Management Accounting Test Questions - Set 2

1)   Management accounting is

A) Subjective
B) Objective


a. Only A
b. Only B
c. Both A and B
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Only A

Explanation:
No explanation is available for this question!


2)   The assessment of financial statements by a shareholder is an example of

a. Vertical Analysis
b. Horizontal Analysis
c. Internal Analysis
d. External Analysis
Answer  Explanation  Related Ques

ANSWER: External Analysis

Explanation:
No explanation is available for this question!


3)   Trend percentages and trend ratios are used in

a. Static Analysis
b. Dynamic Analysis
c. Horizontal Analysis
d. Vertical Analysis
Answer  Explanation  Related Ques

ANSWER: Static Analysis

Explanation:
No explanation is available for this question!


4)   If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:

a. 10% per annum
b. 10.10% per annum
c. 10.25% per annum
d. 10.38% per annum
Answer  Explanation  Related Ques

ANSWER: 10.38% per annum

Explanation:
No explanation is available for this question!


5)   Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:

a. Effective rate > Nominal rate
b. Effective rate < Nominal rate
c. Effective rate = Nominal rate
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Effective rate > Nominal rate

Explanation:
No explanation is available for this question!


6)   Liquidity ratios are expressed in

a. Pure ratio form
b. Percentage
c. Rate or time
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Pure ratio form

Explanation:
No explanation is available for this question!


7)   Which of the following statements are true about Ratio Analysis?

A) Ratio analysis is useful in financial analysis.
B) Ratio analysis is helpful in communication and coordination.
C) Ratio Analysis is not helpful in identifying weak spots of the business.
D) Ratio Analysis is helpful in financial planning and forecasting.


a. A, B and D
b. A, C and D
c. A, B and C
d. A, B, C, D
Answer  Explanation  Related Ques

ANSWER: A, B and D

Explanation:
No explanation is available for this question!


8)   The ratio analysis is helpful to management in taking several decisions, but as a mechanical substitute for judgment and thinking, it is worse than useless.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


9)   Which of the following are examples of Funds Flow Statement?

A) Collection of debtors
B) Shares issued for cash
C) Shares issued against the purchase of machinery
D) Shares issued for property


a. A and B
b. A and C
c. A and D
d. A, B, C and D
Answer  Explanation  Related Ques

ANSWER: A and B

Explanation:
No explanation is available for this question!


10)   Which of the following statements are true about movement of funds?

A) Funds flow in a transaction between current assets and fixed assets.
B) Funds flow in a transaction between current asset and capital.
C) Funds flow in a transaction between fixed assets and current liabilities.
D) Funds flow in a transaction between current liabilities and capital.


a. A and B
b. A and C
c. A and D
d. A, B, C and D
Answer  Explanation  Related Ques

ANSWER: A, B, C and D

Explanation:
No explanation is available for this question!


11)   In cash flow statement, the item of interest is shown in

A) Operating Activities
B) Financing Activities
C) Investing Activities


a. Both A and B
b. Both A and C
c. Both B and C
d. A, B, C
Answer  Explanation  Related Ques

ANSWER: Both B and C

Explanation:
No explanation is available for this question!


12)   Cash Flow Statement is based upon

a. Cash basis of accounting
b. Accrual basis of accounting
c. Credit basis of accounting
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Cash basis of accounting

Explanation:
No explanation is available for this question!


13)   Which of the following statements are false?

A) Cash Flow Statement is helpful in the formation of policies.
B) Cash Flow Statement is useful for external analysis.
C) Cash Flow Statement is helpful in estimating future cash flow.


a. Both A and B
b. Both A and C
c. Both B and C
d. None of the above
Answer  Explanation  Related Ques

ANSWER: None of the above

Explanation:
No explanation is available for this question!


14)   All factory costs are treated as _______ while all administration costs are treated as ________.

a. Product costs, Period costs
b. Period Costs, Product costs
c. Fixed costs, Period costs
d. Period costs, fixed costs
Answer  Explanation  Related Ques

ANSWER: Product costs, Period costs

Explanation:
No explanation is available for this question!


15)   While ascertaining gross profit under absorption costing, only that portion of manufacturing overheads is deducted from sales revenue which is associated with the goods sold.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


16)   Under absorption costing among fixed expenses

a. Fixed manufacturing expenses are included in unit cost
b. Fixed non-manufacturing expenses are included in unit cost
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Fixed manufacturing expenses are included in unit cost

Explanation:
No explanation is available for this question!


17)   A component is being made with the help of a machine. 10,000 units are made at a cost of Rs 10 per unit (of which Rs 9 are variable). The same component can be bought from the market at Rs 9.50 per unit. However, the owner intends to rent the machine for Rs 6,000 following which he will buy components from market. If he does so, what will be the impact?

a. Savings of Rs 1,000
b. Loss of Rs 1,000
c. No Change
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Savings of Rs 1,000

Explanation:
No explanation is available for this question!


18)   A company is producing product T on a machine. The selling price of T is Rs 100, marginal cost is Rs 60 and machine takes 20 hours to produce T. The company uses a component H which can be made on same machine in 3 hours for a marginal cost of Rs 5. Component can also be bought from the market for Rs 10. What will be the final result if the company decides to by component H from market? (Machine is fully utilized)

a. Savings of Rs 1
b. Loss of Rs 5
c. Loss of Rs 1
d. Savings of Rs 5
Answer  Explanation  Related Ques

ANSWER: Savings of Rs 1

Explanation:
No explanation is available for this question!


19)   As per J.M. Clark, when a decision has to be made involving _________, the difference in cost between two policies may be considered to be the cost really incurred on account of these n-units of business.

a. An increase of n-units of output
b. A decrease of n-units of output
c. An increase or decrease of n-units of output
d. None of the above
Answer  Explanation  Related Ques

ANSWER: An increase or decrease of n-units of output

Explanation:
No explanation is available for this question!


20)   Break-even analysis is used in “Make or Buy” decision.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


21)   Using equation method, Break-even point is calculated as

a. Sales = Variable expenses + Fixed expenses + Profit
b. Sales = Variable expenses + Fixed expenses - Profit
c. Sales = Variable expenses - Fixed expenses + Profit
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Sales = Variable expenses + Fixed expenses + Profit

Explanation:
No explanation is available for this question!


22)   Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point?

a. 500 units
b. 1,000 units
c. 1,250 units
d. None of the above
Answer  Explanation  Related Ques

ANSWER: 1,250 units

Explanation:
No explanation is available for this question!


23)   Contribution is also known as

a. Contribution margin
b. Net Margin
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Contribution margin

Explanation:
No explanation is available for this question!


24)   Given selling price is RS 20 per unit, variable cost is Rs 16 per unit contribution is

a. Rs 1.25 per unit
b. Rs 4 per unit
c. Rs 0.8 per unit
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 4 per unit

Explanation:
No explanation is available for this question!


25)   Standard Costing is more widely applied in job order industries and not suitable for engineering industries.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


26)   Which of the following statements are true about Standard Costing?

A) It controls certain elements of cost affecting production and sales.
B) It creates cost consciousness among workers.
C) It plays no role in forecast of production cost, profit and sales.
D) It follows principle of management by exception at operational level.


a. A and B
b. B and C
c. A and D
d. B and D
Answer  Explanation  Related Ques

ANSWER: B and D

Explanation:
No explanation is available for this question!


27)   As per J. Batty, Standard Cost represents ______under given conditions.

a. Anticipated costs
b. Current costs
c. Historical costs
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Anticipated costs

Explanation:
No explanation is available for this question!


28)   In forecast, there is a promise or commitment to achieve estimates.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


29)   Which of the following are not the objectives of Budgeting?

A) To express the objectives of the firms in qualitative terms.
B) To prepare base for evaluation of work performance.
C) To co-ordinate organizational and managerial units of the firm.
D) To develop a strong appraisal of objectives and policies of firm.


a. A, B and C
b. B, C and D
c. D, C and A
d. None of the above
Answer  Explanation  Related Ques

ANSWER: None of the above

Explanation:
No explanation is available for this question!


30)   The process of budgeting does not establish a system of decentralization of authority.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


31)   Cash budget is more helpful in those business concerns where there are

a. No seasonal fluctuations
b. Wide seasonal fluctuations
c. Rare seasonal fluctuations
d. All of the above
Answer  Explanation  Related Ques

ANSWER: Wide seasonal fluctuations

Explanation:
No explanation is available for this question!


32)   While preparing a cash budget the focus should be on

a. Sources of cash inflow during a particular period
b. Amount of cash to be received from cash inflow sources
c. Timing of cash inflow
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


33)   Flexible budget is that budget which presents __________ at various levels of business activity.

a. Costs
b. Revenues
c. Profits
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


34)   Flexible budget is also known as

a. Sliding scale budget
b. Dynamic budget
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Sliding scale budget

Explanation:
No explanation is available for this question!


35)   When the actual cost is less than the standard cost, the difference is termed as

a. Favorable variance
b. Adverse variance
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Favorable variance

Explanation:
No explanation is available for this question!


36)   The controllable variances are related with the

a. Internal and external policies of organization
b. External policies of organization
c. Internal polices of organization
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Internal polices of organization

Explanation:
No explanation is available for this question!


37)   The events like government policies, price rise etc have an impact on controllable variances.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


38)   Management audit is useful for

a. Suggestion for targets
b. Assistance to management
c. Good staff relationship
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


39)   Responsibility Accounting is also known as

a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Both a and b

Explanation:
No explanation is available for this question!


40)   Internal reporting provides financial statement and annual accounts.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!