UNIT 4 COST AND MANAGEMENT ACCOUNTING

Cost Accounting: Nature and Scope – Methods and Techniques of Costing – Cost
Centre and Profit Centre – Cost Sheet – Standard Costing – Variance Analysis –
Responsibility Accounting – Profit Planning and Control – Elements of Cost – Reconciliation
Of cost And Financial Accounting Management Accounting: Meaning and Importance- Cash
Flow, Fund Flow – Ratio Analysis – Interpretation of Financial Statement – Marginal Costing
Cost – Application of Marginal Costing – Volume Profit Relationship – Break-Even Analysis
-Budgets – Budgetary Control.

1)What is the object of cost accounting?

a) To earn more profit
b) To provide information to the management for planning and control
c) Valuation of closing finished goods
d) To find cost of a product
Ans: b) To provide information to the
management for planning and control
2) Which of the following is included in the Cost of goods sold?
a) Cost of production and work in progress b) Cost of production and finished goods
c) Cost of production , work in progress d) Cost of production alone
and finished goods
Ans: b) Cost of production and finished goods
3) When the method of Batch costing is useful?
a)To determine maximum quantity of output
b) To determine minimum quantity of output
c) To determine economic batch quantity
d) To determine Cost of production
Ans: c) To determine economic batch quantity
4) What is Costing?
a)A technique of allocating cost
b) A technique of apportioning cost
c) A technique of Ascertaining cost
d) Both a and b
Ans: c) A technique of Ascertaining cost
5) Which one of the following is most important tool in cost planning?
a) Contract costing b) Standard costing
c) Marginal costing d) Budgeting
Ans: d) Budgeting
6) Which of the following method of costing is employed in hospital?
a) Operating costing b) Process costing
c) Job costing d) Contract costing
Ans: a) Operating costing
7) What will be the amount of profit if sales is Rs. 1,67,000 and the total cost is Rs. 1,23,000?
a) Rs. 3,00,000
b) Rs. 4,400
c) Rs. 6,000
d) Rs. 4000
Ans: b) Rs. 4,400
8) Which of the following is a manufacturing cost?
a)Advertisement expenses
b)Factory rent
c)Office expenses
d)Direct material cost
Ans: d)Direct material cost
9) Which of the following should not be included in Cost sheet?
a) Factory Rent b) Salesman salary
c) Goodwill written off d) Office expenses
Ans: c) Goodwill written off
10) How the administrative overheads are recovered?
a) As a percentage of direct wages b) As a percentage of direct materials
c) As a percentage of prime cost d) As a percentage of works cost
Ans: d) As a percentage of works cost
11) Which of the following shows cost per unit of each element of cost?
a) Work sheet
b)Cost sheet
c) Cost data
d) Bin card
Ans: b)Cost sheet
12) Which of the following is included in cost accounts?
a) Rent b) Transfer to general reserve
c) Charitable donation d) Dividend
Ans: a) Rent
13) Which of the following is an example of cost unit?
a) Few metres
b) One metre
c) A heap
d) Few products
Ans: b) One metre
14) Which is the basis for the payment of wages under Time rate system?
a) Quantity produced b) Time saved
c) Time worked d) Time allotted
Ans: d) Time allotted
15) Which is the basis for the payment of wages under Piece rate system?
a) Quantity produced
b) Time saved
c) Time worked
d) Time allotted
Ans: a) Quantity produced
16) What is called if an overhead which tends to be unaffected by variation in volume of
output?
a) Variable b) Office
c) Fixed d) Semi-variable
Ans: c) Fixed
17) What is the basis for the apportionment of fire insurance premium on building?
a) Sales b)Horse power
c) Plant value d) Floor area
Ans: d) Floor area
18) What is called an indirect expense incurred in sales division for selling the goods?
a) Office overhead b) Works overhead
c)Administrative overhead d) Selling overhead
Ans: d) Selling overhead
19) What is the basis for the apportionment of factory overheads?
a) Direct labour hours b) Machine hours
c) Direct labour cost d)Floor area occupied
Ans: b) Machine hours
20) What is called the manufacturing overheads absorbed by a single overhead?
a) Blanket rate b) Per unit rate
c) Actual rate d) Time rate
Ans: a) Blanket rate
21) What is a form of operation costing?
a) Job costing
b) Unit costing
c) Process costing
d) Contract costing
Ans: c) Process costing
22) What is called an indirect expense incurred in sales division for selling the goods?
a) Office overhead b) Works overhead
c)Administrative overhead d) Selling overhead
Ans: d) Selling overhead
23) How the administrative overheads are recovered?
a) As a percentage of direct wages
b) As a percentage of direct materials
c) As a percentage of prime cost
d) As a percentage of works cost
Ans: d) As a percentage of works cost
24) Which method of pricing of material is suitable when the material prices are rising?
a) FIFO b) LIFO c) Simple Average d) Weighted Average
Ans: b) LIFO
25) How much will be the abnormal gain if 100 units are introduced into a process, 10% is
normal loss and output is 95 units?
a)5 units
b)10 units
c)15 units
d)20 units
Ans: a)5 units
26) Which of the following formula cannot be used for calculating the P/V ratio
a)(Salesvalue minus variable cost) / Sales value
b) (Fixed Cost-plus profit)/Sales value
c) Change in profits/Change in sales
d) Profit/Sales value
Answer:(D) Profit/Sales value
27) Which of the following formula cannot be used for calculating the contribution
(A) Fixed Cost-plus profit
(B) Fixed Cost minus loss
(C) Sales minus variable cost
(D) Fixed Cost-plus loss
Answer:(D) Fixed cost-plus loss
28) The costing method in which fixed factory overheads are added to inventory is
a) Activity-based costing
b) Marginal costing
c) Direct costing
d) Absorption costing
Answer:(D) Absorption costing
29) In the cash flow statement, interest received by the company is classified as
(A) Operating activities
(B) Cash and cash equivalents
(C) Investing activities
(D) Financing activities
Answer:(C) Investing activities
30) In the cash flow statement, the dividend paid in the case of a financing company is
classified as
a) Operating activities
b) Investing activities
c) Financing activities
d) Cash and cash equivalents
Answer:(A) Operating activities
31) As per Accounting Standard-3, cash equivalents include –
(A) Treasury bills
(B) Commercial papers
(C) Money market funds
(D) All of the above
Answer:(D) All of the above
32) Cash payments to and on behalf of employees is an example of cash flow from –
(A) Operating activity
(B) Investing activity
(C) Financing activity
(D) None of the above
Answer:(A) Operating activity
33)As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial
remuneration, if gross profit is the starting point, then which of the following is allowed to
deduct
(A) Loss of capital natures
(B) Voluntarily compensation
(C) Director’s seating fee
(D) Super-tax on the income
Answer: (C) Director’s seating fee
34) If Net Profit is the starting point for the purpose of calculation of managerial
Remuneration, then which of the following you will deduct:
a) Income Tax
b) Capital Profits
c) Compensation for breach of contract
d) General expenses
Answer: (B) Capital Profits
35) Depreciation is a process of
(A) Valuation
(B) Allocation
(C) Reduction
(D) Appreciation
Answer: (B) Allocation
36) which can be immediately be converted into cash, such as Government Securities.
(A) Intangible Assets
(B) Fictitious Assets
(C) Wasting Assets
(D) Floating Assets
Answer: (D) Floating Assets
37) The budgeting system designed to change in relation to the level of activity actually
attained is known as
(A) Fixed budgeting
(B) Flexible budgeting
(C) Performance budgeting
(D) Functional budgeting
Answer:(B) Flexible budgeting
38) From the following, which one is a functional budget
(A) Master budget
(B) Fixed budget
(C) Sales budget
(D) Current budget
Answer:(C) Sales budget
39) A factor that limits the activities of an undertaking and which is taken into account while
preparing a budget is known as
(A) Budget manual
(B) Budget controller
(C) A Budget key factor
(D) Budget centre
Answer:(C) A Budget key factor
40) A budget that gives a summary of all the functional budgets and budgeted statement of
profit and loss is called
(A) Flexible budget
(B) Master budget
(C) Performance budget
(D) Zero base budget
Answer:(B) Master budget
41) Budget which remains unchanged regardless of the actual level of activity is known as –
(A) Fixed budget
(B) Functional budget
(C) Flexible budget
(D) Cash budget
Answer:(A) Fixed budget
42) Working capital ratio is also known as:
a) Quick ratio
b) Debt-Equity ratio
c) Current ratio
d) Liquid ratio
Answer: (C) Current ratio
43) Which of the following is a method used in analysing financial statements –
(A) Variance analysis
(B) Trend analysis
(C) Break-even analysis
(D) Budget analysis
Answer: (B) Trend analysis
44)Which of the following results in a decrease in working capital
(A) Goods sold on credit
(B) Decrease in current liabilities
(C) Decrease in current assets
(D) Increase in current assets
Answer: (C) Decrease in current assets
45) If provision for taxation is treated as a current liability, then payment of tax is
a) An application of funds
b) A source of funds
c) No flow of funds
d) None of the above
Answer: (C) No flow of funds
46) Which one of the following is a non-current item
a) Securities premium
b) Outstanding wages
c) Trade payables
d) Bank balance
Answer: (A) Securities premium
47) Which of the following is not applied in Management Accounting?
(A) Comparative Statement
(B) Managerial reporting
(C) Double-entry system
(D) Operation research
Answer: (D) Operation research
48) Management Accounting aims at:
(A) Presentation of accounting information
(B) Assist in long-term planning
(C) Assist in day-to-day activities
(D) All of the above
Answer: (D) All of the above
49) Net Profit + non-cash expenses =
a) Gross Profit
b) Profit after tax
c) Fund from the operation
d) Distributable profit
Answer: (C) Fund from the operation
50) Management accounting and cost accounting are____to each other.
(A) Complementary
(B) Supplementary
(C) Opposite
(D) Independent
Answer: (B) Supplementary