Cost and Managerial Accounting Online MCQ Set 5

QN01. Blanket overhead rate is:

  1. One single overhead absorption rate for the whole factory
  2. Rate which is blank or nil rate
  3. rate in which multiple overhead rates are calculated for each production department, service department etc.
  4. Always a machine hour rate
Answer

(A)One single overhead absorption rate for the whole factory

QN02. Budgeted sales of X for March are 18000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for March are budgeted to be 15000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully
passed the quality control check. The production budget for X for March, in units is:

  1. 12,960
  2. 14,400
  3. 15,840
  4. 16,000
Answer

(D)16,000

QN03. In process costing, a joint product is

  1. a product which is later divided into many parts
  2. a product which is produced simultaneously with other products and is of similar value to at least one of the other products.
  3. A product which is produced simultaneously with other products but which is of a greater value than any of the other products.
  4. a product produced jointly with another organization
Answer

(B)a product which is produced simultaneously with other products and is of similar value to at least one of the other products.

QN04. Which of the following organisations should not be advised to use service costing?

  1. Distribution service
  2. Hospital
  3. Maintenance division of a manufacturing company
  4. A light engineering company
Answer

(D)A light engineering company

QN05. A company manufactures a single product for which cost and selling price data are as follows:
Selling price per unit - Rs. 12
Variable cost per unit - Rs. 8
Fixed cost for a period - Rs. 98,000
Budgeted sales for a period - 30,000 units
The margin of safety, expressed as a percentage of budgeted sales,is:

  1. 20%
  2. 25%
  3. 73%
  4. 125%
Answer

(A)20%

QN06. In 'make or buy' decision, it is profitable to buy from outside only when the supplier's price is below the firm's own ______________.

  1. Fixed Cost
  2. Variable Cost
  3. Total Cost
  4. Prime Cost
Answer

(B)Variable Cost

QN07. For the financial year ended as on March 31, 2013 the figures extracted from the balance sheet of
Xerox Limited as under:
Opening Stock Rs. 29,000; Purchases Rs. 2,42,000; Sales Rs. 3,20,000; Gross Profit 25% of Sales. Stock Turnover Ratio will be :-

  1. 8 times
  2. 6 times
  3. 9 times
  4. 10 times
Answer

(A)8 times

QN08. In element-wise classification of overheads, which one of the following is not included -

  1. Fixed overheads
  2. Indirect labour
  3. Indirect materials
  4. Indirect expenditure.
Answer

(A)Fixed overheads

QN09. Cost Unit is defined as:

  1. Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed
  2. A location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control.
  3. Centres having the responsibility of generating and maximising profits
  4. Centres concerned with earning an adequate return on investment
Answer

(A)Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed

QN10. Fixed cost is a cost:

  1. Which changes in total in proportion to changes in output
  2. which is partly fixed and partly variable in relation to output
  3. Which do not change in total during a given period despise changes in output
  4. which remains same for each unit of output
Answer

(C)Which do not change in total during a given period despise changes in output

QN11. Conversion cost includes cost of converting ______________ into ______________

  1. Raw material, WIP
  2. Raw material, Finished goods
  3. WIP, Finished goods
  4. Finished goods, Saleable goods
Answer

(B)Raw material, Finished goods

QN12. Stores Ledger is a:

  1. Quantitative as well as value wise records of material received, issued and balance;
  2. Quantitative record of material received, issued and balance
  3. Value wise records of material received, issued and balance
  4. a record of labour attendance
Answer

(A)Quantitative as well as value wise records of material received, issued and balance;

QN13. Calculate the value of closing stock from the following according to LIFO method:
1st January, 2014: Opening balance: 50 units @ Rs. 4
Receipts:
5th January, 2014: 100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January, 2014: 150 units

  1. Rs. 765
  2. Rs. 805
  3. Rs. 786
  4. Rs. 700
Answer

(B)Rs. 805

QN14. If overtime is resorted to at the desire of the customer, then the overtime premium:

  1. should be charged to costing profit and loss account;
  2. should not be charged at all
  3. should be charged to the job directly
  4. should be charged to the highest profit making department
Answer

(C)should be charged to the job directly

QN15. Which of the following is not a method of cost absorption?

  1. Percentage of direct material cost
  2. Machine hour rate
  3. Labour hour rate
  4. Repeated distribution method
Answer

(D)Repeated distribution method

QN16. Process B had no opening inventory. 13,500 units of raw material were transferred in at Rs 4.50
per unit. Additional material at Rs1.25per unit was added in process. Labour and overheads were Rs 6.25 per completed unit and Rs 2.50 per unit incomplete.
If 11,750completed units were transferred out, what was the closing inventory in Process B?

  1. Rs. 6562.50
  2. Rs. 12,250.00
  3. Rs. 14,437.50
  4. Rs. 25,375.00
Answer

(C)Rs. 14,437.50

QN17. Calculate the most appropriate unit cost for a distribution division of a multinational company using the following information.

Miles travelled 636,500
Tonnes carried 2,479
Number of drivers 20
Hours worked by drivers 35,520
Tonnes miles carried 375,200
Cost incurred 562,800
  1. Rs .88
  2. Rs 1.50
  3. Rs 15.84
  4. Rs28, 140
Answer

(B)Rs 1.50

QN18. A budget which is prepared in a manner so as to give the budgeted cost for any level of activity is known as:

  1. Master budget
  2. Zero base budget
  3. Functional budget
  4. Flexible budget
Answer

(D)Flexible budget

QN19. The summarized balance sheet of Rakesh udyog Limited shows the balances of previous and current year of provision for taxation Rs. 50,000 and Rs. 65,000. If taxed paid during the current year amounted to Rs. 70,000 then amount charge from Profit and Loss Account will be:

  1. Rs. 55,000
  2. Rs. 85,000
  3. Rs. 45,000
  4. Rs. 1,85,000
Answer

(B)Rs. 85,000

QN20. Uncontrollable costs are the costs which be influenced by the action of a specified member of an undertaking.

  1. can not
  2. can
  3. may or may not
  4. must
Answer

(A)can not

QN21. Calculate cost of sales from the following:
Net Works cost: Rs. 2,00,000
Office & Administration Overheads: Rs. 1,00,000
Opening stock of WIP: Rs. 10,000
Closing Stock of WIP: Rs. 20,000
Closing stock of finished goods: Rs. 30,000
There was no opening stock of finished goods.
Selling overheads: Rs. 10,000

  1. Rs. 2,70,000
  2. Rs. 2,80,000
  3. Rs. 3,00,000
  4. Rs. 3,20,000
Answer

(B)Rs. 2,80,000

QN22. In case of rising prices (inflation), FIFO method will:

  1. provide lowest value of closing stock and profit
  2. provide highest value of closing stock and profit
  3. provide highest value of closing stock but lowest value of profit
  4. provide highest value of profit but lowest value of closing stock
Answer

(B)provide highest value of closing stock and profit

QN23. From the following information, calculate the extra cost of material by following EOQ:
Annual consumption: = 45000 units
Ordering cost per order: = Rs. 10
Carrying cost per unit per annum: = Rs. 10
Purchase price per unit = Rs. 50
Re-order quantity at present = 45000 units
There is discount of 10% per unit in case of purchase of 45000 units in bulk.

  1. No saving
  2. Rs. 2,00,000
  3. Rs. 2,22,010
  4. Rs. 2,990
Answer

(D)Rs. 2,990

QN24. Calculate workers recruited and joined from the following:
Labour turnover rates are 20%, 10% and 6% respectively under Flux method, Replacement method and Separation method. No. of workers replaced during the quarter is 80.

  1. 112
  2. 80
  3. 48
  4. 64
Answer

(A)112

QN25. AT Co makes a single product and is preparing its material usage budget for next year. Each unit of
product requires 2kg of material, and 5,000 units of product are to be produced next year.
Opening inventory of material is budgeted to be 800 kg and AT co budgets to increase material inventory at the end of next year by 20%
The material usage budget for next year is

  1. 8,000 Kg
  2. 9,840 kg
  3. 10,000 Kg
  4. 10,160 Kg
Answer

(C)10,000 Kg

QN26. BDL Ltd. is currently preparing its cash budget for the year to 31 March 2014. An extract from its
sales budget for the same year shows the following sales values.

March 60,000
April 70,000
May 55,000
June 65,000
40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in month after sale and take a 2% discount. 27% are expected to pay in the second month after the sale, and the remaining 3% are expected to be bad debts. The value of sales budget to be shown in the cash budget for May 2013 is
  1. Rs 60,532
  2. Rs 61,120
  3. Rs 66,532
  4. Rs 86,620
Answer

(A)Rs 60,532

QN27. A company’s break even point is 6,000 units per annum. The selling price is Rs. 90 per unit and the variable cost is Rs. 40 per unit. What are the company’s annual fixed costs?

  1. Rs. 120
  2. Rs. 2,40,000
  3. Rs. 3,00,000
  4. Rs. 5,40,000
Answer

(C)Rs. 3,00,000

QN28. _______________ is also known as working capital ratio.

  1. Current ratio
  2. Quick ratio
  3. Liquid ratio
  4. Debt-equity ratio
Answer

(A)Current ratio

QN29. Following information is available of XYZ Limited for quarter ended June, 2013
Fixed cost Rs. 5,00,000
Variable cost Rs. 10 per unit
Selling price Rs. 15 per unit
Output level 1,50,000 units

What will be amount of profit earned during the quarter using the marginal costing technique?

  1. Rs. 2,50,000
  2. Rs. 10,00,000
  3. Rs. 5,00,000
  4. Rs. 17,50,000
Answer

(A)Rs. 2,50,000

QN30. Element/s of Cost of a product are:

  1. Material only
  2. Labour only
  3. Expenses only
  4. Material, Labour and expenses
Answer

(D)Material, Labour and expenses

QN31. Abnormal cost is the cost:

  1. Cost normally incurred at a given level of output
  2. Cost not normally incurred at a given level of output
  3. Cost which is charged to customer
  4. Cost which is included in the cost of the product
Answer

(B)Cost not normally incurred at a given level of output

QN32. Describe the method of costing to be applied in case of Nursing Home:

  1. Operating Costing
  2. Process Costing
  3. Contract Costing
  4. Job Costing
Answer

(A)Operating Costing

QN33. Total cost of a product: Rs. 10,000
Profit: 25% on Selling Price
Profit is:

  1. Rs. 2,500
  2. Rs. 3,000
  3. Rs. 3,333
  4. Rs. 2,000
Answer

(C)Rs. 3,333

QN34. Out of the following, what is not the work of purchase department:

  1. Receiving purchase requisition
  2. Exploring the sources of material supply
  3. Preparation and execution of purchase orders
  4. Accounting for material received
Answer

(D)Accounting for material received

QN35. Which of the following is an abnormal cause of Idle time:

  1. Time taken by workers to travel the distance between the main gate of factory and place of their work
  2. Time lost between the finish of one job and starting of next job
  3. Time spent to meet their personal needs like taking lunch, tea etc.
  4. Machine break downs
Answer

(D)Machine break downs

QN36. Calculate the labour turnover rate according to replacement method from the following:
No. of workers on the payroll:
- At the beginning of the month: 500
- At the end of the month: 600

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

  1. 4.55%
  2. 1.82%
  3. 6%
  4. 3%
Answer

(B)1.82%

QN37. During a period 17, 500 labour hours were worked at a standard cost of Rs 6.50 per hour. The labour efficiency variance was Rs 7,800 favourable. How many standard hours were produced?

  1. 1,200
  2. 16,300
  3. 17,500
  4. 18,700
Answer

(D)18,700

QN38. In process costing, if an abnormal loss arises, the process account is generally

  1. Debited with the scrap value of the abnormal loss units
  2. Debited with the full production cost of the abnormal loss units
  3. Credited with the scrap value of the abnormal loss units
  4. Credited with the full production cost of the abnormal loss units
Answer

(D)Credited with the full production cost of the abnormal loss units

QN39. In case of joint products, the main objective of accounting of the cost is to apportion the joint costs
incurred up to the split off point. For cost apportionment one company has chosen Physical Quantity Method. Three joint products 'A', 'B' and 'C' are produced in the same process. Up to the point of split off the total production of A, B and C is 60,000 kg, out of which 'A' produces 30,000 kg and joint costs are Rs. 3,60,000. Joint costs allocated to product A is

  1. Rs. 1,20,000
  2. Rs. 60,000
  3. Rs. 1,80,000
  4. None of the these
Answer

(C)Rs. 1,80,000

QN40. Re-order level is calculated as:

  1. Maximum consumption x Maximum re-order period
  2. Minimum consumption x Minimum re-order period
  3. 1/2 of (Minimum + Maximum consumption)
  4. Maximum level - Minimum level
Answer

(A)Maximum consumption x Maximum re-order period

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