Cost and Management Accounting 4

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Objective Questions and Answers of MBA: Cost and Management Accounting 4

Subject: Objective Questions and Answers of MBA: Cost and Management Accounting 4

Part 4: Objective questions and answers of Cost and Management Accounting


Q1. Which one out of the following is not an inventory valuation method?



c) Weighted Average

d) EOQ


Q2. Costs associated with the labour turnover can be categorized into:

a) Preventive Costs only

b) Replacement costs only

c) Both of the above

d) Machine costs


Q3. During September, 300 labour hours were worked for a total cost of Rs 4800. The variable overhead expenditure variance was Rs 600 (A). Overheads are assumed to be related to direct labour hours of active working. What was the standard cost per labour hour?

a) Rs 14

b) Rs 16.50

c) Rs 17.50

d) Rs 18


Q4. A ltd is a manufacturing company that has no production resource limitations for the foreseeable future. The Managing Director has asked the company mangers to coordinate the preparation of their budgets for the next financial year. In what order should the following budgets be prepared?

1) Sales budget

2) Cash budget

3) Production budget

4) Purchase budget

5) Finished goods inventory budget

a) (2), (3), (4), (5), (1)

b) (1), (5), (3), (4), (2)

c) (1), (4), (5), (3), (2)

d) (4), (5), (3), (1), (2)


Q5. State which of the following are the characteristics of service costing.

1) High levels of indirect costs as a proportion of total costs

2) Use of composite cost units

3) Use of equivalent units

a) (1) only

b) (1) and (2) only

c) (2) only

d) (2) and (3) only


Q6. After inviting tenders for supply of raw materials, two quotations are received as follows- Supplier P Rs. 2.20 per unit, Supplier Q Rs. 2.10 per unit plus Rs. 2,000 fixed charges irrespective of the units ordered. The order quantity for which the purchase price per unit will be the samea) 22,000 units

b) 20,000 units

c) 21,000 units

d) None of the above.


Q7. The summarized balance sheet of Auto light Limited shows the balances of previous and current year of retained earnings Rs. 25,000 and Rs. 35,000, If dividend paid during the current year amounted to Rs. 5,000 then profit earned during the year will be:

a) Rs. 5,000

b) Rs. 55,000

c) Rs. 15,000

d) Rs. 65,000


Q8. When the sales increase from Rs. 40,000 to Rs. 60,000 and profit increases by Rs. 5,000, the P/V ratio is ______________

a) 20%

b) 30%

c) 25%

d) 40%.


Q9. Sunk costs are:

a) Relevant for decision making

b) Not relevant for decision making

c) Cost to be incurred in future

d) Future costs


Q10. Economic order quantity is that quantity at which cost of holding and carrying inventory is:

a) Maximum and equal

b) Minimum and equal

c) It can be maximum or minimum depending upon case to case.

d) Minimum and unequal


Q11. Calculate re-order level from the following:

Safety stock: 1000 units

Consumption per week: 500 units

It takes 12 weeks to reach material from the date of ordering.

a) 1000 units

b) 6000 units

c) 3000 units

d) 7000 units


Q12. Calculate the labour turnover rate according to Separation method from the following: No. Of workers on the payroll:

– At the beginning of the month: 500

– At the end of the month: 600

During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest were engaged for an expansion scheme.

a) 4.55%

b) 1.82%

c) 6%

d) 3%


Q13. Which of the following is not a reason for an idle time variance?

a) Wage rate increase

b) Machine breakdown

c) Illness or injury to worker

d) Non- availability of material


Q14. S produces and sells one product, P, for which the data are as follows:

Selling price Rs 28

Variable cost Rs 16

Fixed cost Rs 4

The fixed costs are based on a budgeted production and sales level of 25,000 units for the next period. Due to market changes both the selling price and the variable cost are expected to increase above the budgeted level in the next period. If the selling price and variable cost per unit increase by 10% and 8% respectively, by how much must sales volume change, compared with the original budgeted level, in order to achieve the original budgeted profit for the period?

a) 10.1% decrease

b) 11.2% decrease

c) 13.3% decrease

d) 16.0% decrease


Q15. A company makes a single product and incurs fixed costs of Rs. 30,000 per annum. Variable cost per unit is Rs. 5 and each unit sells for Rs. 15. Annual sales demand is 7,000 units. The breakeven point is:

a) 2,000 units

b) 3,000 units

c) 4,000 units

d) 6,000 units


Q16. ____________ is a detailed budget of cash receipts and cash expenditure incorporating both revenue and capital items.

a) Cash Budget

b) Capital Expenditure Budget

c) Sales Budget

d) Overhead Budget


Q17. Following information is available of PQR for year ended March, 2013: 4,000 units in process, 3,800 units output, 10% of input is normal wastage, Rs. 2.50 per unit is scrap value and Rs. 46,000 incurred towards total process cost then amount on account of abnormal gain to be transferred to Costing P&L will be:-

a) Rs. 2,500

b) Rs. 2,000

c) Rs. 4,000

d) Rs. 3,500


Q18. Calculate the prime cost from the following information:

Direct material purchased: Rs. 1,00,000

Direct material consumed: Rs. 90,000

Direct labour: Rs. 60,000

Direct expenses: Rs. 20,000

Manufacturing overheads: Rs. 30,000

a) Rs. 1,80,000

b) Rs. 2,00,000

c) Rs. 1,70,000

d) Rs. 2,10,000


Q19. Calculate EOQ (approx.) From the following details:

Annual Consumption: 24000 units

Ordering cost: Rs. 10 per order

Purchase price: Rs. 100 per unit

Carrying cost: 5%

a) 310

b) 400

c) 290

d) 300


Q20. Labour turnover means:

a) Turnover generated by labour

b) Rate of change in composition of labour force during a specified period

c) Either of the above

d) Both of the above


Part 4: Objective questions and answers of Cost and Management Accounting


Q1. Answer d


Q2. Answer c


Q3. Answer a


Q4. Answer b


Q5. Answer b


Q6. Answer b


Q7. Answer c


Q8. Answer c


Q9. Answer b


Q10. Answer b


Q11. Answer d


Q12. Answer a


Q13. Answer a


Q14. Answer b


Q15. Answer b


Q16. Answer a


Q17. Answer a


Q18. Answer c


Q19. Answer a


Q20. Answer b

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