Question:* What is net profit if the contribution margin was $100,000 fixed costs were $60,000 and variable costs were $30,000?
Answer: • $40,000
Question:* Which of the following businesses would generally use job/order costing rather than process costing?
Answer: • Building houses
Question:* True or False: Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment.
Answer: • True
Question:* Which of the following is more a management accounting function than a financial accounting function?
Answer: • Cost accounting
Question:* The time value of money primarily focuses on ...?
Answer: • future cash flow predictions.
Question:* Which of the following is more the management accounting function than a financial accounting function?
Answer: • The information produced is not made public and is used for internal decision making only
Question:* A Learning curve shows that as experience increases the amount of time taken to perform a function ________.
Answer: • decreases
Question:* Variable costs do NOT include:
Answer: • rent
Question:* Indirect costs that cannot be easily and economically traced to a finished product are known as ....?
Answer: • factory overheads
Question:* Partly finished goods that a manufacturer may have on hand at the end of an accounting period is known as ...?
Answer: • Work in progress
Question:* True or False: Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.
Answer: • True
Question:* If a product cost $50 and the required mark-up was 50%, what would the selling price be?
Answer: • $75.00
Question:* Costs that cannot be easily or economically traced accurately to the final product are known as ...?
Answer: • Indirect costs
Question:* Net present value (NPV) is best defined as:
Answer: • The difference between the present value of cash inflows and the present value of cash outflows
Question:* What is the name given to the difference between the actual cost of a product's inputs and the standard cost of one of the product's inputs?
Answer: • Variance
Question:* The management accounting function produces a variety of financial reports set by the needs of management.
Answer: • True
Question:* A company makes computers. Which one of the following is likely to be a Variable Cost?
Answer: • The wages of shop workers paid by piece rate
Question:* Should a project be accepted if the NPV is -632?
Answer: • No - The project should not be accepted
Question:* Which of the following costs would NOT be an element of product (manufacturing) costs?
Answer: • Financial costs
Question:* Which of the following would NOT be a labor-related cost?
Answer: • Depreciation on staff cafeteria equipment
Question:* True or False: In calculating the cash flow in capital budgeting, depreciation is added back in the net profit to arrive at the cash flow figure.
Answer: • True
Question:* Which option below correctly completes the statement: Involvement in the budgeting process should _____.
Answer: • include the management and the people responsible for achieving the budgeted outcomes
Question:* What order of inventory classification best describes the manufacturing process?
Answer: • Raw material-Work in process- Finished Goods
Question:* True or False: BOTH variable and fixed manufacturing overhead are included in the Absorption Costing Method
Answer: • True
Question:* Complete the sentence - Perpetuity is the annuity that lasts...?
Answer: • Forever
Question:* What is a hurdle rate?
Answer: • In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.
Question:* Which of the following is an example of qualitative data ...?
Answer: • customer satisfaction
Question:* Sunk cost is best defined as...
Answer: • the cost which has already been incurred in the past any future or present action could not affect it
Question:* The appropriate and careful selection of financial resources results in ...?
Answer: • greater profitability
Question:* If the profitability index of the project is greater than 1 then this project should be...?
Answer: • Accepted
Question:* The project with shorter payback period should be...
Answer: • Accepted
Question:* True or False: Actual Costing is the system of costing in which actual cost incurred during the period is charged to the product.
Answer: • True
Question:* The project should be accepted if NPV of the Cash flow is...
Answer: • Positive
Question:* Working capital is ...?
Answer: • current assets less current liabilities
Question:* True or False: In variable costing, variable costs are considered for product costing inventory valuation and other allied management decisions.
Answer: • True
Question:* Which of the following would NOT be classified as a production department?
Answer: • stores
Question:* Manufacturing costs typically consist of ...?
Answer: • direct materials, direct labor, and manufacturing overhead
Question:* The break-even point is the level of sales that ....?
Answer: • will result in no profit or loss.
Question:* Which of the following is not considered to be an appropriate form of finance for capital investment projects?
Answer: • Bank overdraft
Question:* True or False: Setup cost is an example of a batch-level cost.
Answer: • True
Question:* True or False: In zero base budgeting, each item is redefined from zero instead of using last year's budget as a base.
Answer: • True
Question:* Product and service costing information is prepared for...
Answer: • all of these
Question:* If marginal costing toal sales is $10000, total variable cost is $5000, and total fixed cost is $2500, what will the profit be?
Answer: • 2500
Question:* A company is considering building a factory in Lahore. Which one of the following is a sunk cost to the decision?
Answer: • The cost of the investigation so far
Question:* True of False: A general rule for profit maximization in the short run is: If the additional revenues exceed the additional expenses, do it.
Answer: • True
Question:* Which of the mentioned payroll cost(s) represent direct labor?
Answer: • Hourly pay to production employees and Salaries to production managers
Question:* True or False: While depreciation does not result in a payment of cash, tax depreciation does reduce the cash payments for income taxes.
Answer: • True
Question:* True or False: Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.
Answer: • True
Question:* The project should be accepted if its Profitability index is greater then
Answer: • 1
Question:* The Discounted Payback Period is the length of time required for an investment's discounted cash flows to equal its initial cost. True or False?
Answer: • True
Question:* True or False: The standard cost of direct materials is the cost the manufacturer should have used to make the good output.
Answer: • True
Question:* True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.
Answer: • True
Question:* Which of the following is NOT a type of internal benchmark?
Answer: • Government economic indicators
Question:* What is the most important purpose of a balanced scorecard?
Answer: • Measure performance
Question:* Opportunity cost in management accounting is best described as ...?
Answer: • The economic value of what is given up when a person chooses one option over another.
Question:* Which statement best describes the current role of the managerial accountant?
Answer: • Managerial accountants facilitate the decision-making process within an organization.
Question:* Which one of the following statements about budgeting is NOT true?
Answer: • Budgeting is a bookkeeping task.
Question:* Which of the following is a monetary objective rather than a non-monetary objective?
Answer: • to achieve a targeted return on investment
Question:* Marginal cost is:
Answer: • The cost of one extra unit produced
Question:* The time value of money focuses on:
Answer: • cash flow
Question:* True or False: The value of inventory under full costing is higher then variable costing.
Answer: • True
Question:* The most likely strategy to reduce the breakeven point would be to:
Answer: • Decrease fixed costs and increase the contribution margin
Question:* True or False: Decreasing a company's fixed expenses should reduce the break-even point.
Answer: • True
Question:* Which of the following reports would be a produced under the management accounting function rather than the financial accounting function?
Answer: • Variance report
Question:* What is the formula for the contribution margin?
Answer: • sales - variable costs
Question:* True or False: Depreciation Expense is a negative cash flow that needs to be discounted.
Answer: • False
Question:* If sales are 100,000 variable costs are 40,000 and fixed costs are 10,000, what is contribution margin?
Answer: • 60,000
Question:* True or False: Activity based costing is recommended for the allocation of SG&A expenses in order to determine the true profitability of a product or a customer.
Answer: • True
Question:* A subsidiary ledger containing only those accounts related to manufacturing costs is known as ....?
Answer: • Factory ledger
Question:* If production increases, fixed cost per unit...
Answer: • decreases
Question:* The comprehensive budget that covers all the activities of the organisation and which integrates the individual budgets that cover each of the subsidiary functions, is known as the ...?
Answer: • master budget
Question:* True or False: Depreciation Expense can be ignored when computing the accounting rate of return.
Answer: • False
Question:* Under responsibility accounting, the bottling plant of a soft drink company will most likely be treated as .....?
Answer: • a cost center
Question:* Which cost remains constant in total, but vary per unit?
Answer: • fixed costs
Question:* Sale is 100, variable cost is =? ,fixed cost is 20, profit is 25, what will the variable cost be using marginal costing?
Answer: • 55
Question:* You are given the cost/volume information below: 1 unit/$ 15, 10 units/$150, 100 units/$1500. What type of a cost is being described?
Answer: • variable cost
Question:* The profit center's revenues and expenses are held separate from the main company's in order to determine their profitability?
Answer: • True
Question:* What is the equation to calculate a difference in variance analysis?
Answer: • Standard - Actual = Difference
Question:* True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.
Answer: • False
Question:* A budget that is continuously updated by adding a new incremental period and dropping off the period just completed, is known as ...?
Answer: • a rolling budget
Question:* SG&A is the acronym for ...?
Answer: • Selling, General And Administration
Question:* The contribution margin (CM) is calculated by deducting all the .................... costs from sales?
Answer: • Variable
Question:* A company can accelerate its cash receipts by all of the following except:
Answer: • writing off receivables
Question:* Which is the correct set of equations for cost objects?
Answer: • prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead
Question:* Which of the following is the best example of discretionary cost?
Answer: • Advertising, Research
Question:* Fixed Expense + Target Income / Unit of Contribution Margin is the formula for:
Answer: • Sale volume in units required to earn target income
Question:* Contribution Margin/Net Income is the formula for
Answer: • Operating leverage
Question:* Fixed expense+target income /Contribution margin ratio is the formula of
Answer: • Sales volume in dollars required to earn target income
Question:* Using Variable costing .IF fixed cost is 2500, variable cost is 3500, profit is 2000, what will be the sales price?
Answer: • 8000
Question:* True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.
Answer: • True
Question:* What is the difference between break even sales and break even per units?
Answer: • In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.
Question:* Break-even analysis assumes that over the relevant range:
Answer: • Unit variable costs are unchanged
Question:* How do you calculate the break even point?
Answer: • fixed cost ÷ contribution margin ratio
Question:* Which of the following alternatives is generally chosen from a cost-benefit analysis? The one that shows the ...
Answer: • highest benefit to cost ratio
Question:* If profit is 10000 Dollars ,and fixed cost is 25000 Dollars ,and variable cost is 40000 dollars what will be the sales price?
Answer: • 75000 dollars
Question:* Which of the following factors is irrelevant when using the payback method?
Answer: • Depreciation of the initial asset acquired
Question:* True or False: The original cost of an asset presently in use is generally not relevant in the decision to replace the asset.
Answer: • True
Question:* If sales were $100,000, contribution margin $60,000 and fixed costs $30,000: What would the variable costs be?
Answer: • $40,000
Question:* Management by exception means ...?
Answer: • that management can concentrate on significant matters that require attention
Question:* What is the formula for breakeven?
Answer: • Fixed costs ÷ contribution margin %
Question:* If profit under absorption costing is 4000, and profit under variable costing is 2000, and contribution margin is 5000 under variable costing, what will be the OPERATING LEVERAGE?
Answer: • 2.5
Question:* If sales were $100,000, variable costs $70,000 and fixed costs $10,000: What is contribution margin?
Answer: • $30,000
Question:* Which of the following statements regarding graphs of fixed and variable costs is true?
Answer: • Variable costs are zero when production is equal to zero.
Question:* How do you calculate the Contribution Margin?
Answer: • sales - variable costs
Question:* True or False: Activity based costing is considered to be a traditional costing method.
Answer: • False
Question:* Which of the following is NOT generally treated as a fixed cost in management accounting?
Answer: • Direct materials
Question:* True or False: If a company's sales were to triple, some fixed expenses are likely to increase.
Answer: • True
Question:* How do you calculate the breakeven point in monetary value?
Answer: • fixed costs ÷ contribution margin ratio
Question:* How do you calculate breakeven in units?
Answer: • fixed costs ÷ contribution margin per unit
Question:* Which of the following BEST describes target costing?
Answer: • Setting a cost by subtracting a desired profit margin from a competitive market price
Question:* Breakeven $ is calculated by which formula?
Answer: • 'Fixed costs' ÷ 'Contribution margin ratio'
Question:* How do you calculate the margin of safety?
Answer: • sales - break even sales
Question:* How to you calculate breakeven in sales?
Answer: • fixed costs ÷ contribution margin ratio
Question:* At the breakeven point, the contribution margin equals the total of the .........?
Answer: • fixed costs
Question:* Net terminal value is=
Answer: • Repayment of capital payment + interest due on it or surplus arising after the repayment of capital amount with interest
Question:* Out of pocket cost requires
Answer: • cash expenditure
Question:* The Scattergraph method is...
Answer: • a more accurate method of analysing mixed costs than the high-low method
Question:* Which of the following is NOT generally identified as a reporting center under responsibility accounting?
Answer: • equity center
Question:* How do you calculate the Margin of Safety?
Answer: • total sales - break even sales
Question:* The best example of committed cost is...
Answer: • Depreciation, Rent of building
Question:* The difference between the budgeted sales and the break-even sales, is known as ....?
Answer: • the margin of safety
Question:* Under responsibility accounting, reports that show the budget and actual figures along with the variances that may arise, is known as ......?
Answer: • performance reports
Question:* Which of the following specialist information systems is management accounting least engaged?
Answer: • Double-entry bookkeeping system
Question:* In a "Cost of Quality" report, which of the following is a nonconforming cost, as opposed to a conforming cost?
Answer: • External failure reworking costs
Question:* If the selling price was $100 per unit, the variable cost was $50 per unit and the fixed cost was $10,000 what would be the sales break even point in units?
Answer: • 200
Question:* Malik makes plastic windows and doors. Which one of the following is likely to be a Fixed Cost?
Answer: • The cost of heating the factory
Question:* A business sells a product for $30 per unit. The variable cost of production per unit is $18 and the fixed cost has been calculated at $8 per unit. The contribution per unit is ...?
Answer: • $12
Question:* In capital budgeting using profitability index if Npv of the cash flow is 2000, and initial investment is 2500, what will be the profitability index?
Answer: • .8
Question:* Which of the following is NOT a job or process costing used in management accounting?
Answer: • Accumulation costing
Question:* The contribution margin is calculated by ...?
Answer: • deducting all variable costs from sales
Question:* Which of the following correctly completes the statement? "As production increases within the relevant range ..."
Answer: • variable costs will vary in total.
Question:* If a budgeted expense for the month was $100 and the actual was $110, the variance would be ....?
Answer: • +10% and unfavorable
Question:* What is the flow of costs after direct materials, direct labor and manufacturing overhead is utilized?
Answer: • Work in Process, finished goods, cost of goods sold
Question:* True or False: The most relevant amounts for making a decision are found in the general ledger.
Answer: • False
Question:* True or False: A project whose future cash flows are discounted by 10% will have a larger net present value than the same cash flows discounted by 8%.
Answer: • False
Question:* Which one of the following is a Period Cost?
Answer: • Fixed Overhead
Question:* If the selling price was $200 and the cost price was $100, what is the Gross Profit %?
Answer: • 50%
Question:* Definition of cost accounting
Answer: • The establishment of budget standard cost and actual cost of operation process activities or products and the analysis of the variance profitability or the social use of funds.
Question:* Which of the following does NOT describe 'Backflush Costing'?
Answer: • A product costing system that requires detailed tracking of costs throughout the production process
Question:* A company wishes to evaluate a division which has the following extracts from income statement and statement of financial position. Income statement: $’000 Sales 500 Gross profit 200 Net profit 120 Statement of financial position: $’000 Non current assets 750 Current assets 350 Current liabilities (450) Net assets 650 What is the residual income for the division if the company has a cost of capital of 18%?
Answer: • 3,000
Question:* Managment accounting is LEAST concerned with which of the following?
Answer: • Preparing financial statements for prior periods.
Question:* Which component is included in BOTH prime and conversion costs?
Answer: • direct labor
Question:* Which of the following would NOT be a feature of 'bottom up' budgeting?
Answer: • determined by senior management
Question:* A company used the net present value method for evaluating a project. The project requires an immediate cash outlay of $950,000. The company discounted the cash flows by 16% and determined that the net present value of the project was a negative $600. From this information it is likely that the project...
Answer: • had an internal rate of return that was slightly LESS than 16%
Question:* What expenses are NOT included in fixed factory overhead?
Answer: • freight in
Question:* if ending inventory under absorption costing is 2500, and under variable costing is 1000 what is the difference between the profit under variable costing and absorption costing?
Answer: • The profit under absorption costing will be higher 1500 from variable costing
Question:* True or False: Selling expenses should be allocated to the cost of goods sold for external financial reporting.
Answer: • False
Question:* 'Relevant range' in budgeting and cost accounting relates to the:
Answer: • the span of activity
Question:* In management accounting the terms 'cost' and 'expense' can be accurately used interchangeably?
Answer: • False
Question:* A budget where past information is not considered relevant for future decisions, is known as a ...?
Answer: • zero-sum budget
Question:* Which of the following bases is a volume-based cost driver in relation to applying overheads?
Answer: • actual units made
Question:* The costs involved in converting raw materials into finished products is known as ...?
Answer: • Conversion costs
Question:* Which of the following specifically describes an 'expense' rather than a 'cost'?
Answer: • it is the monetary value that was used up in the generation of revenue for an accounting period
Question:* A system whereby actual results for each sub-unit is an organisation is measured against budgets and significant differences investigated, is known as...?
Answer: • responsibility accounting
Question:* In ABC the assumption is that __________________ use resources or cause costs.
Answer: • Activites
Question:* According to full costing method, if cost of sale is 800, Gross profit is 200, and variable cost is 400, what is the contribution margin?
Answer: • 600
Question:* Which of the following is NOT a prime cost in management accounting?
Answer: • Factory overhead costs
Question:* Royalties paid are which type of cost?
Answer: • Variable
Question:* Which of the following correctly completes the statement: Capital budgets are ...?
Answer: • prepared for the acquisition of capital items
Question:* Which of the following is NOT used as a treatment of fixed manufacturing costs in management accounting?
Answer: • Margin costing
Question:* Engineered cost is best defined as:
Answer: • Cost that has a clear relationship between the input and output of that process
Question:* Which of the following cost classification methods is not relevant in decision-making?
Answer: • Direct and Indirect Cost
Question:* What is the ideal transfer price that would satisfy both the supplying and receiving segment?
Answer: • opportunity cost plus the Standard variable cost
Question:* If sale is 1000, fixed cost is 200, and profit is 500, what is contribution margin ratio?
Answer: • 70%
Question:* The accumulation of the costs incurred in buying and/or making inventory items is known as ....?
Answer: • Product costs
Question:* Which of the following bases is more an activity-based cost driver rather than a volume based cost driver in relation to applying overheads?
Answer: • number of inspections
Question:* What is the formula for operating leverage?
Answer: • Contribution margin/net income
Question:* A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000 What is the company’s return on investment?
Answer: • 30%
Question:* Rolling budgets are useful when
Answer: • Future event cannot be forecast reliably
Question:* Which of the following businesses would generally use process costing rather than job/order costing?
Answer: • Manufacturing cars
Question:* NIFO (Next-In First-Out) is an inventory valuation system where the cost of sale of the item is based on ...?
Answer: • the cost to replace it rather than on historical cost.
Question:* When more factory overheads are incurred than have been applied to the product costing, it is known as...?
Answer: • under-applied overhead
Question:* Which of the following would NOT be treated as a period cost in management accounting?
Answer: • Material costs
Question:* Which of the following would NOT be a reason for setting up a standard cost system?
Answer: • for financial statement auditing purposes
Question:* In throughput accounting if the sale is 100, fixed cost is 25, and variable material cost is 45, what is throughput ?
Answer: • 55
Question:* Which of the following models for evaluating capital expenditures considers the time value of money by discounting the future cash flows?
Answer: • Internal Rate of Return
Question:* In a manufacturing overhead variance, which is excluded from a two-way variance, as opposed to a three-way?
Answer: • spending variance
Question:* If contribution margin is 10000 and fixed expense is 8000, net income is 2000 what is OPERATING LEVERAGE?
Answer: • 5
Question:* A manufacturing company benchmarks the performance of its accounts receivable department with that of a leading credit card company, what type of benchmarking is the company using?
Answer: • Functional benchmarking
Question:* Goal congruence best describes as
Answer: • Employees working in their own personal interest help to meet the overall goal of the organization
Question:* Find EVA (ECONOMIC VALUE ADDED) if operating profit is 10000, weighted averege cost of capital is 12%, and operating assets are 75000.
Answer: • 1000
Question:* A cost classification that identifies the degree to which a cost can be changed in the short term is known as ...?
Answer: • Discretionary costs
Question:* Which of the following should you use 'process costing' rather than 'job/product' costing?
Answer: • Brick and tile manufacturing
Question:* Which of the following asset accounts is NOT used to record and capture the flow of manufacturing costs?
Answer: • Cost of Goods Sold
Question:* Which of the following is *NOT* a benefit likely to arise from the implementation of a ‘just in time’ cost approach?
Answer: • A reduction in production delays as a result of ‘stockouts’.
Question:* Operating Leverage Indicates
Answer: • how for an organization used fixed cost for the period
Question:* Total fixed costs 150000; contribution margin 60% of revenue per unit; unit price 125; What is break even in units?
Answer: • 2000
Question:* Internal rate of return is the rate of return at which net present value becomes?
Answer: • 0
Question:* Which of the following is considered a financial statement budget?
Answer: • Trading account budget
Question:* The total asset turnover ratio is calculated by which formula?
Answer: • Net Annual Sales ÷ Total assets
Question:* Which one of the following is not a technique used for capital investment appraisal?
Answer: • Capital budgeting.
Question:* True or False: A variable expense means that the per unit amount will vary with sales.
Answer: • False
Question:* What is break even point if profit is 10000,fixed cost is 25000, and the sale is 60000?
Answer: • 42860
Question:* If profit before tax is 10 000, taxation is 35%, and depreciation for the year is 1 000, what will the cash flow be?
Answer: • 7 500
Question:* Which one of the following is not normally a characteristic of major capital expenditure projects?
Answer: • The costs can be estimated with a fair degree of certainty.
Question:* Which of the following is NOT a generally accepted method of valuing inventory for a business?
Answer: • Liquidation value
Question:* Which of the following costs is likely to be the minimum price charged for a special order?
Answer: • Variable cost
Question:* True or False: If the net present value of a project is $0, the project should be rejected.
Answer: • True
Question:* Which of the following would be the appropriate cost driver for the cost Package and Wrapping?
Answer: • customers served
Question:* Job/order costing is used when there is a continuous production of similar products. True or false?
Answer: • False
Question:* Operating leverage shows...
Answer: • how an organization used fixed cost for the period
Question:* The factory overhead recovery rate is best set based on a ........ analysis?
Answer: • yearly
Question:* Total fixed cost 150000; CM 60% of revenue per unit; Price 125; What is break even in dollars?
Answer: • 250000
Question:* Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. What was the receivables turnover ratio?
Answer: • 6.4
Question:* Which of the following expense groups is deducted from Gross Profit to calculate the Net Contribution Margin?
Answer: • Variable administration and sales expenses
Question:* Which of the following models does NOT use cash flows?
Answer: • Accounting Rate of Return
Question:* The formula for material turnover ratio is...
Answer: • Cost of sale / Avg Stock
Question:* Which of the following is NOT a method used to allocate costs in management accounting?
Answer: • Indirect costing
Question:* Which of the following would NOT be classified as a service department in managerial accounting?
Answer: • assembly
Question:* In variable costing or marginal costing if sale is 100 per unit, material cost 20 per unit, labour cost 10 per unit, variable overhead 10 per unit, fixed overhead 10 per unit, variable selling is expense 10 per unit, what will be the CONTRIBUTION MARGIN?
Answer: • 70
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