P10A Cost & MGNT Ac PDF

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P10A COST & MANAGEMENT ACCOUNTING
Objective Question in Books
Multiple Choice Questions:

1. Planning and control are done by
A. top management B. lowest level of management
C. all levels of management D. None of the above
2. Decision-making concerns the

A. Past B. Future C. Past and future both D. None of the above
3. The comparison of actual results with expected results is referred to as

A. Feedback B. Controlling C. None
4. Decision-making is involved in the following function/s of management

A. Planning B. Organizing C. Controlling D. All the above functions
5. This function works like a policeman to ensure the performance of the employees:
A. Controlling B. Planning C. Organizing D. None of these
6. The use of management accounting is

A. Compulsory B. Optional C. Mandatory as per the law D. None of the above
7. Management Accounting relates to

A. Collection of data from different sources B. Modification of data to meet the specific needs
C. Presentation of data D. All of the above
8. Division of Accounting is divided into

A. 2 B. 3 C. 4 D. None of the above
[Ans: 1. (a) 2. (b) 3. (a) 4. (d) 5 (a) 6. (b) 7. (d) 8. (b)]
Match the followings:

Column A Column B
1 Management Accounting is a tool to. A Effective and efficient
2 Management accounting is composed of. B Planning, Organising, Controlling and Decision making
3 Organisation has to be both C Maximisation of profit and minimisation of losses.
4 Objective of management Accounting D Management
5 Function of Management E Management and Accounting
[Ans: D, E, A, C, B]
True or False:
1. Any form of accounting, which enables a business to be conducted more efficiently can be regarded as
Management Accounting.
2. Standard formats are used in management accounting for preparation of reports.
3. In Management Accounting, Generally Accepted Accounting Principles and Practices of Accounting
govern the preparation of reports.
4. It is optional for a company to have financial accounting
5. Management Accounting reports are public documents
[Ans: 1. True, 2. False, 3. False, 4. False, 5. False]
Fill in the blanks:

1. Decision-making is a process of choosing among ___________ alternatives.
2. Management Accounting tailors ___________information to meet the specific needs of management.
3. Management Accounting is ___________in its orientation.
4. The accounting information system for financial accounting and __________accounting is same.
Page 2
5. Management accounting a ________ tools to management.
[Ans: Competing, Financial, Futuristic, Management, Modern]
1. The breakeven point is the point at which,

A. There is no profit, no loss B. Contribution margin is equal to total fixed cost
C. Total fixed cost is equal to total revenue D. All of the above.
2. A large margin of safety indicates

A. Over capitalization B. The soundness of business
C. Overproduction D. None of the above
3. The selling price is `20 per unit, variable cost `12 per unit, and fixed cost `16,000, the breakeven-point in
units will be
A. 800 units B. 2000 units C. 3000 units D. None of these
4. The P/V ratio of a product is 0.4 and the selling price is `40 per unit. The marginal cost of the product
would be,
A. ` 8 B. ` 24 C. ` 20 D. ` 25
5. Fixed cost per unit decreases when,

A. Production volume increases B. Production volume decreases
C. Variable cost per unit decreases D. Variable cost per unit increases.
6. Each of the following would affect the breakeven point except a change in the,
A. Number of units sold. B. Variable cost per unit C. Total fixed cost D. Sales price per unit.
7. A decrease in sales price,

A. Does not affect the break-even-sales. B. Lowers the net profit
C. Increases the break-even-point. D. Lowers the break-even-point
8. Under the marginal costing system, the contribution margin discloses the excess of,
A. Revenue over fixed cost B. Projected revenue over the break-even-point
C. Revenues over variable costs D. Variable costs over fixed costs.
9. Cost volume-profit analysis allows management to determine the relative profitability of product by,
A. Highlighting potential bottlenecks in the production process
B. Keeping fixed costs to an obsolete minimum
C. Determine contribution margin per unit and projected profits at various levels production
D. Assigning costs to a product in a manner that maximizes the contribution margin.
10. Contribution margin is known as,

A. Marginal income B. Gross profit C. Net income D. Net profit.
State the following statement is true or false:

1. Marginal cost includes prime cost plus fixed overheads.
2. Contribution is the difference between the selling price and the variable costs.
3. An increase in the volume of the production will result in reduction in unit variable cost.
4. The amount of profit under absorption costing and marginal costing is one and the same.
5. All variable costs are included in the marginal cost.
6. Margin of safety is the difference between actual sales and the sales and the break even point.
7. The difference between the budgeted output and the actual output is known as margin of safety.
8. The breakeven point will be lower if the selling price is increased but the amount of cost does not
change.
9. At breakeven point margin of safety is nil.
10. When fixed cost is deducted from total cost, we get marginal cost.
Page 3
[Ans: 1-False; 2-True; 3-False; 4-False; 5-True; 6-True; 7-False; 8-False; 9-True; 10-True]
Match the following:

Column A Column B
1 Differential cost is adopted. A Contribution / Sales X 100
2 Contribution B Decision Making
3 P/V ratio C Profit/ Pv ratio
4 Differential costing D Differential Cost
5 Shut down point E To ascertain Pv ratio.
6 Marginal costing helps in the measuring of. F Fixed cost / Pv ratio
7 Margin of Safety G Fixed per unit
8 Difference between the costs of two alternatives H Divisional performance
is known as.
9 Variable cost remain I Marginal Costing
10 Breakeven point J Avoidable fixed cost / Pv ratio
[Ans: 1-I, 2-E, 3-A, 4-B, 5-J, 6-H, 7-C, 8-D, 9-G, 10-F]
Fill in the blanks:

1. In cost accounting, marginal cost does not include _____________ . Answer:
2. In absorption costing,_______________ cost is added to inventory. 1.-Fixed Cost;
3. Sales minus variable cost = fixed costs plus________________ . 2.-Fixed;
4. Profit volume ratio is contribution /__________________X 100 3.-Porfit;
5. At breakeven point total revenue is equal to costs. 4.-Sales;
6. In marginal costing, fixed costs are charged to__________________. 5.-Fixed;
Cost & Management Accounting and Financial Management 6.-Costing Profit and loss account;
88 The Institute of Cost Accountants of India 7.-Total Sales– BEP Sales;
7. Margin of safety is the difference between________and ________________ 8.-Variable
. cost;
8. In marginal costing, stock is valued at ___________. 9.-Fixed cost;
9. When the production volume is nil, the loss will be equal to_________. 10.-Key factor or Limiting factor]
10. Constraint on various resources is also known as _____________ .
Multiple Choice Questions:

1. Budget period depends upon…
A. The type of budget B. The nature of business,
C. The length of trade cycles D. All of these
2. A key factor is one which restricts…

A. The volume of production B. The volume of sales,
C. The volume of purchase, D. All of the above
3. Budget relating to the key factor is prepared…

A. After other budgets B. With other budgets C. Before other budgets D. None
4. The budgets are classified on the basis of…
A. Time B. Function C. Flexibility D. All
5. An example of long period budget is…

A. R& D budget B. Master budget C. Sales budget D. Personnel budget
6. Sales budget shows the sales details as…

A. Month wise B. Product wise C. Area wise D. All of the above
7. The main objective of budgetary control is…

A. To define the goal of the firm B. To coordinate different departments ANSWER:
C. To plan to achieve its goals D. All of the above 1-D, 2-A,
3-C, 4-D,
5-A, 6-A,
7-C, 8-B,
9-C, 10-C
Page 4
8. Fixed budget is useless for comparison when the level of activity…

A. Increases B. Fluctuates both ways C. Decreases D. Constant
9. Usually the production budget is stated in terms of…

A. Money B. Quantity C. Both D. None
10. Revision of budgets is

A. Unnecessary B. Can’t determine C. Necessary D. Inadequate data

Column A Column B Ans.:
1 A budget is a plan of action expressed in… A Definite period E
2 A budget is tool which helps the management in B Management C
planning and control of…
3 Budgetary control system acts as a friend, B
philosopher and guide to the… C Financial terms & Non financial terms
4 Budget is prepared for a… D Decision making A
5 Zero based Budgeting E All business activitie D
State whether the following statement is True or False:

1. Zero Based Budgeting cannot be used for Decision making. [Ans:
2. There is necessity to revise the budget. 1.False,
3. A budget is expressed in financial or Quantitative terms. 2.True,
4. A budget is prepared for a specified period. 3.True,
5. A flexible budget takes into account only fixed costs. 4.True,
6. The master budget is prepared first and all other budgets are sub ordinate to it 5.False,
7. The key factor should not be taken into account while preparing budgets. 6.False,
8. A budget is a summary of all functional budgets. 7.False,
9. A flexible budget is prepared for more than one level of activity. 8.True,
10. Cash budget shows the expected sources and utilisation of cash. 9.True,
10.True]
Fill in the Blanks:
1. Budgetary control system facilitates centralized control with ___________.
2. Budgetary control facilitates easy introduction of the ____________.
3. Budgetary control helps the management in ______________.
4. Budgetary control system helps the management to eliminate ________________________.
5. Budgetary control provides a basis for ______________.
6. Budgetary control helps to introduce a suitable incentive and remuneration based on __.
7. Budgetary control __________ replace management in decision making.
8. The success of budgetary control system depends upon the willing cooperation of ______.
9. Recording of actual performance is __________________.
10. Revision of budgets is ___________________.
[Ans: 1. Centralised & Decentralised Activity, 2. Standard Costing, 3. Obtaining Bank Credit,
4. Under and Over Capitalisation, 5. Remuneration Plans, 6. Inflationary Conditions,
7. Cannot, 8. All functional area of Management,
9. A step in Budgetary Control, 10. Necessary]
MULTIPLE CHOICE QUESTIONS:

1. Which of the following is true about standard costs?
A. They are the actual costs for delivering a product or service under normal conditions
B. They are predetermined costs for delivering a product or service under normal conditions.
C. They are the actual costs for producing a product under normal conditions
D. They are predetermined costs for delivering a product or service under normal and abnormal conditions.
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2. Which of the following is true?

A. Standard costs are predetermined rates for materials and labour only.
B. Standard costs are predetermined rates for materials only.
C. Standard costs are based on actual activity at the end of the period
D. Standard costs are predetermined rates for materials, labour, and overhead.
3. Which of the following is often the cause of differences between actual and standard costs of materials and
labour?
A. Price changes for materials B. Excessive labour hours
C. Excessive use of materials D. All of the above
4. Which of the following can be used to calculate the materials price variance?
A. (AQ – SQ) x SP B. (AP – SP) x AQ C. (AP – SP) x SQ D. (AQ – SQ) x AP
5. Which of the following is the difference between actual and standard cost of material caused by the actual
quantity of material used exceeding the standard quantity of material allowed?
A. Price variance B. Mix variance C. Quantity variance D. Yield variance
6. Which of the following departments is most likely responsible for a price variance in direct materials?
A. Warehousing B. Receiving C. Purchasing D. Production
7. The overhead variance is caused by the difference between which of the following?
A. Actual overhead and standard overhead applied
B. Actual overhead and overhead budgeted at the actual operating level
C. Standard overhead applied and budgeted overhead
D. Budgeted overhead and overhead applied
8. When are the overhead variances recorded in a standard costing system?

A. When the cost of goods sold is recorded
B. When the factory overhead is applied to work-in-process
C. When the goods are transferred out of work-in-process
D. When direct labour is recorded
9. Which of the following is true when recording variances in a standard costing system?
A. All unfavourable variances are debited B. Only unfavourable material variances are credited.
C. Only unfavourable material variances are debited. D. Only unfavourable variances are credited.
10. Which of the following operating measures would a manager want to see decreasing over time?
A. Merchandise inventory turnover B. Total quality cost
C. Percentage of on-time deliveries D. Finished goods inventory turnover
[Ans: B, D, D, B, C, C, A, B, A, B]

Column A Column B
1 Inter firm comparison A Technique to assist inter-firm comparison
2 Calendar Variance B Standard Sales – Actual Sales
3 Ind As-2 C Difference between Standard and Actual cost
4 Variance Analysis D Standard rate per hour X Deficit hour worked
5 Difficulty of inter firm comparison E Budgeted Sales – Actual Sales
6 Sales Price variance F About its utility
7 Uniform Costing G Inventory valuation
8 Uniform Costing H Technique of Costing
9 Variance Analysis I Technique for evaluating performance
10 Sales value variance J Management by Exception
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[Ans: I, D, G, A, F, B, H, J, C, E]
State whether the following statement is True or False: [Ans:

1. Standard costing works on the principle of exception. 1.True,
2. An increase in production means an increase in overall productivity. 2.False,
3. Difference between the standard cost and actual cost is called as variance. 3.True,
4. Uniform costing helps in free exchange of ideas among the participating members. 4.True,
5. A variance may be either favourable or adverse. 5.True,
6. There is no difference between standard costing and budgeting. 6.False,
7. The objective of uniform costing is wealth maximisation. 7.True,
8. Uniform costing is a method of costing. 8.False,
9. Uniform costing is a must for meaningful in a firm comparison. 9.True,
10. Standards are arrived at on the basis of past performance. 10.False]
Fill in the Blanks: 1.Adverse,
1. Ideal time variance is always ________________. 2.Mix Variance and Yield variance,
2. Material usage variance is the sum of ______________. 3.Uniform Costing,
3. ____________ is a must for meaningful inter firm comparison. 4.Predetermined Cost,
4. Standard cost is the ___________ cost. 5.Technique,
5. Uniform costing is a _____________ of costing. 6.Performance,
6. Inter firm comparison is the technique of evaluation of _____________. 7.Predetermined,
7. Standard cost is a _____________cost. 8.Basic Standard & Normal Standard,
9.Engineering,
8. Three types of standard ______________.
10.Favourable.]
9. Standards costing are applied in ____________ industry.
10. When standard cost is less than the standard cost, it is known as ___________ variance.
Work Book
(a) Choose the correct answer from the given four alternatives.
(i) Management Accounting is an integral part of management concerned with identifying,
presenting and interpreting information for:
(a) Formulating strategy (b) Planning and controlling activities
(c) Decision taking (d) All of the above
(ii) Which one of the following is true function of management in the light of management
accounting?
1. Planning, 2. Organising, 3. Controlling, 4. Decision-making and 5. Staffing
(a) 1,2 and 3 (b) 1, 2, 3 and 4 (c) 1, 2, 4 and 5 (d) 1, 2, 3, 4 and 5
(iii) Despite the development of Management Accounting as an effective discipline to improve the
managerial performance, it has some limitations. Which of the following is a limitation of
management accounting?
(a) Psychological Resistance (b) Physiological Resistance
(c) Both of the above (d) None of the above
(iv) The primary objective of Management Accounting is to _______________.
(a) maximize profits (b) minimize losses
(c) maximize profits or minimize losses (d) All of the above
(v) Management accounting is concerned with data collection from _____________.
(a) internal sources (b) external sources
(c) internal and external sources (d) internal or external sources
(vi) ‘Management Accounting is concerned with accounting information, which is useful to the
management.’ —This definition is given by ______________.
(a) Robert N. Anthony (b) Brown and Howard
(c) CIMA (d) The Institute of Chartered Accountants of England and Wales
(vii) The following is the limitation of management accounting –
(a) Costly Affair (b) Evolutionary Stage
(c) Psychological Resistance (d) All of the above
Answer:
(i) (ii) (iii) (iv) (v) (vi) (vii)
Page 7
(d) (d) (a) (d) (c) (a) (d)

(b) Match the statement in column I with the most appropriate statement in column II:
Column I Column II
1 Management Accounting A suitable information to internal and external users
2 Fiduciary Accounting B suitable information to operation management
3 Financial Accounting C suitable information to internal users
4 Cost Accounting D suitable information to third party
Answer: 1-c; 2-d; 3-a; 4-b
(c) State whether the following statements are true or false Ans:
(1) Management Accounting is a traditional approach to accounting 1-F;
(2) The information in the management accounting system is used for three different purposes. 2-T;
(3) Management accounting helps in decision making only, not in strategic decision making. 3-F;
(4) The scope of Management Accounting is broader than the scope of Cost Accounting. 4-T;
(5) As the reports generated by management accounting are not used by any external party, the 5-T;
business enterprises don’t need to take care of GAAP. 6-F;
(6) Management accounting records are kept for public. 7-T.
(7) Management Accountancy makes corporate planning and strategy effective.
Choose the correct alternative:

(i) Marginal costs is taken as equal to
a) Prime Cost plus all variable overheads b) Prime Cost minus all variable overheads
c) Variable overheads d) None of the above
(ii) Marginal costing is also known as

a) Direct costing b) Variable costing c) Both a and b d) None of the above
(iii) Which of the following costs is relevant in decision-making?

a) committed costs b) accounting costs c) historical costs d) cash costs
(iv) An opportunity cost is the cost of

a) lost business b) unplanned new business
c) obtaining new business opportunities d) the next best alternative course of action
(v) In a product mix decision, which is the most important factor to consider in order to try to maximize profit?
a) contribution per unit of a scarce resource used to make the product
b) contribution per unit of the product c) variable cost per unit of the product
d) product unit selling price
(vi) Which of the following costs incurred by a commercial airline can be classified as variable?
a) Interest costs on leasing of aircraft b) Pilots' salaries
c) Depreciation of aircraft d) None of these three costs can be classified as variable
(vii)The basic decision rule on acceptance of special contracts is: Ans:

a) Accept the special contract if additional fixed costs can be covered by contribution from other
i.-(a);
products
b) Accept the special contract if the additional revenue from the contract exceeds the fixed costs of ii.-(c);
manufacture iii.-(a);
c) Accept the special contract if it produces a positive contribution to fixed costs iv.-(a);
d) Accept the special contract if it produces a positive contribution to variable costs v.-(a);
vi.-(d);
(viii) When labour hour is the limiting factor, the ranking between products should be based on vii.-(c);
a) Contribution per unit b) Profit volume ratio viii.-(c);
c) Contribution per labour hour d) Contribution per head ix.-(d);
x.-(d).
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(ix) Which one of the following is the correct formula for minimum transfer price per unit?
a) Total cost per unit b) Variable cost per unit
c) Total cost per unit + Target profit d) Variable cost per unit + opportunity cost
(x) Which of the following costs is not relevant in decision making?

a) Variable cost b) Fixed cost c) Opportunity loss d) Avoidable fixed cost
2. State true or False.

(i) In marginal costing, managerial decisions are guided by profit.
(ii) In Absorption Costing, closing stock is valued at full cost.
(iii) In marginal costing, fixed costs are treated as period cost.
(iv) Marginal costing is a technique of cost control.
(v) When quantity (kg) of material is the limiting factor, products are ranked based on contribution per
unit.
(vi) When sales value (`) is the limiting factor, products are ranked based on Profit Volume ratio.
(vii) Fixed costs are always unavoidable.
(viii) Differential costing may be applied in both absorption costing and marginal costing.
(ix) Effective transfer pricing strategy ensures goal congruence.
(x) When there is adequate surplus capacity left for production, transfer price is exactly equal to the
variable cost per unit.
Solution: i. False; ii. True; iii. True; iv. False; v. False;
vi. True; vii. False; viii. True; ix. True; x. True.
3. Match the following items in Column ‘A’ with items shown in Column ‘B
Column A Column B Solution:
I General Administrative Overhead A Contribution I. D

II Marginal Costing B Relevant cost II. A
III Make or buy decision C Excess over Break-even sales III. B
IV Margin of safety D Unavoidable fixed cost IV. C
(a) Choose the correct answer from the given four alternatives.
(i) The budgetary control system is designed to fix responsibilities on executives through _________.
(a) preparation of budgets (b) execution of budgets (c) planning of budgets (d) zero base
budgeting
(ii) Budgetary Control helps as a basis for ______________.

(a) statutory audit (b) internal audit (c) both (a) and (b) (d) none of the above
(iii) Factors to be considered in Production Budget:

(a) Production plan (b) The capacity of the business concern
(c) Inventory Policy (d) All of the above
(iv) If budgets are prepared of a business concern for a certain period taking each and every
function separately such budgets are called ______________.
(a) Separate Budgets (b) Functional Budgets (c) Both of them (d) None of the above
(v) Which of the following is not an example of functional budget?

(a) Production budget (b) Cost of production budget (c) Materials budget (d) None of the above
(vi) Which of the following is an essential of a budget?

(a) It is prepared for a definite future period. 0
(b) It is a statement prepared prior to a defined period of time.
(c) The Budget is monetary and I or quantitative statement of policy. (d) All of the above
(vii) When preparing a production budget, the quantity to be produced equals

(a) sales quantity + opening inventory of finished goods + closing inventory of finished goods
Page 9
(b) sales quantity – opening inventory of finished goods + closing inventory of finished goods
(c) sales quantity – opening inventory of finished goods – closing inventory of finished goods
(d) sales quantity + opening inventory of finished goods – closing inventory of finished goods
(viii) In comparing a fixed budget with a flexible budget, what is the reason for the difference
between the profit figures in the two budgets?
(a) Different levels of activity (b) Different levels of spending
(c) Different levels of efficiency (d) The difference between actual and budgeted performance
(ix) When budget allowances are set without the involvement of the budget owner, the budgeting
process can be described as:
(a) top down budgeting (b) negotiated budgeting
(c) zero based budgeting (d) participative budgeting
(x) For which of the following would zero based budgeting be most suitable?
(a) Building construction (b) Mining company operations
(c) Transport company operations (d) Government department activities
Answer:
(i)- a (ii)-b (iii)-d (iv)-b (v)-d (vi)-d (vii)-b (viii)-a (ix)-a (x)-d
(b) Match the statement in column I with the most appropriate statement in column II: Ans :
Column I Column II
1. Principal budget factor A. 'rationalisation' 1-c; 2-d;
2. Incremental budgeting B. summary budget. 3a; 4-b.
3. ZBB C. sales demand
4. The Master Budget D. encourages slack
(c) State whether the following statements are true or false
1. A budget is not a quantitative statement.
Ans:
2. The principal budget factor is the factor which limits the activities of an organisation.
1-F;
3. The flexible budget also called as Sliding Scale Budget.
2-T;
4. The budget is imposed by lower management.
3-T;
5. The sales budget is an example of functional budget.
4-F;
6. Responsibility accounting is also called profitability accounting and activity accounting.
5-T;
7. Helpful in preparation of projected profit and loss statement, which is useful in evaluation of
6-T,
performance and profitability is one of the objectives and advantages of production budget.
7-T,
8. Flexible budget can be recasted on the basis of activity level to be achieved. Thus, it is not rigid.
8-T,
9. One of the principles of responsibility accounting is ‘a target is fixed for each department or
9-T.
responsibility center’.
Which among the below is the reason behind Material Price Variance:
a) Change in basis purchase price of material. b) Uneconomical size of purchase order.
c) Payment of excess or less freight. d) All of the above.
Answer : d) All of the above.
2. Standard cost of material for output of 2,600 units is ` 71,500 and actual output is 2,550 units. If material
mix variance is ` 1,095 adverse, what will be the material usage variance?
a) ` 1375 (Adverse) b) ` 2470 (Adverse) c) ` 1570 (Adverse) d) ` 2400 (Favourable)
Answer : b) ` 2470 (Adverse)
3. In cost accounting, purpose of variance analysis is to:

a) understand reasons for variances. b) take remedial measures.
c) improve future performances. d) All of the above.
Answer : d) All of the above
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10
4. In a factory Standard rate per hour ` 4, Standard time per unit of output – 20 hours, Units produced -500,
Actual hours worked-12,000. Compute Labour Efficiency Variance.
a) ` 6000 (Favourable) b) ` 8000 (Adverse) c) ` 9,600 (Favourable) d) ` 8000 (Favourable)
Answer : b) ` 8000 (Adverse)
(Hints: Labour Efficiency Variance = SR(SH-AH)=4(500×20-12,000)=8,000 (Adverse)
5. MSE Manufacturing gives you the following details.

Standard Price per kg of Material ` 2, Actual Material used 2,000 kg, Actual cost of Material ` 3,000.
Actual output 2,100 kg. Compute Material Price Variance.
a) ` 1050 (Favourable) b) ` 1142 (Favourable) c) ` 1000 (Favourable) d) None of the above
Answer : ` 1000 (Favourable)
(Hints: Material Price Variance=(SP-AP)×AQ=(2-3000/2000)2000=(2-.5)2000=1000(Favourable)
6. State whether the following statements are true or false.

(i) Standard Costing system establishes yard stick against which the efficiency of actual performance is
measured.
(ii) Ideal time variance is always favorable. Answer: (i) True; (ii) False
(i) Which of the following factors does not affect Learning Curve
A. Method of production B. Labour strike C. Shut down D. Efficiency rate
(ii) Which of the following is not a reason to use the concept of Learning Curve?
A. Labour efficiency B. Introducing new technology
C. Value chain effect D. Standardization, specialization, and methods improvements
(iii) Learning curve theory is not applicable to

A. Direct labour B. Material C. Spoilage and defective works D. Overhead
(iv) Which of the following is the correct formula for learning curve ratio?
A.
B.
C.
D.
Solution: i. D; ii. B; iii. D; iv. A.
2. State true or false.

(i) Learning curve passes through three stages.
(ii) Learning curve suggests great opportunities for cost reduction.
(iii) Application of learning curve concept pre-requisites uninterrupted flow of work.
(iv) Learning curve effects make the value chain inefficient.
(v) The more experience a firm has in producing a particular product, the higher is its costs.
(vi) As the employees gain experience they are more likely to reduce material wastage.
Solution: i. True; ii. True; iii. True; iv. False; v. False vi. True.
Revisionary Test Paper_June2018
I. Multiple Choice Questions (MCQ)

1. Cost Price is not fixed in case of:
A. Cost plus contracts B. Escalation clause C. De escalation clause D. All of the above.
Page
11
2. Continuous stock taking is a part of:

A. ABC analysis B. Annual stock taking C. Perpetual Inventory D. None of these.
3. In Reconciliation Statements expenses shown only in financial accounts are:

A. Added to financial profit B. Deducted from financial profit
C. Ignored D. Added to costing profit.
4. Operating costing is applicable to:

A. Hospitals B. Cinemas C. Transport undertaking D. All the above.
5. Flexible budget requires a careful study of:

A. Fixed, semi-fixed and variable expenses B. Past and current expenses
C. Overheads, selling and administrative expenses D. None of the above.
6. Which of the following items is not excluded while preparing a cost sheet?
A. Goodwill written off B. Provision for taxation
C. Property tax on factory building D. Interest paid.
7. The most important element of cost is:

A. Material B. Labour C. Overheads D. All the above.
8. Continuous stock taking is a part of:

A. ABC analysis B. Annual stock taking C. Perpetual inventory D. None of the above.
9. Depreciation is an example of:
A. Fixed cost B. Variable cost C. Semi variable cost D. None of the above.
10. Joint cost is suitable for:

A. Infrastructure industry B. Ornament industry C. Oil industry D. Fertilizer industry.
Answer:
1-A 2-C 3-A 4-D 5-A 6-C 7-A 8-C 9-A 10-C
II. True / False

1. Multiple costing is suitable for banking industry.
2. Cost ledger control account makes the cost ledger self balancing.
3. Production cost includes only direct costs related to the production.
4. CAS 9 is for direct expenses as issued by the Cost Accounting Standards Board (CASB) of the Institute of
Cost Accountants of India.
5. ABC analysis is based on the principle of management by exception.
6. Slow moving materials have a high turnover ratio.
7. Cost of indirect material is apportioned to various departments.
8. Departments that assist producing Department indirectly, are called service departments.
9. Waste and scrap of material have small realisation value.
10. Bin card are not the part of accounting records.
Answer: 1. False 2. True 3. False 4. False 5. True
6. False 7. False 8. True 9. False 10.True.
Column A Column B
1 Research and Development Cost A CAS 2
2 Depreciation on computer purchased for B Forms part of selling expenses
office
3 Abnormal loss is transferred to C Costing Profit and Loss Account
4 In electricity companies, the cost unit is D Kilowatt
5 The summary of all functional budgets E CAS 18

6 Cost of free samples of products F Forms part of office administration expenses
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distributed
7 In contract costing, cost unit is G Per contract
8 Capacity Determination H Not shown in the cost sheet but debited to profit & loss
account
9 Scrap value of abnormal loss of finished I Not shown in the cost sheet but credited to profit & loss
output account
10 Cash discount allowed J Master budget
Answer: 1-E 2-F 3-C 4-D 5-J 6-B 7-G 8-A 9-I 10-H
Revisionary Test Paper _December 2018
(a) Choose the correct answer from the given four alternatives:
(i) Contribution margin is equal to:
(A) Sales-Fixed Cost –Profit (B) Profit+ Variable Cost (C) Fixed Cost –Loss (D) None of the above
(ii) When Fixed cost is `10,000 and P/V ratio is 50%, the breakeven point will be:
(A) `20000 (B) `40000 (C) `50000 (D) None of these.
(iii) In break even chart, Y–axis represents:

(A) Volume of sales in units (B) Value of sales in rupees.
(C) Cost and Sales in rupees (D) Value of Production in rupees.
(iv) The scare factors is also known as

(A) Key factor (B) Abnormal factor (C) Linking factor (D) None of the above
(v) A budgeting process which demands each manager to justify his entire budget in detail from beginning is
(A) Functional budget (B) Master budget (C) Zero base budgeting (D) None of the above
(vi) One of the most important tools of cost planning is

(A) Cost sheet (B) Unit cost (C) Direct Cost (D) Budget
(vii)Material price variance is `300 (A), material mix variance is `150(A) and material sub-usage variance is
`50(F). The material cost variance is
(A) `400(A) (B) `450(A)
(C) `500(A) (D) Cannot be computed.
(viii)Overhead budget variance is a sub-variance of

(A) Overhead volume variance (B) Overhead efficiency variance
(C) Overhead cost variance (D) None of the above
(ix) Which of the following is not a source of improvement in learning curves?

(A) Employee training and education
(B) Changes in administration, equipment, and product design
(C) Work specialization
(D) Frequently redesigned product
(x) Which of the following are tools of management accounting?

(i) Decision accounting (ii) Standard costing
(iii) Budgetary control (iv) Human Resources Accounting
(A) (i), (iii) and (iv) (B) (i), (ii) and (iv)
(C) (i), (ii) and (iii) (D) (i), (ii), (iii) and (iv)
Answer:
(i)- (C) (ii)-(A) (iii)- (C) (iv)- (A) (v)- (C) (vi)- (D) (vii)- (A) (viii)- (C) (ix)- (D) (x) - (C)
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(b) Match the following

Column 'A' Column 'B'
1. Transfer Price A) Goal Congruence
2. Zero Base Budgeting B) Responsibility Accounting
3. Performance Budgeting C) Performance Measurement
4. Throughput Accounting D) Notional Profit
5. Profit Earned on a Contract Account E) Not on the Basis of Trends
6. Determines priorities in functional budget F) Value Analysis
7. Margin of Safety G) Decision making

8. Cost reduction H Key factor
9. Differential costing I) Cannot be used for cost control.
10. Normal standard J) Difference between actual sales and BEP
Answer: b
1. A 2. E 3. B 4. C 5. D
6. H 7. J 8. F 9. G 10. I
(c) State whether the following statements are True/False.

(i) Fixed budgets are more suited for fixed expenses.
(ii) There may be two or more key factors operating at the same time.
(iii) Total cost variance is the difference between total standard cost of standard output and actual cost
incurred.
(iv) Idle time variance is calculated by multiplying idle hours with standard rate.
(v) Overhead cost variance is sub–divided into fixed, variable and semi variable overhead variances.
(vi) The angle which the sales line makes with variable cost line is known as angle of incidence. (vii) A high
margin of safety shows that actual sales are much more than break-even sales.
(viii) A rise in fixed cost will not affect P/V ratio.
(ix) The learning curve assumes that production will continue without any major interruptions.
(x) Management Accounting Reports are public documents.
Answer:(c)
(I)False (ii) True (iii) False. (vi) True (v) False.
(vi) False. (vii) True. (viii) True. (ix) True. (x) False.
MTP_ June2017_Set 1
(a) Choose the correct answer from the given four alternatives. [1x6=6]
(i) The breakeven point is the point at which,

(a) There is no profit, no loss (b) Contribution margin is equal to total fixed cost
(c) Total fixed cost is equal to total revenue (d) All of the above.
(ii) The P/V ratio of a product is 0.4 and the selling price is `40 per unit. The marginal cost of the product
would be,
(a) ` 8 (b) ` 24 (c) ` 20 (d) ` 25
(iii) If standard hours are 400 @ ` 1 per hour and actual hours are 380 @ `1.25 per hour, the labour rate
variance is:
(a) ` 20 (F) (b) ` 25 (F) (c) ` 100 (A) (d) ` 95 (A)
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(iv) The time taken for initial unit of a product is 100 hours. At 80% learning rate what is the total time for 4
units.
(a) 100 hours (b) 80 hours (c) 160 hours (d) 256 hours
(v) Sales `4,00,000; Variable Cost ` 3,00,000; Fixed Cost ` 75,000; Investments ` 1,50,000 and desired 20%
on investments. What is residual income?
(a) ` 25,000 (b) ` 30,000 (c) ` 20,000 (d) ` (5,000)
(vi) Sales in January month ` 3,00,000; Credit Sales are 80%; Credit period is 2 months. Amount collected in
the month of March is
(a) ` 50,000 (b) ` 2,40,000 (c) ` 40,000 (d) None of the above
Answer:
(i) (a) There is no profit, no loss (ii) (b) `24 (iii) (d) `95 (Adverse)
(iv) (d) 256 hours (v) (d) `(5,000) (vi) (b) `2,40,000
(b) Match the following

Column I Column II
1. Inter-firm comparison A Decision Making
2. Margin of Safety B Difference between Standard and Actual Cost.
3. Variance Analysis C Profit / PV Ratio
4 Differential Costing D Technique for evaluating performance.
Answer:
1.-D, 2.-C, 3.-B, 4.-A,.
(c) State whether the following statements are True or False [1x4=4]
(i) Uniform costing is a method of costing.

(ii) A variance may be either favourable or adverse.
(iii) Marginal cost equals to prime cost plus variable overheads.
(iv) Variable Cost is also known as Indirect Cost.
Answer:
(i) False (ii) True (iii) False (iv) False
MTP_ June2017_Set 2
(i) Planning and control are done by

(a) top management (b) lowest level of management
(c) all levels of management (d) None of the above
(ii) The use of management accounting is

(a) Compulsory (b) Optional
(c) Mandatory as per the law (d) None of the above
(iii) The budgets are classified on the basis of

(a) Time (b) Function (c) Flexibility (d) All of the above
(iv) Which of the following departments is most likely responsible for a price variance in direct materials?
(a) Warehousing (b) Receiving (c) Purchasing (d) Production
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(v) Idle time variance is always:

(a) Favourable (b) Adverse (c) Favourable (or) Adverse (d) None of these
(vi) In marginal costing, stock is valued at _________

(a) Fixed Cost (b) Variable Cost (c) Inventory (d) sales
Answer:
(i) (a) top management (ii) (b) Optional (iii) (d) All of the above
(iv) (c) Purchasing (v) (b) Adverse (vi) (b) Variable cost
(b) Match the statement in Column I with the most appropriate statement in Column II :
Column I Column II Answer:
1. Transfer pricing A Opportunity cost 1. (B)
2. Budgetary Control B Divisional Profits 2. (C)
3. Learning Curve C An Executive Function 3. (D)
4. Relevant Cost D A mathematical or Statistical Technique 4. (A)
(c) State whether the following statements are True or False [1x4=4]
Answer:
(i) It is optional for a company to have financial accounting.
i-False,
(ii) There is no difference between standard costing and budgeting. ii- False,
(iii) Contribution is the difference between the selling price and the variable cost. iii- True
(iv) Constraint on various resources is also known a key factor or limiting factor. iv-False
MTP_ Dec 2017_Set 1

(a) Choose the correct answer from the given four alternatives. [1x 6 = 6]
(i) ________ establishes the objective of the firm and decides the course of action to achieve it.
(a) Organizing (b) Staffing (c) Controlling (d) Planning
(ii) _____________ provides the technique for interpretation of accounting data.
(a) Financial Accounting (b) Management Accounting
(iii) Limiting factor is also known as ___________.
(a) Contributing factor (b) Key factor
(iv) Under this method the cost of product is determined after considering the total cost i.e., both fixed and
variable costs. This technique is known as ___________.
(a) Absorption Costing (b) Traditional Costing (c) Total Costing (d) All of the above
(v) Cost data are presented to highlight the total contribution of each product.
(a) Standard Costing (b) Absorption Costing (c) Marginal Costing (d) None of the above
(vi) ______________ of budget is necessary.
(a) Modification (b) Changes (c) Revision
Answer: (i) (d), (ii) (b), (iii) (b), (iv) (d), (v) (c) (vi) (c)
i. Responsibility Accounting A Inter Firm Comparison D
ii. Difference between Standard and Actual Cost B Zero Based Budgeting C
iii. Evaluation of Performance C Variance Analysis A
iv. Budgeting starts from scratch D Activity Accounting B
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(c) State whether the following statements are true or false [1 x 4 = 4]

(i) Standard Costing system establishes yard stick against which the efficiency of actual performance is
measured.
(ii) The learning curve is useful only for new operations where machines do not constitute a major part of the
production process. It is not applicable to all productions. E.g. New and experienced workmen.
(iii) Performance budgeting is synonymous with Responsibility Accounting.
(iv) Differential cost is the change in the costs which results from the adoption of an alternative course of
action.
Answer:[ True, True, True, True.]
MTP_ Dec 2017_Set 2
(a) Choose the correct answer from the given four alternatives. [1x 6 = 6]
i. Marginal cost includes prime cost plus____________.
(a) Fixed overhead (b) Variable overhead (c) Margin of safety (d) Actual cost
ii. Management Accounting implications are __________

(a) Mandatory by the statue (b) Optional (c) Compulsory
iii. All __________ cost are included in the marginal cost.

(a) Fixed (b) Variable
iv. Budget preparation are classified on the basis of ________________.

(a) Function (b) Flexibility (c) Time
v. The formula for material price variance is ________.

(a) (AQ – SQ) x AP (b) (AP-SP) x SQ (c) (AP-SP) x AQ (d) None of the above
vi. Select from the enumerated list the functions of the management accounting.
(a) Control (b) Reporting to the Management
(c) Coordination (d) All of the above
Answer: [ (i) (a), (ii) (b), (iii) (a), (iv) (d), (v) (c), (vi) (d)]
Column I Column II
i Performance Evaluation A Breakeven point
ii Fixed cost / Pv ratio B Zero based budgeting
iii Total Costing C Inter Firm Comparison
iv Decision making D Absorption Costing
Answer: [ (i) (C), (ii) (A), (iii) (D), (iv) (B), ]
(c) State whether the following statements are true or false [1 x 4 = 4]

(i) Budgetary control aims at maximization of profits through optimum utillisation of resources.
(ii) Ideal time variance is always favorable.
(iii) Management Accounting is a modern tool to the management.
(iv) In cost accounting, marginal cost does include fixed cost.
Answer: (c) [ (i) True (ii) False (iii) True (iv) False]
MTP_ June2018_Set 1
(a) Choose the correct answer from the given four alternatives: [1 ×6 = 6]
(i) Profit volume ratio establishes the relationship between…
(A) Contribution and profit (B) Fixed cost and contribution
(C) Profit and sales (D) Contribution and sales value
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17
(ii) A desire to achieve a particular goal with pursuit of that goal is called:
(A) motivation (B) goal congruence (C ) effort (D) autonomy
(iii) The scare factors is also known as

(A) Key factor (B) Abnormal factor (C) Linking factor (D) None of the above
(iv) A budgeting process which demands each manager to justify his entire budget in detail from beginning is:
(A) Functional budget (B) Master budget (C ) Zero base budgeting (D) None of the above
(v) The sub-variance of material usage variance, known as Material mix variance is measured as
(A) Total standard cost - Total actual cost
(B) Standard cost of revised standard mix - Standard cost of actual mix
(C) (Standard unit price - Actual unit price) * Actual quantity used
(D) (Standard quantity - Actual quantity) * Unit standard price
(vi) Another name for the learning curve is a(n)

(A) experience curve (B) exponential curve (C) growth curve (D) production curve
Answer:
1. (a) (i) - (D) (ii)-(A) (iii)-(A) (iv)-(C) (v)-(B) (vi)- (A)
(b) Match the statement in Column I with the most appropriate statement in Column II:
Column I Column II Answer:
(i)Differential Cost (A) Division of total cost into Fixed and Variable (i)-(B)
(ii)Opportunity Cost (B)Future cost (ii)-(D)
(iii)Marginal Cost (C) Cost Cannot be controlled (iii)-(A)
(iv)Sunk Cost (D) Cost can be controlled (iv)-( C)
(c) State whether the following statements are True' or 'False': [1x4=4]
(i)Standard costs are used for external reporting.
(ii) A high P/V ratio for a business indicates that a slight decrease in sales volume results in higher profits.
(iii)Zero based budgeting involves identification of decision units.
(iv) Learning curve is a cost reduction technique.
Answer: (c) (i) False (ii)False (iii)True (iv)False
MTP_June2018_Set 2
1. Answer the following questions:
(a) Choose the correct answer from the given four alternatives: [1 ×6 = 6]
(i) While computation of profit in marginal costing
(A) Total marginal cost is deducted from total sales revenues
(B) Total marginal cost is added to total sales revenues
(C) Fixed cost is added to contribution (D) None of the above
(ii) If total cost of 100 units is ` 5000 and those of 101 units is ` 5030 then increase of Rs 30 in total cost is
(A) Marginal cost (B) Prime cost (C) All variable overheads (D) None of the above
(iii) R&D budget and Capital expenditure budget are examples of

(A) Short-term budget (B) Current budget (C) Long-term budget (D) None of the above
(iv) While determining material quantity standards, a proper consideration should be assigned to
(A) Normal material wastage (B) Abnormal material wastage
(C) Both a and b (D) None of the above
(v) Volume variance arises when

(A) There is rise in overhead rate per hour
(B) There is decline in overhead rate per hour
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(C) There is decrease or increase in actual output compared to the budgeted output
(D) None of the above
(vi) In management accounting, an emphasis and focus must be

(A) future oriented (B) past oriented (C) communication oriented (D) bank oriented
Answer: 1.(a) (i)-(A) (ii)-(A) (iii)-(C) (iv)-(A) (v)-(C) (vi)-(A)
Column I Column II
(i)Output Costing (A) Decision Making
(ii) Variance Analysis (B)Decision package
(iii)Differential Costing (C) Management by Exception
(iv)ZBB (D) Coal Industry
Answer: 1. (b) (i)-(D) (ii)-(C) (iii)-(A) (iv)-( B)
(c) State whether the following statements are True' or 'False': [1x4=4]
(i)Activity Based Costing is a traditional method of charging overhead.
(ii) Abnormal Costs are uncontrollable.
(iii) Ideal standards are achievable in normal course.
(iv) Royalty based on units produced is considered as direct expenses.
Answer: (c) (i) False (ii)False (iii) False (iv) True
MTP-December2018_Set -1
(a) Choose the correct answer from the given four alternatives: [1×6=6]
(i) Reporting under marginal costing is accomplished by:
(A) eliminating the WIP inventory account
(B) including only variable costs in income statement
(C) matching variable costs against revenue and treating fixed costs as period costs
(D) treating all costs as period costs.
(ii) Which of the following is not depicted on break-even chart?

(A) Profit/Loss at different levels of output (B) Sales to earn a given profit
(C) Contribution (D) P/V ratio
(iii) Difference between budgeted amounts and actual results is classified as

(A) standard deviation (B) variances (C) mean average (D) weighted average
(iv) Part of master budget, which covers capital expenditures, budgeted statement of cash flows and balance
sheets are classified as
(A) financial budget (B) capital budget (C) cash flows budget (D) balanced budget
(v) The type of standard that is best suited for cost control objective is
(A) Normal standard (B)Basic standard (C) Expected standard (D) Ideal standard
(vi) The corrective actions after the analysis of variances has to be taken by
(A) Cost Auditor (B) Management (C) Both A and B (D) None of the above
Answer: (i) (C) (ii) (D) (iii) (B) (iv) (A) (v) (C) (vi) (B)
(b) Match the statement in Column I with most appropriate statement in Column II
Column I Column II
(i) Fixed Cost (A) Cost Control
(ii) Standard cost (B)Direct Material
(iii)Variable Cost (C) If there is no production , loss is equal to
(iv)Normal idle time cost (D) Factory overhead.
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Answer:(b) (i) C. (ii) A. (iii) B. (iv) D.
(c) State whether the following statements are True/False? [1×4=4]

(i) When output increases, marginal cost per unit decreases.
(ii) Labour mix variance arises only when two or more category of workers perform the same task.
(iii) In flexible budgeting, one fixed budget is developed for each level of activity.
(iv) Learning curve is useful in case of experienced workmen.
Answer: (c) (i) False. (ii) True. (iii) True. (iv) False.
MTP-December2018_Set -2
(i) When actual price is higher or lower than the standard price, then it is
(A) Sales price variance (B) Sales volume variance
(C) Sales mix variance (D) Sales quantity variance
(ii) If the actual output is more than the budgeted output, volume variance is
(A) Favourable (B). Non-favorable (C) No impact (D) None of the above
(iii) Marginal costs is taken as equal to

(A) Prime Cost plus all variable overheads (B) Prime Cost minus all variable overheads
(C) Variable overheads (D) None of the above
(iv) ________ is the first step of budgetary system and all other budgets depends on it.
(A) Cost budget (B) Sales budget (C) Production budget (D) None of the above
(v) Which of the following statements are true for forecast and budget?
(A) Forecast and budget are one and same thing
(B) Budget is prepared after the forecast
(C) Forecast and budget both can be expressed in financial form
(D) All of the above
(vi) Determine Contribution if Sales is ` 1,50,000 and P/V ratio is 40%.

(A) ` 60,000 (B) ` 70,000 (C) ` 30,000 (D) None of the above
Answer: (i) (A) (ii) (A) (iii) (A) (iv) (B) (v) (B) (vi) (A)
Column I Column II
(i)Marginal Costing (A)Fixed Cost
(ii)Period Cost (B)marginal income
(iii)Contribution margin (C)Break even Analysis.
(iv)P/V ratio (D)Variable costing
Answer: (i)-D (ii)-A (iii)-B (iv)-C
(c) State whether the following statements are True/False? [1×4=4]

(i) Break even Analysis is based on the assumption that total fixed cost does not change.
(ii) Sales Value Variance is the difference between actual sales and budgeted sales.
(iii) A favourable budget variance is always an indication of efficient performance.
(iv) P/V ratio indicates the relationship between profit and sales.
Answer: (c) (i) True (ii) True (iii) False (iv) False.
MTP_June,2019_ Set 1
(i) Division Accounting is divided into
(a) 2 (b) 3 (c) 4 (d) None of these
(ii) Contribution margin is known as,

(a) Net income (b) Gross margin (c) Net profit (d) None of these
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(iii) The P/V ratio of a product is 0.4 and the selling price is 40 per unit.The marginal cost of the
product would be
(a) 8 (b) 20 (c) 24 (d) 16
(iv)Budget period depends upon….

(a) The type of budget (b) The nature of business (c) The length of trade Cycle (d) All of these
(v) Which of the following operating measures would a manager want to see decreasing
over time?
(a) Merchandise inventory turnover (b) Total quality cost
(c) Percentage of on-time deliveries (d) Finished goods inventory turnmover.
Column I Column II
1 Variance Analysis (A) Definite Period
2 Budget is prepared for a (B) Avoidable Fixed Cost/PV ratio
3 Breakeven Point (C) Difference between Standard and Actual Cost
4 Shut down Point (D) Fixed Cost/PV ratio
Answer: (i) C (ii) A (iii) D (iv) B
(c) Statement whether the following statement are True or False

(i)At breakeven point margin of safety is nil.
(ii)It is optional for a company to have financial accounting. Answer:
(iii)Zero based Budgeting cannot be used for decision making. (i) True (ii) False
(iv)Cash Budget Shows the expected sources and utilization of cash. (iii) False (iv) True
MTP_June,2019_Set 2
1.(a) Choose the most Appropriate alternative for the

(i) The use of management accounting is
(a) Compulsory (b) Optional c) Mandatory as per law (d) None of the above.
(ii) The selling price is 20 per unit,variable cost 12 per unit,and fixed cost 16,000,the break
even-point in units will be
(a) 800 units (b) 3,000 units (c) 2,000 units (d) None of these
(iii) Which of the following departments is most likely responsible for a price variance in direct
material?
(a) Warehousing (b) Receiving (c) Purchasing (d) Production
(iv)When are the overhead variances recorded in a standard costing system?

(a) When the cost of goods sold is recorded
(b) When the factory overhead is applied to work-in-process
(c) When the goods are transferred out of work-in-process
(d) when direct labour is recorded.
(v) The comparison of actual results with expected results is referred to as

(a) Feedback (b) Controlling (c) a & b (d) None of these.
(vi) An example of long period budget is…..

(a) R & D budget (b) Master budget (c) Sales budget (d) Personnel budget
(b)Match the statement under Column I with the most appropriate statement under Column II
Column I Column II
1 Learning Curve (A) Negotiated Pricing
2 Zero Base Budgeting (B) Human Phenomenon
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3 Transfer Price (C) Fixed Costs are charged to Cost of Production

4 Absorption Costing (D) Discretionary Cost
Answer: 1(B) 2(D) 3 (A) 4(C)
(c) Statement whether the following statement are True or False

(i)A flexible budget is prepared for more than one level of activity.
(ii) Difference between the standard cost and actual cost is called as variance.
(iii) The objective of uniform costing is wealth maximization.
(iv) Standard formats are used in management accounting for preparation of reports.
Answer:
1(True) 2(True) 3 (True) 4(False)
MTP_December_2019_Set _1
(i) Division of Accounting is divided into
(a) 2 (b) 3 (c) 4 (d) None of the above.
(ii) Sales budget shows the sales detail as

(a) Month wise (b) Area wise (c) Product wise (d) All of the above
(iii) Which of the following can be used to calculate the material price variance :
(a) (AQ - SQ) ×SP (b) (AP –SP) × AQ (c) (AP –SP) × SQ (d) (AQ – SQ) × AP
(iv) Which of the following is often the cause of differences between actual and standard costs
of materials and labour?
(a) Price changes for materials (b) Excessive labour hours
(c) Excessive use of material (d) All of the above
(v) Planning and control are done by :

(a) Top management (b) Lowest level of management
(c) All levels of management (d) None of the above
(vi) If standard hours are 400 @ `1 per hour and actual hours are 380 @ `1.50 per hour, the labour
rate variance is:
(a) `20 (Favorable) (b) `25 (Favorable) (c) `100 (Adverse) (d) `190 (Adverse)
(b) Match the following:

Column ‘A’ Column ‘B’
1. Sales value variance A. Cost of goods during the year/ average inventory
2. Fixed asset ratio B. Limiting factor
3. Constraint on various resources C. Ideal ratio is 0.67
4. Stock turnover ratio D. Budgeted sales – Actual sales
Answer: [1.-D, 2.-B, 3.-C, 4.-A. ]
(c) Say True or False for the following question: [4×1=4]

(i) Uniform costing is a method of costing. [ FALSE ]
(ii) Management Accounting tailors non –financial information to meet the specific needs of
management. [ FALSE ]
(iii) When fixed cost is deducted from total cost, we get marginal cost. [ True ]
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(iv) Standard costing works on the principle of exception. [ True ]
MTP_December_2019_Set _2
(i) The use of management accounting is :
(a) compulsory (b) optional (c) mandatory as per the law (d) none of the above
(ii) The selling price is `20 per unit , variable cost ` 16 , and fixed cost `16000, the breakeven point
in unit will be :
(a) 800 units (b) 2000 units (c) 4000 units (d) None of the above
(iii) Budget period depends upon

(a) Type of budget (b) The nature of budget (c) The length of trade cycle (d) All of the above
(iv) Revision of budget is :

(a) Unnecessary (b) can’t determine (c) necessary (d) Inadequate data.
(v) Which of the following operating measures would to see decreasing over time?
(a) Merchandise inventory turnover (b) Total quality cost
(c) Percentage of on-time deliveries (d) Finished goods inventory turnover
(vi) Which of the following is incorrect :

(a) Learning curve may be applied to direct labour and material.
(b) Learning curve is a cost reduction technique.
(c) Learning curve concept provides a means of evaluating the effectiveness of training
program.
(d) Learning curve is a mathematical technique.
(b) Match the following:

Column ‘A’ Column ‘B’
1. Budget is prepared for A. Profit / PV ratio
2. Management accounting is a tool to B. Standard rate per hour × deficit hour worked
3. Margin of safety C. Definite period
4. Calendar variance D. Management
Answer: [1.-C, 2.-D, 3,-A, 4.-B.]
(c) Say True or False for the following question: [4×1=4]

(i) Management Accounting reports are public document. [ False ]
(ii) Break even means the volume of production or sale where there is huge loss/profit. [Fales]
(iii) Zero based budgeting cannot be used for decision making . [ False ]
(iv) A flexible budget is prepared for more than one level of activity. [ True ]
Suggested Answer_Jun2017
1. (a) Choose the correct answer from the given four alternatives: 1×6=6
(i) Type of accounting which measures, reports and analyse non-financial and financial information to help in
decision making is called:
(A) Financial Accounting (B) Management Accounting
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23
(C) Cost Accounting (D) Green Accounting
(ii) Which one of the following is not considered as a method of Transfer Pricing?
(A) Negotiated Transfer Pricing (B) Market Price Based Transfer Pricing
(C) Fixed Cost Based Transfer Pricing (D) Opportunity Cost Based Transfer Pricing
(iii) In cost accounting, purpose of variance analysis is to:

(A) understand reasons for variances. (B) take remedial measures.
(C) improve future performance. (D) All of the above
(iv) Absorption Costing is also known as:

(A) Total Costing (B) Committed Costing
(C) Target Costing (D) Discretionary Costing
(v) Which of the following is not correct with regard to Margin of Safety (MOS)?
(A) MOS = / (B) MOS = Total Sales – Sales at BEP
(C) MOS = − × 100
Total Sales (D) MOS = PV Ratio × Sales – Fixed Cost
(vi) Which one of the following is not to be considered for preparing a production budget?
(A) The production plan of the organization (B) The Sales Budget
(C) Research and Development Budget (D) Availability of Raw Materials
Answer: (a) (i) (B) (ii) (C) (iii) (D) (iv) (A) (v) (D) (vi) (C)
(b) Match Column A with Column B: 1×4=4

Column 'A' Column 'B'
1. Learning Curve (A) Negotiated Pricing
2. Zero Base Budgeting (B) Human Phenomenon
3. Transfer Price (C) Fixed Costs are charged to Cost of Production
4. Absorption Costing (D) Discretionary Cost
Answer: (1) (B) (2) (D) (3) (A) (4) (C)
(c) State whether the following statements are True or False: 1×4=4
(i) Standard Costs are arrived on the basis of costs incurred in the past.
(ii) Experience Curve effects are reinforced when two or more products share a common resource.
(iii) Preparation of a Master Budget precedes preparation of Functional Budgets.
(iv) Other variables remaining constant, a hike in selling price per unit will lower the Break Even Point.
Answer: (c) (i) False (ii) False (iii) False (iv) True
SUGGESTED_ANSWERS _DEC2017
1. (a) Choose the correct answer from the given four alternatives: 1x6=6
(i) Which statement best describes the role of the management accountant?
(A) Management accountants prepare the financial statements for an organization.
(B) Management accountants facilitate the decision-making process within an organization.
(C) Management accountants make the principal decisions within an organization.
(D) Management accountants are basically information collectors.
(ii) In a factory when production is increased within the relevant range then:
(A) variable costs will vary on a per unit basis.
(B) variable costs will vary in total.
(C) fixed costs will vary in total.
(D) fixed and variable cost stay the same in total.
(iii) The main objective of budgetary control is:
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24
(A) to define the goal of the firm (B) to coordinate different departments
(C) to plan to achieve its goals (D) All of the above
(iv) Method of pricing, when two separate pricing methods are used to price transfer of products from one
subunit to another, is called:
(A) dual pricing (B) functional pricing (C) congruent pricing (D) optimal pricing
(v) When are overhead variances recorded in a standard costing system?

(A) When the goods are transferred out of work-in-progress.
(B) When the factory overhead is applied to work-in-progress.
(C) When the cost of goods sold is recorded.
(D) When the direct labour is recorded.
(vi) Which of the following factors does not affect Learning Curve?
(A) Method of Production (B) Labour Strike (C) Shut Down (D) Efficiency Rate
Answer: 1. (a) (i) — (B) (ii) — (B) (iii) — (B) (iv) — (A) (v) — (B) (vi) — * *Wrong question and no options are true.
Student attempting this question has been given full 1 mark.
Column I Column II
(i) Market Based Price (A) Break-Even Analysis
(ii) Decision Unit (B) Differential Cost
(iii) Margin of Safety (C) Transfer Pricing
(iv) Difference between costs of two alternatives (D) Zero-Base Budgeting
Answer 1. (b) (i) — (C) (ii) — (D) (iii) — (A) (iv) — (B)
(c) State whether the following statements are True or False: 1x4=4
(i) The profit calculated under absorption costing and marginal costing is always equal.
(ii) A flexible budget takes into account only fixed costs.
(iii) At break-even point, margin of safety is nil.
(iv) An increase in production means an increase in overall productivity.
Answer 1. (c) (i) False (ii) False (iii) True (iv) False
SUGGESTED_ANSWERS _JUNE2018
1. (a) Choose the correct answer from the given four alternatives (You may write only the Roman numeral and
alphabet chosen for your answer): 1×6=6
(i) Decision-marking concerns with:
(A) Past (B) Future (C) Past and Future both (D) None of the above
(ii) A large Margin of Safety indicates
(A) Over-Capitalization (B) The soundness of business
(C) Over Production (D) None of the above
(iii) Revision of budgets is
(A) Unnecessary (B) Cannot determine (C) Necessary (D) Inadequate data
(iv) Which of the following operating measures would a manager would like to see decreasing over time?
(A) Merchandise Inventory Turn-over (B) Total quality cost
(C) % of on-time deliveries (D) Finished Goods Inventory Turn-over
(v) Which of the following departments is most likely responsible for a Price Variance in Direct Materials?
(A) Warehousing (B) Receiving (C) Purchasing (D) Production
(vi) Another name for the 'Learning Curve' is
(A) Exponential Curve (B) Growth Curve (C) Production Curve (D) Experience Curve
Answer: (i) (B) (ii) (B) (iii) (C) (iv) (B) (v) (C) (vi) (D)
(b) Match the statement under Column I with the most appropriate statement under Column II:
Column I Column II
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25
1 Distinctive feature of (A) on the principle of exception.

Learning curve
2 Standard Costing works (B) is designed to fix responsibilities on executives, through the preparation
of budgets.
3 Budgetary Control (C) is that notional value at which goods and services are transferred
System between divisions in a decentralized organization.
4 Transfer Price (D) Persons engaged in repetitive task will improve his performance over
time.
Answer: (1) (D) (2) (A) (3) (B) (4) (C)
(c) State whether the following statements are True or False

(i) Management Accounting is largely based on estimates and as such total accuracy is not ensured under
Management Accountancy.
(ii) The main objective of Budgetary control is to co-ordinate the different departments.
(iii) Standard Costing are applicable in Banking Industry.
(iv) Learning Curve is a Cost Reduction technique.
Answer: (c) (i) True (ii) False (iii) False (iv) False
Suggested Answer _Dec2018

1. Answer all questions:
(a) Choose the correct answer from the given four
(i) The well-known basic function of management is
(A) Motivating (B) Leadership (C) Decision-making (D) Communicating
(ii) Contribution margin is equal to
(A) Sales - Fixed Cost - Profit (B) Profit + Variable Cost
(C) Fixed Cost-Loss (D) None of the above
(iii) In a system whereby all activities are revaluated each time a budget is formulated and starts with the
assumption that requirement of funds does not exist is called
(A) Performance Budgeting (B) Programme Budgeting
(C) Flexible Budgeting (D) Zero based Budgeting
(iv) The management’s time is saved by reporting only the deviations from the predetermined standards is
called
(A) Management by objectives (B) Budgetary Control
(C) Standard Costing (D) Management by Exception
(v) Marginal Costing is also known as
(A) Direct Costing (B) Absorption Costing (C) Variable Cost (D) Variable Costing
(vi) Another name for ‘Contribution’ is
(A) Marginal Income (B) Gross Profit (C) Net Income (D) None of the above
Answer: 1 (a) (i) (C) (ii) (C) (iii) (D) (iv) (D) (v) (D) (vi) (A)
(b) Match the statement under Column I with the most appropriate statement under Column II
Column I Column II
1 Learning Curve (A) Theodare P. Wright
2 Transfer Price (B) Cumulative Average Time
3 Experience Curve (C) Notional Value
4 Factors affecting the cost of Airlines (D) Boston Consulting Group
Answer: 1 (b) 1) – B (2) –C 3) – D 4) – A
(c) State whether the following statements are True or

(i) Standard Costing may not be suitable for small concerns
(ii) Production Budget is prepared before Sales Budget
(iii) Budgets are always prepared for one year
(iv) At Break Even Point, the Margin of Safety is nil
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26
Answer: 1 (c) (i) True (ii) False (iii) False (iv) True
SUGGESTED ANSWERS _ JUNE 2019

1. (a) Choose the correct answer from the given four alternatives
(i) Management Accounting
(A) accumulates, summarises and analyses the available data.
(B) is primarily concerned with the requirements of the management.
(C) makes Corporate Planning and Strategy effective.
(D) All of the above
(ii) XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full
capacity and incurs ` 15 Lakhs and ` 40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets
were purchased from an outside supplier, the machine could be used to produce other items, which would
earn a total contribution of ` 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the
outside supplier for the gadgets, assuming there is no change in Fixed Costs?
(A) ` 40 Lakhs (B) ` 65 Lakhs (C) ` 25 Lakhs (D) ` 15 Lakhs
(iii) When a manager is concerned with monitoring total cost, total revenue and net profit conditioned upon the
level of productivity, an accountant should normally recommend Flexible Standard Budgeting costing
(A) Yes Yes (B) Yes No (C) No Yes (D) No No
(iv) In a system whereby all activities are re-evaluated each time a budget is formulated and starts with
assumption that requirement of funds does not exist is called.
(A) Performance Budgeting (B) Programme Budget
(C) Flexible Budget (D) Zero-based Budgeting
(v) The difference between hours paid and hours worked is known as
(A) Labour rate variance (B) Labour efficiency variance
(C) Idle time variance (D) Net efficiency variance
(vi) The difference in total cost that results from two alternative courses of action is called
(A) Relevant Cost (B) Opportunity Cost (C) Differential Cost (D) Marginal Cost
Answer: (i) (D) (ii) (A) (iii) (A) (iv) (D) (v) (C) (vi) (C)
(b) Match the statement under Column I with the most appropriate statement under Column II:
Column I Column II
1 Budgetary Control System (A) are useful for budget and performance evaluation
2 Standard Costs (B) helps in profit planning and analysis
3 Marginal Costing (C) aims at adherence to planning costs
4 Cost Control (D) The introduction and implementation of the system may be expensive
Answer: 1. (D) 2. (A) 3. (B) 4. (C)
(c) State whether the following statements are True or False
(i) Marginal Costing is useful for long term planning. Ans:
(ii) Profit Planning and Control is not a part of Budgetary Control Mechanism. (i)False
(iii) Standard Costs are based on technical assessments. (ii) False
i (iv) PV Chart exhibits the relationship between profit and overhead volume. (iii) True
(iv) False
ALL THE BEST

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MCQs

Objective Question in Books

Multiple Choice Questions:

2. Decision-making concerns the

3. The comparison of actual results with expected results is referred to as

4. Decision-making is involved in the following function/s of management

6. The use of management accounting is

7. Management Accounting relates to

8. Division of Accounting is divided into

[Ans: 1. (a) 2. (b) 3. (a) 4. (d) 5 (a) 6. (b) 7. (d) 8. (b)]

Match the followings:

Fill in the blanks:

5. Management accounting a ________ tools to management.

[Ans: Competing, Financial, Futuristic, Management, Modern]

1. The breakeven point is the point at which,

2. A large margin of safety indicates

5. Fixed cost per unit decreases when,

7. A decrease in sales price,

10. Contribution margin is known as,

State the following statement is true or false:

Match the following:

Fill in the blanks:

Multiple Choice Questions:

2. A key factor is one which restricts…

3. Budget relating to the key factor is prepared…

5. An example of long period budget is…

6. Sales budget shows the sales details as…

7. The main objective of budgetary control is…

8. Fixed budget is useless for comparison when the level of activity…

9. Usually the production budget is stated in terms of…

10. Revision of budgets is

Match the following:

State whether the following statement is True or False:

MULTIPLE CHOICE QUESTIONS:

2. Which of the following is true?

8. When are the overhead variances recorded in a standard costing system?

Match the following:

State whether the following statement is True or False: [Ans:

(d) (d) (a) (d) (c) (a) (d)

Choose the correct alternative:

(ii) Marginal costing is also known as

(iii) Which of the following costs is relevant in decision-making?

(iv) An opportunity cost is the cost of

(vii)The basic decision rule on acceptance of special contracts is: Ans:

(x) Which of the following costs is not relevant in decision making?

2. State true or False.

I General Administrative Overhead A Contribution I. D

(ii) Budgetary Control helps as a basis for ______________.

(iii) Factors to be considered in Production Budget:

(v) Which of the following is not an example of functional budget?

(vi) Which of the following is an essential of a budget?

(vii) When preparing a production budget, the quantity to be produced equals

3. In cost accounting, purpose of variance analysis is to:

5. MSE Manufacturing gives you the following details.

6. State whether the following statements are true or false.

(iii) Learning curve theory is not applicable to

Solution: i. D; ii. B; iii. D; iv. A.

2. State true or false.

Revisionary Test Paper_June2018

I. Multiple Choice Questions (MCQ)

2. Continuous stock taking is a part of:

3. In Reconciliation Statements expenses shown only in financial accounts are:

4. Operating costing is applicable to: