Question Answer

The closing inventory if any under variable costing is valued at Variable manufacturing cost per unit

Variable & Fixed manufacturing cost

The closing inventory if any under absorption costing is valued at
per unit
Which of the following will not appear in cash budget Depreciation of machinery
Resources that are limited in quantity are called as Key factors
Gain on sale of investment property should be disclosed in the safety of
Other income
profit and loss as
Cost of factory lighting is an example of Indirect cost
Calculate Machine hour rate? Rs. 12.60 per hour
Effective machine hours worked in a year 2122
Calculate Depreciation rate per hour? 9.43 per hour
Calculate Depreciation on Machine? 19400 p.a.
Calculate Electricity consumption rate per hour? Rs. 6 per hour
Calculate the Effective machine hours worked in a year? 374 hours
What is Syl’s break-even point in sales dollars? (CPA adapted) $50,000

Profit and loss from discounting operations and other comprehensive

EBITDA
income are not included in the profit and loss for computing

The cost are assigned to activities and

Activity based costing ABC is a costing technique that uses a two-stage
then to the products based upon
allocation process and the two stages are
their use of the activities
These are the course which would change as a result of the decision
Relevant cost
under consideration
__ attached with the balance sheet forms as a part of the financial
Schedules or notes to accounts
statements
Sales revenue less cost of goods
Formula for gross margin
manufactured and sold
The model is a technique to determine the economic order quantity is
All of these
based on the restrictive assumptions namely
When corperation seek to headgear to financial situation the pressure to
Unethical and illegal
engage in
A current asset that can be transferred into cash within three months is
Cash equivalent
known as
One of the following is not included in costing and control of factory
Absorption of overheads
overheads
Current ratio of a concern is 1 net working capital will be Nil
What is the main difference between traditional budgeting and zero
ZBB starts at zero
based budgeting (ZBB)
__ are the assets which the management expects to convert into cash
Current asset
within 12 months after the balance sheet date
Factory overhead costs refer to all indirect manufacturing costs which
Depreciation on factory plant and
cannot be identified with a particular orders or units of product. It
equipment’s factory building
includes
On the basis of _ budget is classified into long-term budget short term
Time
budget and current budget
The underlying difference between absorption costing and variable
Fixed Manufacturing cost
costing lies in the treatment of
The word relevant range as used in cost accounting means the range
Cost relationships are valid
over which
Items of property plant and equipment for sale Non-current
The ABC System is a widely-used classification technique to identify
various items of inventory for purposes of inventory control and
Most costly and/or slow turnover
recommends that a firm should exercise the maximum control on those
items of inventary that are
Debt equity ratio is equal to or below `1:1
Conflict of interest is built into the accounting system because for the for the company whose account it is
firm is working auditing
Financial statements of the company are required to be presented in the
Schedule III
format prescribed in _ of the Companies Act 2013
The Cost of raw materials used in production is an example of _ Product cost
Cash flows arung from the purchase and sale of dealing or trading
Operating activities
securities are classified as _ for a brokerage firm
Quick assets do not include Inventories
Below total cost but above marginal
A special order can be acknowledged at
cost
In case of a bank, interest income should be recognised in the statement
Revenue
of profit and loss as
Vertical analysis requires preparation of financial statement. Common-size
Gross profit margin is calculated by dividing gross profit by Revenue
In general, the first budget prepared is the sales budget
Excess of ASR over the break even sales value is known as Margin of safety
It is a separate performance obligation Service warranty
Which of the following is an irrelevant cost Sunk cost
_ are not recognised in the balance sheet as they do not meet the
Contingent liabilities
definition of a liability

The Distribution of common cost among user departments is known as Apportionment

If an accounting form certifies a company’s financial statements, it

Motivation
should have to make the firm’s financial situation look better than it is

The point at which different individual products are separated after

Split off point
common stage of production is known as
Activity based management reffer to a set of actions that management
All of these
can take to increase profitability
The following costs are irrelevant for a special order that will allow an
Unavaoidable fixed overhead
organisation to utilise some of its present idle capacity
Unavaoidable fixed overhead working capital
Only __ fixed costs are reckoned in sales or further process type of
Non incremental
decision making
In shutdown or continue decisions factor to be considered are _ Unavoidable fixed overhead
Research and development and advertisement expenses in the profit
Discretionary expenses
and loss statement are
Cash receipt received from the sales fixed assets are registered under
Investing activities
the head of
Opportunity costs represent the _ foregone by not choosing second-best
Benefit
alternative in favour of the best one
Horizontal analysis requires preparation of __ financial statements Indexed
Sunk cost _ cost committed cost
Objectivity and Independence are important ethical values in the
All of these
accounting profession. Accountants must remain
Form of balancesheet is horizontal or vertical
Crucial step in the C-V-P analysis is the determination of break even
The Total revenues equal total cost
point(BEP) which is defined as the sales level at which
A capacity in which the normal working hours of a machine or worker or
theoritical capacity
employee are considered is known as
BEP 2000 units ,VC 8rs ,Sales 14rs Fixed cost? 12000

A firm requires 8,000 nos. of certain component, which it bought at Rs

60 each. The cost of placing an order and following it up is 60 and the
400 units
annual storage charges work out to 10% of the cost of the item. To get
maximum benefit the firm should place order for __ units at a time?

2*ordercost 10*unit 7800 /carrying 2 1lakh 20

Annual requirement is 100000 units. Unit price ` 5, order cost ` 20 per
order. Carrying cost ` 1 per unit and lead time is 2 week, The Economic 2000 units
order quantity would be.
The tax expense in the statement of profit and loss is 40,00,000. Current
tax liability at the beginning and at the end of the year was 2,00,000 and
3900000
3,00,000 respectively. Cash outflow during the year on account of
income tax payment was ___
p/v is 40% and margin of safety is 20% and sales is 20 lakh . what is
16 lakhs
break even point

Tibu Company expects sales of Product W to be 60,000 units in April,

75,000 units in May, and 70,000 units in June. The company desires that
the inventory on hand at the end of each month be equal to 40% of the
next month’s expected unit sales. Due to excessive production during 60000
March, on March 31 there were 30,000 units of Product W in the ending
inventory. Given this information, Tibu Company’s production of Product
W for the month of April should be

SEBI requires non Finance Companies to present cash flows using ___
Indirect
method
The cost allocation process does not comprise of one of the basic
Rationalisation of activities
activities which is
Which of the following equation represents breakeven point? Contribution=Fixed Cost
For a financial institution interest paid and interest and dividends
Operating
received are classified as ___ cash flow
Assumptions regarding the VCP graphs are All of these
The costs of a single process, or a series of processes that
simultaneously produce two or more products of significant sales value Joint cost
is
__is not charged on items included in capital work in progress Depreciation
___ companies earn interest from investments and therefore for them
Non-financial
interest income is not revenue
Profit & Loss Statement and Balance
sheet If a company revalues its
The term ‘financial statement’ covers
assets, its net worth Ans- Will
improve
__is a proxy for pre-tax cash operating margins EBITDA
analysis is used for trend analysis Horizontal
Quick ratio is also called acid-test ratio
_ refers to the ability to direct the use of and obtain substantially all of
control of an asset
the remaining benefits from the assets.

Departments or activities and then

In two stage system whether traditional or ABC will first allocate cost to
allocates costs to product or services

Many manufactures make more than one type of product and the
relative proportion of each product solid in the aggregate sales is known sales-mix
as the

If an accounting firms certifies a company’s financial statement, it should

no financial incentive
have to make the firm financial situation look better than it is

The overheads are absorbed into different products under activity using level of activity used in
costing system producing the cost unit
An asset is classified as a ____asset if its value is not determinable in a
Non-monetary
fixed amount of cash.
All those costs which affect the decision are known as Relevant costs
Fixed costs are fixed for a relevant range of volume for a given budget period

Income from ‘after sales services’ to customers should be included in Other operating income

The Activity Based Costing (ABC) system has advantages All of these
It is a two-stage cost allocation
system that allocates costs to
The following is true about activity-based costing
activities and then to products based
on their use of the activities
Current tax asset is classified as Current asset
Interest received, dividend received are an example of Other income
are the only self-generated intangible assets allowed to be recognized in
Softwares
financial statement by GAAP
There are no clear rules and
Ethics and integrity standards are based on the following except
responsibilities in the group.
Which report gives a review on the profitability of a business Income statement

Costs that consist of both fixed costs and variable costs are known as Mixed costs

It is a separate performance obligation Service warranty

The fixed manufacturing cost can be carried forward to next period as
Full costing
part of inventory cost in which of the following costing system ?

The difference between total sales and total variable costs is called as The Contribution margin.

The following is included in overheads All of these

P&L statement is also known as All of these
Relevant costs are costs which would change as a result of the_ Decision
__ is the traditional method of income determination which includes all
Absorption costing
manufacturing costs i.e. variable and fixed expenses.
Financial assistance to companies which invest in pollution control
Government grant
equipment is an example of
__are the expenses related to business activity but are disproportionate
Operating Expenses
in amount or occur infrequently
When production is less than units sold then the income under
absorption costing will be ____ in comparison to income under variable Lower
costing
When production is more than units sold then the income under
absorption costing will be ____ in comparison to income under variable Higher
costing
When a department or product line is dropped, the common fixed costs are allocated to the remaining
which had been allocated to that department: departments or product lines
Cash flows arising from the purchase and sale of dealing or trading
Operating activities
securities are classified as____for a brokerage firm

When corporations seek to hide their true financial situation, the

Unethical & Illegal
pressure to engage in bookkeeping techniques falls on their accountants

Costs that tend to vary in direct proportion or in a one-to-one

relationship to changes in production activity sales activity or some
Variable Costs
other measure of volume within relevant range for a given budget
period are referred to as
From total income, when CoGS, Admin and Selling & Distribution
EBIT
expenses are deducted resulting profit is known as
The basis of absorption of factory overheads is All of these
Flexible budget estimates costs at several levels of Activity

Flexible budgets as a tool of planning and control, are superior to fixed indicate the range within which costs
budgets. The major weaknesses of fixed budgets are their inability to: doesn't change

Master budget is the overall budget for the entire Organisation

The principle underlying the variable costing is that the fixed
all of these
manufacturing overheads are
For an organization involved in construction of diverse type of housing
like HIG, MIG and LIG houses, which of the following costing system is Absorption costing
appropriate for absorptions of overheads?

Which of the following would not cause the break-even point to change? Sales volume decreases

Buy back of shares is an ____ of fund Investment

Notes Cost-Volume-Profit Analysis
Break-even analysis assumes that over the relevant range: (CPA
Unit Variable Costs are unchanged.
adapted)
At the break-even point, the total contribution margin equals total: (CPA
Fixed costs.
adapted)
On January 1, 2013, Lake increased its direct labor wage rates. All other
budgeted costs and revenues were unchanged. How did this increase
Option B
affect Lake’s budgeted break-even point and budgeted margin of safety?
(CPA adapted)

During 2012, Thor Lab supplied hospitals with a comprehensive

diagnostic kit for $120.At a volume of 80,000 kits, Thor had fixed costs of
$1,000,000 and a profit before income taxes of $200,000. Due to an
adverse legal decision, Thor’s 2013 liability insurance increased by $240.00.
$1,200,000 over 2012. Assuming the volume and other costs are
unchanged, what should the 2013 price be if Thor is to make the same
$200,000 profit before income taxes? (CPA adapted)

The following information pertains to Syl : What is Syl’s break-even point

$50,000
in sales dollars? (CPA adapted)
The following pertains to Clove Co. for the year ending December 31,
$300,000
2012: Clove’s margin of safety is: (CPA adapted)

Kator manufactures industrial components. One of its products used as a

subcomponent in auto manufacturing is KB-96. The selling price and cost
per unit data for 9,000 units of KB-96 are as follows. During the next
year, sales of KB-96 are expected to be 10,000 units. All costs will remain
$1,080,000
the same except for fixed manufacturing overhead, which will increase
by 20%, and material, which will increase by 10%. The selling price per
unit for next year will be $160. Based on these data, Kator Inc.’s total
contribution margin for next year will be: (CMA adapted)

Sanfran has the following data: How many units must Sanfran produce
22,500 units
and sell in order to break even?

Sanfran has the following data: How many units must Sanfran produce
25,000 units
and sell in order to achieve a profit of $30,000 per month?

Sanfran has the following data: If Sanfran produces and sells 30,000
7,500 units
units, what is the margin of safety in units?
Acme Sales has two store locations. Store A has fixed costs of $125,000
per month and a variable cost ratio of 60%. Store B has fixed costs of
$285,714
$200,000 per month and a variable cost ratio of 30%. What is the break-
even sales volume for Store B?
If the fixed costs for a product increase and the variable costs (as a
percentage of sales dollars) increase, what will be the effect on the Option A
contribution margin ratio and the break-even point, respectively?
A variable cost increase will decrease CM%; a fixed cost increase will an increase in the number of units
increase the break-even point. produced and sold.
a change in the number of units
A company’s break-even point will not be changed by:
produced and sold.
If both the variable cost per unit and the selling price per unit increase,
Cannot determine with the
the new contribution margin ratio in relation to the old contribution
information given.
margin ratio will be:
Misa Corporation manufactures circuit boards and is in the process of
preparing next year’s The pro forma income statement for the current
year is presented below. For the coming year, the management of Misa
$477,500.
Corporation anticipates a 5 percent decrease in sales, a 10 percent
increase in all variable costs, and a $45,000 increase in fixed costs. The
operating profit for next year would be:
You have been provided with the following information: If sales
decrease by 10%, what level of fixed costs will maintain the current $20,400
operating profit?
The difference between total sales in dollars and total variable costs is
the contribution margin.
called:
Which of the following formulas is used to calculate the contribution
(Sales – Variable costs) ÷ Sales.
margin ratio?
the average variable cost per unit is
Break-even analysis assumes that:
constant.
If Q equals the level of output, P is the selling price per unit, V is the
variable cost per unit, and F is the fixed cost, then the break-even point F ÷ (P-V).
in units is:
(Total sales – Break-even sales) ÷
The margin of safety percentage is computed as:
Total sales.
The amount by which a company’s sales can decline before losses are
margin of safety.
incurred is called the:
Mancuso Corporation has provided its contribution format income
statement for The company produces and sells a single product If the
$173,600.
company sells 3,100 units, its total contribution margin should be closest
to
Which of the following statements is (are) true regarding cost
behaviors?
A. In general, accounting records accumulate cost information according
Only B is true.
to its
B.Cost behaviors are the most important consideration in managerial
decision
Which cost estimation method does not use the company’s cost
information as its primary source of information about the relationship Engineering estimates.
between total costs and activity levels?
A manager is trying to estimate the manufacturing costs of a new
product. The company makes several other products that utilize some of
the same manufacturing procedures as the new product. Which cost Engineering estimates.
estimation method would be the best method to determine the total
cost of manufacturing the new product?
Engineering cost estimates are usually based on operating conditions
optimal.
that are considered:
Which of the following costs would most likely be classified as variable,
assuming the account analysis method is used to determine cost Indirect materials.
behaviors?
activity level used to estimate the
In the cost equation TC = F + VX, X is best described as the:
total cost.
In the cost equation TC = F + VX, V is best described as the: slope of the cost equation.
Which of the following cost estimation methods finds the fixed portion
Account analysis.
of a mixed cost before calculating the variable portion?
The term “relevant range” as used in cost accounting means the range
cost relationships are valid.
over which:
The of the following cost estimation methods finds the variable portion
High-low method.
of a mixed cost before calculating the fixed portion?
uses only two data points, which may
A disadvantage of the high-low method of cost analysis is that it: not be representative of normal
conditions
In the standard regression equation of y = a + bx, the letter b is best
slope of the equation.
described as the
.In the standard regression equation of y = a + bx, the letter a is best
intercept of the equation.
described as the:
In the standard regression equation of y = a + bx, the letter y is best
dependent variable.
described as the:
Given actual amounts of a semivariable cost for various levels of output,
the method that will always give the most reliable measure of the fixed linear regression method.
and variable components is the:
Which of the following statements regarding regression analysis is (are)
true?
A. One way to control the effects of a nonlinear relationship between
Both A and B are true.
total costs and activity is reduce the relevant range.
B .The linear cost estimate tends to understate the slope of the cost line
in ranges close to

Mount Company incurred a total cost of $8,600 to produce 400 units of

pulp. Each unit of pulp required five (5) direct labor hours to What is the $5,600.
total fixed cost if the variable cost was $1.50 per direct labor hour?

$8,600 = FC + $1.50(400)(5); FC = $5,600 640

The Shapely Company uses the high-low method to determine its cost
equation. The following information was gathered for the past year: $10.00.
What are the direct labor costs per machine hour?
A common cost that should not be assigned to a particular product on a
the salary of the corporation
segmented income statement is:
president.

Would the following costs be classified as product or period costs under

Option D
variable costing at a retail clothing store?
Fixed manufacturing overhead is included in product costs under: Option D
Which of the following are considered to be product costs under
Selling and administrative
variable costing?

Under variable costing, costs that are treated as period costs include all fixed costs.

Selling and administrative expenses are considered to be a period cost under variable costing.

A portion of the total fixed manufacturing overhead cost incurred during be excluded from cost of goods sold
a period may: under absorption costing.
Which of the following are considered to be product costs under
absorption costing?
If the number of units produced exceeds the number of units sold, then be greater than net operating income
net operating income under absorption costing will: under variable costing
Over an extended period of time in which the final ending inventories
the same as those reported under
are zero, the accumulated net operating income figures reported under
variable costing.
absorption costing will be:

A manufacturing company that produces a single product has provided

$302,600
the following data concerning its most recent month of operations

Roy Corporation produces a single product. During July, Roy produced

10,000 Costs incurred during the month were as follows:
$4.40
Under absorption costing, any unsold units would be carried in the
inventory account at a unit product cost of:
Tsuchiya Corporation manufactures a variety of products. Last year, the
company’s variable costing net operating income was $57,500. Fixed
manufacturing overhead costs deferred in inventory under absorption $92,900
costing amounted to $35,400. What was the absorption costing net
operating income last year?
The ARB Company has two divisions: Electronics and DVD/Video Sales.
Electronics has traceable fixed expenses of $146,280 and the DVD/Video
Sales has traceable fixed expenses of $81,765. If ARB Company has a $94,445
total of $322,490 in fixed expenses, what are its common fixed
expenses?
Sugiki Corporation has two divisions: the Alpha Division and the Delta
Division. The Alpha Division has sales of $820,000, variable expenses of
$369,000, and traceable fixed expenses of $347,300. The Delta Division
has sales of $460,000, variable expenses of $294,400, and traceable $37,900
fixed expenses of $134,100. The total amount of common fixed
expenses not traceable to the individual divisions is $97,300. What is the
company’s net operating income?
Last year, Heidenescher Corporation’s variable costing net operating
income was $63,600 and its inventory decreased by 600 Fixed
$63,000
manufacturing overhead cost was $1 per unit. What was the absorption
costing net operating income last year?

Sproles Inc. manufactures a variety of products. Variable costing net

operating income was $90,500 last year and its inventory decreased by
$69,500
3,500 units. Fixed manufacturing overhead cost was $6 per unit. What
was the absorption costing net operating income last year?

Cockriel Inc., which produces a single product, has provided the

following data for its most recent month of operations:
$37
There were no beginning or ending inventories. The variable costing unit
product cost was:
variable expenses and traceable fixed
Segment margin is sales minus
expenses.
Gangwer Corporation produces a single product and has the following
cost structure: $95
The absorption costing unit product cost is:
Net operating income reported under absorption costing will exceed net production exceeds sales for that
operating income reported under variable costing for a given period if: period.

is the length of time required to produce one product; is the

Cycle time; velocity
number of units that can be produced in a given period of
The identification and elimination of activities that fail to add value
activity elimination
refers to:
The process of choosing among different sets of activities caused by
activity selection
competing strategies refers to:
The process of decreasing the time and resources required by an activity
activity reduction
is known as:
Increasing the efficiency of necessary activities by using economies of
activity sharing
scale is known as:

Setups, material handling, and inspection are all possible examples of: non-unit level overhead activities

is present whenever products have different consumption ratios for

Product diversity
different overhead
A ratio measures the proportion of an activity consumed by a consumption
A costing system that first assigns costs to activities and then to
activity based costing
products is:
A list of activities accompanied by information that describes each
dictionary
activity is an activity .
are assigned using direct tracing and resource Costs
is concerned with identifying the root causes of activity Driver analysis
Which of the following is not one of the three conditions necessary to be
the activity increases efficiency
classified as a discretionary activity?
activities are unnecessary Nonvalue-added
Using only unit-based activity drivers to assign non-unit-related
distorted product costs
overhead costs can cause:
Activity drivers can be classified as either or unit-level; non-unit-level
In an activity dictionary, types of resources consumed is an example of
activity attribute
a(n)
A is derived from the interview process (or written survey). work distribution matrix
To calculate an activity rate, the of each activity must be practical capacity

Which of the following is not a possible source of customer diversity? Pricing

All of the following are supplier-driven activities except: Efficiency

Which is NOT a component of process value analysis? Velocity

Complying with the filing requirements of the IRS is an example of a: required activity

Which of the following is NOT an example of a nonvalue-added activity? Supervising

___focuses on the relationship of activity inputs to activity Efficiency

From the following details calculate Interest Coverage Ratio:
Net profit after tax – ₹ 7,00,000
Interest Coverage Ratio =9.33 times.
6% debentures of ₹ 20,00,000
Tax Rate 30%
Costs which can be easibly identified with a department, process or
Traceable cost
product are termed as
The excess of the actual sales revenue (ASR) over the break-
Margin of Safety
even sales revenue (BESR) is known as:
Direct material is a Fixed cost

The period for which the budget is prepared and employed is termed as budget period

If average consumption is 15 units per day and lead time for emergency
60 units
purchases is 4 days, then find out Danger level?
Depreciation, rent, property taxes, salaries of key personnel, insurance,
Committed fixed cost
and so on are examples of
Director's remuneration and expences form part of administrative overhead
Show the potential variability of
Flexible budgets, as a tool of planning and control, are superior to fixed
various estimates used in preparation
budgets. The major weaknesses of fixed budgets are their inability to
of budget
Profit planning is done in the case of CVP analysis
Under absorption costing which of the following fixed expenses are
all of these
charged to cost of goods sold
Bad debts and advertising expenditure are the part of S&D overhead

The quantity upon which cost can be conveniently. allocated is known as COST UNIT

Which of the following statement about fixed cost is true l it remains

fixed irrespective of the level of output, II. It decreases per unit with the
I & II
increase in level of output, III It varies proportionately with the level of
output, IV. It remains fixed per unit with the change in level of output

P Company produces three types of products- product A,

product B and product C. Product A requires 200 machine
setups and machine hours used on it were 1.000. Product B
requires 400 machine setups and machine hours used on it
were 500. Product C requires 620 machine setups and
30000 , 60000 , 93000
machine hours used on it were 1,500. The company has
defined an activity cost pool machine setups for which the
cost driver is number of machine setups. The total overhead
cost assigned to that cost pool was Rs.183,000, The machine
setups overhead assigned to each of the products was;
The P/V ratio of a company is 40% and margin of safety is 20%. If
1600000
present sales is Rs. 20,00,000 then Break Even Point in Rs. will be
What will be sales for desired profit if fixed cost is Rs. 25000,
4000 units
profit is Rs. 15000 and Contribution per unit is Rs. 10
Total cost is Rs. 20 per unit, fixed cost is Rs. 9 what will be contribution
Rs. 29 & 72.5%
and PV ratio if Sales is Rs, 40

Which of the following statements is true for Flexible Budgets Budget

can be shifted to any level of business activity II. Budget can not be
shifted to any level of business activity III. Budget adapted to actual I and III
output is comparable to actual business activity. IV. Budget adapted to
actual output is not comparable to actual business activity

__ is the firm ability to arrange cash in short term to meet its short term
obligations where as __ is its long term visibility and ability to honour Liquidity,Solvency
long term financial commitments
A Volume-cost-profit (VCP) analysis is a tool to show the relationship
all of these
between various ingredients of profit planning namely
The fixed-variable cost classification has a special significance in the
Flexible budgets
preparation of
The underlying difference between Absorption costing and Variable
Fixed Manufacturing cost
costing lies is the treatment of

A contract with a customer sets out the rights and obligations of both, The entity’s right is to deliver goods
the entity and the customer. Which of the statement is correct. and services, and the obligation-------

As per flexible budget, sales is Rs 5,00,000 CoGS is Rs 3,00,000 and 20%

of which is fixed. Calculate at 80% capacity utilization, considering that Rs 400000
current utilization of capacity is 60%
Factory overhead should be absorbed on the basis of: Relationship to cost incurred
Research and development training programs for its employees,
advertising and sales promotions, charitable and/or political donations , Discretionary Fixed Cost
management consulting services and so on are called
Patent is categorised as under which assets? Intangible asset
When assets are subtracted from liabilities it will be equal to Capital
The following information pertains to Tailler Co.: Sales
8,00,000 Variable Costs 1,60,000 Fixed Costs 40,000 What 50000
is Tiller's break-even point in Sales Value?
current assets are also known as Working Capital
From the following information, calculate the net profit ratio.
Particulars Sales 25,20,000, Fixed assets 14. 40,000, Cost of
0.1429
sales 19,20,000 Net worth 15,00,000 Net profit 3,60,000 Debt
9,00,000 Inventory 7.00 000 Current liabilities 5.00,000
Which of the following will not appear in a cash budget? Depreciation of Machinery
If maximum re-order period is 8 weeks and re-order level is 1600 units,
200
then find out maximum consumption?

A firm requires 8000 nos of a certain component which a bought at 60

each. The cost of pacing order and lowing it up is GD and the immul
1000
storage chapes mone out to 100% of the cost of the term To get
maximum benefit the firm should place an order for -----Unit at a time

Following information is available for Prime Ltd. For year ended March
2020 Fixed Cost Rs. 8,00,000, variable cost 20/unit, and selling price Rs.
30 per unit output level 2,00,000 units. Closing stock 50,000 units. What Rs. 9,00,000
will be the profit earned during the year as per the absorption costing
method.
Following information is available of Prime Ltd. for year ended
March 2020 Fixed cost Rs, 8,00,000 Variable cost Rs. 20 per
unit Selling price Rs. 30 per unit Output level 2,00,000 units 700000
Closing Stock 50,000 units What will be amount of profit
earned during the year using the Marginal costing technique?
The part of cost of joint products that can be attributed exclusively and
wholly to a particular product, process, division or department is known Seperable
as
Printers Ltd Uses activity-based costing for its products which
includes laser printers and inic-jet printers. The total estimated
overhead cost for the parts administration activity pool was Rs12,00,000
720000
and the expected activity was 4000 part types if laser printer requires
2400 part types, the amount of overhead allocated to them for parts
administration would be
Calculate profit under variable costing technique, when number of units
produced is 1,00,000 units, selling price is Rs 10 unit, variable cost is Rs 6 Rs 2,00,000
per unit and fixed costs are Rs 2,00,000
If rent of factory is Re 10000 per month and a machine occupies 1/4th
space of factory Calculate machine hour rate, if machine works for 1000 Rs. 30/hour
hours in a year
Variable cost are budgeted to be 60% of the sales value where as the
fixed cost are estimated as 10% of the sales value if the company
increases its selling price by 10% and fixed cost per unit variable cost per An increase by 30%
unit and sales volume remain the same, the effect of the contribution
will be
Construction Ltd. Plans to discontinue its interior decoration segment.
Last year, this segment generated a contribution margin of Rs 60,000
and incurred Rs 80,000 in fixed cost. Discontinuing the segment will Rs. 20,000 Increase
allow the company to avoid half of the fixed costs. What effect is
expected to occur to the company’s overall
A budget which is prepared keeping in mind the changing level of
Flexible budget
activity is termed as
The accounting statement of cash flow reports a firm's cash flow
Operating, investing and financing
segregated into what categorical order
For cash ltd. Estimated sales for April, may, June & July , august are
46,000 , 48000, 28,000, 44,000, 30,000. increase 50% sales are realized
Rs. 47,000 & Rs. 38,000
in the next month and the balance in the next to next month . determine
cash collection from sales in June& July –

If the sales price will increase which of the following are true I.
contribution margin will go up II. Breakdown points will go up III I & II
Breakdown point will go down IV Contribution Margin will go down

price per unit Rs 150, annual consumption 2,000 units, ordering cost Rs
300 per order and other charges 20% of cost. What should be the None of the above
quantity of each order?
quantity of input of material to
In material costing Input-Output ratio is the ratio of
prodiction
About 60 items are required every day for a machine. A fixed cost of 40
per order is incurred for placing an order. The inventory carrying cost
1500
per item amounts to Re. 0.05 per day. The lead period is 25 days.
Compute reorder level.
Which of the following will not result in an increase in the net working
capital. I increase in cash II increase in creditors III decrease in bank II and IV
borrowings IV decrease in inventory
Furniture Ltd. produces multiple types of chairs. It uses activity-based
costing and has the following activity cost pools, estimated overhead
cost for each pool and related cost driver: a) Handling material Rs
240,000 for which cost driver is number of parts, total parts are 6000 b)
Processing purchase orders Rs 720,000 for which Rs. 300000
cost driver is number of purchase orders, total purchase orders placed in
a year are 12000. If number of purchase orders and number of parts for
the Manager chair are 3000 and 3000 respectively then calculate the
overheads allocated to

Furniture Ltd. produces multiple types of chairs. It uses activity-based

costing and has the following activity cost pools, estimated overhead
cost for each pool and related cost driver: a) Handling material Rs
240,000 for which cost driver is number of parts, total parts are 6000 b)
Processing purchase orders Rs 720,000 for which cost driver is number Rs 200000
of purchase orders, total purchase orders placed in a year are 12000. If
number of purchase orders and number of parts for the Manager chair
are 2000 and 2000 respectively then calculate the overheads allocated
to Manager chairs.

The amount of expenditure incurred on or attributable to a given thing is

Cost
termed as
A technique in which the cost of a product is determined after
Absorption Costing
considering both fixed and variable cost is termed as

Which of the following statement about inventory valuation is True I. in

case of rising prices FIFO method will result in higher valuation, in case
of rising prices LIFO method will but in higher valuation III in case of I & IV
falling prices FIFO method will result in higher valuation IV in case of
falling prices UFO method will result in higher valuation,

Which of the following statement about variable cost is true it remains

fixed inespective of the level of output, it decre per unit with the
III and IV
increase in level of output, varies proportionately with the level of
output, IV it remales fixed per unit with the change in level of output

The purchase of Jan, feb & march is rs 10000, 12000, 15000. Payment to
supplier is done 50% in the month of purchase and 50% in the next 11000
month. Calculate the cash payment for the month of feb

The transfer of legal right of an asset may indicate that the customer has
Asset
obtained control of the

Calculate overhead rate using material costing method Factory overhead

2
1600000, Direct materials 100000 and Direct wages 80000

The cost which remains constant in total but reduces per unit as the
Variable cost
volume of the production increase is known as:
Profit and Loss statement and
The term financial statement covers:
Balance sheet
Selling and distribution charges are incurred for marketing of products,
All of the these
dispatching goods sold, and so on and include
A firm has profit before interest & taxes of Rs90,000, interest charges
Rs10000, taxes Rs40000, total assets Rs600,000 and total liabilities 0.2
Rs400,000.What is the return to shareholders (ROE) expect?

The direct method and indirect method of presenting cash flow

statement the force only in respect of presenting cash flow from ___ Operating
activities
The process of charging the full amount of overhead costs to a particular
allocation of overheads
cost centre is termed as
Porter Corporation is working on its direct labour budget for the next
two months. Each unit of output requires 0.84 direct labour hours. The
direct labour rate is " 9.40 per direct labour hour. The production budget
calls for producing 2,100 units in June and 1,900 units in July. If the 31584
direct labour work force is fully adjusted to the total direct labour hours
needed each month, what would be the total combined direct labour
cost for the two months?
Lead time 5 weeks , average weekly consumption 28 units . what should
140 units
be the reordering level
factory cost comprises of prime cost and factory overheads

A document which provides for the assembly of the estimated detailed

Cost Sheet
cost in respect of the cost centres and cost units are termed as

Compute contribution if sales is 5,00,000 fixed cost is 2,00,000 and

300000
variable cost is 2,00,000
Expenses pertaining to management of business like office rent, lighting
and heating, postage, telephone, fax and other charges, depreciation of
Indirect material expense
office furniture's and equipment's, legal charges, audit fee, and so on
are example of

In product mix decision, most important factor to be considered is Contribution per unit of key resource

A company makes and sells a single product. If the fixed cost incurred in
The breakeven point will increase
making and selling the product increases
What is the balancing equation for the balance sheet? I. Assets =
Liabilities + Stockholder's equity Il. Assets + Liabilities =
I & III
Stockholder's equity Ill. Revenues - Expenses = Net Income IV.
Assets - Liabilities = Stockholder's equity
Which budget includes all expenses relating to selling, advertising, selling and distribution overhead
delivery of goods to customers etc. budget
There is no complication of over-absorption of factory overheads or
absorption costing
even their underabsorption in the case of _ costing
ABC Ltd. Plans to produce and sell 4,000 units of product C each month,
at a selling price of Rs. 18 per unit. The unit cost comprises of Rs. 8
0.6
variable cost and Rs. 4 fixed cost. Calculate the monthly margin of
safety, as a percentage of planned sales.
ABC Ltd manufacturers a single product which it sells for 20 per unit.
Fixed cost are Rs. 60,000 per annum. The contribution to sales ratio is 7500
40%. ABC Ltd. breakeven point in units is
FOR ABC Ltd., annual rent of factory is Rs 12,00,000 and units
produced in the current year are 1,00,000. The overhead absorption rate 2lac
is Rs 10 per unit. Calculate the underabsorption in this case?

ABC Ltd Sella single product for ₹9 per unit. the variable cost is ₹6 per
unit and the fixed cost total Rs. 54,000 per month. In a period when the
2000
actual sales were rupees 1,80,000. ABC Ltd margin of safety in units
were
A budget that gives a summary of all the functional budget and
Master budget
projected profit and loss account is known as_____

The companies average cost per unit to make inhouse component is

more than cost to buy from outside. Which of the following should be
decision of the company: I. Produce inhouse, If variable cost to make the
II & III
component is less than buying from outside. Il. Buy from Outside Ill. Buy
from Outside, if variable cost to produce inhouse is more than
ousourcing cost IV. Make inhouse

Fixed cost is Rs. 12000, P/V Ratio is 25% what will be break even sales in
48000
Rupees
A company manufactures a single product for which cost and selling
price data are as follows. Selling price per unit - Rs. 6 Variable cost per
5000
unit - Rs. 4 Fixed cost for a period - Rs. 20,000 Budgeted sales for a
period -15,000 units The margin of safety is
The ideal quick ratio is 1:1
__ Is a detailed budget of all cash receipts and cash expenditures Cash budget
The main operations related expenses of a business are termed as Operating expenses

In Inventory control minimum level indicates lowest level of stock held at any time

When break even point is 2000 units and Selling price per unit is 14 and
12000
Variable cost is 8, what is the fixed cost
An increase in selling price per unit lead to An Increase in contribution
Direct Material, Direct Labour & Direct Overheads are part of Prime Cost
Following information is available of GGSS ltd for year ended dec 2020---
--using the 1900
absorption
the level of activity at which these is neither a profit nor a loss is termed
break-even point
as
The process further or sell now decision, the decision should be taken Incremental Revenue & Incremental
based on Cost

Eventually applied by the user

From the perspective of cost allocation , Service department costs are
departments to the units produced

These are overheads which remain constant irrespective of the quantum

Fixed overhead
of output within the capacity of the organisation
Which of the following would be considered a cash-flow item from a A cash outflow to repurchase the
"financing" activity? firm's own common stock
__is an example of non-cash expense Depreciation
The following details relate to a particular company: a) Total
cost centre overhead are Rs 200,000 for machining dept. and
Rs 150000 for assembly dept. b) Machine hours used in
machining are 10000 hrs and in assembly are 5000 hrs. c) 20 per machine hours
Labour Hours used in machining are 4000 hrs and in
assembly are 12000 hrs. The most appropriate overhead rate
to use for the machining department would be:
Of the four costs shown below which would not be included in the cash
Depreciation of fixed assets
budget of an insurance form
The costs which are not asociated with production are called Period cost
Current Ratio is 4:1. Net working capital is 30,000. Find the amount of
40000
current assets
The EOQ model as a technique to determine the economic order
All of these
quantity is based on restrictive assumptions, name
The rate which can be calculated by dividing the actual overheads to be
absorbed by the actual quantity or value of the base selected is termed Actual Overhead Rate
as
Building is an example of Non current assets

The most common basis of budget classifications are done according to All of these

Compute the machine hour rate: Cost of machine: Rs.32000,

estimated scrap value: Rs.2000, Working life is 11000 hours,
repair & maintainence: Rs. 3500, power consumed is Rs.0,50 10.55
per unit. Standing charges: Rs. 2 per hour. Machine consumes
11 units of power per hour.
Compute the machine hour rate. Cost of machine is Rs. 32000. Estimated
scrap value: Rs. 2000, working life is 10,000 hours, repair and
6.55
maintenance: Rs 2500, power consumed in Rs. 0.30 per unit. machine
consumes 11 units of power per hour
Satin Ltd disclosed the information for 2019 and 2018: Prepaid
rent as on 31st March 2019 11,500, Prepaid rent as on 31st
27700
March 2018 14,000 and rent expense for the year 2018-19
25,200. Calculate the cash paid for rent during the year?
The analysis of system which is determines the break even level and the
break even analysis
probable profit at any level of activity is termed as:
Maximum possible productive capacity of a plant when no operating
Normal capacity
time is lost , is its
Which of the following items would be subtracted from net income
when using the indirect method of calculating cash flows provided by A gain on sale of land
operating activities?
Break even point is computed on the basis of relationship between fixed
Contribution Margin
cost and the
In most of the industries the most important element of cost is: Material
The term current asset doesn’t cover Car
These are the examples of intangible assets. All of these
when preparing a production budget the quantity to be produced sales quantity – opening stock +
equals: closing stock
The size of the order for which both ordering and carrying cost are
economic order quantity
minimum is known as
Misclassification of revenue expense as a capital expense leads to: I. an
increase in expenses on a decrease in profits. II. decrease in expense and
II & III
increase in profit. III. Leads finance managers to treat recurring expenses
as a one-time IV. An Increase in expense and an increase in profit.

Retained profit from the statement of comprehensive income is:

I.shown as a liability in the statement of financial position
II.added to reserves in the statement of financial position III only
III.carried forward to form part of the trading profit for the next year
IV.subtracted from reserves in the statement of financial position

If the Debtors have been collected by the firm then which of the
following statement is true
I, II & IV
I. Debtors will reduce II. cash will increase. III. current ratio will increase
IV. current ratio will remain same
Banks generally sees that Debt Equity Ratio is equal to or below `2:1
If the company increases the lot size of inventory purchase and which of
the following statement is not true
i) average inventory will increase
II only
ii) inventory turnover ratio will increase
iii) invented turnover ratio will decrease
iv) days inventory will decrease

Product X generates a contribution to sales ratio of 30%. Fixed costs

directly attributable to X amount to Rs. 75,000 per month. Calculate the Rs. 3,00,000
sales revenue required to achieve a monthly profit of Rs. 15,000

A document which sets out the responsibility of the person engaged in

the routine of and the form of records required for the budgetary Budget Manual
control known as :
The cost which refers to advantage in measurable terms which has been
foregone on account of not using the facilities in the manner originally Opportunity Cost
planned is termed as

Fixed cost at 80% capacity is Rs. 12000 what will be at 35% capacity 12000

Which of the following statements is true regarding variable cost? i.It

remains fixed irrespective of level of output
ii.It decrease per unit with the increase in level of output III & IV
iii.It varies proportionately with the level of output.
iv.It remains fixed per unit with the change in level of output.

if the variable cost will increase then which of the following statements
are true: 1. Contribution Margin will go up, I Breakeven Point will go up, II & IV
Ill. Breakeven Point will go down, IV. Contribution Margin will go down

Overhead absorption rates will

Which of the following is true normally be based on estimates of
what costs are expected to be
The overheads which are expected to be incurred in attaining a given
Normal overheads
output is termed as
Which of the following statement are correct? I. Revenue recognition is
the determination of the point and the amount at which income is
accounted for. II) Income should not be accounted for unless inflow of
economic benefit is probable and the amount thereof may be estimated I, II and IV
reliably III) Income should not accounted for unless it is received in cash
IV) A sale made subject to the customer right to return within a week
should not be recognised as income until that week is over

The average cost of production per unit is greater than per unit revenue
for special order. the company should do which of the following: I.
Reject the order outrightly II. Accept the order III. accept the order if
III & IV
variable cost per unit is less than the revenue and break even has
already been arrived IV. accept the order if contribution per unit for
special order is positive and fixed cost is already recovered.

The factor which limits the volume of output our level of activities of an
key factor
undertaking at a particular point of time or over a period is termed as

The cost which have been created in the past and cannot be changed by
Sunk Cost
any decision that will be made in future
The amount at any given volume of output by which aggregate cost are
change if the volume of output is increased or decreased by one unit is Marginal cost
termed as
The summary budget which is finally approved, adopted and employed
Master budget
termed as
the costs which can be influenced by the action of a specified member of
Uncontrollable costs
an undertaking is termed as
Net profit is reported as 50,00,000. Net profit includes interest expense
5,00,000 income tax expense 20,00,000. Interest income 3,00,000.
depreciation 6,00,000. There is no change in working capital. there was 5800000
no income tax liability at the beginning and at the end of the year. Cash
flow from operating activities
Net profit is reported as 50,00,000. Net profit includes interest expense
5,00,000 income tax expense 20,00,000. Interest income 3,00,000.
depreciation 6,00,000. There is no change in working capital. there was 5400000
no income tax liability at the beginning and at the end of the year. Cash
flow from operating activities
Goodwill is categorised under which assets Intangible asset
Net profit as per statement of profit and loss is 10,00,000. the statement
of profit and loss shows interest income of ₹1,00,000, finance cost
1105000
₹5,00,000 and tax expense 3,00,000. the marginal tax rate is 35%. net
operating profit after tax (NOPAT) is
When the amount of overhead absorbed is less than the amount of
Under absorption of overhead
overhead incurred, it is called
An activity based costing system will
provide a more
Which of the following is true of an activity based costing system accurate apportionment of
overheads to products
than absorption costing
Automobile company produces 5000 parts each year that are used in
one of its products. the unit cost of producing this part is: Variable cost
Rs. 30,000 increases
₹7; fixed cost: ₹8 the part can be purchased from an outside supplier at
₹9 Per unit. if the part is purchased from the outside supplier

If an owned premises is used for a business, the rental income, the

Opportunity Cost
rental income forgone by not giving it on rent is an example of

If there is no opening and closing inventory than profit under marginal

Same
costing will be_______in comparison to absorption costing

The overall PV ratio of XYZ ltd is 60%. The marginal cost of the product X
125
is estimated at Rs. 50 Determine the selling price of product Z?

Which do not change in total during a

Fixed cost is a cost given period irrespective of changes
in output
The following costs are not considered in a differential analysis for Fixed overhead that will continue if
decision making the item is purchased
_________is an obligation present at the balance sheet date. Liability
Which of the following statements are true.
A) financial statements are only interim reports
Option B & C
B) Financial statements are also known as annual records
C) Financial statements are historic
charging the overheads to cost centre
Apportionment means
or cost unit
The method of pricing of issues of materials in the order in which they
FIFO method
are purchased are known as
According to flexibility budget can be classified into B & C both
One of the following is the correct formula for gross margin under full Sales revenue less cost of goods
costing manufactured and sold

A system assigns indirect costs or products in two stages, first the

accumulated costs are allocated to production department, Second the
accumulated cost in cost centers are assigned to individual job/products traditional costing system (TCS)
on the basis of an overhead allocation rate based labour cost, Direct
labour-hour rate, machine-hour rate. The systems is

Which statement shows the flow of cash and cash equivalent during the
Cash flow statement
financial period?
The cost which remain constant in total but reduces per unit as the
Fixed cost
volume of production increase is known as _____
An increase in variable cost per unit will lead to A reduction in contribution
Gain from sale of items of PP&E should be included in Other income
Sales budget is a Functional Budget
The ratio establishing the relationship between the contribution and the
PV ratio
sales value is termed as

A company makes a single product and incurs fixed cost of ₹60,000 per
annum. variable cost per unit is Rs. 10 and each unit Sells Rs. 30. annual 3000 units
sales demand is 14,000 units the break even point is
which of the following statement about budget & budgetary control is
true
I. it is a costing technique
II & III
II. It is a forecasting tool
III. It is a planning as well as control tool
IV. It is an over head cost
Fixed costs caused by the purchase of capacity producing assets such as
Committed
plant and equipment are called as
Which method of absorption of factory overheads do you suggest in a
a rate per unit of output
concern which produces only one uniform item of product?
On the basis of flexibility budget is classified into two types such as fixed
Flexible
budget and __ budget
 CASE STUDY

Based on the following information for Shine Limited answer the given questions
Cost of machine ₹2,00,000
Estimated life 10 years
Scrap Value Rs 6000
Factory operation hours in a week ₹48
Machine breakdown time 15%.
Electricity used by machinery is 10 units/hr ₹60 per unit.

Q1) Calculate the depreciation on machine.

Ans- 19,400

Q2) Calculate electricity consumption rate per hour.

Ans- Rs 6 per hour

Q3) Calculate depreciation rate per hour

Ans- Rs. 9.43 Per hour

Q4) Calculate machine hour rate

Ans- Rs. 12.60 Per hour