Professional Documents
Culture Documents
________ Accounting assists the management in establishing the plans to attain the
Management
economic objectives and take proper decisions for the attainment of its objectives.
________ Accounting is the process of analysis and interpretation of financial data
Management
collected with help of financial accounting & cost accounting
________ and ________ are examples of element wise classification ofoverhead
Idirect material indirect labour
costs
________ and ________ are examples of semi- variable overheads. Maintenance cost electricity
________ and ________ are non monetary incentives Safety services education facility
________ is any documentary evidence to justify that a particular transaction has
Voucher
taken place.
________ Legal charges and ________ are the accounts which are shown on the
Like office rent, Audit fees
debit side of Profit & Loss Account
________ of Trial Balance generally ensures ________ accuracy of the process of
Talling arithmetical
ledger posting .
________ system of wage payment is a combination of Halsey system and Gantt
Diemer
system.
________ variance arises when the mix of materials used in the production is
Materials mix
different from the predetermined standard mix of operation.
________ variance represents the over or under utilisation of pland and machinery. Capacity
__________ Accounting becomes a source of information for Management
Financial
Accounting.
__________ Accounting is primarily protects the interest of the outsiders dealing
Financial
with the organization various capacities like investors, suppliers, customers etc.
________account can be defined as the record of all the transactions pertaining to
a person, asset, liability income or expenditure which have taken place in a Ledger
specified period.
________is the summary of all the balances in all the accounts listed in ledger
Trial Balance
account of an organization at any given point of time.
200 units of material were purchased from X @ Rs.5/- per unit and 300 units were tion follows FIFO system of pricing of issues and the
purchased from Y @ Rs.6/- per unit. The above purchases
4.Under the differential time rate method the wages are paid at Rs. 1.50 per hour
101% to 125 % 80% to90%
between ________ efficiency and Rs.1.25 per hour between ________ efficiency
A ________ inventory turnover period indicates efficient utilisation of material. Low
A budget manual is a document setting out the ________ of the persons and
Responsibilities Forms and procedures
________ required for the budget control.
Management Accounting 2
Duties and responsibilities of various executives ,
A Budget Manual may contain the following particulars Functions and duties of Budget Officer , Scope of the
Budget and area to be covered
A business's telephone bill should nromally be classified into which one of the
Semi-variable cost
following categories?
A cheque of Rs.400/- received and deposited into bank on 26th September, was
Difference in the balance as per bank book and as per
credited in the pass book but was omitted to be entered in the bank book: this error
pass book
will result in :
A Co. having factory cost of Rs. 13,10,800. The administrative overheads are
salaries 40,000, rent & rates 6400, Traveling expenses 12,400, Depreciation 2400, 14,59,200
Directors fees 24,000, General Charges 2
A company budgets for a production of 150,000 units. The variable cost per unit is
Rs.14/- and fixed cost is Rs.2/- per unit. The company fixes its selling price to fetch 68,182 units
a profit of 15% on total cost. What is the break even point for the company?
A company has normal capacity of 100 machines working 8 hours per day of 25
days in a month. The budgeted fixed overheads of a month are Rs.150,000/-. The
standard time to manufacture one unit of product is 4 hours. In a particular month,
Rs.9,000/- (Adverse)
the company worked for 24 days of 750 machine hours per day and produced 4,500
units of the product. The actual fixed overheads incurred amounted to Rs.145,000/-.
Compute capacity variance.
A company manufactures and sells four products, viz. A, B, C and D. The details
are as follows : Profit volume ratio:-Product A- 20%, Product B- 40%, Product C-
25%, Product D-18%; Incremental rupee sale for each Rupee spent on Product B
advertisement:-Product A- Rs.11/-, Product B-Rs.6/-, Product C-Rs.12/-, Product D-
Rs.10/-. Amount of advertisement available is only Rs.5,000/-.
A company wishes to earn a 15% profit margin on selling price when quoting for a
job. Which of the following is the profit margin of cost which will achieve the required 0.1765
profit margin ?
A complete list of all material required, with quantities, for a particular job is given in
Bill of material
the ________.
A dividend warrant of Rs.2,076/- was paid direct to the bank and nothing appeared
Direct deposit into the bank
in the cash book. This is an example of :
A factory has 8 hours a day and the standard daily wage is Rs.80/-. Standard output
per hour is 5 units. During a day worker P produced 30 units, Q produced 36 units
P - Rs.60/-; Q - Rs.79.20; S - Rs.100.80
and S produced 42 units. Calculate wages payable to P,Q and S under Merrick
Multiple Piece Rate System.
Management Accounting 3
A firm employs ten workers at an hourly rate of Rs.20/-. They worked for 40 hours
each and completed the job for which standard time was 48 hours for each worker. Rs.9,333.33
Calculate labour cost for the job under the Rowan Plan.
A firm has monthly fixed cost commitment of Rs.200,000/-. It is producing only one
product which is sold at a price of Rs.80/- per unit. Per unit variable cost is Rs.50/-. 80,000 units
Calculate annual break even point.
A firm has purchased a machine for manufacturing a new product, the cost data for
Rs.9.20/-
which is given below.
A firm is able to break even at 60% capacity with budgeted fixed cost of
Rs.300,000/-, budgeted selling price Rs.20/- per unit and budgeted contribution
Rs.82,500/-
Rs.6/- per unit. The firm can produce and sell at 90% capacity but it is estimated
that in that case
A forecast is mere estimate of what is likely to happen, but ________ is the action
Budget
plan to be followed.
A key factor is defined as the factor which, at a particular point of time or over a
limit output
period will ________ the volume of ________
A lathe machine was purhcased on 31st March, 2004 for Rs.65,000/-, however it
was installed only on 5th April, 2004. The depreciation is charged @ 15% p.a.. Find
Nil
the amount of depreciation charge for the said lathe machine for the year ended
31st March, 2004.
A low margin of safety indicates ________ fixed overheads. higher
Quantity requisitioned , Per unit material cost , Job
A materials requisition form normally contains the following aspects:
number
A person in charge of a ________ may be held responsible for its proper functioning
Cost centre
and cost control.
A producer has a policy of fixing selling price at two-and-a-half times the variable
cost. He also wants to have a monthly break-even at sales of 20,000 units. Annual Rs.12.50
fixed cost is Rs.18,00,000/-. What is the selling price per unit of the product?
A producer is using certain tool item in productive process. Annual requirement is
20,000 units of the tool. Cost of ordering a lot is Rs.160/-. Per unit price of the tool is
Rs.360/-. Annual interest cost is 10%, insurance cost is 0.5% of the average Rs.8,000/-
inventory in stores, and other storage expenses are Rs.2.20 per unit. Calculate
annual ordering cost.
A proprietor purchase goods worth Rs. 5500 & cash account credited to Rs. 5000
500
rectification of the suspense accounted debited to Rs
A started business with cash 5000, building 5000, furniture 2000, having
depreciation of 10% on building. The total amount of capital comes to Rs. 11500
__________
Management Accounting 4
A worker is paid a monthly salary of Rs.500/- alongwith a bonus of 50 paise per unit
Semi-variable
completed, this type of labour cost may be classified as ________ cost.
A written order sent to inform the purchasing department of a need for materials is
Purchase requisition note
called a ________.
A written request sent to a supplier for specified goods at an agreed upon price is
Purchase order
often called as :
ABC Ltd. is planning to sell 200,000 units of product B. The fixed costs are
Rs.400,000/- and the variable costs are 60% of the selling price. In order to realize a Rs.6.25
profit of Rs.100,000/-, the selling price per unit would have to be :
Accounting is the art where transactions are … Summarized , Classified , Recorded
Longer life-span on business is divided into shorter
segments , Each one being in the form of accounting
Accounting period Concept________________
period , Selection of accounting period may depend on
various factors
Accounting to the matching principles of accounting, the ________ incurred during
cost revenues
an accounting period are required to be match with ________ during that period
Accounts is a Record of all transaction
Accrued income indicates: Current year's income not received in the current year
Abnormal expenses , In efficient use of labour , In
Actual costs may be affected due to inefficient functioning such as
efficient use of material
Adjustment entries always have ________ effects. Two
Administration overheads are ________ in nature and can be controlled mainly at
fixed top
________ level of the management
Advance received from customers is ________ for the organisation. A liability
After material is received from the supplier, quantity actually received is compared
ordered variation
with quantity ________-and ________-if any, are taken up with the supplier
Along with financial accounting, ________ and ________ are the other streams of
Cost Accounting Management Accounting
accounting
Alpha Bros. manufactures and sells four products-A, B, C and D. The sales mix in
value comprises 33-1/3%, 41-2/3%, 16-2/3% and 8-1/3%, respectively, out of the
total sales of Rs.60,000/-. Operating costs are 60%, 68%, 80% and 40%,
Rs.42,000/-
respectively of the selling price. Fixed costs are Rs.14,700/- per month. You are
required to find out the break even point for the products on an overall basis for
Alpha Bros.
Management Accounting 5
Amit purchase of Rs. 6710 had been posted to the debit of the creditors A/C as
540
6170 rectifying the transaction the creditor A/C is to be debited amount to Rs
Amit sold Goods to Atul for Rs. 50,000 on cash & Rs. 50,000 on credit basis &
allowed 10% discount on on the spot transaction. Cash Account debited to Rs. 45000
_____________
Amit sold Goods to Atul for Rs. 50,000/- on cash & Rs. 50,000/- on credit basis.
Amit allowed 10% discount for on the spot transaction. What is the amount that Rs.45,000/-
should be debited to the cash account?
An adjustment relating to outstanding expenses will ________ the net profit. Decrease
An advertisement contract was made with an artist which stated that the
remuneration will be 12% of net sales. On an average the monthly sales were
Rs.49,248/-
Rs.36,000/-, however the average rate of sales return was 5% of that month's sale.
Find the expenditure on account of advertisement.
An amount of Rs.200/- is received from P and is credited to Q. The rectification
P's A/c and Q's A/c
entry would affect ________
An error of partial omission can be rectified by either debiting or crediting the
suspense
________ account, as the case maybe.
An order for goods worth Rs.18,000/- was placed on 25th March, 2004. The goods
were received on 1st April, 2004. Calculate the impact of this transaction on the final The net profit will not be affected
statements of accounts for the year ended 31st March, 2004.
Angle formed by the intersection of total cost line and sales line is called angle of
Incidence
________.
Annual fixed cost of a producer is Rs.500,000/-. The price of its product is Rs.60/-
and per unit variable cost is Rs.40. In the next year his fixed cost commitments are
0.2
expected to go up by 20%. By what percentage the break even point will go up in
the next year.
Annual sales were Rs.10,50,000/- and sales returned by customers amounted to
Rs.28,000/-. The salesmen are entitled to an incentive of 3% of net sales. Calculate Rs.30,660/-
the amount of incentive due to the salesmen.
Annual subscription paid by bank to the Chamber of Commerce on 31/03/04, as per
Balance as per bank book > Balance as per pass book
the standing instructions, and advise sent thereafter, may lead to:
As a part of the data presented in support of a proposal to increase the production
of clock radios, the sales manager of Wittman Electronics reproted the total
Incremental cost
additional cost required for the proposed increased production level. The increase in
total cost is known as :
As cost centers facilitate the control function, in many cases, they are termed as . . . Responsibility centers
Management Accounting 6
As on 30th September, 2004 the cost of closing stock was Rs.84,696/- and its
market price as on the same day was Rs.66,584/-. Which value of closing stock
Rs.66,584/-
should be considered in the final statement of accounts for the year ended on 30th
September, 2004?
As per the provisions of Section 209 of ________, all the company form of
organisation is legally required to follow the mercantile or accrual system of The Companies Act, 1956
accounting.
At 60% capacity utilisation the overhead recovery rate is Rs.35/- per unit. At 70%
capacity the rate gets reduced to Rs.32/- per unit. What should be the recovery rate Rs.28/- per unit
if the production attains 90% capacity utilisation?
At a break even point of 400 units, the variable costs are Rs.400/- and the fixed
Re.0.50
costs are Rs.200/-. What will the 401st unit sold contribute to profit?
Average stock = ________ + (Order size / 2) Safety stock
Bank reconciliation statement is the statement prepared to explain the ________ as
to why the bank balance as per ________ and bank balance as per bank book does reasons pass book
not match
Based on the journal entry given, identify what transaction has taken place. Suresh
Cash paid to Kailash should not be recovered from
Account………….Dr. Rs.500 To Cash Account Rs.500 (Being paid to Kailash on
creditor Suresh
behalf of creditor Suresh)
per unit selling price remains constant at all the levels
Basic assumptions made by marginal costing are of activities. , whatever is produced by the organisation
is sold off. , per unit variable cost remain constant.
Basic objective of Uniform Costing is . . . comparison
Bin card is maintained by ________ department whereas ________ is maintained
Stores Store ledger
by costing department.
Bin Card is not an ________ record but only a ________ record. Accounting Quantitative
Break even point is a situation of no ________ no ________ profit loss
Budget is prepared in terms of Quantity and/or Money
Budgetary Control is useful for ________-and ________-as a powerful tool in the
Cost control Maximization of profits
hands of management
Budgeted profit and loss account and budgeted balance sheet are also known as
Master budget
________.
Establishment of budgets , Comparison of budgeted
Budgetory Control deals with
results with actuals , Computation of variance.
Business is separated from the owner. , The
Business Entity Concept ______________. accounting process carried out for the business ,
Separate legal entity
Management Accounting 7
In a factory, bonus to workmen is paid according to the Rowan plan. The allotted
time for a job is 40 hours and the normal rate of wages is Rs.1.25 per hour. The
factory overhead charges are 50 paise per hor for the hours taken. The factory cost
30 hours
of a work order, executed by one worker, X, is Rs.161.875 and that by another, Y, is
Rs.155.46. The cost of material in each case is Rs.100/-. Calculate the amount of
time taken by the the workman X to complete the work order.
In calculation of total sales margin variance, the ________cost of sales is deducted
Standard
from the actual sales revenue.
In case of defective material being returned by the stores department to the vendor,
___.
such material should be valued at
Management Accounting 16
In case of industries where capital investment is very high, budget should be
Longer period
prepared for a
Receipt of loan/borrowings , Issue of shares , Sale of
In Cash budget , Non operating cash inflow includes
fixed assets
In Cash budget , Non-Operating cash outflow includesVarious kinds of over heads Loan instalments , Taxes , Purchase of fixed assets.
Payment to Creditors , Cash purchases of raw material
In Cash budget , Operating cash outflow includes
, Wages/salaries
Cash Sales , Collection from Debtors ,
In Cash budget Operating cash inflow includes
Interest/Dividend received
In EOQ, to express carrying cost as a percentage of the unit cost of purchases this
i
is used in the formula-----------
In financial statements P& L Accounts relates to a specific duration whereas
P& L Accounts Balance sheet
________ is for a given point of time
Variance Efficiency Variance , Capacity Variance ,
In fixed overhead variance, the volume variance is further analyzed as
Calendar Variance
In India the gas industry and electricity industry, and ________ industry are
fertilizer
examples of industries using the uniform costing system.
In India, where public undertakings operate along with the private sector
undertakings, ________ enables a comparative assessment to be made of the two uniform costing
sectors.
In order to rectify the totaling mistake, wherein the sales return ledger was
credited
undercast by Rs.2,000/-, the suspense account should be ________ with Rs.2,000/-
Ram and Laxman are partners of Kush & Bros. As on 1st April, 2003 Ram's capital
is Rs.50,000/- and Laxman's capital is Rs.80,000/-. If interest on capital is to be Ram's capital Rs.55,000/- , Laxman's capital
provided @ 10% p.a., what will be amount of capital of each of the partners as on Rs.88,000/- , Interest on capital should be debited to
31st March, 2004, assuming there were no additions during this period? Also, state the Profit and loss account
the treatment of this item in the Profit and loss account.
Rent of Rs.7,500/- for the month of April was received in March. Which account
should be credited in the books of accounts for making an entry for receipt of the Rent received in advance account
said amount?
Maximum stock level - re-order level + (minimum
Re-order quantity may be measured as :
usage X minimum re-order period)
Replacement costs of labour turnover are ________ and ________ training breakages of machine
Management Accounting 23
Revenues are more than the differential costs, then the proposed project should be
accepted
________
Rs. 2500 paid for the purchase of radio set for personal use of proprietor debited to
Drawing A/C
general expenses account for rectifying the error, which A/C to be debited
Rs.2,650/- were paid to ABC Ltd. for maintenance of machine; which account
Maintenance of machine account
should be debited for this transaction?
Rs.5000 paid as ________ to ________ should be debited to salary account Mahesh salary
S Ltd., a multi-product company, furnishes the following data: 1st half of 2004 Total
sales Rs.45, 000 /- and total cost Rs.40, 000/-. 2nd half of 2004: Total sales Rs.50,
000 /- and total cost Rs.43, 000/-. Assuming stability in prices and that fixed Rs.65,000/-
expenses are incurred equally in the two half year periods, calculate the break even
sales for S Ltd. for the year 2004.
Salary given in trial balance Rs. 5000/-, and Rs. 2,000/- is yet to be paid . The
Balance Sheet - liability side
outstanding salary account will be disclosed in the …
Salary given in trial balance Rs. 5000/-, still 2000/- is to be paid . The outstanding
Transfer to balance sheet liability side
salary is debited to Profit &Loss A/C. The second effect is --
Salary paid to employee amounted Rs. 10,000, transferred to Trading A/C is an
Error of Commission
example of_______
Sales quantity may be forecasted after taking into consideration various factors Analysis of past trends , Market research , Reports by
such as salesmen
Provides reliable basis for budgeting , Facilitates
Select the advantages of standard cost system. delegation of authority , Promotes economy and
efficiency
Select the appropriate rectification entries for the following transactions (i) Rs.200/-
received in respect of a bad debt previously written off was credited to Debtors Debtors A/c ..........Dr. Rs.200/- to bad debts recovered
account. (ii) Paid Rs.6,000/- to a Mr. Rao, clerk, as salary in lieu of notice. This A/c Rs.200/- , Rs.6,000/- to Rao's A/c Rs.6,000/- ,
amount was debited to his personal account (iii) Interest @ 5% p.a. on a loan of Rs.250/- to General Expenses A/c Rs.250/-
Rs.5,000/- was debited to general expenses account.
Closing stock is valued at cost or market price
whichever is lower , Providing for discount on debtors ,
Select the cases where convention of conservation is applied :
Amorisation of goodwill (goodwill being written off to
Profit and Loss Account)
Fixed cost / (Selling price per unit - Variable cost per
Select the correct formulae for calculating break even point. unit) , [Fixed cost / Marginal contribution] X Sales ,
[Fixed cost / (Fixed cost + Net Profit)] X Sales
Select the correct statements. Ram's account…….Dr. Rs.10,000 To Bank account Ram is a creditor , Rs.10,000/- has been paid to Ram ,
Rs.10,000 The payment is made by cheque
Management Accounting 24
Select the cost that indicates increased or decreased total cost due to the increased
Differential cost
or decreased volume of operations.
Purchase A/c ......... Dr. to Damodar's A/c (Being
furniture purchased from Damodar) , Gopal's A/c
........... Dr. to cash A/c (Being entry for payment of
Select the entries which need to be rectified
railway freight for goods purchased) , Cash A/c
............Dr. to Suresh's A/c (Being cash received from
Suresh for goods sold to him for)
Sales budget , Production budget , Research and
Select the examples of functional budgets:
development budget
Select the information to be considered before installing a costing system Labour intensivity of the product
Depreciation on office furniture , Director's
Select the items which may be classified as administration overheads.
remuneration , Telephone expenses
Delivery van expenses , Rent of finished goods
Select the items which may be classified as selling and distribution overheads.
warehouse , Sales research expenses
Health and safety services , Canteen facility , Loans at
Select the non-monetary incentives
reduced rate of interest
Compare the transactions in the bank book and the
pass book , Check the totals and the balancing of both
Select the steps to be followed while preparing bank reconciliation statement.
the books , Confirm that the opening balances of both
the books are tallying
Select the transactions which can be entered in the Journal proper. Opening entries , Closing entries , Rectification entries
Use of supplementary rates , Carrying over the amount
Select the various methods adopted for treatment of under or over absorbed
to remaining period , Writing off to the Costing Profit
overheads
and Loss Account
Selecting an appropriate method of valuation of inventory is important because : It influences the figure of gross profit
Indirect Material such as packing material, samples
etc., , Indirect labour like salaries to sales personnel
Selling and distribution overheads includes
manager , Indirect expenses like warehouse charges,
advertisement
Selling price per tonne is Rs. 69.50 , variable cost per tonne is Rs. 35.50 and fixed
53000
cost is Rs. 18,02000. Find out the BEP in units,
Semi ________ overheads are neither ________ nor variable in nature. fixed variable
Since the pass book and the bank book record the ________ transactions, the bank
Same
balance as per these books should be equal.
Management Accounting 25
Sita and Gita are partners of SGL & Co. As on 1st August, 2003 Sita's capital stood
as Rs.10,000/- and Gita's capital as Rs.18,000/-. If interest on capital is to be Profit and loss account should be debited with
provided @ 10% p.a., what should be the treatment of this interest in the profitability Rs.1,866.67
statement, assuming there were no additions to capital during this period?
Sold Goods of Amitabh worth Rs. 15,000 against 15% Trade discount. The Goods
12750
worth appear on account ___________
Small concerns , Industries having non-standardized
Standard Costing may not be useful in
products , Contract jobs
Standard Costing specifically relates to the function of Production
Standard Costing system facilitates ________ and ________ for each individual or
Delegation of authority Fixation of responsibility
department
Standard costs are the targets to be attained by the actual performance. Minimum
Standard Costs are used as tool for Cost Control
Standard labour cost of a job has been specified as 50 hours work by skilled
workers @ Rs.20/- per hour and 150 hours work by unskilled workers @ Rs.10/- per
Rs.500/- (Adverse)
hor. Actual time taken was 70 hours by skilled workers @ Rs.18/- per hour and 170
hours by unskilled workers @ Rs.13/- per hour. Calculate labour yield variance.
Standard may not be necessarily useful for this purpose. Forecasting
Standard time required for a job is 10 hours, i.e.10 X 60 = 600 'Bs'. The worker has 60 'Bs'. Time wage rate is Rs.20/- per hour. Bonus is
actually completed the job in 6 hours, i.e.6 shared
Standard time required for a job is 10 hours, i.e.10 X 60 = 600 'Bs'. The worker has
actually completed the job in 6 hours, i.e.6 X 60 = 360 'Bs'. Time wage rate is
Rs.180/-
Rs.20/- per hour. Bonus is shared between the worker and the foreman in the ratio
of 3:1. Calculate total earning of the worker as per Bedeaux Point System.
State the features of these transactions : (i) Commission paid Rs.250/- was posted
The debit side of the trial balance will be in excess by
twice to Commission account (ii) Rs.5,000/- representing goods sold to A, was
Rs.250/- , Involves an error of principle , Involves an
posted to the credit to commission received account (iii) Sold machine for Rs.8000/-
error of commission
, was credited to Sales account.
Record of all receipts and issue transactions , Financial
Store ledger expressions of all transactions , Maintenance of Store
ledges provides a second check
Techniques of management accounting include: Marginal costing , Budgetary control , Standard costing
The ________ adjustment is necessary to relfect the cost for the use of fixed asset
Depreciation
during the year.
Management Accounting 26
The ________ adjustment is necessary to relfect the cost for the use of fixed asset
Depreciation
during the year.
The ________ is a perpetual inventory record. Bin card
The ________ is of immense help in guiding the companies to operate their
uniform cost manual
accounts on uniform basis.
The ________ is responsible for material losses while in storage. Store-keeper
The ________ ledger carries the individual accounts, whereas the general ledger
Control
records the consolidated effect of the individual transactions.
The ________ variance is the difference between the actual variable overhead
Total variable overhead
incurred and the standard variable overhead charged to production.
Maintaining Bin cards , Maintaining store ledger ,
The aims of perpetual inventory system are as follows
Continuous verification of physical stock
The alternative courses of action for an integrated textile mill are: Sell cloth
The analysis which is also referred as 'what if' analysis is known as________. Cost volume profit analysis
The balance of the suspense account will ________ after all the errors are become zero
The bank book shows an overdraft of Rs.117/- as on 31st December, 2003. It is
found that the pass book is debited with Rs.11/- representing a dishonoured
Rs.128/- (overdraft)
cheque, originally received from Mr.A. The fact of dishonour was not recorded in the
bank book. Find the balance as per pass book.
Arithmetical errors in calculating , Non- posting a
The Bin card and stores ledges do not match due to the following reasons:
certain document , Posting a wrong Bin card
The budget manual must contain statement regarding: Objectives of the orgainsation
The budget that represents the funds investment for expansion, diversification, etc.
Capital expenditure budget
is known as ________.
The capacity utilised to installed capacity ratio is 80% for the company. The capacity
utilisation ratio in respect of a machine for a particular month is 90%. The available
working hours in a month are 200 hours. The break of idle time is as follows :
Rs.96/-
Waiting for job - 5hours, breakdown - 4 hours and waiting for tools - 3 hours.
Calculate the idle time cost when the hourly fixed cost of running the machine is
Rs.8/-.
Administrative causes , Productive causes , economic
The causes of idle time can be analysed as
causes
Administrative causes , Productive causes , Economic
The causes of idle time can be analysed as -
causes
The characteristics of a good wage system are : Flexible , Economical to use , Easy to understand
The column which refers to the page number of the ledger is known as ________. Ledger folio
The combination in which different products are sold by a company is known as
Sales mix
________.
Management Accounting 27
Distribution expenses , Publicity expenditure , Salary of
The components of the selling and distribution cost budget are :
sales-office workers
The composition of selling costs is given below : salaries 4% of sales, travelling
. Find the amount of selling overheads if the sales are
expenses 1.5% of sales, and sales office 2%
The concept of marginal costing is based on the important distinction between
period
product costs and ________ costs.
The cost accountancy is defined as “ the application of costing principles,methods
and techniques to the ________, art and practice of ________ ascertainment of the science cost control
profitability and the presenta
The cost of asset is Rs. 1,10,000, Estimated scrap value 10,000,estimated life 10
10000
yrs. Calculate the depreciation according to straight line method
The cost of fixed asset is Rs. 1,00,000. Rs. 17,000 deducted as depreciation.
0.17
Calculate the percentage
The cost of idle time incurred by employees that is considered normal for the
Factory overheads
production process should be charged to :
The cost that indicates historical cost, which is incurred in past, is known as Sunk cost
The cost that varies in direct proportion with the level of activity is called variable cost
The cost-volume-profit analysis basically highlights the effect of changes in sales
short run
volume on the profit of the company, in the ________.
The credit purchases are as follows : July Rs.80,000/- and August Rs.140,000/-.
Creditors are paid either on a 'prompt basis' (on the spot) or 30 days basis. It is
Rs.177,000/-
estimated that 10% of the creditors are in the prompt category. Find the amount
paid to
The credit side of the sales book was overcast by Rs.2,000/-. As a result of this The liability side of the balance sheet will increase by
rectification, what of the given impacts is likely to happen? Rs.2,000/-
The data for two materials P and Q is given below : Material P : opening stock
Inventory turnover period for material P is 40.5 days ,
Rs.80,000/-; closing stock Rs.40,000/- and purchases Rs.500,000/-. Material Q :
Material P is faster moving material , Consumption of
opening stock Rs.170,000/-; closing stock Rs.60,000/- and purchases Rs.750,000/-.
material Q is Rs.860,000/-
Identify which of the given statements relevant to the data given are correct.
The data for XYZ Ltd. is as follows : Fixed assets Rs.60,000/-; total cost
Rs.105,000/-; working capital is equal to 25% of the sales value. The company Sales Rs.128,000/- , Return on capital employed ,
expects 25% return on capital employed. Capital employed is equal to fixed assets Working capital Rs.32,000/-
plus working capital. Select the C.Ans :-s:
The difference between sales and cost of sales is termed as ________. Net Profit
The difference between sales and factory/ works cost is termed as ________ the
gross profit cost of sales
difference between sales and ________ ermed as net profit
The different purposes served by standard costing technique are : Cost control , Cost awareness , Performance appraisal
Management Accounting 28
The direct material useage budget and direct material purchase budget differ
A planned change in the level of material stock
because of which of the following:
Ignores the efficiency of workers , Higher labour cost ,
The disadvantages of time rate system are :
Lack of motivation to increase productivity
The document which lays down the cost accounting plans and procedures to be
.
followed by the constituent units is known as
The document which lays down the cost accounting plans and procedures to be
uniform cost manual
followed by the constituent units is known as ________.
The Ezee Company Ltd. plans to sell 108,000 units of product E in first quarter of
2004, 120,000 units in second quarter of 2004, 132,000 units in third quarter of
153,000 units
2004, 156,000 units in fourth quarter of 2004and 138,000 units in the first quarter of
20
Type of budget, viz. Sales or capital expenditure
The factors that influence determination of budget period are : budget , General economic conditions , Trade cycle of
business
The factors which influence the selection of the method for absorption of overheads Type of industry , Nature of products , Manufacturing
are: process
More than one key factors , Refers to a complex
The features of multiplicity of key factors are as follows : situation , Can be resolved by using linear
programming technique
The benefit of time saved is divided equally between
The features of the Halsey Plan are:
the employer and employee
The final result disclosed by Profit & Loss Account is the ________ profit after taxes
Net
earned by the organization.
The final result disclosed by the Manufacturing account is the ________. Cost of production
The final result disclosed by trading account is the ________profit earned by the
Gross
organization.
The finance manager is responsible for which of the following budget? Cash budget
Percentage of profits , Availability of funds ,
The following factors affects the budgeted advertisement cost
Competitors policy
The following information is available regarding two orders for the same product.
Order I : material Rs.20,000/-; wages Rs.25,000/-; selling price Rs.120,000/- and
100% of works cost
percentage of profit on cost 20%. Order II : material Rs.30,000/-; wages Rs.40,000/-
; selling price Rs.195,000/- and percentage of profit on cost 25%.
The gross profit for the year 2004 is Rs.184,326/-. The depreciation on furniture for
the year is Rs.24,561/-; dividend received amounted to Rs.12,000/- and the
Rs.75,981/-
director's remuneration worked out to be Rs.95,784/-. Find the net profit for the year
2004.
Management Accounting 29
The gross profit transferred from the trading account is Rs.98,999/-. The expenses
debited to the profit and loss account are salary Rs.12,000/-; advertisement
expenses Rs.18,000/-; printing and stationery Rs.5,500/- and managing director's Rs.34,408.09
incentive Rs.28,000/-. It was noted that no entry was made for salary of one month
which was due but not yet paid. Find the net profit of the company.
The half-yearly sales of product X are as follows : 1st half -30,000 units; 2nd half -
37,500 units. The production pattern of the company is based on 80% of the sales
1st half -31,500 units; 2nd half - 30,000 units
of the current six months and 20% of the budgeted sales of the next six months.
Calcu
The ideal standards are generally ________ in nature and the variances always
theoretical unfavorable
shows ________ trends
The integrated form of all functional budgets is known as : Master budget
The key factor determines the : Level of activity , Capacity utilization , Level of sales
The levels indicated on the Bin card enables the ________ department to keep a
watch on the balance and replace the material as soon as it reached at ________ Stores Re-order level
level.
The lowest profit volume ratio can be ________%. 0
Employees try to increase productivity , Incentives are
The main advantages of profit sharing are : shared by all the employees , Augments emplyees'
efficiency
Helps in immediate compilation of costs , Helps
The main objectives of determining overhead rates are : application of overhead on an equitable basis , Assits
in calculating unit cost before starting production
The management of Horngreen Ltd. is deciding whether to continue working at loss
Loss of trained personnel , Loss of regular customers ,
or to temporarily shut down the factory. State the qualitative aspects that must be
Expenditure required to restart the factory
considered before arriving at a decision.
The material issued to production department may be returned back to the stores
Material issued is defective
because material issued in excess requirement and
The material physically received is compared with material ordered as per the this
Purchase order
order
Number and date , Department demanding the material
The material Requisition note contains
, Signature of the authority approving the demand
The method of overhead apportionment which considers both the material cost as
Prime cost percentage rate
well as the labour cost, is known as ________ method.
The method of remuneration under which the workers are given in share in profits of
the organization, at a specified percentage, along-with their wages, is known as Profit-sharing
________ method.
Management Accounting 30
The method which deals with ownership rights being given to workers is known as
Co-partnership
________ method of remuneration.
Accrued commission income of-Rs.32,960/- was not
The net profit before certain adjustments was Rs.95,040/-. After giving due effects entered in the books , Rent for the month of March was
to the adjustments, the revised net profit (after considering the adjustments) is payable and yet to be recorded Rs.19,280/- , Repairs
Rs.78,560/-. Select the adjustments which might brought this change. expenditure to the extent of Rs.30,160/- was wrongly
transferred to Machinery account
Cost control , Ascertain ment of cost of each product ,
The objectives of cost accounting are :
Assist in managerial decision-making
To fix a common selling price for the industry as a
whole , To compare efficiency of each unit against
The objectives of Uniform costing system are as follows :
industry's overall performance , To compile reliable
cost data for inter-firm comparison of costs
To ascertain cost and profitability , Cost Control ,
The objects of cost accountancy are . .
Presentation of Information
The operating profit as per cost statement may differ from the profit as per Profit Depreciation on plant and machinery , Interest on loans
and Loss Account due to existence of taken from other , Interest on loans granted to others
Functional responsibility of different functional
managers , Delegation of authority to various
The organization chart shows the following aspects :
managers , Inter-functional relationships of these
managers
The overheads apportioned to three production departments A, B and C and two
service departments P and Q are Rs.75,000/-; Rs.100,000/-; Rs.80,000/-;
Rs.60,000/- and Rs.40,000/- respectively. Overheads of department P are shared
A -Rs.116,836/-; B -Rs.134,889/- and C -Rs.103,265/-
by A, B, C and Q in the ratio of 4 : 3 : 2 : 1 and that of department Q are shared by
A, B, C and P in the ratio of 3 : 3 : 2 : 2. Ascertain the total overheads of each
production department.
The periodical total of sales book was cash short by Rs. 5000 for rectifying the
Suspense A/C
same, which A/C to be debited
The present unit cost data for a product is as follows: selling price Rs.15/-, variable
costs Rs.8/-. If selling prices are reduced by 10% and variable costs are increased 0.333
by 12.5%. Which of the following is the amended contribution to sales ratio?
The prime cost is Rs. 10,00,000 the factory cost is Rs. 13,00,000, the total
administration overheads are 14,00,000 and having selling overhead of Rs. 86000. 37,86,000
What is the Total cost?
Management Accounting 31
Classifying labour cost according to jobs, processes,
etc. , Preparation of different reports based on direct,
The principal functions of the cost accounting department are :
indirect labour cost, etc. , To focus on areas where
labour cost may be reduced.
The principle of ________ is followed while preparing the financial statements. Going concern
The process of Allocation & apportionment can followed to decide the ________ of
Allocation & apportionment Loading
overheads to each budget center
The process of attributing proportions of items of costs amongst const centres is
Cost apportionment
called ________.
The process of recording the business transactions in a defined set of records is
Balance sheet
referred to as ________.
The process of recording the costs in a formal and systematic manner with the
intention of preparing statistical data there from a ascertain the cost, is known as . . Cost accounting
.
The profit volume ratio of BB & Co, dealing in precision instruments, is 50% and the
Break even point-Rs.30,00,000/-, net profit-
margin of safety is 40%. You are required to work out the break-even point and the
Rs.10,00,000/-
net profit if the sale volume is Rs.50,00,000/-
The profit volume ratio of X Ltd. is 50% and the margin of safety to sales ratio is
Rs.20,000/-
40%. You are required to calculate the net profit if sale volume is Rs.100,000/-
The purchase budget for October is Rs.12,500/- and November is Rs.15,000/-. If ing a rebate of 5%. If the materials are purchased on
the materials are purchased for cash the supplier credit of
The purchase budget for October is Rs.12,500/- and November is Rs.15,000/-. If
the materials are purchased for cash the supplier is offering a rebate of 5%. If the
October- NIL, November- Rs.26,750/-
materials are purchased on credit of 30 days, no rebate is offered. The company
purchase
To aid the planning of annual operations , To
communicate the organisational plans to the different
The reasons and objectives of budgets may be stated as :
departments , To motivate the managers to strive for
attainment of the organisational goals
The sales forecast (quantity) should be compared with the ________ to find out
Production capacity
whether it is possible for the firm to handle this level of sales.
The selection of ________ may depend upon the various factors like characteristics
Accounting period
of the business organisation, tax considerations, statutory requirements etc.
The selection of the base on which overheads should be apportioned depend on the
service or use basis , survey basis , ability to pay basis
following principles.
The short run financial plan which acts as a guide to achieve the predefined targets
Budget
is known as ________.
Management Accounting 32
The sources which have been used by an organisation to raise funds indicate
A liability
________for the organisation.
The stores department is a ________ department. Service
The system which provides an opportunity to the small units to take advantage of
the research work taken by the large scale units of the same industry is known as Uniform costing
________ system.
The systematic process of identifying and reporting variance is known as ________. Variance analysis
The term ________ indicates expenditure incurred on or attributable to a given
Cost
thing.
The total production cost for making 20,000 units was Rs.21,000/- and the total
production cost for making 50,000 units was Rs.34,000/-. Once production exceeds
Re.0.98
25,000 units, additional fixed costs of Rs.4,000/- are incurred. The full production
cost per unit of making 30,000 units is:
The treatment of ________ time in cost accounting depends upon the distinction
Idle
between normal and abnormal time.
The use of contribution per unti of limiting factor as the basis for ranking products to
Maximisation of short-term profit
be produced and sold is aimed at which of the following?
The variance which denotes the variation in overhead recovery due to the budgeted
quantity of products being greater or less than actual production, is known as Volume
________ variance.
The variance which measures the deviation of the rate actually paid to labour as
Labour rate variance
from the standard hourly rate is known as:
The variance which measures the profit consequences of selling different products
________ variance.
in proportions other than the standard, is
The variance which measures the profit consequences of selling different products
Sales margin mix
in proportions other than the standard, is known as ________ variance.
The varinace that attempts to ascertain the effect of change in sales volume on the
difference between actual and budgeted contribution is known as ________ Sales margin volume
variance.
Valuation of inventories , Charging of depreciation ,
The various areas in which uniform costing can be adopted are . .
Apportionment of overheads
The wages paid to a trainee who constructs wooden mould for concrete laying on a
Direct labour cost
building contract should be defined as :
The wages paid to maintenance department workers who do repair work principally
for production departments but also on the vehicles in the distribuiton department Service costs
shoud be charged as:
total cost remains the same , per unit cost may vary ,
These are the features of fixed overheads
not dependent on volume of output
Management Accounting 33
vary directly in proportion to volume of output. , per unit
These are the features of variable overheads cost remains the same , total overheads may increase
or decrease as per volume of output.
Replacement Method , Separation Method , Flux
These are the methods of measuring labour turnover.
Method
Cost of maintaining good relations with the workers ,
These are the preventive costs of labour turnover.
Cost of medical services , Cost of welfare facilities
Inefficiency of new workers , Cost of selection and
These are the replacement costs of labour turnover.
placement , Increased spoilage and defectives
This cost indicates historical cost which is incurred in past. Sunk cost
This cost indicates increased or decreased cost due to the increased or decreased
Differential cost
volume of operations.
This is not the non monetary incentive. Co-partnership
This is the best example of element wise classification of cost. material
This is the process of recording attendance time of the workers. Time keeping
To ascertain the ________ of all the transactions recorded in the ledger account,
Net effect Balanced
the account is required to be ________
Token or disc method is a related to the system of ________. Time-keeping
Tom company has sales of Rs.200, 000/- with variable expenses of Rs.150,000/-,
fixed expenses of Rs.60,000/-, and an operating loss of Rs.10,000/-. By how much
Rs.200,000/-
would Tom have to increase its sales in order to achieve an operating income of
10% of sales?
Trade Discount refers to the discount . . . received on purchases
Trading a/c credit side includes sales , goods lost by fire , closing stock
Two competing companies Hero Ltd. and Zero Ltd. sell the same type of product in
the market. Their forecasted profit and loss accounts for the year ending December
2003 are as follows : Hero Ltd.: Sales Rs.500,000/-; Variable cost Rs.400,000/-; Hero Ltd.
fixed costs Rs.50,000/-. Zero Ltd.:Sales Rs.500,000/-; Variable cost Rs.300,000/-;
fixed costs Rs.150,000/-. You are
Strike , Change in customers demand , Devaluation of
Uncontrollable variances are
currency
Under Differential Time Rate method payment is made at Rs. 1.40 per hour when
90% to 100%
the level of efficiency is between________.
Under Gannt Task bonus system where the output is ________ payment is made
as per minimum time rate, output is ________ payment is made as per time wages below standard at standard
plus some increase in wage rates
Under Merrick Differential Piece rate System of wage payment up to 83% of
Normal
efficiency following rate is offered.
Management Accounting 34
Payment for idle time to workers , Production hold ups
Under stocking may have following consequences resulting into disturbed delivery schedule , Eleventh
hour purchase
Under the average cost method of valuing material issues, new issue price is
Each
determined after ________ issue.
Under the differential time rate method of wage payment between 90% to 100% of
Rs. 1.40 per hour
efficiency following rate is offered.
Under the Emerson’s Efficiency Bonus System at following efficiency level no bonus
Below 66.66%
is payable.
Under the repeated distribution method the overheads of ________ department are
service percentage
distributed to other departments on agreed ________
Unearned commission of Rs.5,000/- needs to be recorded in the books of accounts. The asset side of the balance sheet will increase by
Find its correct impact. Rs.5,000/-
Uniform costing is not a separate method of ________. cost accounting
In single organization having number of branches. ,
Uniform Costing Methods may be advantageously applied Number of companies in same industry. , Similar
Industries such as cotton, jute etc.
Single organization having number of branches. ,
Uniform Costing Methods may be advantageously applied to . . . Number of companies in same industry , Similar
Industries such as cotton, jute etc.
Information is freely supplied by all the units , Well
Uniform costing system can be successfully implemented in any industry only when organised sector is ready to share the technological
: improvements , Information furnished by the units is
complete and correct
Valuation of material uses the following methods FIFO and LIFO , Average price method , Market price
variable cost is the cost that tend to ________ in direct proportion with ________ vary level of activity
Variable costs are the controllable costs at the ________ level of the management
whereas fixed costs can be controlled only on the ________ level of the Lower Top
management
The system of wage payments , System for bonus
Wage rate standards takes into consideration the following factors
payment , Grades of workers required
Warehousing cost is an item of ________ Distribution overheads
What will be the impact of following transactions on the cost of a lathe machine : (a)
Transport charges on the lathe machine were debited to Carriage inward account,
Cost will increase by Rs.1,300/-
Rs.1,100/- (b) Cost of installing the machine stands debited to miscellaneous
expenses account, Rs.200/-
When bank balance as per bank book is considered for preparing bank Cheques issued but not presented , Direct deposit
reconciliation statement, then following items need to be added : made by customer , Wrong credits given by bank
Management Accounting 35
cheques issued but not presented , direct deposit by
When bank balance as per bank book is considered then following to be added.
customer , wrong credits given by bank
cheques deposited but not cleared , Interest debited by
When bank balance as per pass book is considered then following to be added.
bank , bank charges debited by bank
cheques issued but not presented , direct deposit by
When bank balance as per pass book is considered then following to be deducted.
customer , wrong credits given by bank
Which cost is defined as an estimated cost, prepared in advance of production or
Standard cost
supply, estimated within a prescribed set of working conditions?
Which of the following aspects are mainly responsible for difficulty in application of
Capital investment , Plant size , Location
Uniform costing system.
Capital expenditure budget , Research and
Which of the following budgets may be termed as a long term budget? Development expenditure budget , Budget of a
transportation company
Which of the following cost is also termed as Prime Cost ? Direct cost
Which of the following costs is most likely to have a cost behaviour pattern its, with a variable cost there after which decreases
described as ..a fixed cost upto an activity level of from 10
Which of the following documents contains information as to quantity and value of
Stores ledger
material stock?
Date of receipt of material , Quantity received ,
Which of the following information is included in the goods received note?
Description of goods
Which of the following is a correct definition of the key factor? The factor which limits the activites of the undertaking
The level of control of the used of material in the
Which of the following is likely to be a contributory factor to the incidence of excess production cycle , The incorrect choice of purchase
expenditure on material cost? order quantity , Failure to control the issue of materials
from stores
Which of the following is most likely to be an allocated production overhead cost to
Salary of the finishing centre's manager
the finishing cost centre?
To facilitate payment for time spend on the work
Which of the following is the most efficient use of the clock card?
premises
Which of the following is usually prepared daily by employees for each job worked
Job card
on?
Which of the following operations would normally be carried out first when preparing
Determining the budget period
a master budget?
Which of the following source documetns in a cost accounting system is designed to
exercise control over the delivery of and accurate recording of the receipts of Goods received note
goods?
Which of the following transactions should be excluded while preparing a cost sheet Interest on loan , Bad debts , Expenses on criminal law
? suit
Management Accounting 36
Change in contribution / Change in sales , 1 - (Change
Which of the formulae can be used to calculate profit volume ratio : in variable cost / Change in sales) , (Fixed cost + Profit)
/ Sales
Which system can assist in fixing a common selling price for the industry as a whole
longing to that industry ?
on the basis of cost of production of all
Which system can assist in fixing a common selling price for the industry as a whole
Uniform costing
on the basis of cost of production of all units belonging to that industry ?
Which system provides an opportunity to companies to adopt the one best method
Uniform costing
of cost accounting system known to the industry ?
Which variance is used to analyse the effect of change in the quantity of output from
Materials yield variance
a given mix of inputs?
The number and types of products sold by the
organisation , Whether the organisation's market share
While preparing sales budget the following factors must be considered :
is increasing or decreasing? , Details of seasonal
fluctuations in sales
While preparing the bank reconciliation statement as on 31st March, 2004 you find
the following discrepancy : 'a cheque of Rs.3,700/- received and deposited in bank
on 27th March, 2004 was entered credited in the pass book on 3rd April, 2004.' In Balance as per pass book < Balance as per bank book
this background, which of the following statement holds true as on 31st March,
2004?
While preparing trial balance, the balance as per ________ book is considered as
Bank
bank balance.
While preparing trial balance, the balance as per ________ book is considered as
Bank
bank balance.
While selecting source of supply ________ epartment may call for the ________
purchase quotation
from the prospective suppliers
XYZ & Co. has taken a loan of Rs.100,000/- @ 15% p.a.on 1st October, 2003. Interest account should be debited with Rs.7,520.55
Interest is to be paid on half yearly basis. What treatment should be given in the and outstanding interest account should be credited
books of accounts of XYZ & Co. as on 31st March, 2004? with Rs.7,520.55
XYZ & Co. is a partnership with X and Z as partners. The capital of X is Rs.58, 000/-
and that of Z is Rs.75, 000/-. Interest on capital is charged @ 12% p.a. and interest
on drawings is charged @ 5% p.a. The drawings of X totaled to Rs.15, 000/- and
X - Rs.118,721.28 and Z -Rs.153,888.72
that of Z totaled to Rs.12, 000/-. The profit for the year after considering interest on
capital and drawings is Rs.125, 000/- and the profits are shared in the ratio of their
capitals, i.e. 58: 75. Find the balance of capital accounts after giving
Management Accounting 37
XYZ Ltd. has set up the following standards for variable production overheads :
standard hours per unit -3 hours; standard variable overhead per hour -Rs.10/-. The
actual data for the month is as follows : actual variable overheads incurred Rs.20,000/- (Adverse)
Rs.620,000/-; actual output -20,000 units and actual hours worked- 54,000 hours.
Find variable overheads cost variance.
You are using petrol as one of the raw materials. Daily you purchase 1,000 litres of
petrol at Rs.28.50 per ltire. 5% of it generally gets lost due to spillage and
evaporation. On a particular hot and dry day, the issue of petrol from 1,000 litres Loss due to spillage and evaporation - 30 litres. , Rate
drum was as follows : To job X 200 litres; job Y 400 litres and job Z 320 litres. After of charge per litre of petrol - Rs.30/-
these issues the drum was empty. Calculate per litre charge for use of petrol,
quantum of loss and total quantum of petrol used for jobs X,Y and Z.
Manufacturing overheads represents all costs incurred in the factory including direct
FALSE
material cost and direct labour cost.
Profitability statement indicates the amount of assets & liabilities. FALSE
Provision for discount on debtors account should be credited to the Profit and Loss
FALSE
Account.
Balance sheet indicates the expenditure & income from the business. FALSE
Absorption costing is more suitable for decision making than marginal costing FALSE
Bank charges debited in the pass book represent clerical mistake on the part of the
FALSE
bank employees.
While preparing the labour cost budget, factors such as overtime working or night
FALSE
shift working may be ignored.
To take make or buy decision under the marginal costing , if purchase price of the
product is less than its variable cost it is advisable to go for manufacturing FALSE
proposition.
Credit balances in all the Personal & Real accounts appear on asset side. FALSE
Non-operating / financial expenses are added while calculating net profit. FALSE
Bin Card is having all the information of item received and issued. FALSE
Cost Accounting is concerned with calculation of the profitability and state of affairs
FALSE
of the organization as a whole.
Financial accounting may deal with the ascertainment of cost & calculation of
FALSE
profitability of the individual product.
Amount invested in purchasing Fixed Asset is a revenue expenditure. FALSE
Valuation of returns indicates the material returned by store department to
FALSE
production department
A good wage payment system will punish the workers for the matters beyond the
FALSE
control of the workers.
Under marginal costing technique only fixed costs are considered as relevant for
FALSE
decision making.
Management Accounting 38
Uniform Costing disturbs the healthy competition in the industry FALSE
The danger level fixed below maximum level FALSE
(No. of unit * Rate of depreciation per unit ) this formula is used for written down
FALSE
value method.
If the product is labour intensive, more stress may be necessary on inventory
FALSE
control procedure.
Under time rate system a worker is paid on the basis of production achieved by him. FALSE
Cost Accounting restrict itself with historical transactions FALSE
Generally speaking income represents wealth increase and business success;
FALSE
higher the income, lower will be the success of a business.
Bank reconciliation statement is a systematic presentation of errors made by the
FALSE
accountant.
Control on purchase of material is exercised by the storekeeper. FALSE
The best way to reduce labour cost is to recruit cheap labour. FALSE
Sundry creditors transfer to asset side. FALSE
As soon as the suspense account balance is wiped out , it may be assumed that all
FALSE
mistakes have been corrected.
Credit sale of Rs. 5000 to Bobby should be entered in the purchase book. FALSE
Flux method is important method of wage payment. FALSE
Material Mix Variance occurs where only one raw material is required FALSE
Variable cost + Profit = Sales FALSE
Treating capital receipt as revenue income is an example of errors of commission. FALSE
Cheque received from a client on 28th September, 2004 must be entered in the
FALSE
bank book only after it is credited in the pass book.
Under time rate system a worker is paid on the basis of production achieved by him
FALSE
in a given time.
A pre-determined factory overhead rate holds up product costing. FALSE
A bill of Rs. 500 for old furniture sold to Raj, was entered in the sales day book FALSE
Abnormal cost indicates that cost which is normally incurred at a certain level of
FALSE
output under normal circumstances.
Indirect material cost assist the manufacturing process is an integral part of finish
FALSE
goods.
Fixed cost is the cost that varies in direct proportion with the level of activity or
FALSE
volume of operations.
Standard costing and Marginal Costing are the best possible tools available to the
FALSE
management for cost control
Penalty paid for delay in payment to creditors represents uncontrollable cost. FALSE
Management Accounting 39
The bin card and stores ledger, being independent records, comparison of these
FALSE
two records should be avoided.
Amortisation of goodwill should be considered while preparing cash budget. FALSE
Uniform costing system is a pre-requisite to an inter-firm comparison of firms
FALSE
belonging to the different industries.
The effect of price reduction is always reduction in the margin of safety and also
FALSE
reduction in the break even point.
If excess of cash is estimated in the cash budget, it may be possible to utilise it to
FALSE
give bonus to the employees.
Any amount of profit earned in the past which is not distributed to the owner,
FALSE
belongs to the creditors.
Direct labour hour rate method of absorption of overheads is suitable where most of
FALSE
the production is done by using machines.
The sales mix variance highlights the fact that the actual mix of sales has been in
FALSE
the same ratio as budgeted.
The sum of indirect material cost, indirect labour cost and indirect expenses is
FALSE
termed as factory cost.
In the ledger account only credit entries relating to a particular account are posted. FALSE
Cost Accounting is a legal requirement. FALSE
Cash account can have a credit balance. FALSE
Period cost is the cost assigned to the products. FALSE
Financial Statements which are generated as a result of the management
FALSE
accounting report & financial performance of the organization as a whole.
An entry in the stores ledger is required for transfer of material from one job to
FALSE
another in the same department.
GAIL having monopoly in the CNG (Compressed Natural Gas) market can
FALSE
implement the Uniform costing system.
The balance sheet has three columns, viz. assets, liabilities and ledger folio. FALSE
It is very easy to measure the portion of increased sales which is due to expenditure
FALSE
incurred for advertisement of the product
Depreciation under Reducing Balance Method is calculated as (Number of units *
FALSE
Rate of depreciation per unit)
All cash sales are recorded in the sales register. FALSE
Indirect material cost is an integral part of finished goods. FALSE
All personal expenses of the owner should be debited to the organisation's profit
FALSE
and loss account.
Material mix and material yield variance can be calculated even when only one raw
FALSE
material is used for production.
Management Accounting 40
In marginal costing, under and over absorption of fixed overheads is bound to arise. FALSE
There is no need to open a suspense account if the trial balance does not agree. FALSE
A contractor’s bill for the extension of premises amounting to Rs. 2750 has been
FALSE
debited to building repair account
Under time rate system a worker is paid on the basis of production achieved by him
FALSE
in a given time.
The phrase 'By Balance c/d.' written on the credit side of the rent account, indicates
FALSE
credit balance for this account.
Piece rate system is suitable when quality of goods produced is of extreme
FALSE
importance.
A firm earns profit when contribution is equal to fixed costs under variable costing. FALSE
Profitability statement indicates the amount of assets & liabilities. FALSE
Balance sheet indicates the expenditure & income from the business. FALSE
According to the standard costing principles, only adverse variance must be further
FALSE
investigated.
The purchase account should be debited when an order is placed with the
FALSE
supplier of material.
Control on purchase of material is exercised by the storekeeper. FALSE
Differential cost analysis is incorporated in the cost books. FALSE
The process of recording attendance time of the workers is known as time booking. FALSE
The phrase 'By Balance c/d.' written on the credit side of the rent account, indicates
FALSE
credit balance for this account.
Margin of safety = Contribution / Profit volume ratio FALSE
While calculating the minimum level, normal lead time is not necessary FALSE
Favorable variances need on investigation FALSE
Debit the receiver & credit the giver is a rule of Real a/c. FALSE
The situation of over absorption arises if the overheads absorbed are less than the
FALSE
actual overheads.
Due to errors of principle the arithmetical accuracy of the trial balance get affected. FALSE
canteen facility to workers, health and safety services are examples of monetary
FALSE
incentives.
If actual cost is more than the standard cost then it is called favorable variance. FALSE
The aggregate of indirect material cost, indirect labour cost and indirect expenses is
FALSE
termed as factory cost.
Management Accounting 41
According to the standard costing principles, only adverse variance must be further
FALSE
investigated.
Error of commission refer to a situation where a transaction is not recorded in the
FALSE
books of account.
Semi variable expenses fluctuate in direct proportion to volume. FALSE
The greater the volume of production, the greater is the unit cost of production. FALSE
Routing the purchase requisition through the purchase department entails
FALSE
unnecessary delay in receiving the required materials.
Under ABC analysis, category A represents items with high volumes. FALSE
Narration must be mentioned in the ledger. FALSE
Receipts and payments method of cash budget is useful for preparing long term
FALSE
estimates.
Make or buy decisions are made by comparing fixed cost with outside purchase
FALSE
price.
Depreciation on assets is credited to the trading account. FALSE
Balance sheet is a part of the ledger accounts maintained by the company. FALSE
The term 'scheduled costs' is used interchangeably with the word 'standard costs'. FALSE
A low inventory turnover ratio should always be preferred. FALSE
Under the Rowan plan bonus is a fixed percentage. FALSE
High time wages means necessarily high cost of production. FALSE
Factory overheads consist of all overhead costs incurred from the stage of
TRUE
procurement of material till the production of finished goods.
If the physical stock is less than the stock as per the stores ledger, such shortage
TRUE
should be treated as an issue of material.
Marginal costing is a technique of cost control. TRUE
The problem of multiple key factors can be solved with the help of techniques like
TRUE
linear programming, operations research, etc.
Accounting is an art of recording, classifying & summarizing in a significant manner. TRUE
The process of accounting split into three steams i.e. financial, cost, management
TRUE
accounting.
Financial statements are basically in two forms i.e. profitability statement and
TRUE
balance sheet.
A business is an activity carried out with the intention of earning the profit. TRUE
Accounting refers to the process of analyzing & interpreting the information already
TRUE
recorded in the books of accounts.
Depreciation, interest and property tax continue even when the operations are
TRUE
discontinued.
Management Accounting 42
Balance sheet indicates the financial status of the business at given period. TRUE
Income received in advance transfer to current liabilities TRUE
For taking make or buy decision marginal costing technique provide useful
TRUE
assistance.
The variable costs are controllable at the lower level. TRUE
Due to errors of principle the arithmetical accuracy of the trial balance does not get
TRUE
affected.
Budget is prepared for a fixed period of time. TRUE
A very wide scope of Management Accounting is the limitation by itself. TRUE
Financial Accounting discloses the financial performance & financial statements of
TRUE
the business as a whole.
Management Accounting is the process of analysis and interpretation of financial
TRUE
data collected with help of financial accounting and cost accounting
P&L statement which is a period statement & relates to a certain period tells about
TRUE
results of operations.
Management Accounting aims at enabling the management to take the decisions
TRUE
about the future. It may consider future data as well as non-financial factors.
Financial Accounting primarily protects the interests of the outsiders dealing with
TRUE
organization in various capacities.
Cheques issued but not yet presented – the balance as per the bank pass book will
TRUE
be higher.
The wage payment system should take into consideration the external obligations
such as the Minimum wages Act and the agreement entered into by the TRUE
organization with the workers.
Product mix refers to the proportion in which various products of a company can be
TRUE
sold.
Depreciation does not involve cash out flow TRUE
The difference between standard cost and actual cost is termed as Variance. TRUE
Wage payment system should be properly tied up with quality control procedures to
TRUE
ensure that the workers are paid only for good and quality production.
A good wage payment system will not punish the workers for the matters beyond
TRUE
the control of the workers.
Fixed assets do not give the returns during the same period during which they are
TRUE
paid for
Amount with drawn for personal purpose drawing A/C to be debited. TRUE
In a Balance-Sheet right hand side is referred as assets side and left hand side is
TRUE
referred as liabilities.
New companies can adopt Uniform costing system as a ready-made system. TRUE
Management Accounting 43
Re-order level for materials is determined considering maximum consumption and
TRUE
maximum delivery period.
Under some circumstances, it may be advisable to sell at prices equal to or below
TRUE
the marginal cost ignoring fixed cost.
A bank reconciliation statement is prepared on a particular date. TRUE
Fixed cost tends to vary with time rather than with level of activity. TRUE
Flexible budget is an effective tool for evaluation of performance. TRUE
Maintenance Department is a service cost centre. TRUE
For a manufacturing company, dividend received is a non-operating income. TRUE
Suspense account is closed automatically after rectification of all the errors. TRUE
The sum of indirect material cost, indirect labour cost and indirect expenses is
TRUE
termed as Overheads.
Error of commission refer to calculation errors, totaling errors, errors in carrying
TRUE
forward etc.
Standard costing is always accompanied by a system of budgeting but budgetary
TRUE
control may be operated in business where standard costing is impracticable.
Budgetary control system provides a basis for establishment of the incentive
TRUE
systems.
A fixed budget is useful only when the actual level of activity corresponds to the
TRUE
budgeted level of activity.
Price based on Uniform Costing may be taken to be reliable and representative of
TRUE
the whole industry.
Bank reconciliation statement can be prepared on weekly basis. TRUE
Real Accounts may also consist the accounts of some intangible assets like
TRUE
Goodwill Account
The rate at which the depreciation is to be calculated are also specified in the
TRUE
Income Tax Act 1961.
Material cost is the first and probably the most important element of cost. TRUE
If the organisation follows the policy of considering predetermined overhead
absorption rates, it may face the problem of under or over absorption of overheads TRUE
if the actual overheads to be absorbed o
The analysis of overhead variances is different and the most complex task. TRUE
Depreciation can be defined as a permanent, continuous and gradual reduction in
TRUE
the book value of a fixed asset.
Linking overhead to a cost unit is known as overhead absorption. TRUE
Malik started business by contributing cash Rs.50,000/- and his personal car worth
TRUE
Rs.25,000/-; thus his capital account should be credited with Rs.75,000/-.
Management Accounting 44
While passing the journal entry, it is of utmost importance to ensure that the total of
TRUE
amount debited is equal to the total of the amount credited.
The cost of abnormal time may be recovered by inflating the hourly labour rate. TRUE
Interim dividend paid by the company should be debited to the profit and loss
TRUE
appropriation account.
A grinding machine is an example of impersonal cost centre TRUE
Overhead absorption rate will be different at different capacity levels. TRUE
Uniform Costing simplifies the work of wage boards of fixing minimum wages and
TRUE
fair wages.
Balance sheet is considered to be a part of the financial statements. TRUE
Uniform costing may lead to monopolistic conditions within the industry, prices may
TRUE
be raised and customers may suffer.
Budgetary control is one of the techniques of management accounting. TRUE
Management Accounting is a developed stage of Cost Accounting TRUE
Fixed overhead variances may be calculated either on the basis of units of output or
TRUE
on the basis of standard hours.
Financial Accounting discloses the financial performance & Financial status of the
TRUE
business as a whole
Book keeping is clerical while accounting is managerial TRUE
1) Cost Accounting and Management Accounting are similar to each other in many
TRUE
respects.
The reports generated by financial accounting are meant for the use by
TRUE
management for effective decisions.
Cost Accounting may be considered to be a part of management Accounting. TRUE
It is said that marginal costs are used primarily in guiding decisions that are yet to
TRUE
be made.
Management Accounting is not at all a legal requirement TRUE
The role of the budget committee may be taken as an advisory role to the Chief
TRUE
Executive.
Trading account is an important account which will be used to analyse how
TRUE
successful and how efficiently the firm runs its business.
The labour cost which can be identified with the individual cost centre is known as
TRUE
the Direct Labour Cost.
The amount of profit which is retained by the organisation is transferred to
TRUE
'Reserves and Surplus' in the balance sheet.
Yield variance equal to zero indicates that the standard yield and actual yield are the
TRUE
same.
Management Accounting 45
Trading account is used to analyse how successfully and how efficiently the firm
TRUE
runs, particularly with regards to the maintenance of the gross profit margin.
Credit balance in interest account indicates income for the organisation. TRUE
Patents and Trade Marks Account is a Real Account. TRUE
Dividend received is a Non-operating Income. TRUE
The ultimate incorporation of all functional budgets takes the form of budgeted Profit
TRUE
& Loss Account and Balance Sheet.
Long term loan borrowed from financial institution comes under the heading of long
TRUE
term liabilities.
Balance sheet indicates the financial status of the business at given period. TRUE
Category C items, as per the ABC analysis, usually refers to indirect material. TRUE
A business is an activity carried out with the intention of earning the profit. TRUE
Uniform Costing simplifies the work of wage boards of fixing minimum wages and
TRUE
fair wages.
Accounting refers to the process of analyzing & interpreting the information already
TRUE
recorded in the books of accounts.
Accounting is an art of recording, classifying & summarizing in a significant manner. TRUE
Match TRUE
Profit = Profit volume ratio X Margin of safety TRUE
To Increase the existing production capacity, additional capital expenditure is
TRUE
required.
Whatever is to be sold need not be produced. TRUE
Purchased computers of Rs. 50,000 come under the heading of fixed asset TRUE
Total of purchase register for the month of March is taken 50,000 instead of 55,000.
Posting to individual A/C of supplier total to correct amount is 55,000 but purchase TRUE
account is debited by Rs. 50,0
There is reverse relationship between the ordering cost and carrying cost TRUE
Where overheads chargeable to the department are Rs. 5000/- , direct labour hours
TRUE
worked are 24000 then labour hour rate is Re. 0.2083 labour hour.
The Budget key factor may be in the form of sales, raw material, labour etc. TRUE
Indirect labour cost indicates that labour cost which cannot be identified with the
TRUE
individual cost centre.
Head of the Department should sign the purchase requisition. TRUE
Compound journal entry avoids duplication of effort. TRUE
Fundamentally, changes in price and changes in sales volume give rise to sales
TRUE
variances.
Management Accounting 46
The actual loss incurred by a company, due to fire, is the extent of difference
between the cost of goods destroyed and the amount of claim settled by the TRUE
insurance company.
Lack of efficient control on various aspects related to raw-material increases the
TRUE
material cost component of the finished product.
The purpose of profit and loss account is to brign together information which relates
TRUE
to gross profit and the expenses for running the business.
According to Reducing Balance Method, the depreciation is provided at a
predetermined percentage on the balance of cost of asset after deduction of the TRUE
depreciation previously charged.
The perpetual inventory system enables management to ascertain stock without
TRUE
physical verification.
The rates at which the depreciation is to be calculated are specified in the Income
TRUE
Tax Act 1961 and The Companies Act, 1956.
The actual hours taken by the labour are compared with the standard hours allowed
TRUE
for output to find out the labour yield variance.
Uniform costing system is defined as a system using common concepts and
standard accounting practices by different entities in different industry to facilitate TRUE
inter-firm comparison.
Marginal costing rewards sales whereas absorption costing rewards production. TRUE
Straight Piece rate system The rate of payment is fixed per piece
Diemer system Halsey system & Gantt System
Time rate System Worker is paid on the basis of time attended by him
Workers are paid according to the production achieved
Payment by Result
by him
Different hourly rates are fixed for different levels of
Differential Time rate
efficiency
Global Tender Any supplier from the global market can fill the tender
Single Tender Tender from only one supplier
Limited Tender Tenders from reliable but few suppliers
Open Tender Any supplier from the local market can fill the tender
[( Actual sales - Break even sales) ]/ Actual sales Margin of safety as a percentage of actual sales
Fixed cost / Contribution margin ratio Break even point
Fixed cost - (Sales X Profit volume ratio) Profit
(Sales X Profit volume ratio) -Fixed cost Loss