Cost & management accounting quiz

TRUE OR FALSE
(i) ABC analysis is made on the basis of unit prices of materials. (ii) Cost of tube used for packing tooth paste is indirect material cost. (iii) No distinction is made between direct and indirect materials in Process Costing. (iv) Opportunity cost is the value of benet sacriced in favor of an alternative course of action. (v) Fixed costs vary with volume rather than time. (vi) Future costs are not relevant while making management decisions

TRUE OR FALSE
(vii) In break-even analysis it is assumed that variable costs uctuate inversely with volume.

(viii) If an expense can be identied with a specic cost unit, it is treated as direct expense.
(ix) Variable Cost varies with time.

(x) ABC analysis is based on the unit price of materials. (xi) Differential Costing and Marginal Costing mean the same thing

FILL IN THE BLANKS

(i) ---------------cost is the difference in total cost that results from two alternative courses of action. (ii) ------------is a must for meaningful inter rm comparison. (iii) Generally an item of expense, when identied with a specic cost unit is treated as--------- (iv) Two methods used for calculation of equivalent production are _________ and _________. (v) Economic Batch Quantity depends on _________ and _________ costs.

QUESTIONS
1.Which of the following is the primary objective of costing? (a) Ascertainment of cost (b) Control of cost (c) Cost reduction (d) Estimation of sales price (e) Preparation of financial statements.

QUESTIONS
2.Which of the following can improve break-even point? (a) Increase in variable cost (b) Increase in fixed cost (c) Increase in sale price (d) Increase in sales volume (e) Increase in production volume.

QUESTIONS
3.Due to changes that are occurring in the basic operations of many firms, all of the following represent, trends of allocation of indirect cost, except (a) Treating direct labor as an indirect manufacturing cost in an automated factory (b) Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time (c) Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations (d) Using several machine cost pools to measure product costs on the basis of time in a machine center (e) Using cost drivers as application to increase the accuracy of reported product costs.

QUESTIONS
4.The total of costs incurred in the operation of a business undertaking other than the cost of manufacturing and production is (a) Out-of-pocket cost (b) Programmed cost (c) Conversion cost (d) Commercial cost (e) Imputed cost.

QUESTIONS
5.The term cost refers to (a) The present value of future benefits (b) An asset that has given benefit and is now expired (c) An asset that has not given benefit and is now expired (d) The price of products sold or services rendered (e) The value of the sacrifice made to acquire goods or services.

QUESTIONS
6.Which of the following costs is not an example of a committed fixed cost? (a) Interest payments on a long-term loan (b) Property taxes on land and related buildings (c) Employees training (d) Lease payments on production equipment (e) Depreciation on plant & machinery.

QUESTIONS
7.Non-production overhead costs are not considered in stock valuation, because (a) They are outside the control of production manager (b) They are fixed period costs (c) They cannot be identified with individual product (d) They are incurred after stock has been brought to its present location and condition (e) They are indirect costs.

QUESTIONS
8.The cost of goods sold under a periodic cost accumulation system is equal to the (a) Cost of goods available for sale less ending finished goods inventory (b) Cost of goods available for sale plus beginning finished goods inventory (c) Cost of goods manufactured plus beginning finished goods inventory (d) Cost of goods manufactured less beginning finished goods inventory (e) Cost of goods available for sale less beginning finished goods inventory.

QUESTIONS
9.Which of the following is a cost-behavior oriented approach to product costing? (a) Absorption costing (b) Marginal costing (c) Process costing (d) Uniform costing (e) Job order costing.

QUESTIONS
10 An accounting system that collects financial and operating data on the basis of underlying nature and extent to the cost drivers is (a) Direct costing (b) Target costing (c) Activity based costing (d) Variable costing (e) Cycle-time costing.

QUESTIONS
11.Which of the following statements is false? (a) Notional costs are not included while ascertaining costs (b) Administrative expenses are mostly fixed (c) Historical costs are useful solely for estimating costs that lie ahead (d) Abnormal cost is controllable (e) Direct cost is one that can be conveniently identified with and charged to a particular unit of cost.

QUESTIONS
12.Which of the following assumptions is true in cases where practical capacity is treated as plant capacity? (a) It assumes all personnel and equipment will operate at the maximum efficiency and the total plant capacity will be used (b) It does not consider idle time caused by inadequate sales demand (c) It includes consideration of idle time caused by both limited sales orders and human & equipment inefficiencies (d) It is the production volume that is always less than the actual use of capacity (e) It is the production volume that is necessary to meet sales demand for the next year.

QUESTIONS
13.Cost of idle time arising due to non-availability of raw-materials should be (a) Charged to costing profit & loss account (b) Charged to factory overheads (c) Recovered by inflating the wage rates (d) Charged to indirect labor cost (e) Charged to direct labor cost.

QUESTIONS
14.Which of the following information is required by the Operating Management? (a) Changes in government policies (b) Overtime payments (c) Working capital (d) Order bookings (e) Return on investment.

QUESTIONS
15.Which of the following does not form a part of needs according to Maslows hierarchy of human needs? (a) Psychological needs (b) Safety needs (c) Social needs (d) Esteem needs (e) Self-fulfillment needs.

QUESTIONS
16.Which of the following is/are not true in relation to Value Chain Analysis? I. Value chain is the linked set of value-creating activities from the basic raw material sources for suppliers to the ultimate end-use product delivered to the customer. II. No individual firm is likely to span the entire value chain. III. Value chain requires an internal focus unlike conventional management accounting in which focus is external to the firm. IV. Each firm must be understood in the context of the overall value chain of value-creating activities. (a) Only (I) above (b) Only (II) above (c) Only (III) above (d) Only (IV) above (e) Both (II) and (III) above.

QUESTIONS
17.Which of the following statements is false in respect of activity based costing? (a) It does not segregate variable and fixed costs (b) It tends to be more costly than the traditional methods of costing (c) It is based on historical costs (d) It highlights the causes of costs (e) It deals with the direct costs only.

QUESTIONS
18.Which of the following statements is false with respect to target costing? (a) Target costing is a customer oriented technique (b) Target costing requires market research to determine the customers perceived value of the product based on its functions and attributes (c) The maximum advantage of adopting target costing is, when it is deployed at the products selling stage (d) A major feature of target costing is that a team approach is adopted to achieve the target cost (e) Target costs are conceptually different from standard costs.

QUESTIONS
19.Target pricing (a) Is more appropriate when applied to mature and long-established products (b) Considers the variable costs and excludes fixed costs (c) Is often used when costs are difficult to control (d) Is a pricing strategy used to create competitive advantage (e) Is well suited for complex products that require many sub-assemblies.

QUESTIONS
20.Which of the following statements is false with respect to Total Quality Control (TQC)? (a) TQC is a management process based on the belief that quality costs are minimized with zero defects (b) The proponents of TQC do not advocate that quality is free (c) TQC begins with the design and engineering of the product (d) TQC is often associated with JIT manufacturing (e) TQC is sometimes referred to as TQM (Total Quality Management).

QUESTIONS
21.A profit making firm can increase its return on investment by (a) Increasing sales revenue and operating expenses by the same amount in rupees (b) Increasing investment and operating expenses by the same amount in rupees (c) Decreasing sales revenue and operating expenses by the same percentage (d) Increasing sales revenue and operating expenses by the same percentage (e) Decreasing investment and sales by the same percentage.

QUESTIONS
22.Which of the following is true with respect to direct costs? (a) They are incurred for the benefit of cost centers (b) They are incurred as a direct consequence of a decision (c) They can be economically identified with the item being costed (d) They cannot be economically identified with the item being costed (e) They can be controlled immediately when it is incurred. .

QUESTIONS
23.Overhead rate per unit of production is an appropriate overhead allocation base when (a) Several well differentiated products are manufactured (b) Direct labor costs are low (c) Direct material costs are large relative to direct labor costs (d) Only one product is manufactured (e) The manufacturing process is complex.

QUESTIONS
24. Which of the following statements is false? (a) Management Accounting provides data for internal uses whereas Financial Accounting provides data for external users (b) Management Accounting is concerned with a strong orientation towards future while Financial Accounting is concerned with a record of financial data of the past (c) Management Accounting relies on the concept of responsibility whereas Financial Accounting does not rely on the concept of responsibility (d) Financial Accounting is mandatory for business organizations whereas Management Accounting is not mandatory

QUESTIONS
25. Which of the following statements is false? (a) By-product is a secondary product, which incidentally results from the manufacture of main product (b) Joint products are produced from the same basic raw material, and by a common process (c) The main difference between joint products and byproducts is its commercial value (d) Where the by-products are utilized in the same undertaking, the by-product is valued at standard cost (e) The relationship between main product and byproduct changes with changes in economic conditions.

QUESTIONS
26. An Operation Costing System is (a) Identical to a process costing system except that actual cost is used for manufacturing overhead (b) The same as a job-order costing system except that no overhead allocations are made since actual costs are used throughout (c) The same as a job-order costing system except that materials are accounted for in the same way as they are in a process costing system (d) The same as a process costing system except that materials are allocated on the basis of batches of production (e) Identical to direct costing system except that no overhead allocations are made since actual costs are used throughout.

QUESTIONS
27.Fixed cost is the product of (a) Break-even sales and margin of safety (b) Sales and margin of safety (c) Sales and profit-volume ratio (d) Profit-volume ratio and excess of sales over margin of safety (e) Profit-volume ratio and excess of sales over breakeven point.

QUESTIONS
28.Insurance Premium is an example of (a) Opportunity cost (b) Sunk cost (c) Program cost (d) Discretionary cost (e) Committed cost.

QUESTIONS
29.Which of the following is an indirect labor? (a) A floor cleaner in a factory (b) A Painter in a furniture shop (c) An assembly worker in a company manufacturing televisions (d) A Cobbler in a footwear company (e) A Goldsmith of a jewelry manufacturing company.

QUESTIONS
30.Which of the following items is controllable by the production manager? (a) Price paid for raw materials (b) Usage of raw material (c) Depreciation on machinery (d) Insurance on machinery (e) Rent for floor space.

QUESTIONS
31.Equivalent units of production are used in process accounting to (a) Measure the efficiency of the production process (b) Measure the effectiveness of the cost center (c) Allocate overheads to production (d) Establish standard costs (e) Provide a means of allocating costs to partially completed units.

QUESTIONS
32.Market survey costs incurred for a new product are (a) Sunk costs (b) Conversion costs (c) Joint costs (d) Relevant costs (e) Avoidable costs.

QUESTIONS
33. If a product is the result of a common process, which of the following costs are relevant for future decisionmaking? (a) Joint costs before allocation (b) Joint costs allocated to the products (c) Joint and separable costs in total (d) Separable costs only (e) None of the above.

QUESTIONS
34.Which of the following activities uses process costing? (a) Foundry (b) Automobile repair (c) Road building (d) Electrical contracting (e) Newspaper publishing