Important mcqs for final Managerial Accounting

Question No: 1 ( Marks: 1/2 ) - Please choose one
Cost
of finished goods inventory is calculated by:
► Deducting total cost from finished goods inventory
► Multiplying units of finished goods inventory with the cost per unit
► Dividing units of finished goods inventory with the cost per unit
► Multiplying total cost with finished goods inventory
Question No: 2 ( Marks: 1 /2) - Please choose one
Assuming no returns outwards or carriage inwards, the cost of goods sold will be equal to:
► Opening stock Less purchases plus closing stock
► Closing stock plus purchases plus opening stock
► Sales less gross profit
► Purchases plus closing stock plus opening stock plus direct labor
Which of the following is a reason for the overtime to be incurred?
► Make up for lost time
► Produce more of the product than anticipated
► Increase efficiency of the workers
► Both for make up of lost time and produced more product than anticipated
Good Job Plc makes one product which sells for Rs. 80 per unit. Fixed costs are Rs. 28,000 per
month and marginal costs are Rs. 42 per unit. What sales level in units will provide a profit of Rs.
10,000?
► 350 units
► 667 units
► 1,000 units
► 1,350 units
Variable costing is also known as:
► Direct Costing
► Marginal Costing
► Both Direct Costing & Marginal Costing
► Indirect Costing

Cost
volume Profit analysis (CVP) is a behavior of how many variables?
► 2
► 3
► 4
► 5
If
the sellingpriceandthe variablecostperunit bothdecreaseat10% and fixedcostsdonot change,
what is the effect on the contribution margin per unit and the contribution margin ratio?
► Contribution margin per unit and the contribution margin ratio both remains unchanged
► Contribution margin per unit and the contribution margin ratio both increases
► Contribution margin per unit decreases and the contribution margin ratio remains
unchanged
► Contribution margin per unit increases and the contribution margin ratio remains
unchanged
All
of the following are true EXCEPT:
► Profit + Fixed cost + Variable cost = Sales
► Profit + Fixed cost = Sales – Variable cost
► Contribution margin – Fixed cost = Profit
► Profit + Fixed cost = Sales + Variable cost
Question No: 9 ( Marks: 1/2) - Please choose one
Éclair Ltd manufactured three products,JP,1,JP2,JP,3 with the following cost of raw material
10,000 kg ,cost Rs. 24,000 and conversion cost is Rs. 28,000.
Process costs are apportioned on a sales value basis.
Required: What was the apportioned cost for JP1.
Out-Put Production,Kg sales price, per Kg
JP,1 4,000 11
JP,2 3,000 10
JP,3 1,000 26

► Rs. 22,880
► Rs. 15,600
► Rs. 13,520
► Rs. 52,000
Reference:
J1 =4000 x 11 = 44000/10000 x 52000 = 22880
In
which of the following way the last month closing inventory figure will be treated?
► Will not be carried forward
► As opening inventory of current month
► As closing inventory of current month
► As units sold for the same months
Extent Incorporated estimates its direct labor costs at 2 hours per unit at an average cost of Rs.
12 per hour. The budgeted direct labor cost to produce 27,000 units of product is:
► Rs. 324,000
► Rs. 470,
► Rs. 540,000
► Rs. 648,000
Which of the following is true for the manufacturing overhead budget?
► Provides a schedule of all costs of production other than direct materials and direct labor
► Includes both variable and fixed costs associated with overhead
► Depreciation has to be deducted as a non-cash expense in order to determine the level of
cash required for overhead
► All of the given options

Costs that have been incurred include which of the following?
► Only opportunity costs
► Costs that have already been paid
► Costs that have been committed
► Both costs that have already been paid and committed
If,
Total fixed cost Rs. 2,000, Variable manufacturing cost Rs. 4,000, Variable selling cost Rs. 3,000
and Sales Rs. 10,000 then what is the amount of margin available to recover fixed cost?
► Rs.6,000
► Rs.3,000
► Rs.7,000
► Rs.8,000
A
company has budgeted sales of Rs. 48,000, breakeven sales of Rs. 35,000 and actual sales of Rs. 40,000
during a particular period. What will be the margin of safety?
► Rs. 8,000
► Rs. 13,000
► Rs. 5,000
► Rs. 21,000
A
company ABC has budgeted sales of Rs. 8,000 and breakeven sales of Rs. 5,000 during a
particular period whereas the actual sales amounted to Rs. 7,000. What will be the margin of
safety ratio?
► None of the given options
► 37.5%
► 40%
► 60%
Which of the following is TRUE in case of positive contribution margin?

► Profit will occur
► Both profit and loss are possible
► Profit will occur if the fixed expenses are greater than the contribution margin
► A loss will occur if the contribution margin are greater than the fixed expenses
Question No: 18 ( Marks: 1 /2) - Please choose one
If:
Cost of opening finished goods Rs. 2,000
Cost of goods to be produced Rs. 6,000
Operating expenses Rs. 1,000.
Which of the following is the cost of goods available for sale?
► Rs. 8,000
► Rs. 4,000
► Rs. 7,000
► Rs. 9,000
A
company produced a desired level of product ‘A’ in 5,500 Hours. The standard hours required to
produce the same product are 5,000 Hours. What is the amount & nature of variance?
► 500 hours (Favorable)
► 500 hours (Unfavorable)
► 5,000 hours (Favorable)
► 5,000 hours (Unfavorable)
Question No: 20 ( Marks: 1 ) - Please choose one
The
cost of telephone bill of the factory is treated as:
► Fixed cost
► Variable cost
► Semi variable cost
► Direct labor cost
Which of the given cost does not become the part of cost unit?
► Advertising expenses
► Direct labor cost
► Factory overhead cost
► Cost of raw material

Given data that:
Work in Process Opening Inventory Rs. 20,000
Work in Process Closing Inventory 10,000
Finished goods Opening Inventory 30,000
Finished goods Closing Inventor 50,000
Cost of goods sold 190,000
What will be the value of cost of goods manufactured?
► Rs. 200,000
► Rs. 210,000
► Rs. 220,000
► Rs. 240,000
If
Budgeted FOH for actual volume is Rs. 678,925 and Actual factory overhead is Rs. 648,925 then
difference of both will be:
► Unfavorable Spending variance of Rs. 30,000
► Favorable Spending varianceof Rs. 30,000
► Unfavorable Capacity variance Rs. 30,000
► Favorable Capacity variance of Rs. 30,000
Job
ABC requires 380 active hours to complete job. It is assumed that there will be no idle time. The
wage rate per hour is Rs. 10. The labor cost of job ABC is:
► Rs. 390
► Rs. 370
► Rs. 3800
► Cannot be determined with the help of given data

A
machinecostRs. 60,000 fiveyearsago.It is expectedthatthe machinewill generatefuturerevenue
of 40,000. Alternatively, the machine could be scrapped for Rs. 35,000. An equivalent machine in
the same condition cost 38,000 to buy now.
Required: Identify the realizable value with the help of given data.
► Rs. 60,000
► Rs. 40,000
► Rs. 35, 000
► Rs. 38,000
If
Budgeted FOH for actual volume is Rs. 678,925 and Actual factory overhead is Rs. 648,925 then
difference of both will be:
► Unfavorable Spending variance of Rs. 30,000
► Favorable Spending varianceof Rs. 30,000
► Unfavorable Capacity variance Rs. 30,000
► Favorable Capacity variance of Rs. 30,000
Q.1. Cost Unit is defined as:
(a) Unit of quantity of product, service or time in relation to which costs may be
ascertained or
expressed
(b) A location, person or an item of equipment or a group of these for which costs are
ascertained
and used for cost control.
(c) Centres having the responsibility of generating and maximising profits
(d) Centres concerned with earning an adequate return on investment
Q.2. Fixed cost is a cost:
(a) Which changes in total in proportion to changes in output
(b) which is partly fixed and partly variable in relation to output
(c) Which do not change in total during a given period despise changes in output
(d) which remains same for each unit of output
Q.3. Conversion cost includes cost of converting……….into……..
(a) Raw material, WIP
(b) Raw material, Finished goods

(c) WIP, Finished goods
(d) Finished goods, Saleable goods
Q.4. Sunk costs are:
(a) relevant for decision making
(b) Not relevant for decision making
(c) cost to be incurred in future
(d) future costs
Q.5. Describe the method of costing to be applied in case of Nursing Home:
(a) Operating Costing
(b) Process Costing
(c) Contract Costing
(d) Job Costing
Q.6. Calculate the prime cost from the following information:
Direct material purchased: Rs. 1,00,000
Direct material consumed: Rs. 90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000
(a) Rs. 1,80,000
(b) Rs. 2,00,000
(c) Rs. 1,70,000
(d) Rs. 2,10,000
Q. 7. Total cost of a product: Rs. 10,000
Profit: 25% on Selling Price
Profit is:
(a) Rs. 2,500
(b) Rs. 3,000
(c) Rs. 3,333
(d) Rs. 2,000
Profit: 25% on Selling Price
Q.8. Calculate cost of sales from the following:
Net Works cost: Rs. 2,00,000
Office & Administration Overheads: Rs. 1,00,000
Opening stock of WIP: Rs. 10,000
Closing Stock of WIP: Rs. 20,000
Closing stock of finished goods: Rs. 30,000

There was no opening stock of finished goods.
Selling overheads: Rs. 10,000
(a) Rs. 2,70,000
(b) Rs. 2,80,000
(c) Rs. 3,00,000
(d) Rs. 3,20,000
Q.9. Calculate value of closing stock from the following:
Opening stock of finished goods (500 units) : Rs. 2,000
Cost of production (10000 units) : Rs. 50,000 Closing stock (1000 units):?
(a) Rs. 4,000
(b) Rs. 4,500
(c) Rs. 5,000
(d) Rs. 6,000
Q.10. ABC analysis is an inventory control technique in which:
(a) Inventory levels are maintained
(b) Inventory is classified into A, B and C category with A being the highest quantity,
lowest value.
(c) Inventory is classified into A, B and C Category with A being the lowest quantity,
highest value
(d) Either b or c.
Q.11. In case of rising prices (inflation), FIFO method will:
(a) provide lowest value of closing stock and profit
(b) provide highest value of closing stock and profit
(c) provide highest value of closing stock but lowest value of profit
(d) provide highest value of profit but lowest value of closing stock
Q.12. Calculate the value of closing stock from the following according to LIFO method:
1st January, 2014: Opening balance: 50 units @ Rs. 4
Receipts:
5th January, 2014: 100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January, 2014: 150 units
(a) Rs. 765
(b) Rs. 805
(c) Rs. 786
(d) Rs. 700

Q.13. Allotment of whole item of cost to a cost centre or cost unit is known as:
(a) Cost Apportionment
(b) Cost Allocation
(c) Cost Absorption
(d) Machine hour rate
Q.14. Most suitable basis for apportioning insurance of machine would be:
(a) Floor Area
(b) Value of Machines
(c) No. of Workers
(d) No. of Machines
Q.15. A company calculates the prices of jobs by adding overheads to the prime cost
and adding 30% to
total costs as a profit margin. Job number Y256 was sold for Rs1690 and incurred
overheads of Rs 694.
What was the prime cost of the job?
(a) Rs 489
(b) Rs 606
(c) Rs 996
(d) Rs 1300
Q.16 The following information is available for the W hotel for the latest thirty day
period.
Number of rooms available per night 40
Percentage occupancy achieved 65%
Room servicing cost incurred Rs. 3900
The room servicing cost per occupied room-night last period, to the nearest Rs, was:
(a) Rs 3.25
(b) Rs 5.00
(c) Rs 97.50
(d) Rs 150.00
Q.17. A company manufactures a single product for which cost and selling price data
are as follows:
Selling price per unit - Rs. 12

Variable cost per unit - Rs. 8
Fixed cost for a period - Rs. 98,000
Budgeted sales for a period - 30,000 units The margin of safety, expressed as a
percentage of
budgeted sales,is:
(a) 20%
(b) 25%
(c) 73%
(d) 125%
Q.18. A company's break even point is 6,000 units per annum. The selling price is Rs.
90 per unit and
the variable cost is Rs. 40 per unit. What are the company's annual fixed costs?
(a) Rs. 120
(b) Rs. 2,40,000
(c) Rs. 3,00,000
(d) Rs. 5,40,000
Q.19. In ‘make or buy’ decision, it is profitable to buy from outside only when the
supplier’s price is below
the firm’s own ______________.
(a) Fixed Cost
(b) Variable Cost
(c) Total Cost
(d) Prime Cost
Q.20. Following information is available of XYZ Limited for quarter ended June, 2013
Fixed cost Rs. 5,00,000
Variable cost Rs. 10 per unit
Selling price Rs. 15 per unit
Output level 1,50,000 units What will be amount of profit earned during the quarter
using the marginal costing technique?
(a) Rs. 2,50,000
(b) Rs. 10,00,000
(c) Rs. 5,00,000
(d) Rs. 17,50,000
Q.1. Element/s of Cost of a product are:

(a) Material only
(b) Labour only
(c) Expenses only
(d) Material, Labour and expenses
Q. 2. Which of these is not a Material control technique:
(a) ABC Analysis
(b) Fixation of raw material levels
(c) Maintaining stores ledger
(d) Control over slow moving and non moving items
Q.3. In case of rising prices (inflation), LIFO will:
(a) provide lowest value of closing stock and profit
(b) provide highest value of closing stock and profit
(c) provide highest value of closing stock but lowest value of profit
(d) provide highest value of profit but lowest value of closing stock
Q.4. Calculate the value of closing stock from the following according to FIFO method:
1st January, 2014: Opening balance: 50 units @ Rs. 4
Receipts:
5th January, 2014: 100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January, 2014: 150 units
(a) Rs. 765
(b) Rs. 805
(c) Rs. 786
(d) Rs. 700
Q.5. S produces and sells one product, P, for which the data are as follows:
Selling price Rs 28
Variable cost Rs 16
Fixed cost Rs 4
The fixed costs are based on a budgeted production and sales level of 25,000 units for the next
period. Due to market changes both the selling price and the variable cost are expected to
increase above the budgeted level in the next period.

If the selling price and variable cost per unit increase by 10% and 8% respectively, by how much
must sales volume change, compared with the original budgeted level, in order to achieve the
original budgeted profit for the period?
(a) 10.1% decrease
(b) 11.2% decrease
(c) 13.3% decrease
(d) 16.0% decrease
Q.6. Which of the following statements is/are correct?
1. A materials requisition note is used to record the issue of direct material to a specific job.
2. A typical job cost will contain actual costs for material, labour and production overheads, and
non –production overheads are often added as a percentage of total production cost
3. The job costing method can be applied in costing batches.
(a) (1) only
(b) (1) and (2) only
(c) (1) and (3) only
(d) (2) and (3) only
Q.7. A company calculates the prices of jobs by adding overheads to the prime cost and adding
30% to total costs as a profit margin. Job number Y256 was sold for Rs1690 and incurred
overheads of Rs 694.
What was the prime cost of the job?
(a) Rs 489
(b) Rs 606
(c) Rs 996
(d) Rs 1300
Q.8. Calculate the most appropriate unit cost for a distribution division of a multinational
company using
the following information.
Miles travelled 636,500
Tonnes carried 2,479
Number of drivers 20
Hours worked by drivers 35,520
Tonnes miles carried 375,200
Cost incurred 562,800
(a) Rs .88
(b) Rs 1.50
(c) Rs 15.84
(d) Rs28, 140
Q.9. Information concerning A Ltd.'s single product is as follows:

Selling price - Rs. 6 per unit
Variable production cost - RS. 1.20 per unit
Variable selling cost - Rs. 0.40 per unit
Fixed production cost - Rs. 4 per unit
Fixed selling cost - Rs. 0.80 per unit.
Budgeted production and sales for the year are 10,000 units.
What is the company's breakeven point:
(a) 8,000 units
b) 8,333 units
(c) 10,000 units
(d) 10,909 units
Q.10 The cost per unit of a product manufactured in a factory amounts to Rs. 160 (75% variable)
when the production is 10,000 units. When production increases by 25%, the cost of production
will be Rs. per unit.
(a) Rs. 145
(b) Rs. 150
(c) Rs. 152
(d) Rs. 140
Q.11. If credit sales for the year is Rs. 5,40,000 and Debtors at the end of year is Rs. 90,000 the
Average Collection Period will be.
(a) 30 days
(b) 61 days
(c) 90 days
(d) 120 days
Q.12. The P/v ratio of a company is 50% and margin of safety is 40%. If present sales is Rs.
30,00,000
then Break Even Point in Rs. will be
(a) Rs. 9,00,000
(b) Rs. 18,00,000
(c) Rs. 5,00,000
(d) None of the above
Q.13. In element-wise classification of overheads, which one of the following is not included —
(a) Fixed overheads
(b) Indirect labour
(c) Indirect materials
(d) Indirect expenditure.
Q.14. Following information is available of XYZ Limited for quarter ended June, 2013
Fixed cost Rs. 5,00,000

Variable cost Rs. 10 per unit
Selling price Rs. 15 per unit
Output level 1,50,000 units
What will be amount of profit earned during the quarter using the marginal costing technique?
(a) Rs. 2,50,000
(b) Rs. 10,00,000
(c) Rs. 5,00,000
(d) Rs. 17,50,000
Q15. Information concerning Label Corporation’s product A is as follows.
Sales Rs. 300,000
Variable cost 240,000
Fixed cost 40,000
Assuming that Label increased sales of product A by 20%; the profit from product A is
(1) Rs. 20,000;
(2) Rs. 24,000;
(3) 32,000;
(4) Rs. 80,000.
The total cost of the beginning inventory was Rs. 60,000. During the month, 50,000 units were
transferred out. The equivalent unit cost was computed to be Rs. 4.00 for materials and Rs. 7.40
for conversion costs. With the help of given information, what was the total cost of the units
completed and transferred out during the month.
► Rs. 480,000
► Rs. 570,000
► Rs. 540,000
► Rs. 510,000
If, Sales = Rs. 1200,000
Markup = 20% of cost
What would be the value of Gross profit?
. Rs. 200,000
. Rs. 100,000
. Rs. 580,000
. Rs. 740,000

GP= (Given info / given %age)* % of req Info
Cost of incoming freight on merchandise to be sold to customers by a retail chain would be
considered by that merchandiser to be:
► Prime costs
► Inventoriable costs
► Period costs
Question No:4 ( Marks: 1 ) - Please choose one
A Company maintains a margin of safety of 25% on its current sales and earns a profit of Rs. 30
lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales amount
to
► A: Rs. 200 lakhs;
► B: Rs. 300 lakhs;
► C: Rs. 325 lakhs;
► D: None of the above.
Question No:5 ( Marks: 1 ) - Please choose one
Nelson Company has following FOH detail.
Budgeted (Rs.) Actual (Rs.)
Production Fixed overheads 36,000 39,000
Production Variable overheads 9,000 12,000
Direct labor hours 18,000 20,000
What would be the applied rate.
► Rs.2.00 per labor hour
Which of the following costs do NOT change when the activity base
Fluctuates?
► Variable costs
► Discretionary costs
► Fixed costs
► Mixed costs

In CVP analysis, when the number of units sold changes, which one of the
following will remain the same?
► Total contribution margin
► Total sales revenues
► Total variable costs
► Total fixed costs
Terrell, Inc. sells a single product at a selling price of Rs. 40 per unit. Variable costs are Rs. 22 per
unit and fixed costs are Rs. 82,800. Terrell's breakeven point is:
► Rs. 184,000
► 3,764 units
► Rs. 150,540
► 2,070 units
If, Total fixed cost Rs. 2,000, Variable manufacturing cost Rs. 3,000, Variable selling cost Rs.
1,000 and Sales Rs. 10,000 then what will be the profit?
► Rs.7,000
► Rs.5,000
► Rs.4,000
► Rs.8,000
A company ABC has contribution to sales ratio of 35%, variable cost to sales ratio of 65% and a
profit to sales ratio of 17%. What will be the margin of safety ratio?
► 48.6%
► 53.8%
► 26.2%
► It can not be calculated from the given data
If:
Cost of goods available for sales Rs. 7,000. Cost of opening finished goods inventory is Rs. 1,000.
Commercial expenses Rs. 2,000. Which of the following is the cost of goods to be produced?
► Rs. 6,000
► Rs. 4,000
► Rs. 8,000
► Rs. 10,000

Raymond Corporation estimates factory overhead of Rs. 345,000 for next fiscal year. It is
estimated that 60,000 units will be produced at a material cost of Rs. 575,000. Conversion will
require 34,500 direct labor hours at a cost of Rs. 10 per hour, with 25,875 machine hours.
FOH rate on the bases of Prime cost would be?
. Rs. 37.5 per unit
. Rs. 56.6 per unit
. Rs. 60 per unit
. Rs.1 per unit
Prime cost = Direct Material Cost +Direct Labor Cost +Direct Expense
Prime cost = Direct Material cost + conversion Cost
An ice factory has a contribution margin of Rs. 450,000 and fixed cost for the year amounts to Rs.
495,000. The fixed cost of Rs. 215,000 can be eliminated if the operations are to be closed during
winter season. An extra sale of Rs. 25,000 is also expected during winter season. What would be
the decision?
► Operations would be closed during winter season
► Operations would be continued as we are having extra sales in winter season
► Operations would be partially closed
A contract will be accepted in which of the following condition?
► If it reduces the contribution margin
► If it increases the contribution margin
► If it increases the fixed cost
► If it decreases sales revenue
Question No: 15 ( Marks: 1 )
Classify whether true or false the following organization with respect to cost accumulation
procedure generally used either Job order costing or Process costing by filling the appropriate
boxes given below.

Industries Costing Procedure to be applied
Paint -Process Costing
Leather -Process Costing
Printing press- Job Order
Wood furniture- Job Order
Steel -Process Costing
Jewelry items -Job Order
Accounting firms -Job Order
Mobile phones -Job Order
Tires and tubes -Process Costing
Sugar -Process Costing

Important mcqs for final Managerial Accounting

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Important mcqs for final Managerial Accounting