Management Accounting Test Questions - Set 3

1)   The use of management accounting is

a. Optional
b. Compulsory
c. Legally obligatory
d. Compulsory to some and optional to others
Answer  Explanation  Related Ques

ANSWER: Optional

Explanation:
No explanation is available for this question!


2)   Which of the following statements are true?

A) Vertical Analysis is also termed as dynamic analysis.
B) Horizontal analysis is also termed as dynamic analysis.
C) Static Analysis is not extremely useful for the long-term financial planning.


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!


3)   Which of the following statements are true?

A) Funds Flow statement is one of the ways to analyse & interpret financial statements.
B) Cash Flow Statement is one of the ways to analyse & interprets financial statements.
C) Common-size statement is one of the ways to analyse & interpret financial statements.


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

ANSWER: A, B, C

Explanation:
No explanation is available for this question!


4)   Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum. The first installment will be paid at the end of year 5. Determine the amount of equal annual installments if Mr. X wishes to repay the amount in five installments.

a. Rs 19500
b. Rs 19400
c. Rs 19310
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 19310

Explanation:
No explanation is available for this question!


5)   If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per annum, determine the frequency of compounding:

a. 1
b. 2
c. 3
d. None of the above
Answer  Explanation  Related Ques

ANSWER: 2

Explanation:
No explanation is available for this question!


6)   Profit for the objective of calculating a ratio may be taken as

a. Profit before tax but after interest
b. Profit before interest and tax
c. Profit after interest and tax
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


7)   Which of the following are limitations of ratio analysis?

A) Ratio analysis may result in false results if variations in price levels are not considered.
B) Ratio analysis ignores qualitative factors.
C) Ratio Analysis ignores quantitative factors.
D) Ratio Analysis is historical analysis.


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)   Which of the following falls under Profitability ratios?

A) General Profitability ratios
B) Overall Profitability ratios
C) Comprehensive Profitability ratios


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

ANSWER: A and B

Explanation:
No explanation is available for this question!


9)   Which of the following transactions will result in inflow of funds?

A) Issue of debentures
B) Conversion of debentures into equity shares
C) Redemption of long term loan
D) Creation of General Reserve


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

ANSWER: Only A

Explanation:
No explanation is available for this question!


10)   During the year, a business was bought by issue of Rs 25,000 debentures and Rs 25,000 shares. The business bought had machine worth Rs 20,000, Debtors Rs 15,000, Stock Rs 5,000 and Creditors Rs 5,000. Determine the effect of this transaction on flow of funds.

a. Net outflow of Rs 15,000
b. Net inflow of Rs 15,000
c. Neither inflow nor outflow
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Net inflow of Rs 15,000

Explanation:
No explanation is available for this question!


11)   Which of the following statements are true?

A) Cash flow reveals only the inflow of cash.
B) Cash flow reveals only the outflow of cash.
C) Cash flow is a substitute for income statement.
D) Cash flow statement is not a replacement of funds flow statement.


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

ANSWER: Only D

Explanation:
No explanation is available for this question!


12)   Cash flow statement is based upon _________ while Funds Flow Statement recognizes _______.

a. Cash basis of accounting, accrual basis of accounting
b. Accrual basis of accounting, cash basis of accounting
c. Both are based on cash basis of accounting
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Cash basis of accounting, accrual basis of accounting

Explanation:
No explanation is available for this question!


13)   Statement of changes in working capital is prepared separately in

a. Cash Flow Statement
b. Funds Flow Statement
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Funds Flow Statement

Explanation:
No explanation is available for this question!


14)   Absorption costing is used for

a. Price determination on basis of full cost
b. Solution of separation of costs
c. Calculation of gross and net profit
d. All of the above
Answer  Explanation  Related Ques

ANSWER: Price determination on basis of full cost

Explanation:
No explanation is available for this question!


15)   Absorption costs help in

a. Difference between product cost and period cost
b. Charged of fixed factory overheads on inventory
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!


16)   Which of the following statements are true?

A) Absorption costing helps in preparation of fixed budget.
B) Absorption costing is dependent on level of level of output.
C) Absorption costing is very helpful in taking managerial decisions.
D) Absorption costing helps to conform with accrual and matching concept.


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!


17)   If the management decides to manufacture a product it in own factory, the focus should be on

a. Cost factors
b. All Non-cost factors
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Cost factors

Explanation:
No explanation is available for this question!


18)   If there are large fluctuations in demand, the component should be

a. Purchased from outside
b. Made in factory
c. Should be made in factory in peak season
d. Should be made in factory in off season
Answer  Explanation  Related Ques

ANSWER: Purchased from outside

Explanation:
No explanation is available for this question!


19)   Pertaining to the differential cost systems, which of the following statements are true?

A) Differential cost plus differential income shows net loss or net income
B) Differential cost is ascertained by comparing total costs of each alternative.
C) Differential cost related to differential investments is calculated every time.


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

ANSWER: Only B

Explanation:
No explanation is available for this question!


20)   The term marginal cost can be used as a substitute of variable cost while measuring Contribution.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


21)   Determine total as well as per unit contribution if Sales is Rs 40,000, Sales in units is 4,000 and variable cost is Rs 30,000.

a. Rs 10,000 and Rs 2.5
b. Rs 70,000 and Rs 3.5
c. Rs 36,000 and Rs 3.6
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 10,000 and Rs 2.5

Explanation:
No explanation is available for this question!


22)   Determine Contribution if Sales is Rs 1,50,000 and P/V ratio is 40%.

a. Rs 60,000
b. Rs 70,000
c. Rs 30,000
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 60,000

Explanation:
No explanation is available for this question!


23)   Determine Contribution if Fixed cost is Rs 40,000 and profit is Rs 30,000.

a. Rs 60,000
b. Rs 70,000
c. Rs 30,000
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 70,000

Explanation:
No explanation is available for this question!


24)   Determine Contribution if Fixed cost is Rs 50,000 and loss is Rs 20,000.

a. Rs 60,000
b. Rs 70,000
c. Rs 30,000
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Rs 30,000

Explanation:
No explanation is available for this question!


25)   Standard costs are useful in

a. Establishing budgets
b. Supporting cost reduction measures
c. Simplifying cost procedures and expediting cost reports
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


26)   Which of the following statements are not true?

A) Standard costs are of forward nature while historical costs are actual in nature.
B) Historical costs are useful for control purposes while standard costs are not.
C) Standard cost is an important tool for measurement of operational efficiency while historical costs are not related to operational efficiency.
D) Standard costs are not reasonably attainable ideal costs.


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

ANSWER: B and D

Explanation:
No explanation is available for this question!


27)   Historical costs have no managerial use because

a. They are made available to management too early to correct inefficiencies
b. They provide motivation to employees to achieve their objectives
c. They provide yardstick to ascertain the operational efficiency
d. They cannot become the basis of budgeting and planning
Answer  Explanation  Related Ques

ANSWER: They cannot become the basis of budgeting and planning

Explanation:
No explanation is available for this question!


28)   According to George R. Terry, _________ may be described as a process of finding out what is being done and comparing actual results with the corresponding budget data in order to approve accomplishment.

a. Budgetary control
b. Budget
c. Budgeting
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Budgetary control

Explanation:
No explanation is available for this question!


29)   Budget, Budgeting and Budgetary control are one and same thing.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


30)   Which of the following statements are true about budget, budgeting & budgetary control?

a. Budgetary control is a wider concept whereas Budget and budgeting are narrower concepts
b. If there is budgeting or budget, it is not necessary that there should be budgetary control also
c. If there is budgetary control, budgeting and budget are must
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


31)   Outstanding expenses and reserve for doubtful debts are shown in cash budget.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


32)   The receipts from cash sales, advance from customers, collection from debtors and bills receivable are

a. Receipts from Non-business operations
b. Receipts from business operations
c. Receipts from capital transactions
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Receipts from business operations

Explanation:
No explanation is available for this question!


33)   In _________ actual performance can easily be compared due to availability of budgets at different levels of activity.

a. Fixed budget
b. Flexible budget
c. Both a and b
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Flexible budget

Explanation:
No explanation is available for this question!


34)   Which of the following statements are true flexible budget?

a. On the basis of fixed budget, marginal analysis can be obtained
b. Flexible budget is important for cost reduction and cost control
c. Fixed budgetary system is more flexible than flexible budgetary system
d. None of the above
Answer  Explanation  Related Ques

ANSWER: Flexible budget is important for cost reduction and cost control

Explanation:
No explanation is available for this question!


35)   Material cost variances is measured as

a. Total standard cost - Total actual cost
b. Standard cost of revised standard mix - Standard cost of actual mix
c. (Standard unit price - Actual unit price) * Actual quantity used
d. (Standard quantity - Actual quantity) * Unit standard price
Answer  Explanation  Related Ques

ANSWER: Total standard cost - Total actual cost

Explanation:
No explanation is available for this question!


36)   Standard quality must relate to actual output.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: True

Explanation:
No explanation is available for this question!


37)   The formula to calculate material price variance is

a. Total standard cost - Total actual cost
b. Standard cost of revised standard mix - Standard cost of actual mix
c. (Standard unit price - Actual unit price) * Actual quantity used
d. (Standard quantity - Actual quantity) * Unit standard price
Answer  Explanation  Related Ques

ANSWER: (Standard unit price - Actual unit price) * Actual quantity used

Explanation:
No explanation is available for this question!


38)   Management auditing is a part of statutory auditing.

a. True
b. False


Answer  Explanation  Related Ques

ANSWER: False

Explanation:
No explanation is available for this question!


39)   In responsibility accounting, responsibilities of various groups or individuals are identified in terms of

a. Work
b. Revenue
c. Cost
d. All of the above
Answer  Explanation  Related Ques

ANSWER: All of the above

Explanation:
No explanation is available for this question!


40)   Which of the following are not covered in managerial reporting?

a. Buy or make
b. Sales policy
c. Capacity utilization
d. None of the above
Answer  Explanation  Related Ques

ANSWER: None of the above

Explanation:
No explanation is available for this question!