Management Accounting - 9

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Multiple Answer
Question The management of Horngreen Ltd. is deciding whether to continue working at loss or to temporarily shut down the factory. State the qualitative aspects that must be considered before arriving at a decision.
Correct Answer Loss of trained personnel , Loss of regular customers , Expenditure required to restart the factory
Your Answer Expenditure required to restart the factory

Multiple Choice Single Answer
Question The purchase budget for October is Rs.12,500/- and November is Rs.15,000/-. If the materials are purchased for cash the supplier is offering a rebate of 5%. If the materials are purchased on credit of 30 days, no rebate is offered. The company purchase
Correct Answer October- NIL, November- Rs.26,750/-
Your Answer October- Rs.14,250/-, November- Rs.11,875/-

True/False
Question Maintenance Department is a service cost centre.
Correct Answer True
Your Answer True

Multiple Choice Multiple Answer
Question Ram and Laxman are partners of Kush & Bros. As on 1st April, 2003 Ram's capital is Rs.50,000/- and Laxman's capital is Rs.80,000/-. If interest on capital is to be provided @ 10% p.a., what will be amount of capital of each of the partners as on 31st March, 2004, assuming there were no additions during this period? Also, state the treatment of this item in the Profit and loss account.
Correct Answer Ram's capital Rs.55,000/- , Laxman's capital Rs.88,000/- , Interest on capital should be debited to the Profit and loss account
Your Answer Laxman's capital Rs.88,000/- , Interest on capital should be debited to the Profit and loss account

Multiple Choice Single Answer
Question Rs.2,650/- were paid to ABC Ltd. for maintenance of machine; which account should be debited for this transaction?
Correct Answer Maintenance of machine account
Your Answer ABC Ltd.'s Account

Match The Following
Question Correct Answer Your Answer

Advantageously applicable in similar industries Scope of uniform costing Fields covered by uniform costing

Spirit of mutual trust Requisite for uniform costing Disadvantage of uniform costing

Avoids cut throat competition Advantage of uniform costing Requisite for uniform costing

Treatment given to research and development costs Fields covered by uniform costing Advantage of uniform costing


Select The Blank
Question Under the AB________ analysis, nuts and bolts used as material will be classified as category C.
Correct Answer C
Your Answer C

Select The Blank
Question If overhead absorbed i.e. overheads charged to units during the period is more than the overhead incurred, it is said that the overheads are ________.
Correct Answer Over-absorbed
Your Answer True and fair

Multiple Choice Multiple Answer
Question Identify the causes due to which the cost of labour may be high:
Correct Answer Excess staffing , Lack of experienced and efficient personnel , High labour turnover
Your Answer Lack of experienced and efficient personnel , High labour turnover , No idle time

Multiple Choice Multiple Answer
Question Identify the fixed expenses from the following.
Correct Answer Rent and taxes of the factory , Wages paid to indirect workers like cleaners, helpers,etc. , Salary paid to factory supervisor
Your Answer Rent and taxes of the factory , Wages paid to indirect workers like cleaners, helpers,etc. , Salary paid to factory supervisor

Multiple Choice Multiple Answer
Question From the following, select intangible assets:
Correct Answer Goodwill , Patents , Trade Marks
Your Answer Goodwill , Patents , Trade Marks

True/False
Question According to Reducing Balance Method, the depreciation is provided at a predetermined percentage on the balance of cost of asset after deduction of the depreciation previously charged.
Correct Answer True
Your Answer False

Select The Blank
Question Average stock = ________ + (Order size / 2)
Correct Answer Safety stock
Your Answer Reorder level

True/False
Question High time wages means necessarily high cost of production.
Correct Answer False
Your Answer True

Multiple Choice Single Answer
Question The integrated form of all functional budgets is known as :
Correct Answer Master budget
Your Answer Master budget

Select The Blank
Question Marginal costing is also known as ________.
Correct Answer Variable costing
Your Answer Indirect costing

Multiple Choice Single Answer
Question Purchased 200 shares of Bharat Forge Ltd. for Rs.850/- per share, which account should be debited?
Correct Answer Investment account - Rs.170,000/-
Your Answer Investment account - Rs.170,000/-

Multiple Choice Single Answer
Question For a bought out material item the following are the relevant data : Ordering cost Rs.512/- per order; holding cost is 40%; cost per item Rs.100/- and annual demand 1,000 units. The Purchase manager places 5 orders of equal quantity in one year, in order to avail the discount of 5% on the cost of the item. Work out the total cost to the organisation due to his ordering policy for this item.
Correct Answer Rs.101,360/-
Your Answer Rs.101,360/-

True/False
Question Due to compensating errors the arithmetical accuracy of the trial balance is affected.
Correct Answer False
Your Answer False

Multiple Choice Single Answer
Question From the given information compute the total cost variance. Material cost variance -Rs.4,400/- (Favourable); labour cost variance -Rs.450/- (Adverse); fixed overhead cost variance -Rs.22,000/- (Adverse); variable overhead cost variance -Rs.6,000/- (adverse).
Correct Answer Rs.24,050/- (Adverse)
Your Answer Rs.32,850/- (Favourable)

Multiple Choice Single Answer
Question Advance tax account should appear in which of the final statement of accounts.
Correct Answer Asset side of the balance sheet
Your Answer Debit side of the profit and loss account

Match The Following
Question Correct Answer Your Answer

Operating income Cash Sales Cash Sales

Non-Operating income Issue of shares Issue of shares

Plan of investment in fixed assets Capital Expenditure Budget Cash Budget

Plan for surplus/shortage of cash Cash Budget Capital Expenditure Budget


Select The Blank
Question Furniture account will always have a ________ balance.
Correct Answer Debit
Your Answer Inflated

Select The Blank
Question Payment by ________ method lowers the cost of production through their impact on fixed costs.
Correct Answer Results
Your Answer Cash

Multiple Choice Multiple Answer
Question The objects of cost accountancy are . .
Correct Answer To ascertain cost and profitability , Cost Control , Presentation of Information
Your Answer To ascertain cost and profitability , Cost Control , To portray the financial status

Multiple Choice Multiple Answer
Question Select the various methods adopted for treatment of under or over absorbed overheads
Correct Answer Use of supplementary rates , Carrying over the amount to remaining period , Writing off to the Costing Profit and Loss Account
Your Answer Use of supplementary rates , Carrying over the amount to remaining period , Writing off to the Costing Profit and Loss Account

True/False
Question Absorption costing is more suitable for decision making than marginal costing
Correct Answer False
Your Answer True

Select The Blank
Question A low margin of safety indicates ________ fixed overheads.
Correct Answer higher
Your Answer higher

Multiple Choice Single Answer
Question Which of the following operations would normally be carried out first when preparing a master budget?
Correct Answer Determining the budget period
Your Answer Identifying the principal budget factor

True/False
Question Period cost is the cost assigned to the products.
Correct Answer False
Your Answer True

Select The Blank
Question Profit = Contribution per unit X ________.
Correct Answer Margin of safety (units)
Your Answer Sales (units)

Multiple Choice Multiple Answer
Question Which of the following aspects are mainly responsible for difficulty in application of Uniform costing system.
Correct Answer Capital investment , Plant size , Location
Your Answer Capital investment , Plant size , Loans taken

Select The Blank
Question As per the provisions of Section 209 of ________, all the company form of organisation is legally required to follow the mercantile or accrual system of accounting.
Correct Answer The Companies Act, 1956
Your Answer The Companies Act, 1956

Multiple Choice Single Answer
Question ABC Ltd. produces 10,000 units at 100% capacity utilization and its cost structure is as follows : Fixed cost Rs.50,000/-; variable costs Rs.30,000/- and semi-variable costs Rs.40,000/- (40% var
Correct Answer Rs.13.85
Your Answer Rs.11.85

Select The Blank
Question Loss of uninsured goods by fire was debited incorrectly to United India Assurance Company's account instead of debiting it to ________ account.
Correct Answer Goods lost by fire
Your Answer Goods lost by fire

Multiple Choice Multiple Answer
Question Management Accounting is…
Correct Answer Designed particularly for internal use , Helpful in estimating the future along with past period , Useful in furnishing the necessary information to the management
Your Answer Helpful in estimating the future along with past period , Useful in furnishing the necessary information to the management , A legal requirement.

Multiple Choice Multiple Answer
Question The disadvantages of supplementary overhead rates are:
Correct Answer It can be determined only after the end of the accounting period , Defeats the basic concept of normal cost , Involves lot of clerical activity
Your Answer Defeats the basic concept of normal cost , Involves lot of clerical activity , It can be determined only in the beginning of the accounting period

True/False
Question GAIL having monopoly in the CNG (Compressed Natural Gas) market can implement the Uniform costing system.
Correct Answer False
Your Answer True

True/False
Question One of the main objection to the contribution approach of costing is that it ignores fixed cost.
Correct Answer True
Your Answer False

Multiple Choice Multiple Answer
Question Pre-requisites of Uniform Costing are . . .
Correct Answer Spirit of mutual trust , Free Exchange of ideas , No rivalry
Your Answer Spirit of mutual trust , Free Exchange of ideas , Tendency of withholding information

Select The Blank
Question Uniform costing is not a separate method of ________.
Correct Answer cost accounting
Your Answer costing

Multiple Choice Single Answer
Question Tom company has sales of Rs.200,000/- with variable expenses of Rs.150,000/-, fixed expenses of Rs.60,000/-, and an operating loss of Rs.10,000/-. By how much would Tom have to increase its sales in order to achieve an operating income of 10% of sales?
Correct Answer Rs.200,000/-
Your Answer Rs.251,000/-

True/False
Question An entry in the stores ledger is required for transfer of material from one job to another in the same department.
Correct Answer False
Your Answer False

Multiple Choice Multiple Answer
Question For the month of November, a firm has budgeted sales of 20,000 units of X at a price of Rs.10/- and sale of 30,000 untis of Y at a price of Rs.6/- per unit. Actual sale during the month was 35,000 units of X at Rs.9/- per unit and 25,000 units of Y at Rs.8/- per unit. Calculate sales volume variance, sales mix variance and sales quantity variance.
Correct Answer Sales volume variance -Rs.120,000/- (Favourable) , Sales mix variance -Rs.44,000/- (Favourable) , Sales Quantity variance-Rs.76,000/- (Favourable)
Your Answer Sales volume variance -Rs.120,000/- (Favourable) , Sales mix variance -Rs.44,000/- (Favourable) , Sales Quantity variance-Rs.76,000/- (Favourable)

True/False
Question The purpose of the profit and loss account is to bring togethre information which relates to gross profit and the expenses for running the business.
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question A firm has purchased a plant to manufacture a new product, the cost data for which is given below : Estimated annual sales 24,000 units. Estimated costs : Materials Rs.4/- per unit; labour Re.0.60 per unit; overheads Rs.24,000/- per year; administrative expenses Rs.28,800/- per year and selling expenses are 15% of sales; Calculate the selling price per unit if profit per unit is Rs.1.02.
Correct Answer Rs.9.20/-
Your Answer Rs.7.74/-

Multiple Choice Single Answer
Question A company wishes to earn a 15% profit margin on selling price when quoting for a job. Which of the following is the profit margin of cost which will achieve the required profit margin ?
Correct Answer 0.1765
Your Answer 0.15