

Bank overdraft

Issuance of share capital

Leasing

Answer

Correct Answer: Bank overdraft

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252. 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.

True

False

Answer

Correct Answer: True

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

Answer

Correct Answer: 1

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254. Variable costs do NOT include:

direct labor

variable manufacturing overhead

rent

direct materials

Answer

Correct Answer: rent

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

current earnings.

future cash flow predictions.

accrual net income.

earnings per share.

accounting net income.

Answer

Correct Answer: future cash flow predictions.

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

The wages rate of the workers

The cost of the investigation so far

The business rates of the factory

None of these.

Answer

Correct Answer: The cost of the investigation so far

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

8500

2500

7500

4500

5000

Answer

Correct Answer: 2500

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

Pareto Diagrams

Control charts

Cause and Effect (fishbone) diagram

Government economic indicators

Answer

Correct Answer: Government economic indicators

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

Managerial Accountants are solely staff advisors in an organization.

Managerial accountants prepare the financial statements for an organization.

Managerial accountants facilitate the decision-making process within an organization.

Managerial accountants are primarily information collectors.

Managerial accountants make the key decisions within an organization.

Answer

Correct Answer: Managerial accountants facilitate the decision-making process within an organization.

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

True

False

Answer

Correct Answer: True

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

True

False

Answer

Correct Answer: True

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262. 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.

False

True

Answer

Correct Answer: True

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

Material on hand

Finished goods

Merchandise inventory

Work in progress

Answer

Correct Answer: Work in progress

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

Hourly pay to production employees and Salaries to production managers

Hourly pay to factory Cleaning employees

Hourly pay to administrative employees

Hourly pay to security employees

Answer

Correct Answer: Hourly pay to production employees and Salaries to production managers

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265. 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?

True

False

Answer

Correct Answer: True

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

meets the expected sales target

ensures a sustainable net profit

is exactly equal to the fixed costs

is needed to pay the bank loans

will result in no profit or loss.

Answer

Correct Answer: will result in no profit or loss.

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

True

False

Answer

Correct Answer: True

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

True

False

Answer

Correct Answer: True

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

True

False

Answer

Correct Answer: True

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

painting

assembly

stores

machining

Answer

Correct Answer: stores

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

material costs

service costs

factory overheads

labor costs

product costs

Answer

Correct Answer: factory overheads

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

Positive

Negative

Answer

Correct Answer: Positive

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273. Working capital is ...?

cash at bank

all the assets of the organisation

the total of all the investments of the business

current assets less current liabilities

money held on the business premises

Answer

Correct Answer: current assets less current liabilities

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

$75.00

$250.00

$52.50

$100.00

$25.00

Answer

Correct Answer: $75.00

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

1 years

Forever

10 years

3 years

5 years

Answer

Correct Answer: Forever

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276. Manufacturing costs typically consist of ...?

direct materials, direct labor, marketing and administrative costs

direct materials, direct labor, and administrative costs

production and marketing costs

direct materials, direct labor, and manufacturing overhead

production and shipping costs

Answer

Correct Answer: direct materials, direct labor, and manufacturing overhead

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277. Sunk cost is best defined as...

the cost which has already been incurred in the past any future or present action could not affect it

a cost which is incurred due to increase in the volume of production

a cost which will incurred in the future

a cost which remains fixed

a cost which changes due to volume

Answer

Correct Answer: the cost which has already been incurred in the past any future or present action could not affect it

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

greater profitability

improvement in the brand image

a higher skilled workforce

increased production

more efficient work groups

Answer

Correct Answer: greater profitability

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

manufacturing companies without inventory

manufacturing companies with inventory

merchandising companies

all of these

service providers

Answer

Correct Answer: all of these

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

product cost

customer satisfaction

net worth

inventory cost

net income

Answer

Correct Answer: customer satisfaction

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

Material costs

Factory overhead costs

Financial costs

Labor costs

Answer

Correct Answer: Financial costs

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

Not accepted

Accepted

Answer

Correct Answer: Accepted

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

NOT accepted

Accepted

Answer

Correct Answer: Accepted

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284. 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.

False

True

Answer

Correct Answer: True

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

be restricted to qualified accountants

be open to everyone in the organisation who thinks they have some good ideas

never include people below tactical level management

be restricted to top-level management

include the management and the people responsible for achieving the budgeted outcomes

Answer

Correct Answer: include the management and the people responsible for achieving the budgeted outcomes

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

True

False

Answer

Correct Answer: True

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

The different between the cash inflow and present value of cash outflow

The difference between cash out flow and inflow

The difference between the present value of cash inflows and the present value of cash outflows

Answer

Correct Answer: The difference between the present value of cash inflows and the present value of cash outflows

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

False

True

Answer

Correct Answer: True

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

True

False

Answer

Correct Answer: True

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

Payroll taxes

Long-service leave

Holiday leave

Depreciation on staff cafeteria equipment

Workers accident insurance

Answer

Correct Answer: Depreciation on staff cafeteria equipment

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291. 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.

False

True

Answer

Correct Answer: True

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

Yes - The project should be accepted

No - The project should not be accepted

Answer

Correct Answer: No - The project should not be accepted

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

The salary of the managing director

Salary of the accounts manager

The salary of the factory manager

Salary of the Admin manager

The wages of shop workers paid by piece rate

Answer

Correct Answer: The wages of shop workers paid by piece rate

Note: This Question is unanswered, help us to find answer for this one

294. What is a hurdle rate?

The rate which company earns after investing in Stock Exchange in securities.

Bank interest rate is also called the hurdle rate.

In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.

Answer

Correct Answer: In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.

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

True

False

Answer

Correct Answer: True

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296. 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?

Difference

Variance

Answer

Correct Answer: Variance

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

Indirect costs

Service costs

Direct costs

Manufacturing costs

Product costs

Answer

Correct Answer: Indirect costs

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

False

True

Answer

Correct Answer: True

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

Raw material-Work in process- Finished Goods

work in Process- Finished Goods

None of these

Raw material- Finished Goods work in process

Answer

Correct Answer: Raw material-Work in process- Finished Goods

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

True

False

Answer

Correct Answer: True

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

Manufacturing canned fruit

Building houses

Baking bread

Manufacturing instant coffee

Manufacturing bags of cement

Answer

Correct Answer: Building houses

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302. 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.

False

True

Answer

Correct Answer: True

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Management Accounting MCQs | Topic-wise

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