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Model Question Paper Cost and Management Accounting

This document contains a 30 question model exam for the course "Cost and Management Accounting". The exam covers topics such as profit centers, characteristics of accurate information, production departments, calculating job costs, estimating fixed and variable costs, characteristics of fixed costs, economic order quantity, inventory costing methods, labor turnover rates, costing methods, absorption costing, flexible budgets, standard cost variances, target costing, activity based costing, financial ratio analysis, and issues with comparing financial ratios across different reporting agencies.

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Suhas BR
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3K views

Model Question Paper Cost and Management Accounting

This document contains a 30 question model exam for the course "Cost and Management Accounting". The exam covers topics such as profit centers, characteristics of accurate information, production departments, calculating job costs, estimating fixed and variable costs, characteristics of fixed costs, economic order quantity, inventory costing methods, labor turnover rates, costing methods, absorption costing, flexible budgets, standard cost variances, target costing, activity based costing, financial ratio analysis, and issues with comparing financial ratios across different reporting agencies.

Uploaded by

Suhas BR
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Model Question Paper

Course Name: Cost and Management Accounting

1. What is a profit centre?


 Where the manager has the responsibility of generating and
maximising profits
 Which is concerned with earning an adequate Return on Investment
 Where the manager has the responsibility over costs alone
 Which manages cost

2. Information should have which of the following characteristic because


using incorrect information could cause serious and damaging
consequences?
 Timely
 Cost-effective
 Accurate
 Detailed

3. Which of the following is not a production department?


 Power department
 Machining department
 Refining department
 Finishing department

4. A company calculates the prices of jobs by adding overheads to the prime


cost and adding 30% to total costs as a profit margin. Job number Y256
was sold for Rs1690 and incurred overheads of Rs 694. What was the prime
cost of the job?
 Rs 489
 Rs 606
 Rs 996
 Rs 1300

5. Which of the following is true about the high-low method?


 It is used to estimate the fixed and variable cost elements of a
mixed cost
 It can be used when mixed costs are not involved
 It assumes a curvilinear relationship between cost and activity
 It is more accurate compared to the least squares method

6. Which of the following best describes a fixed cost?


 A cost representing a fixed proportion of total costs
 A cost that remains at the same level up to a particular level of
output
 A cost directly related to output.
 A cost that remains at the same level when output increases.

7. Economic order quantity is that quantity at which cost of holding and


carrying inventory is at what level?
 Maximum and equal
 Minimum and equal
 It can be maximum or minimum depending upon case to case.
 Minimum and unequal

8. Annual requirement is 7800 units; consumption per week is 150 units. Unit
price Rs 5, order cost Rs 10 per order. Carrying cost Rs 1 per unit and lead
time is 3 week. What is the Economic order quantity?
 395 units
 300 units
 250 units
 150 units

9. In which method, materials are issued out of stock in the order in which
they were delivered into inventory, i.e. issues are priced at the cost of the
earliest delivery remaining in inventory?
 LIFO
 Weighted average
 FIFO
 Periodic inventory

10. What is the meaning of labour turnover?


 Turnover generated by labour
 Rate of change in composition of labour force during a
specified period
 Employees left in a period
 Count of employees continuing in the organisation
11. At 31 March 20X7, an organisation had 5,400 employees.
During the previous year, 750 employees had left the organisation, and the
organisation had 5,100 employees at the end of the year.
What was the labour turnover rate?
 13.89%
 11.11%
 8.57%
 11.27%

12. Under which of the following labour remuneration methods will direct
labour cost always be a variable cost?
 Day rate
 Piece rate
 Differential piece rate
 Group bonus scheme

13. Which of the following is not a method of cost absorption?


 Percentage of direct material cost
 Machine hour rate
 Labour hour rate
 Repeated distribution method

14. If a business needs to absorb an overhead for a foreman's salary, which is


the most suitable basis for absorption?
 Weight of material
 Direct labour hours
 Selling price
 Prime cost

15. A process costing system for J Co used an input of 3,500Kg of materials at


Rs20 per Kg and labour hours of 2,750 at Rs25 per hour. Normal loss is
20% and losses can be sold at a scrap value of Rs5per Kg. Output was
2,950 Kg. What is the value of the output?
 Rs 142,485
 Rs 146,183
 Rs 149,746
 Rs 152,986

16. Which of the following is an advantage of absorption costing?


 Simple to operate
 Recognise the selling price must cover all costs
 No over or under absorption
 Does not comply with financial accounting rules

17. Which costing method values inventory at the total variable production
cost of a product?
 Marginal costing
 Absorption costing
 Process costing
 Service costing

18. When production is greater than sales, which of the following is true?
 The use of absorption costing produces a higher net income
than the use of marginal costing
 The use of absorption costing produces a lower net income than
the use of the marginal costing
 The use of absorption costing causes the inventory value to increase
more than it would through the use of marginal costing
 The use of absorption costing produces an equal income than the
use of marginal costing

19. A budget which is prepared in a manner so as to give the budgeted cost


for any level of activity is known as what?
 Master budget
 Zero base budget
 Functional budget
 Flexible budget

20. Which of the following is not a characteristic of a flexible budget?


 Providing estimates of what costs should be for any activity within a
relevant range
 Prepared at the beginning of the budgeting period and is valid
only for the planned level of activity
 Taking into account change in costs that should occur as a result of
changes in activity
 When used for performance evaluation, actual costs are compared
to what costs should have been for the actual level of activity during
the period

21. Which of the following statements are true?


 Budget is prepared for an indefinite period
 Budget can be expressed in form of physical units
 It is no way related with the management plans and policies to be
pursued in future
 It provides a base for measuring the success of expected results

22. While computing variances from standard costs, the difference between
the actual and the Standard prices multiplied by the actual quantity yields
which variance?
 Labour rate variance
 Material price variance
 Material usage variance
 Idle time variance

23. Which of the following statements are true about labour idle time?
 Labour idle time variance is not caused by non-availability of raw
material
 Labour idle time variance is measured as: Abnormal idle hours *
Actual hourly rate
 Labour idle time variance is always unfavourable or adverse

 Labour idle time variance can be favourable or adverse


24. A standard cost card reveals that one unit of Product A needs 2 kg of
material X at Rs 10 per kg. During February 800 units of Product A were
produced. Actual price paid for material X is Rs 9 per kg and total cost Rs
15,300. What is the favourable material cost variance?
 Rs 700
 Rs 400
 Rs 550
 Rs 450

25. What is the name of the costing approach used where the product’s selling
price is identified and ways are established of meeting production costs
and making an acceptable profit?
 Total life cycle costing
 Target costing
 Benchmarking
 Activity based costing
26. Which of the following is true for life cycle costing?
 Is sometimes used as a basis for cost planning and product
pricing.
 Includes only manufacturing costs incurred over the life of the
product.
 Includes only manufacturing cost, selling expense, and distribution
expense.
 Emphasizes cost savings opportunities during the manufacturing
cycle.

27. Which of the following is the main cost driver of customer order
processing activity?
 Flow of the product from the assembly line
 Order value
 Number of problem suppliers
 Number of machine charges

28. A firm’s current ratio is above the industry average& however; the firm’s
quick ratio is below the industry average. What does this ratio suggest?
 Has relatively more total current assets and even more
inventory than other firms in the industry
 Is very efficient at managing inventories
 has liquidity that is superior to the average firm in the industry
 is near technical insolvency

29. Who among the following is not an external user of the financial statement
analysis?
 Shareholders
 Debenture holders
 Creditors
 Management

30. One problem with comparing financial ratios prepared by different


reporting agencies is which of the following?
 Some agencies receive financial information later than others.
 Agencies vary in their policies as to what is included in specific
calculations.
 some agencies are careless in their reporting
 some firms are more conservative in their accounting practices

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