Cost & Management Accounting

COST AND MANAGEMENT ACCOUNTING
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1 What is responsibility Accounting. Explain the responsibility centers.
2 What is flexible budget. Explain
3 What is standard costing? How is it different from Historical costing?
4 What is cost volume profit analysis? Explain.
5 What is idle time? What are the causes for idle time? How should idle time
wages be treated in cost Accounts?
6 What do you mean by ABC analysis? State its advantages.
7 Briefly explain the different ways of ‘classifying cost’.
8 What is cost accounting? What are its objectives?

Case Detail :
CASE STUDY:
A retail dealer in garments is currently selling 24000 shirts annually. He supplies
the following details for the
year ended 31st December,2007.
Rs
Selling Price per shirt 40
Variable Cost per shirt 25
Fixed cost:
staff salaries for the year 120000
General office cost for the year 80000
Advertising costs for the year 40000
As a cost accountant of the firm, you are required to answer the following each
part independently:-
1. Calculate the break-even point and margin of safety in sales revenue and no of shirts sold.
2. Assume that 20000 shirts were sold in a year. Fin
out the net profit of the firm.
3.
Question No: 1
The Rowan Plan
Is the best for efficient workers
Pays lower bonus that that of Halsey beyond 50% saving in time.
Pays increased bonus at an increasing rate as the efficiency

None of the above
Question No: 2
A written request to a supplier for specified goods at an agreed upon price is called a
Receiving Report
Purchase order
Material requisition form
Purchase requisition
Question No: 3
Which of the following service departments’ costs is apportioned on the basis of rate of
labor turnover?
Payroll department
Personnel department
Canteen service
None of the above
Question No: 4
Which of the following bases is appropriate to apportion the cost incurred on supervision
of machine?
Floor area occupied by each machine
Equitable basis
Value of each machine
None of the above
Question No: 5
Which of the following bases is used for apportionment of overtime premium of workers
engaged in a particular department?
Direct allocation
Direct labor hours
Number of workers
None of the above
Question No: 6
The rate used in addition to the original rates for ascertaining the true profit for adjusting
the under or over absorption of

overheads is known as
Predetermined rate
Blanket rate
Moving average rate
None of the above
Supplementary Overhead Rates
Question No: 7
Which of the following transfer pricing methods will preserve the sub-unit autonomy?
Cost-based pricing
Negotiated pricing
Variable-cost pricing
None of the above
Question No: 8
The most fundamental responsibility center affected by the use of market-based transfer
prices is
Revenue center
Cost center
Profit center
None of the above
Question No: 9
Target pricing
Is a pricing strategy used to create competitive advantage
Considers the variable costs and excludes fixed costs
Is often used when costs are difficult to control
None of the above
Question No: 10
Any activity for which a separate measurement of costs is desired is known as
Cost unit
Cost center
Cost object

None of the above
Question No: 11
Which of the following can improve break-even point?
Increase in variable cost
Increase in fixed cost
Increase in sale price
None of the above
Question No: 12
Which of the following best describes a fixed cost? A cost which:
Represents a fixed proportion of total costs
Remains at the same level up to a particular level of output
Has a direct relationship with output
Remains at the same level when output increases
Question No: 13
A business's telephone bill should be classified into which one of these categories?
Fixed cost
Stepped fixed cost
Semi-variable cost
Variable cost
Question No: 14
The total production cost for making 20,000 units was £21,000 & total production cost for
making 50,000 was £34,000. When production goes over 25,000 units, more fixed costs
of £4,000 occur. So full production cost per unit for making 30,000 units is:
£0.30
£0.68
£0.84
£0.93
Question No: 15
Which of the following is least likely to be an objective of cost accounting system?

Product Costing
Optimum Sale Mix determination
Maximization of profits
Sales Commission determination
Question No: 16
The classification of costs as either direct or indirect depends upon
The timing of the cash outlay for the cost
The cost object to which the cost is being related
The behavior of the cost in response to volume changes
Whether the cost is expensed in the period in which it is incurred
Question No: 17
Which of the following is false with regard to the supplementary rate method for
accounting of under or over absorption of overheads?
It facilitates the absorption of actual overhead for production
Correction of costs through supplementary rates is necessary for maintaining data for comparison
The supplementary rate can be determined only after the end of the accounting period
None of the above
Question No: 18
Which of the following factors should not be taken into consideration for determining the
basis for applyingoverheads to products?
Adequacy
Convenience
Time factor
None of the above
Question No: 19
Storekeeping expenses are to be apportioned on the basis of
Floor area of the production departments
Direct labor hours of each product
Number of units manufactured of each product
None of the above
Question No: 20

A company has a margin of safety of Rs.40 lakh and earns an annual profit of Rs.10
lakh. If the fixed costs amount toRs.20 lakh, the annual sales will be
Rs.160 lakh
Rs.140 lakh
Rs.120 lakh
None of the above
Question No: 21
Which of the following statements is false with respect to the use of predetermined
overhead absorption rates?
Product cost can be worked out promptly
Use of predetermined overhead rate will provide data available for decision making but not for cost
control
Product costs are not affected unnecessarily due to the vagaries of the calendar or seasonal
fluctuations
None of the above
Question No: 22
In process costing, equivalent units, using first in first out (FIFO) are a measure of
Work done on the beginning as well as ending work-in-process inventory
Work done on units started in the production process during the period
Work done in the department during the period
None of the above
Question No: 23
A company’s approach to a make or buy decision
Depends on whether the company is operating at or below break-even level
Depends on whether the company is operating at or below normal volume
Depends on whether the company is operating at practical capacity level
None of the above
Question No: 24
Which of the following statements is false?
Historical costs are useful solely for estimating costs that lie ahead
Abnormal cost is controllable

Conversion cost is the production cost minus direct material cost
None of the above
Question No: 25
Ramesha Ltd. manufactures product DN for last seven years. The company maintains a
margin of safety of 37.5%with an overall contribution to sales ratio of 40%. If fixed cost is
Rs.5 lakh, the profit of the company is
Rs.12.50 lakh
Rs. 4.25 lakh
Rs. 3.00 lakh
None of the above
Question No: 26
Which of the following statements is true for a firm that uses variable costing?
Profits fluctuate with sales
An idle facility variation is calculated
Product costs include variable administrative costs
None of the above
Question No: 27
If the price rises, which of the following methods of valuing stock will give the highest
profit?
LIFO method
Replacement cost method
FIFO method
None of the above
Question No: 28
An accounting system that collects financial and operating data on the basis of
underlying nature and extent to the costdrivers is
Direct costing
Target costing
Activity based costing
None of the above
Question No: 29

Which of the following is a cause of materials usage variance?
Emergency buying in smaller quantities
Carriage, freight and other charges absorbed instead of being charged to suppliers
Cash discount not taken
None of the above
Question No: 30
The following are the causes of labour efficiency variance except
Bad working condition
Defective tools, equipment and materials
Defective supervision
None of the above
Question No: 31
In allocating factory service department costs to producing departments, which of the
following items would mostlikely be used as an activity base?
Salary of service department employees
Units of electric power consumed
Direct materials usage
None of the above
Question No: 32
Apportionment of overhead cost may be defined as
Charge to a cost center of an overhead cost item with no estimation
Charge to cost center for the use of an overhead cost
Charge to cost units for the use of an overhead cost
None of the above
Question No: 33
An increase in variable costs where selling price and fixed cost remain constant will
result in which of the following?
An increase in margin of safety
No change in margin of safety
A fall in the sales level at which break even point will occur
None of the above

Question No: 34
A segment of an organization is referred to as a profit center if it has
Responsibility for developing markets and selling the output of the organization
Responsibility for combining materials, labor and other factors of production into a final output
Authority to provide specialized support to other units within the organization
None of the above
Question No: 35
Which of the following is false about standard costing system?
It is based on a cost control concept
It assumes stability in the current manufacturing process
The goal is to meet cost performance standards
None of the above
Question No: 36
Which of the following is true regarding the difference between marginal costing and
absorption costing?
Under marginal costing, fixed costs are treated as product costs while it is excluded under
absorption costing
Under absorption costing, under absorption or over absorption of overhead occurs but it does not
occur under marginal costing
The net income under absorption costing is always more than the net income under marginal costing
None of the above
Question No: 37
Which of the following statements is false?
The aggregate of indirect material, indirect wages and indirect expenses is overhead costs
Direct costs are never treated as overhead costs even in cases where efforts involved in identifying
and accounting are disproportionately large
The overheads can be apportioned to a cost center in accordance with the principles of benefit
and/or responsibilities
None of the above
Question No: 38
An increase in variable costs where selling price and fixed cost remain constant will

result in which of the following?
An increase in margin of safety
A fall in the sales level at which break even point will occur
A rise in the sales level at which break even point will occur
None of the above
Question No: 39
Which of the following statements is true for a firm that uses variable costing?
Product costs include variable selling costs
An idle facility variation is calculated
The cost of a unit of product changes because of changes in number of units manufactured
None of the above
Question No: 40
Which of the following statements is/are true?
I. A cost unit is a unit of output in the production of which costs are incurred.
II. A cost center is the smallest segment of activity or area of responsibility for which
costs are accumulated.
III. Typically departments are cost centers and there may be many departments in a cost
center.
Only (I) above
Only (II) above
Both (I) and (III) above
None of the above
We also provide synopsis and project.
Contact www.kimsharma.co.in for best and lowest cost solution or
Email: amitymbaassignment@gmail.com
Call: 9971223030

Cost & Management Accounting

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