1.

The fixed manufacturing cost can be carried forward to next period as part of inventory cost in which of the following
costing system ---------- Full Costing

2. Calculate overhead rate using labour cost method – Factory OH Rs.160,000, Direct Materials – Rs.100,000 & Direct
wages – Rs.80,000 --------- 2

3. Construction Ltd. Plans to discontinue its interior decoration segment. Last year, this segment generated a
contribution margin Rs.60,000 and incurred Rs.80,000 in fixed costs. Discontinuing the segment will allow the
company to avoid half of the fixed costs. What effect is expected to occur to the companying overall profit? ---- Rs.
40,000 increase

4. A system assigns indirect costs or products in two stages. First, the accumulated costs are allocated to production
departments, second, the accumulated costs in cost centers are assigned to individual job/products on the basis of an
overhead allocation rate based labour cost, direct labour-hour rate,machine-hour rate. This system is -------------
Activity Based cost

5. Gross profit margin is calculating by dividing gross profit by -------------- Revenue

6. Calculate profit under variable costing technique, when number of units produced is 1,00,000 units, selling price is
Rs.10 per unit, variable cost is Rs. 6 per unit and fixed cost are Rs. 2,00,000 ---------- Rs.2,00,000

Profit = Revenue/total sales – total variable cost – fixed cost

7. Which of the following is an irrelevant cost? ---- out of pocket cost

8. Compute contribution if sales is Rs. 5,00,000, fixed cost is Rs. 2,00,000 and variable cost is Rs. 2,00,000 ------- Rs.
3,00,000

9. _________ is the traditional method of income determination which includes all manufacturing costs i.e. variable and
fixed expenses ---------- Absorption costing

10. _____ is an example of non-cash expense ------------- Depreciation

11. Which of the following will not appear in a cash budget? ------------------ depreciation of machinery

12. Break even point is computed on the basis of the relationship between the fixed costs and the --------------
Contribution Margin

13. Opportunity costs represent the ______________ foregone by not choosing the second-best alternative in favour of
the best one. ------------------ Benefit

14. The closing inventory, if any, under absorption costing is valued at ____________ variable & fixed manufacturing cost
per unit

15. Based on the following information for Shine Ltd, answer the given questions – cost of machine – Rs. 200000,
estimated life - 10yrs, scrap value - Rs.6000, factory operation hours in a week - 48, machine breakdown time – 15%,
electricity used by machinery is 10 units/hr – Rs.60p/unit.. calculate machine hour rate? ---------- Rs. 14 per hour
16. Porter corporation is working on its direct labour budget for the next two months. Each unit of output requires 0.84
direct labour hours. The direct labour rate is 9.40 per direct labour hour. The production budget calls for producing
2,100 units in June and 1,900 units in July. If the direct labour work force is fully adjusted to the total direct labour
hours needed each month. What whould be the total combined direct labour cost for the two months? ------------- Rs.
31,584.00

17. Income from after sales services to customer should be included in -------- Revenue

18. Based on the following information for Shine Ltd, answer the given questions – cost of machine – Rs. 200000,
estimated life - 10yrs, scrap value - Rs.6000, factory operation hours in a week - 48, machine breakdown time – 15%,
 electricity used by machinery is 10 units/hr – Rs.60p/unit.. calculate the depreciation on machine? ---------- Rs. 19,400
p.a

19. Based on the following information for Shine Ltd, answer the given questions – cost of machine – Rs. 200000,
estimated life - 10yrs, scrap value - Rs.6000, factory operation hours in a week - 48, machine breakdown time – 15%,
electricity used by machinery is 10 units/hr – Rs.60p/unit.. calculate the effective machine hours worked in a year? ----
------ 2122 hours

20. The crucial step in the C-V-P analysis is the determination of break-even point (BEP), which is defined as the sales level
at which ------------- the total revenues equal total costs

21. On the basis of flexibility budget is classified into two types such as fixed budget and ------------- Flexible budget.

22. Flexible budget estimates costs at several levels of ------------- activity

23. The overhears are absorbed into different products under activity costing system ---- both of these

24. Following information is available of Prime Ltd. For year ended March 2020. Fixed cost Rs. 8,00,000. Variable cost
Rs.20 per unit. Selling price Rs.30 per unit. Output level 2,00,000 units. Closing stock 50,000 units. What will be
amount of profit earned during the year using the marginal cost technique? ------------------- Rs. 12,00,000 , 7,00,000

25. Current tax asset is classified as ----------- current asset

26. The EOQ model, as a technique to determine the economic order quantity is based on restrictive assumptions, namely
--------- All of these

27. Current rate is 4:1. Net working capital is 30,000. Find the amount of current assets. ------ Rs.40,000 , 24000

Net working capital = current asset – current liabilities

Current ratio = current assets / current liabilities

28. The tax expense in the statement of profit and loss is 40,00,000. Current tax liability at the beginning and at the end of
the year was 2,00,000 and 3,00,000 respectively. Cash outflow during the year on account of income tax payment was
--------- 4000000

29. Tibu company expects sales of product W to be 60,000 units in April, 75,000 units in May, and 70,000 units in June.
The company desires that the inventory on hand at the end of each month be equal to 40% of the next month’s
expected unit sales. Dur to excessive production during march, on march 31 there were 30,000 units of product W in
the ending inventory. Given this information, Tibu company’s production of product W for the month of April should
be: -------- 60,000 units

30. In shutdown or continue decisions, the factor to be considered are ---------- decrease in contribution margin &
unavoidable fixed cost

31. A technique in which the cost of a product is determined after considering both fixed and variable cost is termed as ----
------ Absorption costing

32. Which of the following statement about budget and budgetary control is true. I. It is a costing technique. II. It is a
forecasting tool. III. It is a planning as well as control tool. IV. It is a overhead cost ----------- I & III

33. Kyoto protocol (GHG – green house gases) -------- developed countries
34. Which of the following about variable cost is true. I. it remains fixed irrespective of the level of output. II. It decreases
per unit with the increase in level of output. III. It varies proportionately with the level of output. IV. It remains fixed
per unit with the change in level of output ----------- III and IV

35. The amount of expenditure incurred on or attributable to a given thing is termed as --- Cost

36. Which method of absorption of factory overheads do you suggest in a concern which produces only one uniform item
of products? ----------------- a rate per unit of output

37. Profit planning is done in case of ----------- BEP analysis

38. A document which provides for the assembly of the estimated detailed cost in respect of the cost centres and cost
units are termed as ------------- cost sheet

39. Net profit is reported at 50,00,000. Net profit includes interest expense 5,00,000. Income tax expense 20,00,000.
Interest income 3,00,000. Depreciation 6,00,000. Working capital increased during the year by 4,00,000. There was no
income tax liability at the beginning and at the end of the year. Cash flow from operating activities is --------------
54,00,000

40. The difference between total sales and total variable costs is called as ----------- Contribution margin

41. About 60 items are required every day for a machine. A fixed cost of 40 per order is incurred for placing an order. The
inventory carrying cost per item amounts to Rs. 0.05 per day. The lead period is 25 days. Compute reorder level -----
1500 items

Recorder level = (maximum daily usage rate X lead time ) + safety stock

42. The process of charging the full amount of overhead costs to a particular cost center is termed as ---------- allocation of
overhead

43. A current asset that can be transferred into cash within three months is known as ---------- cash equivalent

44. Interest received, dividend received are an example of ------- other income

45. Goodwill is categorized under which assets ------------ intangible

46. _______ is not charged on items included in capital work-in-progress ----------- Depreciation

47. The term current asset doesn’t cover ------------ Car

48. A contract with a customer sets out the rights and obligations of both, the entity and the customer. Which of the
statement is correct ----------- the entity obligation is to deliver goods and services and the right is to receive the (XX
consideration agreed for the supply of goods and services XX)

49. Which of the following item would be subtracted from net income when using the indirect method of calculating cash
flows provided by operating activities? --- a gain on the sale of land

50. For a financial institution interest paid and interest and divided received are classified as _________ cash flows -------
operating
51. Which report gives a review on the profitability of a business --------- income statement

52. Factory overhead costs refer to all indirect manufacturing costs which cannot be identified with particular orders or
units of product. It includes --------------- depreciation on factory plant and equipment’s and factory building

53. The following is true about activity-based costing ----- it is a two-stage cost allocation system that allocates costs to
activities and then to products based on their use of the activities.

54. On the basis of _________, budget is classified into long term budget, short term budget and current budget -------
Time

55. Costs that tend to vary in direct proportion or in a one-to-one relationship to changes in production activity, sales
activity or some other measure of volume within relevant range for a given budget period are referred to as -----------
variable costs

56. The volume-cost-profit (VCP) analysis is a tool to show the relationship between various ingredients of profit planning.
Namely ---------- all of these (unit sales price (SP), unit variable cost (VC), fixed cost, sales volume, sales-mix)

57. Banks generally sees that debt equity ratio is equal to or below ------- 1:3

58. Relevant costs are costs which would change as a result of the ------------- Decision

59. As per flexible budget, sales is Rs.5,00,000. COGS is Rs. 3,00,000 and 20% of which is fixed. Calculate COGS at 80%
capacity utilization, considering that current utilization capacity is 60% (69)--------- Rs. 3,80,000

60. The principle underlying the variable costing is that the fixed manufacturing overheads are -------- period cost

61. If an owned premises is used for business, the rental income forgone by not giving it on rent is an example of -----
opportunity cost

62. Costs that consist of both fixed costs and variable costs are known as ---------- mixed cost (semi-variable cost)

63. When production is less that units sold then the income under absorption costing will be _________ in comparison to
income under variable costing ---------- lower

64. When break even point is 2000 units, selling price per unit is Rs. 14 and variable cost is Rs. 8. Find out fixed cost? -------
--- Rs. 12, 000

Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)

65. The underlying difference between absorption costing and variable costing lies in the treatment of --------- fixed
manufacturing cost

66. The excess of the actual sales revenue (ASR) over the break-even sales revenue (BESR) is known as ----------- margin of
safety

67. The cost of raw materials used in production is an example of ------------- product cost

68. There is no complication of over-absorption of factory overheads or even their under absorption in the case of
_________ costing ------------------ Absorption costing
69. For ABC Ltd, annual rent of factory is Rs. 12,00,000 and units produced in the current year are 1,00,000. The overheard
absorption rate is Rs. 10 per unit. Calculate the underabsorption in this case? ------- Rs.2 lacs (12,00,000 – (1,00,000 X
10))

70. When production is less than units sold then the income under absorption costing will be __________ in comparison
to income under variable costing ----------------- Lower

71. ________ is a detailed budget of all cash receipts and cash expenditures --------- cash budget

72. From total income, when COGS, Admin and Selling & Distribution expenses are deducted, resulting profit is known as -
--------- EBITDA

73. ______ companies earn interest from investments, and therefore, for them, interest income is not revenue -------
Financial

74. The basis of absorption of factory overheads is --------- units of production

75. The distribution of common cost among user departments is known as ---------- apportionment

76. Furniture ltd, produces multiple types of chairs. It uses activity-based costing and has the following activity cost pools,
estimated overhead cost for each pool and related cost driver. A) handling material Rs. 240,000 for which cost driver is
number of parts, total parts are 6000 b) processing purchase orders Rs. 720,000 for which cost driver is number for
purchase orders. Total purchase orders placed in a year are 12000. If number of purchase orders and number of parts
for student chair are 3000 and 3000 respectively then calculate the overheads allocated to student chairs ---------- Rs.
12000

77. The activity based costing (ABC) system has advantages ------------ it may result in improved cost control

78. The cost which refers to advantage, in measurable terms, which has been foregone on account of not using the
facilities in the manner originally planned is termed as ------------ opportunity cost
1. The ABC is widely used classification technique to identify various items of
inventory for purpose of inventory control and recommends that a firm should
exercise the maximum control on ……. Items of inventory that are :
a. Most costly and/or slowest turnover
b. High in volume
c. Fast turning
d. All of these

2. The fixed manufacturing cost can be carried forward to next period as part of
inventory cost in which of the following costing system _____________ ?
a. Marginal Costing
b. Variable Costing
c. Unit costing
d. Full costing

3. For Cash ltd estimated sales for April, May, June, July August are Rs 46000, Rs
48000, Rs 28000 Rs 44000 ans Rs 30000. In cash 50% of sales are realized in the next
month and balance in the next of next month, determine cash collection from sales in
june and July.
a. Rs 47000 and Rs 38000
b. Rs 38000 and Rs 36000
c. Rs 14000 and Rs 22000
d. Rs 24000 and Rs 14000.

4. An increase in selling price per unit will lead to __________

a. A decrease in profit
b. An increase in contribution
c. A reduction in contribution
d. A decrease in P/V ratio
e. Rs 24000 and Rs 14000.

5. The direct method and indirect method of presenting cash flow statement differs only
in respect of presenting cash flows from _____________ activities.
a. Non-operating
b. Direct
c. Operating
d. Indirect

6. Resources that are limited in quality are called as

a. Key lender
b. Contributor
c. Key factors
d. Key limiters
7. As per flexible budget, sales is Rs 500000 CoGS is Rs 300000 and 20% of which is
fixed. Calculate CoGS at 80% capacity utilization, considering that current utilization
of capacity is 60%.
a. Rs 320000
b. Rs 380000
c. Rs 400000
d. Rs 500000.

8. The cost which remain constant in total but reduces per unit as the volume of
production increase is known as____________
a. Variable Cost
b. Fixed Cost
c. Mixed Cost
d. Semi Variable Cost

9. The part of cost of joint products that can be attributed exclusively and wholly to a
particular products, process, Division or department is known as
a. Inseparable
b. Separable
c. Fixed
d. None of the above.

10. If an owned premises is used for a business, the rental income forgone by not giving
it on rent is an example of ______________
a. Opportunity Cost
b. Out of pocket cost
c. Sunk Cost
d. Variable Cost

11. __________ are the expenses related to business activity but are disproportionate in
amount or occurs infrequently
a. Extraordinary items
b. Non-operating Expenses
c. Operating Expenses
d. Exceptional items

12. Selling and distribution charges are incurred for marketing of products, dispatching
goods sold and so on and include
a. Advertisement expenses cost of preparing tenders travelling expenses, bad debts.
, Collection charges
b. Warehouse charges, packing and loading charges and carriage outward
c. All of these
d. None of these
13. _________ is an obligation present at the balance sheet date.
a. Liability
b. Asset
c. Equity
d. Bonds
14. __________ attached with the balance sheet forms a part of the financial statement
a. …………….
b. Schedules or notes …..
c. Acts
d. Rules

15. Furniture ltd produces multiple types of chairs. It uses activity-based costing and has
the following activity cost pools, estimated overhead cost for each pool and related
cost driver
a) Handling material Rs 240000 for which cost driver is number of parts, total parts
are 6000
b) Processing purchase orders Rs 720000 for which cost driver is number of purchase
orders, if number of purchase orders placed in a year are 12000.
If number of purchase orders and number of parts for student chair are 3000 & 3000
respectively then calculate the overheads allocated to student chairs.
a. Rs 80000
b. Rs 120000
c. Rs 480000
d. Rs 200000

16. Factory overhead costs refer to all indirect manufacturing costs which cannot be
identified with particular orders or units of product. It includes …………
a) Direct Material
b) Depreciation on factory plant and equipment’s and factory building
c) Direct Labour
d) None of these

17. Gain from sale of items of PP&E should be included in ……….

a) Revenue
b) Other operating income
c) Other income
d) Turnover

18. Annual requirement is 100000 units , Unit price 20 per order. Carrying cost 1 per
unit and lead time is 2 week. The economic order quantity would be.
a) 1000 units
b) 2000 units
c) 800 units
d) 10000 units

19. In product mix decision, most important factor to be considered is …….?

a) Contribution per unit.
b) Contribution per unit of key resource
c) profit per unit
d) revenue of each product
20. When a department or product line is dropped, the common Fixed costs which had
been allocated to that department.
a) Are eliminated
b) Become variable costs
c) Are allocated to the remaining departments or product lines
d) Become sunk costs

21. The overheads are absorbed into different products under activity costing system
a) Using level of activity used in producing the cost under
b) Using departmental overhead rate
c) Both of these
d) None of these

22. About 60 items are required everyday for a machine. A fixed cost of 40per order is
incurred for placing an order. The inventory carrying cost per item amounts to
Re.0.05 per day. The lead period is 25 days .Compute reorder level.
a) 2400 items
b) 1500 items =60X25=1500
c) 120 items
d) 1000 items

23. From the prospective of cost allocation, service department costs are
a) Generally treated as period costs rather than products costs.
b) Reported as selling and administrative expenses on the income statement
c) Eventually applied by the user departments to the units produced
d) Seldom found in manufacturing organizations

24. Economists believe that

a) people who choose to promote the interests of others cannot be acting rationally
in their own self-interest.
b) people show concern only for those whom they know personally
c) the notion of self-interest rules out concern for others
d) concern for the welfare of others is consistent with the concept of self-interest

25. On the basis of …………., budget is classified into long term budget, short term
budget and current budget.
a) Time
b) Flexibility
c) Function
d) Cost

26. The principle underlying the variable costing is that the fixed manufacturing
overheads are……….
a) Non-Inventoriable costs
b) period cost
c) to be deducted in the year in which they are
d) All of these
27. Net profit is reported at 5000000. Net profit includes interest expense 500000,
income tax expense 2000000, interest income 300000, depreciation 600000, working
capital increased during the year by 400000. There was no income tax liability at the
beginning and at the end of the year. Cash flow from operative activities is ……
a) 6400000
b) 5400000
c) 7400000
d) 6200000

28. The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is
Rs.20,00,000 then Break Even Point in Rs. Will be …………..
a) Rs. 4,00,000
b) Rs. 12,00,000
c) Rs. 8,00,000
d) Rs. 16,00,000
Solution:
Calculation of Break-Even Point
Margin of safety is 40% of sales = 20,00,000 x 40 / 100 = 8,00,000
Break-even sales = Sales – Margin of safety= 20,00,000 – 8,00,000= 12,00,000

29. Cash flows arising from the purchase and sale of dealing or trading securities are
classified as …………for a brokerage firm.
a) Non-operating activities
b) Investing activities
c) Financing activities
d) Operating activities

30. ………….. is the traditional method of income determination which includes all
manufacturing costs i.e. variable and fixed expenses?
a) Absorption Costing
b) Variable Costing
c) Fixed Costing
d) Process Costing

31. Fixed cost is cost…………

a) Which changes in total in proportion to changes
b) Which is partly fixed and partly variable in relation to output
c) Which do not change in total during a given period irrespective of changes in
output.
d) Which remains same for each unit of output

32. Current ratio of a concern is 1, its net working capital will be

a) Positive
b) Negative
c) Nil
d) None of these
33. When assets are subtracted from liabilities it will be equal to
a) Capital
b) Net income
c) Working capital
d) Goodwill

34. Assumptions regarding the VCP graph are

a) Costs can be bifurcated into variable and fixed components
b) Fixed costs will remain constant during the relevant volume range of graph
c) Variable cost per unit remain constant for units manufacture
d) All of these

35. When break-even point is 2000 units, selling price per unit is Rs. 14 and variable
cost is Rs. 8, find out fixed cost ?
a) Rs. 12,000
b) Rs. 8,000
c) Rs. 5,000
d) Rs. 16,000

36. The basis of absorption of factory overheads is:

a) Units of production
b) Direct materials cost
c) Machine Hour Rate
d) All of these

37. ……………… refers to the ability to direct the use of, and obtain substantially all
of the remaining benefits from, the asset
a) Control of an asset
b) Transaction price
c) Performance obligation
d) Standalone selling price

38. Which of the following is an irrelevant cost ?

a) Opportunity Cost
b) Replacement Cost
c) Sunk Cost
d) Out of Pocket Cost

39. Current tax asset is classified as ……………….

a) Monetary asset
b) Current asset
c) Non-current asset
d) Non-monetary asset
 40. Construction Ltd plans to discontinue its interior decoration segment. Last year,
this segment generated a contribution margin of Rs. 60,000 and incurred Rs.
80,000 in fixed costs . Discontinuing the segment will allow the company to avoid
half of the fixed costs. What effect is expected to occur to the company’s overall
profit?
a) Rs. 40,000 increase
b) Rs. 20,000 increase
c) Rs. 20,000 decrease
d) Profit will remain same

41. Opportunity costs represent the ………. foregone by not choosing the second-best
alternative in favour of the best one.
a) Loss
b) Benefit
c) Both
d) None of Above

42. A current asset that can be transferred into cash within three months is known as
a) Cash equivalent
b) Intangible asset
c) Operating asset
d) cash asset

43. The closing inventory, if any, under absorption costing is valued at ………?
a) All variable cost per unit
b) Variable manufacturing cost per unit
c) Variable & fixed manufacturing cost per unit
d) Variable & fixed cost per unit.

44. An increase in selling price per unit will lead to ………

a) A decrease in profits
b) An increase in contribution
c) A reduction in contribution
d) A decrease in P/V ratio

45. An increase in variable cost per unit will lead to ………..

a) An increase in profits
b) An increase in contribution
c) A reduction in contribution
d) An increase in P/V ratio

46. For Cash Ltd. estimated sales for April, May, June, July, August are Rs. 46,000, Rs.
48,000 , Rs. 28,000, Rs. 44,000 and Rs. 30,000 . In case 50% of sales are realized in
the next month and balance in the next of next month, determine cash collection
from sales in June & July.
a) Rs. 47,000 & Rs. 38,000
b) Rs. 38,000 & Rs. 36,000
c) Rs. 14,000 & Rs. 22,000
d) Rs. 24,000 & Rs. 14,000
47. ………. Is a detailed budget of all cash receipts and cash expenditures
a) Cash Budget
b) Revenue Budget
c) Capex Budget
d) Flexible Budget

48. In process further or sell now decisions, the decision should be taken based on
………….?
a) Incremental Cost
b) Contribution margin
c) Incremental revenue
d) Incremental Revenue & Incremental Cost

49. The accounting statement of cash flows reports a firm’s cash flows segregated into
categorical order?
a) Operating, investing and financing
b) Investing, Operating and financing
c) Financing, operating and investing
d) Financing, investing and operating

50. For a financial institution interest paid and interest and dividends received are
classified as ……. cash flows .
a) Investing
b) Operating
c) Financing
d) Non-operating

51. Income from after sales services to customers should be included in …………..
a) Revenue
b) Other operating income
c) Net profit
d) Other income

52. Which report gives a review on the profitability of a business

a) Statement of changes in equity
b) Cash flow statement
c) Balance sheet
d) Income statement

53. Interest received, dividend received are an example of ……

a) Revenue
b) Other Operating Income
c) Other Income
d) Profit

54. Cost of factory lighting is an example of …………?

a) Product Cost
b) Direct Cost
c) Indirect Cost
d) Separable Cost
55. The cost allocation process does not comprise of one of the basic activities which is:
a) Accumulating the cost objects on the basis of department or division or product.
b) Identifying the cost objects or recipients of the allocated costs say, a unit of
product or department
c) Selecting a method for relating the costs so accumulated to cost objects.
d) Rationalization of activities

56. Which of the following will not appear in a cash budget?

a) Sales revenue
b) Machinery bought on hire purchase
c) Wages
d) Depreciation of machinery

57. Tibu Company expects sales of Product W to be 60,000 units in April, 75,000 units
in May, and 70,000 units in June. The company desires that the inventory on hand at
the end of each month be equal to 40% of the next month’s expected unit sales. Due
to excessive production during March, on March 31 there were 30,000 units of
Product W in the ending inventory. Given this information, Tibu Company’s
production of Product W for the month of April should be:
a) 60,000 units
b) 65,000 units
c) 75,000 units
d) 66,000 units

58. The difference between total sales and total variable cost is called as:
a) Operating profit
b) Net Profit
c) The gross margin
d) The contribution margin

59. Current ratio is 4:1. Net working capital is 30,000. Find the amount of current assets.
a) 10,000
b) 40,000
c) 24,000
d) 6,000
Solution:
Current ratio = Current Asset/Current Liabilities
So, Current liabilities = Current Asset/Current ratio= Current Asset/4
Now, Net working capital = Current Asset-Current Liabilities
= Current Asset- Current Asset/4= (3/4) * Current Asset
Therefore, Current Asset = (4/3) of Networking Capital = (4/3) * 30,000 = 40,000

60. _____ is the firm's ability to arrange cash in short-term to meet its short-term
obligations, whereas__________ is its long-term viability and ability to honour
long-term financial commitments.
a) Solvency, liquidity
b) Credit, investing
c) Liquidity, solvency
d) Investing, credit
 61. ___________ is an example of non-current assets.
a) Inventory
b) Advance Tax
c) Property, Plant & Equipment
d) All of these
62. The excess of the actual sales revenue ASR over the break-even sales revenue
(BESR) is known as: Margin of Safety
63. The cost of a single process or a series of processes that simultaneously produce two
or more products of signification sales value is : Joint Cost
64. The ideal quick ratio is: 1
65. SEBI requires non finance companies to present cash flow -------- method: Direct
66. Building is an example of ------ Non-Current Asset
67. The cost which remains constant in total but reduces per unit as the volume of
production increase is known as Fixed Cost
68. When production is more than units sold then the income under absorption costing
will be ------in comparison to income under variable costing: Higher
69. A contract with a customer sets out the rights and obligations of both, the entity and
the customer. Which of the statement is correct? The entity's is obligation is to
deliver goods and services and the right is to receive the consideration agreed for
the supply of goods and services
70. If the number of units produced exceeds the number of units sold, then net operating
income under absorption costing will:
a) be equal to the net operating income under variable costing.
b) be greater than net operating income under variable costing.
c) be equal to the net operating income under variable costing plus total fixed
manufacturing costs.
d) be equal to the net operating income under variable costing less total fixed
manufacturing costs.
71. Flexible budgets as a tool of planning and control are superior to fixed budgets. The
major weakness of fixed budgets is their inability to: The fixed budget is not
effective for evaluating the performance of cost centers.

72. Following information is available of Prime ltd for year ended march 2020. Fixed cost
Rs 8,00,000, variable cost Rs 20 per unit, selling price Rs 30 per unit Output level
2,00,000 units, closing stock 50,000 units. What will be amount of profit earned
during the year using the marginal costing technique?
Total Unit in period = 2,00,000-50,000= 1,50,000
Sales = Fixed Cost+ variable Cost + Profit-Loss (if any)
1,50,000*30 = 8,00,000 +1,50,000*20 + Profit-Loss (if any)
Therefore, Profit-Loss (if any) = 1,50,000*30 -1,50,000*20 - 8,00,000 = 7,00,000

73. Which of the following would be subtracted from net income when determining cash
flows from operating activities under the indirect method?
a) An increase in accounts payable.
b) Depreciation expense.
c) A decrease in prepaid insurance.
d) A gain on the sale of a depreciable asset/gain on sale of land.
74. Which of the following would be subtracted from net income when using the indirect
method to derive net cash flows from operating activities?
a. Decrease in salaries and wages payable.
b. Loss on sale of investments.
c. Decrease in net accounts receivable.
d. Depreciation expense.
75. Buy back of shares is an Application of fund

76. Relevant costs are costs which would change as a result of a Decision

77. A company manufactures a single product for which cost and selling price data are as
follows - Selling price per unit Rs 6, variable cost per unit Rs 4, fixed cost for a period
Rs. 20,000 Budgeted sales for a period -15000 units. The margin safety is Units and
percentage of budgeted sales is:
Solution: Selling Price (S.P.) = 6, Variable Cost (C.P.) = 4, Fixed Cost (FC)=20,000
Budgeted sales (Units)= 15,000
Expected Sales = 15000*S.P= 15,000*6 = 90,000/-
Break-even point = Budgeted Sales(Units) * C.P. = 15,000 * 4 = 60,000/-

Margin of Safety (%) of budgeted Sales

= (Expected Sales - Break-even point)/Expected Sales
= (90,000-60,000)/90,000 = 33%
Margin of safety (Units) = (Expected Sales - Break-even point)/ S.P.
= (90,000-60,000)/6 = 30,000/6= 5,000 Units

78. From total income, when CoGS, admin and Selling & Distribution expenses are
deducted resulting profit is known as: EBITDA or Operating Profit
79. A firm requires 8000 nos. of a certain component which is bought at 60 each. The cost
of placing an order and following is up is 60 and the annual storage charges works out
to 10% of the cost of the item. To get maximum benefit the firm should place an order
for ______ units at a time 400 units

80. The distribution of common cost among user departments is known as:
Apportionment

81. Based on the following information of Shine LTd

Answer the given question
Cost of Machine Rs 200000
Estimated Life 10 Years
Scrap value Rs 6000
Factory operation hour
In a week 48
Machine breakdown time 15%
Estimated user by machinery
Is 10 units/hour Rs 60p/unit
Calculate the effective machine hours worked in a year?
a. 2496 hours
b. 374 hours
c. 2122 hours Eff M/c hr = 48*52*(Efficiency 85%) = 48*52*0.85=2121.6 = 2122
d. 576 hours
 82. Based on the following information of Shine LTd
Calculate Machine hour rate?
a) Rs 14 per hour
b) Rs11.61 per hour
c) Rs 12.60 hour
d) Rs 18 per hour
83. Calculate Electricity consumption rate per hour
a) Rs 6 per hour =10unit* Rs 0.6= Rs. 6
b) Rs 10 per hour
c) 60 paisa per hour
d) Rs 60 per hour

84. Calculate the Depreciation on Machine?

a) Rs. 20,000 p.a.
b) Rs. 14,000 p.a.
c) Rs. 19,400 p.a. Depreciation (p.a.) = (Cost of Machin-scrap value)/Estimate life
= (200,000-6,000)/10 = 19,400/-
d) Rs. 10,000 p.a.

85. Calculate depreciation rate per hour?

a) Rs 8.01 per hour (When No Scrap & 100% Efficiency)
b) Rs 9.43 per hour (No Scrap & 85% Efficiency)
c) Rs 5.61 per hour
d) Rs 6.60 per hour

Solution: Depreciation (p.a.) = (Cost of Machine-scrap value)/Estimate life

= (200,000-6,000)/10 = 19,400/-
Case 1: When 100% efficiency is considered:
Depreciation rate per hour = Depreciation (p.a.)/Total no. of machine hours (p.a.)
= 19,400/2496
= Rs. 7.77 per hour. (No such option given)
Case 2: When 85% efficiency is considered:
Depreciation rate per hour = Depreciation (p.a.)/Effective machine hours.
= 19,400/2122
= Rs. 9.14 per hour. (No such option given)
Though this is correct answer.
Case 3: No scrap value & 100% Efficiency is considered:
Depreciation rate per hour = Original Cost/Total no. of machine hours
= 2,00,000/[No. of years*Tot. no. of machine hours (p.a.)]
= 2,00,000/(10*2496)
= Rs. 8.01 per hour. (Option A)
Case 4: No scrap value & 85% Efficiency is considered:
Depreciation rate per hour = Original Cost/Total no. of machine hours
= 2,00,000/[No. of years*Effective machine hours (p.a.)]
= 2,00,000/(10*2122)
= Rs. 9.43 per hour. (Option B)
86. For ABC ltd., a annual rent of factory is 1200000 and units produced in the current
year are 1,00,000. The overhead absorption is Rs. 10 per unit. Calculate the under
absorption in this case:
a) Rs. 10 lacs
b) Rs. 12 lacs
c) Rs. 2 lacs.
d) Rs. 1 lac.

87. Calculate overhead rate using material cost method Factory OH - Rs 160000, direct
materials - Rs 1,00,000 & direct wages Rs. 80000.
a) 2
b) 1.6
c) 0.88
d) 0.6
1. The ABC is widely used classification technique to identify various items of inventory for purpose
of inventory control and recommends that a firm should exercise the maximum control on …….
Items of inventory that are :

a. Most costly and/or slowest turnover

b. High in volume
c. Fast turning
d. All of these

2.The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following costing system _____________ ?

a. Marginal Costing
b. Variable Costing
c. Unit costing
d. Full costing

3. For Cash ltd estimated sales for April, May, June, July August are Rs 46000, Rs 48000, Rs 28000 Rs
44000 ans Rs 30000. In cash 50% of sales are realized in the next month and balance in the next of
next month, determine cash collection from sales in june and July.

a. Rs 47000 and Rs 38000

b. Rs 38000 and Rs 36000
c. Rs 14000 and Rs 22000
d. Rs 24000 and Rs 14000.

4. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate the effective machine houres worked in a year ?

a. 2496 hours
b. 374 hours
c. 2122 hours
d. 576 hours
5. An increase in selling price per unit will lead to __________

a. A decrease in profit
b. An increase in contribution
c. A reduction in contribution
d. A decrease in P/V ratio
e. Rs 24000 and Rs 14000.

6. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate Machine hour rate?

a. Rs 14 per hour
b. Rs11.61 per hour
c. Rs 12.60 hour
d. Rs 18 per hour

7. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from _____________ activities.

a. Non-operating
b. Direct
c. Operating
d. Indirect

8. Resources that are limited in quality are called as

a. Key lender
b. Contributor
c. Key factors
d. Key limiters
9. As per flexible budget,sales is Rs 500000 CoGS is Rs 300000 and 20% of which is fixed. Calculate
CoGS at 80% capacity utilization, considering that current utilization of capacity is 60%.

a. Rs 320000
b. Rs 380000
c. Rs 400000
d. Rs 500000.

10. The cost which remain constant in total but reduces per unit as the volume of production
increases known as____________

a. Variable Cost
b. Fixed Cost
c. Mixed Cost
d. Semi Variable Cost

11. The part of cost of joint products that can be attributed exclusively and wholly to a particular
products, process, Division or department is known as

a. Inseparable
b. Separable
c. Fixed
d. None of the above.

12. If an owned premises is used for a business, the rental income forgone by not giving it on rent is
an example of ______________

a. Opportunity Cost
b. Out of pocket cost
c. Sunk Cost
d. Variable Cost

13. __________ are the expenses related to business activity but are disproportionate in amount or
occurs infrequently

a. Extraordinary items
b. Non-operating Expenses
c. Operating Expenses
d. Exceptional items

14. Selling and distribution charges are incurred for marketing of products, dispatching goods sold
and so on and include

a. Advertisement expenses cost of preparing tenders travelling expenses, bad depts. ,

Collection charges
b. Warehouse charges, packing and loading charges and carriage outward
c. All of these
d. None of these
15. _________ is an obligation present at the balance sheet date.

a. Liability
b. Asset
c. Equity
d. Bonds

16. Based on the following information of Shine LTd

Answer the given question
Cost of Machine Rs 200000
Estimated Life 10 Years
Scrap value Rs 6000
Factory operation hour
In a week 48
Machine breakdown time 15%
Estimated user by machinery
Is 10 units/hour Rs 60p/unit

17. Calculate Electricity consumption rate per hour

a. Rs 6 per hour
b. Rs 10 per hour
c. 60 paisa per hour
d. Rs 60 per hour

18. __________ attached with the balance sheet forms a part of the financial statement

a. …………….
b. Schedules or notes …..
c. Acts
d. Rules

19. Furniture ltd produces multiple types of chair. It user activity-based costing and has the following
activity cost pools, estimated overhead cost for each pool and related cost driver a)Handling
materials Rs 240000 for which cost driver is number of parts , total parts are 6000, b) processing
purchase order Rs 720000 for which cost driver is number of purchase order, total purchase order
and number of parts for the manager chair are 2000 and …….. respectively the calculate the
overheads located to Manager chairs.

a. Rs 80000
b. Rs 120000
c. Rs 480000
d. Rs 200000
20. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate depreciation rate per hour?

a. Rs 8.01 per hour

b. Rs 9.43 per hour
c. Rs 5.61 per hour
d. Rs 6.60 per hour
21. Factory overhead costs refer to all indirect manufacturing costs whichcan not be identified with
particular orders or units of product. It includes …………

a) Direct Material

b) Depreciation on factory plant and equipment’s and factory building

c) Direct Labor

d) None of these

22. Gain from sale of items of PP&E should be included in ……….

a) Revenue

b) Other operating income

c) Other income

d) Turnover

23. Annual requirement is 100000 units , Unit price 20 per order. Carrying cost 1 per unit and lead
time is 2 week. The economic order quantity would be.

a) 1000 units

b) 2000 units

c) 800 units

d) 10000 units

24. In product mix decision, most important factor to be considered is …….?

a) Contribution per unit.

b) Contribution per unit of key resource

c) profit per unit

d) revenue of each product

25. When a department or product line is dropped, the common Fixed costs which had been
allocated to that department .

a) Are eliminated

b) Become variable costs

c) Are allocated to the remaining departments or product lines

d) Become sunk costs

26. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost under

b) Using departmental overhead rate

c) Both of these

d) None of these

27. About 60 items are required every day for a machine. A fixed cost of 40per order is incurred for
placing an order. The inventory carrying cost per item amounts to Re.0.05 per day.The lead period is
25 days .Compute reorder level.

a) 2400 items

b) 1500 items

c) 120 items

d) 1000 items

28. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost.

b) Using departmental overhead rate .

c) Both of these

d) None of these

29. From the prospective of cost allocation, service department costs are

a) Generally treated as period costs rather than products costs.

b) Reported as selling and administrative expenses on the income statement

c) Eventually applied by the user departments to the units produced

d) Seldom found in manufacturing organizations

30. The part of cost of joint products that can be attributed exclusively and wholly to a particular
product, process, division or department is known as

a) Inseparable

b) Separable

c) Fixed
d) None of Above

31. Economists believe that

a) people who choose to promote the interests of others cannot be acting rationally in their own
self-interest.

b) people show concern only for those whom they know personally

c) the notion of self-interest rules out concern for others

d) concern for the welfare of others is consistent with the concept of self-interest

32. On the basis of …………., budget is classified into long term budget, short term budget and current
budget.

a) Time

b) Flexibility

c) Function

d) Cost

33. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from …………. activities .

a) non-operating

b) Direct

c) Operating

d) Indirect

34. The principle underlying the variable costing is that the fixed manufacturing overheads are ……….

a) Non-Inventoriable costs

b) period cost

c) to be deducted in the year in which they are

d) All of these

35. Net profit is reported at 5000000. Net profit includes interest expense 500000 , income tax
expense 2000000, interest income 300000, depreciation 600000, working capital increased during
the year by 400000. There was no income tax liability at the beginning and at the end of the year.
Cash flow from operative activities is ……………………

a) 6400000

b) 5400000

c) 7400000
d) 6200000

36. The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is Rs. 20,00,000
then Break Even Point in Rs. Will be …………..

a) Rs. 4,00,000

b) Rs. 12,00,000

c) Rs. 8,00,000

d) Rs. 16,00,000

37. Cash flows arising from the purchase and sale of dealing or trading securities are classified as
……………….. for a brokerage firm .

a) Non-operating activities

b) Investing activities

c) Financing activities

d) Operating activities

38. Based on the following information for Shine Ltd. answer the given questions :

Cost of a Machine Rs.200000 , Estimated life 10 years , Scrap value Rs. 6000 , Factory operation
hours in a week 48 , Machine breakdown time 15% . Electricity used by machinery is 10 units/hrsRs.
60p/unit.

Calculate Depreciation rate per hour ?

a) Rs. 8.01 per hour

b) Rs. 9.43 per hour

c) Rs. 5.61 per hour

d) Rs. 6.60 per unit

39. Calculate the Effective machine hours worked in a year ?

a) 2496 hours

b) 374 hours

c) 2122 hours

d) 576 hours
40. Calculate Electricity consumption rate per hour ?

a) Rs. 6 per hour

b) Rs. 10 per hour

c) 60 paise per hour

d) Rs. 60 per hour

41. Calculate the Depreciation on Machine ?

a) Rs. 20,000 p.a.

b) Rs. 14,000 p.a.

c) Rs. 19,400 p.a.

d) Rs. 10,000 p.a.

42. ………….. is the traditional method of income determination which includes all manufacturing
costs i.e. variable and fixed expenses .

a) Absorption Costing

b) Variable Costing

c) Fixed Costing

d) Process Costing

43. Fixed cost is cost…………

a) Which changes in total in proportion to changes

b) Which is partly fixed and partly variable in relation to output

c) Which do not change in total during a given period irrespective of changes in output.

d) Which remains same for each unit of output

44. Current ratio of a concern is 1, its net working capital will be

a) Positive

b) Negative

c) Nil

d) None of these
45. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income

c) Working capital

d) Goodwill

46. Assumptions regarding the VCP graph are

a) Costs can be bifurcated into variable and fixed components

b) Fixed costs will remain constant during the relevant volume range of graph

c) Variable cost per unit remain constant for units manufacture

d) All of these

47. When break even point is 2000 units , selling price per unit is Rs. 14 and variable cost is Rs. 8 ,
find out fixed cost ?

a) Rs. 12,000

b) Rs. 8,000

c) Rs. 5,000

d) Rs. 16,000

48. The basis of absorption of factory overheads is :

a) Units of production

b) Direct materials cost

c) Machine Hour Rate

d) All of these

49. ……………… refers to the ability to direct the use of, and obtain substantially all of the remaining
benefits from, the asset

a) Control of an asset

b) Transaction price

c) Performance obligation
d) Standalone selling price

50.Which of the following is an irrelevant cost ?

a) Opportunity Cost

b) Replacement Cost

c) Sunk Cost

d) Out of Pocket Cost

51. Current tax asset is classified as ……………….

a) Monetary asset

b) Current asset

c) Non-current asset

d) Non-monetary asset

52. Construction Ltd plans to discontinue its interior decoration segment. Last year , this year this
segment generated a contribution margin of Rs. 60,000 and incurred Rs. 80,000 in fixed costs .
Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is
expected to occur to the company’s overall profit?

a) Rs. 40,000 increase

b) Rs. 20,000 increase

c) Rs. 20,000 decrease

d) Profit will remain same

53. Opportunity costs represent the ……….. foregone by not choosing the second-best alternative in
favour of the best one .

a) Loss

b) Benefit

c) Both

d) None of Above

54. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income
c) Working capital

d) Goodwill

55. A current asset that can be transferred into cash within three months is known as

a) Cash equivalent

b) Intangible asset

c) Operating asset

d) cash asset

56. The closing inventory , if any, under absorption costing is valued at ……………..?

a) All variable cost per unit

b) Variable manufacturing cost per unit

c) Variable & fixed manufacturing cost per unit

d) Variable & fixed cost per unit.

57. An increase in selling price per unit will lead to ………

a) A decrease in profits

b) An increase in contribution

c) A reduction in contribution

d) A decrease in P/V ratio

58. An increase in variable cost per unit will lead to ………..

a) An increase in profits

b) An increase in contribution

c) A reduction in contribution

d) An increase in P/V ratio

59.For Cash Ltd. estimated sales for April ,May June July August are Rs. 46,000, Rs. 48,000 , Rs.
28,000, Rs. 44,000 and Rs. 30,000 . In case 50% of sales are realized in the next month and balance in
the next of next month , determine cash collection from sales in June & July.

a) Rs. 47,000 & Rs. 38,000

b) Rs. 38,000 & Rs. 36,000

c) Rs. 14,000 & Rs. 22,000

d) Rs. 24,000 & Rs. 14,000

60. ………. Is a detailed budget of all cash receipts and cash expenditures

a) Cash Budget

b) Revenue Budget

c) Capex Budget

d) Flexible Budget

61. In process further or sell now decisions, the decision should be taken based on ………….?

a) Incremental Cost

b) Contribution margin

c) Incremental revenue

d) Incremental Revenue & Incremental Cost

62.The accounting statement of cash flows reports a firm’s cash flows segregated into what
categorical order ?

a) Operating, investing and financing

b) Investing , Operating and financing

c) Financing , operating and investing

d) Financing, investing and operating

63. For a financial institution interest paid and interest and dividends received are classified as
……….cash flows .

a) Investing

b) Operating

c) Financing

d) Non-operating

64. Income from after sales services to customers should be included in …………..

a) Revenue
b) Other operating income

c) Net profit

d) Other income

65. Which report gives a review on the profitability of a business

a) Statement of changes in equity

b) Cash flow statement

c) Balance sheet

d) Income statement

66. Interest received , dividend received are an example of …………..

a) Revenue

b) Other Operating Income

c) Other Income

d) Profit

67. Cost of factory lighting is an example of ………… ?

a) Product Cost

b) Direct Cost

c) Indirect Cost

d) Separable Cost

68. The cost allocation process does not comprise of one of the basic activities which is :

a) Accumulating the cost objects on the basis of department or division or product.

b) Identifying the cost objects or recipients of the allocated costs say , a unit of product or
department

c) Selecting a method for relating the costs so accumulated to cost objects.

d) Rationalization of activities

69. Which of the following will not appear in a cash budget ?

a) Sales revenue
b) Machinery bought on hire purchase

c) Wages

d) Depreciation of machinery

70. Tibu Company expects sales of Product W to be 60,000 units in April, 75,000 units in May , and
70,000 units in June. The company desires that the inventory on hand at the end of each month be
equal to 40% of the next month’s expected unit sales. Due to excessive production during March, on
March 31 there were 30,000 units of Product W in the ending inventory. Given this information ,
Tibu Company’s production of Product W for the month of April should be :

a) 60,000 units

b) 65,000 units

c) 75,000 units

d) 66,000 units

• The ABC has advantages- All of the above

• There is no complication of over absorption of factory overheads or under absorption in case

of- Variable costing

• From total income, when CoGS, admin and Selling & Distribution expenses are deducted
resulting profit is known as – EBITDA

• Difference in absorption costing and variable costing lies in the treatment of-Fixed Cost

• Distribution of common cost among user departments-Apportionment cost

• _________ companies earn interest from investments and therefore, for them, interest
income is not revenue - Non financial

• When production is more than units sold then the income under absorption costing will be --
----in comparison to income under variable costing - Lower
• Cost of raw material is an example of- Product cost
• The access of the actual sales revenue ASR over the break even sales revenue (BESR) is
known as- Margin of Safety

• Cost that contain both fixed and variable cost is known as- Mixed cost

• Relevant cost are cost which would change as the result of a- Decision

• Which of the following is a non-cashexpense- Depreciation

• For banks Debit equity ratio is equal to or below- 2:1

• Assumptions of VCP graph are- All of these

• Cost that varies in one-to-one relation to changes in production activity - Variable costs

• The following is true about activity based costing- it is a two stage cost allocation system
that allocates costs to activities and then to products based on their use of activity

• A contract with a customer sets out the rights and obligations of both, the entity and the
customer. Which of the statement is correct- The entity's is obligation is to deliver good
and services and the right is to receive the consideration agreed for the supply of goods
and services
• Which of the following items would be subtracted from net income when using the indirect
method of calculating cash flows provided by operating activities- Gain on Sale of Land
• Which of the following is not a current asset- Car
• ___ is not charged on the items included in Capital Work-in-progress- Depreciation
• Gross profit margin is calculated by dividing the gross profit by- Revenue
• Good will is categorised as- Intangible
• Break even point is contributed on basis of relationship between- Fixed cost and
contribution margin
• EOQ to determine economic order quantity- Rate at which firm uses inventory is steady
• BEP break even point is defined as- Total revenue equals total cost
• A flexible budget estimates cost at several levels of- Activity
• on the basis of flexibility budget is classified into two types such as fixed budget and ______
budget- Flexible
• A system assigns indirect costs or assigns tow stages, the accumulated costs are allocated to
the production department- Activity based cost
• The transfer of legal rights of an asset may indicate that the customer has obtained control
of the - Asset/ Revenue
• Increase in selling price will lead to – Increase in the contribution
• Which of the following will not cause the break even point to change- Sales Volume
Decreases
• Master budget is the overall budget of the – Organization
• No opening and closing stock: In this case, profit / loss under absorption and
marginal costing-will be Same
• HIG MIG LIG flats the type of costing system- Activity based costing system.
• The closing inventory if any under variable costing is valued at—Variable and fixed cost per
unit
1. The ABC is widely used classification technique to identify various items of inventory for purpose
of inventory control and recommends that a firm should exercise the maximum control on …….
Items of inventory that are :

a. Most costly and/or slowest turnover

b. High in volume
c. Fast turning
d. All of these

2.The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following costing system _____________ ?

a. Marginal Costing
b. Variable Costing
c. Unit costing
d. Full costing

3. For Cash ltd estimated sales for April, May, June, July August are Rs 46000, Rs 48000, Rs 28000 Rs
44000 ans Rs 30000. In cash 50% of sales are realized in the next month and balance in the next of
next month, determine cash collection from sales in june and July.

a. Rs 47000 and Rs 38000

b. Rs 38000 and Rs 36000
c. Rs 14000 and Rs 22000
d. Rs 24000 and Rs 14000.

7. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from _____________ activities.

a. Non-operating
b. Direct
c. Operating
d. Indirect

8. Resources that are limited in quality are called as

a. Key lender
b. Contributor
c. Key factors
d. Key limiters

9. As per flexible budget, sales is Rs 500000 CoGS is Rs 300000 and 20% of which is fixed. Calculate
CoGS at 80% capacity utilization, considering that current utilization of capacity is 60%.

a. Rs 320000
b. Rs 380000
c. Rs 400000
d. Rs 500000.
10. The cost which remain constant in total but reduces per unit as the volume of production
increaseis known as____________

a. Variable Cost
b. Fixed Cost
c. Mixed Cost
d. Semi Variable Cost

11. The part of cost of joint products that can be attributed exclusively and wholly to a particular
products, process, Division or department is known as

a. Inseparable
b. Separable
c. Fixed
d. None of the above.

12. If an owned premises is used for a business, the rental income forgone by not giving it on rent is
an example of ______________

a. Opportunity Cost
b. Out of pocket cost
c. Sunk Cost
d. Variable Cost

13. __________ are the expenses related to business activity but are disproportionate in amount or
occurs infrequently

a. Extraordinary items
b. Non-operating Expenses
c. Operating Expenses
d. Exceptional items

14. Selling and distribution charges are incurred for marketing of products, dispatching goods sold
and so on and include

a. Advertisement expenses cost of preparing tenders travelling expenses, bad depts. ,

Collection charges
b. Warehouse charges, packing and loading charges and carriage outward
c. All of these
d. None of these

15. _________ is an obligation present at the balance sheet date.

a. Liability
b. Asset
c. Equity
d. Bonds
21. Factory overhead costs refer to all indirect manufacturing costs which can not be identified with
particular orders or units of product. It includes …………

a) Direct Material

b) Depreciation on factory plant and equipments’s and eactory building

c) Direct Labour

d) None of these

22. Gain from sale of items of PP&E should be included in ……….

a) Revenue

b) Other operating income

c) Other income

d) Turnover

23. Annual requirement is 100000 units , Unit price 20 per order. Carrying cost 1 per unit and lead
time is 2 week. The economic order quantity would be.

a) 1000 units

b) 2000 units

c) 800 units

d) 10000 units

24. In product mix decision, most important factor to be considered is …….?

a) Contribution per unit.

b) Contribution per unit of key resource

c) profit per unit

d) revenue of each product

25. When a department or product line is dropped, the common Fixed costs which had been
allocated to that department .

a) Are eliminated

b) Become variable costs

c) Are allocated to the remaining departments or product lines

d) Become sunk costs

26. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost under

b) Using departmental overhead rate

c) Both of these

d) None of these

27. About 60 items are required everyday for a machine. A fixed cost of 40per order is incurred for
placing an order. The inventory carrying cost per item amounts to Re.0.05 per day.The lead period is
25 days .Compute reorder level.

a) 2400 items

b) 1500 items

c) 120 items

d) 1000 items

29. From the prospective of cost allocation , service department costs are

a) Generally treated as period costs rather than products costs.

b) Reported as selling and administrative expenses on the income statement

c) Eventually applied by the user departments to the units produced

d) Seldom found in manufacturing organizations

36. The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is Rs. 20,00,000
then Break Even Point in Rs. Will be …………..

a) Rs. 4,00,000

b) Rs. 12,00,000

c) Rs. 8,00,000

d) Rs. 16,00,000

38. Based on the following information for Shine Ltd. answer the given questions :
Cost of a Machine Rs. 200000 , Estimated life 10 years , Scrap value Rs. 6000 , Factory operation
hours in a week 48 , Machine breakdown time 15% . Electricity used by machinery is 10 units/hrs
Rs. 60p/unit.

38. Calculate Depreciation rate per hour ?

Rs. 9.43 per hour
39. Calculate the Effective machine hours worked in a year ?
2122 hours

40. Calculate Electricity consumption rate per hour ?

Rs. 6 per hour

41. Calculate the Depreciation on Machine ?

Rs. 19,400 p.a.

49. ……………… refers to the ability to direct the use of , and obtain substantially all of the remaining
benefits from, the asset

a) Control of an asset

b) Transaction price

c) Performance obligation

d) Standalone selling price

57. An increase in selling price per unit will lead to ………

a) A decrease in profits

b) An increase in contribution

c) A reduction in contribution

d) A decrease in P/V ratio

58. An increase in variable cost per unit will lead to ………..

a) An increase in profits

b) An increase in contribution

c) A reduction in contribution

d) An increase in P/V ratio

59.For Cash Ltd. estimated sales for April ,May June July August are Rs. 46,000, Rs. 48,000 , Rs.
28,000, Rs. 44,000 and Rs. 30,000 . In case 50% of sales are realized in the next month and balance in
the next of next month , determine cash collection from sales in June & July.

a) Rs. 47,000 & Rs. 38,000

b) Rs. 38,000 & Rs. 36,000

c) Rs. 14,000 & Rs. 22,000

d) Rs. 24,000 & Rs. 14,000

61. In process further or sell now decisions , the decision should be taken based on ………….?

a) Incremental Cost

b) Contribution margin

c) Incremental revenue

d) Incremental Revenue & Incremental Cost

67. Cost of factory lighting is an example of …………?

Indirect Cost

68. The cost allocation process does not comprise of one of the basic activities which is :

a) Accumulating the cost objects on the basis of department or division or product.

b) Identifying the cost objects or recipients of the allocated costs say , a unit of product or
department

c) Selecting a method for relating the costs so accumulated to cost objects.

d) Rationalization of activities
 Screenshots
1 The access of the actual sales revenue ASR over the Margin of Safety
break even sales revenue (BESR) is known as
2 The cost of a single process or a series of processes that Joint cost
simultaneously produce two or more products of
signification sales value is
3 The ideal quick ratio is 1 ratio 1
4 resources that are limited in quantity are called as Key Factors
5 SEBI requires npn finance companies to present cash Direct
flow -------- method
6 Building is an example of ------ Non current asset
7 A contract with a customer sets out the rights and The entity's is obligation is to
obligations of both, the entity and the customer. Which deliver good and services and
of the statement is correct? the right is to receivce the
consideration agreed for the
supply of goods and services
8 When production is more than units sold then the Lower
income under absorption costing will be ------in
comparison to income under variable costing
9 Which report gives a review on the profitability of a Income statement
buisness
10 Based on the following information for shine ltd. Cost 6 per hour
of machine 200000, estimated life 10 yrs, scrap value
6000, Calculate electricity
11 Based on the following information for shine ltd. Cost 2122 hrs
of machine 200000, estimated life 10 yrs, scrap value
6000, Effective machine hours
12 Based on the following information for shine ltd. Cost 19400 pa
of machine 200000, estimated life 10 yrs, scrap value
6000, Depriciation of machine
13 Based on the following information for shine ltd. Cost 12.60 per hour
of machine 200000, estimated life 10 yrs, scrap value
6000, Calculate machine hour rate
14 https://www.allgyan.com/costing-accounting-question-
answer/
15 For abc ltd, annual rent of factory is Rs 1200000 and 12 lakh
units produced in the curren year are 100000. The
overhead absorption rate is 10 rs per unit, Calculate the
underabsorption in this case?
16 Following information is available of Prime ltd for year 700000
ended march 2020. Fixed cost rS 8,00000, variable cost
Rs 20 per unit selling price Rs 30 per unit Output level
200000 units, closing stock 50000 units. What will be
amount of profit earned duting the year using the
marginal costing technique ?
17 Annual requirement is 100000 units; unit price 5, order 2000 units
cost 20 per order. Carrying cost 1 per unit and lead time
is 2 week the economic order quantity would be
18 Which of the following items would be subtracted from Gain on sale
net income when using the indirect method of
calculating cash flows provided by operating activities
19 An increase in variable cost per unit will lead to ------ reduction in contribution
20 _______________ is an example of non current assests property plant and equipment
21 For a financial institution interest paid and interest and operating
dividends received are classified as _________ cash
flows
22 Quick ratio is also called Acid test ratio
23 A company manufactures a single product for which 5000 units
cost and selling price data are as follows - Selling price
per unit Rs 6 variable cost per unit Rs 4 fixed cost for a
period rs 20000 Budgeted sales for a period -15000
units. The margin safety is
24 When a departmet or product line is dropped, the are allocated to the remaining
common fixed costs which had been allocated to that departments or product lines
department
25 The principle underlying the variable cost is that the All of these
fixed manufacturing overheads are_________
26 The following details relate to a particular company a) 12.5 per labour
total cost centre overhead are Rs 200000 for machining
dept. and Rs 150000 for assembly dept. b) machine
hours used in machining are 10000 hrs and in assembly
are 5000 hrs c) labour hours used in machining are
4000 hrs and in assembly are 12000 hrs . The most
appropraite overhead rate to use for the machining
dept. would be
27 From total income, when CoGS, admin and Selling & EBITDA
Distribution expenses are deducted resulting profit is
known as
28 Income from after sales services' to customers should Other income
be included in ___________
29 _________ companies earn interest from investments Non Financial
and therefore, for them, interest income is not revenue
30 the overheads are absorbed into different products using level of activiy used in
under activity costing system producing the cost unit
31 Which of the following would be considered a cash- A cash outflow to repurchase the
flow item from a financing activity ? firm's own common stock
32 on the basis of flexibility budget is classified into two Fixed budget and flexible budget
types such as fixed budget ad ______ budget
33 Tibu company expects sales of Product W to be 60000 60000 units
unts in April, 75000 units in May and 70000 units in 65000
June. The company desires that the inventory on hand
at the end of each month be equal to 40% of the next
month's expected unit sales. Due to excessive
production during March, on march 31 there were
30,000 units of product W in the ending inventory
Given this information, Tibu company's production of
Product W for the month of April should be
34 Costs that tend to vay in direct proportion or in a one Variable cost
to one rtelationship to changes in productioon activity,
sales activity or some other measure of volume within
relevant range for a given budget period are referred to
as
35 __________ are the assests which the management Current assest
expects to convert into cash wiythin 12 months after
the balance sheet date
36 gain from sale of items of PP&E should be included in Other income
____________
37 The closing inventory, if any, under absorbtion costing Variable& fixed cost per unit
is valued at__________ ?
38 The main operations related expenses of a business are Operating
termed as _____
39 Assumptions regarding the VCP graph are All of these
40 Buy back of shares is an _________ of fund
41 Which statement shows the flow of cash and cash Cash flow statement
equivalents the financial period?
42 Goodwill is categorised under which assests Intangible assest
43 Cost of factory lighting is an example of ____________ direct cost
?
44 one of the following is not included in costing and
control of factory overheads
45 Patent is categorised under which assests ? Intangible assest
46 ___________ are the assests which the management Current assest
expects to convert into cash within 12 months after the
balance sheet date
1. The fixed manufacturing cost can be carried forward to next period as part of inventory cost
in which of the following costing system.
FULL COSTING

2. Calculate overhead rate using labour cost method - Factory OH-Rs. 160,000, Direct materials
- Rs. 1, 00.000 & Direct wages - Rs.80,000.
2

3. Construction Ltd. plans to discontinue its interior decoration segment. Last year, this
segment generated a contribution margin of Rs 60,000 and incurred Rs 80,000 in fixed costs.
Discontinuing the segment will allow the company to avoid half of the fixed costs. What
effect is expected to occur to the company's overall profit?
40000 INCREASE

4. A system assigns indirect costs or products in two stages: first, the accumulated costs are
allocated to production departments, second, the accumulated costs in cost centres are
assigned to individual job/products on the basis of an overhead allocation rate based labour
cost, direct labour-hour rate, machine-hour rate. This system is
ACTIVITY BASED COSTING

5. Gross profit margin is calculated by dividing gross profit by

REVENUE

6. Calculate profit under variable costing technique, when number of units produced is
1,00,000 units, selling price is Rs. 10 per unit, variable cost is Rs. 6 per unit and fixed costs
are Rs. 2,00,000.
200000

Compute contribution if sales is Rs. 5,00,000, fixed cost is Rs. 2,00.000 and Variable cost is
Rs. 2,00,000.
300000

is the traditional method of income determination which includes all manufacturing costs
ie.. variable and fixed expenses.
ABSORPTION

Break Even Point is computed on the basis of the relationship between the fixed costs and
the:
CONTRIBUTION MARGIN

The closing inventory, if any, under absorption costig is valued at

VARIABLE AND FIXED MANUFACTURING COST PER UNIT
Porter Corporation is working on its direct labour budget for the next two months. Each unit
of output requires 0.84 direct labour hours. The direct labour rate is 9.40 per direct labour
hour. The production budget calls for producing 2.100 units in June and 1.900 units in July. If
the direct labour work force is fully adjusted to the total direct labour hours needed each
month, what would be the total combined direct labour cost for the two months?
31584

The EOQ model, as a technique to determine the economic order quantity is based on
restrictive assumptions, namely:
ALL OF THESE

Banks generally sees that Debt Equity Ratio is equal to or below:

2:1

As per flexible budget, sales is Rs 5,00,000 COGS is Rs 3,00,000 and 20% of which is fixed.
Calculate CoCS at 80% capacity utilization, considering that current utilization of capacity is
60%
380000

The principle underlying the variable costing is that the fixed manufacturing overheads are
TO BE DEDUCTED IN THE YEAR

When production is less than units sold then the income under absorption costing will be
____ comparison to income under variable costing
LOWER

When break even point is 2000 units, selling price per unit is Rs. 14 and variable cost is Rs.8,
find out fixed cost?
12000

The excess of the actual sales revenue (ASR) over the break-even sales revenue (BESR) is
known as:
MARGIN OF SAFETY

There is no complication of over-absorption of factory overheads or even their

underabsorption in the case of _____ costing
ABSORPTION

The distribution of common cost among user departments is known as

APPORTIONENT

is not charged on items included in Capital Work-in-Progress

DEPRECIATION

Assumptions regarding the VCP (Volume cost Profit) graph are

ALL
1. The ABC is widely used classification technique to identify various items of inventory for purpose
of inventory control and recommends that a firm should exercise the maximum control on …….
Items of inventory that are :

a. Most costly and/or slowest turnover

b. High in volume
c. Fast turning
d. All of these

2.The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following costing system _____________ ?

a. Marginal Costing
b. Variable Costing
c. Unit costing
d. Full costing

3. For Cash ltd estimated sales for April, May, June, July August are Rs 46000, Rs 48000, Rs 28000 Rs
44000 ans Rs 30000. In cash 50% of sales are realized in the next month and balance in the next of
next month, determine cash collection from sales in june and July.

a. Rs 47000 and Rs 38000

b. Rs 38000 and Rs 36000
c. Rs 14000 and Rs 22000
d. Rs 24000 and Rs 14000.

4. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate the effective machine houres worked in a year ?

a. 2496 hours
b. 374 hours
c. 2122 hours
d. 576 hours
5. An increase in selling price per unit will lead to __________

a. A decrease in profit
b. An increase in contribution
c. A reduction in contribution
d. A decrease in P/V ratio
e. Rs 24000 and Rs 14000.

6. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate Machine hour rate?

a. Rs 14 per hour
b. Rs11.61 per hour
c. Rs 12.60 hour
d. Rs 18 per hour

7. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from _____________ activities.

a. Non-operating
b. Direct
c. Operating
d. Indirect

8. Resources that are limited in quality are called as

a. Key lender
b. Contributor
c. Key factors
d. Key limiters
9. As per flexible budget, sales is Rs 500000 CoGS is Rs 300000 and 20% of which is fixed. Calculate
CoGS at 80% capacity utilization, considering that current utilization of capacity is 60%.

a. Rs 320000
b. Rs 380000
c. Rs 400000
d. Rs 500000.

10. The cost which remain constant in total but reduces per unit as the volume of production
increaseis known as____________

a. Variable Cost
b. Fixed Cost
c. Mixed Cost
d. Semi Variable Cost

11. The part of cost of joint products that can be attributed exclusively and wholly to a particular
products, process, Division or department is known as

a. Inseparable
b. Separable
c. Fixed
d. None of the above.

12. If an owned premises is used for a business, the rental income forgone by not giving it on rent is
an example of ______________

a. Opportunity Cost
b. Out of pocket cost
c. Sunk Cost
d. Variable Cost

13. __________ are the expenses related to business activity but are disproportionate in amount or
occurs infrequently

a. Extraordinary items
b. Non-operating Expenses
c. Operating Expenses
d. Exceptional items

14. Selling and distribution charges are incurred for marketing of products, dispatching goods sold
and so on and include

a. Advertisement expenses cost of preparing tenders travelling expenses, bad depts. ,

Collection charges
b. Warehouse charges, packing and loading charges and carriage outward
c. All of these
d. None of these
15. _________ is an obligation present at the balance sheet date.

a. Liability
b. Asset
c. Equity
d. Bonds

16. Based on the following information of Shine LTd

Answer the given question
Cost of Machine Rs 200000
Estimated Life 10 Years
Scrap value Rs 6000
Factory operation hour
In a week 48
Machine breakdown time 15%
Estimated user by machinery
Is 10 units/hour Rs 60p/unit

17. Calculate Electricity consumption rate per hour

a. ./Rs 6 per hour

b. Rs 10 per hour
c. 60 paisa per hour
d. Rs 60 per hour

18. __________ attached with the balance sheet forms a part of the financial statement

a. …………….
b. Schedules or notes …..
c. Acts
d. Rules

19. Furniture ltd produces multiple types of chair. It user activity-based costing and has the following
activity cost pools, estimated overhead cost for each pool and related cost driver a)Handling
materials Rs 240000 for which cost driver is number of parts , total parts are 6000, b) processing
purchase order Rs 720000 for which cost driver is number of purchase order, total purchase order
and number of parts for the manager chair are 2000 and …….. respectively the calculate the
overheads located to Manager chairs.

a. Rs 80000
b. Rs 120000
c. Rs 480000
d. Rs 200000
20. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate depreciation rate per hour? Ans should be 9.14

a. Rs 8.01 per hour

b. Rs 9.43 per hour
c. Rs 5.61 per hour
d. Rs 6.60 per hour
21. Factory overhead costs refer to all indirect manufacturing costs which can not be identified with
particular orders or units of product. It includes …………

a) Direct Material

b) Depreciation on factory plant and equipments’s and eactory building

c) Direct Labour

d) None of these

22. Gain from sale of items of PP&E should be included in ……….

a) Revenue

b) Other operating income

c) Other income

d) Turnover

23. Annual requirement is 100000 units , Unit price 20 per order. Carrying cost 1 per unit and lead
time is 2 week. The economic order quantity would be.

a) 1000 units

b) 2000 units

c) 800 units

d) 10000 units

24. In product mix decision, most important factor to be considered is …….?

a) Contribution per unit.

b) Contribution per unit of key resource

c) profit per unit

d) revenue of each product

25. When a department or product line is dropped, the common Fixed costs which had been
allocated to that department .

a) Are eliminated

b) Become variable costs

c) Are allocated to the remaining departments or product lines

d) Become sunk costs

26. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost underh

b) Using departmental overhead rate

c) Both of these

d) None of these

27. About 60 items are required everyday for a machine. A fixed cost of 40per order is incurred for
placing an order. The inventory carrying cost per item amounts to Re.0.05 per day.The lead period is
25 days .Compute reorder level.

a) 2400 items

b) 1500 items

c) 120 items

d) 1000 items

28. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost.

b) Using departmental overhead rate .

c) Both of these

d) None of these

29. From the prospective of cost allocation , service department costs are

a) Generally treated as period costs rather than products costs.

b) Reported as selling and administrative expenses on the income statement

c) Eventually applied by the user departments to the units produced

d) Seldom found in manufacturing organizations

30. The part of cost of joint products that can be attributed exclusively and wholly to a particular
product, process, division or department is known as

a) Inseparable

b) Separable

c) Fixed

d) None of Above
31. Economists believe that

a) people who choose to promote the interests of others cannot be acting rationally in their own
self-interest.

b) people show concern only for those whom they know personally

c) the notion of self-interest rules out concern for others

d) concern for the welfare of others is consistent with the concept of self-interest

32. On the basis of …………., budget is classified into long term budget, short term budget and current
budget.

a) Time

b) Flexibility

c) Function

d) Cost

33. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from …………. activities .

a) non-operating

b) Direct

c) Operating

d) Indirect

34. The principle underlying the variable costing is that the fixed manufacturing overheads are ……….

a) Non-Inventoriable costs

b) period cost

c) to be deducted in the year in which they are

d) All of these
35. Net profit is reported at 5000000. Net profit includes interest expense 500000 , income tax
expense 2000000, interest income 300000, depreciation 600000, working capital increased during
the year by 400000. There was no income tax liability at the beginning and at the end of the year.
Cash flow from operative activities is ……………………

a) 6400000

b) 5400000

c) 7400000

d) 6200000
36. The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is Rs. 20,00,000
then Break Even Point in Rs. Will be …………..

a) Rs. 4,00,000

b) Rs. 12,00,000

c) Rs. 8,00,000

d) Rs. 16,00,000

37. Cash flows arising from the purchase and sale of dealing or trading securities are classified as
……………….. for a brokerage firm .

a) Non-operating activities

b) Investing activities

c) Financing activities

d) Operating activities

38. Based on the following information for Shine Ltd. answer the given questions :

Cost of a Machine Rs. 200000 , Estimated life 10 years , Scrap value Rs. 6000 , Factory operation
hours in a week 48 , Machine breakdown time 15% . Electricity used by machinery is 10 units/hrs
Rs. 60p/unit.

Calculate Depreciation rate per hour ?

a) Rs. 8.01 per hour

b) Rs. 9.43 per hour

c) Rs. 5.61 per hour

d) Rs. 6.60 per unit

39. Calculate the Effective machine hours worked in a year ?

a) 2496 hours

b) 374 hours

c) 2122 hours

d) 576 hours
40. Calculate Electricity consumption rate per hour ?

a) Rs. 6 per hour

b) Rs. 10 per hour

c) 60 paise per hour

d) Rs. 60 per hour

41. Calculate the Depreciation on Machine ?

a) Rs. 20,000 p.a.

b) Rs. 14,000 p.a.

c) Rs. 19,400 p.a.

d) Rs. 10,000 p.a.

42. ………….. is the traditional method of income determination which includes all manufacturing
costs i.e. variable and fixed expenses .

a) Absorption Costing

b) Variable Costing

c) Fixed Costing

d) Process Costing

43. Fixed cost is cost…………

a) Which changes in total in proportion to changes

b) Which is partly fixed and partly variable in relation to output

c) Which do not change in total during a given period irrespective of changes in output.

d) Which remains same for each unit of output

44. Current ratio of a concern is 1, its net working capital will be

a) Positive

b) Negative

c) Nil

d) None of these
45. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income

c) Working capital

d) Goodwill

46. Assumptions regarding the VCP graph are

a) Costs can be bifurcated into variable and fixed components

b) Fixed costs will remain constant during the relevant volume range of graph

c) Variable cost per unit remain constant for units manufacture

d) All of these

47. When break even point is 2000 units , selling price per unit is Rs. 14 and variable cost is Rs. 8 ,
find out fixed cost ?

a) Rs. 12,000

b) Rs. 8,000

c) Rs. 5,000

d) Rs. 16,000

48. The basis of absorption of factory overheads is :

a) Units of production

b) Direct materials cost

c) Machine Hour Rate

d) All of these

49. ……………… refers to the ability to direct the use of , and obtain substantially all of the remaining
benefits from, the asset

a) Control of an asset

b) Transaction price

c) Performance obligation

d) Standalone selling price

50.Which of the following is an irrelevant cost ?

a) Opportunity Cost

b) Replacement Cost

c) Sunk Cost

d) Out of Pocket Cost

51. Current tax asset is classified as ……………….

a) Monetary asset

b) Current asset

c) Non-current asset

d) Non-monetary asset

52. Construction Ltd plans to discontinue its interior decoration segment. Last year , this year this
segment generated a contribution margin of Rs. 60,000 and incurred Rs. 80,000 in fixed costs .
Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is
expected to occur to the company’s overall profit?

a) Rs. 40,000 increase

b) Rs. 20,000 increase

c) Rs. 20,000 decrease

d) Profit will remain same

53. Opportunity costs represent the ……….. foregone by not choosing the second-best alternative in
favour of the best one .

a) Loss

b) Benefit

c) Both

d) None of Above

54. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income

c) Working capital

d) Goodwill
55. A current asset that can be transferred into cash within three months is known as

a) Cash equivalent

b) Intangible asset

c) Operating asset

d) cash asset

56. The closing inventory , if any, under absorption costing is valued at ……………..?

a) All variable cost per unit

b) Variable manufacturing cost per unit

c) Variable & fixed manufacturing cost per unit

d) Variable & fixed cost per unit.

57. An increase in selling price per unit will lead to ………

a) A decrease in profits

b) An increase in contribution

c) A reduction in contribution

d) A decrease in P/V ratio

58. An increase in variable cost per unit will lead to ………..

a) An increase in profits

b) An increase in contribution

c) A reduction in contribution

d) An increase in P/V ratio

59.For Cash Ltd. estimated sales for April ,May June July August are Rs. 46,000, Rs. 48,000 , Rs.
28,000, Rs. 44,000 and Rs. 30,000 . In case 50% of sales are realized in the next month and balance in
the next of next month , determine cash collection from sales in June & July.

a) Rs. 47,000 & Rs. 38,000

b) Rs. 38,000 & Rs. 36,000

c) Rs. 14,000 & Rs. 22,000

d) Rs. 24,000 & Rs. 14,000

60. ………. Is a detailed budget of all cash receipts and cash expenditures

a) Cash Budget

b) Revenue Budget

c) Capex Budget

d) Flexible Budget

61. In process further or sell now decisions , the decision should be taken based on ………….?

a) Incremental Cost

b) Contribution margin

c) Incremental revenue

d) Incremental Revenue & Incremental Cost

62.The accounting statement of cash flows reports a firm’s cash flows segregated into what
categorical order ?

a) Operating, investing and financing

b) Investing , Operating and financing

c) Financing , operating and investing

d) Financing, investing and operating

63. For a financial institution interest paid and interest and dividends received are classified as
……….cash flows .

a) Investing

b) Operating

c) Financing

d) Non-operating

64. Income from after sales services to customers should be included in …………..

a) Revenue

b) Other operating income

c) Net profit

d) Other income
65. Which report gives a review on the profitability of a business

a) Statement of changes in equity

b) Cash flow statement

c) Balance sheet

d) Income statement

66. Interest received , dividend received are an example of …………..

a) Revenue

b) Other Operating Income

c) Other Income

d) Profit

67. Cost of factory lighting is an example of ………… ?

a) Product Cost

b) Direct Cost

c) Indirect Cost

d) Separable Cost

68. The cost allocation process does not comprise of one of the basic activities which is :

a) Accumulating the cost objects on the basis of department or division or product.

b) Identifying the cost objects or recipients of the allocated costs say , a unit of product or
department

c) Selecting a method for relating the costs so accumulated to cost objects.

d) Rationalization of activities

69. Which of the following will not appear in a cash budget ?

a) Sales revenue

b) Machinery bought on hire purchase

c) Wages

d) Depreciation of machinery
70. Tibu Company expects sales of Product W to be 60,000 units in April, 75,000 units in May , and
70,000 units in June. The company desires that the inventory on hand at the end of each month be
equal to 40% of the next month’s expected unit sales. Due to excessive production during March, on
March 31 there were 30,000 units of Product W in the ending inventory. Given this information ,
Tibu Company’s production of Product W for the month of April should be :

a) 60,000 units

b) 65,000 units

c) 75,000 units

d) 66,000 units
1. The ABC is widely used classification technique to identify various items of inventory for purpose
of inventory control and recommends that a firm should exercise the maximum control on …….
Items of inventory that are :

a. Most costly and/or slowest turnover

b. High in volume
c. Fast turning
d. All of these

2.The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following costing system _____________ ?

a. Marginal Costing
b. Variable Costing
c. Unit costing
d. Full costing

3. For Cash ltd estimated sales for April, May, June, July August are Rs 46000, Rs 48000, Rs 28000 Rs
44000 ans Rs 30000. In cash 50% of sales are realized in the next month and balance in the next of
next month, determine cash collection from sales in june and July.

a. Rs 47000 and Rs 38000

b. Rs 38000 and Rs 36000
c. Rs 14000 and Rs 22000
d. Rs 24000 and Rs 14000.

4. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate the effective machine houres worked in a year ?

a. 2496 hours
b. 374 hours
c. 2122 hours
d. 576 hours
5. An increase in selling price per unit will lead to __________

a. A decrease in profit
b. An increase in contribution
c. A reduction in contribution
d. A decrease in P/V ratio
e. Rs 24000 and Rs 14000.

6. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate Machine hour rate?

a. Rs 14 per hour
b. Rs11.61 per hour
c. Rs 12.60 hour
d. Rs 18 per hour

7. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from _____________ activities.

a. Non-operating
b. Direct
c. Operating
d. Indirect

8. Resources that are limited in quality are called as

a. Key lender
b. Contributor
c. Key factors
d. Key limiters
9. As per flexible budget,sales is Rs 500000 CoGS is Rs 300000 and 20% of which is fixed. Calculate
CoGS at 80% capacity utilization, considering that current utilization of capacity is 60%.

a. Rs 320000
b. Rs 380000
c. Rs 400000
d. Rs 500000.

10. The cost which remain constant in total but reduces per unit as the volume of production
increases known as____________

a. Variable Cost
b. Fixed Cost
c. Mixed Cost
d. Semi Variable Cost

11. The part of cost of joint products that can be attributed exclusively and wholly to a particular
products, process, Division or department is known as

a. Inseparable
b. Separable
c. Fixed
d. None of the above.

12. If an owned premises is used for a business, the rental income forgone by not giving it on rent is
an example of ______________

a. Opportunity Cost
b. Out of pocket cost
c. Sunk Cost
d. Variable Cost

13. __________ are the expenses related to business activity but are disproportionate in amount or
occurs infrequently

a. Extraordinary items
b. Non-operating Expenses
c. Operating Expenses
d. Exceptional items

14. Selling and distribution charges are incurred for marketing of products, dispatching goods sold
and so on and include

a. Advertisement expenses cost of preparing tenders travelling expenses, bad depts. ,

Collection charges
b. Warehouse charges, packing and loading charges and carriage outward
c. All of these
d. None of these
15. _________ is an obligation present at the balance sheet date.

a. Liability
b. Asset
c. Equity
d. Bonds

16. Based on the following information of Shine LTd

Answer the given question
Cost of Machine Rs 200000
Estimated Life 10 Years
Scrap value Rs 6000
Factory operation hour
In a week 48
Machine breakdown time 15%
Estimated user by machinery
Is 10 units/hour Rs 60p/unit

17. Calculate Electricity consumption rate per hour

a. Rs 6 per hour
b. Rs 10 per hour
c. 60 paisa per hour
d. Rs 60 per hour

18. __________ attached with the balance sheet forms a part of the financial statement

a. …………….
b. Schedules or notes …..
c. Acts
d. Rules

19. Furniture ltd produces multiple types of chair. It user activity-based costing and has the following
activity cost pools, estimated overhead cost for each pool and related cost driver a)Handling
materials Rs 240000 for which cost driver is number of parts , total parts are 6000, b) processing
purchase order Rs 720000 for which cost driver is number of purchase order, total purchase order
and number of parts for the manager chair are 2000 and …….. respectively the calculate the
overheads located to Manager chairs.

a. Rs 80000
b. Rs 120000
c. Rs 480000
d. Rs 200000
20. Based on the following information of Shine LTd

Answer the given question

Cost of Machine Rs 200000

Estimated Life 10 Years

Scrap value Rs 6000

Factory operation hour

In a week 48

Machine breakdown time 15%

Estimated user by machinery

Is 10 units/hour Rs 60p/unit

Calculate depreciation rate per hour?

a. Rs 8.01 per hour

b. Rs 9.43 per hour
c. Rs 5.61 per hour
d. Rs 6.60 per hour
21. Factory overhead costs refer to all indirect manufacturing costs whichcan not be identified with
particular orders or units of product. It includes …………

a) Direct Material

b) Depreciation on factory plant and equipment’s and factory building

c) Direct Labor

d) None of these

22. Gain from sale of items of PP&E should be included in ……….

a) Revenue

b) Other operating income

c) Other income

d) Turnover

23. Annual requirement is 100000 units , Unit price 20 per order. Carrying cost 1 per unit and lead
time is 2 week. The economic order quantity would be.

a) 1000 units

b) 2000 units

c) 800 units

d) 10000 units

24. In product mix decision, most important factor to be considered is …….?

a) Contribution per unit.

b) Contribution per unit of key resource

c) profit per unit

d) revenue of each product

25. When a department or product line is dropped, the common Fixed costs which had been
allocated to that department .

a) Are eliminated

b) Become variable costs

c) Are allocated to the remaining departments or product lines

d) Become sunk costs

26. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost under

b) Using departmental overhead rate

c) Both of these

d) None of these

27. About 60 items are required every day for a machine. A fixed cost of 40per order is incurred for
placing an order. The inventory carrying cost per item amounts to Re.0.05 per day.The lead period is
25 days .Compute reorder level.

a) 2400 items

b) 1500 items

c) 120 items

d) 1000 items

28. The overheads are absorbed into different products under activity costing system

a) Using level of activity used in producing the cost.

b) Using departmental overhead rate .

c) Both of these

d) None of these

29. From the prospective of cost allocation, service department costs are

a) Generally treated as period costs rather than products costs.

b) Reported as selling and administrative expenses on the income statement

c) Eventually applied by the user departments to the units produced

d) Seldom found in manufacturing organizations

30. The part of cost of joint products that can be attributed exclusively and wholly to a particular
product, process, division or department is known as

a) Inseparable

b) Separable

c) Fixed

d) None of Above
31. Economists believe that

a) people who choose to promote the interests of others cannot be acting rationally in their own
self-interest.

b) people show concern only for those whom they know personally

c) the notion of self-interest rules out concern for others

d) concern for the welfare of others is consistent with the concept of self-interest

32. On the basis of …………., budget is classified into long term budget, short term budget and current
budget.

a) Time

b) Flexibility

c) Function

d) Cost

33. The direct method and indirect method of presenting cash flow statement differs only in respect
of presenting cash flows from …………. activities .

a) non-operating

b) Direct

c) Operating

d) Indirect

34. The principle underlying the variable costing is that the fixed manufacturing overheads are ……….

a) Non-Inventoriable costs

b) period cost

c) to be deducted in the year in which they are

d) All of these

35. Net profit is reported at 5000000. Net profit includes interest expense 500000 , income tax
expense 2000000, interest income 300000, depreciation 600000, working capital increased during
the year by 400000. There was no income tax liability at the beginning and at the end of the year.
Cash flow from operative activities is ……………………

a) 6400000

b) 5400000

c) 7400000

d) 6200000
36. The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is Rs. 20,00,000
then Break Even Point in Rs. Will be …………..

a) Rs. 4,00,000

b) Rs. 12,00,000

c) Rs. 8,00,000

d) Rs. 16,00,000

37. Cash flows arising from the purchase and sale of dealing or trading securities are classified as
……………….. for a brokerage firm .

a) Non-operating activities

b) Investing activities

c) Financing activities

d) Operating activities

38. Based on the following information for Shine Ltd. answer the given questions :

Cost of a Machine Rs.200000 , Estimated life 10 years , Scrap value Rs. 6000 , Factory operation
hours in a week 48 , Machine breakdown time 15% . Electricity used by machinery is 10 units/hrsRs.
60p/unit.

Calculate Depreciation rate per hour ?

a) Rs. 8.01 per hour

b) Rs. 9.43 per hour

c) Rs. 5.61 per hour

d) Rs. 6.60 per unit

39. Calculate the Effective machine hours worked in a year ?

a) 2496 hours

b) 374 hours

c) 2122 hours

d) 576 hours
40. Calculate Electricity consumption rate per hour ?

a) Rs. 6 per hour

b) Rs. 10 per hour

c) 60 paise per hour

d) Rs. 60 per hour

41. Calculate the Depreciation on Machine ?

a) Rs. 20,000 p.a.

b) Rs. 14,000 p.a.

c) Rs. 19,400 p.a.

d) Rs. 10,000 p.a.

42. ………….. is the traditional method of income determination which includes all manufacturing
costs i.e. variable and fixed expenses .

a) Absorption Costing

b) Variable Costing

c) Fixed Costing

d) Process Costing

43. Fixed cost is cost…………

a) Which changes in total in proportion to changes

b) Which is partly fixed and partly variable in relation to output

c) Which do not change in total during a given period irrespective of changes in output.

d) Which remains same for each unit of output

44. Current ratio of a concern is 1, its net working capital will be

a) Positive

b) Negative

c) Nil

d) None of these
45. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income

c) Working capital

d) Goodwill

46. Assumptions regarding the VCP graph are

a) Costs can be bifurcated into variable and fixed components

b) Fixed costs will remain constant during the relevant volume range of graph

c) Variable cost per unit remain constant for units manufacture

d) All of these

47. When break even point is 2000 units , selling price per unit is Rs. 14 and variable cost is Rs. 8 ,
find out fixed cost ?

a) Rs. 12,000

b) Rs. 8,000

c) Rs. 5,000

d) Rs. 16,000

48. The basis of absorption of factory overheads is :

a) Units of production

b) Direct materials cost

c) Machine Hour Rate

d) All of these

49. ……………… refers to the ability to direct the use of, and obtain substantially all of the remaining
benefits from, the asset

a) Control of an asset

b) Transaction price

c) Performance obligation

d) Standalone selling price

50.Which of the following is an irrelevant cost ?

a) Opportunity Cost

b) Replacement Cost

c) Sunk Cost

d) Out of Pocket Cost

51. Current tax asset is classified as ……………….

a) Monetary asset

b) Current asset

c) Non-current asset

d) Non-monetary asset

52. Construction Ltd plans to discontinue its interior decoration segment. Last year , this year this
segment generated a contribution margin of Rs. 60,000 and incurred Rs. 80,000 in fixed costs .
Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is
expected to occur to the company’s overall profit?

a) Rs. 40,000 increase

b) Rs. 20,000 increase

c) Rs. 20,000 decrease

d) Profit will remain same

53. Opportunity costs represent the ……….. foregone by not choosing the second-best alternative in
favour of the best one .

a) Loss

b) Benefit

c) Both

d) None of Above

54. When assets are subtracted from liabilities it will be equal to

a) Capital

b) Net income

c) Working capital

d) Goodwill
55. A current asset that can be transferred into cash within three months is known as

a) Cash equivalent

b) Intangible asset

c) Operating asset

d) cash asset

56. The closing inventory , if any, under absorption costing is valued at ……………..?

a) All variable cost per unit

b) Variable manufacturing cost per unit

c) Variable & fixed manufacturing cost per unit

d) Variable & fixed cost per unit.

57. An increase in selling price per unit will lead to ………

a) A decrease in profits

b) An increase in contribution

c) A reduction in contribution

d) A decrease in P/V ratio

58. An increase in variable cost per unit will lead to ………..

a) An increase in profits

b) An increase in contribution

c) A reduction in contribution

d) An increase in P/V ratio

59.For Cash Ltd. estimated sales for April ,May June July August are Rs. 46,000, Rs. 48,000 , Rs.
28,000, Rs. 44,000 and Rs. 30,000 . In case 50% of sales are realized in the next month and balance in
the next of next month , determine cash collection from sales in June & July.

a) Rs. 47,000 & Rs. 38,000

b) Rs. 38,000 & Rs. 36,000

c) Rs. 14,000 & Rs. 22,000

d) Rs. 24,000 & Rs. 14,000

60. ………. Is a detailed budget of all cash receipts and cash expenditures

a) Cash Budget

b) Revenue Budget

c) Capex Budget

d) Flexible Budget

61. In process further or sell now decisions, the decision should be taken based on ………….?

a) Incremental Cost

b) Contribution margin

c) Incremental revenue

d) Incremental Revenue & Incremental Cost

62.The accounting statement of cash flows reports a firm’s cash flows segregated into what
categorical order ?

a) Operating, investing and financing

b) Investing , Operating and financing

c) Financing , operating and investing

d) Financing, investing and operating

63. For a financial institution interest paid and interest and dividends received are classified as
……….cash flows .

a) Investing

b) Operating

c) Financing

d) Non-operating

64. Income from after sales services to customers should be included in …………..

a) Revenue

b) Other operating income

c) Net profit

d) Other income
65. Which report gives a review on the profitability of a business

a) Statement of changes in equity

b) Cash flow statement

c) Balance sheet

d) Income statement

66. Interest received , dividend received are an example of …………..

a) Revenue

b) Other Operating Income

c) Other Income

d) Profit

67. Cost of factory lighting is an example of ………… ?

a) Product Cost

b) Direct Cost

c) Indirect Cost

d) Separable Cost

68. The cost allocation process does not comprise of one of the basic activities which is :

a) Accumulating the cost objects on the basis of department or division or product.

b) Identifying the cost objects or recipients of the allocated costs say , a unit of product or
department

c) Selecting a method for relating the costs so accumulated to cost objects.

d) Rationalization of activities

69. Which of the following will not appear in a cash budget ?

a) Sales revenue

b) Machinery bought on hire purchase

c) Wages

d) Depreciation of machinery
70. Tibu Company expects sales of Product W to be 60,000 units in April, 75,000 units in May , and
70,000 units in June. The company desires that the inventory on hand at the end of each month be
equal to 40% of the next month’s expected unit sales. Due to excessive production during March, on
March 31 there were 30,000 units of Product W in the ending inventory. Given this information ,
Tibu Company’s production of Product W for the month of April should be :

a) 60,000 units

b) 65,000 units

c) 75,000 units

d) 66,000 units

 The ABC has advantages- All of the above

 There is no complication of over absorption of factory overheads or under absorption in case

of- Variable costing

 From total income, when CoGS, admin and Selling & Distribution expenses are deducted
resulting profit is known as – EBITDA

 Difference in absorption costing and variable costing lies in the treatment of-Fixed Cost

 Distribution of common cost among user departments-Apportionment cost

 _________ companies earn interest from investments and therefore, for them, interest
income is not revenue - Non financial

 When production is more than units sold then the income under absorption costing will be --
----in comparison to income under variable costing - Lower
 Cost of raw material is an example of- Product cost
 The access of the actual sales revenue ASR over the break even sales revenue (BESR) is
known as- Margin of Safety

 Cost that contain both fixed and variable cost is known as- Mixed cost

 Relevant cost are cost which would change as the result of a- Decision
 Which of the following is a non-cash expense- Depreciation

 For banks Debit equity ratio is equal to or below- 2:1

 Assumptions of VCP graph are- All of these

 Cost that varies in one-to-one relation to changes in production activity - Variable costs

 The following is true about activity based costing- it is a two stage cost allocation system
that allocates costs to activities and then to products based on their use of activity

 A contract with a customer sets out the rights and obligations of both, the entity and the
customer. Which of the statement is correct- The entity's is obligation is to deliver good
and services and the right is to receive the consideration agreed for the supply of goods
and services
 Which of the following items would be subtracted from net income when using the indirect
method of calculating cash flows provided by operating activities- Gain on Sale of Land
 Which of the following is not a current asset- Car
 ___ is not charged on the items included in Capital Work-in-progress- Depreciation
 Gross profit margin is calculated by dividing the gross profit by- Revenue
 Good will is categorised as- Intangible
 Break even point is contributed on basis of relationship between- Fixed cost and
contribution margin
 EOQ to determine economic order quantity- Rate at which firm uses inventory is steady
 BEP break even point is defined as- Total revenue equals total cost
 A flexible budget estimates cost at several levels of- Activity
 on the basis of flexibility budget is classified into two types such as fixed budget and ______
budget- Flexible
 A system assigns indirect costs or assigns tow stages, the accumulated costs are allocated to
the production department- Activity based cost
 The transfer of legal rights of an asset may indicate that the customer has obtained control
of the - Asset/ Revenue
 Increase in selling price will lead to – Increase in the contribution
 Which of the following will not cause the break even point to change- Sales Volume
Decreases
 Master budget is the overall budget of the – Organization
 No opening and closing stock: In this case, profit / loss under absorption and
marginal costing-will be Same
 HIG MIG LIG flats the type of costing system- Activity based costing system.

 The closing inventory if any under variable costing is valued at—Variable and fixed cost per
unit
 Screenshots
1 The access of the actual sales revenue ASR over the break even sales revenue (BESR) is known as Margin of Safety
The cost of a single process or a series of processes that simultaneously produce two or more products of
2 signification sales value is Joint cost
3 The ideal quick ratio is 1 ratio 1
4 resources that are limited in quantity are called as Key Factors
5 SEBI requires npn finance companies to present cash flow -------- method Direct
6 Building is an example of ------ Non current asset

A contract with a customer sets out the rights and obligations of both, the entity and the customer. Which of The entity's is obligation is to deliver good and services and the right is to
7 the statement is correct? receivce the consideration agreed for the supply of goods and services
When production is more than units sold then the income under absorption costing will be ------in comparison
8 to income under variable costing Lower
9 Which report gives a review on the profitability of a buisness Income statement
Flexible budgets as a tool of planning and control are superior to fixed budgets. The major weakness of fixed
10 budgets are their inability to none of these
Based on the following information for shine ltd. Cost of machine 200000, estimated life 10 yrs, scrap value
11 6000, Calculate electricity 6 per hour
Based on the following information for shine ltd. Cost of machine 200000, estimated life 10 yrs, scrap value
12 6000, Effective machine hours 2122 hrs
Based on the following information for shine ltd. Cost of machine 200000, estimated life 10 yrs, scrap value
13 6000, Depriciation of machine 19400 pa
Based on the following information for shine ltd. Cost of machine 200000, estimated life 10 yrs, scrap value
14 6000, Calculate machine hour rate 12.60 per hour
15 https://www.allgyan.com/costing-accounting-question-answer/
For abc ltd, annual rent of factory is Rs 1200000 and units produced in the curren year are 100000. The
16 overhead absorption rate is 10 rs per unit, Calculate the underabsorption in this case? 12 lakh
700000
Following information is available of Prime ltd for year ended march 2020. Fixed cost rS 8,00000, variable cost
Rs 20 per unit selling price Rs 30 per unit Output level 200000 units, closing stock 50000 units. What will be
17 amount of profit earned duting the year using the marginal costing technique ?
Annual requirement is 100000 units; unit price 5, order cost 20 per order. Carrying cost 1 per unit and lead time
18 is 2 week the economic order quantity would be 2000 units
Which of the following items would be subtracted from net income when using the indirect method of
19 calculating cash flows provided by operating activities Gain on sale
20 An increase in variable cost per unit will lead to ------ reduction in contribution
21 _______________ is an example of non current assests property plant and equipment
For a financial institution interest paid and interest and dividends received are classified as _________ cash
22 flows operating
23 Quick ratio is also called Acid test ratio
A company manufactures a single product for which cost and selling price data are as follows - Selling price per
unit Rs 6 variable cost per unit Rs 4 fixed cost for a period rs 20000 Budgeted sales for a period -15000 units.
24 The margin safety is 5000 units
When a departmet or product line is dropped, the common fixed costs which had been allocated to that
25 department are allocated to the remaining departments or product lines

26 The principle underlying the variable cost is that the fixed manufacturing overheads are_________ All of these

The following details relate to a particular company a) total cost centre overhead are Rs 200000 for machining
dept. and Rs 150000 for assembly dept. b) machine hours used in machining are 10000 hrs and in assembly are
5000 hrs c) labour hours used in machining are 4000 hrs and in assembly are 12000 hrs . The most appropraite
27 overhead rate to use for the machining dept. would be 12.5 per labour
From total income, when CoGS, admin and Selling & Distribution expenses are deducted resulting profit is
28 known as EBITDA
A firm requires 8000 nos of a certain component which is bought at 60 each. The cost of placing an order and
following is up is 60 and the annual stoarge charges works out to 10% of the cost of the item. To get maximum
29 benefit the firm should place an order for ______ units at a time 400
30 Income from after sales services' to customers should be included in ___________ Other income

31 _________ companies earn interest from investments and therefore, for them, interest income is not revenue Non Financial
32 the overheads are absorbed into different products under activity costing system using level of activiy used in producing the cost unit

Furniture ltd produces multiple types of chairs. It uses activity based costing and has the following activity cost
pools, estimated overhead cost for each pool and related cost driver a) Handling material Rs 240000 for which
cost driver is number of parts, total parts are 6000 b) Processing purchase orders Rs 720000 for which cost
driver is number of purchase orders, if number of purchase orders placed in a year are 12000, if number of
purchase orders ad number of parts for student chair are 3000 & 3000 respectively then calculate the
33 overheads allocated to student chairs 300000
The tax expense in the statement of profit and loss is 40,00000. Current tax liability at the beginning and at the
end of the year was 2,00,000 and 3,00,000 resp. Cash outflow during the year on account of income tax
34 payment was 3900000

For cash ltd estimated sales for April, May, June, July, August and rs 46000, rs 48000, rs 28000, rs 44000 and rs
35 30000. in case 50% of sales are reakized in the next month, determine cash collection from sales in june & july 47000 & 38000
36 Which of the following would be considered a cash-flow item from a financing activity ? A cash outflow to repurchase the firm's own common stock
37 on the basis of flexibility budget is classified into two types such as fixed budget ad ______ budget Fixed budget and flexible budget
Tibu company expects sales of Product W to be 60000 unts in April, 75000 units in May and 70000 units in June.
The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's
expected unit sales. Due to excessive production during March, on march 31 there were 30,000 units of product
W in the ending inventory Given this information, Tibu company's production of Product W for the month of
38 April should be 60000 units
 Construction ltd plans to discontinue its interior decoration segment. Last year, this segment generated a
contribution margin of Rs 60,000 and incurred Rs 80,000 in fixed costs. Discontinuing the segment will allow the
39 company to avoid half of the fixed costs. what effect is expected to occur to the company's overall profit? 20000 decrease
Costs that tend to vay in direct proportion or in a one to one rtelationship to changes in productioon activity,
sales activity or some other measure of volume within relevant range for a given budget period are referred to
40 as Variable cost
__________ are the assests which the management expects to convert into cash wiythin 12 months after the
41 balance sheet date Current assest

Furniture ltd produces multiple types of chairs. It uses activity based costing and has the following activity cost
pools, estimated overhead cost for each pool and related cost driver a) Handling material Rs 240000 for which
cost driver is number of parts, total parts are 6000 b) Processing purchase orders Rs 720000 for which cost
driver is number of purchase orders, if number of purchase orders placed in a year are 12000, if number of
purchase orders ad number of parts for student chair are 2000 & 2000 respectively then calculate the
42 overheads allocated to manager chairs 200000
43 gain from sale of items of PP&E should be included in ____________ Other income
44 The closing inventory, if any, under absorbtion costing is valued at__________ ? Variable& fixed cost per unit
45 The main operations related expenses of a business are termed as _____ Operating
46 Assumptions regarding the VCP graph are All of these
47 Buy back of shares is an _________ of fund Application
48 Which statement shows the flow of cash and cash equivalents the financial period? Cash flow statement

Printers lt uses activity based costing for its products which includes laser printers and ink jet printers. The total
estimated overhead cost for the parts adminstration activity was 4000 part types. If laser printer requires 2400
49 part types, the amount of overhead allocated to them for parts administration would be 720000
50 Goodwill is categorised under which assests Intangible assest

51 _______ are the expenses related to business activity but are disproportionate in amount or occur infrequently extra ordinary
52 Cost of factory lighting is an example of ____________ ? direct cost
53 one of the following is not included in costing and control of factory overheads no allocation of overhead
54 Patent is categorised under which assests ? Intangible assest
Calculate profit under variable costng technique, when number of units produced is 1,00,000 units, selling price
55 is rs. 10 per unit, variable cost is rs 6 per unit and fixec costs are rs 2,00,000 200000
Calculate ovehead rate using material cost method factory OH_ Rs 160000, direct materials - Rs 1,00,000 &
56 direct wages rs 80000 1.6

the purchase of Jan, Feb & March is Rs 10,000, Rs 12000 & Rs 15000. Payment to supplier is done 50% in the
57 month of purchase and 50 % in next month, Calculate the cash payment for the month of feb. 11000
___________ are the assests which the management expects to convert into cash within 12 months after the
58 balance sheet date Current assest
59 In product mix decision, most important factor to be considered is _________ ? contribution per unit of the key respurce
About 60 items are required everyday for a machine. A fixed cost of 40 per order is incurred for placing an
order, the inventory carrying cost per item amounts to Rs 0.05 per da. The lead period is 25 days. Compute
60 reorder level 1500
61 From the perspective of cost allocation, service department costs are eventually applied by th user department to the units produced
the part of cost of joint products that can be attributed exclusively and wholly product, process, division or
62 department is known as seperable
63 economists believe that

64 on the basis of _____ budget is classified into long term budget, short term budet and current budget time
the direct method & indirect method of presenting cash flow of statement differes only in respect of presenting
65 cash flows from _____ activities indirect activities
Net profit is reported at 5000000. Net profit includes interest expense 500000 , income tax expense 2000000,
interest income 300000, depreciation 600000, working capital increased during the year by 400000. There was
no income tax liability at the beginning and at the end of the year. Cash flow from operative activities is
66 …………………… 7400000
The P/V ratio of a company is 40% and margin of safety is 20%. If present sales is Rs. 20,00,000 then Break Even
67 Point in Rs. Will be ………….. 1600000
Cash flows arising from the purchase and sale of dealing or trading securities are classified as ……………….. for a
68 brokerage firm . Operating activities
Based on the following information for Shine Ltd. answer the given questions : Cost of a Machine Rs. 200000 ,
Estimated life 10 years , Scrap value Rs. 6000 , Factory operation hours in a week 48 , Machine breakdown time
15% . Electricity used by machinery is 10 units/hrs Rs. 60p/unit. depreciation rate till now--
69 9.43 per hour
is the traditional method of income determination which includes all manufacturing costs i.e. variable and fixed
expenses . absorption costing
does not change in total quantity a given period irrepective changes in
Fixed cost is cost…………
output
Current ratio of a concern is 1, its net working capital will be NIL
. When assets are subtracted from liabilities it will be equal to Capital

Automobile company produces 5000 parts each year that are used in on eof its products> The unit cost of
producing this part is Variable cost Rs 7 fixed cost , RS 8 The part cab be purchased from an outside supplier at
Rs 9 per unit. If the part is purchased from the outside supplier, three-fourth of the fixed costs incurred in
producing the part can be eliminated. The effect on operating income from purchasing the part would be 20000 increase
When break even point is 2000 units , selling price per unit is Rs. 14 and variable cost is Rs. 8 , find out fixed cost
? 12000
. The basis of absorption of factory overheads is : Units of production
……………… refers to the ability to direct the use of , and obtain substantially all of the remaining benefits from,
the asset control of an assest
Which of the following is an irrelevant cost ? Sunk Cost
Current tax asset is classified as ………………. Current assest
Opportunity costs represent the ……….. foregone by not choosing the second-best alternative in favour of the
best one . benefit
A current asset that can be transferred into cash within three months is known as Cash equivalent
The closing inventory , if any, under absorption costing is valued at ……………..? Variable & fixed manufacturing cost per unit
An increase in selling price per unit will lead to increase in contribution
An increase in variable cost per unit will lead to ……….. reduction in contribution
The difference between total sales and total variable costs is called as The contribution margin
The ABC system is widely used contribution most costly or slowest turning
Is a detailed budget of all cash receipts and cash expenditures Cash budget
In process further or sell now decisions , the decision should be taken based on ………….? Incremental Revenue & Incremental Cost
The accounting statement of cash flows reports a firm’s cash flows segregated into what categorical order ?
Operating, investing & Financing
For a financial institution interest paid and interest and dividends received are classified as ……….cash flows .
Operating
Current ratio is 4:1 Net working capital is 30,000. Find the amount of current assests 24000

________ is the firm's ability to arrange cash in short term to meet its long term obligations ,
whereas___________ as its long term viability and ability to honour long term financial commitments Solvency, Liquidilty
The cost allocation process does not compromise of one of the basic activities which is Rationalisation of activities
Interest received, divident received are an example of Other income
which of the following will not appear in a cash budget depreciation of machinery
Calculate overhead rate using material cost method - Factory OH - Rs 160,000, Direct materials - Rs 1,00,000 &
Direct wages - Rs. 80,000
1. The cost of raw materials used in the production is an example of : Product Cost
2. The underlying difference between absorption costing and variable costing lies in the treatment
of : Fixed Manufacturing Cost
3. Quick assets do not include : Inventories
4. Which of the following will not appear in a cash budget : Depreciation of machineries
5. When production is more than units sold then the income under absorption costing will be :
Higher
6. An increase in selling price per unit will lead to : An increase in contribution (option B)
7. Which report gives a review on the profitability of a business : Income statement
8. The tax expense in the statement of profit and loss is 4000000 Current tax liability at the
beginning and the end of the year was 200000 and 300000 respectively Cash outflow during the
year on account of income tax payment was : 3900000
9. is a proxy for pre tax cash operating margin :EBITDA
10. ……….. companies earn interest from investments and therefore for them interest income is not
revenue : Non Financial
11. The term current asset doesn’t cover : CAR
12. The purchase of Jan Feb and March is Rs 10000 Rs 12000 and Rs 15000 Payment to supplier is
done 50% in the month of purchase and 50% in next month. Calculate the cash payment for the
month of feb : Rs 11000
13. The costs of a single process or a series of process that simultaneously produce two or more
products of significant sales value is : Joint Cost
14. The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following costing system: Full Costing
15. Ethics and integrity standards are based on the following except :There are no clear roles and
responsibilities in the group
16. The cost allocation process does not comprise of one of the basic activities which is :
Rationalization of activities
17. The form of balance sheet is : Horizontal OR vertical
18. Fixed cost is a cost : Which do not change in total during a given period irrespective of changes
in output
19. Which of the following equation represents break even point : Contribution = Fixed Cost

20. Net profit is reported at 5000000 Net profit includes interest expense 500000 income tax
expense 2000000 interest income 100000 depreciation 600000 working capital increased during
the year by 400000 There was income tax liability at the beginning and at the end of the year
Cash flow from operating activities is : 7400000

21. If rent of factory is Rs 10000 per month and a machine occupies 1/4th space of factory. Calculate
machine hour rate. If machine works for 1000 hours in a year : Rs 30 per hour

22. A company makes single product and incurs fixed costs of Rs 60000 per annum. Variable cost per
unit is Rs 10 and each unit sells for Rs 30 Annual sales demand is 14000 units. The breakeven
point is : 4000 units

23. In product mix decision most important factor to be considered is : contribution per unit of key
resource
24. Which of the following would be considered a cash flow item from a financing activity : A cash
outflow to repurchase the firm's own common stock
25. An asset classified as a asset if its value is not determinable in a fixed amount cash : Non
Monetray
26. Compute contribution if sales is Rs 500000 fixed cost is Rs 200000 and variable cost is Rs 200000
: Rs 100000
27. Financial leverage (FLEV) of a company with _______ cannot be calculated : Net worth
28. Banks generally sees that Debt equity ratio is equal to or below : 2:1
29. Goodwill is categorised under which assets : Intangible
30. Flexible budget estimates costs at several levels of : Activity
31. Is an example of non current assets : Property plant and equipment
32. Is the firm’s ability to arrange cash in short term to meet its short term obligations whereas is a
long term viability and ability to honour long term financial commitments: Liquidity and
solvency
33. ____ is an obligation present at the balance sheet date : Liability
34. Analysis is used for trend analysis : Horizontal
35. Code of ethics for accounting professionals is based on : All of these
36. The quality of being honest and having strong principles that you refuse to change is : Integrity
37. Cost of factory lighting is an example of : Indirect cost

38. Which of the following is true about financial statements: (A) Financial statements give a
summary of accounts (B) Financial statements can be stated as recorded facts : Both A and B

39. Is a detailed budget of all cash receipts and cash expenditures : Cash Budget
40. A current asset that can be transferred into cash within three months is known as : Cash
equivalent
41. For cash ltd. Estimated sales for April may June July august are Rs 45000 Rs 48000 Rs 28000 Rs
44000 and Rs 30000. In case 50% of sales are realized in the next month and balance in the next
of next month determine cash collection from sales in June and July : Rs 47000 and Rs 38000
42. Horizontal analysis requires preparation of ____ financial statements : Cash Flow
43. The financial statements of the companies are required to be presented in the format prescribed
in _______ of the companies Act 2013 : Schedule III

44. Net profit is reported at 5000000. Net profit includes interest expense 500000 income tax
expense 2000000 interest income 300000 and depreciation 600000. There is no change in
working capital. There was no income tax liability at the beginning and at the end of the year.
Cash flow from operating activities is

45. The closing inventory if any under variable costing is valued at : Variable manufacturing cost per
unit
46. The term Financial Statement covers: Profit and Loss Statement and Balance Sheet
47. When assets are subtracted from liabilities it will be equal to : Capital
48. The principle underlying the variable costing is that the fixed manufacturing overheads are : All
of these
49. Following information is available of Prime Ltd for year ended March 2020 Fixed cost Rs 800000
variable cost Rs 20 per unit Selling price Rs 30 per unit Output level 200000 units closing stocks
 50000 units What will be amount of profit earned during the year using absorption costing
technique: Rs 700,000
50. The transfer of legal rights of an asset may indicate that the customer has obtained control of
the : Asset
51. Which statement shows the flow of cash and cash equivalents during the financial period : Cash
flow statement
52. Potential equity shares are treated as dilutive when and only when their conversion to equity
shares would decrease _____ from continuing ordinary operations : Net profit per share

53. Printers limited uses activity based costing : Rs 720000

54. The point at which different individual products are separated after a common stage of
production is known as the: Split off point
55. Master budget is the overall budget for the entire : Organization
56. Which of the following items would be subtracted from net income when using the indirect
method of calculating cash flows provided by operating activities : A gain on the sale of land

57. The activity based management (ABM) refers to a set of actions that management can take
based on information from an ABC study to increase profitability which includes a combination
of : All of these
58. When break even point is 2000 units selling price per unit is Rs 14 and variable cost is Rs 8 find
out fixed cost : Rs 12000
59. The following is included in overheads : All of these
60. If there is no opening and closing inventory then profit under marginal costing will be _______
in comparison to absorption costing : Same

61. CASE STUDY: Shine LTD.

Calculate depreciation rate per hour? 9.43

Calculate machine rate per hour? Rs 12.60 per hour
Calculate the depreciation on machine? 19400
Calculate the effective machine hours worked in a year? 2122
Calculate electricity consumption rate per hour? Rs 6 per hour

62. A capacity in which the normal working hours of a machine or worker or employee are
considered is known as : Practical Capacity
63. The cost which uses a two stage overhead allocation the tracing cost to activities and tracing
costs from activities to products or job is : Activity Based Cost
64. Porter corporation is working on its direct labour : Rs 31584
65. Slow moving and non moving items of inventories other than stock of finished goods and….:
Current Asset
If an accounting firm certifies a company's financial statements, it should have ___________
to make the firm's financial situation look better than it is. : Motivation

66. The excess of the actual sales revenue (ASR) over the break even sales revenue (BESR) is known
as : Margin of Safety
67. Activity based costing (ABC) is a costing technique that uses a two stage allocation process and
the two stages are: The costs are assigned to activities, and then to the products based upon
their use of the activities
68. Gain on sale of investment property should be disclosed in the statement of profit and losses as :
Other Income

69. A firm requires 8,000 nos. of certain component, which it bought at Rs 60 each. The cost of
placing an order and following it up is 60 and the annual storage charges work out to 10% of the
cost of the item. To get maximum benefit the firm should place an order for ……….. units at a
time : 400 units

70. Furniture ltd produces multiple types of chairs. It uses activity based costing : Rs 300000 (3 Lakh)

71. p/v is 40% and margin of safety is 20% and sales is 2000000. what is break even point : 1600000

72. Interest received dividend received are an example of : Other income

73. A system assigns indirect costs or products in two stages first the accumulated costs are
allocated to the production departments second the accumulated costs in cost centres are
assigned to individual job/product on the basis of an overhead allocation rate based labour cost
direct labour hour rate machine hour rate. This system is: Activity Based Cost

74. Many manufacturers make more than one type of product and the relative proportion of each
product sold in the aggregate sales is known as the: Sales Mix

75. attached with the balance sheet forms as a part of the financial statements : Schedules or notes
to accounts

76. What is the main difference between traditional budgeting and zero based budgeting : ZBB
starts at zero

77. The following is true about activity based costing : Two stage cost allocation system that
allocates costs to activities and then to products based on their use of the activities

78. Objectivity and Independence are important ethical values in the accounting profession.
Accountants must remain free ……. When conducting accounting services: All of these

79. On the basis of flexibility budget is classified into two types such as fixed budget and : Flexible
Budget

80. All those costs which affect the decision are known as : Relevant costs

81. Vertical analysis requires preparation of ____ financial statement: Common Size

82. Cash flow arising from the purchase and sale of dealing or trading securities are classified as
……….. for a brokerage firm : Operating activities
83. The main operations related expenses of the business are termed as: Operating expenses

84. Break even point is computed on the basis of the relationship between the fixed costs and the:
Contribution Margin
85. The crucial step in the cvp analysis is the determination of break even point (BEP) which is
defined as the sales level at which: Total revenues equal total cost

86. Selling and distribution charges are incurred for marketing of products dispatching goods sold
and so on and include : All of these
87. Sunk costs are……. costs: Committed Cost
88. Which of the following is an irrelevant cost : Sunk Cost

89. A contract with a customer sets out the rights and obligations of both the entity and the
customer. Which of the statement is correct : (Option D longest one) The entitys obligation is
and the right is and the customers right is and the obligation is

90. Research and development and advertisement expenses in the profit and loss statement are:
Discretionary expenses

91. The following costs are irrelevant for a special order that will allow an organisation to utilise
some of its present idle capacity: Unavoidable fixed overhead

92. Which of the following would not cause the breakeven point to change: Sales volume decreases
93. Current ratio of a concern is 1 net working capital will be : Nil

94. Costs that consist of both fixed costs and variable costs are known as: Mixed Costs

95. There is no complication of over absorption of factory overheads or even their under absorption
in the case of : Absorption Costing

96. When production is more than units sold then the income under absorption costing will be ____
in comparison to income under variable costing: Higher
97. Research and development training programmes for its employees advertising and sales
promotion charitable and or political donations management consulting services and so on are
called : Discretionary Fixed Costs
98. is not charged on items included in capital work in progress : Depreciation

99. refers to the ability to direct the use of and obtain substantially all of the remaining benefits
from the assets: Control of the asset
100. Expenses pertaining to management of businesses like office rent lighting and heating
postage telephone fax : Office and administrative expenses
101. Is an example of non cash expense : Depreciation
102. From total income, when CoGS, Admin and Selling & Distribution expenses are deducted
resulting profit is known as : EBITDA
103. On the basis of ..….. budget is classified into long term budget short term budget and current
budget: Time

104. Opportunity costs represent the _____ foregone by not choosing the second best alternative
in favour of the best one: Benefit

105. Flexible budgets as a tool of planning and control, are superior to fixed budgets. The major
weaknesses of fixed budgets are their inability to: Show the potential variability of various
estimates used in the preparation of the budget

106. In case of a bank interest income should be recognised in the statement of profit and loss as
: Revenue

107. For a financial institution interest paid and interest and dividends received are classified as
cash flow : Operating

108. Are not recognised in the balance sheet as they do not meet the definition of a liability:
Contingent liabilities

109. Profit and loss from discontinuing operations and other comprehensive income are not
included in the profit and loss for computing : EBITDA

110. In general First budget prepared is : Sales Budget

111. In two stage system whether traditional or ABC will first allocate costs to : Departments or
activities and then allocates costs to product or services

112. According to critics of the professional accounting rules conflict of interest is built into the
accounting system because for the firm is working: for the company whose accounts it is
auditing
113. Patent is categorised under which assets : Intangible
114. When asset are subtracted from liabilities it will be : Capital
115. Income from after sales services to customers should be included in : Other Operating
Income
116. Gain from sale of items of PP&E should be included in : Other Income
117. GAAP allows recognition of……. That an entitiy acquires : Intangible Asset
118. The word relevant range as used in cost accounting means the range over which : Cost
relationships are valid
119. Is a separate performance obligation : Service Warranty
120. For ABC Ltd annual rent of factory is Rs 1200000 and units produced in the current year are
100000. The overhead absorption rate is Rs 10 per unit Calculate the under absorption in this
case : 200000 (2 lakh)
121. As per flexible budget sales is Rs 500000 CoGS is Rs 300000 and 20% of which is fixed
Calculate CoGS ………utilization of capacity is 60% : Rs 400000 (4 lakh)
122. Following information is available of Prime Ltd for year ended March 2020 Fixed Cost is Rs
800000 Variable Cost Rs 20 per unit Selling Price Rs 30 per unit Output level 200000
units……..What will be amount of profit earned during the year using the absorption costing
technique: Rs 7000000 (7 lakh)

123. Relevant costs are costs which would change as a result of the : Decision

124. Net profit as per statement of profit and loss is 1000000 The statement of profit and loss
shows interest income 100000 finance cost 300000 and tax expense 500000 The marginal tax
rate is 35 percent Net operating profit after tax NOPAT is : 1235000

125. Reorganise balance sheet of a company shows equity 100 lakhs and net financial assets at 30
lakhs The net operating asset at the balance sheet date was : 70 lakh

126. Distribution of common cost among user departments is known as : All

of these
 Management ACCOUNTING

6) A special Order can be acknowledged at

- Below marginal cost

- Below total cost and above marginal cost
- Below fixed cost
- Above total cost

11) From the perspective of cost allocation , Service department costs are:

- Generally treated as period costs rather than product costs

- Reported as selling and administrative expenses on the income statement.
- Eventually applied by the user departments to the units produced
- Seldom found in manufacturing organizations

13). The following is true about activity- based costing

- It is a two stage allocating system that allocates costs to activities and then to products based on
their uses
- Under this , both direct costs and indirect costs are absorbed into products using predetermined
department
- Under this standard cost system is used
- Under this budgeted costs are used

1) . The p/v ratio of a company is 40% and the margin safety is 20%. If present sales is RS 20,00,000 then break
even point in Rs is

- Rs 4,00,000
- Rs 12,00,000
- Rs 8,00,000
- Rs 16,00,000

7). The accounting statement of cash flow reports a firm's cash flow segregated into what categorical order

- Operating, investing and financing

- Investing, Operating and financing
- Financing, Operating and investing
- Financing, Investing and Operating

12). Code of ethics for accounting professionals is based upon:

- Integrity
- Objectivity
- Confidentiality
- All of these

8). It is a separate performance obligation

- Assurance Warranty
- Service Warranty
- Both of these
- None of these

5). The word “relevant range” is used in cost accounting, means the range over which

- Relevant costs are incurred

- Costs may fluctuate
- Cost relationships are valid
- Cost data is available

20). An increase in variable cost per unit will lead to

 - An increase in profits
- An increase in contribution
- A reduction in contribution
- An increase in P/V ratio

16). The activity based management (ABM) refers to a set of actions that management can take, Based on
information from an ABC

- Repricing of unprofitable products

- Increasing sales volume of highly profitability products
- Process improvement
- All of these

14). which remains constant in total but reduces per unit as the volume of the production increase is known as:
The cost

- Variable cost
- Fixed cost
- Mixed cost
- Semi-variable cost

- But answer is fixed cost

9). On the basis of flexibility budget is classified into two types such as fixed budget and _ budget

- Flexible
- Semi – Variable
- Rolling
- Constant

3). Which of the following items would be subtracted from net income when using the indirect method of
calculating cash flows provided by

- Depreciation expense
- Repayment of bonds payable
- A gain of sales on land
- A loss on the sale of equipment

4). Flexible budgets, as a tool of planning and control, are superior to fixed budgets are their inability to

- Show the potential variability of various estimates used in preparation of budget

- Indicate the range which costs doesn’t change
- Indicate the range within which cost change
- None of these

10). ------ are the assets which the management expects to convert into cash within 12 months after the
balance sheet date.

- Non-current assets
- - Deferring tax assets
- Current asset
- Intangible asset

19). If an accounting firm certifies a company’s financial statement, it should have ---- to make the financial
situation look better

- Motivation
- Financial incentive
- Financial incentive
- Ethical intention
17). In general, the first budget prepared is the

- Production budget
- Direct labour budget
- Sales budget
- Overheard budget

15). The fixed manufacturing cost can be carried forward to next period as part of inventory cost in which of
the following control system: -

- Marginal costing
- Variable costing
- Unit costing
- Full costing

50)- Revaluation gain is included in

- Net profit
- Other Comprehensive income
- Other income
- Net income

51. The ABC system has advantages

A. All of these

52. As at April 1 2017 100000 shares were outstanding..

A. 125000

53. When production is less than unit sold then the income under absorption costing will be - - - - - - than the
income from variable costing

A. Lower

When production is More than unit sold then the income under absorption costing will be - - - - - - than

SAME

53. A company makes a single product and incurs fixed cost of Rs 60000 per annum

A. 6000 BEP =FC/SP - VC

54. Which of the following would be considered a cash flow item from a financing activity

A. A cash outflow to repurchase the firm's own common stock

55. The excess of AVERAGE SALES REVENUE over BESR is known as

A. Margin of Safety

56. Income from after sales services to customers would be recorded in:

A. Other income

57. Goodwill is categorised under which assets:

A. Intangible assets.

58. The costs of a single process or a series of processes that produce two or more products of significant sale
value is known as:

A. Joint product cost

59. Ethics and integrity standards are based on the following except

A. There are no clear rules or responsibilities???

60. In process further and sell now decisions, the decision should be taken based on:

A. Incremental revenues and Incremental costs.

61. As on April 1 2017 100000 shares were outstanding. On October 1 2017 50000 shares were issued. The
weighted average number of shares to be used as denominator to calculate Basic EPS is

A. 125000

62. Following information is available for Prime Ltd…..Fixed Cost 800000, variable cost 20/unit, and selling price
per unit 30/- of 200000 units. Closing stock 50000 units. What will be the profit earned during the year as per
the Marginal costing method.

63. Which of the following equations represent break even point:

A. Contribution = Fixed cost

64 Cost of factory lighting is an example of

A. Indirect cost

65. Assumptions regarding VCP graphs are

A. All of these

66. In shut down or continue decisions the factors to be considered are:

A. Contribution Margin

67. Fixed costs are fixed for a relevant range of volume for a given Budget period,Lean period, Production
period

A. All of these.

68.Banks generally see that the Debt to Equity ration is equal to or below

A. 1:1

69. The underlying difference between Absorption costing and Variable costing is the treatment of

A. Fixed Manufacturing cost

Q. 72 The term financial statement cover:

A. Profit and Loss statement and Balance sheet

73. Horizontal Analysis needs preparation of________ financial statements

A. Cash flows

74. Activity based costing is a costing technique that uses a two state allocation and these are:

A. The costs are assigned to activities and then to products based upon the use of the activities.

75. Which of the following will not cause the BEP to change

A. Sales volume decreases

76 In ________ strategy of earning management the entity increases or decreases the earning in order to
reduce the visibility in reported earnings from period to period

A. Income smoothing

77. Calculate overhead rate using material costing method Factory overhead 1600000, Direct materials 100000
and Direct wages 80000

A. 2

78. Master budget is the budget of the entire

A. Organisation

79 The cost of the single process or a series of processes that simultaneously produce two or more products of
significant value are;

A. Joint costs.

80. Which statement shows the flow of cash and cash equivalents during the financial period?

A. Cash flow statements

81. Under Abs costing which of the following fixed expenses charged to COGS

A. All of these ( Fixed manufacturing costs fixed admin cost and fixed selling cost)

82. ______ analysis is used for Trend analysis

A. Ration Trend Analysis

84. A Volume cost profit analysis is a tool to show the relationship between various ingredients of profit
planning namely

A. All of these.

85. When BEP is 2000 units and SP is 14 and VC is 8, what is the fixed cost

A. 12000 ( FC/Sp-Vc)

86. Annual requirement 100000 units, unit price 5 order cost 20 per order, carrying cost 1 per unit and lead
time is 2 weeks the EOQ would be

A. 2000( Square root of 2AB/C where A is requirement, B is order cost and C is carrying cost)

87. The following costs are irrelevant to Special order that will allow the Organisation to utilise some of its idle
capacity:

A. Unavoidable Fixed OH

88. R&D and Advertising expenses in the P &L statement are

A. Cost of sales

89. A balance sheet of the company shows equity 100000 and financial assets 30 lakhs the NOA at the balance
sheet date was

A. 70 lakhs

90. The accounting statement of cash flows reports a firms cash flow segregated into what categorical order

A. Operating, investing and financing

91.BEP is computed on the basis of relationship between Fixed cost and

A. Contribution Margin.

92. One of the following is not included in the costing and control of factory overhead

A. No allocation of overhead

94. Profit and Loss from discontinuing operations and other comprehensive income are not included in the
profit and loss for computing

A. NOPAT ( Net Operating Profit after Tax)

95. Patents are categorised as under:

A. Intangible asset

96. Revaluation gain is included in

A. Other comprehensive income

97. Financial assistance given to co investing in pollution control machines is known as

A. Govt grant.

98. The form of balance sheet is

A. Horizontal or Vertical

99. All costs that affect a decision are called

A. Relevant costs.

100. SEBI requires the non-finance co to present cash flow using

A. Indirect method

101. Which of the following equation represents break even point

A. Contribution = Fixed cost

102. Cost of factory lighting is an example of

A. Indirect cost

103. Assumptions regarding VCP graphs are

A. All of these Costs can be bifurcated into variable and fixed components.

2. Fixed costs will remain constant during the relevant volume range of graph.

3. Variable cost per unit will remain constant during the relevant volume range of graph.

4. Selling price per unit will remain constant irrespective of the quantity sold within the relevant range of the
graph.

5. In the case of multi-product companies, in addition to the above four assumptions, it is assumed that the
sales-mix remains constant.

104. For shut down and continue decision factors to be considered are

A. Contribution margin

105.Fixed costs are fixed for a relevant range of volume for a given

A. All of these

106. The underlying difference between Abs costing and Variable costing is the treatment of

A. Fixed Manufacturing cost

ACCOUNTING

1. The cost of raw materials used in production is an example of

a. Product cost
 2. Quick assets do not include
a. Inventories

3. An increase in selling price per unit lead to

Increase in contribution

4. Which of the following will not appear in a cash budget?

Depreciation of Machinery

5. Financial leverage of a company with can not be calculated

Negative Net worth

6. A special Order can be acknowledged at

Below marginal cost

7. Costs that consist of both fixed costs and variable costs are known as

Mixed Cost

8. If a company revalue its assets , its net worth

Will improve

9. The cost allocation process does not comprise of one of the basic activities which is

Rationalization of activities

10. For a Financial Institution Interest paid and Interest dividends received are classified as
Investing

11. From the perspective of cost allocation , Service department costs are:
Eventually applied by the user departments to the units
produced
 12. The following is true about activity- based costing
It is a two stage allocating system that allocates costs to activities and then to products based on their
uses

13. Net profit is reported as 500000. Net profit includes interest expense 5,00,000 income tax
expense 20,00,000. Interest income 3,00,000 depreciation 6,00,000. Working capital increased
during the year 4,00,000. There was no income tax liability at the beginning and at the end of the
year. Cash flow from operating activities is
540000

14. The p/v ratio of a company is 40% and the margin safety is 20%. If present sales is RS 20,00,000
then break even point in Rs is

Rs 4,00,000
Rs 12,00,000
Rs 8,00,000

Rs 16,00,000

15. The accounting statement of cash flow reports a firm's cash flow segregated into what categorical
order
Operating, investing and financing

16. Which report gives a review on the profitability of business

Income statement

17. Code of ethics for accounting professionals is based upon:

All of these

18. It is a separate performance obligation

Service Warranty

19. The word “relevant range” is used in cost accounting, means the range over which
Cost relationships are valid
20. An increase in variable cost per unit will lead to

A reduction in contribution
 20. The Activity based costing ( ABC) system has advantages

All of these

21. The activity based management (ABM) refers to a set of actions that management can take,Based
on information from an ABC

Repricing of unprofitable products

Increasing sales volume of highly profitability
products Process improvement
All of these

22. The cost which remains constant in total but reduces per unit as the volume of the production
increase is known as:
Variable cost

23. On basis of flexibility budget is classified into two types such as fixed budget and _ budget

Flexible

24. Which of the following items would be subtracted from net income when using the indirect
method of calculating cash flows provided by
A gain of sales on land

25. When assets are subtracted from liabilities it will be equal to

Capital

26. Flexible budgets, as a tool of planning and control, are superior to fixed budgets are their inability
to
Show the potential variability of various estimates used in preparation of budget

27. Flexible budget estimates cost at several levels of

Activity
 28. ------ are the assets which the management expects to convert into cash within 12 months after
the balance sheet date.
Current asset
 29. A current asset that can be transferred into cash within three months as known as
Cash equivalent

30. ----------------- is an obligation present at the balance sheet date

Liability

31. is an example of Non-current assets

Property plant

32. Current Ratio is 4:1. Net working capital is 30,000. Find the amount of current
assets 10,000
40,000
24,000
6,000

33. Current ratio of a concern is 1, its net working capital will

be NIL

34. the Closing Inventory, if any, under variable costing is valued

at Variable and fixed manufacturing cost per unit

35. If there is no opening and closing inventory then profit under marginal costing will
be in comparison to absorption costing
Same

36. Financial statements of the companies are required to be presented in the format prescribed
in of the companies Act,2013
Schedule III

37. The transfer of legal right of an asset may indicate that the customer has obtained control of the
Asset
 38. Horizontal Analysis requires preparation of
Indexed

39. The term Current asset doesn’t cover

Car

40. net profit as per statement of profit and loss is 10,00,000, finance cost 300,000, ---------

A 1105000

B 1170000

C 845000

D 1235000
 40. ----------------is an example of non cash expense

Depreciation

41. if an owned premises is used for a business , the rental income forgone by not giving it
Sunk cost

42. A company makes a single product and incures fixed cost of Rs. 60,000 per annum. Variable cost
per unit is Rs. 10 ans each unit sells for Rs. 30. Annual sales demand is 14,000 units. The
breakeven point is
60000 /30-10
=3000 units

43. If an accounting firm certifies a company’s financial statement, it should have ---- to make
the financial situation look better
Ethical intention

44. In general, the first budget prepared is the

Sales budget

45. The fixed manufacturing cost can be carried forward to next period as part of inventory cost in
which of the following control system : -
Full costing

46. The ABC system has advantages

All of these

47. When production is less than unit sold then the income under absorption costing will be - - - - - -
than the income from variable costing
Lower
 48. Which of the following would be considered a cash flow item from a financing activity
A cash outflow to repurchase the firm's own common stock

49. The excess of ASR over BESR is known as

A. Margin of Safety
 50. Research and development training programs for its employees, advertising and sales promotions,
charitable and/or political donations , management consulting services and so on are called
Discretionary Fixed Cost

51. Income from after sales services to customers would be recorded in:
Other income

52. Goodwill is categorised under which assets:

Intangible assets.

53. Ethics and integrity standards are based on the following except
A. There are no clear rules or responsibilities???

54. In process further and sell now decisions, the decision should be taken based on:
A. Incremental revenues and Incremental costs.

55. As on April 1 2017 100000 shares were outstanding. On October 1 2017 50000 shares were
issued. The weighter average number of shares to be used as denominator to calculate Basic EPS
is
A. 125000

56. Following information is available for prime limited for year end march 2020 fixed cost 800000
Variable cost rs 20 per unit selling price rs 30 per unit output level 2,00000 units Closing stock
50,0000 units what will be the amount of profit earned during the year using the absorption costing
technique Ans 7,00,000

57. Is a detailed budget of all cash receipts and all expenditures Cash
budget
58. Selling and distribution charges are incurred for marketing of products, dispatching goods sold,
and so on and include
All of the above
 59. For cash ltd. Estimated sales for April , may, June & July , august are 46,000 , 48000, 28,000,
44,000, 30,000. increase 50% sales are realized in the next month and the balance in the next
to next month . determine cash collection from sales in June& July –
38000 & 36000

60. Cost of factory lighting is an

example of Indirect cost

61. Assumptions regarding VCP

graphs are All of these

62. The point at which different individual products are separated after a common stage of production
is known as the
Split off point

63. In shut down or continue decisions the factors to be considered are:

Contribution Margin

64. Banks generally see that the Debt to Equity ratio is equal to or below
2:1

65. In case of a bank, interest income should be recognised in the statement of profit and loss
as Other income

66. The Principle underlying the variable costing is that the fixed manufacturing
overheads are Period cost

67. Potential equity shares are treated as dilutive when and only when their conversation to equity
shares would increase from continuing ordinary operations
Net profit per share

68. The following is included in overheads

Indirect material
indirect labour
indirect expenses all
of these

69. -------------------attached with the balance sheet forms a part of the financial statements
Schedules or notes to accounts

70. The term financial statement covers:

Profit and Loss statement and Balance sheet

71. Activity based costing is a costing technique that uses a two state allocation and these are:

The costs are assigned to activities and then to products based upon the use of the activities.

72. Which of the following will not cause the BEP to change

Sales volume decreases

73. Cash flows arising from the purchase and sale of dealing securities are classified as

Operating Activities

74. A contract with a customer sets out the rights and obligations of both, the entity and the
customer. Which of the statement is correct
A: The entity’s right is to deliver goods and services. And the obligation----------

75. 76 In strategy of earning management the entity increases or decreases the earning in order
to reduce the visibility in reported earnings from period to period
Income smoothing
 76. Resources that are limited in quantity are
called as CONTRIBUTOR

77. Master budget is the budget of the entire

Organisation

78. The quality of being honest and having strong principles that you refuse to change
is Integrity

79. 79 The cost of the single process or a series of processes that simultaneously produce two or
more products of significant value are;
Joint costs
 80. Which statement shows the flow of cash and cash equivalents during the financial period

Cash flow statements

81. Under Abs costing which of the following fixed expenses charged to COGS

All of these ( Fixed manufacturing costs fixed admin cost and fixed selling cost)

82. analysis is used for Trend analysis

Horizontal Analysis

83. The following details relate to a particular co. total cost centre oH are 200000, for machining
Deptt and Rs. 150000 for assembly dept, machine hrs used in machinery are 10000hrs, and in
assembly 5000hrs labour hrs used in machinery are 4000 and in assembly 12000, the most
appropriate rate to be used for machinery deptt. Is

15

84. A VCP analysis is a tool to show the relationship between various ingredients of profit planning
namely

All of these.

85. When break even point is 2000 units and SP is 14 and VC is 8, what is the fixed cost

12000 ( FC/Sp-Vc)

86. Annual requirement 100000 units, unit price 5 order cost 20 per order, carrying cost 1 per unit
and lead time is 2 weeks the EOQ would be

2000( Square root of 2AB/C where A is requirement, B is order cost and C is carrying cost)

87. The following costs are irrelevant to Special order that will allow the Organisation to utilise some
of its idle capacity:

Unavoidable Fixed OH
 88. R&D and Advertising expenses in the P &L statement are

Cost of sales
 89. A balance sheet of the company shows equity 100000 and financial assests 30 lakhs the NOA at
the balance sheet date was
70 lakhs

90. is the traditional method of income determination which includes all

manufacturing costs i.e and fixed expenses
ABSORPTION COSTING

91. Cash receipt received from the sales fixed assets are registered under the haed
of Investing activities

92. are the expenses related to business activity but are disproportionate selling in amount
Operating Expenses

93. Opportunity cost represents the forgone by not choosing the second best alternative in favor of
the best one :
A. Loss
Benefit
Both
none of the above

94. Fixed cost is a cost

Which do not change in total during a given period despite changes in output

95. The accounting statement of cash flows reports a firms cash flow segregated into
what categorical order

Operating,investing and financing

96. Break even point is computed on the basis of relationship between Fixed cost and
 Contribution Margin.

Q. The ABC system is a widely used classification technique to identify various item of inventory for purpose
of inventory control

HIGH IN VOLUME

MOST COSTLY AND/OR SLOWEST

FAST - TURNING

ALL OF THESE

Interest received, dividend received are an example of

Other operating income

.
 97. Compute contribution if sales is 5,00,000 fixed cost is 2,00,000 and variable cost is 2,00,000

3,00,000

98. One of the following is not included in the costing and control of factory Overheads
No allocation of Overheads

99. The tax expense statement of Profit and Loss account is Rs. 4000000 current tax liability at the
beginning and end of the year is 2lacs and 1lac respectively. Cash outflow on account of income
tax payment was:
A.3900000

100. is a proxy for pretax cash operating margin

EBITDA

101.The main operations related expenses of a business are termed as

Operating expenses

102.If rent of factory is 10000 per month and a machine occupies 1/4th space of factory
calculate machine hour rate. If machine works for 1000 hours in a year. Calculate MHR
Rs. 30/hour

103.Companies earn interest from investments and therefore for them interest income is not
revenue
Non-Financial

104.Profit and Loss from discontinuing operations and other comprehensive income are not
included in the profit and loss for computing
NOPAT ( Net Operating Profit after Tax)

105.The purchase of Jan feb march is rs 10000, 12000, 15000. Payment to supplier is done 50% in
the month of purchase and 50% in the next month. Calculate the cash payment for the month
of feb
11000
 106.Patents are categorised as under:

Intangible asset

107. Revaluation gain is included in

Other comprehensive income

108.Financial assistance to companies which invest in pollution control equipment is an

example of
Govt grant

109.The form of balance sheet is

Horizontal or Vertical

110.All costs that affect a decision are called

Relevant costs.

111.SEBI requires the non-finance co to present cash flow using

Indirect method

112.Which of the following equation represents break even point

Contribution = Fixed cost

113.Cost of factory lighting is an example of

Indirect cost

114.Fixed costs are fixed for a relevant range of volume for a given
All of these
 115.The underlying difference between Abs costing and Variable costing is the treatment of
Fixed Manufacturing cost

116. For a given info on shine Ltd answer the question

Cost of Machine 200000

Estimated life 10yrs
Scrap value 6000
Factory ops hrs in week 48

Machinery break down 15%

Electricity used by machinery is 10 units/h and 60p /unit Machine Hr rate=

Calculate depreciation

19400

1. Calculate electricity consumption rate per hour ?

Rs 6 per hour

Rs 10 per hour

Rs 60 paise per hour

Rs 60 per hour

2. Calculate the effective machine hours worked in a year ?

2496 hours

374 hours

2122 hours

576 hours

3. calculate machine hour rate

Rs 14 per hour

Rs 11.61 per hour

Rs 12.60 per hour

Rs 18 per hour

4. calculate deprecation rate per hour.

Rs 9.43 per hour

Rs 5.61 per hour

Rs 6.60 per hour

Rs 8.01 per hour

117. The direct method and indirect method of presenting cash flow statement the force only in respect of presenting
cash flow from

Non- operating

Direct

Operating

Indirect
 116.Which break even point is 2000 units. Selling price per unit is Rs. 14 and variable cost is Rs. 8
find out fixed cost
Rs 12000

117.For ABC Limited annual rent of factory is 12,0000 and units produced in the current year at
1,0000
s2 LACS

118.The distribution of common cost among user departments is known as

Apportionment of Cost

119.In product mix decision. Most important factor to be considered is

contribution per unit of a scarce resource used to make the product

120.A asset is classified as asset if its value is not determinable in a fixed amount of cash Non-
monetary

121. is the firm ability to arrange cash in short term to meet its short term obligations where as
is its long term visibility and ability to honour long term financial commitments Liquidity.
Solvency option C

122.Furniture Ltd. produces multiple types of chairs. It uses activity-based costing and has the
following activity cost pools, estimated overhead cost for each pool and related cost driver: a)
Handling material Rs 240,000 for which cost driver is number of parts, total parts are 6000 b)
Processing purchase orders Rs 720,000 for which cost driver is number of purchase orders, total
purchase orders placed in a year are 12000. If number of purchase orders and number of parts for
the Manager chair are 2000 and 2000 respectively then calculate the overheads allocated to
Manager chairs.
Rs 80000
Rs 120000
Rs 480000
Rs 200000 - Ans (shared in the other group)
 123.Printers limited uses activity based costing for its products which includes laser printers and ink
jet printers. The total estimated overhead cost for the
7,20,000

As per flexible budget, sales is Rs 5,00,000 CoGS is Rs 3,00,000 and 20% of which is fixed. Calculate at
80% capacity utilization, considering that current utilization of capacity is 60% ::

Rs 320000

Rs 380000

Rs 400000

Rs 500000

Furniture Ltd. produces multiple types of chairs. It uses activity-based costing and has the following activity
cost pools, estimated overhead cost for each pool and related cost driver: a) Handling material Rs 240,000 for
which cost driver is number of parts, total parts are 6000 b) Processing purchase orders Rs 720,000 for which
cost driver is number of purchase orders, total purchase orders placed in a year are 12000. If number of
purchase orders and number of parts for the Manager chair are 3000 and 3000 respectively then calculate the
overheads allocated to

A 120000

B 180000

C 300000

D 960000

P
 124.The earnings management mechanics in which the management takes as many write-
offs as possible in a period of markedly poor performance is called--------
Liquidity Smoothening

125. Tibu Company

Question 60000

126.For Torque Ltd the sales income from

1,30,000 0.33

127.Buy back of shares is an

of fund – INVESTMENT

128.A system assigns indirect costs or products in two stages: first, the accumulated cost
are allocated to production departments, second, the accumulated cost
centres Traditional costing systems

129.According to the critics of the professional accounting rules, conflict of interest is

built into the accounting system because the accounting firm is working

For the company whose accounts it is auditing

130.In process further or sell now decisions , the decisions should be taken based on …..

Incremental revenue and incremental cost

131.The part of cost of joint products that can be attributed exclusively and wholly to
a particular product, process, division or department is known as…..

Seperable
In cash flows, when a firm invests in fixed assets and short-term financial investments results in

Select one:

a. Increased Liabilities

b. Decreased Cash

c. Increased Equity

d. Increased cash

It is a part of business analysis.

Select one:

a. Credit details analysis

b. Financial statement analysis

c. Financial accounting

d. Bank statement analysis

For a non-finance entity, interest and dividend income are classifed as ................

Select one:

a. Government grant

b. Other operating income

c. Other income

d. Operating income

All the assets that an entity controls are recognised in the ................

Select one:

a. Accounting book

b. Balance sheet

c. Pro

t & loss statement

d. Financial statement

Cash flow example from an investing activity is

Select one:

a. Sale of investment by non-financial enterprise

b. Repayment of long-term loan

c. Purchase of raw materials for cash

d. Issue of debenture

The terms ‘................’ is used in the context of PP&E and the term '................' is used in the context of
intangible assets.

Select one:

a. Amortisation, Depreciation

b. Amortisation, Depletion

c. Depreciation, Amortisation

d. Depreciation, Depletion

................ reduces the opportunity for window dressing by controlling accounting policy.

Select one:

a. GDP

b. GAAP

c. Equity

d. Company Law

A firm that issues stocks and bonds to raise funds results in

Select one:

a. Increases cash

b. Decreases cash

c. Increases equity

d. Increases liabilities

Revenue is categorized as ........

Select one:

a. Earnings

b. Other income

c. Profit

d. Operating Income

Financial assistance to companies which invest in pollution control equipment is an example of

................

Select one:

a. Private Fund

b. Government donation

c. Government grant
d. NGO Fund

In the Balance sheet of a firm, the debt equity ratio is 2:1. The amount of long term sources is `12 lac.
What is the amount of tangible net worth of the firm?

Select one:

a. ` 2 lac

b. `12 lac

c. ` 4 lac.

d. `8 lac

Managing it through accounting manipulations is known as earnings management.

Select one:

a. Accounting

b. Earnings

c. Accrual management

d. Tax liability

If members of the auditing profession breach the trust that investors and other stakeholders place on
the profession and misreport on the true and fairness of financial statements due to negligence or
otherwise, the smooth functioning and growth of the capital market

Select one:

a. Will not be affected at all

b. Will not be affected

c. Will be affected positively

d. Will get affected adversely

EBIT= EBITDA- ................

Select one:

a. Depreciation and Amortisation

b. Profit

c. Depreciation

d. Amortisation

An asset is a

Select one:
a. Source of fund

b. Inflow of funds

c. None of the above

d. Use of fund

Equity is classiffed into...... and .........

Select one:

a. Equity capital, other equity

b. Total equity, equity share

c. Equity shares, total equity

d. Equity capital, equity shares

Statement of cash flows includes

Select one:

a. All of the above

b. Financing activities

c. Operating activities

d. Investing activities

It applies values in its conduct with all the stakeholders, including those with whom it has no
commercial dealing.

Select one:

a. Ethical business

b. Responsible business

c. Professional business

d. None of the above

The expenses in Statement of Profit and Loss are classified as per their________

Select one:

a. Nature

b. Function

c. Variable-Fixed

d. Finacial-Non Financial

Total comprehensive income has ................ components

Select one:
a. Six

b. Five

c. Two

d. Three

While analysing ...... both investors in equity shares and lenders evaluate downside risks.

Select one:

a. Credit statement

b. Liabilities

c. Assets

d. Financial statement

An accountant who is employed with a company and is a member of a project team must have the
knowledge of the product and the application issues in applying...........in the industry.

Select one:

a. Guidelines of confidentiality

b. Guidelines for CFO

c. accounting guidelines

d. IndAS

Which of these are unique features of the accounting profession

Select one:

a. Do not share confidential information

b. Form professional judgements

c. 1&3

d. Do not necessarily serve public interest

Financial statements, including consolidated financial statements should be approved

by............................

Select one:

a. Members

b. Board of directors

c. Chairman

d. CEO

Authorised capital of a company is `5 lac,40% of it is paid up. Loss incurred during the year is
`50,000.Accumulated loss carried from last year is `2 lac. The company has a Tangible Net Worth of

Select one:
a. `1 lac

b. (–) `50,000

c. Nil

d. `2.50 lac

................ Facilitates comparing performance of a company with peers by ensuring uniformity in

accounting policy being adopted by all the

Companies in the same industry.

Select one:

a. Accounting ledger

b. Balance sheet

c. GDP

d. GAAP

In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio is 3:1 but quick
ratio is 1:1.This indicates comparably

Select one:

a. Lower stock

b. High liquidity

c. Low Pro

tability

d. Higher stock

cost is the amount of benefitts foregone from the second-best alternative decision/action.

Select one:

a. Opportunity

b. Sunk

c. Direct

d. Indirect

The type of cost which changes with the change in alternative course of decision/actions whereas
irrelevant cost remains constant across all the alternative course of decision/ actions

Select one:

a. Irrelevant

b. None of these

c. Constant

d. Relevant
Zero base budgeting (ZBB) can be defined as

Select one:

a. It is a management process that provides for systematic consideration of all programs.

b. Justification of each program

c. A tool for efficient use of resources

d. All of these

The ____________ costs which would change as a result of the decision under consideration, whereas
irrelevant costs are those which would remain unaffected by the decision and therefore, only these
costs would be included in the analytical framework.

Select one:

a. Relevant costs

b. Incremental cost

c. Irrelevant costs

d. None of these

If selling price per unit increases and variable cost per unit decreases, and total fixed cost does not
change, then margin of safety (MOS) at a given level of output will

Select one:

a. Need more facts to answer

b. Remain unchanged

c. Decrease

d. Increase

The following is the basic assumption of variable costing technique

Select one:

a. Fixed costs resulting from the investment are product costs.

b. Fixed costs resulting from the investment are period costs.

c. Variable costs are period costs.

d. Fixed costs are sunk cost

Overheads include which of the following component?

Select one:

a. Indirect labour cost

b. Indirect material cost

c. All of these
d. Indirect expenses

The following is considered as product cost under variable costing.

Select one:

a. Fixed cost

b. Contingent cost

c. Direct material cost

d. Opportunity cost

It is the cost of materials which cannot be conveniently assigned to a specific physical unit of
production.

Select one:

a. None of these

b. Indirect expenses Cost

c. Indirect material cost

d. Direct material cost

There are three different types of cost behaviors which can be visualized with changes in volume or
level of activity:

Select one:

a. All of these

b. Mixed costs

c. Variable costs

d. Fixed costs

If the Rent of building os 12000 and there are two production departments A & B. Department A uses
one-third area of building and department B uses two-third area. How much overhead cost must be
apportioned to Department A

Select one:

a. 4000

b. 6000

c. 12000

d. 8000

A type of costing system in which only variable costs are recognised as product costs is called as

Select one:

a. Variable
b. Fixed

c. Invariable

d. None of these

cost concept which is relevant to the short-term decision making is the

Select one:

a. Sunk cost

b. Opportunity costs

c. None of these

d. Committed cost

While analysing ...... both investors in equity shares and lenders evaluate downside risks.

Select one:

a. Financial statement

b. Credit statement

c. Liabilities

d. Assets

Entities estimate the transaction price at contract inception which is important for allocating the
................ to different performance obligations in a single contract.

Select one:

a. Performance obligation

b. Revenue

c. Transaction price

d. Warranties

Indian companies present balance sheet in the format prescribed in ................ of the Companies Act,
2013

Select one:

a. Schedule III

b. Schedule II

c. Schedule V

d. Schedule IV

A firm that issues stocks and bonds to raise funds results in

Select one:

a. Increases equity
b. Increases cash

c. Increases liabilities

d. Decreases cash

Preference Dividend is to be treated as part of ______

Select one:

a. Operating Expense

b. Capital Expense

c. Financial Expense

d. Cash Expense

Statement of cash flows includes

Select one:

a. Investing activities

b. All of the above

c. Financing activities

d. Operating activities

The expenses in Statement of Profit and Loss are classifed as per their________

Select one:

a. Finacial-Non Financial

b. Nature

c. Variable-Fixed

d. Function

ROIC stands for

Select one:

a. Return of Investing company

b. Reserve of Investing company

c. Reserve of invested capital

d. Return on invested capital

It applies values in its conduct with all the stakeholders, including those with whom it has no
commercial dealing.

Select one:

a. Ethical business
b. Responsible business

c. Professional business

d. None of the above

Authorised capital of a company is `5 lac,40% of it is paid up. Loss incurred during the year is
`50,000.Accumulated loss carried from last year is `2 lac. The company has a Tangible Net Worth of

Select one:

a. `2.50 lac

b. `1 lac

c. (–) `50,000

d. Nil

For a non-finance entity, interest and dividend income are classifed as ................

Select one:

a. Operating income

b. Other operating income

c. Other income

d. Government grant

Net profit is profit after ................ and tax expense.

Select one:

a. Sales

b. Purchase

c. Non-operating

d. Interest

A company having one or more subsidiary companies are required to publish ................

Select one:

a. Cash flow statements

b. Consolidated Financial statement

c. Financial statement

d. Statement of profit & loss

It is a part of business analysis.

Select one:

a. Financial statement analysis

b. Bank statement analysis

c. Credit details analysis

d. Financial accounting

If members of the auditing profession breach the trust that investors and other stakeholders place on
the profession and misreport on the true and fairness of financial statements due to negligence or
otherwise, the smooth functioning and growth of the capital market

Select one:

a. Will not be affected

b. Will be affected positively

c. Will get affected adversely

d. Will not be affected at all

Directors’ Responsibility Statement is a component of ..........................

Select one:

a. Auditor's report

b. Periodical report

c. Board of directors’ report

d. Technical report

For a non-finance entity, interest and dividend income are classified as ................

Select one:

a. Operating income

b. Other operating income

c. Other income

d. Government grant

It is a part of business analysis.

Select one:

a. Financial statement analysis

b. Bank statement analysis

c. Credit details analysis

d. Financial accounting

Net profit is profit after ................ and tax expense.

Select one:

a. Sales

b. Purchase

c. Non-operating

d. Interest

Cash flow example from an investing activity is

Select one:

a. Repayment of long-term loan

b. Issue of debenture

c. Sale of investment by non-financial enterprise

d. Purchase of raw materials for cash In the Balance sheet of a firm, the debt equity ratio is 2:1. The
amount of long term sources is `12 lac.What is the amount of tangible net worth of the firm?

Select one:

a. `12 lac

b. ` 4 lac.

c. `8 lac

d. ` 2 lac

A company having one or more subsidiary companies are required to publish ................

Select one:

a. Cash

ow statements

b. Consolidated financial statement

c. Financial statement

d. Statement of profit & loss

measures the change in equity during the current period other than changes from transactions with
equity shareholders.

Select one:

a. Profit/Loss

b. Revenue
c. Capital

d. CoGS

All the assets that an entity controls are recognised in the ................

Select one:

a. Balance sheet

b. Accounting book

c. Financial statement

d. Profit & loss statement

Any economic resource that the entity uses to carry out its operations is an ................ in the context
of financial accounting.

Select one:

a. Debt

b. Liability

c. Loss

d. Asset

Debt Equity Ratio is 3:1, the amount of total assets `20 lac, current ratio is 1.5:1 and owned funds `3
lac. What is the amount of current

asset?

Select one:

a. none of the above

b. `12 lac

c. `5 lac

d. `3 lac

The statement of only parent

rm without including the subsidiary statements are known as_____

Select one:

a. Standalone Financial statement

b. Non Consolidated Financial Statements

c. Consolidate Financial Statement

d. Individual Financial Statement

Identifying ............. is the key to recognising revenue correctly.

Select one:

a. Operating income

b. Transaction price

c. Value of money

d. Performance obligations

Manoj is a professional accountant and leading a group, which cheats nave villagers through a Ponzi
scheme. She is arrested by the enforcement authority along with other members of the group. He has
violated the principle of ......

Select one:

a. Con

Dentiality

b. Professional behaviour

c. Dilemma

d. Self-interest threat

Equity is classified into...... and.........

Select one:

a. Equity capital, other equity

b. Equity capital, equity shares

c. Total equity, equity share

d. Equity shares, total equity

While analysing ...... both investors in equity shares and lenders evaluate downside risks.

Select one:

a. Financial statement

b. Credit statement

c. Liabilities

d. Assets

Entities estimate the transaction price at contract inception which is important for allocating the
................ to different performance obligations in a single contract.

Select one:

a. Performance obligation

b. Revenue

c. Transaction price
d. Warranties

Margin of ________ is the excess of actual sales revenue over the break-even sales revenue

Select one:

a. Hazards

b. Quality

c. None of these

d. Safety

Zeta Ltd. Manufactures the furniture and sells it without furnishing. Their material and labour cost is
Rs 2000 per unit and Rent is Rs 25000 per month. Company sells 25 units per month. Now the
management decided to do proper finishing and polishing of furniture before selling it. This will lead
to additional Rs 500 variable cost per unit and selling price can be increased by Rs 800 per unit. What
is the

relevant cost to take this decision?

Select one:

a. Rs 3000 per unit

b. Rs 2000 per unit

c. Rs 2500 per unit

d. Rs 500 per unit (this seems more correct...2000 will anyways will be incurred )

The substance from which the product is made is known as material and all the materials which
become an integral part of the finished product and which can be conveniently assigned to specific
physical units are called as

Select one:

a. Indirect Material

b. Labour

c. None of these

d. Direct material

It is a system based on activities linking spending on resources to the products/services produced or

delivered to customers.

Select one:

a. Activity based cost

b. Activity rate cost

c. Activity cost driver rate

d. None of these
________ costs have been incurred by a decision that was made in the past and cannot be changed
by any decision that would be made in

the future.

Select one:

a. Budgeted cost

b. Targeted cost

c. Sunk cost

d. None of these

If selling price per unit increases and variable cost per unit decreases, and total fixed cost does not
change, then margin of safety (MOS) at a given level of output will

Select one:

a. Need more facts to answer

b. Remain unchanged

c. Increase

d. Decrease

A cost result from over costing of high-volume products and under costing of low-volume products is

Select one:

a. None of these

b. Activity cost driver rate

c. Cost distortion

d. Traditional costing system

There are three different types of cost behaviors which can be visualized with changes in volume or
level of activity:

Select one:

a. Mixed costs

b. Fixed costs

c. All of these

d. Variable

It is the cost of materials which cannot be conveniently assigned to a specifc physical unit of
production.

Select one:

a. Indirect material cost

b. Direct material cost

c. None of these

d. Indirect expenses Cost

Incremental or differential costs are useful in planning and decision-making and provide a device for
testing the proftability of increased output, and give a better measure than the

Select one:

a. Additional cost

b. Average Cost

c. None of these

d. Sunk Cost

The Pearl Merchandise Company has budgeted Rs 40,000 in sales for the month of December. The
company’s cost of goods sold is 30% of sales. If the company has budgeted to purchase Rs 18,000 in
merchandise during December, then the budgeted change in inventory levels over the month of
December is:

Select one:

a. Rs 22,000 Decrease

b. Rs 15,000 Increase

c. Rs 10,000 Increase

d. Rs 6,000 Decrease

A margin is the excess of unit sale price over unit variable cost.

Select one:

a. Contribution

b. None of these

c. Situational

d. Cost

The Planning Process includes:

Select one:

a. Objectives

b. All of these

c. Strategies

d. Goals

The cost that has been incurred in the past _____

Select one:

a. Indirect
b. Sunk

c. None of these

d. Direct

The following is considered as product cost under variable costing.

Select one:

a. Fixed cost

b. Opportunity cost

c. Direct material cost

d. Contingent cost

If fixed cost is Rs 5000 and units produced in a year are 1000, then how much fixed cost will be
charged to product in case of variable costing?

Select one:

a. Rs 60

b. Rs 5000

c. Rs 5

d. Rs 0

The monetary benefits that would accrue from taking the alternative course are sacrificed and these
benefits, if measurable, should be added to the costs of the

Select one:

a. Money

b. All of these

c. Decision

d. Time

Activity based costing is primarily used for proper absorption of _______ to product

Select one:

a. Material cost

b. All of these

c. Overhead Cost

d. Labour Cost

A type of costing system in which only variable costs are recognised as product costs is called as

Select one:

a. Fixed

b. Variable

c. Invariable
d. None of these

The costing indicates that the manufacturing fixed overheads are inventoriable costs; they are the
product costs and must be matched against the revenue of the year in which sales are made is

Select one:

a. Absorption cost

b. Variable cost

c. None of these

d. Fixed cost

If the total inspection cost is Rs 10 lacs and number of inspections done during the year are 10000,
what will be the overhead cost for a product which requires 5 inspections

Select one:

a. 20

b. 100

c. 500

d. 10000

The contribution margin ratio is 25% for Crowne Company and the break-even point in sales is Rs
200,000. If Crowne Company’s target operating proft is Rs 60,000, sales would have to be:

Select one:

a. Rs 260,000

b. Rs 440000

c. Rs 280000

d. Rs 240000

Direct Human efforts, both physical and mental, used for conversion of materials into finished
products is

Select one:

a. Labour

b. None of these

c. Production

d. Work

If the Rent of building os 12000 and there are two production departments A & B. Department A uses
one-third area of building and department B uses two-third area. How much overhead cost must be
apportioned to Department A

Select one:

a. 12000
b. 6000

c. 4000

d. 8000

No. of Inspections is an example of which type of activity cost driver

Select one:

a. None of these

b. Transaction

c. Intensity

d. Duration

The ____________ costs which would change as a result of the decision under consideration, whereas
irrelevant costs are those which would remain unaffected by the decision and therefore, only these
costs would be included in the analytical framework.

Select one:

a. Incremental cost

b. Relevant costs

c. Irrelevant costs

d. None of these

Indirect Labour Cost cannot be conveniently traced to a specifc unit of product /output and includes

Select one:

a. Wages of storekeepers

b. Foremen, time-keepers

c. Directors’ and salesmen salary

d. All of these

Which of the following is feature of Zero base budgeting?

Select one:

a. Individual units are linked to organizational targets

b. All of these

c. Concentration on justification of the activity

d. Based on cost-benefits

A _______ break-even point is total cash fixed cost divided by contribution margin per unit.
Select one:

a. Cash

b. Profit

c. None of these

d. Loss

Avoidable costs are relevant costs when particular decision alternatives are

Select one:

a. None of these

b. Inexpensive

c. Compared

d. Expensive

The Planning Process includes:

Select one:

a. Goals

b. Strategies

c. All of these

d. Objectives

At a break-even point of 400 units, variable costs were Rs 400 and fixed costs were Rs 200. What will
the 401st unit sold contribution to operating profits before income taxes is

Select one:

a. Rs 1.00

b. Rs 2.00

c. Rs 0.50

d. Rs 1.50

Operating budgets relate to the physical activities or operations of a firm such as sales, production,
purchasing, debtors collection and creditors payment schedules and in specific terms, an operating
budget has the following components:

Select one:

a. Purchase budget

b. Sales budget

c. All of these
d. Production budget

If the total inspection cost is Rs 10 lacs and number of inspections done during the year are 10000,
what will be the overhead cost for a product which requires 5 inspections

Select one:

a. 100

b. 20

c. 10000

d. 500

Direct Human efforts, both physical and mental, used for conversion of materials into finished
products is

Select one:

a. None of these

b. Work

c. Production

d. Labour

A cost-profit analysis shows the relationship among the various ingredients of profit planning, namely,
unit sale price, variable cost, sales volume, sales mix and fixed cost is

Select one:

a. Cost-Weight-Profit Analysis

b. Quantity-Volume-Profit Analysis

c. Cost-Volume-Profit Analysis

d. None of these

The following is considered relevant cost under variable costing.

Select one:

a. Direct expense

b. All of these

c. Direct labour cost

d. Direct material cost

Margin of ________ is the excess of actual sales revenue over the break-even sales revenue

Select one:

a. Safety

b. Hazards
c. None of these

d. Quality

________ costs have been incurred by a decision that was made in the past and cannot be changed
by any decision that would be made in

the future.

Select one:

a. Targeted cost

b. None of these

c. Budgeted cost

d. Sunk cost

Financial budgets are concerned with expected cash receipts or disbursements, financial position and
results of operations and in other words, a financial budget has the following components:

Select one:

a. Cash budget

b. Budgeted income statement

c. All of these

d. Budgeted statement of retained earnings

A _______ break-even point is total cash fixed cost divided by contribution margin per unit.

Select one:

a. Loss

b. Profit

c. None of these

d. Cash

If the total inspection cost is Rs 10 lacs and number of inspections done during the year are 10000,
what will be the overhead cost for a product which requires 5 inspections

Select one:

a. 500

b. 20

c. 100

d. 10000
Elements of cost includes

Select one:

a. Direct labour

b. Overheads

c. Direct material

d. All of these

Cost which can be identified with goods produced or purchased for resale is named as

Select one:

a. Unexpired Cost

b. Expired Cost

c. Product Cost

d. Period Cost

ABC system is a widely used classification technique, should exercise the maximum control
on items of inventory data

Most costly or slowest turning

P/V ratio = (Change in profit / Change in sales) x 100 = (9000/30000) x 100 = 30%

Fixed cost = (Sales x P/V ratio) – Profit = (270,000 x 0.3) – 6,000 = `75000

Break-even point = Fixed cost / PV ratio = 75,000 / 30% = `2,50,000

FIXED COSTS ÷ (SALES PRICE PER UNIT – VARIABLE COSTS PER UNIT)

Margin of safety at a profit of `24000 = Profit/ P.V ratio = 24000/30% = `80000

 Calculate profit under variable costing technique, when number of units

produced is 1,00,000 units, selling price is Rs 10 unit, variable cost is Rs 6
per unit and fixed costs are Rs 2,00,000 :: Rs 2,00,00

 Cash flow arising from the purchase and sale of dealing or trading securities
are classified as for a brokerage firm :: Operating Actiivities

 is an example of non-current assests :: Property, Plant & Equipment

 An asset is classified as a __ asset if its value is not determinable in fixed
amount of cash :: Non-monetary

 A current asset that can be transferred into cash within three months is
known as :: Cash Equivalent

 Financial Leverage (FLEV) of a company with __ cannont be calculated ::
Negative Net worth

 Which of the following items would be subtracted from net income when
using the indirect method of calculating cash flows provided by operating
activities :: Gain on sale of land

 Code of Ethics for accounting professional is based on: Integrity,
Objectivity, Confidentiality

 The part of cost of joint products that can be attributed exclusively and
wholly to a particular product, process, division or department is known as
:: Seperable

 Many manufacturers make more than one type of product and the relative
proportion of each product sold in the aggregate sales is known as the ::

The process further or sell now decision, the decision should be taken based on
__ ? :: Incremental Revenue & Incremental Cost
 refers to the ability to direct the use of, and obtain substantially all of the
remaining benefits from the asset :: Control of an asset

 Which of the following is an irrelevant cost :: Sunk Cost

 When Corporations seek to hide their true financial situation, the pressure
to engage in ___ bookkeeping technique falls on the accountant :: Unethical
and Illegal

 Earing Per Share (EPS) is calculated based on …….. :: Net Profit

 The Cost Allocation process does not comprise of one of the basic activities
which is :: Rationalizing of the Activities

 Reorganise balance sheet of a company shows, equity 100 lakhs and net
financial assets of 30 lakhs. The net operating asset (also called invested
capital of the balance sheet was??

 Building is an example of :: Non-Current Asset
 ___ are the only self-generated intangible to be recognized in financial
statements by GAAP :: Goodwill

 Fixed costs caused by purchase of capacity producing assets such as plant
and equipment are called as :: Committed Cost

 Construction Ltd. Plans to discontinue its interior decoration segment. Last
year, this segment generated a contribution margin of Rs 60,000 and
incurred Rs 80,000 in fixed cost. Discontinuing the segment will allow the
company to avoid half of the fixed costs. What effect is expected to occur to
the company’s overall product :: 20,000 decrease


The overheads are absorbed into different product under activity activity costing system

Using level of activity used in producing the cost unit

 Relevant costs are costs which would change as a result of

decision

About 60 items are required everyday for a machine a fixed cost of 40 per order is incurred
for placing an order

1500

Gross profit margin is calculated by dividing gross profit by

cost of sale

Which of the following would not cause the breakeven point to change

Sales volume decrease

Under absorption costing which of the following fixed expenses are charged to cost of
goods sold

All of the above

NUMERICALS --------------

A firm requires 8000 nos of a certain component, which is bought at 60 each.

A 1000

B 900

C 800

D 400

Q. The crucial step in the C-V-P analysis is the determination of break even point which is defined at the
sales level at which--------------

The total revenue equals total costs

Q. When a department or product line is dropped, the common fixed costs which had been allocated to that
department:
A) are eliminated.

B) become variable costs.

C) are allocated to the remaining departments or product lines.

D) become sunk costs.

Q. is not charged on items included in capital work in progress

Depreciation

Porter Corporation is working on its direct labour budget for next two months. Each unit
of output requires 0.84 direct labour hours. The direct labour rate is 9.40 per direct labour
hour. The production budget calls for producing 2,100 units in June and 1,900 units in July.
If the direct labour works force is fully adjusted to the total direct labour hours needed
each----------------------------------
31,584

Q. Automobile company produced 5000 part each year that are used in one of its products
the unit cost of producing this part is variable cost------------------

20000 increase

Which of the following costs are not considered in a differential analysis for a make-or-
buy decision?

Fixed overhead that will continue if the item is purchased.

Q. for an organisation involved in construction of diverse type of housing like HIG, MIG
and------------
absorption costing
Q. The eoq model as a technique to determine the economic order quantity

All of these

Q. Costs that tend to vary in direct proportion in a one-to-one relationship to changes in

production activities
Variable cost

Q. Expense pertaining to management of business like office rent, lightning and heating,

Office and administration expenses

Q. Only fixed costs are reckoned in sale of further process type of decision-making
incrimental

Q. there is no complication of over-absorption of factory overheads or eve their….

absorption costing.

Q. The following information pertains to Tailler Co: sales 800000 variable cost…..
50000

Q : ABC ltd plans to produce and sell 4000 units (****)

Ans :0.60

Q: Tailer company sales 800000 variable cost 1600000 fixed cost 40000
Ans : 160000
Q: Sales budget is
Ans :Functional budget

Q : Inventory control minimum level indicates

Ans: lowest level of stock held

Q: P company produces three type of product A,B,C

Ans :300000 , 600000 , 93000

Q: A company manufacturing a single product for which selling and cost price
Ans :5000 units

Q: Compute the machine hour rate cost of machine is 32000 estimated scrap
Ans :Rs 6

Q: If maximum reorder period is 8 weeks and reorder level is 1600 units (***)
Ans :200

Q : when preparing a production budget the quantity to be produced

Ans : sales quantity – opening stock + closing stock

Q. A company makes and sells a single product . If the fixed cost incurred in making and selling the
product increases
Ans : The break even point will increase

Q: ______________________companies earn interest from investment and therefore for them

investment income is not revenue .

Ans: Non- Financial

Q: Satin LTD disclosed the information …2019 and 2018 rent …..as 31st march 2019 is 11500.

Ans : 27700

Q : The company average cost per unit to make in house component is more than the cost to buy
from out side .

Ans : l and lV

Q:Factory over head cost refers to all indirect manufacturing cost which cannot be identified with
particular ….unit of products it includes ___________

Ans : Depreciation on factory plants and .

Q: which of the following is true for flexible budget .

Ans – I and III

Q: ABC LTD sella single product for rs 9 per unit ------sales were 180000----ABC LTD margin
safety in unit was

Ans :160000

Q: Following information is available of GGSS ltd for year ended dec 2020-----using the
absorption
Ans : 1900

Q: . The overall PV ratio of XYZ ltd is 60%. The marginal cost of the product X is estimated at
rs 50 Determine selling price of product Z?

Ans 125

Q:. ABC system is widely used classification technique to identify various items of inventory
for purpose of inventory control and recommends that a firm should exercise the maximum
control on those item of inventory that are .
Ans : Most costly and or slowest

Q:. For cash ltd estimated sales for April , may June July august are 46000 , 48000 28000
44000 . Incase 50% sales are realized in the next month and balance in the next
month……determine cash collection from sales in June and July
Ans: 14000 and 22000

Q: In marginal costing input output ratio is the ration on

Ans : Non of these

Q: Cost which can be easily identified with a department process or product are termed as :-
----
Ans : Traceable cost

Q: If the rent of the factory is rs 10000 per month and machine occupies 1/4th space of
factory

Ans : 30 per hour

Q: Tibu company expects sales of product W to be 600000……company production of

product W for the month of April should be

Ans: 60000 units

Q: Following information is available for Prime LTD for year ended march 2020 fixed cost rs
80000 ……….. during the year marginal cost . Ans : 700000
Q: Profit planning is done in the case of
Ans : CVP analysis

Q: From the following information calculate the net profit ratio . Particular sales 2520000.
Fixed assets 1440000 cost of sales 1920000, current liabilities 50000
Ans : 0.1412

Q: Product X generates a contribution a contribution to sales ratio of 30 % fixed cost directly

attributable to X amount to rs 75000 per month . Calculate the sales revenue required to
achieve a monthly profit of 15000
Ans 276000

Q: Building is an example of Non current assets

Q: If the sales price will increase which of the following are true ;
Ans : I & ll (both will increase)

Q: In the budget that gives summary of all the functional budget and projected profit and
loss account is known as___________
Ans : Master budget

Q Factory over head should be absorbed on the basis of:

Ans: Relationship to cost incurred

Q: These are the example of intangible asset .

Ans : All of these

Q: Gain from the sale of item of PP&E should be included as :

Ans : Other income.

Q: If average consumption is 15 units per days………..4days . Find out the danger level .
Ans : 60 units

Q: A budget which is prepared keeping in mind the changing level of activity is termed as

Ans : Flexible budget

Q: Bad debts and advertising expenditure are the part of

Ans : S&D over head

Q:The cost which has been created in the past and can not changed by any decision that will
be made in future .
Ans : Sunk cost

Q: A document which sets our the responsibility of the person engaged in the routine of and
the form of records required for the budgetary control known as : Ans : Budget manual
Q: Which of the following will not result in an increase in the net working capital.
Ans : II and IV

Q: _______________ is the traditional method of income determination which includes all

manufacturing cost .
Ans : Absorption cost.

Q: what will be sale of desired profit if fixed cost is rs 25000 profit is 15000 and contribution
per unit is 10 .

Ans : 4000 units .

Q: One of the following is the correct formula for gross margin under full costing
Ans : sales revenue less cost of goods

Q: According to flexibility budget can be classified into

Ans B & C both ( Purchase and flexibility Budget)

Q: Of the four cost shown below which would not be included in the cash budget of an
insurance form .
Ans : commission paid to agents

Q: Which of the following statement are true A) Financial statement are only interim report

Ans : Option B and C

Q: what is the main difference between traditional budgeting and and zero based
budgeting(ZBB)?
Ans :ZBB starts at zero plus income from last year .

Q: Bank generally sees that debt equity ratio is equal to or below

Ans : 2:1

Q: Assumption regarding the VCP graph are

Ans :All of these

Q: There are overheads which remain constant within the capacity of the organisation
Ans : Fixed overhead

Q: Lead time 5 weeks , average weekly consumption 28 units . what should be the
reordering level .
Ans: 150 units

Q: Current ratio of a concern is 1 its net working capital will be

Ans : Nil
Q: Annual requirement is 100000 units , 5 order cost 20 per order carrying cost ,1per unit
and lead time is 2 weeks . The economic order quantity will be .
Ans :2000 units
Accounting questions

The closing inventory if any under variable costing is valued at

Variable manufacturing cost per unit

Which of the following will not appear in cash budget

Depreciation of machinery

Resources that are limited in quantity are called as

Key factors

Gain on sale of investment property should be disclosed in the safety of profit

and loss as

Other income

Cost of factory lighting is an example of

Indirect cost
Based on the following information for Shine Ltd. answer the given questions

Cost of a Machine ₹ 200000

Estimated life 10 years

Scrap value ₹ 6000

Factory operation hours in a week 48

Machine breakdown time 15%

Electricity used by machinery is 10 units/hr ₹ 60 p/unit

Calculate Machine hour rate?

1) Rs. 14 per hour

2) Rs. 11.61 per hour

3) Rs. 12.60 per hour

4) Rs. 18 per hour

Ans Rs. 12.60 per hour

Q: Based on the following information for Shine Ltd. answer the given
questions

Cost of a Machine ₹ 200000

Estimated life 10 years

Scrap value ₹ 6000

Factory operation hours in a week 48

Machine breakdown time 15%

Electricity used by machinery is 10 units/hr ₹ 60 p/unit

Calculate Depreciation rate per hour?

Rs. 8.01 per hour

Rs. 9.43 per hour

Rs. 5.61 per hour

Rs. 6.60 per hour

Ans 9.43 per hour

Q: Based on the following information for Shine Ltd. answer the given
questions

Cost of a Machine ₹ 200000

Estimated life 10 years

Scrap value ₹ 6000

Factory operation hours in a week 48

Machine breakdown time 15%

Electricity used by machinery is 10 units/hr ₹ 60 p/unit

Calculate Depreciation on Machine?

Ans 19400 p.a.

Q: Based on the following information for Shine Ltd. answer the given
questions

Cost of a Machine ₹ 200000

Estimated life 10 years

Scrap value ₹ 6000

Factory operation hours in a week 48

Machine breakdown time 15%

Electricity used by machinery is 10 units/hr ₹ 60 p/unit

Calculate Electricity consumption rate per hour?

Rs. 6 per hour

Rs. 10 per hour

60 paisa per hour

Rs. 60 per hour

Ans Rs. 6 per hour

Q: Based on the following information for Shine Ltd. answer the given
questions

Cost of a Machine ₹ 200000

Estimated life 10 years

Scrap value ₹ 6000

Factory operation hours in a week 48

Machine breakdown time 15%

Electricity used by machinery is 10 units/hr ₹ 60 p/unit

Calculate the Effective machine hours worked in a year?

1). 2496 hours

2) 374 hours – – as per answer given in above questions-solutions

3) 2122 hours

4) 576 hours

Ans 2122 hours

What is Syl’s break-even point in sales dollars? (CPA adapted)

 A. $200,000.

B. $160,000.

$50,000 ($800,000 – 160,000)/$800,000 = 80%;

C.
$40,000/.80 = $50,000.

D. $40,000.

Profit and loss from discounting operations and other comprehensive income
are not included in the profit and loss for computing

EBITDA

Activity based costing ABC is a costing technique that uses a two-stage

allocation process and the two stages are

The cost are assigned to activities and then to the products based upon their
use of the activities

These are the course which would change as a result of the decision under
consideration

Relevant cost

__ attached with the balance sheet forms as a part of the financial

statements

Schedules or notes to accounts

Formula for gross margin

Sales revenue less cost of goods manufactured and sold

The model is a technique to determine the economic order quantity is based

on the restrictive assumptions namely

All of these

When corperation seek to headgear to financial situation the pressure to

engage in

Unethical and illegal

A current asset that can be transferred into cash within 3 months is known
as

Cash equivalent

One of the following is not included in costing and control of factory

overheads

Absorption of overheads
Current ratio of a concern is 1 net working capital will be

Nil

What is the main difference between traditional budgeting and zero based
budgeting

ZBB starts at zero

Which of the following would be considered a cash flow item from a financing
activity

Cash outflow to repurchase the forms own common stock

__ are the assets which the management expects to convert into cash within
12 months after the balance sheet date

Current asset

Factory overhead cost refer to all indirect manufacturing costs which cannot
be identified with a particular orders or units of product. It includes

Depreciation on factory plant and equipment’s factory building

On the basis of _ budget is classified into long-term budget short term
budget and current budget

Time

The following is true about activity based costing

Two stage cost allocation system

The underlying difference between absorption costing and variable costing

lies in the treatment of

Fixed cost

The word relevant range as used in cost accounting means the range over
which

Cost relationships are valid

Items of property plant and equipment for sale

Non-current

ABC system is a widely used classification technique, should exercise the

maximum control on items of inventory data
Most costly or slowest turning

Debt equity ratio is equal to or below

1:1

Conflict of interest is built into the accounting system because for the firm is
working

for the company whose account it is auditing

Financial statements of the company are required to be presented in the

format prescribed in _ Companies Act 2013

Schedule III

Cost of raw materials used in production is an example of

Product cost

Cash flows arung from the purchase and sale of dealing or trading securities
are classified as _ for a brokerage firm
Non operating activities

Investing activities

Financing activities

Operating activities <

Quick assets do not include

Inventories <

Cash

Book debts

Cash equivalents

A special order can be acknowledged at

Below marginal cost

Below total cost but above marginal cost <

Below fixed cost

Above total cost

In case of a bank interest income should be recognised in the statement of
profit and loss as

Revenue

Vertical analysis requires preparation of financial statement.

Common-size

Gross profit margin is calculated by dividing gross profit by

Revenue

First budget prepared is

sales budget

Excess of ASR over the break even sales value is known as

Margin of safety

It is a separate performance obligation

Service warranty
Which of the following is an irrelevant cost

Sunk cost

_ are not recognised in the balance sheet as they do not meet the definition
of a liability

Contingent liabilities

Distribution of common cost among user departments is known as

Apportionment

Allocation

If an accounting form certifies a company’s financial statements, it should

have to make the firm’s financial situation look better than it is

Motivation

The main operations related expenses of the business are termed as

Operating expenses
The point at which different individual products are separated after common
stage of production is known as

Split off point

Activity based management reffer to a set of actions that management can

take to increase profitability

All of these

Goodwill are self generated intangible assets

The following cost are irrelevant for a special order that will allow an
organisation to utilise some of its present idle capacity

Unavaoidable fixed overhead

Current assets are also known as

working capital

_ fixed cost are reckoned in sales or further process type of decision making

Non incremental
In shutdown or continue decisions factor to be considered are

Unavaoidable fixed overhead

Research and development and advertisement expenses in the profit and loss
statement are

Discretionary expenses

Cash receipt received from the sales fixed assets are registered under the
head of

Investing activities

Opportunity cost represent the _ foregone by not choosing best alternative

Benefit

Horizontal analysis requires preparation of __ financial statements

Indexed

Sunk cost _ cost

committed cost

Objectivity and Independence are important ethical values in the accounting

profession. Accountants must remain

All of these

Form of balancesheet is

horizontal or vertical

Crucial step in the cvp analysis is the determination of break even point
which is defined as the sales level at which

Total revenues equal total cost

A capacity in which the normal working hours of a machine or worker or

employee are considered is known as

theoritical capacity

BEP 2000 units

VC 8rs
Sales 14rs

Fixed cost?

Ans- 12000

A firm requires 8,000 nos. of certain component, which it bought at Rs 60

each. The cost of placing an order and following it up is 60 and the annual
storage charges work out to 10% of the cost of the item. To get maximum
benefit the firm should place order for how many units at a time?

Ans- = 2*8000*60 / 6 = 400 units

2*ordercost 10*unit 7800 /carrying

2 1lakh 20

Annual requirement is 100000 units. Unit price ` 5, order cost ` 20 per

order. Carrying cost ` 1 per unit and lead time is 2 week, The Economic
order quantity would be.

2000 units

The tax expense in the statement of profit and loss is 40,00,000. Current tax
liability at the beginning and at the end of the year was 2,00,000 and
3,00,000 respectively. Cash outflow during the year on account of income
tax payment was ___

3900000

p/v is 40% and margin of safety is 20% and sales is 20 lakh . what is break
even point

16 lakhs

Tibu Company expects sales of Product W to be 60,000 units in April, 75,000

units in May, and 70,000 units in June. The company desires that the
inventory on hand at the end of each month be equal to 40% of the next
month’s expected unit sales. Due to excessive production during March, on
March 31 there were 30,000 units of Product W in the ending inventory.
Given this information, Tibu Company’s production of Product W for the
month of April should be

60000

SEBI requires non Finance Companies to present cash flows using ___
method

Indirect

The cost allocation process comprise of one of the basic activities which is
Rationalisation of activities

Which of the following equation represents breakeven point? Ans-

Contribution=Fixed Cost

For a financial institution interest paid and interest and dividends received
are classified as cash flow

Ans- Operating

Assumptions regarding the VCP graphs are

Ans- All of these

The costs of a single process, or a series of processes that simultaneously

produce two or more products of significant sales value is

Ans- Joint cost

is not charged on items included in capital work in progress Ans-

Depreciation

companies earn interest from investments and therefore for them interest
income is not revenue

Ans- Non-financial
The term ‘financial statement’ covers

Ans- Profit & Loss Statement and Balance sheet If a company revalues its
assets, its net worth Ans- Will improve

is a proxy for pre-tax cash operating margins Ans-EBITDA

analysis is used for trend analysis Ans-Horizontal

Quick ratio is also called Ans- acid-test ratio

refers to the ability to direct the use of and obtain substantially all of the
remaining benefits from the assets.

Ans- control of an asset

In two stage system whether traditional or ABC will first allocate cost to

Ans- Departments or activities and then allocates costs to product or services

Many manufactures make more than one type of product and the relative
proportion of each product solid in the aggregate sales is known as the

Ans-sales-mix

If an accounting firms certifies a company’s financial statement, it should

have to make the firm financial situation look better than it is

Ans- no financial incentive

The overheads are absorbed into different products under activity costing
system Ans- Using departmental overhead rate

An asset is classified as a asset if its value is not determinable in a

fixed amount of cash. Ans- Non-monetary

All those costs which affect the decision are known as- Ans- Relevant costs

A capacity in which the normal working hours of a machine or worker or

employee are considered is known as ?

Ans-Practical capacity

Fixed costs are fixed for a relevant range of volume for a given

Ans- budget period

Income from ‘after sales services’ to customers should be included in

Ans-Other operating income

The Activity Based Costing (ABC) system has advantages

Ans-All of these

The following is true about activity-based costing

Ans- It is a two-stage cost allocation system that allocates costs to activities

and then to products based on their use of the activities
Current tax asset is classified as

Ans-Current asset

Interest received; dividend received are an example of

Ans-Other income

are the only self-generated intangible assets allowed to be recognized in

financial statement by GAAP

Ans-Softwares

Ethics and integrity standards are based on the following except: Ans-There
are no clear rules and responsibilities in the group.

Which report gives a review on the profitability of a business Ans-Income

statement

Costs that consist of both fixed costs and variable costs are known as

Ans- Mixed costs

It is a separate performance obligation Ans-Service warranty

The fixed manufacturing cost can be carried forward to next period as part of
inventory cost in which of the following costing system ?

Ans- Full costing

The difference between total sales and total variable costs is called as

Ans- The Contribution margin. P&L statement is also known as

Ans-All of these

The following is included in overheads:

Ans-All of these

Relevant costs are costs which would change as a result of the_ Ans-
Decision

is the traditional method of income determination which includes all

manufacturing costs i.e. variable and fixed expenses.

Ans-Absorption costing

Financial assistance to companies which invest in pollution control equipment

is an example of

Ans- Government grant

are the expenses related to business activity but are disproportionate in
amount or occur infrequently

Ans- Exceptional items

When production is less than units sold then the income under absorption
costing will be ____ in comparison to income under variable costing

Higher

Lower

Same

Difference of production and sales unit doesn’t affect profits.

Ans- Lower

When production is more than units sold then the income under absorption
costing will be ____ in comparison to income under variable costing

Ans- Higher

When a department or product line is dropped, the common fixed costs

which had been allocated to that department:

Ans- are allocated to the remaining departments or product lines

Cash flow arising from the purchase and sale of dealing or trading securities
are classified as for a brokerage firm

Ans- Operating activities

When corporations seek to hide their true financial situation, the pressure to
engage in

bookkeeping techniques falls on their accountants. Ans- Unethical & Illegal

Costs that tend to vary in direct proportion or in a one-to-one relationship to

changes in production activity sales activity or some other measure of
volume within relevant range for a given budget period are referred to as

Ans- Variable Costs

is an example of non-cash expense. Ans- Depreciation

From total income, when CoGS, Admin and Selling & Distribution expenses
are deducted resulting profit is known as

Ans-EBITDA

The basis of absorption of factory overheads is

Ans-All of these

Flexible budget estimates costs at several levels of

Ans- Activity

Flexible budgets as a tool of planning and control, are superior to fixed

budgets. The major weaknesses of fixed budgets are their inability to:

Ans- Show the potential variability of various estimates used in the

preparation of the budget

Master budget is the overall budget for the entire Ans- Organisation

The principle underlying the variable costing is that the fixed manufacturing
overheads are Ans-all of these

For an organization involved in construction of diverse type of housing like

HIG, MIG and LIG houses, which of the following costing system is
appropriate for absorptions of overheads?

Ans-Absorption costing

Which of the following would not cause the breakeven point to change? Ans-
Sales volume decreases

Buy back of shares is an ____ of fund

Ans- Investment

Notes

Cost-Volume-Profit Analysis

2. Break-even analysis assumes that over the relevant range: (CPA

adapted)

A. Total Fixed Costs are nonlinear.

B. Total Costs are unchanged.

C. Unit Variable Costs are unchanged.

D. Unit Revenues are nonlinear.

The assumption is that over the relevant range unit variable costs remain
unchanged or linear.

3. At the break-even point, the total contribution margin equals total:

(CPA adapted)

A. Variable costs.

B. Sales.

C. Selling and administrative costs.

D. Fixed costs.
This statement defines break-even (e.g., contribution margin – fixed costs =
zero).

4. On January 1, 2013, Lake increased its direct labor wage rates. All
other budgeted costs and revenues were unchanged. How did this
increase affect Lake’s budgeted break-even point

5.

and budgeted margin of safety? (CPA adapted)

A. Option A

B. Option B

C. Option C

D. Option D

Direct labor is a variable cost, so the unit contribution margin will decrease,
increasing the break-even point. Since break-even increases and sales are
unchanged, the margin of safety decreases.

5. During 2012, Thor Lab supplied hospitals with a comprehensive

diagnostic kit for $120.

At a volume of 80,000 kits, Thor had fixed costs of $1,000,000 and a profit
before income taxes of

$200,000. Due to an adverse legal decision, Thor’s 2013 liability insurance

increased by $1,200,000 over 2012. Assuming the volume and other costs
are unchanged, what should the 2013 price be if Thor is to make the same
$200,000 profit before income taxes? (CPA adapted)

A. $122.50.

B. $135.00.

C. $152.50.

D. $240.00.

2012 CM% is 12.5% ($15/$120). 2013 CM = $2,400,000 ($1,000,000 +

$200,000; 2013 CM per unit =

$2,400,000/80,000 units = $30 CM per unit; 2013 selling price per unit =
$30/.125 = $240

6.

7.

• The following information pertains to Syl :

What is Syl’s break-even point in sales dollars? (CPA adapted)

A. $200,000.

B. $160,000.
 $50,000 ($800,000 – 160,000)/$800,000 = 80%;
C.
$40,000/.80 = $50,000.

D. $40,000.

7. The following pertains to Clove Co. for the year ending December
31, 2012:

Clove’s margin of safety is: (CPA adapted)

$300,000. $1,000,000 – $700,000 =

A.
$300,000.

B. $400,000.

C. $500,000.

D. $800,000.

8.

9.

• Kator manufactures industrial components. One of its products used

as a subcomponent in auto manufacturing is KB-96. The selling
price and cost per unit data for 9,000 units of KB-96 are as follows.
During the next year, sales of KB-96 are expected to be 10,000 units. All
costs will remain the same except for fixed manufacturing overhead, which
will increase by 20%,

and material, which will increase by 10%. The selling price per unit for next
year will be $160. Based on these data, Kator Inc.’s total contribution margin
for next year will be: (CMA adapted)

A. $882,000.

B. $980,000.

C. $972,000.

$1,080,000. [($160 – 22 – 15 – 12 – 3)10,000 units] =

D.
$1,080,000.

9.

10.

• Sanfran has the following data:

How many units must Sanfran produce and sell in order to break even?

A. 8,333 units.

B. 12,500 units.

C. 15,000 units.

22,500 units. ($150,000 + 120,000)/($40 – 22 – 6) = 22,500

D.
units

.
 10.

11.

• Sanfran has the following data:

How many units must Sanfran produce and sell in order to achieve a profit of
$30,000 per month?

A. 10,000 units.

B. 8,824 units.

25,000 units. ($150,000 + 120,000 + 30,000)/($40 – 22 –

C.
6) = 25,000 units.

D. 15,000 units.

11.

12.

• Sanfran has the following data:

If Sanfran produces and sells 30,000 units, what is the margin of safety in
units?

A. 5,000 units.

B. 7,500 units. 30,000 – 22,500 = 7,500 units

C. 22,500 units.

D. 30,000 units.
 12. Acme Sales has two store locations. Store A has fixed costs of
$125,000 per month and a variable cost ratio of 60%. Store B has
fixed costs of $200,000 per month and a variable cost ratio of 30%.
What is the break-even sales volume for Store B?

A. $666,667.

B. $325,000.

C. $285,714. $200,000/(1 – .3) = $285,714.

D. Cannot determine with the information given.

13. Which of the following would not cause the break-even point to
change?

A. Sales price increases.

B. Sales volume increases.

C. Fixed cost increases.

D. Variable costs per unit decreases.

E. Product mix shifts towards the cheaper products.

Volume changes do not affect the break-

even point.
 14. If the fixed costs for a product increase and the variable costs
(as a percentage of sales dollars) increase, what will be the effect
on the contribution margin ratio and the break-even point,
respectively?

A. Option A

B. Option B

C. Option C

D. Option D

A variable cost increase will decrease

CM%; a fixed cost increase will increase
the break-even point.

15. A company’s break-even point will not be increased by:

A. an increase in the number of units produced and sold.

B. a decrease in the selling price per unit.

C. an increase in the variable cost per unit.

D. an increase in the variable cost ratio.

E. an increase in total fixed costs.

Volume changes do not affect the break-
even point.
16. A company’s break-even point will not be changed by:

A. a change in total fixed costs.

B. a change in the number of units produced and sold.

C. a change in the variable cost ratio.

D. a change in the contribution margin ratio.

E. a change in the product mix.

Volume changes do not affect the break-

even point.

17. If both the variable cost per unit and the selling price per unit
increase, the new contribution margin ratio in relation to the old
contribution margin ratio will be:

A. Lower.

B. Higher.

C. Unchanged.

D. Cannot determine with the information given.

Need to know size of increase of each.

 18.

19.

• Misa Corporation manufactures circuit boards and is in the process

of preparing next year’s The pro forma income statement for the
current year is presented below.

For the coming year, the management of Misa Corporation anticipates a 5

percent decrease in sales, a 10 percent increase in all variable costs, and a
$45,000 increase in fixed costs.

The operating profit for next year would be:

A. $477,500.

B. $492,500.

C. $552,500.

D. $831,250.

($3,500,000 × .95) – ($1,775,000 × 1.10) –

($850,000 + 45,000) = $477,500.

19. You have been provided with the following information:

If sales decrease by 10%, what level of fixed costs will maintain the current
operating profit?
A. $12,000.

B. $20,400. $36,000 × .9 – 12,000 = $20,400.

C. $21,600.

D. $24,000.

20. The difference between total sales in dollars and total variable
costs is called:

A. operating profit.

B. net profit.

C. the gross margin.

D. the contribution margin.

Contribution margin = Total sales – Total

variable costs.

21. Which of the following formulas is used to calculate the

contribution margin ratio?

A. (Sales – Fixed costs) ÷ Sales.

B. (Sales – Cost of goods sold) ÷ Sales.

C. (Sales – Variable costs) ÷ Sales.

D. (Sales – Total costs) ÷ Sales.

(Sales – Variable costs) ÷ Sales.

22. Break-even analysis assumes that:

A. total costs are constant.

B. the average fixed cost per unit is constant.

C. the average variable cost per unit is constant.

D. variable costs are nonlinear.

The average variable cost per unit is

constant.
23. If Q equals the level of output, P is the selling price per unit, V is
the variable cost per unit, and F is the fixed cost, then the break-
even point in units is:

A. Q ÷ (P-V).

B. F ÷ (P-V).

C. V ÷ (P-V).

D. F ÷ [Q(P-V)].

Unit sales to break-even = Fixed costs ÷

Unit CM or F ÷ (P-V).
24. The margin of safety percentage is computed as:
 A. Break-even sales ÷ Total sales.

B. Total sales – Break-even sales.

C. (Total sales – Break-even sales) ÷ Break-even sales.

D. (Total sales – Break-even sales) ÷ Total sales.

Margin of safety percentage = Margin of

safety in dollars ÷ Total budgeted (or
actual) sales

25. The amount by which a company’s sales can decline before

losses are incurred is called the:

A. contribution margin ratio.

B. degree of operating leverage.

C. margin of safety.

D. contribution margin.

This is a basic description for margin of safety.

26.

27.

• Mancuso Corporation has provided its contribution format income

statement for The company produces and sells a single product.
If the company sells 3,100 units, its total contribution margin should be
closest to:

A. $27,045.

B. $181,000.

C. $162,400.

D. $173,600.

See calculation below.

* Sales $269,700 ÷ 2,900 = $93.00 per unit Variable costs $107,300

÷ 2,900 = $37.00 per unit Sales 3,100 units × $93 per unit =
$288,300

Variable costs (Manufacturing) 3,100

units × $37 per unit = $114,700

27. Which of the following statements is (are) true regarding cost

behaviors?
o In general, accounting records accumulate cost information
according to its
o Cost behaviors are the most important consideration in
managerial decision

A. Only A is true.
 B. Only B is true.

C. Both A and B are true.

D. Neither A nor B is true.

Accounting records are by account and not by behavior.

28. Which cost estimation method does not use the company’s cost
information as its primary source of information about the
relationship between total costs and activity levels?

A. Scattergraph.

B. High-low.

C. Account analysis.

D. Regression analysis.

E. Engineering estimates.

The engineering method uses time and motion studies (estimates), rather
than cost estimates.

29. A manager is trying to estimate the manufacturing costs of a

new product. The company makes several other products that utilize
some of the same manufacturing procedures as the new product.
Which cost estimation method would be the best method to
determine the total cost of manufacturing the new product?

A. Engineering estimates.

B. Regression analysis.

C. Account analysis.

D. Scattergraph.
 E. High-low.

A new product has no previous history so there is no past data regression or

account analysis ability.

30. Engineering cost estimates are usually based on operating

conditions that are considered:

A. optimal.

B. practical.

C. attainable.

D. historical.

E. realistic.

Engineering estimates are often based on optimal conditions. This a difficulty

in selecting this technique.

31. Which of the following costs would most likely be classified as

variable, assuming the account analysis method is used to
determine cost behaviors?

A. Indirect materials.

B. Supervisory salaries.

C. Equipment maintenance.

D. Annual Christmas party.

E. Building occupancy costs.

Only indirect materials would have variable behavior. All the other items
have fixed behavior.
 32. In the cost equation TC = F + VX, X is best described as the:

A. costs that do not vary with changes in the activity level.

B. costs that do vary with changes in the activity level.

C. total cost estimate at a particular activity level.

D. activity level used to estimate the total cost.

For example, this would be the volume in number of units of output, by

definition

33. In the cost equation TC = F + VX, V is best described as the:

A. costs that do not vary with changes in the activity level.

B. intercept of the cost equation.

C. slope of the cost equation.

D. activity level used to estimate the dependent variable.

This is the variable cost per unit which makes up the slope of the variable
cost curve.

34. Which of the following cost estimation methods finds the fixed
portion of a mixed cost before calculating the variable portion?

A. Scattergraph.

B. High-low method.

C. Account analysis.

D. Linear regression.
 E. Engineering approach.

All of the other methods estimate the variable portion either first or
simultaneously with fixed costs.

35. The term “relevant range” as used in cost accounting means the
range over which:

A. relevant costs are incurred.

B. costs may fluctuate.

C. cost relationships are valid.

D. cost data is available.

This is the level of activity for which a cost estimate may be valid.

36. The of the following cost estimation methods finds the variable
portion of a mixed cost before calculating the fixed portion?

A. Scattergraph.

B. High-low method.

C. Account analysis.

D. Linear regression.

E. Engineering approach.

Account analysis finds the fixed first; regression and engineering find fixed
and variable simultaneously.

37. A disadvantage of the high-low method of cost analysis is that it:

 A. typically results in a totally inaccurate cost formula.

B. is too time consuming to apply.

uses only two data points, which may not be representative of

C.
normal conditions.

D. relies totally on the judgment of the person performing the cost analysis.

The estimates are not always inaccurate, it is fast to apply, and it doesn’t
rely solely on judgment.

38. In the standard regression equation of y = a + bx, the letter b is

best described as the:

A. independent variable.

B. dependent variable.

C. slope of the equation.

D. intercept of the equation.

This a basic definition of the term of the formula.

38 .In the standard regression equation of y = a + bx, the letter a is best

described as the:

A. independent variable.

B. dependent variable.

C. slope of the equation.

D. intercept of the equation.

This a basic definition of the term of the formula.

 39. In the standard regression equation of y = a + bx, the letter y is
best described as the:

A. independent variable.

B. dependent variable.

C. slope of the equation.

D. intercept of the equation.

This a basic definition of the term of the formula.

40. Given actual amounts of a semivariable cost for various levels of

output, the method that will always give the most reliable measure
of the fixed and variable components is the:

A. high-low method.

B. linear regression method.

C. scattergraph method.

D. account analysis method.

Linear regression will always give the best line, high-low may give the best
line, scattergraph and account analysis rely on judgment.

41. Which of the following statements regarding regression analysis

is (are) true?
o One way to control the effects of a nonlinear relationship
between total costs and activity is reduce the relevant
range.
 o The linear cost estimate tends to understate the slope of
the cost line in ranges close to

A. Only A is true.

B. Only B is true.

C. Both A and B are true.

D. Neither A nor B is true.

When capacity is approached there are more scheduling problems and

overtime may be needed, changing the variable cost.

42. Mount Company incurred a total cost of $8,600 to produce 400

units of pulp. Each unit of pulp required five (5) direct labor hours to
What is the total fixed cost if the variable cost was $1.50 per direct
labor hour?

A. $1,700.

B. $3,000.

C. $5,600.

D. $8,000.

$8,600 = FC + $1.50(400)(5); FC = $5,600

43. Given the following information, compute the total number of

units for the period:

A. 360.
 B. 432.

C. 640.

D. 840.

$132,600 = $75(units) + 12,000($2.70) + .50(12,000)($2.70) +

$36,000; Units = 640

44. The Shapely Company uses the high-low method to determine

its cost equation. The following information was gathered for the
past year:

What are the direct labor costs per machine hour?

A. $20.00.

B. $16.00.

C. $14.29.

D. $10.00.

VC per M/C Hr. = ($200,000 – 120,000)/(14,000 – 6,000) = $10.00

45. A common cost that should not be assigned to a particular

product on a segmented income statement is:
46. the product’s advertising

B. the salary of the corporation

president. X
1. direct materials
2. the product manager’s salary.
 46. Segment margin is sales minus:
47. variable
48. traceable fixed expenses.
49. variable expenses and common fixed

D. variable expenses and traceable fixed

expenses.
X

47.

48.

• Would the following costs be classified as product or period costs

under variable costing at a retail clothing store?

1. Option A
2. Option B
3. Option C

D. Option D X

Chapter 6 multiple choice questions Variable costing

1.
 2.

• Would the following costs be classified as product or period costs

under variable costing at a retail clothing store?
1. Option A
2. Option B
3. Option C

D. Option D X

2.

3.

• Fixed manufacturing overhead is included in product costs under:

1. Option A
2. Option B
3. Option C

D. Option D X

3. Which of the following are considered to be product costs under

variable costing?

1. Variable manufacturing
2. Fixed manufacturing
 • Selling and administrative

A. I. X
1. I and
2. I and
3. I, II, and

4. Which of the following are considered to be product costs under

absorption costing?

1. Variable manufacturing
2. Fixed manufacturing

• Selling and administrative

1. I, II, and
2. I and
3. I and
4.

5. Under variable costing, costs that are treated as period costs

include:
1. only fixed manufacturing
2. both variable and fixed manufacturing

C. all fixed costs. X

1. only fixed selling and administrative
 6. Selling and administrative expenses are considered to be:
1. a product cost under variable
2. a product cost under absorption
3. part of fixed manufacturing overhead under variable

D. a period cost under variable

costing. X

7. A portion of the total fixed manufacturing overhead cost incurred

during a period may:

A. be excluded from cost of goods sold

under absorption
costing.
X
1. be charged as a period cost with the remainder deferred under
variable
2. never be excluded from cost of goods sold under absorption
3. never be excluded from cost of goods sold under variable

8. Net operating income reported under absorption costing will exceed

net operating income reported under variable costing for a given
period if:
1. production equals sales for that
B. production exceeds sales for that
period. X
1. sales exceed production for that
2. the variable manufacturing overhead exceeds the fixed
manufacturing

9. If the number of units produced exceeds the number of units sold,

then net operating income under absorption costing will:
1. be equal to the net operating income under variable

B. be greater than net operating income

under variable
costing.
X
1. be equal to the net operating income under variable costing plus
total fixed manufacturing
2. be equal to the net operating income under variable costing less
total fixed manufacturing

10. Over an extended period of time in which the final ending

inventories are zero, the accumulated net operating income figures
reported under absorption costing will be:
1. greater than those reported under variable
2. less than those reported under variable costing.
C. the same as those reported under
variable
costing.
X
1. higher or lower since no generalization can be made.

11. A common cost that should not be assigned to a particular

product on a segmented income statement is:
1. the product’s advertising

B. the salary of the corporation

president. X
1. direct materials
2. the product manager’s salary.

12. Segment margin is sales minus:

1. variable
2. traceable fixed expenses.
3. variable expenses and common fixed

D. variable expenses and traceable fixed

expenses.
X
 13.

14.

• Gangwer Corporation produces a single product and has the

following cost structure:

The absorption costing unit product cost is:

A. $95 X
1. $119
2. $61
3. $56

14.

15.

• A manufacturing company that produces a single product has

provided the following data concerning its most recent month of
operations:

What is the total period cost for the month under variable costing? A.
$185,000

1. $117,600
2. $273,200
D. $302,600 X

15.

16.

• Cockriel Inc., which produces a single product, has provided the

following data for its most recent month of operations:

There were no beginning or ending inventories. The variable costing unit

product cost was:

1. $42
2. $43

C. $37 X DM + DL +
VMOH (14 +22+1= 37)
1. $48

16.

17.
 • Roy Corporation produces a single product. During July, Roy
produced 10,000 Costs incurred during the month were as follows:

Under absorption costing, any unsold units would be carried in the inventory
account at a unit product cost of:

5. $5.10

B. $4.40 X 10,000 +20,000+

5,000+ 9,000 = 44,000/ 10,000 Units =
4.40
3. $3.80
4. $3.50

17. Last year, Heidenescher Corporation’s variable costing net

operating income was $63,600 and its inventory decreased by 600
Fixed manufacturing overhead cost was $1 per unit. What was the
absorption costing net operating income last year?
18. $64,200

B. $63,000 X
1. $63,600
2. $600
 18. Sproles Inc. manufactures a variety of products. Variable costing
net operating income was $90,500 last year and its inventory
decreased by 3,500 units. Fixed manufacturing overhead cost was
$6 per unit. What was the absorption costing net operating income
last year?
19. $90,500
20. $21,000

C. $69,500 X
1. $111,500

19. Tsuchiya Corporation manufactures a variety of products. Last

year, the company’s variable costing net operating income was
$57,500. Fixed manufacturing overhead costs deferred in inventory
under absorption costing amounted to $35,400. What was the
absorption costing net operating income last year?
20. $22,100
21. $35,400
22. $57,500

D. $92,900 X

20. The ARB Company has two divisions: Electronics and DVD/Video
Sales. Electronics has traceable fixed expenses of $146,280 and the
DVD/Video Sales has traceable fixed expenses of $81,765. If ARB
Company has a total of $322,490 in fixed expenses, what are its
common fixed expenses?
A. $94,445 X
1. $322,490
2. $228,045
3. $47,223

Common fixed expenses = Total fixed expenses – Traceable fixed expenses

= $322,490 – ($146,280 + $81,765) =$94,445

21. Sugiki Corporation has two divisions: the Alpha Division and the
Delta Division. The Alpha Division has sales of $820,000, variable
expenses of $369,000, and traceable fixed expenses of $347,300.
The Delta Division has sales of $460,000, variable expenses of
$294,400, and traceable fixed expenses of $134,100. The total
amount of common fixed expenses not traceable to the individual
divisions is $97,300. What is the company’s net operating income?
22. $135,200

B. $37,900 X
1. $616,600
2. $519,300
Ch 7 MULTIPLE CHOICES ( ABC)

1. is the length of time required to produce one

product;
is the number of units that can be produced in a given
period of

a. Cycle time; velocity

b. Velocity; cycle time

c. Activity time; cycle production

d. Cycle time; activity output

e. Velocity; cycle production

2. The identification and elimination of activities that fail to add value

refers to:

a. activity selection

b. activity sharing

c. activity reduction

d. activity elimination
 3. The process of choosing among different sets of activities caused by
competing strategies refers to:

a. activity elimination

b. activity reduction

c. activity selection

d. activity sharing

4. The process of decreasing the time and resources required by an

activity is known as:

a. activity reduction

b. activity sharing

c. activity elimination

d. activity selection

5. Increasing the efficiency of necessary activities by using economies

of scale is known as:

a. activity elimination

b. activity sharing

c. activity reduction

d. activity selection

6. Setups, material handling, and inspection are all possible examples

of:
a. non-unit level overhead activities

b. unit level overhead activities

c. product diversity

d. sustainable development

e. none of these

7. is present whenever products have different consumption ratios for

different overhead

a. Volume costing

b. Activity based costing

c. Product diversity

d. Allocable costing

e. None of these

8. A ratio measures the proportion of an activity consumed by a

a. production

b. consumption

c. efficiency

d. quality

e. usage
 9. A costing system that first assigns costs to activities and then to
products is:

a. activity based costing

b. kaizen costing

c. production costing

d. volume based costing

e. unit-level costing

10. A list of activities accompanied by information that describes

each activity is an activity .

a. manifesto

b. Diary

c. Journal

d. dictionary

e. Note

11. are assigned using direct tracing and resource

a. Resources

b. Costs

c. Profits

d. Materials

e. Products
 12. is concerned with identifying the root causes of activity

a. Direct analysis

b. Activity analysis

c. Driver analysis

d. Causal analysis

e. None of these

13. Which of the following is not one of the three conditions

necessary to be classified as a discretionary activity?

a. the activity produces a change of state

b. the change of state was not achievable by preceding activities

c. the activity enables other activities to be performed

d. the activity increases efficiency

14. activities are unnecessary

a. Frivolous

b. Nonvalue-added

c. Expensive

d. Under-performing

e. none of these
 15. Using only unit-based activity drivers to assign non-unit-related
overhead costs can cause:

a. distorted product costs

b. product diversity

c. efficiency

d. activity sharing

e. none of these

16. Activity drivers can be classified as either or .

a. unit-level; non-unit-level

b. exact; inexact

c. inputs; outputs

d. right; wrong

17. In an activity dictionary, types of resources consumed is an

example of a(n)

a. activity sharing

b. Quality

c. activity attribute

d. Allocation
 18. A is derived from the interview process (or written survey).

a. work distribution matrix

b. activity explanation matrix

c. driver consumption matrix

d. value analysis matrix

e. tracing matrix

19. To calculate an activity rate, the of each activity must be

a. Value

b. expenditure level

c. processing ratio

d. practical capacity

20. Which of the following is not a possible source of customer

diversity?

a. sales support

b. order frequency

c. delivery frequency

d. geographic distance

e. Pricing
 21. All of the following are supplier-driven activities except:

a. Receiving

b. Purchasing

c. Efficiency

d. inspection of incoming components

22. Which is NOT a component of process value analysis?

a. driver analysis

b. Velocity

c. activity analysis

d. performance measurement

e. none of these

23. Complying with the filing requirements of the IRS is an example

of a:

a. recreational activity

b. discretionary activity

c. recommended activity

d. required activity
 24. Which of the following is NOT an example of a nonvalue-added
activity?

a. Inspecting

b. Scheduling

c. Moving

d. Waiting

e. Supervising

25. focuses on the relationship of activity inputs to activity

a. Quality

b. Efficiency

c. Time

d. Cycle time

e. none of these

From the following details calculate Interest Coverage Ratio:

Net profit after tax – ₹ 7,00,000
6% debentures of ₹ 20,00,000
Tax Rate 30%

Solution :

Net Profit Before Tax – Tax paid = Net Profit After Tax
x – 30/100 (x) = ₹7,00,000
x = ₹ 7,00,000 (100/70)
x = ₹ 10,00,000
Net Profit Before Tax = ₹ 10,00,000
Interest Payment = 6/100 (₹ 20,00,000) = ₹ 1,20,000
Earning Before Interest and Tax = Net Profit Before Tax + Interest Payment
= ₹ 10,00,000 + ₹ 1,20,000
= ₹11,20,000
Interest Coverage ration =Earning Before Interest and TaxInterest
Expense =Earning Before Interest and TaxInterest Expense
Interest Coverage Ratio =₹11,20,000/₹1,20,000=₹11,20,000/₹1,20,000
Interest Coverage Ratio =9.33 times.