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1. Management Accounting __________________.

Accumulates, summarizes and analyses the available data. Is primarily concerned with the requirements of the management. Makes Corporate Planning and Strategy effective. All of the above.

2. Management accounting can be viewed as________________.

Marketing-oriented Accounting Management-oriented Accounting Accounting-oriented Management Manager-oriented Accounting

3. The main objective of management accounting is ___________________.

To maintain the accounting records To know the amount due from customers and suppliers To ascertain analyse and interpret the results of business operations To record all the business transactions

4. is the study of managerial aspects of financial accounting ______________.

Cost accounting Financial accounting Management accounting Business accounting

5. The purpose of management accounting is to help make decisions.

Managers Investors Marketers Banks

6. Management accounting assists the management in Planning, Directing, Controlling.

Planning Directing Controlling All of the above

7. ‘Period of lost relevance’ is the of the evolution of management accounting.

1st stage 2nd stage 3rd stage 4th stage

8. __________________ criteria are a set of standards for a company’s behaviour used by socially conscious investors to screen potential investments.

JIT AMT ESG ABC

9. Management accounting information helps managers formulate strategy by answering which of the following questions?

Who are the most important customers, and how can the company deliver value to the customers? What is most critical capability of the company which may be technology, production, or marketing? How can we leverage it for new strategic initiatives? All of the above

10. Management accounting with specific focus on environmental issues is becoming increasingly important in organizations as environmental costs are large in many organisations. There are three specific reasons for this, which are___________________.

Environmental costs are often high in many manufacturing organisations Regulatory requirements often impose huge fines for non-compliance Companies are increasingly realizing that being socially and environmentally responsible declines their image and this has positive impact on their bottom line. Both 1 and 2

11. Management accounting is concerned with data collection from ____________.

internal sources external sources internal and external sources internal or external sources

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

Robert N. Antho Brown and Howard CIMA The Institute of Chartered Accountants of England and Wales

13. The primary objective of Management Accounting is to _______________.

maximize profits minimize losses maximize profits or minimize losses All of the above

14. Which of the following is a correct definition of activity-based management?

An approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs. Resources are assigned to activities and activities to cost objects based on consumption estimates. A method of budgeting based on an activity framework and utilizing cost driver data in the budget-setting and variance feedback processes. A system of management which uses activity-based cost information for a variety of purposes including cost reduction, cost modeling and customer profitability analysis.

15. Which of the following characteristics would be an indicator that a company would benefit from switching to activity based costing?

Only one homogenous product is produced on a continuous basis The existing cost system is reliable and has produced excellent results Overhead costs are high and increasing and no one seems to know why The costs of implementing ABC outweigh the benefits

16. According to the Chartered Institute of Management Accountants (CIMA), cost attribution to cost units on the basis of benefits received from indirect activities e.g. ordering, setting up, and assuring quality is known as:

Absorption costing Marginal costing Activity-based costing Job costing

17. In an ABC system, which of the following is likely to be classified as a batch level activity?

Machine set-up Product design Inspection of every item produced Production manager’s work

18. Activity based costing

Uses a plant wide overhead rate to assign overhead Is not expensive to implement Typically applies overhead costs using direct labour hours Uses multiple activity rates

19. Which of the following activities is not a batch level activity?

Processing purchase orders Designing products Receive raw materials from suppliers Setting up equipment

20. Which of the following is not included in batch level activities?

Material ordering cost Machine set-up cost Inspection cost Designing the product

21. Assigning overhead using ABC often:

Shifts overhead costs from high-volume products to low-volume products Shifts overhead costs from low-volume products to high-volume products Provides the same results as traditional costing Requires one predetermined overhead rate

22. In Activity Based Costing:

Non-manufacturing costs may not be assigned to products Some manufacturing costs may be excluded from product costs Allocation bases are the same as those used in traditional costing methods Similar to traditional costing, ABC only uses one overhead cost pool

23. In an ABC system, the allocation bases that are used for applying costs to services or procedures are called:

Cost Pool Cost Driver Cost Absorption Cost Object

24. Which of the following would not be deducted from sales in a management report prepared using ABC?

Direct materials Direct labour Variable selling and administration costs Shipping costs

25. an item for which cost measurement is required e.g. product, job or a customer

Cost Pool Cost Driver Cost Absorption Cost Object

26. Which of the following is different in ABC when compared to traditional costing?

Traditional costing and ABC costing usually yield very similar product costs In an ABC costing system, costs are only assigned to products that actually required work that gave rise to a particular cost In ABC, batch-level costs are applied to products using unit-level bases Under traditional costing, batch-level costs are shifted from high-volume products to low-volume products

27. Process of Cost allocation under Activity Based Costing is:

Cost of Activities—Activities—Cost Driver – Cost allocated to cost objects Cost Driver — Cost of Activities— Cost allocated to cost objects – Activities Activities— Cost of Activities—Cost Driver – Cost allocated to cost objects Activities—Cost Driver – Cost allocated to cost objects — Cost of Activities

28. Cost of maintaining a building is:

Unit Level Cost Batch Level Cost Product Level Cost Facility Level Cost

29. should be subtracted from net product revenues instead of an arbitrary and illogical apportionment.

Facility Level Cost Product Level Cost Organizational Level Cost High Level Cost

30. The basis of apportionment of overheads which takes into account the profitability of various departments is called:

FIFO basis LIFO basis Ability to pay basis Activity basis

31. Which of the following is the main cost driver of customer order processing activity?

Flow of the product from the assembly line Order value Number of problem suppliers Number of machine charges

32. Painting the product would be an example of which activity level groups:

Facility-level activity Product-level activity Unit-level activity Batch-level activity

33. Which of the following tasks is not normally associated with an activity-based costing system?

Calculation of cost application rates Identification of cost pools Preparation of allocation matrices Identification of cost drivers

34. All of the following are examples of batch level activities except:

Purchase order processing Setting up equipment The clerical activity associated with processing purchase orders to produce an order for a standard product Worker recreational facilities

35. A cost driver -

is a force behind the overhead cost is an allocation base is a transaction that is a significant determinant of cost is all of the above

36. Which of these is NOT a cost driver For the Activity Design of products, services & Processes?

Number of Products in design Number of Parts per product Number of employee Training Programmes Number of engineering Hours

37. Which of these in NOT a Cost driver for Marketing and sales Function?

Number of advertisements/Insertions Number of research projects Number of Sales personnel Sales Revenue

38. Which of these in NOT a Cost driver for Customer Service Activity?

Number of service calls Number of Products serviced Hours spent on servicing products Sales Revenue

39. Plant depreciation is an example of which activity-level group?

Unit-level activity Facility-level activity Batch-level activity Product-level activity

40. Under activity-based costing, ‘material ordering’ is considered as —

Unit-level activity Facility-level activity Batch-level activity Product-level activity

41. Samsung an appliance manufacturer is developing a new line of ovens that uses controlled-laser technology. Research and testing costs associated with the new ovens is said to arise from a:

Unit Level Activity Competitive Level Activity Facility Level Activity Product Sustaining Activity

42. A homogeneous cost pool is one that:

Does not change over time Needs many activity drivers to be allocated to a cost object Can be explained with a single activity driver Has only one type of material assigned to it

43. In an Activity-Based Costing, an inspection of the product is a level activity:

Unit Batch Product Facility

44. A company uses traditional standard costing system. The inspection and set-up costs are actually ₹1,760 against a budget of ₹2,000. ABC system is being implemented and accordingly the number of batches is identified as the cost driver for inspection and set up. The budgeted production is 10,000 units in batches of 1,000 units whereas actually 9,000 units were produced in 11 batches. The cost per batch under ABC system will be:

₹ 160 ₹ 200 ₹ 180 ₹ 220

45. X Company uses activity-based costing for Product B and Product D. The total estimated overhead cost for the parts administration activity pool was ₹5,50,000 and the expected activity was 2000 part types. If Product D requires 1200 part types, the amount of overhead allocated to product D for parts administration would be:

₹ 2,75,000 ₹ 3,00,000 ₹ 3,30,000 ₹ 3,45,000

46. Fast Ltd. manufactures three types of products A, B, and C following ABC System. During a period, the company incurred ₹73,000 as inspection cost and it was worked for 10, 20 and 9 production runs respectively for producing products A, B, and C. The inspection costs for product B under the ABC system was:

₹ 15,000 ₹ 40,000 ₹ 18,000 ₹ 24,000

47. A company operates an activity based costing (ABC) system to attribute its overhead costs to cost objects. In its budget for the year-ending 31st August, 2022. The company expected to place a total of 2000 purchase orders at a total cost of ₹1,00,000. This activity and its related costs were budgeted to occur at a constant rate throughout the budget year which is divided into 13 four week periods. During the four-week period ended 30th June 2021, a total of 200 purchase orders were placed at a cost of ₹ 9,000. The over recovery of these costs for the four-week period was:

₹ 2,000 ₹ 3,000 ₹ 1,500 ₹ 1,000

48. A company manufactures 500 units of product AX the material cost to manufacture is ₹ 1,50,000, Labour cost ₹2,65,000. Material reordering cost is ₹4,500, Material handling cost is ₹2,500 Material order – 35, Material movement – 20. Total Material cost under Activity based costing is:

₹ 554 ₹ 4,22,000 ₹ 1,57,000 ₹ 1,084

49. To obtain the break-even point in rupee sales value, total fixed costs are divided by:

Variable cost per unit Contribution margin per unit Fixed cost per unit Profit/volume ratio

50. The break-even point is the point at which:

There is no profit, no loss Contribution margin is equal to total fixed cost Total revenue is equal to total cost All of the above

51. The primary difference between a fixed budget and a variable (flexible) budget is that a fixed budget:

includes only fixed costs, while a variable budget includes only variable costs. is concerned with only further acquisitions of fixed costs, while a variable budget is concerned with expenses which vary with sales. cannot be changed after the period begins, while a variable budget can be changed after the period begins. is a plan for a single level of sales (or other measure of activity), while a variable budget consists of several plans, one for each of several levels of sales (or other measures of activity).

52. Margin of safety is referred to as:

Excess of actual sales over fixed expenses Excess of actual sales over variable expenses Excess of actual sales over break-even sales Excess of budgeted sales over fixed costs

53. Contribution margin is known as:

Marginal income Gross profit Net income Net profit

54. Fixed cost per unit decrease when:

Production volume increases Production volume decreases Variable costs per unit decreases Prime costs per unit decreases

55. Within a relevant range, the amount of variable costs per unit:

Differs at each production level Remains constant at each production level Increases as production increases Decreases as production increases

56. Margin of safety is referred to as:

Excess of budgeted or actual sales over the variable expenses and fixed expense, at break-even. Excess of budgeted or actual sales revenue over the fixed expenses. Excess of actual sales over budgeted sales. Excess of sales revenue over the variable expenses.

57. Under marginal costing system, the contribution margin discloses the excess of:

Revenue over fixed costs Projected revenues over the break-even point Revenues over variable costs Variable costs over fixed costs

58. A decrease in sales price:

does not affect the break-even point lowers the fixed cost Increases the break-even point lowers the break-even point

59. Determine Margin of safety if Profit is ₹15,000 and P/V ratio is 40%.

₹ 37,500 ₹ 33,000 ₹ 38,000 None of the above

60. What is Margin of Safety if Sales is 20,000 units and B.E.P is 15,000 units?

15,000 units 5,000 units 10,000 units 20,000 units

61. Determine sales in rupees for desired profit if fixed cost is ₹10,000, Variable cost is ₹30,000, Sales is ₹50,000 and desired profit is ₹5,000.

₹ 73,500 ₹ 75,000 ₹ 5,000 ₹ 37,500

62. What will be sales in rupees for desired profit if fixed cost is ₹30,000, desired profit is ₹15,000 and P/V ratio is 30%?

₹ 1,50,000 ₹ 1,00,000 ₹ 2,00,000 None of the above

63. Calculate sales in rupees for desired profit if fixed cost is ₹10,000, selling price is ₹20 per unit, Variable cost is ₹15 per unit and desired profit is ₹1 per unit.

₹ 20,000 ₹ 50,000 ₹ 70,000 ₹ 10,000

64. Determine sales in units for desired profit if Fixed cost is ₹15,000, desired profit is ₹5,000 Selling price per unit is ₹20 and Variable cost per unit is ₹16.

₹5,000 units ₹5,000 ₹10,000 ₹10,000 units

65. What will be sales in units if fixed cost is ₹50,000 Contribution per unit is ₹60 and desired profit per unit is ₹10.

₹6,000 units ₹1,000 ₹1,000 units ₹6,000

66. Determine B.E.P in units and amount if Units produced if ₹10,000, Fixed cost is ₹40,000, Selling price is ₹50 per unit and Variable cost is ₹30 per unit.

₹40 per unit, ₹2,00,000 ₹50 per unit, ₹10,00,000 ₹20 per unit, ₹1,00,000 None of the above

67. Determine B.E.P if Sales is ₹1,00,000, Variable cost is ₹50,000 and Profit is ₹20,000.

₹60,000 ₹40,000 ₹80,000 None of the above

68. P/V ratio will increase if there is:

a decrease in fixed cost an increase in fixed cost a decrease in selling price per unit a decrease in variable cost per unit

69. Under marginal costing, the cost of product for inventory valuation includes:

prime costs and variable factory overheads prime cost only prime costs and fixed factory overheads prime costs and all factory overheads

70. Period costs are:

variable cost fixed cost prime cost overheads cost

71. Marginal costs is taken as equal to:

Prime Cost plus all variable overheads Prime Cost minus all variable overheads Variable overheads None of the above

72. Contribution margin is equal to:

Sales - Fixed Cost - Profit Profit + Variable Cost Fixed Cost - Loss None of the above

73. It is planned to sell 1,00,000 units of product A at ₹12 per unit. Fixed Costs are ₹2,80,000. To achieve a profit of ₹2,00,000 what would the variable costs be?

₹4,80,000 ₹7,20,000 ₹9,00,000 ₹9,20,000

74. Factors which can change the break-even point:

change in total fixed costs change in variable costs per unit change in the selling price per unit All of the above.

75. Net profit ratio is 12% and B.E.P is 40% of total sales compute P/V ratio:

60% 52% 28% 20%

76. If the total cost of 1000 units is ₹60,000 and that of 1001 units is ₹60,400, then the increase of ₹400 in the total cost is:

Prime cost All variable overheads Marginal cost None of the above

77. Which of the following statements are true about marginal costing?

In marginal costing, fixed costs are treated as product costs Marginal costing is not an independent system of costing The elements of cost in marginal costing are divided into fixed and variable components Both b and c

78. The costing method where fixed factory overheads are added to inventory is called:

Activity-based costing Absorption costing Marginal costing All of the above

79. While computing profit in marginal costing:

The fixed cost gets added to the contribution The total marginal cost gets deducted from total sales revenue The total marginal cost gets added to total sales revenue None of the above

80. Which of the following assumptions are made while calculating marginal cost:

Total fixed cost is constant at all levels of output Total variable cost varies according to the volume of output All elements of cost can be divided into fixed and variable components All of the above

81. Contribution margin in marginal costing is also known as:

Net income Gross profit Marginal income None of the above

82. What is the opportunity cost of making a component part in a factory given no alternative use of the capacity?

The variable manufacturing cost of the component The total manufacturing cost of the component The total variable cost of the component Zero

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

Relevant Cost Opportunity Cost Differential Cost Marginal Cost

84. Relevant costs are:

unavoidable, future and measured by cash avoidable, future and measured by cash avoidable, future and measured by profit unavoidable, future and measured by profit

85. The profit at which total revenue is equal to the total cost is known as:

Margin of safety Break-even point Both a and b are incorrect Both a and b are correct

86. Which of the following costs would not be accounted for in a company’s recordkeeping system?

an unexpired cost an expired cost a product cost an opportunity cost

87. PQR Ltd. manufactures a single product which it sells for ₹40 per unit. Fixed cost is ₹60,000 per year. The contribution to sales ratio is 40%. PQR Ltd.’s Break Even Point in units is:

3500 3700 3750 4000

88. The break-even point of a manufacturing company is ₹1,60,000. Fixed cost is ₹48,000. Variable cost is ₹12 per unit. The PV ratio will be:

20% 40% 30% 25%

89. Product A generates a contribution to sales ratio of 40%. Fixed cost directly attributable to Product A amounted to ₹60,000. The sales revenue required to achieve a profit of ₹15,000 is:

₹2,00,000 ₹1,85,000 ₹1,87,500 ₹2,10,000

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

₹40 Lakhs ₹65 Lakhs ₹25 Lakhs ₹15 Lakhs

91. X Ltd. has 1000 units of an obsolete item which are carried in inventory at the original price of ₹50,000. If these items are reworked for ₹20,000, they can be sold for ₹36,000. Alternatively, they can be sold as scrap for ₹6,000 in the market. In a decision model used to analyze the reworking proposal, the opportunity cost should be taken as:

₹16,000 ₹6,000 ₹30,000 ₹20,000

92. The sales and profit of a firm for the year 2021 are ₹1,50,000 and ₹20,000 and for the year 2022 are ₹1,70,000 and ₹25,000 respectively. The P/V Ratio of the firm is:

15% 20% 25% 30%

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

Negotiated Transfer Pricing Market Price Based Transfer Pricing Fixed Cost Based Transfer Pricing Opportunity Cost Based Transfer Pricing

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

Dual pricing Functional pricing Congruent pricing Optimal pricing

95. The Eastern division sells goods internally to the Western division of the same company. The quoted external price in industry publications from a supplier near Eastern is ₹200 per ton plus transportation. It costs ₹20 per ton to transport the goods to Western. Eastern’s actual market cost per ton to buy the direct materials to make the transferred product is ₹100. Actual per ton direct labour is ₹50. Other actual costs of storage and handling are ₹40. The company president selects a ₹220 transfer price. This is an example of:

Negotiated transfer pricing Cost plus 20% transfer pricing Cost-based transfer pricing Market-based transfer pricing

96. Division P transfers its output to Division Q at variable cost. Once a year P charges a fixed fee to Q, representing an allowance for P’s fixed costs. This type of transfer pricing system is commonly known as:

Dual pricing Negotiated transfer pricing Opportunity cost based transfer pricing Two-part tariff transfer pricing

97. In which of the following circumstances is there a strong argument that profit centre accounting is a waste of time?

When the transferred item is also sold on an external market When the supplying division is based in a different country to head office If the transferred item is a major product of the supplying division If there is no similar product sold on an external market and the transferred item is a major product of the supplying division

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

Negotiated Transfer Pricing Market Price Based Transfer Pricing Fixed Cost Based Transfer Pricing Opportunity Cost Based Transfer Pricing

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

Dual pricing Functional pricing Congruent pricing Optimal pricing

100. M Group has two divisions, Division P and Division Q. Division P manufactures an item that is transferred to Division Q. The item has no external market and 6,000 units produced are transferred internally each year. The costs of each division are as follows? Variable Cost Division P ₹100 per unit Division Q ₹120 per unit Fixed cost each year ₹1,20,000 ₹90,000 Head Office management decided that a transfer price should be set that provides a profit of ₹30,000 to Division P. What should be the transfer price per unit?

₹145 ₹125 ₹120 ₹135

101. Minimax Ltd. fixes inter-divisional transfer prices for its products on the basis of cost plus a return on investment in the division. The budget for division X for 2022 – 23 appears as under -Fixed Assets ₹8,00,000 Current Assets ₹5,00,000 Debtors ₹2,00,000 Annual fixed cost of the division ₹8,00,000 Variable cost per unit of the product 10 Budgeted volume ₹4,00,000 units per year Desired ROI 28%. Transfer price for division X is ______________

₹13.05 ₹10.70 ₹8.70 ₹14.70

102. BC Company fixes the inter-divisional transfer prices for its products on the basis of cost, plus a return on investment in the division. The Budget for Division for Alpha for the year 2021-22 appears as under: Fixed Assets ₹5,00,000 Current assets ₹3,00,000 Debtors ₹2,00,000 Annual Fixed Cost of the Division ₹8,00,000 Variable Cost per unit of Product ₹10 Budgeted Volume 4,00,000 units per year Desired ROI 28% on ₹10,00,000. Determine the transfer Price for Alpha.

₹12.7 ₹17.2 ₹27.1 ₹11.7

103. The _____ method of transfer pricing was introduced in order to overcome the problems caused by using marginal cost.

dual price Two-Part Transfer Pricing Negotiated Transfer Pricing none of them

104. Transfer pricing methods may be classified under:

3 pricing method 4 pricing method 5 pricing method 7 pricing method

105. Which of the following is true of standards?

Standards represent a benchmark or a norm Standards relate to input quantity Standards relate to input cost All of the above

106. Standards that can be attained only under the best circumstances are referred to as:

Attainable standards Budget standards Ideal standards Practical standards

107. Who is most likely to be held responsible for a material price variance?

Line workers Production supervisors Purchasing managers Production schedulers

108. Cost variance is the difference between:

The standard cost and marginal cost The standards cost and budgeted cost The standards cost and the actual cost None of these

Question Bank Management Accounting