Cost and Management Accounting 7

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Objective Questions and Answers of MBA: Cost and Management Accounting 7

Subject: Objective Questions and Answers of MBA: Cost and Management Accounting 7

Part 7: Objective questions and answers of Cost and Management Accounting


Q1. Calculate cost of sales from the following: 

net works cost: rs. 2,00,000

office & administration overheads: rs. 1,00,000

opening stock of wip: rs. 10,000

closing stock of wip: rs. 20,000

closing stock of finished goods: rs. 30,000

there was no opening stock of finished goods.

Selling overheads: rs. 10,000

a) Rs. 2,70,000

b) Rs. 2,80,000

c) Rs. 3,00,000

d) Rs. 3,20,000


Q2. From the following information, calculate the extra cost of material by following eoq: annual consumption: = 45000 units

ordering cost per order: = rs. 10

carrying cost per unit per annum: = rs. 10

purchase price per unit = rs. 50

re-order quantity at present = 45000 units

there is discount of 10% per unit in case of purchase of 45000 units in bulk.

a) No saving

b) Rs. 2,00,000

c) Rs. 2,22,010

d) Rs. 2,990


Q3. Bdl ltd. Is currently preparing its cash budget for the year to 31 march 2014. An extract from its sales budget for the same year shows the following sales values.

March 60,000

April 70,000

May 55,000

June 65,000

40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in month after sale and take a 2% discount. 27% are expected to pay in the second month after the sale, and the remaining 3% are expected to be bad debts. The value of sales budget to be shown in the cash budget for may 2013 is

a) Rs 60,532

b) Rs 61,120

c) Rs 66,532

d) Rs 86,620


Q4. _______________ is also known as working capital ratio.

a) Current ratio

b) Quick ratio

c) Liquid ratio

d) Debt-equity ratio


Q5. Element/s of cost of a product is:

a) Material only

b) Labour only

c) Expenses only

d) Material, labour and expenses


Q6. Describe the method of costing to be applied in case of nursing home:

a) Operating costing

b) Process costing

c) Contract costing

d) Job costing


Q7. Out of the following, what is not the work of purchase department?

a) Receiving purchase requisition

b) Exploring the sources of material supply

c) Preparation and execution of purchase orders

d) Accounting for material received


Q8. Calculate the labour turnover rate according to replacement 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%


Q9. In process costing, if an abnormal loss arises, the process account is generally

a) Debited with the scrap value of the abnormal loss units

b) Debited with the full production cost of the abnormal loss units

c) Credited with the scrap value of the abnormal loss units

d) Credited with the full production cost of the abnormal loss units


Q10. In case of joint products, the main objective of accounting of the cost is to apportion the joint costs incurred up to the split off point. For cost apportionment one company has chosen physical quantity method. Three joint products 'a', 'b' and 'c' are produced in the same process. Up to the point of split off the total production of a, b and c is 60,000 kg, out of which 'a' produces 30,000 kg and joint costs are rs. 3,60,000. Joint costs allocated to product a is

a) Rs. 1,20,000

b) Rs. 60,000

c) Rs. 1,80,000

d) None of the these


Q11. Calculate workers left and discharged from the following: labour turnover rates are

20%, 10% and 6% respectively under flux method, replacement method and separation method. No. Of workers replaced during the quarter is 80.

a) 112

b) 80

c) 48

d) 64


Q12. Cg co manufactures a single product t. Budgeted production output of product t during

June is 200 units. Each unit of product t requires 6 labour hours for completion and cg co anticipates 20 per cent idle time. Labour is paid at a rate of rs7 per hour. The direct labour cost budget for march is

a) Rs 6,720

b) 8,400

c) 10,080

d) 10,500


Q13. The p/v ratio of a company is 50% and margin of safety is 40%. If present sales is rs.

30,00,000 then break even point in rs. Will be

a) Rs. 9,00,000

b) Rs. 18,00,000

c) Rs. 5,00,000

d) None of the above


Q14. Calculate the value of closing stock from the following according to fifo method:

1st january, 2014: opening balance: 50 units @ rs. 4


5th january, 2014: 100 units @ rs. 5

12th january, 2014: 200 units @ rs. 4.50


2nd january, 2014: 30 units

18th january, 2014: 150 units

a) Rs. 765

b) Rs. 805

c) Rs. 786

d) Rs. 700


Q15. Which of the following would explain an adverse variable production overhead efficiency variance?

Employees were of a lower skill level than specified in the standard

Unexpected idle time resulted from a series of machine breakdown

Poor quality material was difficult to process

a) (1), (2) and (3)

b) (1) and (2)

c) (2) and (3)

d) (1) and (3)


Q16. A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total labour cost budgeted for the job is rs36,300. What is the labour cost per hour( to the nearest cent)?

a) Rs 8.25

b) Rs 8.80

c) Rs 11.00

d) Rs 14.67


Q17. Capital gearing ratio is ______________.

a) Market test ratio

b) Long-term solvency ratio

c) Liquid ratio

d) Urnover ratio


Q18. A transport company is running five buses between two towns, which are 50 kms apart. Seating capacity of each bus is 50 passengers. Actually passengers carried by each bus

were 75% of seating capacity. All buses ran on all days of the month. Each bus made one round trip per day. Passenger kms are:

a) 2,81,250

b) 1,87,500

c) 5,62,500

d) None of the above


Q19. Ca co manufactures a single product and has drawn up the following flexed budget for

the year.

                                                       60%                    70%                       80%

                                                       rs                         rs                           rs

Direct materials                         120,000             140,000               160,000

Direct labour                              90,000                105,000               120,000

Production overheads              54,000                58,000                 62,000

Other overheads                       40,000                40,000                 40,000

Total cost                                    304,000              343,000              382,000

What would be the total cost in a budget that is prepared at the 77% level of activity?

a) Rs 330,300

b) Rs 370,300

c) Rs 373,300

d) Rs 377,300


Q20. ______________ costing is a type or technique of costing.

a) Marginal

b) Batch

c) Multiple

d) Job


Part 7: Objective questions and answers of Cost and Management Accounting


Q1. Answer b


Q2. Answer d


Q3. Answer a


Q4. Answer a


Q5. Answer d


Q6. Answer a


Q7. Answer d


Q8. Answer b


Q9. Answer d


Q10. Answer c


Q11. Answer c


Q12. Answer d


Q13. Answer b


Q14. Answer a


Q15. Answer d


Q16. Answer a


Q17. Answer b


Q18. Answer c


Q19. Answer b


Q20. Answer a

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